<PAGE>
As filed with the Securities and Exchange Commission on September 3, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUSTS
(Issuer with respect to the Securities)
EAGLEMARK, INC.
(Sponsor of the Trusts described herein)
(Exact name of Registrant as specified in its charter)
Nevada 88-0292891
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4150 Technology Way
Carson City, Nevada 89706
(702) 886-3200
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Donna F. Zarcone
President and Chief Operating Officer
Eaglemark, Inc.
4150 Technology Way
Carson City, Nevada 89706
(702) 886-3200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
M. David Galainena, Esq. Jack M. Costello, Esq.
Winston & Strawn Brown & Wood LLP
35 West Wacker Drive One World Trade Center
Chicago, Illinois 60601 New York, New York 10048
(312) 558-5600 (212) 839-5300
_____________________________
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /_______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of Securities Amount to Be Proposed Maximum Offering Price Proposed Maximum Aggregate Amount of
to Be Registered Registered(1) Per Unit (2) Offering Price Registration Fee
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Harley-Davidson $1,200,000,000 100% $1,200,000,000 $354,000
Motorcycle Contract
Backed Notes and
Certificates
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</TABLE>
(1) The amount of Securities being registered represents the maximum
aggregate principal amount of Securities currently expected to be
offered for sale. $10,000,000 aggregate principal amount of the
Securities registered by the Registrant under Registration Statement No.
333-21793 referred to below and not previously sold are consolidated in
this Registration Statement pursuant to Rule 429. All registration fees
in the amount of $181,818 in connection with such unsold amount of
Securities have previously been paid under Registration Statement No.
333-21793. The total amount registered under this Registration
Statement as so consolidated as of the date of this filing is
$1,210,000,000
(2) Estimated solely for purposes of calculating the registration fee.
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
and Prospectus Supplement filed as part of this Registration Statement also
relate to $10,000,000 principal amount of Securities previously registered by
the Registrant under its Registration Statement on Form S-3 (File No.
333-21793).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
INTRODUCTORY NOTE
This Registration Statement contains a form of Prospectus relating to
the offering of series of Harley-Davidson Motorcycle Contract Backed Notes
and/or Harley-Davidson Motorcycle Contract Backed Certificates by various
Harley-Davidson Eaglemark Motorcycle Trusts created from time to time by
Eaglemark, Inc., as well as two forms of Prospectus Supplement relating to the
offering by a Harley-Davidson Eaglemark Motorcycle Trust of the particular
series of Harley-Davidson Motorcycle Contract Backed Certificates or of
Harley-Davidson Motorcycle Contract Backed Notes and/or Harley-Davidson
Motorcycle Contract Backed Certificates, as applicable, described therein. Each
form of Prospectus Supplement relates only to the securities described therein
and is a form that may be used, among others, by Eaglemark, Inc. to offer
Harley-Davidson Motorcycle Contract Backed Notes and/or Harley-Davidson
Motorcycle Contract Backed Certificates under this Registration Statement.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED
PROSPECTUS SUPPLEMENT
(To Prospectus dated )
$
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST 199__-[ ]
$ % HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-1
$ % HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2
$ % HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES
EAGLEMARK, INC.
SELLER AND SERVICER
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]
TRUST DEPOSITOR
__________________
The Harley-Davidson Eaglemark Motorcycle Trust 199__-[ ] Harley-Davidson
Contract Backed Securities described in this Prospectus Supplement will consist
of two Classes of notes (respectively, the "CLASS A-1 NOTES", and the "CLASS A-2
NOTES" and collectively, the "NOTES") and one Class of certificates (the
"CERTIFICATES" and, together with the Notes, the "SECURITIES"). Principal, in
the amounts set forth herein, and interest at the Interest Rates and
Pass-Through Rate specified above for each Class of Notes and the Certificates
will be distributed to the related Securityholders on the fifteenth day of each
month (or, if such day is not a Business Day, on the immediately succeeding
Business Day, each, a "DISTRIBUTION DATE"), beginning .
Distributions on the Certificates will be subordinated to payments due on the
Notes to the extent described herein. Each Class of Notes and Certificates will
be payable in full on the Final Distribution Dates (as herein defined) specified
herein for such Securities.
Distributions on the Certificates will be subordinated in priority to
payments due on the Notes. Payments of principal on the Class A-2 Notes
generally (with certain limited exceptions described herein) will not be made
before repayment of the entire principal amount due on the Class A-1 Notes. See
"Summary of Terms--Securities Offered--General" herein.
(COVER CONTINUED ON THE NEXT PAGE)
POTENTIAL INVESTORS SHOULD CAREFULLY CONSIDER THE POTENTIAL RISK FACTORS
SET FORTH UNDER "RISK FACTORS" ON PAGE S-[ ] HEREOF AND ON PAGE 13 OF THE
PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
__________________
The Underwriters have agreed to purchase the Notes and the Certificates
from the Trust as provided herein, and the Securities will be offered by the
Underwriters from time to time as provided herein in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. The aggregate
net proceeds to the Seller from the sale of the Securities are expected to be
$ before deducting other offering expenses payable by the Seller of
approximately $ .
The Securities are offered subject to receipt and acceptance by the
Underwriters and to the Underwriters' right to reject any offer in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Securities will be made in book-entry form through the
facilities of The Depository Trust Company ("DTC"), and solely in the case of
the Notes, Cedel Bank, societe anonyme ""CEDEL") and the Euroclear System
("EUROCLEAR") on or about .
__________________
SALOMON SMITH BARNEY
The date of this Prospectus Supplement is .
<PAGE>
(cover page continued)
The Harley-Davidson Eaglemark Motorcycle Trust 199__-[ ] (the "TRUST") will be
formed pursuant to a Trust Agreement dated as of [ ], 199__ (the
"TRUST AGREEMENT") entered into by and between Eaglemark Customer Funding
Corporation-[ ] (the "TRUST DEPOSITOR") and Wilmington Trust Company, as Owner
Trustee (the "OWNER TRUSTEE"). The Trust Depositor is a wholly owned,
limited-purpose subsidiary of Eaglemark, Inc. ("EAGLEMARK"). The Certificates
will be issued pursuant to the Trust Agreement and will represent fractional
undivided equity interests in the Trust. The Notes will be issued and secured
pursuant to an Indenture dated as of [ ], 199__ (the "INDENTURE") to
be entered into by and between the Trust and Harris Trust and Savings Bank, as
Indenture Trustee (the "INDENTURE TRUSTEE" and together with the Owner Trustee,
the "TRUSTEES"), and will represent obligations of the Trust.
The Trust property will consist of an initial pool of fixed-rate, simple
interest motorcycle conditional sales contracts (the "INITIAL CONTRACTS" which,
together with any Subsequent Contracts (as defined below), are collectively the
"CONTRACTS") relating to Motorcycles manufactured by Harley-Davidson, Inc.
("HARLEY-DAVIDSON") or, in certain limited instances as described herein,
Motorcycles manufactured by an affiliate of Harley-Davidson, Buell Motorcycle
Company ("BUELL"), including all rights to receive payments collected on such
Initial Contracts on or after [ ], 199__ (the "INITIAL CUTOFF DATE").
The Trust property also will consist of security interests in the Motorcycles
financed through the Contracts; proceeds from certain insurance policies as
described in "CERTAIN INFORMATION REGARDING THE SECURITIES -- INDIVIDUAL
MOTORCYCLE INSURANCE" herein; amounts held for the Trust in the Collection
Account; and certain other property as more fully described herein
(collectively, the "TRUST PROPERTY"). The Trust will also pledge certain monies
on deposit in a trust account (the "PRE-FUNDING ACCOUNT") to be established with
the Indenture Trustee on behalf of the Noteholders which will be used by the
Trust to purchase from the Trust Depositor Subsequent Contracts (as defined
herein).
The Contracts were originated by Eaglemark indirectly through Harley-Davidson
motorcycle dealers. Contracts with an aggregate principal balance (as of the
Initial Cutoff Date) of $[ ] will be sold by Eaglemark (in such
capacity, the "SELLER") to the Trust Depositor on the date of issuance of the
Notes and Certificates pursuant to a Transfer and Sale Agreement dated as of [
], 199__ by and between the Seller and the Trust Depositor (the "TRANSFER
AND SALE AGREEMENT"), will be further transferred and assigned by the Trust
Depositor to the Trust on such date pursuant to the Sale and Servicing Agreement
dated as of [ ], 199__ (the "AGREEMENT") by and among the Trust, the
Trust Depositor, the Indenture Trustee and Eaglemark, as Servicer (in such
capacity, together with successors and assigns, the "SERVICER") and will be
pledged by the Trust to the Indenture Trustee pursuant to the Indenture.
Additional fixed-rate, simple interest Harley-Davidson (and, in limited
instances, Buell) motorcycle conditional sales contracts (the "SUBSEQUENT
CONTRACTS") will be sold from time to time by the Seller to the Trust Depositor
at or before the end of the Funding Period (as defined herein) and concurrently,
in accordance with the Agreement, transferred by the Trust Depositor to the
Trust and, in accordance with the Indenture, pledged by the Trust to the
Indenture Trustee, with the purchase price to be payable to the Trust Depositor
from funds on deposit in the Pre-Funding Account.
Principal, and interest with respect to the Class A-1 Notes of _____% per annum
(the "CLASS A-1 RATE"), the Class A-2 Notes of _____% per annum (the "CLASS A-2
RATE"), and the Certificates of _____% per annum (the "PASS-THROUGH RATE") will
be distributable with respect to the Class A-1 Notes, the Class A-2 Notes and
the Certificates on the Distribution Date. The final scheduled Distribution
Date of the Class A-1 Notes, Class A-2 Notes and the Certificates will be on the
Distribution Dates occurring in [ ], 200__, [ ],
200__ and [ ] 200__, respectively. See "CERTAIN INFORMATION REGARDING
THE SECURITIES." However, payment in full of the Notes and Certificates could
occur earlier than such date as described herein. In addition, the Class A-2
Notes and the Certificates will be subject to prepayment in whole, but not in
part, on any Distribution Date on which the Trust Depositor exercises its option
to repurchase the Contracts from the Trust. The Trust Depositor may repurchase
the Contracts from the Trust (and the Seller may concurrently repurchase such
Contracts from the Trust Depositor) when the Principal Balance of the Contracts
(the "Pool Balance") has declined to less than 10% of the Pool Balance as of the
Initial Cutoff Date (the "Initial Pool Balance") (such repurchase being referred
to herein as an "OPTIONAL PURCHASE"). Both the Class A-1 Notes and the Class
A-2 Notes will also be subject to partial mandatory prepayment, without premium,
in the event that funds remain in the Pre-Funding Account at the end of the
Funding Period (as defined herein).
S-2
<PAGE>
It is a condition of issuance that the Class A-1 Notes and the Class A-2 Notes
be rated AAA and Aaa by Standard & Poor's Ratings Services ("S&P") and Moody's
Investors Service, Inc. ("MOODY'S" and, together with S&P, the "RATING
AGENCIES"), respectively and that the Certificates be rated at least [ ] by
S&P and [ ] by Moody's.
THE NOTES WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES WILL REPRESENT
BENEFICIAL EQUITY INTERESTS IN, THE TRUST AND WILL NOT REPRESENT OBLIGATIONS OF
OR INTERESTS IN EAGLEMARK FINANCIAL SERVICES, INC., EAGLEMARK, INC., EAGLEMARK
CUSTOMER FUNDING CORPORATION-[ ] OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE
OF THE NOTES, THE CERTIFICATES OR THE CONTRACTS IS INSURED OR GUARANTEED BY ANY
GOVERNMENTAL ENTITY.
THE SECURITIES ARE BEING OFFERED FROM TIME TO TIME PURSUANT TO THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS ACCOMPANYING THIS PROSPECTUS SUPPLEMENT. THIS
PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE OFFERING
OF THE SECURITIES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS, AND
PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
IN FULL. SALES OF THE SECURITIES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER
HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO THE EXTENT
THAT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT MODIFY STATEMENTS CONTAINED IN
THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Underwriters expect, but are not
obligated, to make a market in the Notes and the Certificates. There is no
assurance that any such market will develop, or if one does develop, that it
will continue or provide sufficient liquidity.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
AFFECT THE PRICE OF THE SECURITIES. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE
OF SECURITIES TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE
TRANSACTIONS, SEE "UNDERWRITING" HEREIN.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an Underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a Prospectus Supplement and Prospectus, the Seller or such
Underwriter will promptly deliver, or cause to be delivered, without charge, to
such investor a paper copy of the Prospectus Supplement and Prospectus.
UNTIL 90 DAYS FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS EFFECTING
TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
REPORTS TO SECURITYHOLDERS
Unless and until the Securities are issued in definitive certificate form,
monthly and annual unaudited reports containing information concerning the
Contracts will be prepared by the Servicer, and sent on behalf of the Trust only
to Cede & Co., as nominee of DTC and registered holder of the Certificates. See
"CERTAIN INFORMATION REGARDING THE SECURITIES--BOOK-ENTRY REGISTRATION" and
"--REPORTS TO SECURITYHOLDERS" in the accompanying Prospectus. Such reports
will not constitute financial statements prepared in accordance with generally
accepted accounting principles. The Servicer will file with the Securities and
Exchange Commission (the "COMMISSION") such periodic reports with respect to the
Trust as are required under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations of the Commission thereunder.
S-3
<PAGE>
SUMMARY OF TERMS
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE HEREIN AND IN THE PROSPECTUS. CERTAIN
CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT ON THE PAGES INDICATED IN THE "INDEX OF DEFINED TERMS" OR, TO THE
EXTENT NOT DEFINED HEREIN, HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE
PROSPECTUS.
Trust. . . . . . . . . . . . . Harley-Davidson Eaglemark Motorcycle Trust
199__-[ ] (the "TRUST").
Trust Depositor. . . . . . . . Eaglemark Customer Funding Corporation-[ ], a
wholly owned, limited-purpose subsidiary
of Eaglemark, Inc. (the "TRUST
DEPOSITOR").
Seller and Servicer or
Seller/Servicer. . . . . . . Eaglemark, Inc. ("EAGLEMARK" or the "SELLER"
or, in its capacity as Servicer, the
"SERVICER"), a 100% owned subsidiary of
Eaglemark Financial Services, Inc.
("EAGLEMARK FINANCIAL").
Owner Trustee. . . . . . . . . Wilmington Trust Company, a Delaware banking
corporation (in such capacity, the
"OWNER TRUSTEE").
Indenture Trustee. . . . . . . Harris Trust and Savings Bank, an Illinois
banking corporation (in such capacity,
the "INDENTURE TRUSTEE"). The Indenture
Trustee will also act as Paying Agent
under the Indenture and the Trust
Agreement.
Closing Date . . . . . . . . . On or about [ ], 199__.
Securities Offered . . . . . . The securities offered are as follows:
A. General . . . . . . . The Harley-Davidson Eaglemark Motorcycle
Trust 199__-[ ] Harley-Davidson
Motorcycle Contract Backed Notes (the
"NOTES") will represent indebtedness of
the Trust secured by the assets of the
Trust (other than the Certificate
Distribution Account as defined herein).
The Harley-Davidson Eaglemark Motorcycle
Trust 199__-[ ] Harley-Davidson
Motorcycle Contract Backed Certificates
(the "CERTIFICATES" and, together with
the Notes, the "SECURITIES") will
represent fractional undivided equity
interests in the Trust.
S-4
<PAGE>
The Trust will issue two Classes of Notes
pursuant to an Indenture to be dated as
of [ ], 199__ (the
"INDENTURE"), between the Trust and the
Indenture Trustee, as follows: (i) $[
] aggregate principal amount
(the "INITIAL CLASS A-1 NOTE BALANCE")
of Class A-1 [ ]% Harley-Davidson
Motorcycle Contract Backed Notes (the
"CLASS A-1 NOTES") and (ii) $[
] aggregate principal amount (the
"INITIAL CLASS A-2 NOTE BALANCE") of
Class A-2 [ ]% Harley-Davidson
Motorcycle Contract Backed Notes (the
"CLASS A-2 NOTES"). Payments of
principal, made through the application
of available collections on the
Contracts in an amount reflecting
reductions in the principal balances of
the Contracts, and from certain other
available amounts as described herein,
will be made first on the Class A-1
Notes until the Class A-1 Notes have
been repaid in full (except to the
limited extent described in "TERMS OF
THE NOTES -- MANDATORY SPECIAL
REDEMPTION" below), and thereafter on
the Class A-2 Notes until the Class A-2
Notes have been repaid in full, and in
each case prior to any repayment of
principal on the Certificates. Payments
of interest on the Class A-1 Notes and
the Class A-2 Notes will be made from
available collections on the Contracts,
and from certain other available amounts
as described herein, without priority of
payment between such Classes, but in
each case prior to payment of interest
on the Certificates. See "CERTAIN
INFORMATION REGARDING THE SECURITIES --
DISTRIBUTIONS ON THE SECURITIES."
Accordingly, the principal distinction
between an investment in the Class A-1
Notes and the Class A-2 Notes is that
holders of Class A-1 Notes will receive
a return of invested principal sooner
than holders of Class A-2 Notes.
The Trust will issue $[ ]
aggregate principal amount of [ ]%
Certificates pursuant to a Trust
Agreement to be dated as of [ ],
199__ (the "TRUST AGREEMENT") by and
between the Trust Depositor and the
Owner Trustee (the Owner Trustee,
together with the Indenture Trustee,
being sometimes collectively referred to
herein as the "TRUSTEES"). Payments in
respect of principal and interest on the
Certificates will be subordinated to
payments on the Notes to the extent
described herein.
Each Class of Notes and the Certificates will
be issued in minimum denominations of
$1,000 and will be available in
book-entry form only. Securityholders
will be able to receive Definitive
Securities (as defined herein) only in
the limited circumstances described
herein. See "CERTAIN INFORMATION
REGARDING THE SECURITIES -- FORM,
EXCHANGE, REGISTRATION AND TITLE"
herein.
B. Trust Property . . . . . . The Trust Property consists of, among other
things, the pool of Initial Contracts
together with any Subsequent Contracts
transferred to the Trust, and all
rights, benefits, obligations and
proceeds arising therefrom or in
connection therewith, including security
interests in the Harley-Davidson (and,
in certain limited instances, Buell)
motorcycles (the "MOTORCYCLES"; see "THE
CONTRACTS" and "HARLEY-DAVIDSON
MOTORCYCLES") securing such Contracts
and proceeds, if any, from certain
insurance policies with respect to
individual Motorcycles.
S-5
<PAGE>
C. Distribution Dates . . . . Distributions of interest and principal on
the Securities will be made on the
fifteenth day of each month (or, if such
day is not a Business Day, on the next
succeeding Business Day) (each, a
"DISTRIBUTION DATE"), commencing [ ],
199__. Payments on the Securities on
each Distribution Date will be paid to
the holders of the related Securities
who are of record on the last Business
Day immediately preceding the related
Distribution Date (each, a "RECORD
DATE").
A "BUSINESS DAY" will be any day other than a
Saturday, a Sunday or a day on which
banking institutions in Chicago,
Illinois or Wilmington, Delaware are
authorized or obligated by law,
executive order or government decree to
be closed.
To the extent not previously paid prior to
such dates, the outstanding principal
amount of (i) the Class A-1 Notes will
be payable on the Distribution Date
occurring in [ ] 200__ (the
"CLASS A-1 FINAL DISTRIBUTION DATE") and
(ii) the Class A-2 Notes will be payable
on the Distribution Date occurring in [
] 200__ (the "CLASS A-2 FINAL
DISTRIBUTION DATE" and, together with
the Class A-1 Final Distribution Date,
the "NOTE FINAL DISTRIBUTION DATES").
To the extent not previously paid in
full prior to such date, the unpaid
principal balance of the Certificates
will be payable on the Distribution Date
occurring in [ ] 200__ (the
"CERTIFICATE FINAL DISTRIBUTION DATE"
and, together with the Note Final
Distribution Dates, the "FINAL
DISTRIBUTION DATES").
Terms of the Notes . . . . . . The principal terms of the Notes will be as
described below:
A. Interest Rates . . . . . . The Class A-1 Notes will bear interest at the
rate of [ ]% per annum (the "CLASS
A-1 RATE") and the Class A-2 Notes will
bear interest at the rate of [ ]%
per annum (the "CLASS A-2 RATE" and,
together with the Class A-1 Rate, the
"INTEREST RATES").
B. Interest . . . . . . . . . Interest on the outstanding principal amount
of the Class A-1 Notes and Class A-2
Notes will accrue at the related
Interest Rate from and including the
fifteenth day of the month of the most
recent Distribution Date based on a
360-day year consisting of 12 months of
30 days each (or from and including the
Closing Date with respect to the first
Distribution Date) to but excluding the
fifteenth day of the month of the
current Distribution Date (each, an
"INTEREST PERIOD"). Interest on the
Notes for any Distribution Date due but
not paid on such Distribution Date will
be due on the next Distribution Date,
together with, to the extent permitted
by applicable law, interest on such
shortfall at the related Interest Rate.
See "DESCRIPTION OF THE NOTES --
PAYMENTS OF INTEREST" and "CERTAIN
INFORMATION REGARDING THE SECURITIES --
DISTRIBUTIONS ON THE SECURITIES."
S-6
<PAGE>
C. Principal. . . . . . . . . Principal of the Notes will be payable on
each Distribution Date in an amount
generally equal to the Note Principal
Distributable Amount (as defined herein)
for such Distribution Date, calculated
as described under "CERTAIN INFORMATION
REGARDING THE SECURITIES --
DISTRIBUTIONS ON THE SECURITIES --
DEPOSITS TO THE DISTRIBUTION ACCOUNTS;
PRIORITY OF PAYMENTS." On each
Distribution Date, the Note Principal
Distributable Amount will be applied in
the following priority: first to reduce
the principal amount of the Class A-1
Notes to zero, and thereafter, to reduce
the principal amount of the Class A-2
Notes to zero. Notwithstanding the
foregoing, if the principal amount of
either the Class A-1 Notes or Class A-2
Notes has not been paid in full prior to
its related Note Final Distribution
Date, the Note Principal Distributable
Amount for such Note Final Distribution
Date will be the unpaid principal amount
of such Class of Notes as of such Note
Final Distribution Date. See
"DESCRIPTION OF THE NOTES -- PAYMENTS OF
PRINCIPAL."
D. Optional
Redemption. . . . . . . . In the event of an Optional Purchase, the
Class A-2 Notes will be redeemed in
whole, but not in part, at a redemption
price equal to the unpaid principal
amount of the Class A-2 Notes plus
accrued interest thereon at the related
Interest Rate. See "DESCRIPTION OF THE
NOTES -- OPTIONAL REDEMPTION."
E. Mandatory
Redemption. . . . . . . . Under certain conditions, the Notes may be
accelerated upon the occurrence of an
Event of Default under the Indenture.
See "DESCRIPTION OF THE NOTES -- EVENTS
OF DEFAULT."
F. Mandatory Special
Redemption . . . . . The holders of Class A-1 Notes ("CLASS A-1
NOTEHOLDERS") and Class A-2 Notes
("CLASS A-2 NOTEHOLDERS") will be
prepaid in part, without premium, on the
Distribution Date on or immediately
following the last day of the Funding
Period in the event that any amount
remains on deposit in the Pre-Funding
Account after giving effect to the
purchase of all Subsequent Contracts,
including any such purchase on such date
(a "MANDATORY SPECIAL REDEMPTION"). The
aggregate principal amount of Class A-1
Notes and Class A-2 Notes to be prepaid
will be an amount equal to the amount
then on deposit in the Pre-Funding
Account allocated pro rata; PROVIDED,
HOWEVER, in the event the Mandatory
Special Redemption Amount is less than
$150,000 such amount shall be allocated,
pro rata, solely to the Class A-1
Noteholders.
S-7
<PAGE>
Terms of the Certificates. . . The principal terms of the Certificates will
be as described below:
A. Interest. . . . . . . On each Distribution Date, the Owner Trustee
or any paying agent or paying agents as
the Owner Trustee may designate from
time to time (each, a "PAYING AGENT",
which initially will be the Indenture
Trustee) will distribute pro rata to
Certificateholders of record as of the
related Record Date accrued interest at
the rate of [ ]% per annum (the
"PASS-THROUGH RATE") on the Certificate
Balance (as defined herein) as of the
immediately preceding Distribution Date
(after giving effect to distributions of
principal to be made on such immediately
preceding Distribution Date) or, in the
case of the first Distribution Date, the
Initial Certificate Balance. Interest
in respect of a Distribution Date will
accrue from and including the Closing
Date (in the case of the first
Distribution Date) or from and including
the fifteenth day of the month of the
most recent Distribution Date to but
excluding the fifteenth day of the month
of the current Distribution Date based
on a 360-day year consisting of 12
months of 30 days each. Interest on the
Certificates for any Distribution Date
due but not paid on such Distribution
Date will be due on the next
Distribution Date, together with, to the
extent permitted by applicable law,
interest on such shortfall at the
Pass-Through Rate. See "DESCRIPTION OF
THE CERTIFICATES -- DISTRIBUTIONS OF
INTEREST" and "CERTAIN INFORMATION
REGARDING THE SECURITIES --
DISTRIBUTIONS ON THE SECURITIES."
The "CERTIFICATE BALANCE" will equal
$[ ] (the "INITIAL CERTIFICATE
BALANCE") on the Closing Date and on any
date thereafter will equal the Initial
Certificate Balance reduced by all
distributions of principal previously
made in respect of the Certificates.
Distributions on the Certificates will
be subordinated to payments of interest
and principal on the Notes to the extent
described under "DESCRIPTION OF THE
CERTIFICATES" and "CERTAIN INFORMATION
REGARDING THE SECURITIES --
DISTRIBUTIONS ON THE SECURITIES."
B. Principal . . . . . . No principal will be paid on the Certificates
until the Distribution Date on which the
principal amounts of the Class A-1 Notes
and Class A-2 Notes have been reduced to
zero. On such Distribution Date and
each Distribution Date thereafter,
principal of the Certificates will be
payable in an amount equal to the
Certificate Principal Distributable
Amount (as defined herein) for such
Distribution Date, calculated as
described under "CERTAIN INFORMATION
REGARDING THE SECURITIES --
DISTRIBUTIONS ON THE SECURITIES --
DEPOSITS TO THE DISTRIBUTION ACCOUNTS;
PRIORITY OF PAYMENTS." If not paid in
full prior to the Certificate Final
Distribution Date, the remaining
Certificate Balance, if any, will be
payable on that date. See "DESCRIPTION
OF THE CERTIFICATES -- DISTRIBUTIONS OF
PRINCIPAL."
C. Optional
Prepayment. . . . . . . . In the event of an Optional Purchase, the
Certificates will be repaid in whole,
but not in part, at a repayment price
equal to the Certificate Balance plus
accrued interest thereon at the
Pass-Through Rate. See "DESCRIPTION OF
THE CERTIFICATES -- OPTIONAL
PREPAYMENT."
S-8
<PAGE>
Security for the Securities. . The principal security for the Securities
will be as described below:
A. The Contracts . . . . The Contracts will be fixed-rate, simple-
interest conditional sales contracts
for Motorcycles, including any and all
rights to receive payments collected
thereunder on or after the related
Cutoff Date and security interests in
the Motorcycles financed thereby.
On the Closing Date, the Trust Depositor will
sell, transfer and assign to the Trust
pursuant to the Agreement, and the Trust
will pledge to the Indenture Trustee,
pursuant to the Indenture, Initial
Contracts with an aggregate principal
balance of $[ ] as
of [ ], 199__ (the "INITIAL
CUTOFF DATE"). Following the Closing
Date, pursuant to the Agreement, the
Trust Depositor will be obligated,
subject only to the availability
thereof, to sell, and the Trust will be
obligated to purchase and pledge subject
to the satisfaction of certain
conditions set forth therein, Subsequent
Contracts from time to time during the
Funding Period (as defined below) having
an aggregate principal balance equal to
$[ ], such amount being
equal to the amount on deposit in the
Pre-Funding Account established under
the Indenture on the Closing Date. With
respect to each transfer of Subsequent
Contracts to the Trust and the
simultaneous pledge of Subsequent
Contracts to the Indenture Trustee, the
Trust Depositor will designate as a
cutoff date (each a "SUBSEQUENT CUTOFF
DATE") the date as of which such
Subsequent Contracts are deemed sold to
the Trust and pledged to the Indenture
Trustee. Each date on which Subsequent
Contracts are conveyed and pledged is
referred to herein as a "SUBSEQUENT
TRANSFER DATE."
The Initial Contracts and the Subsequent
Contracts will be selected from retail
Motorcycle installment sales contracts
in the Trust Depositor's portfolio based
on the criteria specified in the
Transfer and Sale Agreement. The
Contracts arise and will arise from
loans to Obligors located in the 50
states of the United States, the
District of Columbia and the U.S.
Territories. As of the Initial Cutoff
Date, the annual percentage rate of
interest on the Initial Contracts ranges
from [ ]% to [ ]% with a
weighted average of approximately
[ ]%. The Initial Contracts had a
weighted average term to scheduled
maturity, as of origination, of
approximately [ ] months, and a
weighted average term to scheduled
maturity, as of the Initial Cutoff Date,
of approximately [ ] months. The
final scheduled Distribution Date on the
Initial Contract with the latest
maturity is no later than [ ]
200__. No Contract (including any
Subsequent Contract) will have a
scheduled maturity later than [ ]
200__. The Contracts generally are or
will be prepayable at any time without
penalty to the Obligor. Following the
transfer of Subsequent Contracts to the
Trust, the aggregate characteristics of
the entire pool of Contracts may vary
from those of the Initial Contracts as
to the criteria identified and described
in "THE CONTRACTS" herein.
S-9
<PAGE>
B. The Reserve Fund. . . The Securityholders will be afforded certain
limited protection, to the extent
described herein, against losses in
respect of the Contracts by the
establishment of an account in the name
of the Indenture Trustee for the benefit
of the Securityholders (the "RESERVE
FUND").
The Reserve Fund will be created with an
initial deposit by the Trust Depositor
of $[ ] (the "RESERVE FUND
INITIAL DEPOSIT") on the Closing Date.
The funds in the Reserve Fund (including
the Initial Certificate Reserve Amount)
will thereafter be supplemented on each
Distribution Date by the deposit of
certain Excess Amounts, Subsequent
Reserve Fund Amounts and Subsequent
Certificate Reserve Amounts (as defined
herein) (such Excess Amounts, Subsequent
Reserve Fund Amounts and Subsequent
Certificate Reserve Amounts, together
with the Reserve Fund Initial Deposit
and the Initial Certificate Reserve
Amount (as defined herein), the "RESERVE
FUND DEPOSITS"), until the amount in the
Reserve Fund reaches the Specified
Reserve Fund Balance (as defined
herein). "EXCESS AMOUNTS" in respect of
a Distribution Date will be calculated
as described under "CERTAIN INFORMATION
REGARDING THE SECURITIES --
DISTRIBUTIONS ON THE SECURITIES --
DEPOSITS TO THE DISTRIBUTION ACCOUNTS;
PRIORITY OF PAYMENTS" and will equal the
funds on deposit in the Collection
Account in respect of such Distribution
Date, after giving effect to all
distributions required to be made on
such Distribution Date from Available
Monies (as defined herein). The
"SUBSEQUENT RESERVE FUND AMOUNT" will
equal the amount on each Subsequent
Transfer Date equal to [ ]% of the
aggregate balance of the Subsequent
Contracts conveyed to the Trust. On
each Distribution Date, funds will be
withdrawn from the Reserve Fund, up to
the Available Amount (as hereinafter
defined), for distribution to
Securityholders to cover any shortfalls
in interest and principal required to be
paid on the Securities.
S-10
<PAGE>
In addition to the Reserve Fund Initial
Deposit, the Trust Depositor will
deposit $[ ], (the "INITIAL
CERTIFICATE RESERVE AMOUNT"), into the
Reserve Fund on the Closing Date. On
each Subsequent Transfer Date, the Trust
Depositor will deposit into the Reserve
Fund an amount equal to [ ]% of the
aggregate balance of the Subsequent
Contracts conveyed to the Trust on such
date (the "SUBSEQUENT CERTIFICATE
RESERVE AMOUNT", and together with the
Initial Certificate Reserve Amount the
"CERTIFICATE RESERVE AMOUNT"). If funds
in the Reserve Fund (other than the
Certificate Reserve Amount) are applied
in accordance with the last sentence of
the preceding paragraph and are
insufficient to distribute the interest
or principal due on the Certificates,
funds available from the Certificate
Reserve Amount will be withdrawn from
the Reserve Fund and applied solely to
cover any shortfalls of interest on the
Certificates on each Distribution Date
and of interest and principal on the
Certificates on the Certificate Final
Distribution Date. The Certificate
Reserve Amount will not be available to
pay interest or principal on the Notes.
The "AVAILABLE AMOUNT" will equal the
amount of all funds on deposit in the
Reserve Fund less the undistributed
balance of the Certificate Reserve
Amount, if any.
The "SPECIFIED RESERVE FUND BALANCE" with
respect to any Distribution Date will be
an amount equal to the sum of (i)[ ]%
of the Principal Balance of the
Contracts in the Trust as of the first
day of the immediately preceding Due
Period and (ii) $[ ];
PROVIDED, HOWEVER, in the event a
Reserve Fund Trigger Event (as
hereinafter defined) occurs with respect
to a Distribution Date and has not
terminated for three consecutive
Distribution Dates (inclusive of the
respective Distribution Date), the
Specified Reserve Fund Balance shall be
equal to the sum of (i) [ ]% of the
Principal Balance of the Contracts in
the Trust as of the first day of the
immediately preceding Due Period and
(ii) $[ ]. Notwithstanding
the foregoing, in no event shall the
Specified Reserve Fund Balance be less
than the sum of (i)[ ]% of the
aggregate of the Initial Class A-1 Note
Balance, Initial Class A-2 Note Balance
and Initial Certificate Balance and (ii)
$[ ]. As of any Distribution
Date, the amount of funds actually on
deposit in the Reserve Fund may, in
certain circumstances, be less than the
Specified Reserve Fund Balance. See
"CERTAIN INFORMATION REGARDING THE
SECURITIES -- PAYMENT PRIORITIES OF THE
NOTES AND CERTIFICATES."
On each Distribution Date, after giving
effect to all distributions made on such
Distribution Date, any amounts in the
Reserve Fund that are in excess of the
Specified Reserve Fund Balance will be
allocated and distributed to the Trust
Depositor. See "CERTAIN INFORMATION
REGARDING THE SECURITIES -- PAYMENT
PRIORITIES OF THE NOTES AND THE
CERTIFICATES; THE RESERVE FUND."
S-11
<PAGE>
C. Pre-Funding
Account . . . . . . . . . During the period (the "FUNDING PERIOD") from
and including the Closing Date until the
earliest of (a) the Distribution Date on
which the amount on deposit in the
Pre-Funding Account is less than $[ ],
(b) the date on which an Event of
Termination occurs with respect to the
Servicer under the Agreement, (c) the
date on which certain events of
insolvency occur with respect to the
Trust Depositor or (d) the close of
business on the date which is 90 days
from and including the Closing Date, the
Pre-Funding Account will be maintained
as an account in the name of the
Indenture Trustee on behalf of the
Noteholders to secure the Trust
Depositor's obligations under the
Agreement, as applicable, to purchase
and transfer Subsequent Contracts to the
Trust and the Trust's obligations under
the Indenture to pledge Subsequent
Contracts to the Indenture Trustee. The
Pre-Funded Amount will initially equal
$[ ] and, during the Funding
Period, will be reduced by the amount
thereof that the Trust uses to purchase
Subsequent Contracts from the Trust
Depositor and contemporaneously
therewith from the Seller by the Trust
Depositor. The Trust Depositor expects
that the Pre-Funded Amount will be
reduced to less than $[ ] by
the Distribution Date occurring in
[ ] 199__. Any Pre-Funded Amount
remaining at the end of the Funding
Period will be payable to the
Noteholders as described above in "TERMS
OF THE NOTES -- MANDATORY SPECIAL
REDEMPTION."
D. Interest Reserve
Account. . . . . . . . . The Trust Depositor will establish, and fund
with an initial deposit on the Closing
Date, a separate collateral account in
the name of the Indenture Trustee on
behalf of the Securityholders under the
Agreement (the "INTEREST RESERVE
ACCOUNT"), for the purpose of providing
additional funds for payment of Carrying
Charges (as described below) to pay
certain distributions on Distribution
Dates occurring during (and on the first
Distribution Date following the end of)
the Funding Period. In addition to the
initial deposit, all investment earnings
with respect to the Pre-Funding Account
are to be deposited into the Interest
Reserve Account and, pursuant to the
Agreement, on each Distribution Date
described above, amounts in respect of
Carrying Charges from such account will
be transferred into the Collection
Account. "CARRYING CHARGES" means (i)
the product of (x) the weighted average
of the Class A-1 Rate, the Class A-2
Rate and the Pass-Through Rate and (y)
the undisbursed funds (excluding
investment earnings) in the Pre-Funding
Account (as of the last day of the
related Due Period, as defined herein)
over (ii) the amount of any investment
earnings on funds in the Pre-Funding
Account which was transferred to the
Interest Reserve Account, as well as
interest earnings on amounts in the
Interest Reserve Account.
S-12
<PAGE>
The Interest Reserve Account will be
established to account for the fact that
a portion of the proceeds obtained from
the sale of the Notes will be initially
deposited in the Pre-Funding Account (as
the initial Pre-Funded Amount) rather
than invested in Contracts, and the
monthly investment earnings on such
Pre-Funded Amount (until the Pre-Funded
Amount is used to purchase Subsequent
Contracts) are expected to be less than
the weighted average of the Class A-1
Rate, the Class A-2 Rate and the
Pass-Through Rate with respect to the
corresponding portion of the Class A-1
Principal Balance, Class A-2 Principal
Balance and the Certificate Balance, as
well as the amount necessary to pay the
Trustees' Fees. The Interest Reserve
Account is not designed to provide any
protection against losses on the
Contracts in the Trust. After the
Funding Period, money remaining in the
Interest Reserve Account will be
released to the Trust Depositor.
Optional Purchase. . . . . . . The Seller, through the Trust Depositor may,
but will not be obligated to, purchase
all of the Contracts in the Trust, and
thereby cause early retirement of all
outstanding Securities, on any
Distribution Date as of which the Pool
Balance has declined to less than 10% of
the Initial Pool Balance (an "OPTIONAL
PURCHASE"). See "YIELD AND PREPAYMENT
CONSIDERATIONS."
Ratings. . . . . . . . . . . . It is a condition of issuance that the Class
A-1 Notes and Class A-2 Notes be rated
AAA by Standard & Poor's Ratings
Services, A Division of The McGraw-Hill
Companies ("S&P") and Aaa by Moody's
Investors Service, Inc. ("MOODY'S" and,
together with S&P, the "RATING
AGENCIES") and the Certificates be rated
at least [ ] by S&P and [ ] by
Moody's. See "RATINGS OF THE
SECURITIES."
Advances . . . . . . . . . . . The Servicer is obligated to advance each
month an amount equal to accrued and
unpaid interest on the Contracts which
was delinquent with respect to the
related Due Period (as defined herein)
(each an "ADVANCE"), but only to the
extent that the Servicer believes that
the amount of such Advance will be
recoverable from collections on the
Contracts. The Servicer will be
entitled to reimbursement of outstanding
Advances on any Distribution Date by
means of a first priority withdrawal of
Available Monies (as defined herein)
then held in the Collection Account.
See "CERTAIN INFORMATION REGARDING THE
SECURITIES--ADVANCES."
S-13
<PAGE>
Mandatory Repurchase by the
Trust Depositor. . . . . . . . Under the Agreement, the Trust Depositor has
agreed, in the event of a breach of
certain representations and warranties
made by the Trust Depositor and
contained therein which materially and
adversely affects the Trust's interest
in any Contract and which has not been
cured, to repurchase such Contract
within two business days prior to the
first Determination Date after the Trust
Depositor becomes aware of such breach.
"DETERMINATION DATE" means the fourth
business day following the conclusion of
a Due Period. The Seller is obligated
under the Transfer and Sale Agreement
(which right against the Seller the
Trust Depositor has assigned in such
circumstances to the Trust) to
repurchase the Contracts from the Trust
Depositor contemporaneously with the
Trust Depositor's purchase of the
Contracts from the Trust. See "CERTAIN
INFORMATION REGARDING THE
SECURITIES--CONVEYANCE OF CONTRACTS."
S-14
<PAGE>
Security Interests and Other
Aspects of the Contracts . . . In connection with the establishment of the
Trust as well as the assignment,
conveyance and transfer of Contracts
(including Subsequent Contracts) to the
Trust and pledge to the Indenture
Trustee, security interests in the
Motorcycles securing the Contracts have
been (or will be) (i) conveyed and
assigned by the Seller to the Trust
Depositor pursuant to the Transfer and
Sale Agreement (and, in the case of
Subsequent Contracts, the related
Subsequent Purchase Agreement as defined
therein and executed thereunder), (ii)
conveyed and assigned by the Trust
Depositor to the Trust pursuant to the
Agreement (and, in the case of
Subsequent Contracts, the related
Subsequent Transfer Agreement as defined
herein and executed thereunder) and
(iii) pledged by the Trust to the
Indenture Trustee pursuant to the
Indenture. The Agreement will designate
the Servicer as custodian to maintain
possession, as the Indenture Trustee's
agent, of the Contracts and any other
documents relating to the Motorcycles.
Uniform Commercial Code financing
statements will be filed in both Nevada
and Illinois, reflecting the conveyance
and assignment of the Contracts to the
Trust Depositor from the Seller, from
the Trust Depositor to the Trust and the
pledge from the Trust to the Indenture
Trustee, and the Seller's and the Trust
Depositor's accounting records and
computer systems will also reflect such
conveyance and assignment and pledge.
To facilitate servicing and save
administrative costs, such documents
will not be segregated from other
similar documents that are in the
Servicer's possession. However, the
Contracts will be stamped to reflect
their conveyance and assignment and
pledge. If, however, through fraud,
negligence or otherwise, a subsequent
purchaser were able to take physical
possession of the Contracts without
notice of such conveyance and assignment
and pledge, the Trust's and Indenture
Trustee's interest in the Contracts
could be defeated.
In addition, due to administrative
burden and expense, the certificates of
title to the Motorcycles will not be
amended or reissued to reflect the
conveyance and assignment of the
Seller's security interest in the
Motorcycles related to the Contracts to
the Trust Depositor and the Trust or the
pledge to the Indenture Trustee. In the
absence of amendments to the
certificates of title, the Trust and
Indenture Trustee will not have a
perfected security interest in the
Motorcycles in some states. Further,
federal and state consumer protection
laws impose requirements upon creditors
in connection with extensions of credit
and collections on conditional sales
contracts, and certain of these laws
make an assignee of such a contract
liable to the obligor thereon for any
violation of such laws by the lender.
The Trust Depositor has agreed to
repurchase any Contract as to which it
has failed to perfect a security
interest in the Motorcycle securing such
Contract, or as to which a breach of
federal or state laws exists if such
breach materially and adversely affects
the Trust's interest in such Contract
and if such failure or breach has not
been cured within 90 days. The Seller
has entered into a corresponding
obligation to repurchase such Contracts
from the Trust Depositor under the
Transfer and Sale Agreement and
Subsequent Purchase Agreements. See
"SECURITY INTERESTS AND OTHER ASPECTS OF
THE CONTRACTS; REPURCHASE OBLIGATIONS."
S-15
<PAGE>
Monthly Servicing Fee. . . . . The Servicer will be entitled to receive for
each Due Period a monthly servicing fee
(the "MONTHLY SERVICING FEE") equal to
1/12th of [ ]% of the Principal
Balance of the Contracts as of the
beginning of such Due Period. The
Servicer will also be entitled to
receive any extension fees or late
payment penalty fees paid by Obligors
(collectively with the Monthly Servicing
Fee, the "SERVICING FEE"). The
Servicing Fee is payable prior to any
payments to the Noteholders or the
Certificateholders. See "CERTAIN
INFORMATION REGARDING THE
SECURITIES--SERVICING COMPENSATION AND
PAYMENT OF EXPENSES."
Tax Status . . . . . . . . . . In the opinion of Winston & Strawn, federal
tax counsel to the Trust Depositor, for
federal income tax purposes, the Notes
will be characterized as debt, and the
Trust will not be characterized as an
association (or a publicly traded
partnership) taxable as a corporation.
Each Noteholder, by the acceptance of a
Note, will agree to treat the Notes as
indebtedness, and each
Certificateholder, by the acceptance of
a Certificate, will agree to treat the
Trust as a partnership in which the
Certificateholders are partners for
federal income tax purposes. See
"FEDERAL INCOME TAX CONSEQUENCES."
ERISA Considerations . . . . . Subject to the considerations discussed under
"ERISA CONSIDERATIONS" herein, the Notes
will be eligible for purchase by
employee benefit plans. Any benefit
plan fiduciary considering purchase of
the Notes should, however, consult with
its counsel regarding the consequences
of such purchase under ERISA and the
Code. See "ERISA CONSIDERATIONS."
The Certificates are not eligible for
purchase by (i) employee benefit plans
subject to ERISA, or (ii) individual
retirement accounts and other retirement
plans subject to Section 4975 of the
Code.
S-16
<PAGE>
RISK FACTORS
THE CONTRACTS AND REINVESTMENT RISK ASSOCIATED WITH THE PRE-FUNDING
ACCOUNT. On the Closing Date, the Trust Depositor will transfer $[ ] of
Initial Contracts to the Trust, which Initial Contracts the Trust Depositor
purchased from the Seller using part of the proceeds of the Notes and
Certificates sold to investors. The Trust Depositor will transfer $[ ]
(representing the Pre-Funded Amount), pursuant to the Agreement, into the
Pre-Funding Account established and maintained in the name of the Indenture
Trustee on behalf of the Securityholders. Such pledge will secure the Trust's
obligation to purchase from the Trust Depositor and transfer to the Trust the
Subsequent Contracts in a principal amount equal to the initial Pre-Funded
Amount at or before the end of the Funding Period. If the Seller fails to
originate a principal amount of eligible Contracts during the Funding Period
which is at least equal to the Pre-Funded Amount, the Trust Depositor will be
unable to acquire sufficient Subsequent Contracts to transfer to the Trust on
one or more Subsequent Transfer Dates, thereby resulting in a Mandatory Special
Redemption and prepayment of principal to the Noteholders as described in the
following paragraph. In addition, any conveyance of Subsequent Contracts is
subject to the satisfaction, on or before the related Subsequent Transfer Date,
of the following conditions, among others: (i) each such Subsequent Contract
satisfies the eligibility criteria specified in the Transfer and Sale Agreement
and the related Subsequent Purchase Agreement executed thereunder; (ii) as of
the applicable Subsequent Cutoff Date, no Contract in the Trust, including the
Subsequent Contracts that the Trust Depositor will be conveying as of such
Subsequent Cutoff Date, will have a scheduled maturity date later than
[ ] 200__; (iii) the Trust Depositor shall have executed and delivered in
favor of the Trust a written assignment (a "SUBSEQUENT TRANSFER AGREEMENT")
conveying such Subsequent Contracts to the Trust (including a schedule
identifying such Subsequent Contracts); (iv) the Trust Depositor shall have
delivered certain opinions of counsel to the Trustees, the Initial Purchaser and
the Rating Agencies with respect to the validity and other aspects of the
conveyance of all such Subsequent Contracts and (v) the Rating Agencies shall
have each notified the Trust Depositor and the Trustees in writing that,
following the addition of such Subsequent Contracts, the Class A-1 Notes and the
Class A-2 Notes will be rated AAA by S&P and Aaa by Moody's, and the
Certificates will be rated at least BBB by S&P and Baa2 by Moody's. Such
confirmation of the ratings of the Class A-1 Notes and the Class A-2 Notes and
the Certificates may depend on factors other than the characteristics of the
Subsequent Contracts, including the delinquency, repossession and net loss
experience on the Contracts in the Trust. Also, there can be no assurance that
the Seller will continue to generate Motorcycle conditional sales contracts that
satisfy the criteria set forth in the Transfer and Sale Agreement.
To the extent that amounts on deposit in the Pre-Funding Account have
not been fully applied to the purchase of Subsequent Contracts by the Trust
Depositor during the Funding Period, the Class A-1 Noteholders and Class A-2
Noteholders will receive, on the Distribution Date on or immediately following
the last day of the Funding Period, a prepayment of principal in an amount equal
to the amount remaining in the Pre-Funding Account pro rata; PROVIDED, HOWEVER,
in the event the Mandatory Special Redemption Amount is less than $150,000 such
amount shall be allocated solely to the Class A-1 Noteholders. See also "RISK
FACTORS -- REINVESTMENT RISK ASSOCIATED WITH PRE-FUNDING ACCOUNTS AND COLLATERAL
REINVESTMENT ACCOUNTS" in the Prospectus. It is anticipated that even if the
Seller originates sufficient Subsequent Contracts to exhaust most of the
Pre-Funded Amount, the principal amount of Subsequent Contracts conveyed to the
Trust by the end of the Funding Period will not be exactly equal to the amount
on deposit in the Pre-Funding Account and that therefore there will be at least
a nominal amount of principal prepaid to the Class A-1 Noteholders at the end of
the Funding Period in any event.
Following the transfer of Subsequent Contracts to the Trust, the
aggregate characteristics of the entire pool of Contracts may vary from those of
the Initial Contracts as of the Initial Cutoff Date, as to the criteria
described in "THE CONTRACTS" below.
TRUST'S RELATIONSHIP TO THE TRUST DEPOSITOR AND SELLER. Neither the
Seller nor the Trust Depositor is generally obligated to make any payments in
respect of the Notes, Certificates or Contracts. However, in connection with
each conveyance of Contracts by the Seller to the Trust Depositor and by the
Trust Depositor to the Trust, the Seller and the Trust Depositor will make
representations and warranties with respect to the characteristics of such
Contracts. In certain circumstances, the Seller through the Trust Depositor is
obligated to repurchase Contracts with respect to which such representations or
warranties are not true as of the date made. Neither the Seller nor the Trust
Depositor is otherwise obligated with respect to the Notes or Certificates
(other than in respect of the transfer of Subsequent Contracts as
S-17
<PAGE>
described herein). See also "RISK FACTORS -- TRUST'S RELATIONSHIP TO EAGLEMARK,
THE TRUST DEPOSITORS, AND THEIR AFFILIATES" and "-- RISKS ASSOCIATED WITH
NON-RECOURSE NATURE OF THE SECURITIES" in the Prospectus.
SUBORDINATION; LIMITED ASSETS. See "CERTAIN INFORMATION REGARDING THE
SECURITIES -- PAYMENT PRIORITIES OF THE NOTES AND CERTIFICATES; RESERVE FUND."
Principal and interest payments on the Certificates will be subordinated to
payments on the Notes as described herein. Accordingly, the yield on the
Certificates will be sensitive to the loss experience on the Contracts and the
timing of such losses. If the actual rate and amount of losses experienced on
the Contracts exceed the rate and amount of losses assumed by an investor, the
yield to maturity of the Certificates may be lower than anticipated.
The Trust will not have, nor is it expected to have, any significant
assets or sources of funds other than the Contracts and its rights under the
Agreement, including the Pre-Funding Account, the Interest Reserve Account and
the Reserve Fund. Holders of the Securities must rely for repayment upon
payments on the Contracts and, if and to the extent available, amounts on
deposit in the Pre-Funding Account, the Interest Reserve Account and the Reserve
Fund. The Pre-Funding Account and the Interest Reserve Account will be
available during the Funding Period. The Pre-Funding Account will be used
solely to purchase Subsequent Contracts and is not available to cover losses on
the Contracts. The Interest Reserve Account is designed to cover obligations of
the Trust relating to that portion of the initial Note net proceeds not invested
in Contracts, and is not designed to provide any protection against losses on
the Contracts.
LIMITED DELINQUENCY AND LOAN LOSS EXPERIENCE WITH MOTORCYCLE CONTRACTS.
Eaglemark was organized in January 1993 and began purchasing and servicing
conditional sales contracts for Motorcycles in February 1993. Accordingly, and
for other reasons, Eaglemark's delinquency experience and loan loss and
repossession experience set forth under "THE CONTRACTS" may not be indicative of
the performance of the Contracts sold to the Trust Depositor and held by the
Trust and pledged to the Indenture Trustee. The Trust Depositor is a special
purpose corporation established for the limited purpose of purchasing the
Contracts (and other similar retail motorcycle conditional sales contracts) and
related assets from the Seller, and selling the same into the Trust (and other
similar trusts); the Trust Depositor was organized in October 1996.
SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS. See generally
"RISK FACTORS -- RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED
MOTORCYCLES," "ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO
REALIZE ON ITS SECURITY INTEREST - BANKRUPTCY LAWS" and "-- ADDITIONAL LEGAL
LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE ON ITS SECURITY INTEREST -
CONSUMER PROTECTION LAWS" in the Prospectus.
LIMITED LIQUIDITY. There is currently no secondary market for the
Securities offered hereby. The Underwriter currently intends to make a market
in the Securities, but it is under no obligation to do so. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide the Securityholders with liquidity of investment
or that it will continue for the life of the Securities.
COMPANY BANKRUPTCY CONSIDERATIONS. See generally "RISK FACTORS --
COMPANY BANKRUPTCY CONSIDERATIONS" in the Prospectus.
YIELD AND PREPAYMENT CONSIDERATIONS. See generally "RISK FACTORS --
PREPAYMENTS ON CONTRACTS AFFECT YIELD OF SECURITIES" in the Prospectus.
TAX STATUS. In the opinion of Winston & Strawn as federal income tax
counsel to the Trust Depositor, for federal income tax purposes, the Notes will
be characterized as debt and the Trust will not be characterized as an
association (or publicly traded partnership) taxable as a corporation. As no
cases, regulations or administrative rulings have addressed transactions similar
to those described herein, however, there can be no assurance the IRS or a court
will not take contrary positions. See "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS."
RISK OF COMMINGLING. The Seller has initiated a direct debit program
with certain Obligors pursuant to which payments to be made by such Obligors
will be transferred from their checking or savings accounts to an account in the
Seller's name (the "ACH ACCOUNT") and remitted on a daily basis to a lockbox
account and transferred from such lockbox
S-18
<PAGE>
account pursuant to the Servicer's instructions to the related Collection
Account as specified in this Prospectus Supplement. Pending transfer of such
funds from the Seller's account to the Servicer such funds will not be
segregated from other funds of the Seller held in the ACH Account. See
generally "RISK FACTORS--RISK OF COMMINGLING" and "CERTAIN INFORMATION REGARDING
THE SECURITIES -- THE ACCOUNTS AND ELIGIBLE INVESTMENTS" in the Prospectus.
YEAR 2000. See generally "RISK FACTORS--RISKS RELATED TO YEAR 2000
ISSUES" in the Prospectus.
FORMATION OF THE TRUST
GENERAL
The Trust will be a business trust formed under the laws of the State of
Delaware pursuant to the Trust Agreement for the transactions described herein.
After its formation, the Trust will not engage in any activity other than (i)
acquiring, holding and managing the Contracts and the other assets of the Trust
and proceeds therefrom; (ii) issuing the Notes and the Certificates; (iii)
making payments on the Notes and the Certificates; and (iv) engaging in other
activities that are necessary, suitable or convenient to accomplish the
foregoing purposes or are incidental thereto or connected therewith.
On the Closing Date, the Trust Depositor will sell and assign the Trust
Property to the Trust. Eaglemark will act as Servicer of the Contracts and will
receive compensation and fees for such services. See "CERTAIN INFORMATION
REGARDING THE SECURITIES -- SERVICING COMPENSATION AND PAYMENT OF EXPENSES."
The Trust's principal offices will be in Wilmington, Delaware, in care
of Wilmington Trust Company, as Owner Trustee, at the address listed below under
"THE OWNER TRUSTEE."
CAPITALIZATION
The Trust will initially be capitalized with equity equal to the Initial
Certificate Balance. The Trust Depositor will purchase Certificates with an
Initial Certificate Balance of approximately 1% of the Initial Certificate
Balance and the remaining equity interests will be sold to third party investors
that are expected to be unaffiliated with the Seller, the Trust Depositor, the
Servicer or the Trust.
The following table illustrates the capitalization of the Trust as of
the Cut-Off Date, as if the issuance and sale of the Securities had taken place,
on such date:
Class A-1 Notes . . . . $
Class A-2 Notes . . . . $
Certificates. . . . . . $
-------------
Total . . . . . . $
-------------
-------------
THE OWNER TRUSTEE
Wilmington Trust Company will be the Owner Trustee under the Trust
Agreement. Wilmington Trust Company is a Delaware corporation and its Corporate
Trust Office is located at 1100 North Market Street, Wilmington, Delaware
19890.
The Owner Trustee will have the rights and duties set forth herein under
"CERTAIN INFORMATION REGARDING THE SECURITIES -- THE TRUSTEES" and "-- DUTIES OF
THE TRUSTEES."
S-19
<PAGE>
POOL FACTORS AND TRADING INFORMATION
The "NOTE POOL FACTOR" for each Class of Notes will be a six-digit
decimal which the Servicer will compute prior to each Distribution Date with
respect to the Notes indicating the unpaid principal amount of such Class of
Notes, after giving effect to payments to be made on such Distribution Date, as
a fraction of the initial outstanding principal amount of such Class of Notes.
The "CERTIFICATE POOL FACTOR" for the Certificates will be a six-digit decimal
which the Servicer will compute prior to each Distribution Date indicating the
remaining Certificate Balance after giving effect to distributions to be made on
such Distribution Date, as a fraction of the Initial Certificate Balance. Each
Note Pool Factor and the Certificate Pool Factor will be 1.000000 as of the
Closing Date, and thereafter will decline to reflect reductions in the
outstanding principal amount of the applicable Class of Notes, or the reduction
of the Certificate Balance, as the case may be. A Noteholder's portion of the
aggregate outstanding principal amount of the related Class of Notes will be the
product of (i) the original denomination of such Noteholder's Notes and (ii) the
applicable Note Pool Factor at the time of determination. A Certificateholder's
portion of the aggregate outstanding Certificate Balance will be the product of
(i) the original denomination of such Certificateholder's Certificate and (ii)
the Certificate Pool Factor at the time of determination.
The Noteholders will receive reports on or about each Distribution Date
concerning payments received on the Contracts, the Pool Balance, each Note Pool
Factor and various other items of information, and the Certificateholders will
receive reports on or about each Distribution Date concerning payments received
on the Contracts, the Pool Balance, the Certificate Pool Factor and various
other items of information. In addition, Securityholders of record during any
calendar year will be furnished information for tax reporting purposes not later
than the latest date permitted by law. See "CERTAIN INFORMATION REGARDING THE
SECURITIES -- STATEMENTS TO SECURITYHOLDERS."
USE OF PROCEEDS
The Trust Depositor will use the net proceeds received from the sale of
the Notes and Certificates (i) for the purchase of the Initial Contracts and
related assets from the Seller, and (ii) the remainder for the funding of the
Pre-Funding Account. The Seller will use the net proceeds from the Trust
Depositor's purchase of the Initial Contracts, as well as Subsequent Contracts,
for the repayment of a substantial portion of the outstanding principal of the
warehouse lines through which it finances its motorcycle conditional sales
contracts. Following each such repayment, it is expected that the warehouse
lines will be used to build a new portfolio of Motorcycle conditional sales
contracts.
THE CONTRACTS
Each Contract is (or will be, in the case of Subsequent Contracts)
secured by a Motorcycle (as described below) and is (or will be) a conditional
sales contract originated by a Harley-Davidson dealer and purchased by the Trust
Depositor. No Contract may be substituted by the Seller or the Trust Depositor
with another Motorcycle contract after such Contract has been sold by the Trust
Depositor to the Trust.
Each Contract (a) is (or will be) secured by a Motorcycle, (b) has (or
will have) a fixed annual percentage rate and provide for, if timely made,
payments of principal and interest which fully amortize the loan on a simple
interest basis over its term, (c) with respect to the Initial Contracts, has its
last scheduled payment due no later than [ ] 200__, and with respect
to the Contracts as a whole (including any Subsequent Contracts conveyed to the
Trust after the Closing Date), will have a last scheduled payment due no later
than [ ] 200__, and (d) with respect to the Initial Contracts,
has its first scheduled payment due no later than [ ] 199__.
The Contracts were (or will be) acquired by the Trust Depositor in the ordinary
course of the Trust Depositor's business. A detailed listing of the Initial
Contracts is appended to the Agreement. See "DESCRIPTION OF THE CERTIFICATES"
below. (For general composition of the Initial Contracts see Table 1 below).
Approximately [ ]% of the Principal Balance of the Initial Contracts as of
the Initial Cutoff Date is attributable to loans to purchase Motorcycles which
were new and approximately [ ]% is attributable to loans to purchase
Motorcycles which were used at the time the related Contract was originated.
All Initial Contracts have a contractual rate of interest of at least [ ]%
per annum and not more than [ ]% per annum and the weighted
S-20
<PAGE>
average contractual rate of interest of the Initial Contracts as of the Initial
Cutoff Date is approximately [ ]% per annum (see Table 2 below). The
Initial Contracts have remaining maturities as of the Initial Cutoff Date of at
least [ ] months but not more than [ ] months and original maturities of at
least [ ] months but not more than [ ] months. The Initial Contracts had a
weighted average term to scheduled maturity, as of origination, of approximately
[ ] months, and a weighted average term to scheduled maturity as of the
Initial Cutoff Date of approximately [ ] months (see Tables 3 and 4 below).
The average principal balance per Initial Contract as of the Initial Cutoff Date
was approximately $[ ] and the principal balances on the Initial Contracts as
of the Initial Cutoff Date ranged from $[ ] to $[ ] (see
Table 5 below). The Contracts arise (or will arise) from loans to Obligors
located in 50 states, the District of Columbia and the U.S. Territories and with
respect to the Initial Contracts, constitute the following approximate amounts
expressed as a percentage of the aggregate principal balances on the Initial
Contracts as of the Initial Cutoff Date:[ ]% in the state of [ ], [ ]%
in [ ], [ ]% in [ ] and [ ]% in [ ] (see Table 6
below). No other state represented more than [ ]% of the Initial Contracts.
Except for the criteria described in the preceding paragraph and under
"RISK FACTORS -- THE CONTRACTS AND THE PRE-FUNDING ACCOUNT," there will be no
required characteristics of the Subsequent Contracts. Therefore, following the
transfer of the Subsequent Contracts to the Trust, the aggregate characteristics
of the entire pool of the Contracts, including the composition of the Contracts,
the distribution by weighted average annual percentage rate of the Contracts,
the distribution by calculated remaining term of the Contracts, the distribution
by original term to maturity of the Contracts, the distribution by current
balance of the Contracts, and the geographic distribution of the Contracts,
described in the following tables, may vary from those of the Initial Contracts
as of the Initial Cutoff Date.
The motorcycle dealer agreements between each of the originating dealers
and the Seller require the originating dealer to repurchase certain motorcycles
repossessed by the Seller in the event of a default by the Obligor ("DEALER
RECOURSE"); the Dealer Recourse will be assigned by the Seller to the Trust
Depositor pursuant to the Transfer and Sale Agreement, assigned from the Trust
Depositor to the Trust pursuant to the Agreement and pledged from the Trust to
the Indenture Trustee pursuant to the Indenture. There can be no assurance that
an originating dealer will perform its Dealer Recourse obligations under such
motorcycle dealer agreements if and when required to do so.
TABLE 1
COMPOSITION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<S> <C>
Aggregate Principal Balance. . . . . . . . . . . . . $[ ]
Number of Contracts. . . . . . . . . . . . . . . . . [ ]
Average Principal Balance. . . . . . . . . . . . . . $[ ]
Weighted Average Annual Percentage
Rate ("APR"). . . . . . . . . . . . . . . . . . [ ]%
(Range) . . . . . . . . . . . . . . . . . . . . [ ]%-[ ]%
Weighted Average Original Term (in months) . . . . . [ ]
(Range) . . . . . . . . . . . . . . . . . . . . [ ] to [ ]
Weighted Average Calculated Remaining Term (in months) [ ]
(Range) . . . . . . . . . . . . . . . . . . . . [ ] to [ ]
</TABLE>
S-21
<PAGE>
TABLE 2
DISTRIBUTION BY APR OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF NUMBER OF TOTAL OUTSTANDING PERCENT OF POOL
RATE CONTRACTS CONTRACTS(1) PRINCIPAL BALANCE BALANCE(1)
---- -------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
8.500- 9.000% % $ %
9.001-10.000
10.001-11.000
11.001-12.000
12.001-13.000
13.001-14.000
14.001-15.000
15.001-16.000
16.001-17.000
17.001-18.000
18.001-19.000
19.001-20.000
20.001-21.000
21.001-22.000
22.001-22.990
Totals: 100.00% 100.00 %
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
TABLE 3
DISTRIBUTION BY CALCULATED REMAINING TERM
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENT OF
CALCULATED REMAINING NUMBER OF TOTAL OUTSTANDING PERCENT OF
TERM (MONTHS) NUMBER OF CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE POOL BALANCE (1)
------------ ------------------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C>
0 - 12 % $ %
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
TOTALS: 100.00% 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
S-22
<PAGE>
TABLE 4
DISTRIBUTION BY ORIGINAL TERM TO MATURITY
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
PERCENT OF OUTSTANDING
ORIGINAL NUMBER OF NUMBER OF PRINCIPAL PERCENT OF POOL
TERM (MONTHS) CONTRACTS CONTRACTS (1) BALANCE BALANCE (1)
- ------------ --------- ------------- ------- -----------
<S> <C> <C> <C> <C>
0 - 12 % $ %
13 - 24
25 - 36
37 - 48
49 - 60
61 - 72
TOTALS: 100.00% 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
S-23
<PAGE>
TABLE 5
DISTRIBUTION BY CURRENT BALANCE OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF NUMBER OF TOTAL OUTSTANDING PERCENT OF POOL
CURRENT BALANCE CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE BALANCE(1)
--------------- --------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
$ 0.01 - 1,000.00 % $ %
$ 1,000.01 - 2,000.00
$ 2,000.01 - 3,000.00
$ 3,000.01 - 4,000.00
$ 4,000.01 - 5,000.00
$ 5,000.01 - 6,000.00
$ 6,000.01 - 7,000.00
$ 7,000.01 - 8,000.00
$ 8,000.01 - 9,000.00
$ 9,000.01 - 10,000.00
$ 10,000.01 - 11,000.00
$ 11,000.01 - 12,000.00
$ 12,000.01 - 13,000.00
$ 13,000.01 - 14,000.00
$ 14,000.01 - 15,000.00
$ 15,000.01 - 16,000.00
$ 16,000.01 - 17,000.00
$ 17,000.01 - 18,000.00
$ 18,000.01 - 19,000.00
$ 19,000.01 - 20,000.00
$ 20,000.01 - 21,000.00
$ 21,000.01 - 22,000.00
$ 22,000.01 - 23,000.00
$ 23,000.01 - 24,000.00
$ 24,000.01 - 25,000.00
$ 25,000.01 - 26,000.00
$ 26,000.01 - 27,000.00
$ 27,000.01 - 28,000.00
$ 28,000.01 - 29,000.00
$ 30,000.01 - 31,000.00
$ 33,000.01 - 34,000.00
$ 35,000.01 - 36,000.00
TOTALS: 100.00% 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
S-24
<PAGE>
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
NUMBER OF NUMBER OF TOTAL OUTSTANDING POOL
STATE CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1)
----- --------- ------------- ----------------- -----------
<S> <C> <C> <C> <C>
ALABAMA % $ %
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
DISTRICT OF COLUMBIA
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
KANSAS
KENTUCKY
LOUISANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
</TABLE>
S-25
<PAGE>
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
(CONTINUED)
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
NUMBER OF NUMBER OF TOTAL OUTSTANDING POOL
STATE CONTRACTS CONTRACTS (1) PRINCIPAL BALANCE BALANCE (1)
----- --------- ------------- ----------------- -----------
<S> <C> <C> <C> <C>
NEW YORK % $ %
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING
OTHER
TOTALS: 100.00% 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
S-26
<PAGE>
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
The Seller was organized in January 1993 and is a one hundred percent
owned subsidiary of Eaglemark Financial. The Seller began purchasing and
servicing conditional sales contracts for Motorcycles in February 1993.
Accordingly, the Seller has not accumulated a significant amount of delinquency
and loss data on Motorcycle conditional sales contracts similar to the
Contracts. See "RISK FACTORS -- LIMITED EXPERIENCE WITH MOTORCYCLE CONTRACTS."
The following tables set forth the delinquency experience and loan loss
and repossession experience of the Seller's portfolio of conditional sales
contracts for Motorcycles. These figures include data in respect of contracts
which the Seller has previously sold with respect to prior securitizations and
for which the Seller acts as servicer.
S-27
<PAGE>
DELINQUENCY EXPERIENCE(1)/
(DOLLARS IN THOUSANDS)
AT
___________________________________________________________________________
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, [ ], [ ],
------------ ------------ ------------ ----- -----
1995 1996 1997 199 199
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NUMBER OF
CONTRACTS AND
ASSOCIATED
OUTSTANDING
PRINCIPAL DOLLAR
BALANCES. . . . . . .
PERIOD OF
DELINQUENCY AND
ASSOCIATED
OUTSTANDING
PRINCIPAL
BALANCES(2)/
30-59 DAYS
60-89 DAYS
90 DAYS OR MORE . . .
TOTAL NUMBER OF
DELINQUENT
CONTRACTS . . . . . .
DELINQUENT
CONTRACTS AS A %
OF TOTAL NUMBER
OF CONTRACTS . . . .
AGGREGATE
PRINCIPAL
BALANCE OF
DELINQUENT
CONTRACTS. . . . . .
</TABLE>
S-28
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, [ ], [ ],
------------ ------------ ------------ ----- -----
1995 1996 1997 199 199
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
AGGREGATE
PRINCIPAL
BALANCE OF
DELINQUENT
CONTRACTS AS A
PERCENTAGE OF
THE AGGREGATE
OUTSTANDING
PRINCIPAL
BALANCE OF
CONTRACTS. . . . . .
</TABLE>
(1) Excludes Contracts already in repossession, which Contracts the Servicer
does not consider outstanding.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a
Contract due on the first day of a month is not 30 days delinquent until
the first day of the next month.
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<PAGE>
LOAN LOSS/REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE TWELVE TWELVE
MONTHS MONTHS MONTHS [ ] [ ]
ENDED ENDED ENDED MONTHS MONTHS
DECEMBER DECEMBER DECEMBER ENDED ENDED
31, 31, 31, [ ], [ ],
1995 1996 1997 199 199
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRINCIPAL BALANCE
OF ALL CONTRACTS
SERVICED(1)/. . . .
