| • | | [LIBOR]of (x) [LIBOR] for the related Payment Date minus the Cap Rate, (y) the notional amount on the cap, [which will equal the aggregate outstanding principal amount of the Class A-[ ] Notes on the first day of the Accrual Period related to such Payment Date], and (z) a fraction, the numerator of which is the actual number of days elapsed from and including the previous Payment Date, to but excluding the current Payment Date, or with respect to the first Payment Date, from and including the Closing Date, to but excluding the first Payment Date, and the denominator of which is [360][365]. Among other things, an event of default under the Interest Rate [Cap][Swap] Agreement includes: | • | | failure to make payments due under the Interest Rate [Cap][Swap] Agreement; | | | | | • | | the notional amount on the cap, [which will equal the aggregate outstanding principal amountoccurrence of certain bankruptcy events of the Class A-[ ] Notes on the first dayIssuing Entity or bankruptcy and insolvency events of the Accrual Period[Cap Provider][Swap Counterparty]; | | | • | | any breach of the Interest Rate [Cap][Swap] Agreement or related agreements by the [Cap Provider][Swap Counterparty]; | | | • | | misrepresentation by the [Cap Provider][Swap Counterparty]; or | | | • | | merger by the [Cap Provider][Swap Counterparty] without assumption of its obligations under the Interest Rate [Cap][Swap] Agreement. |
Among other things, a termination event under the Interest Rate [Cap][Swap] Agreement includes: | • | | illegality of the transactions contemplated by the Interest Rate [Cap][Swap] Agreement; | | | • | | any acceleration of the notes following an Indenture Default under the Indenture; | | | • | | failure of the [Cap Provider][Swap Counterparty] to such Payment Date],provide the financial information required by Regulation AB and other requested information or to post eligible collateral or assign the Interest Rate [Cap][Swap] Agreement to an eligible counterparty that is able to provide the information; | | | • | | certain tax events that would affect the ability of the [Cap Provider][Swap Counterparty] to make payments without withholding taxes therefrom to the Issuing Entity, that occur because of a change in tax law, an action by a court or taxing authority or a merger or consolidation of the [Cap Provider][Swap Counterparty]; | | | | | • | | a fraction,merger or consolidation of the numerator of which is the actual number of days elapsed from and including the previous Payment Date, to but excluding the current Payment Date, or[Cap Provider][Swap Counterparty] into an entity with respect to the first Payment Date, from and including the Closing Date, to but excluding the first Payment Date, and the denominator of which is [360][365].] |
For more information regarding the interest rate cap agreement, you should refer to “Description of the Interest Rate Cap Agreement” in this prospectus supplement.]
[Interest Rate Swap Agreement]
[In order to issue the Class A-[ ] Notes bearing interest at floating rates, the Issuing Entity has entered into an interest rate swap agreement with [ ], as swap counterparty (the “Swap Counterparty”). Pursuant to the interest rate swap agreement, the Issuing Entity will receive payments at a rate determined by reference to LIBOR, which is the basis for determining the amount of interest due on the Class A-[ ] Notes. Under the interest rate swap agreement, on each Payment Date, (1) the Issuing Entity will be obligated to pay to the Swap Counterparty an amount equal to interest on a notional amount equal to [the aggregate outstanding principal balance of the Class A-[ ] Notes at the notional fixed rate of [ ]%] and (2) the Swap Counterparty will be obligated to pay to the Issuing Entity [a floating interest rate of LIBOR plus [ ]% on a notional amount equal to the aggregate outstanding principal balance of the Class A-[ ] Notes].
[For more information regarding the interest rate swap agreement, you should refer to “Description of the Interest Rate Swap Agreement” in this prospectus supplement.]
As more fully described under “Additional Information Regarding the Securities — Payments on the Securities,” interest payments on the Notes on a Payment Date generally will be made from the sum of:
| • | | Available Funds remaining after the Servicer has been paid the Payment Date Advance Reimbursement and the Servicing Fee andmaterially weaker creditworthiness; | | | | | • | | Amounts on deposit infailure of the Reserve Account.[Cap Provider][Swap Counterparty] (or its credit support provider, if any) to maintain its credit rating at certain levels required by the Interest Rate Swap Agreement, which failure may not constitute a termination event if the Swap Counterparty maintains certain minimum credit ratings and, among other things: | | | • | | at its own expense obtains an unconditional guarantee or similar assurance from a guarantor with the appropriate credit rating, along with a legal opinion regarding the guarantee; |
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| • | | posts collateral; or | | | • | | assigns its rights and obligations under the Interest Rate [Cap][Swap] Agreement to a substitute [Cap Provider][Swap Counterparty] that satisfies the eligibility criteria set forth in the Interest Rate [Cap][Swap] Agreement. |
Upon the occurrence of any event of default or termination event specified in the Interest Rate [Cap][Swap] Agreement, the non-defaulting or non-affected party may elect to terminate the Interest Rate [Cap][Swap] Agreement; provided that, following the early termination of the Interest Rate [Cap][Swap] Agreement due to an event of default or termination event specified in the Interest Rate [Cap][Swap] Agreement, the Issuing Entity shall, in accordance with the terms of such Interest Rate [Cap][Swap] Agreement, enter into a replacement Interest Rate [Cap][Swap] Agreement to the extent possible and practicable. If the Interest Rate Swap Agreement is terminated due to an event of default or a termination event, a Swap Termination Payment under the Interest Rate Swap Agreement may be due to the Swap Counterparty by the Issuing Entity out of Available Amounts or may be due to the Issuing Entity by the Swap Counterparty. The amount of any Swap Termination Payment may be based on the actual cost or market quotations of the cost of entering into a similar swap transaction or such other methods as may be required under the Interest Rate Swap Agreement, in each case in accordance with the procedures set forth in the Interest Rate Swap Agreement. Any Swap Termination Payment could, if market rates or other conditions have changed materially, be substantial. If a replacement Interest Rate Swap Agreement is entered into, any payments made by the replacement Swap Counterparty in consideration for replacing the Swap Counterparty, will be applied to any Swap Termination Payment owed to the Swap Counterparty, under the Interest Rate Swap Agreement to the extent not previously paid. For purposes of this Prospectus Supplement, the following terms will have the following meanings: “Net Swap Payment”means for the Interest Rate Swap Agreement, the net amounts owed by the Issuing Entity to the Swap Counterparty, if any, on any Payment Date, excluding Swap Termination Payments. “Net Swap Receipts”means for the Interest Rate Swap Agreement, the net amounts owed by the Swap Counterparty to the Issuing Entity, if any, on any Payment Date, excluding any Swap Termination Payments. “Senior Swap Termination Payment”means any Swap Termination Payment owed by the Issuing Entity to the Swap Counterparty under the Interest Rate Swap Agreement due to (i) the failure of the Issuing Entity to make Net Swap Payments due under the Interest Rate Swap Agreement, (ii) illegality of performance under the Interest Rate Swap Agreement or (iii) the occurrence of bankruptcy or insolvency events with respect to the Issuing Entity. “Subordinated Swap Termination Payment”means any Swap Termination Payment owed by the Issuing Entity to the Swap Counterparty under the Interest Rate Swap Agreement other than a Senior Swap Termination Payment. “Swap Termination Payment”means payments due to the Swap Counterparty by the Issuing Entity or to the Issuing Entity by the Swap Counterparty under the Interest Rate Swap Agreement, including interest that may accrue thereon, due to a termination of the Interest Rate Swap Agreement due to an “event of default” or “termination event” under the Interest Rate Swap Agreement. For more information regarding the Interest Rate [Cap][Swap] Agreement, you should refer to “Description of the Hedge Agreement” in the accompanying Prospectus.] Principal OnUntil the Notes have been paid in full, principal payments to Securityholders will be made on each Payment Date in the amount and order of priority described under“Distributions on the Notes” in this Prospectus Supplement. Generally, on each Payment Date, Securityholders will be entitled to receive an amount (the “Principal“Principal Distribution Amount”) equal to the sum of (i) the Optimal Principal Distributable Amount and (ii) any Principal Carryover Shortfall as of the preceding Payment Date; provided, however, that on or after the Final Scheduled Payment Date for any class of Notes, and so long as no default under the Indenture Default has been declared, the Principal Distribution Amount will equal, until the principal balance of such class is reduced to zero, the greater of (a) such principal balance and (b) the sum of (A) the Optimal Principal Distributable Amount and (B) any Principal Carryover Shortfall as of the preceding Payment Date[;Date; provided, further, that if the amount on deposit in the Reserve Account after giving effect to all deposits and withdrawals on such Payment Date exceeds the aggregate unpaid principal amount of the Notes, the unpaid principal amount of the Notes will be paid in full.] S-55
Notwithstanding the foregoing, the Principal Distribution Amount shall not exceed the [balancesum of the Notes]then-outstanding Note Balance and Certificate Balance and the aggregate amount of principal paid in respect of a class of Notes will not exceed its Initial Note Balance. [TheThe funds available to make principal distributions on a Payment Date (the “Available“Available Principal Distribution Amount”) will equal the excess of (i) the sum of (a) Available Funds remaining after the Servicer has been paid the Payment Date Advance Reimbursement and the Servicing Fee (together with any unpaid Servicing Fees in respect of one or more prior Collection Periods), [and the Swap Counterparty has been paid any Net Swap Payments and Senior Termination Payments,] and (b) the Reserve Account Draw Amount, over (ii) accrued interest that has been paid on the Notes on that Payment Date. Principal payments will be made to Securityholders on each Payment Date in an amount equal to the lesser of (a) the Principal Distribution Amount and (b) the Available Principal Distribution Amount (the “Monthly“Monthly Principal Distributable Amount”).] The “Principal“Principal Carryover Shortfall”will mean, as of the close of business on any Payment Date, the excess, if any, of the Principal Distribution Amount over the Monthly Principal Distributable Amount. On each Payment Date, unless the maturity of the Notes has been accelerated following an Indenture Default, principal payments shall be made sequentially so that no principal will be paid on any class of Notes until each class of Notes with a lower numerical designation has been paid in full. Thus, no principal will be paid on the Class A-2 Notes until the principal on the Class A-1 Notes has been paid in full, no principal will be paid on the Class A-3 Notes until the principal on the Class A-2 Notes has been paid in full and no principal will be paid on the Class A-4 until the principal on the Class A-3 Notes has been paid in full. Any remaining principal payment will then be paid to the Certificates until they have been paid in full. On any Payment Date, the “Note“Note Balance”will equal the Initial Note Balance reduced by all payments of principal made on or prior to such Payment Date on the Notes. On each Payment Date after the maturity of the Notes has been accelerated following an Indenture Default, principal will be allocated first to the Class A-1 Notes, until they have been paid in full, second, pro rata among all other classes of the Notes until they have been paid in full, and third, to the Certificates. See “Additional Information Regarding the Securities - Payments“Distributions on the Securities” Notes”in this prospectus supplementProspectus Supplement and “Additional Document Provisions — The“Description of the Indenture — Indenture Defaults”in the accompanying prospectus.Prospectus. The “Optimal“Optimal Principal Distributable Amount”for any Payment Date and the related Collection Period will equal the sum of the following amounts: | | • | | for each Leased Vehicle for which the related Lease did not terminate during that Collection Period, the difference between the Securitization Value of the Lease at the beginning and at the end of that Collection Period, | | | | | • | | for each Leased Vehicle for which the related Lease reached its Lease Maturity Date during that Collection Period, the Securitization Value of the Lease as of the Lease Maturity Date, | | | | | • | | for each Leased Vehicle purchased by the Servicer before its Lease Maturity Date, the Repurchase Payment, and | | | | | • | | for each Lease that became subject to an Early Lease Termination during the related Collection Period, the Securitization Value of the Lease as of the effective date of the Early Lease Termination. |
“Reallocation“Reallocation Payments”will mean the proceeds allocated from the UTI to the SUBI in connection with any reallocation of a Matured Vehicle or Defaulted Vehicle from such SUBI to the UTI in an amount equal to the Net Liquidation Proceeds for such Matured Vehicle or Defaulted Vehicle. “Net“Net Liquidation Proceeds”will mean Liquidation Proceeds reduced by the related expenses. 56S-56
“Liquidation“Liquidation Proceeds”will mean the gross amount received by the Servicer in connection with the attempted realization of the full amounts due or to become due under any Lease and of the Base Residual of the Leased Vehicle, whether from the sale or other disposition of the related Leased Vehicle (irrespective of whether or not such proceeds exceed the related Base Residual), the proceeds of any repossession, recovery or collection effort, the proceeds of recourse or similar payments payable under the related dealer agreement, receipt of insurance proceeds and application of the related security deposit and the proceeds of any disposition fees or other related proceeds. To the extent not previously paid prior to such dates, the outstanding principal amount of each class of Notes will be payable in full on the Payment Date in the months specified below (each, a “Note“Note Final Scheduled Payment Date”): | | • | | for the Class A-[1]A-1 Notes, [ , ],] | | | | | • | | for the Class A-[2]A-2 Notes, [ , ],] | | | | | • | | for the Class A-[3]A-3 Notes, [ , ], | | | • | | for the Class A-[4a] Notes, [ , ] and | | | | | • | | for the Class A-[4b]A-4 Notes, [ , ]. |
The actual date on which the outstanding principal amount of any class of Notes is paid may be later or significantly earlier than its Final Scheduled Payment Date based on a variety of factors, including the factors described under “Weighted“Weighted Average Life of the Notes”in this prospectus supplementProspectus Supplement and under “Maturity,“Maturity, Prepayment and Yield Considerations”in this prospectus supplementProspectus Supplement and the accompanying prospectus.Prospectus. Optional Purchase [TheThe Notes may be redeemed in whole, but not in part, on any Payment Date when an Optional Purchase can be exercised. The redemption price will equal the outstanding principal balance of the Notes plus accrued and unpaid interest thereon at the applicable Note Rate through the related Accrual Period. See “Additional“Additional Information Regarding the Securities — Optional Purchase.”]Purchase”in this Prospectus Supplement. Events of DefaultIndenture Defaults
Events of default under the Indenture (each, an “Indenture Default”)Defaults as well as the rights and remedies available to the Indenture Trustee, the Noteholders and the NoteholdersSwap Counterparty when an Indenture Default occurs, are described under “Description“Description of the Indenture — Indenture Defaults”and“— Remedies Upon an Indenture Default”in the prospectus.accompanying Prospectus. Following the occurrence of an Indenture Default that results in the acceleration of the Notes and unless and until such acceleration has been rescinded, on each Payment Date, the Indenture Trust shall make the following payments and distributions from the 20[ ] -[ ] SUBI Collection Account in the following priority: | (a) | | to the Servicer, the Payment Date Advance Reimbursement, | | | (b) | | to the Servicer, the Servicing Fees, together with any unpaid Servicing Fees in respect of one or more prior Collection Periods, | | | (c) | | [the Net Swap Payment, if any, to be paid under the Interest Rate Swap Agreement to the Swap Counterparty,] | | | (d) | | to the Note Distribution Account, on a pro-rata basis (based, for the Noteholders, on the amounts distributable to each class) to pay (x) interest due on the outstanding Notes on that Payment Date (including any overdue interest), (y) [any Senior Swap Termination Payments due under the Interest Rate Swap Agreement to the Swap Counterparty and (z)] to the extent permitted under applicable law, interest on any overdue interest thereon at the applicable Note Rate, |
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| (e) | | to the Note Distribution Account, the Monthly Principal Distributable Amount, which will be allocated to pay principal, first, to the Class A-1 Notes, until they have been paid in full, and second, to the Class A-2 Notes, the Class A-3 Notes, and the Class A-4 Notes, pro rata, until all such Notes have been paid in full, | | | (f) | | [to the Swap Counterparty, any Subordinated Swap Termination Payments for such Payment Date,] and | | | (g) | | to the Certificate Distribution Account, for the Depositor. |
If an Indenture Default occurs, the Indenture Trustee or the holders of at least a majority of the aggregate principal amount of the Notes, voting as a single class, may declare the principal of the Notes to be immediately due and payable. If the Notes are accelerated, you may receive principal before the Final Scheduled Payment Date for your notes. DESCRIPTION OF THE CERTIFICATES General The Certificates will be issued under the Trust Agreement in definitive form. Payments on the Certificates will be subordinated to payments on the Notes. The Certificates will not bear interest. Principal Principal payments will be made to Certificateholder on each Payment Date in the priority and in the amount set forth under “Additional Information Regarding the Securities — Payments“Distributions on the Securities” Notes”in this prospectus supplement.Prospectus Supplement. No principal payment will be made on the Certificates until the Notes have been paid in full. See “Description“Description of the Notes — Principal”and “Additional“Additional Information Regarding the Securities — Payments on the Securities”in this prospectus supplement.Prospectus Supplement. On any Payment Date, the“Certificate Balance”will equal the Initial Certificate Balance reduced by all payments of principal made on or prior to such Payment Date on the Certificates. [DESCRIPTION OF THE INTEREST RATE [CAP][SWAP] AGREEMENT]
[The following summary describes certain terms of the [Cap][Swap] Agreement. The summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the [Cap][Swap] Agreement.]
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[Payments Under the Cap Agreement
On the Closing Date the Issuing Entity will enter into a [1992] [2002] International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement (such agreement, the “Master Agreement”) with [ ], as cap provider, as modified to reflect the transactions described below (the Master Agreement, as so modified, the “Cap Agreement”). The Cap Agreement will incorporate certain relevant standard definitions in the [2000] ISDA Definitions and the Annex to the [2000] ISDA Definitions published by ISDA. Under the Cap Agreement, if [LIBOR] related to any Payment Date exceeds the Cap Rate, the cap provider will pay to the Issuing Entity an amount equal to the product of:
| • | | [LIBOR] for the related Payment Date minus the Cap Rate, | | | • | | the notional amount on the cap, [which will equal the total outstanding principal amount of the Class A-[ ] Notes on the first day of the Accrual Period related to such Payment Date] and | | | • | | a fraction, the numerator of which is the actual number of days elapsed from and including the previous Payment Date, to but excluding the current Payment Date, or with respect to the first Payment Date, from and including the Closing Date, to but excluding the first Payment Date, and the denominator of which is [360][365]. |
Unless the Cap Agreement is terminated early as described below under “— Early Termination of Cap Agreement,” the Cap Agreement will terminate, with respect to the Class A-[ ] Notes, on the earlier of (x) the Class A-[ ] Final Scheduled Payment Date and (y) the date on which the principal balance of the Class A-[ ] Notes has been reduced to zero.]
[Description of the Swap Agreement]
On the Closing Date the Issuing Entity will enter into a [1992] [2002] International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreement (such agreement, the “Master Agreement”) with [ ], as swap counterparty, as modified to reflect the transactions described below (the Master Agreement, as so modified, the “Swap Agreement”). The Swap Agreement will incorporate certain relevant standard definitions in the [2000] ISDA Definitions and the Annex to the [2000] ISDA Definitions published by ISDA. Under the Swap Agreement, the Issuing Entity will receive payments at a rate determined by reference to [LIBOR], which is the basis for determining the amount of interest due on the Class A-[ ] Notes. Under the Swap Agreement, on each Payment Date,
| • | | the Issuing Entity will be obligated to pay to the Swap Counterparty an amount equal to interest on a notional amount equal to [the aggregate outstanding principal balance of the Class A-[ ] Notes at the notional fixed rate of [ ]%], | | | • | | the Swap Counterparty will be obligated to pay to the Issuing Entity a floating interest rate of [LIBOR] plus [ ]% on a notional amount equal to [the aggregate outstanding principal balance of the Class A-[ ] Notes]. |
On each Payment Date, the amount the Issuing Entity is obligated to pay will be netted against the amount the Swap Counterparty is obligated to pay under the Swap Agreement. Only the net amount will be due from the Issuing Entity or the Swap Counterparty, as applicable. Any amounts due to the Swap Counterparty, other than Swap Termination Payments, will be paid prior to payment of interest on the Notes.]
We estimate the “significance percentage” within the meaning of Item 1115 of Regulation AB, or the maximum probable exposure, made in substantially the same manner as that used in NMAC’s internal risk management process in respect of similar instruments, as a percentage of the aggregate principal balance of the Class A[_] Notes, is less than 10%.
[Description of the [Cap Provider][Swap Counterparty]
[ ], is a [ ] corporation with its principal place of business located at [ ]. [It is a wholly-owned subsidiary of [ ] .. [ ] primarily acts as a counterparty for certain derivative financial products, including interest rate, currency, and commodity swaps, caps and floors, currency options, and credit derivatives. [ ] maintains positions in interest-bearing securities, financial futures, and forward contracts primarily to hedge its exposure. In the normal course of its business, [ ] enters into repurchase and resale agreements with certain affiliated companies. The obligations of [ ] under the [Cap][Swap] Agreement will be guaranteed by [ ].]
[ ], is a [ ] corporation with its principal place of business located at [ ]. [ ]’s senior unsecured debt obligations currently are rated [ ] by Standard & Poor’s and [ ] by Moody’s.
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[Add disclosure as required under Reg AB 1114(b)(2)(i) if swap counterparty or cap provider provides payment representing 10% to less than 20% of cash flow supporting any offered class.]
[Add disclosure as required under Reg AB 1114(b)(2)(ii) if swap counterparty or cap provider supports 20% or more of cash flow supporting any offered class.]
[Conditions Precedent
The obligations of the [Cap Provider][Swap Counterparty] to pay certain amounts due under the [Cap][Swap] Agreement will be subject to the conditions precedent that no Early Termination Date (as defined below under “— Early Termination of [Cap][Swap] Agreement”) shall have occurred or shall have been effectively designated.]
[Defaults Under [Cap][Swap] Agreement
Events of default under the [Cap][Swap] Agreement (each, a “[Cap][Swap] Event of Default”) are limited to: (i) the failure of the [Cap Provider][Swap Counterparty] to pay any amount when due under the [Cap][Swap] Agreement after giving effect to any applicable grace period; (ii) the occurrence of certain events of insolvency or bankruptcy of the [Cap Provider][Swap Counterparty]; [and (iii) certain other standard events of default under the Master Agreement.]
[Cap][Swap] Termination Events
[Cap][Swap] Termination Events” under the [Cap][Swap] Agreement consist of the following: (i) any event of default under the Indenture that results in the acceleration of the Notes or the liquidation of the Issuing Entity’s Estate; (ii) the Indenture is amended or supplemented without the consent of the [Cap Provider][Swap Counterparty] in any manner which would adversely affect any of the [Cap Provider][Swap Counterparty]’s rights or obligations under the [Cap][Swap] Agreement; (iii) the long-term debt rating of [ ] is reduced to a level below “[ ]” by Moody’s or “[ ]” by Standard & Poor’s or the short-term debt rating of [ ] is reduced to a level below “[ ]” by Moody’s, or"[ ]” by Standard & Poor’s (or, in each case, such lower ratings as may be permitted by Moody’s and Standard & Poor’s without causing a downgrade in the ratings applicable to the Notes) and the [Cap Provider][Swap Counterparty] has failed to otherwise cure such default under the terms of the [Cap][Swap] Agreement; and (iv) certain standard termination events under the Master Agreement including “Illegality” (which generally relates to changes in law causing it to become unlawful for either of the parties to perform its obligations under the [Cap][Swap] Agreement), “Force Majeure Event” (which generally relates to the occurrence of catastrophic events beyond the control of the parties, such as natural disasters or acts of state that prevent either of the parties from performing its obligations under the [Cap][Swap] Agreement, “Tax Event” (which generally relates to either party to the [Cap][Swap] Agreement receiving payments thereunder from which an amount has been deducted or withheld for or on account of certain taxes) and “Tax Event Upon Merger” (which generally relates to a party to the [Cap][Swap] Agreement receiving a payment under the [Cap][Swap] Agreement from which an amount has been deducted or withheld for or on account of certain taxes as a result of a party merging with another entity), each as more fully described in Sections [5(b)(i)], [5(b)(ii)], [5(b)(iii)], and [5(b)(iv)] of the Master Agreement.]
[Early Termination of [Cap][Swap] Agreement
Upon the occurrence and during the continuance of any [Cap][Swap] Event of Default, the non-defaulting party will have the right to designate an “Early Termination Date” (as defined in the [Cap][Swap] Agreement). On the Early Termination Date, the [Cap][Swap] Agreement will terminate. With respect to [Cap][Swap] Termination Events, an Early Termination Date may be designated by one or both of the parties (as specified in the [Cap][Swap] Agreement with respect to each [Cap][Swap] Termination Event) and will occur only upon notice and, in certain cases, after the party causing the [Cap][Swap] Termination Event has used reasonable efforts to transfer its rights and obligations under such [Cap][Swap] Agreement to a related entity within a limited period after notice has been given of the [Cap][Swap] Termination Event, all as set forth in the [Cap][Swap] Agreement. The occurrence of an Early Termination Date under the [Cap][Swap] Agreement will constitute a “[Cap][Swap] Termination.”
The Issuing Entity will assign its rights under the [Cap][Swap] Agreement to the Indenture Trustee in connection with the Issuing Entity’s pledge of the assets of the Issuing Entity as collateral for the Notes. The Indenture provides that upon the occurrence of (i) any [Cap][Swap] Event of Default arising from any action taken, or failure to act, by the [Cap Provider][Swap Counterparty], or (ii) any [Cap][Swap] Termination Event (except as described in the following sentence) with respect to which the [Cap Provider][Swap Counterparty] is an affected party, the Indenture Trustee may and will, at the direction of the Noteholders evidencing at least a majority of the aggregate of the outstanding principal balances of all such classes voting as a single class, by notice to the [Cap Provider][Swap Counterparty], designate an Early Termination Date with respect to the [Cap][Swap] Agreement. If a [Cap][Swap] Termination Event occurs as a result of the insolvency or bankruptcy of the [Cap Provider][Swap Counterparty], which event has not
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been otherwise cured under the terms of the [Cap][Swap] Agreement, the Indenture Trustee will be required by the terms of the Indenture (as assignee of the rights of the Issuing Entity under the [Cap][Swap] Agreement) to terminate the [Cap][Swap] Agreement.
Following an Early Termination Date, [the Issuing Entity or] the [Cap Provider][Swap Counterparty] may be liable to make a termination payment to the [other party][the Issuing Entity], in some cases regardless, of which party may have caused such termination (any such payment, a "[Cap][Swap] Termination Payment”). The amount of any [Cap][Swap] Termination Payment due to the Issuing Entity will be available to make payment on the Notes[, and the amount of any Swap Termination Payment due to the Swap Counterparty will be payable out of funds pari passu with payments of interest on the Notes]. The [Cap][Swap] Termination Payment will generally be based on the replacement costs incurred or gains realized in replacing or providing the economic equivalent of the material terms of the interest rate [cap][swap] transactions, together with amounts in respect of obligations that were due but unfulfilled at the time of termination, in accordance with the procedures set forth in the [Cap][Swap] Agreement (assuming, for purposes of such calculation, that all outstanding shortfalls in amounts payable as [Cap][Swap] Payments are due and payable on the first Payment Date that would have occurred after the Early Termination Date). Any [Cap][Swap] Termination Payment could, if interest rates have changed significantly, be substantial.
With respect to certain [Cap][Swap] Termination Events, the Issuing Entity may, but is not obligated to, obtain a replacement interest rate [cap][swap] agreement on substantially the same terms as the [Cap][Swap] Agreement, provided that, (a) the new [cap provider][swap counterparty] enters into a substantially similar interest rate [cap][swap] agreement to the reasonable satisfaction of the Indenture Trustee (as assignee of the rights of the Issuing Entity under the [Cap][Swap] Agreement) and (b) the ratings assigned to the Notes after such assignment and release will be at least equal to the ratings assigned by Moody’s and Standard & Poor’s to the Notes at the time of such [Cap][Swap] Termination.
Upon the occurrence of any Event of Default that results in acceleration of the Notes or involving an uncured payment default under the Indenture, the principal of each class of Notes will become immediately payable and the Indenture Trustee will be obligated to liquidate the assets of the Issuing Entity. In any such event, the ability of the Issuing Entity to pay interest on each class of Notes will depend on (a) the price at which the assets of the Issuing Entity are liquidated and (b) the amount of the [Cap][Swap] Termination Payment, if any, that may be due to the Issuing Entity from the [Cap Provider][Swap Counterparty] under the [Cap][Swap] Agreement. If the net proceeds of the liquidation of the assets of the Issuing Entity are not sufficient to make all payments due in respect of the Notes and for the Issuing Entity to meet its obligations, if any, in respect of the termination of the [Cap][Swap] Agreement, then such amounts will be allocated and applied in accordance with the priority of payments described herein. See “Description of the Notes — Principal"]
[Taxation
Neither the Issuing Entity nor the [Cap Provider][Swap Counterparty] is obligated under the [Cap][Swap] Agreement to gross up if withholding taxes are imposed on payments made under the [Cap][Swap] Agreement. If payments by the [Cap Provider][Swap Counterparty] to the Issuing Entity become subject to withholding taxes, holders of Notes evidencing at least a majority of the aggregate of the outstanding principal balances of all such classes voting as a single class may direct the Indenture Trustee to terminate the [Cap][Swap] Agreement, as described above under “— [Cap][Swap] Termination Events.”]
[Modification and Amendment of [Cap][Swap] Agreement
The Indenture contains provisions permitting the Indenture Trustee (as assignee of the rights of the Issuing Entity under the [Cap][Swap] Agreement) to enter into any amendment of the [Cap][Swap] Agreement (i) to cure any ambiguity or mistake, (ii) to correct any defective provisions or to correct or supplement any provision therein that may be inconsistent with any other provision therein or with the Indenture or (iii) to add any other provisions with respect to matters or questions arising under the [Cap][Swap] Agreement; provided, in the case of clause (iii), that such amendment will not adversely affect in any material respect the interest of any Noteholder. Any such amendment shall be deemed not to adversely affect in any material respect the interests of any Noteholder if [the Rating Agency Condition is satisfied with respect to such amendment] [Standard & Poor’s delivers a letter to the Indenture Trustee to the effect that the amendment will not result in a qualification, reduction or withdrawal of its then-current rating of any class of Notes, and if the Indenture Trustee has provided Moody’s with 10 days prior written notice of the amendment and Moody’s shall not have notified the Indenture Trustee or the Owner Trustee that the amendment might or would result in the qualification, reduction or withdrawal of the rating it has currently assigned to any class of Notes.]
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SECURITY FOR THE NOTES General On the Closing Date, the Issuing Entity will pledge the 20[ ] -[ ] SUBI Certificate, the Reserve Account and the other property of the Issuing Entity’s Estate to the Indenture Trustee [and the Swap Counterparty] to secure the Issuing Entity’s obligations under the Notes.Notes [and the Interest Rate Swap Agreement]. The property of the Issuing Entity — the Issuing Entity’s Estate — will consist of: | | • | | the 20[ ] -[ ] SUBI Certificate, which includes the right to amounts payable with respect to the 20[ ] -[ ] SUBI Certificate, including collections and the right to receive the amounts realized from the sale or other disposition of Leased Vehicles after the Cutoff Date, | | | | | • | | the Reserve Account and any amounts deposited therein, | | | | | • | | [proceeds of the [Cap][Swap]Interest Rate Swap Agreement and the rights of the Issuing Entity under the [Cap][Swap] Agreement,]Interest Rate Swap Agreement], | | | | | • | | the rights of the Issuing Entity under the Back-up Security Agreement, | | | | | • | | the rights of the Issuing Entity to the funds on deposit from time to time in the Note Distribution Account, and any other account or accounts established pursuant to the Indenture and all cash, investment property and other property from time to time deposited or credited thereto and all proceeds thereof, and | | | | | • | | the other property and assets described under “The“The Issuing Entity — Property of the Issuing Entity”and the Issuing Entity’s rights as a third-party beneficiary of the SUBI Trust Agreement and the Servicing Agreement. |
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The Accounts The SUBI Collection Account On or prior to the Closing Date, the Titling Trustee, at the direction of the Servicer, will establish a trust account for the benefit of the holders of interests in the SUBI, into which collections on or in respect of the Leases and the Leased Vehicles, and other payments received, will generally be deposited (the “SUBI“SUBI Collection Account”). within two Business Days after identification unless the Monthly Remittance Condition is met. As of the Closing Date, the Monthly Remittance Condition will not be met. Deposits into the SUBI Collection Account.As more fully described under “Description“Description of the Servicing Agreement — Collections,” “— Monthly Remittance Condition,”and “Nissan“Nissan Motor Acceptance Corporation — Like Kind Exchange”in the prospectus,accompanying Prospectus, the Servicer may reallocate a Leased Vehicle returned to the Servicer at the scheduled end of the related Lease and in connection with an Lessee Initiated Early Termination or a Casualty Termination (each, a “Matured“Matured Vehicle”) or a Leased Vehicle returned to, or repossessed by, the Servicer in connection with a Credit Termination (a “Defaulted“Defaulted Vehicle”) from the SUBI to the UTI for purposes of implementing NMAC’s LKE program. In connection with such reallocation, NILT Trust, as UTI Beneficiary, will cause to be deposited into the SUBI Collection Account any Reallocation Payments no later than two Business Days after the reallocation, unless the Monthly Remittance Condition is satisfied. If NMAC is the Servicer and no Servicer default has occurred and is continuing, the “Monthly“Monthly Remittance Condition”will be satisfied if [(a)(a) NMAC’s short-term unsecured debt obligations are rated at least “P-1��“P-1” by Moody’s and “A-1” by Standard & Poor’s (in each case, so long as Moody’s or Standard & Poor’s is a Rating Agency); (b) NMAC maintains a letter of credit or other form of enhancement acceptable to the Rating Agencies to support NMAC’s obligation to deposit collections into the Collection Account; or (c) after the issuance of the Notes, NMAC otherwise satisfies each Rating Agency’s requirements.] If the Monthly Remittance Condition is satisfied, the Servicer will be permitted to retain the Reallocation Payments and all Collections received during a Collection Period until such amounts are required to be disbursed on the next Payment Date. In addition, on each Deposit Date, the following additional amounts, if any, in respect of the related Collection Period and Payment Date will be deposited into the SUBI Collection Account: Advances made by the Servicer and, in the case of an Optional Purchase, the Optional Purchase Price. See “Description“Description of the Servicing Agreement — Collections”in the prospectus.accompanying Prospectus. Withdrawals from the SUBI Collection Account.On each Payment Date, the Titling Trustee shall transmit or shall cause to be transmitted the sum of all Available Funds from the SUBI Collection Account for the related Collection Period in the amounts and in the priority, and to such accounts as set forth under “Additional Information Regarding the Securities — Payments“Distributions on the Securities — Deposits to the Distribution Accounts; Priority of Payments.”Notes”in this Prospectus Supplement. If, on any date, the Servicer supplies the Titling Trustee and the Indenture Trustee with an officer’s certificate setting forth the calculations for Reimbursable Expenses, the Titling Trustee shall remit to the Servicer, without interest and before any other distribution from the SUBI Collection Account on that date, monies from the SUBI Collection Account representing such Reimbursable Expenses. 61
“Reimbursable“Reimbursable Expenses”means, with respect to each Lease or Leased Vehicle allocated to the SUBI, the costs or expenses incurred by the Servicer in a legal proceeding (including a legal proceeding to repossess the Leased Vehicle) to protect or otherwise enforce the interests of the Titling Trust, the Titling Trustee on behalf of the Titling Trust or the holder of the 20[ ] -[ ] SUBI Certificate in that Lease or Leased Vehicle. All Reimbursable Expenses will be reimbursed to the Servicer out of amounts on deposit in the Collection Account. See “Description“Description of the Servicing Agreement — Realization Upon Liquidated Leases”in the prospectus.accompanying Prospectus. “Contingent“Contingent and Excess Liability Insurance”means the insurance maintained by NMAC for the benefit of among others, NMAC, the Titling Trustee, on behalf of the Titling Trust, the UTI Beneficiary, the Depositor and the Issuing Entity, against third party claims that may be raised against the Titling Trust or the Titling Trustee, on behalf of the Titling Trust, with respect to any leased vehicle owned by the Titling Trust. For more information regarding the Contingent and Excess Liability Insurance, you should refer to “Nissan“Nissan Motor Acceptance Corporation — Insurance on the Leased Vehicles”in the prospectus.accompanying Prospectus. The Reserve Account On or before the Closing Date the Servicer, on behalf of the Issuing Entity [and the Swap Counterparty], will establish a trust account in the name of the Indenture Trustee for the benefit of the Noteholders [and the Swap Counterparty] (the “Reserve“Reserve Account”). The Reserve Account will be established to provide additional security for payments on the Notes.Notes [and payments due to the Swap Counterparty]. On each Payment Date, amounts on deposit in the Reserve Account, together with Available Funds, will be available to make the distributions described under “Additional Information Regarding the Securities — Payments“Distributions on the Securities — Deposits to the Distribution Accounts; Priority of Payments.”Notes”in this Prospectus Supplement. S-59
The Reserve Account initially will be funded by the Issuing Entity with a deposit of $[ ], representing approximately [ ]% of the aggregate [SecuritizationSecuritization Value of the Leases and the Related Leased Vehicles as of the Cutoff Date][initial principal amount of the Notes],Date, and the amounts on deposit in the Reserve Account will be pledged to the Indenture Trustee.Trustee [and the Swap Counterparty]. To the extent the amount deposited in the Reserve Account is less than the Reserve Account Requirement, on each Payment Date, monies on deposit in the Reserve Account will be supplemented by the deposit of: | | • | | any the amount necessary to meet the Reserve Amount Requirement (the“Excess AmountsAmounts”), if any, and | | | | | • | | income received on the investment of funds on deposit in the SUBI Collection Account and the Reserve Account. |
On each Payment Date, a withdrawal will be made from the Reserve Account in an amount (the “Reserve“Reserve Account Draw Amount”) equal to the lesser of (1) the Available Funds Shortfall Amount for that Payment Date, calculated as described under “Additional Information Regarding the Securities — Payments“Distributions on the SecuritiesNotes — Determination of Available Funds,”or (2) the amount on deposit in the Reserve Account after giving effect to all deposits thereto on the related Deposit Date or that Payment Date. On any Payment Date on which the amount on deposit in the Reserve Account, after giving effect to all withdrawals therefrom and deposits thereto in respect of that Payment Date, exceeds the Reserve Account Requirement, any such excess shall be paid to the Depositor. [InIn addition, if on any Payment Date on which the amount on deposit in the Reserve Account, after giving effect to all withdrawals therefrom and deposits thereto in respect of that Payment Date, is greater than or equal to the balance of the Notes then outstanding and all accrued and unpaid interest, such amount will be used to retire the then outstanding Notes. ] The “Reserve“Reserve Account Requirement”on any Payment Date will equal $[ ], which represents [ ]% of the aggregate [SecuritizationSecuritization Value of the Leases and the related Leased Vehicles as of the Cutoff Date][initial principal amount of the Notes].Date. The Reserve Account Requirement on each Payment Date may be reduced pursuant to a downward adjustment formula acceptable to the Rating Agencies. The Distribution Accounts On or before the Closing Date, (a) the Depositor, on behalf of the Issuing Entity, will establish a trust account in the name of the Indenture Trustee for the benefit of the Noteholders and the Swap Counterparty, into which amounts released from the SUBI Collection Account and, when necessary, from the Reserve Account, for distribution to the Noteholders and the Swap Counterparty will be deposited and from which all distributions to the Noteholders and the Swap Counterparty will be made (the “Note“Note Distribution Account”) and (b) the Owner Trustee, at the direction of the Depositor, will establish a trust account in the name of the Owner Trustee on behalf of the Certificateholder, into which amounts released from the SUBI Collection Account and, when necessary, from the Reserve Account, for distribution to the Certificateholder will be deposited and from which all distributions to the Certificateholder will be made (the “Certificate“Certificate Distribution Account”and, together with the Note Distribution Account, the “Distribution“Distribution Accounts”). For further information regarding these deposits and payments, you should refer to “—“— The SUBI Collection Account”and “—“— The Reserve Account”in this prospectus supplement.Prospectus Supplement. 62
On or before each Payment Date, (a) the Titling Trustee shall deposit or cause to be deposited from the SUBI Collection Account and (b) the Indenture Trustee shall deposit or cause to be deposited from the Reserve Account, if necessary, respectively, the amounts allocable to the Noteholders, the Certificateholder and the Certificateholder,Swap Counterparty, as set forth in “Additional Information Regarding the Securities — Payments“Distributions on the Securities — Deposits to the Distribution Accounts; Priority of Payments”Notes”in this Prospectus Supplement for the related Payment Date in the Note Distribution Account and the Certificate Distribution Account, respectively. On each Payment Date, the Trustees will distribute the allocated amounts for the related Collection Period to the Securityholders.Securityholders and the payments due to the Swap Counterparty to the Swap Counterparty. Maintenance of the Accounts The Note Distribution Account and the Reserve Account will be maintained with the Indenture Trustee and the SUBI Collection Account (together with the Note Distribution Account and the SUBI Collection Account, the “Accounts”“Accounts”) will be maintained with the Trust Agent, respectively, so long as either (a) the short-term unsecured debt obligations of the Indenture Trustee or the Trust Agent, as the case may be, are rated in the highest short-term rating category by Standard & Poor’s Rating Services and Moody’s (excluding any “+” signs S-60
associated with such rating) or (b) the Indenture Trustee or the Trust Agent, as the case may be, is a depository institution or trust company having a long-term unsecured debt rating acceptable to each Rating Agency and corporate trust powers and the related Account is maintained in a segregated trust account of the Indenture Trustee or the Trust Agent, as the case may be (the “Required“Required Deposit Rating”). Each of the Accounts will be segregated trust accounts. If either of the Indenture Trustee or the Trust Agent at any time does not have the Required Deposit Rating, the Servicer shall, with the assistance of the Indenture Trustee or the Trust Agent, as the case may be, as necessary, cause the related Account to be moved to a depository institution or trust company organized under the laws of the United States or any constituent state of the United States that has the Required Deposit Rating. If the Certificate Distribution Account does not at any time have the Required Deposit Rating, the Owner Trustee, or the Depositor on behalf of the Owner Trustee, if the Certificate Distribution Account is not then held by the Owner Trustee or an affiliate thereof, shall establish a new account meeting such Required Deposit Rating and move any funds. On the Payment Date on which all of the Notes have been paid in full and following payment of any remaining obligations of the Issuing Entity under the Basic Documents, any amounts remaining on deposit in the Accounts — after giving effect to all withdrawals therefrom and deposits thereto in respect of that Payment Date [(and taking into account any payments due to the Swap Counterparty)] — will be paid to the holder of the Certificates. Permitted Investments When funds are deposited in (a) the SUBI Collection Account and (b) the Reserve Account, they will be invested at the direction of the Servicer and the Administrative Agent, respectively, in one or more Permitted Investments maturing no later than the Deposit Date immediately succeeding the date of that investment. Notwithstanding the foregoing, Permitted Investments on which the entity at which the related account is located may mature on the related Deposit Date. When funds are deposited in (a) the SUBI Collection Account of the related series of Notes and (b) the Reserve Account of such series of Notes, they will be invested at the direction of the Servicer and the Administrative Agent, respectively, in one or more Permitted Investments maturing no later than the Deposit Date immediately succeeding the date of that investment. Notwithstanding the foregoing, Permitted Investments on which the entity at which the related account is located may mature on the related Deposit Date. “Permitted Investments’’ “Permitted Investments”will be limited to highly rated obligations, instruments or securities that meet the criteria of each Rating Agency from time to time as being consistent with its then-current ratings of the Notes which mature no later than the business dayBusiness Day prior to the date on which such funds are required to be available for application pursuant to the Basic Documents. On each Payment Date, all net income or other gain from the investment of funds on deposit in the Reserve Account and the SUBI Collection Account in respect of the related Collection Period will be deposited into the Reserve Account. On each Payment Date, all net income or other gain from the investment of funds on deposit in the Reserve Account and the SUBI Collection Account in respect of the related Collection Period will be deposited into the Reserve Account. On each Payment Date, all net income or other gain from the investment of funds on deposit in the Reserve Account and the SUBI Collection Account in respect of the related Collection Period will be deposited into the Reserve Account. ADDITIONAL INFORMATION REGARDINGDISTRIBUTIONS ON THE SECURITIESNOTES
Payments on the Securities
General
As more fully described under “The SUBI,”“The SUBI”in this Prospectus Supplement, the 20[ ]-[ ] SUBI Certificate will evidence a beneficial interest in the related SUBI Assets, which are comprised of Leased Vehicles and related Leases having an aggregate Securitization Value as of the Cutoff Date of $[ ] 63
(based (based on a Securitization Rate of [ ]%). On or prior to the [tenthtenth calendar day of each month or, if such day is not a Business Day, the immediately succeeding Business Day]Day (each, a “Determination“Determination Date”), the Servicer will inform the Trustees of, among other things, the amount of (a) collections described in the third paragraph of “Description“Description of the Servicing Agreement — Account” (the “Collections”Accounts”in the accompanying Prospectus,(the“Collections”), (b) Advances to be made by the Servicer, (c) the Servicing Fee payable to the Servicer, in each case with respect to the month immediately preceding the month in which the related Payment Date occurs (each, a “Collection“Collection Period”), [and] (d) the Optimal Principal Distributable Amount, (e) [the amount of Net Swap Payments, Net Swap Receipts and (e)Swap Termination Payments, if any, to be paid by or to the Swap Counterparty under the Interest Rate Swap Agreement, and (f)] based on Available Funds and other amounts available for distribution on the related Payment Date as described below, the amount to be distributed to the Securityholders.
The Trustees will make distributions to the Securityholders and the Swap Counterparty out of amounts on deposit in the related Distribution Accounts. The amount to be distributed to the Servicer, the Securityholders and the SecurityholdersSwap Counterparty will be determined in the manner described below. S-61
Determination of Available Funds The amount of funds available for distribution on a Payment Date will generally equal the sum of Available Funds and amounts on deposit in the Reserve Account. “Available“Available Funds”for a Payment Date and the related Collection Period will equal the sum of: (a) Collections, (b) Advances required to be made by the Servicer, [(c)[and] (c) in the case of an Optional Purchase, the Optional Purchase Price]Price [and (d) any [Cap][Swap] PaymentsNet Swap Receipts received from the Swap Counterparty and [Cap][Swap]any Swap Termination Payments made by the [Cap Provider][Swap Counterparty] to the Issuing Entity]. The “Available“Available Funds Shortfall Amount”for a Payment Date and the related Collection Period will equal the amount by which Available Funds are less than the amount necessary to make the distributions in clauses (a) through [(c)][(d)] of the first paragraph under “—“— Deposits to the Distribution Accounts; Priority of Payments — SUBI Collection Account”in this prospectus supplement,Prospectus Supplement, except that the Optimal Principal Distributable Amount rather than the Monthly Principal Distributable Amount will be used for purposes of clause (d). Deposits to the Distribution Accounts; Priority of Payments SUBI Collection Account.On each Payment Date, the Servicer will allocate amounts on deposit in the SUBI Collection Account with respect to the related Collection Period as described below and will instruct the Titling Trustee, acting through the Trust Agent, to cause the following deposits and distributions to be made in the following amounts and order of priority: | | (a) | | to the Servicer, the Payment Date Advance Reimbursement, | | | | | (b) | | to the Servicer, the Servicing Fees, together with any unpaid Servicing Fees in respect of one or more prior Collection Periods, | | | | | [(c) | | [the net amount,Net Swap Payment, if any, to be paid under the Interest Rate Swap Agreement to the Swap Counterparty,] | | | | | (d)] | | to the Note Distribution Account, on a pro-rata basis (based, for the Noteholders, on the amounts distributable to each class) to pay (x) interest due on the outstanding Notes on that Payment Date (including any overdue interest), (y) [termination payments[any Senior Swap Termination Payments due under the [Swap]Interest Rate Swap Agreement to the [SwapSwap Counterparty] and (z)] to the extent permitted under applicable law, interest on any overdue interest thereon at the applicable Note Rate, | | | | | (e) | | [to the Note Distribution Account, (i) the Monthly Principal Distributable Amount, which will be allocated to pay principal first, to the Class A-1 Notes, until they have been paid in full, second, to the Class A-2 Notes, until they have been paid in full, third, to the Class A-3 Notes, until they have been paid in full and fourth, to the [Class A-4a]Class A-4 Notes and the [Class A-4b] Notes pro rata until they have been paid in full, unless the maturity of the Notes has been accelerated following an Indenture Default, or (ii) if the maturity of the Notes has been accelerated following an Indenture Default (unless and until such acceleration has been rescinded), the principal payments, (A) first to the Class A-1 Notes until they have been paid in full and then second, pro rata, to the Class A-2 Notes, the Class A-3 Notes the [Class A-4a Notes] and the [Class A-4b]Class A-4 Notes until they have been paid in full, then (B) to the Certificate Distribution Account, any remaining amounts to be allocated to pay principal and the Certificates until they have been paid in full. | | | | | (f) | | while any of the Notes remain outstanding and unless the maturity of the Notes has been accelerated following an Indenture Default, to the Reserve Account, the remaining amounts Excess Amounts, [; and] | | | (g) | | [to the extent necessary to meet the Reserve Amount Requirement (the “Excess Amounts”),Swap Counterparty, any Subordinated Swap Termination Payments for such Payment Date; and | | | | | [(g)(h)] | | to the Certificate Distribution Account, for the Depositor]Depositor. |
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The “Payment“Payment Date Advance Reimbursement”for a Payment Date will equal the sum of all (a) outstanding Sales Proceeds Advances (1) in respect of Leased Vehicles that were sold during the related Collection Period or (2) that have been outstanding as of the end of that Collection Period for at least 90 days and (b) Monthly Payment Advances as to which the related lessee has made all or a portion of the advanced Monthly Payment or that have been outstanding as of the end of the Collection Period for at least 90 days. S-62
Reserve Account.On each Payment Date, after taking into account amounts available to be distributed to Securityholders from the SUBI Collection Account [to pay any amounts due to the Swap Counterparty], the Servicer will allocate the Reserve Account Draw Amount on deposit in the Reserve Account with respect to the related Collection Period and will instruct the Indenture Trustee to make the following deposits and distributions in the following amounts (but not to exceed the Reserve Account Draw Amount) and order of priority: | | (a) | | [to pay any Net Swap Payments due to the Swap Counterparty;] | | | (b) | | to the Note Distribution Account, to pay, on a pro rata basis [(i)] any remaining interest due on the outstanding Notes on that Payment Date, and, to the extent permitted under applicable law, interest on any overdue interest at the applicable Note Rate, [and (ii) any remaining Senior Swap Termination Payments to the Swap Counterparty,] and | | | | | (b)(c) | | to the Note Distribution Account, the remaining Monthly Principal Distributable Amount, which will be allocated to pay principal on the Notes [andand to the Certificates]Certificates in the amounts and order of priority described under “—"— Deposits to the Distribution Accounts; Priority of Payments — SUBI Collection Account”above. |
On each Payment Date, if, after giving effect to the distributions set forth above, the amount on deposit in the Reserve Account exceeds the Reserve Account Requirement, any such excess shall be released to the Depositor. [InIn addition, if on any Payment Date on which the amount on deposit in the Reserve Account, after giving effect to all withdrawals therefrom and deposits thereto in respect of that Payment Date, is greater than or equal to the balance of the Notes then outstanding, such amount will be used to retire the then outstanding Notes.] Upon any such distributions, the Securityholders [and the Swap Counterparty] will have no further rights in, or claims to such amounts. Amounts distributed to the Depositor and to any holder of the Certificates will not be available in later periods to fund charge offs or the reserve account. See “Risk“Risk Factors — Payment priorities increase risk of loss or delay in payment to certain notes.”notes”in this Prospectus Supplement. Amounts distributed to the Depositor will be distributed to NMAC, the sole member of the Depositor, for general corporate uses. The final distribution to any Securityholder will be made only upon surrender and cancellation of the certificate representing its Securities at an office or agency of the Issuing Entity specified in the notice of termination. Any funds remaining in the Issuing Entity, after the related Trustee has taken certain measures to locate the related Securityholders and those measures have failed, will be distributed to the Depositor. None of the Securityholders, the Indenture Trustee, the Owner Trustee, the Depositor, or[or] the Servicer [or the Swap Counterparty] will be required to refund any amounts properly distributed or paid to them, whether or not there are sufficient funds on any subsequent Payment Date to make full distributions to the Securityholders. Payment Date Certificate The Issuing Entity will cause the Servicer to agree to deliver to the Indenture Trustee, the Owner Trustee and each paying agent, if any, on the tenth calendar day of each month or, if the tenth day is not a Business Day, the next succeeding Business Day, a certificate (the “Payment“Payment Date Certificate”) including, among other things, the following information with respect to such Payment Date and the related Collection Period and Accrual Period: | | (i) | | the amount of collections allocable to the 20[ ] -[ ] SUBI Certificate, | | | | | (ii) | | the amount of Available Funds, | | | | | (iii) | | the amount of interest accrued during the related Accrual Period on each class of Notes, | | | | | (iv) | | the Class A-1 Note Balance, the Class A-2 Note Balance, the Class A-3 Note Balance the Class [A-4a] Note Balance and the Class [A-4b]A-4 Note Balance, in each case before giving effect to payments on such Payment Date, | |
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| | (v) | | (A) the Reserve Account Requirement, (B) the amount deposited in the Reserve Account, if any, (C) the Reserve Account Draw Amount, if any, (D) the balance on deposit in the Reserve Account after giving effect to withdrawals therefrom and deposits thereto in respect of such Payment Date and (E) the change in such balance from the immediately preceding Payment Date, |
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| | | (vi) | | the amount being distributed to each class of the Noteholders (the “Note“Note Distribution Amount”) and to the Certificateholder (the “Certificate“Certificate Distribution Amount”), | | | | | (vii) | | the amount of the Note Distribution Amount allocable to interest on and principal of each class of the Notes and any Principal Carryover Shortfall for each class of the Notes, | | | | | (viii) | | the amount of any principal paid on, and Principal Carryover Shortfall for, the Certificates, | | | | | (ix) | | the Note Factor for each class of the Notes after giving effect to the distribution of the Note Distribution Amount, | | | | | (x) | | the amount of Residual Value Losses and Residual Value Surplus for such Collection Period, | | | | | (xi) | | the amount of Sales Proceeds Advances and Monthly Payment Advances included in Available Funds, | | | | | (xii) | | the amount of any Payment Date Advance Reimbursement for such Collection Period, | | | | | [(xiii) | | [the amount of the [Cap][Swap] PaymentsNet Swap Receipts and the [Cap][Swap]Swap Termination Payments received, if any, by the Issuing Entity from the [Cap Provider][Swap Counterparty]Counterparty under the [Cap][Swap]Interest Rate Swap Agreement,] | | | | | [(xiv) | | [the amount of the Net Swap Payments and the Swap Termination Payments, if any, due to the Swap Counterparty under the Interest Rate Swap Agreement,] | | | | | (xv) | | the Servicing Fee for such Collection Period, | | | | | (xvi) | | delinquency and loss information for the Collection Period, | | | | | (xvii) | | any material change in practices with respect to charge-offs, collection and management of delinquent Leases, and the effect of any grade period, re-aging, re-structure, partial payments or other practices on delinquency and loss experience, | | | | | (xviii) | | any material modifications, extensions or waivers to Lease terms, fees, penalties or payments during the Collection Period, | | | | | (xix) | | any material breaches of representations, warranties or covenants contained in the Leases, | | | | | (xx) | | any new issuance of notes or other securities backed by the SUBI Assets (if applicable), | | | | | (xxi) | | any material additions, removals or substitutions of SUBI Assets, repurchases of SUBI Assets, and | | | | | (xxii) | | any material change in the underwriting, origination or acquisition of Leases. |
On any Payment Date, the “Note Balance”Note Balance will equal the Initial Note Balance reduced by all payments of principal made on or prior to such Payment Date on the Notes. “Residual“Residual Value Loss”Loss” for each Leased Vehicle that is returned to the Servicer following the termination of the related Lease at its Lease Maturity Date or an Early Lease Termination, will mean the positive difference, if any, between (a) the Base Residual of such Leased Vehicle, and (b) the related Net Auction Proceeds plus all Net Insurance Proceeds. S-64
“Residual“Residual Value Surplus”Surplus” for each Leased Vehicle that is returned to the Servicer following the termination of the related Lease at its Lease Maturity Date or an Early Lease Termination, will mean the positive difference, if any, between (a) the Net Auction Proceeds from the sale of the Leased Vehicle plus all Net Insurance Proceeds and (b) the Base Residual of such Leased Vehicle. “Net“Net Auction Proceeds”Proceeds” will mean with respect to a Collection Period, all amounts received by the Servicer in connection with the sale or disposition of any Leased Vehicle that is sold at auction or otherwise disposed of by the Servicer during such Collection Period, other than Insurance Proceeds, reduced by the related Disposition Expenses and, in the case of a Matured Vehicle, any outstanding Sales Proceeds Advances. “Net“Net Insurance Proceeds”Proceeds” means, with respect to any Leased Vehicle, Lease or lessee, all related Insurance Proceeds, net of the amount thereof (a) applied to the repair of the related Leased Vehicle, (b) released to the lessee in accordance with applicable law or the customary servicing procedures of the Servicer or (c) representing other related expenses incurred by the Servicer not otherwise included in liquidation expenses or Disposition Expenses that are recoverable by the Servicer under the Servicing Agreement. 66
“Insurance Expenses”“Insurance Expenses” means, with respect to any Leased Vehicle, Lease or lessee, the amount thereof (a) applied to the repair of the related Leased Vehicle, (b) released to the lessee in accordance with applicable law or the customary servicing procedures of the Servicer or (c) representing other related expenses incurred by the Servicer not otherwise included in liquidation expenses or disposition expenses that are recoverable by the Servicer under the Servicing Agreement. Insurance Expenses will be reimbursable to the Servicer as a deduction from Net Insurance Proceeds. Each amount set forth pursuant to clauses (iii), (iv), (vi), (vii) and (viii) above will be expressed in the aggregate and as a dollar amount per $1,000 of original principal amount of a Note. The Indenture Trustee has no duty or obligation to verify or confirm the accuracy of any of the information or numbers set forth in the Payment Date Certificate delivered to the Indenture Trustee, and the Indenture Trustee shall be fully protected in relying upon the Payment Date Certificate. ADDITIONAL INFORMATION REGARDING THE SECURITIES Statements to Securityholders On each Payment Date, the Indenture Trustee will include with each distribution to each Noteholder of record, as of the close of business on the related Deposit Date (which shall be Cede as the nominee of DTC unless Definitive Notes are issued under the limited circumstances described in “Additional“Additional Information Regarding the Notes — Definitive Notes”in the prospectus)accompanying Prospectus) and each Rating Agency, an unaudited report (which may or may not be based on the Payment Date Certificate prepared by the Servicer), setting forth with respect to such Payment Date or the related Deposit Date or Collection Period, as the case may be, among other things, the items listed under clauses (i) through (xiv) in the first paragraph of “— “Distributions on the Notes—Payment Date Certificate”above. Copies of such statements may be obtained by the Noteholders or Note Owners by a request in writing addressed to the Indenture Trustee. In addition, within the prescribed period of time for tax reporting purposes after the end of each calendar year, the Indenture Trustee (during the term of the Indenture) will mail to each person who at any time during such calendar year was a Noteholder a statement containing such information as is reasonably necessary to permit the Noteholder to prepare its state and federal income taxes. Optional Purchase [InIn order to avoid excessive administrative expenses, the Servicer will be permitted at its option to purchase the 20[ ]-[ ] SUBI Certificate from the Issuing Entity on any Payment Date if, either before or after giving effect to any payment of principal required to be made on such Payment Date, (a) the [the current Securitization Valuesum of the Leases]then-outstanding Note Balance and the then-outstanding Certificate Balance is less than or equal to [5]%5% of the Securitization Valuesum of the Leases as ofInitial Note Balance and the Cut-Off DateInitial Certificate Balance or (b) the principal amount of the Notes has been reduced to zero. The exercise of that option by the Servicer is referred to in this prospectus supplementProspectus Supplement as an “Optional“Optional Purchase.”The purchase price for the 20[ ]-[ ] SUBI Certificate (the “Optional“Optional Purchase Price”) will equal the aggregate Securitization Value of the SUBI Assets (including Leases of Defaulted Vehicles) plus the appraised value of any other property (other S-65
(other than cash, in which case such value shall be the amount of such funds held in cash) held as part of the Issuing Entity’s Estate (less liquidation expenses); provided, however, that such price will be at least equal to the sum of the Note Balance plus accrued and unpaid interest on the Notes, the Servicing Fee (including any unpaid Servicing Fees for prior Collections Periods), and[all amounts payable to the Swap Counterparty under the Interest Rate Swap Agreement ]and unpaid portions of any outstanding Sales Proceeds Advances and Monthly Payment Advances. In connection with an Optional Purchase, the outstanding Notes, if any, will be redeemed on such Payment Date in whole, but not in part, for the Redemption Price. The “Redemption“Redemption Price”for the Notes will equal the aggregate outstanding Note Balance, plus accrued and unpaid interest thereon at the related Note Rates (including, to the extent allowed by law, interest on overdue interest, if applicable), to but not including the Payment Date fixed for redemption. The Owner Trustee and the Indenture Trustee (to the extent the Notes are still outstanding), will give written notice of redemption to each Securityholder. On the Payment Date fixed for redemption, the Notes will be due and payable at the Redemption Price, and no interest will accrue on the Notes after such Payment Date. If the 20[ ] -[ ] SUBI Certificate is held by the UTI Beneficiary after the exercise by the Servicer of the Optional Purchase, the SUBI Assets may be reallocated to the UTI at the discretion of the UTI Beneficiary.] It is expected that at such time as the Optional Purchase becomes available to the Servicer, only the Certificates will be outstanding. Advances On each Deposit Date, the Servicer will be obligated to make, by deposit into the SUBI Collection Account, a Monthly Payment Advance in respect of the unpaid Monthly Payment of certain Leased Vehicles, and a Sales Proceeds Advance in respect of the Securitization Value of Leases relating to certain Matured Vehicles. As used in this prospectusProspectus Supplement, an “Advance”the term“Advance” refers to either a Monthly Payment Advance or a Sales Proceeds Advance. The Servicer will be required to make an Advance only to the extent 67
that it determines that such Advance will be recoverable from future payments or collections on the related Lease or Leased Vehicle or otherwise. In making Advances, the Servicer will assist in maintaining a regular flow of scheduled payments on the Leases and, accordingly, in respect of the Securities, rather than guarantee or insure against losses. Accordingly, all Advances will be reimbursable to the Servicer, without interest, as described in this prospectus.Prospectus Supplement. Monthly Payment Advances.If a lessee makes a Monthly Payment that is less than the total Monthly Payment billed with respect to the lessee’s vehicle for the related Collection Period, the Servicer will advance the difference between (a) the amount of the Monthly Payment due and (b) the actual lessee payment received less amounts thereof allocated to monthly sales, use, lease or other taxes (each, a “Monthly“Monthly Payment Advance”). The Servicer will be entitled to reimbursement of all Monthly Payment Advances from (a) subsequent payments made by the related lessee in respect of the Monthly Payment due or (b) if the Monthly Payment Advance has been outstanding for at least 90 days after the end of the Collection Period in respect of which such Monthly Payment Advance was made, from the SUBI Collection Account. Sales Proceeds Advances.If the Servicer does not sell or otherwise dispose of a Leased Vehicle that became a Matured Vehicle by the end of the related Collection Period, on the related Deposit Date the Servicer will advance to the Issuing Entity an amount equal to, if the related Lease (i) terminated early but is not a Lease in default, the Securitization Value and (ii) relates to a Leased Vehicle that matured on its scheduled termination date, the Base Residual (each, a “Sales“Sales Proceeds Advance”). If the Servicer sells a Matured Vehicle after making a Sales Proceeds Advance, the Net Auction Proceeds will be paid to the Servicer up to the amount of such Sales Proceeds Advance, and the Residual Value Surplus will be deposited into the SUBI Collection Account. If the Net Auction Proceeds are insufficient to reimburse the Servicer for the entire Sales Proceeds Advance, the Servicer will be entitled to reimbursement of the difference from Collections, on the SUBI Assets, in respect of one or more future Collection Periods and retain such amount as reimbursement for the outstanding portion of the related Sales Proceeds Advance. If the Servicer has not sold a Matured Vehicle within 90 days after it has made a Sales Proceeds Advance, it may be reimbursed for that Sales Proceeds Advance from amounts on deposit in the SUBI Collection Account. Within six months of receiving that reimbursement, if the related Leased Vehicle has not been sold, the Servicer shall, if permitted by applicable law, cause that Leased Vehicle to be sold at auction and shall remit the proceeds associated with the disposition of that Leased Vehicle to the SUBI Collection Account. S-66
For more information regarding the Servicer’s obligation to deposit Advances into the SUBI Collection Account, you should refer to “Description“Description of the Servicing Agreement — Advances”in the prospectus.accompanying Prospectus. Compensation for Servicer and Administrative Agent As Servicer, NMAC will be entitled to compensation for the performance of its servicing obligations with respect to the SUBI Assets under the Servicing Agreement. NMAC will also perform the administrative obligations required to be performed by the trust or the owner trustee under the indenture and the trust agreement. As Servicer and Administrative Agent, NMAC will be entitled to receive a fee in respect of the SUBI Assets equal to, for each Collection Period, one-twelfth of the product of (a) 1.00% and (b) the aggregate Securitization Value of all Leases as of the first day of that Collection Period (the “Servicing“Servicing Fee”). The Servicing Fee will be payable on each Payment Date and will be calculated and paid based upon a 360-day year consisting of twelve 30-day months. As Servicer, NMAC will also be entitled to additional compensation as described under “Description“Description of the Servicing Agreement — Servicing Compensation”in the prospectus.accompanying Prospectus. Fees and Expenses Set forth below is a list of all fees and expenses payable on each Payment Date out of Available Funds and amounts on deposit in the Reserve Account for the related Collection Period. 68
| | | | | | | | | | | | | Party | | | | Type of Fee | | Amount of Fee | | Receiving Fee | | Priority in Distribution | Servicing Fee1(1) | | One-twelfth of the product of (a) [ ]%1.00% and (b) the aggregate Securitization Value of all Leases as of the first day of the Collection Period or, in the case of the first Payment Date, atas of the Cutoff DateDate. | | Servicer and Administrative Agent | | Payable prior to payment of interest and principal on the Notes | | | | | | | | [Net amounts due to the Swap Counterparty] 2
| | [Net amount due on each Payment Date from the Issuing Entity to the Swap Counterparty under the Swap Agreement for the related Collection Period] | | [Swap Counterparty] | | [Payable Prior to payment of interest and principal on the Notes] | | | | | | | | Reimbursable
Expenses3(2) | | Costs and expenses incurred by the Servicer in a legal proceeding to protect or otherwise enforce the rights of the Titling Trust or the Titling Trustee in a Lease or Leased Vehicle. | | Servicer | | Payable Priorprior to payment of interest and principal on the Notes | | | | | | | | [Swap termination
payments] 2
| | [Market value of the Swap Agreement based on market quotations of the cost of entering into interest rate swap transactions with the same terms and conditions that would have the effect of preserving the full payment obligations of the parties in accordance with the procedures set forth in the Swap Agreement.] | | [Swap Counterparty] | | [Pari passu with payment of interest on the Notes] |
| | | | (1) | | The formula for calculating the Servicing Fee may not be changed without the consent of all of the holders of the Notes and Certificates then outstanding and delivery of an opinion of counsel as to certain tax matters. See “Description“Description of the Servicing Agreement — Amendment”in the prospectus.accompanying Prospectus. The fees and expenses of the Indenture Trustee, the Owner Trustee and the Titling Trustee will not be paid out of Available Funds on each Payment Date. Instead, such fees and expenses will be paid by NMAC, both as the Servicer, pursuant to the Servicing Agreement and as the Administrative Agent, pursuant to the Trust Administration Agreement. | | | [(2) | | The Swap Agreement may be amended if Standard & Poor’s delivers a letter to the Indenture Trustee to the effect that the amendment will not result in a qualification, reduction or withdrawal of its then-current rating of any class of Notes, and if the Indenture Trustee has provided Moody’s with 10 days prior written notice of the amendment and Moody’s shall not have notified the Indenture Trustee or the Owner Trustee that the amendment might or would result in the qualification, reduction or withdrawal of the rating it has currently assigned to any class of Notes. See “Description of the Interest Rate Swap Agreement — Modification and Amendment of Swap Agreement.”] | | (3) | | Reimbursable Expenses will be paid to the Servicer on any day after the Servicer supplies the Titling Trustee and Indenture Trustee with an officer’s certificate setting forth the calculations for such Reimbursable Expenses. See “Security“Security for the Notes — The Accounts — The SUBI Collection Account — Withdrawals from the SUBI Collection Account.”Account”in this Prospectus Supplement. The formula for calculating Reimbursable Expenses may not be changed without the consent of all of the holders of the Notes and Certificates then outstanding and delivery of an opinion of counsel as to certain tax matters. See “Description“Description of the Servicing Agreement — Amendment”in the prospectus.accompanying Prospectus. |
MATERIAL FEDERAL INCOME TAX CONSEQUENCES In the opinion of Mayer Brown Rowe & Maw LLP, special counsel to the Depositor, for federal income tax purposes, the Notes will be classified as debt and the Issuing Entity will not be treated as an association or publicly traded partnership taxable as a corporation. See the discussion under “Material“Material Federal Income Tax Consequences”in the accompanying prospectus. CERTAIN ERISA CONSIDERATIONS
[THE FOLLOWING DISCLOSURE ASSUMES THAT THE NOTES QUALIFY AS DEBT FOR ERISA PURPOSES]Prospectus.