CONTRACT
LIQUIDATIONS(2)/. .
NET LOSSES:
DOLLARS(3)/ . . . .
PERCENTAGE(4)/. . .
</TABLE>
(1) As of period end. Includes Contracts already in repossession.
(2) As a percentage of the total number of Contracts being serviced as of
period end, calculated on an annualized basis.
(3) The calculation of net loss includes actual charge-offs, deficiency
balances remaining after liquidation of repossessed vehicles and
expenses of repossession and liquidation, net of recoveries.
(4) As a percentage of the principal amount of Contracts being serviced as
of period end, calculated on an annualized basis.
THE DATA PRESENTED IN THE FOREGOING TABLES ARE FOR ILLUSTRATIVE PURPOSES ONLY
AND THERE IS NO ASSURANCE THAT THE DELINQUENCY, LOAN LOSS OR REPOSSESSION
EXPERIENCE OF THE CONTRACTS WILL BE SIMILAR TO THAT SET FORTH ABOVE.
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<PAGE>
HARLEY-DAVIDSON MOTORCYCLES
All of the motorcycles securing Contracts were manufactured by
Harley-Davidson, Inc., except not more than 2.5% of the Contracts (including all
Subsequent Contracts) relate to, and are secured by, motorcycles manufactured by
Buell. Buell produces "PERFORMANCE" motorcycles using engines and certain other
parts manufactured by Harley-Davidson. Buell is a wholly-owned subsidiary of
Harley-Davidson.
Harley-Davidson produces and sells premium heavyweight motorcycles.
Within the heavyweight class, Harley-Davidson sells touring motorcycles
(equipped for long-distance touring), as well as custom motorcycles which
emphasize the distinctive styling associated with certain classic
Harley-Davidson motorcycles. Harley-Davidson motorcycles are based on
variations of five basic chassis designs and are powered by one of four air
cooled, twin cylinder engines of "V" configuration which have displacements of
883cc, 1200cc, 1340cc and 1450cc. Harley-Davidson manufactures its own engines
and frames and is the only major manufacturer of motorcycles in the United
States.
Buell produces "PERFORMANCE" motorcycles using Harley-Davidson 1200cc
engines that are further modified in the manufacturing process, as well as
certain other Harley parts. The "PERFORMANCE" aspect of the motorcycles refers
to overall handling characteristics of the motorcycle, including cornering,
acceleration and braking. Buell motorcycles and related products are currently
distributed exclusively through Harley-Davidson dealers. Buell's overall share
of the "PERFORMANCE" market is negligible, but increasing.
YIELD AND PREPAYMENT CONSIDERATIONS
By their terms, the Contracts may be prepaid, in whole or in part, at
any time and each Contract contains a provision which permits the Seller to
require full prepayment in the event of a sale of the Motorcycle securing a
Contract. In addition, repurchases of the Contracts from the Trust by the Trust
Depositor, and concurrently from the Trust Depositor by the Seller, could occur
in the event of a breach of certain representation and warranties with respect
to the Contracts and upon exercise of the Trust Depositor's limited option to
repurchase the Contracts from the Trust when the Pool Balance has declined to
less than 10% of the Initial Pool Balance. Any prepayments and repurchases of
Contracts will reduce the average life of the Notes and Certificates and the
interest received by the Securityholders over the life of the Notes and
Certificates (for this purpose the term "PREPAYMENT" includes liquidations due
to default, as well as receipt of proceeds from credit life, credit disability
and casualty insurance policies). In addition, the occurrence of a Mandatory
Special Redemption at or before the end of the Funding Period would have the
effect of reducing the interest received by Noteholders over the life of the
Notes.
Payments on the Certificates will be subordinated to payments on the
Notes. Accordingly, the yield on the Certificates will be sensitive to the loss
experience on the Contracts and the timing of such losses. If the actual rate
and amount of losses experienced on the Contracts exceed the rate and amount of
losses assumed by an investor, the yield to maturity of the Certificates may be
lower than anticipated.
The final scheduled Distribution Date on the Initial Contract with the
latest maturity is no later than [ ] 200__. The final scheduled
Distribution Date on the Contract with the latest maturity among the Contracts
as a whole, including any Subsequent Contracts, will be not later than [
] 200__.
EAGLEMARK FINANCIAL SERVICES, INC.;
EAGLEMARK, INC.
EAGLEMARK FINANCIAL SERVICES, INC.
Eaglemark Financial was formed in June 1992 with a capital infusion of
$10,000,000 from Harley-Davidson and an additional $15,000,000 capital
contribution from a major institutional investor in January 1993. In November
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<PAGE>
1995, Harley-Davidson purchased the equity owned by the major institutional
investor and as a result Eaglemark Financial is a 97.8% owned subsidiary of
Harley-Davidson. The business of Eaglemark Financial, through its 100%
ownership of Eaglemark, has been to provide wholesale and retail financing,
credit card and insurance services to dealers and customers of Harley-Davidson.
EAGLEMARK, INC.
Eaglemark is a Nevada corporation and is a wholly-owned subsidiary of
Eaglemark Financial. Eaglemark began operations in January 1993 when it
purchased the $85 million wholesale financing portfolio of certain
Harley-Davidson dealers from ITT Commercial Finance; subsequently, Eaglemark
entered the retail consumer finance business. Eaglemark provides financing to
Harley-Davidson customers for new and used motorcycles, as well as certain other
recreational products such as single-engine aircraft and marine products.
Harley-Davidson motorcyles are financed through the Canadian Harley-Davidson
dealers under the trade name "Deeley Credit." Eaglemark also finances extended
service contracts on Motorcycles. Eaglemark's financing, credit card and
insurance programs are designed to work together as a package that appeals to
the needs of Harley-Davidson's customers. The intent of such a package is to
increase dealer and customer loyalty to Eaglemark while improving revenue and
profits over time. Eaglemark's principal executive offices are located at 4150
Technology Way, Carson City, Nevada 89706 (telephone 702/886-3200). As of
December 31, 1997, Eaglemark had total assets of $551.8 million, and
stockholder's equity of $68.1 million.
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]
The Trust Depositor is a special purpose corporation incorporated in the
State of Nevada in [ ] 199__. All of the common stock of the Trust
Depositor is owned by the Seller. All of the officers and directors of the
Trust Depositor are employed by the Seller, except that at least two directors
of the Trust Depositor are required to be independent of the Trust Depositor.
The Trust Depositor's business is limited to purchasing the Contracts and
related assets (and other similar retail motorcycle installment conditional
sales contracts) from the Seller, acting as the general partner of the Trust and
other similar trusts and performing the obligations described in the Agreement
and the Transfer and Sale Agreement (as well as similar agreements entered into
in connection with the formation of similar trusts).
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the Indenture.
PAYMENTS OF INTEREST
Interest on the outstanding principal amount of each Class of Notes will
accrue at the applicable Interest Rate from and including the fifteenth day of
the month of the most recent Distribution Date based on a 360-day year
consisting of 30 days each (or from and including the Closing Date with respect
to the first Distribution Date) to but excluding the fifteenth day of the month
of the current Distribution Date. Interest payments on the Notes will be made
from Available Monies after all accrued and unpaid Servicing Fees, trustees'
fees and other administrative fees of the Trust (collectively, "TRUST FEES AND
EXPENSES") have been paid. See "CERTAIN INFORMATION REGARDING THE SECURITIES --
DISTRIBUTIONS ON THE SECURITIES -- DEPOSITS TO THE DISTRIBUTION ACCOUNT;
PRIORITY OF PAYMENTS."
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders, to the extent
described below, on each Distribution Date in an amount equal to the Note
Principal Distributable Amount, in each case calculated as described under
"CERTAIN INFORMATION REGARDING THE SECURITIES -- DISTRIBUTIONS ON THE SECURITIES
- -- DEPOSITS TO THE DISTRIBUTION ACCOUNT; PRIORITY OF PAYMENTS." Principal
payments on the Notes will be made from Available Monies after all Trust Fees
and Expenses
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have been paid, and after distribution of the Note Interest Distributable
Amount. See "CERTAIN INFORMATION REGARDING THE SECURITIES -- DISTRIBUTIONS ON
THE SECURITIES -- DEPOSITS TO THE DISTRIBUTION ACCOUNT; PRIORITY OF PAYMENTS."
Principal payments on the Notes will be applied on each Distribution
Date from the Note Distribution Account as follows: first, to the holders of the
Class A-1 Notes until the principal amount of the Class A-1 Notes has been
reduced to zero, but in no event later than the Class A-1 Final Distribution
Date and second, to the holders of the Class A-2 Notes until the principal
amount of the Class A-2 Notes has been reduced to zero, but in no event later
than the Class A-2 Final Distribution Date.
To the extent that the Note Principal Distributable Amount is greater
than the principal balance of the Class A-1 Notes on any Distribution Date, the
Principal Distributable Amount will first be allocated to reduce the principal
amount of the Class A-1 Notes to zero and will thereafter be allocated to the
Class A-2 Notes.
The principal amount of each class of Notes, to the extent not
previously paid, will be due on the related Note Final Distribution Date for
that class of Notes. The actual date on which the aggregate outstanding
principal amount of any class of Notes is paid may be earlier than its Note
Final Distribution Date based on a variety of factors, including the factors
described under "YIELD AND PREPAYMENT CONSIDERATIONS."
OPTIONAL REDEMPTION
The Class A-2 Notes will be subject to redemption in whole, but not in
part, on any Distribution Date relating to an Optional Purchase. The redemption
price will equal the unpaid principal amount of the Class A-2 Notes plus accrued
interest thereon at the applicable Interest Rate.
MANDATORY SPECIAL REDEMPTION
The Class A-1 Noteholders and Class A-2 Noteholders will be prepaid in
part pursuant to a Mandatory Special Redemption, without premium, on the
Distribution Date on or immediately following the last day of the Funding Period
in the event that any amount remains on deposit in the Pre-Funding Account after
giving effect to the purchase of all Subsequent Contracts, including any such
purchase on such date. The aggregate principal amount of Class A-1 Notes and
Class A-2 Notes to be prepaid will be an amount equal to the amount then on
deposit in the Pre-Funding Account allocated pro rata; PROVIDED, HOWEVER, in the
event the Mandatory Special Redemption Amount is less than $150,000 such amount
shall be allocated solely to the Class A-1 Noteholders.
THE INDENTURE TRUSTEE
Harris Trust and Savings Bank will be the Indenture Trustee. The
Indenture Trustee is an Illinois banking corporation and its Corporate Trust
Office is located at 311 West Monroe Street, Chicago, Illinois 60603.
The Indenture Trustee will have the rights and duties set forth under
"CERTAIN INFORMATION REGARDING THE SECURITIES -- THE TRUSTEES" AND "-- DUTIES OF
THE TRUSTEES."
EVENTS OF DEFAULT
"EVENTS OF DEFAULT" under the Indenture will consist of: (i) a default
by the Trust for five days or more in the payment of any interest on the Notes
of any class when the same becomes due and payable; (ii) a default by the Trust
in the payment of the principal of or any installment of the principal of the
Notes of any class when the same becomes due and payable; (iii) a default in the
observance or performance of any covenant or agreement of the Trust made in the
Indenture or any representation or warranty made by the Trust in the Indenture
or in any certificate delivered pursuant thereto or in connection therewith
having been incorrect in a material respect as of the time made, and the
continuation of any such default for a period of 30 days after notice thereof is
given to the Trust by the Indenture Trustee or to the Trust and the Indenture
Trustee by the holders of Notes evidencing at least 25% of the voting interest
thereof, voting
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together as a single class and (iv) certain events of bankruptcy, insolvency,
receivership or liquidation relating to the Trust (each, a "TRUST INSOLVENCY").
Upon the occurrence and continuation of an Event of Default, the Notes
shall become immediately due and payable at par, together with accrued interest
therein unless holders of Notes evidencing not less than 662/3% of the voting
interests thereof, voting together as a single class, waive such an Event of
Default.
No sale or liquidation of the property of the Trust may be made if the
proceeds thereof are not sufficient to pay all outstanding principal of and
accrued interest on the Notes, unless (a) holders of Notes evidencing 100% of
the voting interests thereof, voting together as a single class, consent to such
sale or liquidation, or (b)(1) the Indenture Trustee determines that the
property of the Trust will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes, (2) the Indenture Trustee
provides prior written notice of such sale or liquidation to each Rating Agency
and (3) holders of Notes evidencing not less than 662/3% of the voting interests
thereof, voting together as a single class, consent to such sale or liquidation.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Trust Agreement. Copies
of the Trust Agreement (without exhibits) may be obtained by holders of
Certificates upon request in writing to the Owner Trustee at its Corporate Trust
Office. The Certificates may not be purchased by pension trusts. See "ERISA
CONSIDERATIONS" below.
DISTRIBUTIONS OF INTEREST
Interest on the Certificate Balance will accrue at the Pass-Through Rate
from and including the fifteenth day of the month of the most recent
Distribution Date based on a 360-day year consisting of 30 days each (or from
and including the Closing Date with respect to the first Distribution Date) to
but excluding the fifteenth day of the month of the current Distribution Date.
Interest accrued but not paid on any Distribution Date will be due on the
immediately succeeding Distribution Date, together with, to the extent permitted
by applicable law, interest on such amount at the Pass-Through Rate. Interest
distributions with respect to the Certificates will be made from Available
Interest after all Trust Fees and Expenses have been paid and after the Note
Distributable Amount has been distributed. See "CERTAIN INFORMATION REGARDING
THE SECURITIES -- DISTRIBUTION ON THE SECURITIES -- DEPOSITS TO THE DISTRIBUTION
ACCOUNT; PRIORITY OF PAYMENTS."
DISTRIBUTIONS OF PRINCIPAL
No principal will be paid on the Certificates until the Distribution
Date on which the principal balance of the Class A-1 and Class A-2 Notes has
been reduced to zero. On such Distribution Date and thereafter, the
Certificateholders will be entitled to distributions in an amount equal to
Available Principal calculated as described under "CERTAIN INFORMATION
REGARDING THE SECURITIES -- DISTRIBUTIONS ON THE SECURITIES -- DEPOSITS TO THE
DISTRIBUTION ACCOUNT; PRIORITY OF PAYMENTS" but not in excess of the
outstanding principal balance on the Certificates. Distributions with respect
to principal payments will be made from Available Principal after all Trust Fees
and Expenses have been paid and after the Note Distributable Amount and the
Certificate Interest Distributable Amount has been distributed. See "CERTAIN
INFORMATION REGARDING THE SECURITIES -- DISTRIBUTIONS ON THE SECURITIES --
DEPOSITS TO THE DISTRIBUTION ACCOUNT; PRIORITY OF PAYMENTS."
OPTIONAL PREPAYMENT
The Certificates will be subject to prepayment in whole, but not in
part, on any Distribution Date relating to an Optional Purchase.
Certificateholders will receive an amount in respect of the Certificates equal
to the Certificate Balance, together with accrued interest at the Pass-Through
Rate. Any such distribution will effect early retirement of the Certificates.
See "CERTAIN INFORMATION REGARDING THE SECURITIES -- TERMINATION."
MANDATORY PREPAYMENT
As more fully described under "THE NOTES -- EVENTS OF DEFAULT," upon the
occurrence of an Event of Default, under certain circumstances the Noteholders
have the right to cause the property of the Trust to be sold or liquidated in
whole or in part. In the event of such liquidation or sale, the Certificates
may suffer a loss if proceeds are insufficient to pay both the Notes and the
principal and interest on the Certificates.
PAYING AGENTS
Distributions of principal of and interest on the Certificates will be
made by the Owner Trustee or any Paying Agent or Paying Agents as the Owner
Trustee may designate from time to time. The Indenture Trustee will be
designated as the initial Paying Agent with respect to the Certificates.
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CERTAIN INFORMATION REGARDING THE SECURITIES
FORM, EXCHANGE, REGISTRATION AND TITLE
The Notes and Certificates will initially be registered in the name of
Cede & Co. ("CEDE"), the nominee of The Depository Trust Company ("DTC").
Securityholders may hold their Securities in the United States through DTC, or,
solely in the case of the Notes, in Europe, through CEDEL Bank, societe anonyme
("CEDEL") or the Euroclear System ("EUROCLEAR"), if they are participants of
such systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Notes and Certificates.
CEDEL and Euroclear will hold omnibus positions on behalf of the CEDEL
Participants (as defined below) and Euroclear Participants (as defined below),
respectively, through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective depositaries (collectively, the
"DEPOSITARIES") which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "CLEARING
CORPORATION" within the meaning of the New York Uniform Commercial Code, and a
"CLEARING AGENCY" registered pursuant to the provisions of Section 17A of the
1934 Act. DTC accepts securities for deposit from its participating
organizations ("PARTICIPANTS") and facilitates the clearance and settlement of
securities transactions between Participants in such securities through
electronic book-entry changes in accounts of Participants, thereby eliminating
the need for physical movement of securities. Participants include securities
brokers and dealers, banks and trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly. Transfers between Participants will occur in accordance
with DTC rules. Transfers between CEDEL Participants and Euroclear Participants
will occur in the ordinary way in accordance with their applicable rules and
operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants 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, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European International clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant CEDEL or
Euroclear cash account only as of the business day following settlement in DTC.
Securityholders who are not Participants but desire to purchase, sell or
otherwise transfer, ownership of the Securities may do so only through
Participants (unless and until Definitive Securities are issued). In addition,
Securityholders will receive all distributions of principal of and interest on
the Securities from the Indenture Trustee or Owner Trustee (collectively, the
"TRUSTEES"), as applicable, through DTC and Participants. Securityholders will
not
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receive or be entitled to receive physical securities representing their
respective interests in the Securities, except under the limited circumstances
described below.
Unless and until Definitive Securities are issued, it is anticipated
that the only Securityholders will be Cede, as nominee of DTC. Beneficial
owners of the Securities will not be Securityholders as that term is used in the
Agreement. Beneficial owners are only permitted to exercise the rights of
Securityholders indirectly through Participants and DTC.
While the Securities are outstanding (except under the circumstances
described below), under the rules, regulations and procedures creating and
affecting DTC and its operations (the "RULES"), DTC is required to make
book-entry transfers among Participants on whose behalf it acts with respect to
the Securities and is required to receive and transmit distributions of
principal of, and interest on, the Securities. Unless and until Definitive
Securities are issued, beneficial owners who are not Participants may transfer
ownership of Securities only through Participants by instructing such
Participants to transfer the Securities only through Participants by instructing
such Participants to transfer the Securities by book-entry transfer through DTC
for the account of the purchasers of such Securities, which account is
maintained with their respective Participants. Under the Rules and in
accordance with DTC's normal procedures, transfers of ownership of the
Securities will be executed through DTC and the accounts of the respective
Participants at DTC will be debited and credited.
Physical Notes or Certificates will be issued in registered form to
Securityholders, or their nominees, rather than to DTC (such Securities being
referred to herein as "DEFINITIVE SECURITIES"), only if (i) DTC or the Company
advises the applicable Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to such Securities and the Company or such Trustee is unable to locate a
qualified successor; (ii) the Company, at its sole option and with the consent
of such Trustee, elects to terminate the book-entry system through DTC or (iii)
in the case of the Notes, after the occurrence of any Indenture Event of
Default, DTC, at the direction of Noteholders having a majority in interest of
the Notes, advises the Indenture Trustee in writing that the continuation of a
book-entry system through DTC (or a successor thereto) to the exclusion of any
physical securities being issued to Noteholders is no longer in the best
interest of Noteholders. Upon issuance of Definitive Securities to
Securityholders, such Securities will be transferable directly (and not
exclusively on a book-entry basis), and registered holders will deal directly
with the applicable Trustee with respect to transfers, notices and
distributions.
DTC has advised the Trust Depositor and the Trustee that, unless and
until Definitive Securities are issued, DTC will take any action permitted to be
taken by a Noteholder under the Indenture or a Certificateholder under the Trust
Agreement only at the direction of one or more Participants to whose DTC account
the Securities are credited. DTC has advised the Seller that DTC will take such
action with respect to any Percentage Interests of the Securities only at the
direction of and on behalf of such Participants with respect to such Percentage
Interests of the Securities. DTC may take actions, at the direction of the
related Participants, with respect to some Securities that conflict with actions
taken with respect to other Securities.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
PARTICIPANTS") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants. Transactions may be settled in CEDEL in any of
28 currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depositary, CEDEL is subject to regulations by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporation and certain other
organizations and may include the underwriters of any class of Securities.
Indirect access to CEDEL is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a CEDEL Participant, either directly or indirectly.
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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 securities and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 32 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "EUROCLEAR OPERATOR" or "EUROCLEAR"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the "EUROCLEAR
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 Euroclear Cooperative. The Euroclear
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,
indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "TERMS AND CONDITIONS"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal 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 securities
to specific securities clearance accounts. The Euroclear Operator acts under
the Terms and Conditions only on behalf of Euroclear Participants and has no
record of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through CEDEL or Euroclear will
be credited to the cash accounts of CEDEL Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See
"CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES." CEDEL or the Euroclear
Operator, as the case may be, will take any other action permitted to be taken
by a Noteholder under the Indenture on behalf of a CEDEL Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of the Securities among participants
of DTC, CEDEL and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, CEDEL or Euroclear should discontinue its
services, the Seller would seek an alternative depositary (if available) or
cause the issuance of Definitive Securities to Securityholders or their nominees
in the manner described above.
Issuance of the Securities in book-entry form rather than as physical
securities may adversely affect the liquidity of the Securities in the secondary
market and the ability of Securityholders to pledge them. In addition, since
distributions on the Securities will be made by the Trustees to DTC and DTC will
credit such distributions to the accounts of its Participants, which will
further credit them to the accounts of indirect participants of Securityholders,
Securityholders may experience delays in the receipt of such distributions.
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CONVEYANCE OF CONTRACTS
On the Closing Date, (i) the Seller will sell, transfer, assign, set
over and otherwise convey the Initial Contracts and related assets to the Trust
Depositor, (ii) the Trust Depositor will sell, transfer, assign, set over and
otherwise convey to the Trust all right, title and interest in the Initial
Contracts and related assets , and (iii) the Trust will pledge to the Indenture
Trustee all right, title and interest in the Initial Contracts and related
assets. The Initial Contracts will be described on a list delivered to each
Trustee and certified by a duly authorized officer of the Trust Depositor. Such
list will include the amount of monthly payments due on each Initial Contract as
of the Initial Cutoff Date, the contractual rate of interest on each Contract
and the maturity date of each Contract. Such list will be available for
inspection by any Securityholder at the principal office of the Servicer. Prior
to the conveyance of the Initial Contracts to the Trust, the Servicer's
compliance officer will have completed a review of all the related Contract
Files, including the certificates of title to, or other evidence of a perfected
security interest in, the Motorcycles, confirming the accuracy of the list of
Initial Contracts delivered to the Trustees. The Trust Depositor will deliver
to the Trustees a report of a nationally recognized independent public
accounting firm which states that such firm has performed specific procedures
for a sample of the Initial Contracts supplied by the Seller. Any Contract
discovered not to agree with such list in a manner that is materially adverse to
the interests of the Securityholders will be required to be repurchased by the
Seller, or, if the discrepancy relates to the unpaid Principal Balance of a
Contract, the Seller may deposit cash in the Collection Account in an amount
sufficient to offset such discrepancy.
In addition to the Initial Contracts, the Trust Property will include
the Trust's rights under the Agreement in respect of the Trust Depositor's
obligation to purchase from the Seller, and concurrently convey to the Trust,
Subsequent Contracts purchased as of the applicable Subsequent Cutoff Date (the
Initial Cutoff Date or any Subsequent Cutoff Date being individually referred to
herein as a "CUTOFF DATE"). Any conveyance of Subsequent Contracts on a
Subsequent Transfer Date will be subject to the satisfaction of the following
conditions, among others (computed, where applicable, based on the
characteristics of the Initial Contracts on the Initial Cutoff Date and any
Subsequent Contracts as of the related Subsequent Cutoff Date): (i) each such
Subsequent Contract satisfies the eligibility criteria specified in the Transfer
and Sale Agreement and the related Subsequent Purchase Agreement executed
thereunder; (ii) as of the applicable Subsequent Cutoff Date, no Contract in
the Trust, including the Subsequent Contracts that the Trust Depositor will be
conveying as of such Subsequent Cutoff Date, will have a scheduled maturity date
later than November 2004; (iii) the Trust Depositor shall have executed and
delivered in favor of the Trust a Subsequent Transfer Agreement conveying such
Subsequent Contracts to the Trust (including a schedule identifying such
Subsequent Contracts); (iv) the Trust Depositor shall have delivered certain
opinions of counsel to the Trustee, the Initial Purchaser and the Rating
Agencies with respect to the validity and other aspects of the conveyance of all
such Subsequent Contracts and (v) the Rating Agencies shall have each notified
the Trust Depositor and the Trustees in writing that, following the addition of
such Subsequent Contracts, the Class A-1 Notes and Class A-2 Notes will be rated
AAA by S&P and Aaa by Moody's and the Certificates will be rated at least [
] by S&P and [ ] by Moody's.
The Agreement will designate the Servicer as custodian to maintain
possession, as the Trustees' agent, of the Contracts and any other documents
relating to the Motorcycles. To facilitate servicing and save administrative
costs, the documents will not be segregated from other similar documents that
are in the Servicer's possession. Uniform Commercial Code financing statements
will be filed in Nevada and Illinois, reflecting the conveyance and assignment
of the Contracts to the Trust Depositor from the Seller, the conveyance and
assignment from the Trust Depositor to the Trust and the pledge from the Trust
to the Indenture Trustee, and the Seller's, Trust Depositor's and Indenture
Trustee's accounting records and computer systems will also reflect such
conveyance and assignment and pledge. In addition, each Contract will be
stamped to reflect their conveyance and assignment to the Trust and the pledge
to the Indenture Trustee. However, if, through fraud, negligence or otherwise,
a subsequent purchaser were able to take physical possession of the Contracts
without notice of such conveyance and assignment, the Indenture Trustee's
interest in the Contracts could be defeated. In addition, certificates of title
with respect to the Motorcycles will not be amended to reflect the assignment of
the Seller's security interest in the Motorcycles to the Trust Depositor, the
assignment of the Trust Depositor's security interest in the Motorcycles to the
Trust and the pledge of the Trust's security interest to the Indenture Trustee.
In the absence of amendments to the certificates of title, the Indenture Trustee
may not have a perfected security interest in the Motorcycles. See "RISK
FACTORS -- RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED MOTORCYCLES" in
the Prospectus.
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The Seller will make certain representations and warranties in the
Transfer and Sale Agreement with respect to each Contract, including that
(references to the Closing Date below being deemed, in respect of Subsequent
Contracts, to refer to the related Subsequent Transfer Date): (a) as of the
related Cutoff Date the most recent scheduled payment was made or was not
delinquent more than 30 days and, to the best of the Seller's knowledge, all
payments on the Contract were made by the Obligor of the Contract; (b) as of the
Closing Date no provision of a Contract has been waived, altered or modified in
any respect, except by instruments or documents contained in the Contract File;
(c) each Contract is a genuine, legal, valid and binding obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by laws affecting creditors' rights generally); (d) as of the Closing
Date no Contract is subject to any right of rescission, set-off, counterclaim or
defense; (e) as of the Closing Date each Motorcycle securing a Contract is
covered by certain insurance policies described under "DESCRIPTION OF THE
CERTIFICATES -- INDIVIDUAL MOTORCYCLE INSURANCE"; (f) each Contract was
originated by a Harley-Davidson motorcycle dealer in the ordinary course of such
dealer's business which dealer had all necessary licenses and permits to
originate the Contracts in the state where such dealer was located, was fully
and properly executed by the parties thereto and was sold by such dealer to the
Seller without any fraud or misrepresentation on the part of such dealer; (g) no
Contract was originated in or is subject to the laws of any jurisdiction whose
laws would make the transfer, sale and assignment of the Contract pursuant to
the Transfer and Sale Agreement or the Agreement or pursuant to transfers of
Certificates unlawful, void or voidable; (h) each Contract and each sale of the
related Motorcycle complies with all requirements of any applicable federal,
state or local law and regulations thereunder, including, without limitation,
usury, truth in lending, motor vehicle installment loan and equal credit
opportunity laws, with such compliance not being affected by the Trust
Depositor's conveyance and assignment of the Contracts to the Trust, or the
Trust's pledge of the Contracts to the Indenture Trustee, and the Seller will
maintain in its possession, available for inspection by or delivery to the Trust
Depositor and the Trustees, evidence of compliance with all such requirements;
(i) as of the Closing Date no Contract has been satisfied, subordinated in whole
or in part or rescinded and the Motorcycle securing the Contract has not been
released from the lien of the Contract in whole or in part; (j) each Contract
creates a valid, subsisting and enforceable first priority security interest in
favor of the Seller in the Motorcycle covered thereby; such security interest
has been conveyed and assigned by the Seller to the Trust Depositor and by the
Trust Depositor to the Trust and pledged by the Trust to the Indenture Trustee;
the original certificate of title, certificate of lien or other notification
(the "LIEN CERTIFICATE") issued by the body responsible for the registration of,
and the issuance of certificates of title relating to, motor vehicles and liens
thereon (the "REGISTRAR OF TITLES") of the applicable state to a secured party
which indicates the lien of the secured party on the Motorcycle is recorded on
the original certificate of title; and the original certificate of title for
each Motorcycle shows, or if a new or replacement Lien Certificate is being
applied for with respect to such Motorcycle the Lien Certificate will be
received within 180 days of the Closing Date and will show, the Seller as
original secured party under each Contract and as the holder of a first priority
security interest in such Motorcycle (and with respect to each Contract for
which the Lien Certificate has not yet been returned from the Registrar of
Titles, the Seller has received written evidence from the related dealer that
such Lien Certificate showing the Seller as lienholder has been applied for) and
the Seller's security interest has been validly assigned by the Seller to the
Trust Depositor and by the Trust Depositor to the Trust and pledged by the Trust
to the Indenture Trustee in order that immediately after the sale, each Contract
will be secured by an enforceable and perfected first priority security interest
in the Motorcycle in favor of the Indenture Trustee as secured party, which
security interest is prior to all other liens upon and security interests in
such Motorcycle which now exist or may hereafter arise or be created (except, as
to priority, for any lien for taxes, labor, materials or any state law
enforcement agency affecting a Motorcycle which may arise after such sale); (k)
all parties to each Contract had capacity to execute such Contract; (l) no
Contract has been sold, conveyed and assigned or pledged to any other person
other than the Trust Depositor, as transferee of the Seller, the Trust as
transferee of the Trust Depositor or the Indenture Trustee as pledgee of the
Trust, and prior to the transfer of the Contract to the Trust Depositor, the
Seller has good and marketable title to each Contract free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest, and as of
the Closing Date the Indenture Trustee will have a first priority perfected
security interest therein; (m) as of the related Cutoff Date there was no
default, breach, violation or event permitting acceleration under any Contract
(except for payment delinquencies permitted by clause (a) above), no event which
with notice and the expiration of any grace or cure period would constitute a
default, breach, violation or event permitting acceleration under such Contract,
and the Seller has not waived any of the foregoing; (n) as of the Closing Date
there are, to the best of the Seller's knowledge, no liens or claims which have
been filed for work, labor or materials affecting a motorcycle securing a
Contract, which are or may be liens prior or equal to the lien of the Contract;
(o) each Contract has a fixed rate of interest and provides for monthly payments
of principal and interest which, if timely made, would fully amortize the loan
on a
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simple interest basis over its term; (p) each Contract contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for realization against the collateral of the benefits of the
security; (q) the description of each Contract set forth in the list delivered
to the Trustees is true and correct and (r) there is only one original of each
Contract. The Seller will also make certain representations and warranties with
respect to the Contracts in the aggregate, including that (i) the aggregate
principal amount payable by the Obligors as of the Initial Cutoff Date (plus the
Pre-Funded Amount as of the Closing Date) equals the sum of the initial
principal amount of the Notes and the Initial Certificate Balance, and each
Initial Contract has a contractual rate of interest of at least [ ]%, (ii)
all motorcycles securing the Contracts are Harley-Davidson or Buell motorcycles,
(iii) approximately [ ]% of the aggregate Principal Balance of the Initial
Contracts is attributable to loans to purchase new Motorcycles and approximately
[ ]% of the aggregate Principal Balance of the Initial Contracts is
attributable to loans to purchase used Motorcycles, (iv) no Initial Contract has
a remaining maturity of more than [ ] months, (v) the first payment under each
Initial Contract is due on or before [ ] 199__ and (vi) no adverse
selection procedures were or will be employed in selecting the Contracts from
the Seller's portfolio.
Under the Transfer and Sale Agreement and Subsequent Purchase Agreement,
the Seller will agree that in the event of a breach of any such representations
and warranties made by the Seller that materially and adversely affects the
Trustees' interest in any Contract the Seller will repurchase such Contract
within 90 days at the Repurchase Price unless such breach is cured. Under the
Agreement, the Trust Depositor will assign all of its right, title and interest
in such representations and warranties (including the Seller's repurchase
obligations) to the Trustee. Under the Indenture, the Trust will pledge its
right, title and interest in such representations and warranties to the
Indenture Trustee. The Trust Depositor will make no representations and
warranties with respect to the Contracts. The Seller is selling the Contracts
without recourse and, accordingly, will have no obligation with respect to the
Contracts other than pursuant to such representations, warranties and repurchase
obligations. The repurchase obligations of the Seller described above will
constitute the sole remedy against the Seller by the Trust and the
Securityholders for a breach of any such representations and warranties made by
the Seller.
Pursuant to the Agreement, the Servicer will service and administer the
Contracts conveyed and assigned to the Trust and pledged to the Indenture
Trustee as more fully set forth below.
THE ACCOUNTS AND ELIGIBLE INVESTMENTS
THE COLLECTION ACCOUNT. The Servicer will cause all collections made on
or in respect of the Contracts during a Due Period to be deposited in or
credited to an account (the "COLLECTION ACCOUNT") to be established by the
Indenture Trustee under the Agreement. The Servicer is required to deposit,
without deposit into any intervening account, into the Collection Account as
promptly as possible, but in any case not later than the second Business Day
following the receipt thereof, all amounts received on or in respect of the
Contracts. The Servicer is required to use its best efforts to cause an Obligor
to make all payments on the Contracts directly to one or more Lockbox Banks,
acting as agent for the Trust pursuant to a Lockbox Agreement. Funds in the
Collection Account will be invested in Eligible Investments as described below.
"ELIGIBLE INVESTMENTS" will be specified in the Agreement and will be
limited to investments which meet the criteria of each Rating Agency that rated
any Class of Notes or the Certificates at the request of the Trust Depositor
from time to time as being consistent with their then-current ratings of the
related Securities. All income or other gain from such investments will be
promptly deposited in, and any loss resulting from such investments shall be
charged to, the Collection Account.
THE PRE-FUNDING ACCOUNT. During the Funding Period until the earliest
of (a) the Distribution Date on which the amount on deposit in the Pre-Funding
Account is less than $[ ], (b) the date on which an Event of
Termination occurs with respect to the Servicer under the Agreement, (c) the
date on which certain events of insolvency occur with respect to the Trust
Depositor or (d) the close of business on the date which is 90 days from and
including the Closing Date, the Pre-Funding Account will be maintained as an
account in the name of the Indenture Trustee on behalf of the Securityholders to
secure the Trust Depositor's obligations under the Agreement to purchase and
transfer Subsequent Contracts to the Trust and the Trust's obligations under the
Indenture to pledge Subsequent Contracts to the Indenture
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Trustee. The Pre-Funded Amount will initially equal $[ ] and,
during the Funding Period, will be reduced by the amount thereof that the Trust
Depositor uses to purchase Subsequent Contracts from the Seller and
contemporaneously transfer to the Trust. The Trust Depositor expects that the
Pre-Funded Amount will be reduced to less than $[ ] by the
Distribution Date occurring in [ ] 199__. Any Pre-Funded Amount
remaining at the end of the Funding Period will be payable to the Noteholders
(see "DESCRIPTION OF THE NOTES -- MANDATORY SPECIAL REDEMPTION").
THE RESERVE FUND. The Securityholders will be afforded certain limited
protection, to the extent described herein, against losses in respect of the
Contracts by the establishment of an account in the name of the Indenture
Trustee for the benefit of the Securityholders (the "RESERVE FUND").
The Reserve Fund will be created with the Reserve Fund Initial Deposit
by the Trust Depositor of $[ ] on the Closing Date. The funds in the
Reserve Fund will thereafter be supplemented on each Distribution Date by the
deposit of certain Excess Amounts, Subsequent Reserve Fund Amounts and
Subsequent Certificate Reserve Amounts, until the amount in the Reserve Fund
reaches the Specified Reserve Fund Balance. The Specified Reserve Fund Balance
for any Distribution Date will be calculated as described under "CERTAIN
INFORMATION REGARDING THE SECURITIES -- PAYMENT PRIORITIES OF THE NOTES AND THE
CERTIFICATES; THE RESERVE FUND." On each Distribution Date, funds will be
withdrawn from the Reserve Fund, up to the Available Amount, for distribution
to Securityholders to cover any shortfalls in interest and principal required to
be paid on the Securities.
In addition to the Reserve Fund Initial Deposit, the Trust Depositor
will deposit $[ ], representing the Initial Certificate Reserve
Amount, into the Reserve Fund on the Closing Date. On each Subsequent Transfer
Date, the Trust Depositor will deposit into the Reserve Fund a Subsequent
Certificate Reserve Amount equal to [ ]% of the aggregate balance of the
Subsequent Contracts conveyed to the Trust on such date. If funds in the
Reserve Fund (other than the Certificate Reserve Amount) are applied in
accordance with the preceding paragraph and are insufficient to distribute the
interest or principal due on the Certificates, funds available from the
Certificate Reserve Amount will be withdrawn from the Reserve Fund and applied
solely to cover any shortfalls of interest on the Certificates on each
Distribution Date and of interest and principal on the Certificates on the
Certificate Final Distribution Date. The Certificate Reserve Amount will not be
available to pay interest or principal on the Notes. The Available Amount will
equal the amount of all funds on deposit in the Reserve Fund less the
undistributed balance of the Certificate Reserve Amount, if any.
On each Distribution Date, after giving effect to all distributions
made on such Distribution Date, any amounts in the Reserve Fund that are in
excess of the Specified Reserve Fund Balance will be allocated and distributed
to the Trust Depositor. See "CERTAIN INFORMATION REGARDING THE SECURITIES --
PAYMENT PRIORITIES OF THE NOTES AND THE CERTIFICATES; THE RESERVE FUND."
INTEREST RESERVE ACCOUNT. The Trust Depositor will establish, and fund
with an initial deposit on the Closing Date, the Interest Reserve Account, for
the purpose of providing additional funds for payment to the Trust of Carrying
Charges to pay certain distributions on Distribution Dates occurring during (and
on the first Distribution Date following the end of) the Funding Period. In
addition to the initial deposit, all investment earnings with respect to the
Pre-Funded Account are to be deposited into the Interest Reserve Account and,
pursuant to the Agreement, the Trust Depositor is obligated to pay to the Trust,
on each Distribution Date described above, amounts in respect of Carrying
Charges from such account.
The Interest Reserve Account will be established to account for the fact
that a portion of the proceeds obtained from the sale of the Notes will be
initially deposited in the Pre-Funding Account (as the initial Pre-Funded
Amount) rather than invested in Contracts, and the monthly investment earnings
on such Pre-Funded Amount (until the Pre-Funded Amount is used to purchase
Subsequent Contracts) are expected to be less than the weighted average of the
Class A-1 Rate, the Class A-2 Rate and the Pass-Through Rate with respect to the
corresponding portion of the Class A-1 Principal Balance, Class A-2 Principal
Balance and the Certificate Balance, as well as the amount necessary to pay the
Trustees' Fees. The Interest Reserve Account is not designed to provide any
protection against losses on the Contracts in the Trust. After the Funding
Period, money in the Interest Reserve Account will be released to the Trust
Depositor.
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THE DISTRIBUTION ACCOUNTS. The Indenture Trustee will establish and
maintain with itself an account, in the name of the Indenture Trustee on behalf
of the Noteholders, in which amounts released from the Collection Account for
distribution to Noteholders will be deposited and from which all distributions
to Noteholders will be made (the "NOTE DISTRIBUTION ACCOUNT"). The Owner
Trustee will establish the Certificate Distribution Account, in the name of the
Owner Trustee on behalf of the Certificateholders, in which amounts released
from the Collection Account for distribution to Certificateholders will be
deposited and from which all distributions to Certificateholders will be made
(the "CERTIFICATE DISTRIBUTION ACCOUNT" and, together with the Note Distribution
Account, the "DISTRIBUTION ACCOUNTS").
DISTRIBUTIONS ON THE SECURITIES
GENERAL. On the fourth Business Day of each month (each such date, a
"DETERMINATION DATE"), the Servicer will determine the following: (i) the amount
of Available Monies with respect to the Distribution Date occurring in such
month; (ii) the Note Interest Distributable Amount; (iii) the Note Principal
Distributable Amount; (iv) the Certificate Interest Distributable Amount; (v)
the Certificate Principal Distributable Amount; (vi) the Servicing Fee; and
(vii) the Trustees' Fees.
DEPOSITS TO THE DISTRIBUTION ACCOUNT; PRIORITY OF PAYMENTS. On each
Distribution Date, the Servicer will allocate amounts on deposit in the
Collection Account as described below and will instruct the Indenture Trustee to
make the following deposits and distributions in the following amounts and order
of priority:
(i) to the Mandatory Special Redemption Subaccount in the
Note Distribution Account to the Class A-1 Noteholders and Class A-2
Noteholders, the amount of any Mandatory Special Redemption, pro rata,
calculated on the then current principal balance of the Class A-1 and
Class A-2 Notes with the amounts derived from draws on the Pre-Funding
Account (which amounts are available for payment of such Mandatory
Special Redemptions and not for any other purpose); PROVIDED, HOWEVER,
in the event the Mandatory Special Redemption Amount is less than
$150,000 such amount shall be allocated solely to the Class A-1
Noteholders;
(ii) to the Servicer from Available Monies, reimbursement to
the Servicer for Advances previously made;
(iii) to the Servicer from Available Monies, the Servicing
Fee, including any unpaid Servicing Fee with respect to one or more
prior Due Periods;
(iv) to the Indenture Trustee and the Owner Trustee from
Available Monies, any accrued and unpaid Indenture Trustee's Fees and
Owner Trustee's Fees, respectively, with respect to one or more period
Due Periods;
(v) to the Note Distribution Account from Available Monies,
the Note Interest Distributable Amount to the holders of the Notes at
their respective Interest Rates;
(vi) to the Note Distribution Account from Available Monies,
the Note Principal Distributable Amount to the holders of the Class A-1
Notes until the principal amount of the Class A-1 Notes has been reduced
to zero, and second to the holders of the Class A-2 Notes until the
principal amount of the Class A-2 Notes has been reduced to zero;
(vii) to the Certificate Distribution Account from Available
Interest, the Certificate Interest Distributable Amount to the holders
of the Certificates; provided, however, in the event Available Interest
is insufficient to make such payment, from such other monies as may be
available to the Trust;
(viii) to the Certificate Distribution Account from Available
Principal, the Certificate Principal Distributable Amount to the holders
of the Certificates; provided, however, in the event Available Principal
is insufficient to make such payment, from such monies as may be
available to the Trust; and
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(ix) in the event that the distributions described in clauses
(i) through (viii) above have been funded exclusively from Available
Monies, any remaining Available Monies ("EXCESS AMOUNTS") will be
deposited into the Reserve Fund, until the amount on deposit therein
equals the Specified Reserve Fund Balance, with any excess being
distributed to the Trust Depositor.
If the Notes are accelerated following an Event of Default, amounts
collected following the sale or liquidation of the property of the Trust will be
distributed in the priority described above. See "THE NOTES -- EVENTS OF
DEFAULT."
For the purposes hereof, the following terms will have the following
meanings:
"AGGREGATE PRINCIPAL BALANCE" will equal the sum of the Principal
Balances of each outstanding Contract and the Pre-Funded Amount. At the time of
initial issuance of the Securities, the initial aggregate principal amount of
the Securities will equal the Aggregate Principal Balance plus the initial
Pre-Funded Amount.
"AGGREGATE PRINCIPAL BALANCE DECLINE" means, with respect to any
Distribution Date, the amount by which the Aggregate Principal Balance as of the
Distribution Date immediately preceding such Distribution Date (or as of the
Cutoff Date in the case of the first Distribution Date) exceeds the Aggregate
Principal Balance as of such Distribution Date.
"AVAILABLE INTEREST" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer on
or in respect of the Contracts during the related Due Period: (i) all amounts
received in respect of interest on the Contracts (as well as Late Payment
Penalty Fees and Extension Fees), (ii) the interest component of all Net
Liquidation Proceeds, (iii) the interest component of the aggregate of the
Repurchase Prices for Contracts repurchased by the Seller pursuant to a breach
of representation or warranty, (iv) all Advances made by the Servicer, (v) the
interest component of all amounts paid by the Trust Depositor in connection with
an Optional Purchase, (vi) all amounts received in respect of Carrying Charges
transferred from the Interest Reserve Account and (vii) all amounts received in
respect of interest, dividends, gains, income and earnings on investment of
funds in the Trust Accounts (which does not include the Interest Reserve
Account).
"AVAILABLE MONIES" means, Available Interest and Available Principal.
"AVAILABLE PRINCIPAL" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer on
or in respect of the Contracts during the related Due Period: (i) all amounts
received in respect of principal on the Contracts, (ii) the principal component
of all Net Liquidation Proceeds, (iii) the principal component of the aggregate
of the Repurchase Prices for Contracts repurchased by the Seller pursuant to a
breach of a representation or warranty, and (iv) the principal component of all
amounts paid by the Trust Depositor in connection with an Optional Purchase of
the Contracts.
"CERTIFICATE DISTRIBUTABLE AMOUNT" will mean, with respect to any
Distribution Date, the sum of the Certificate Principal Distributable Amount and
the Certificate Interest Distributable Amount for such Distribution Date.
"CERTIFICATE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Monthly Interest Distributable
Amount for such Distribution Date and the Certificate Interest Carryover
Shortfall for such Distribution Date.
"CERTIFICATE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of the sum of the Certificate Monthly Interest
Distributable Amount for the immediately preceding Distribution Date and any
outstanding Certificate Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest on the Certificates
that was actually deposited in the Certificate Distribution Account on such
preceding Distribution Date, plus interest on such excess, to the extent
permitted by law, at the Pass-Through Rate for the related Interest Period
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"CERTIFICATE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, 30 days of interest (or in the case of the first
Distribution Date, interest accrued from and including the Closing Date to but
excluding such Distribution Date) at the Pass-Through Rate on the outstanding
principal amount of the Certificates on the immediately preceding Distribution
Date, after giving effect to all payments of principal to the Certificateholders
on such preceding Distribution Date (or, in the case of the first Distribution
Date, on the original principal amount of the Certificates).
"CERTIFICATE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, the Certificate Percentage of the Principal
Distributable Amount for such Distribution Date.
"CERTIFICATE PERCENTAGE" means (i) for each Distribution Date to but
excluding the Distribution Date on which the principal amount of the Class A-2
Notes is reduced to zero, 0%; (ii) on the Distribution Date on which the
principal amount of the Class A-2 Notes is reduced to zero, such percentage that
equals 100% minus the Note Percentage; and (iii) 100% thereafter.
"CERTIFICATE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
any Distribution Date, the excess of the sum of the Certificate Monthly
Principal Distributable Amount and any outstanding Certificate Principal
Carryover Shortfall from the immediately preceding Distribution Date, over the
amount in respect of principal that was actually deposited in the Certificate
Distribution Account on such Distribution Date.
"CERTIFICATE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Monthly Principal Distributable
Amount and (ii) any outstanding Certificate Principal Carryover Shortfall as of
the close of the immediately preceding Distribution Date; PROVIDED, HOWEVER,
that the Certificate Principal Distributable Amount shall not exceed the
Certificate Balance. In addition, on the Certificate Final Distribution Date,
the principal required to be deposited into the Certificate Distribution Account
will include the amount necessary to reduce the Certificate Balance to zero.
"DUE PERIOD" means, a calendar month during the term of the Agreement,
and the Due Period related to a Determination Date or Distribution Date shall be
the calendar month immediately preceding such date; PROVIDED, HOWEVER, that with
respect to the initial Determination Date or initial Distribution Date, the Due
Period shall be the period from the Initial Cutoff Date to and including [
], 199__.
"INTEREST PERIOD" means, with respect to any Distribution Date, the
period from and including the fifteenth day of the month of the Distribution
Date immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but excluding the fifteenth day of the
month of such Distribution Date.
"NOTE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the sum of the Note Principal Distributable Amount and the Note Interest
Distributable Amount for such Distribution Date.
"NOTE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date and a Class of Notes, the excess, if any, of the sum of the
Note Interest Distributable Amount for such Class for the immediately preceding
Distribution Date plus any outstanding Note Interest Carryover Shortfall for
such Class on such preceding Distribution Date, over the amount in respect of
interest that was actually deposited in the Note Distribution Account with
respect to such Class on such preceding Distribution Date, plus, to the extent
permitted by applicable law, interest on the amount of interest due but not paid
to the Noteholders of such Class on such preceding Distribution Date at the
related Interest Rate for the related Interest Period.
"NOTE INTEREST DISTRIBUTABLE AMOUNT" will mean, with respect to any
Distribution Date and a Class of Notes, the sum of the Note Monthly Interest
Distributable Amount and the Note Interest Carryover Shortfall for such Class of
Notes for such Distribution Date.
"NOTE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, interest accrued from and including the fifteenth day of the
month of the preceding calendar month to, but excluding, the fifteenth day
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of the calendar month in which such Distribution Date occurs (or in the case of
the first Distribution Date, interest accrued from and including the Closing
Date to but excluding such Distribution Date) at the related Interest Rate for
each Class of Notes on the outstanding principal amount of the Notes of such
Class on the immediately preceding Distribution Date, after giving effect to all
payments of principal to Noteholders of such Class on or prior to such
Distribution Date (or, in the case of the first Distribution Date, on the
original principal amount of such Class of Notes).
"NOTE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the Note Percentage of the Principal Distributable Amount for
such Distribution Date.
"NOTE PERCENTAGE" means (i) for each Distribution Date to but excluding
the Distribution Date on which the principal amount of the Class A-2 Notes is
reduced to zero, 100%; (ii) on the Distribution Date on which the principal
amount of the Class A-2 Notes is reduced to zero, such percentage which
represents the fraction of the Principal Distributable Amount necessary to
reduce the principal amount of the Class A-2 Notes to zero; and (iii) 0.0%
thereafter.
"NOTE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
Distribution Date, the excess of the sum of the Note Monthly Principal
Distributable Amount and any outstanding Note Principal Carryover Shortfall from
the immediately preceding Distribution Date over the amount in respect of
principal that was actually deposited in the Note Distribution Account on such
Distribution Date.
"NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Note Monthly Principal Distributable Amount
for such Distribution Date and any outstanding Note Principal Carryover
Shortfall for the immediately preceding Distribution Date; PROVIDED, HOWEVER,
that the Note Principal Distributable Amount for a Class of Notes shall not
exceed the outstanding principal amount of such Class of Notes.
Notwithstanding the foregoing, the Note Principal Distributable Amount (i) on
the Class A-1 Final Distribution Date shall not be less than the amount that is
necessary (after giving effect to other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal) to
reduce the outstanding principal amount of the Class A-1 Notes to zero, and (ii)
on the Class A-2 Final Distribution Date shall not be less than the amount that
is necessary (after giving effect to other amounts to be deposited in the Note
Distribution Account on such Distribution Date and allocable to principal) to
reduce the outstanding principal amount of the Class A-2 Notes to zero.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the Aggregate Principal Balance Decline for such Distribution date.
"PRINCIPAL BALANCE" means, (a) with respect to any Contract as of any
date, an amount equal to the unpaid principal balance of such Contract as of the
opening of business on the Initial Cutoff Date or related Subsequent Cutoff
Date, as applicable, reduced by the sum of (x) all payments received by the
Servicer as of such date allocable to principal and (y) any Cram Down Loss in
respect of such Contract; PROVIDED, HOWEVER, that (i) if (x) a Contract is
repurchased by the Seller because of a breach of representation or warranty, or
if (y) the Trust Depositor gives notice of its intent to purchase the Contracts
in connection with an optional termination of the Trust, in each case the
Principal Balance of such Contract or Contracts shall be deemed as of the
related Determination Date to be zero for the Due Period in which such event
occurs and for each Due Period thereafter, (ii) from and after the third Due
Period succeeding the final Due Period in which the Obligor is required to make
the final scheduled payment on a Contract, the Principal Balance, if any, of
such Contract shall be deemed to be zero, and (iii) from and after the Due
Period in which a Contract becomes a Liquidated Contract, the Principal Balance
of such Contract shall be deemed to be zero; and (b) where the context requires,
the aggregate of the Principal Balances described in clause (a) for all such
Contracts.
PAYMENT PRIORITIES OF THE NOTES AND THE CERTIFICATES; THE RESERVE FUND
GENERAL. The rights of the Securityholders to receive distributions
with respect to the Contracts will be subordinated to the rights of the Servicer
(to the extent that the Servicer has not been reimbursed for any outstanding
Advances and has not been paid all Servicing Fees) and the Trustees and certain
other entities (to the extent the Trustees and such other entities have not
received all Trust Fees and Expenses payable to them). In addition, the rights
of the Securityholders to receive distributions with respect to the Contracts
will be subject to the priorities set forth under "--
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DISTRIBUTIONS ON THE SECURITIES -- DEPOSITS TO THE DISTRIBUTION ACCOUNT;
PRIORITY OF PAYMENTS." Such priorities and subordination are intended to
enhance the likelihood of timely receipt by the Noteholders of the full amount
of interest and principal required to be paid to them, and to afford such
Noteholders limited protection against losses in respect of the Contracts.
In the event of delinquencies or losses on the Contracts, the foregoing
protection will be effected both by the preferential right of the Noteholders to
receive, to the extent described herein, current distributions with respect to
the Contracts and by the establishment of the Reserve Fund. The Reserve Fund
will be an account in the name of the Indenture Trustee on behalf of the
Securityholders. The Reserve Fund will be created with an initial deposit by
the Trust on behalf of the Trust Depositor on the Closing Date of an amount
equal to the sum of the Reserve Fund Initial Deposit and the Initial Certificate
Reserve Amount. The Reserve Fund will thereafter be funded by the deposit
therein of all Excess Amounts and Subsequent Reserve Fund Amounts, if any, in
respect of each Distribution Date until the amount on deposit in the Reserve
Fund is equal to the Specified Reserve Fund Balance.
If the amount on deposit in the Reserve Fund on any Distribution Date
(after giving effect to all deposits thereto or withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Fund Balance, the
Indenture Trustee will distribute any excess to the Trust Depositor. Upon any
such distributions to the Trust Depositor, the Securityholders will have no
further rights in, or claims to, such amounts.
CALCULATION OF SPECIFIED RESERVE FUND BALANCE. The Reserve Fund will
be created with an initial deposit by the Trust on behalf of the Trust Depositor
of the sum of (i) an amount equal to $[ ] and (ii) the Initial
Certificate Reserve Amount of $[ ], in the Trust and will
thereafter be funded on each Distribution Date by the deposit therein of certain
monies pursuant to the Agreement, until the monies in the Reserve Fund reach an
amount equal to the Specified Reserve Fund Balance (as hereinafter defined).
Thereafter, on each Distribution Date on which amounts held in the Reserve Fund
(after giving effect to any required withdrawals therefrom on such date) exceed
the Specified Reserve Fund Balance such amounts shall be released to the Trust
Depositor.
The "SPECIFIED RESERVE FUND BALANCE" with respect to any Distribution
Date will be an amount equal to the sum of (i)[ ]% of the Principal
Balance of the Contracts in the Trust as of the first day of the immediately
preceding Due Period and (ii) $[ ]; PROVIDED, HOWEVER, in the
event a Reserve Fund Trigger Event (as hereinafter defined) occurs with respect
to a Distribution Date and has not terminated for three consecutive Distribution
Dates (inclusive of the respective Distribution Date), the Specified Reserve
Fund Balance shall be equal to the sum of (i) [ ]% of the Principal Balance
of the Contracts in the Trust as of the first day of the immediately preceding
Due Period and (ii) $[ ]. Notwithstanding the foregoing, in
no event shall the Specified Reserve Fund Balance be less than the sum of (i)[
]% of the aggregate of the Initial Class A-1 Note Balance, Initial Class
A-2 Note Balance and Initial Certificate Balance and (ii) $[ ].
As of any Distribution Date, the amount of funds actually on deposit in the
Reserve Fund may, in certain circumstances, be less than the Specified Reserve
Fund Balance.
A "RESERVE FUND TRIGGER EVENT" will have been deemed to occur with
respect to any Distribution Date if (i) the Average Delinquency Ratio (as
hereinafter defined) for such Distribution Date is equal to or greater than (a)[
]% with respect to any Distribution Date which occurs within the period
from the Closing Date to, and inclusive of, the first anniversary of the Closing
Date, (b)[ ]% with respect to any Distribution Date which occurs within
the period from the day after the first anniversary of the Closing Date to, and
inclusive of, the second anniversary of the Closing Date, or (c)[ ]%
for any Distribution Date which occurs within the period from the day after the
second anniversary of the Closing Date to, and inclusive of, the third
anniversary of the Closing Date or (d) [ ]% for any Distribution Date
following the third anniversary of the Closing Date; (ii) the Average Loss Ratio
(as hereinafter defined) for such Distribution Date is equal to or greater than
(a) [ ]% with respect to any Distribution Date which occurs within the
period from the Closing Date to, and inclusive of, the eighteen months following
the Closing Date or (b) [ ]% with respect to any Distribution Date
which occurs following the eighteen month period following the Closing Date; or
(iii) the Cumulative Loss Ratio (as hereinafter defined) for such Distribution
Date is equal to or greater than (a) [ ]% with respect to any
Distribution Date which occurs within the period from the Closing Date to, and
inclusive of, the first anniversary of the Closing Date, (b)[ ]% with
respect to any Distribution Date which occurs within the period from the day
after the first anniversary of the Closing Date to, and inclusive of, the second
anniversary of the Closing Date,
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(c) [ ]% for any Distribution Date which occurs within the period from
the day after the second anniversary of the Closing Date to, and inclusive of,
the third anniversary of the Closing Date, or (d) [ ]% following the
third anniversary of the Closing Date.
The "AVERAGE DELINQUENCY RATIO" for any Distribution Date is equal to
the arithmetic average of the Delinquency Ratios for the Distribution Date and
the two immediately preceding Distribution Dates and the "DELINQUENCY RATIO" for
any Distribution Date is equal to the fraction (expressed as a percentage)
derived by dividing (a) the Delinquency Amount during the immediately preceding
Due Period by (b) the Principal Balance of the Contracts as of the beginning of
the related Due Period. The "DELINQUENCY AMOUNT" as of any Distribution Date
means the Principal Balance of all Contracts that were delinquent 60 days or
more as of the end of the related Due Period (including Contracts in respect of
which the related Motorcycles have been repossessed and are still inventory).
The "AVERAGE LOSS RATIO" for any Distribution Date is equal to the arithmetic
average of the Loss Ratios for such Distribution Date and the two immediately
preceding Distribution Dates and the "LOSS RATIO" for any Distribution Date is
equal to the fraction (expressed as a percentage) derived by dividing (x) the
Net Liquidation Losses for all Contracts that became Liquidated Contracts during
the immediately preceding Due Period multiplied by 12 by (y) the outstanding
Principal Balances of all Contracts as of the beginning of the related Due
Period. "NET LIQUIDATION LOSSES" means, with respect to a Liquidated Contract,
the amount, if any, by which (a) the outstanding Principal Balance of such
Liquidated Contract plus accrued and unpaid interest thereon at the Contract
Rate to the date on which such Liquidated Contract became a Liquidated Contract
exceeds (b) the Net Liquidation Proceeds for such Liquidated Contract. "NET
LIQUIDATION PROCEEDS" means, as to any Liquidated Contract, the proceeds
realized on the sale or other disposition of the related Motorcycle, including
proceeds realized on the repurchase of such Motorcycle by the originating dealer
for breach of warranties, and the proceeds of any insurance relating to such
Motorcycle, after payment of all expenses incurred thereby, together, in all
instances, with the expected or actual proceeds of any recourse rights relating
to such Contract as well as any post disposition proceeds received by the
Servicer. "LIQUIDATED CONTRACT" means any defaulted Contract as to which the
Servicer has determined that all amounts which it expects to recover from or on
account of such Contract have been recovered; provided that any defaulted
Contract in respect of which the related Motorcycle has been realized upon and
disposed of and the proceeds of such disposition have been realized shall be
deemed to be a Liquidated Contract; and PROVIDED FURTHER, a Contract which has
been repossessed and has not been sold by the Servicer for a period in excess of
90 days from such date of repossession or a Contract which has been delinquent
more than 150 days shall be deemed to be a Liquidated Contract with a zero
balance. The "CUMULATIVE LOSS RATIO" for any Distribution Date means the
fraction (expressed as a percentage) computed by the Servicer by dividing (a)
the aggregate Net Liquidation Losses for all Contracts since the Cutoff Date
through the end of the related Due Period by (b) the sum of (i) the Principal
Balance of the Contracts as of the Cutoff Date plus (B) the Principal Balance of
any Subsequent Contracts as of the related Subsequent Cutoff Date. A Trigger
Event will be deemed to have terminated with respect to a Distribution Date if
no Trigger Event shall exist with respect to three consecutive Distribution
Dates (inclusive of the respective Distribution Date).
Amounts held from time to time in the Reserve Fund will continue to be
held for the benefit of the Securityholders. Funds on deposit in the Reserve
Fund may be invested in Eligible Investments. Investment income on monies on
deposit in the Reserve Fund will not be available for distribution to
Securityholders after the Specified Reserve Fund Balance has been met and
released to the Trust Depositor. Any loss on such investments will be charged
to the Reserve Fund.
"AVAILABLE AMOUNT" means, with respect to any Distribution Date, the
amount of funds on deposit in the Reserve Fund on such Distribution Date less
the Certificate Reserve Amount with respect to such Distribution Date, in each
case, before giving effect to any reduction thereto on such Distribution Date.
"CERTIFICATE RESERVE AMOUNT" means the sum of the Initial Certificate
Reserve Amount and each Subsequent Certificate Reserve Amount, as such amount
may be reduced or restored from time to time pursuant to the Agreement.
If, on any Distribution Date, the Certificate Principal Balance equals
zero and amounts on deposit in the Reserve Fund have been depleted as a result
of losses in respect of the Contracts, the protection afforded to the
Noteholders by
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the subordination of the Certificates and by the Reserve Fund will be exhausted
and the Noteholders will bear directly the risks associated with ownership of
the Contracts.
None of the Securityholders, the Indenture Trustee, the Owner Trustee,
the Seller nor the Trust Depositor will be required to refund any amounts
properly distributed or paid to them, whether or not there are sufficient funds
on any subsequent Distribution Date to make full distributions to the
Securityholders.
The Servicer may, from time to time after the date of this Prospectus
Supplement, request each Rating Agency that rated any of the Securities to, at
the request of the Trust Depositor, approve a formula for determining the
Specified Reserve Fund Balance that is different from the formula described
above and would result in a decrease in the amount of the Specified Reserve Fund
Balance or the Certificate Reserve Amount or the manner by which the Reserve
Fund is funded. If each Rating Agency delivers a letter to the Indenture
Trustee and the Owner Trustee to the effect that the use of any such new
formulation will not in and of itself result in a qualification, reduction or
withdrawal of its then-current rating of any Class of Securities then the
Specified Reserve Fund Balance will be determined in accordance with such new
formula. The Agreement will accordingly be amended to reflect such new
calculation without the consent of any Securityholder.
WITHDRAWALS FROM THE RESERVE FUND
Amounts held from time to time in the Reserve Fund will continue to be
held for the benefit of the Securityholders. On each Distribution Date, funds
will be withdrawn from the Reserve Fund to the extent that the amount on deposit
in the Note Distribution Account with respect to any Distribution Date up to the
Available Amount is less than the Note Distributable Amount and will be
deposited in the Note Distribution Account. In addition, after giving effect to
such withdrawal, funds will be withdrawn from the Reserve Fund, first from the
Available Amount and then from the Certificate Reserve Amount, to the extent
that the amount on deposit in the Certificate Distribution Account is less than
the Certificate Distributable Amount and will be deposited in the Certificate
Distribution Account. See "PAYMENTS FROM THE RESERVE FUND."
PAYMENTS FROM THE RESERVE FUND
On each Distribution Date on which the Note Distributable Amount exceeds
the amount then on deposit in the Note Distribution Account, the Noteholders
will be entitled to receive such deficiency (including amounts necessary to
reduce the outstanding principal balance of a given Class of Notes to zero on
the related Note Final Distribution Date), from amounts on deposit in the
Reserve Fund. Subject to the Noteholders' priority on each Distribution Date on
which the Certificate Distributable Amount exceeds the amount then on deposit in
the Certificate Distribution Account, the Certificateholders will be entitled to
receive such deficiency (including amounts necessary to reduce the balance of
the Certificates to zero on the Certificate Final Distribution Date) from
amounts on deposit in the Reserve Fund.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and
provide to the Indenture Trustee a statement to be delivered to each Noteholder
and to the Owner Trustee a statement to be delivered to each Certificateholder
on such Distribution Date (the "DISTRIBUTION DATE STATEMENT"), setting forth
with respect to the related Distribution Date or Due Period, as applicable,
among other things, the following information:
(i) the amount of the Certificateholder's distribution
allocable to principal and the amount of the Noteholder's principal
distribution;
(ii) the amount of the Certificateholder's distribution
allocable to interest and the amount of the Noteholder's interest
distribution;
(iii) the amount of fees payable out of the Trust, separately
identifying the Servicing Fee, and the Trustees' Fees;
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(iv) the amount of any Note Interest Carryover Shortfall,
Note Principal Carryover Shortfall, Certificate Interest Carryover
Shortfall and Certificate Principal Carryover Shortfall on such
Distribution Date and the change in such amounts from those with respect
to the immediately preceding Distribution Date;
(v) the Note Pool Factor for each Class of Notes and the
Certificate Pool Factor, in each case as of such Distribution Date;
(vi) the amount of the distributions described in (i) or (ii)
above payable pursuant to a claim on the Reserve Fund or from any other
source not constituting Available Monies and the amount remaining in the
Reserve Fund after giving effect to all deposits and withdrawals from
the Reserve Fund on such date;
(vii) the amount of any Mandatory Special Redemption to be
made on such Distribution Date;
(viii) for each Distribution Date during the Funding Period,
the remaining Pre-Funded Amount;
(ix) for each Distribution Date during the Funding Period to
and including the Distribution Date immediately following the end of the
Funding Period, the Principal Balance and number of Subsequent Contracts
conveyed to the Trust during the related Due Period;
(x) the remaining Principal Balance after giving effect to
the distribution of principal (and Mandatory Special Redemption, if any)
to each class of Notes and the Certificates to be made on such
Distribution Date;
(xi) the number and aggregate principal balance of Contracts
delinquent, 31-59 days, 60-89 days and 90 or more days, computed as of
the end of the related Due Period;
(xii) the number and aggregate Principal Balance of Contracts
that became Liquidated Contracts during the immediately preceding Due
Period, the amount of liquidation proceeds for such Due Period, the
amount of liquidation expenses being deducted from liquidation proceeds
for such Due Period, the Net Liquidation Proceeds and the Net
Liquidation Losses for such Due Period;
(xiii) the Loss Ratio, the Average Loss Ratio, the Cumulative
Loss Ratio, the Delinquency Ratio and the Average Delinquency Ratio as
of such Distribution Date;
(xiv) the number of Contracts and the aggregate Principal
Balance of such Contracts, as of the first day of the Due Period
relating to such Distribution Date (after giving effect to payments
received during such Due Period and to any transfers of Subsequent
Contract to the Trust occurring on or prior to such Distribution Date);
(xv) the aggregate Principal Balance and number of Contracts
that were repurchased by the Seller pursuant to the Agreement with
respect to the related Due Period, identifying such Contracts and the
Repurchase Price for such Contracts; and
(xvi) such other customary factual information as is available
to the Servicer as the Servicer deems necessary and can reasonably
obtain from its existing data base to enable Noteholders and
Certificateholders to prepare their tax returns.
Each amount set forth pursuant to subclauses (i), (ii), (iii) and (iv)
above will be expressed in the aggregate and as a dollar amount per $1,000 of
original principal amount of a Note or the Initial Certificate Balance of a
Certificate, as the case may be. In addition, within the prescribed period of
time for tax reporting purposes after the end of each calendar year during the
term of the Agreement, the Indenture Trustee and the Owner Trustee will mail to
each person who at any time during such calendar year shall have been a
Noteholder or a Certificateholder, as the case may be, a
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statement containing the sum of the amounts described in clauses (i), (ii),
(iii) and (iv) above for the purposes of such holder's preparation of federal
income tax returns. See "FEDERAL INCOME TAX CONSEQUENCES."
VOTING INTERESTS
The "VOTING INTERESTS" of the (i) Notes of a Class or Classes will be
allocated among the Noteholders or related Note Owners, as the case may be, in
accordance with the unpaid principal amount of the Notes of such Class or
Classes represented thereby and (ii) Certificates will be allocated among the
Certificateholders or related Certificate Owners, as the case may be, in
accordance with the Certificate Balance represented thereby; except that in
certain circumstances any Securities held by the Trust Depositor or the Seller,
or any of their respective affiliates shall be excluded from such determination.
AMENDMENT
AMENDMENT OF THE AGREEMENT. The Agreement may be amended, without the
consent of the Securityholders, to cure any ambiguity, correct or supplement any
provision therein which may be inconsistent with any other provision therein, to
add any other provisions with respect to matters or questions arising under such
agreement which are not inconsistent with the provisions thereof, to add or
provide for any credit enhancement for any Class of Securities or to permit
certain changes with respect to the amount required to be maintained on deposit
in the Reserve Fund; provided, that any such action will not, in the opinion of
counsel satisfactory to the related Trustee, materially and adversely affect the
interests of any such Securityholder, and provided further, that in the case of
a change with respect to the amount required to be maintained on deposit in or
pursuant to the Reserve Fund, the Trustee receives a letter from each Rating
Agency that rated any of the Securities to the effect that its then-current
rating on each Class of Securities will not be qualified, reduced or withdrawn
due to such amendment and the Servicer shall provide the Rating Agencies notice
of such amendment.
The Agreement may also be amended from time to time with the consent or
the holders of Notes and Certificates evidencing not less than 66 2/3% of the
respective voting interests thereof, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of such agreement
or of modifying in any manner the rights of the related Securityholders of each
Class; provided, that no such amendment may (i) except as described above,
increase or reduce in any manner the amount of or accelerate or delay the timing
of collections of payments on or in respect of the Contracts, required
distributions on the Securities, or the Specified Reserve Fund Balance or the
manner in which the Reserve Fund is funded, or (ii) reduce the aforesaid
percentage of the voting interests of which the holders of any Class of
Securities are required to consent to any such amendment, without the consent of
the holders of all of the relevant Class of Securities.
AMENDMENT OF THE TRUST AGREEMENT. The Trust Agreement may be amended
without the consent of the Securityholders, to cure any ambiguity, correct or
supplement any provision therein which may be inconsistent with any other
provision therein, or to add any other provisions with respect to matters or
questions arising under such agreement which are not inconsistent with the
provisions thereof; provided, that any such action will not, in the opinion of
counsel satisfactory to the related Trustee, materially and adversely affect the
interests of any such Noteholder or Certificateholder.
The Trust Agreement may also be amended from time to time with the
consent of the Securityholders evidencing not less than 66 2/3% of the
respective voting interests thereof, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of such agreement
or of modifying in any manner the rights of the Securityholders, provided, that
no such amendment may increase or reduce in any manner the amount of or
accelerate or delay the timing of (i) collections of payments on or in respect
of the Contracts or required distributions on the Securities or any Interest
Rate or the Pass-Through Rate or (ii) reduce the aforesaid percentage of the
voting interests of which the holders of any Class of Securities are required to
consent to any such amendment, without the consent of the holders of all of the
relevant Class of Securities.
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AMENDMENT OF THE INDENTURE. The Trust and the Indenture Trustee (on
behalf of such Trust) may, without consent of the Noteholders, enter into one
or more supplemental indentures for any of the following purposes: (i) to
correct or amplify the description of the property subject to the lien of the
Indenture or to subject additional property to the lien of the Indenture; (ii)
to provide for the assumption of the Notes and the Indenture obligations by a
permitted successor to the Trust; (iii) to add additional covenants for the
benefit of the related Noteholders, or to surrender any rights or powers
conferred upon the Trust; (iv) to convey, transfer, assign, mortgage or pledge
any property to the Indenture Trustee; (v) to cure any ambiguity or correct or
supplement any provision in the Indenture or in any supplemental indenture which
may be inconsistent with any other provision in the Indenture, any supplemental
indenture, the Agreement or certain other agreements; provided, that any action
specified in clause (v) shall not adversely affect the interests of any
Noteholder; (vi) to provide for the acceptance of the appointment of a successor
Indenture Trustee or to add to or change any of the provisions of the Indenture
as shall be necessary and permitted to facilitate the administration by more
than one Indenture Trustee; (vii) to modify, eliminate or add to the provisions
of the Indenture in order to comply with the Trust Indenture Act of 1939, as
amended; and (viii) to add any provisions to, change in any manner, or eliminate
any of the provisions of, the Indenture or modify in any manner the rights of
Noteholders under such Indenture; provided that any action specified in clause
(viii) shall not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any Noteholder unless such Noteholder's
consent is otherwise obtained as described below.
Without the consent of the holder of each outstanding Note affected
thereby, no supplemental indenture may: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the Interest Rate thereon (or the method by which such interest
or principal is calculated) or the redemption price with respect thereto or
change any place of payment where or the coin or currency in which any such Note
or any interest thereon is payable; (ii) impair the right to institute suit for
the enforcement of the provisions of the Indenture regarding payment; (iii)
reduce the percentage of the voting interests of the Notes, the consent of the
holders of which is required for any such supplemental indenture or the consent
of the holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture; (iv) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the Trust, any
other obligor on such Notes, the Trust Depositor, or any of their respective
affiliates; (v) reduce the percentage of the voting interests of the Notes, the
consent of the holders of which is required to direct the Indenture Trustee to
sell or liquidate the property of the Trust if the proceeds of such sale or
liquidation would be insufficient to pay the principal amount and accrued but
unpaid interest on the outstanding Notes; (vi) decrease the percentage of the
aggregate of such Notes required to amend the provisions of the Indenture which
specify the applicable percentage of voting interests of the Notes necessary to
amend such Indenture or certain other related agreements; or (vii) permit the
creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in the Indenture, terminate the lien of such
Indenture on any such collateral or deprive the holder of any such Note of the
security afforded by the lien of such Indenture.
LIST OF SECURITYHOLDERS
Upon the written request of the Servicer, the Owner Trustee will provide
to the Servicer within 15 days after receipt of such request, a list of the
names and addresses of all Certificateholders. In addition, three or more
holders of Certificates or holders of Certificates evidencing not less than 25%
of the voting interests of the Certificates, upon compliance by such
Certificateholders with certain provisions of the Trust Agreement, may request
that the Owner Trustee afford such Certificateholders access during business
hours to the current list of Certificateholders of purposes of communicating
with other Certificateholders with respect to their rights under the Trust
Agreement.
Three or more holders of Notes may, by written request to the Indenture
Trustee, obtain access to the list of all Noteholders maintained by such
Indenture Trustee for the purpose of communicating with the other Noteholders
with respect to their rights under the Indenture or under the Notes. The
Indenture Trustee may elect not to afford the requesting Noteholders access to
the list of Noteholders if it agrees to mail the desired communication or proxy,
on behalf of and at the expense of the requesting Noteholders, to all
Noteholders.
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Neither the Trust Agreement nor the Indenture will provide for the
holding of any annual or other meetings of Securityholders.
TERMINATION
The obligations of the Servicer, the Trust Depositor, the Owner Trustee
and Indenture Trustee with respect to the related Securityholders pursuant to
the Trust Agreement, Agreement or Indenture will terminate upon the earliest to
occur of (i) the maturity or other liquidation of the last Contract and the
disposition of any amounts received upon liquidation of any property remaining
in the Trust, or (ii) the payment to Securityholders of all amounts required to
be paid to them pursuant to the Indenture and the Trust Agreement; PROVIDED,
HOWEVER, in no event shall the Trust continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy, the
late Ambassador of the United States to the Court of St. James, living on the
Closing Date. The Seller's representations, warranties and indemnities will
survive any termination of the Agreement. Upon termination, amounts in the
Collection Account, if any, will be paid to the Trust Depositor.
The Owner Trustee and Indenture Trustee will give written notice of
termination to each Securityholder of record. The final distribution to each
Securityholder will be made only upon surrender and cancellation of such
holder's Securities at the office or agency of the related Trustee specified in
the notice of termination. Any funds remaining in the Trust, after such Trustee
has taken certain measures to locate a Securityholder and such measures have
failed, will be distributed to a charity designated by the Servicer.
PAYMENT IN FULL OF NOTES
Upon the payment in full of all outstanding Notes and the satisfaction
and discharge of the Indenture, the Owner Trustee will succeed to all the rights
of the Indenture Trustee, and the Certificateholders will succeed to all the
rights of the Noteholders, under the Agreement, except as otherwise provided
therein.
THE TRUSTEES
A Trustee may resign at any time, in which event the Administrator, or
its successor, will be obligated to appoint a successor trustee. The
Administrator (as defined herein) may also remove the Owner Trustee or the
Indenture Trustee, in each case if such Trustee becomes insolvent or ceases to
be eligible to continue as trustee under the Trust Agreement or Indenture, as
the case may be. In such event, the Administrator will be obligated to appoint
a successor Owner Trustee or Indenture Trustee. Any resignation or removal of a
Trustee and appointment of a successor trustee will not become effective until
acceptance of the appointment by the successor trustee.
Each Trustee and any of its affiliates may hold Securities in their own
names or as pledgees. For the purpose of meeting the legal requirements of
certain jurisdictions, the Administrator and the Owner Trustee or Indenture
Trustee acting jointly (or in some instances, the Owner Trustee and Indenture
Trustee acting without the Administrator) will have the power to appoint
co-trustees or separate trustees of all or any part of the Trust. In the event
of such an appointment, all rights, powers, duties and obligations conferred or
imposed upon such Trustee by the Indenture, the Agreement or Trust Agreement
will be conferred or imposed upon such Trustee and such separate trustee or
co-trustee jointly, or, in any jurisdiction in which such Trustee will be
incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who will exercise and perform such rights, powers, duties
and obligations solely at the direction of such Trustee.
The Trust Agreement will further provide that the Owner Trustee will be
entitled to indemnification by the Trust Depositor for, and will be held
harmless against, any loss, liability or expense incurred by such Trustee not
resulting from its own willful misconduct, bad faith or negligence (other than
by reason of a breach of any of its representations or warranties set forth in
such agreement). The Indenture will further provide that the Indenture Trustee
will be entitled to indemnification by the Trust or the Administrator for any
loss, liability or expense incurred by such Trustee not resulting from its own
willful misconduct, negligence or bad faith.
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DUTIES OF THE TRUSTEES
The Trustees will not make any representations as to the validity or
sufficiency of the Trust Agreement or the Indenture, the Securities issued
pursuant thereto (other than the execution and authentication thereof) or of any
Contracts or related documents. The Trustees will not be accountable for the
use or application by the Trust Depositor or the Servicer of any funds paid to
the Trust Depositor or the Servicer in respect of such Securities or the related
Contracts or the investment of any monies by the Servicer before such monies are
deposited into the Collection Account. The Trustees will not independently
verify the existence or characteristics of the Contracts. If no Event of
Default or Termination Event has occurred and is continuing, the Trustees will
be required to perform only those duties specifically required of it under the
Indenture, the Trust Agreement or the Agreement, as the case may be. Generally
those duties will be limited to the receipt of the various certificates and
reports or other instruments required to be furnished to such Trustee under such
agreements, in which case it will only be required to examine them to determine
whether they conform to the requirements of such agreements. The Trustees will
not be charged with knowledge of a failure by the Servicer to perform its duties
under the relevant agreements which failure constitutes an Event of Default or a
Termination Event unless the Owner Trustee or Indenture Trustee obtains actual
knowledge of such failure as specified in such agreements.
Neither the Indenture Trustee nor the Owner Trustee will be under any
obligation to exercise any of the rights or powers vested in it by the
Indenture, the Trust Agreement or the Agreement, as the case may be, or to make
any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the Securityholders, unless such Securityholders have
offered to such Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby. No
Securityholder will have any right under any such agreement to institute any
proceeding with respect to such agreement, unless such holder previously has
given to such Trustee written notice of default and (i) the default arises from
the Servicer's failure to remit payments when due or (ii) the holders of
Securities evidencing not less than 25% of the voting interests of all of the
related Securities, voting together as a single class, have made written request
upon such Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to such Trustee reasonable indemnity and such
Trustee for 60 days has neglected or refused to institute any such proceedings.
TRUST DEPOSITOR LIABILITY
The Trust Agreement will require the Trust Depositor to agree to be
liable directly to an injured party for the entire amount of any losses, claims,
damages or liabilities (other than those incurred by a Securityholder in the
capacity of an investor with respect to the Trust) arising out of or based on
the arrangement created by the Trust Agreement as though such arrangement
created a partnership under the Delaware Revised Uniform Limited Partnership Act
in which Trust Depositor was a general partner.
ADMINISTRATION AGREEMENT
Eaglemark, in its capacity as administrator (in such capacity, the
"ADMINISTRATOR"), will enter into an agreement (the "ADMINISTRATION AGREEMENT")
with the Trust, the Trust Depositor and the Indenture Trustee pursuant to which
the Administrator will agree, to the extent provided in the Administration
Agreement, to provide the notices and to perform other administrative
obligations required to be provided or performed by the Trust or the Owner
Trustee under the Indenture. The Administrator in the Administration Agreement
agrees to perform certain accounting functions of the Trust which the Owner
Trustee is required to perform pursuant to the Trust Agreement, including but
not limited to maintaining the books of the trust, filing tax returns for the
trust, and delivering tax related reports to each Securityholder (except the
Owner Trustee shall retain responsibility for distributing the Schedule K-1s).
As compensation for the performance of the Administrator's obligations under the
Administration Agreement and as reimbursement for its expenses related thereto,
the Administrator will be entitled to a monthly administration fee (the
"ADMINISTRATION FEE"), which fee will be paid by the Servicer.
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COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will manage, administer, service and make collections on
the Contracts exercising the degree of skill and care consistent with the
highest degree of skill and care that the Servicer exercises with respect to
similar contracts serviced by the Servicer and in any event with no less degree
of skill and care than would be exercised by a prudent servicer of motorcycle
conditional sales contracts.
The Servicer may, consistent with its customary servicing procedures,
grant to the Obligor on any Contract an extension of payments due under such
Contract, provided that (i) the extension period is limited to 45 days, (ii) the
Obligor has not received an extension during the previous twelve-month period,
(iii) the evidence supports the Obligor's willingness and capability to resume
monthly payments, (iv) such extension is consistent with the Servicer's
customary servicing procedures and with the Agreement, (v) such extension does
not extend the maturity date of the Contract beyond the last maturity date of
any of the Contracts as of the Initial Cutoff Date (or as of the last Subsequent
Cutoff Date, if any) and (vi) the aggregate Principal Balances of Contracts
which have had extensions granted does not exceed more than 3% of the aggregate
of the principal amount of the Notes and the Certificate Balance.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer will be entitled to receive a Monthly Servicing Fee for
each Due Period (to be paid on the related Distribution Date) equal to 1/12th of
[ ]% of the Principal Balance of the Contracts as of the beginning of such
Due Period. Along with the Monthly Servicing Fee, and included as part of the
"SERVICING FEE" as defined in the Agreement, the Servicer will be entitled to
receive late payment penalty fees and extension fee paid by Obligors during the
related Due Period as additional compensation. Such Servicing Fee is payable
prior to the payment of principal and interest on the Securities. See "CERTAIN
INFORMATION REGARDING THE SECURITIES -- DISTRIBUTIONS ON THE SECURITIES" above.
The Servicing Fee provides compensation for customary third-party
servicing activities to be performed by the Servicer for the Trust, for
additional administrative services performed by the Servicer on behalf of the
Trust and for expenses paid by the Servicer on behalf of the Trust.
Customary servicing activities include collecting and recording
payments, communicating with Obligors, investigating payment delinquencies,
providing billing and tax records to Obligors and maintaining internal records
with respect to each Contract. Administrative services performed by the
Servicer on behalf of the Trust include selecting and packaging the Contracts,
calculating distributions to Noteholders and Certificateholders and providing
related data processing and reporting services for Noteholders and
Certificateholders and on behalf of the Trustees. Expenses incurred in
connection with servicing of the Contracts and paid by the Servicer from its
servicing fees include payment of fees and expenses of accountants, payments of
all fees and expenses incurred in connection with the enforcement of Contracts,
and payment of expenses incurred in connection with distributions and reports to
Securityholders.
INDIVIDUAL MOTORCYCLE INSURANCE
The terms of each Contract require that for the life of the Contract,
each Motorcycle is covered by a collision and comprehensive or equivalent
insurance policy which covers physical damage risks, provides limited insurance
coverage for damage to the Motorcycle and names the Seller as a loss payee. The
amount of insurance coverage is limited to the value of the Motorcycle. In the
Transfer and Sale Agreement, the Seller has warranted that all premium payments
on such insurance have been paid in full for one year from the date of the
Contracts' origination. Pursuant to Contract terms, the Servicer may "FORCE
PLACE" collision and comprehensive insurance with respect to the related
Motorcycle in those situations in which the Obligor has not maintained the
required insurance. As conveyee and assignee of the Contracts, the Trust will
be entitled to the benefits of such insurance. See "CERTAIN INFORMATION
REGARDING THE SECURITIES -- CONVEYANCE OF CONTRACTS." Following repossession of
a Motorcycle by the Servicer, the Servicer does not maintain such insurance. In
the event the Servicer repossesses a Motorcycle on behalf of the Trust, the
Servicer will act as self-insurer for any damage to such motorcycle until it is
resold.
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EVIDENCE AS TO COMPLIANCE
Pursuant to the Agreement, on or before March 31 of each year, beginning
on March 31, [ ], the Servicer will deliver to the Trustees and the
Rating Agencies a report of a nationally recognized accounting firm, with
respect to the twelve months ended the immediately preceding December 31, a
statement (the "ACCOUNTANT'S REPORT") addressed to the Board of Directors of the
Servicer, and to the Trustees to the effect that such firm has audited the
consolidated financial statements of Eaglemark Financial and issued its report
thereon and that such audit (1) was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances; (2) included an examination of documents and records relating
to the servicing of substantially similar motorcycle conditional sales contracts
under substantially similar pooling and servicing agreements (such
substantially similar statement to have attached thereto a schedule setting
forth the pooling and servicing agreements covered thereby, including the
Agreement); (3) included an examination of the delinquency and loss statistics
relating to the portfolio of motorcycle conditional sales contracts of Eaglemark
Financial and its subsidiaries; and (4) except as described in the statement,
disclosed no exceptions or errors in the records relating to motorcycle loans
serviced for others that, in the firm's opinion, generally accepted auditing
standards requires such firm to report. The Accountant's Report will further
state that (1) a review in accordance with agreed upon procedures was made of
one randomly selected Monthly Report and (2) except as disclosed in the
Accountant's Report, no exceptions or errors in the Monthly Report so examined
were found.
The Agreement provides that the Servicer shall furnish to the Trustees
and the Rating Agencies such underlying data as each may reasonably request.
EVENTS OF TERMINATION
An Event of Termination under the Agreement will occur if (a) either the
Servicer or the Seller fails to make any payment or deposit required under the
Securities, the Agreement or the Transfer and Sale Agreement and such failure
continues for four Business Days after the date on which such payment or deposit
was due; (b) either the Servicer or the Seller fails to observe or perform in
any material respect any covenant or agreement in the Notes, Certificates, the
Agreement or the Transfer and Sale Agreement which continues unremedied for
thirty days after the date on which such failure commences; (c) either the
Servicer or the Seller assigns its duties or rights under the Agreement or the
Transfer and Sale Agreement, except as specifically permitted under the
Agreement or the Transfer and Sale Agreement, or attempts to make such an
assignment; (d) a court having jurisdiction in the premises enters a decree or
order for relief in respect of the Servicer or Trust Depositor in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appoints a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Servicer, or Trust
Depositor, or for any substantial liquidation of their respective affairs; (e)
the Servicer or Trust Depositor commences a voluntary case under any applicable
bankruptcy, insolvency or similar law, or consents to the entry of an order for
relief in an involuntary case under any such law, or consents to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian
or sequestrator (or other similar official) of the Servicer or Trust Depositor
or for any substantial part of its property or shall have made any general
assignment for the benefit of creditors, or fails to, or admits in writing its
inability to, pay debts as they become due, or takes any corporate action in
furtherance of the foregoing; (f) the failure of the Servicer to deliver the
Monthly Report pursuant to the terms of the Agreement and such failure remains
uncured for five business days after the date on which such failure commences;
or (g) any representation, warranty or statement of the Servicer made in the
Agreement or any certificate, report or other writing delivered pursuant thereto
shall prove to be incorrect in any material respect as of the time when the same
shall have been made and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Trust and, within 30 days after
written notice thereof shall have been given to the Servicer or the Trust
Depositor by the Trustee, the circumstances or condition in respect of which
such representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured. The Servicer will be required under the
Agreement to give the Trustees, the Rating Agencies, the Noteholders and the
Certificateholders notice of an Event of Termination promptly upon the
occurrence of such Event.
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RIGHTS UPON AN EVENT OF TERMINATION
If an Event of Termination has occurred and is continuing, the
Noteholders evidencing more than 50% of the voting interests of the Notes or, if
all the Notes have been paid in full and the Indenture has been discharged in
accordance with its terms, the holders of Certificates evidencing more than 50%
of the voting interests of the Certificates, may terminate all of the Servicer's
management, administrative, servicing, custodian and collection functions under
the Agreement. Upon such termination, the Indenture Trustee will succeed to all
the responsibilities, duties and liabilities of the Servicer under the Agreement
and will be entitled to similar compensation arrangements; PROVIDED, HOWEVER,
that the Indenture Trustee will not assume any obligation of the Seller to
repurchase Contracts for breach of representations and warranties, and the
Indenture Trustee will not be liable for any acts or omissions of the Servicer
occurring prior to a transfer of the Servicer's servicing and related functions
or for any breach by the Servicer of any of its representations and warranties
contained in the Agreement or any related document or agreement.
Notwithstanding such termination, the Servicer shall be entitled to payment of
certain amounts payable to it prior to such termination, for services rendered
prior to such termination. No such termination will affect in any manner the
Seller's obligation to repurchase certain Contracts for breaches of
representations and warranties under the Agreement. In the event that the
Indenture Trustee in so acting would be in violation of legal requirements with
a resulting material adverse effect upon it, it may resign such role and if a
successor has not been appointed within 60 days, it may petition a court of
competent jurisdiction for its removal.
Following an Event of Termination, the Indenture Trustee shall terminate
the Lockbox Agreement and direct all Obligors under the Contracts to make all
payments under the Contracts to the Indenture Trustee, or to a lockbox
established by the Indenture Trustee.
ADVANCES
The Servicer is obligated to advance each month an amount equal to
accrued and unpaid interest on the Contracts which was delinquent with respect
to the related Due Period, but only to the extent that the Servicer believes
that the amount of such Advance will be recoverable from collections on the
Contracts. The Servicer will deposit any Advances in the Collection Account no
later than the Determination Date. The Servicer will be entitled to recoup
Advances on a Contract by means of a first priority withdrawal from Available
Monies on any Distribution Date.
SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS;
REPURCHASE OBLIGATIONS
GENERAL
As a result of the Seller's conveyance and assignment of the Contracts
to the Trust Depositor pursuant to the Transfer and Sale Agreement, the Trust
Depositor's conveyance and assignment of the Contracts to the Trust pursuant to
the Agreement, the Trust's pledge to the Indenture Trustee pursuant to the
Indenture, the Noteholders and the Certificateholders, through the Indenture
Trustee, will succeed collectively to all of the rights under such Contracts
(including the right to receive payment on the Contracts) on or after the
related Cutoff Date. Each Contract evidences both (a) the obligation of the
Obligor to repay the loan evidenced thereby and (b) the grant of a security
interest in the Motorcycle to secure repayment of such loan. Certain aspects of
both features of the Contracts are more fully described below.
The Contracts are "CHATTEL PAPER" as defined in the Uniform Commercial
Code (the "UCC") in effect in the states in which the Motorcycles were initially
registered. Pursuant to the UCC, the sale of chattel paper is treated in a
manner similar to perfection of a security interest in chattel paper. The
Seller and the Depositor will make an appropriate filing of UCC-1 financing
statements in Nevada and Illinois to give notice of the Indenture Trustee's
security interest in the Contracts, and the Contracts held by the Servicer as
custodian will be stamped to reflect their conveyance and assignment from the
Seller to the Trust Depositor and the Trust Depositor to the Trust and their
pledge from the Trust to the Indenture Trustee. However, if a subsequent
purchaser were able to take physical possession of any
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Contracts without notice of such conveyance and assignment, the Trust's interest
in those Contracts could be defeated. See "DESCRIPTION OF THE
CERTIFICATES--CONVEYANCE OF CONTRACTS" above.
SECURITY INTERESTS IN THE MOTORCYCLES
The Motorcycles securing the Contracts are located in 50 states, the
District of Columbia and the U.S. Territories. Security interests in
motorcycles may be perfected either by notation of the secured party's lien on
the certificate of title or by delivery of the required documents and payment of
a fee to the state motor vehicle authority, depending on state law. The
Seller's practice is to effect such notation or delivery of the required
documents and fees, and to obtain possession of the certificate of title, as
appropriate under the laws of the state in which any Motorcycle securing a
Motorcycle conditional sales contract is registered. In the event either the
Trust Depositor fails, due to clerical error, to effect such notation or
delivery, or files the security interest under the wrong law, the Seller may not
have a first priority security interest in the Motorcycle securing a Contract.
In such event, the only recourse of the Trust would be against the Seller
pursuant to its repurchase obligation. See "SECURITY INTEREST AND OTHER ASPECTS
OF THE CONTRACTS; REPURCHASE OBLIGATIONS--REPURCHASE OBLIGATIONS" below.
However, the Seller believes that it has obtained a perfected first priority
security interest by proper notation or delivery of the required documents and
fees with respect to all of the Motorcycles securing Contracts.
The Seller will convey and assign its security interest in the
Motorcycles to the Trust Depositor pursuant to the Transfer and Sale Agreement,
the Trust Depositor will convey and assign its security interest in the
Motorcycles to the Trust pursuant to the Agreement and the Trust will pledge its
security interest in the Motorcycles to the Indenture Trustee pursuant to the
Indenture. However, because of the administrative burden and expense, neither
the Seller, the Trust Depositor, the Owner Trustee nor the Indenture Trustee
will amend the certificates of title to identify the Indenture Trustee as the
new secured party and, accordingly, the Seller will continue to be named as the
secured party on the certificates of title relating to the Motorcycles. See
generally "RISK FACTORS -- RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED
MOTORCYCLES" in the Prospectus. The Seller, as Servicer, will continue to hold
any certificates of title relating to the Motorcycles in its possession as
custodian and agent for the Trust pursuant to the Agreement.
In the event that the owner of a Motorcycle moves to a state other than
the state in which such Motorcycle initially is registered, under the laws of
most states the perfected security interest in the Motorcycle would continue for
four months after such relocation and thereafter until the owner re-registers
the motorcycle in such state. A majority of states generally require surrender
of a certificate of title to re-register a motorcycle; accordingly, the Servicer
must surrender possession if it holds the certificate of title to such
Motorcycle or, in the case of Motorcycles registered in states which provide for
notation of lien, the Seller would receive notice of surrender if the security
interest in the Motorcycle is noted on the certificate of title. Accordingly,
the Servicer would have the opportunity to re-perfect its security interest in
the Motorcycle in the state of relocation. In states which do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. In the ordinary course of servicing its portfolio of
Motorcycle conditional sales contracts, the Servicer takes steps to effect such
re-perfection upon receipt of notice of re-registration or information from the
obligor or the obligor's insurance carrier as to relocation. Similarly, when an
obligor under a Motorcycle conditional sales contract sells a Motorcycle, the
Servicer must surrender possession of the certificate of title or will receive
notice as a result of its lien noted thereon and accordingly will have an
opportunity to require satisfaction of the related Motorcycle conditional sales
contract before release of the lien. Under the Agreement, the Servicer is
obligated to take such steps, at its expense, as are necessary to maintain
perfection of security interests in the Motorcycles.
Under the laws of most states, liens for repairs performed on a
motorcycle take priority even over a perfected security interest. The Seller
will represent in the Transfer and Sale Agreement that as of the sale date of
the Contracts, it has no knowledge of any such liens with respect to any
Motorcycle securing payment on any Contract. However, such liens could arise at
any time during the term of a Contract. No notice will be given to the Trust,
to the Noteholders or Certificateholders in the event such a lien arises.
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ENFORCEMENT OF SECURITY INTERESTS IN MOTORCYCLES
The Servicer on behalf of the Trust may take action to enforce the
Trust's security interest with respect to defaulted Contracts by repossession
and resale of the Motorcycles securing such defaulted Contracts. Under the laws
applicable in most states, a creditor can repossess a motorcycle securing a
contract by voluntary surrender, by "SELF-HELP" repossession that is "PEACEFUL"
(I.E., without breach of the peace) or, in the absence of voluntary surrender
and the ability to repossess without breach of the peace, by judicial process.
The UCC and consumer protection laws in most states place restrictions on
repossession sales, including requiring prior notice to the debtor and
commercial reasonableness in effecting such a sale. In the event of such
repossession and resale of a Motorcycle, the Trust would be entitled to be paid
out of the sale proceeds before such proceeds could be applied to the payment of
the claims of unsecured creditors or the holders of subsequently perfected
security interests or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the motor vehicle securing such debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments.
Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit or
delay the ability of a lender to repossess and resell collateral or enforce a
deficiency judgment.
OTHER MATTERS
The so-called "HOLDER-IN-DUE-COURSE" rule of the Federal Trade
Commission is intended to defeat the ability of the transferor of a consumer
credit contract which is the seller of goods which gave rise to the transaction
(and certain related lenders' assignees) to transfer such contract free of
notice of claims by the debtor thereunder. The effect of this rule is to
subject the assignee of such a contract to all claims and defenses which the
debtor could assert against the seller. Liability under this rule, which would
be applicable to the Trust, is limited to amounts paid under a Contract;
however, the Obligor also may be able to assert the rule to set off remaining
amounts due as a defense against a claim brought by the Trust against such
Obligor. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination of and lending pursuant to the
Contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with
their provisions may affect the enforceability of the related Contract. See
generally "RISK FACTORS -- ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S
ABILITY TO REALIZE ON ITS SECURITY INTEREST IN THE MOTORCYCLES; CONSUMER
PROTECTION LAWS" in the Prospectus.
REPURCHASE OBLIGATIONS
Under the Transfer and Sale Agreement, the Seller will make warranties
relating to validity, subsistence, perfection and priority of the security
interest in each Motorcycle securing a Contract. Accordingly, if any defect
exists in the perfection of the security interest in any Motorcycle and such
defect materially adversely affects a Contract, such defect would constitute a
breach of a representation and warranty under the Transfer and Sale Agreement
and would create an obligation of the Trust Depositor to repurchase such
Contract from the Trust unless the breach is cured. See "CERTAIN INFORMATION
REGARDING THE SECURITIES--CONVEYANCE OF CONTRACTS" above.
In addition, the Seller will also warrant under the Transfer and Sale
Agreement that each Contract complies with all requirements of law.
Accordingly, if any Obligor has a claim against the Trust for violation of any
law and such claim materially adversely affects the Trust's interest in a
Contract, such violation would constitute a breach of a representation and
warranty under the Transfer and Sale Agreement and would create an obligation to
repurchase such Contract unless the breach is cured. See "CERTAIN INFORMATION
REGARDING THE SECURITIES--CONVEYANCE OF CONTRACTS" above.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general and brief discussion of certain United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes and the Certificates. For a full description of the material federal
income tax consequences of the ownership of Notes and Certificates in the Owner
Trust, see the Prospectus, "FEDERAL INCOME TAX CONSEQUENCES--OWNER TRUSTS." Any
material variations from the discussion in the Prospectus, "FEDERAL INCOME TAX
CONSEQUENCES--OWNER TRUSTS" will be specified below.
The discussion herein is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "CODE"), Treasury Regulations promulgated
thereunder, current administrative rulings, judicial decisions and other
applicable authorities in effect as of the date hereof, all of which are subject
to change, possibly with retroactive effect. There are no cases or Internal
Revenue Service ("IRS") rulings on similar transactions involving a trust and
instruments issued by that trust with terms similar to those of the Trust, and
the Notes and the Certificates. As a result, there can be no assurance that the
IRS will not challenge the conclusions set forth in the following summary, and
no ruling from the IRS has been or will be sought on any of the issues discussed
below. Furthermore, legislative, judicial or administrative changes may occur,
perhaps with retroactive effect, which could affect the accuracy of the
statements and conclusions set forth herein as well as the tax consequences to
holders of the Notes and the Certificates.
This discussion and the more detailed discussion set forth in the
Prospectus, "FEDERAL INCOME TAX CONSEQUENCES--OWNER TRUSTS," do not purport to
deal with all aspects of federal income taxation that may be relevant to all
holders of Notes and Certificates in light of their personal investment or tax
circumstances nor to certain types of holders who may be subject to special
treatment under the federal income tax laws (including, without limitation,
financial institutions, broker-dealers, insurance companies, foreign persons,
tax-exempt organizations and persons who hold the Notes or Certificates as part
of a straddle, hedging or conversion transaction). This information is
generally directed to prospective purchasers who purchase Notes or Certificates
at the time of original issue, who are citizens or residents of the United
States, and who hold the Notes or Certificates as "CAPITAL ASSETS" within the
meaning of Section 1221 of the Code. Taxpayers and preparers of tax returns
(including those filed by any partnership or other issuer) should be aware that
under applicable Treasury Regulations a provider of advice on specific issues of
law is not considered an income tax return preparer unless the advice is (i)
given with respect to events that have occurred at the time the advice is
rendered and is not given with respect to the consequences of contemplated
actions, and (ii) is directly relevant to the determination of an entry on a tax
return. Accordingly, taxpayers should consult their own tax advisors and tax
return preparers regarding the preparation of any item on a tax return, even
where the anticipated tax treatment has been discussed herein. PROSPECTIVE
INVESTORS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE,
LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF NOTES AND CERTIFICATES.
TAX CHARACTERIZATION OF THE TRUST AND THE NOTES
Winston & Strawn, as federal tax counsel ("FEDERAL TAX COUNSEL") to
the Trust Depositor has delivered an opinion to the Trust Depositor that for
U.S. federal income tax purposes (i) the Trust will not be treated as an
association (or publicly traded partnership) taxable as a corporation and
(ii) the Notes will be treated as indebtedness of the Trust. This opinion is
based on the assumption that the terms of the Trust Agreement and related
documents will be complied with, including, without limitation, that the
Trust Depositor, each Certificateholder, and each Noteholder will agree to
treat the Certificates as equity interests in a partnership and the Notes as
debt of such partnership and that the Certificateholders will take all action
necessary, if any, or refrain from taking any inconsistent action so as to
ensure that the Trust is a partnership under Treasury Regulations sections
301.7701-2 and 301.7701-3. The Owner Trustee on behalf of the Trust will
file IRS Form 8832 making for the Trust a protective election to be treated
as a partnership for federal income tax purposes. The opinion is also based
on Federal Tax Counsel's conclusions that (i) the Trust will constitute a
business entity that has two or more members within the meaning of those
regulations; (ii) the nature of the Trust's income will exempt it from the
rule that certain publicly traded partnerships are taxable as corporations,
and (iii) the Trust, if a corporation, would not constitute a regulated
investment company under Code Section 851. An opinion of
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counsel is not binding on a court or the IRS and there can be no assurance that
the IRS or a court will agree with Federal Tax Counsel's opinion.
GENERAL TAX TREATMENT OF HOLDER'S OF NOTES
Unless the Notes are treated as having original issue discount, a holder
of a Note will generally be taxable on the interest received or accrued with
respect to the Note under the holder's general system of tax accounting. On a
sale of a Note, a holder will generally recognize gain or loss on the difference
between the amount realized and the holder's basis in the Note. Such gain or
loss generally will be capital gain or loss. Withholding tax may be imposed on
payments received with respect to the Notes unless certain IRS forms are
provided to the Owner Trustee or the holder is eligible for an exemption from
such withholding. For a complete discussion of these withholding rules and the
other federal income tax consequences to a holder of the Notes, see the
Prospectus, "FEDERAL INCOME TAX CONSEQUENCES--OWNER TRUSTS."
GENERAL TAX TREATMENT OF A HOLDER A CERTIFICATE
A holder of a Certificate, as a partner in a partnership, will be
treated as receiving such holder's allocable share of the Trust's income, gain,
loss, or deductions in accordance with the terms of the Trust Agreement, the
Code, and the Regulations promulgated thereunder. The holder will generally
recognize gain or loss on the sale of a Certificate equal to the difference
between the amount realized and the holder's basis in its partnership interest
that is allocated to the Certificate. Withholding taxes may also be imposed
with respect to payments on the Certificates unless certain IRS forms are
provided to the Owner Trustee or the holder is eligible for an exemption from
such withholding. For a complete discussion of these withholding tax rules and
the other federal income tax consequences to a holder of a Certificate, see the
Prospectus, "FEDERAL INCOME TAX CONSEQUENCES--OWNER TRUSTS."
ERISA CONSIDERATIONS
THE NOTES
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements on employee benefit plans subject to
ERISA ("ERISA PLANS") and prohibits certain transactions between ERISA Plans and
persons who are "PARTIES IN INTEREST" (as defined under ERISA) with respect to
assets of such Plans. Section 4975 of the Code prohibits a similar set of
transactions between certain plans or individual retirement accounts ("CODE
PLANS," and together with ERISA Plans, "PLANS") and persons who are
"DISQUALIFIED PERSONS" (as defined in the Code) with respect to Code Plans.
Certain employee benefit plans, such as governmental plans and church plans (if
no election has been made under Section 410(d) of the Code), are not subject to
the requirements of ERISA or Section 4975 of the Code, and assets of such plans
may be invested in the Notes, subject to the provisions of other applicable
federal and state law. Any such plan which is qualified under Section 401(a) of
the Code and exempt from taxation under Section 501(a) of the Code is, however,
subject to the prohibited transaction rules set forth in Section 503 of the
Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that investments be made in accordance with
the documents governing the ERISA Plan. Before investing in the Notes, an ERISA
Plan fiduciary should consider, among other factors, whether to do so is
appropriate in view of the overall investment policy and liquidity needs of the
ERISA Plan.
PROHIBITED TRANSACTIONS
In addition, Section 406 of ERISA and Section 4975 of the Code prohibit
parties in interest and disqualified persons with respect to ERISA Plans and
Code Plans from engaging in certain transactions involving such Plans or "PLAN
ASSETS" of such Plans, unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code and Sections 502(i) and 502(1) of
ERISA provide for the imposition of certain excise taxes and civil penalties on
certain
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persons that engage or participate in such prohibited transactions. The Trust
Depositor, the Underwriters, the Servicer, the Indenture Trustee or the Owner
Trustee or certain affiliates thereof may be considered or may become parties in
interest or disqualified persons with respect to a Plan. If so, the acquisition
or holding of the Notes by, on behalf of or with "PLAN ASSETS" of such Plan may
be considered to give rise to a "prohibited transaction" within the meaning of
ERISA and/or Section 4975 of the Code, unless an administrative exemption
described below or some other exemption is available.
The Notes may not be purchased with the assets of a Plan if the Trust
Depositor, the Underwriters, the Servicer, the Indenture Trustee, or the Owner
Trustee or an affiliate thereof either (a) has discretionary authority or
control with respect to the investment or management of such assets or (b) has
authority or responsibility to give, or regularly gives, investment advice with
respect to such assets pursuant to an agreement or understanding that such
advice will serve as a primary basis for investment decisions with respect to
such assets and that such advice will be based on the particular needs of the
Plan or (c) is an employer of employees covered under the Plan unless such
investment is made through an insurance company general or pooled separate
account or a bank collective investment fund and an exemption is available.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the Notes - for
example, Prohibited Transaction Class Exemption ("PTCE") 96-23, which exempts
certain transactions effected on behalf of a Plan by an "IN-HOUSE ASSET
MANAGER;" PTCE 95-60, which exempts certain transactions between insurance
company general accounts and parties in interest; PTCE 91-38, which exempts
certain transactions between bank collective investment funds and parties in
interest; PTCE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and parties in interest; or PTCE 84-14, which
exempts certain transactions effected on behalf of a Plan by a "QUALIFIED
PROFESSIONAL ASSET MANAGER." There can be no assurance that any of these
exemptions will apply with respect to any Plan's investment in the Notes or,
even if an exemption were deemed to apply, that any exemption would apply to all
prohibited transactions that may occur in connection with such investment.
Due to the complexity of these rules and the penalties imposed, any
fiduciary or other Plan investor who proposes to invest assets of a Plan in the
Notes should consult with its counsel with respect to the potential consequences
under ERISA and Section 4975 of the Code of doing so.
THE CERTIFICATES
The Certificates may not be acquired by a Plan. By its acceptance of a
Certificate or a beneficial interest therein, each Certificateholder or
Certificate Owner will be deemed to have represented and warranted that it is
not (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is
subject to the provisions of Title I of ERISA, (ii) a plan described in Section
4975(e)(1) of the Code (other than a governmental plan described in Section
4975(g)(2) of the Code) or (iii) any entity whose underlying assets include
assets of such a plan by reason of the plan's investment in the entity or which
uses assets of such a plan to acquire Certificates.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated [ ], 199__, among the Seller, the Trust Depositor and the
Underwriters (the "UNDERWRITING AGREEMENT"), the Seller has agreed to cause the
Trust to sell to the Underwriters named below (the "UNDERWRITERS"), and the
Underwriters have agreed to purchase, the principal amount of the Securities set
forth below.
<TABLE>
<CAPTION>
Principal Amount Principal Amount Principal Amount
Underwriters of Class A-1 Notes of Class A-2 Notes of Certificates
<S> <C> <C> <C>
Salomon Smith Barney Inc. $ $ $
----------- ----------- -----------
Total $ $ $
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Securities if any
Securities are purchased. In the event of default by the Underwriters, the
Underwriting Agreement provides that, in certain circumstances, the Underwriting
Agreement may be terminated.
Distribution of the Securities may be made by the Underwriters from time to
time in one or more negotiated transactions, or otherwise, at varying prices to
be determined at the time of sale. The Underwriters may effect such
transactions by selling the Securities to or through dealers, and such dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriters. In connection with the sale of the
Securities, the Underwriters may be deemed to have received compensation from
the Seller in the form of underwriting compensation. The Underwriters and any
dealers that participate with the Underwriters may be deemed to be an
underwriter, and any commissions received by them and any profit on the resale
of the Securities positioned by them may be deemed to be underwriting discounts
and commissions, under the Securities Act.
If the Underwriters create a short position in the Securities in connection
with the offering, I.E., if they sell more Securities than are set forth on the
cover page of this Prospectus Supplement, the Underwriters may reduce that short
position by purchasing Securities in the open market.
In general, purchases of a security to reduce a short position could cause
the price of the security to be higher than it might be in the absence of such
purchases.
Neither the Seller nor the Underwriters make any representations or
prediction as to the direction or magnitude of any effect that the transactions
described above, if engaged in, may have on the prices of the Securities. In
addition, neither the Seller nor the Underwriters make any representation that
the Underwriters will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
The Underwriters have represented and agreed that (i) they have not offered
or sold and, prior to the expiration of the period of six months from the
Closing Date, will not offer or sell any Securities to persons in the United
Kingdom, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulation 1995; (ii) they
have complied and will comply with all applicable provisions of the Financial
Services Act
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<PAGE>
1986 with respect to anything done by it in relation to the Securities in, from
or otherwise involving the United Kingdom; and (iii) they have only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Securities to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995, or is a person to whom such
document may otherwise lawfully be issued or passed on.
The Underwriting Agreement provides that the Seller and the Trust Depositor
will indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act, or contribute to payments the Underwriters
may be required to make in respect thereof.
RATINGS OF THE SECURITIES
It is a condition of issuance that the Class A-1 Notes be rated AAA by S&P
and Aaa by Moody's and the Class A-2 Notes be rated AAA by S&P and Aaa by
Moody's and the Certificates be rated at least [ ] by S&P and [ ] by
Moody's.
There is no assurance that any such rating will continue for any period of
time or that it will not be revised or withdrawn entirely by the assigning
rating agency if, in its judgment, circumstances so warrant. A revision or
withdrawal of such rating may have an adverse effect on the market price of the
Notes and the Certificates. A security rating is not a recommendation to buy,
sell or hold the Securities.
LEGAL MATTERS
Certain legal matters with respect to the Securities, including certain
federal income tax matters, will be passed upon for the Seller, Servicer, Trust
Depositor and the Trust by Winston & Strawn, Chicago, Illinois. Certain legal
matters for the Underwriters will be passed upon by Brown & Wood LLP, New York,
New York.
S-64
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Securities
(the "GLOBAL SECURITIES") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through DTC and, in the
case of the Notes, CEDEL or Euroclear. The Global Securities will be tradeable
as home market instruments in both the European and U.S. domestic markets.
Initial settlement and all secondary trades will settle in same-day funds.
Capitalized terms used but not defined in this Annex I have the meanings
assigned to them in the Prospectus Supplement and the Prospectus.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (I.E. seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Global Securities will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, CEDEL and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to similar issues on pass-through
certificates. Investors' securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "LOCK-UP" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payments in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish 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 similar issues
of pass-through certificates in same-day funds.
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<PAGE>
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL 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. Payment 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 CEDEL Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit 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 CEDEL or
Euroclear cash debit will be valued instead as of the actual settlement date.
CEDEL 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 pre-positions funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were 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 such overdraft
charges, although this result will depend on each CEDEL 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 Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, CEDEL 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 CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, CEDEL or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account 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. The payment will then be reflected in the
account of the CEDEL Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the CEDEL 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 CEDEL
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation or receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges 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 CEDEL Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date. Finally, day traders that use, CEDEL
or Euroclear and that purchase Global Securities from
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<PAGE>
DTC Participants for delivery to CEDEL Participants or Euroclear Participants
should note that these trades would automatically fail on the sale side unless
affirmative action were taken. At least three techniques should be readily
available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL
or Euroclear accounts) in accordance with the clearing
system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which
would give the Global Securities sufficient time to be
reflected in their CEDEL or Euroclear account in order to
settle the sale side of the trade; or
(c) 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 CEDEL Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENT
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issued discount) on registered debt issued by U.S.
Persons, unless (i) 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 such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of
Securities that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8
must be filed within 30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WILL EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY
COUNTRIES (FORM 1001). Non-U.S. Persons that are Securityholders residing
in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing
Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the Securityholder or his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURES. The holder of a Global
Security or in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the
books of the clearing agency). Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
S-67
<PAGE>
The term "U.S. PERSON" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (ii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source or which is under the supervision of a U.S.
court or U.S. fiduciary. This summary does not deal with all aspects of U.S.
Federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities.
S-68
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
<S> <C>
Index
ACH Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-18
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-55
Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-13
Aggregate Principal Balance . . . . . . . . . . . . . . . . . . . . . .S-44
Aggregate Principal Balance Decline . . . . . . . . . . . . . . . . . .S-44
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Available Amount. . . . . . . . . . . . . . . . . . . . . . . . .S-11, S-49
Available Interest. . . . . . . . . . . . . . . . . . . . . . . . . . .S-44
Available Monies. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-44
Available Principal . . . . . . . . . . . . . . . . . . . . . . . . . .S-44
Average Delinquency Ratio . . . . . . . . . . . . . . . . . . . . . . .S-48
Average Loss Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . .S-48
Buell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Carrying Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-12
Certificate Balance . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Certificate Distributable Amount. . . . . . . . . . . . . . . . . . . .S-45
Certificate Distribution Account. . . . . . . . . . . . . . . . . . . .S-43
Certificate Final Distribution Date . . . . . . . . . . . . . . . . . . S-6
Certificate Interest Carryover Shortfall. . . . . . . . . . . . . . . .S-45
Certificate Interest Distributable Amount . . . . . . . . . . . . . . .S-45
Certificate Monthly Interest Distributable Amount . . . . . . . . . . .S-45
Certificate Monthly Principal Distributable Amount. . . . . . . . . . .S-45
Certificate Percentage. . . . . . . . . . . . . . . . . . . . . . . . .S-45
Certificate Pool Factor . . . . . . . . . . . . . . . . . . . . . . . .S-20
Certificate Principal Carryover Shortfall . . . . . . . . . . . . . . .S-45
Certificate Principal Distributable Amount. . . . . . . . . . . . . . .S-45
Certificate Reserve Amount. . . . . . . . . . . . . . . . . . . .S-11, S-49
Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Class A-1 Final Distribution Date . . . . . . . . . . . . . . . . . . . S-6
Class A-1 Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Class A-1 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Class A-1 Rate. . . . . . . . . . . . . . . . . . . . . . . . . . .S-2, S-6
Class A-2 Final Distribution Date . . . . . . . . . . . . . . . . . . . S-6
Class A-2 Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Class A-2 Notes . . . . . . . . . . . . . . . . . . . . . . . . . .S-4, S-5
Class A-2 Rate. . . . . . . . . . . . . . . . . . . . . . . . . . .S-2, S-6
Collection Account. . . . . . . . . . . . . . . . . . . . . . . . . . .S-41
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Cumulative Loss Ratio . . . . . . . . . . . . . . . . . . . . . . . . .S-49
Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-39
Dealer Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-21
Delinquency Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-48
Delinquency Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . .S-48
Determination Date. . . . . . . . . . . . . . . . . . . . . . . .S-13, S-43
Distribution Accounts . . . . . . . . . . . . . . . . . . . . . . . . .S-43
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Due Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-45
Eaglemark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Eligible Investments. . . . . . . . . . . . . . . . . . . . . . . . . .S-41
S-69
<PAGE>
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
Excess Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-10
Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Final Distribution Dates. . . . . . . . . . . . . . . . . . . . . . . . S-6
Funding Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-11
Harley-Davidson . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Initial Certificate Balance . . . . . . . . . . . . . . . . . . . . . . S-8
Initial Certificate Reserve Amount. . . . . . . . . . . . . . . . . . .S-11
Initial Class A-1 Note Balance. . . . . . . . . . . . . . . . . . . . . S-4
Initial Class A-2 Note Balance. . . . . . . . . . . . . . . . . . . . . S-4
Initial Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Initial Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . .S-2, S-9
Interest Period . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-46
Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Interest Reserve Account. . . . . . . . . . . . . . . . . . . . . . . .S-12
Lien Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-40
Liquidated Contract . . . . . . . . . . . . . . . . . . . . . . . . . .S-48
Loss Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-48
Mandatory Special Redemption. . . . . . . . . . . . . . . . . . . . . . S-7
Monthly Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . .S-16
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Motorcycles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Net Liquidation Losses. . . . . . . . . . . . . . . . . . . . . . . . .S-48
Net Liquidation Proceeds. . . . . . . . . . . . . . . . . . . . . . . .S-48
Note Distributable Amount . . . . . . . . . . . . . . . . . . . . . . .S-46
Note Distribution Account . . . . . . . . . . . . . . . . . . . . . . .S-43
Note Final Distribution Dates . . . . . . . . . . . . . . . . . . . . . S-6
Note Interest Carryover Shortfall . . . . . . . . . . . . . . . . . . .S-46
Note Interest Distributable Amount. . . . . . . . . . . . . . . . . . .S-46
Note Monthly Interest Distributable Amount. . . . . . . . . . . . . . .S-46
Note Monthly Principal Distributable Amount . . . . . . . . . . . . . .S-46
Note Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-46
Note Pool Factor. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-19
Note Principal Carryover Shortfall. . . . . . . . . . . . . . . . . . .S-46
Note Principal Distributable Amount . . . . . . . . . . . . . . . . . .S-46
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Optional Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Owner Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . .S-47
Principal Distributable Amount. . . . . . . . . . . . . . . . . . . . .S-47
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-6, S-9
Registrar of Titles . . . . . . . . . . . . . . . . . . . . . . . . . .S-40
Reserve Fund. . . . . . . . . . . . . . . . . . . . . . . . . . .S-10, S-42
Reserve Fund Deposits . . . . . . . . . . . . . . . . . . . . . . . . .S-10
Reserve Fund Initial Deposit. . . . . . . . . . . . . . . . . . . . . .S-10
Reserve Fund Trigger Event. . . . . . . . . . . . . . . . . . . . . . .S-48
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
S-70
<PAGE>
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-2, S-4
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-16
Specified Reserve Fund Balance. . . . . . . . . . . . . . . . . .S-11, S-48
Subsequent Certificate Reserve Amount . . . . . . . . . . . . . . . . .S-11
Subsequent Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Subsequent Cutoff Date. . . . . . . . . . . . . . . . . . . . . . . . . S-9
Subsequent Reserve Fund Amount. . . . . . . . . . . . . . . . . . . . .S-10
Subsequent Transfer Agreement . . . . . . . . . . . . . . . . . . . . .S-17
Subsequent Transfer Date. . . . . . . . . . . . . . . . . . . . . . . . S-9
Transfer and Sale Agreement . . . . . . . . . . . . . . . . . . . . . . S-2
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Trust Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Trust Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . .S-33
Trust Insolvency. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
Trust Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . S-2, S-5, S-6
voting interests. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-51
</TABLE>
S-71
<PAGE>
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- -------------------------------------------------------------------------------
No dealer, salesman or other person is authorized to give any information or to
make any representation not contained in this Prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company, as sponsor of the Trusts or the Underwriters. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy any security other than the Securities offered hereby, nor does it
constitute an offer to sell or a solicitation of an offer to buy any of the
Securities to any person in any jurisdiction in which the person making such
offer or solicitation is not qualified to do so or to anyone whom it is unlawful
to make such an offer or solicitation to such person. Neither the delivery of
this Prospectus nor any sale made hereunder shall under any circumstance create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
PROSPECTUS SUPPLEMENT
SUMMARY OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-16
FORMATION OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . .S-18
POOL FACTORS AND TRADING INFORMATION . . . . . . . . . . . . . . . . . . . .S-19
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-19
THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-19
HARLEY-DAVIDSON MOTORCYCLES. . . . . . . . . . . . . . . . . . . . . . . . .S-30
YIELD AND PREPAYMENT CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . .S-30
EAGLEMARK FINANCIAL SERVICES, INC.; EAGLEMARK, INC.. . . . . . . . . . . . .S-31
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]. . . . . . . . . . . . . . . . .S-31
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . .S-32
DESCRIPTION OF THE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . .S-34
CERTAIN INFORMATION REGARDING THE SECURITIES . . . . . . . . . . . . . . . .S-35
SECURITY INTEREST AND OTHER ASPECTS OF THE
CONTRACTS; REPURCHASE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . .S-57
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-59
UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-63
RATINGS OF THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . .S-64
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-64
PROSPECTUS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
THE TRUSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
HARLEY-DAVIDSON MOTORCYCLES. . . . . . . . . . . . . . . . . . . . . . . . . .18
THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
WEIGHTED AVERAGE LIFE OF THE SECURITIES. . . . . . . . . . . . . . . . . . . .19
POOL FACTORS AND TRADING INFORMATION . . . . . . . . . . . . . . . . . . . . .20
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
EAGLEMARK FINANCIAL SERVICES, INC.;
EAGLEMARK, INC.; AND THE TRUST DEPOSITORS. . . . . . . . . . . . . . . . . . .21
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . .21
DESCRIPTION OF THE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . .26
CERTAIN INFORMATION REGARDING THE SECURITIES . . . . . . . . . . . . . . . . .27
DESCRIPTION OF THE TRANSFER AND SALE AGREEMENTS. . . . . . . . . . . . . . . .34
DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND
POOLING AND SERVICING AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . .36
CERTAIN LEGAL ASPECTS OF THE CONTRACTS . . . . . . . . . . . . . . . . . . . .46
FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . . . . . . . . .49
OWNER TRUSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
CERTAIN STATE TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . .61
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
</TABLE>
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Securities offered by this Prospectus Supplement,
whether or not participating in this distribution, may be required to deliver
this Prospectus Supplement and the Prospectus. This is in addition to the
obligation of dealers to deliver this Prospectus Supplement and the Prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$[ ]
HARLEY-DAVIDSON EAGLEMARK
MOTORCYCLE TRUST 199__ - [ ]
$[ ] [ ]% HARLEY-DAVIDSON
MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-1
$[ ] [ ]% HARLEY-DAVIDSON
MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2
$[ ] [ ]% HARLEY-DAVIDSON
MOTORCYCLE CONTRACT BACKED CERTIFICATES
EAGLEMARK, INC.
Seller and Servicer
EAGLEMARK CUSTOMER
FUNDING CORPORATION-[ ]
Trust Depositor
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
SALOMON SMITH BARNEY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE INFORMATION HEREIN HAS BEEN
COMPLETED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED [ ], 199_
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED [ ], 199_)
$[ ]
HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST 199_-[ ]
[ ]% CERTIFICATES, CLASS A
[ ]% CERTIFICATES, CLASS B
EAGLEMARK, INC.
SELLER AND SERVICER
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]
TRUST DEPOSITOR
The Harley-Davidson Eaglemark Motorcycle Trust 199_-[ ] (the "TRUST")
Harley-Davidson Motorcycle Contract Backed Certificates described in this
Prospectus Supplement will consist of one class of senior certificates (the
"CLASS A CERTIFICATES") and one class of subordinated certificates (the
"CLASS B CERTIFICATES" and, together with the Class A Certificates, the
"CERTIFICATES"). The Class A Certificates and the Class B Certificates
offered hereby will evidence in the aggregate undivided ownership interests
of ___% (the "CLASS A PERCENTAGE") and ___% (the "CLASS B PERCENTAGE"),
respectively, in the Trust. The Trust will be created by Eaglemark Customer
Funding Corporation-[ ], a 100% owned subsidiary of Eaglemark, Inc., as
trust depositor (the "TRUST DEPOSITOR") pursuant to a Pooling and Servicing
Agreement dated as of [ ], 199_ (the "AGREEMENT"), to be entered into by
and among the Trust Depositor, Eaglemark, Inc. ("EAGLEMARK"), as servicer (in
such capacity, the "SERVICER") and Harris Trust and Savings Bank, as trustee
(in such capacity, the "TRUSTEE").
The rights of the Class B Certificateholders to receive distributions from
the assets of the Trust with respect to interest will be subordinate to the
rights of the Class A Certificateholders to receive distributions with
respect to interest, and the rights of the Class B Certificateholders to
receive distributions of principal will be subordinate to the rights of the
Class A Certificateholders to receive distributions of interest and
principal. See "SUMMARY OF TERMS -- SUBORDINATION OF THE CLASS B
CERTIFICATES; RESERVE FUND" and "DESCRIPTION OF THE CERTIFICATES --
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE FUND."
The Trust property will consist of an initial pool of fixed-rate, simple
interest motorcycle conditional sales contracts (the "INITIAL CONTRACTS"
which, together with any Subsequent Contracts as defined below, are
collectively the "CONTRACTS") relating to Motorcycles manufactured by
Harley-Davidson, Inc. ("HARLEY-DAVIDSON") or, in certain limited instances as
described herein, Motorcycles manufactured by an affiliate of
Harley-Davidson, Buell Motorcycle Company ("BUELL"), including all rights to
receive payments collected on such Initial Contracts on or after
[ ],199_ (the "INITIAL CUTOFF DATE"). The Trust property also
will consist of security interests in the motorcycles financed through the
Contracts; proceeds from certain insurance policies as described in
"DESCRIPTION OF THE CERTIFICATES -- INDIVIDUAL MOTORCYCLE INSURANCE;" an
Agreement to Deposit Contracts dated as of [ ], 199_ from the Trust
Depositor in favor of the
<PAGE>
Trust (the "DEPOSIT AGREEMENT"); rights under a Security Agreement in favor
of the Trust (the "SECURITY AGREEMENT") securing the Trust Depositor's
obligation under the Deposit Agreement to purchase Subsequent Contracts and
transfer the same to the Trust, through the pledge of monies on deposit in a
collateral account (the "PRE-FUNDING ACCOUNT") established thereunder;
amounts held for the Trust in the Collection Account; and certain other
property as more fully described herein.
(cover continued on next page)
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE POTENTIAL RISK FACTORS
SET FORTH UNDER "RISK FACTORS" ON PAGE S-[ ] HEREOF AND ON PAGE 13 OF THE
PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE SERVICER, THE TRUST DEPOSITOR
OR ANY AFFILIATE THEREOF, EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN. THE
CERTIFICATES DO NOT REPRESENT OBLIGATIONS OF, AND WILL NOT BE INSURED OR
GUARANTEED BY, ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Underwriters have agreed to purchase the Certificates [from the Seller]
as provided herein, and the Certificates will be offered by the Underwriters
from time to time as provided herein in negotiated transactions or otherwise
at varying prices to be determined at the time of sale. The aggregate
proceeds to the Seller from the sale of the Securities are expected to be $
before deducting expenses payable by the Seller of approximately $
.
The Certificates are offered subject to receipt and acceptance by the
Underwriters and to the Underwriters' right to reject any offer in whole or
in part and to withdraw, cancel or modify the offer without notice. It is
expected that delivery of the Certificates will be made in book-entry form
through the facilities of The Depository Trust Company ("DTC") on or about
________.
Underwriters of the Certificates
SALOMON SMITH BARNEY [ ]
The date of this Prospectus Supplement is [__________]
The Contracts were originated by Eaglemark indirectly through Harley-Davidson
motorcycle dealers. Contracts with an aggregate principal balance (as of the
Initial Cutoff Date) of $_______________ will be sold by Eaglemark (in such
capacity, the "SELLER") to the Trust Depositor on the date of issuance of the
Certificates pursuant to a Transfer and Sale Agreement dated as of
[ ], 199_ by and between the Seller and the Trust Depositor (the
"TRANSFER AND SALE AGREEMENT") and will be further transferred and assigned
by the Trust Depositor to the Trust on such date. Additional fixed-rate,
simple interest Harley-Davidson (and, in limited instances, Buell) motorcycle
conditional sales contracts (the "SUBSEQUENT CONTRACTS") will be sold from
time to time by the Seller to the Trust Depositor at or before the end of the
Funding Period (as defined herein) and concurrently, in accordance with the
Deposit Agreement, transferred by the Trust Depositor to the Trust, with the
purchase price to be payable to the Seller from funds on deposit in the
Pre-Funding Account.
S-2
<PAGE>
Principal, and interest to the extent of the Class A Pass-Through Rate of
[ ]% per annum (the "CLASS A PASS-THROUGH RATE") and the Class B
Pass-Through Rate of [ ]% per annum (the "CLASS B PASS-THROUGH RATE"),
will be distributable with respect to the Class A Certificates and the Class
B Certificates, respectively, on the fifteenth day of each month (or, if such
fifteenth day is not a Business Day, the first Business Day thereafter)
beginning [ ], 199_ (each, a "PAYMENT DATE"). The Class A
Initial Certificate Principal Balance and the Class B Initial Certificate
Principal Balance represent the aggregate of the Principal Balances of the
Initial Contracts on the Initial Cutoff Date, plus amounts on deposit in the
Pre-Funding Account as of the date of issuance of the Certificates. The
final scheduled Payment Date of the Certificates will be on [ ] (the
"FINAL SCHEDULED PAYMENT DATE"). See "DESCRIPTION OF THE CERTIFICATES."
However, payment in full of the Certificates could occur earlier than such
date as described herein. In addition, the Certificates will be subject to
prepayment in whole, but not in part, on any Payment Date on which the Seller
exercises its option to purchase the Contracts. The Seller may purchase the
Contracts when the aggregate outstanding Class A Certificate Balance and
Class B Certificate Balance has declined to less than 10% of the aggregate
Class A Initial Certificate Balance and Class B Initial Certificate Balance.
The Certificates will also be subject to partial mandatory prepayment,
without premium, in the event that funds remain in the Pre-Funding Account at
the end of the Funding Period (as defined herein).
It is a condition of issuance that the Class A Certificates be rated AAA by
Standard & Poor's Ratings Services ("S&P") and Aaa by Moody's Investors
Service, Inc. ("MOODY'S"), and the Class B Certificates be rated at least
_____ by S&P and ______ by Moody's (S&P, together with Moody's, the "RATING
AGENCIES").
S-3
<PAGE>
THE SECURITIES ARE BEING OFFERED [BY THE SELLER] FROM TIME TO TIME PURSUANT
TO THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ACCOMPANYING THIS PROSPECTUS
SUPPLEMENT. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION
ABOUT THE OFFERING OF THE SECURITIES. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS, AND PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE SECURITIES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. TO THE EXTENT THAT ANY STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT MODIFY STATEMENTS CONTAINED IN THE PROSPECTUS, THE STATEMENTS IN
THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Certificate Underwriters expect, but
are not obligated, to make a market in the Certificates. There is no
assurance that any such market will develop, or if one does develop, that it
will continue or provide sufficient liquidity.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT AFFECT THE PRICE OF THE CERTIFICATES. SUCH TRANSACTIONS MAY INCLUDE THE
PURCHASE OF CERTIFICATES TO COVER SYNDICATE SHORT POSITIONS. FOR A
DESCRIPTION OF THESE TRANSACTIONS, SEE "UNDERWRITING" HEREIN.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an Underwriter or a request by such
investor's representative within the period during which there is an
obligation to deliver a Prospectus Supplement and Prospectus, the Seller or
such Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
UNTIL 90 DAYS FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
REPORT TO SECURITYHOLDERS
Unless and until the Certificates are issued in definitive certificate form,
monthly and annual unaudited reports containing information concerning the
Contracts will be prepared by the Servicer and sent on behalf of the trust
only to Cede & Co., as nominee of DTC and registered holder of the
Certificates. See "CERTAIN INFORMATION REGARDING THE SECURITIES--BOOK-ENTRY
REGISTRATION" and "--REPORTS TO SECURITYHOLDERS" in the accompanying
Prospectus. Such reports will not constitute financial statements prepared
in accordance with generally accepted accounting principles. The Servicer
will file with the Securities and Exchange Commission (the "COMMISSION") such
periodic reports with respect to the Trust as are required under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the
rules and regulations of the Commission thereunder.
S-4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
STRUCTURE OF THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . .14
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
THE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
HARLEY-DAVIDSON MOTORCYCLES . . . . . . . . . . . . . . . . . . . . . . .25
YIELD AND PREPAYMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . .25
EAGLEMARK FINANCIAL SERVICES, INC.;
EAGLEMARK, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ] . . . . . . . . . . . . . .26
DESCRIPTION OF THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . .27
SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS;
REPURCHASE OBLIGATIONS. . . . . . . . . . . . . . . . . . . . .41
FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . .44
ERISA CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .45
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
</TABLE>
S-5
<PAGE>
SUMMARY OF TERMS
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE HEREIN AND IN THE PROSPECTUS. CERTAIN
CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT ON THE PAGES INDICATED IN THE "INDEX OF DEFINED TERMS" ON PAGE 51 OR,
TO THE EXTENT NOT DEFINED HEREIN, HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN
THE PROSPECTUS.
<TABLE>
<S> <C>
Securities Offered. . . . . . Certificates for Harley-Davidson Motorcycle
Contracts [ ]% Certificates, Class A
("CLASS A CERTIFICATES") and [ ]%
Certificates, Class B ("CLASS B CERTIFICATES"
and, together with the Class A Certificates,
the "CERTIFICATES"). The Class A
Certificates and the Class B Certificates
will evidence in the aggregate undivided
ownership interests of [ ]% (the "CLASS A
PERCENTAGE") and [ ]% (the "CLASS B
PERCENTAGE"), respectively, in the Trust.
The rights of the Class B Certificateholders
to receive distributions with respect to
assets of the Trust will be subordinate to
the right of the Class A Certificateholders
to the extent described herein. See "SUMMARY
OF TERMS - SUBORDINATION OF THE CLASS B
CERTIFICATES; RESERVE FUND" and "DESCRIPTION
OF THE CERTIFICATES -- SUBORDINATION OF THE
CLASS B CERTIFICATES; RESERVE FUND" below.
Trust . . . . . . . . . . . . Harley-Davidson Eaglemark Motorcycle Trust
199_-[ ] (THE "TRUST"), to be created by
the Trust Depositor pursuant to the
Agreement.
Class A Initial Certificate
Balance and Class B Initial
Certificate Balance . . . . . $[ ] (the "CLASS A INITIAL CERTIFICATE
BALANCE") representing the aggregate
Principal Balance of the Initial Contracts on
[ ], 199_ (the "INITIAL CUTOFF
DATE") plus the amount on deposit in the
Pre-Funding Account as of the Closing Date
multiplied by the Class A Percentage, and
$[ ] (the "CLASS B INITIAL
CERTIFICATE BALANCE") representing the
aggregate Principal Balance of the Initial
Contracts on the Initial Cutoff Date plus the
amount on deposit in the Pre-Funding Account
as of the Closing Date multiplied by the
Class B Percentage.
Trustee . . . . . . . . . . . Harris Trust and Savings Bank, an Illinois
banking corporation (THE "TRUSTEE"). The
Trustee will also act as Paying Agent.
Trust Depositor . . . . . . . Eaglemark Customer Funding Corporation-[ ],
a 100% owned subsidiary of Eaglemark, Inc.
(THE "TRUST DEPOSITOR").
S-6
<PAGE>
Seller and Servicer . . . . . Eaglemark, Inc. ("EAGLEMARK" or the "SELLER" or
the "SELLER/SERVICER" or, solely in its
capacity as Servicer, the "SERVICER"), a 100%
owned subsidiary of Eaglemark Financial
Services, Inc.
Trust Property. . . . . . . . The Trust property consists of, among other
things, the pool of Initial Contracts
together with any Subsequent Contracts
transferred to the Trust, and all rights,
benefits, obligations and proceeds arising
therefrom or in connection therewith,
including security interests in the
Harley-Davidson (and, in certain limited
instances, Buell) motorcycles (the
"MOTORCYCLES"; see "THE CONTRACTS-
HARLEY-DAVIDSON MOTORCYCLES" below) securing
such Contracts and proceeds, if any, from
certain insurance policies with respect to
individual Motorcycles. No more than [
]% of the Principal Balance of all Contracts
conveyed to the Trust (including all
Subsequent Contracts) will relate to Buell
motorcycles.
Distributions on the
Certificates. . . . . . . . . Distributions of interest and principal on the
Certificates will be made on the fifteenth
day of each month or, if such day is not a
Business Day, the next succeeding Business
Day, commencing [ ], 199_
(each, a "PAYMENT DATE"). In addition, if
amounts remain on deposit in the Pre-Funding
Account at the end of the Funding Period (as
defined herein), such amounts will be
distributed on the corresponding Payment Date
as a Special Distribution of principal (see
"MANDATORY SPECIAL DISTRIBUTION" below).
Distributions on any Payment Date will be
made to the holders of the related
Certificates who are of record on the last
day immediately preceding the calendar month
in which such Payment Date occurs, whether or
not such day is a Business Day (each, a
"RECORD DATE").
Class A Pass-Through Rate
and Class B Pass- Through
Rate . . . . . . . . . . . . [ ]% per annum for the Class A Certificates
and [ ]% per annum for the Class B
Certificates, both computed on the basis of a
360-day year consisting of twelve 30-day
months (the "CLASS A PASS-THROUGH RATE" and
the "CLASS B PASS-THROUGH RATE",
respectively).