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ERISA CONSIDERATIONS Subject to important considerations described below and under “Certain “ERISA Considerations”in the accompanying prospectus,Prospectus, the notes are eligible for purchase by pension, profit-sharing or other employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended(“ERISA”), as well as individual retirement accounts, Keogh plans and other plans subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”“Code”), as well as any entity holding “plan assets” of any of the foregoing (each, a “Benefit“Benefit Plan”).] [AlthoughAlthough there is little guidance on the subject, assuming the notes constitute debt for local law purposes, the Issuing Entity believes that, at the time of their initial issuance, the notes should be treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulation.Assets Regulation (as defined in“ERISA Considerations”in the accompanying Prospectus). This determination is based in part upon the traditional debt features of the notes, including the reasonable expectation of purchasers of notes that the notes will be repaid when due, as well as the absence of conversion rights, warrants and other typical equity features. The debt treatment of the notes for ERISA purposes could change if the Issuing Entity incurs losses. This risk of recharacterization is enhanced for notes that are subordinated to other classes of securities.] [ByBy acquiring a note, each purchaser and transferee will be deemed to represent, warrant and covenant that either (i) it is not acquiring the note (or any interest therein) with the assets of a Benefit Plan;Plan or any other plan which is subject to applicable law that is substantially similar to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code; or (ii) the acquisition, holding and disposition of the note will not give rise to a nonexempt prohibited transaction under Section 406 of ERISA, or Section 4975 of the Code.]Code or any substantially similar law. UNDERWRITING Subject to the terms and conditions set forth in an Underwriting Agreement (the “Underwriting“Underwriting Agreement”), the Depositor has agreed to sell to each of the Underwriters named below (collectively, the “Underwriters”“Underwriters”), and each of the Underwriters has severally agreed to purchase, the principal amount of Notes set forth opposite its name below: | | | | | | | | | | | | | Principal | | Principal | | Principal | | Principal | | | Amount | | Amount of | | Amount of | | Amount of | | | of Class A-1 | | Class A-2 | | Class A-3 | | Class A-4 | | Underwriters | | Notes | | Notes | | Notes | | Notes | | Citigroup Global Markets Inc. | | | | | | | | | | J.P. Morgan Securities Inc. | | Principal | | | Principal | | | Principal | | | Principal | | | Principal | | | | Amount of | | | Amount of | | | Amount of | | | Amount of | | | Amount of | | Underwriters | | Class [A-1] Notes | | | Class [A-2] Notes | | | Class [A-3] Notes | | | Class[A-4a] Notes | | | Class [A-4b] Notes | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | Deutsche Bank Securities Inc. | | | | | | | | | | HSBC Securities (USA) Inc. | | | | | | | | | | Merrill Lynch, Pierce, Fenner & Smith Incorporated | | | | | | | | | | Greenwich Capital Markets, Inc. | | | | | | | | | | Total | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | | | | |
In the Underwriting Agreement, the Underwriters have agreed, subject to the terms and conditions set forth in the Underwriting Agreement, to purchase all of the Notes if any of the Notes are purchased. This obligation of the Underwriters is subject to specified conditions precedent set forth in the Underwriting Agreement. [TheThe Depositor has been advised by the Underwriters that they propose initially to offer the Notes to the public at the prices set forth on the cover of this prospectus supplement,Prospectus Supplement, and to specified dealers at that price less the initial concession not in excess of [ ]% of the principal amount of the Notes per Class [A-1]A-1 Note, [ ]% per Class [A-2]A-2 Note, [ ]% per Class [A-3] Note, [ ]% per Class [A-4a]A-3 Note and [ ]% per Class [A-4b] Note,.A-4 Note. The Underwriters may allow, and those dealers may reallow, a concession not in excess of [ ]% per Class [A-1]A-1 Note, [ ]% per Class [A-2]A-2 Note, [ ]% per Class [A-3] Note, [ ]% per Class [A-4a]A-3 Note and [ ]% per Class [A-4b]A-4 Note to some other dealers. After the initial public offering of the Notes, the public offering price and those concessions may be changed.] The Depositor and NMAC have agreed to indemnify the Underwriters against specified liabilities, including liabilities under the Securities Act, or to contribute to payments which the Underwriters may be required to make in respect thereof. However, in the opinion of the SEC, certain indemnification provisions for liability arising under the federal securities laws 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. S-68
The Notes are new issues of securities with no established trading markets. The Depositor has been advised by the Underwriters that they intend to make a market in the Notes of each class, in each case as permitted by applicable laws and regulations. The Underwriters are not obligated, however, to make a market in the Notes of any class, and that market-making may be discontinued at any time without notice at the sole discretion of the Underwriters. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Notes of any class. 70
The Issuing Entity may, from time to time, invest funds in the Accounts in EligiblePermitted Investments acquired from the Underwriters. NMAC or its affiliates may apply all or any portion of the net proceeds of the sale of the 20[ ] -[ ] SUBI Certificate to the Depositor to the repayment of indebtedness, including “warehouse” indebtedness secured by leases and/or to reallocate leases sold into a lease purchase facility. One or more of the Underwriters (or (a) their respective affiliates or (b) entities for which their respective affiliates act as administrative agent and/or provide liquidity lines) may have acted as a “warehouse” lender or purchaser to NMAC or its affiliates, and may receive a portion of such proceeds as repayment of such “warehouse” indebtedness or as repurchase proceeds. Additionally, certain of the Underwriters and their affiliates engage in transactions with and perform services for NMAC and its affiliates in the ordinary course of business and have engaged, and may in the future engage, in commercial banking and investment banking transactions with NMAC and its affiliates. The Underwriters have advised the Depositor that in connection with the offering of the Notes, the Underwriters may engage in overallotment transactions, stabilizing transactions or syndicate covering transactions in accordance with Regulation M under the 1934 Act. Overallotment involves sales in excess of the offering size, which creates a short position for the Underwriters. Stabilizing transactions involve bids to purchase the Notes in the open market for the purpose of pegging, fixing or maintaining the price of the Notes. Syndicate covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. Overallotment, stabilizing transactions and syndicate covering transactions may cause the price of the Notes to be higher than it would otherwise be in the absence of those transactions. Neither the Depositor nor the Underwriters makes any representation or prediction as to the direction or magnitude of any of that effect on the prices for the Notes. Neither the Depositor nor the Underwriters represent that the Underwriters will engage in any such transactions. If the Underwriters engage in such transactions, they may discontinue them at any time. Rule 15c6-1 under the 1934 Act generally requires trades in the secondary market to settle in three Business Days, unless the parties to such trade expressly agree otherwise. Because delivery of Notes to purchasers hereunder will settle more than three Business Days after the date hereof, purchasers hereunder who wish to trade notes in the secondary market on the date hereof will be required to specify an alternative settlement cycle with their secondary purchasers to prevent a failed settlement of the secondary purchase. Purchasers hereunder who wish to make such secondary trades on the date hereof are encouraged to consult their own advisors. Each Underwriter will represent that (i) it has not offered or sold and will not offer or sell, prior to the date six months after their date of issuance, any Notes to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted in and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, as amended; (ii) it has complied and will comply with all applicable provisions of the Financial Services and Markets Act 2000 (the “FSMA”“FSMA”) with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom; and (iii) it will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any Securities in circumstances in which Section 21(1) of the FSMA does not apply to the Depositor. In connection with any sales of securities outside of the United States, the Underwriters may act through one or more of their affiliates. In addition, NILT Trustthe UTI Beneficiary and Nissan Auto Leasing LLC IIthe Depositor are the underwriters with respect to the 20[ ] -[ ] SUBI Certificate. The Swap Counterparty is affiliated with one of the Underwriters of the Notes. S-69
MATERIAL LITIGATION No litigation or governmental proceeding is pending, or has been threatened, against the UTI Beneficiary, the Depositor or the Issuing Entity. NMAC and the Titling Trust are parties to, and are vigorously defending, numerous legal proceedings, all of which NMAC and the Titling Trust, as applicable, believe constitute ordinary routine litigation incidental to the business and activities conducted by NMAC and the Titling Trust. Some of the actions naming NMAC and/or the Titling Trust are or purport to be class action suits. In the opinion of management of NMAC, the amount of ultimate liability on pending claims and actions as of the date of this prospectus supplementProspectus Supplement should not have a material adverse effect on its condition, financial or otherwise, or on the Titling Trust, the Titling Trust Assets or the SUBI. However, there can be no assurance in this regard or that future litigation will not adversely affect NMAC or the Titling Trust. See “Risk“Risk Factors — Adverse events with respect to Nissan Motor Acceptance Corporation, its affiliates or third party providersservicers to whom Nissan Motor Acceptance Corporation outsources its activities may affect the timing of payments on your notes or have other adverse effects on your notes”in the accompanying prospectus.Prospectus. 71
CERTAIN RELATIONSHIPS The Depositor is a wholly-owned subsidiary of NMAC. The sole beneficiary of the Titling Trust is the UTI Beneficiary. The sole beneficiary of the UTI Beneficiary is NMAC. In addition to the agreements described in the prospectusaccompanying Prospectus and this prospectus supplement,Prospectus Supplement, NMAC may from time to time enter into agreements in the ordinary course of business or that are on arms’ length terms with its parent Nissan North America, Inc. [Describe any agreements that are not arms’ length and outside the ordinary course of business.]. RATINGS OF THE NOTES [TheThe Securities will be issued only if the Class [A-1]A-1 Notes are rated in the highest short-term rating category and the Class [A-2]A-2 Notes, the Class [A-3] Notes, the Class [A-4a]A-3 Notes and the Class [A-4b]A-4 Notes are rated in the highest long-term category.] The ratings of the Notes will be based primarily upon the value of the Leases and the Leased Vehicles, the Reserve Account, the Certificates and the terms of the Securities. There can be no assurance that any such rating will not be lowered or withdrawn by the assigning Rating Agency if, in its judgment, circumstances so warrant. If a rating with respect to any class of Notes is qualified, reduced or withdrawn, no person or entity will be obligated to provide any additional credit enhancement with respect to the Notes or any other Securities that have been rated. A rating is not a recommendation to buy, sell or hold the Notes, inasmuch as such rating does not comment as to market price or suitability for a particular investor. The rating of the Notes address the likelihood of the payments on the Notes pursuant to their terms. There can be no assurance as to whether any rating agency other than the assigning Rating Agency will rate the Notes or, if one does, what rating will be assigned by such other rating agency. A rating on the Notes by another rating agency, if assigned at all, may be lower than the ratings assigned to the Notes by the assigning Rating Agency. NMAC has paid a fee to the assigning Rating Agencies to rate the Notes. Although no contractual arrangements are in place, we believe that the assigning Rating Agencies will continue to monitor the transaction while the Notes are outstanding. LEGAL MATTERS In addition to the legal opinions described in the accompanying prospectus,Prospectus, certain legal matters relating to the Notes and federal income tax and other matters will be passed upon for the Depositor by Mayer,[Mayer Brown RoweLLP]. [Richards, Layton & Maw LLP. [ Finger, P.A.] will act as Delaware counsel to the Depositor. [ ][Orrick, Herrington & Sutcliffe LLP] will act as counsel for the Underwriters. 72S-70
INDEX OF PRINCIPAL TERMS | | | | | | [2002] Master Agreement | | | S-57 | | [Cap][Swap] Event of Default | | | S-58 | | [Cap][Swap] Termination | | | S-58 | | [Cap][Swap] Termination Events | | | S-58 | | [Cap][Swap] Termination Payment | | | S-59 | | 0% Prepayment Assumption | | | S-46 | | | 100% Prepayment Assumption | | | S-45 | S-35 | | 1934 Act | | S-22 | S-1920[ ]-[ ] SUBI Certificate | | S-20 | | 25% Prepayment Assumption | | S-35 | S-4650% Prepayment Assumption | | S-35 | | ABS, | | | S-45 | S-35 | | Accounts | | | S-62 | S-60 | | Accrual Period | | | S-53 | S-52 | | Adjusted Capitalized Cost | | | S-24 | S-28 | | Administrative Agent | | | S-21 | S-23 | | Administrative Lien | | S-28 | S-23Advance | | S-65 | | ALG | | S-30 | S-26ALG Residual | | S-30 | | Available Funds | | | S-63 | S-61 | | Available Funds Shortfall Amount | | | S-63 | S-61 | | Available Principal Distribution Amount | | S-55 | S-55Bank | | S-24 | | Base Residual | | | S-26 | S-30 | | Basic Documents | | | S-19 | S-21 | | Basic Servicing Agreement | | | S-21 | S-25 | | Benefit Plan | | | S-69 | S-67 | | Business Day | | | S-53 | S-51 | Cap AgreementCalculation Agent | | | S-57 | | Cap Payment | | | S-54 | | Cap Provider | | | S-54 | | Cap Rate | | | S-54 | S-53 | | Casualty Termination | | | S-23 | S-27 | | Cede | | S-47 | S-48Certificate Balance | | S-57 | | Certificate Distribution Account | | | S-61 | S-59 | | Certificate Distribution Amount | | | S-65 | S-63 | | Certificateholder | | | S-18 | S-20 | | Certificates | | | S-18 | S-20 | | Closing Date | | | S-18 | S-20 | | Code | | | S-69 | S-67 | | Collection Period | | | S-63 | S-61 | | Collections | | | S-63 | S-61 | | Contingent and Excess Liability Insurance | | S-58 | S-61Contract Residual | | S-30 | | Credit Termination | | | S-23 | S-27 | | Cutoff Date | | | S-20 | S-22 | | Dealers | | | S-18 | S-20 | | Defaulted Vehicle | | | S-60 | S-58 | | Definitive Notes | | | S-52 | S-51 | | Deposit Date | | | S-53 | S-51 | | Depositor | | | S-18 | | Description of Indenture | | | S-21 | S-20 | | Designated LIBOR Page | | | S-54 | S-53 | | Determination Date | | | S-63 | S-61 | | Distribution Accounts | | | S-61 | S-59 | | DTC | | | S-48 | S-47 | | Early Lease Termination | | | S-23 | S-27 | | Early Termination Charge | | | S-24 | | Early Termination Date | | | S-58 | S-28 | | ERISA | | S-67 | S-69ERISA Considerations | | S-67 | | Excess Amounts | | | S-63 | S-59 | | Excess Mileage and Excess Wear and Tear Charges | | | S-41 | S-40 | | FICO Scores | | | S-24 | S-28 | | Final Scheduled Payment Date | | | S-30 | | Floating Rate Notes | | | S-53 | | Force Majeure Event | | | S-58 | | FSMA | | | S-70 | | Illegality | | | S-58 | | Indenture | | | S-19 | | Indenture Default | | | S-56 | | Indenture Trustee | | | S-19 | | Initial Note Balance | | | S-18 | | Insurance Expenses | | | S-66 | | Interest Determination Date | | | S-53 | | Interest Reset Date | | | S-53 | | ISDA | | | S-57 | | Issuing Entity | | | S-18 | | Issuing Entity’s Estate | | | S-20 | | Lease Maturity Date | | | S-23 | | Lease Rate | | | S-23 | | Lease Term | | | S-22 | | Leased Vehicles | | | S-18 | | Leases | | | S-18 | | Lessee Initiated Early Termination | | | S-23 | | LIBOR | | | S-53 | | Liquidation Proceeds | | | S-56 | | London Business Day | | | S-54 | | Matured Vehicle | | | S-60 | | Maximum Residualized MSRP | | | S-26 | | Monthly Payment | | | S-22 | | Monthly Principal Distributable Amount | | | S-55 | | Monthly Remittance Condition | | | S-60 | | Moody’s | | | S-18 | | MRM ALG Residual | | | S-26 | | MSRP | | | S-26 | | NALT 2000-A | | | S-49 | | Net Auction Proceeds | | | S-65 | | Net Insurance Proceeds | | | S-65 | | Net Liquidation Proceeds | | | S-55 | | Nissan | | | S-52 | | NMAC | | | S-18 | | Note Balance | | | S-65 | | Note Distribution Account | | | S-61 | | Note Distribution Amount | | | S-65 | | Note Factor | | | S-48 | | Note Final Scheduled Payment Date | | | S-56 | | Note Owner | | | S-52 | | Note Rate | | | S-53 | | Noteholders | | | S-18 | S-34 |
73S-71
| | | | | Floating Rate Notes | | S-52 | | FSMA | | S-69 | | Global Securities | | A-1 | | HSBC Holdings | | S-24 | | HSBC USA | | S-24 | | IFS | | S-20 | | Indenture | | S-21 | | Indenture Default | | S-34 | | Indenture Trustee | | S-21 | | Initial ALG Residual | | S-40 | | Initial Certificate Balance | | S-20 | | Initial Note Balance | | S-20 | | Insurance Expenses | | S-64 | | Interest Determination Date | | S-52 | | Interest Rate Swap Agreement | | S-53 | | Interest Reset Date | | S-52 | | Issuing Entity | | S-20 | | Issuing Entity’s Estate | | S-22 | | Lease Maturity Date | | S-27 | | Lease Rate | | S-27 | | Lease Term | | S-27 | | Leased Vehicles | | S-20 | | Leases | | S-20 | | Lessee Initiated Early Termination | | S-27 | | LIBOR | | S-52 | | Liquidation Proceeds | | S-56 | | London Business Day | | S-53 | | Matured Vehicle | | S-58 | | Monthly Payment | | S-27 | | Monthly Payment Advance | | S-65 | | Monthly Principal Distributable Amount | | S-55 | | Monthly Remittance Condition | | S-58 | | Moody’s | | S-21 | | MRM Residual | | S-30 | | MSRP | | S-49 | | NALT 2000-A | | S-48 | | Net Auction Proceeds | | S-64 | | Net Insurance Proceeds | | S-64 | | Net Liquidation Proceeds | | S-56 | | Net Swap Payment | | S-54 | | Net Swap Receipts | | S-54 | | NMAC | | S-20 | | NML | | S-50 | | Note Balance | | S-55 | | Note Distribution Account | | S-59 | | Note Distribution Amount | | S-63 | | Note Factor | | S-47 | | Note Final Scheduled Payment Date | | S-56 | | Note Owner | | S-51 | | Note Rate | | S-52 | | Noteholders | | S-20 | | Notes | | | S-18 | S-20 | | Optimal Principal Distributable Amount | | S-55 | S-55Optional Purchase | | S-65 | | Optional Purchase Price | | S-65 | | Other SUBI | | | S-18 | S-20 | | Owner Trustee | | | S-19 | S-21 | | Payment Date | | S-51 |
S-72
| | S-53 | | | Payment Date Advance Reimbursement | | | S-64 | S-62 | | Payment Date Certificate | | S-63 | S-64Permitted Investments | | S-60 | | Principal Carryover Shortfall | | | S-55 | | | Principal Distribution Amount | | | S-55 | | | Rating Agencies | | | S-18 | S-21 | | Reallocation Payments | | | S-55 | S-56 | | Redemption Price | | | S-66 | S-65 | | Reimbursable Expenses | | | S-61 | S-58 | | Repurchase Payment | | | S-25 | S-30 | | Required Deposit Rating | | | S-62 | S-60 | | Reserve Account | | | S-61 | S-59 | | Reserve Account Draw Amount | | | S-61 | S-59 | | Reserve Account Requirement | | | S-61 | S-59 | | Residual Value Loss | | | S-65 | S-64 | | Residual Value Surplus | | | S-65 | S-64 | | Sales Proceeds Advance | | | S-67 | S-66 | | SEC | | | S-19 | S-22 | | Securities | | S-20 | S-18Securitization Rate | | S-30 | | Securitization Value | | | S-26 | S-30 | | Securityholders | | S-20 | S-18Senior Swap Termination Payment | | S-54 | | Servicer | | | S-21 | S-25 | | Servicing Agreement | | | S-21 | S-25 | | Servicing Fee | | | S-67 | S-66 | | Servicing Supplement | | | S-21 | S-25 | | Spread | | | S-53 | S-52 | | Standard & Poor’s | | | S-18 | S-20 | | SUBI | | | S-18 | S-20 | | SUBI Assets | | | S-18 | | SUBI Certificate | | | S-18 | S-20 | | SUBI Certificate Transfer Agreement | | | S-22 | S-26 | | SUBI Collection Account | | | S-60 | S-58 | | SUBI Supplement | | | S-21 | S-25 | | SUBI Trust Agreement | | | S-21 | S-25 | Subordinated Swap AgreementTermination Payment | | | S-57 | S-54 | | Swap Counterparty | | | S-54 | S-53 | | Swap Termination Payment | | | S-9 | | Swap Receipt | | | S-9 | | Tax Event | | | S-58 | | Tax Event Upon Merger | | | S-58 | S-54 | The Trust AgreementDepositor | | | S-21 | S-47 | | Titling Trust | | | S-18 | S-20 | | Titling Trust Agreement | | | S-21 | S-25 | | Titling Trustee | | | S-21 | S-25 | | Trust Administration Agreement | | | S-21 | S-23 | | Trust Agent | | | S-21 | S-25 | | Trust Agreement | | | S-19 | S-21 | | Trust SUBI Certificate Transfer Agreement | | | S-22 | S-26 | | Trustees | | S-21 | S-19[U.S. Bank] | | S-23 | | Underwriters | | | S-69 | S-67 | | Underwriting Agreement | | | S-69 | S-67 | | UTI | | | S-18 | S-20 | | UTI Beneficiary | | | S-18 | S-20 |
74S-73
ANNEXAPPENDIX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES Except in specified circumstances, the globally offered Notes (the “Global“Global Securities”) will be available only in book-entry form. Investors in the Global Securities may hold those Global Securities through DTC, Clearstream Banking Luxembourg or Euroclear. The Global Securities will be tradable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through Clearstream Banking Luxembourg and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice (i.e., three calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedure applicable to U.S. corporate debt obligations and prior asset-backed securities issues. Secondary cross-market trading between Clearstream Banking Luxembourg or Euroclear and DTC Participants holding securities will be effected on a delivery-against-payment basis through the depositaries of Clearstream Banking Luxembourg and Euroclear (in that capacity) and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless those holders meet specified requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. Initial Settlement All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors’ interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, Clearstream Banking Luxembourg and Euroclear will hold positions on behalf of their participants through their depositaries, which in turn will hold those positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow DTC settlement practice. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through Clearstream Banking Luxembourg or Euroclear accounts will follow the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no “lock-up” or restricted period. Global Securities will be credited to securities custody accounts on the settlement date against payment in same-day funds. Secondary Market Trading Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date. Trading between DTC Participants.Secondary market trading between DTC Participants will be settled using the procedures applicable to prior asset-backed securities issues in same-day funds. Trading between Clearstream Banking Luxembourg and/or Euroclear Participants.Secondary market trading between Clearstream Banking Luxembourg Participants or Euroclear Participants will be settled using the procedures applicable to conventional eurobonds in same-day funds. Trading between DTC Seller and Clearstream Banking Luxembourg or Euroclear Participants.When Global Securities are to be transferred from the account of a DTC Participant to the account of a Clearstream Banking Luxembourg Participant or a Euroclear A-1
Participant, the purchaser will send instructions to Clearstream Banking Luxembourg or Euroclear through a Clearstream Banking Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. Clearstream Banking Luxembourg or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date, on the basis of the actual number of days in that accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment A-1
will then be made by the respective Depositary to the DTC Participant’s account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the Clearstream Banking Luxembourg Participant’s or Euroclear Participant’s account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the Clearstream Banking Luxembourg or Euroclear cash debt will be valued instead as of the actual settlement date. Clearstream Banking Luxembourg Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream Banking Luxembourg or Euroclear. Under this approach, they may take on credit exposure to Clearstream Banking Luxembourg or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if Clearstream Banking Luxembourg or Euroclear has extended a line of credit to them, Clearstream Banking Luxembourg Participants or Euroclear Participants can elect not to preposition funds and allow that credit line to be drawn upon to finance settlement. Under this procedure, Clearstream Banking Luxembourg Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they clear the overdraft when the Global Securities are credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of those overdraft charges, although this result will depend on each Clearstream Banking Luxembourg Participant’s or Euroclear Participant’s particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of Clearstream Banking Luxembourg Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. Trading between Clearstream Banking Luxembourg or Euroclear Seller and DTC Purchaser.Due to time zone differences in their favor, Clearstream Banking Luxembourg Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to Clearstream Banking Luxembourg or Euroclear through a Clearstream Banking Luxembourg Participant or Euroclear Participant at least one business day prior to settlement. In these cases, Clearstream Banking Luxembourg or Euroclear will instruct the Relevant Depositary, as appropriate, to deliver the Global Securities to the DTC Participant’s account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment to and excluding the settlement date on the basis of the actual number of days in that accrual period and a year assumed to consist of 360 days. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the Clearstream Banking Luxembourg Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the Clearstream Banking Luxembourg Participant’s or Euroclear Participant’s account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream Banking Luxembourg Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back valuation will extinguish any overdraft incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream Banking Luxembourg Participant’s or Euroclear Participant’s account would instead be valued as of the actual settlement date. A-2
Finally, day traders that use Clearstream Banking Luxembourg or Euroclear and that purchase Global Securities from DTC Participants for delivery to Clearstream Banking Luxembourg Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: | | (1) | | borrowing through Clearstream Banking Luxembourg or Euroclear for one day (until the purchase side of the day trade is reflected in their Clearstream Banking Luxembourg or Euroclear accounts) in accordance with the clearing system’s customary procedures; |
A-2
| | | (2) | | borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their Clearstream Banking Luxembourg or Euroclear account in order to settle the sale side of the trade; or | | | | | (3) | | staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the Clearstream Banking Luxembourg Participant or Euroclear Participant. |
Material U.S. Federal Income Tax Documentation Requirements A beneficial owner of Global Securities holding securities through Clearstream Banking Luxembourg or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. persons, unless (1) each clearing system, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business in the chain of intermediaries between that beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (2) that beneficial owner takes appropriate steps to obtain an exemption or reduced tax rate. See “Material“Material Federal Income Tax Consequences”in the prospectus.accompanying Prospectus. A-3
PROSPECTUSAPPENDIX B
STATIC POOL INFORMATION REGARDING CERTAIN PREVIOUS SECURITIZATIONS The information presented in this Appendix B, to the extent such information relates to NMAC’s experience with respect to its securitized portfolios of leases established prior to January 1, 2006, is not deemed to be part of this Prospectus Supplement, the accompanying Prospectus or the registration statement. Characteristics of the Leases The leases allocated to the SUBI in each of NMAC’s securitized portfolios consisted of leases originated by a Dealer in such Dealer’s ordinary course of business and assigned to the Titling Trust on or prior to the applicable Cutoff Date, in accordance with the underwriting procedures described under “Nissan Motor Acceptance Corporation — Lease Underwriting Procedures” in the accompanying Prospectus. As of the relevant Cutoff Date, the leases in the securitized portfolios consisted of the following characteristics: B-1
PROSPECTUS Nissan Auto Lease Trusts
Issuing Entities
Nissan Auto Leasing LLC II,
Depositor
Nissan Motor Acceptance Corporation,
Servicer/Sponsor
Asset Backed Notes
The Issuing Entities:Entities | 1. | | A new issuing entity will be formed to issue each series of notes. | | | | 2. | | The property of each issuing entity will consist of: |
| | • | | a certificate evidencing a 100% beneficial interest in a pool of closed-end Nissan and Infiniti vehicle leases, the related Nissan and Infiniti leased vehicles, all proceeds of those leased vehicles, all of the dealers’ rights with respect to those leases and leased vehicles, | | | | | • | | amounts deposited in any reserve or similar account (including investment earnings, net of losses and investment expenses, on amounts on deposit therein), | | | | | • | | the proceeds of any hedge or similar agreement and the rights of the issuing entity under such agreement, | | | | | • | | the rights of the related indenture trustee as secured party under a back-up security agreement with respect to the certificate and the undivided beneficial interest in the related pool assets, | | | | | • | | the rights of the issuing entity to funds on deposit from time to time in separate trust accounts specified in the applicable prospectus supplement, | | | | | • | | the rights of the depositor, as transferee under a certain certificate transfer agreement, | | | | | • | | the rights of the issuing entity, as transferee under a certain certificate transfer agreement, | | | | | • | | the rights of the issuing entity and the indenture trustee under any credit enhancement issued with respect to any particular series or class, | | | | | • | | the rights of the issuing entity as a third-party beneficiary of the related servicing agreement, including the right to certain advances from the servicer, to the extent relating to the pool assets, and a certain trust agreement, and | | | | | • | | all proceeds of the foregoing. |
1
The Notes: | 1. | | will be asset-backed securities sold periodically in one or more series, | | | | 2. | | will be paid only from the assets of the related issuing entity, and | | | | 3. | | will be issued as part of a designated series that may include one or more classes. |
Before you decide to invest in any of the notes, please read this prospectus and the prospectus supplement that will be attached to this prospectus. There are material risks in investing in the notes. Please read the risk factors beginning on page [___][8] of this prospectus and in the applicable prospectus supplement. The notes will represent obligations of the related issuing entity only and will not represent obligations of or interests in Nissan Motor Acceptance Corporation, Nissan Auto Leasing LLC II, Nissan-Infiniti LT or any of their other respective affiliates. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes or determined that this prospectus or the applicable prospectus supplement is accurate or complete. Any representation to the contrary is a criminal offense.offense. The amounts, prices and terms of each offering of notes will be determined at the time of sale and will be described in a prospectus supplement that will be attached to this prospectus. This prospectus may be used to offer and sell any series of notes only if accompanied by the prospectus supplement for that series. The date of this prospectus is [,]. ]. 2
Prospectus | | | | | | | Summary of Terms | | | 35 | | | Risk Factors | | | 911 | | | | | 20 | | | | | 21 | | | | | 21 | | | | | 23 | | | The Issuing Entities | | | 24 | | | Use of Proceeds | | | 25 | | | The Titling Trust | | | 3425 | | | The SUBI | | | 3728 | | | The Depositor | | | 3829 | | | Nissan Motor Acceptance Corporation | | | 30 | | | The Leases | | | 39 | | | Maturity, Prepayment and Yield Considerations | | | 4042 | | | Note Factors and Trading Information | | | 4844 | | | The Notes | | | 5444 | | | Additional Information Regarding the Notes | | | 5745 | | | Description of the Indenture | | | 6055 | | | Description of the Trust Agreement | | | 61 | | | Description of the SUBI Trust Agreement | | | 66 | | | Description of the Servicing Agreement | | | 69 | | | | | 70 | | | | | 73 | | | | | 74 | | | Description of the Trust Administration Agreement | | | 79 | | | Description of the Hedge Agreement | | | 8280 | | | Miscellaneous Provisions of the Basic Documents | | | 8684 | | | Additional Legal Aspects of the Titling Trust and the SUBI | | | 8785 | | | Additional Legal Aspects of the Leases and the Leased Vehicles | | | 8890 | | | Material Federal Income Tax Consequences | | | 8994 | | | Erisa Considerations | | | 99 | | | Underwriting | | | 100 | | | Legal Opinions | | | 100 | | | Index of Principal Terms | | | 101 | |
23
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE ACCOMPANYINGAPPLICABLE PROSPECTUS SUPPLEMENT We provide information to you about the notes in two separate documents that progressively provide varying levels of detail: this prospectus, which provides general information, some of which may not apply to a particular series of notes including your series, and the accompanyingapplicable prospectus supplement, which will describe the specific terms of the offered notes. We have started with several introductory sections describing the issuing entity and the notes in abbreviated form, followed by a more complete description of the terms. The introductory sections are: | | • | | Summary of Terms — gives a brief introduction to the notes to be offered; and | | | | | • | | Risk Factors — describes briefly some of the risks to investors of a purchase of the notes. |
You can find a listing of the pages where capitalized terms used in this prospectus are defined under the caption “Index“Index of Principal Terms”beginning on page [___]103 in this prospectus. Whenever we use words like “intends,” “anticipates” or “expects,” or similar words in this prospectus, we are making a forward-looking statement, or a projection of what we think will happen in the future. Forward-looking statements are inherently subject to a variety of circumstances, many of which are beyond our control and could cause actual results to differ materially from what we anticipate. Any forward-looking statements in this prospectus speak only as of the date of this prospectus. We do not assume any responsibility to update or review any forward-looking statement contained in this prospectus to reflect any change in our expectation about the subject of that forward-looking statement or to reflect any change in events, conditions or circumstances on which we have based any forward-looking statement. The notes are not a suitable investment for any investor that requires a regular or predictable schedule of payments or payment on specific dates. The notes are complex investments. We suggest that only investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment and default risks, the tax consequences of the investment and the interaction of these factors should consider purchasing the notes. WHERE YOU CAN FIND MORE INFORMATION The depositor, Nissan-Infiniti LT and NILT Trust have filed with the Securities and Exchange Commission (the “SEC”“SEC”) a Registration Statement that includes this prospectus and certain amendments and exhibits under the Securities Act of 1933, as amended, relating to the offering of the notes described herein. This prospectus does not contain all of the information in the Registration Statement. Annual reports on Form 10-K, distribution reports on Form 10-D, current reports on Form 8-K, and amendments to those reports will be prepared, signed and filed with the SEC by the depositor or the servicer on behalf of each issuing entity. Electronic or paper copies of these reports and the Registration Statement will not be posted on the registrants’ web sites for administrative reasons, but will be provided free of charge upon written request to Nissan Motor Acceptance Corporation, 990 West 190th Street, M-9-A, Torrance, California 90502.P.O. Box 685011, Franklin, Tennessee 37067-5011. The reports and the Registration Statement are also available for inspection and copying at the SEC’s Public Reference Room, located at 100 F Street N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. 4
SUMMARY OF TERMS This summary highlights selected information from this prospectus and may not contain all of the information that you need to consider in making your investment decision. This summary provides an overview of certain information to aid your understanding and is qualified in its entirety by the full description of this information appearing elsewhere in this prospectus and the accompanyingapplicable prospectus supplement. You should carefully read both documents to understand all of the terms of the offering. | | | | Issuing Entity: | | The issuing entity will be formed for each series of notes by a trust agreement between the depositor and the trustee of the issuing entity. | | | | | Depositor: | | Nissan Auto Leasing LLC II. |
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| | | | Sponsor, Servicer and Administrative Agent: | | Nissan Motor Acceptance Corporation. | | | | | Indenture Trustee: | | The indenture trustee under the indenture pursuant to which the notes of each series will be issued will be named in the prospectus supplement for that series. | | | | | Owner Trustee: | | The owner trustee for the issuing entity issuing each series of notes will be named in the prospectus supplement for that series. | | | | | Titling Trust: | | Nissan-Infiniti LT. | | | | | Titling Trustee: | | NILT, Inc. | | | | | Securities Offered: | | Notes of a series may include one or more classes, and will be issued pursuant to an indenture. Some of the notes issued by the issuing entity may not be offered to the public. The applicable prospectus supplement will specify the class or classes of notes that are being offered by it. The issuing entity will also issue certificates representing all of the beneficial ownership interests in the issuing entity. These certificates will not be offered to the public and will be retained by the depositor. Other than those certificates, no other series or classes of securities will be backed by the same asset pool or otherwise have claims on the same assets. No securityholder approval is necessary for the issuance of such notes or the certificates. | | | | | | The terms of each class of notes in a series described in the applicable prospectus supplement will include the following: | | | | |
| | 1. | | 1. the stated principal amount of each class of notes; and | | | | | | | 2. | | 2. the interest rate (which may be fixed, variable, adjustable or some combination of these rates) or method of determining the interest rate. |
| | | | | | | A class of notes may differ from other classes of notes in one or more aspects, including: |
| | 1. | | | | 1. timing and priority of payments; | | | | | 2. | | seniority; | | | | | 3. | 2. seniority; | | | | | | 3. allocation of losses; | | | | | | | 4. | | 4. interest rate or formula; | | | | | | | 5. | | 5. amount of interest or principal payments; and | | | | | | | 6. | | 6. whether interest or principal will be payable to holders of the class if specified events occur. |
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| | | | | | | | | | If the issuing entity issues notes and certificates, the notes will be the only securities being offered to you. The depositor will retain all of the certificates. Payment on the certificates, if any are issued, will be subordinated to payment on one or more classes of notes to the extent described in the applicable prospectus supplement. | | | | | The SUBI Certificate: | | Motor vehicle dealers in the Nissan Motor Acceptance Corporation network of dealers have assigned closed-end retail lease contracts and have sold the related Nissan and Infiniti leased vehicles — which may include Nissan and Infiniti automobiles, minivans, sport utility vehicles and light-duty trucks — to Nissan-Infiniti LT. The leases have been or will be underwritten using the underwriting criteria described in this prospectus under “Nissan“Nissan Motor Acceptance Corporation — Lease Underwriting Procedures.” |
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| | | | | | | On or before the date the notes of a series are issued, Nissan-Infiniti LT will establish a special unit of beneficial interest, which is also called a SUBI, and allocate to the SUBI certain leases and related leased vehicles owned by Nissan-Infiniti LT. Each lease and the related leased vehicle allocated to the SUBI will be selected based on criteria specified in a servicing agreement among Nissan Motor Acceptance Corporation, as servicer, NILT Trust and Nissan-Infiniti LT. These criteria will be described in the applicable prospectus supplement. | | | | | | | | Each SUBI will be represented by a SUBI certificate representing a beneficial interest in that SUBI. Upon the creation of a SUBI, Nissan-Infiniti LT will issue the related SUBI certificate to NILT Trust, the beneficiary of Nissan-Infiniti LT. NILT Trust will then sell the SUBI certificate to Nissan Auto Leasing LLC II pursuant to a SUBI certificate transfer agreement. The SUBI certificate will be resold by Nissan Auto Leasing LLC II to the issuing entity pursuant to a trust SUBI certificate transfer agreement in exchange for the notes and certificates issued by the issuing entity. | | | | | The Issuing Entity’s Property: | | The property of each issuing entity: |
| | 1. | | | | 1. will be described in the applicable prospectus supplement, | | | | | | | 2. | | 2. will be primarily the SUBI certificate and the proceeds received on the related assets, including the right to receive monthly payments under the leases and the amounts realized from sales of the related leased vehicles on or after a specified cut-off date, and | | | | | | | 3. | | 3. will include other related assets such as: |
| | • | | | | •amounts deposited in specified bank accounts, | | | | | | • | | •proceeds of any hedge or similar agreement and the rights of the issuing entity under such agreement, | | | | | | • | | •any other enhancement issued with respect to any particular series or class, and |
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| | | | | • | | •the rights of the depositor and the issuing entity in the agreements specified in the applicable prospectus supplement. |
| | | | | | | For more information regarding assets of the issuing entity, you should refer to “The Issuing Entities — Property of the Trusts”Issuing Entities” in this prospectus and “The Issuing Entity — Property of the Issuing Entity” in the applicable prospectus supplement. | | | | | Credit Enhancement: | | The issuing entities may include features designed to provide protection to one or more classes of notes. These features are referred to as “credit enhancement.” Credit enhancement may include any one or more of the following: |
| | 1. | | | | 1. subordination of one or more other classes of notes; | | | | | | | 2. | | 2. subordination of certificates to one or more classes of notes; | | | | | | | 3. | | 3. one or more reserve accounts; | | | | | 4. | | over-collateralization; | | | | | 5. | 4. over-collateralization; | | | | | | 5. letters of credit or other credit facilities; | | | | | | | 6. | | 6. surety bond or insurance policies; |
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| | 7. | | | | 7. guaranteed investment contracts; | | | | | | | 8. | | 8. cash collateral guaranties or accounts; or | | | | | | | 9. | | 9. cash deposits. |