Monthly Interest
Distributions . . . . . . . . The Trustee will distribute, to the extent of
funds available for the payment thereof, on
each Payment Date to the holders of record of
the Class A Certificates (the "CLASS A
CERTIFICATEHOLDERS") and the holders of
record of the Class B Certificates (the
"CLASS B CERTIFICATEHOLDERS") as of the
Record Date, the Class A Interest
Distributable
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<PAGE>
Amount and the Class B Interest Distributable
Amount, respectively, as described
immediately below. The "CLASS A INTEREST
DISTRIBUTABLE AMOUNT" with respect to any
Payment Date will be an amount equal to the
sum of (i) the product of (a) one-twelfth
(or, with respect to the first Payment Date,
a fraction, the numerator of which equals the
number of days from and including the Closing
Date to but excluding the first Payment Date
and the denominator of which equals 360) of
the Class A Pass-Through Rate and (b) the
Class A Certificate Balance (defined below)
as of the immediately preceding Payment Date
(after giving effect to distributions of
principal made on such immediately preceding
Payment Date) or, in the case of the first
Payment Date, the Class A Initial Certificate
Balance, plus (ii) the Class A Interest
Carryover Shortfall (as defined below) for
such Payment Date. The "CLASS B INTEREST
DISTRIBUTABLE AMOUNT" with respect to any
Payment Date (other than the first Payment
Date), will be an amount equal to the sum of
(i) the product of (a) one-twelfth (or, with
respect to the first Payment Date, a fraction
the numerator of which equals the number of
days from and including the Closing Date to
but excluding the first Payment Date and the
denominator of which equals 360) of the Class
B Pass-Through Rate and (b) the Class B
Certificate Balance (defined below) as of the
immediately preceding Payment Date (after
giving effect to distributions of principal
made on such immediately preceding Payment
Date) or, in the case of the first Payment
Date, the Class B Initial Certificate
Balance, plus (ii) the Class B Interest
Carryover Shortfall (as defined below) for
such Payment Date. As used herein, "CLASS A
CERTIFICATE BALANCE" means the Class A
Initial Certificate Balance, reduced by all
amounts previously distributed to Class A
Certificateholders and allocable to
principal; "CLASS B CERTIFICATE BALANCE"
means, initially, the Class B Initial
Certificate Principal Balance, and
thereafter, the amount by which the sum of
the aggregate Principal Balance of all
Contracts, plus the Pre-Funded Amount,
exceeds the Class A Certificate Balance;
"CLASS A INTEREST CARRYOVER SHORTFALL" means,
with respect to any Payment Date, (i) the
excess of the Class A Interest Distributable
Amount for the preceding Payment Date over
the amount of interest that was actually
distributed to Class A Certificateholders on
such preceding Payment Date, plus (ii) 30
days of interest on the amount specified in
clause (i), to the extent permitted by law,
at the Class A Pass-Through
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<PAGE>
Rate; and "CLASS B INTEREST CARRYOVER
SHORTFALL" means, with respect to any Payment
Date, (i) the excess of the Class B Interest
Distributable Amount for the preceding
Payment Date over the amount of interest that
was actually distributed to Class B
Certificateholders on such preceding Payment
Date, plus (ii) 30 days of interest on the
amount specified in clause (i), to the extent
permitted by law, at the Class B Pass-Through
Rate.
The Class A Interest Distributable Amount and
Class B Interest Distributable Amount are
first payable out of Available Interest.
"AVAILABLE INTEREST" means, with respect to
any Payment Date, the total (without
duplication) of the following amounts
received by the Servicer on or in respect of
the Contracts during the calendar month
preceding such Payment Date (such calendar
month period, with respect to that Payment
Date, being the related "DUE PERIOD"): (i)
all amounts received in respect of interest
on the Contracts (as well as late payment
penalty fees and extension fees), (ii) the
interest component of all Net Liquidation
Proceeds (as defined in the Agreement) with
respect to any Contract, (iii) the interest
component of the aggregate of the Repurchase
Prices (as defined in "STRUCTURE OF THE
TRANSACTION" below) for Contracts repurchased
by the Seller with respect to breaches of
certain representations and warranties, (iv)
all Advances (as defined in "SUMMARY OF TERMS
-- ADVANCES" below) made by the Servicer, (v)
the interest component of all amounts paid by
the Seller in connection with an optional
repurchase of the Contracts in the event that
the aggregate of the Class A Certificate
Balance and Class B Certificate Balance is
less than 10% of the aggregate of the Class A
Initial Certificate Balance and Class B
Initial Certificate Balance, (vi) all amounts
received in respect of Carrying Charges (as
defined in "SUMMARY OF TERMS - INTEREST
RESERVE" below) transferred from the Interest
Reserve Account (as defined herein), and
(vii) all amounts received in respect of
interest, dividends, gains, income and
earnings on investment of funds in the
Collection Account and the Special
Distribution Subaccount, as defined in the
Agreement (the "TRUST ACCOUNTS").
Additionally, the Class A Interest
Distributable Amount with respect to any
Payment Date is payable, to the extent not
paid from Available Interest as described
above, from the Class B Percentage of
Available Principal (as defined in "SUMMARY
OF TERMS - MONTHLY PRINCIPAL DISTRIBUTIONS"
below) for such Payment Date.
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<PAGE>
Finally, if not paid from the above-described
sources, the Class A Interest Distributable
Amount and Class B Interest Distributable
Amount are payable from the Reserve Fund.
See "DESCRIPTION OF THE CERTIFICATES --
PAYMENTS ON CONTRACTS; AVAILABLE FUNDS,
AVAILABLE INTEREST AND AVAILABLE PRINCIPAL,"
"-- CALCULATION OF DISTRIBUTABLE AMOUNTS,"
and "-- SUBORDINATION OF THE CLASS B
CERTIFICATES; RESERVE FUND" below).
Monthly Principal
Distributions . . . . . . . . The Trustee will distribute, to the extent of
funds available for the payment thereof, on
each Payment Date to the Class A
Certificateholders and the Class B
Certificateholders the Class A Principal
Distributable Amount and the Class B
Principal Distributable Amount, respectively.
The "CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT"
with respect to any Payment Date, equals the
sum of (i) the product of the Class A
Percentage and the Monthly Principal (as
defined below) for such Payment Date, plus
(ii) the Class A Principal Carryover
Shortfall (as defined below) for such Payment
Date. The "CLASS B PRINCIPAL DISTRIBUTABLE
AMOUNT" with respect to any Payment Date
equals the sum of (i) the product of the
Class B Percentage and the Monthly Principal
for such Payment Date, plus (ii) the Class B
Principal Carryover Shortfall (as defined
below) for such Payment Date. "MONTHLY
PRINCIPAL" means, as to any Payment Date, the
following amount calculated as of the related
Determination Date: the difference between
(i) the sum of (A) the Principal Balance of
the Contracts (as defined below) as of the
first day of the Due Period preceding the Due
Period in which such Payment Date occurs (or,
in the case of the first Payment Date, the
Principal Balance of the Contracts as of the
Initial Cutoff Date), plus (B) the
Pre-Funded Amount on such date (or, in the
case of the first Payment Date, the
Pre-Funded Amount on the Closing Date) and
(ii) the sum of (A) the Principal Balance of
the Contracts as of the first day of the Due
Period in which such Payment Date occurs,
plus (B) the Pre-Funded Amount on such day,
plus (C) the amount of any Special
Distribution occurring from the day referred
to in clause (i)(A) above to the day referred
to in clause (ii)(A) above; provided, that on
the Final Scheduled Payment Date, Monthly
Principal shall equal the aggregate of the
Class A Certificate Balance and the Class B
Certificate Balance on such date (subject to
adjustments for Special Distributions). The
"PRINCIPAL BALANCE" of the Contracts means
the aggregate of the unpaid principal balance
of each
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<PAGE>
Contract as of the related Cutoff Date,
reduced by the sum of (x) all payments
received by the Servicer allocable to
principal, plus (y) any reduction in the
principal balance of such Contract
attributable to bankruptcy court order.
Also, the Principal Balance of the following
Contracts is deemed to be zero: (i) Contracts
with respect to which the Seller has given
notice of the intent to exercise an optional
repurchase, or which the Seller has in fact
repurchased as a result of a breach of
representation or warranty; and (ii)
Contracts as to which extensive delinquencies
or defaults exist beyond the threshold levels
set forth in the Agreement, or with respect
to which a 90 day period has elapsed
following repossession of the related
Motorcycle. Also, as used herein, "CLASS A
PRINCIPAL CARRYOVER SHORTFALL" means, with
respect to any Payment Date, the excess of
(i) the Class A Principal Distributable
Amount for the preceding Payment Date over
(ii) the amount of principal that was
actually distributed to Class A
Certificateholders on such preceding Payment
Date; "CLASS B PRINCIPAL CARRYOVER SHORTFALL"
means, with respect to any Payment Date, the
excess of (i) the Class B Principal
Distributable Amount for the preceding
Payment Date over (ii) the amount of
principal that was actually distributed to
Class B Certificateholders on such preceding
Payment Date.
The Class A Principal Distributable Amount and
Class B Principal Distributable Amount are
payable out of Available Principal.
"AVAILABLE PRINCIPAL" means, with respect to
any Payment Date, the total (without
duplication) of the following amounts
received by the Servicer on or in respect of
the Contracts during the related Due Period:
(i) all amounts received in respect of
principal on the Contracts, (ii) the
principal component of all Net Liquidation
Proceeds, (iii) the principal component of
the aggregate of the Repurchase Prices for
Contracts repurchased by the Seller with
respect to breaches of certain
representations and warranties, and (iv) the
principal component of all amounts paid by
the Seller in connection with an optional
repurchase of the Contracts in the event the
Class A Certificate Balance and Class B
Certificate Balance is less than 10% of the
Class A Initial Certificate Balance and Class
B Initial Certificate Balance. Additionally,
the Class A Principal Distributable Amount
and Class B Principal Distributable Amount
are payable, subject to certain limitations,
from remaining Available Interest (after
payment of the Class A Interest
S-11
<PAGE>
Distributable Amount, the Class B Interest
Distributable Amount, and certain other costs
therefrom) and from the Reserve Fund. See
"DESCRIPTION OF THE CERTIFICATES -- PAYMENTS
ON CONTRACTS; AVAILABLE FUNDS, AVAILABLE
INTEREST AND AVAILABLE PRINCIPAL," "--
CALCULATION OF DISTRIBUTABLE AMOUNTS," and
"-- SUBORDINATION OF THE CLASS B
CERTIFICATES; RESERVE FUND" below.
Subordination of the Class B
Certificates; Reserve Fund . The rights of the Class B Certificateholders to
receive distributions to which they would
otherwise be entitled with respect to the
Contracts will be subordinated to the rights
of the Class A Certificateholders.
The Class B Certificateholders will not receive
any distributions in respect of the Class B
Interest Distributable Amount on a Payment
Date until the Class A Interest Distributable
Amount for such Payment Date has been
distributed to the Class A
Certificateholders, and the Class B
Certificateholders will not receive any
distributions of the Class B Principal
Distributable Amount for such Payment Date
until the Class A Interest Distributable
Amount and the Class A Principal
Distributable Amount for such Payment Date
has been distributed to the Class A
Certificateholders. Distributions of the
Class B Interest Distributable Amount, to the
extent of Available Interest (after payment
of the Class A Interest Distributable Amount
for such Payment Date) and certain available
amounts on deposit in the Reserve Fund (as
defined herein), will not be subordinated to
the payment of the Class A Principal
Distributable Amount.
The protection afforded to the Class A
Certificateholders by the subordination
feature described above will be effected by
the preferential right of the Class A
Certificateholders to receive current
distributions from collections on or in
respect of the Contracts and from the Reserve
Fund to the extent described herein.
Certificateholders will have the benefit of a
segregated trust account held by Harris Trust
and Savings Bank as collateral agent (in such
capacity, the "RESERVE AGENT") for the
benefit of the Certificateholders (the
"RESERVE FUND"). The Reserve Fund will not
be part of the Trust. The Reserve Fund will
be created with an initial deposit by the
Trust Depositor of $[ ] (the "RESERVE
FUND INITIAL DEPOSIT"). Monies in the
Reserve Fund will thereafter be supplemented
on each Payment
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<PAGE>
Date by the deposit therein of certain monies
(such monies, together with the Reserve Fund
Initial Deposit, the "RESERVE FUND
DEPOSITS"). The Reserve Agent will retain
Reserve Fund Deposits in the Reserve Fund
until the amounts therein reach amounts
specified in the Reserve Fund Agreement (as
further defined herein the "RESERVE FUND
REQUISITE AMOUNT"); additionally, on each
Subsequent Purchase Date, to the extent
necessary, the Seller will contribute
additional monies into the Reserve Fund
("RESERVE FUND ADDITIONAL DEPOSITS"). In the
event and to the extent the Reserve Fund
Deposits exceed the Reserve Fund Requisite
Amount on a Payment Date (after giving effect
to all other withdrawals from the Reserve
Fund required to be made on such date), such
excess amounts will be released from the
Reserve Fund to the Trust Depositor.
On each Payment Date, to the extent necessary
and to the extent monies are available in the
Reserve Fund, monies will be withdrawn from
the Reserve Fund for distribution FIRST to
the Class A Certificateholders to the extent
necessary to pay the Class A Interest
Distributable Amount for such Payment Date,
SECOND, to the Class B Certificateholders to
the extent necessary to pay the Class B
Interest Distributable Amount for such
Payment Date, THIRD, to the Class A
Certificateholders to the extent necessary to
pay the Class A Principal Distributable
Amount for such Payment Date, and FOURTH, to
the Class B Certificateholders to the extent
necessary to pay the Class B Principal
Distributable Amount for such Payment Date.
See "DESCRIPTION OF THE CERTIFICATES --
SUBORDINATION OF THE CLASS B CERTIFICATES;
RESERVE FUND" below.
The Contracts . . . . . . . . The Contracts will be fixed-rate,
simple-interest conditional sales contracts
for Motorcycles, including any and all rights
to receive payments collected thereunder on
or after the related Cutoff Date (as defined
herein) and security interests in the
Motorcycles financed thereby.
On the Closing Date, the Trust Depositor will
sell, transfer and assign to the Trust
pursuant to the Agreement Initial Contracts
with an aggregate principal balance of $[ ]
as of [ ], the Initial Cutoff Date.
Following the Closing Date, pursuant to the
Deposit Agreement, the Trust Depositor will
be obligated, subject only to the
availability thereof, to sell, and the Trust
will be obligated to purchase, subject to the
satisfaction of
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<PAGE>
certain conditions set forth therein,
Subsequent Contracts from time to time during
the Funding Period (as defined below) having
an aggregate principal balance equal to $[ ]
such amount being equal to the amount on
deposit in the Pre-Funding Account
established under the Security Agreement (the
"PRE-FUNDED AMOUNT") on the Closing Date.
With respect to each transfer of Subsequent
Contracts to the Trust, the Trust Depositor
will designate as a cutoff date (each a
"SUBSEQUENT CUTOFF DATE") the date as of
which such Subsequent Contracts are deemed
sold to the Trust. Each date on which
Subsequent Contracts are conveyed is referred
to herein as a "SUBSEQUENT TRANSFER DATE".
The Initial Contracts and the Subsequent
Contracts will be selected from retail
Motorcycle installment sales contracts in the
Seller's portfolio based on the criteria
specified in the Transfer and Sale Agreement
executed and delivered on the Closing Date.
The Contracts arise and will arise from loans
to Obligors located in 50 states, the
District of Columbia and the U.S.
Territories. As of the Initial Cutoff Date,
the annual percentage rate of interest on the
Initial Contracts ranges from [ ]% to [ ]%
with a weighted average of approximately [ ]%.
The Initial Contracts had a weighted
average term to scheduled maturity, as of
origination, of approximately [ ] months,
and a weighted average term to scheduled
maturity, as of the Initial Cutoff Date, of
approximately [ ] months. The final
scheduled payment date on the Initial
Contract with the latest maturity is no later
than [ ]. No Contract (including
any Subsequent Contract) will have a
scheduled maturity later than [ ].
The Contracts generally are or will be
prepayable at any time without penalty to the
Obligor. Following the transfer of
Subsequent Contracts to the Trust, the
aggregate characteristics of the entire pool
of Contracts may vary from those of the
Initial Contracts as of the Initial Cutoff
Date as to the criteria identified and
described above and in "THE CONTRACTS" below.
Pre-Funding Account . . . . . During the period (the "FUNDING PERIOD") from
and including the Closing Date until the
earliest of (a) the Payment Date on which the
amount on deposit in the Pre-Funding Account
is less than $[ ], (b) the date on
which an Event of Termination occurs with
respect to the Servicer under the Agreement,
(c) the date on which certain events of
insolvency occur with respect to the Seller,
or (d)
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<PAGE>
the close of business on the date which is 90
days from and including the Closing Date, the
Pre-Funded Account will be maintained in the
Pre-Funding Account established under the
Security Agreement as a collateral account
pledged by the Trust Depositor in favor of
the Trustee to secure the Trust Depositor's
obligations under the Deposit Agreement to
purchase and transfer Subsequent Contracts to
the Trust. The Pre-Funded Amount will
initially equal $[ ] and,
during the Funding Period, will be reduced by
the amount thereof that the Trust Depositor
uses to purchase Subsequent Contracts from
the Seller. The Trust Depositor expects that
the Pre-Funded Account will be reduced to
less than $[_______] by the Payment Date
occurring in [ ]. Any
Pre-Funded Amount remaining at the end of the
Funding Period will be payable to the
Certificateholders as described below in
"MANDATORY SPECIAL DISTRIBUTIONS". The
Pre-Funding Account will not be part of the
Trust.
Mandatory Special
Distribution. . . . . . . . . The Class A Certificates and Class B Certificat
es will be prepaid in part, without premium,
on the Payment Date on or immediately
following the last day of the Funding Period
in the event that any amount remains on
deposit in the Pre-Funding Account after
giving effect to the purchase of all
Subsequent Contracts, including any such
purchase on such date (a "SPECIAL
DISTRIBUTION"). The aggregate principal
amount of Class A Certificates and Class B
Certificates to be prepaid will be an amount
equal to the amount then on deposit in the
Pre-Funding Account multiplied by the Class A
Percentage and Class B Percentage,
respectively.
Interest Reserve Account . . The Trust Depositor has established, and funded
with an initial deposit on the Closing Date,
a separate collateral account under the
Security Agreement (the "INTEREST RESERVE
ACCOUNT") for the purpose of providing
additional funds (for payment to the Trust of
Carrying Charges as described below) to pay
certain distributions on Payment Dates
occurring during (and on the first Payment
Date following the end of) the Funding
Period. In addition to the initial deposit,
all investment earnings with respect to the
Pre-Funded Amount are to be deposited into
the Interest Reserve Account and, pursuant to
the Deposit Agreement, the Trust Depositor is
obligated to pay to the Trust, on each
Payment Date described above, amounts in
respect of Carrying Charges from such
account. "CARRYING CHARGES" means the sum of
(i) the product of (A)
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<PAGE>
one-twelfth (1/12th) of the sum of (x) the
Class A Pass-Through Rate and (y)[ ]%
times (B) the Class A Percentage of the
Pre-Funded Amount as of the beginning of the
related Due Period plus (ii) the product of
(A) one-twelfth (1/12th) of the sum of (x)
the Class B Pass-Through Rate and (y) [ ]%
times] (B) the Class B Percentage of the
Pre-Funded Amount as of the beginning of the
related Due Period. The Interest Reserve
Account has been established to account for
the fact that a portion of the proceeds
obtained from the sale of Certificates will
be initially deposited in the Pre-Funding
Account (as the initial Pre-Funded Amount)
rather than invested in Contracts, and the
monthly investment earnings on such
Pre-Funded Amount (until the Pre-Funded
Amount is used to purchase Subsequent
Contracts) are expected to be less than the
Class A Pass-Through Rate and Class B
Pass-Through Rate, with respect to the
corresponding portion of the Class A
Certificate Balance and Class B Certificate
Balance and the amount necessary to pay the
Trustee's Fee. The Interest Reserve Account
is not designed to provide any protection
against losses on the Contracts in the Trust.
After the Funding Period, money remaining in
the Interest Reserve Account will be released
to the Trust Depositor free and clear of the
lien of the Security Agreement. The Interest
Reserve Account will not be part of the
Trust.
Advances. . . . . . . . . . . The Servicer is obligated to advance each month
an amount equal to accrued and unpaid
interest on the Contracts which was
delinquent with respect to the related Due
Period (each an "ADVANCE"), but only to the
extent that the Servicer believes that the
amount of such Advance will be recoverable
from collections on the Contracts. The
Servicer will be entitled to reimbursement of
outstanding Advances on any Payment Date by
means of a first priority withdrawal of
Available Funds then held in the Collection
Account (as defined herein). See
"DESCRIPTION OF THE CERTIFICATES--ADVANCES."
Mandatory Repurchases by
the Seller. . . . . . . . . . Under the Transfer and Sale Agreement, the
Seller has agreed, in the event of a breach
of certain representations and warranties
made by the Seller and contained therein
which materially and adversely affects the
Trust's interest in any Contract, to
repurchase such Contract within 90 days,
unless such breach is cured. See "DESCRIPTION
OF THE CERTIFICATES -- CONVEYANCE OF
CONTRACTS."
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<PAGE>
Repurchase Option . . . . . . The Seller will have the option to repurchase
all of the outstanding Contracts on any
Payment Date on which the aggregate of the
Class A Certificate Balance and Class B
Certificate Balance is less than 10% of the
Class A Initial Certificate Balance and of
the Class B Initial Certificate Balance, at a
price equal to the aggregate of the Class A
Certificate Balance and Class B Certificate
Balance on the prior Payment Date plus the
aggregate of the Class A Interest
Distributable Amount and the Class B Interest
Distributable Amount for the current Payment
Date and any accrued and unpaid fees to the
date of such repurchase. See "DESCRIPTION OF
THE CERTIFICATES -- REPURCHASE OPTION."
Security Interests and
Other Aspectsof the
Contracts . . . . . . . . . . In connection with the establishment of the
Trust as well as the transfer of contracts
(including Subsequent Contracts) to the
Trust, security interests in the Motorcycles
securing the Contracts have been (or will be)
conveyed and assigned by (i) the Seller to
the Trust Depositor pursuant to the Transfer
and Sale Agreement (and, in the case of
Subsequent Contracts, the related Subsequent
Purchase Agreement as defined therein and
executed thereunder) and (ii) the Trust
Depositor to the Trust pursuant to the
Agreement (and, in the case of Subsequent
Contracts, the related Subsequent Transfer
Agreement as defined herein and executed
thereunder). The Agreement will designate
the Servicer as custodian to maintain
possession, as the Trustee's agent, of the
Contracts and any other documents relating to
the Motorcycles. Uniform Commercial Code
financing statements will be filed in both
Nevada and Illinois, reflecting the
conveyance and assignment of the Contracts to
the Trust Depositor from the Seller and from
the Trust Depositor to the Trust, and the
Seller's and the Trust Depositor's accounting
records and computer systems will also
reflect such conveyance and assignment. To
facilitate servicing and save administrative
costs, such documents will not be segregated
from other similar documents that are in the
Servicer's possession. However, the
Contracts will be stamped to reflect their
conveyance and assignment to the Trust. If,
however, through fraud, negligence or
otherwise, a subsequent purchaser were able
to take physical possession of the Contracts
without notice of such conveyance and
assignment, the Trust's interest in the
Contracts could be defeated. In addition,
due to administrative burden and expense, the
certificates
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<PAGE>
of title to the Motorcycles will not be
amended or reissued to reflect the assignment
of the Seller's security interest in the
Motorcycles related to the Contracts to the
Trust Depositor or the Trust. In the absence
of amendments to the certificates of title,
the Trustee may not have a perfected security
interest in the Motorcycles. Further,
Federal and state consumer protection laws
impose requirements upon creditors in
connection with extensions of credit and
collections on conditional sales contracts,
and certain of these laws make an assignee of
such a contract liable to the obligor thereon
for any violation of such laws by the lender.
The Seller has agreed to repurchase any
Contract as to which it has failed to perfect
a security interest in the Motorcycle
securing such Contract, or as to which a
breach of federal or state laws exists if
such breach materially adversely affects the
Trust's interest in such Contract, if such
failure or breach has not been cured within
the time period specified in the Transfer and
Sole Agreement. See "SECURITY INTERESTS AND
OTHER ASPECTS OF THE CONTRACTS; REPURCHASE
OBLIGATIONS" below.
Monthly Servicing Fee . . . . The Servicer will be entitled to receive for
each Due Period a monthly servicing fee (the
"MONTHLY SERVICING FEE") equal to 1/12th of
[ ]% of the Principal Balance of the
Contracts as of the beginning of such Due
Period. The Servicer will also be entitled
to receive any extension fees or late payment
penalty fees paid by Obligors (collectively
with the Monthly Servicing Fee, the
"SERVICING FEE"). The Servicing Fee is
payable from Available Interest, prior to the
payment of the Class A Distributable Amount
and the Class B Distributable Amount. See
"DESCRIPTION OF THE CERTIFICATES -- SERVICING
COMPENSATION AND PAYMENT OF EXPENSES," and
"-- RIGHTS UPON AN EVENT OF TERMINATION"
below.
Tax Status. . . . . . . . . . In the opinion of Winston & Strawn, federal
income tax counsel to the Trust Depositor,
the Trust will be classified as a grantor
trust for federal income tax purposes and not
as an association taxable as a corporation.
Each Certificateholder will be treated as the
owner of an undivided interest in the assets
of the Trust, including the Contracts.
Accordingly, each Certificateholder must
report on its federal income tax return its
share of income from the Contracts and,
subject to limitations on deductions by
individuals, estates and trusts, may deduct
its share of the reasonable fees paid by the
Trust, as if such Certificateholder held its
share of the assets
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<PAGE>
of the Trust directly. Furthermore, the
Certificates may represent interests in
"STRIPPED BONDS" and "STRIPPED COUPONS"
within the meaning of Section 1286 of the
Internal Revenue Code of 1986, as amended
(the "CODE"). See "FEDERAL INCOME TAX
CONSEQUENCES -- GRANTOR TRUST" in the
Prospectus.
ERISA Considerations. . . . . After the expiration of the Funding Period, the
Class A Certificates will be eligible for
purchase by employee benefit plans. Any plan
fiduciary who proposes to cause a plan to
acquire any of the Certificates should
consult with its own counsel with respect to
the applicability of the Employee Retirement
Income Security Act of 1974, as amended
("ERISA") and the Code to such investment,
including the availability of any class or
individual ERISA prohibited transaction
exemption. See "ERISA CONSIDERATIONS" below.
The Class B Certificates are not eligible for
purchase by (i) employee benefit plans
subject to ERISA, or (ii) individual
retirement accounts and other retirement
plans subject to Section 4975 of the Code,
other than through an insurance company
general account after the expiration of the
Funding Period. See "ERISA CONSIDERATIONS"
below.
Ratings . . . . . . . . . . . It is a condition to the closing that the Class
A Certificates be rated Aaa by Moody's and
AAA by S&P and the Class B Certificates be
rated at least [ ] by Moody's and [ ] by
S&P. A security rating is not a
recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the rating agency.
In the event that the rating initially
assigned to the Certificates is subsequently
lowered or withdrawn for any reason, no
person or entity will be obligated to provide
any additional credit enhancement with
respect to the Certificates.
</TABLE>
S-19
<PAGE>
RISK FACTORS
THE CONTRACTS AND REINVESTMENT RISK ASSOCIATED WITH THE PRE-FUNDING
ACCOUNT. On the Closing Date, the Trust Depositor will transfer
$[ ] of Initial Contracts to the Trust, which Initial
Contracts the Trust Depositor purchased from the Seller using part of the
proceeds of the Certificates sold to investors. The Trust Depositor will
pledge $[ ] I.E., the remaining Certificate proceeds
(representing the Pre-Funded Amount) pursuant to the Security Agreement in
favor of the Trust, and such amount will be deposited into the Pre-Funding
Account maintained by Harris Trust and Savings Bank as collateral agent under
the Security Agreement (the "COLLATERAL AGENT"). Such pledge will secure the
Trust Depositor's obligation, in favor of the Trust, to purchase from the
Seller and transfer to the Trust Subsequent Contracts in a principal amount
equal to the initial Pre-Funded Amount at or before the end of the Funding
Period. The Pre-Funding Account will not be a part of or otherwise
includible in the Trust and will be a segregated trust account held by the
Trust Depositor for the benefit of the Trustee. Any amounts held on deposit
in the Pre-Funding Account and any investment earnings thereon are owned by,
and will be taxable to, the Trust Depositor for federal income tax purposes.
If the Seller fails to originate a principal amount of eligible Contracts
during the Funding Period which is at least equal to the Pre-Funded Amount,
the Trust Depositor will be unable to acquire sufficient Subsequent Contracts
to transfer to the Trust on one or more Subsequent Transfer Dates, thereby
resulting in a Special Distribution and prepayment of principal to the
Certificateholders as described in the following paragraph. See "--TRUST'S
RELATIONSHIP TO THE TRUST DEPOSITOR AND SELLER" below. In addition, any
conveyance of Subsequent Contracts is subject to the satisfaction, on or
before the related Subsequent Transfer Date, of the following conditions,
among others: (i) each such Subsequent Contract satisfies the eligibility
criteria specified in the Transfer and Sale Agreement and the related
Subsequent Purchase Agreement executed thereunder; (ii) as of the applicable
Subsequent Cutoff Date, no Contract in the Trust, including the Subsequent
Contracts that the Trust Depositor will be conveying as of such Subsequent
Cutoff Date, will have a scheduled maturity date later than
[ ]; (iii) the Trust Depositor shall have executed and
delivered in favor of the Trust a written assignment (a "SUBSEQUENT TRANSFER
AGREEMENT") conveying such Subsequent Contracts to the Trust (including a
schedule identifying such Subsequent Contracts); (iv) the Trust Depositor
shall have delivered certain opinions of counsel to the Trustee, the
Placement Agent and the Rating Agencies with respect to the validity and
other aspects of the conveyance of all such Subsequent Contracts; and (v) the
Rating Agencies shall have each notified the Trust Depositor and the Trustee
in writing that, following the addition of such Subsequent Contracts, the
Class A Certificates will be rated AAA by S&P and Aaa by Moody's and the
Class B Certificates will be rated at least [ ] by S&P and [ ]
by Moody's, respectively. Such confirmation of the ratings of the Class A
Certificates and Class B Certificates may depend on factors other than the
characteristics of the Subsequent Contracts, including the delinquency,
repossession and net loss experience on the Contracts in the Trust. Also,
there can be no assurance that the Seller will continue to generate
Motorcycle conditional sales contracts that satisfy the criteria set forth in
the Transfer and Sale Agreement.
To the extent that amounts on deposit in the Pre-Funding Account have
not been fully applied to the purchase of Subsequent Contracts by the Trust
Depositor during the Funding Period, the Class A Certificateholders and Class
B Certificateholders will receive, on the Payment Date on or immediately
following the last day of the Funding Period, a prepayment of principal in an
amount equal to the amount remaining in the Pre-Funding Account (taking into
account applications to the purchase of any Subsequent Contracts on such
Payment Date) multiplied by the Class A Percentage and Class B Percentage,
respectively. See also "RISK FACTORS--REINVESTMENT RISK ASSOCIATED WITH
PRE-FUNDING ACCOUNTS AND COLLATERAL REINVESTMENT ACCOUNTS" in the Prospectus.
It is anticipated that even if the Seller originates sufficient Subsequent
Contracts to exhaust most of the Pre-Funded Amount, the principal amount of
Subsequent Contracts conveyed to the Trust by the end of the Funding Period
will not be exactly equal to the amount on deposit in the Pre-Funding Account
and that therefore there will be at least a nominal amount of principal
prepaid to the Certificateholders at the end of the Funding Period in any
event.
S-20
<PAGE>
Following the transfer of Subsequent Contracts to the Trust, the
aggregate characteristics of the entire pool of Contracts may vary from those
of the Initial Contracts as of the Initial Cutoff Date, as to the criteria
described in "THE CONTRACTS" below.
RISKS ASSOCIATED WITH NON-RECOURSE NATURE OF SECURITIES - NO RECOURSE
TO THE TRUST DEPOSITOR OR SELLER. Neither the Trust Depositor nor the Seller
is generally obligated to make any payments in respect of the Certificates or
the Contracts. However, in connection with each conveyance of Contracts by
the Seller to the Trust Depositor and by the Trust Depositor to the Trust,
each of the Seller and the Trust Depositor will make representations and
warranties with respect to the characteristics of such Contracts. In certain
circumstances, the Seller is obligated to repurchase Contracts with respect
to which such representations or warranties are not true as of the date made.
Neither the Seller nor the Trust Depositor is otherwise obligated with
respect to the Certificates (other than in respect of the transfer of
Subsequent Contracts as described herein). See also "RISK FACTORS--RISKS
ASSOCIATED WITH NON-RECOURSE NATURE OF SECURITIES - NO RECOURSE TO THE
COMPANY, TRUST DEPOSITORS OR THEIR AFFILIATES" and "--RISKS ASSOCIATED WITH
NON-RECOURSE NATURE OF THE SECURITIES -TRUSTS HAVE NO SIGNIFICANT ASSETS OR
SOURCES OF FUNDS OTHER THAN THE CONTRACTS" in the Prospectus.
SUBORDINATION; LIMITED ASSETS. The rights of the Class B
Certificateholders to receive payments in respect of the Class B Interest
Distributable Amount on any Payment Date are subordinated to the rights of
the Class A Certificateholders to receive payments in respect of the Class A
Interest Distributable Amount on such date, and the rights of the Class B
Certificateholders to receive payments in respect of the Class B Principal
Distributable Amount on any Payment Date are subordinated to the rights of
the Class A Certificateholders to receive payments in respect of the Class A
Interest Distributable Amount and the Class A Principal Distributable Amount
for such date. Consequently, on any Payment Date, Available Interest (after
the payment therefrom of any unreimbursed Advances to the Servicer, the
Servicing Fee, the Back-up Servicing Fee and the Trustee's Fee on such date)
and monies on deposit in the Reserve Fund will be applied to the payment of
the Class A Interest Distributable Amount before payment of the Class B
Interest Distributable Amount, and on any Payment Date, Available Principal
(after the payment therefrom of any unreimbursed Advances to the Servicer),
Available Interest (after the payment therefrom of any unreimbursed Advances
to the Servicer, the Servicing Fee, the Trustee's Fee, the Back-up Servicer
Fee, the Class A Interest Distributable Amount and the Class B Interest
Distributable Amount) and monies on deposit in the Reserve Fund will be
applied to the payment of the Class A Principal Distributable Amount before
payment of the Class B Principal Distributable Amount. In addition, on any
Payment Date, amounts in respect of the Class B Percentage of Available
Principal may be distributed to pay the Class A Interest Distributable
Amount. If amounts otherwise allocable to the Class B Certificates are used
to fund payments of interest on or principal of the Class A Certificates,
distributions with respect to the Class B Certificates may be delayed or
reduced and Class B Certificateholders may suffer a loss. See "DESCRIPTION
OF THE CERTIFICATES -- SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE
FUND."
The Trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Contracts, its rights
against the Trust Depositor under the Deposit Agreement as secured by the
Pre-Funding Account and the Interest Reserve Account pledged by the Trust
Depositor under the Security Agreement, and the Reserve Fund. Holders of the
Certificates must rely for repayment upon payments on the Contracts and, if
and to the extent available, amounts on deposit in the Pre-Funding Account,
the Interest Reserve Account and the Reserve Fund. The Pre-Funding Account
and the Interest Reserve Account will only be available during the Funding
Period. The Pre-Funding Account will be used solely to purchase Subsequent
Contracts and is not available to cover losses on the Contracts. The
Interest Reserve Account is designed to cover obligations of the Trust
relating to that portion of the initial Certificate proceeds not invested in
Contracts, and is not designed to provide any protection against losses on
the Contracts.
LIMITED DELINQUENCY AND LOAN LOSS EXPERIENCE WITH MOTORCYCLE
CONTRACTS. The Seller/Servicer was organized in January 1993 and began
purchasing and servicing conditional sales contracts for Motorcycles in
February 1993, and thus has limited underwriting and servicing experience,
delinquency experience and loan loss and repossession experience with respect
to the Contracts. Accordingly, and for other reasons, the
S-21
<PAGE>
Seller's/Servicer's delinquency experience and loan loss and repossession
experience set forth under "THE CONTRACTS" may not be indicative of the
performance of the Contracts sold to the Trust Depositor and held by the Trust.
The Trust Depositor is a special purpose corporation established for the limited
purpose of purchasing the Contracts (and other similar retail motorcycle
conditional sales contracts) and related assets from the Seller, and selling the
same into the Trust (and other similar trusts); the Trust Depositor was
organized in [_____________].
RISKS ASSOCIATED WITH GEOGRAPHIC CONCENTRATIONS OF CONTRACTS. [___]% of
the aggregate principal balances on the Initial Contracts as of the Initial
Cutoff Date arise from loans to Obligors in [___]. ____ may have negative
implications on repayments of the Contracts, including____.
See generally "RISK FACTORS--RISK OF UNPERFECTED SECURITY INTERESTS IN
FINANCED MOTORCYCLES" and "-- ADDITIONAL LEGAL LIMITS ON THE APPLICABLE
TRUSTEE'S ABILITY TO REALIZE ON ITS SECURITY INTEREST -BANKRUPTCY LAWS" and " --
ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE ON ITS
SECURITY INTEREST CONSUMER PROTECTION LAWS" in the Prospectus.
LIMITED LIQUIDITY. There is currently no secondary market for the
Certificates offered hereby. The Underwriter currently intends to make a market
in the Certificates, but it is under no obligation to do so. There can be no
assurance that a secondary market will develop or, if a secondary market does
develop, that it will provide the Certificateholders with liquidity of
investment or that it will continue for the life of the Certificates.
SELLER BANKRUPTCY CONSIDERATIONS. See generally "RISK FACTORS--COMPANY
BANKRUPTCY CONSIDERATIONS" in the Prospectus.
See generally "RISK FACTORS--PREPAYMENTS ON CONTRACTS AFFECT YIELD OF
SECURITIES" in the Prospectus.
The Class B Certificates will be subordinated to the Class A
Certificates as described herein. Accordingly, the yield on the Class B
Certificates will be extremely sensitive to the loss experience on the Contracts
and the timing of such losses. If the actual rate and amount of losses
experienced on the Contracts exceed the rate and amount of losses assumed by an
investor, the yield to maturity of the Class B Certificates may be lower than
anticipated.
RISK ASSOCIATED WITH FAILURE OF OBLIGORS TO DESIGNATE PAYMENTS AS BEING
PAYMENTS ON THE CONTRACTS - JOINT ACCOUNTS. In certain circumstances, the
monthly billing statements relating to the Contracts and provided to the
Obligors also reflect the Obligors' outstanding "HARLEY CARD" monthly balance.
See "EAGLEMARK, INC. - GENERAL" below. With respect to such a joint billing
statement, the Obligor sends one payment which if not appropriately designated
by such Obligor in the statement returned with their payment will be allocated
first to the minimum payment due on the Harley Card. To the extent a payment is
insufficient to cover payment amounts due under both the Contract and the
minimum amount due on the Harley Card, the Contract will suffer the associated
shortfall.
YEAR 2000. See generally "RISK FACTORS--RISKS RELATED TO YEAR 2000
ISSUES" in the Prospectus.
STRUCTURE OF THE TRANSACTION
On the date of issuance of the Certificates, the Seller will sell,
transfer, assign, set over and otherwise convey the Initial Contracts and
related assets to the Trust Depositor, and the Trust Depositor will
simultaneously establish the Trust, and sell, transfer, assign, set over and
otherwise convey to the Trust all right, title and interest in such Initial
Contracts and related assets. Additionally, the Trust Depositor will deposit
into the Pre-Funding Account, the Pre-Funded Amount; into the Reserve Fund, the
Reserve Fund Initial Deposit; and into the Interest Reserve Account, the amount
required to be deposited therein. On behalf of the Trust, as the issuer of the
Certificates offered hereby, the Trustee will, concurrently with such
conveyance, execute and deliver the Certificates to or upon the
S-22
<PAGE>
order of the Trust Depositor. The Seller will continue to service the Contracts
pursuant to the Agreement, and will be compensated as Servicer.
The Trust will use funds on deposit in the Pre-Funding Account to
acquire Subsequent Contracts during the Funding Period as and to the extent
described herein. Any such acquisition of Subsequent Contracts is subject to
the availability thereof and to the satisfaction of the conditions described
herein. To the extent that amounts on deposit in the Pre-Funding Account have
not been fully applied to the purchase of Subsequent Contracts during the
Funding Period, the Class A Certificates and Class B Certificates will be
prepaid in part, without premium, on the Payment Date immediately following the
last day of the Funding Period in an amount equal to the amount then on deposit
in the Pre-Funding Account multiplied by the Class A Percentage and Class B
Percentage, respectively.
The Certificates will represent fractional undivided interests in the
Trust, the corpus of which will consist of the Initial Contracts and related
assets (including all rights to receive payments collected on such Contracts on
or after [ ], 199_, I.E., the Initial Cutoff Date, security
interests in the Motorcycles financed through such Contracts, and rights, if
any, under individual insurance policies with respect thereto); rights of the
Trust against the Trust Depositor under the Deposit Agreement; rights of the
Trust in respect of the collateral which the Trust Depositor has pledged under
the Security Agreement securing its obligations under the Deposit Agreement; any
Subsequent Contracts which the Trust Depositor conveys to the Trust in
accordance with the Deposit Agreement (including all rights to receive payments
collected on such Contracts on or after the applicable Subsequent Cutoff Date,
related security interests and insurance policy rights as described above);
amounts held for the Trust in the Collection Account (as defined below); and
rights in the Interest Reserve Account and Reserve Fund. The Certificates will
be issued in denominations of $1,000.
Payments and recoveries in respect of principal and interest on the
Contracts will be paid into a separate trust account maintained at the Trustee
in the name of the Trust (the "COLLECTION ACCOUNT"), no later than two Business
Days after receipt. Payments deposited in the Collection Account in respect of
each Due Period, net of certain fees and other amounts which the Trustee is
authorized to withdraw therefrom as described herein, will be applied on each
Payment Date to pay interest and principal to Certificateholders as and to the
extent described herein.
The Servicer is obligated to advance each month an amount equal to
accrued and unpaid interest on the Contracts which was delinquent with respect
to the related Due Period (subject to the limitations described below). The
Servicer will be entitled to reimbursement of such Advances by means of a first
priority withdrawal from the Collection Account of Available Funds. The Servicer
will not be required to make any such Advances to the extent that it does not
expect to recoup the Advance from such funds.
The Seller, as seller of the Contracts, will make certain
representations and warranties to the Trust Depositor with respect to the
Contracts. Under the Transfer and Sale Agreement, the Seller will agree that in
the event of a breach of any such representation and warranty made by the Seller
that materially and adversely affects the Trust's interest in any Contract
(without regard to the benefits of the Reserve Fund), the Seller will repurchase
such Contract within the time specified in the Transfer and Sale Agreement at a
price equal to (a) the remaining Principal Balance of such Contract, plus (b)
accrued and unpaid interest at the Contract Rate on such Contract from the end
of the Due Period with respect to which the Obligor last made a payment through
the end of the immediately preceding Due Period (the "REPURCHASE PRICE").
S-23
<PAGE>
USE OF PROCEEDS
The Trust Depositor will use the net proceeds received from the sale of
the Certificates (i) for the purchase of the Initial Contracts and related
assets from the Seller, and (ii) the remainder for the funding of the
Pre-Funding Account held by the Collateral Agent under the Security Agreement.
The Seller will use the proceeds from the Trust Depositor's purchase of the
Initial Contracts, as well as Subsequent Contracts, for the repayment of a
substantial portion of the outstanding principal of the warehouse lines through
which it finances its motorcycle conditional sales contracts. Following each
such repayment, it is expected that the warehouse lines will be used to build a
new portfolio of Motorcycle conditional sales contracts.
THE CONTRACTS
Each Contract is (or will be, in the case of Subsequent Contracts)
secured by a Motorcycle (as described below) and is (or will be) a conditional
sales contract originated by a Harley-Davidson dealer and purchased by the
Seller. No Contract may be substituted by the Seller or the Trust Depositor
with another Motorcycle contract after such Contract has been sold by the Trust
Depositor to the Trust.
Each Contract (a) is (or will be) secured by a Motorcycle, (b) has
(or will have) a fixed annual percentage rate and provide for, if timely
made, payments of principal and interest which fully amortize the loan on a
simple interest basis over its term, (c) with respect to the Initial
Contracts, has its last scheduled payment due no later than
[ ], and with respect to the Contracts as a whole
(including any Subsequent Contracts conveyed to the Trust after the Closing
Date), will have a last scheduled payment due no later than
[ ], and (d) with respect to the Initial Contracts, has its
first scheduled payment due no later than [ ]. The
Contracts were (or will be) acquired by the Seller in the ordinary course of
the Seller's business. A detailed listing of the Initial Contracts is
appended to the Agreement. See "DESCRIPTION OF THE CERTIFICATES" below.
(For general composition of the Initial Contracts see Table 1 below).
Approximately [ ]% of the Principal Balance of the Initial
Contracts as of the Initial Cutoff Date is attributable to loans to purchase
Motorcycles which were new and approximately [ ]% is attributable
to loans to purchase Motorcycles which were used at the time the related
Contract was originated. All Initial Contracts have a contractual rate of
interest of at least [ ]% per annum and not more than [ ]
% per annum and the weighted average contractual rate of interest of the
Initial Contracts as of the Initial Cutoff Date is approximately [ ]%
per annum (see Table 2 below). The Initial Contracts have remaining
maturities as of the Initial Cutoff Date of at least 6 months but not more
than [ ] months and original maturities of at least [ ] months but
not more than [ ]months (see Tables 3 and 4 below). The Initial Contracts
had a weighted average term to scheduled maturity, as of origination, of
approximately [ ] months, and a weighted average term to scheduled
maturity as of the Initial Cutoff Date of approximately [ ] months.
The average principal balance per Initial Contract as of the Initial Cutoff
Date was approximately $[ ] and the principal balances on the
Initial Contracts as of the Initial Cutoff Date ranged from $[ ] to
$[ ] (see Table 5 below). The Contracts arise (or will arise) from
loans to Obligors located in 50 states, the District of Columbia and the U.S.
Territories, and with respect to the Initial Contracts, in the following
approximate amounts expressed as a percentage of the aggregate principal
balances on the Initial Contracts as of the Initial Cutoff Date: [ ]% in
the state of [ ], [ ]% in [ ], [ ]% in
[ ], [ ]% in [ ], [ ]% in [ ], [ ]
% in [ ], [ ]% in [ ], [ ]% in [ ], and
[ ]% in [ ] (see Table 6 below). No other state represented
more than [ ]% of the Initial Contracts.
Except for the criteria described in the preceding paragraph and under
"RISK FACTORS -- THE CONTRACTS AND THE PRE-FUNDING ACCOUNT," there will be no
required characteristics of the Subsequent Contracts. Therefore, following the
transfer of the Subsequent Contracts to the Trust, the aggregate
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<PAGE>
characteristics of the entire pool of the Contracts, including the composition
of the Contracts, the distribution by APR of the Contracts, the distribution by
calculated remaining term of the Contracts, the distribution by original term to
maturity of the Contracts, the distribution by current balance of the Contracts,
and the geographic distribution of the Contracts, described in the following
tables, may vary from those of the Initial Contracts as of the Initial Cutoff
Date.
The motorcycle dealer agreements between each of the originating dealers
and the Seller require the originating dealer to repurchase certain motorcycles
repossessed by the Seller in the event of a default by the Obligor ("DEALER
RECOURSE"); the Dealer Recourse will be assigned by the Seller to the Trust
Depositor pursuant to the Transfer and Sale Agreement and from the Trust
Depositor to the Trust pursuant to the Agreement. There can be no assurance
that an originating dealer will perform its Dealer Recourse obligations under
such motorcycle dealer agreements if and when required to do so.
TABLE 1
COMPOSITION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<S> <C>
Aggregate Principal Balance . . . . . . . . . . . . . . $[_____________]
Number of Contracts . . . . . . . . . . . . . . . . . . [_____]
Average Principal Balance . . . . . . . . . . . . . . . $[________]
Weighted Average Annual Percentage
Rate ("APR") . . . . . . . . . . . . . . . . . . . [_____]%
(Range). . . . . . . . . . . . . . . . . . . . . . [_____]% to [_____]%
Weighted Average Original Term (in months). . . . . . . [____]
(Range). . . . . . . . . . . . . . . . . . . . . . [___] to [___]
Weighted Average Calculated Remaining Term (in months). [_____]
(Range). . . . . . . . . . . . . . . . . . . . . . [__] to [___]
</TABLE>
TABLE 2
DISTRIBUTION BY APR OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
PERCENT OF OUTSTANDING PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL POOL
RATE CONTRACTS CONTRACTS BALANCE BALANCE
<S> <C> <C> <C> <C>
8.01-9.00% % $ %
9.01-10.00
10.01-11.00
11.01-12.00
S-25
<PAGE>
12.01-13.00
13.01-14.00
14.01-15.00
15.01-16.00
16.01-17.00
TOTALS: 100.00% 100.00%
</TABLE>
S-26
<PAGE>
TABLE 3
DISTRIBUTION BY CALCULATED REMAINING TERM
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
PERCENT OF OUTSTANDING PERCENT OF
CALCULATED NUMBER OF NUMBER OF PRINCIPAL POOL
REMAINING TERM CONTRACTS CONTRACTS BALANCE BALANCE
<S> <C> <C> <C> <C>
1-12 MONTHS % $ %
13-24 MONTHS
25-36 MONTHS
37-48 MONTHS
49-60 MONTHS
61-72 MONTHS
TOTALS: 100.00% 100.00%
</TABLE>
TABLE 4
DISTRIBUTION BY ORIGINAL TERM TO MATURITY
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
PERCENT OF OUTSTANDING PERCENT OF
ORIGINAL NUMBER OF NUMBER OF PRINCIPAL POOL
TERM CONTRACTS CONTRACTS BALANCE BALANCE
<S> <C> <C> <C> <C>
1-12 MONTHS $ %
13-24 MONTHS
25-36 MONTHS
37-48 MONTHS
49-60 MONTHS
61-72 MONTHS
TOTALS: 0 100.00% 100.00%
</TABLE>
S-27
<PAGE>
TABLE 5
DISTRIBUTION BY CURRENT BALANCE OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
PERCENT OF OUTSTANDING PERCENT OF
NUMBER OF NUMBER OF PRINCIPAL POOL
CURRENT BALANCE CONTRACTS CONTRACTS BALANCE BALANCE
<S> <C> <C> <C> <C>
$01 - $1,000 $ %
$1,001 - $1,500
$1,501 - $2,000
$2,001 - $2,500
$2,501 - $3,000
$3,001 - $3,500
$3,501 - $4,000
$4,001 - $4,500
$4,501 - $5,000
$5,001 - $5,500
$5,501 - $6,000
$6,001 - $6,500
$6,501 - $7,000
$7,001 - $7,500
$7,501 - $8,000
$8,001 - $8,500
$8,501 - $9,000
$9,001 - $9,500
$9,501 - $10,000
$10,001 - $10,500
$10,501 - $11,000
$11,001 - $11,500
$11,501 - $12,000
$12,001 - $12,500
$12,501 - $13,000
$13,001 - $14,000
$14,001 - $15,000
$15,001 - $16,000
$16,001 - $17,000
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<PAGE>
$17,001 - $18,000
$18,001 - $19,000
$19,001 - $20,000
$20,001 - $22,000
$22,001 - $24,000
$24,001 - $26,000
$26,001 - $28,000
$28,001 - $30,000
$30,001 - $32,000
TOTALS: 100.00% 100.00%
</TABLE>
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
TOTAL
PERCENT OF OUTSTANDING PERCENT
NUMBER OF NUMBER OF PRINCIPAL OF POOL
STATE CONTRACTS CONTRACTS BALANCE BALANCE
<S> <C> <C> <C> <C>
ALABAMA $ %
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
DISTRICT OF COLUMBIA
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
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<PAGE>
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW YORK
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
(CONTINUED)
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING
OTHER
TOTALS: 100.00% 100.00%
</TABLE>
S-30
<PAGE>
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
The Seller was organized in January 1993 and is a one hundred percent
owned subsidiary of Eaglemark Financial Services, Inc., a Delaware corporation
("EAGLEMARK FINANCIAL"). The Seller began purchasing and servicing conditional
sales contracts for Motorcycles in February 1993. Accordingly, the Seller has
not accumulated a significant amount of delinquency and loss data on Motorcycle
conditional sales contracts similar to the Contracts. See "RISK FACTORS --
LIMITED EXPERIENCE WITH MOTORCYCLE CONTRACTS."
The following tables set forth the delinquency experience and loan loss
and repossession experience of the Seller's portfolio of conditional sales
contracts for Motorcycles since the Seller began purchasing and servicing such
contracts. These figures include data in respect of contracts which the Seller
has previously sold with respect to prior securitizations and for which the
Seller acts as servicer.
S-31
<PAGE>
DELINQUENCY EXPERIENCE
(UNAUDITED)
(DOLLARS IN THOUSANDS)
AT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, [ ], [ ],
------------ ------------ ------------ ------------- -------------
1994 1995 1996 199 199
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NUMBER OF MOTORCYCLE
CONDITIONAL SALES CONTRACTS
AND ASSOCIATED OUTSTANDING
PRINCIPAL DOLLAR BALANCES (1)...
PERIOD OF DELINQUENCY AND
ASSOCIATED OUTSTANDING
PRINCIPAL BALANCES (2)..........
30-59 DAYS......................
60-89 DAYS......................
90 DAYS OR MORE.................
TOTAL NUMBER OF DELINQUENT
MOTORCYCLE CONDITIONAL SALES
CONTRACTS.......................
DELINQUENT MOTORCYCLE
CONDITIONAL SALES CONTRACTS
AS A PERCENT OF TOTAL NUMBER
OF MOTORCYCLE CONDITIONAL
SALES CONTRACTS.................
AGGREGATE PRINCIPAL BALANCE
OF DELINQUENT MOTORCYCLE
CONDITIONAL SALES CONTRACTS.....
</TABLE>
- ------------------------------
(1) Excludes Contracts already in repossession, which Contracts the
Servicer does not consider outstanding.
(2) The period of delinquency is based on the number of days
payments are contractually past due (assuming 30-day months).
Consequently, a contract due on the first day of a month is not
30 days delinquent until the first day of the next month.
S-32
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, [ ], [ ],
------------ ------------ ------------ ------------- -------------
1994 1995 1996 199 199
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
AGGREGATE PRINCIPAL BALANCE
OF DELINQUENT MOTORCYCLE
CONDITIONAL SALES CONTRACTS
AS A PERCENTAGE OF THE
AGGREGATE OUTSTANDING
PRINCIPAL BALANCE OF
MOTORCYCLE CONDITIONAL SALES
CONTRACTS.......................
</TABLE>
S-33
<PAGE>
LOAN LOSS/REPOSSESSION EXPERIENCE
(UNAUDITED)
(ACTUAL DOLLARS)
<TABLE>
<CAPTION>
Twelve Months
Ended Twelve Months Twelve Months
December 31, Ended Ended [Three Months [Three Months
1994 December December 31, Ended Ended
31, 1995 1996 ] ]
<S> <C> <C> <C> <C> <C>
Principal
Balance of all
Motorcycle
conditional
contracts
serviced (1)
Contract
liquidations (2)
Net losses:
Dollars(3)
Percentage(4)
</TABLE>
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the total number of Contracts being serviced as of
period end, calculated on an annualized basis.
(3) The calculation of net loss includes actual charge-offs, deficiency
balances remaining after liquidation of repossessed vehicles, expenses
of repossession and liquidation, net of recoveries.
(4) As a percentage of the principal amount of contracts being serviced as
of period end, calculated on an annualized basis.
THE DATA PRESENTED IN THE FOREGOING TABLES ARE FOR ILLUSTRATIVE PURPOSES ONLY
AND THERE IS NO ASSURANCE THAT THE DELINQUENCY, LOAN LOSS OR REPOSSESSION
EXPERIENCE OF THE CONTRACTS WILL BE SIMILAR TO THAT SET FORTH ABOVE.
S-34
<PAGE>
HARLEY-DAVIDSON MOTORCYCLES
All of the motorcycles securing Contracts were manufactured by
Harley-Davidson, Inc., except not more than 2.5% of the Contracts (including all
Subsequent Contracts) relate to, and are secured by, motorcycles manufactured by
Buell. Buell produces "PERFORMANCE" motorcycles using engines and certain other
parts manufactured by Harley-Davidson. Buell is a wholly-owned subsidiary of
Harley-Davidson.
Harley-Davidson produces and sells premium heavyweight motorcycles.
Within the heavyweight class, Harley-Davidson sells touring motorcycles
(equipped for long-distance touring), as well as custom motorcycles which
emphasize the distinctive styling associated with certain classic
Harley-Davidson motorcycles. Harley-Davidson motorcycles are based on
variations of five basic chassis designs and are powered by one of four air
cooled, twin cylinder engines of "V" configuration which have displacements of
883cc, 1200cc, 1340cc and 1450cc. Harley-Davidson manufactures its own engines
and frames and is the only major manufacturer of motorcycles in the United
States. Harley-Davidson, as of December 31, 1997, accounts for approximately
55% of the market for motorcycles with an engine displacement of 751cc and
above.
Buell produces "PERFORMANCE" motorcycles using Harley-Davidson 1200cc
engines that are further modified in the manufacturing process, as well as
certain other Harley parts. The "PERFORMANCE" aspect of the motorcycles refers
to overall handling characteristics of the motorcycle, including cornering,
acceleration and braking. Buell motorcycles and related products are currently
distributed exclusively through Harley-Davidson dealers. Buell's overall share
of the "PERFORMANCE" market is negligible, but increasing.
As of December 31, 1997, Eaglemark has originated Contracts with
principal balances outstanding equal to approximately $_______ which are related
to, and secured by, "touring cycles", and $_______ which are related to, and
secured by, "street legal" cycles. "Touring cycles" (with displacements
typically over 750cc) are generally intended for use in long distance travel,
and "street legal cycles" include all other motorcycles which may be licensed
for street use under applicable state or local law and which are not generally
viewed as falling with the "touring cycle" category.
YIELD AND PREPAYMENT CONSIDERATIONS
By their terms, the Contracts may be prepaid, in whole or in part, at
any time and each Contract contains a provision which permits the Seller to
require full prepayment in the event of a sale of the Motorcycle securing a
Contract. In addition, repurchases of the Contracts by the Seller could occur
in the event of a breach of certain representations and warranties with respect
to the Contracts and upon exercise of the Seller's limited option to repurchase
the Contracts when the principal balance of the Certificates has decreased to a
certain level. Any prepayments and repurchases of Contracts will reduce the
average life of the Certificates and the interest received by the
Certificateholders over the life of the Certificates (for this purpose the term
"PREPAYMENT" includes liquidations due to default, as well as receipt of
proceeds from credit life, credit disability and casualty insurance policies).
In addition, the occurrence of a Special Distribution at or before the end of
the Funding Period would have the effect of reducing the interest received by
Certificateholders over the life of the Certificates.
The Class B Certificates will be subordinated to the Class A
Certificates as described herein. Accordingly, the yield on the Class B
Certificates will be extremely sensitive to the loss experience on the Contracts
and the timing of such losses. If the actual rate and amount of losses
experienced on the Contracts exceed the rate and amount of losses assumed by an
investor, the yield to maturity of the Class B Certificates may be lower than
anticipated.
S-35
<PAGE>
Although the contractual rates of interest on the Contracts vary,
disproportionate rates of principal prepayments between Contracts with higher
and lower contractual rates of interest will not affect the yield on the
Certificates if the Certificates are purchased at par because the contractual
rate of interest on each Contract is greater than the sum of the Class B
Pass-Through Rate, the Monthly Servicing Fee, the Back-up Servicing Fee and the
Trustee Fee.
The final scheduled payment date on the Initial Contract with the latest
maturity is no later than [ ]. The final scheduled payment date
on the Contract with the latest maturity among the Contracts as a whole,
including any Subsequent Contracts, will be not later than [ ].
EAGLEMARK FINANCIAL SERVICES, INC.;
EAGLEMARK, INC.
EAGLEMARK FINANCIAL SERVICES, INC.
Eaglemark Financial was formed in June 1992 with a capital infusion of
$10,000,000 from Harley-Davidson and an additional $15,000,000 capital
contribution from a major institutional investor in January 1993. In November
1995, Harley-Davidson purchased the equity owned by the major institutional
investor and as a result Eaglemark Financial is a 97.8% owned subsidiary of
Harley-Davidson. The business of Eaglemark Financial, through its 100%
ownership of Eaglemark, has been to provide wholesale and retail financing,
credit card and insurance services to dealers and customers of Harley-Davidson.
EAGLEMARK, INC.
Eaglemark is a Nevada corporation and is a wholly-owned subsidiary of
Eaglemark Financial. Eaglemark began operations in January 1993 when it
purchased the $85 million wholesale financing portfolio of certain
Harley-Davidson dealers from ITT Commercial Finance; subsequently, Eaglemark
entered the retail consumer finance business. Eaglemark provides financing to
Harley-Davidson customers for new and used motorcycles, as well as certain other
recreational products such as single-engine aircraft and marine products.
Harley-Davidson motorcyles are financed through the Canadian Harley-Davidson
dealers under the trade name "Deeley Credit." Eaglemark also finances extended
service contracts on Motorcycles. Eaglemark's financing, credit card and
insurance programs are designed to work together as a package that appeals to
the needs of Harley-Davidson's customers. The intent of such a package is to
increase dealer and customer loyalty to Eaglemark while improving revenue and
profits over time. Eaglemark's principal executive offices are located at 4150
Technology Way, Carson City, Nevada 89706 (telephone 702/886-3200). As of
December 31, 1997, Eaglemark had total assets of $551.8 million, and
stockholder's equity of $68.1 million.
EAGLEMARK CUSTOMER FUNDING CORPORATION-[__]
The Trust Depositor is a special purpose corporation incorporated in the
State of Nevada in [_____]. All of the common stock of the Trust Depositor is
owned by the Seller. All of the officers and directors of the Trust Depositor
are employed by the Seller, except that at least two directors of the Trust
Depositor are required to be independent of the Seller. The Trust Depositor's
business is limited to purchasing the Contracts and related assets (and other
similar retail motorcycle installment conditional sales contracts) from the
Seller, acting as the settlor of the Trust and other similar trusts and
performing the obligations described in the Agreement and the Transfer and Sale
Agreement (as well as similar agreements entered into in connection with the
formation of similar trusts).
S-36
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Agreement to be entered
into by the Trust Depositor, as originator of the Trust, the Servicer as the
servicer of the Contracts and Harris Trust and Savings Bank, as Trustee and as
Back-up Servicer. The Certificates will be issued in book-entry form only and
will represent fractional undivided interests in the Trust. The Certificates
will be issued in denominations of $1,000 in excess thereof, except for one
Class A Certificate with a denomination representing the remainder of the Class
A Initial Certificate Balance and one Class B Certificate with a denomination
representing the remainder of the Class B Initial Certificate Balance. The
Trust will consist of (among other things) the Contracts and the rights,
benefits, obligations and proceeds arising therefrom or in connection therewith,
security interests in the Motorcycles financed through the Contracts, proceeds
from certain insurance policies on individual Motorcycles, the Deposit
Agreement, rights under the Security Agreement securing the Trust Depositor's
obligation under the Deposit Agreement to purchase Subsequent Contracts and
transfer the same to the Trust through the pledge of monies on deposit in the
Pre-Funding Account, and amounts held for the Trust in the Collection Account.
Distributions of the Class A Interest Distributable Amount, the Class B
Interest Distributable Amount, the Class A Principal Distributable Amount, and
the Class B Principal Distributable Amount will be made by the Paying Agent
monthly on each Payment Date to persons in whose names the Class A Certificates
and Class B Certificates are registered as of the Record Date. The first
Payment Date for the Certificates will be [ ], 199_. Payments will
be made by check mailed to such Certificateholder at the address appearing on
the Certificate Register; PROVIDED, HOWEVER, that a Certificateholder may
request payment by wire transfer pursuant to instructions delivered to the
Trustee at least ten (10) days prior to such Payment Date. Final payments of
principal and interest will be made only upon tender of the Certificates to the
Paying Agent for cancellation.
CONVEYANCE OF CONTRACTS
On the date of issuance of the Certificates, the Seller will sell,
transfer, assign, set over and otherwise convey the Initial Contracts and
related assets to the Trust Depositor, and the Trust Depositor will
simultaneously establish the Trust and sell, transfer, assign, set over and
otherwise convey to the Trust all right, title and interest in the Initial
Contracts and related assets. On behalf of the Trust, as the issuer of the
Certificates offered hereby, the Trustee will, concurrently with such
conveyance, execute and deliver the Certificates to or upon the order of the
Trust Depositor. The Initial Contracts will be described on a list delivered to
the Trustee and certified by a duly authorized officer of the Trust Depositor.
Such list will include the amount of monthly payments due on each Initial
Contract as of the Initial Cutoff Date, the contractual rate of interest on each
Contract and the maturity date of each Contract. Such list will be available
for inspection by any Certificateholder at the principal office of the Servicer.
Prior to the conveyance of the Initial Contracts to the Trust, the Servicer's
compliance officer will have completed a review of all the related Contract
files, including the certificates of title to, or other evidence of a perfected
security interest in, the Motorcycles, confirming the accuracy of the list of
Initial Contracts delivered to the Trustee. The Trust Depositor will deliver to
the Trustee a report of a nationally recognized independent public accounting
firm which states that such firm has performed specific procedures for a sample
of the Initial Contracts supplied by the Seller. Any Contract discovered not to
agree with such list in a manner that is materially adverse to the interests of
the Certificateholders will be required to be repurchased by the Seller, or, if
the discrepancy relates to the unpaid Principal Balance of a Contract, the
Seller may deposit cash in the Collection Account in an amount sufficient to
offset such discrepancy.
S-37
<PAGE>
In addition to the Initial Contracts, the Trust property will include
the Trust's rights under the Deposit Agreement in respect of the Trust
Depositor's obligation to purchase from the Seller, and concurrently convey to
the Trust, Subsequent Contracts purchased as of the applicable Subsequent
Cutoff Date (the Initial Cutoff Date or any Subsequent Cutoff Date being
individually referred to herein as a "CUTOFF DATE"). Any conveyance of
Subsequent Contracts on a Subsequent Transfer Date will be subject to the
satisfaction of the following conditions, among others (computed, where
applicable, based on the characteristics of the Initial Contracts on the Initial
Cutoff Date and any Subsequent Contracts as of the related Subsequent Cutoff
Date): (i) each such Subsequent Contract satisfies the eligibility criteria
specified in the Transfer and Sale Agreement and the related Subsequent Purchase
Agreement executed thereunder; (ii) as of the applicable Subsequent Cutoff
Date, no Contract in the Trust, including the Subsequent Contracts that the
Trust Depositor will be conveying as of such Subsequent Cutoff Date, will have a
scheduled maturity date later than [ ]; (iii) the
Trust Depositor shall have executed and delivered in favor of the Trust a
Subsequent Transfer Agreement conveying such Subsequent Contracts to the Trust
(including a schedule identifying such Subsequent Contracts); (iv) the Trust
Depositor shall have delivered certain opinions of counsel to the Trustee, the
Placement Agent and the Rating Agencies with respect to the validity and other
aspects of the conveyance of all such Subsequent Contracts; and (v) the Rating
Agencies shall have each notified the Trust Depositor and the Trustee in writing
that, following the addition of such Subsequent Contracts, the Class A
Certificates will be rated AAA by S&P and Aaa by Moody's and the Class B
Certificates will be rated [ ] by S&P and [ ] by Moody's.
The Agreement will designate the Servicer as custodian to maintain
possession, as the Trustee's agent, of the Contracts and any other documents
relating to the Motorcycles. To facilitate servicing and save administrative
costs, the documents will not be segregated from other similar documents that
are in the Servicer's possession. Uniform Commercial Code financing statements
will be filed in Nevada and Illinois, reflecting the conveyance and assignment
of the Contracts to the Trust Depositor from the Seller and from the Trust
Depositor to the Trustee, and the Seller's and the Trust Depositor's accounting
records and computer systems will also reflect such conveyance and assignment.
In addition, each Contract will be stamped to reflect their conveyance and
assignment to the Trust. However, if, through fraud, negligence or otherwise, a
subsequent purchaser were able to take physical possession of the Contracts
without notice of such conveyance and assignment, the Trust's interest in the
Contracts could be defeated. In addition, certificates of title with respect to
the Motorcycles will not be amended to reflect the assignment of the Seller's
security interest in the Motorcycles to the Trust Depositor and the assignment
of the Trust Depositor's security interest in the Motorcycles to the Trust. In
the absence of amendments to the certificates of title, the Trust may not have a
perfected security interest in the Motorcycles. See "RISK FACTORS--RISK OF
UNPERFECTED SECURITY INTERESTS IN FINANCIAL MOTORCYCLES" in the Prospectus.