| | | | | | | The specific terms of any enhancement applicable to an issuing entity or to the notes issued by aan issuing entity will be described in detail in the applicable prospectus supplement. See“ADDITIONAL INFORMATION REGARDING THE NOTESAdditional Information Regarding The Notes — Credit EnhancementEnhancement”” in this prospectus for general terms applicable to the different forms of credit enhancement that may be used by the issuing entities. | | | | | Hedge Agreement: | | To the extent specified in the applicable prospectus supplement, one or more classes of notes may have the benefit of a currency swap, an interest rate swap or a combined currency and interest rate swap, or an interest rate cap entered into between the issuing entity or indenture trustee for the benefit of the holders of the notes and a counterparty specified in the applicable prospectus supplement, the principal terms and provisions of which will be specified in the applicable prospectus supplement. See“Description of the Hedge AgreementAgreement”” in this prospectus. | | | | | Events of Default:Indenture Defaults:
| | The indenture governing the terms and conditions of the notes of each series includes a list of adverse events called events of default. Events of defaultindenture defaults. Indenture defaults include the following: |
| | • | | | | •the issuing entity fails to pay interest on any note within five days of its due date, | | | | | | • | | •the issuing entity fails to pay the principal of any note in full on its final maturityscheduled payment date, |
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| | | | | • | | The• the issuing entity defaults in the observance or performance of any covenant or agreement of the issuing entity, or any representation or warranty of the issuing entity made in the indenture or in any certificate or other writing delivered under the indenture that proves to have been inaccurate in any material respect at the time made, which default or inaccuracy materially and adversely affects the interests of the noteholders, and the continuation of that default or inaccuracy for a period of 60 days (or for such longer period not in excess of 90 days as may be reasonably necessary to remedy such failure; provided that (A) such failure is capable of remedy within 90 days or less and (B) a majority of the outstanding principal amount of the notes, voting as a single class, consent to such longer cure period) after written notice thereof is given to the issuing entity by the indenture trustee or to the issuing entity and the indenture trustee by the holders of notes holding not less than the majority of the aggregate principal amount of the notes, voting as a single class, or | | | | | | • | | Certain• certain events of bankruptcy, insolvency, receivership or liquidation of the issuing entity (which, if involuntary, remains unstayed for more than 90 days). |
| | | | Events ofIndenture Default Remedies:
| | If an event ofindenture default occurs and is continuing with respect to a series of notes, the related indenture trustee or holders of at least a majority of the outstanding principal amount of that series of notes, voting as a single class, may declare the principal of those notes immediately due and payable. That declaration, under limited circumstances, may be rescinded by the holders of at least a majority of the outstanding principal amount of the notes voting as a single class. | | | | | | After an event ofindenture default and the acceleration of the affected notes, funds on deposit |
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| | | | | in the collection account and any of the issuing entity’s bank accounts with respect to the affected notes will be applied to pay principal of and interest on those notes in the order and amounts specified in the applicable prospectus supplement. | | | | | | | | If an event ofindenture default relates to a failure of the issuing entity to pay interest on the notes when due or principal of the notes on their respective final maturityscheduled payment dates, and the notes are accelerated following such event ofindenture default, the indenture trustee may elect to sell the assets of the issuing entity. For other events of default,indenture defaults, the indenture trustee may only sell the assets of the issuing entity if (i) the holders of all outstanding notes of that series consent to the sale, (ii) the proceeds from the sale are sufficient to pay in full the principal of and the accrued and unpaid interest on all outstanding notes of that series, or (iii) the indenture trustee determines that the proceeds from the sale would not be sufficient to make all payments on the outstanding notes of that series, but the holders of at least 66 2/3% of the outstanding principal amount of the affected notes voting as a single class, otherwise consent to the sale. | | | | | | | | For more detailed information regarding the events constituting an indenture default and the remedies available following such default, you should refer to “Description of the Indenture -— Indenture Default”Defaults” and “-“— Remedies Upon an Indenture Default” in this prospectus. |
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| | | | | | | Servicing/Administrative Agent: | | Nissan Motor Acceptance Corporation, as the servicer, will be responsible for servicing the leases, handling the disposition of the related vehicles when the leases terminate or when vehicles relating to defaulted leases are repossessed, and collecting amounts due in respect of the leases. In addition, Nissan Motor Acceptance Corporation will act as administrative agent for the issuing entity. The issuing entity will pay Nissan Motor Acceptance Corporation a monthly fee specified in the applicable prospectus supplement for performing the functions of an administrator and third party servicer of the leases. The servicer will also receive additional servicing compensation in the form of, among other things, late fees, extension fees, and other administration fees and expenses or similar charges received by the servicer during that month. | | | | | Optional Purchase: | | The servicer may have the option to purchase or cause to be purchased all of the assets of the issuing entity when then current securitization value of the leases and the related leased vehicles provided in the applicable prospectus supplement declines to or below a specified percentage of the securitization value of the leases and related leased vehicles as of the cutoff date. | | | | | | | | You should refer to “Description of the Trust Agreement -— Termination” in this prospectus and “Additional Information Regarding the Securities — Optional Purchase” in the accompanyingapplicable prospectus supplement for more detailed information regarding the optional purchase of notes and certificates. | | | | | Advances: | | The servicer is required to advance to the issuing entity (i) lease payments that are due but unpaid by the lessee and (ii) proceeds from expected sales on leased vehicles for which the related leases have terminated to the extent provided in the accompanyingapplicable prospectus supplement. The servicer will not be required to make any advance if it determines that it will not be able to recover an advance from future payments on the related lease or leased vehicle. | | | | | | | | For more detailed information regarding advances made by the servicer and reimbursement of advances, you should refer to “Description of the Servicing Agreement — Advances” in this prospectus and “Additional Information Regarding the Securities - -— Advances” in the accompanyingapplicable prospectus supplement. | | | | | Reallocation of Leases and Leased Vehicles from the SUBI: | | With respect to each series of notes, the servicer will be obligated to reallocate from the related SUBI any leases and related leased vehicles that do not meet certain representations and warranties. In addition, the servicer will be obligated to |
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| | | | | reallocate from the SUBI the leased vehicles relating to any leases for which the servicer grants ana term extension onthat either extends the lease.lease term beyond the final scheduled payment date of the latest maturing class of notes or extends the lease term more than six months beyond the original lease maturity date. In connection with such reallocation, the servicer will be required to pay the related issuing entity the repurchase payments for the lease. If a lessee changes the domicile of or title to the related leased vehicle to any jurisdiction in which the titling issuing entity is not qualified and licensed to do business or any other jurisdiction specified in the applicable prospectus supplement, the titling issuing entity, or the titling trustee on behalf of the titling issuing entity, will cause the affected lease and leased vehicle either to be reallocated from the SUBI or to be conveyed to the servicer. In connection with such reallocation or reconveyance, the titling issuing entity, or the titling trustee on behalf of the titling issuing entity, will pay to the related trust the repurchase payments. |
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| | | | | | | For more information regarding the representations and warranties made by the servicer for each series of notes, you should refer to “The Leases — General,” “-“— Representations, Warranties and Covenants” in this prospectus and “The Leases -— Characteristics of the Leases” in the applicable prospectus supplement. For more information regarding the obligation of the servicer to reallocate leases and the related leased vehicles from the SUBI for each series of notes, you should refer to “Description of the Servicing Agreement — Purchase of Leases Before Their Lease Maturity Dates” in this prospectus. | | | | | Tax Status: | | Subject to the important considerations described herein, special federal income tax counsel to the depositor and the issuing entity will deliver its opinion that the notes of each series will be characterized as debt for federal income tax purposes, and that the issuing entity will not be characterized as an association or a publicly traded partnership taxable as a corporation for federal income tax purposes. A purchaser of the notes will agree to treat the notes as debt for all applicable tax purposes. | | | | | | | | You should refer to “Material Federal Income Tax Consequences” in this prospectus and the accompanyingapplicable prospectus supplement for more detailed information on the application of federal and other tax laws. | | | | | Certain ERISA Considerations:
| | If you are an employeea Benefit Plan (as defined in“Certain ERISA ConsiderationsConsiderations””)in this prospectus), you should review the considerations discussed under“Certain ERISA Considerations”in this prospectus and the accompanyingapplicable prospectus supplement and consult counsel before investing in the notes. In general, subject to those considerations and conditions described in that section and to the extent specified in the applicable prospectus supplement, you may purchase notes of any series. |
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RISK FACTORS You should consider the following risk factors and the risks described in the section captioned “Risk Factors” in the applicable prospectus supplement in deciding whether to purchase notes of any class. | | | | You may experience a loss if defaults on
the leases or residual value losses exceed
the available credit enhancement.enhancement | | The issuing entity does not have, nor is it permitted or expected to have, any significant assets or sources of funds other than the related SUBI certificate, together with its right to payments under any hedge agreement and available funds in certain accounts. The notes of a series represent obligations solely of the issuing entity and will not be insured or guaranteed by any entity. Accordingly, you will rely primarily upon collections on the leases and the related leased vehicles allocated to the SUBI for your series of notes and, to the extent available, any credit enhancement for the issuing entity, including incoming payments under any hedge agreement and amounts on deposit in any reserve account or similar account. Funds on deposit in any reserve account or similar account will cover delinquencies on the leases and losses on the leases and leased vehicles up to a certain amount. However, if delinquencies and losses exceed the available credit enhancement for your series of notes, including the credit enhancement provided by subordination of the certificates, you may experience delays in payments due to you and you could suffer a loss. You will have no claim to any amounts properly distributed to the transferor or to others from time to time. | | | | | | | | The residual values established by Nissan Motor Acceptance Corporation are future projections that are based on projections by Automotive Lease Guide, as described in the accompanyingapplicable prospectus supplement. There is no guarantee that the assumptions regarding future events that are used to determine residual values will prove to be correct. If the residual values of the leased vehicles as originally determined by Nissan Motor Acceptance Corporation are substantially higher than the sales proceeds actually realized upon the sale of the leased vehicles, you may suffer losses if the available credit enhancement for your series of notes is exceeded. | | | | | | | | For a discussion of factors that may contribute to residual value losses, you should refer to “Risk Factors — Used car market factors may increase the risk of loss on your investment,” “-“— Increased turn-in rates may increase losses” and “Nissan Motor Acceptance Corporation — Determination of Residual Values” in this prospectus and “Risk Factors — The concentration of leased vehicles to particular models could negatively affect the issuing entity’spool assets” and “-“— The geographic concentration of the leases, economic factors and lease performance could negatively affect the pool assets” in the accompanyingapplicable prospectus supplement. | | | | | Used car market factors may increase the risk of loss on your investment.investment | | The used car market is affected by supply and demand, consumer tastes, economic factors and manufacturer decisions on pricing of new car models. For instance, introduction of a new model with additional equipment not reflected in the manufacturer’s suggested retail price may impact the resale value of the existing portfolio of similar model types. Discount pricing incentives or other marketing incentive programs on new cars by Nissan North America, Inc. or by its competitors that effectively reduce the prices of new cars may have the effect of reducing demand by consumers for used cars. Other factors that are beyond the control of the issuing entity, the depositor and the servicer could also have a |
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| | | | | negative impact on the value of a vehicle. If the proceeds actually realized upon the sale of the leased vehicles are substantially lower than the residual values originally established by Nissan Motor Acceptance Corporation, you may suffer a loss on your investment. | | | | | Increased turn-in rates may
increase losses.losses | | Losses may be greater as turn-in rates upon the expiration of leases increase because more used cars would be available on the used car market. Under each lease, the lessee may elect to purchase the related vehicle at the expiration of the lease for an amount generally equal to the stated residual value established at the inception of the lease. Lessees who decide not to purchase their related vehicles at lease expiration will |
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| | | | | expose the issuing entity to possible losses if the sale prices of such vehicles in the used car market are less than their respective stated residual values. The level of turn-ins at termination of the leases could be adversely affected by lessee views on vehicle quality, the relative attractiveness of new models available to the lessees, sales and lease incentives offered with respect to other vehicles (including those offered by Nissan Motor Acceptance Corporation), the level of the purchase option prices for the related vehicles compared to new and used vehicle prices and economic conditions generally. The early termination of leases by lessees may affect the number of turn-ins in a particular month. If losses resulting from increased turn-ins exceed the credit enhancement available for your series of notes, you may suffer a loss on your investment. | | | | | Returns on your investments may be reduced by prepayments on the leases, events of default,indenture defaults, optional redemption, reallocation of the leases and the leased vehicles from the SUBI or early termination of the issuing entity.entity | | You may receive payment of principal on your notes earlier than you expected for the reasons set forth below. You may not be able to invest the principal paid to you earlier than you expected at a rate of return that is equal to or greater than the rate of return on your notes.
| | | | | | The amount of principal distributed on your notes and the time when you receive those distributions depend on the rate of payments and losses relating to the leases and the leased vehicles. Prepayments, liquidations of defaulted leases, reallocations from the SUBI of leases and the related vehicles that do not meet certain eligibility criteria or events of defaultindenture defaults that result in an acceleration of payments on the notes will shorten the life of the notes to an extent that cannot be fully predicted. | | | | | | | | The servicer may be required to reallocate from the SUBI certain leases and leased vehicles if there is a breach of the representations and warranties relating to those leases or leased vehicles. In connection with such reallocation, the servicer will be obligated to pay the issuing entity an amount equal to (i) the present value of the monthly payments remaining to be made under the affected lease, discounted at a rate specified in the applicable prospectus supplement, (ii) the residual value of the leased vehicle and (iii) any delinquent payments not paid by the lessee. The servicer may also be entitled to purchase all of the assets of the issuing entity when the aggregate securitization value of the leases and the related leased vehicles is at or below a specified percentage, set forth in the applicable prospectus supplement, of the initial aggregate securitization value of the leases and the related leased vehicles on the related cutoff date. |
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| | | | | | | Further, the leases allocated to the SUBI may be prepaid, in full or in part, voluntarily or as a result of defaults, theft of or damage to the related leased vehicles or for other reasons. For example, a lessee under certain circumstances may elect to terminate the lease prior to its maturity in order to enter into a new lease contract for a different Nissan or Infiniti vehicle. In the case of such early termination, any payments due and payable by the lessee will be paid and deposited into the related collection account within the time period required for the servicer to deposit collections into the related collection account. | | | | | | | | Each of these payments will have the effect of accelerating the payment of principal and shortening the average lives of all outstanding notes of a series. The servicer has limited historical experience with respect to prepayments on the leases, and is not aware of publicly available industry statistics that detail the prepayment experience for contracts similar to the leases. For these reasons, the servicer cannot predict the actual prepayment rates for the leases. You will bear any reinvestment risks resulting from a faster or slower rate of payments of the leases and the leased vehicles, including the risk that available investments at that time have lower interest rates than the rates offered by your notes. | | | | | | | | For more information regarding prepayments or delinquencies, you should refer to |
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| | | | | “Maturity, “Maturity, Prepayment and Yield Considerations” in this prospectus and “Prepayments, Delinquencies, Repossessions and Net Losses” in the accompanyingapplicable prospectus supplement. For more information regarding the servicer’s obligation to reallocate leases and leased vehicles from the SUBI, you should refer to “Description of the Servicing Agreement -— Sale and Disposition of Leased Vehicles” and “-“— Purchase of Leases Before Their Lease Maturity Dates” in this prospectus. For more information regarding the optional purchase by the servicer, you should refer to “Additional Information Regarding the Securities -— Optional Purchase” in the accompanyingapplicable prospectus supplement. For more detailed information regarding the collection procedures for leases that have terminated, defaulted or become uncollectible, you should refer to “Nissan Motor Acceptance Corporation — Collection and Repossession Procedures,” ““Nissan Motor Acceptance Corporation — Extensions and Pull-Forwards,” “The Leases — Early Termination,” “Extensions and Pull-Forwards” and “Description of the Servicing Agreement — Realization Upon Liquidated Leases” in this prospectus. | | | | | Interests of other persons in the leases and the leased vehicles could be superior to the issuing entity’s interest, which may result in delayed or reduced payment on your notes.notes | | Because the SUBI will represent a beneficial interest in the related SUBI assets, you will be dependent on payments made on the leases allocated to the SUBI for your series of notes and proceeds received in connection with the sale or other disposition of the related leased vehicles for payments on your notes. Except to the extent of the back-up security interest as discussed in“Additional Legal Aspects of the Leases and the Leased Vehicles — Back-up Security InterestsInterests”,”in this prospectus, the issuing entity of a series will not have a direct ownership interest in the leases or a direct ownership interest or perfected security interest in the leased vehicles — which will be titled in the name of the titling issuing entity or the titling trustee on behalf of the titling trust. It is therefore possible that a claim against or lien on the leased vehicles or the other assets of the titling trust could limit the amounts payable in respect of the SUBI certificate to less than the amounts received from the lessees of the leased vehicles or received from the sale or other disposition of the leased vehicles. |
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| | | | | | | Further, liens in favor of and/or enforceable by the Pension Benefit Guaranty Corporation could attach to the leases and leased vehicles owned by the titling trust (including the leases and the leased vehicles allocated to the SUBI) and could be used to satisfy unfunded ERISA obligations of any member of a controlled group that includes Nissan Motor Acceptance Corporation and its affiliates. Because these liens could attach directly to the leases and leased vehicles allocated to the SUBI and because the issuing entity does not have a prior perfected security interest in the assets of the SUBI, these liens could have priority over the interest of the issuing entity in the assets of the SUBI. | | | | | | | | To the extent a third-party makes a claim against, or files a lien on, the assets of the titling trust, including the leased vehicles allocated to the SUBI for your series of notes, it may delay the disposition of those leased vehicles or reduce the amount paid to the holder of the related SUBI certificate. If that occurs, you may experience delays in payment or losses on your investment. | | | | | | | | For more information on the effect of third-party claims or liens on payment of the notes, you should refer to“Additional “Additional Legal Aspects of the Titling Trust and the SUBI -— Allocation of Titling Trust Liabilities,”“— "— The SUBI” and “Additional Legal Aspects of the Leases and the Leased Vehicles — Back-up Security Interests”Interests” in this prospectus. | | | | | Failure to comply with consumer protection laws could result in a loss.loss | | Federal and state consumer protection laws, including the federal Consumer Leasing Act of 1976 and Regulation M promulgated by the Board of Governors of the Federal Reserve System, impose requirements on retail lease contracts such as the leases. The failure by the titling trust to comply with these requirements may give rise to liabilities on the part of the titling trust or the issuing entity of a series (as owner of the related SUBI certificate). Further, many states have adopted “lemon laws” that provide |
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| | | | | vehicle users certain rights in respect of substandard vehicles. A successful claim under a lemon law could result in, among other things, the termination of the related lease and/or the requirement that a portion of payment previously paid by the lessee be refunded. Nissan Motor Acceptance Corporation will represent and warrant that each lease complies with applicable law in all material respects. If that representation and warranty relating to any lease allocated to a SUBI for a series of notes proves incorrect, materially and adversely affects the interest of the issuing entity, and is not timely cured, Nissan Motor Acceptance Corporation will be required to repurchase the beneficial interest in the noncompliant lease and repurchase related leased vehicle from the issuing entity. To the extent that Nissan Motor Acceptance Corporation fails to make such repurchase, or to the extent that a court holds the titling trust or the issuing entity liable for violating consumer protection laws regardless of such a repurchase, a failure to comply with consumer protection laws could result in required payments by the titling trust or the issuing entity. If sufficient funds are not available to make both payments to lessees and on your notes, you may suffer a loss on your investment in the notes. | | | | | | | | For a discussion of federal and state consumer protection laws which may affect the leases, you should refer to “Additional Legal Aspects of the Leases and the Leased Vehicles — Consumer Protection Laws”Law” in this prospectus and “Additional Legal Aspects of the Leases and the Leased Vehicles — Consumer Protection Laws” in the accompanying prospectus supplement.prospectus. | | | | | If ERISA liens are placed on the titling trust assets, you could suffer a loss.loss | | Liens in favor of and/or enforceable by the Pension Benefit Guaranty Corporation could attach to the leases and leased vehicles owned by the titling trust and could be used to satisfy unfunded ERISA obligations of any member of a controlled |
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| | | | | group that includes Nissan Motor Acceptance Corporation and its affiliates. Because these liens could attach directly to the leases and leased vehicles and because the issuing entity does not have a prior perfected security interest in the assets included in a SUBI, these liens could have priority over the interest of the issuing entity in the assets included in a SUBI. As of the date of this prospectus, neither Nissan Motor Acceptance Corporation nor any of its affiliates had any material unfunded liabilities with respect to their respective defined benefit pension plans. Moreover, the depositor believes that the likelihood of this liability being asserted against the assets of the titling trust or, if so asserted, being successfully pursued, is remote. However, you cannot be sure the leases and leased vehicles will not become subject to an ERISA liability. | | | | | Vicarious tort liability may
result in a loss.loss | | Some states allow a party that incurs an injury involving a leased vehicle to sue the owner of the vehicle merely because of that ownership. Most states, however, either prohibit these vicarious liability suits or limit the lessor’s liability to the amount of liability insurance that the lessee was required to carry under applicable law but failed to maintain. | | | | | | | | On August 8,10, 2005, President Bush signed into law the Safe Accountable, Flexible, and Efficient Transportation Equity Act of 2005 (the “Transportation Act”), Pub. L. No. 109-59. The Transportation Act provides that an owner of a motor vehicle that rents or leases the vehicle to a person shall not be liable under the law of a state or political subdivision by reason of being the owner of the vehicle, for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the rental or lease, if (i) the owner (or an affiliate of the owner) is engaged in the trade or business of renting or leasing motor vehicles; and (ii) there is no negligence or criminal wrongdoing on the part of the owner (or an affiliate of the owner). This provision of the Transportation Act was effective upon enactment and applies to any action commenced on or after August 8,10, 2005. The Transportation Act is intended to preempt state and local laws that impose possible vicarious tort liability on entities owning motor vehicles that are rented or leased and it is expected that the Transportation Act should reduce the likelihood of vicarious liability being imposed on the titling trust. |
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| | | | | State and federal courts considering whether the Transportation Act preempts state laws permitting vicarious liability have generally concluded that such laws are preempted with respect to cases commenced on or after August 10, 2005. One New York lower court, however, has reached a contrary conclusion in a recent case involving Nissan-Infiniti LT. This New York court concluded that the preemption provision in the Transportation Act was an unconstitutional exercise of congressional authority under the Commerce Clause of the United States Constitution and, therefore, did not preempt New York law regarding vicarious liability. | | | | | | | | Nissan Motor Acceptance Corporation maintains, on behalf of the titling trust contingent liability, insurance coverage against third party claims that provides coverage with no annual or aggregate cap on the number of claims thereunder, providing a minimum primary coverage of $1 million combined single limit coverage per occurrence and a minimum excess coverage of $15 million combined single limit per occurrence.each occurrence, without limit on the number of occurrences in any policy period. If Nissan Motor Acceptance Corporation ceases to maintain this insurance coverage or the insurance coverage protecting the |
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| | | | | titling trust is insufficient to cover, or does not cover, a material claim, that claim could be satisfied out of the proceeds of the vehicles and leases allocated to the SUBI for your series of notes and you could incur a loss on your investment. | | | | | | | | If vicarious liability imposed on the titling trust exceeds the coverage provided by its primary and excess liability insurance policies, or if lawsuits are brought against either the titling trust or Nissan Motor Acceptance Corporation involving the negligent use or operation of a leased vehicle, you could experience delays in payments due to you, or you may ultimately suffer a loss. | | | | | | | | For a discussion of the possible liability of the titling trust in connection with the use or operation of the leased vehicles, you should refer to “Additional Legal Aspects of the Leases and the Leased Vehicles — Vicarious Tort Liability” in the this prospectus. | | | | | A depositor or servicer bankruptcy could delay or limit payments to you.you | | Following a bankruptcy or insolvency of the servicer or the depositor, a court could conclude that the SUBI certificate for your series of notes is owned by the servicer or the depositor, instead of the issuing entity. This conclusion could be either because the transfer of that SUBI certificate from the depositor to the issuing entity was not a true sale or because the court concluded that the depositor or the issuing entity should be consolidated with the servicer or the depositor for bankruptcy purposes. If this were to occur, you could experience delays in payments due to you, or you may not ultimately receive all amounts due to you as a result of: |
| | • | | | | •the automatic stay, which prevents a secured creditor from exercising remedies against a debtor in bankruptcy without permission from the court, and provisions of the United States bankruptcy code that permit substitution for collateral in limited circumstances, | | | | | | • | | •tax or government liens on the servicer’s or the depositor’s property (that arose prior to the transfer of the SUBI certificate to the issuing entity) having a prior claim on collections before the collections are used to make payments on the notes, and | | | | | | • | | •the fact that neither the issuing entity nor the indenture trustee for your series of notes has a perfected security interest in the leased vehicles allocated to the SUBI and may not have a perfected security interest in any cash collections of the leases and leased vehicles allocated to the SUBI held by the servicer at the time that a bankruptcy proceeding begins. |
| | | | | | | For a discussion of how a bankruptcy proceeding of the servicer, the depositor or certain related entities may affect the issuing entity and the notes, you should refer to “Additional Legal Aspects of the Titling Trust and the SUBI — Insolvency Related Matters” in this prospectus. | | | | | The return on your notes could be reduced by shortfalls due to military action.action | | The effect of any current or future military action by or against the United States, as well as any future terrorist attacks, on the performance of the leases is unclear, but there may be an adverse effect on general economic conditions, consumer confidence and general market liquidity. Investors should consider the possible effects on delinquency, default and prepayment experience of the leases and the leased vehicles. |
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| | | | | | | The Servicemembers Civil Relief Act and similar state laws may provide relief to members of the military on active duty, including reservists or national guard members, |
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| | | | | who have entered into an obligation, such as a lease contract for a lease of a vehicle, before entering into military service and provide that under some circumstances the lessor may not terminate the lease contract for breach of the terms of the contract, including non-payment. Furthermore, under the Servicemembers Civil Relief Act, a lessee may terminate a lease of a vehicle at anytime after the lessee’s entry into military service or the date of the lessee’s military orders (as described below) if (i) the lease is executed by or on behalf of a person who subsequently enters military service under a call or order specifying a period of not less than 180 days (or who enters military service under a call or order specifying a period of 180 days or less and who, without a break in service, receives orders extending the period of military service to a period of not less than 180 days); or (ii) the lessee, while in the military, executes a lease contract for a vehicle and thereafter receives military orders for a permanent change of station outside of the continental United States or to deploy with a military unit for a period of not less than 180 days. No early termination charges may be imposed on the lessee for such termination. No information can be provided as to the number of leases that may be affected by these laws. In addition, current military operations of the United States, including military operations in Iraq and the Middle East, have increased and may continue to increase the number of citizens who are in active military service, including persons in reserve or national guard status who have been called or will be called to active duty. In addition, these laws may impose limitations that would impair the ability of the servicer to repossess a defaulted vehicle during the related obligor’s period of active duty and, in some cases, may require the servicer to extend the maturity of the lease contract, lower the monthly payments and readjust the payment schedule for a period of time after the completion of the obligor’s military service. It is not clear that the Servicemembers Civil Relief Act would apply to leases such as the leases allocated to a SUBI. If a lessee’s obligation to make lease payments is reduced, adjusted or extended, or if the lease is terminated early and no early termination charge is imposed, the servicer will not be required to advance those amounts. Any resulting shortfalls in interest or principal will reduce the amount available for distribution on the notes and the certificates. | | | | | | | | For more information regarding the effect of the Servicemembers Civil Relief Act and other similar legislation, you should refer to “Additional Legal Aspects of the Leases and the Leased Vehicles — Consumer Protection Law” in this prospectus. | | | | | You may suffer losses on your notes if the servicer holds collections and commingles them with its own funds.funds | | So long as Nissan Motor Acceptance Corporation is servicer, if each condition to making monthly deposits as may be required by the servicing agreement (including the satisfaction of specified ratings criteria of Nissan Motor Acceptance Corporation and the absence of any servicer default) is satisfied, Nissan Motor Acceptance Corporation, as the servicer, may retain all payments on the leases received from the related lessees and all proceeds relating to the leases and the leased vehicles collected during a collection period until the business day preceding the related payment date (currently, Nissan Motor Acceptance Corporation does not satisfy these conditions). During this time, the servicer may invest such amounts at its own risk and for its own benefit and need not segregate such amounts from its own funds. On or before the business day preceding a date on which payments are due to be made on a series of notes, the |
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| | | | | servicer must deposit into the related collection account, all payments on the leases received from the lessees and all proceeds relating to the leases and the leased vehicles collected during the related collection period. If the servicer is unable to deposit these amounts into the collection account, you might incur a loss on your notes. | | | | | Factors affecting the information management systems of Nissan Motor Acceptance Corporation may increase the risk of loss on your investment.investment | | The success of your investment depends upon the ability of the servicer, Nissan Motor Acceptance Corporation, to store, retrieve, process and manage substantial amounts of information. If Nissan Motor Acceptance Corporation or any of these providers experiences interruptions or loss in its information processing capabilities, its business, financial conditions, results of operations and ultimately your notes may suffer. | | | | | Adverse events with respect to Nissan Motor Acceptance Corporation, or its affiliates or third party servicers to whom Nissan Motor Acceptance Corporation outsources its activities may affect the timing of payments on your notes or have other adverse effects on your notes.notes | | Adverse events with respect to Nissan Motor Acceptance Corporation, its affiliates or a third party providerservicer to whom Nissan Motor Acceptance Corporation outsources its activities may result in servicing disruptions or reduce the market value of your notes. Nissan Motor Acceptance Corporation currently outsources some of its activities as |
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| | | | | servicer to third party providers.servicers. In the event of a termination and replacement of Nissan Motor Acceptance Corporation as the servicer, or if any of the third party providersservicers cannot perform its activities, there may be some disruption of the collection activity with respect to delinquent leases and therefore delinquencies and credit losses could increase. As servicer, Nissan Motor Acceptance Corporation is required to reallocate certain leases that do not comply with representations and warranties made by Nissan Motor Acceptance Corporation (for example, representations relating to the compliance of the lease contracts with applicable laws). If Nissan Motor Acceptance Corporation becomes unable to reallocate any of such leases or make the related payment to the issuing entity, investors could suffer losses. In addition, adverse corporate developments with respect to servicers of asset-backed securities or their affiliates have in some cases also resulted in a reduction in the market value of the related asset-backed securities. For example, Nissan Motor Acceptance Corporation is an indirect wholly-owned subsidiary of Nissan Motor Co., Ltd. Although Nissan Motor Co., Ltd. is not guaranteeing the obligations of the issuing entity for any series of notes, if Nissan Motor Co., Ltd. ceased to manufacture vehicles or support the sale of vehicles or if Nissan Motor Co., Ltd faced financial or operational difficulties, such events may reduce the market value of Nissan and Infiniti vehicles, and ultimately the amount realized on any Nissan or Infiniti leased vehicle, including the leased vehicles allocated to the SUBI for your series of notes. | | | | | You may experience a loss or a delay in receiving payments on the notes if the assets of the issuing entity are liquidated.liquidated | | If certain events of default under the agreements specified in the applicable prospectus supplement (including indenture defaults) occur and the notes of a series are accelerated, the assets of the related issuing entity may be liquidated. If a liquidation occurs close to the date when one or more classes of notes of that series would otherwise be paid in full, repayment of such classes might be delayed while liquidation of the assets is occurring. It is difficult to predict the length of time that will be required for liquidation of the assets of the trustissuing entity to be completed. In addition, the amount received from liquidation may be less than the aggregate principal amount of the outstanding notes of that series. In that circumstance, the principal amount of those notes will not be paid in full. Even if liquidation proceeds are sufficient to repay the notes in full, any liquidation that causes the principal of one or more classes of notes to be paid |
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| | | | | before the related final scheduled payment date will involve the prepayment risks described under“Risk Factors - You may experience reduced returns— Returns on your investment resulting frominvestments may be reduced by prepayments on the leases, indenture defaults, optional redemption, reallocation of the leases and the leased vehicles from the SUBI or early termination of the trust.issuing entity””in this prospectus. | | | | | Because the notes are in book-entry form, your rights can only be exercised indirectly.indirectly | | Because the notes will be issued in book-entry form, you will be required to hold your interest in the notes through The Depository Trust Company in the United States, or Clearstream Banking, société anonyme or Euroclear Bank S.A./NV as operator of the Euroclear System in Europe or Asia. Transfers of interests in the notes within The Depository Trust Company, Clearstream Banking, société anonyme or Euroclear Bank/S.A./NV as operator of the Euroclear System must be made in accordance with the usual rules and operating procedures of those systems. So long as the notes are in book-entry form, you will not be entitled to receive a definitive note representing your interest. The notes of a series will remain in book-entry form except in the limited circumstances described under the caption “Material‘‘Additional Information Regarding the Notes — Definitive NotesNotes”” in this prospectus. Unless and until the notes cease to be held in book-entry form, the indenture trustee will not recognize you as a “Noteholder”‘‘Noteholder” and the owner trustee will not recognize you as a “Securityholder,‘‘Securityholder,” as those terms are used in the indenture, the trust agreement and the servicing agreement. As a result, you will only be able to exercise the rights as a noteholder indirectly through The Depository Trust Company (if in the United States) and its participating organizations, or Clearstream Banking,société anonyme and Euroclear Bank S.A./NV as operator of the Euroclear System (in Europe or Asia) and their participating organizations. Holding the notes in book-entry form could also limit your ability to pledge or transfer your notes to persons or entities that do not participate in The |
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| | | | | Depository Trust Company, Clearstream Banking, société anonyme or Euroclear Bank S.A./NV as operator of the Euroclear System. In addition, having the notes in book-entry form may reduce their liquidity in the secondary market since certain potential investors may be unwilling to purchase securities for which they cannot obtain physical notes. | | | | | | | | Interest and principal on the notes of any series will be paid by the related issuing entity to The Depository Trust Company as the record holder of those notes while they are held in book-entry form. The Depository Trust Company will credit payments received from the issuing entity to the accounts of its participants which, in turn, will credit those amounts to noteholders either directly or indirectly through indirect participants. This process may delay your receipt of principal and interest payments from the issuing entity. | | | | | The failure to make principal payments on the notes prior to the applicable final scheduled payment date will generally not result in an event ofindenture default under the indenture. | | The amount of principal required to be paid to you prior to the applicable final scheduled payment date set forth in the applicable prospectus supplement generally will be limited to amounts available for those purposes. Therefore, the failure to pay principal of a note before the applicable final scheduled payment date generally will not result in an event ofindenture default under the indenture for any series of notes until the applicable final scheduled payment date for that series of notes. | | | | | If the issuing entity enters