The Seller will make certain representations and warranties in the
Transfer and Sale Agreement with respect to each Contract, including that
(references to the Closing Date below being deemed, in respect of Subsequent
Contracts, to refer to the related Subsequent Transfer Date): (a) as of the
related Cutoff Date the most recent scheduled payment was made or was not
delinquent more than 30 days and, to the best of the Seller's knowledge, all
payments on the Contract were made by the Obligor of the Contract; (b) as of the
Closing Date no provision of a Contract has been waived, altered or modified in
any respect, except by instruments or documents identified in the Contract File;
(c) each Contract is a genuine, legal, valid and binding obligation of the
Obligor and is enforceable in accordance with its terms (except as may be
limited by laws affecting creditors' rights generally); (d) as of the Closing
Date no Contract is subject to any right of rescission, set-off, counterclaim or
defense, (e) as of the Closing Date each Motorcycle securing a Contract is
covered by certain insurance policies described under "DESCRIPTION OF THE
CERTIFICATES--INDIVIDUAL MOTORCYCLE INSURANCE" below; (f) each Contract was
originated by a Harley-Davidson motorcycle dealer in the ordinary course of such
dealer's business which dealer had all necessary licenses and permits to
originate the Contracts in the state
S-38
<PAGE>
where such dealer was located, was fully and properly executed by the parties
thereto and was sold by such dealer to the Seller without any fraud or
misrepresentation on the part of such dealer; (g) no Contract was originated in
or is subject to the laws of any jurisdiction whose laws would make the
transfer, sale and assignment of the Contract pursuant to the Transfer and Sale
Agreement or the Agreement or pursuant to transfers of Certificates unlawful,
void or voidable; (h) each Contract and each sale of the related Motorcycle
complies with all requirements of any applicable federal, state or local law and
regulations thereunder, including, without limitation, usury, truth in lending,
motor vehicle installment loan and equal credit opportunity laws, with such
compliance not being affected by the Trust Depositor's or the Trust's ownership
of the Contracts and with the Seller to maintain in its possession, available
for inspection by or delivery to the Trust Depositor and the Trustee, evidence
of compliance with all such requirements; (i) as of the Closing Date no Contract
has been satisfied, subordinated in whole or in part or rescinded and the
Motorcycle securing the Contract has not been released from the lien of the
Contract in whole or in part; (j) each Contract creates a valid, subsisting and
enforceable first priority security interest in favor of the Seller in the
Motorcycle covered thereby, and such security interest has been conveyed and
assigned by the Seller to the Trust Depositor and the Trust Depositor to the
Trust and the original certificate of title, certificate of lien or other
notification (the "LIEN CERTIFICATE") issued by the body responsible for the
registration of, and the issuance of certificates of title relating to, motor
vehicles and liens thereon (the "REGISTRAR OF TITLES") of the applicable state
to a secured party which indicates the lien of the secured party on the
Motorcycle is recorded on the original certificate of title, and the original
certificate of title for each Motorcycle shows, or if a new or replacement Lien
Certificate is being applied for with respect to such Motorcycle the Lien
Certificate will be received within 180 days of the Closing Date and will show,
the Seller as original secured party under each Contract and as the holder of a
first priority security interest in such Motorcycle (and with respect to each
Contract for which the Lien Certificate has not yet been returned from the
Registrar of Titles, the Seller has received written evidence from the related
dealer that such Lien Certificate showing the Seller as lienholder has been
applied for), and the Seller's security interest has been validly assigned by
the Seller to the Trust Depositor and by the Trust Depositor to the Trustee
pursuant to this Agreement in order that immediately after the sale, each
Contract will be secured by an enforceable and perfected first priority security
interest in the Motorcycle in favor of the Trust as secured party, which
security interest is prior to all other liens upon and security interests in
such Motorcycle which now exist or may hereafter arise or be created (except, as
to priority, for any lien for taxes, labor, materials or any state law
enforcement agency affecting a Motorcycle which may arise after such sale); (k)
all parties to each Contract had capacity to execute such Contract; (l) no
Contract has been sold, conveyed and assigned or pledged to any other person
other than the Trust Depositor and the Trustee as transferee of the Trust
Depositor and prior to the transfer of the Contract to the Trust Depositor, the
Seller has good and marketable title to each Contract free and clear of any
encumbrance, equity, loan, pledge, charge, claim or security interest, and as of
the Closing Date the Trustee will have a first priority perfected security
interest therein; (m) as of the related Cutoff Date there was no default,
breach, violation or event permitting acceleration under any Contract (except
for payment delinquencies permitted by clause (a) above), no event which with
notice and the expiration of any grace or cure period would constitute a
default, breach, violation or event permitting acceleration under such Contract,
and the Seller has not waived any of the foregoing; (n) as of the Closing Date
there are, to the best of the Seller's knowledge, no liens or claims which have
been filed for work, labor or materials affecting a motorcycle securing a
Contract, which are or may be liens prior or equal to the lien of the Contract;
(o) each Contract has a fixed rate of interest and provides for monthly payments
of principal and interest which, if timely made, would fully amortize the loan
on a simple interest basis over its term; (p) each Contract contains customary
and enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral of the benefits
of the security; (q) the description of each Contract set forth in the list
delivered to the Trustee is true and correct; and (r) there is only one original
of each Contract. The Seller will also make certain representations and
warranties with respect to the Contracts in the aggregate, including that (i)
the aggregate principal amount payable by the Obligors as of the Cutoff Date
equals the Initial Certificate
S-39
<PAGE>
Principal Balance (plus the Pre-Funded Amount as of the Closing Date), and each
Initial Contract has a contractual rate of interest of at least [ ]%, (ii)
all motorcycles securing the Contracts are Harley-Davidson or Buell motorcycles,
(iii) approximately [ ]% of the aggregate Principal Balance of the Initial
Contracts is attributable to loans to purchase new Motorcycles and approximately
[ ]% of the aggregate Principal Balance of the Initial Contracts is
attributable to loans to purchase used Motorcycles, (iv) no Initial Contract has
a remaining maturity of more than [ ]months, (v) the first payment under each
Initial Contract is due on or before[ ], 199_ and (vi) no adverse
selection procedures were or will be employed in selecting the Contracts from
the Seller's portfolio.
Under the Transfer and Sale Agreement, the Seller will agree that in the
event of a breach of any such representations and warranties made by the Seller
that materially and adversely affects the Trustee's interest in any Contract the
Seller will repurchase such Contract within 90 days at the Repurchase Price (as
defined in "STRUCTURE OF THE TRANSACTION" above), unless such breach is cured.
Under the Agreement, the Trust Depositor will assign all of its right, title and
interest in such representations and warranties (including the Seller's
repurchase obligations) to the Trustee. The Trust Depositor will make no
representations and warranties with respect to the Contracts. The Seller is
selling the Contracts without recourse and, accordingly, will have no obligation
with respect to the Contracts other than pursuant to such representations,
warranties and repurchase obligations. The repurchase obligations of the Seller
described above will constitute the sole remedy against the Seller by the Trust
and the Certificateholders for a breach of any such representations and
warranties made by the Seller.
Pursuant to the Agreement, the Servicer will service and administer the
Contracts conveyed and assigned to the Trustee as more fully set forth below.
PAYMENTS ON CONTRACTS; AVAILABLE FUNDS, AVAILABLE INTEREST AND AVAILABLE
PRINCIPAL
The Trust Depositor, on behalf of the Trust, will establish and maintain
the Collection Account at the Trustee's office. The Collection Account must be
established and maintained as an "ELIGIBLE ACCOUNT", which is (i) a segregated
direct deposit account maintained with a depositary institution or trust company
organized under the laws of the United States of America or any of the States
thereof, or the District of Columbia, having a certificate of deposit,
short-term deposit or commercial paper rating of at least A-1 by S&P and P-1 by
Moody's. The Servicer may authorize the Trustee to invest the funds in the
Collection Account in Eligible Investments (as defined in the Agreement) that
will mature not later than one Business Day prior to the applicable Payment
Date. Such Eligible Investments include, among other investments, obligations
of the United States or of any agency thereof backed by the full faith and
credit of the United States, certificates of deposit, demand and time deposits
and bankers' acceptances sold by eligible depository institutions and trust
companies, certain repurchase agreements of United States government securities
with eligible commercial banks, corporate securities assigned the highest rating
by Moody's and S&P of which no investment in the securities of any one company
may exceed 10% of amounts in the Collection Account at the time of such
investment or pledge as security, and commercial paper assigned the highest
rating by Moody's and S&P. The Servicer is required to use its best efforts to
cause Obligors to make all payments on the Contracts directly to one or more
Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox Agreement.
The Servicer is required to deposit without deposit into any intervening
account into the Collection Account as promptly as possible, but in any case not
later than the second Business Day following the receipt thereof, all amounts
received on or in respect of the Contracts.
The "AVAILABLE FUNDS" for any Payment Date is an amount equal to the sum
of the Available Interest and the Available Principal for such Payment Date.
S-40
<PAGE>
The Available Interest for a Payment Date will be equal to the total
(without duplication) of the following amounts received by the Servicer on or in
respect of the Contracts during the related Due Period: (i) all amounts received
in respect of interest on the Contracts (as well as late payment penalty fees
and extension fees), (ii) the interest component of all Net Liquidation Proceeds
(as defined in the Agreement) with respect to any Contract, (iii) the interest
component of the aggregate of the Repurchase Prices for Contracts repurchased by
the Seller as the result of the Seller's breach of representations and
warranties, (iv) all Advances made by the Servicer, (v) the interest component
of all amounts paid by the Seller in connection with an optional repurchase of
the Contracts when the aggregate outstanding Class A Certificate Balance and
Class B Certificate Balance has declined to less than 10% of the aggregate Class
A Initial Certificate Balance and Class B Initial Certificate Balance, (vi) all
amounts received in respect of Carrying Charges transferred from the Interest
Reserve Account, and (vii) all amounts received in respect of interest,
dividends, gains, income and earnings on investment of funds in the Trust
Accounts.
The Available Principal for a Payment Date means the total (without
duplication) of the following amounts received by the Servicer on or in respect
of the Contracts during the related Due Period: (i) all amounts received in
respect of principal on the Contracts, (ii) the principal component of all Net
Liquidation Proceeds, (iii) the principal component of the aggregate of the
Repurchase Prices for Contracts repurchased by the Seller as the result of the
Seller's breach of certain representations and warranties, and (iv) the
principal component of all amounts paid by the Seller in connection with an
optional repurchase of the Contracts in the circumstance described above.
CALCULATION OF DISTRIBUTABLE AMOUNTS
The "CLASS A DISTRIBUTABLE AMOUNT" with respect to a Payment Date will
equal the sum of (a) the Class A Principal Distributable Amount (as defined in
"SUMMARY OF TERMS -- MONTHLY PRINCIPAL DISTRIBUTIONS" above), and (b) the Class
A Interest Distributable Amount (as defined in "SUMMARY OF TERMS -- MONTHLY
INTEREST DISTRIBUTIONS" above) for such Payment Date.
The "CLASS B DISTRIBUTABLE AMOUNT" with respect to a Payment Date will
equal the sum of (a) the Class B Principal Distributable Amount (as defined in
"SUMMARY OF TERMS -- MONTHLY PRINCIPAL DISTRIBUTIONS" above) and (b) the Class
B Interest Distributable Amount (as defined in "SUMMARY OF TERMS -- MONTHLY
INTEREST DISTRIBUTIONS" above) for such Payment Date.
DISTRIBUTIONS ON CERTIFICATES
On the fourth Business Day of each month (the "DETERMINATION DATE") the
Servicer will determine the following: (i) the amount of the Available Funds
with respect to the upcoming Payment Date occurring in such month, (ii)
Available Interest with respect to the upcoming Payment Date occurring in such
month, and (iii) Available Principal with respect to the upcoming Payment Date
occurring in such month.
On each Payment Date, the Trustee will distribute the following amounts
in the following order and priority:
(a) from the Special Distribution Subaccount, the amount of
any Mandatory Special Distribution, to be distributed (i) to the Class A
Certificateholders, in an amount equal to the Class A Percentage
multiplied by the amount in the Special Distribution Subaccount and (ii)
to the Class B Certificateholders, in an amount equal to the Class B
Percentage multiplied by the amount in the Special Distribution
Subaccount, with the amounts in the Special Distribution Subaccount
being derived from draws on the Pre-Funding Account (which amounts are
available solely for payment of such Special Distributions and not for
any other purpose);
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(b) from the Available Funds, reimbursement to the Servicer
for Advances previously made;
(c) from the Available Interest, the Servicing Fee to the
Servicer;
(d) from the Available Interest, the Trustee's Fee for the
related Due Period to the Trustee;
(e) from the Available Interest, the Back-up Servicer Fee
for the related Due Period to the Back-up Servicer;
(f) from the Available Interest, to the Class A
Certificateholders of record, an amount equal to the Class A Interest
Distributable Amount (including Class A Interest Carryover Shortfall)
for such Payment Date and, if such Available Interest is insufficient,
the Class A Certificateholders will receive such shortfall first, from
the Class B Percentage of Available Principal and second, if such
amounts are still insufficient, from monies on deposit in the Reserve
Fund;
(g) from the Available Interest, to the Class B
Certificateholders of record, an amount equal to the Class B Interest
Distributable Amount (including Class B Interest Carryover Shortfall)
for such Payment Date and, if such Available Interest is insufficient,
the Class B Certificateholders will receive such shortfall from monies
on deposit in the Reserve Fund;
(h) from the Available Principal, to the Class A
Certificateholders of record, an amount equal to the Class A Principal
Distributable Amount (including Class A Principal Carryover Shortfall)
for such Payment Date and, if such Available Principal is insufficient,
the Class A Certificateholders will receive such shortfall first, from
Available Interest and second, if such amounts are still insufficient,
from monies on deposit in the Reserve Fund;
(i) from the Available Principal, to the Class B
Certificateholders of record, an amount equal to the Class B Principal
Distributable Amount (including Class B Principal Carryover Shortfall)
for such Payment Date and, if such Available Principal is insufficient,
the Class B Certificateholders will receive such shortfall first, from
Available Interest and second, if such amounts are still insufficient,
from monies on deposit in the Reserve Fund; and
(j) any remaining Available Funds after the payments
described in clauses (a) through (i) above shall be transferred to the
Reserve Agent for deposit in the Reserve Account.
Distributions on each Payment Date will be made to holders of record of
each Class of Certificates on the related Record Date in an amount equal to the
product of the Fractional Interest (as defined herein) represented by the
Certificates of such Class held by such Certificateholders on such Record Date
and the aggregate amounts distributed in respect of the Certificates of such
Class on such Payment Date. The "FRACTIONAL INTEREST" represented by the
Certificates of a Class held by a Certificateholder on any date equals the
percentage obtained by dividing (i) the principal balance of all Certificates of
such Class held by such Certificateholder on such date by (ii) the aggregate of
the principal balances of all of the Certificates of such Class held by all
Certificateholders on such date.
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE FUND; INTEREST RESERVE
ACCOUNT
SUBORDINATION. The rights of the Class B Certificateholders to receive
payments in respect of the Class B Interest Distributable Amount on any Payment
Date are subordinated to the rights of the Class A Certificateholders to receive
payments in respect of the Class A Interest Distributable Amount
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on such date, and the rights of the Class B Certificateholders to receive
payments in respect of the Class B Principal Distributable Amount on any Payment
Date are subordinated to the rights of the Class A Certificateholders to receive
payments in respect of the Class A Interest Distributable Amount and the Class A
Principal Distributable Amount for such date. Consequently, on any Payment
Date, Available Interest (after the payment therefrom of any unreimbursed
Advances to the Servicer, the Servicing Fee, the Back-up Servicing Fee and the
Trustee's Fee on such date) and monies on deposit in the Reserve Fund will be
applied to the payment of the Class A Interest Distributable Amount before
payment of the Class B Interest Distributable Amount, and on any Payment Date,
Available Principal (after the payment therefrom of any unreimbursed Advances to
the Servicer), Available Interest (after the payment therefrom of any
unreimbursed Advances to the Servicer, the Servicing Fee, the Trustee's Fee, the
Back-up Servicing Fee, the Class A Interest Distributable Amount and the Class
B Interest Distributable Amount) and monies on deposit in the Reserve Fund will
be applied to the payment of the Class A Principal Distributable Amount before
payment of the Class B Principal Distributable Amount. In addition, on any
Payment Date, amounts in respect of the Class B Percentage of Available
Principal may be distributed to pay the Class A Interest Distributable Amount.
If amounts otherwise allocable to the Class B Certificates are used to fund
payments of interest on or principal of the Class A Certificates, distributions
with respect to the Class B Certificates may be delayed or reduced and Class B
Certificateholders may suffer a loss.
The Certificateholders will have the benefit of the Reserve Fund. The
Reserve Fund will not be a part of or otherwise includible in the Trust and will
be a segregated trust account held by the Reserve Agent for the benefit of the
Trustee. Any amounts held on deposit in the Reserve Fund and any investment
earnings thereon are owned by, and will be taxable to, the Trust Depositor for
federal income tax purposes. The Reserve Fund will be created with an initial
deposit by the Trust Depositor of an amount equal to [ ]% of the
Principal Balance of the Initial Contracts ($_________) in the Trust and will
thereafter be funded on each Payment Date by the deposit therein of certain
monies pursuant to the Agreement, until the monies in the Reserve Fund reach an
amount equal to the Reserve Fund Requisite Amount (as hereinafter defined).
Thereafter, on each Payment Date on which amounts held in the Reserve Fund
(after giving effect to any required withdrawals therefrom on such date) exceed
the Reserve Fund Requisite Amount such amounts shall be released to the Trust
Depositor and the Trustee's lien thereon shall be released.
The "RESERVE FUND REQUISITE AMOUNT" with respect to any Payment Date
will be an amount equal to [ ]% of the Principal Balance of the Contracts in
the Trust as of the first day of the immediately preceding Due Period; provided,
however, in the event a Reserve Fund Trigger Event (as defined herein) occurs
with respect to a Payment Date and has not terminated for three consecutive
Payment Dates (inclusive of the respective Payment Date), the Reserve Fund
Requisite Amount shall be equal to [ ]% of the Principal Balance of the
Contracts in the Trust as of the first day of the immediately preceding Due
Period. Notwithstanding the foregoing, after the Funding Period, in no event
shall the Reserve Fund Requisite Amount be less than [ ]% of the aggregate
of the Initial Class A Certificate Balance and Initial Class B Certificate
Balance. As of any Payment Date, the amount of funds actually on deposit in the
Reserve Fund may, in certain circumstances, be less than the Reserve Fund
Requisite Amount.
A "RESERVE FUND TRIGGER EVENT" will have been deemed to occur with
respect to any Payment Date if (i) the Average Delinquency Ratio (as defined
herein) for such Payment Date is equal to or greater than [ ]%; (ii) the
Average Loss Ratio (as defined herein) for such Payment Date is equal to or
greater than [ ]%, (iii) the Cumulative Loss Ratio (as defined herein) for
such Payment Date is equal to or greater than (a) [ ]% with respect to any
Payment Date which occurs within the period from the Closing Date to, and
inclusive of, the first anniversary of the Closing Date, (b) [ ]% with
respect to any Payment Date which occurs within the period from the day after
the first anniversary of the Closing Date to, and inclusive of, the second
anniversary of the Closing Date, or (c)
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[ ]% for any Payment Date following the second anniversary of the Closing
Date or (iv) the Average Default Ratio for such Payment Date is equal to or
greater than [ ]%. The "AVERAGE DELINQUENCY RATIO" for any Payment Date is
equal to the arithmetic average of the Delinquency Ratios for the Payment Date
and the two immediately preceding Payment Dates and the Delinquency Ratio for
any Payment Date is equal to the fraction (expressed as a percentage) derived by
dividing (a) the Delinquency Amount during the immediately preceding Due Period
multiplied by twelve by (b) the Principal Balance of the Contracts as of the
beginning of the related Due Period. The "DELINQUENCY AMOUNT" as of any Payment
Date means the Principal Balance of all Contracts that were delinquent 60 days
or more as of the end of the related Due Period (including Contracts in respect
of which the related Motorcycles have been repossessed and are still inventory).
The "AVERAGE LOSS RATIO" for any Payment Date is equal to the arithmetic average
of the Loss Ratios for such Payment Date and the two immediately preceding
Payment Dates and the Loss Ratio for any Payment Date is equal to the fraction
(expressed as a percentage) derived by dividing (x) the Net Liquidation Losses
for all Contracts that became Liquidated Contracts during the immediately
preceding Due Period multiplied by twelve by (y) the outstanding Principal
Balances of all Contracts as of the beginning of the related Due Period. "NET
LIQUIDATION LOSSES" means, with respect to a Liquidated Contract, the amount, if
any, by which (a) the outstanding Principal Balance of such Liquidated Contract
plus accrued and unpaid interest thereon at the Contract Rate to the date on
which such Liquidated Contract became a Liquidated Contract exceeds (b) the Net
Liquidation Proceeds for such Liquidated Contract. "NET LIQUIDATION PROCEEDS"
means, as to any Liquidated Contract, the proceeds realized on the sale or other
disposition of the related Motorcycle, including proceeds realized on the
repurchase of such Motorcycle by the originating dealer for breach of
warranties, and the proceeds of any insurance relating to such Motorcycle, after
payment of all expenses incurred thereby, together, in all instances, with the
expected or actual proceeds of any recourse rights relating to such Contract as
well as any post disposition proceeds received by the Servicer. "LIQUIDATED
CONTRACT" means any defaulted Contract as to which the Servicer has determined
that all amounts which it expects to recover from or on account of such Contract
have been recovered; provided that any defaulted Contract in respect of which
the related Motorcycle has been realized upon and disposed of and the proceeds
of such disposition have been realized shall be deemed to be a Liquidated
Contract; and provided further, a Contract which has been repossessed and has
not been sold by the Servicer for a period in excess of 90 days from such date
of repossession or a Contract which has been delinquent more than 150 days shall
be deemed to be a Liquidated Contract with a zero balance. The "CUMULATIVE LOSS
RATIO" for any Payment Date means the fraction (expressed as a percentage)
computed by the Servicer by dividing (a) the aggregate Net Liquidation Losses
for all Contracts since the Cutoff Date through the end of the related Due
Period by (b) the sum of (i) the Principal Balance of the Contracts as of the
Cutoff Date plus (B) the Principal Balance of any Subsequent Contracts as of the
related Subsequent Cutoff Date. The "AVERAGE DEFAULT RATIO" for any Payment
Date is equal to the arithmetic average of the Default Ratio for such Payment
Date and the two immediately preceding Payment Dates and the Default Ratio for
any Payment Date is equal to the fraction (expressed as a percentage) derived by
dividing (x) the Principal Balance for all Contracts that become Defaulted
Contracts during the immediately preceding Due Period multiplied by twelve by
(y) the outstanding Principal Balances of all Contracts as of the beginning of
the related Due Period. A "DEFAULTED CONTRACT" means a Contract with respect to
which there has occurred one or more of the following: (i) all or some portion
of any payment under the Contract is 120 days or more delinquent, (ii)
repossession (and expiration of any redemption period) of a Motorcycle securing
a Contract, or (iii) the Servicer has determined in good faith that an Obligor
is not likely to resume payment under a Contract. A Trigger Event will be
deemed to have terminated with respect to a Payment Date if no Trigger Event
shall exist with respect to three consecutive Payment Dates (inclusive of the
respective Payment Date).
The Servicer may, from time to time after the date of this Prospectus
Supplement, request each Rating Agency to approve a formula for determining the
Reserve Fund Requisite Amount that is different from those described above and
would result in a decrease in the Reserve Fund Requisite
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Amount or the manner by which the Reserve Fund is funded. If each Rating Agency
delivers a letter to the Trustee to the effect that the use of any such new
formulation will not result in a qualification, reduction or withdrawal of its
then-current rating of the Class A Certificates and the Class B Certificates,
then the Reserve Fund Requisite Amount will be determined in accordance with
such new formula. The Agreement will accordingly be amended, without the
consent of any Certificateholder, to reflect such new calculation.
Amounts held from time to time in the Reserve Fund will continue to be
held for the benefit of the Certificateholders. Funds on deposit in the Reserve
Fund may be invested in Reserve Fund Permitted Investments (as defined in the
Agreement). Investment income on monies on deposit in the Reserve Fund will not
be available for distribution to Certificateholders or otherwise subject to any
claims or rights of the Certificateholders and will be paid to the Trust
Depositor. Any loss on such investments will be charged to the Reserve Fund.
If on any Payment Date the Class B Certificate Balance equals zero and
amounts on deposit in the Reserve Fund have been depleted as a result of losses
in respect of the Contracts, the protection afforded to the Class A
Certificateholders by the subordination of the Class B Certificates and by the
Reserve Fund will be exhausted and the Class A Certificateholders will bear
directly the risks associated with ownership of the Contracts.
Neither the Class B Certificateholders, the Seller nor the Servicer will
be required to refund any amounts properly distributed or paid to them, whether
or not there are sufficient funds on any subsequent Payment Date to make full
distributions to the Class A Certificateholders.
The Trust Depositor has established, and funded with an initial deposit
on the Closing Date, the Interest Reserve Account for the purpose of providing
additional funds (by payment to the Trust of Carrying Charges as described
below) to pay certain distributions on Payment Dates occurring during (and on
the first Payment Date following the end of) the Funding Period. In addition to
the initial deposit, all investment earnings with respect to the Pre-Funded
Amount are to be deposited into the Interest Reserve Account and, pursuant to
the Deposit Agreement, the Trust Depositor is obligated to pay to the Trust, on
each Payment Date described above, Carrying Charges from such account. The
Interest Reserve Account has been established to account for the fact that a
portion of the proceeds obtained from the sale of Certificates will be initially
deposited in the Pre-Funding Account (as the initial Pre-Funded Amount) rather
than invested in Contracts, and the monthly investment earnings on such
Pre-Funded Amount (until the Pre-Funded Amount is used to purchase Subsequent
Contracts) are expected to be less than the Class A Pass-Through Rate and Class
B Pass-Through Rate, with respect to the corresponding portion of the Class A
Certificate Balance and Class B Certificate Balance. The Interest Reserve
Account is not designed to provide any protection against losses on the
Contracts in the Trust. The Interest Reserve Account will not be a part of or
otherwise includible in the Trust and will be a segregated trust account held by
the Trust Depositor for the benefit of the Trustee. Any amounts held on deposit
in the Interest Reserve Account and any investment earnings thereon are owned
by, and will be taxable to, the Trust Depositor for federal income tax purposes.
After the Funding Period, money in the Interest Reserve Account will be released
to the Trust Depositor free and clear of the lien of the Security Agreement.
ADVANCES
The Servicer is obligated to advance each month an amount equal to
accrued and unpaid interest on the Contracts which was delinquent with respect
to the related Due Period, but only to the extent that the Servicer believes
that the amount of such Advance will be recoverable from collections on the
Contracts. The Servicer will deposit any Advances in the Collection Account no
later than the
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Determination Date. The Servicer will be entitled to recoup Advances on a
Contract by means of a first priority withdrawal from Available Funds on any
Payment Date.
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution to Certificateholders pursuant to
Article VIII of the Agreement, the Trustee, in its capacity as Certificate
Registrar and Paying Agent, shall cause to be mailed to each Certificateholder,
at the address appearing in the Certificate Register, a statement as of the
related Payment Date prepared by the Servicer setting forth:
(i) the amount distributed on such date and allocable to
principal of the Class A Certificates and Class B Certificates;
(ii) the amount distributed on such date and allocable to
interest on the Class A Certificates and Class B Certificates;
(iii) the amount of the Class A and Class B Principal and
Interest Carryover Shortfalls, if any, on such Payment Date and the
change in the Class A and Class B Principal and Interest Carryover
Shortfalls from the immediately preceding Payment Date;
(iv) the amount otherwise distributable to the Class B
Certificateholders that is instead distributed to the Class A
Certificateholders on such Payment Date;
(v) the amount of the distributions described in (i) or (ii)
above payable pursuant to a claim on the Reserve Fund or from any other
source not constituting Available Funds and the amount remaining in the
Reserve Fund after giving effect to all deposits and withdrawals from
the Reserve Fund on such date;
(vi) the amount of any Special Distribution to be made on
such Payment Date;
(vii) for each Payment Date during the Funding Period, the
remaining Pre-Funded Amount;
(viii) for each Payment Date during the Funding Period to and
including the Payment Date immediately following the end of the Funding
Period, the Principal Balance and number of Subsequent Contracts
conveyed to the Trust during the related Due Period;
(ix) the remaining Class A Certificate Balance and Class B
Certificate Balance after giving effect to the distribution of principal
(and Special Distribution, if any) to be made on such Payment Date;
(x) the Pool Balance as of the close of business on the last
day of the related Due Period;
(xi) the Class A Pool Factor and the Class B Pool Factor
immediately before and immediately after such Payment Date;
(xii) the amount of fees payable out of the Trust, separately
identifying the Monthly Servicing Fee, the Trustee Fee and the Back-up
Servicer Fee;
(xiii) the number and aggregate Principal Balance of Contracts
delinquent, 31-59 days, 60-89 days and 90 or more days, computed as of
the end of the related Due Period;
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(xiv) the number and aggregate Principal Balance of Contracts
that became Liquidated Contracts during the immediately preceding Due
Period, the amount of liquidation proceeds for such Due Period, the
amount of liquidation expenses being deducted from liquidation proceeds
for such Due Period, the Net Liquidation Proceeds and the Net
Liquidation Losses for such Due Period;
(xv) the Loss Ratio, the Average Loss Ratio, the Cumulative Loss
Ratio, the Delinquency Ratio, the Average Delinquency Ratio, the Default
Ratio and the Average Default Ratio as of such Payment Date;
(xvi) the number of Contracts and the aggregate Principal
Balance of such Contracts, as of the first day of the Due Period
relating to such Payment Date (after giving effect to payments received
during such Due Period and to any transfers of Subsequent Contracts to
the Trust occurring on or prior to such Payment Date);
(xvii) the aggregate Principal Balance and number of Contracts
that were repurchased by the Seller pursuant to the Agreement with
respect to the related Due Period, identifying such Contracts and the
Repurchase Price for such Contracts; and
(xviii) such other customary factual information as is available
to the Servicer as the Servicer deems necessary and can reasonably
obtain from its existing data base to enable Certificateholders to
prepare their tax return.
Within 75 days after the end of each calendar year, the Certificate
Registrar shall mail to each Certificateholder of record at any time during such
calendar year a report as to the aggregate amounts reported pursuant to
subsections (a)(i), (ii), and (xii) described above attributable to such
Certificateholder and such other information as is reasonably necessary for the
preparation of such Certificateholder's income tax return in respect of the
Certificates for such calendar year.
ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER
The Servicer will deliver to the Trustee, Moody's and S&P on or before
January 31 of each year commencing January 31, 199_, an officer's certificate
stating that (a) a review of its activities during the prior calendar year and
of its performance under the Agreement was made under the supervision of the
officer signing such certificate and (b) to such officer's knowledge, based on
such review, the Servicer has fully performed all its obligations under the
Agreement throughout such period, or, if there has been a default in the
performance of any such obligation, specifying each such default known to such
officer and the nature and status thereof. A copy of such certificate may be
obtained by any Certificateholder by a request in writing to the Trustee
addressed as follows: 311 West Monroe Street, 12th Floor, Chicago, Illinois
60606, Attention: Indenture Trust Division.
REPURCHASE OPTION
The Agreement will provide that on any Payment Date on which the
aggregate of the Class A and Class B Certificate Balance is less than 10% of the
Class A and Class B Initial Certificate Principal Balance, the Seller will have
the option to repurchase, on 20 days' prior written notice to the Trustee, all
outstanding Contracts at a price equal to the Class A and Class B Certificate
Balance on the prior Payment Date plus the aggregate of the Class A Interest
Distributable Amount and the Class B Interest Distributable Amount for the
current Payment Date as well as the accrued and unpaid Monthly Servicing Fee,
Trustee Fee, Back-up Servicer Fee and unreimbursed Advances to the date of such
repurchase. Such repurchase will effect an early termination of the Trust. The
Trustee shall send written notice to
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each Certificateholder of the Seller's intention to repurchase such Contracts
within five Business Days of the Trustee's receipt of written notice from the
Seller of the Seller's intention.
MANDATORY SPECIAL DISTRIBUTIONS
The Class A Certificates and Class B Certificates will be prepaid in part
pursuant to a Mandatory Special Distribution, without premium, on the Payment
Date on or immediately following the last day of the Funding Period in the event
that any amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Subsequent Contracts, including any such purchase
on such date. The aggregate principal amount of Class A Certificates and Class
B Certificates to be prepaid will be an amount equal to the amount then on
deposit in the Pre-Funding Account multiplied by the Class A Percentage and
Class B Percentage, respectively.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will manage, administer, service and make collections on
the Contracts exercising the degree of skill and care consistent with the
highest degree of skill and care that the Servicer exercises with respect to
similar contracts serviced by the Servicer and in any event with no less degree
of skill and care than would be exercised by a prudent servicer of motorcycle
conditional sales contracts.
The Servicer may, consistent with its customary servicing procedures,
grant to the Obligor on any Contract an extension of payments due under such
Contract; PROVIDED that (i) the extension period is limited to 45 days, (ii) and
the Obligor has not received an extension during the previous twelve-month
period, (iii) the evidence supports the Obligor's willingness and capability to
resume monthly payments, (iv) such extension is consistent with the Servicer's
customary servicing procedures and with the Agreement, (v) such extension does
not extend the maturity date of the Contract beyond the last maturity date of
any of the Contracts as of the Initial Cutoff Date (or as of the last Subsequent
Cutoff Date, if any) and (vi) the aggregate Principal Balances of Contracts
which have had extensions granted does not exceed more than 3% of the aggregate
of the Class A Initial Certificate Principal Balance and the Class B Initial
Certificate Principal Balance.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer will be entitled to receive a Monthly Servicing Fee for
each Due Period (to be paid on the related Payment Date) equal to 1/12th of
[_______%] of the Principal Balance of the Contracts as of the beginning of such
Due Period. Along with the Monthly Servicing Fee, and included as part of the
"SERVICING FEE" as defined in the Agreement, the Servicer will be entitled to
receive late payment penalty fees and extension fee paid by Obligors during the
related Due Period as additional compensation. Such Servicing Fee is payable
from Available Interest prior to the payment from such Available Interest of
interest and/or principal on the Certificates. See "DESCRIPTION OF THE
CERTIFICATES -- DISTRIBUTIONS ON CERTIFICATES" above.
The Servicing Fee provides compensation for customary third-party
servicing activities to be performed by the Servicer for the Trust, for
additional administrative services performed by the Servicer on behalf of the
Trust and for expenses paid by the Servicer on behalf of the Trust.
Customary servicing activities include collecting and recording
payments, communicating with Obligors, investigating payment delinquencies,
providing billing and tax records to Obligors and maintaining internal records
with respect to each Contract. Administrative services performed by the
Servicer on behalf of the Trust include selecting and packaging the Contracts,
calculating distributions to Certificateholders and providing related data
processing and reporting services for Certificateholders
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and on behalf of the Trustee. Expenses incurred in connection with servicing of
the Contracts and paid by the Servicer from its servicing fees include payment
of fees and expenses of accountants, payments of all fees and expenses incurred
in connection with the enforcement of Contracts, and payment of expenses
incurred in connection with distributions and reports to Certificateholders.
INDIVIDUAL MOTORCYCLE INSURANCE
The terms of each Contract require that for the life of the Contract,
each Motorcycle is covered by a collision and comprehensive or equivalent
insurance policy which covers physical damage risks, provides limited insurance
coverage for damage to the Motorcycle and names the Seller as a loss payee. The
amount of insurance coverage is limited to the value of the Motorcycle. In the
Transfer and Sale Agreement, the Seller has warranted that all premium payments
on such insurance have been paid in full for one year from the date of the
Contracts' origination. Pursuant to Contract terms, the Servicer may "FORCE
PLACE" collision and comprehensive insurance with respect to the related
Motorcycle in those situations in which the Obligor has not maintained the
required insurance. As conveyee and assignee of the Contracts, the Trust will
be entitled to the benefits of such insurance. See "DESCRIPTION OF THE
CERTIFICATES--CONVEYANCE OF CONTRACTS." Following repossession of a Motorcycle
by the Servicer, the Servicer does not maintain such insurance. In the event
the Servicer repossesses a Motorcycle on behalf of the Trust, the Servicer will
act as self-insurer for any damage to such Motorcycle until it is resold.
EVIDENCE AS TO COMPLIANCE
On or before March 31 of each year, beginning on March 31, 199_, the
Servicer will deliver to the Trustee and each Rating Agency a report of a
nationally recognized accounting firm, with respect to the twelve months ended
the immediately preceding December 31, a statement (the "ACCOUNTANT'S REPORT")
addressed to the Board of Directors of the Servicer and to the Trustee to the
effect that such firm has audited the consolidated financial statements of
Eaglemark Financial and issued its report thereon and that such audit (1) was
made in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing procedures
as such firm considered necessary in the circumstances; (2) included an
examination of documents and records relating to the servicing of motorcycle
conditional sales contracts under pooling and servicing agreements substantially
similar one to another (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby, including
the Agreement); (3) included an examination of the delinquency and loss
statistics relating to the portfolio of motorcycle conditional sales contracts
of Eaglemark Financial and its subsidiaries; and (4) except as described in the
statement, disclosed no exceptions or errors in the records relating to
motorcycle loans serviced for others that, in the firm's opinion, generally
accepted auditing standards requires such firm to report. The Accountant's
Report will further state that (1) a review in accordance with agreed upon
procedures was made of one randomly selected Monthly Report and (2) except as
disclosed in the Accountant's Report, no exceptions or errors in the Monthly
Report so examined were found.
The Agreement provides that the Servicer shall furnish to the Trustee,
S&P and Moody's such underlying data as each may reasonably request.
CERTAIN MATTERS RELATING TO THE SERVICER
The Agreement provides that the Servicer may not resign from its
obligations and duties as servicer thereunder, except upon a determination that
the Servicer's performance of such duties is no longer permissible under the
Agreement or applicable law, and will prohibit the Servicer from extending
credit to any Certificateholder for the purchase of a Certificate, purchasing
Certificates in any agency or trustee capacity or, except as provided in the
Agreement, lending money to the Trust.
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EVENTS OF TERMINATION
An "EVENT OF TERMINATION" under the Agreement will occur if (a) either
the Servicer or the Seller fails to make any payment or deposit required under
the Certificates, the Agreement or the Transfer and Sale Agreement and such
failure continues for four Business Days after the date on which such payment or
deposit was due; (b) either the Servicer or the Seller fails to observe or
perform in any material respect any covenant or agreement in the Certificates,
the Agreement or the Transfer and Sale Agreement which continues unremedied for
thirty days after the date on which such failure commences; (c) either the
Servicer or the Seller assigns its duties or rights under the Agreement or the
Transfer and Sale Agreement, except as specifically permitted under the
Agreement or the Transfer and Sale Agreement, or attempts to make such an
assignment; (d) a court having jurisdiction in the premises enters a decree or
order for relief in respect of the Servicer or Trust Depositor in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appoints a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Servicer, or Trust
Depositor, or for any substantial liquidation of their respective affairs; (e)
the Servicer or Trust Depositor commences a voluntary case under any applicable
bankruptcy, insolvency or similar law, or consents to the entry of an order for
relief in an involuntary case under any such law, or consents to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian
or sequestrator (or other similar official) of the Servicer or Trust Depositor
or for any substantial part of its property or shall have made any general
assignment for the benefit of creditors, or fails to, or admits in writing its
inability to, pay debts as they become due, or takes any corporate action in
furtherance of the foregoing; (f) the failure of the Servicer to deliver the
Monthly Report pursuant to the terms of the Agreement and such failure remains
uncured for five business days after the date on which such failure commences;
or (g) any representation, warranty or statement of the Servicer made in the
Agreement or any certificate, report or other writing delivered pursuant thereto
shall prove to be incorrect in any material respect as of the time when the same
shall have been made and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Trust and, within 30 days after
written notice thereof shall have been given to the Servicer or the Trust
Depositor by the Trustee, the circumstances or condition in respect of which
such representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured. The Servicer will be required under the
Agreement to give the Trustee, Moody's, S&P, the Back-up Servicer and the
Certificateholders notice of an Event of Termination promptly upon the
occurrence of such Event.
RIGHTS UPON AN EVENT OF TERMINATION
If an Event of Termination has occurred and is continuing, (a) the
Trustee or (b) the holders of Certificates with aggregate Fractional Interests
evidencing 25% or more of the Trust may terminate all of the Servicer's
management, administrative, servicing, custodian and collection functions under
the Agreement. Upon such termination, the Back-up Servicer will succeed to all
the responsibilities, duties and liabilities of the Servicer under the Agreement
and will be entitled to similar compensation arrangements; PROVIDED, HOWEVER,
that the Back-up Servicer will not assume any obligation of the Seller to
repurchase Contracts for breach of representations and warranties, and the
Back-up Servicer will not be liable for any acts or omissions of the Servicer
occurring prior to a transfer of the Servicer's servicing and related functions
or for any breach by the Servicer of any of its representations and warranties
contained in the Agreement or any related document or agreement.
Notwithstanding such termination, the Servicer shall be entitled to payment of
certain amounts payable to it prior to such termination, for services rendered
prior to such termination. No such termination will affect in any manner the
Seller's obligation to repurchase certain Contracts for breaches of
representations and warranties under the Agreement. In the event that the
Back-up Servicer in so acting would be in violation of legal requirements with a
resulting material adverse effect upon it, it may resign such role and if a
successor has not been appointed within 60 days, it may petition a court of
competent jurisdiction for its removal.
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Following an Event of Termination, the Trustee shall terminate the
Lockbox Agreement and direct all Obligors under the Contracts to make all
payments under the Contracts to the Trustee, or to a lockbox established by the
Trustee.
TERMINATION OF THE AGREEMENT
The Agreement will terminate (after distribution of all Class A
Distributable Amounts and Class B Distributable Amounts due to Class A
Certificateholders and Class B Certificateholders) on the Payment Date on which
the Class A Certificate Balance and Class B Certificate Balance is reduced to
zero; PROVIDED, that in no event shall the trust created hereby continue beyond
the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof. "DESCRIPTION OF THE
CERTIFICATES--REPURCHASE OPTION" above. However, the Seller's representations,
warranties and indemnities will survive any termination of the Agreement. Upon
termination, amounts in the Collection Account, if any, will be paid to the
Seller. See "DESCRIPTION OF THE CERTIFICATES--SERVICING COMPENSATION AND
PAYMENT OF EXPENSES" above.
AMENDMENT; WAIVER
The Agreement may be amended by agreement of the Trustee, the Servicer
and the Trust Depositor at any time without the consent of the
Certificateholders to correct manifest error, to cure any ambiguity, to correct
or supplement any provision which may be inconsistent with any other provision
or to add other provisions not inconsistent with the Agreement upon receipt of
an opinion of counsel to the Trust Depositor that such amendment will not
adversely affect in any material respect the interests of any Certificateholder.
The Agreement may also be amended from time to time by the Trustee, the
Servicer and the Trust Depositor, and with the consent of Certificateholders
evidencing Fractional Interests representing 66-2/3% or more of the Certificate
Principal Balance of each Class voting as a separate Class PROVIDED that no
such amendment or waiver shall (a) reduce in any manner the amount of, or delay
the timing of, collections of payments on Contracts or distributions which are
required to be made on any Certificate or (b) reduce the aggregate amount of
Certificates required for any amendment of the Agreement on any waiver of an
Event of Termination, without unanimous consent of the Certificateholders.
The Trustee is required under the Agreement to furnish
Certificateholders, S&P and Moody's with notice promptly upon execution of any
amendment to the Agreement and a copy of any such amendment.
INDEMNIFICATION
The Agreement will provide that the Servicer will defend and indemnify
the Trust, the Trustee (including any agent of the Trustee), and the
Certificateholders against any and all costs, expenses, losses, damages, claims
and liabilities, including reasonable fees and expenses of counsel and expenses
of litigation arising out of or resulting from the use, ownership or operation
by the Servicer or any affiliate thereof of any Motorcycle securing a Contract.
The Transfer and Sale Agreement further provides that the Seller will pay any
taxes and defend, indemnify and hold harmless the Trust, the Trustee (including
any agent of the Trustee) and the Certificateholders against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation for any taxes which may at any
time be asserted with respect to the conveyance of the Contracts to the Trust
(but not including any federal, state or other tax arising out of the creation
of the Trust and the issuance of the Certificates).
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The Agreement will also provide that the Servicer, in connection with
its duties as servicer of the Contracts, will defend and indemnify the Trust,
the Trustee and the Certificateholders (which indemnification will survive any
removal of the Seller as Servicer of the Contracts) against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation, in respect of any action taken
by the Servicer with respect to any Contract.
DUTIES AND IMMUNITIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or
sufficiency of the Agreement, the Certificates or of any Contract, Contract file
or related documents, and will not be accountable for the use or application by
the Trust Depositor of any funds paid to the Trust Depositor in consideration of
the conveyance of the Contracts or deposited into or withdrawn from the
Collection Account by the Servicer. If no Event of Termination has occurred,
the Trustee will be required to perform only those duties specifically required
of it under the Agreement and will not be personally liable for any actions
taken, suffered or omitted by it in good faith with the direction of
Certificateholders evidencing Fractional Interests representing at least 25% of
the Certificate Principal Balance of each Class voting as a separate Class.
However, upon receipt of the various certificates, reports or other instruments
required to be furnished to it, the Trustee will be required to examine them to
determine whether they conform as to form to the requirements of the Agreement.
Certificateholders with Fractional Interests representing 25% or more
of the Certificate Principal Balance of each Class voting as a separate Class
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee under the Agreement, or
exercising any trust or power conferred on the Trustee under the Agreement,
except that the required percentage for waivers of Events of Termination shall
be more than 50% of each Class voting as a separate Class.
Under the Agreement the Servicer will agree to indemnify the Trustee
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the Trust and its duties thereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties thereunder.
The Agreement also provides that the Trustee will maintain at its
expense in Chicago, Illinois, an office or agency where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee and the certificate registrar and transfer agent
in respect of the Certificates pursuant to the Agreement may be served. On the
date hereof the Trustee's office for such purposes is located at 311 West Monroe
Street, 12th Floor, Chicago, Illinois 60606. The Trustee will promptly give
written notice to the Trust Depositor and the Certificateholders of any change
thereof.
THE TRUSTEE
The Trustee is an Illinois banking corporation. The Trustee may resign
at any time, in which event the Servicer will be obligated to appoint a
successor Trustee. The Servicer may also remove the Trustee if the Trustee
ceases to be eligible to continue as such under the Agreement or if the Trustee
becomes insolvent. In such circumstances, the Servicer will also be obligated
to appoint a successor Trustee. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance of
the appointment by the successor Trustee. For its services under the Agreement,
the Trustee will receive the Trustee's Fee.
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SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS;
REPURCHASE OBLIGATIONS
GENERAL
As a result of the Seller's conveyance and assignment of the Contracts
to the Trust Depositor pursuant to the Transfer and Sale Agreement and the Trust
Depositor's conveyance and assignment of the Contracts to the Trust pursuant to
the Agreement, the Certificateholders, through the Trust, will succeed
collectively to all of the rights under such Contracts (including the right to
receive payment on the Contracts) on or after the related Cutoff Date. Each
Contract evidences both (a) the obligation of the Obligor to repay the loan
evidenced thereby and (b) the grant of a security interest in the Motorcycle to
secure repayment of such loan. Certain aspects of both features of the
Contracts are more fully described below.
The Contracts are "CHATTEL PAPER" as defined in the Uniform Commercial
Code (the "UCC") in effect in the states in which the Motorcycles were initially
registered. Pursuant to the UCC, the sale of chattel paper is treated in a
manner similar to perfection of a security interest in chattel paper. The
Seller and the Trust Depositor will make an appropriate filing of UCC-1
financing statements in Nevada and Illinois to give notice of the Trust's
ownership of the Contracts, and the Contracts held by the Servicer as custodian
will be stamped to reflect their conveyance and assignment from the Seller to
the Trust Depositor and the Trust Depositor to the Trust. However, if a
subsequent purchaser were able to take physical possession of any Contracts
without notice of such conveyance and assignment, the Trust's interest in those
Contracts could be defeated. See "DESCRIPTION OF THE CERTIFICATES--CONVEYANCE
OF CONTRACTS" above.
SECURITY INTERESTS IN THE MOTORCYCLES
The Motorcycles securing the Contracts are located in 50 states, the
District of Columbia and the U.S. Territories. Security interests in
motorcycles may be perfected either by notation of the secured party's lien on
the certificate of title or by delivery of the required documents and payment of
a fee to the state motor vehicle authority, depending on state law. The
Seller's practice is to effect such notation or delivery of the required
documents and fees, and to obtain possession of the certificate of title, as
appropriate under the laws of the state in which any Motorcycle securing a
Motorcycle conditional sales contract is registered. In the event either the
Seller fails, due to clerical error, to effect such notation or delivery, or
files the security interest under the wrong law, the Seller may not have a first
priority security interest in the Motorcycle securing a Contract. In such
event, the only recourse of the Trust would be against the Seller pursuant to
its repurchase obligation. See "SECURITY INTEREST AND OTHER ASPECTS OF THE
CONTRACTS; REPURCHASE OBLIGATIONS--REPURCHASE OBLIGATIONS" below. However, the
Seller believes that it has obtained a perfected first priority security
interest by proper notation or delivery of the required documents and fees with
respect to all of the Motorcycles securing Contracts.
The Seller will convey and assign its security interest in the
Motorcycles to the Trust Depositor pursuant to the Transfer and Sale Agreement,
and the Trust Depositor will convey and assign its security interest in the
Motorcycles to the Trust pursuant to the Agreement. However, because of the
administrative burden and expense, neither the Seller, the Trust Depositor nor
the Trustee will amend the certificates of title to identify the Trust as the
new secured party and, accordingly, the Seller will continue to be named as the
secured party on the certificates of title relating to the Motorcycles. See
generally "RISK FACTORS--RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED
MOTORCYCLES" in the Prospectus. The Seller, as Servicer, will continue to hold
any certificates of title relating to the Motorcycles in its possession as
custodian and agent for the Trust pursuant to the Agreement.
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In the event that the owner of a Motorcycle moves to a state other than
the state in which such Motorcycle initially is registered, under the laws of
most states the perfected security interest in the Motorcycle would continue for
four months after such relocation and thereafter until the owner re-registers
the motorcycle in such state. A majority of states generally require surrender
of a certificate of title to re-register a motorcycle; accordingly, the Servicer
must surrender possession if it holds the certificate of title to such
Motorcycle or, in the case of Motorcycles registered in states which provide for
notation of lien, the Seller would receive notice of surrender if the security
interest in the Motorcycle is noted on the certificate of title. Accordingly,
the Servicer would have the opportunity to re-perfect its security interest in
the Motorcycle in the state of relocation. In states which do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. In the ordinary course of servicing its portfolio of
Motorcycle conditional sales contracts, the Servicer takes steps to effect such
re-perfection upon receipt of notice of re-registration or information from the
obligor or the obligor's insurance carrier as to relocation. Similarly, when an
obligor under a Motorcycle conditional sales contract sells a Motorcycle, the
Servicer must surrender possession of the certificate of title or will receive
notice as a result of its lien noted thereon and accordingly will have an
opportunity to require satisfaction of the related Motorcycle conditional sales
contract before release of the lien. Under the Agreement, the Servicer is
obligated to take such steps, at its expense, as are necessary to maintain
perfection of security interests in the Motorcycles.
Under the laws of most states, liens for repairs performed on a
motorcycle take priority even over a perfected security interest. The Seller
will represent in the Transfer and Sale Agreement that as of the sale date of
the Contracts, it has no knowledge of any such liens with respect to any
Motorcycle securing payment on any Contract. However, such liens could arise at
any time during the term of a Contract. No notice will be given to the Trust or
Certificateholders in the event such a lien arises.
ENFORCEMENT OF SECURITY INTERESTS IN MOTORCYCLES
The Servicer on behalf of the Trust may take action to enforce the
Trust's security interest with respect to defaulted Contracts by repossession
and resale of the Motorcycles securing such defaulted Contracts. Under the laws
applicable in most states, a creditor can repossess a motorcycle securing a
contract by voluntary surrender, by "SELF-HELP" repossession that is "PEACEFUL"
(I.E., without breach of the peace) or, in the absence of voluntary surrender
and the ability to repossess without breach of the peace, by judicial process.
The UCC and consumer protection laws in most states place restrictions on
repossession sales, including requiring prior notice to the debtor and
commercial reasonableness in effecting such a sale. In the event of such
repossession and resale of a Motorcycle, the Trust would be entitled to be paid
out of the sale proceeds before such proceeds could be applied to the payment of
the claims of unsecured creditors or the holders of subsequently perfected
security interests or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the motor vehicle securing such debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments.
Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit or
delay the ability of a lender to repossess and resell collateral or enforce a
deficiency judgment.
OTHER MATTERS
The so-called "HOLDER-IN-DUE-COURSE" rule of the Federal Trade
Commission is intended to defeat the ability of the transferor of a consumer
credit contract which is the seller of goods which gave rise
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to the transaction (and certain related lenders' assignees) to transfer such
contract free of notice of claims by the debtor thereunder. The effect of this
rule is to subject the assignee of such a contract to all claims and defenses
which the debtor could assert against the seller of goods. Liability under this
rule, which would be applicable to the Trust, is limited to amounts paid under a
Contract; however, the Obligor also may be able to assert the rule to set off
remaining amounts due as a defense against a claim brought by the Trust against
such Obligor. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination of and lending pursuant to the
Contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with
their provisions may affect the enforceability of the related Contract. See
generally "RISK FACTORS--ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S
ABILITY TO REALIZE ON ITS SECURITY INTEREST IN THE MOTORCYCLES; CONSUMER
PROTECTION LAWS" in the Prospectus.
REPURCHASE OBLIGATIONS
Under the Transfer and Sale Agreement, the Seller will make warranties
relating to validity, subsistence, perfection and priority of the security
interest in each Motorcycle securing a Contract. Accordingly, if any defect
exists in the perfection of the security interest in any Motorcycle and such
defect materially adversely affects a Contract, such defect would constitute a
breach of a representation and warranty under the Transfer and Sale Agreement
and would create an obligation of the Seller to repurchase such Contract from
the Trust unless the breach is cured. See "DESCRIPTION OF THE
CERTIFICATES--CONVEYANCE OF CONTRACTS" above.
In addition, the Seller will also warrant under the Transfer and Sale
Agreement that each Contract complies with all requirements of law.
Accordingly, if any Obligor has a claim against the Trust for violation of any
law and such claim materially adversely affects the Trust's interest in a
Contract, such violation would constitute a breach of a representation and
warranty under the Transfer and Sale Agreement and would create an obligation to
repurchase such Contract unless the breach is cured. See "DESCRIPTION OF THE
CERTIFICATES--CONVEYANCE OF CONTRACTS" above.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general and brief discussion of certain United States
federal income tax consequences of the purchase, ownership and disposition of
the Certificates. For a full description of the material federal income tax
consequences of the ownership of the Certificates in the Trust, see the
Prospectus, "Federal Income Tax Consequences--Grantor Trusts." Any material
variations from the discussion in the Prospectus, "Federal Income Tax
Consequences--Grantor Trusts" will be specified below.
The discussion herein is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "CODE"), Treasury Regulations promulgated
thereunder, current administrative rulings, judicial decisions and other
applicable authorities in effect as of the date hereof, all of which are subject
to change, possibly with retroactive effect. There are no cases or Internal
Revenue Service ("IRS") rulings on similar transactions involving a trust and
instruments issued by that trust with terms similar to those of the Trust and
the Certificates. As a result, there can be no assurance that the IRS will not
challenge the conclusions set forth in the following summary, and no ruling from
the IRS has been or will be sought on any of the issues discussed below.
Furthermore, legislative, judicial or administrative changes may occur, perhaps
with retroactive effect, which could affect the accuracy of the statements and
conclusions set forth herein as well as the tax consequences to holders of
the Certificates.
This discussion and the more detailed discussion set forth in the
Prospectus, "Federal Income Tax Consequences--Grantor Trusts," do not purport to
deal with all aspects of federal income taxation that may be relevant to all
holders of Certificates in light of their personal investment or tax
circumstances nor to certain types of holders who may be subject to special
treatment under the federal income tax laws (including, without limitation,
financial institutions, broker-dealers, insurance companies, foreign persons,
tax-exempt organizations and persons who hold the Certificates as part of a
straddle, hedging or conversion transaction). This information is generally
directed to prospective purchasers who purchase Certificates at the time of
original issue, who are citizens or residents of the United States, and who hold
the Certificates as "CAPITAL ASSETS" within the meaning of Section 1221 of the
Code. Taxpayers and preparers of tax returns (including those filed by any
partnership or other issuer) should be aware that under applicable Treasury
Regulations a provider of advice on specific issues of law is not considered an
income tax return preparer unless the advice is (i) given with respect to events
that have occurred at the time the advice is rendered and is not given with
respect to the consequences of contemplated actions, and (ii) is directly
relevant to the determination of an entry on a tax return. Accordingly,
taxpayers should consult their own tax advisors and tax return preparers
regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed herein. PROSPECTIVE INVESTORS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL,
FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CERTIFICATES.
TAX CHARACTERIZATION OF THE TRUST
Winston & Strawn, as federal tax counsel ("FEDERAL TAX COUNSEL") to the
Trust Depositor, has delivered an opinion to the Trust Depositor that for U.S.
federal income tax purposes the Trust will be classified as a grantor trust and
not as an association taxable as a corporation, and that each Certificateholder
will be treated as the owner of an undivided interest in the assets and income
of the Trust. An opinion of counsel is not binding on a court or the IRS and
there can be no assurance that the IRS or a court will agree with Federal Tax
Counsel's opinion.
GENERAL TAX TREATMENT OF CERTIFICATEHOLDERS
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As a grantor trust, each Certificateholder will be treated as the owner
of an undivided interest in the assets of the Trust, including the Contracts.
Accordingly, each Certificateholder must report on its federal income tax return
its share of income from the Contracts and other Trust assets and, subject to
the limitations on deductions by individuals, estates, and trusts, may deduct
its share of the reasonable fees and expenses paid by the Trust, as if such
Certificateholder held its share of the assets of the Trust directly.
The Certificates will be treated as representing interests in stripped
bonds and stripped coupons within the meaning of Section 1286 of the Code. As a
result, Certificateholders will be treated as having original issue discount
("OID") which is includible in income as it economically accrues regardless of
when cash is actually paid. It is expected, however, that the amount and
accrual of OID should closely correspond to the timing and amount of payments on
the Certificates at their respective pass-through rates so that a
Certificateholder will not experience any material difference between the cash
received at the pass-through rate and the Certificateholder's taxable OID
income. A Certificateholder will recognize gain or loss when the
Certificateholder sells a Certificate or an asset of the Trust is sold. For a
complete discussion of the federal tax consequences of owning a Certificate in
the Trust, see Prospectus, "Federal Income Tax Consequences--Grantor Trusts."
ERISA CONSIDERATIONS
THE CLASS A CERTIFICATES
THE CLASS A CERTIFICATES DURING THE FUNDING PERIOD. During the Funding
Period, the Class A Certificates may not be acquired by any employee benefit
plan subject to ERISA or Section 4975 of the Code.
THE CLASS A CERTIFICATES AFTER THE FUNDING PERIOD. Notwithstanding the
above described restriction which is applicable solely during the Funding
Period, the following analysis is applicable to a Class A Certificate after the
Funding Period. ERISA and Section 4975 of the Code impose certain restrictions
on employee benefit plans subject to ERISA and/or subject to the requirements of
Section 4975 of the Code (including, for example, individual retirement accounts
and Keogh plans) (collectively, "PLANS"), and on persons who are "PARTIES IN
INTEREST" (as defined under ERISA) or "DISQUALIFIED PERSONS" (as defined under
the Code) (collectively, "PARTIES IN INTEREST") with respect to such Plans.
Certain employee benefit plans, such as governmental plans and church plans
(assuming that no election has been made under Section 410(d) of the Code) are
not subject to the restrictions of ERISA or Section 4975 of the Code. However,
any such governmental or church plan which is qualified under Section 401(a) of
the Code and exempt from taxation under Section 501(a) of the Code is subject to
the prohibited transaction rules set forth under Section 503 of the Code and may
be subject to additional fiduciary constraints under applicable state or local
law.
Investments by Plans covered by ERISA are subject to general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with both the documents governing the Plan and the prohibited
transaction provisions of ERISA and the Code. Any Plan fiduciary which proposes
to cause a Plan to acquire any of the Certificates should consult with its
counsel with respect to the potential consequences under ERISA and the Code of
the Plan's acquisition and ownership of such Certificates.
PLAN ASSETS. If a Plan acquires a Certificate, then the Plan's assets
may include both the Certificate it acquires and an undivided interest in the
underlying assets of the Trust. Accordingly, the acquisition of a Certificate
might constitute an improper delegation by such Plan's fiduciary of the duty to
manage Plan assets. ERISA and the Code do not define "PLAN ASSETS." The United
States Department of Labor (the "DOL") has issued a final regulation (29 C.F.R.
Section 2510.3-101) (the "PLAN ASSET
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REGULATION") containing rules for determining what constitutes the assets of a
Plan. The Plan Asset Regulation provides that, as a general rule, the
underlying assets and properties of corporations, partnerships or trusts may be
deemed to be "PLAN ASSETS" unless certain exceptions apply. This offering has
not been structured to avoid plan asset characterization. If the underlying
assets of the Trust are considered "PLAN ASSETS," the persons providing services
with respect to the assets of the Trust may be subject to the fiduciary
responsibility provisions of Title I of ERISA and be subject to the prohibited
transaction provisions of ERISA and the Code with respect to transactions
involving such assets unless such transactions are subject to a statutory or
administrative exemption.
PROHIBITED TRANSACTIONS. Each fiduciary should also be aware that
Section 406 of ERISA and Section 4975 of the Code prohibit a Plan from engaging
in certain transactions involving the assets of the Plan with a person or entity
that is a "PARTY IN INTEREST" to the Plan ("PROHIBITED TRANSACTIONS"). A "PARTY
IN INTEREST" is defined to include, among others, a fiduciary of the Plan, a
service provider to the Plan, an employer of participants in the Plan and
certain affiliates of such parties. Section 4975 of the Code (or, in some
cases, Section 502 of ERISA) imposes substantial excise taxes on parties in
interest engaging in non-exempted prohibited transactions. A purchase or
holding of a Certificate by a Plan could result in a prohibited transaction;
however, such purchase or holding may be exempt from the prohibited transaction
restrictions in accordance with certain exemptions promulgated by the DOL.
UNDERWRITERS PROHIBITED TRANSACTION EXEMPTION. DOL has granted to the
Underwriters an administrative exemption (Prohibited Transaction Exemption
89-89; Exemption Application No. D-6446, 54 Fed. Reg. 42589 (1989)) (the
"EXEMPTION") from certain of the prohibited transaction rules of ERISA and the
related excise tax provisions of Section 4975 of the Code with respect to the
initial purchase, the holding and the subsequent resale in the secondary market
by Plans of certificates in pass-through trusts that consist of certain
receivables, loans, and other obligations that meet the conditions and
requirements of the Exemption. The loans covered by the Exemption include
obligations that bear interest or are purchased at a discount and which are
secured by motor vehicles or equipment or qualified motor vehicle leases such as
the Contracts. It should be noted, however, that in issuing the exemption, the
DOL may not have considered interests in pools of the exact nature of the
Certificates.
Among the conditions that must be satisfied for the Exemption to apply
to the acquisition of the Certificates by a Plan are the following:
(1) the acquisition of the Certificates by a Plan is on
terms (including the price for the Certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction
with an unrelated party;
(2) the rights and interest evidenced by the Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other Certificates of the Trust;
(3) the Certificates acquired by the Plan have received a
rating at the time of such acquisition that is one of the three highest
generic rating categories from either S&P, Moody's, Duff & Phelps Inc.
("D&P") or Fitch Investors Service, Inc. ("FITCH");
(4) the Trustee must not be an affiliate of any other member
of the Restricted Group (as defined below);
(5) the sum of all payments made to and retained by the
Placement Agent in connection with the distribution of the Certificates
represents not more than reasonable compensation for placing the
Certificates; the sum of all payments made to and retained by the Trust
Depositor pursuant to the assignment of the Contracts to the Trust
represents not more than the fair market value of such Contracts; the
sum of all payments made to and retained by
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the Servicer represents not more than reasonable compensation for such
person's services under the Agreement and reimbursements of such
person's reasonable expenses in connection therewith; and
(6) the Plan investing in the Certificates is an "ACCREDITED
INVESTOR" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933.
In light of the foregoing requirements listed in (2) and (3), following the
expiration of the Funding Period only the Class A Certificates may be eligible
for the Exemption.
The trust fund (I.E., in the case of the Certificates, the Trust) must
also meet the following requirements:
(i) the corpus of the trust fund must consist solely of assets of
the type that have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated
in one of the three highest rating categories of S&P, Moody's, Fitch or D&P for
at least one year prior to the Plan's acquisition of Certificates; and
(iii) certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of Certificates.
Moreover, the Exemption may provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
the Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables held in the trust
provided that, among other requirements, (i) in the case of an acquisition in
connection with the initial issuance of certificates, at least fifty percent
(50%) of each class of certificates in which Plans have invested is acquired by
persons independent of the Restricted Group; (ii) such fiduciary (or its
affiliate) is an obligor with respect to five percent or less of the fair market
value of the obligations contained in the trust; (iii) the Plan's investment in
certificates of any class does not exceed twenty-five percent (25%) of all of
the certificates of that class outstanding at the time of the acquisition; and
(iv) immediately after the acquisition, no more than twenty-five percent (25%)
of the assets of the Plan with respect to which such person is a fiduciary are
invested in certificates representing an interest in one or more trusts
containing assets sold or served by the same entity.
The Exemption does not apply to Plans sponsored by the Trust Depositor,
the Placement Agent, the Trustee, the Servicer, the Paying Agent, the
Certificate Registrar, any insurer of the assets of the Trust, any Obligor with
respect to Contracts included in the Trust constituting more than five percent
(5%) of the aggregate unamortized principal balance of the assets in the Trust,
or any affiliate of such parties (the "RESTRICTED GROUP").
Prospective Plan Investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemption
or any other administrative exemption from the prohibited transaction provisions
of ERISA and the Code, and the potential consequences in their specific
circumstances, prior to making an investment in the Certificates. Moreover,
each Plan fiduciary should determine whether under the general fiduciary
standards of investment procedure and diversification an investment in the
Certificates is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
S-59
<PAGE>
THE CLASS B CERTIFICATES
The Class B Certificates may not be acquired or held by any employee
benefit plan, individual retirement account or Keogh plan subject to ERISA or
Section 4975 of the Code, other than after the Funding Period by an insurance
company using assets of its general account under circumstances in which such
purchase and holding of such Certificates would be exempt from the prohibited
transaction provision of ERISA and the Code under Prohibited Transaction Class
Exemption 95-60.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated [ ], 199_, among the Seller, Trust Depositor and the
Underwriters (the "UNDERWRITING AGREEMENT"), the Seller has agreed to cause the
Trust to sell to the Underwriters named below (the "UNDERWRITERS"), and the
Underwriters have agreed to purchase, the principal amount of the Certificates
set forth below.
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount of
Certificates, Certificates,
Underwriter Class A Class B
- ----------- ------- -------
<S> <C> <C>
Salomon Smith Barney Inc. $ $
------- -------
Total $ $
--------- ---------
--------- ---------
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Certificates
if any Certificates are purchased. In the event of default by the Underwriters,
the Underwriting Agreement provides that, in certain circumstances, the
Underwriting Agreement may be terminated.
Distribution of the Certificates may be made by the Underwriters from
time to time in one or more negotiated transactions, or otherwise, at varying
prices to be determined at the time of sale. The Underwriters may effect such
transactions by selling the Certificates to or through dealers, and such dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriters. In connection with the sale of the
Certificates, the Underwriters may be deemed to have received compensation from
the Seller in the form of underwriting compensation. The Underwriters and any
dealers that participate with the Underwriters in the distribution of the
Certificates may be deemed to be an Underwriter and any commissions received by
them and any profit on the resale of the Certificates positioned by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
If the Underwriters create a short position in the Certificates in
connection with the offering, I.E., if they sell more Certificates than are set
forth on the cover page of this Prospectus Supplement, the Underwriters may
reduce that short position by purchasing Certificates in the open market.
In general, purchases of a security to reduce a short position could
cause the price of the security to be higher than it might be in the absence of
such purchases.
S-60
<PAGE>
Neither the Seller nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above, if engaged in, may have on the prices of the Certificates. In
addition, neither the Seller nor the Underwriters make any representation that
the Underwriter will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Underwriters have represented and agreed that (i) they have not
offered or sold and, prior to the expiration of the period of six months from
the Closing Date, will not offer or sell any Certificates to persons in the
United Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulation 1995;
(ii) they have complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by them in relation to
the Certificates in, from or otherwise involving the United Kingdom; and (iii)
they have only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Certificates to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995,
or is a person to whom such document may otherwise lawfully be issued or passed
on.
The Underwriting Agreement provides that the Seller and Trust Depositor
will indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act, or contribute to payments the Underwriters
may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will
be passed upon for the Seller, Servicer, Trust Depositor and the Trust by
Winston & Strawn, Chicago, Illinois. Certain legal matters will be passed upon
for the Underwriters by Brown & Wood LLP, New York, New York.
S-61
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
Accountant's Report. . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
APR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Available Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Available Principal. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Average Default Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . .33
Average Delinquency Ratio. . . . . . . . . . . . . . . . . . . . . . . . .33
Average Loss Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Buell. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Carrying Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 1
Class A Certificate Balance. . . . . . . . . . . . . . . . . . . . . . . . 3
Class A Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . 2
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . .1, 1
Class A Distributable Amount . . . . . . . . . . . . . . . . . . . . . . .30
Class A Initial Certificate Balance. . . . . . . . . . . . . . . . . . . . 1
Class A Interest Carryover Shortfall . . . . . . . . . . . . . . . . . . . 3
Class A Interest Distributable Amount. . . . . . . . . . . . . . . . . . . 2
Class A Pass-Through Rate. . . . . . . . . . . . . . . . . . . . . . . .2, 2
Class A Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 1
Class A Principal Carryover Shortfall. . . . . . . . . . . . . . . . . . . 5
Class A Principal Distributable Amount . . . . . . . . . . . . . . . . . . 4
Class B Certificate Balance. . . . . . . . . . . . . . . . . . . . . . . . 3
Class B Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . 2
Class B Certificates . . . . . . . . . . . . . . . . . . . . . . . . . .1, 1
Class B Distributable Amount . . . . . . . . . . . . . . . . . . . . . . .30
Class B Initial Certificate Balance. . . . . . . . . . . . . . . . . . . . 1
Class B Interest Carryover Shortfall . . . . . . . . . . . . . . . . . . . 3
Class B Interest Distributable Amount. . . . . . . . . . . . . . . . . . . 2
Class B Pass-Through Rate. . . . . . . . . . . . . . . . . . . . . . . .2, 2
Class B Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 1
Class B Principal Carryover Shortfall. . . . . . . . . . . . . . . . . . . 5
Class B Principal Distributable Amount . . . . . . . . . . . . . . . . . . 4
Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Cumulative Loss Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . .33
Cutoff Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Dealer Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Defaulted Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Delinquency Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Deposit Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
DOL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Due Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Eaglemark. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Eaglemark Financial. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Event of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Final Scheduled Payment Date . . . . . . . . . . . . . . . . . . . . . . . 2
Fractional Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Harley-Davidson. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Initial Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Initial Cutoff Date. . . . . . . . . . . . . . . . . . . . . . . . . . .1, 1
Interest Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . 8
Lien Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Liquidated Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Mandatory Special Distribution . . . . . . . . . . . . . . . . . . . . . . 2
Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Monthly Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . .10
Motorcycles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Net Liquidation Losses . . . . . . . . . . . . . . . . . . . . . . . . . .33
Net Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . .33
Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2, 2
Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Pre-Funded Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Principal Balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Rating Agencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Registrar of Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Repurchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Reserve Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Reserve Fund Additional Deposits . . . . . . . . . . . . . . . . . . . . . 6
Reserve Fund Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Reserve Fund Initial Deposit . . . . . . . . . . . . . . . . . . . . . . . 6
Reserve Fund Requisite Amount. . . . . . . . . . . . . . . . . . . . . 6, 32
Reserve Fund Trigger Event . . . . . . . . . . . . . . . . . . . . . . . .33
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10, 37
Special Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Subsequent Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Subsequent Cutoff Date . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Subsequent Transfer Agreement. . . . . . . . . . . . . . . . . . . . . . .12
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . 7
Transfer and Sale Agreement. . . . . . . . . . . . . . . . . . . . . . . . 2
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Trust Depositor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesman or other person is authorized to give any information or to
make any representation not contained in this Prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company, as sponsor of the Trusts or the Underwriters. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy any security other than the Securities offered hereby, nor does it
constitute an offer to sell or a solicitation of an offer to buy any of the
Securities to any person in any jurisdiction in which the person making such
offer or solicitation is not qualified to do so or to anyone whom it is unlawful
to make such an offer or solicitation to such person. Neither the delivery of
this Prospectus nor any sale made hereunder shall under any circumstance create
any implication that the information contained herein is correct as of any date
subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<S> <C>
SUMMARY OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FORMATION OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . .
POOL FACTORS AND TRADING INFORMATION . . . . . . . . . . . . . . . . . . .
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HARLEY-DAVIDSON MOTORCYCLES. . . . . . . . . . . . . . . . . . . . . . . .
YIELD AND PREPAYMENT CONSIDERATIONS. . . . . . . . . . . . . . . . . . . .
EAGLEMARK FINANCIAL SERVICES, INC.; EAGLEMARK, INC.. . . . . . . . . . . .
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]. . . . . . . . . . . . . . . .
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF THE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . .
CERTAIN INFORMATION REGARDING THE SECURITIES . . . . . . . . . . . . . . .
SECURITY INTEREST AND OTHER ASPECTS OF THE
CONTRACTS; REPURCHASE OBLIGATIONS . . . . . . . . . . . . . . . . . . . .
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RATINGS OF THE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROSPECTUS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .2
SUMMARY OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
THE TRUSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
HARLEY-DAVIDSON MOTORCYCLES. . . . . . . . . . . . . . . . . . . . . . . 18
THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
WEIGHTED AVERAGE LIFE OF THE SECURITIES. . . . . . . . . . . . . . . . . 19
POOL FACTORS AND TRADING INFORMATION . . . . . . . . . . . . . . . . . . 20
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EAGLEMARK FINANCIAL SERVICES, INC.;
EAGLEMARK, INC.; AND THE TRUST DEPOSITORS. . . . . . . . . . . . . . . . 21
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . 21
DESCRIPTION OF THE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . 26
CERTAIN INFORMATION REGARDING THE SECURITIES . . . . . . . . . . . . . . 27
DESCRIPTION OF THE TRANSFER AND SALE AGREEMENTS. . . . . . . . . . . . . 34
DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND
POOLING AND SERVICING AGREEMENTS. . . . . . . . . . . . . . . . . . . . 36
CERTAIN LEGAL ASPECTS OF THE CONTRACTS . . . . . . . . . . . . . . . . . 46
FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . . . . . . 49
OWNER TRUSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
CERTAIN STATE TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . 61
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 61
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 62
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Securities offered by this Prospectus Supplement,
whether or not participating in this distribution, may be required to deliver
this Prospectus Supplement and the Prospectus. This is in addition to the
obligation of dealers to deliver this Prospectus Supplement and the Prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$[ ]
HARLEY-DAVIDSON MOTORCYCLE
CONTRACT BACKED CERTIFICATES
HARLEY-DAVIDSON EAGLEMARK
MOTORCYCLE TRUST 199__-[ ]
___% HARLEY-DAVIDSON MOTORCYCLE
CONTRACT BACKED CERTIFICATES, CLASS A
___% HARLEY-DAVIDSON MOTORCYCLE
CONTRACT BACKED CERTIFICATES, CLASS B
EAGLEMARK, INC.
Seller and Servicer
EAGLEMARK CUSTOMER
FUNDING CORPORATION-[ ]
Trust Depositor
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
SALOMON SMITH BARNEY
[ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Subject to Completion, dated , 1998
PROSPECTUS
Harley-Davidson Eaglemark Motorcycle Trusts
Harley-Davidson Motorcycle Contract Backed Notes
Harley-Davidson Motorcycle Contract Backed Certificates
-----------
EAGLEMARK, INC.
-----------
The Harley-Davidson Motorcycle Contract Backed Notes (the "NOTES") and
the Harley-Davidson Motorcycle Contract Backed Certificates (the "CERTIFICATES"
and, together with the Notes, the "SECURITIES") described herein may be sold
from time to time in one or more series, in amounts, at prices and on terms to
be determined at the time of sale and to be set forth in a supplement to this
Prospectus (a "PROSPECTUS SUPPLEMENT"). Each series of Securities, which will
include one or more classes of Certificates and may also include one or more
classes of Notes, will be issued by a trust or other legal entity to be formed
with respect to such series (each, a "TRUST"). Each Trust will be formed
pursuant to either (i) a Trust Agreement to be entered into between a special-
purpose finance subsidiary organized and established by Eaglemark, Inc. (the
"COMPANY" ) (each such special-purpose finance subsidiary, a "TRUST DEPOSITOR"),
as depositor, and the Trustee specified in the related Prospectus Supplement
(the "TRUSTEE") or (ii) a Pooling and Servicing Agreement to be entered into
among the Trustee, the Trust Depositor, as seller, and the Company, as servicer
(in such capacity, the "SERVICER"). If a series of Securities includes Notes,
such Notes will be issued and secured pursuant to an Indenture between the Trust
and the Indenture Trustee specified in the related Prospectus Supplement (the
"INDENTURE TRUSTEE") and will represent indebtedness of the related Trust. The
Certificates of a series will represent fractional undivided interests in the
related Trust. Each Prospectus Supplement will specify which class or classes
of Notes, if any, and/or which class or classes of Certificates of the related
series are being offered thereby. The property of each Trust will include a
pool of fixed rate, simple interest motorcycle conditional sales contracts
(collectively such contracts, the "CONTRACTS") relating to motorcycles
manufactured by Harley-Davidson, Inc. ("HARLEY-DAVIDSON") or, in certain limited
instances and subject to certain limitations described herein (i) motorcycles
manufactured by an affiliate of Harley-Davidson, Buell Motorcycle Company
("BUELL") and (ii) motorcycles manufactured by certain other manufacturers
("OTHER MANUFACTURERS") as well as certain monies due or received thereunder on
and after the applicable Cutoff Date set forth in the related Prospectus
Supplement, security interests in the motorcycles financed through the Contracts
and certain other property as described herein (the "TRUST PROPERTY"). In
addition, if so specified in the related Prospectus Supplement, the property of
the Trust will include monies on deposit in a trust account (the "PRE-FUNDING
ACCOUNT") and/or monies on deposit in a trust account (the "COLLATERAL
REINVESTMENT ACCOUNT") to be established with the Indenture Trustee, which will
be used to purchase additional Contracts (the "SUBSEQUENT CONTRACTS") from the
Trust Depositor from time to time during the Funding Period or Revolving Period
specified in such Prospectus Supplement.
Each class of Securities of any series will represent the right to
receive a specified amount of payments and/or distributions, expected to be
derived primarily from collections in respect of principal and interest on the
related Contracts, with such payments and/or distributions to be made at the
rates, on the dates and in the manner described herein and in such Prospectus
Supplement. If a series includes multiple classes of Securities, the rights of
one or more classes of Securities to receive payments or distributions may be
senior or subordinate to the rights of one or more of the other classes of such
series. Also, distributions on Certificates of a series may be subordinated in
priority to payments due on the Notes, if any, of such series to the extent
described herein and in the related Prospectus Supplement. A series may include
one or more classes of Notes and/or Certificates which differ from the other
classes of such series as to the timing and priority of payment, interest rate
or amount of distributions in respect of principal or interest or both. A
series may include one or more classes of Notes or Certificates entitled to
distributions in respect of principal with disproportionate, nominal or no
interest distributions, or to interest distributions, with disproportionate,
nominal or no distributions in respect of principal. The rate of payment in
respect of principal of any class of Notes and the rate of distributions in
respect of the Certificate Balance (as defined herein) of the Certificates of
any class will depend on the priority of payment of such class and the rate and
timing of payments (including prepayments, defaults, liquidations and
repurchases of Contracts) on the related Contracts. A rate of payment lower or
higher than that anticipated may affect the weighted average life of each class
of Securities in the manner described herein and in the related Prospectus
Supplement.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH
UNDER "RISK FACTORS" ON PAGE 13 OF THIS PROSPECTUS AND IN THE RELATED PROSPECTUS
SUPPLEMENT.
EXCEPT AS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, THE NOTES OF
A SERIES WILL REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A SERIES WILL
REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND WILL NOT REPRESENT
OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY, EAGLEMARK
FINANCIAL SERVICES, INC., EAGLEMARK, INC., THE TRUST DEPOSITOR OR ANY OF THEIR
RESPECTIVE AFFILIATES OR ANY GOVERNMENTAL AGENCY.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference.
This Prospectus may not be used to consummate sales
of Securities offered hereby unless accompanied by a Prospectus Supplement.
--------------------
The date of this Prospectus is , 1998.
<PAGE>
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities, the Servicer will prepare and
forward to the Applicable Trustee (as defined herein), for distribution to the
related Securityholders, certain monthly and annual reports concerning such
Securities and the related Trust. In addition, within the prescribed period of
time for tax reporting purposes after the end of each calendar year during the
term of each Trust, the Applicable Trustee will mail to each person who at any
time during such calendar year has been a registered Securityholder with respect
to such Trust and received any payment thereon a statement containing certain
information for the purposes of such Securityholder's preparation of federal
income tax returns. See "FEDERAL INCOME TAX CONSEQUENCES" and "CERTAIN
INFORMATION REGARDING THE SECURITIES - REPORTS TO SECURITYHOLDERS" herein.
AVAILABLE INFORMATION
The Company, as originator of the Contracts in each Trust, has filed
with the Securities and Exchange Commission (the "COMMISSION") a Registration
Statement on Form S-3 (together with all amendments and exhibits thereto, the
"REGISTRATION STATEMENT") under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), with respect to the Securities being offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. For further information, reference is made
to the Registration Statement, which is available for inspection without charge
at the public reference facilities of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and the regional offices of the
Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such information can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web
site at http://www.sec.gov containing reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission.
UPON RECEIPT OF A REQUEST BY AN INVESTOR WHO HAS RECEIVED AN ELECTRONIC
PROSPECTUS SUPPLEMENT AND PROSPECTUS FROM AN UNDERWRITER OR A REQUEST BY SUCH
INVESTOR'S REPRESENTATIVE WITHIN THE PERIOD DURING WHICH THERE IS AN OBLIGATION
TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS, THE COMPANY OR THE
UNDERWRITERS WITH RESPECT TO THE RELATED TRUST WILL PROMPTLY DELIVER, OR CAUSE
TO BE DELIVERED, WITHOUT CHARGE, TO SUCH INVESTOR A PAPER COPY OF THE PROSPECTUS
SUPPLEMENT AND PROSPECTUS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed on behalf of each Trust by the Company as the
originator of the Contracts in each Trust, pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), after the date of this Prospectus and prior to the termination of the
offering of the Securities offered by such Trusts shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
dates of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein (or in the accompanying Prospectus
Supplement) or in any subsequently filed document that also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company, on behalf of each Trust, will provide without charge to
each person, including any beneficial owner, to whom a copy of this Prospectus
is delivered, on the written or oral request of such person, a copy of any or
all of the documents incorporated herein by reference, except the exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into the documents incorporated herein by reference). Requests for such copies
should be directed to Secretary, Eaglemark, Inc., 4150 Technology Way, Carson
City, Nevada 89706; telephone (702) 886-3200.
2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in this summary
are defined elsewhere in this Prospectus on the pages indicated in the "Index of
Terms" on page 60.
Issuer. . . . . . . . . . . . . . . . With respect to each series of
Securities, a Trust will be formed
pursuant to either a Trust Agreement (as
amended and supplemented from time to
time, a "TRUST AGREEMENT") between the
Trust Depositor and the Trustee for such
Trust or a Pooling and Servicing
Agreement (a "POOLING AND SERVICING
AGREEMENT") among the Trustee, the Trust
Depositor and Eaglemark, Inc., as
Servicer for such Trust. Each Trust
that is structured as an owner trust
intended to be taxable as a partnership
for federal income tax purposes will be
referred to herein as an "OWNER TRUST".
Each Trust that is taxable as a grantor
trust under subpart E, Part I of
subchapter J of the Code (as hereinafter
defined) will be referred to herein as a
"GRANTOR TRUST". There are also
references to the possibility of a Trust
being structured as a financial asset
securitization investment trust,
referred to herein as a "FASIT," as
authorized by recent tax legislation.
Seller. . . . . . . . . . . . . . . . Eaglemark, Inc. (referred to herein as
"EAGLEMARK", the "SELLER" or the
"COMPANY"), a Nevada corporation, a 100%
owned subsidiary of Eaglemark Financial
Services, Inc. ("EAGLEMARK FINANCIAL").
The Company's principal executive
offices are located at 4150 Technology
Way, Carson City, Nevada 89706, and its
telephone number is (702) 886-3200. See
"EAGLEMARK FINANCIAL SERVICES, INC.;
EAGLEMARK, INC.; AND THE TRUST
DEPOSITORS".
Trust Depositor . . . . . . . . . . . With respect to each series of
Securities, a special-purpose finance
subsidiary of the Company.
Servicer. . . . . . . . . . . . . . . Eaglemark, Inc. (in such capacity, the
"SERVICER")
Trustee . . . . . . . . . . . . . . . With respect to a Grantor Trust, the
Trustee specified in the related
Prospectus Supplement and with respect
to an Owner Trust, the Owner Trustee
specified in the related Prospectus
Supplement.
Indenture Trustee . . . . . . . . . . With respect to any series of Securities
that is issued by an Owner Trust and
includes one or more classes of Notes,
the Indenture Trustee specified in the
related Prospectus Supplement (each such
Indenture Trustee, or other Trustee as
described immediately above, being
sometimes referred to herein, as
appropriate, as the "APPLICABLE
TRUSTEE").
Securities Offered . . . . . . . . . Each series of Securities issued by an
Owner Trust will include one or more
classes of Certificates and may also
include one or more classes of Notes.
Each series of Securities issued by a
Grantor Trust will include one or more
classes of Certificates, but will not
include any Notes. Each class of Notes
will be issued pursuant to an indenture
(each, an "INDENTURE") between the
related Owner Trust and the Indenture
Trustee specified in the related
Prospectus Supplement. Each class of
Certificates will be issued pursuant to
the related Trust Agreement or the
related Pooling and Servicing Agreement.
The related
4
<PAGE>
Prospectus Supplement will specify which
class or classes of Notes and/or
Certificates of the related series are
being offered thereby.
The Notes . . . . . . . . . . . . . . The Notes will be available for purchase
in denominations of $1,000 and integral
multiples thereof and will be available
in book-entry form only. Noteholders
will be able to receive Definitive Notes
(as defined herein) only in the limited
circumstances described herein or in
such Prospectus Supplement. See
"CERTAIN INFORMATION REGARDING THE
SECURITIES - DEFINITIVE SECURITIES".
Each class of Notes will have a stated
principal amount and will accrue
interest thereon at a specified rate
(with respect to each class of Notes,
the "INTEREST RATE"). Each class of
Notes may have a different Interest
Rate, which may be a fixed, variable or
adjustable Interest Rate, or any
combination of the foregoing. The
related Prospectus Supplement will
specify the Interest Rate for each class
of Notes, or the method for determining
such Interest Rate.
With respect to a series that includes
two or more classes of Notes, each such
class may differ from the other class or
classes of such series as to the timing
and priority of payments, seniority,
allocations of losses, Interest Rate or
amount of payments of principal or
interest. Payments of principal or
interest in respect of any such class or
classes may or may not be made upon the
occurrence of specified events or on the
basis of collections from designated
portions of the Pool of Contracts.
In addition, a series may include one or
more classes of Notes ("STRIP NOTES")
entitled to (i) principal payments with
disproportionate, nominal or no interest
payments or (ii) interest payments with
disproportionate, nominal or no
principal payments.
Redemption of the Notes . . . . . . . If the Seller exercises its option to
repurchase the Contracts of a Trust
in the event the Pool Balance has
declined to less than 10% of the
Initial Pool Balance in the manner
and on the respective terms and
conditions described under
"DESCRIPTION OF THE SALE AND
SERVICING AGREEMENTS AND POOLING AND
SERVICING AGREEMENTS - TERMINATION",
one or more classes of the
outstanding Noteswill be redeemed as
set forth in the related Prospectus
Supplement. Inaddition, if the
related Prospectus Supplement
provides that the property ofa Trust
will include monies in a Pre-Funding
Account or Collateral Reinvestment
Account that will be used to purchase
additional Contracts (see "RISK
FACTORS -- SALES OF SUBSEQUENT
CONTRACTS AND EFFECT ON POOL
CHARACTERISTICS" herein) after the
Closing Date specified in such
related Prospectus Supplement (the
"CLOSING DATE"), one or more classes
of the outstanding Notes will be
subject to partial redemption at or
immediately following the end of the
Funding Period or Revolving Period
(each as defined herein and in such
Prospectus Supplement), as
applicable, in an amount and in the
manner specified in such Prospectus
Supplement. In the event of such
partial redemption, the Noteholders
may be entitled to receive a
prepayment premium from the Trust, in
the amount and to the extent provided
in the related Prospectus Supplement.
The Certificates. . . . . . . . . . . The Certificates will be available for
purchase in a minimum denomination of
$1,000 and integral multiples thereof
and will be available in book-entry form
only. Certificateholders will be able
to receive Definitive Certificates (as
defined herein) only in the limited
circumstances described herein or in
such Prospectus
5
<PAGE>
Supplement. See "CERTAIN INFORMATION
REGARDING THE SECURITIES - DEFINITIVE
SECURITIES".
Each class of Certificates will have a
stated Certificate Balance specified in
such Prospectus Supplement (the
"CERTIFICATE BALANCE") and will accrue
interest on such Certificate Balance at
a specified rate (with respect to each
class of Certificates, the "PASS-THROUGH
RATE"). Each class of Certificates may
have a different Pass-Through Rate,
which may be a fixed, variable or
adjustable Pass-Through Rate, or any
combination of the foregoing. The
related Prospectus Supplement will
specify the Pass-Through Rate for each
class of Certificates or the method for
determining such Pass-Through Rate.
With respect to a series that includes
two or more classes of Certificates,
each such class may differ from the
other class or classes of such series as
to the timing and priority of
distributions, seniority, allocations of
losses, Pass-Through Rate or amount of
distributions in respect of principal or
interest, or distributions in respect of
principal or interest in respect of any
such class or classes may or may not be
made upon the occurrence of specified
events or on the basis of collections
from designated portions of the pool of
Contracts.
In addition, a series may include one or
more classes of Certificates ("STRIP
CERTIFICATES") entitled to (i)
distributions in respect of principal
with disproportionate, nominal or no
interest distributions or (ii) interest
distributions with disproportionate,
nominal or no distributions in respect
of principal.
If a series of Securities includes
classes of Notes, distributions on the
Certificates of such series may be
subordinated in priority of payment to
payments on such Notes to the extent
specified in the related Prospectus
Supplement.
Prepayment of the Certificates. . . . If the Seller exercises its option to
repurchase the Contracts of a Trust in
the event the Pool Balance has declined
to less than 10% of the Initial Pool
Balance in the manner and on the
respective terms and conditions
described under "DESCRIPTION OF THE SALE
AND SERVICING AGREEMENTS AND POOLING AND
SERVICING AGREEMENTS - TERMINATION",
Certificateholders will receive as a
prepayment in respect of the
Certificates as specified in such
Prospectus Supplement. In addition, if
the related Prospectus Supplement
provides that the property of a Trust
will include monies in a Pre-Funding
Account or Collateral Reinvestment
Account that will be used to purchase
additional Contracts after the Closing
Date, one or more classes of the
outstanding Certificates may receive a
partial prepayment of principal at or
immediately following the end of the
Funding Period or Revolving Period, as
applicable, in an amount and in the
manner specified in such Prospectus
Supplement. In the event of such
partial prepayment, the
Certificateholders may be entitled to
receive a prepayment premium from the
Trust, in the amount and to the extent
provided in the related Prospectus
Supplement.
Cross-Collateralization . . . . . . . As described in the related Trust
Agreement or Pooling and Servicing
Agreement, as applicable, and the
related Prospectus Supplement, the
source of payment for Securities of each
series will be the related Trust
Property only.
6
<PAGE>
However, as may be described in the
related Prospectus Supplement, a series
or class of Securities may include the
right to receive monies from a common
pool of credit enhancement which may be
available for more than one series of
Securities, such as a master reserve
fund, master insurance policy or a
master collateral pool consisting of
similar Contracts. Notwithstanding the
foregoing, and as described in the
related Prospectus Supplement, no
payment received on any Contract held by
any Trust may be applied to the payment
of Securities issued by any other Trust
(except to the limited extent that
certain collections in excess of the
amounts needed to pay the related
Securities may be deposited in a common
master reserve fund or an
overcollateralization account that
provides credit enhancement for more
than one series of Securities issued
pursuant to the related Trust Agreement
or Pooling and Servicing Agreement, as
applicable).
The Trust Property. . . . . . . . . . The property of each Trust will include
a pool of fixed-rate, simple interest
motorcycle conditional sales contracts
(the "CONTRACTS") relating to new or
used Harley-Davidson motorcycles or, in
certain limited instances and subject to
certain other limitations described
herein, (i) motorcycles manufactured by
an affiliate of Harley-Davidson, Buell
Motorcycle Company ("BUELL") and (ii)
motorcycles manufactured by certain
other manufacturers ("OTHER
MANUFACTURERS") (see "OTHER
MANUFACTURERS" herein) as well as
certain monies due or received
thereunder on and after the applicable
Cutoff Date set forth in the related
Prospectus Supplement, security
interests in the Motorcycles financed
thereby (collectively, the
"MOTORCYCLES"), all of the Trust
Depositor's right, title and interest in
and to the Transfer and Sale Agreement
(as defined herein) pursuant to which
the Trust Depositor will purchase
Contracts from the Seller, any proceeds
from claims under certain insurance
policies related to the Motorcycles, and
all other proceeds of any of the
foregoing. The property of each Trust
will also include amounts on deposit in
certain trust accounts, including the
related Collection Account, any Pre-
Funding Account, any Collateral
Reinvestment Account, any Reserve Fund
(as defined herein) and any other
account identified in the applicable
Prospectus Supplement and such other
property as is specified in such
Prospectus Supplement, including
notes or other securities evidencing
or backed by Contracts. On the
Closing Date specified in the related
Prospectus Supplement with respect to
a Trust, the Trust Depositor will, if
so specified in such Prospectus
Supplement, sell or transfer
Contracts (the "INITIAL CONTRACTS")
having an aggregate principal balance
specified in such Prospectus
Supplement as of the date specified
therein (the "INITIAL CUTOFF DATE")
to such Trust pursuant to either, in
the case of Owner Trusts, a Sale and
Servicing Agreement among the Trust
Depositor, the Servicer, the
Indenture Trustee and the Owner Trust
(a "SALE AND SERVICING AGREEMENT")
or, in the case of Grantor Trusts,
the related Pooling and Servicing
Agreement among the Trust Depositor,
the Servicer and the Trustee.
To the extent provided in the related
Prospectus Supplement, from time to time
(as frequently as daily) during the
period (the "FUNDING PERIOD") specified
in such Prospectus Supplement, the Trust
Depositor will be obligated (subject
only to the availability thereof) to
sell, and the related Trust will be
obligated to purchase (subject to the
satisfaction of certain conditions
described in the applicable Sale and
Servicing Agreement or Pooling and
Servicing Agreement), additional
Contracts (the "SUBSEQUENT CONTRACTS")
having an aggregate principal balance
approximately equal to the amount on
deposit (the
7
<PAGE>
"PRE-FUNDED AMOUNT") in an account (the
"PRE-FUNDING ACCOUNT") on the related
Closing Date. In no event will the Pre-
Funded Amount exceed 40% of the initial
aggregate principal amount of the
Notes and/or Certificates of the
related series of Securities.
In addition, if so provided in the
related Prospectus Supplement, in lieu
of a Funding Period, during the period
(the "REVOLVING PERIOD") from the
Closing Date until the first to occur of
(i) such event or events as are
described in such Prospectus Supplement
(each, an "EARLY AMORTIZATION EVENT") or
(ii) the last day of the Due Period (as
defined herein) preceding a Distribution
Date specified in such Prospectus
Supplement, an account will be
maintained in the name of the related
Trustee or Indenture Trustee (the
"COLLATERAL REINVESTMENT ACCOUNT"). The
amount on deposit in the Collateral
Reinvestment Account on the Closing Date
may, if so specified in the related
Prospectus Supplement, include an amount
to be deposited out of the net proceeds
of the sale of the related Securities.
During the Revolving Period, principal
will not be distributed on the
Securities of the related series.
Instead, principal collections, together
with (if and to the extent described in
the related Prospectus Supplement)
interest collections on the Contracts
that are in excess of amounts required
to be distributed therefrom, will be
deposited from time to time in the
Collateral Reinvestment Account and will
be used to purchase Subsequent
Contracts.
As used in this Prospectus, the term
"CONTRACTS" will include the Initial
Contracts transferred to a Trust on the
Closing Date as well as any Subsequent
Contracts transferred to such Trust
during the related Funding Period or
Revolving Period, if any.
Amounts on deposit in any Pre-Funding
Account during the related Funding
Period or in any Collateral Reinvestment
Account during the related Revolving
Period will be invested by the
Applicable Trustee (as directed by the
Servicer) in Eligible Investments (as
defined herein), and any resultant
investment income, less any related
investment expenses ("INVESTMENT
INCOME"), will be added, on the
Distribution Date (as defined herein)
immediately following the date on which
such Investment Income is paid to the
Trust, to interest collections on the
Contracts for the related Due Period (as
defined herein), or will otherwise be
deposited or applied as specified in the
related Prospectus Supplement and will
be thereafter distributed in the manner
specified in the related Prospectus
Supplement. Any funds remaining in a
Pre-Funding Account at the end of the
related Funding Period or in a
Collateral Reinvestment Account at the
end of the related Revolving Period will
be distributed as a prepayment or early
distribution of principal to holders of
one or more classes of the Notes and/or
Certificates of the related series of
Securities, in the amounts and in
accordance with the payment priorities
specified in the related Prospectus
Supplement. No Funding Period will end
more than ninety (90) days after the
related Closing Date. See "RISK FACTORS
- PRE-FUNDING ACCOUNTS", "- SALES OF
SUBSEQUENT CONTRACTS" and "DESCRIPTION
OF THE SALE AND SERVICING AGREEMENTS AND
POOLING AND SERVICING AGREEMENTS -
ACCOUNTS".
The Seller will acquire the Contracts
from a network of Harley-Davidson
dealers located throughout the United
States (the "DEALERS"). The Contracts
for any given pool of Contracts
comprising a Trust will be sold by the
Seller to a Trust
8
<PAGE>
Depositor pursuant to a related Transfer
and Sale Agreement (the "TRANSFER AND
SALE AGREEMENT"), which Trust Depositor
will in turn convey the Contracts to the
Trust pursuant to the related Sale and
Servicing Agreement or Pooling and
Servicing Agreement, as applicable.
Such Contracts will be selected from the
contracts owned by the Seller based on
the criteria specified in the related
Transfer and Sale Agreement, Sale and
Servicing Agreement or Pooling and
Servicing Agreement, as applicable, and
described herein and in the related
Prospectus Supplement.
Credit and Cash Flow
Enhancement . . . . . . . . . . . . . To the extent specified in the related
Prospectus Supplement, credit
enhancement with respect to a Trust or
any class or classes of Securities may
include any one or more of the
following: subordination of one or more
other classes of Securities, Reserve
Funds (as defined herein), spread
accounts, overcollateralization,
insurance policies, letters of credit,
credit or liquidity facilities, cash
collateral accounts, surety bonds,
guaranteed investment contracts, swaps
or other interest rate protection
agreements, repurchase obligations,
yield supplement agreements, other
agreements with respect to third party
payments or other support, cash deposits
or other arrangements. See "DESCRIPTION
OF THE SALE AND SERVICING AGREEMENTS --
CREDIT AND CASH FLOW ENHANCEMENT"
herein. To the extent specified in the
related Prospectus Supplement, any
particular form of credit enhancement
may be subject to certain limitations
and exclusions from coverage thereunder.
Reserve Fund. . . . . . . . . . . . . If and to the extent specified in the
related Prospectus Supplement, a Reserve
Fund will be created for a Trust with an
initial deposit by the Trust Depositor
of cash or certain investments or other
property (including Contracts) having a
value equal to the amount specified in
such Prospectus Supplement. To the
extent specified in the related
Prospectus Supplement, funds in the
Reserve Fund will thereafter be
supplemented by the deposit of amounts
remaining on any Distribution Date after
making all other distributions required
on such date and any amounts deposited
from time to time in connection with a
purchase of Subsequent Contracts.
Amounts in the Reserve Fund, if any,
will be available to cover shortfalls in
amounts due to the holders of those
classes of Securities specified in the
related Prospectus Supplement in the
manner and under the circumstances
specified therein. The related
Prospectus Supplement will also specify
to whom and the manner and circumstances
under which amounts on deposit in the
Reserve Fund (after giving effect to all
other required distributions to be made
by the applicable Trust) in excess of
the amounts required to be held therein
as of the date of determination (as set
forth in such Prospectus Supplement)
will be distributed.
Sale and Servicing Agreements
and Pooling and Servicing
Agreements. . . . . . . . . . . . . . With respect to each Trust, the Trust
Depositor will sell the related
Contracts and such other Trust Property
as is specified in the related
Prospectus Supplement to such Trust
pursuant to a Sale and Servicing
Agreement or a Pooling and Servicing
Agreement, as applicable. The rights
and benefits of an Owner Trust under any
Sale and Servicing Agreement will, if
such Owner Trust issues Notes, be
assigned to the related Indenture
Trustee as collateral for such Notes
pursuant to the related Indenture. The
Servicer will agree with each Trust to
be responsible for servicing, managing,
maintaining custody of and
9
<PAGE>
making collections on the Contracts.
The Company will undertake certain
administrative duties under an
Administration Agreement (as defined
herein) with respect to each Owner Trust
that is formed pursuant to a Trust
Agreement.
To the extent specified in the related
Prospectus Supplement, the Servicer will
be obligated to advance each month an
amount equal to accrued and unpaid
interest on the Contracts which was
delinquent with respect to the related
Due Period (as defined herein) but only
to the extent that the Servicer believes
that the amount of such advance will be
recoverable from collections on the
Contracts (an "ADVANCE"). The Servicer
will be entitled to reimbursement of
Advances from subsequent payments on or
with respect to the Contracts or from
other sources to the extent described in
the related Prospectus Supplement. The
Servicer will disclose the aggregate
amount of Advances and the amount of
related delinquencies on Contracts as
part of the monthly statement provided
to Securityholders and described in
"CERTAIN INFORMATION REGARDING THE
SECURITIES -- REPORTS TO
SECURITYHOLDERS" herein. The making of
Advances indicates that while interest
payable on a portion of the Contracts in
the overall pool of Contracts held by
the Trust may be delinquent, the
Servicer believes that it will
ultimately be reimbursed for such
Advances from collections on the pool of
Contracts as a whole.
Unless otherwise provided in the related
Prospectus Supplement, under the
respective Sale and Servicing Agreement
or Pooling and Servicing Agreement, the
Trust Depositor has agreed, in the event
of a breach of certain representations
and warranties related to the Contracts
made by the Trust Depositor and
contained therein, to repurchase such
Contract within a certain number of days
as specified in the related Prospectus
Supplement, unless such breach is cured.
Eaglemark, as Seller under the related
Transfer and Sale Agreement(rights in
respect of which will be assigned to a
Trust) is obligated to repurchase the
Contracts from the Trust Depositor
contemporaneously with the Trust
Depositor's purchase of such Contracts
from the Trust. See "CERTAIN
INFORMATION REGARDING THE SECURITIES--
CONVEYANCE OF CONTRACTS" and
"DESCRIPTION OF THE TRANSFER AND SALE
AGREEMENTS."
Security Interests in the
Motorcycles; Consumer
Protection Laws; Repurchase
Obligations . . . . . . . . . . . . . In connection with the sale of the
Contracts, security interests in the
Motorcycles securing the Contracts will
be assigned by the Seller to a Trust
Depositor pursuant to a Transfer and
Sale Agreement, which Trust Depositor
will, in turn, assign such security
interests to the Trust pursuant to
either a Sale and Servicing Agreement or
a Pooling and Servicing Agreement. In
the case of an Owner Trust, such
security interests in turn will be
pledged and assigned to the related
Indenture Trustee as security for any
Notes issued by such Trust. The
certificates of title to the
Motorcycles, however, will not be
amended or reissued to reflect the sale
of the Contracts and assignment of
security interests to either the Trust
Depositor or the Trust or the pledge
pursuant to any Indenture, due to the
administrative burden and expense
inherent in physically revising
notations of security interests on
certificates of title for the numerous
individual Contract obligors in each
applicable state where Contracts were
originated (and paying associated fees
in such states). In the absence of such
amendments, either the related Trust,
the Applicable Trustee or both will not
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have a perfected security interest in
the Motorcycles securing the Contracts
in some states. The Seller will be
obligated to repurchase any Contracts
sold to the related Trust Depositor (and
subsequently sold by such Trust
Depositor to such Trust) as to which
there did not exist on the Closing Date
a first priority perfected security
interest in the name of the Company in
the related Motorcycle, if such failure
materially and adversely affects the
interest of the Trust Depositor or such
Trust in such Contract and if such
failure is not cured in a timely manner.
To the extent their respective security
interests in a Motorcycle are perfected,
the related Trust and the Applicable
Trustee will have a prior claim over
subsequent purchasers of such Motorcycle
and holders of subsequently perfected
security interests therein. However, as
against liens for repairs or storage of
a Motorcycle or for taxes unpaid by the
related obligor with respect to the
Contract (the "OBLIGOR"), or through
fraud or negligence, the related Trust
or the Applicable Trustee could lose its
security interest or the priority of its
security interest in a Motorcycle. The
Seller will not have any obligation to
repurchase a Contract with respect to
which the related Trust or the
Applicable Trustee loses its security
interest or the priority of its security
interest in the related Motorcycle after
the Closing Date due to any such lien
for repairs, storage or taxes or the
negligence or fraud of a third party.
Federal and state consumer protection
laws impose requirements upon creditors
in connection with extensions of credit
and collections of retail installment
loans, and certain of these laws make an
assignee of such a loan liable to the
obligor thereon for any violation by the
lender. The Trust Depositor will be
obligated to repurchase from the
applicable Trust any Contract that fails
to comply with such requirements and
contemporaneously therewith the Seller,
pursuant to the related Transfer and
Sale Agreement, will be obligated to
repurchase such Contract from the Trust
Depositor.
Tax Status. . . . . . . . . . . . . . The federal income tax consequences
applicable to a Trust and to the Notes
and Certificates issued by the Trust
will depend upon whether the Trust is an
Owner Trust, Grantor Trust or, under
1996 legislation effective on September
1, 1997, a FASIT (as each of those terms
is described herein) as specified in the
Prospectus Supplement applicable to such
Trust. See "FEDERAL INCOME TAX
CONSEQUENCES" herein for a fuller
discussion of the following summary of
federal income tax treatment.
For a Trust which is an Owner Trust,
Federal Tax Counsel (as defined herein)
will deliver its opinion that, for
federal income tax purposes, any Notes
issued by such Trust will be
characterized as debt, and the Trust
will not be characterized as an
association (or a publicly traded
partnership) taxable as a corporation.
Each holder of a Note (a "NOTEHOLDER"),
by the acceptance of a Note, will agree
to treat the Notes as indebtedness, and
each holder of a Certificate (a
"CERTIFICATEHOLDER") issued by such
Trust, by the acceptance of a
Certificate, will agree to treat the
Trust as a partnership in which the
Certificateholders are partners for
federal income tax purposes.
For a Trust which is a Grantor Trust,
Federal Tax Counsel will deliver its
opinion that the Trust will be
classified as a grantor trust for
federal income tax purposes and not as
an association taxable as a corporation.
Each
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<PAGE>
Certificateholder will be treated as the
owner of an undivided interest in the
assets of the Trust, including the
Contracts. Accordingly, each
Certificateholder must report on its
federal income tax return its share of
income from the Contracts and, subject
to limitations on deductions by
individuals, estates and trusts, may
deduct its share of the reasonable fees
paid by the Trust, as if such
Certificateholder held its share of the
assets of the Trust directly.
Furthermore, the Certificates may
represent interests in "STRIPPED BONDS"
and "STRIPPED COUPONS" within the
meaning of Section 1286 of the Code (as
defined herein).
For a Trust which properly elects to be
a FASIT, Federal Tax Counsel will
deliver its opinion that the Trust will
be treated as a FASIT and the Securities
issued by the FASIT will be
characterized as debt for federal income
tax purposes.
ERISA Considerations. . . . . . . . . Fiduciaries of employee benefit plans
and certain retirement arrangements that
are subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code,
should carefully review with their legal
advisors whether the purchase or holding
of the Securities may give rise to a
transaction that is prohibited or is not
otherwise permissible either under ERISA
or Section 4975 of the Code. See "ERISA
CONSIDERATIONS" herein and in the
related Prospectus Supplement.
Ratings . . . . . . . . . . . . . . . It is a condition to the issuance of the
Securities to be offered hereunder that
they be rated in one of the four highest
rating categories by at least one
nationally recognized statistical rating
organization (a "RATING AGENCY"). A
rating is not a recommendation to
purchase, hold or sell Securities
inasmuch as such rating does not comment
as to market price or suitability for a
particular investor. Ratings of
Securities will address the likelihood
of the payment of principal and interest
thereon pursuant to their terms. The
ratings of Securities will not address
the likelihood of an early return of
invested principal. There can be no
assurance that a rating will remain for
a given period of time or that a rating
will not be lowered or withdrawn
entirely by a Rating Agency if in its
judgment circumstances in the future so
warrant. For more detailed information
regarding the ratings assigned to any
class of a particular series of
Securities, see "SUMMARY OF TERMS -
RATINGS" herein and "RISK FACTORS -
RATINGS OF THE SECURITIES" in the
related Prospectus Supplement.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus and in
the related Prospectus Supplement to be prepared and delivered in connection
with the offering of any series of Securities, prospective investors should
carefully consider the following risk factors before investing in any class or
classes of Securities of any such series. This Prospectus also contains
forward-looking statements that involve risks and uncertainties. Actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks described below.
REINVESTMENT RISK ASSOCIATED WITH PRE-FUNDING ACCOUNTS AND COLLATERAL
REINVESTMENT ACCOUNTS. If so provided in the related Prospectus Supplement, on
the Closing Date the Pre-Funded Amount specified in such Prospectus Supplement
will be deposited into the Pre-Funding Account. In addition, if so specified in
the related Prospectus Supplement, on the Closing Date specified amounts will be
deposited into the Collateral Reinvestment Account. During the Revolving
Period, principal will not be distributed on the Securities of the related
series, and principal collections, together with (if and to the extent described
in the related Prospectus Supplement) interest collections on the Contracts that
are in excess of amounts required to be distributed therefrom, will be deposited
from time to time in the Collateral Reinvestment Account. The Pre-Funded Amount
and the amounts on deposit in the Collateral Reinvestment Account will be used
to purchase Subsequent Contracts from the Trust Depositor (which, concurrently
will acquire such Subsequent Contracts from the Company) from time to time
during the related Funding Period or Revolving Period, as applicable. If the
principal amount of the eligible Subsequent Contracts acquired by the Company
from Dealers during a Funding Period or Revolving Period is less than the Pre-
Funded Amount or the amount on deposit in the Collateral Reinvestment Account,
as the case may be, the Company may have insufficient Subsequent Contracts to
transfer to the Trust Depositor. To the extent that the entire Pre-Funded
Amount or the entire amount on deposit in the Collateral Reinvestment Account
has not been applied to the purchase of Subsequent Contracts by the end of the
related Funding Period or Revolving Period, any amounts remaining in the Pre-
Funding Account or the Collateral Reinvestment Account will be distributed as a
prepayment of principal to Noteholders, if applicable, and Certificateholders
(collectively, the "SECURITYHOLDERS") on the Distribution Date at or immediately
following the end of such Funding Period or Revolving Period, in the amounts and
pursuant to the priorities set forth in the related Prospectus Supplement (the
"MANDATORY SPECIAL REDEMPTION"). To the extent a Securityholder receives such a
prepayment of principal, there may not then exist a comparably favorable
reinvestment opportunity for such Securityholder. The Securityholders will bear
all reinvestment risk resulting from such prepayments. See also "-- PREPAYMENTS
ON CONTRACTS AFFECT YIELD ON SECURITIES" below.
SALES OF SUBSEQUENT CONTRACTS AND EFFECT ON POOL CHARACTERISTICS. Any
conveyance of Subsequent Contracts to a Trust is subject to the satisfaction, on
or before the related transfer date (each, a "SUBSEQUENT TRANSFER DATE"), of the
following conditions precedent, among others: (i) each such Subsequent Contract
must satisfy the eligibility criteria specified in the related Transfer and Sale
Agreement, Pooling and Servicing Agreement or Sale and Servicing Agreement, as
applicable; (ii) the Company and Trust Depositor shall not have selected such
Subsequent Contracts in a manner that is adverse to the interests of holders of
the related Securities; (iii) as of the respective Cutoff Dates (as such term is
defined in the related Prospectus Supplement) for such Subsequent Contracts, all
of the Contracts in the Trust, including the Subsequent Contracts to be conveyed
to the Trust as of such date, must satisfy the parameters described under "THE
CONTRACTS" herein and "THE CONTRACTS" in such Prospectus Supplement; and (iv)
the Trust Depositor must execute and deliver to such Trust a written assignment
conveying such Subsequent Contracts to such Trust. Except as described herein
and in the related Prospectus Supplement, there will be no other required
characteristics of Subsequent Contracts. It is not anticipated, however, that
the characteristics of the pool of Contracts as a whole will vary significantly
following the addition of Subsequent Contracts.
RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED MOTORCYCLES. Each
Contract is secured by a security interest in a Motorcycle. As part of the sale
and assignment of Contracts to a Trust, security interests in the related
Contracts will be assigned by the Seller to the Trust Depositor and by the Trust
Depositor to such Trust. In most states, such an assignment is an effective
conveyance of a security interest without
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<PAGE>
amendment of any such security interest noted on a Motorcycle's certificate of
title, and the assignee succeeds thereby to the assignor's rights as secured
party. However, in order to perfect such security interest, certain states
require the notation of a secured party's security interest on the vehicle's
certificate of title as filed with the applicable state motor vehicle registrar
or similar state authority. Due to administrative burden and expense, the
certificates of title to the Motorcycles will not be amended to reflect the
conveyance and assignment of Eaglemark's interest therein to the Trust
Depositor, the conveyance and assignment of the Trust Depositor's interest
therein to the Trust and the pledge of the Trust's interest therein to the
Indenture Trustee, as applicable. In the absence of such an amendment, the
Applicable Trustee, in certain cases, will not have a perfected security
interest in the Motorcycles. By not specifying the related Trust as a secured
party on the certificate of title, the security interest of the Trust, the
Indenture Trustee or both could be defeated through fraud or negligence of the
Seller or as a result of the imposition of a lien for repairs or storage of a
Motorcycle or for taxes unpaid by the Obligor under the related Contract.
Pursuant to the Transfer and Sale Agreement, Eaglemark will make certain
representations and warranties relating to the validity, subsistence, perfection
and priority of the security interest in each Motorcycle securing a Contract. A
breach of any such representation and warranty that materially and adversely
affects the Trust's interest in any Contract would create an obligation of the
Trust Depositor in the Sale and Servicing Agreement to repurchase such Contract
from the Trust and a simultaneous obligation of Eaglemark to repurchase such
Contract from the Trust Depositor (which right of the Trust Depositor against
Eaglemark is assigned to the Trust) unless such breach is cured. In the event
that the Trust must rely on repossession and resale of Motorcycles securing
Contracts that are in default to recover principal and interest due thereon,
certain other factors may limit the ability of the Trust to realize upon the
Motorcycle or may limit the amount realized to less than the amount due. See
"CERTAIN LEGAL ASPECTS OF THE CONTRACTS" below.
To the extent that the Trust's and the Applicable Trustee's security
interest in a Motorcycle is perfected, the Trust and the Applicable Trustee will
have a prior claim under applicable state laws over subsequent purchasers of
such Motorcycle and holders of subsequently perfected security interests
therein. However, as against liens for repairs or storage of a Motorcycle or
taxes unpaid by the Obligor on the Contract secured thereby, the Trust and the
Applicable Trustee could lose their respective security interests or the
priority of such security interests in a Motorcycle. In addition, even if the
Seller, the Trust or the Applicable Trustee were to be identified as the secured
party on the certificate of title of a Motorcycle, such secured party's security
interest could be defeated by the fraud or forgery of the vehicle owner or by
administrative errors by applicable state or local agencies responsible for
titling vehicles. The Company will not have any obligation to repurchase a
Contract with respect to which the Trust or the Applicable Trustee loses its
security interest in the related Motorcycle after the Closing Date due to any
such lien for repairs, storage or taxes or due to the negligence or fraud of a
third party.
ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE
ON ITS SECURITY INTEREST IN THE MOTORCYCLES - BANKRUPTCY LAWS. Under the United
States Bankruptcy Code, a court in a bankruptcy case with respect to an Obligor
on a Contract may prevent the Applicable Trustee from repossessing a Motorcycle
and may reduce the amount of secured indebtedness or change the amount or timing
of monthly payments or the interest rate applicable to a Contract.
ADDITIONAL LEGAL LIMITS ON THE APPLICABLE TRUSTEE'S ABILITY TO REALIZE
ON ITS SECURITY INTEREST IN THE MOTORCYCLES - CONSUMER PROTECTION LAWS.
Numerous federal and state consumer protection laws impose requirements on
lenders and/or servicers with respect to conditional financing arrangements such
as the Contracts, including requirements regarding the adequate disclosure of
loan terms (including finance charges and deemed finance charges) and
limitations on loan terms (including the permitted finance charge or deemed
finance charge), collection practices and creditor remedies. Failure by Dealers
or Eaglemark to comply with such requirements could have the effect of
subjecting an assignee of the Contracts to the related claims and defenses of
the Obligor on such Contract. This risk would apply to a Trust as assignee, and
with respect to an Owner Trust, the Indenture Trustee as pledgee, of the
Contracts. See also "CERTAIN LEGAL ASPECTS OF THE CONTRACTS -- CONSUMER
PROTECTION LAWS" below.
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<PAGE>
Generally, under the terms of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Relief Act"), or similar state legislation, an
Obligor who enters military service after the origination of the related
Contract (including an Obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the Contract and is later
called to active duty) may not be charged interest (including fees and charges)
above an annual rate of 6% during the period of such Obligor's active duty
status, unless a court orders otherwise upon application of the lender. It is
possible that such action could have an effect, for an indeterminate period of
time, on the ability of the Servicer to collect full amounts of interest on
certain of the Contracts. In addition, the Relief Act imposes limitations that
would impair the ability of the Servicer to foreclose on an affected Contract
during the Obligor's period of active duty status. Thus, in the event that such
a Contract goes into default, there may be delays and losses occasioned by the
inability of the Servicer to realize upon the Motorcycle in a timely fashion.
The Seller will warrant under the related Transfer and Sale Agreement
that each Contract complies with all requirements of law in all material
respects. Accordingly, if an Obligor has a claim against the related Trust for
violation of any law and such claim materially and adversely affects such
Trust's interest in a Contract, such violation would constitute a breach of the
warranties of the Seller under the related Transfer and Sale Agreement and would
create an obligation of the Seller to repurchase the Contract from the Trust,
through the Trust Depositor (with the Trust as assignee of the Trust Depositor's
rights against the Seller in this regard), unless the breach were cured. See
"DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND POOLING AND SERVICING
AGREEMENTS - SALE AND ASSIGNMENT OF CONTRACTS".
COMPANY BANKRUPTCY CONSIDERATIONS. Winston & Strawn, counsel to the
Company and the Trust Depositor, will render an opinion to the Applicable
Trustee that in the event the Company became a debtor under the United States
Bankruptcy Code, the transfer of the Contracts from the Company to the Trust
Depositor in accordance with the Transfer and Sale Agreement (and any related
purchase agreement in connection with transfers of Subsequent Contracts;
hereinafter, a "SUBSEQUENT PURCHASE AGREEMENT") would be treated as a sale and
not as a pledge to secure borrowings and that the Trust Depositor would not be
consolidated with the Company as a single entity. If, however, the transfer of
the Contracts from the Company to the Trust Depositor were treated as a pledge
to secure borrowings by the Company or if the Trust Depositor were ordered
consolidated with the Company as a single entity or were to become bankrupt for
any reason, the distribution of proceeds of the Contracts to the Trust might be
subject to the automatic stay provisions of the United States Bankruptcy Code,
which would delay the distribution of such proceeds for an uncertain period of
time. In addition, a bankruptcy trustee would have the power to sell the
Contracts if the proceeds of such sale could satisfy the amount of the debt
deemed owed by the Company, or the bankruptcy trustee could substitute other
collateral in lieu of the Contracts to secure such debt, or such debt could be
subject to adjustment by the bankruptcy court if the Company were to file for
reorganization under Chapter 11 of the United States Bankruptcy Code. A case
decided by the United States Court of Appeals for the Tenth Circuit contains
language to the effect that accounts sold by a debtor under Article 9 of the
Uniform Commercial Code ("UCC") would remain property of the debtor's bankruptcy
estate. Although the Contracts constitute chattel paper under the UCC rather
than accounts, sales of chattel paper are similarly governed by Article 9 of the
UCC. If, following a bankruptcy of the Company, a court were to follow the
reasoning of the Tenth Circuit and apply such reasoning to chattel paper, then
similar reductions or delays in payments of collections on or in respect of the
Contracts could occur. Additionally, because the Company has purchased
Contracts from Dealers located in the Tenth Circuit which could become debtors
in a bankruptcy proceeding, the rationale of such case could be applicable to
such Dealers' sales of Contracts to the Company and the corresponding negative
implications for timing of receipt of payments with respect to such Contracts
may occur.
RISKS ASSOCIATED WITH NON-RECOURSE NATURE OF SECURITIES - NO RECOURSE TO
THE COMPANY, TRUST DEPOSITORS OR THEIR AFFILIATES. None of the Company, any
Trust Depositor or any of their affiliates is generally obligated to make any
payments in respect of any Notes, the Certificates or the Contracts of a given
Trust. However, in connection with the sale of Contracts by the Trust Depositor
to a given Trust, the Trust Depositor will make representations and warranties
with respect to the characteristics of such Contracts and, in certain
circumstances, the Trust Depositor may be required to repurchase Contracts with
respect to which such representations and warranties have been breached. See
"DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS
15
<PAGE>
AND POOLING AND SERVICING AGREEMENTS - SALE AND ASSIGNMENT OF CONTRACTS". The
Company, as Seller, will correspondingly be obligated to the Trust Depositor
under the Transfer and Sale Agreement (which rights of the Trust Depositor
against the Company will be assigned to the Trust) to repurchase the Contracts
from the Trust Depositor contemporaneously with the Trust Depositor's purchase
of the Contract from a Trust. See "DESCRIPTION OF THE TRANSFER AND SALE
AGREEMENT". Moreover, if the Company were to cease acting as Servicer, delays
in processing payments on the Contracts and information in respect thereof could
occur and result in delays in payments to the Securityholders. The related
Prospectus Supplement may set forth certain additional information regarding the
Company and any Trust Depositor.
RISKS ASSOCIATED WITH NON-RECOURSE NATURE OF SECURITIES - TRUSTS HAVE NO
SIGNIFICANT ASSETS OR SOURCES OF FUNDS OTHER THAN THE CONTRACTS. None of the
Trusts will have, nor will any Trust be permitted or expected to have, any
significant assets or sources of funds other than the Contracts and, to the
extent provided in the related Prospectus Supplement, a Pre-Funding Account, a
Collateral Reinvestment Account, a Reserve Fund and any other credit enhancement
or Trust Property. The Notes of any series will represent obligations solely
of, and the Certificates of any series will represent interests solely in, the
related Trust, and neither the Notes nor the Certificates of any series will be
insured or guaranteed by the Trust Depositor, the Servicer, the Applicable
Trustee, or any other person or entity (except as may be described in a
Prospectus Supplement). Consequently, holders of the Securities of any series
must rely for repayment upon payments on the related Contracts and, if and to
the extent available, amounts on deposit in the Pre-Funding Account (if any),
the Collateral Reinvestment Account (if any), the Reserve Fund (if any) and any
other credit enhancement, all as specified in the related Prospectus Supplement.
Any such credit enhancement will not cover all contingencies, and losses in
excess of amounts available pursuant to such credit enhancement will be borne
directly by the Securityholders.
SUBORDINATION OF CERTAIN CLASSES OF SECURITIES. To the extent specified
in the related Prospectus Supplement, distributions of interest and principal on
one or more classes of Notes, if any, or Certificates of a series may be
subordinated in priority of payment to interest and principal due on certain of
the Notes, if any, of such series or one or more classes of Certificates of such
series. As a result of such subordination, in the event that losses with
respect to the Contracts and associated reductions in collections require
application of available collections and credit enhancement to a class of
Securities with priority of payment over another class, there may not be
sufficient assets remaining to pay amounts due on the subordinated Securities.
PREPAYMENTS ON CONTRACTS AFFECT YIELD OF SECURITIES. By their terms,
the Contracts may be prepaid, in whole or in part, at any time and each Contract
contains a provision which permits the Trust Depositor to require full
prepayment in the event of a sale of the Motorcycle securing a Contract. In
addition, repurchases of the Contracts by the Seller through the Trust Depositor
could occur in the event of a breach of a representation and warranty with
respect to the Contracts and upon exercise of the Trust Depositor's option to
repurchase Contracts when the aggregate outstanding principal balances of the
Contracts owned by the Trust (the "POOL BALANCE") has decreased to a certain
level. Any prepayments and repurchases of Contracts will reduce the average
life of the Contracts and the interest received by the Noteholders or
Certificateholders over the life of the Notes or Certificates (for this purpose
the term "PREPAYMENT" includes liquidations due to default, as well as receipt
of proceeds from credit life, credit disability and casualty insurance
policies). In addition, with respect to an Owner Trust the occurrence of a
Mandatory Special Redemption at or before the end of the Funding Period would
have the effect of reducing the interest received by Noteholders over the life
of the Notes.
In light of the above considerations, there can be no assurance as to
the amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Distribution Date since such amount will
depend, in part, on the amount of principal collected on the related pool of
Contracts during the applicable Due Period. Any reinvestment risks resulting
from a faster or slower incidence of prepayment of Contracts, or repurchases of
Contracts, as described above, will be borne entirely by the Securityholders of
a given series. The related Prospectus Supplement may set forth certain
additional information with respect to the maturity and prepayment
considerations applicable to the particular pool of Contracts and the related
series of Securities. See "WEIGHTED AVERAGE LIFE OF THE SECURITIES."
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<PAGE>
SOCIAL, ECONOMIC AND OTHER FACTORS AFFECTING THE PERFORMANCE OF THE
CONTRACTS OR GENERATION OF SUBSEQUENT CONTRACTS. Economic conditions in states
or U.S. Territories where Obligors reside may affect the delinquency, loan loss
and repossession experience of a Trust with respect to the related Contracts.
The performance by such Obligors, or the ability of Eaglemark to acquire from
Dealers sufficient Subsequent Contracts for purchase with the Pre-Funded Amount,
may be affected by a variety of social and economic factors including, but are
not limited to, interest rates, unemployment levels, the rate of inflation, and
consumer perception of economic conditions generally. However, neither
Eaglemark nor the Trust Depositor is able to determine and has no basis to
predict whether or to what extent economic or social factors will affect the
performance by any Obligors, or the availability of Subsequent Contracts in
cases where Subsequent Contracts are to be transferred to a Trust as specified
in the related Prospectus Supplement.
RISK OF COMMINGLING. With respect to each Trust, the Servicer will be
obligated to deposit all payments on the Contracts (from whatever source) and
all proceeds of such Contracts collected during each Due Period into the
Collection Account of such Trust within two business days of receipt thereof.
However, if so provided in the related Prospectus Supplement, in the event that
the Company satisfies certain requirements for monthly or less frequent
remittances and the Rating Agencies affirm their ratings of the related
Securities at the initial level, then for so long as the Company is the Servicer
and provided that (i) there exists no Servicer Default (as defined herein) and
(ii) each other condition to making such monthly or less frequent deposits as
may be specified by the Rating Agencies and described in such Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account of such Trust until on or before the
business day preceding each Distribution Date. The Servicer will also be
obligated to deposit the aggregate Purchase Amount (as defined herein) of
Contracts purchased by the Servicer into the applicable Collection Account on or
before the business day preceding each Distribution Date. Pending deposit into
such Collection Account, collections may be invested by the Servicer at its own
risk and for its own benefit and will not be segregated from funds of the
Servicer. If the Servicer were unable to remit such funds, the applicable
Securityholders might incur a loss. To the extent set forth in the related
Prospectus Supplement, the Servicer may, in order to satisfy the requirements
described above, obtain a letter of credit or other security for the benefit of
the related Trust to secure timely remittances of collections on the related
Contracts and payment of the aggregate Purchase Amount with respect to Contracts
purchased by the Servicer.
NOTEHOLDERS' ABILITY TO REMOVE SERVICER WITHOUT CERTIFICATEHOLDERS'
CONSENT. Unless otherwise provided in the related Prospectus Supplement with
respect to a series of Securities issued by an Owner Trust that includes Notes,
in the event a Servicer Default (as defined herein) occurs, the Indenture
Trustee or the Noteholders with respect to such series, as described under
"DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND POOLING AND SERVICING
AGREEMENTS - RIGHTS UPON SERVICER DEFAULT", may remove the Servicer without the
consent of the Owner Trustee or any of the Certificateholders with respect to
such series. The Owner Trustee or the Certificateholders with respect to such
series will not have the ability, without the concurrence of the Noteholders of
such series, to remove the Servicer if a Servicer Default occurs.
NO ASSURANCES GIVEN AS TO CHANGES IN THE RATINGS OF THE SECURITIES. It
is a condition to the issuance of the Securities to be offered hereunder that
they be rated in one of the four highest rating categories by at least one
nationally recognized statistical rating organization (a "RATING AGENCY"). A
rating is not a recommendation to purchase, hold or sell Securities inasmuch as
such rating does not comment as to market price or suitability for a particular
investor. Ratings of Securities will address the likelihood of the payment of
principal and interest thereon pursuant to their terms. The ratings of
Securities will not address the likelihood of an early return of invested
principal. There can be no assurance that a rating will remain for a given
period of time or that a rating will not be lowered or withdrawn entirely by a
Rating Agency if in its judgment circumstances in the future so warrant. For
more detailed information regarding the ratings assigned to any class of a
particular series of Securities, see "SUMMARY OF TERMS - RATINGS" and "RISK
FACTORS - RATINGS OF THE SECURITIES" in the related Prospectus Supplement.
BOOK-ENTRY REGISTRATION - SECURITYHOLDERS LIMITED TO EXERCISING THEIR
RIGHTS THROUGH DTC. Each class of Securities of a given series will be
initially represented by one or more certificates registered in the
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name of Cede & Co. ("CEDE"), or any other nominee for The Depository Trust
Company ("DTC") set forth in such Prospectus Supplement (Cede, or such other
nominee, "DTC'S NOMINEE"), and will not be registered in the names of the
holders of the Securities of such series or their nominees. Because of this,
unless and until Definitive Securities (as defined herein) for such series are
issued, Securityholders will not be recognized by the Applicable Trustee.
Hence, until Definitive Securities are issued, Securityholders will be able to
exercise their rights only indirectly through DTC and its participating
organizations. See "CERTAIN INFORMATION REGARDING THE SECURITIES - BOOK-ENTRY
REGISTRATION" and "- DEFINITIVE SECURITIES".
LIMITED LIQUIDITY. There is currently no secondary market for the
Securities. There can be no assurance that any such market will develop or, if
it does develop, that it will provide Securityholders with liquidity of
investment or will continue for the life of the Securities. The Securities will
not be listed on any securities exchange.
RISKS RELATING TO YEAR 2000 ISSUES. The "YEAR 2000" issue concerns the
potential exposures related to the automated generation of business and
financial misinformation resulting from the application of computer programs
which have been written using two digits to identify a year in the date field
rather than four. These programs could fail or produce erroneous results during
the transition from the Year 1999 to the Year 2000.
Eaglemark Financial, the parent of Eaglemark, is addressing the Year
2000 issue from a corporate perspective. In 1997, Eaglemark established a
corporate Year 2000 compliance program to provide oversight from both a business
and technical perspective. The program coordinates vendors, consultants, local
and regional resources in a focused effort to validate and track Year 2000
compliance. Eaglemark has completed an investigation of the impact of Year 2000
on its internal applications that include PC-based and mid-range platforms and
products. Eaglemark currently does not support mainframe systems in-house.
Eaglemark plans to be fully Year 2000 compliant with its internal, critical
systems by December 31, 1998. As a prerequisite to purchase, all new or
replacement systems acquired by Eaglemark have been certified as Year 2000
compliant by third-party software vendors. As implementation of these products
progresses, technical and user project teams include Year 2000 testing scripts
as part of acceptance testing criteria. Additionally, Eaglemark is tracking the
progress of its third-party processors to meet the December 31, 1998 target for
Year 2000 compliance. Eaglemark has begun the process of developing a
contingency plan to address the possibility that its systems will not be fully
Year 2000 compliant by December 31, 1999.
Eaglemark expects all of its third-party providers to find and correct
Year 2000 deficiencies. To this end, Eaglemark is in the process of accessing
the readiness of its third-party providers whose system disruptions or data
delivery would be problematic to Eaglemark. Eaglemark has sent its third-party
providers a Year 2000 questionnaire to assist in our evaluation of their Year
2000 compliance efforts. Once Eaglemark receives their responses, it will
develop a critical supplier list for additional inquiry and follow up until
their Year 2000 readiness is comfirmed.
Management does not anticipate that the total cost to Eaglemark of these
Year 2000 compliance activities will be material to its financial position or
results of operations in any given year. All costs incurred to date have been
internal. The costs of these activities has been figured into the 1998 and 1999
budgets and none of the costs relating to such activities will be paid out of
the Trust Property.
If Eaglemark, as Servicer, the Owner Trustee or the Indenture Trustee do
not have computerized systems that are Year 2000 compliant by the Year 2000, the
ability to service the Contracts (in the case of the Servicer), to make
distributions to the Noteholders (in the case of the Indenture Trustee) and
Certificateholders (in the case of the Owner Trustee) may be materially and
adversely affected.
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THE TRUSTS
With respect to each series of Securities, the Trust Depositor will
establish a separate Trust pursuant to the respective Trust Agreement or Pooling
and Servicing Agreement, as applicable, for the transactions described herein
and in the related Prospectus Supplement. The property of each Trust will
include a pool of retail installment sales contracts of new and used Harley-
Davidson motorcycles, or in certain limited instances Motorcycles manufactured
by Buell (limited to 2.5% of the principal balance of the Contracts owned by a
Trust) and Motorcycles manufactured by certain Other Manufacturers (see "OTHER
MANUFACTURERS" herein) (limited to 10% of the principal balance of the
Contracts owned by a Trust) as well as all payments due thereunder on and after
the applicable Cutoff Date. Such Contracts will be sold by the Company to the
Trust Depositor but will continue to be serviced by the Company as Servicer. On
the applicable Closing Date, after the issuance of the Certificates and any
Notes of a given series, the Trust Depositor will sell the Initial Contracts to
the Trust to the extent specified in the related Prospectus Supplement. If and
to the extent so provided in the related Prospectus Supplement, Subsequent
Contracts will be conveyed to the Trust as frequently as daily during the
Funding Period. In addition, if so provided in the related Prospectus
Supplement, the property of a Trust may also include monies deposited into the
Collateral Reinvestment Account on the Closing Date. With respect to an Owner
Trust, during the Revolving Period (if applicable), principal will not be
distributed on the Securities of the related series, and principal collections
on the Contracts of such Trust, together with (if and to the extent described in
the related Prospectus Supplement) interest collections on such Contracts that
are in excess of amounts required to be distributed therefrom, will be deposited
from time to time in the Collateral Reinvestment Account and will be used by the
Trust to purchase Subsequent Contracts during such Revolving Period. Any
Subsequent Contracts so conveyed will also be assets of the applicable Trust,
subject, in the case of any Owner Trust that issues Notes, to the prior rights
of the related Indenture Trustee and the Noteholders, if any, in such Subsequent
Contracts. The property of each Trust will also include (i) such amounts as
from time to time may be held in separate trust accounts established and
maintained pursuant to the related Sale and Servicing Agreement or Pooling and
Servicing Agreement and the proceeds of such accounts, as described herein and
in the related Prospectus Supplement; (ii) security interests in the Motorcycles
and any other interest of the Trust Depositor in such Motorcycles; (iii) the
rights to proceeds from claims on certain physical damage, credit life and
disability insurance policies covering the Motorcycles or the Obligors, as the
case may be; (iv) the interest of the Trust Depositor in any proceeds from
recourse to Dealers (as defined herein) or other originators in respect of
Contracts as to which the Servicer has determined that eventual repayment in
full is unlikely; and (v) any and all proceeds of the foregoing. To the extent
specified in the related Prospectus Supplement, a Pre-Funding Account, a
Collateral Reinvestment Account, a Reserve Fund or other form of credit
enhancement or such other property, may be a part of the property of any given
Trust or may be held by the Trustee or an Indenture Trustee for the benefit of
holders of the related Securities.
The Servicer will continue to service the Contracts held by each Trust
and will receive fees for such services. See "DESCRIPTION OF THE SALE AND
SERVICING AGREEMENTS AND POOLING AND SERVICING AGREEMENTS - SERVICING
COMPENSATION AND PAYMENT OF EXPENSES" herein and in the related Prospectus
Supplement. To facilitate the servicing of the Contracts, the Trust Depositor
and the Applicable Trustee will authorize the Servicer to retain physical
possession of the Contracts held by each Trust and other documents relating
thereto as custodian for each such Trust. Due to the administrative burden and
expense, the certificates of title to the Motorcycles will not be amended to
reflect the sale and assignment of the security interest in the Motorcycles to
each Trust. In the absence of such an amendment, the Trust may not have a
perfected security interest in the Motorcycles in all states. See "RISK FACTORS
- -- RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED MOTORCYCLES"; "CERTAIN
LEGAL ASPECTS OF THE CONTRACTS"; and "DESCRIPTION OF THE SALE AND SERVICING
AGREEMENTS AND POOLING AND SERVICING AGREEMENTS - SALE AND ASSIGNMENT OF
CONTRACTS" herein.
If the protection provided to any Noteholders of a given series by the
subordination of the related Certificates and by the Reserve Fund, if any, or
other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Fund or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be, would
have to look principally to the Obligors on the related Contracts, the proceeds
from the repossession and sale of Motorcycles which secure defaulted
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Contracts and the proceeds from any recourse against Dealers or other
originators with respect to such Contracts. In such event, certain factors,
such as the applicable Trust's not having perfected security interests in the
Motorcycles in all states, may affect the Servicer's ability to repossess and
sell the collateral securing the Contracts, and thus may reduce the proceeds to
be distributed to the holders of the Securities of such series. See
"DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND POOLING AND SERVICING
AGREEMENTS - DISTRIBUTIONS", "- CREDIT AND CASH FLOW ENHANCEMENT" and "CERTAIN
LEGAL ASPECTS OF THE CONTRACTS".
The principal offices of each Trust and the related Applicable Trustee
will be specified in the applicable Prospectus Supplement.
THE TRUSTEE AND THE INDENTURE TRUSTEE
The Trustee and the Indenture Trustee, as applicable, for each Trust
will be specified in the related Prospectus Supplement. The Applicable
Trustee's liability in connection with the issuance and sale of the related
Securities will be limited solely to the express obligations of such Applicable
Trustee set forth in the related Trust Agreement and the Sale and Servicing
Agreement or the related Pooling and Servicing Agreement, as applicable. The
Applicable Trustee may resign at any time, in which event the Servicer, or its
successor (or, in the case of an Owner Trust that issues Notes, the
Administrator thereof), will be obligated to appoint a successor trustee. The
Administrator of any Owner Trust that issues Notes and the Servicer in respect
of any Grantor Trust may also remove the Applicable Trustee if such Trustee
ceases to be eligible to continue as Trustee under the related Trust Agreement
or Pooling and Servicing Agreement, as applicable, or if the Applicable Trustee
becomes insolvent. In such circumstances, the Administrator or Servicer, as
applicable, will be obligated to appoint a successor Trustee. Any resignation
or removal of a Trustee or Indenture Trustee, as applicable, and appointment of
a successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee.
HARLEY-DAVIDSON MOTORCYCLES
All of the Motorcycles securing Contracts were manufactured by
Harley-Davidson, except that not more than 2.5% of the Contracts (including all
Subsequent Contracts) may relate to, and be secured by, Motorcycles manufactured
by Buell, and not more than 10.0% of the Contracts (including all Subsequent
Contracts) may relate to, and be secured by, Motorcycles manufactured by Other
Manufacturers. See "OTHER MANUFACTURERS." Buell produces "PERFORMANCE"
motorcycles using engines and certain other parts manufactured by
Harley-Davidson.
Harley-Davidson produces and sells premium heavyweight motorcycles.
Within the heavyweight class, Harley-Davidson sells touring motorcycles
(equipped for long-distance touring), as well as custom motorcycles which
emphasize the distinctive styling associated with certain classic
Harley-Davidson motorcycles. Harley-Davidson motorcycles are based on
variations of five basic chassis designs and are powered by one of four air
cooled, twin cylinder engines of "V" configuration which have displacements of
883cc, 1200cc, 1340cc and 1450cc. Harley-Davidson manufactures its own engines
and frames and is the only major manufacturer of motorcycles in the United
States.
Buell produces "PERFORMANCE" motorcycles using Harley-Davidson 1200cc
engines that are further modified in the manufacturing process, as well as
certain other Harley parts. The "PERFORMANCE" aspect of the motorcycles refers
to overall handling characteristics of the motorcycle, including cornering,
acceleration and braking. Buell motorcycles and related products are currently
distributed exclusively through Harley-Davidson dealers. Buell's overall share
of the "PERFORMANCE" market is negligible, but increasing.
OTHER MANUFACTURERS
Except as otherwise specified in the related Prospectus Supplement,
Contracts aggregating not more than 10.0% of the aggregate principal balances of
all Contracts in a Trust (including Subsequent Contracts) may relate to, and be
secured by, Motorcycles manufactured by Honda, Yamaha, Suzuki, Kawasaki as well
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as certain other manufacturers. Such Motorcycles fall within two (2)
categories: "touring cycles" (with displacements typically over 750cc) which are
generally intended for use in long distance travel, and "street legal cycles",
which include all other motorcycles which may be licensed for street use under
applicable state or local law and which are not generally viewed as falling with
the "touring cycle" category.