into a currency swap or an
interest rate swap, payments
on the notes will be dependent on payments made under the swap agreement. | | If the issuing entity enters into a currency swap, interest rate swap or a combined currency and interest rate swap, its ability to protect itself from shortfalls in cash flow caused by currency or interest rate changes will depend to a large extent on the terms of the swap agreement and whether the swap counterparty performs its |
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| | | dependent on payments made
under the swap agreement | | obligations under the related currency swap or the interest rate swap, as applicable. If the issuing entity does not receive the payments it expects from the swap counterparty, the issuing entity may not have adequate funds to make all payments to noteholders when due, if ever. | | | | | | | | If the issuing entity issues notes with adjustable interest rates, interest will be due on the notes at adjustable rates, while payments under the leases are fixed monthly obligations. The issuing entity may enter into an interest rate swap to reduce its exposure to changes in interest rates. An interest rate swap requires one party to make payments to the other party in an amount calculated by applying an interest rate (for example, a floating rate) to a specified notional amount in exchange for the other party making a payment calculated by applying a different interest rate (for example, a fixed rate) to the same notional amount. For example, if the trustissuing entity issues $100 million of notes bearing interest at a floating rate based on the London Interbank Offered Rate, it might enter into a swap agreement under which the issuing entity would pay interest to the swap counterparty in an amount equal to an agreed upon fixed rate on $100 million in exchange for receiving interest on $100 million at the floating rate based on the London Interbank Offered Rate. The $100 million would be the “notional” amount because it is used simply to make the calculation. In an interest rate swap, no principal payments are exchanged. | | | | | | | | If the issuing entity issues notes denominated in a currency other than U.S. dollars, the issuing entity will need to make payments on the notes in a currency other than U.S. dollars, as described in the relatedapplicable prospectus supplement. Payments collected on the leases and the related leased vehicles, however, will be made in U.S. dollars. If this occurs, the issuing entity may enter into a currency swap to reduce its exposure to changes in currency exchange rates. A currency swap requires one party to provide a specified amount of a currency to the other party at specified times in exchange for the other party providing a different currency at a predetermined exchange ratio. For example, if the issuing entity issues notes denominated in Swiss Francs, it might enter into a swap agreement with a swap counterparty under which the issuing entity would use the collections on the leases to pay U.S. dollars to the swap counterparty in exchange for receiving Swiss Francs at a predetermined exchange rate to make the payments owed on the notes. |
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| | | | | | | The terms of any currency swap or interest rate swap will be described in more detail in the applicable prospectus supplement. | | | | | If the issuing entity enters
into an interest rate cap
agreement, payments on the
notes will be dependent on
payments made under the
interest rate cap agreement.agreement | | If the issuing entity enters into an interest rate cap agreement, the amounts available to the issuing entity to pay interest and principal of all classes of the notes will depend in part on the terms of the interest rate cap agreement and the performance by the cap provider of its obligations under the interest rate cap agreement. If the issuing entity does not receive the payments it expects from the cap provider, the issuing entity may not have adequate funds to make all payments to noteholders when due, if ever. | | | | | | | | If the issuing entity issues notes with adjustable interest rates, interest will be due on the notes at adjustable rates, while payments under the leases are fixed monthly obligations. If this occurs, the issuing entity may enter into an interest rate cap agreement with a cap provider to reduce its exposure to changes in interest rates. An interest rate cap agreement may require that if the specified |
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| | | | | | | | | interest rate related to any payment date exceeds the cap rate specified in the applicable prospectus supplement, the cap provider pays to the issuing entity an amount equal to the product of: |
| | | | | | | | | • | | the specified interest rate for the related payment date minus the cap rate; | | | | | | | | | | | | | • | | the notional amount of the cap, which will be equal to the total outstanding principal amount of the notes on the first day of the accrual period related to such payment date; and | | | | | | | | | | | | | • | | a fraction, the numerator of which is the actual number of days elapsed from and including the previous payment date, to but excluding the current payment date, or with respect to the first payment date, from and including the closing date, to but excluding the first payment date, and the denominator of which is 360 or 365, as specified in the applicable prospectus supplement. | | |
| | | | | | | | | | During those periods in which the specified interest rate is substantially greater than the cap rate, the issuing entity will be more dependent on receiving payments from the cap provider in order to make payments on the notes. If the cap provider fails to pay the amounts due under the interest rate cap agreement, the amount of credit enhancement available in the current or any future period may be reduced and you may experience delays and/or reductions in the interest and principal payments on your notes. | | | | | | | | | | | | The terms of any interest rate cap will be described in more detail in the applicable prospectus supplement. | | | | | | | | | Termination of an interest rate swap agreement, a currency swap agreement or an interest rate cap agreement may cause termination of the issuing entity.entity | | An interest rate swap agreement, a currency swap agreement or an interest rate cap agreement may be terminated if certain events occur. Most of these events are generally beyond the control of the issuing entity, the swap counterparty or cap provider, as applicable. If the interest rate swap agreement, the currency swap agreement or interest rate cap agreement is terminated, unless a replacement interest rate swap, a currency swap or an interest rate cap, as applicable, can be arranged, the trustee generally will sell the assets of the issuing entity and the issuing entity will terminate. In this type of situation, it is impossible to predict how long it would take to sell the assets of the issuing entity or what amount of proceeds would be received. Some of the possible adverse consequences of such a sale are: |
| | | | | | | | | • | | The proceeds from the sale of assets under such circumstances may not be sufficient to pay all amounts owed to you. | | | | | | | | | | | | | • | | The sale may result in payments to you significantly earlier than expected, reducing the weighted average life of the notes and the yield to maturity. | | |
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| | | | | | | | | • | | Conversely, a significant delay in arranging a sale could result in a delay in principal payments. This would, in turn, increase the weighted average life of the notes and could reduce the yield to maturity. | | | | | | | | | | | | | • | | Amounts available to pay you will be further reduced if the trustissuing entity is required to make a termination payment to the swap counterparty pursuant to an interest rate swap agreement or a currency swap agreement, as applicable. | | |
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| | | | | | | | | | | • | | The termination of the interest rate swap agreement, the currency swap agreement or interest rate cap agreement may expose the issuing entity to interest rate or currency risk, further reducing amounts available to pay you. | | | | | | | |
| | | | | | | See “The“Description of the Hedge Agreement — Early Termination of Hedge Agreement” in this prospectus for more information concerning the termination of a swap agreement or an interest rate cap agreement and the sale of the issuing entity’s assets.Additional information about this subject, including a description of the circumstances that may cause a termination of the interest rate swap agreement, the currency swap agreement or the interest rate cap agreement and the issuing entity and how the proceeds of a sale would be distributed, will be included in the applicable prospectus supplement. | | | | | | | | | The rating of a swap counterparty or cap provider may affect the ratings of the notes.notes | | If a issuing entity enters into an interest rate swap agreement, a currency swap agreement or an interest rate cap agreement, the rating agencies that rate the notes will consider the provisions of such interest rate swap agreement, currency swap agreement or interest rate cap agreement, as applicable, and the rating of the swap counterparty or the cap provider, as applicable, in rating the notes. If a rating agency downgrades the debt rating of the swap counterparty or the cap provider, it is also likely to downgrade the rating of the notes. Any downgrade in the rating of the notes could have severe adverse consequences on their liquidity or market value. | | | | | | | | | | | | To provide some protection against the adverse consequences of a downgrade, the swap counterparty or cap provider may be permitted, but generally not required, to take the following actions if the rating agencies reduce its debt ratings below certain levels: |
| | | | | | | | | • | | assign the interest rate swap agreement, the currency swap agreement or interest rate cap agreement, as applicable, to another party; | | | | | | | | | | | | | • | | obtain a replacement interest rate swap agreement, currency swap agreement or interest rate cap agreement, as applicable, on substantially the same terms as the existing interest rate swap agreement, the currency swap agreement or interest rate cap agreement, as applicable; or | | | | | | | | | | | | | • | | establish any other arrangement satisfactory to the rating agencies. | | |
| | | | | | | | | | Any interest rate swap, currency swap or interest rate cap involves a high degree of risk. A trust will be exposed to this risk should it use either of these mechanisms. | | | | | | | | | The notes are not suitable investments for all investors.investors | | The notes are complex investments that are not a suitable investment if you require a regular predictable schedule of payments. The notes should be considered only by investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment, residual value, default and market risk, the tax consequences of an investment and the interaction of these factors. | | | | | | | | | You must rely for repayment only upon the issuing entity’s assets which may not be sufficient to make full payments on your notes. | | Your notes are asset backed securities issued by and represent obligations of the issuing entity only and do not represent obligations of or interest in Nissan Motor Acceptance Corporation, Nissan Auto Leasing LLC II or any of their respective |
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| | | | | | | | not be sufficient to make full payments on your notes | | affiliates. Distributions on any class of securities will depend solely on the amount and timing of payments and other collections in respect of the related leases and any credit enhancement for the notes specified in the applicable prospectus supplement. We cannot assure you that these amounts, together with other payments and collections in respect of the related leases, will be sufficient to make full and timely distributions on your notes. The notes and the leases will not be insured or guaranteed, |
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| | | | | in whole or in part, by the United States or any governmental entity or, unless specifically set forth in the applicable prospectus supplement, by any provider of credit enhancement. | | | | | | | | | Changes to federal or state bankruptcy or debtor relief laws may impede collection efforts or alter timing and amount of collections, which may result in acceleration of or reduction in payment on your notes.notes | | If a lessee sought protection under federal or state bankruptcy or debtor relief laws, a court could reduce or discharge completely the lessee’s obligations to repay amounts due on its lease. As a result, that lease would be written off as uncollectible. You could suffer a loss if no funds are available from credit enhancement or other sources and finance charge amounts allocated to the notes are insufficient to cover the applicable default amount. |
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THE ISSUING ENTITIES Formation Nissan Auto Leasing LLC II (the “Depositor”“Depositor”) will establish, for each series of notes (the“Notes”), a new issuing entity (each, an “Issuing“Issuing Entity”) pursuant to a trust agreement (as it may be amended and restated from time to time, the “Trusteach a“Trust Agreement”). The terms of each series of notes (the “Notes”)Notes and, if applicable, the certificates (the “Certificates,“Certificates,” and together with the Notes, the “Securities”“Securities”) issued by the related Trust (the “Issuing Entity”)Issuing Entity and additional information concerning the assets of the Issuing Entity and any applicable credit enhancement will be set forth in a supplement (a “Prospectus(each, a“Prospectus Supplement”) related to this prospectus (the “Prospectus”“Prospectus”). The Issuing Entity for each series of Notes will not engage in any activity other than: | | • | | issuing and making payments on the Notes and the Certificates that it issues, | | | | | • | | acquiring the related SUBI Certificate from the Depositor in exchange for (i) issuance of the Notes to the Depositor, (ii) certain capital contributions from the Depositor and (iii) issuance of the Certificates to the Depositor, | | | | | • | | assigning, granting and pledging the Issuing Entity’s Estate to the related Indenture Trustee as security for the Notes, | | | | | • | | managing and distributing to the holders of the Certificates any portion of the Issuing Entity’s Estate released from the lien of the related Indenture, | | | | | • | | engaging in any other activities that are necessary, suitable or convenient to accomplish any of the purposes listed above or in any way connected with those activities, | | | | | • | | engaging in any other activities as may be required, to the extent permitted under the related financing documents, to conserve the Issuing Entity’s Estate, and | | | | | • | | engaging in ancillary or related activities as specified in the applicable Prospectus Supplement. |
Property of the Issuing Entities All of the motor vehicle dealers (“Dealers”) in the Nissan Motor Acceptance Corporation(“NMAC”) networkestablished Nissan-Infiniti LT, a Delaware statutory trust (the“Titling Trust”), to purchase new vehicle, closed-end fixed rate lease contracts originated through dealers of primarily Nissan- and Infiniti-branded new and used automobiles and light-duty trucks(“Dealers”). All of the Dealers have entered into agreements with NMAC or Infiniti Financial Services, which is a division of NMAC, pursuant to which theythe Dealers have assigned and will assign retail closed-end motor vehicle lease contracts to Nissan-Infiniti LT, a Delaware statutory trust (the “Titling Trust”).the Titling Trust. The Titling Trust was created in July 1998 to avoid the administrative difficulty and expense associated with retitling leased vehicles for the securitization of motor vehicle leases. See “The“The Titling Trust.”Trust”in this Prospectus. The Titling Trust issued to NILT Trust (the “UTI“UTI Beneficiary”) an undivided trust interest (the “UTI”“UTI”) representing the entire beneficial interest in the unallocated assets of the Titling Trust. See “The“The Titling Trust –— Property of the Titling Trust.”Trust”in this Prospectus. On or before the date of the initial issuance of any series of Notes (each, a “Closing“Closing Date”), the UTI Beneficiary will instruct the trustee of the Titling Trust (1) to establish a special unit of beneficial interest (the “SUBI”“SUBI”), and (2)allocate to allocatethe SUBI a separate portfolio of leases (the “Leases”“Leases”), the related vehicles leased under the Leases (the“Leased Vehicles”) and the related leased vehicles (the “Leased Vehicles”) and relatedother associated assets of the Titling Trust to the SUBI.Trust. The SUBI will represent the entire beneficial interest in the Leases, Leased Vehicles and the related assets (collectively, the “SUBI“SUBI Assets”). Upon the creation of the SUBI, the separate portfolio of related Leases, or Leasethe related Leased Vehicles and the related assets will no longer constitute assets of the Titling Trust represented by the UTI, and the interest in the Titling Trust Assets represented by the UTI will be reduced accordingly. The SUBI will not represent a beneficial interest in any Titling Trust Assets other than the related SUBI Assets. Payments made on or in respect of any Titling Trust Assets other than the SUBI Assets allocated to a series of Notes and Certificates will not be available to make payments on that series of Notes and Certificates. 24
The Titling Trust will issue a certificate evidencing the SUBI (the “SUBI“SUBI Certificate”) to or upon the order of the UTI Beneficiary. The SUBI Certificate will evidence an indirect beneficial interest, rather than a direct legal interest, in the related Leases and the Leased Vehicles. With respect to each series of Notes and Certificates, the UTI Beneficiary will sell, transfer and assign the related SUBI Certificate to the Depositor. The Depositor will in turn transfer and assign the SUBI Certificate to the TrustIssuing Entity in exchange for the Notes and Certificates issued by the Issuing Entity. Each Issuing Entity will rely primarily upon collections from the Leases and proceeds from the disposition of the related Leased Vehicles to make payments on the related series of Notes. In addition to a SUBI Certificate, the property of each Issuing Entity (the “Issuing“Issuing Entity’s Estate”) will include the following: 20
| | • | | amounts deposited in any reserve or similar account (including investment earnings, net of losses and investment expenses, on amounts on deposit therein), | | | | | • | | the proceeds of any hedge or similar agreement and the rights of the Issuing Entity under such agreement, | | | | | • | | the rights of the related Indenture Trustee as secured party under a back-up security agreement with respect to the SUBI Certificate and the undivided beneficial interest in the related SUBI Assets, | | | | | • | | the rights of the Issuing Entity to funds on deposit from time to time in separate trust accounts specified in the applicable Prospectus Supplement, | | | | | • | | the rights of the Depositor, as transferee under the SUBI Certificate Transfer Agreement, | | | | | • | | the rights of the Issuing Entity, as transferee under the Trust SUBI Certificate Transfer Agreement, | | | | | • | | the rights of the Issuing Entity and the Indenture Trustee under any credit enhancement issued with respect to any particular series or class, and | | | | | • | | the rights of the Issuing Entity as a third-party beneficiary of the related Servicing Agreement, including the right to certain advances from the Servicer, to the extent relating to the SUBI Assets, and the SUBI Trust Agreement, and | | | | | • | | all proceeds of the foregoing. |
The Notes will be the only securities being offered to you, the Depositor will retain all of the Certificates and payment on the Certificates will be subordinated to payments on one or more classes of Notes to the extent described in the applicable Prospectus Supplement. See “Additional“Additional Information Regarding the Notes – Credit Enhancement –— Subordination of Certificates to Notes”in this Prospectus. USE OF PROCEEDS The net proceeds from the sale of each series of Notes received by the Depositor will be used (i) to pay NILT Trust for the related SUBI Certificate, (ii) to make capital contributions, if any, to the Issuing Entity, (iii) if specified in the applicable Prospectus Supplement, to purchase an interest rate swap agreement, a currency swap agreement or a interest rate cap and to fund the Reserve Account and (iv) to pay down warehouse debt owed to the warehouse lenders. THE TITLING TRUST General Nissan-Infiniti LT, the Titling Trust, is a Delaware statutory trust and is governed by an amended and restated trust and servicing agreement, dated as of August 26, 1998 (the “Titling“Titling Trust Agreement”), among NILT Trust, as the UTI Beneficiary, NMAC as servicer (the “Servicer”“Servicer”), NILT, Inc., as trustee (the “Titling“Titling Trustee”), Wilmington Trust Company, as Delaware trustee, and U.S. Bank National Association (“(“U.S. Bank”), as trust agent (in that capacity, the “Trust“Trust Agent”). To provide for the servicing of 25
the Titling Trust Assets, the Titling Trust, the Servicer and the UTI Beneficiary have entered into the Servicing Agreement (the “Basic“Basic Servicing Agreement”), dated as of March 1, 1999. The primary business purpose of the Titling Trust is to take assignments of, and serve as record holder of title to, leases and leased vehicles, in order to facilitate the securitization of the leases and leased vehicles in connection with the issuance of asset backed securities. Except as otherwise described under “Description“Description of the SUBI Trust Agreement”in this Prospectus, under the Titling Trust Agreement, the Titling Trust has not and will not: | | • | | issue beneficial or other interests in the Titling Trust Assets, notes or certificates other than (i) with respect to each issuance of Notes, the related SUBI and SUBI Certificate, (ii) one or more special units of beneficial interest, each consisting of a portfolio of leases and related leased vehicles separate from the portfolio allocated to the SUBI (each, an “Other“Other SUBI”), (iii) one or more certificates representing each Other SUBI (the “Other“Other SUBI Certificates”), and (iv) the UTI and one or more certificates representing the UTI (the “UTI“UTI Certificates”), | | | | | • | | borrow money, except from NMAC, the UTI Beneficiary or their respective affiliates in connection with funds used to acquire leases and leased vehicles, |
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| | | • | | make loans, | | | | | • | | invest in or underwrite securities, | | | | | • | | offer notes and certificates in exchange for Titling Trust Assets, with the exception of the SUBI Certificate issued with respect to any series of Notes and Certificates and the UTI Certificates, | | | | | • | | repurchase or otherwise reacquire, other than for purposes of cancellation, any UTI Certificate or, except as permitted by or in connection with permitted financing transactions, any SUBI Certificate, or | | | | | • | | grant any security interest in or lien on any Titling Trust Assets. |
For more information regarding the Titling Trust and the servicing of the Leases and Leased Vehicles, you should refer to “Description“Description of the SUBI Trust Agreement”and “Description“Description of the Servicing Agreement”in this Prospectus. The UTI Beneficiary NILT Trust is the UTI Beneficiary under the Titling Trust Agreement. The sole beneficiary of the UTI Beneficiary is NMAC. The UTI Beneficiary was formed as a Delaware statutory trust in July 1998 for the sole purpose of being initial beneficiary of the Titling Trust, holding the UTI Certificate, acquiring interests in one or more SUBIs, and engaging in related transactions. So long as any financings involving interests in the Titling Trust, including the transactions described in this Prospectus and any accompanyingapplicable Prospectus Supplement, are outstanding, NMAC may not transfer its beneficial interest in the UTI Beneficiary. The principal offices of NILT Trust are located at 990 West 190thBellSouth Tower, 333 Commerce Street, Torrance, California 90502,Nashville, Tennessee, 37201-1800, and its telephone number is (310) 719-8584. In July 2006, the principal executive offices of NILT Trust are scheduled to be relocated to Nashville, Tennessee.(615) 625-1224. The Titling Trustee NILT, Inc., the Titling Trustee, is a wholly-owned special purpose subsidiary of U.S. Bank and was incorporated in Delaware for the sole purpose of acting as Titling Trustee. The Titling Trustee is not affiliated with NMAC or any of its affiliates. Since the creation of the Titling Trust, NILT, Inc. has served as the Titling Trustee. U.S. Bank has provided titling trustee services for auto lease-backed securities since 1993. It has one of the largest titling trustee businesses in the country with a market share of approximately [___%]. As of September 30, 2005, U.S. Bank was providing titling trustee services for approximately [___] issuances of auto lease-backed securities, with an outstanding aggregate principal balance of approximately $[___].
U.S. Bank, as trust agent, serves as agent for the Titling Trustee to perform some functions of the Titling Trustee under the Titling Trust Agreement. Under the Titling Trust Agreement, if U.S. Bank can no longer act as the trust agent, the designees of the UTI Beneficiary — which may not be the UTI Beneficiary or any of its affiliates — will have the option to purchase the stock of the Titling Trustee for a nominal amount. If the UTI Beneficiary does not timely exercise that option, a successor trust agent appointed by the Titling Trustee will have the option to purchase the stock of the Titling Trustee. If none of these options is timely exercised, U.S. Bank may sell the stock of the Titling Trustee to another party. The principal offices of NILT, Inc. are located at 209 South LaSalle Street, Suite 300, Chicago, Illinois 60604, and its telephone number is (312) 325-8902. 26
Property of the Titling Trust The assets of the Titling Trust (the “Titling“Titling Trust Assets”) generally consist of: | | • | | leases originated by Dealers and assigned to the Titling Trust and all monies due from the lessees thereunder, | | | | | • | | leased vehicles and all proceeds of those leased vehicles, | | | | | • | | all of the Dealers’ rights with respect to those leases and leased vehicles, | | | | | • | | the rights to proceeds from any physical damage, liability or other insurance policies, if any, covering the leases or the related lessees or the leased vehicles, including but not limited to the Contingent and Excess Liability Insurance, and | | | | | • | | all proceeds of the foregoing. |
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From time to time after the date of this Prospectus and any applicable Prospectus Supplement, Dealers may assign additional leases to the Titling Trust and, as described below, title the related leased vehicles in the name of the Titling Trust (or a nominee or trustee thereof on behalf of the Titling Trust). Lease Origination and the Titling of Vehicles All leases owned by the Titling Trust have been or will be underwritten using the underwriting criteria described under “Nissan“Nissan Motor Acceptance Corporation — Lease Underwriting Procedures.”Procedures”in this Prospectus. Under each lease, the Titling Trust (or a nominee or trustee thereof on behalf of the Titling Trust) will be listed as the owner of the related leased vehicle on the related certificate of title. LiensExcept as described below, liens will not be placed on the certificates of title, nor will new certificates of title be issued, to reflect the interest of any Trust, as holder of a SUBI Certificate, in the related Leased Vehicles. The certificates of title to those Leased Vehicles registered in several states will, however, reflect a first lien held by the Titling Trust or NMAC (the “Administrative“Administrative Lien”) that will exist solely to provide for delivery of title documentation of those Leased Vehicles to the Titling Trustee or the Servicer. Each entity that records an Administrative Lien (other than the Titling Trust) will enter into an agreement by which it acknowledges that it has no interest in the related Leased Vehicles and additionally waives, quitclaims and releases any claim that it may have against the Leased Vehicles by virtue of such liens. After the sale of the SUBI Certificate to an Issuing Entity, the Servicer will be obligated to reallocate from the related SUBI any Leases and related Leased Vehicles that do not meet certain representations and warranties. Those representations and warranties relate primarily to the origination of the Leases and do not typically relate to the creditworthiness of the related lessees or the collectibility of the Leases. For more information regarding the specific representations and warranties made by the Servicer for each series of Notes, you should refer to “The“The Leases –— General,” “–“— Representations, Warranties and Covenants”in this Prospectus and “The“The Leases –— Characteristics of the Leases”in the applicable Prospectus Supplement. In addition, the Servicer will be obligated to reallocate from the related SUBI the Leased Vehicles relating to any Leases for which the Servicer grants a lease term extension which either extends the lease term beyond the final scheduled payment date of the latest maturing Class of Notes or extends the Lease term for more than six months beyond the original maturity date of the Lease (each, a“Term Extension,Extension”), and in connection with such reallocation, the Servicer will be required to pay the related Issuing Entity an amount equal to (x) the sum of (i) the present value, discounted at a rate specified in the applicable Prospectus Supplement, of (i) the monthly payments remaining to be made under the affected Lease, and (ii) the base residual of the Leased Vehicles, which will be calculated as described in the applicable Prospectus Supplement (the“Base Residual”), and (y) any delinquent payments not paid by the lessee (collectively, the “Repurchase“Repurchase Payments”). If a lessee changes the domicile of or title to the related Leased Vehicle to any jurisdiction in which the Titling Trust is not qualified and licensed to do business (or exempt from such qualification or licensing) or any other jurisdiction specified in the applicable Prospectus Supplement (each, a “Restricted“Restricted Jurisdiction”), the Titling Trust, or the Titling Trustee on behalf of the Titling Trust, will cause the affected Lease and Leased Vehicle either to be reallocated from the SUBI to the UTI or to be conveyed to the Servicer. In connection with such reallocation or reconveyance, the Titling Trust, or the Titling Trustee on behalf of the Titling Trust, will pay to the related Issuing Entity the Repurchase Payments. See “Description“Description of the Servicing Agreement –— Purchase of Leases Before Their Lease Maturity Dates.”Dates”in this Prospectus. 27
All leased vehicles owned by the Titling Trust will be held for the benefit of entities that from time to time hold beneficial interests in the Titling Trust. Those interests will be evidenced by one or more SUBIs or the UTI. Entities holding beneficial interests in the Titling Trust will not have a direct ownership in the related leases or a direct ownership or perfected security interest in the related leased vehicles. Therefore, if the transfer of a SUBI Certificate from the Depositor to the related Issuing Entity were recharacterized as a secured loan, that Issuing Entity would not have a perfected lien in the related SUBI Assets, unless a validly filed financing statement is in effect in each of the appropriate jurisdictions, to the extent that the security interest may be perfected by filing a financing statement under the Uniform Commercial Code (the “UCC”“UCC”). The Servicer has agreed to file or cause to be filed a financing statement and any appropriate continuing statements in each of the appropriate jurisdictions. For further information regarding the titling of the Leased Vehicles and the interests of the related Issuing Entities therein, you should refer to “Additional“Additional Legal Aspects of the Leases and the Leased Vehicles — Back-up Security Interests”in this Prospectus. THE SUBI General On or prior to the Closing Date for each series of Notes, the SUBI relating to that series of Notes will be issued by the Titling Trust pursuant to a supplement to the Titling Trust Agreement (the “SUBI“SUBI Supplement”and, together with the Titling Trust Agreement, the “SUBI“SUBI Trust Agreement”). To provide for the servicing of the related SUBI Assets, the Titling Trust, the Servicer and the UTI Beneficiary will enter into a supplement to the Basic Servicing Agreement (together with the Basic Servicing Agreement, the “Servicing“Servicing Agreement”). Each SUBI Certificate will evidence an indirect beneficial interest, rather than a direct legal interest, in the related SUBI Assets, which will generally consist of the Leases and the Leased Vehicles allocated to that SUBI, and all proceeds of or 23
payments on or in respect of those Leases or Leased Vehicles received or due after the close of business on the applicable cut-off date (each, a “Cutoff“Cutoff Date”) and other related SUBI Assets, including: | | • | | amounts in the applicable accounts relating to that SUBI and received in respect of the Leases allocated to that SUBI or the sale of the related Leased Vehicles, | | | | | • | | certain monies due under or payable in respect of the Leases and the Leased Vehicles after the related Cutoff Date, including the right to receive payments made to NMAC, the Depositor, the Titling Trust, the Titling Trustee or the Servicer under any insurance policy relating to the Leases, the Leased Vehicles or the related lessees, and | | | | | • | | all proceeds of the foregoing. |
A SUBI will not represent a beneficial interest in any Titling Trust Assets other than the related SUBI Assets, and neither the TrustIssuing Entity nor the related Noteholders will have an interest in the UTI, any Other SUBI issued by the Titling Trust, or any assets of the Titling Trust evidenced by the UTI or any Other SUBI. Payments made on or in respect of Titling Trust Assets not represented by a SUBI will not be available to make payments on the Notes relating to that SUBI. On or prior to each Closing Date, the Titling Trust will issue the related SUBI Certificate to or upon the order of NILT Trust, as UTI Beneficiary. Transfers of the SUBI Certificate Simultaneously with the issuance of the SUBI Certificate to the UTI Beneficiary, the UTI Beneficiary will convey that SUBI Certificate to the Depositor pursuant to a transfer agreement (the “SUBI“SUBI Certificate Transfer Agreement”). The UTI Beneficiary will covenant to treat each conveyance of the SUBI Certificate to the Depositor as a true sale, transfer and assignment for all purposes. Immediately after the transfer of the SUBI Certificate to the Depositor, the Depositor will: | • | | transfer to the related Issuing Entity, without recourse, all of its right, title and interest in and to the SUBI Certificate under a transfer agreement (the “Trust SUBI Certificate Transfer Agreement”) and | | | • | | deliver the SUBI Certificate to the Issuing Entity. |
transfer to the related Issuing Entity, without recourse, all of its right, title and interest in and to the SUBI Certificate under a transfer agreement (theTrust SUBI Certificate Transfer Agreement”), and 28
deliver the SUBI Certificate to the Issuing Entity. In exchange, the Issuing Entity will transfer to the Depositor the Notes and, if any, the Certificates that it issues. Immediately following the transfer of the SUBI Certificate to the Issuing Entity, the Issuing Entity will pledge its interest in the related Issuing Entity’s Estate, which includes the SUBI Certificate, to the related Indenture Trustee as security for the Notes. THE DEPOSITOR Nissan Auto Leasing LLC II (“(“NALL II”), the Depositor, is a special purpose limited liability company that was formed under the laws of Delaware on October 24, 2001. The sole member of the Depositor is NMAC. NMAC may not transfer its membership interest in the Depositor so long as any financings involving interests held by the Depositor at any time in the Titling Trust, including the transaction described in this Prospectus and the accompanyingapplicable Prospectus Supplement, are outstanding. The limited liability company agreement of the Depositor limits its activities to the following purposes: | | • | | acquire from, or sell to, NMAC or its dealersDealers or affiliates its rights and interest in and to (including any beneficial interests in and to) receivables or leases arising out of or relating to the sale or lease of Nissan and Infiniti vehicles, moneys due under the receivables and the leases, security interests in the related financed or leased vehicles and proceeds from claims on the related insurance policies (collectively, the “Receivables”“Receivables”), | | | | | • | | acquire from NMAC or any of its affiliates as the holder of the UTI or one or more SUBIs and act as the beneficiary of any such SUBIs, and sell to NMAC or reallocate to the UTI certain of the leased vehicles and related leases comprising such SUBIs, | | | | | • | | acquire, own and assign the Receivables and SUBIs, the collateral securing the Receivables and SUBIs, related insurance policies, agreements with dealersDealers or lessors or other originators or servicers of the Receivables and any proceeds or rights thereto (the “Collateral”“Collateral”), |
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| | | • | | transfer the Receivables and SUBIs and/or related Collateral to a trust pursuant to one or more pooling and servicing agreements, sale and servicing agreements or other agreements (the “Pooling“Pooling Agreements”) to be entered into by, among others, NALL II, the related trustee and the servicer of the Receivables or SUBIs, | | | | | • | | authorize, sell and deliver any class of certificates or notes issued by the trustsIssuing Entity under the related Pooling Agreements, | | | | | • | | acquire from NMAC the certificates or notes issued by one or more trusts to which NMAC or one of its subsidiaries transferred the Receivables, | | | | | • | | issue and deliver one or more series and classes of notes and certificates secured by or collateralized by one or more pools of the Receivables, the SUBIs or the Collateral, | | | | | • | | sell and issue the notes and certificates secured by the SUBIs or the Receivables and the related Collateral to certain purchasers, pursuant to indentures, purchase agreements or other similar agreements (collectively, the “Purchase“Purchase Agreements”), | | | | | • | | loan to, or borrow from, affiliates or others or otherwise invest or apply funds received as a result of NALL II’s interest in any of the notes or certificates and any other income, | | | | | • | | perform its obligations under the Pooling Agreements and Purchase Agreements, including entering into one or more interest rate cap agreements to the extent permitted by and in accordance with the terms of such Pooling Agreements or Purchase Agreements, and | | | • | | engage in any activity and exercise any powers permitted to limited liability companies under the laws of the State of Delaware that are related or incidental to the foregoing. |
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engage in any activity and exercise any powers permitted to limited liability companies under the laws of the State of Delaware that are related or incidental to the foregoing. Since its formation in October 2001, NALL II has been the Depositor in each of NMAC’s lease securitization transactions, and has not participated in or been a party to any other financing transactions. For more information regarding NMAC’s lease securitization program, you should refer to “Nissan Motor Acceptance Corporation –— NMAC Responsibilities in Securitization Program – Lease”— Leases” in this Prospectus. On each Closing Date, the UTI Beneficiary will convey the related SUBI Certificate to the Depositor, and the Depositor will immediately convey that SUBI Certificate to the Issuing Entity issuing the related series of Notes and Certificates in exchange for those Notes and Certificates. The Depositor will then sell the Notes to the underwriters for that series pursuant to an underwriting agreement. For more information regarding the transfers of the SUBI Certificate on each Closing Date and the sale of the related series of Notes to the underwriters, you should refer, respectively, to “The SUBI –— Transfers of the SUBI Certificate” in this Prospectus and “Underwriting” in the applicable Prospectus Supplement. If the Issuing Entity of a series issues Certificates, the Depositor will generally retain all of those Certificates. As the holder of Certificates, the Depositor will have various rights and obligations under the related Trust Agreement, including (i) removal of the Servicer upon the occurrence and continuance of a Servicer Default relating to the applicable series of Notes, (ii) appointment of a successor trustee upon resignation and removal of the Trustee of the related Issuing Entity, and (iii) indemnification of the Trustee of the related Issuing Entity. Notwithstanding the foregoing, the rights of the Depositor, as holder of the Certificates of a series, to take any action affecting the related Issuing Entity’s Estate will be subject to the rights of the Indenture Trustee under the related Indenture. For more information regarding the rights and obligations of the Depositor upon the initial issuance of a series of Notes, you should refer to “Description of the Trust Agreement” in this Prospectus. The principal office of the Depositor is located at 990 West 190thBellSouth Tower, 333 Commerce Street, M-9-A, Torrance, California 90502,Nashville, Tennessee, 37201-1800, and its telephone number is (310) 719-8509. In July 2006, the principal executive offices of the Depositor are scheduled to be relocated to Nashville, Tennessee.(615) 725-1127. NISSAN MOTOR ACCEPTANCE CORPORATION Overview NMAC was incorporated in the state of California in November 1981 and began operations in February 1982. NMAC is a wholly owned subsidiary of Nissan North America, Inc.(“NNA”), the primary distributor of Nissan and Infiniti vehicles in the United States. 25
NNA is a direct wholly owned subsidiary of Nissan Motor Co., Ltd., a Japanese corporation(“Nissan”NML”), which is a worldwide manufacturer and distributor of motor vehicles and industrial equipment. NMAC provides indirectThe retail automobile and light-duty truck loan and lease financing by purchasing consumer installment sales contracts and leases from authorized Nissan and Infiniti vehicle dealers and, to a lesser extent other domestic and import franchised dealers in all 50 states of the United States. NMAC also provides direct wholesale financing to many of those dealers, by financing inventories and other dealer activities such as business acquisitions, facilities refurbishment, real estate purchases and working capital requirements. The consumer installment sales contractsthat NMAC purchases are sourced from dealersDealers and are for new, “near-new,” used and certified near-new and used automobiles. A “near-new” vehicle is defined as any make vehicle up to three model years old. NMAC introduced the “near-new” classification in April 1995 principally to distinguish off-lease vehicles from other used vehicles. A used vehicle is defined as any pre-owned Nissan or Infiniti vehicles four or five model years old, and other makes of pre-owned vehicles up to five model years old. Certified vehicles are Nissan and Infiniti vehicles which have been inspected by dealersDealers and that meet certain published standards. The leases NMAC purchases are for new-vehicle, closed-end lease contracts also sourced from the Dealers. See “The Leases – General.”— General” in this Prospectus. Any leased vehicle not purchased by the lessee at the residual value stated in the lease is returned to NMAC for sale through auction. See “–“— Lease Termination”Return and “–Remarketing” and “— Methods of Vehicle Disposal.”Disposal” in this Prospectus. NMAC collects payments and services the leases and sales contracts, employing various collection methods including a behavioral-based collection strategy to minimize risk of loss.
NMAC extends credit lines to Nissan and Infiniti dealersDealers that operate exclusive Nissan and Infiniti dealerships, to dealersDealers that operate Nissan, Infiniti and non-Nissan and non-Infiniti franchises in one dealership, and also to dealersDealers that operate dealerships franchised by non-Nissan and non-Infiniti manufacturers for their purchase of inventories of new and used Nissan, Infiniti and other vehicles in the normal course of business. Dealers who have non-Nissan and non-Infiniti franchises may use part of NMAC’s financing, pursuant to their 30
related wholesale financing agreement, to finance vehicles purchased from other manufacturers. NMAC also extends term loans and revolving lines of credit to dealersDealers for business acquisitions, facilities refurbishment, real estate purchases, construction and working capital requirements. The principal executive officeoffices of NMAC isare located at 990 West 190thBellSouth Tower, 333 Commerce Street, Torrance, California 90502,Nashville, Tennessee, 37201-1800, and its telephone number is (310) 719-8000. In July 2006, the principal executive offices of NMAC are scheduled to be relocated to Nashville, Tennessee.(214) 596-4000. NMAC also has a centralized operations center in Irving, Texas, which performs underwriting, servicing and collection activities. Certain back office operations, including finance, accounting, legal and human resources, have been reorganized as functional departments under NNA. The effect has been to lower costs, streamline processes and improve communication. Financing Operations Retail Financing NMAC primarily purchases newprovides indirect retail automobile and used vehiclelight-duty truck installment sale and lease financing by purchasing retail installment contracts and leases from authorized Nissan and Infiniti Dealers and, to a lesserlimited extent other domestic and import franchise dealers. Contractsfranchised Dealers, in all 50 states of the United States. NMAC also provides direct wholesale financing to many of those Dealers, by financing inventories and other dealer activities, such as business acquisitions, facilities refurbishment, real estate purchases and working capital requirements. Retail installment contracts and leases that are purchased by NMAC must comply with NMAC’s underwriting standards and other requirements under existing agreements between NMAC and the dealers.Dealers. After purchasing the financing contracts, NMAC has responsibility for contract administration and collection. See “___Lease“— Lease Underwriting Procedures.”Procedures”in this Prospectus. Retail Financing The retail installment sales contracts that NMAC acquires from dealers generally name NMAC as assignee and as the secured party.Dealers are assigned to NMAC. NMAC also takes steps under the relevant laws of the state in which the related financed vehicle is located to perfect its security interest, including, where applicable, havingcausing the related Dealer to have a notation of NMAC’s lien recorded on the related certificate of title and obtaining possession of that certificate of title. As a result, NMAC has the right to repossess the assets if customers fail to meet contractual obligations as well as the right to enforce collection actions against the obligors under the contracts. Upon default, NMAC sells the vehicles through auctions. Repossessed vehicles are sold through a variety of distribution channels. Substantially all of NMAC’s retail financing receivables are non-recourse to the dealers,Dealers, which relieves the dealersDealers from financial responsibility in the event of repossession. Wholesale and Other Dealer Financing NMAC supports vehicle dealersDealers by offering wholesale and other dealerDealer financing for a variety of dealers’Dealers’ business needs. Wholesale Financing.NMAC provides wholesale financing to vehicle dealersDealers for their purchase of inventories of new and used Nissan, Infiniti and other vehicles in the normal course of business for their sale to retail buyers and lessees. NMAC acquires a 26
security interest in vehicles financed under wholesale loans, which NMAC perfects through UCC filings. These financings in some cases may be backed by a subordinated security interest in parts inventory, machinery, tools, equipment, fixtures and service accounts of dealers or real estate owned byDealers. In most cases, NMAC obtains the guarantee of a dealer and/or may be guaranteed by a dealer’sDealer’s parent holding company or affiliate or personally by the dealers’ principal and unless waived, from other owners of 10% interests or more in the dealership entity. NMAC extends credit lines to Nissan and Infiniti dealers that operate exclusive Nissan or Infiniti dealerships, that operate Nissan, Infiniti and non-Nissan and non-Infiniti franchises in one dealership, and that operate dealerships franchised by non-Nissan and non-Infiniti manufacturers. Dealers who have non-Nissan and non-Infiniti franchises may obtain financing of vehicles from such other manufacturers or may use part of NMAC’s financing, pursuant to their related wholesale financing agreement, to finance vehicles purchased from such other manufacturers. In the case of certain Nissan- and Infiniti-franchised dealers, who also are franchised by other manufacturers, NMAC provides wholesale financing for new Nissan and Infiniti vehicles, but not the new vehicles of other manufacturers.
NMAC extends credit to newly franchised dealers from time to time based on established credit criteria. NMAC’s credit decisions for new franchised dealers requesting a new credit line are based on NMAC’s investigation and review of the dealer’s financial status and bank references, as well as its marketing capabilities, financial resources and credit requirements. When an existing dealer requests the establishment of a wholesale new vehicle credit line, NMAC typically reviews the dealers’ credit reports, including the experience of the dealer’s operations and management, including evaluating any factory reference and marketing capabilities.Dealers’ principal’s personal guarantee.
Other Dealer FinancingFinancing.. NMAC extends term loans and revolving lines of credit to dealersDealers for business acquisitions, facilities refurbishment, real estate purchases, construction, and working capital requirements. These loans are typically secured with liens on real estate, vehicle inventory, and/or other dealership assets, as appropriate, and usually are guaranteed by the personal or corporate guarantees of the dealer principals, and unless waived, from other owners of 10% interests or more in the dealership entity, or dealerships. NMAC also provides financing to various multi-franchise dealer organizations, referred to as dealer groups, for wholesale, working capital, real estate and business acquisitions. TheseThe wholesale new vehicle credit lines, mortgage, construction and equipment loans are typically collateralizedsecured with liens on real estate, vehicle inventory, and/or other dealership assets, as appropriate. NMAC obtainsrequires a personal guarantee from the dealer,Dealer and unless waived,other owners of 10% interests or more in the dealership entity, or corporate guarantee from the dealership when deemed prudent.dealerships, unless waived. Although the loans are typically collateralized or guaranteed the value of the underlying collateral or guarantees may not be sufficient to cover NMAC’s exposure under such agreements. 31
Lease Financing NMAC has establishedFor a titling trust that purchases new vehicle, closed-end fixed rate lease contracts originated through the Dealers. Alldescription of the Dealers have entered into agreements with NMAC or Infiniti Financial Service, which is a division of NMAC, pursuant to which they have assigned and will assign retail closed-end motor vehicle lease contracts to the titling trust. The titling trust was created in 1998 to avoid the administrative difficulty and expense associated with retitling leased vehicles for the securitization of motor vehicle leases. The titling trust issued to NILT Trust, a subsidiary of NMAC, a beneficial interest in the undivided trust interest representing the entire beneficial interest in unallocated assets of the titling trust. For more information regarding NMAC’s lease financing business, you should refer to “The Issuing Entities — Property of the Issuing Entities” and “— Lease Underwriting Procedures”Procedures”, in this Prospectus. NMAC Responsibilities in Securitization Program The primary funding source for NMAC has been the packaging and sale of retail installment contracts, loans and leases through asset-backed securitization or “ABS,” transactions. Three types of assets are sold through NMAC’s ABSasset-backed securitization program: retail loans,installment contracts, operating leases and floorplan loans to dealers.Dealers. As described in more detail below, NMAC’s primary responsibilities with respect to each type of securitized assets consist of (i) acquiring the loansretail installment contracts and leases from NissanDealers and Infiniti dealers,making loans to Dealers, (ii) selling the loans and leases to a special purpose entity in connection with an ABSasset-backed securitization transaction, and (iii) servicing the loans and leases throughout the life of the ABSasset-backed securitization transaction. Retail LoansInstallment Contracts The retail loansinstallment contracts purchased by NMAC (each, a “retail“retail receivable”) are underwritten using NMAC’s standard underwriting procedures, which emphasize, among other factors, the applicant’s willingness and ability to pay and the value of the vehicle to be financed. You should refer to “—“— Lease Underwriting Procedures”Procedures” in this Prospectus for more detailed information regarding NMAC’s underwriting standards. In connection with each ABSasset-backed securitization transaction involving retail receivables, NMAC will sell its selected portfolio of retail receivables to Nissan Auto Receivables Corporation II (“(“NARC II”), a Delaware corporation and a wholly owned subsidiary of NMAC. NARC II then re-sells the retail receivables to the related issuing entity issuing notes and/or certificates secured by those retail receivables. 27
NMAC will act as the servicer and, in that capacity, will handle all collections, administer defaults and delinquencies and otherwise service the retail receivables. NMAC considers a retail receivable to be past due when the obligor under the contract fails to make at least 80% of a payment by the due date and delinquent when 20% or more of a scheduled payment is 15 days past due.due for a specified number of days. If a payment is delinquent, NMAC will soon thereafter initiate telephone contacts and may mail notices requesting payment. If the delinquent receivable cannot be brought current or completely collected within 60 to 90 days, NMAC generally attempts to repossess the vehicle. NMAC holds repossessed vehicles in inventory to comply with any applicable statutory requirements for reinstatement and then sells those vehicles. Any deficiencies remaining after repossession and sale of the vehicle or after the full charge-off of the retail receivable are pursued by or on behalf of NMAC to the extent practicable and legally permitted. NMAC attempts to contact the obligor of the contract and establish and monitor repayment schedules until the deficiencies are either paid in full or become impractical to pursue. The servicer will be obligated to advance to the related issuing entity interest on any retail receivablesreceivable that is due but unpaid by the obligor on the retail receivable. The servicer will not be required, however, to make such an advance (other than the advance of an interest shortfall arising from a prepaid retail receivable) if it determines that it will not be able to recover an advance from an obligor. In addition, if a retail receivable is a “defaulted receivable” or the servicer determines that any recovery from payments made on or with respect to such retail receivable is unlikely, the servicer will be reimbursed for all outstanding advances on that receivable from general collections on the receivables. NARC II has filed registration statements, including certain amendments and exhibits, under the Securities Act of 1933, as amended (the “Securities Act”) with the SEC in connection with each offering of securities backed by the retail receivables of NMAC. For more information regarding these ABSasset-backed securitization transactions, you should review the registration statements and other reports filed by NARC II with the SEC at http://www.sec.gov. 32
Loans to Dealers NMAC extends credit to dealersDealers to finance their inventory of automobiles and light-duty trucks based upon established credit lines. Each dealerDealer requesting to establish a credit line is evaluated by NMAC’s commercial credit department based on several criteria, including evaluation of the dealers’ credit reports, bank references and the dealer’sDealer’s current state of operations and management. See “– Financing Operations” above. Upon approval, each dealerDealer enters into an automotive wholesale financing and security agreement with NMAC (each, an “account”“account”) whichthat provides NMAC, among other things, with a first priority security interest in the financed vehicles. The principal and interest payments received on each account are the “floorplan“floorplan receivables.”In connection with each ABSasset-backed securitization transaction involving floorplan receivables, NMAC will designate certain accounts and sell the floorplan receivables arising from those accounts to Nissan Wholesale Receivables Corporation II (“(“NWRC II”), a Delaware corporation and a wholly owned subsidiary of NMAC. NWRC II will then re-sell the floorplan receivables to the related issuing entity issuing notes secured by those floorplan receivables. Each account designated by NMAC is selected based on a number of eligibility criteria including, among others, limitations on the dealers’ geographic location. Under certain circumstances, NMAC may designate additional accounts and, upon such designation, all new floorplan receivables arising in connection with those additional accounts will be transferred to the trust issuing the securities, unless the accounts become ineligible or are subsequently redesignated by NMAC for removal.
NMAC will service the floorplan receivables in accordance with customary procedures and guidelines that it uses in servicing dealerDealer floorplan receivables that it services for its own account or for others and in accordance with the agreements it has entered into with the dealers.Dealers. Servicing activities performed by the servicer include, among others, collecting and recording payments, making any required adjustment to the floorplan receivables, monitoring dealerDealer payments, evaluating increases in credit limits and maintaining internal records with respect to each account. The servicer may also change, in limited circumstances, the terms of the floorplan receivables under the designated accounts. These terms may include the applicable interest rates, payment terms and amount of the dealer’sDealer’s credit line under the designated account, as well as the underwriting procedures. Upon the sale of a NMAC financed vehicle, NMAC is entitled to receive payment in full of the related advance withinthe earlier of 10 calendar days of the sale but not later thanor two business days after the dealership has received payment therefor. Dealers remit payments by check or electronically directly to NMAC. If the financed vehicle is not sold or leased within a year, advancesthe advance for such vehicle is typically due in the twelfth month after the date funded, but, with NMAC approval, may be repaid in equal monthly installments beginning on the thirteenth month. NWRC II has filed a registration statement and certain amendments and exhibits under the Securities Act with the SEC relating to theeach offering of securities backed by the floorplan receivables of NMAC. For more information regarding that transaction,these transactions, you should review the registration statement and other reports filed by NWRC II with the SEC at http://http/www.sec.gov. 28
LeaseLeases
As described in more detail elsewhere in this Prospectus and the applicable Prospectus Supplement, NMAC (i) underwrites the leases that will be assigned to the Titling Trust, (ii) selects the leases and the leased vehicles that will be allocated to each SUBI, and (iii) services the leases and the leased vehicles owned by the Titling Trust. As the servicer for the leasesLeases and the related vehiclesLeased Vehicles owned by the titling Trust, NMAC will service the leases and the leased vehicles, using the same degree of skill and attention that it exercises with respect to comparable assets that it services for itself or others. See “Description“Description of the Servicing Agreement – General.”— General” in this Prospectus. NMAC will also serve as the administrative agent for each series of Notes and, in that capacity, will provide notices and perform other administrative obligations required to be performed by the related Issuing Entity or the Trustee under the related Indenture. For more information regarding NMAC’s lease financing business and its responsibilities as servicer and administrator, you should refer, respectively, to “Nissan“Nissan Motor Acceptance Corporation,” “Description of the Servicing Agreement” and “Description“Description of the Trust Administration Agreement” in this Prospectus and “Nissan“Nissan Motor Acceptance Corporation – Experience in Asset-Backed— Securitization Transactions –— Lease Securitization”in the accompanyingapplicable Prospectus Supplement. Lease Underwriting Procedures Both auto loanretail installment contract and auto lease applications are subject to the same credit policies and procedures at NMAC. Contracts that are purchased must comply with NMAC’s underwriting standards and other requirements, as described below, under existing agreements between NMAC and the Dealers. NMAC’s underwriting standards emphasize the prospective lessee’s ability to pay, as well as the asset value of the motor vehicle to be financed. NMAC’s underwriting, servicing and collection activities are conducted principally at a centralized processing center in Irving, Texas. 33
NMAC’s credit decision is influenced by, among other things, the applicant’s credit score as obtained by NMAC from the three national credit bureaus Equifax, Experian and TransUnion. A lease application may be reviewed by the credit officers within NMAC’s consumer credit department. Depending on their level and experience, credit officers may have the authority to approve or deny certain types of lease applications. For example, newly hired credit analysts are assigned level 1 authority, which allows them to approve applications with a FICO Score of 620 and above and amounts up to $30,000$35,000 ($50,000 for analysts assigned to Infiniti Financial Services.)Services) Senior Credit Analysts are given level 2 authority, which allows them to approve applications with a FICO Score as low as 500 and amounts up to $75,000. A credit supervisor has level 3 authority, and may approve amounts up to $150,000 for any FICO Score. Finally, level 4 authority is reserved for the regional credit manager, the senior manager of the consumer credit and risk management departments, and the regional financial service managers, all of whom can approve or deny any type of lease application. NMAC makes its final credit decision based upon the degree of credit risk with respect to each lease applicant. NMAC also uses a repeat customer algorithm to grant pre-approvals to existing lease customers. From September 1996 through October 2001, NMAC utilized its own empirically derived scorecards. However, for competitive reasons, NMAC switched to risk models developed by Fair Isaac and Company, Inc.Corporation beginning October 4, 2001. These generic scorecards (“(“FICO Scores”)allow Dealers to enter into financing contracts with customers during hours that NMAC is not open for business. Determination of Residual Values The value of the Notes being issued is based on the aggregate Securitization Value of the Leases and the related Leased Vehicles. The term “Securitization“Securitization Value”means, for each Lease and the related Leased Vehicle, (a) as of the maturity date of the related Lease, an amount equal to the base residualBase Residual of the related Leased Vehicle and (b) as of any date other than the maturity date of the related Lease, an amount equal to the sum of the present value of the remaining monthly lease payments and the base residual,Base Residual, the calculation of such amount will be more fully described in the applicable prospectus supplement.Prospectus Supplement. The base residualBase Residual of the related Leased Vehicle will be calculated as provided in the applicable prospectus supplement,Prospectus Supplement, and is based on the expected value of the Leased Vehicle at Lease termination. The Leases and Leased Vehicles that will be allocated to each SUBI after the date of this prospectusProspectus will have been originated under revised residual policies that were initiated in fiscal year 1999. Notwithstanding the foregoing, no assurance can be given as to NMAC’s future experience with respect to the return rates of Nissan and Infiniti vehicles relating to leases originated under these revised residual policies. In addition, no assurance can be given that NMAC’s experience with respect to the return of off-lease Nissan and Infiniti vehicles or related residual value losses, or the experience of any issuing entityIssuing Entity of a series with respect to the related Leased Vehicles, will be similar to that set forth in the residual value loss experience table. If the residual values of the Leased Vehicles, as originally determined by NMAC are substantially higher than the sales proceeds actually realized upon the sale of the Leased Vehicles, you may suffer losses on your investment. See“Risk Factors –— You may experience a loss if defaults on the leases or residual value losses exceed the available credit enhancementenhancement”.”in this Prospectus. For more information regarding NMAC’s procedures for realizing the residual value of leased vehicles, see “–“— Methods of Vehicle Disposal” and “–“— Collection and Repossession ProceduresProcedures”” below. 29
NMAC believes that the historical residual value loss experience is partially attributable to new car pricing policies of all manufacturers. Most manufacturers have recently endeavored to keep new car pricing flatLease Return and in some cases, less than the prices for models from prior years. New car models frequently have certain standard equipment that was included as optional equipment in models from prior years. NMAC believes that these factors have exerted additional downward pressure on the value of used vehicles when compared to the price for new vehicles.
Remarketing Program NMAC handles all remarketing of leased vehicles, including customer service, collections, accounting, the end of term process and titling. NMAC’s remarketing department conducts a direct mail campaign to lessees at 180 days 120 days,and 90 days, and 30 days prior to the lease maturity date. 180 day mailer — explains end of lease options, information on the end of term process and product information. A business reply card is enclosed for the lessee to indicate whether or not he intends to purchase the leased vehicle at the end of the lease term. 90 day mailer — explains end of term options, end of term process and provides more in-depth information regarding the pre-return and inspection process. A brochure describing excessive wear and tear and a key assessment card are also included, along with a pre-approval certificate (if the lessee qualifies) and information on the owner loyalty program. 34
| • | | 180 day mailer- explains end of lease options, information on the end of term process and product information. A business reply card is enclosed for the lessee to indicate whether or not he intends to purchase the leased vehicle at the end of the lease term. | | | • | | 120 day mailer- explains end of term options, end of term process and the owner loyalty program. A business reply card is also included. | | | • | | 90 day mailer- explains end of term options, end of term process and provides more in-depth information regarding the pre-return and inspection process. A brochure describing excessive wear and tear and a key assessment card are also included, along with a pre-approval certificate (if the lessee qualifies) and information on the owner loyalty program. | | | • | | 30 day letter- explains end of lease responsibilities with regard to the federal odometer statement and the vehicle condition report. |
At 9060 days to maturity, NMAC’s Lease Customer Network Department(“LCN”)begins placing calls to a lessee to: | | • | | Obtain the lessee’s end of term intentions and document the current mileage on the lease vehicle; | | | | | • | | Determine the date the lessee plans to return the vehicle and the dealership to which the vehicle will be returned; | | | | | • | | Assist and educate the lessee regarding the end of lease process; | | | | | • | | Advise the lessee of the need for a complimentary pre-termination inspection of the vehicle that can be conducted at the lessee’s home or place of business, and transfer the lessee to NMAC’s independent inspection company to schedule an appointment; | | | | | • | | Advise the lessee (if any repairs are made to the vehicle after it has been pre-inspected) to contact LCN to schedule another inspection; | | | | | • | | Advise the lessee to schedule an appointment with the Dealer for return of the vehicle; | | | | | • | | Provide the lessee with information on special extension offers,owner loyalty programs or models;and new model information; | | | | | • | | Answer questions and resolve issues withEducate the lessee regarding end of lease liability statement;billing; | | | | | • | | Provide product brochures on new models; | | | | | • | | Advise the lessee to sign and retain a copy of the federal odometer statement completed on-line at the dealership upon return of the vehicle; and | | | | | • | | If applicable, advise the lessee of state-specific rights pertaining to the pre-termination vehicle inspection and/or counter inspection of the lessee’s vehicle. |
Lease Vehicle Maintenance Each NMAC form of lease provides that the lessee is responsible for all maintenance, repair, service and operating expenses of the leased vehicle. In addition, the lessee is responsible for all damage to the leased vehicle and for its loss, seizure or theft. At the 30
scheduled maturity date of a lease, if the lessee does not purchase the leased vehicle, the lease requires the lessee to pay the lessor any applicable charges for excess mileage or excess wear and tear (“(“Excess Mileage and Excess Wear and Tear Charges”). The Excess Mileage and Excess Wear and Tear Charges are assessed to compensate the lessor in connection with, among others: (1) inoperative mechanical parts including powerpowertrain accessories; (2) dents, scratches, chips or rusted areas on the body; (3) mismatched paint; (4) broken windows or inoperative window mechanisms; (5) broken headlight lenses or sealed beams, dents, cuts, scratches or gouges in the bumper;bumpers; (6) broken grilles or dents in the grilles; (7) single dents or a series of small dents on other train parts, including headlight and taillight bezels; (8) seats, seat belts, head lining, door panels or carpeting that are torn or are damaged beyond ordinary wear and use or are burned; (9) any windshield damageddamage with chips, cracks or bull’s-eyes; (10) any tire not part of a matching set of five tires (or four with an emergency spare), or tires with less than 1/8 inch of tread remaining at the shallowest point, or tires which are not a matching set of tires of comparable type and quality to the tires furnished with the vehicle upon commencement of the lease; or (11) missing parts, accessories and adornments, including bumpers, ornamentation, aerials, hubcaps, chrome stripping, rearview mirrors, radio and stereo components, or emergency spare. If the lessee fails to pay the Excess Mileage and Excess Wear and Tear Charges, NMAC generally follows the collection and repossession procedures described in“NISSAN MOTOR ACCEPTANCE CORPORATION –Nissan Motor Acceptance Corporation — Collection and Repossession ProceduresProcedures”” of in this prospectus.Prospectus. 35
Methods of Vehicle Disposal NMAC’s vehicle remarketing department handles all motor vehicle sales for NMAC including repossessions and end of term leases. The department is managed at a centralized location in [Torrance, California],Irving, Texas, with a customer call center (the “NMAC“NMAC Lease Customer Network”)also located in Irving, Texas and field representatives located near their respective auction sites. Each lease provides that upon maturity, the lessee has the option to purchase the related motor vehicle for an amount equal to the related Contract Residual. If the lessee does not exercise this option, the related “grounding” Dealer has the option to purchase the vehicle at the Contract Residual. Vehicles that are not purchased byNMAC utilizes the lessee or the Dealer are turned over to NMAC for sale. Returned vehicles that meet certain mileage / condition parameters are then offered for sale to other Nissan or Infiniti dealers at the Contract Residual over the internet utilizing the Nissan or Infiniti Remarketing Portfolio ManagementManager (“RPM”) electronic grounding, recovery and sales system. The RPM system, provides an electronic grounding, recovery and sales procedure, for the dealership to use at lease termination to obtain the related vehicle federal odometer statement and electronic customer signature.signature for all returned off-lease vehicles. The RPM system is also usedemployed by the grounding dealerDealer to process the purchase by the returned vehicles atgrounding Dealer or the Contract Residual. Dealers that purchase vehicles vialessee, as the RPM system are charged electronically for the amountcase may be, of the Contract Residual and then have the responsibility for transporting the vehicle from the grounding dealer to their own dealership. If neither the lessee nor the grounding dealer decides to purchase the returned vehicle, the returned vehicle is made available for purchase to non-grounding Nissan and Infiniti dealers over the RPM system at an amount equal to the Contract Residual.related motor vehicle. After a two day grounding Dealer sale period, eligible Infiniti vehicles are offered to non-grounding Infiniti franchise dealers at contract residual for another two day sale cycle. All returned vehicles that have not been sold electronicallypurchased by the lessee grounding Dealer or non-grounding Infiniti Dealer are then sentshipped to auction by the vehicle remarketing departmentdepartment. Once at auction small volumes of off-lease and fleet vehicles are offered weekly to auction.all Nissan and Infiniti Dealers via the auction internet sales systems (Manheim OVE & Adesa Bid Now Buy Now). All remaining auction inventory is managed through Corporate Closed and Open Auction sales. NMAC uses a system of auto auctions throughout the United States. NMACStates and views speed and efficiency of operations balanced with maximizing recovery values as the most critical aspects of managing off-lease vehicle inventory. NMAC has an internal target of 45 days from the time a leased vehicle is turned in until it is sold at auction. Credit repossessions are handled in accordance with various state requirements. All remarketing operations are electronic. This allows NMAC to control inventory management, select the best sales channel, manage the flow of vehicles to the auction and placement of the vehicles to auction locations that it believes will yield the highest net recovery value. Each vehicle is required to be inspected by an independent third party at the auction locations to determine its condition prior to sale. Condition reports are electronically transmitted to the remarketing department’s system. Based on the vehicle’s condition and mileage, NMAC’s remarketing department assigns a target auction floor price to such vehicle. Field representatives monitor the auctions and determine which vehicles to sell or pass on a given day. Vehicles that are passed on are offered again on the next available auction date, to attempt to ensure that the vehicles are sold in a timely manner. In general, off-lease vehicles are sold in the following order of preference: (a) ElectronicCustomer — to the lease customer at contract residual plus any other customer liabilities (assuming the customer is not leasing or purchasing a replacement Nissan/Infiniti vehicle); (b) Grounding Dealer — to the grounding Dealer at contract residual; (c) Non-Grounding Infiniti dealers — to eligible Infiniti vehicles at contract residual; (d) Auction Internet Sales System — NMAC makes available some of these off-lease vehicles for sale to Nissan and Infiniti Dealers over its RPMthe Manheim OVE & Adesa Bid Now Buy Now auction internet system; (b) Closed Auction — only Nissan Dealers can purchase Nissan vehicles and only Infiniti Dealers can purchase Infiniti vehicles at a closed auction event; (c)(e) Corporate Closed Auction — open to both Nissan and Infiniti Dealers regardless of which type of off-lease vehicle is sold; and (d)(f) Open Auction — open to any licensed Dealer in the United States. NMAC favors corporate closed auctions; however, open auctions are used when NMAC management deems it appropriate given the size of the off-lease vehicle inventory. On-line Simulcast and Liveblock auctions run concurrently with many corporate closed and open auction events to increase buyer participation and maximize value. NMAC has regular sales at major auction locations throughout the United States. NMAC’s highest volume has historically been in the northeast region. From time to time, auction capacity and demand for pre-owned vehicles in the northern markets is insufficient 31
to absorb the volume. Therefore, NMAC will transport vehicles to different regions where it perceives there to be a greater demand in order to maximize the vehicles’ recovery values. Insurance on the Leased Vehicles NMAC’s form of lease requires that lessees maintain motor vehicle liability and motor vehicle physical damage insurance on the leased vehicle. The motor vehicle liability coverage must provide minimum limits of $100,000 per person and $300,000 combined limit per accident for bodily injury to third parties, and $50,000 for damage to the property of third parties ($30,000 in Hawaii). These limits exceed the statutory minimums required by many states. The insurance policy must name the Titling Trust, or the Titling Trustee, on behalf of the Titling Trust, as an additional insured and loss payee. The motor vehicle physical damage coverage must provide comprehensive and collision coverage for the actual cash value of the vehicle, with maximum deductibles of $1,000 for each 36
such coverage. Since lessees may choose their own insurers to provide the required coverage, the specific terms and conditions of policies vary. NMAC requires lessees to provide evidence that the specified insurance coverage and additional insured loss payee provisions are in effect at the inception of the lease. If a lessee does not have appropriate insurance at the time of registration, NMAC’s policies and procedures require it to repossess the related vehicle. NMAC’s historical experience and expectation is that the number of leased vehicles repossessed as a result of the failure of the lessee to maintain appropriate insurance has not been and will not be material. For vehicle leases originated prior to April 1, 2004, NMAC provided Guaranteed Automobile Protection coverage on all leased vehicles with no additional cost to the lessee. If a lessee’s vehicle is destroyed or irretrievably lost as a result of theft, an accident or other reason that meets NMAC’s published criteria, and NMAC determines that the lessee is not in default, NMAC will accept the actual cash value paid by the lessee’s insurance company as payment in full of the lease balance. If the insurance loss proceeds exceed the lessee’s lease obligations, it is NMAC’s policy not to refund the excess will not be refunded to the lessee (unless required by state law).; however, such refunds are granted on a case-by-case basis. If the lessee owes any past due payments or other amounts under the lease, NMAC may use the security deposits to offset such amounts. NMAC does not require lessees to carry credit disability, credit life, credit health or other similar insurance coverage, which provides for payments to be made on the leases on behalf of lessees in the event of disability or death. To the extent that the lessee obtains any of these insurance coverages, payments received onby NMAC with respect to such coverage may,will be applied by NMAC, if permitted by applicable law, be applied to payments on the related lease to the extent that the lessee’s beneficiary chooses to do so.lease. Contingent and Excess Liability Insurance In addition to the personal propertyphysical damage and liability insurance coverage required to be obtained and maintained by the lessees pursuant to the leases, and as additional protection if a lessee fails to maintain the required insurance, NMAC maintains contingent liability or similar types of insurance for the benefit of, among others, NMAC, the Titling Trustee, on behalf of the Titling Trust, the UTI Beneficiary, the Depositor and each Issuing Entity issuing a series of Notes, against third party claims that may be raised against the Titling Trust or the Titling Trustee, on behalf of the Titling Trust, with respect to any leased vehicle owned by the Titling Trust (the “Contingent“Contingent and Excess Liability Insurance”).The Contingent and Excess Liability Insurance provides a minimum primary coverage of $1 million combined single limit coverage per occurrence and a minimum excess coverage of $15 million combined single limit each occurrence, without limit on the number of occurrences in any policy period. Claims could be imposed against the assets of the Titling Trust, in excess of such coverage. In that event, you could incur a loss on your investment. See “Risk“Risk Factors — Vicarious tort liability may result in a loss,” “Additional Legal Aspects of the Titling Trust and the SUBI — The SUBI” and “Additional Legal Aspects of the Leases and the Leased Vehicles — Vicarious Tort Liability” in this Prospectus for a discussion of related risks. With respect to damage to the leased vehicles, each lessee is required by the related lease to maintain comprehensive and collision insurance. As more fully described under “Description“Description of the Servicing Agreement — Insurance on Leased Vehicles,”Vehicles” in this Prospectus, the Servicer will generally not be required to monitor a lessee’s continued compliance with insurance requirements. If the foregoing insurance coverage is exhausted or unavailable for any reason and no third-party reimbursement for any damage is available, you could incur a loss on your investment. The Servicing Agreement for each Issuing Entity will provide that for so long as any of the related series of Notes are outstanding, neither the Titling Trustee nor NMAC may terminate or cause the termination of any Contingent and Excess Liability Insurance policy unless (i) a replacement insurance policy is obtained that provides coverage against third party claims that may be raised against the Titling Trust, the Trustee on behalf of the Titling Trust or the related Issuing Entity in an amount at least equal to $1 million combined single limit per occurrence and excess coverage of at least $15 million combined single limit each occurrence, without limit on the number of occurrences in any policy period (which insurance policy may be a blanket insurance policy covering the Servicer and one or more of its affiliates), and (ii) each rating agency then rating that series of Notes (each, a “Rating Agency”) receives prior written notice of such termination and any replacement insurance. These obligations of NMAC will survive any termination of NMAC 32
as Servicer under the related Servicing Agreement, until such time as claims can no longer be brought that would be covered by such insurance policies, whether as a result of the expiration of any applicable statute of limitations period or otherwise. 37
Collection and Repossession Procedures There are twoseveral methods for lessees to make monthly lease payments. Most lessees either mail payments, along with a payment statement, to one of four lockboxes.lockboxes or submit payments using online bill payment services offered by an individual lessee’s bank, known as consumer electronic receivables. A small percentage of lessees (1) use NMAC’s automated clearinghouse system, others utilize a pay by phone system or(2) make cash payments through Western Union.Union, (3) use Bill Matrix, an electronic payment service provider, to make payments by phone or online, or (4) physically deposit their payments into a drop box. Lease payments are due on the 1st1st through the 28th day of each calendar month. AllGenerally, all payments received by NMAC which can be identified will be deposited into the related collection account within two business days after receipt,identification, unless certain conditions as set forth in the related Servicing Agreement have been met, which would then permit deposits on a monthly basis. See “Description“Description of the Servicing Agreement — Collections.”Collections”in this Prospectus. NMAC considers a lease to be delinquent when 5% or more of the payment amount is past due. If a lease is delinquent, NMAC will charge a late fee where permissible and not exceeding statutory limits for each month that the lease is delinquent. Since August 2000, NMAC has utilized behavioral based campaigns in its collection activities. The behavioral based campaigns are comprised of two areas in addressing delinquent lessees. The first assesses the risk of the delinquent lessee through a behavioral scoring algorithm. The algorithm prioiritizesprioritizes the lessee from high to low risk and calling campaigns are structured to target high-risk lessees. Secondly, based on the score, management determines the best strategy for past due letters. Assessing the score allows the managers to focus resources on higher risk lessees. Lower risk lessees may receive no communication from NMAC unless the delinquency becomes more severe. If the delinquent lease cannot be brought current or completely collected within 60 to 90 days, NMAC generally attempts to repossess the related leased vehicle. NMAC holds repossessed vehicles in inventory to comply with any applicable statutory requirements for reinstatement and then sells or otherwise disposes of the vehicles. Any deficiencies remaining after repossession and sale of the vehicle or after the full charge-off of the lease are pursued by or on behalf of NMAC to the extent practicable and legally permitted. See “Additional“Additional Legal Aspects of the Leases and Leased Vehicles — Deficiency Judgments.”Judgments” in this Prospectus. NMAC attempts to contact lessees and establish and monitor repayment schedules until the deficiencies are either paid in full or become impractical to pursue. Extensions and Pull-Forwards On occasion, NMAC may extend the term of a lease if the lessee requests such extension and is not in default on any of its obligations under the lease and if the lessee agrees to continue to make monthly payments (each, a “Term Extension”).payments. Lessees at the end of a lease who intend to lease or purchase another Nissan or an Infiniti automobile but cannot do so at lease maturity for reasons such as awaiting delivery of a new vehicle, preference for the next model year or other timing circumstances, may qualify for a lease term extension of up to sixtwelve months on contract terms greater than 24 months or up to three months on contract terms up to 24 months. Lessees who wish to extend their lease term beyond six months (up to one year) of the original Lease Maturity Date must sign and return a lease extension agreement with NMAC.agreement. In the future NMAC may adopt incentive programs that encourage Term Extensionslease term extensions in circumstances other than in connection with the lease [or purchase]or purchase of another Nissan or Infiniti automobile. If NMAC grants a Term Extension, is granted, the Servicer will be required to deposit into the related Collection Account an amount equal to the Repurchase Payment, at which time such lease and the related leased vehicle will be repurchased from the Issuing Entity and reallocated from the related SUBI to the UTI and will no longer constitute assets of such SUBI. NMAC, as Servicer, may also permit a lessee under a pull-forward program to terminate a lease prior to its maturity in order to allow such lessee, among other things, (i) to enter into a new lease contract for a differentnew Nissan or Infiniti vehicle or (ii) to purchase a differentnew Nissan or Infiniti vehicle, provided that the lessee is not in default on any of its obligations under the related Lease and the financing of the related vehicle is provided by NMAC (each, a “Pull-Forward”“Pull-Forward”). In the case of such early termination, all Pull-Forward Payments due and payable by the lessee under the lease will be paid and deposited in the related Collection Account within the time period required for the Servicer to deposit collections into the related Collection Account. The lessee willmay still be responsible for (a) any amounts assessed by the Servicer as a result of excessive wear and tear, (b) any excess mileage charge for the period for which the lease was in effect, pro-rated monthly and (c) any taxes related to the termination of the lease. The “Pull-Forward“Pull-Forward Payment”with respect of any lease will mean an amount equal tosome or all of the sum of (a) any due and unpaid payments under that Lease plus (b) the monthly payment amount multiplied by the number of monthly payments not yet due with respect to that Lease.Lease, which may vary by particular program. 3338
Delinquency, Repossession and Loss Data Information concerning NMAC’s experience pertaining to delinquencies, repossessions and net losses on its portfolio of motor vehicle leases (including leases owned by NMAC or the Titling Trust and leases that have been sold but are still being serviced by NMAC) will be set forth in the applicable Prospectus Supplement. There can be no assurance that the delinquency, repossession and net loss experience on any pool of Leases will be comparable to prior experience or to the information in any Prospectus Supplement. Like Kind Exchange In January 2001, NMAC implemented a like kind exchange(“LKE”)program for its lease portfolio. Previously, NMAC recognized a taxable gain on the resale of most vehicles returned to the Titling Trust upon lease termination. The LKE program is designed to permit NMAC to defer recognition of taxable gain by exchanging Matured Vehicles and Defaulted Vehicles, for new vehicles (the “Replacement“Replacement Vehicles”): | | • | | The documents governing the LKE program requires the proceeds from the sale of a Matured Vehicle or a Defaulted Vehicle to be assigned to, and deposited directly with, a Qualified Intermediary (the “QI”“QI”) rather than being paid directly to NMAC as Servicer. | | | | | • | | In order to enable NMAC to take advantage of the tax deferral, the Matured Vehicle or the Defaulted Vehicle will be reallocated from the related SUBI to the UTI at the same time and in exchange for the same dollar amount that such Matured Vehicle or Defaulted Vehicle is sold at auction. See “Description“Description of the Servicing Agreement –— Sale and Disposition of Leased Vehicles.”Vehicles”in this Prospectus. | | | | | • | | The QI uses the proceeds of the sale, together with additional funds, if necessary, to purchase Replacement Vehicles. | | | | | • | | The Replacement Vehicles are then transferred to the Titling Trust and become part of the UTI. | | | | | • | | The Titling Trust is then deemed to have exchanged Matured Vehicles and Defaulted Vehicles for the Replacement Vehicles and NMAC is not required to recognize any taxable gain. |
Because the related SUBI will receive amounts equal to the Reallocation Payments for the Leased Vehicles in the same time frame as if there was no reallocation from that SUBI to the UTI, the LKE program is not anticipated to have any impact on the amounts and timing of payments to be received by the related Issuing Entity from the disposition of the Leased Vehicles. “Reallocation“Reallocation Payments”means, with respect to any Matured Vehicle or Defaulted Vehicle reallocated from the SUBI to the UTI pursuant to the LKE program, the Net Liquidation Proceeds for such Matured Vehicle or Defaulted Vehicle. “Net“Net Liquidation Proceeds”will mean Liquidation Proceeds reduced by the related expenses. “Liquidation Proceeds” will mean the gross amount received by the Servicer in connection with the attempted realization of the full amounts due or to become due under any Lease and of the Base Residual of the Leased Vehicle, whether from the sale or other disposition of the related Leased Vehicle (irrespective of whether or not such proceeds exceed the related Base Residual Value), the proceeds of any repossession, recovery or collection effort, the proceeds of recourse or similar payments payable under the related dealer agreement, receipt of insurance proceeds and application of the related Security Deposit and the proceeds of any disposition fees or other related proceeds.
THE LEASES General Each of the Leases allocated to a SUBI will have been originated by a Dealer in the ordinary course of that Dealer’s business and assigned to the Titling Trust on or prior to the related Cutoff Date, in accordance with the underwriting procedures described under “Nissan“Nissan Motor Acceptance Corporation — Lease Underwriting Procedures.”Procedures”in this Prospectus. NMAC represents in the Servicing Agreement for each Issuing Entity that it uses no adverse selection procedures in selecting any Leases or Leased Vehicles for allocation to the related SUBI. NMAC strives to select a pool of Leases that is a representative sample of its overall portfolio of closed-end leases, maturing over the anticipated life of the related transaction. NMAC believes that no procedures adverse to the pool assets were used in the selection process. Each Lease is an operating lease for accounting purposes and is selected from those retail closed-end leases held in the Titling Trust’s portfolio that meet several criteria. These criteria provide that each Lease: 3439
| | • | | relates to a Nissan or Infiniti automobile, light duty truck, minivan or sport utility vehicle, | | | | | • | | was originated in the United States, | | | | | • | | provides for level payments that fully amortize the adjusted capitalized cost of the Lease at a contractual annual percentage rate (the “Lease“Lease Rate”) to the related Contract Residual over the Lease Term, and | | | | | • | | satisfies the other criteria, if any, set forth in the applicable Prospectus Supplement. |
The Servicing Agreement for each Issuing Entity provides that if the Titling Trustee, NMAC, the related Trustees or the Depositor discovers a breach of any representation, warranty or covenant referred to in the preceding paragraph that materially and adversely affects the interest of the Issuing Entity in the related Lease or Leased Vehicles, and such breach is not cured in all material respects on or before the date specified in the applicable Prospectus Supplement, the Lease and related Leased Vehicle will be reallocated to the UTI. In connection with such reallocation, NMAC will be required to remit the Repurchase Payment to the Issuing Entity. Under some circumstances, the Servicer will be required to make Repurchase Payments in respect of Leases as to which the Servicer grants a Term Extension and, in certain circumstances, the Titling Trust, or the Titling Trustee on behalf of the Titling Trust, will be required to make Repurchase Payments in respect of Leases as to which the related lessee changes the domicile of or title to a Leased Vehicle to a Restricted Jurisdiction. See “Description“Description of the Servicing Agreement –— Purchase of Leases Before Their Lease Maturity Dates.”Dates”in this Prospectus. Each Lease will be a closed-end lease.Over the term of each Lease (the “Lease“Lease Term”), the lessee is required to make level monthly payments intended to cover the cost of financing the related Leased Vehicle, scheduled depreciation of the Leased Vehicle and certain sales, use or lease taxes. From each payment billed with respect to a Leased Vehicle, the amounts that represent the financing cost and depreciation of the Leased Vehicle (including any capitalized amounts, such as insurance and warranty premiums) (the “Monthly“Monthly Payment”) will be available to the related Issuing Entity to make payments in respect of the Notes and Certificates. At the scheduled end of the Lease Term (the “Lease“Lease Maturity Date”), the lessee has two options: | | (1) | | the lessee can purchase the Leased Vehicle at the Contract Residual stated in the Lease, or | | | | | (2) | | the lessee can return the Leased Vehicle to, or upon the order of, the lessor and pay an amount (the “Disposition“Disposition Amount”) determined by adding (a) any due but unpaid payments and other charges under the Lease, (b) any amounts assessed by the Servicer as a result of excessive wear and tear, (c) any excess mileage charge for the period for which the Lease was in effect, pro-rated monthly and (d) any taxes related to the termination of the Lease. |
The Contract Residuals paid by lessees to purchase Leased Vehicles and all amounts assessed and collected by the Servicer in connection with the Excess Mileage and Excess Wear and Tear Charges upon return of the Leased Vehicles will be available to the Issuing Entity to make payments on the related series of Notes. As a consequence of the frequency of prepayments by lessees prior to the related Lease Maturity Dates, NMAC does not expect many of the Leases to run to their full terms. See “Maturity,“Maturity, Prepayment and Yield Considerations.”Considerations”in this Prospectus. Early Termination In most instances, a Lease will allow the related lessee to terminate the Lease before the related Lease Maturity Date (each, a “Lessee“Lessee Initiated Early Termination”) provided that the lessee is not in default of its obligations under the Lease. A lessee wishing to terminate a Lease will be required to pay, unless required otherwise by state or federal law, the required Disposition Amount (under some lease contracts), as defined above, plus an “Early“Early Termination Charge”equal to the lesser of (i) the difference if any, between, on the one hand, (a) the sum of the present value of (1) the remaining Monthly Payments and (2) the Contract Residual of the related Leased Vehicle and, on the other hand, (b) a wholesale value assigned to the Leased Vehicle by NMAC in accordance with accepted practices in the automobile industryLease agreement executed by the lessee under which trade guides are established as the evaluation method (except as required by state law) (or by written agreement between NMAC, on behalf of the Titling Trust, and the lessee) and (ii) the remaining Monthly Payments. A lessee may dispute the valuation of a vehicle, in which case the lessee may submit a third-party professional appraisal. 40
Credit Termination Each Lease also allows the lessor to terminate the Lease and repossess the related Leased Vehicle upon a lessee default (each, a “Credit“Credit Termination”). Events of default under a Lease include, but are not limited to: | | 1. | | the failure by a lessee to make a payment when due, | | | | | 2. | | the failure of the lessee to provide truthful information on the credit application, | | | | | 3. | | the failure of the lessee to maintain insurance coverage required by the Lease, |
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| | | 4. | | the failure of the lessee to timely or properly perform any obligation under the Lease, | | | | | 5. | | the bankruptcy or other insolvency of the lessee, or | | | | | 6. | | any other act by the lessee constituting a default under applicable law. |
If the lessor terminates a Lease early due to a Credit Termination, the lessee will owe an amount determined by adding the following: | | 1. | | the Disposition Amount (including payments accrued under the Lease through the date of termination), | | | | | 2. | | the Early Termination Charge described above, except that the option to pay only the un-accrued remaining monthly payments is not available and the vehicle valuation is determined by auction, | | | | | 3. | | collection, repossession, transportation, storage and Disposition Expenses, and | | | | | 4. | | reasonable attorneys’ fees and court costs, to the extent permitted by law. |
“Disposition“Disposition Expenses”will mean with respect to a Leased Vehicle that is sold at auction or otherwise disposed of by the Servicer, all expenses and other amounts reasonably incurred by the Servicer in connection with such sale or disposition, including, without limitation, sales commissions, and expenses incurred in connection with making claims under any Contingent and Excess Liability Insurance or other applicable insurance policies. Disposition Expenses will be reimbursable to the Servicer as a deduction from Net Auction Proceeds and from amounts on deposit in the related SUBI Collection Account. A Lease may also terminate prior to its Lease Maturity Date if the related Leased Vehicle has been lost, stolen or damaged beyond economic repair (each, a “Casualty“Casualty Termination”and, together with a Lessee Initiated Early Termination and a Credit Termination, the “Early“Early Lease Terminations”). If the Leased Vehicle is stolen (and not recovered) or destroyed, and, so long as the lessee has complied with the lessee’s insurance obligations under the Lease and is not otherwise in default of its obligations under the Lease, the lessee’s insurance covers the casualty, the Servicer will accept the amount of the applicable deductible paid by the lessee and the actual cash value paid by the lessee’s insurance company (“(“Insurance Proceeds”)in full satisfaction of the lessee’s obligations under the Lease. If the Insurance Proceeds exceed the amount of the lessee’s obligations under the Lease, it is NMAC’s policy to not refund the excess will not be refunded to the lessee (subject to certain exceptions granted on a case-by-case basis), unless otherwise required by applicable law, and will be available to the related Issuing Entity to make payments in respect of the related series of Notes. Conversely, if the Insurance Proceeds are less than the amount of the lessee’s obligations under the Lease, the shortfall will reduce the amount available to the related Issuing Entity for distribution to the Noteholders of the related series. If the lessee owes any past due payments or other amounts under the Lease, the Servicer may use the related Security Deposit to offset such amounts. [AnyAny Insurance Expenses incurred by the Servicer will be reimbursable to the Servicer as a deduction from Net Insurance Proceeds.] 41
Security Deposits The Titling Trust’s rights related to the Leases allocated to a SUBI will include all rights under those Leases to the refundable security deposit paid by the lessees at the time the Leases are originated (the “Security“Security Deposit”). The Security Deposit is available as security for nonpayment of lease payments and excess wear and tear charges. As part of its general servicing obligations, the Servicer will retain possession of each Security Deposit remitted by the lessees and will apply the proceeds of these Security Deposits in accordance with the terms of the Leases, its customary and usual servicing procedures and applicable law. The Servicer will not be required to segregate Security Deposits from its own funds (except for Security Deposits paid in connection with Leases originated in New York, where Security Deposits mustas may be segregated)required under state law). Any income earned from any investment on the Security Deposits by the Servicer will be for the account of the Servicer as additional servicing compensation (except for income earned on Security Deposits paid in connection with Leases originated in New York, which income, if any, must be reserved for the lessee who initially paid the related Security Deposit). Representations, Warranties and Covenants The Leases and Leased Vehicles allocated to a SUBI for a particular Issuing Entity will be described in a schedule appearing as an exhibit to the related SUBI Supplement that will identify for each Lease: | | • | | the identification number of the Lease, | | | | | • | | the identification number of the related Leased Vehicle, |
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| | | • | | the related Lease Maturity Date and | | | | | • | | the Securitization Value of the Lease and the related Leased Vehicle on NMAC’s books as of the related Cutoff Date. |
In the Servicing Agreement for each Issuing Entity, NMAC will make representations and warranties with respect to each Lease and related Leased Vehicle as described generally in the first paragraph under “The“The Leases — General”in this Prospectus and in greater detail in the related prospectus supplement.applicable Prospectus Supplement. The Servicing Agreement for each Issuing Entity will also provide that if the Titling Trustee, NMAC, the Trustee of the related Issuing Entity, the Indenture Trustee or the Depositor discovers a breach of any representation, warranty or covenant referred to under “The“The Leases – General,”— General”in this Prospectus, which materially and adversely affects the related Trust’s interest in the Lease or Leased Vehicle, and which breach is not cured in all material respects prior to the end of the collection period that includes the 60th60th day (or, if the servicer elects, an earlier date) after the date that the Servicer discovers such breach (whether pursuant to such notice or otherwise), the noncompliant Lease and related Leased Vehicle (and any other related SUBI Assets) will be reallocated to the UTI or transferred to the Servicer on the deposit date related to such collection period. In connection with this reallocation, NMAC will be required to deposit (or cause to be deposited) into the related Collection Account the Repurchase Payment on the deposit date related to such collection period. Upon such payment, the related Lease and Leased Vehicle will no longer constitute assets of the related SUBI. The foregoing payment obligation will survive any termination of NMAC as Servicer under the related Servicing Agreement. Under some circumstances, the Servicer will be required to make Repurchase Payments in respect of Leases as to which the Servicer grants a Term Extension and, in certain circumstances, the Titling Trust, or the Titling Trustee on behalf of the Titling Trust, will be required to make Repurchase Payments in respect of Leases as to which the related lessee changes the domicile of or title to a Leased Vehicle to a Restricted Jurisdiction. See “Description“Description of the Servicing Agreement –— Purchases of Leases Before Their Lease Maturity Dates.”Dates”in this Prospectus. MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS General Information regarding maturity and prepayment considerations with respect to each series of Notes is set forth under “Weighted“Weighted Average Life of the Notes”in the applicable Prospectus Supplement and “Risk“Risk Factors— You may experience reduced returnsReturns on your investment resultinginvestments may be reduced by prepayments on the leases, indenture defaults, optional redemption, reallocation of the leases and the leased vehicles from prepayments, repurchasesthe SUBI or early termination of the trust” issuing entity”in this Prospectus. The rate of payment of principal of each class of Notes will depend primarily on the rate of payment on the related Leases and the Leased Vehicles (including scheduled payments on and prepayments and liquidations of the Leases) and losses on those Leases and Leased Vehicles, which cannot be predicted with certainty. 42
A prepayment of a Lease in full (including payment in respect of the Contract Residual of the related Leased Vehicle) may be in the form of: | | • | | proceeds resulting from Early Lease Terminations, including Net Insurance Proceeds and Net Liquidation Proceeds, or | | | | | • | | Repurchase Payments and Reallocation Payments made or caused to be made by the Servicer. |
“Net“Net Insurance Proceeds”means, with respect to any Leased Vehicle, Lease or lessee, all related Insurance Proceeds, net of the amount thereof (a) applied to the repair of the related Leased Vehicle, (b) released to the lessee in accordance with applicable law or the customary servicing procedures of the Servicer or (c) representing other related expenses incurred by the Servicer not otherwise included in liquidation expenses or Disposition Expenses that are recoverable by the Servicer under the Servicing Agreement. “Insurance“Insurance Expenses”means, with respect to any Leased Vehicle, Lease or lessee, the amount thereof (a) applied to the repair of the related Leased Vehicle, (b) released to the lessee in accordance with applicable law or the customary servicing procedures of the Servicer or (c) representing other related expenses incurred by the Servicer not otherwise included in Disposition Expenses that are recoverable by the Servicer under the related Servicing Agreement. Insurance Expenses will be reimbursable to the Servicer as a deduction from Net Insurance Proceeds. The rate of prepayment on the Leases (including payment in respect of the Contract Residual of the related Leased Vehicle) may be influenced by a variety of economic, social and other factors, including the availability of competing lease programs and the conditions in the used motor vehicle market. In general, prepayments of Leases will shorten the weighted average life of the related series of Notes, which is the average amount of time during which each dollar of the principal amount of the Notes is outstanding. As the rate of payment of principal on a series of Notes will depend primarily on the rate of payment — including prepayments — of the related Leases, the final payment of principal of a class or a series of Notes could occur significantly earlier than the applicable final 37
scheduled payment date. If Lease prepayments cause the principal of the related class or series of Notes to be paid earlier than anticipated, the related Noteholders will bear the risk of being able to reinvest principal payments at interest rates at least equal to the interest rates payable on the Notes. Historical levels of lease delinquencies and defaults, leased vehicle repossessions and losses and residual value losses are discussed under “Nissan“Nissan Motor Acceptance Corporation—Corporation — Delinquency, Repossession and Loss Data.”Data”in this Prospectus. NMAC can give no assurances that the Leases will experience the same rate of prepayment or default or any greater or lesser rate than NMAC’s historical rate, or that the residual value experience of Leased Vehicles related to Leases that are scheduled to reach their Lease Maturity Dates will be the same as NMAC’s historical residual value loss experience for all of the retail leases in its portfolio (including leases that NMAC has sold to third parties but continues to service). The effective yield on, and average life of, a series of Notes will depend upon, among other things, the amount of scheduled and unscheduled payments on or in respect of the related Leases and Leased Vehicles and the rate at which such payments are paid to the holders of the Notes. In the event of prepayments of the Leases (and payment of the Contract Residual of the related Leased Vehicles), Noteholders who receive such amounts may be unable to reinvest the related payments received on their Notes at yields as high as the interest rate payable on the Notes. The timing of changes in the rate of prepayments on the Leases and payments in respect of the related Leased Vehicles may also significantly affect an investor’s actual yield to maturity and the average life of the related series of Notes. A substantial increase in the rate of payments on or in respect of the Leases and related Leased Vehicles (including prepayments and liquidations of the Leases) may shorten the final maturity of, and may significantly affect the yield on, the related series of Notes. The yield to an investor who purchases Notes of a series in the secondary market at a price other than par will vary from the anticipated yield if the rate of prepayment on the Leases is actually different than the rate the investor anticipates at the time it purchases those Notes. 43
In sum, the following factors will affect an investor’s expected yield: | | • | | the price the investor paid for Notes of a series, | | | | | • | | the rate of prepayments, including losses, in respect of the Leases and the related Leased Vehicles, and | | | | | • | | the investor’s assumed reinvestment rate. |
These factors do not operate independently, but are interrelated. For example, if the rate of prepayments on the Leases and the related Leased Vehicles is slower than anticipated, the investor’s yield will be lower if interest rates exceed the investor’s expectations and higher if interest rates fall below the investor’s expectations. Conversely, if the rate of prepayments on or in respect of the Leases and the related Leased Vehicles is faster than anticipated, the investor’s yield will be higher if interest rates surpass the investor’s expectations and lower if interest rates fall below the investor’s expectations. In addition, if not previously paid prior to such time, the Notes of a series will be prepaid in full if the Servicer has an option to purchase the related SUBI Certificate and other assets of the Issuing Entity and exercises that option. See “Description“Description of the Trust Agreement –— Termination”in this Prospectus and “Additional“Additional Information Regarding the Securities –— Optional Purchase”in the applicable Prospectus Supplement. NOTE FACTORS AND TRADING INFORMATION The “Note“Note Factor”for each class of Notes will be a seven-digit decimal that the Servicer will compute prior to each payment with respect to that class of Notes. The Note Factor represents the remaining outstanding principal amount of that class of Notes, as of the close of business on the last day of the applicable Collection Period, as a fraction of the initial outstanding principal amount of that class of Notes. Each Note Factor will initially be 1.0000000 and thereafter the Note Factor will decline to reflect reductions in the outstanding principal amount of the applicable class of Notes. A Noteholder’s portion of the aggregate outstanding principal amount of the related class of Notes is the product of (1) the original denomination of that Noteholder’s Note and (2) the applicable Note Factor. Noteholders of a series will receive monthly reports concerning payments received on the related Leases and Leased Vehicles, the Note Factor for each class of Notes, if applicable, and various other items of information. See “Additional“Additional Information Regarding the Securities –— Statement to Securityholders”in the applicable Prospectus Supplement. 38
THE NOTES General Each Issuing Entity will issue one or more classes (each, a “class”“class”) of Notes pursuant to the terms of an indenture (the “Indenture”“Indenture”). A form of the Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Notes with respect to each series and the related Indenture. Each class of Notes will initially be represented by one or more Notes, in each case registered in the name of Cede & Co.(“Cede”), as nominee of The Depository Trust Company(“DTC”), except as set forth below. Notes will be available for purchase in the denominations specified in the applicable Prospectus Supplement in book-entry form only. No holder of record of the Notes (each, a “Noteholder”“Noteholder”) will be entitled to receive a physical certificate representing a Note until Definitive Notes are issued under the limited circumstances described in this Prospectus or in the applicable Prospectus Supplement. All references in this Prospectus and in the applicable Prospectus Supplement to actions by Noteholders refer to actions taken by DTC upon instructions from its Direct Participants and all references in this Prospectus and in the applicable Prospectus Supplement to payments, notices, reports and statements to Noteholders refer to payments, notices, reports and statements to DTC or its nominee, as the registered holder of the 44
Notes, for distribution to Noteholders in accordance with DTC’s procedures. See “Material“Additional Information Regarding the Notes — Book-Entry Registration”and “—“— Definitive Notes”in this Prospectus. Principal of and Interest on the Notes The applicable Prospectus Supplement will describe the timing and priority of payment, seniority, allocations of losses, interest rate and amount of or method of determining payments of principal and interest on each class of Notes of a given series. The rights of holders of any class of Notes to receive payments of principal and interest may be senior or subordinate to the rights of holders of any other class or classes of Notes of that series. Payments of interest on the Notes will generally be made prior to payments of principal. A series may include one or more classes of Notes (the “Strip“Strip Notes”) entitled to (1) principal payments with disproportionate, nominal or no interest payments or (2) interest payments with disproportionate, nominal or no principal payments. Each class of Notes may have a different interest rate, which may be a fixed, variable or adjustable interest rate (and which may be zero for some classes of Strip Notes), or any combination of the foregoing. The applicable Prospectus Supplement will specify the interest rate for each class of Notes of a given series or the method for determining the interest rate. One or more classes of Notes of a series may be redeemable in whole or in part, including as a result of the Servicer exercising its option to purchase the assets of the related Issuing Entity or other early termination of the related Issuing Entity. One or more classes of Notes of a given series may have fixed principal payment schedules, in the manner and to the extent set forth in the applicable Prospectus Supplement. Noteholders of those Notes would be entitled to receive as payments of principal and interest on the dates specified in the applicable Prospectus Supplement (each, a “Payment“Payment Date”). One or more classes of Notes of a given Issuing Entity may have targeted scheduled Payment Dates, in the manner and to the extent set forth in the applicable Prospectus Supplement. Such Notes will be paid in full on their respective targeted scheduled Payment Dates to the extent the related Issuing Entity is able to issue certain variable pay term notes in sufficient principal amounts. The proceeds of issuance of such variable pay term notes, which may be issued publicly or privately, will be applied to pay the specified class of Notes, in the manner set forth in the applicable Prospectus Supplement, and such variable pay term notes will receive principal payments in the amounts and with the priority specified in the applicable Prospectus Supplement. Payments of interest to Noteholders of all classes within a series will generally have the same priority. Under some circumstances, on any Payment Date, the amount available for those payments could be less than the amount of interest payable on the Notes. If this is the case, each class of Noteholders will receive its ratable share (based upon the aggregate amount of interest due to that class of Noteholders) of the aggregate amount of interest available for payment on the Notes. If a series of Notes includes two or more classes of Notes, the sequential order and priority of payment in respect of principal and interest, and any schedule or formula or other provisions applicable to the determination thereof, of each of those classes will be set forth in the applicable Prospectus Supplement. Payments of principal and interest of any class of Notes will be made on a pro rata basis among all the Noteholders of that class. 39
ADDITIONAL INFORMATION REGARDING THE NOTES Fixed Rate Notes Any class of Notes (other than some classes of Strip Notes) may bear interest at a fixed rate per annum (“(“Fixed Rate Notes”)or at a variable or adjustable rate per annum (“(“Floating Rate Notes”), as more fully described below and in the applicable Prospectus Supplement. Each class of Fixed Rate Notes will bear interest at the applicable per annum interest rate specified in the applicable Prospectus Supplement. Interest on each class of Fixed Rate Notes will be computed on the basis of either a 360-day year consisting of twelve 30-day months or the actual number of days elapsed and a 360-day year, as set forth in the applicable Prospectus Supplement. See “The“The Notes — Principal and Interest on the Notes”and “The“Additional Information Regarding the Notes — Subordination of Certificates — Payments of Principal and Interest on the Notes.”to Notes”in this Prospectus. 45
Floating Rate Notes Each class of Floating Rate Notes will bear interest during each applicable Accrual Period at a rate per annum determined by reference to an interest rate basis (the “Base Rate”the relevant London Interbank Offered Rate(“LIBOR”), for a specified period, plus or minus the Spread, if any, in each case as specified in the applicable Prospectus Supplement. The “Spread” is the number of basis points to be added to or subtracted from London Interbank Offered Rate (“LIBOR”)LIBOR for the applicable to the Floating Rate Notes.Notes (the“Spread”), if any, in each case, as specified in the applicable Floating Rate Note and in the applicable Prospectus Supplement.
Each applicable Prospectus Supplement will specify whether the rate of interest on the related Floating Rate Notes will be reset daily, weekly, monthly, quarterly, semiannually, annually or some other specified period (each, an “Interest“Interest Reset Period”) and the dates on which that interest rate will be reset (each, an “Interest“Interest Reset Date”). The Interest Reset Date will be, in the case of Floating Rate Notes which reset: | | 1. | | daily, each Business Day; | | | | | 2. | | weekly, the Wednesday of each week (with the exception of weekly reset Treasury Rate Notes which will reset the Tuesday of each week); | | | | | 3. | | monthly, the third Wednesday of each month; | | | | | 4. | | quarterly, the third Wednesday of March, June, September and December of each year; | | | | | 5. | | semiannually, the third Wednesday of the two months specified in the applicable Prospectus Supplement; and | | | | | 6. | | annually, the third Wednesday of the month specified in the applicable Prospectus Supplement. |
If any Interest Reset Date for a Floating Rate Note would otherwise be a day that is not a Business Day, that Interest Reset Date will be postponed to the next succeeding day that is a Business Day and if that Business Day falls in the next succeeding calendar month, that Interest Reset Date will be the immediately preceding Business Day. Unless specified otherwise in the applicable Prospectus Supplement, “Business“Business Day”means a day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York; Minneapolis, Minnesota; Wilmington, Delaware;Delaware, Irving, Texas; Nashville, Tennessee or, Los Angeles, Californiaif so stated in the related Prospectus Supplement, the principal place of business of the Swap Counterparty, if any, are authorized or obligated by law, regulation, executive order or decree to be closed. A Business Day also must be a day that is a London Business Day. “London“London Business Day”means any day (a) if the Index Currency is other than the Euro, on which dealings in deposits in that Index Currency are transacted in the London interbank market or (b) if the Index Currency is the Euro, a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer System (“(“TARGET system”)is open and on which commercial banks and foreign exchange markets settle payments in London and New York. If any Payment Date for any Floating Rate Note (other than the final scheduled Payment Date) would otherwise be a day that is not a Business Day, that Payment Date will be the next succeeding day that is a Business Day except that, if that Business Day falls in the next succeeding calendar month, that Payment Date will be the immediately preceding Business Day. If the final scheduled Payment Date of a Floating Rate Note falls on a day that is not a Business Day, the payment of principal, premium, if any, and interest will be made on the next succeeding Business Day, and no interest on that payment will accrue for the period from and after that final scheduled Payment Date. 40
Each Floating Rate Note will accrue interest on an “Actual/“Actual/360”basis, an “Actual/“Actual/Actual” basis or a “30/“30/360”basis, in each case as specified in the applicable Prospectus Supplement. For Floating Rate Notes calculated on an Actual/360 basis and Actual/Actual basis, accrued interest for each Accrual Period will be calculated by multiplying: | | 1. | | the face amount of that Floating Rate Note; | | | | | 2. | | the applicable interest rate; and | | | | | 3. | | the actual number of days in the related Accrual Period, and dividing the resulting product by 360 or 365, as applicable (or, with respect to an Actual/Actual basis Floating Rate Note, if any portion of the related Accrual Period falls in a leap year, |
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| | | the product of (1) and (2) above will be multiplied by the sum of (x) the actual number of days in that portion of that Accrual Period falling in a leap year divided by 366 and (y) the actual number of days in that portion of that Accrual Period falling in a non-leap year divided by 365). |
For Floating Rate Notes calculated on a 30/360 basis, accrued interest for an Accrual Period will be computed on the basis of a 360-day year consisting of twelve 30-day months, irrespective of how many days are actually in that Accrual Period. With respect to any Floating Rate Note that accrues interest on a 30/360 basis, if any Payment Date, including the related final scheduled Payment Date, falls on a day that is not a Business Day, the related payment of principal or interest will be made on the next succeeding Business Day as if made on the date that payment was due, and no interest will accrue on the amount so payable for the period from and after that Payment Date. The “Accrual Period”Accrual Period with respect to any class of Floating Rate Notes will be set forth in the applicable Prospectus Supplement. As specified in the applicable Prospectus Supplement, Floating Rate Notes of a given class may also have either or both of the following (in each case expressed as a rate per annum): (1) a maximum limitation, or ceiling, on the rate at which interest may accrue during any Accrual Period and (2) a minimum limitation, or floor, on the rate at which interest may accrue during any Accrual Period. In addition to any maximum interest rate that may be applicable to any class of Floating Rate Notes, the interest rate applicable to any class of Floating Rate Notes will in no event be higher than the maximum rate permitted by applicable law, as the same may be modified by United States law of general application. Each Issuing Entity with respect to which a class of Floating Rate Notes will be issued will appoint, and enter into agreements with, a calculation agent (each, a “Calculation“Calculation Agent”) to calculate interest rates on each class of Floating Rate Notes issued with respect thereto. The applicable Prospectus Supplement will set forth the identity of the Calculation Agent for each class of Floating Rate Notes of a given series, which may be the related Trustee or Indenture Trustee with respect to that series. All determinations of interest by the Calculation Agent will, in the absence of manifest error, be conclusive for all purposes and binding on the holders of Floating Rate Notes of a given class. All percentages resulting from any calculation on Floating Rate Notes will be rounded to the nearest one hundred-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from that calculation on Floating Rate Notes will be rounded to the nearest cent (with one-half cent being rounded upwards). Each Floating Rate Note will bear interest for each Interest Reset Period at an interest rate calculated with reference to LIBOR and the Spread, if any, specified in that Note and in the applicable Prospectus Supplement. “LIBOR” for each Interest Reset Period will be determined by the Calculation Agent for that LIBOReach Floating Rate Note as follows:
| | 1. | | If “LIBOR“LIBOR Telerate”is specified in the applicable Prospectus Supplement, or if none of “LIBOR Reuters,” “LIBOR Bloomberg” and “LIBOR Telerate” is specified in the applicable Prospectus Supplement as the method for calculating LIBOR, LIBOR will be the rate for deposits in the Index Currency having the Index Maturity designated in the applicable Prospectus Supplement commencing on the second London Business Day immediately following the applicable Interest Determination Date (as defined in the applicable Transfer and Service Agreement) that appears on the Designated LIBOR Page specified in the applicable Prospectus Supplement as of 11:00 a.m. London time, on the applicable Interest Determination Date. | | | | | | | If “LIBOR“LIBOR Reuters”is specified in the applicable Prospectus Supplement, LIBOR will be the arithmetic mean of the offered rates for deposits in the Index Currency having the Index Maturity designated in the applicable Prospectus Supplement, commencing on the second London Business Day immediately following the applicable Interest Determination Date, that appear on the Designated LIBOR Page specified in the applicable Prospectus Supplement as of 11:00 a.m. London time, on the applicable Interest Determination Date, if at least two offered rates appear (except as provided in the following sentence). If the Designated LIBOR Page by its terms provides for only a single rate, then the single rate will be used. |
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| | | | | If “LIBOR“LIBOR Bloomberg”is specified in the applicable Prospectus Supplement, LIBOR will be the arithmetic mean of the offered rates (unless the specified Designated LIBOR Page by its terms provides only for a single rate, in which case that single rate will be used) for deposits in the Index Currency having the Index Maturity designated in the applicable Prospectus Supplement, commencing on the second London Business Day immediately following that Interest Determination Date, that appear on the Designated LIBOR Page specified in the applicable Prospectus Supplement as of 11:00 a.m. London time, on that Interest Determination Date, if at least two offered rates appear (unless, as described above, only a single rate is required) on that Designated LIBOR Page. | |
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11:00 a.m. London time, on that Interest Determination Date, if at least two offered rates appear (unless, as described above, only a single rate is required) on that Designated LIBOR Page. | | 2. | | With respect to an Interest Determination Date on which fewer than two offered rates appear, or no rate appears, as the case may be, on the applicable Designated LIBOR Page as specified above, LIBOR for the applicable Interest Determination Date will be the rate calculated by the Calculation Agent as the arithmetic mean of at least two quotations obtained by the Calculation Agent after requesting the principal London offices of each of four major reference banks in the London interbank market, which may include the Calculation Agent and its affiliates, as selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for deposits in the Index Currency for the period of the Index Maturity designated in the applicable Prospectus Supplement, commencing on the second London Business Day immediately following the applicable Interest Determination Date, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on the applicable Interest Determination Date and in a principal amount that is representative for a single transaction in the applicable Index Currency in that market at that time. If at least two such quotations are provided, LIBOR determined on the applicable Interest Determination Date will be the arithmetic mean of the quotations. If fewer than two quotations referred to in this paragraph are provided, LIBOR determined on the applicable Interest Determination Date will be the rate calculated by the Calculation Agent as the arithmetic mean of the rates quoted at approximately 11:00 a.m., or such other time specified in the applicable Prospectus Supplement, in the applicable Principal Financial Center, on the applicable Interest Determination Date by three major banks, which may include the Calculation Agent and its affiliates, in that Principal Financial Center selected by the Calculation Agent for loans in the Index Currency to leading European banks, having the Index Maturity designated in the applicable Prospectus Supplement and in a principal amount that is representative for a single transaction in the Index Currency in that market at that time. If the banks so selected by the Calculation Agent are not quoting as mentioned in this paragraph, LIBOR for the applicable Interest Determination Date will be LIBOR in effect on the applicable Interest Determination Date. |
“Index“Index Currency”means the currency (including composite currencies) specified in the applicable Prospectus Supplement as the currency for which LIBOR will be calculated. If no currency is specified in the applicable Prospectus Supplement, the Index Currency will be U.S. dollars. “Designated“Designated LIBOR Page”means either: | | 1. | | If “LIBOR Telerate” is designated in the applicable Prospectus Supplement or none of “LIBOR Reuters,” “LIBOR Bloomberg” and “LIBOR Telerate” is specified in the applicable Prospectus Supplement as the method for calculating LIBOR, the display on Bridge Telerate, Inc. or any successor service on the page designated in the applicable Prospectus Supplement or any page as may replace the designated page on that service or for the purpose of displaying the London interbank rates of major banks for the applicable Index Currency; | | | | | 2. | | If “LIBOR Reuters” is designated in the applicable Prospectus Supplement, the display on the Reuters Monitor Money Rates Service or any successor service on the page designated in the applicable Prospectus Supplement or any other page as may replace the designated page on that service for the purpose of displaying the London interbank offered rates of major banks for the applicable Index Currency; or | | | | | 3. | | If “LIBOR Bloomberg” is designated in the applicable Prospectus Supplement, the display on Bloomberg on the page designated in the applicable Prospectus Supplement (or another page that may replace that designated page on that service for the purpose of displaying London interbank rates of major banks) for the applicable Index Currency. |
“Principal“Principal Financial Center”means, the capital city of the country to which the Index Currency relates, except that with respect to U.S. dollars, Euro, Deutsche marks, Canadian dollars, Portuguese escudos, South African rand, Swiss francs and Dutch guilders, the Principal Financial Center will be the City of New York, London, Frankfurt, Toronto, London, Johannesburg, Zurich and Amsterdam, respectively, or as specified in the applicable Prospectus Supplement. 4248
Credit Enhancement Credit enhancement for your series or class of Notes may be in the form of overcollateralization (which is effectively subordination of a portion of the interest in the related Issuing Entity’s Assets not allocable to your series or any other series), subordination of other series or classes of Notes, issuance of one or more classes of Certificates that are subordinate to one or more classes of Notes, a reserve account, a demand note, a liquidity agreement, a letter of credit, a surety bond, an insurance policy or any combination of the above. The Prospectus Supplement for each series of Notes will specify the form, amount, limitations and provider of any credit enhancement available to that series or, if applicable, to particular classes of that series. The presence of credit enhancement for the benefit of any class or series of Securities is intended to enhance the likelihood of receipt by the Securityholders of that class or series of the full amount of principal and interest due thereon and to decrease the likelihood that those Securityholders will experience losses. Any form of credit enhancement will have limitations and exclusions from coverage thereunder, which will be described in the applicable prospectus supplement.Prospectus Supplement. The credit enhancement for a class or series of securities will not provide protection against all risks of loss and may not guarantee repayment of the entire outstanding principal balance and interest thereon. If losses occur which exceed the amount covered by any credit enhancement or which are not covered by any credit enhancement, Securityholders may suffer a loss on their investment in those securities, as described in the applicable prospectus supplement.Prospectus Supplement. Subordination Between Classes If so specified in the applicable Prospectus Supplement, one or more classes of a series will be subordinated as described in the Prospectus Supplement to the extent necessary to fund payments with respect to the Notes that are more senior within that series. The rights of the holders of the subordinated Notes to receive distributions of principal of and/or interest on any Payment Date for that series will be subordinate in right and priority to the rights of the holders of Notes within that series that are more senior, but only to the extent set forth in the Prospectus Supplement. If so specified in the Prospectus Supplement, subordination may apply only in the event of specified types of losses or shortfalls not covered by another credit enhancement. The applicable Prospectus Supplement will also set forth information concerning: | | • | | the amount of subordination of a class or classes of subordinated Notes within a series, | | | | | • | | the circumstances in which that subordination will be applicable, | | | | | • | | the manner, if any, in which the amount of subordination will change over time, and | | | | | • | | the conditions under which amounts available from payments that would otherwise be made to holders of those subordinated Notes will be distributed to holders of Notes of that series that are more senior. |
Subordination of Certificates to Notes The Certificates issued by an Issuing Entity will be in definitive form and retained by the Depositor. Payments on the Certificates will be subordinated to payments on the Notes to the extent described in the applicable Prospectus Supplement. The Certificates will not bear interest. Reserve Account If so specified in the Prospectus Supplement, credit enhancement for a series or one or more of the related classes will be provided by the establishment of a segregated trust account, referred to as the reserve account, which will be funded, to the extent provided in the applicable Prospectus Supplement, through an initial deposit and/or through periodic deposits of available excess cash from the related SUBI Assets. The reserve account is intended to assist with the payment of interest and/or principal on the Notes of a series or the related classes and other expenses and amounts of that series or classes in the manner specified in the applicable Prospectus Supplement. 49
Letter of Credit If so specified in the Prospectus Supplement, credit enhancement for a series or one or more of the related classes will be provided by one or more letters of credit. A letter of credit may provide limited protection against specified losses or shortfalls in addition to or in lieu of other credit enhancement. The issuer of the letter of credit will be obligated to honor demands with respect to that letter of credit, to the extent of the amount available thereunder, to provide funds under the circumstances and subject to any 43
conditions as are specified in the applicable Prospectus Supplement. The maximum liability of an issuer of a letter of credit will be set forth in the applicable Prospectus Supplement. Surety Bond or Insurance Policy If so specified in the Prospectus Supplement, credit enhancement for a series or one or more of the related classes will be provided by one or more insurance companies. The insurance policy will guarantee, with respect to one or more classes of the related series, distributions of interest, principal and other expenses and amounts in the manner and amount specified in the applicable Prospectus Supplement. No Cross-Default / Cross-Collateralization/Cross-Collateralization The occurrence of an event of defaultIndenture Default with respect to one series of Notes does not automatically result in a default under any other series of Notes or other indebtedness of NMAC. However, the occurrence and continuation of certain events, such as the commencement of bankruptcy proceedings against NMAC, may constitute a servicer default under one or more series of Notes as well as other indebtedness of NMAC. If this occurs, NMAC’s financial condition, cash flow and its ability to service the leases or otherwise satisfy all of its debt obligations may be impaired, and you may suffer a loss in your investment. See “Risk Factor –“Risk Factors — Adverse events with respect to Nissan Motor Acceptance Corporation, its affiliates or third party providersservicers to whom Nissan Motor Acceptance Corporation outsources its activities may affect the timing of payments on your notes or have other adverse effects on your notes.”notes”in this Prospectus. Payments received on the SUBI Certificate for each series of Notes are not available to make payments on other SUBI Certificates or the UTI Certificate. However, each Issuing Entity and the related Indenture Trustee will not have a direct ownership interest in the related SUBI Assets or a perfected security interest in those SUBI Assets (except to the extent of the back-up security interest as discussed in “Additional“Additional Legal Aspects of the Leases and the Leased Vehicles — Back-up Security Interests”)in this Prospectus). If any liability arises from a lease or leased vehicle that is an asset of another SUBI or the UTI, the Titling Trust Assets (including the SUBI Assets allocated to a particular series of Notes) will be subject to this liability if the assets of such other SUBI or the UTI, as the case may be, are insufficient to pay the liability. Under these circumstances, investors in a series of Notes could incur a loss on their investment. See “Risk“Risk Factors –— Interests of other persons in the leases and the leased vehicles could be superior to the Issuing Entity’sissuing entity’s interest, which may result in delayed or reduced payment on your notes”and “Additional“Additional Legal Aspects of the Titling Trust and the SUBI –— Allocation of Titling Trust Liabilities.”Liabilities”in this Prospectus. Book-Entry Registration The information in this section concerning DTC and DTC’s book-entry system has been provided by DTC. Neither NMAC nor NALL II has independently verified the accuracy of this information. General Each class of Notes offered by this Prospectus and each accompanyingapplicable Prospectus Supplement will be represented by one or more certificates registered in the name of Cede & Co., as nominee of DTC. Noteholders may hold beneficial interests in the Notes through the DTC (in the United States) or Clearstream Banking, société anonyme (“(“Clearstream Banking Luxembourg”)or Euroclear Bank S.A./NV (the “Euroclear“Euroclear Operator”) as operator of the Euroclear System(“Euroclear”) (in(in Europe or Asia) directly if they are participants of those systems, or indirectly through organizations which are participants in those systems. 50
No Noteholder will be entitled to receive a certificate representing that person’s interest in the Notes, except as set forth below. Unless and until Notes of a series are issued in fully registered certificated form under the limited circumstances described below, all references in this Prospectus and the accompanyingapplicable Prospectus Supplement to actions by Noteholders will refer to actions taken by DTC upon instructions from Direct Participants, and all references in this Prospectus to distributions, notices, reports and statements to Noteholders will refer to distributions, notices, reports and statements to Cede, as the registered holder of the Notes, for distribution to Noteholders in accordance with DTC procedures. Therefore, it is anticipated that the only Noteholder will be Cede & Co., the nominee of DTC. Noteholders will not be recognized by the related Trustee as Noteholders as those terms will be used in the relevant agreements will only be able to exercise their collective rights as holders of Notes of the related class indirectly through DTC, the Direct Participants and the Indirect Participants, as further described below. In connection with such indirect exercise of rights through the DTC system, Noteholders may experience some delays in their receipt of payments, since distributions on book-entry securities first will be forwarded to Cede & Co. Notwithstanding the foregoing, Noteholders are entitled to all remedies available at law or in equity with respect to any delay in receiving distributions on the securities, including but not limited to remedies set forth in the relevant agreements against parties thereto, whether or not such delay is attributable to the use of DTC’s book-entry system. 44
Under a book-entry format, because DTC can only act on behalf of Direct Participants that in turn can only act on behalf of Indirect Participants, the ability of a Noteholder to pledge book-entry securities to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such book-entry securities, may be limited due to the lack of physical certificates or notes for such book-entry securities. In addition, issuance of the notes in book-entry form may reduce the liquidity of such securities in the secondary market since certain potential investors may be unwilling to purchase securities for which they cannot obtain physical notes. Clearstream Banking Luxembourg and Euroclear will hold omnibus positions on behalf of their participants (referred to herein as “Clearstream Banking Participants” and “Euroclear Participants,” respectively) through customers’ securities accounts in their respective names on the books of their respective depositaries (collectively, the “Depositaries”“Depositaries") which in turn will hold those positions in customers’ securities accounts in the Depositaries’ names on the books of DTC. Transfers between Direct Participants will occur in accordance with DTC rules. Transfers between Clearstream Banking Participants and Euroclear Participants will occur in accordance with their applicable rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream Banking Luxembourg or Euroclear Participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its Depositary. However, each of these cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Banking Participants and Euroclear Participants may not deliver instructions directly to the Depositaries. Because of time-zone differences, credits of securities received in Clearstream Banking Luxembourg or Euroclear as a result of a transaction with a Direct Participants will be made during subsequent securities settlement processing and dated the business day following the DTC settlement date. Those credits or any transactions in those securities settled during that processing will be reported to the relevant Euroclear or Clearstream Banking Luxembourg participant on that business day. Cash received in Clearstream Banking Luxembourg or Euroclear as a result of sales of Notes by or through a Clearstream Banking Participant or a Euroclear Participant to a Direct Participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream Banking Luxembourg or Euroclear cash account only as of the business day following settlement in DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York UCC, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC’s participants (“(“Direct Participants”)deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This 51
eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“(“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (“(“NSCC,” “GSCC,’‘ “MBSCC”and“EMCC,” “MBSCC” and “EMCC,” also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“(“Indirect Participants”). DTC has Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.(“Standard & Poor’s”)highest rating: AAA. The rules applicable to DTC and its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com. Purchases of Notes of one or more series under the DTC system must be made by or through Direct Participants, which will receive a credit for those Notes on DTC’s records. The ownership interest of each actual purchase of each Note (“(“Beneficial Owner”)is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmation from DTC providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes are to be accomplished by entries made on the books 45
of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in the Notes, except in the event that use of the book-entry system for the Notes is discontinued. To facilitate subsequent transfers, all Notes deposited by Direct Participants with DTC will be registered in the name of DTC’s partnership nominee, Cede or such other name as may be requested by an authorized representative of DTC. The deposit of Notes with DTC and their registration in the name of Cede will effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DTC nor Cede (nor such other DTC nominee) will consent or vote with respect to the Notes unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the related Indenture Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede’s consenting or voting rights to those Direct Participants to whose accounts the Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Notes will be made to Cede, or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the related Indenture Trustee on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the related Indenture Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the related Indenture Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Notes at any time by giving reasonable notice to the related Indenture Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, note certificates are required to be printed and delivered. 52
The Depositor, the Trustee of the related Issuing Entity or the Administrative Agent of a series may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, note certificates will be printed and delivered to DTC. See “–"— Definitive Notes.”Notes”in this Prospectus. Clearstream Banking Luxembourg is incorporated under the laws of Luxembourg as a professional depository. Clearstream Banking Luxembourg holds securities for its participating organizations (“(“Clearstream Banking Participants”)and facilitates the clearance and settlement of securities transactions between Clearstream Banking Participants through electronic book-entry changes in accounts of Clearstream Banking Participants, thereby eliminating the need for physical movement of certificates. Transactions may be settled in Clearstream Banking Luxembourg in any of various currencies, including United States dollars. Clearstream Banking Luxembourg provides to Clearstream Banking Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream Banking Luxembourg interfaces with domestic markets in several countries. As a professional depository, Clearstream Banking Luxembourg is subject to regulation by the Luxembourg Monetary Institute. Clearstream Banking Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and other organizations and may include any underwriters, agents or dealers with respect to any class or series of Notes offered by this Prospectus and each accompanyingapplicable Prospectus Supplement. Indirect access to Clearstream Banking Luxembourg is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Banking Participant, either directly or indirectly. Euroclear was created in 1968 to hold securities for participants of the Euroclear System (“(“Euroclear Participants”)and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of various currencies, including United States dollars. The Euroclear System includes various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries generally similar 46
to the arrangements for cross-market transfers with DTC described above. The Euroclear System is operated by the Euroclear Bank S.A./N.V. (the “Euroclear Operator” or “Euroclear”),Operator under contract with Euroclear Clearance System S.C., a Belgian cooperative corporation (the “Cooperative”“Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for the Euroclear System on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include any underwriters, agents or dealers with respect to any class or series of Notes offered by this Prospectus and each accompanyingapplicable Prospectus Supplement. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the “Terms“Terms and Conditions”Conditions"). The Terms and Conditions govern transfers of securities and cash within the Euroclear System, withdrawals of securities and cash from the Euroclear System and receipts of payments with respect to securities in the Euroclear System. All securities in the Euroclear System are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. Payments with respect to Notes held through Clearstream Banking Luxembourg or Euroclear will be credited to the cash accounts of Clearstream Banking Participants or Euroclear Participants in accordance with the relevant system’s rules and procedures, to the extent received by its Depositary. Those payments will be subject to tax withholding in accordance with relevant United States tax laws and regulations. See “Material“Material Federal Income Tax Consequences.”Consequences”in this Prospectus. Clearstream Banking Luxembourg or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a Noteholder on behalf of a Clearstream Banking Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to its Depositary’s ability to effect those actions on its behalf through DTC. Although DTC, Clearstream Banking Luxembourg and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Notes among participants of DTC, Clearstream Banking Luxembourg and Euroclear, they are under no obligation to perform or continue to perform those procedures and those procedures may be discontinued at any time. 53
None of the Servicer, the Depositor, the Administrative Agent, the related Indenture Trustee or Trustee will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Notes held by Cede, DTC, Clearstream Banking Luxembourg or Euroclear, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Definitive Notes The Notes of any series will be issued in fully registered, certificated form (“(“Definitive Notes”)to Noteholders or their respective nominees, rather than to DTC or its nominee, only if: | | 1. | | DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the Notes of that series and none of the Depositor, the related Indenture Trustee of the Issuing Entity and the Administrative Agent are unable to locate a qualified successor; | | | | | 2. | | the Depositor, the Trustee of the related Issuing Entity or the Administrative Agent at its option, to the extent permitted by applicable law, elects to terminate the book-entry system through DTC; or | | | | | 3. | | after the occurrence of an Event ofIndenture Default with respect to a series, holders representing at least a majority of the outstanding principal amount of the related Notes, voting as a single class, advise the Indenture Trustee through DTC and its Direct Participants in writing that the continuation of a book-entry system through DTC (or a successor thereto) with respect to the Notes is no longer in the best interests of the Noteholders. |
Upon the occurrence of any event described in the immediately preceding paragraph, the Indenture Trustee will be required to notify all related Noteholders through DTC’s Direct Participants of the availability of Definitive Notes. Upon surrender by DTC of the definitive certificates representing the corresponding Notes and receipt of instructions for re-registration, the Indenture Trustee will reissue those Notes as Definitive Notes to the Noteholders. 47
Payments on the Definitive Notes and Certificates will be made by the Indenture Trustee or the Owner Trustee, as the case may be, directly to the holders of the Definitive Notes or Certificates in accordance with the procedures set forth in this prospectusProspectus and to be set forth in the Indenture and the Trust Agreement. Interest and principal payments on the Securities on each Payment Date will be made to the holders in whose names the related Definitive Notes or Certificates, as applicable, were registered at the close of business on the related Deposit Date. Payments will be made by check mailed to the address of such holders as they appear on the Note register or Certificate register, as applicable, except that a Securityholder with Notes or Certificates having original denominations aggregating at least $1 million may request payment by wire transfer of funds pursuant to written instructions delivered to the applicable Trustee at least five Business Days prior to the Deposit Date. The final payment on the Certificates and on any Definitive Notes will be made only upon presentation and surrender of the Certificates or Definitive Notes, as applicable, at the office or agency specified in the notice of final payment to Securityholders. The Indenture Trustee or the Owner Trustee, as the case may be, or a paying agent will provide such notice to the registered Securityholders not more than 30 days nor less than 10 days prior to the date on which the final payment is expected to occur. Definitive Notes will be transferable and exchangeable at the offices of the Indenture Trustee or of a registrar named in a notice delivered to holders of Definitive Notes. No service charge will be imposed for any registration of transfer or exchange, but each of the related Indenture Trustee or the Owner Trustee may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith. Restrictions on Ownership and Transfer There are no restrictions on ownership or transfer of any Note of a series. However, the Notes of any series are complex investments. Only investors who, either alone or with their financial, tax and legal advisors, have the expertise to analyze the prepayment, reinvestment and default risks, the tax consequences of the investment and the interaction of these factors should consider purchasing any series of Notes. See “Risk“Risk Factors –— The notes are not suitable investments for all investors.”investors”in this Prospectus. In 54
addition, because the Notes of a series will not be listed on any securities exchange, you could be limited in your ability to resell them. See “Risk Factor –“Risk Factors — You may have difficulty selling your notes and/or obtaining your desired price” price due to the absence of a secondary market”in the applicable Prospectus Supplement. Certificates of a series will be retained by the Depositor, and may not be sold or transferred unless the Depositor dissolves or is terminated. DESCRIPTION OF THE INDENTURE The following summary describes material terms of the Indenture pursuant to which the Issuing Entity will issue a series of Notes. A form of the Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. Additional provisions of any Indenture for a series of Notes will be described in the applicable Prospectus Supplement. This summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of the Indenture. Indenture Defaults With respect to the Notes of a given series, events of defaultsIndenture Defaults under the related Indenture (each, an “Indenture Default”“Indenture Default") will consist of: | | 1. | | a default for five days or more in the payment of interest on any of those Notes, when the same becomes due and payable; | | | | | 2. | | a default in the payment of principal of any of those Notes on the related final scheduled payment date or on a payment date fixed for redemption of those Notes; | | | | | 3. | | a default in the observance or performance of any covenant or agreement of the Issuing Entity, or any representation or warranty of the Issuing Entity made in the related Indenture or in any certificate or other writing delivered under the related Indenture that proves to have been inaccurate in any material respect at the time made, which default or inaccuracy materially and adversely affects the interests of the Noteholders, and the continuation of that default or inaccuracy for a period of 60 days (or for such longer period not in excess of 90 days as may be reasonably necessary to remedy such failure; provided that (A) such failure is capable of remedy within 90 days or less and (B) a majority of the aggregate outstanding principal amount of the Notes, voting as a single class, consent to such longer cure period) after written notice thereof is given to the Issuing Entity by the Indenture Trustee or to the Issuing Entity and the Indenture Trustee by the holders of not less than the majority of the aggregate principal amount of the Notes, voting as a single class; or |
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| | | 4. | | certain events of bankruptcy, insolvency, receivership or liquidation of the applicable Issuing Entity (which, if involuntarily, remains unstayed for more than 90 days). |
Noteholders holding at least a majority of the aggregate principal amount of a series of Notes outstanding, voting together as a single class, may waive any past default or Indenture Default prior to the declaration of the acceleration of the maturity of the Notes, except a default in the payment of principal of or interest on the Notes, or in respect of any covenant or provision in the related Indenture that cannot be modified or amended without unanimous consent of the Noteholders. However, the amount of principal required to be paid to Noteholders of that series under the related Indenture will generally be limited to amounts available to be deposited in the related Collection Account. Therefore, the failure to pay any principal on any class of Notes of a series generally will not result in the occurrence of an Indenture Default until the final scheduled payment date for that class of Notes or the payment date fixed for redemption of the Notes of that series. See “Risk“Risk Factors –— The failure to make principal payments on the notes prior to the applicable final scheduled payment date will generally not result in an event of default under the indenture.”indenture default”in this Prospectus. In addition, as described below, following the occurrence of an Indenture Default (other than the events described in (1) and (2) above) and acceleration of the maturity of the Notes, the related Indenture Trustee is not required to sell the assets of the related Issuing Entity, and may sell those assets only after meeting requirements specified in the related Indenture. In that case, even if the maturity of the Notes has been accelerated, there may not be any funds to pay principal of the Notes. 55
The Issuing Entity for each series of Notes will be required to give the related Indenture Trustee and each Rating Agency prompt written notice of each Indenture Default on the part of the Administrative Agent under the related Indenture and each Hedge Event of Default on the part of the Cap Provider or Swap Counterparty, as applicable, under the related Hedge Agreement. [InIn addition, on (i) any Payment Date on which the Issuing Entity for a series of Notes has not received from the Cap Provider or Swap Counterparty, as applicable, any amount due from the Cap Provider or Swap Counterparty on such Payment Date, (ii) the Business Day following any such Payment Date if the Issuing Entity has not yet received such amount due from the Cap Provider or Swap Counterparty, as applicable, or (iii) the Business Day on which such failure to pay by the Cap Provider or Swap Counterparty, as applicable, becomes a Hedge Event of Default under the Hedge Agreement, the Issuing Entity of that series will be required to give immediate notice to the Cap Provider or Swap Counterparty, as applicable, the related Indenture Trustee and each Rating Agency.] Remedies Upon an Indenture Default If an Indenture Default occurs and is continuing with respect to a series of Notes, the related Indenture Trustee or the holders of at least a majority of the aggregate principal amount of such Notes, voting as a single class, may declare the principal of the Notes to be immediately due and payable. This declaration may be rescinded by the holders of at least a majority of the then outstanding aggregate principal amount of the Notes of that series, voting together as a single class, before a judgment or decree for payment of the amount due has been obtained by the related Indenture Trustee if: | | • | | the Issuing Entity has deposited with that Indenture Trustee an amount sufficient to pay (1) all interest on and principal of the Notes as if the Indenture Default giving rise to that declaration had not occurred and (2) all amounts advanced by that Indenture Trustee and its costs and expenses, and | | | | | • | | all Indenture Defaults –— other than the nonpayment of principal of the Notes that has become due solely due to that acceleration –— have been cured or waived. |
If the Notes of a series have been declared due and payable following an Indenture Default, the related Indenture Trustee may institute proceedings to collect amounts due, exercise remedies as a secured party, including foreclosure or sale of the related Issuing Entity’s Estate, or elect to maintain that Issuing Entity’s Estate and continue to apply proceeds from that Issuing Entity’s Estate as if there had been no declaration of acceleration. The Indenture Trustee for a series of Notes may not, however, unless it is required to sell the related Issuing Entity’s Estate under the related Trust Agreement as a result of the bankruptcy or insolvency of that Issuing Entity, sell that Issuing Entity’s Estate following an Indenture Default (other than the events described in (1) and (2) under “Indenture Default”“Indenture Defaults”in this Prospectus, above) unless: | | • | | the holders of all outstanding Notes of that series consent to the sale; | | | | | • | | the proceeds of that sale are sufficient to pay in full the principal of and the accrued and unpaid interest on all outstanding Notes of that series at the date of the sale; or | | | | | • | | the Indenture Trustee determines that proceeds of the related Issuing Entity’s Estate would not be sufficient on an ongoing basis to make all payments on the outstanding Notes of that series as those payments would have become due if the |
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obligations had not been declared due and payable, and the Indenture Trustee obtains the consent of holders of at least 66 2/3% of the aggregate principal amount of all Notes of that series outstanding, voting together as a single class. |