THE CONTRACTS
GENERAL
The Contracts (including Subsequent Contracts) in each Trust have been
or will be purchased by the Company from a network of Harley-Davidson Dealers
located throughout the United States. The Company's personnel contact Dealers
and explain the Company's available financing plans, terms, prevailing rates and
credit and financing policies. If the Dealer wishes to use the Company's
available customer financing, the Dealer must make an application to the Company
for approval.
Contracts (including Subsequent Contracts) that the Company purchases
are written on forms provided or approved by the Company and are purchased on an
individually approved basis in accordance with the Company's guidelines. The
Dealer submits the customer's credit application and purchase order to the
Company's office where an analysis of the creditworthiness of the proposed buyer
is made. The analysis includes a review of the proposed buyer's paying habits,
length and likelihood of continued employment and certain other procedures. The
Company's current underwriting guidelines for Contracts generally require that
the monthly payment on the Contract, together with the Obligor's other fixed
monthly obligations, not exceed 40% of the Obligor's monthly gross income;
provided, however, the Company may originate a Contract in excess of 40% of an
Obligor's monthly gross income if the Obligor makes a larger down payment or has
an exceptionally good credit rating or other offsetting factors exist. With
respect to Contracts for new Motorcycles, and for used Motorcycles of model year
1990 or later, the Company generally finances up to 90% of the Motorcycle's
sales price. The Company generally finances up to 85% of such amount for used
Motorcycles of a model year earlier than 1990. The Company will also finance
certain Dealer installed accessories, sales tax and title fees as well as
premiums for the term of the contract on optional credit life and accident and
health insurance, premiums for extended warranty insurance and premiums for
required physical damage insurance on the Motorcycle which financed amounts are
part of the principal balance of the respective Contract. If the application
meets the Company's guidelines and the credit is approved, the Company purchases
the Contract when the customer accepts delivery of the Motorcycle.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the experience of the Company pertaining
to delinquencies, repossessions and net losses with respect to new and used
Motorcycle Contracts will be set forth in each Prospectus Supplement. There can
be no assurance that the delinquency, repossession and net loss experience on
any particular pool of Contracts will be comparable to prior experience or to
such information.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
The weighted average life of the Notes, if any, and the Certificates of
any series will generally be influenced by the rate at which the principal
balances of the related Contracts are paid, which payment may be in the form of
scheduled amortization or prepayments. (For this purpose, the term
"PREPAYMENTS" includes prepayments in full, partial prepayments (including those
related to rebates of extended warranty contract costs and insurance premiums),
liquidations due to default, losses caused by the issuance of an order by a
court in any insolvency proceeding reducing the amount owed under a Contract, as
well as receipts of proceeds from physical damage, credit life and disability
insurance policies and from certain purchases or repurchases of Contracts from
the Trust.) All of the Contracts are prepayable at any time without penalty to
the Obligor. The rate of prepayment of Contracts is influenced by a variety of
economic, social and other factors. In addition, under certain circumstances,
the Company, through the Trust Depositor, will be obligated to repurchase
Contracts from a given Trust pursuant to the related Transfer and Sale
Agreement, Sale and
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Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of certain representations and warranties. See "DESCRIPTION OF THE SALE AND
SERVICING AGREEMENTS AND POOLING AND SERVICING AGREEMENTS - SALE AND ASSIGNMENT
OF CONTRACTS" and "- SERVICING PROCEDURES". See also "DESCRIPTION OF THE SALE
AND SERVICING AGREEMENTS AND POOLING AND SERVICING AGREEMENTS - TERMINATION"
regarding the Trust Depositor's option to repurchase the Contracts from a given
Trust (and the Seller's option to concurrently repurchase such Contracts from
the Trust Depositor) and "- INSOLVENCY EVENT" regarding the sale of the
Contracts owned by a Trust if an Insolvency Event with respect to the Trust
Depositor applicable to such Trust occurs.
In light of the above considerations, there can be no assurance as to
the amount of principal payments to be made on the Notes, if any, or the
Certificates of a given series on each Distribution Date since such amount will
depend, in part, on the amount of principal collected on the related pool of
Contracts during the applicable Due Period. Any reinvestment risks resulting
from a faster or slower incidence of prepayment of Contracts will be borne
entirely by the Noteholders, if any, and the Certificateholders of a given
series. The related Prospectus Supplement may set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to the particular pool of Contracts and the related series of
Securities.
POOL FACTORS AND TRADING INFORMATION
The "NOTE POOL FACTOR" for each class of Notes will be a seven-digit
decimal which the Servicer will compute prior to each distribution with respect
to such class of Notes indicating the remaining outstanding principal balance of
such class of Notes, as of the applicable Distribution Date (after giving effect
to payments to be made on such Distribution Date), as a fraction of the initial
outstanding principal balance of such class of Notes. The "CERTIFICATE POOL
FACTOR" for each class of Certificates will be a seven-digit decimal which the
Servicer will compute prior to each distribution with respect to such class of
Certificates indicating the remaining Certificate Balance of such class of
Certificates, as of the applicable Distribution Date (after giving effect to
distributions to be made on such Distribution Date), as a fraction of the
initial Certificate Balance of such class of Certificates. Each Note Pool
Factor and each Certificate Pool Factor will initially be 1.0000000 and
thereafter will decline to reflect reductions in the outstanding principal
balance of the applicable class of Notes, or the reduction of the Certificate
Balance of the applicable class of Certificates, as the case may be. A
Noteholder's portion of the aggregate outstanding principal balance of the
related class of Notes is the product of (i) the original denomination of such
Noteholder's Note and (ii) the applicable Note Pool Factor. A
Certificateholder's portion of the aggregate outstanding Certificate Balance for
the related class of Certificates is the product of (a) the original
denomination of such Certificateholder's Certificate and (b) the applicable
Certificate Pool Factor.
Unless otherwise provided in the related Prospectus Supplement, the
Noteholders, if any, and the Certificateholders will receive reports on or about
each Distribution Date concerning, with respect to the Due Period immediately
preceding such Distribution Date, payments received on the Contracts, the Pool
Balance, each Certificate Pool Factor or Note Pool Factor, as applicable, and
various other items of information. In addition, Securityholders of record
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. See "CERTAIN
INFORMATION REGARDING THE SECURITIES - REPORTS TO SECURITYHOLDERS".
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the
Trust will use the net proceeds received from the sale of the Securities (i) to
purchase the Initial Contracts and related assets from the Trust Depositor, (ii)
to make the deposit, if any, of the Pre-Funded Amount into the Pre-Funding
Account, if any, and (iii) to make the initial deposit, if any, to the
Collateral Reinvestment Account, if any. The Seller will use the net proceeds
from the Trust Depositor's purchase of the Initial Contracts, as well as
Subsequent Contracts, for the repayment of warehouse lines through which it
finances its Motorcycle conditional sales contracts, and for other corporate
purposes.
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EAGLEMARK FINANCIAL SERVICES, INC.; EAGLEMARK, INC.;
AND THE TRUST DEPOSITORS
EAGLEMARK FINANCIAL SERVICES, INC.
Eaglemark Financial was formed in June 1992 with a capital infusion of
$10,000,000 from Harley-Davidson and an additional $15,000,000 capital
contribution from a major institutional investor in January 1993. In November
1995, Harley-Davidson purchased the equity owned by the major institutional
investor and as a result Eaglemark Financial is a 97.8% owned subsidiary of
Harley-Davidson. The business of Eaglemark Financial, through its 100%
ownership of Eaglemark, has been to provide wholesale and retail financing,
credit card and insurance services to Dealers and customers of Harley-Davidson.
EAGLEMARK, INC.
Eaglemark was incorporated as a Nevada corporation in 1992 and is a
wholly-owned subsidiary of Eaglemark Financial. Eaglemark began operations in
January 1993 when it purchased the $85 million wholesale financing portfolio of
certain Harley-Davidson Dealers from ITT Commercial Finance; subsequently,
Eaglemark entered the retail consumer finance business. Eaglemark provides
financing to Harley-Davidson customers for new and used motorcycles, as well as
certain other recreational products such as single-engine aircraft and marine
products. Harley-Davidson Motorcycles are financed through the Canadian
Harley-Davidson dealers under the trade name "Deeley Credit." Eaglemark also
finances extended service contracts on Motorcycles. Eaglemark's financing,
credit card and insurance programs are designed to work together as a package
that appeals to the needs of Harley-Davidson's customers. The intent of such a
package is to increase Dealer and customer loyalty to Eaglemark while improving
revenue and profits over time. Eaglemark's principal executive offices are
located at 4150 Technology Way, Carson City, Nevada 89706 (telephone
702/886-3200).
THE TRUST DEPOSITORS
With respect to each series of Securities, the Trust Depositor will be a
special-purpose finance subsidiary of the Company. All of the common stock of
the Trust Depositor will be owned by Eaglemark. All of the officers and
directors of each Trust Depositor will be employed by Eaglemark or Eaglemark
Financial, except that at least two directors of each Trust Depositor shall at
all times be independent of Eaglemark, Eaglemark Financial and Harley-Davidson.
DESCRIPTION OF THE NOTES
GENERAL
Each Owner Trust may issue one or more classes of Notes pursuant to an
Indenture, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
Each class of Notes will initially be represented by one or more Notes,
in each case registered in the name of the nominee of DTC (together with any
successor depository selected by the Trust, the "DEPOSITORY"), except as set
forth below. The Notes will be available for purchase in denominations of
$1,000 and integral multiples thereof in book-entry form only. The Company has
been informed by DTC that DTC's nominee will be Cede, unless another nominee is
specified in the related Prospectus Supplement. Accordingly, such nominee is
expected to be the holder of record of the Notes of each class. Unless and
until Definitive Notes (as defined herein) are issued under the limited
circumstances described herein or in the related Prospectus Supplement, no
Noteholder will be entitled to receive a physical certificate representing a
Note. All references herein and in the related Prospectus Supplement to actions
by Noteholders refer to actions taken by DTC upon instructions from its
participating organizations (the "PARTICIPANTS"), and all references herein and
in the related Prospectus Supplement to distributions, notices, reports and
statements to Noteholders refer to
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distributions, notices, reports and statements to DTC or its nominee, as the
registered holder of the Notes, for distribution to Noteholders in accordance
with DTC's procedures with respect thereto. See "CERTAIN INFORMATION REGARDING
THE SECURITIES -- BOOK-ENTRY REGISTRATION" and "-- DEFINITIVE SECURITIES".
PRINCIPAL AND INTEREST ON THE NOTES
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 will be described in the
related Prospectus Supplement. The right 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 such series, as
described in the related Prospectus Supplement. Unless otherwise provided in
the related Prospectus Supplement, payments of interest on the Notes of such
series will be made prior to payments of principal thereon. If so provided in
the related Prospectus Supplement, a series may include one or more classes of
Strip Notes entitled to (i) principal payments with disproportionate, nominal or
no interest payments or (ii) 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 certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes of a given series or the method for determining such Interest Rate.
See also "CERTAIN INFORMATION REGARDING THE SECURITIES -- FIXED RATE SECURITIES"
and "-- FLOATING RATE SECURITIES". One or more classes of Notes of a series may
be redeemable in whole or in part under the circumstances specified in the
related Prospectus Supplement, including, if a Pre-Funding Account or Collateral
Reinvestment Account has been established with respect to a related series, from
amounts remaining in the applicable account at the end of the Funding Period or
Revolving Period, as the case may be, or as a result of the Seller through the
Trust Depositor exercising its option to repurchase the related pool of
Contracts.
To the extent specified in any Prospectus Supplement, one or more
classes of Notes of a given series may have fixed principal payment schedules,
as set forth in such Prospectus Supplement; Noteholders of such Notes would be
entitled to receive as payments of principal on any given Distribution Date the
applicable amounts set forth on such schedule with respect to such Notes, in the
manner and to the extent set forth in the related Prospectus Supplement.
Payments to holders of Notes of all classes within a series in respect
of interest will have the same priority. Under certain circumstances, the
amount available for such payments could be less than the amount of interest
payable on the Notes on any of the dates specified for payments in the related
Prospectus Supplement (each, a "DISTRIBUTION DATE"), in which case each class of
Noteholders will receive its ratable share (based upon the aggregate amount of
interest due to the holders of such class of Notes) of the aggregate amount
available to be distributed in respect of interest on the Notes of such series.
See "DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND POOLING AND SERVICING
AGREEMENTS -- DISTRIBUTIONS" and "-- CREDIT AND CASH FLOW ENHANCEMENT".
In the case of a series of Securities which 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 such class will be set forth in the related
Prospectus Supplement. Payments in respect of principal of and interest on any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class. One or more classes of Notes of a series may be redeemable in whole
or in part under the circumstances specified in the related Prospectus
Supplement, including, if a Pre-Funding Account or Collateral Reinvestment
Account has been established with respect to the related series, from amounts
remaining in the applicable account at the end of the Funding Period or
Revolving Period, as the case may be, or as a result of the exercise by the
Seller through the Trust Depositor or such other party as may be specified in
the related Prospectus Supplement of its option to repurchase the related pool
of Contracts. See "DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND POOLING
AND SERVICING AGREEMENTS -- TERMINATION".
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CERTAIN PROVISIONS OF THE INDENTURE
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the
Notes of a given series, "EVENTS OF DEFAULT" under the related Indenture will
include the following: (i) a default for five days or more in the payment of any
interest on any such Note; (ii) a default in the payment of the principal, or
any installment of the principal, of any such Note when the same becomes due and
payable; (iii) a default in the observance or performance of any covenant or
agreement of the applicable Trust made in such Indenture and the continuation of
any such default for a period of 30 days after notice thereof is given to such
Trust by the applicable Indenture Trustee or to such Trust and such Indenture
Trustee by the holders of at least 25% in principal amount of such Notes then
outstanding; (iv) any representation or warranty made by such Trust in such
Indenture or in any certificate delivered pursuant thereto or in connection
therewith having been incorrect in a material respect as of the time made, if
such breach is not cured within 30 days after notice thereof is given to such
Trust by the applicable Indenture Trustee or to such Trust and such Indenture
Trustee by the holders of at least 25% in principal amount of such Notes then
outstanding; or (v) certain events of bankruptcy, insolvency, receivership or
liquidation of the applicable Trust. However, the amount of principal required
to be paid to Noteholders of such series under the related Indenture will
generally be limited to amounts available to be deposited in the applicable Note
Distribution Account. Therefore, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default until
the final scheduled Distribution Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to
the Notes of any series, the related Indenture Trustee or holders of not less
than 66 2/3% of the principal amount (or a lesser percentage as specified in the
related Prospectus Supplement, but in no case not less than 50%) of such Notes
then outstanding may declare the principal of such Notes to be immediately due
and payable. Such declaration may, under certain circumstances, be rescinded by
the holders not less than 66 2/3% (or a lesser percentage as specified in the
related Prospectus Supplement, but in no case not less than 50%) of the
principal amount of such Notes then outstanding.
If the Notes of any series are declared due and payable following an
Event of Default with respect thereto, the related Indenture Trustee may
institute proceedings to collect amounts due or foreclose on Trust Property,
exercise remedies as a secured party, sell the related Contracts or elect to
have the applicable Trust maintain possession of such Contracts and continue to
apply collections on such Contracts as if there had been no declaration of
acceleration. However, such Indenture Trustee is prohibited from selling such
Contracts following an Event of Default, other than a default in the payment of
any principal of, or a default for five days or more in the payment of any
interest on, any Note of such series, unless (i) the holders of all such
outstanding Notes consent to such sale, (ii) the proceeds of such sale are
sufficient to pay in full the principal of and the accrued interest on such
outstanding Notes at the date of such sale or (iii) such Indenture Trustee
determines that the proceeds of the Contracts would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such obligations had not been declared due and payable, and such
Indenture Trustee obtains the consent of the holders of not less than 66 2/3%
(or a lesser percentage as specified in the related Prospectus Supplement, but
in no case not less than 50%) of the aggregate outstanding principal amount of
such Notes.
Subject to the provisions of the applicable Indenture relating to the
duties of the related Indenture Trustee, if an Event of Default occurs and is
continuing with respect to a series of Notes, such Indenture Trustee will be
under no obligation to exercise any of the rights or powers under such Indenture
at the request or direction of any of the holders of such Notes if such
Indenture Trustee reasonably believes it will not be adequately indemnified
against the costs, expenses and liabilities which might be incurred by it in
complying with such request. Subject to the provisions for indemnification and
certain limitations contained in the related Indenture, the holders of a
majority in principal amount of the outstanding Notes of a given series will
have the right to direct the time, method and place of conducting any proceeding
or any remedy available to the applicable Indenture Trustee, and the holders of
a majority in principal amount of such Notes then outstanding may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or
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interest or a default in respect of a covenant or provision of such Indenture
that cannot be modified without the waiver or consent of all the holders of each
such outstanding Note.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the applicable Indenture Trustee written notice of a
continuing Event of Default, (ii) the holders of not less than 25% in principal
amount of the outstanding Notes of such series have made written request to such
Indenture Trustee to institute such proceeding in its own name as Indenture
Trustee, (iii) such holder or holders have offered such Indenture Trustee
reasonable indemnity, (iv) such Indenture Trustee has for 60 days failed to
institute such proceeding and (v) no direction inconsistent with such written
request has been given to such Indenture Trustee during such 60-day period by
the holders of a majority in principal amount of such outstanding Notes.
In addition each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the Trust Depositor or the applicable Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
With respect to any Trust, neither the related Indenture Trustee nor the
related Trustee in its individual capacity, nor any holder of a Certificate
representing an ownership interest in such Trust nor any of their respective
owners, beneficiaries, agents, officers, directors, employees, affiliates,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the related Notes or for the agreements of such Trust contained in the
applicable Indenture.
CERTAIN COVENANTS. Each Indenture will provide that the related Trust
may not consolidate with or merge into any other entity, unless, among such
other requirements as may be specified in the related Prospectus Supplement,
(i) the entity formed by or surviving such consolidation or merger is organized
under the laws of the United States, any state or the District of Columbia,
(ii) such entity expressly assumes such Trust's obligation to make due and
punctual payments upon the Notes of the related series and to perform or observe
every agreement and covenant of such Trust under the Indenture, (iii) no Event
of Default shall have occurred and be continuing immediately after such merger
or consolidation, (iv) such Trust has been advised that the rating of the Notes
(and, if so provided in such Indenture, the Certificates) of such series then in
effect would not be reduced or withdrawn by the Rating Agencies as a result of
such merger or consolidation, (v) such Trust has received an opinion of counsel
to the effect that such consolidation or merger would have no material adverse
tax consequence to the Trust or to any related Noteholder or Certificateholder
and (vi) any action as is necessary to maintain the lien and security interest
of the Indenture shall have been taken.
No Owner Trust will, among other things, (i) except as expressly
permitted by the applicable Indenture, the applicable Sale and Servicing
Agreement or Pooling and Servicing Agreement or certain related documents with
respect to such Trust (collectively, the "RELATED DOCUMENTS"), sell, transfer,
exchange or otherwise dispose of any of the assets of such Trust, (ii) claim any
credit on or make any deduction from the principal and interest payable in
respect of the Notes of the related series (other than amounts properly withheld
under the Code or applicable state law) or assert any claim against any present
or former holder of such Notes because of the payment of taxes levied or
assessed upon such Trust, (iii) permit the validity or effectiveness of such
Indenture to be impaired or permit any person to be released from any covenants
or obligations with respect to such Notes under such Indenture except as may be
expressly permitted thereby or (iv) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the assets of such Trust or any part thereof,
or any interest therein or the proceeds thereof (other than tax liens,
mechanics' liens and other liens that arise by operation of law, in each case on
a Motorcycle and arising solely as a result of an action or omission of the
related Obligor).
No Trust may engage in any activity other than as described herein or in
the Prospectus Supplement. No Trust will incur, assume or guarantee any
indebtedness other than indebtedness incurred pursuant to the related Notes and
the related Indenture, pursuant to any Advances made to it by the Servicer or
otherwise in accordance with the Related Documents.
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MODIFICATION OF INDENTURE. Each Owner Trust and the related Indenture
Trustee may, with the consent of the holders of more than 50% (or such higher
percentage as specified in the related Prospectus Supplement) of the outstanding
Notes of the related series, execute a supplemental indenture to add provisions
to, change in any manner or eliminate any provisions of, the related Indenture,
or modify (except as provided below) in any manner the rights of the related
Noteholders.
However, with respect to a series of Notes, without the consent of the
holder of each such outstanding Note affected thereby, no supplemental indenture
will, among other things: (i) change the due date of any installment of
principal of or interest on any such Note or reduce the principal amount
thereof, the interest rate specified thereon or the redemption price with
respect thereto or change any place of payment where or the coin or currency in
which any such Note or any interest thereon is payable; (ii) impair the right to
institute suit for the enforcement of certain provisions of the related
Indenture regarding payment; (iii) reduce the percentage of the aggregate amount
of the outstanding Notes of such series, the consent of the holders of which is
required for any such supplemental indenture or the consent of the holders of
which is required for any waiver of compliance with certain provisions of such
Indenture or of certain defaults thereunder and their consequences as provided
for in such Indenture; (iv) modify or alter the provisions of such Indenture
regarding the voting of Notes held by the applicable Trust, any other obligor on
such Notes, the Trust Depositor or an affiliate of any of them; (v) reduce the
percentage of the aggregate outstanding amount of such Notes, the consent of the
holders of which is required to direct the related Indenture Trustee to sell or
liquidate the Contracts if the proceeds of such sale would be insufficient to
pay the principal amount and accrued but unpaid interest on the outstanding
Notes of such series; (vi) amend the provisions of the Indenture which specify
the percentage of the aggregate principal amount of such Notes required to amend
certain sections of such Indenture or certain other related agreements; or (vii)
permit the creation of any lien ranking prior to or on a parity with the lien of
such Indenture with respect to any of the collateral for such Notes or, except
as otherwise permitted or contemplated in such Indenture, terminate the lien of
such Indenture on any such collateral or deprive the holder of any such Note of
the security afforded by the lien of such Indenture.
Unless otherwise provided in the applicable Prospectus Supplement, an
Owner Trust and the applicable Indenture Trustee may also enter into
supplemental indentures, without obtaining the consent of the Noteholders of the
related series, for the purpose of, among other things, adding any provisions to
or changing in any manner or eliminating any of the provisions of the related
Indenture or of modifying in any manner the rights of such Noteholders; provided
that such action will not materially and adversely affect the interest of any
such Noteholder.
ANNUAL COMPLIANCE STATEMENT. Each Owner Trust that issues Notes will be
required to file annually with the related Indenture Trustee a written statement
as to the fulfillment of its obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee for each Owner
Trust that issues Notes will be required to mail each year to all related
Noteholders a brief report relating to its eligibility and qualification to
continue as Indenture Trustee under the related Indenture, any amounts advanced
by it under the Indenture, the amount, interest rate and maturity date of
certain indebtedness owing by the related Owner Trust to the applicable
Indenture Trustee in its individual capacity, the property and funds physically
held by such Indenture Trustee as such and any action taken by it that
materially affects the related Notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be
discharged with respect to the collateral securing the related Notes upon (i)
the delivery to the related Indenture Trustee for cancellation of all such Notes
or, with certain limitations, upon deposit with such Indenture Trustee of funds
sufficient for the payment in full of all such Notes and (ii) the payment of all
amounts and obligations, if any, which the Owner Trust owes to the Noteholders
or Indenture Trustee on behalf of the Noteholders.
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THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for any series may resign
at any time, in which event the related Administrator will be obligated to
appoint a successor Trustee for such series. The Administrator may also remove
any such Indenture Trustee if such Indenture Trustee ceases to be eligible to
continue as such under the related Indenture or if such Indenture Trustee
becomes insolvent. In such circumstances, such Owner Trust will be obligated to
appoint a successor Trustee for the applicable series of Notes. Any resignation
or removal of the Indenture Trustee and appointment of a successor Trustee for
any series of Notes does not become effective until acceptance of the
appointment by the successor Trustee for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Except for the Certificates, if any, of a given series purchased by the
Trust Depositor, each class of Certificates will initially be represented by one
or more Certificates registered in the name of the Depository, except as set
forth below. Except for the Certificates, if any, of a given series purchased
by the Trust Depositor, the Certificates will be available for purchase in
minimum denominations of $1,000 and integral multiples thereof in book-entry
form only. The Company has been informed by DTC that DTC's nominee will be
Cede, unless another nominee is specified in the related Prospectus Supplement.
Accordingly, such nominee is expected to be the holder of record of the
Certificates of any series that are not purchased by the Trust Depositor.
Unless and until Definitive Certificates (as defined herein) are issued under
the limited circumstances described herein or in the related Prospectus
Supplement, no Certificateholder (other than the Trust Depositor) will be
entitled to receive a physical certificate representing a Certificate. All
references herein and in the related Prospectus Supplement to actions by
Certificateholders refer to actions taken by DTC upon instructions from the
Participants, and all references herein and in the related Prospectus Supplement
to distributions, notices, reports and statements to Certificateholders refer to
distributions, notices, reports and statements to DTC or its nominee, as the
case may be, as the registered holder of the Certificates, for distribution to
Certificateholders in accordance with DTC's procedures with respect thereto.
See "CERTAIN INFORMATION REGARDING THE SECURITIES -- BOOK-ENTRY REGISTRATION"
and " -- DEFINITIVE SECURITIES". Any Certificates of a given series owned by
the Trust Depositor or its affiliates will be entitled to equal and
proportionate benefits under the applicable Trust Agreement or Pooling and
Servicing Agreement, except that such Certificates will be deemed not to be
outstanding for the purpose of determining whether the requisite percentage of
Certificateholders has given any request, demand, authorization, direction,
notice or consent or taken any other action under the Related Documents (other
than the commencement by the related Trust of a voluntary proceeding in
bankruptcy as described under "DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS
AND POOLING AND SERVICING AGREEMENTS -- INSOLVENCY EVENT").
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of
losses, Pass-Through Rate and amount of or method of determining distributions
with respect to principal of and interest on each class of Certificates of a
given series will be described in the related Prospectus Supplement.
Distributions of interest on such Certificates will be made on the Distribution
Date specified in the related Prospectus Supplement and will be made prior to
distributions with respect to principal of such Certificates. To the extent
provided in the related Prospectus Supplement, a series may include one or more
classes of Strip Certificates entitled to (i) distributions in respect of
principal with disproportionate, nominal or no interest distributions or (ii)
interest distributions with disproportionate, nominal or no distributions in
respect of principal. Each class of Certificates
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may have a different Pass-Through Rate, which may be a fixed, variable or
adjustable Pass-Through Rate (and which may be zero for certain classes of Strip
Certificates) or any combination of the foregoing. The related Prospectus
Supplement will specify the Pass-Through Rate for each class of Certificates of
a given series or the method for determining such Pass-Through Rate. See also
"CERTAIN INFORMATION REGARDING THE SECURITIES -- FIXED RATE SECURITIES" and
"-- FLOATING RATE SECURITIES". Unless otherwise provided in the related
Prospectus Supplement, distributions in respect of the Certificates of a given
series that includes Notes may be subordinated to payments in respect of the
Notes of such series as more fully described in such Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, distributions in
respect of interest on and principal of any class of Certificates will be made
on a pro rata basis among all the Certificateholders of such class.
In the case of a series of Certificates which includes two or more
classes of Certificates, the timing, sequential order, priority of payment or
amount of distributions in respect of interest and principal, and any
schedule or formula or other provisions applicable to the determination thereof,
of each such class shall be as set forth in the related Prospectus Supplement.
One or more classes of Certificates of a series may be redeemable in whole or in
part under the circumstances specified in the related Prospectus Supplement,
including, if a Pre-Funding Account or Collateral Reinvestment Account has been
established with respect to the related series, from amounts remaining in the
applicable account at the end of the Funding Period or Revolving Period, as the
case may be, or as a result of the exercise by the Seller through the Trust
Depositor or such other party as may be specified in such Prospectus Supplement
of its option to repurchase the related pool of Contracts. See "DESCRIPTION OF
THE SALE AND SERVICING AGREEMENTS AND POOLING AND SERVICING AGREEMENTS
- -- TERMINATION".
CERTAIN INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of Securities (other than certain classes of Strip Notes or
Strip Certificates) may bear interest at a fixed rate per annum ("FIXED RATE
SECURITIES") or at a variable or adjustable rate per annum ("FLOATING RATE
SECURITIES"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Securities will bear interest at the
applicable per annum Interest Rate or Pass-Through Rate, as the case may be,
specified in the applicable Prospectus Supplement. Unless otherwise set forth
in the applicable Prospectus Supplement, interest on each class of Fixed Rate
Securities will be computed on the basis of a 360-day year of twelve 30-day
months. See "DESCRIPTION OF THE NOTES -- PRINCIPAL AND INTEREST ON THE NOTES"
and "DESCRIPTION OF THE CERTIFICATES -- DISTRIBUTIONS OF PRINCIPAL AND
INTEREST".
FLOATING RATE SECURITIES
Each class of Floating Rate Securities will bear interest for each
applicable "INTEREST RESET PERIOD" (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Securities) at a
rate per annum determined by reference to an interest rate basis (the "BASE
RATE"), plus or minus the Spread, if any, or multiplied by the Spread
Multiplier, if any, in each case as specified in such Prospectus Supplement.
The "SPREAD" is the number of basis points (one basis point equals one
one-hundredth of a percentage point) that may be specified in the applicable
Prospectus Supplement as being applicable to such class, and the "SPREAD
MULTIPLIER" is the percentage that may be specified in the applicable Prospectus
Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the following
Base Rates as applicable to a given Floating Rate Security: (i) LIBOR (a "LIBOR
SECURITY"), (ii) the Commercial Paper Rate (a "COMMERCIAL PAPER RATE SECURITY"),
(iii) the Treasury Rate (a "TREASURY RATE SECURITY"), (iv) the Federal Funds
Rate (a "FEDERAL FUNDS RATE SECURITY"), (v) the CD Rate (a "CD RATE SECURITY")
or (vi) such other Base Rate as is set forth in such Prospectus Supplement. The
"INDEX MATURITY" for any class of Floating Rate Securities is the period of
maturity of the instrument or obligation from which the Base Rate is calculated.
"H.15(519)" means the publication entitled "STATISTICAL RELEASE H.15(519),
SELECTED INTEREST RATES", or any successor
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publication, published by the Board of Governors of the Federal Reserve System.
"COMPOSITE QUOTATIONS" means the daily statistical release entitled "COMPOSITE
3:30 P.M. QUOTATIONS FOR U.S. GOVERNMENT SECURITIES" published by the Federal
Reserve Bank of New York. "INTEREST RESET DATE" will be the first day of the
applicable Interest Reset Period, or such other day as may be specified in the
related Prospectus Supplement with respect to a class of Floating Rate
Securities.
As specified in the applicable Prospectus Supplement, Floating Rate
Securities of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Securities, the interest rate
applicable to any class of Floating Rate Securities 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 Trust with respect to which a class of Floating Rate Securities
will be issued will appoint, and enter into agreements with, a calculation agent
(each, a "CALCULATION AGENT") to calculate interest rates on each such class of
Floating Rate Securities issued with respect thereto. The applicable Prospectus
Supplement will set forth the identity of the Calculation Agent for each such
class of Floating Rate Securities of a given series, which may be either the
related Trustee or Indenture Trustee with respect to such series. All
determinations of interest by the Calculation Agent shall, in the absence of
manifest error, be conclusive for all purposes and binding on the holders of
Floating Rate Securities of a given class. All percentages resulting from any
calculation of the rate of interest on a Floating Rate Security will be rounded,
if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate (as defined herein) and the Spread or Spread Multiplier, if any, specified
in such Security and in the applicable Prospectus Supplement.
The "CD RATE" for each Interest Reset Period shall be the rate as of the
second business day prior to the Interest Reset Date for such Interest Reset
Period (a "CD RATE DETERMINATION DATE") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement as
published in H.15(519) under the heading "CDS (SECONDARY MARKET)". In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such CD Rate Determination
Date, then the "CD RATE" for such Interest Reset Period will be the rate on such
CD Rate Determination Date for negotiable certificates of deposit of the Index
Maturity designated in the applicable Prospectus Supplement as published in
Composite Quotations under the heading "CERTIFICATES OF DEPOSIT". If by
3:00 p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the "CD RATE" for
such Interest Reset Period will be calculated by the Calculation Agent for such
CD Rate Security and will be the arithmetic mean of the secondary market offered
rates as of 10:00 a.m., New York City time, on such CD Rate Determination Date,
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent for such
CD Rate Security for negotiable certificates of deposit of major United States
money center banks of the highest credit standing (in the market for negotiable
certificates of deposit) with a remaining maturity closest to the Index Maturity
designated in the related Prospectus Supplement in a denomination of $5,000,000;
PROVIDED, HOWEVER, that if the dealers selected as aforesaid by such Calculation
Agent are not quoting offered rates as mentioned in this sentence, the "CD RATE"
for such Interest Reset Period will be the same as the CD Rate for the
immediately preceding Interest Reset Period.
The "CALCULATION DATE" pertaining to any CD Rate Determination Date
shall be the first to occur of (a) the tenth calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the second business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset Date.
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COMMERCIAL PAPER RATE SECURITIES. Each Commercial Paper Rate Security
will bear interest for each Interest Reset Period at the interest rate
calculated with reference to the Commercial Paper Rate (as defined herein) and
the Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
The "COMMERCIAL PAPER RATE" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Rate Security as
of the second business day prior to the Interest Reset Date for such Interest
Reset Period (a "COMMERCIAL PAPER RATE DETERMINATION DATE") and shall be the
Money Market Yield (as defined below) on such Commercial Paper Rate
Determination Date of the rate for commercial paper having the Index Maturity
specified in the applicable Prospectus Supplement, as such rate shall be
published in H.15(519) under the heading "COMMERCIAL PAPER". In the event that
such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Commercial Paper Rate
Determination Date, then the "COMMERCIAL PAPER RATE" for such Interest Reset
Period shall be the Money Market Yield on such Commercial Paper Rate
Determination Date of the rate for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "COMMERCIAL
PAPER". If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the
"COMMERCIAL PAPER RATE" for such Interest Reset Period shall be the Money Market
Yield of the arithmetic mean of the offered rates, as of 11:00 a.m., New York
City time, on such Commercial Paper Rate Determination Date of three leading
dealers of commercial paper in The City of New York selected by the Calculation
Agent for such Commercial Paper Rate Security for commercial paper of the
specified Index Maturity placed for an industrial issuer whose bonds are rated
"AA" or the equivalent by a nationally recognized rating agency; PROVIDED,
HOWEVER, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the "COMMERCIAL PAPER
RATE" for such Interest Reset Period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period.
"MONEY MARKET YIELD" shall be a yield calculated in accordance with the
following formula:
D x 360
Money Market Yield = ---------------------- X 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "CALCULATION DATE" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
business day, the next succeeding business day or (b) the second business day
preceding the date any payment is required to be made for any period following
the applicable Interest Reset Date.
FEDERAL FUNDS RATE SECURITIES. Each Federal Funds Rate Security will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Federal Funds Rate (as defined herein) and the Spread or
Spread Multiplier, if any, specified in such Security and in the applicable
Prospectus Supplement.
The "FEDERAL FUNDS RATE" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"FEDERAL FUNDS RATE DETERMINATION DATE") for Federal Funds as published in
H.15(519) under the heading "FEDERAL FUNDS (EFFECTIVE)". In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date (as defined below) pertaining to such Federal Funds Rate Determination
Date, the "FEDERAL FUNDS RATE" for such Interest Reset Period shall be the rate
on such Federal Funds Rate Determination Date as published in Composite
Quotations under the heading "FEDERAL FUNDS/EFFECTIVE RATE". If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "FEDERAL FUNDS RATE" for such
Interest Reset Period shall be the rate on such Federal Funds Rate Determination
Date made publicly
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available by the Federal Reserve Bank of New York which is equivalent to the
rate which appears in H.15(519) under the heading "FEDERAL FUNDS (EFFECTIVE)";
PROVIDED, HOWEVER, that if such rate is not made publicly available by the
Federal Reserve Bank of New York by 3:00 p.m., New York City time, on such
Calculation Date, the "FEDERAL FUNDS RATE" for such Interest Reset Period will
be the same as the Federal Funds Rate in effect for the immediately preceding
Interest Reset Period. In the case of a Federal Funds Rate Security that resets
daily, the interest rate on such Security for the period from and including a
Monday to but excluding the succeeding Monday will be reset by the Calculation
Agent for such Security on such second Monday (or, if not a business day, on the
next succeeding business day) to a rate equal to the average of the Federal
Funds Rates in effect with respect to each such day in such week.
The "CALCULATION DATE" pertaining to any Federal Funds Rate
Determination Date shall be the next succeeding business day.
LIBOR SECURITIES. Each LIBOR Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to LIBOR
(as defined herein) and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates for U.S. dollar
deposits, "LIBOR" for each Interest Reset Period will be established by the
Calculation Agent for any LIBOR Security and will equal the offered rate for
United States dollar deposits for one month that appears on Telerate Page 3750
as of 11:00 a.m., London time, on the second LIBOR Business Day (as defined
herein) prior to the Interest Reset Date for such Interest Reset Period (the
"LIBOR DETERMINATION DATE"). "TELERATE PAGE 3750" means the display page so
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service or such other service as may be nominated by the
information vendor for the purpose of displaying London interbank offered rates
of major banks). If such rate appears on Telerate Page 3750 on a LIBOR
Determination Date, LIBOR for the related Interest Reset Period will be such
rate. If on any LIBOR Determination Date such offered rate does not appear on
Telerate Page 3750, the Calculation Agent will request each of the reference
banks (which will be major banks that are engaged in transactions in the London
interbank market selected by the Calculation Agent) to provide the Calculation
Agent with its offered quotation for United States dollar deposits for one month
to prime banks in the London interbank market as of 11:00 a.m., London time, on
such date. If at least two reference banks provide the Calculation Agent with
such offered quotations, LIBOR with respect to such date will be the arithmetic
mean (rounded upwards, if necessary, to the nearest one-sixteenth of one
percent) of all such quotations. If on such date fewer than two of the
reference banks provide the Calculation Agent with such offered quotations,
LIBOR with respect to such date will be the arithmetic mean (rounded upwards, if
necessary, to the nearest one-sixteenth of one percent) of the offered per annum
rates that one or more leading banks in The City of New York selected by the
Calculation Agent are quoting as of 11:00 a.m., New York City time, on such date
to leading European banks for United States dollar deposits for one month;
PROVIDED, HOWEVER, that if such banks are not quoting as described above, LIBOR
with respect to such date will be LIBOR applicable to the immediately preceding
Interest Reset Period. "LIBOR BUSINESS DAY" as used herein means a day that is
both a business day and a day on which banking institutions in the City of
London, England are not required or authorized by law to be closed.
TREASURY RATE SECURITIES. Each Treasury Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Treasury Rate (as defined herein) and the Spread or Spread
Multiplier, if any, specified in such Security and in the applicable Prospectus
Supplement.
The "TREASURY RATE" for each Interest Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below) for such
Interest Reset Period of direct obligations of the United States ("TREASURY
BILLS") having the Index Maturity specified in the applicable Prospectus
Supplement, as such rate shall be published in H.15(519) under the heading "U.S.
GOVERNMENT SECURITIES -- TREASURY BILLS -- AUCTION AVERAGE (INVESTMENT)" or, in
the event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date (as defined below) pertaining to such Treasury
Rate Determination Date (as defined herein), the auction average rate (expressed
as a bond equivalent on the basis of a year of 365 or 366 days,
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as applicable, and applied on a daily basis) on such Treasury Rate Determination
Date as otherwise announced by the United States Department of the Treasury. In
the event that the results of the auction of Treasury bills having the specified
Index Maturity are not published or reported as provided above by 3:00 p.m.,
New York City time, on such Calculation Date, or if no such auction is held on
such Treasury Rate Determination Date, then the "TREASURY RATE" for such
Interest Reset Period shall be calculated by the Calculation Agent for such
Treasury Rate Security and shall be the yield to maturity (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on such Treasury
Rate Determination Date, of three leading primary United States government
securities dealers selected by such Calculation Agent for the issue of
Treasury bills with a remaining maturity closest to the specified Index
Maturity; PROVIDED, HOWEVER, that if the dealers selected as aforesaid by
such Calculation Agent are not quoting bid rates as mentioned in this
sentence, then the "TREASURY RATE" for such Interest Reset Period will be the
same as the Treasury Rate for the immediately preceding Interest Reset Period.
The "TREASURY RATE DETERMINATION DATE" for each Interest Reset Period
will be the day of the week in which the Interest Reset Date for such Interest
Reset Period falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that such auction may be held on the preceding Friday.
If, as the result of a legal holiday, an auction is so held on the preceding
Friday, such Friday will be the Treasury Rate Determination Date pertaining to
the Interest Reset Period commencing in the next succeeding week. If an auction
date shall fall on any day that would otherwise be an Interest Reset Date for a
Treasury Rate Security, then such Interest Reset Date shall instead be the
business day immediately following such auction date.
The "CALCULATION DATE" pertaining to any Treasury Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such
Treasury Rate Determination Date or, if such a day is not a business day, the
next succeeding business day or (b) the second business day preceding the date
any payment is required to be made for any period following the applicable
Interest Reset Date.
BOOK-ENTRY REGISTRATION
DTC will act as securities depository for each class of Securities
offered hereby. Each class of Securities initially will be represented by one
or more certificates registered in the name of Cede, the nominee of DTC. As
such, it is anticipated that the only "NOTEHOLDER" and/or "CERTIFICATEHOLDER"
with respect to a series of Securities will be Cede, as nominee of DTC.
Beneficial owners of the Securities ("SECURITY OWNERS") will not be recognized
by the related Indenture Trustee as "NOTEHOLDERS", as such term is used in each
Indenture, or by the related Trustee as "CERTIFICATEHOLDERS", as such term is
used in each Trust Agreement and Pooling and Servicing Agreement, and Security
Owners will be permitted to exercise the rights of Noteholders or
Certificateholders only indirectly through DTC and its Participants.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, 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 Uniform Commercial Code as in effect in the State of
New York, and a "CLEARING AGENCY" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for the
Participants and to facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entries, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("INDIRECT
PARTICIPANTS").
Security Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or an interest in,
the Securities may do so only through Participants and Indirect Participants.
In addition, all Security Owners will receive all distributions of principal and
interest from
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the related Indenture Trustee or the related Trustee, as applicable, through
Participants. Under a book-entry format, Security Owners may experience some
delay in their receipt of payments, since such payments will be forwarded by the
Applicable Trustee to DTC's nominee. DTC will then forward such payments to the
Participants, which thereafter will forward them to Indirect Participants or
Security Owners.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "RULES"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Securities and to
receive and transmit distributions of principal of and interest on the
Securities. Participants and Indirect Participants with which Security Owners
have accounts with respect to the Securities similarly are required to make
book-entry transfers and to receive and transmit such payments on behalf of
their respective Security Owners. Accordingly, although Security Owners will
not possess physical certificates representing the Securities, the Rules provide
a mechanism by which Participants and Indirect Participants will receive
payments and transfer interests, directly or indirectly, on behalf of Security
Owners.
Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a Security
Owner to pledge Securities to persons or entities that do not participate in the
DTC system, or otherwise take actions with respect to such Securities, may be
limited due to the lack of a physical certificate representing such Securities.
DTC has advised the Company that it will take any action permitted to be
taken by a Security Owner under the Indenture, Trust Agreement or Pooling and
Servicing Agreement, as applicable, only at the direction of one or more
Participants to whose account with DTC the Securities are credited. DTC may
take conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of Participants whose holdings include
such undivided interests.
Except as required by law, none of the Trust Depositor, the Servicer,
the related Administrator or the Applicable Trustee will have any liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of Securities of any series held by DTC's nominee, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
DEFINITIVE SECURITIES
The Notes, if any, and the Certificates of a given series will be issued
in fully registered, certificated form ("DEFINITIVE NOTES" and "DEFINITIVE
CERTIFICATES", respectively, and collectively referred to herein as "DEFINITIVE
SECURITIES") to Noteholders or Certificateholders or their respective nominees,
rather than to DTC or its nominee, only if (i) the related Administrator of an
Owner Trust or Trustee of a Grantor Trust, as applicable, determines that DTC is
no longer willing or able to discharge properly its responsibilities as
depository with respect to such Securities and such Administrator or Trustee is
unable to locate a qualified successor (and if it is an Administrator that has
made such determination, such Administrator so notifies the Applicable Trustee
in writing), (ii) the Administrator or Trustee, as applicable, at its option,
elects to terminate the book-entry system through DTC or (iii) after the
occurrence of an Event of Default or a Servicer Default with respect to such
Securities, Security Owners representing at least a majority of the outstanding
principal amount of the Notes or the Certificates, as the case may be, of such
series advise the Applicable Trustee through DTC in writing that the
continuation of a book-entry system through DTC (or a successor thereto) with
respect to such Notes or Certificates is no longer in the best interest of the
related Security Owners.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC or the Applicable Trustee will be required to notify all
applicable Security Owners of a given series through Participants of the
availability of Definitive Securities. Upon surrender by DTC of the definitive
certificates representing the corresponding Securities and receipt of
instructions for re-registration, the Applicable Trustee will reissue such
Securities as Definitive Securities to such Security Owners.
Distributions of principal of, and interest on, such Definitive
Securities will thereafter be made by the Applicable Trustee in accordance with
the procedures set forth in the related Indenture or the related Trust
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Agreement or Pooling and Servicing Agreement, as applicable, directly to holders
of Definitive Securities in whose names the Definitive Securities were
registered at the close of business on the applicable Record Date specified for
such Securities in the related Prospectus Supplement. Such distributions will
be made by check mailed to the address of such holder as it appears on the
register maintained by the Applicable Trustee. The final payment on any such
Definitive Security, however, will be made only upon presentation and surrender
of such Definitive Security at the office or agency specified in the notice of
final distribution to the applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the Applicable Trustee or of a registrar named in a notice delivered
to holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or
prior to each Distribution Date, the Servicer will prepare and provide to the
related Indenture Trustee a statement to be delivered to the related Noteholders
on such Distribution Date, and on or prior to each Distribution Date, the
Servicer will prepare and provide to the related Trustee a statement to be
delivered to the related Certificateholders. With respect to each series of
Securities, each such statement to be delivered to Noteholders will include (to
the extent applicable) the following information (and any other information so
specified in the related Prospectus Supplement) as to the Notes of such series
with respect to such Distribution Date or the period since the previous
Distribution Date, as applicable, and each such statement to be delivered to
Certificateholders will include (to the extent applicable) the following
information (and any other information so specified in such Prospectus
Supplement) as to the Certificates of such series with respect to such
Distribution Date or the period since the previous Distribution Date, as
applicable:
(i) the amount of the distribution allocable to principal of
each class of such Notes and to the Certificate Balance of each class of
such Certificates;
(ii) the amount of the distribution allocable to interest on
or with respect to each class of Securities of such series;
(iii) the Pool Balance as of the close of business on the last
day of the preceding Due Period;
(iv) the aggregate outstanding principal balance and the Note
Pool Factor for each class of such Notes, and the Certificate Balance
and the Certificate Pool Factor for each class of such Certificates,
each as of the related record date;
(v) the amount of the Servicing Fee paid to the Servicer
with respect to the related Due Period or Due Periods, as the case may
be;
(vi) the Interest Rate or Pass-Through Rate for the next
period for any class of Notes or Certificates of such series with
variable or adjustable rates;
(vii) the amount of the aggregate realized losses, if any, for
the related Due Period;
(viii) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the Certificateholders'
Interest Carryover Shortfall and the Certificateholders' Principal
Carryover Shortfall (each such term, if applicable, as defined in the
related Prospectus Supplement), if any, in each case as applicable to
each class of Securities, and the change in such amounts from the
preceding statement;
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(ix) the aggregate Purchase Amounts for Contracts, if any,
that were repurchased in the related Due Period;
(x) the balance of the Reserve Fund (if any) on such date,
after giving effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any),
the remaining Pre-Funded Amount;
(xii) for the first such date that is on or immediately
following the end of the Funding Period (if any), the amount of any
remaining Pre-Funded Amount that has not been used to fund the purchase
of Subsequent Contracts and is being passed through as payments of
principal on the Securities of such series;
(xiii) for each such date during the Revolving Period (if any),
the remaining amount in the Collateral Reinvestment Account; and
(xiv) for the first such date that is on or immediately
following the end of the Revolving Period (if any), the amount remaining
in the Collateral Reinvestment Account that has not been used to fund
the purchase of Subsequent Contracts and is being passed through as
payments of principal on the Securities of such series.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of each Trust, the Applicable
Trustee will mail to each person who at any time during such calendar year has
been a registered Securityholder with respect to such Trust and received any
payment thereon a statement containing certain information for the purposes of
such Securityholder's preparation of federal income tax returns. See "FEDERAL
INCOME TAX CONSEQUENCES".
LIST OF SECURITYHOLDERS
With respect to the Notes of any series, three or more holders of the
Notes of such series may, by written request to the related Indenture Trustee,
obtain access to the list of all Noteholders maintained by such Indenture
Trustee for the purpose of communicating with other Noteholders with respect to
their rights under the related Indenture or under such Notes. Such Indenture
Trustee may elect not to afford the requesting Noteholders access to the list of
Noteholders if it agrees to mail the desired communication or proxy, on behalf
of and at the expense of the requesting Noteholders, to all Noteholders of such
series.
With respect to the Certificates of any series, three or more holders of
the Certificates of such series or one or more holders of such Certificates
evidencing not less than 25% of the Certificate Balance of such Certificates
may, by written request to the related Trustee, obtain access to the list of all
Certificateholders maintained by such Trustee for the purpose of communicating
with other Certificateholders with respect to their rights under the related
Trust Agreement or Pooling and Servicing Agreement or under such Certificates.
DESCRIPTION OF THE TRANSFER AND SALE AGREEMENTS
On the Closing Date specified with respect to any given Trust in the
related Prospectus Supplement, the Company as Seller will transfer and assign to
the applicable Trust, pursuant to a Transfer and Sale Agreement, its entire
interest in the Initial Contracts, including its security interests in the
related Motorcycles. Each such Contract will be identified in a
schedule appearing as an exhibit to such Transfer and Sale Agreement (a
"SCHEDULE OF CONTRACTS"). The Seller will make certain representations and
warranties in the Transfer and Sale Agreement with respect to each Contract,
including that (references to the Closing Date below being deemed, in respect of
Subsequent Contracts, to refer to the related Subsequent Transfer Date): (a) as
of the related Cutoff Date the most recent scheduled payment was made or was not
delinquent more than 30 days and, to the best of the Seller's knowledge, all
payments on the Contract were made by the Obligor of the Contract; (b) as of the
Closing Date no provision of a Contract has been waived, altered or
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modified in any respect, except by instruments or documents relating to the
Contract and contained in the files maintained in connection therewith; (c) each
Contract is a genuine, legal, valid and binding obligation of the Obligor and is
enforceable in accordance with its terms (except as may be limited by laws
affecting creditors' rights generally); (d) as of the Closing Date no Contract
is subject to any right of rescission, set-off, counterclaim or defense; (e) as
of the Closing Date each Motorcycle securing a Contract is covered by certain
insurance policies described under "-- INDIVIDUAL MOTORCYCLE INSURANCE" below;
(f) each Contract was originated by a Dealer in the ordinary course of such
Dealer's business which Dealer had all necessary licenses and permits to
originate the Contracts in the state where such Dealer was located, was fully
and properly executed by the parties thereto and was sold by such Dealer to the
Seller without any fraud or misrepresentation on the part of such Dealer; (g) no
Contract was originated in or is subject to the laws of any jurisdiction whose
laws would make the transfer, sale and assignment of the Contract unlawful, void
or voidable; (h) each Contract and each sale of the related Motorcycle complies
with all requirements of any applicable federal, state or local law and
regulations thereunder, including, without limitation, usury, truth in lending,
motor vehicle installment loan and equal credit opportunity laws, with such
compliance not being affected by the Trust Depositor's conveyance and assignment
of the Contracts to the Trust, or the Trust's pledge of the Contracts to the
Indenture Trustee, as applicable, and the Seller will maintain in its
possession, available for inspection by or delivery to the Trust Depositor and
the Applicable Trustee, evidence of compliance with all such requirements; (i)
as of the Closing Date no Contract has been satisfied, subordinated in whole or
in part or rescinded and the Motorcycle securing the Contract has not been
released from the lien of the Contract in whole or in part; (j) each Contract
creates a valid, subsisting and enforceable first priority security interest in
favor of the Seller in the Motorcycle covered thereby; such security interest
has been conveyed and assigned by the Seller to the Trust Depositor and by the
Trust Depositor to the Trust and, if applicable, pledged by the Trust to the
Indenture Trustee; the Seller's lien is recorded on the original certificate of
title, certificate of lien or other notification (the "LIEN CERTIFICATE") issued
by the body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon (the
"REGISTRAR OF TITLES") of the applicable state to a secured party which
indicates the lien of the secured party on the Motorcycle; and the original
certificate of title for each Motorcycle shows, or if a new or replacement Lien
Certificate is being applied for with respect to such Motorcycle the Lien
Certificate will be received within 180 days of the Closing Date and will show,
the Seller as original secured party under each Contract and as the holder of a
first priority security interest in such Motorcycle (and with respect to each
Contract for which the Lien Certificate has not yet been returned from the
Registrar of Titles, the Seller has received written evidence from the related
dealer that such Lien Certificate showing the Seller as lienholder has been
applied for) and the Seller's security interest has been validly assigned by the
Seller to the Trust Depositor and by the Trust Depositor to the Trust and (if
applicable) pledged by the Trust to the Indenture Trustee, in order that
immediately after the sale, each Contract will be secured by an enforceable and
perfected first priority security interest in the Motorcycle in favor of the
Applicable Trustee as secured party, which security interest is prior to all
other liens upon and security interests in such Motorcycle which now exist or
may hereafter arise or be created (except, as to priority, for any lien for
taxes, labor, materials or any state law enforcement agency affecting a
Motorcycle which may arise after such sale); (k) all parties to each Contract
had capacity to execute such Contract; (l) no Contract has been sold, conveyed
and assigned or pledged to any other person other than the Trust Depositor, as
transferee of the Seller, the Trust as transferee of the Trust Depositor or the
Indenture Trustee as pledgee of the Trust, and prior to the transfer of the
Contract to the Trust Depositor the Seller has good and marketable title to each
Contract free and clear of any encumbrance, equity, loan, pledge, charge, claim
or security interest, and as of the Closing Date the Applicable Trustee will
have a first priority perfected security interest therein; (m) as of the related
Cutoff Date there was no default, breach, violation or event permitting
acceleration under any Contract (except for payment delinquencies permitted by
clause (a) above), no event which with notice and the expiration of any grace or
cure period would constitute a default, breach, violation or event permitting
acceleration under such Contract, and the Seller has not waived any of the
foregoing; (n) as of the Closing Date there are, to the best of the Seller's
knowledge, no liens or claims which have been filed for work, labor or materials
affecting a motorcycle securing a Contract, which are or may be liens prior or
equal to the lien of the Contract; (o) each Contract has a fixed rate of
interest and provides for monthly payments of principal and interest which, if
timely made, would fully amortize the loan on a simple interest basis over its
term; (p) each Contract contains customary and enforceable provisions such as to
render the rights and remedies of the holder thereof adequate for realization
against the collateral of the
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benefits of the security; (q) the description of each Contract set forth in the
list delivered to the Applicable Trustee, is true and correct, and (r) there is
only one original of each Contract. The Seller will also make certain
representations and warranties with respect to the Contracts in the aggregate,
including that (i) the aggregate principal amount payable by the Obligors as of
the Initial Cutoff Date (plus the Pre-Funded Amount as of the Closing Date)
equals the sum of the initial principal amount of the Notes and the Initial
Certificate Principal Balance, and each Initial Contract has a minimum
contractual rate of interest, (ii) all Motorcycles securing the Contracts are
Harley-Davidson or Buell Motorcycles or Motorcycles of Other Manufacturers,
(iii) a minimum percentage of the aggregate principal balance of the Initial
Contracts is attributable to loans to purchase new Motorcycles and a maximum
percentage of the aggregate Principal Balance of the Initial Contracts is
attributable to loans to purchase used Motorcycles, (iv) no Initial Contract has
a remaining maturity of more than 72 months, and (v) no adverse selection
procedures were or will be employed in selecting the Contracts from the Seller's
portfolio.
Under the Transfer and Sale Agreements, the Seller will agree that in
the event of a breach of any such representations and warranties made by the
Seller that materially and adversely affects the Applicable Trustees' interest
in any Contract the Seller will repurchase such Contract not later than two days
prior to the first Determination Date (as defined herein) after the Seller
becomes aware of such breach at a price (the "PURCHASE AMOUNT") equal to the
outstanding principal balance on such Contract, plus accrued interest thereon
through the most recently ended Due Period, unless such breach is cured. Under
either the Sale and Servicing Agreements or the Pooling and Servicing
Agreements, as applicable, the Trust Depositor will assign all of its right,
title and interest in such representations and warranties (including the
Seller's repurchase obligations) to the Trustee or the Owner Trust, as
applicable. Under the Indenture, if any, the Trust will pledge its right, title
and interest in such representations and warranties to the Indenture Trustee.
The Seller is selling the Contracts without recourse and, accordingly, will have
no obligation with respect to the Contracts other than pursuant to such
representations, warranties and repurchase obligations. The repurchase
obligations of the Seller described above will constitute the sole remedy
against the Seller by the Trust and the Securityholders for a breach of any such
representations and warranties made by the Seller.
DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND
POOLING AND SERVICING AGREEMENTS
The following summary describes certain terms of (i) each Sale and
Servicing Agreement or Pooling and Servicing Agreement pursuant to which a Trust
will purchase Contracts and other Trust Property from the Trust Depositor and
the Servicer will agree to service such Contracts, (ii) each Trust Agreement or
Pooling and Servicing Agreement, as applicable, pursuant to which a Trust will
be created and Certificates will be issued and (iii) each Administration
Agreement pursuant to which the Company will undertake certain administrative
duties with respect to an Owner Trust that issues Notes (collectively, the "SALE
AND SERVICING AGREEMENTS AND POOLING AND SERVICING AGREEMENTS"). Forms of the
Sale and Servicing Agreements and Pooling and Servicing Agreements have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part.
SALE AND ASSIGNMENT OF CONTRACTS
The Applicable Trustee will, concurrently with such transfer and
assignment, execute and deliver the related Notes and/or Certificates. Unless
otherwise provided in the related Prospectus Supplement, the net proceeds
received from the sale of the Certificates and the Notes of a given series will
be applied to the purchase of the related Initial Contracts and other Trust
Property from the Trust Depositor and, to the extent specified in such
Prospectus Supplement, to the deposit of the Pre-Funded Amount into the
Pre-Funding Account and the initial deposit into the Collateral Reinvestment
Account. The related Prospectus Supplement for a given Trust will specify
whether, and the terms, conditions and manner under which, Subsequent Contracts
will be sold by the Trust Depositor to the applicable Trust from time to time
during any Funding Period or Revolving Period on each Subsequent Transfer Date
as specified in the related Prospectus Supplement.
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In each Sale and Servicing Agreement or Pooling and Servicing Agreement,
the Trust Depositor will represent and warrant to the applicable Trust, among
other things, that: (i) the information provided in the related Schedule of
Contracts is correct in all material respects as of the applicable Cutoff Date;
(ii) the Obligor on each related Contract is required to maintain physical
damage insurance covering the Motorcycle in accordance with the Trust
Depositor's normal requirements; (iii) as of the applicable Closing Date or the
applicable Subsequent Transfer Date, if any, to the best of its knowledge, the
related Contracts are free and clear of all security interests, liens, charges
and encumbrances and no offsets, defenses or counterclaims have been asserted or
threatened; (iv) as of the Closing Date or the applicable Subsequent Transfer
Date, if any, each of such Contracts is or will be secured by a first priority
perfected security interest in favor of the Trust Depositor in the Motorcycle;
and (v) each related Contract, at the time it was originated, complied and, as
of the Closing Date or the applicable Subsequent Transfer Date, if any, complies
in all material respects with applicable federal and state laws, including,
without limitation, consumer credit, truth in lending, equal credit opportunity
and disclosure laws; and the Trust Depositor will make any other representations
and warranties that may be set forth in the related Prospectus Supplement. Such
representations and warranties will be concurrently made by the Seller under the
related Transfer and Sale Agreement, and the Seller has agreed to repurchase
Contracts adversely affected by the incorrectness of such representations and
warranties, in the manner described in "Description of the Transfer and Sale
Agreement" above.
Pursuant to each Sale and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Contracts and to reduce
administrative costs, the Trust Depositor and each Trust will designate the
Servicer as custodian to maintain possession, as such Trust's agent, of the
related motor vehicle retail installment sale contracts and installment loans
and any other documents relating to the Contracts. The Trust Depositor's and
the Servicer's accounting records and computer systems will reflect the sale and
assignment of the related Contracts to the applicable Trust, and UCC financing
statements reflecting such sale and assignment will be filed.
ACCOUNTS
With respect to Owner Trusts that issue Notes, the Servicer will
establish and maintain with the related Indenture Trustee one or more accounts,
in the name of the Indenture Trustee on behalf of the related Noteholders and
Certificateholders, into which all payments made on or with respect to the
related Contracts will be deposited (the "COLLECTION ACCOUNT"). The Servicer
will establish and maintain with such Indenture Trustee an account, in the name
of such Indenture Trustee on behalf of such Noteholders, into which amounts
released from the Collection Account and any Pre-Funding Account, Collateral
Reinvestment Account, Reserve Fund or other credit enhancement for payment to
such Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "NOTE DISTRIBUTION ACCOUNT"). With respect to
each Owner Trust or Grantor Trust, the Servicer will establish and maintain with
the related Trustee an account, in the name of such Trustee on behalf of the
Certificateholders of such Trust, into which amounts released from the
Collection Account and any Pre-Funding Account, any Collateral Reinvestment
Account, Reserve Fund or other credit or cash flow enhancement for distribution
to such Certificateholders will be deposited and from which all distributions to
such Certificateholders will be made (the "CERTIFICATE DISTRIBUTION ACCOUNT").
With respect to each Grantor Trust or each Owner Trust that does not issue
Notes, the Servicer will also establish and maintain the Collection Account and
any other Trust Account (as defined herein) in the name of the related Trustee
on behalf of the related Certificateholders.
If so provided in the related Prospectus Supplement, the Trust Depositor
will establish and maintain a Pre-Funding Account, in the name of the related
Indenture Trustee on behalf of the related Securityholders, into which the Trust
Depositor will deposit the Pre-Funded Amount on the related Closing Date. The
Pre-Funded Amount will not exceed 40% of the initial aggregate principal amount
of the Notes and Certificates of the related series. In addition, if so
provided in the related Prospectus Supplement, the Trust Depositor will
establish and maintain a Collateral Reinvestment Account, in the name of the
related Indenture Trustee on behalf of the related Securityholders, into which
the Trust Depositor will deposit the amount, if any, specified in such
Prospectus Supplement. During the Revolving Period, principal will not be
distributed on the Securities of the related series, and principal collections,
together with (if and to the extent described in the
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related Prospectus Supplement) interest collections on the Contracts that are in
excess of amounts required to be distributed therefrom, will be deposited from
time to time in the Collateral Reinvestment Account. The Pre-Funded Amount and
the amounts on deposit in the Collateral Reinvestment Account will be used by
the related Indenture Trustee to purchase Subsequent Contracts from the Trust
Depositor from time to time during the Funding Period and Revolving Period,
respectively. See "THE CONTRACTS -- GENERAL" and "RISK FACTORS -- SALES OF
SUBSEQUENT CONTRACTS AND EFFECT ON POOL CHARACTERISTICS." The amounts on
deposit in the Pre-Funding Account during the Funding Period and the amount on
deposit in the Collateral Reinvestment Account will be invested by the Indenture
Trustee in Eligible Investments. Any Investment Income received on the Eligible
Investments during a Due Period will be included in the interest distribution
amount on the following Distribution Date. The Funding Period or Revolving
Period, if any, for a Trust will begin on the related Closing Date and will end
on the date specified in the related Prospectus Supplement, which, in the case
of the Funding Period, in no event will be later than the date that is one year
after such Closing Date. Any amounts remaining in the Pre-Funding Account at
the end of the Funding Period or in the Collateral Reinvestment Account at the
end of the Revolving Period will be distributed to the related Securityholders
in the manner and priority specified in the related Prospectus Supplement, as a
prepayment of principal of the related Securities.
Any other accounts to be established with respect to a Trust, including
any Reserve Fund, will be described in the related Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account, if any, any Pre-Funding Account, any Collateral
Reinvestment Account, any Reserve Fund and other accounts identified as such in
the related Prospectus Supplement (collectively, the "TRUST ACCOUNTS") and the
Certificate Distribution Account will be invested as provided in the related
Sale and Servicing Agreement or Pooling and Servicing Agreement in Eligible
Investments. "ELIGIBLE INVESTMENTS" means any one or more of the following
types of investments: (a)(i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the United States or any agency or instrumentality of the United
States the obligations of which are backed by the full faith and credit of the
United States; and (ii) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal and
interest by, the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation, but only if, at the time of investment, such obligations
are assigned the highest credit rating by each Rating Agency; and (b) demand or
time deposits in, certificates of deposit of, or bankers' acceptances issued by
any depositary institution or trust company organized under the laws of the
United States or any State and subject to supervision and examination by federal
and/or State banking authorities (including, if applicable, the Trustee or any
agent of the Trustee acting in their respective commercial capacities); PROVIDED
that the short-term unsecured debt obligations of such depositary institution or
trust company at the time of such investment, or contractual commitment
providing for such investment, are assigned the highest credit rating by each
Rating Agency. Except as described below or in the related Prospectus
Supplement, Eligible Investments are limited to obligations or securities that
mature on or before the date of the next distribution for such series. However,
to the extent permitted by the Rating Agencies, funds in any Reserve Fund may be
invested in securities that will not mature prior to the date of the next
distribution with respect to such Certificates or Notes and will not be sold to
meet any shortfalls. Thus, the amount of cash in any Reserve Fund at any time
may be less than the balance of the Reserve Fund. If the amount required to be
withdrawn from any Reserve Fund to cover shortfalls in collections on the
related Contracts (as provided in the related Prospectus Supplement) exceeds the
amount of cash in the Reserve Fund, a temporary shortfall in the amounts
distributed to the related Noteholders or Certificateholders could result, which
could, in turn, increase the average life of the Notes or the Certificates of
such series. Except as otherwise specified in the related Prospectus
Supplement, investment earnings on funds deposited in the Trust Accounts, net of
losses and investment expenses (collectively, "INVESTMENT EARNINGS"), shall be
deposited in the applicable Collection Account on each Distribution Date and
shall be treated as collections of interest on the related Contracts.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"ELIGIBLE DEPOSIT ACCOUNT" means a segregated direct deposit account maintained
with a depository institution or trust company organized under the laws of the
United States of America or any one of the states thereof or the District of
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Columbia having a certificate of deposit, short-term deposit or commercial paper
rating of at least A-1+ by Standard & Poor's Ratings Services and P-1 by Moody's
Investors Service, Inc.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due
with respect to the Contracts held by any Trust and will, consistent with the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, follow
such collection procedures as it follows with respect to comparable motor
vehicle retail installment sale contracts and installment loans it services for
itself or others. The Servicer's collection efforts include having personnel
call a delinquent Obligor every third day in the event such Obligor is twelve to
less than sixty days delinquent, every other day in the event the Obligor is
greater than sixty days delinquent and every day in the event the Obligor is
greater than ninety days delinquent. The Servicer's general approach is to
restructure a delinquent loan as opposed to repossessing the associated
Motorcycle; however, the Servicer's approach with respect to a specific Obligor
is affected by the Obligor's responsiveness and attitude. Consistent with this
approach, the Servicer may, in its discretion, arrange with the Obligor on a
Contract to extend or modify the payment schedule, but no such arrangement will,
for purposes of any Sale and Servicing Agreement or Pooling and Servicing
Agreement, modify the original due dates or the amount of the scheduled payments
or extend the final payment date of any Contract beyond the last day of the Due
Period relating to the latest maturity date (as specified with respect to the
pool of Contracts in the related Prospectus Supplement). Some of such
arrangements may result in the Servicer purchasing the Contract for the Purchase
Amount, while others may result in the Servicer making Advances. The Servicer
may sell the Motorcycle securing the respective Contract at public or private
sale, or take any other action permitted by applicable law. See "CERTAIN LEGAL
ASPECTS OF THE CONTRACTS".
If so specified in the related Prospectus Supplement, a "BACKUP
SERVICER" may be appointed and assigned certain oversight servicing
responsibilities with respect to the Contracts. The identity of any backup
servicer, as well as a description of its responsibilities, of any fees payable
to such backup servicer and the source of payment of such fees, will be included
in the related Prospectus Supplement.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on
the related Contracts (from whatever source) and all proceeds of such Contracts
collected during each collection period specified in the related Prospectus
Supplement (each, a "DUE PERIOD") into the related Collection Account within two
business days after receipt thereof.
ADVANCES
The Servicer is obligated to advance each month an amount equal to
accrued and unpaid interest on the Contracts which was delinquent with respect
to the related Due Period, but only to the extent that the Servicer believes
that the amount of such Advance will be recoverable from collections on the
Contracts. The Servicer will deposit any Advances in the Collection Account no
later than the day preceding the Distribution Date. The Servicer will be
entitled to recoup Advances on a Contract by means of a high priority withdrawal
from the sum of the interest and principal available for distribution as
provided in the related Prospectus Supplement on any Distribution Date.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the Prospectus Supplement with respect to
any Trust, the Servicer will be entitled to receive a servicing fee for each Due
Period in an amount equal to specified percentage per annum (as set forth in the
related Prospectus Supplement, the "SERVICING FEE RATE") of the Pool Balance as
of the first day of the related Due Period (the "SERVICING FEE"). The Servicing
Fee (together with any portion of the Servicing Fee that remains unpaid from
prior Distribution Dates) will be paid solely to the extent of the Available
Interest (as defined in the related Prospectus Supplement). However, the
Servicing Fee will be paid prior to the distribution of any portion of the
Available Interest to the Noteholders or the Certificateholders of the given
series.
Unless otherwise provided in the related Prospectus Supplement with
respect to a given Trust, the Servicer will also collect and retain any late
fees, prepayment charges and other administrative fees or similar charges
allowed by applicable law with respect to the related Contracts and will be
entitled to reimbursement from such Trust for certain liabilities. Payments by
or on behalf of Obligors will be allocated to scheduled payments and late fees
and other charges in accordance with the Servicer's normal practices and
procedures.
The Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of motorcycle Contracts as an agent for
their beneficial owner, including collecting and posting all payments,
responding to inquiries of Obligors on the Contracts, investigating
delinquencies, sending payment coupons to Obligors, reporting tax information to
Obligors, paying costs of collections and disposition of defaults and policing
the collateral. The Servicing Fee also will compensate the Servicer for
performing additional administrative services on behalf of a given Trust,
including making Advances, accounting for collections and furnishing monthly and
annual statements to the related Trustee and Indenture Trustee with respect to
distributions and generating federal income tax information for such Trust and
for the related Noteholders and Certificateholders. The Servicing Fee also will
reimburse the Servicer for certain taxes, the fees of the related Trustee and
Indenture Trustee, if any, accounting fees, outside auditor fees, data
processing costs and other costs incurred in connection with administering the
Contracts relating to such Trust.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Distribution
Date specified in the related Prospectus Supplement, distributions of principal
and interest (or, where applicable, of principal or interest only) on each class
of such Securities entitled thereto will be made by the Applicable Trustee to
the Noteholders and the Certificateholders of such series. The timing,
calculation, allocation, order, source and priorities of, and the requirements
for, all payments to the holders of each class of Notes, if any, and all
distributions to the holders of each class of Certificates of such series will
be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Distribution Date, collections on
the related Contracts will be transferred from the Collection Account to the
Note Distribution Account, if any, and the Certificate Distribution Account for
distribution to Noteholders, if any, and Certificateholders to the extent
provided in the related Prospectus Supplement. Credit enhancement, such as a
Reserve Fund, will be available to cover any shortfalls in the amount available
for distribution on such date to the extent specified in the related Prospectus
Supplement. As more fully described in the related Prospectus Supplement, and
unless otherwise specified therein, distributions in respect of principal of a
class of Securities of a given series will be subordinated to distributions in
respect of interest on such class, and distributions in respect of one or more
classes of Certificates of such series may be subordinated to payments in
respect of Notes, if any, of such series or to distributions in respect of other
classes of Certificates of such series. Distributions of principal on the
Securities of a series may be based on the amount of principal collected or due,
or the amount of realized losses incurred, in a Due Period.
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CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements,
if any, and the provider thereof, if applicable, with respect to each class of
Securities of a given series will be set forth in the related Prospectus
Supplement. If and to the extent provided in the related Prospectus Supplement,
credit and cash flow enhancement may be in the form of subordination of one or
more classes of Securities, Reserve Funds, spread accounts,
overcollateralization, letters of credit, credit or liquidity facilities, surety
bonds, insurance policies, guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase obligations, yield supplement
agreements, other agreements with respect to third party payments or other
support, cash deposits or such other arrangements as may be described in such
Prospectus Supplement, or any combination of two or more of the foregoing. If
specified in the applicable Prospectus Supplement, credit or cash flow
enhancement for a class of Securities may cover one or more other classes of
Securities of the same series, and credit or cash flow enhancement for a series
of Securities may cover one or more other series of Securities.
The presence of a Reserve Fund and other forms 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 such class or series of the full
amount of principal and interest due thereon and to decrease the likelihood that
such Securityholders will experience losses. The credit enhancement for a class
or series of Securities will not provide protection against all risks of loss
and will not guarantee repayment of the entire 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
of any class or series will bear their allocable share of deficiencies, as
described in the related Prospectus Supplement. In addition, if a form of
credit enhancement covers more than one series of Securities, Securityholders of
any such series will be subject to the risk that such credit enhancement will be
exhausted by the claims of Securityholders of other series.
RESERVE FUND. If so provided in the related Prospectus Supplement,
pursuant to the related Sale and Servicing Agreement or Pooling and Servicing
Agreement, the Trust Depositor will establish for a series or class of
Securities an account, as specified in such Prospectus Supplement (the "RESERVE
FUND"), which will be maintained with the related Trustee or Indenture Trustee,
as applicable. Unless otherwise provided in the related Prospectus Supplement,
the Reserve Fund will be funded by an initial deposit by the Trust Depositor on
the Closing Date in the amount set forth in such Prospectus Supplement and, if
the related series has a Funding Period, will also be further funded on each
Subsequent Transfer Date to the extent described in such Prospectus Supplement.
As further described in the related Prospectus Supplement, the amount on deposit
in the Reserve Fund will be increased on each Distribution Date thereafter up to
the Specified Reserve Fund Balance (as defined in such Prospectus Supplement) by
the deposit therein of the amount of collections on the related Contracts
remaining on each such Distribution Date after the payment of all other required
payments and distributions on such date. The related Prospectus Supplement will
describe the circumstances and the manner under which distributions may be made
out of the Reserve Fund, either to holders of the Securities covered thereby or
to the Trust Depositor or to any other entity.
NET DEPOSITS
If so specified in the related Prospectus Supplement as an
administrative convenience, unless the Servicer is required to remit collections
daily (see "-- COLLECTIONS" above), the Servicer will be permitted to make the
deposit of collections, aggregate Advances and Purchase Amounts for any Trust
for or with respect to the related Due Period net of distributions to be made to
the Servicer for such Trust with respect to such Due Period. The Servicer,
however, will account to the Applicable Trustee, the Noteholders, if any, and
the Certificateholders with respect to each Trust as if all deposits,
distributions and transfers were made individually. With respect to any Trust
that issues both Certificates and Notes, if the related Distribution Dates do
not coincide with Distribution Dates, all distributions, deposits or other
remittances made on a Distribution Date will be treated as having been
distributed, deposited or remitted on the Distribution Date for the applicable
Due Period for purposes of determining other amounts required to be distributed,
deposited or otherwise remitted on such Distribution Date.
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STATEMENTS TO THE APPLICABLE TRUSTEE
Prior to each Distribution Date with respect to each series of
Securities, the Servicer will provide to the applicable Indenture Trustee, if
any, and the applicable Trustee as of the close of business on the last day of
the preceding Due Period a statement setting forth substantially the same
information as is required to be provided in the periodic reports provided to
Securityholders of such series described under "CERTAIN INFORMATION REGARDING
THE SECURITIES -- REPORTS TO SECURITYHOLDERS".
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of independent public accountants will furnish annually
to the related Trust and Applicable Trustee a statement to the effect that such
firm has audited the financial statements of Eaglemark Financial and issued its
report thereon and that such audit: (i) included an examination of selected
documents and records relating to the servicing of Contracts, (ii) included an
examination of delinquency and loss statistics relating to Eaglemark's portfolio
of Contracts and (iii) except as described in the statement, disclosed no
exceptions or errors in the records relating to the Contracts serviced.
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will also provide for delivery to the related Trust and the Applicable Trustee,
substantially simultaneously with the delivery of such accountants' statement
referred to above, of a certificate signed by an officer of the Servicer stating
that the Servicer has fulfilled its obligations under the Sale and Servicing
Agreement or Pooling and Servicing Agreement, as applicable, throughout the
preceding twelve months (or, in the case of the first such certificate, from the
applicable Closing Date) or, if there has been a default in the fulfillment of
any such obligation, describing each such default. The Servicer has agreed to
give each Applicable Trustee notice of certain Servicer Defaults under the
related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
applicable.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
Each Sale and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer will exercise that degree of skill and care
consistent with the skill and care that the Servicer exercises with respect to
similar contracts serviced by the Servicer, and, in any event no less degree of
skill and care than would be exercised by a prudent servicer of motorcycle
conditional sales contracts. The Servicer is under no obligation to appear in,
prosecute or defend any legal action that is not incidental to the Servicer's
servicing responsibilities under such Sale and Servicing Agreement or Pooling
and Servicing Agreement and that, in its opinion, may cause it to incur any
expense or liability.
Under the circumstances specified in each Sale and Servicing Agreement
and Pooling and Servicing Agreement, any entity into which the Servicer may be
merged or consolidated, or any entity resulting from any merger or consolidation
to which the Servicer is a party, or any entity succeeding to the business of
the Servicer or, with respect to its obligations as Servicer, any corporation
50% or more of the voting stock of which is owned, directly or indirectly, by
the Company, which corporation or other entity in each of the foregoing cases
assumes the obligations of the Servicer, will be the successor of the Servicer
under such Sale and Servicing Agreement or Pooling and Servicing Agreement.
Under each Sale and Servicing Agreement and Pooling and Servicing
Agreement, the Servicer may appoint a subservicer to perform all or any portion
of its obligations as Servicer; however, in the event that the Servicer does
appoint any such subservicer, the Servicer will remain obligated and liable to
the related Applicable Trustee and Securityholders for servicing and
administering the Contracts and will also be responsible for any fees and
expenses of the subservicer.
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SERVICER DEFAULT
A "SERVICER DEFAULT" under each Sale and Servicing Agreement and Pooling
and Servicing Agreement will include: (i) any failure by the Servicer to make
any payment or deposit required to be made under the Sale and Servicing
Agreement or Pooling and Servicing Agreement or Transfer and Sale Agreement,
which failure continues to be unremedied for four business days after the date
on which such payment or deposit was due; (ii) any failure by the Servicer duly
to observe or perform in any material respect any other covenant or agreement in
such Sale and Servicing Agreement or Pooling and Servicing Agreement or Transfer
and Sale Agreement, which failure materially and adversely affects the rights of
the Noteholders or the Certificateholders of the related series and which
continues unremedied for 30 days after the date on which such failure commences;
and (iii) the occurrence of an Insolvency Event with respect to the Servicer.
"INSOLVENCY EVENT" means, with respect to any person, any of the following
events or actions: certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings with respect to
such person and certain actions by such person indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of Owner Trusts that issue Notes, unless otherwise provided
in the related Prospectus Supplement, as long as a Servicer Default under a Sale
and Servicing Agreement and Pooling and Servicing Agreement remains unremedied,
(i) the related Indenture Trustee or (ii) the holders of Notes of the related
series evidencing more than 50% of the principal amount of the Notes then
outstanding and Certificateholders with aggregate fractional interests
representing more than 50% of the Trust may terminate all the rights and
obligations of the Servicer under such Sale and Servicing Agreement and Pooling
and Servicing Agreement, whereupon such Indenture Trustee or a successor
servicer appointed by such Indenture Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under such Sale and
Servicing Agreement and Pooling and Servicing Agreement and will be entitled to
similar compensation arrangements. In the case of any Grantor Trust or any
Owner Trust that does not issue Notes, unless otherwise provided in the related
Prospectus Supplement, as long as a Servicer Default under the related Pooling
and Servicing Agreement remains unremedied, the related Trustee or holders of
Certificates of the related series evidencing not less than 25% of the principal
amount of such Certificates then outstanding may terminate all the rights and
obligations of the Servicer under such Pooling and Servicing Agreement,
whereupon such Trustee or a successor servicer appointed by such Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under such Pooling and Servicing Agreement and will be entitled to similar
compensation arrangements. If, however, a bankruptcy trustee or similar
official has been appointed for the Servicer, and no Servicer Default other than
such appointment has occurred, such trustee or official may have the power to
prevent any such Indenture Trustee, Noteholders, Trustee or Certificateholders
from effecting a transfer of servicing. In the event that such Indenture
Trustee or Trustee is unwilling or unable to so act, it may appoint, or petition
a court of competent jurisdiction for the appointment of, a successor with a net
worth of at least $100,000,000 (or such other amount as is specified in the
related Prospectus Supplement) and whose regular business includes the servicing
of motor vehicle contracts. Such Indenture Trustee or Trustee may make such
arrangements for compensation to be paid, which in no event may be greater than
the servicing compensation to the Servicer under such Sale and Servicing
Agreement or Pooling and Servicing Agreement.
AMENDMENT
Each of the Sale and Servicing Agreement and Pooling and Servicing
Agreement may be amended by the parties thereto, without the consent of the
related Noteholders or Certificateholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Sale and Servicing Agreement and Pooling and Servicing Agreement or of
modifying in any manner the rights of such Noteholders or Certificateholders;
PROVIDED that such action will not, in the opinion of counsel satisfactory to
the related Trustee or Indenture Trustee, as applicable, materially and
adversely affect the interest of any such Noteholder or Certificateholder.
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The Sale and Servicing Agreement and Pooling and Servicing Agreement may
also be amended by the Trust Depositor, the Servicer, the related Trustee and
any related Indenture Trustee with the consent of the holders of Notes
evidencing at least a majority in principal amount of then outstanding Notes, if
any, of the related series and the holders of the Certificates of such series
evidencing at least a majority of the principal amount of such Certificates then
outstanding, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Sale and Servicing Agreement
and Pooling and Servicing Agreements or of modifying in any manner the rights of
such Noteholders or Certificateholders; PROVIDED, HOWEVER, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on the related Contracts or
distributions that are required to be made for the benefit of such Noteholders
or Certificateholders or (ii) reduce the aforesaid percentage of the Notes or
Certificates of such series which are required to consent to any such amendment,
without the consent of the holders of all the outstanding Notes or Certificates,
as the case may be, of such series.
Each of the Sale and Servicing Agreement and Pooling and Servicing
Agreement may be amended by the parties thereto at the direction of the Company
or Servicer without the consent of any of the Securityholders to add, modify or
eliminate such provisions as may be necessary or advisable in order to enable
all or a portion of a Trust to qualify as, and to permit an election to be made
to cause all or a portion of a Trust to be treated as, a "FINANCIAL ASSET
SECURITIZATION INVESTMENT TRUST" as described in the provisions of the "SMALL
BUSINESS JOB PROTECTION ACT OF 1996," H.R. 3448, and in connection with any such
election, to modify or eliminate existing provisions of a Sale and Servicing
Agreement or Pooling and Servicing Agreement relating to the intended federal
income tax treatment of the Securities and the related Trust in the absence of
the election. See "FEDERAL INCOME TAX CONSEQUENCES--TAX TREATMENT OF A FASIT."
It is a condition to any such amendment that each Rating Agency will have
notified the Company, the Servicer and the Applicable Trustee in writing that
the amendment will not result in a reduction or withdrawal of the rating of any
outstanding Securities with respect to which it is a Rating Agency and that the
Company obtain a legal opinion from nationally recognized counsel that there are
no adverse tax consequences for the Securityholders.
Additionally, each of the Sale and Servicing Agreement and Pooling and
Servicing Agreement may be amended by the parties thereto at the direction of
the Seller or Servicer without the consent of any of the Securityholders to
add, modify or eliminate such provisions as may be necessary or advisable in
order to enable (a) the transfer to the Trust of all or any portion of the
Contracts to be derecognized under generally accepted accounting principles
("GAAP") by the Seller to the applicable Trust, (b) the applicable Trust to
avoid becoming a member of the Seller's consolidated group under GAAP, or (c)
the Seller or any of its affiliates to otherwise comply with or obtain more
favorable treatment under any law or regulation or any accounting rule or
principle; provided, however, that it is a condition to any such amendment that
(x) the Seller delivers an officer's certificate to the related Trustee to the
effect that such amendment meets the requirements set forth in this paragraph
(y) such amendment will not result in a withdrawal or reduction of the rating of
any outstanding series of Securities under the related Trust and (z) a legal
opinion is obtained from nationally recognized counsel that such modification is
in conformity with either the Sale and Servicing Agreement or Pooling and
Servicing Agreement, as applicable.
INSOLVENCY EVENT
With respect to any Owner Trust that issues Notes, if an Insolvency
Event (as defined in the related Sale and Servicing Agreement) occurs with
respect to the Trust Depositor, the related Contracts of such Trust will be
liquidated and the Trust will be terminated 90 days after the date of such
Insolvency Event, unless, before the end of such 90-day period, the related
Trustee shall have received written instructions from (i) holders of each class
of Certificates (excluding any Certificates held by the Trust Depositor) with
respect to such Trust representing more than 50% of the aggregate unpaid
principal amount of each such class (not including the principal amount of such
Certificates held by the Trust Depositor) and (ii) holders of each class of
Notes, if any, with respect to such Trust representing more than 50% of the
aggregate unpaid principal amount of each such class, to the effect that each
such party disapproves of the liquidation of such Contracts and termination of
such Trust. Promptly after the occurrence of an Insolvency Event with respect
to the Trust Depositor, notice thereof is required to be given to the related
Securityholders; PROVIDED that any failure to give
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such required notice will not prevent or delay termination of such Trust. Upon
termination of any Trust, the related Trustee shall, or shall direct the related
Indenture Trustee to, promptly sell the assets of such Trust (other than the
Trust Accounts and the Certificate Distribution Account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from any
such sale, disposition or liquidation of the Contracts of such Trust will be
treated as collections on such Contracts and deposited in the related Collection
Account. With respect to any Trust, if the proceeds from the liquidation of the
related Contracts and any amounts on deposit in the Reserve Fund (if any), the
Note Distribution Account (if any) and the Certificate Distribution Account are
not sufficient to pay in full the Notes, if any, and the Certificates of the
related series, the amount of principal returned to Noteholders and
Certificateholders thereof will be reduced and some or all of such Noteholders
and Certificateholders will incur a loss.
Each Trust Agreement will provide that the applicable Trustee does not
have the power to commence a voluntary proceeding in bankruptcy with respect to
the related Trust without the unanimous prior approval of all Certificateholders
(including the Trust Depositor) of such Trust and the delivery to such Trustee
by each such Certificateholder (including the Trust Depositor) of a certificate
certifying that such Certificateholder reasonably believes that such Trust is
insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and
the satisfaction and discharge of the related Indenture, the related Trustee
will succeed to all the rights of the Indenture Trustee, and the
Certificateholders of such series will succeed to all the rights of the
Noteholders of such series, under the related Sale and Servicing Agreement or
Pooling and Servicing Agreement, except as otherwise provided therein.
TRUST DEPOSITOR LIABILITY
In the case of each Owner Trust that issues Notes, under each Trust
Agreement, the Trust Depositor will agree to be liable directly to an injured
party for the entire amount of any losses, claims, damages or liabilities (other
than those incurred by a Noteholder or a Certificateholder in the capacity of an
investor with respect to such Owner Trust) arising out of or based on the
arrangement created by such Trust Agreement as though such arrangement created a
partnership under the Delaware Revised Uniform Limited Partnership Act in which
the Trust Depositor was a general partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Trust
Depositor, the related Trustee and the related Indenture Trustee, if any,
pursuant to the Sale and Servicing Agreements and Pooling and Servicing
Agreements will terminate upon the earliest to occur of (i) the maturity or
other liquidation of the last related Contract and the disposition of any
amounts received upon liquidation of any such remaining Contracts, (ii) the
payment to Noteholders, if any, and Certificateholders of the related series of
all amounts required to be paid to them pursuant to the Sale and Servicing
Agreements and Pooling and Servicing Agreements and (iii) the occurrence of the
event described in the immediately following paragraph.
Unless otherwise provided in the related Prospectus Supplement, in order
to avoid excessive administrative expense, the Seller through the Trust
Depositor will be permitted at its option to purchase from each Trust, as of the
end of any applicable Due Period, if the then outstanding Pool Balance with
respect to the Contracts held by such Trust is 10% or less of the Initial Pool
Balance (as defined in such Prospectus Supplement, the "INITIAL POOL BALANCE"),
all remaining related Contracts at a price equal to the aggregate of the
Purchase Amounts thereof as of the end of such Due Period.
As and to the extent in the related Prospectus Supplement, outstanding
Notes (or any class of Notes) of the related series may be redeemed concurrently
with the event specified above, and the subsequent
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distribution to the related Securityholders of all amounts required to be
distributed to them pursuant to the applicable Trust Agreement or Indenture will
effect early retirement of the Securities of such series.
ADMINISTRATION AGREEMENT
The Company, in its capacity as administrator (in such capacity, the
"ADMINISTRATOR"), will enter into an agreement (an "ADMINISTRATION AGREEMENT")
with each Owner Trust that issues Notes and the related Indenture Trustee
pursuant to which the Administrator will agree, to the extent provided in such
Administration Agreement, to provide the notices and to perform other
administrative obligations required by the related Indenture. As compensation
for the performance of the Administrator's obligations under the applicable
Administration Agreement and as reimbursement for its expenses related thereto,
the Administrator will be entitled to a monthly administration fee (the
"ADMINISTRATION FEE"), which fee will be paid by the Trust Depositor.
INDIVIDUAL MOTORCYCLE INSURANCE
The terms of each Contract require that for the life of the Contract,
each Motorcycle is to be covered by a collision and comprehensive or equivalent
insurance policy which covers physical damage risks, provides limited insurance
coverage for damage to the Motorcycle, and names the Seller as a loss payee.
The amount of insurance coverage is limited to the value of the Motorcycle.
In the related Transfer and Sale Agreement, the Seller will warrant that all
premium payments on such insurance have been paid in full for one year from the
date of the Contracts' origination. Pursuant to the Contract terms, the
Servicer may "FORCE PLACE" (i.e., purchase on its own, with a corresponding
claim for reimbursement against the Obligor to the extent provided in the
applicable Contract) collision and comprehensive insurance with respect to the
related Motorcycle in those situations in which the Obligor has not maintained
the required insurance. Currently, the Servicer utilizes Recreational Products
Insurance Division, a division of Universal Underwriters Insurance Company, to
"FORCE PLACE" comprehensive and collision insurance in 31 states in which
Obligors reside. As conveyee and assignee of the Contracts, the Trust will be
entitled to the benefits of such insurance. Following repossession of a
Motorcycle by the Servicer, the Servicer does not maintain such insurance.
In the event the Servicer repossesses a Motorcycle on behalf of the Trust, the
Servicer will act as self-insurer for any damage to such motorcycle until it is
resold.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
SECURITY INTEREST IN MOTORCYCLES
The Contracts in general evidence the credit sale of new and used
motorcycles by Dealers to Obligors and also constitute personal property
security agreements granting the holder of such Contract a security interest in
the Motorcycles under the applicable UCC. Perfection of security interests in
the Motorcycles is generally governed by the motor vehicle registration laws of
the state in which a Motorcycle is located. In almost all states in which the
Contracts have been originated, a security interest in motorcycles, automobiles,
light duty trucks, vans and minivans is perfected by notation of the secured
party's lien on the vehicle's certificate of title.
All of the Contracts purchased by the Company name the Company as
obligee (by assignment or otherwise) and as the secured party. The Company also
takes all actions necessary under the laws of the state in which the Motorcycle
is located to perfect the Company's security interest in the Motorcycle,
including, where applicable, having a notation of its lien recorded on such
vehicle's certificate of title.
The Company will sell its interests in Contracts and assign its security
interests in the Motorcycles securing the Contracts to a Trust Depositor
pursuant to a Transfer and Sale Agreement, which Trust Depositor will, in turn,
sell such interests and assign such security interests to the Trust pursuant to
either a Sale and Servicing Agreements or a Pooling and Servicing Agreement.
However, because of the administrative burden and expense, the certificates of
title to the Motorcycles will not be amended to reflect any Trust Depositor or
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the Trust as the new secured party on the certificate of title relating to the
Motorcycles. Each Sale and Servicing Agreement or Pooling and Servicing
Agreement, as applicable, provides that the Servicer, as custodian, will hold
any certificates of title and the documents and other items relating to the
Motorcycles in its possession on behalf of the Trust and the Indenture Trustee.
With respect to certain limitations on the enforceability of the
Applicable Trustees' security interest, see "RISK FACTORS -- SECURITY INTERESTS
AND OTHER ASPECTS OF THE CONTRACTS".
Under the laws of most states, the perfected security interest in a
Motorcycle would continue for four months after such vehicle is moved to a state
other than the state in which it is initially registered, and thereafter until
the owner of the Motorcycle re-registers it in the new state. A majority of
states generally require surrender of a certificate of title in connection with
the re-registration of a vehicle; accordingly, a secured party must surrender
possession if it holds the certificate of title to the vehicle, or, in the case
of a vehicle registered in a state providing for the notation of a lien on the
certificate of title but not possession by the secured party, assuming no fraud
or negligence, the secured party noted on the certificate of title would receive
notice of surrender if the security interest is noted on the certificate of
title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the vehicle in the state of relocation. In states that do
not require a certificate of title for registration of a motor vehicle, a
re-registration could defeat perfection. In the ordinary course of servicing
Contracts, the Company takes steps to effect re-perfection upon receipt of
notice of re-registration or information from the Obligor as to relocation.
Similarly, when an Obligor sells a Motorcycle, the Company must surrender
possession of the certificate of title or will receive notice as a result of its
lien noted thereon and, accordingly, will have an opportunity to require
satisfaction of the related Contract before release of the lien. Under each
Sale and Servicing Agreement or Pooling and Servicing Agreement, as applicable,
the Company as Servicer is obligated to take appropriate steps, at its own
expense, to maintain perfection of security interests in such Motorcycle and is
obligated to repurchase the related Contract if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle, liens for unpaid storage fees and liens for unpaid taxes take priority
over even a perfected security interest in a Motorcycle. The Company will
represent that, as of the date of issuance of the Securities, each security
interest in a Motorcycle is prior to all other present liens upon and security
interests in such Motorcycle. However, liens for repairs, unpaid storage fees
or taxes could arise at any time during the term of a Contract. No notice will
be given to the Applicable Trustee or the Securityholders in the event such a
lien arises nor will the Company be obligated to repurchase the related Contract
if such a lien arises after the Closing Date.
REPOSSESSION
In the event of default by a Motorcycle purchaser, a holder of a retail
installment sale contract or installment loan has all the remedies of a secured
party under the UCC, except where specifically limited by other state laws.
Among its UCC remedies, the secured party has the right to perform self-help
repossession unless such act would constitute a breach of the peace. Self-help
is the method employed by the Company in most cases and is accomplished simply
by retaking possession of the Motorcycle. In the event of default by the
Obligor, some jurisdictions require that the Obligor be notified of the default
and be given a time period within which he or she may cure the default prior to
repossession. Generally, the right to cure a default may be exercised on a
limited number of occasions in any one-year period. In cases where the Obligor
objects or raises a defense to repossession, if a Motorcycle cannot be retaken
without a breach of the peace, or if otherwise required by applicable state law,
a court order must be obtained from an appropriate court, and the Motorcycle
must then be repossessed in accordance with that order.
NOTICE OF SALES; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
Obligor with reasonable notice of the date, time and place of any public sale or
the date after which any private sale or other intended disposition of the
collateral may be held. All aspects of the disposition of the collateral,
including the method,
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manner, time, place and terms must be commercially reasonable. The Obligor has
the right to redeem the collateral prior to actual sale by paying the secured
party the unpaid principal balance of the obligation plus reasonable expenses
for repossessing, holding, and preparing the collateral for disposition and
arranging for its sale plus, in some jurisdictions, reasonable attorneys' fees.
In some states the Obligor may have a post-repossession right to reinstate the
terms of the contract or loan and redeem the collateral by the payment of
delinquent installments and expenses incurred by the secured party in
repossessing the collateral.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds obtained upon repossession and resale of the Motorcycles
generally will be applied first to the expenses of resale and repossession and
then to the satisfaction of the indebtedness. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
resale do not cover the full amount of the indebtedness, a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments,
provided that certain procedures are followed. However, the deficiency judgment
would be a personal judgment against the Obligor for the shortfall, and a
defaulting Obligor can be expected to have very little capital or sources of
income available following repossession. Therefore, in many cases, it may not
be useful to seek a deficiency judgment or, if one is obtained, it may be
settled at a significant discount.
Occasionally, after resale of collateral and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the UCC requires
the secured party to remit the surplus to any holder of a lien with respect to
the collateral or, if no such lienholder exists or there are remaining funds,
the UCC requires the secured party to remit the surplus to the former owner of
the collateral. Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws, may limit or delay the ability of a lender to
repossess and resell collateral or enforce a deficiency judgment.
CONSUMER PROTECTION LAWS
Courts have applied general equitable principles to limit and restrict
secured parties pursuing repossession or litigation involving deficiency
balances. These equitable principles may have the effect of relieving an
Obligor from some or all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protection provided under the 14th Amendment of the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance, including requirements regarding the adequate disclosure of
loan terms (including finance charges and deemed finance charges) and
limitations on loan terms (including the permitted finance charge or deemed
finance charge), collection practices and creditor remedies. The application of
these laws to particular circumstances is not always certain and some courts and
regulatory authorities have shown a willingness to adopt novel interpretations
of such laws. These laws include the Truth in Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Reporting
Act, the Fair Credit Billing Act, the Fair Debt Collection Procedures Act, the
Moss-Magnuson Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act, state adaptations of the Uniform
Consumer Credit Code and state motor vehicle retail installment sales acts,
retail installment sales acts, and other similar laws. State laws generally
impose finance charge ceilings and other restrictions on consumer transactions
and often require contract disclosure in addition to those required under
federal law. These requirements impose specific statutory liabilities upon
creditors who fail to comply with their provisions. In some cases, this
liability could affect an assignee's ability to enforce consumer finance
contracts or loans such as the Contracts.
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Under the laws of certain states, finance charges with respect to motor
vehicle retail installment contracts may include the additional amount, if any,
that a purchaser pays as part of the purchase price for a motorcycle solely
because the purchaser is buying on credit rather than for cash (a "CASH SALE
DIFFERENTIAL"). If a Dealer charges such a cash sale differential, applicable
finance charge ceilings could be exceeded.
The so-called "HOLDER-IN-DUE-COURSE" Rule of the Federal Trade
Commission (the "FTC RULE"), the provisions of which are generally duplicated by
the Uniform Consumer Credit Code and other state laws, has the effect of
subjecting an assignee of a seller of goods (and certain related creditors) to
all claims and defenses that the obligor in the transaction could assert against
the seller of the goods.
All of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, the Trust, as holder of the Contracts, will be subject to
any claims or defenses that the purchaser of the related Motorcycle may assert
against the Dealer. Such claims are limited to a maximum liability equal to the
amounts actually paid by the Obligor on the Contract. If an Obligor were
successful in asserting any such claim or defense, such claim or defense would
constitute a breach of the Company's representations and warranties under the
related Transfer and Sale Agreement and would create an obligation of the
Company to repurchase the related Contract unless the breach were cured. The
Trust Depositor will assign its rights under the related Transfer and Sale
Agreement, including its right to cause the Company to repurchase Contracts with
respect to which it is in breach of its representations and warranties, to the
Trust pursuant to either the related Sale and Servicing Agreement or Pooling and
Servicing Agreement. See "DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND
POOLING AND SERVICING AGREEMENTS -- SALE AND ASSIGNMENT OF CONTRACTS".
Under most state vehicle dealer licensing laws, dealers of motorcycles
are required to be licensed to sell motorcycles at retail sale. In addition,
with respect to used motorcycles, the Federal Trade Commission's Rule on Sale of
Used Motorcycles requires that all dealers of used motorcycles prepare, complete
and display a "BUYER'S GUIDE" which explains the warranty coverage for such
motorcycles. Furthermore, Federal Odometer Regulations promulgated under the
Motor Vehicle Information and Cost Savings Act and the motor vehicle title laws
of most states require that all dealers of used motorcycles furnish a written
statement signed by the dealer certifying the accuracy of the odometer reading.
If a Dealer is not properly licensed or if either a Buyer's Guide or Odometer
Disclosure Statement was not provided to the purchaser of a Motorcycle, the
Obligor may be able to assert a defense against the Dealer. If an Obligor on a
Contract were successful in asserting any such claim or defense, the Servicer
would pursue on behalf of the Trust any reasonable remedies against the Dealer
or the manufacturer of the Motorcycle, subject to certain limitations as to the
expense of any such action to be specified in the Sale and Servicing Agreement
and Pooling and Servicing Agreement.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy code, a court may prevent a
secured party from repossessing a Motorcycle and, as part of the rehabilitation
plan, may reduce the amount of the secured indebtedness to the market value of
the Motorcycle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments
due under a Contract or change the rate of interest and time of repayment of the
indebtedness.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the material United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes and the Certificates. This discussion is based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "CODE"),
Treasury Regulations promulgated thereunder, current administrative rulings,
judicial decisions and other applicable authorities in effect as of the date
hereof, all of which are subject to change, possibly with retroactive effect.
There are no cases or Internal Revenue Service ("IRS") rulings on similar
transactions involving a trust and instruments issued by that trust with terms
similar to those of the Trust, and the Notes and the Certificates. As a result,
there can be no assurance that the IRS will not challenge the conclusions set
forth in the following summary, and no ruling from the IRS has been or will be
sought on any of the issues discussed below. Furthermore, legislative, judicial
or administrative changes may occur, perhaps with retroactive effect, which
could affect the accuracy of the statements and conclusions set forth herein as
well as the tax consequences to holders of the Notes and the Certificates.
This discussion does not purport to deal with all aspects of federal
income taxation that may be relevant to all holders of Notes and Certificates in
light of their personal investment or tax circumstances nor to certain types of
holders who may be subject to special treatment under the federal income tax
laws (including, without limitation, financial institutions, broker-dealers,
insurance companies, foreign persons, tax-exempt organizations and persons who
hold the Notes or Certificates as part of a straddle, hedging or conversion
transaction). This information is generally directed to prospective purchasers
who purchase Notes or Certificates at the time of original issue, who are
citizens or residents of the United States, and who hold the Notes or
Certificates as "CAPITAL ASSETS" within the meaning of Section 1221 of the Code.
Taxpayers and preparers of tax returns (including those filed by any partnership
or other issuer) should be aware that under applicable Treasury Regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice is (i) given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should
consult their own tax advisors and tax return preparers regarding the
preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed herein. PROSPECTIVE INVESTORS SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER
TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES
AND CERTIFICATES.
Each Trust will be provided with an opinion of Winston & Strawn special
federal income tax counsel to each Trust, as specified in the related Prospectus
Supplement ("FEDERAL TAX COUNSEL"), regarding certain federal income tax matters
discussed below. An opinion of Federal Tax Counsel, however, is not binding on
the IRS or the courts. Such opinions will be filed by the Servicer, together
with the final documentation for the respective Trust transaction, with the
Commission under Form 8-K under the Exchange Act. For purposes of the following
summary, references to the Trust, the Notes, the Certificates and related terms,
parties and documents shall be deemed to refer, unless otherwise specified
herein, to each Trust and the Notes, Certificates and related terms, parties and
documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is an Owner Trust, treated as a partnership under
the Code or a Grantor Trust treated as a grantor trust under the Code. Pursuant
to legislation enacted in 1996, as an alternative to those two types of trusts,
effective September 1, 1997 the Trust could elect to be treated as a financial
asset securitization investment trust ("FASIT"). A summary of the federal
income tax consequences pertaining to each type of trust is set forth below.
The Prospectus Supplement for each series of Securities will specify the
treatment of the Trust for federal income tax purposes. To the extent any given
series of Notes or Certificates differs from the assumptions or conditions set
forth in the following discussion, any additional tax considerations will be
disclosed in the applicable Prospectus Supplement.
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OWNER TRUSTS
TAX CHARACTERIZATION OF OWNER TRUSTS
OPINIONS
Federal Tax Counsel will deliver its opinion that a Trust characterized
as an Owner Trust will not be an association (or a publicly traded partnership)
taxable as a corporation for federal income tax purposes. This opinion will be
based on the assumptions that the terms of the Trust Agreement and related
documents will be complied with and that the Certificateholders will take all
action necessary, if any, or refrain from taking any inconsistent action so as
to ensure the Trust is a partnership under the Check the Box regulations
(defined below) and on Federal Tax Counsel's conclusions that (i) the Trust will
constitute a business entity and will have two or more members, (ii) the nature
of the income of the Trust will exempt it from the rule that certain publicly
traded partnerships are taxable as corporations, and (iii) the Trust, if a
corporation, would not constitute a regulated investment company under Code
Section 851.
If the Trust were taxable as a corporation for federal income tax
purposes, it would be subject to corporate income tax on its taxable income.
The Trust's taxable income would include all its income on the related Contracts
and other assets, which may be reduced by its interest expense on the Notes if
the Notes are respected as debt of such corporation. Any such corporate income
tax could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust.
Federal Tax Counsel will also render an opinion that the Notes will be
classified as debt for federal income tax purposes.
TAX CONSEQUENCES TO HOLDERS OF NOTES ISSUED BY AN OWNER TRUST
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Trust Depositor and the
Certificateholders will agree, and the Noteholders will agree by their purchase
of Notes, to treat the Notes as debt for federal income tax purposes.
Additionally, Federal Tax Counsel will render an opinion that the Notes will be
classified as debt for federal income tax purposes. The discussion below
assumes that characterization of the Notes is correct.
OID. The discussion below assumes that all payments on the Notes are
denominated in U.S. dollars. Moreover, the discussion assumes that the interest
formula for the Notes meets the requirements for "QUALIFIED STATED INTEREST"
under Treasury regulations relating to original issue discount ("OID"), and that
any OID on the Notes (I.E., any excess of the stated redemption price at
maturity of the Notes over their issue price) does not exceed a DE MINIMIS
amount (I.E., 1/4% of their stated redemption price at maturity multiplied by
the number of full years included in their term), all within the meaning of such
OID regulations.
If the interest formula for the Notes does not meet the requirements for
"QUALIFIED STATED INTEREST" because it may not satisfy the "UNCONDITIONALLY
PAYABLE" test of the OID regulations or the Notes otherwise have more than a DE
MINIMIS amount of OID, the Notes will have OID and a Noteholder will be
required to include such OID in income as it accrues under a constant yield
method in advance of receipt of cash payments, regardless of the Noteholder's
regular method of tax accounting. In general, the amount of OID included in
income is the sum of the "DAILY PORTIONS" of the OID with respect to the Note
for each day during the taxable year the Noteholder held the Note. The daily
portion generally is determined by allocating to each day in an accrual period a
ratable portion of the OID allocable to such accrual period. The amount of OID
allocable to an accrual period is generally equal to the difference between (i)
the product of the Note's adjusted issue price and its yield to maturity and
(ii) the amount of qualified stated interest payments allocable to such accrual
period. The "ADJUSTED ISSUE PRICE" of an OID Note at the beginning of any
accrual period is the sum of its issue price plus the amount of OID allocable to
prior accrual periods minus the amount of prior payments that were not qualified
stated interest. Alternatively, because the payments on the Notes may be
accelerated by reason of prepayments on the Contracts, OID, other than DE
MINIMIS OID, on the Notes, if any, may have
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to be accrued under Code section 1272(a)(6), which allocates OID to each day in
an accrual period by taking the ratable portion of the excess of (i) the sum of
the present value of the remaining payments on a Note as of the close of the
accrual period and the payments made during the accrual period that were
included in stated redemption price at maturity, over (ii) the adjusted issue
price of the Note at the beginning of the accrual period. No regulations have
been issued under Code section 1272(a)(6) so it is not clear if such section
would apply to the Notes if they are treated as having OID. The Clinton
Administration has proposed legislation which if enacted, would require OID on
the Notes to be computed in accordance with Section 1272(a)(6) and certain
prepayment assumptions.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, the Notes
should not be considered to be issued with OID. The stated interest thereon
will be taxable to a Noteholder as ordinary interest income when received or
accrued in accordance with such Noteholder's method of tax accounting. Under
the OID regulations, a holder of a Note issued with a DE MINIMIS amount of OID
must include such OID in income, on a pro rata basis, as principal payments are
made on the Note. A purchaser who buys a Note for more or less than its
principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
ACQUISITION PREMIUM. A U.S. Holder that purchases a Note for an amount
less than or equal to the sum of all amounts payable on the Note after the
purchase date other than payments of qualified stated interest but in excess of
its adjusted issue price (any such excess being "ACQUISITION PREMIUM") and that
does not make the election described below under "ELECTION TO TREAT ALL INTEREST
AS ORIGINAL ISSUE DISCOUNT" is permitted to reduce the daily portions of OID, if
any, by a fraction, the numerator of which is the excess of the U.S. Holder's
adjusted basis in the Note immediately after its purchase over the adjusted
issue price of the Note, and the denominator of which is the excess of the sum
of all amounts payable on the Note after the purchase date, other than payments
of qualified stated interest, over the Note's adjusted issue price.
MARKET DISCOUNT. The Notes, whether or not issued with original issue
discount, will be subject to the "MARKET DISCOUNT RULES" of section 1276 of the
Code. In general, these rules provide that if the holder of a Note purchases
the Note at a market discount (I.E., a discount from its original issue price
plus any accrued original issue discount that exceeds a DE MINIMIS amount
specified in the Code) and thereafter recognizes gain upon a disposition, the
lesser of (i) such gain or (ii) the accrued market discount will be taxed as
ordinary income. Generally, the accrued market discount will be the total
market discount on the Note multiplied by a fraction, the numerator of which is
the number of days the holder held the Note and the denominator of which is the
number of days from the date the holder acquired the Note until its maturity
date. The holder may elect, however, to determine accrued market discount under
the constant-yield method. Holders should consult with their own tax advisors
as to the effect of making this election.
Limitations imposed by the Code which are intended to match deductions
with the taxation of income defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Noteholder who elects to include market
discount in gross income as it accrues is exempt from this rule. The adjusted
basis of a Note subject to such election will be increased to reflect market
discount included in gross income, thereby reducing any gain or increasing any
loss on a sale or taxable disposition.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT. A U.S.
Holder may elect to include in gross income all interest that accrues on a Note
using the constant-yield method described above under the heading "ORIGINAL
ISSUE DISCOUNT," with modifications described below. For purposes of this
election, interest includes stated interest, OID, DE MINIMIS OID, market
discount, DE MINIMIS market discount and unstated interest, as adjusted by any
amortizable bond premium (described below under "AMORTIZABLE BOND PREMIUM") or
acquisition premium.
In applying the constant-yield method to a Note with respect to which
this election has been made, the issue price of the Note will equal the electing
U.S. Holder's adjusted basis in the Note immediately after its acquisition, the
issue date of the Note will be the date of its acquisition by the electing U.S.
Holder, and no
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payments on the Note will be treated as payments of qualified stated interest.
This election, if made, may not be revoked without the consent of the IRS.
U.S. Holders should consult with their own tax advisors as to the effect in
their circumstances of making this election.
AMORTIZABLE BOND PREMIUM. In general, if a Noteholder purchases a Note
at a premium (I.E., an amount in excess of the amount payable upon the maturity
thereof), such Noteholder will be considered to have purchased such Note with
"AMORTIZABLE BOND PREMIUM" equal to the amount of such excess. Such Noteholder
may elect to deduct the amortizable bond premium as it accrues under a
constant-yield method over the remaining term of the Note. Under proposed
regulations, if finalized, accrued amortized bond premium may only be used as an
offset against qualified stated interest when such interest is included in the
holder's gross income under the holder's normal accounting system.
SALE OR OTHER DISPOSITION. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the Note.
The adjusted tax basis of a Note to a particular Noteholder will equal the
holder's cost basis for the Note, increased by any market discount, acquisition
discount, OID and gain previously included by such Noteholder in income with
respect to the Note and decreased by the amount of bond premium (if any)
previously amortized and by the amount of principal payments previously received
by such Noteholder with respect to such Note. Any such gain or loss will be
capital gain or loss if the Note was held as a capital asset, except for gain
representing accrued interest and accrued market discount not previously
included in income. Capital losses generally may be used only to offset capital
gains. The IRS Restructuring and Reform Act of 1998, which was signed into law
on July 22, 1998, generally reduces from 18 months to one year the period of
time that an individual must hold a capital asset in order to receive long-term
capital gains treatment upon disposition of such asset. This change is
retroactive in effect and generally applies to sales of capital assets occurring
on or after January 1, 1998.
BACK-UP WITHHOLDING. Each holder of Note (other than an exempt holder
such as a corporation, tax exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalty of perjury, a certificate containing the holder's name,
address, correct federal taxpayer identification number and a statement that the
holder is not subject to Back-up withholding. Should a nonexempt Noteholder
fail to provide the required certification, the Trust will be required to
withhold 31% of the amount otherwise payable to the holder, and remit the
withheld amount to the IRS as a credit against the holder's federal income tax
liability.
NEW WITHHOLDING REGULATIONS. On October 6, 1997, the Treasury
Department issued new regulations (the "New Regulations") which make certain
modifications to the backup withholding and information reporting rules
described above. The New Regulations attempt to unify certification
requirements and modify reliance standards. The New Regulations will generally
be effective for payments made after December 31, 1999, subject to certain
transition rules. Prospective investors are urged to consult their own tax
advisors regarding the New Regulations.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder
who is a nonresident alien, foreign corporation or other non-U. S. person (a
"FOREIGN PERSON") generally will be considered "PORTFOLIO INTEREST," and
generally will not be subject to United States federal income tax and
withholding tax, if the interest is not effectively connected with the conduct
of a trade or business within the United States by the foreign person and the
foreign person (i) is not actually or constructively a "10 PERCENT SHAREHOLDER"
of the Trust (including a holder of 10% of the outstanding Certificates) or a
"CONTROLLED FOREIGN CORPORATION" with respect to which the Trust is a "RELATED
PERSON" within the meaning of the Code and (ii) provides the Owner Trustee or
other person who is otherwise required to withhold U.S. tax with respect to the
Notes with an appropriate statement (on Form W-8), signed under penalties of
perjury, certifying that the beneficial owner of the Note is a foreign person
and providing the foreign person's name and address. If a Note is held through
a securities clearing organization or certain other financial institutions, the
organization or institution may provide the relevant signed statement to the
withholding agent; in that case, however, the signed statement
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must be accompanied by a Form W-8 or substitute form provided by the foreign
person that owns the Note. If such interest is not portfolio interest, then it
will be subject to United States federal income and withholding tax at a rate of
30 percent, unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the
opinion of Federal Tax Counsel, the IRS successfully asserted that one or more
of the Notes did not represent debt for federal income tax purposes, the Notes
might be treated as equity interests in the Trust. If so treated, the Trust
might be taxable as a corporation with the adverse consequences described above
(and the resulting taxable corporation would not be able to reduce its taxable
income by deductions for interest expense on Notes recharacterized as equity).
Alternatively, it is possible that the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) could constitute "unrelated business taxable
income," income to foreign holders generally would be subject to U.S. tax and
U.S. tax return filing and withholding requirements, individual holders might be
subject to certain limitations on their ability to deduct their share of Trust
expenses, and income from the Trust's assets would be taxable to Noteholders
regardless if cash distributions are made from the Trust.
TAX CONSEQUENCES TO HOLDERS OF CERTIFICATES ISSUED BY AN OWNER TRUST
TREATMENT OF TRUST AS A PARTNERSHIP. The Trust Depositor and the
Servicer will agree, and the related Certificateholders will agree by their
purchase of Certificates, to treat the Trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the Trust, the partners of the partnership being the Certificateholders, and
the Notes being debt of the partnership. However, the proper characterization
of the arrangement involving the Trust, the Certificates, the Notes, the Trust
Depositor and the Servicer is not certain because there is no authority on
transactions closely comparable to that contemplated herein. The Trust, the
Trust Depositor, and the Certificateholders will take all necessary actions, if
any, and refrain from taking any inconsistent actions, so as to ensure that the
Trust will be treated as a partnership under the final Treasury Regulations
which allow an entity to elect status as a partnership (the "CHECK THE BOX"
regulations).
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Depositor or the Trust. Any
such characterization should not result in materially adverse tax consequences
to Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership and that all payments on the Certificates are denominated in U.S.
dollars.
PARTNERSHIP TAXATION. As a partnership, the Trust will not be subject
to federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. The Trust's income will consist
primarily of interest and finance charges earned on the related Contacts
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of such Contracts. The Trust's
deductions will consist primarily of interest accruing with respect to the
Notes, servicing and other fees, and losses or deductions upon collection or
disposition of Contracts.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(I.E., the Trust Agreement and related documents). The Trust
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Agreement will provide, in general, that the Certificateholders will be
allocated taxable income of the Trust for each month equal to the sum of (i) the
interest that accrues on the Certificates in accordance with their terms for
such month, including interest accruing at the Pass-Through Rate for such month
and interest on amounts previously due on the Certificates but not yet
distributed; (ii) any Trust income attributable to discount on the related
Contracts that corresponds to any excess of the principal amount of the
Certificates over their initial issue price; (iii) prepayment premium payable to
the Certificateholders for such month; and (iv) any other amounts of income
payable to the Certificateholders for such month. Such allocation will be
reduced by any amortization by the Trust of premium on Contracts that
corresponds to any excess of the issue price of Certificates over their
principal amount. All remaining taxable income of the Trust will be allocated
to the Trust Depositor. Based on the economic arrangement of the parties, this
approach for allocating Trust income should be permissible under applicable
Treasury regulations, although no assurance can be given that the IRS would not
require a greater amount of income to be allocated to Certificateholders.
Moreover, even under the foregoing method of allocation, Certificateholders may
be allocated income equal to the entire Pass-Through Rate plus the other items
described above, even though the Trust might not have sufficient cash to make
current cash distributions of such amount. Thus, cash basis holders will in
effect be required to report income from the Certificates on the accrual basis
and Certificateholders may become liable for taxes on Trust income even if they
have not received cash from the Trust to pay such taxes. In addition, because
tax allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
All of the taxable income allocated to a Certificateholder that is a
tax-exempt entity (including an individual retirement account) will constitute
"UNRELATED BUSINESS TAXABLE INCOME" generally taxable to such a holder under the
Code.
With respect to any Certificateholder who is an individual, an
individual taxpayer's share of expenses of the Trust (including fees to the
Servicer but not interest expense) would be miscellaneous itemized deductions.
Such deductions might be disallowed to the individual in whole or in part and
might result in such holder being taxed on an amount of income that exceeds the
amount of cash actually distributed to such holder over the life of the Trust.
The Trust will make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Contract, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
DISCOUNT AND PREMIUM. It is believed that the Contracts will not be
issued with OID, and, therefore, the Trust should not have OID income. However,
the purchase price paid by the Trust for the related Contracts may be greater or
less than the remaining principal balance of the Contracts at the time of
purchase. If so, the Contracts will have been acquired at a premium or
discount, as the case may be. As indicated above, the Trust will make this
calculation on an aggregate basis, but might be required to recompute it on a
Contract-by-Contract basis.
If the Trust acquires the Contracts at a market discount or premium, it
will elect to include any such discount in income currently as it accrues over
the life of such Contracts or to offset any such premium against interest income
on such Contracts. As indicated above, a portion of such market discount income
or premium deduction may be allocated to Certificateholders.
DISTRIBUTIONS TO CERTIFICATEHOLDERS. Certificateholders generally will
not recognize gain or loss with respect to distributions from the Trust. A
Certificateholder will recognize gain, however, to the extent that any money
distributed exceeds the Certificateholder's adjusted basis in the Certificates
(as described below "DISPOSITION OF CERTIFICATES") immediately before the
distribution. A Certificateholder will recognize loss upon the termination of
the Trust or termination of the Certificateholder's interest in the Trust if the
Trust only
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distributes money to the Certificateholder and the amount distributed is less
than the Certificateholder's adjusted basis in the Certificates. Any gain or
loss will generally be long-term gain or loss if the holding period of the
Certificate is more than one year.
SECTION 708 TERMINATION. Under Section 708 of the Code, if 50% or more
of the outstanding interests in the Trust are sold or exchanged within any
12-month period, the Trust will be deemed to terminate and then be reconstituted
for federal income tax purposes. If such a termination occurs, the assets of
the terminated Trust (the "Old Trust") are deemed to be constructively
contributed to a reconstituted Trust (the "New Trust") in exchange for interests
in the New Trust. Such interests would be deemed distributed to the partners,
or Certificateholders, of the Old Trust in liquidation thereof, which would not
constitute a sale or exchange. Accordingly, if the sale of the Trust's
interests terminated the partnership under Section 708 of the Code, the
Certificateholder's basis in its ownership interest would not change. The
Trust's taxable year would also terminate as a result of a constructive
termination and, if the Certificateholder was on a different taxable year than
the Trust, the termination could result in the "bunching" of more than twelve
months of the Trust's income or loss in the Certificateholder's income tax
return for the year in which the Trust was deemed to terminate.
DISPOSITION OF CERTIFICATES. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the Trust Depositor's tax basis in the
Certificates sold. A Certificateholder's tax basis in a Certificate will
generally equal the holder's cost increased by the holder's share of Trust
income (that was includible in the Certificateholder's income) and decreased by
any distributions received with respect to such Certificate. In addition, both
the tax basis in the Certificates and the amount realized on a sale of a
Certificate would include the holder's share of the Notes and other liabilities
of the Trust. A holder acquiring Certificates at different prices may be
required to maintain a single aggregate adjusted tax basis in such Certificates,
and, upon sale or other disposition of some of the Certificates, allocate a
portion of such aggregate tax basis to the Certificates sold (rather than
maintaining a separate tax basis in each Certificate for purposes of computing
gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the related Contracts would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificateholders
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Trust
Depositor will be authorized to revise the Trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
SECTION 754 ELECTION. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the
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administrative complexities that would be involved in keeping accurate
accounting records, as well as potentially onerous information reporting
requirements, the Trust will not make such election. As a result,
Certificateholders might be allocated a greater or lesser amount of Trust income
than would be appropriate based on their own purchase price for Certificates.
ADMINISTRATIVE MATTERS. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (a) the name, address and identification number of such person,
(b) whether such person is a United States person, a tax-exempt entity, a
foreign government or an international organization, or any wholly owned agency
or instrumentality of either of the foregoing, and (c) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold
Certificates through a nominee are required to furnish directly to the Trust
information as to themselves and their ownership of Certificates. A clearing
agency registered under Section 17A of the Exchange Act is not required to
furnish any such information statement to the Trust. The information referred
to above for any calendar year must be furnished to the Trust on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the Trust with the information described above may be subject to
penalties.
The Trust Depositor will be designated as the tax matters partner for
the Trust in the Trust Agreement and, as such, will be responsible for
representing the Certificateholders in any dispute with the IRS. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations
for partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the Trust by the appropriate taxing
authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may be
precluded from separately litigating a proposed adjustment to the items of the
Trust. An adjustment could also result in an audit of a Certificateholder's
returns and adjustments of items not related to the income and losses of the
Trust.
BACK-UP WITHHOLDING. Distributions made on the Certificates and
proceeds from the sale of the Certificates will be subject to a "BACK-UP"
withholding tax of 31% if, in general, the Certificateholder fails to comply
with certain identification procedures, unless the holder is an exempt recipient
under applicable provisions of the Code.
The New Regulations make certain modifications to the backup withholding
and information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS. It is not clear whether
the Trust would be considered to be engaged in a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Nevertheless, the Trust will
withhold as if it were so engaged
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in order to protect the Trust from possible adverse consequences of a failure to
withhold. The Trust expects to withhold on the portion of its taxable income
that is allocable to foreign Certificateholders pursuant to Section 1446 of the
Code, as if such income were effectively connected to a U.S. trade or business,
at a rate of 35% for foreign holders that are taxable as corporations and 39.6%
for all other foreign holders. Subsequent adoption of Treasury regulations or
the issuance of other administrative pronouncements may require the Trust to
change its withholding procedures. In determining a holder's withholding
status, the Trust may generally rely on IRS Form W-8, IRS Form W-9 or the
holder's certification of nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust's income. Each foreign holder must
obtain a taxpayer identification number from the IRS and submit that number to
the Trust on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business (although no assurance can be given as to the prospects for
success of the refund claim). However, even if such a position is successful,
interest payments made (or accrued) to a Certificateholder who is a foreign
person may be considered to be guaranteed payments, but only to the extent such
payments are determined without regard to the income of the Trust. It is
unclear whether the IRS would agree with that characterization. If these
interest payments are properly characterized as guaranteed payments, then the
interest will not constitute "PORTFOLIO INTEREST." As a result,
Certificateholders will be subject to 30 percent U.S. withholding tax, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a foreign
holder would only be entitled to claim a refund for that portion of the taxes in
excess of the taxes that should be withheld with respect to the guaranteed
payments.
GRANTOR TRUSTS
TAX CHARACTERIZATION OF GRANTOR TRUSTS
OPINION
Federal Tax Counsel will deliver its opinion that a Trust characterized
as a Grantor Trust will be classified as a grantor trust and not as an
association taxable as a corporation and that, subject to the discussion below
under "STRIPPED BOND TREATMENT", each Certificateholder will be treated for
federal income tax purposes as the owner of a pro rata undivided interest in the
income and assets of the Trust.
GENERAL
For federal income tax purposes, the Trust will be deemed to have
acquired the following assets: (i) the principal portion of each Contract, plus
a portion of the interest due on each Contract (the "TRUST STRIPPED BONDS"),
(ii) the portion of the interest due on each such Contract not allocable to the
Trust Stripped Bonds or retained by the Seller (the "TRUST STRIPPED COUPONS"),
(iii) the proceeds of certain insurance policies on the motorcycles, (iv) rights
under the Trust Deposit Agreement and (v) rights under the Security Agreement in
favor of the Trust securing the Trust Depositor's obligation to purchase
Subsequent Contracts and deliver them to the Trust. Although the Trust will
have certain rights with respect to the Reserve Fund, the Pre-Funding Account
and the Interest Reserve Account, such accounts are not assets of the Trust.
Each Certificateholder will have a taxable event when an asset of the
Trust (including any Contract) is disposed of (whether by sale, exchange,
redemption or payment at maturity) or when the Certificateholder's Certificate
is redeemed or sold. A Certificateholder must allocate the cost of its
Certificates among its allocable share of the assets of the Trust, including the
Contracts (in accordance with the proportion of the relative fair market values
of such assets as of the date such Certificateholder acquired its Certificate)
in order to determine its initial tax basis for its pro rata portion of each
asset held by the Trust, including the Contracts. For this purpose, a
Certificateholder may treat the Trust's rights in the security interests, the
individual
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insurance contracts on the motorcycles, and other rights the Trust may have
which provide credit enhancement as part of the Contracts such that no separate
allocation of the Certificate cost and determination of basis must be made to
these rights. Such tax basis is adjusted upward by the amount of original issue
discount ("OID"), if applicable (see the discussion below under "STRIPPED BOND
TREATMENT", and downward by the amount of all payments previously received by
such Certificateholder (assuming OID treatment applies) under "STRIPPED BOND
TREATMENT" below.
The Trust Stripped Bonds will be treated as "STRIPPED BONDS" and the
Trust Stripped Coupons will be treated as "STRIPPED COUPONS," both within the
meaning of Section 1286 of the Code.
INCOME OF HOLDERS OF CERTIFICATES ISSUED BY A GRANTOR TRUST
Subject to the discussion below under "STRIPPED BOND TREATMENT", each
Certificateholder will be required to report on its federal income tax return,
in a manner consistent with its method of accounting, its pro rata allocable
share of the entire gross income of the Trust, including interest or finance
charges earned on the Contracts, and any gain or loss upon collection or
disposition of the Contracts. In computing its federal income tax liability, a
Certificateholder will be entitled to deduct, consistent with its method of
accounting, its pro rata allocable share of reasonable fees payable to the
Servicer that are paid or incurred by the Trust as provided in Sections 162 or
212 of the Code. If a Certificateholder is an individual, estate or trust, the
deduction for its pro rata share of such fees will be allowed only to the extent
that all of its miscellaneous itemized deductions, including its share of such
fees, exceed 2% of its adjusted gross income. In addition, Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer whose adjusted gross income exceeds a specified amount will
be reduced by the lesser of (i) 3% of the excess, if any, of adjusted gross
income over such amount, or (ii) 80% of the amount of itemized deductions
otherwise allowable for such year. As a result, such investors holding
Certificates, directly or indirectly through a pass-through entity, may have
aggregate taxable income in excess of the aggregate amount of cash received on
such Certificates with respect to interest at the related Pass-Through Rate on
such Certificates.
STRIPPED BOND TREATMENT
Although the federal income tax treatment of stripped bonds is not
entirely clear, since only limited regulations have been issued by the IRS,
based on guidance by the IRS it is believed that the Contracts should be treated
as "STRIPPED BONDS" and the interest thereon payable to the Certificateholders
as "STRIPPED COUPONS." The Contracts would, therefore, be treated as subject to
the OID provisions and stripped bond provisions of the Code. Each
Certificateholder would be treated as owning stripped bonds (represented by its
portion of the Class A Percentage or Class B Percentage of principal payments on
each Contract) and stripped coupons (equal to that Certificateholder's
proportionate part of the interest on the Trust Stripped Bonds). Furthermore,
each Class B Certificateholder will own a proportionate part of the stripped
coupons represented by the Trust Stripped Coupons. Each stripped bond and
coupon should generally be treated as a single debt instrument. As a result of
this characterization, each Certificateholder will be allocated interest from
the Contracts equal to its respective share of the Class A Pass-Through Rate or
the Class B Pass-Through Rate and principal on the Contracts equal to its Class
A Percentage or Class B Percentage of such principal.
In general, under the stripped bond and OID provisions of the Code, each
initial Certificateholder would report OID (other than certain de minimis
amounts) in each taxable year computed on a constant yield method based on the
yield to maturity of the Contracts held by the Trust. Such yield would be
computed with respect to each Certificateholder by taking into account such
Certificateholder's purchase price for its interest in the Contracts and the
payments to be made in respect of the Certificateholder's interest in such
Contracts. Thus, it is believed that the effect of the stripped bond rules and
the OID provisions would be to treat each Contract as a bond originally issued
on the date it is purchased (I.E., the date that a holder purchases its
Certificate), and having OID equal to the excess of (a) the Certificateholder's
share of the sum of all payments that are part of each Contract over (b) the
portion of the Certificateholder's purchase price for the Certificate
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that is properly allocable to each Contract. As a consequence, each
Certificateholder, regardless of its method of tax accounting, would be required
to include in its ordinary gross income the sum of the "DAILY PORTIONS" of the
OID determined with respect to such Certificateholder's pro rata interest in
such Contracts for all days during the taxable year on which the
Certificateholder owns the Certificate.
The method of calculating yield to maturity is not clear, and in
particular it is not clear under the Code whether prepayments on the underlying
Contracts should be taken into account in determining such yield. The Clinton
Administration has proposed legislation which if enacted, may require the yield
on the Contracts to be determined based on the prepayment assumptions.
Based on the preamble to certain stripped bond regulations, although the
matter is not entirely clear, the interest income on the Class A Certificates
and the Class B Certificates and the portion of the Monthly Servicing Fee
allocable to each such Certificate may be treated, in whole or in part, as
so-called "QUALIFIED STATED INTEREST." In that case, the income reportable by
the initial holder of a Certificate in each monthly accrual period under the OID
provisions should be approximately the same as its pro rata share of the
aggregate interest accruing with respect to the Certificate in accordance with
its terms, plus the Certificate's pro rata share of the portion of the Monthly
Servicing Fee and any allocable fees and expenses.
Under the foregoing analysis, the bond premium and market discount rules
of the Code would not apply to the initial holder of a Certificate.
The OID provisions of the Code and the regulations thereunder are
complex, are unclear in many respects, and do not address many issues raised by
the Contracts. Moreover, only limited guidance has been issued with respect to
stripped bonds and final regulations under the stripped bond provisions of the
Code may provide for different treatment, perhaps with retroactive effect.
Holders of Certificates issued by a Grantor Trust should consult their tax
advisors to determine the proper method of reporting taxable income from the
Certificates.
SALE OF CERTIFICATE
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale allocable to each of the
Contracts and the Certificateholder's adjusted basis in each of the Contracts.
A Certificateholder's adjusted basis will equal the Certificateholder's cost for
the Certificate, increased by any OID previously included in income, and
decreased by the amount of payments previously received on the Contracts,
however denominated (other than qualified stated interest payments). Any gain
or loss will be capital gain or loss if the Certificate was held as a capital
asset. A capital gain or loss will be long-term or short-term depending on
whether or not the Certificates have been owned for more than one year.
FOREIGN CERTIFICATEHOLDERS
Income attributable to Contracts which is received by a foreign
Certificateholder will generally not be subject to the normal 30% withholding
tax imposed with respect to such payments, provided that (i) the foreign
Certificateholder does not own, directly or indirectly, 10% or more of, and is
not a controlled foreign corporation related to , the Seller and (ii) such
holder fulfills certain certification requirements. Under such requirements,
the holder must certify, under penalty of perjury, that it is not a "UNITED
STATES PERSON" and provide its name and address on Form W-8. For this purpose,
"UNITED STATES PERSON" generally means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof or an
estate or trust the income of which is includable in gross income for United
States federal income tax purposes, regardless of its source or which is subject
to the supervision or authority of a U.S. court or U.S. fiduciary. Gain
realized upon the sale of a Certificate by a foreign Certificateholder generally
will not be subject to United States withholding tax. If, however, such
interest or gain is effectively connected to the conduct of a trade or business
within the United States by such foreign Certificateholder (or in the case of
gain the Certificateholder is an individual who is
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present in the United States for a total of 183 days or more during the taxable
year in which such gain is realized), such holder will be subject to United
States federal income tax thereon at either the regular rates or a special 30%
withholding tax rate. Potential investors who are not United States persons
should consult their own tax advisors regarding the specific tax consequences to
them of owning a Certificate issued by a Grantor Trust.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will furnish or make available, within the prescribed period
of time for tax reporting purposes after the end of each calendar year, to each
Certificateholder or each person holding a Certificate on behalf of a
Certificateholder at any time during such year, such information as the Trustee
deems necessary or desirable to assist Certificateholders in preparing their
federal income tax returns. Payments made on the Certificates and proceeds from
the sale of the Certificates will not be subject to a "BACKUP" withholding tax
of 31% unless, in general, a Certificateholder fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
The New Regulations make certain modifications to the backup withholding
and information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
TAX TREATMENT OF A FASIT
The "SMALL BUSINESS JOB PROTECTION ACT OF 1996" (the "ACT") creates a
new type of entity for federal income tax purposes called a "FINANCIAL ASSET
SECURITIZATION INVESTMENT TRUST" or "FASIT" effective on and after September 1,
1997. The Act enables certain arrangements similar to a Trust to elect to be
treated as a FASIT. Under the FASIT provisions of the Act, a FASIT generally
would avoid federal income taxation and could issue securities substantially
similar to the Certificates and Notes, and those securities would be treated as
debt for federal income tax purposes. If so specified in the related Prospectus
Supplement, a Trust may make an election to be treated as a FASIT. The
applicable Pooling and Servicing Agreement or Sale and Servicing Agreement for
such a Trust may contain such terms and provide for the issuance of Notes or
Certificates on such terms and conditions as are permitted for a FASIT. In
addition, upon satisfying certain conditions set forth in the Pooling and
Servicing Agreements or Sale and Servicing Agreements in existence on September
1, 1997, the Seller and Servicer will be permitted to amend any such Pooling and
Servicing Agreements or Sale and Servicing Agreements so as to enable all or a
portion of a Trust to qualify as a FASIT and to permit a FASIT election to be
made with respect thereto, and to make such modifications to a Pooling and
Servicing Agreement or Sale and Servicing Agreement as may be permitted by
reason of the making of such an election. See "DESCRIPTION OF THE POOLING AND
SERVICING AGREEMENTS--AMENDMENT." However, there can be no assurance that the
Seller will or will not cause any permissible FASIT election to be made with
respect to an existing Trust or amend a Pooling and Servicing Agreement or Sale
and Servicing Agreement in connection with any election. In addition, if such
an election is made, it may cause a holder to recognize gain (but not loss) with
respect to any Notes or Certificates held by it, even though Federal Tax Counsel
previously delivered its opinion that the Notes or Certificates will be treated
as debt for federal income tax purposes without regard to the election and the
Notes or Certificates would be treated as debt following the election.
Additionally, any such election and amendments to a Pooling and Servicing
Agreement or Sale and Servicing Agreement may have other tax and non-tax
consequences to Securityholders. Such consequences, together with a detailed
discussion of the tax aspects of a FASIT, will be set forth in the Prospectus
Supplement applicable thereto.
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<PAGE>
CERTAIN STATE TAX CONSEQUENCES
Because of the differences in state tax laws and their applicability to
different investors, it is not possible to summarize the potential state tax
consequences of holding the Certificates. ACCORDINGLY, PURCHASERS OF
CERTIFICATES OR NOTES SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE STATE
TAX CONSEQUENCES OF PURCHASING ANY CERTIFICATES OR NOTES.
* * *
THE FEDERAL AND STATE TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
OR CERTIFICATE OWNER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND CERTIFICATES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as individual retirement
accounts and Keogh Plans (each a "PLAN"), from engaging in certain transactions
with persons that are "PARTIES IN INTEREST" under ERISA or "DISQUALIFIED
PERSONS" under the Code with respect to such Plan. A violation of these
"PROHIBITED TRANSACTION" rules may result in an excise tax or other penalties
and liabilities under ERISA and the Code for such persons.
Certain transactions involving a Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Plan that
purchased Certificates if assets of the Trust were deemed to be assets of the
Plan. Under a regulation issued by the United States Department of Labor (the
"PLAN ASSETS REGULATION"), the assets of a Trust would be treated as assets of a
Plan for the purposes of ERISA and the Code only if the Plan acquired an "EQUITY
INTEREST" in the Trust and none of the exceptions contained in the Plan Assets
Regulation was applicable. An equity interest is defined under the Plan Assets
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements.
A Plan fiduciary considering the purchase of Securities of a given
series should consult its tax and/or legal advisors regarding whether the assets
of the related Trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
THE NOTES
Unless otherwise specified in the Prospectus Supplement, the Notes of
each series may be purchased by a Plan if the fiduciary of the Plan determines
that the purchase of a Note is consistent with its fiduciary duties and does not
result in a nonexempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
SENIOR CERTIFICATES
The following discussion applies only to nonsubordinate Certificates
(referred to herein as "SENIOR CERTIFICATES") issued by a Grantor Trust.
64
<PAGE>
The U.S. Department of Labor has granted to the lead Underwriter named
in the Prospectus Supplement an exemption (the "EXEMPTION") from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
holding and the subsequent resale by Plans of certificates representing
interests in asset-backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Exemption. The contracts covered by the Exemption include
motor vehicle retail installment sales contracts and installment loans such as
the Contracts. The Exemption should apply to the acquisition, holding and
resale in the secondary market of the Senior Certificates by a Plan, provided
that certain conditions (certain of which are described in the related
Prospectus Supplement) are met. It should be noted, however, that in issuing
the Exemption the Department may not have considered interests in pools of the
exact nature of some of the offered Certificates.
Unless otherwise specified in the Prospectus Supplement, the Company
believes that, after the expiration of any applicable Funding Period, the
Exemption will apply to the acquisition and holding by Plans of Senior
Certificates sold by the Underwriter or Underwriters named in the Prospectus
Supplement and that all conditions of the Exemption other than those within the
control of the investors will have been met.
SUBORDINATE CERTIFICATES
Unless otherwise specified in the Prospectus Supplement, the
Certificates issued by Owner Trusts that also issue Notes and Subordinate
Certificates issued by Grantor Trusts may not be purchased by a Plan or by any
entity whose underlying assets include Plan assets by reason of a Plan's
investment in the entity. By its acceptance of such Certificate, each
Certificateholder will be deemed to have represented and warranted that it is
not a Plan.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Notes, if any, of a given series and an underwriting agreement
with respect to the Certificates of such series (collectively, the "UNDERWRITING
AGREEMENTS"), the Trust Depositor will agree to cause the related Trust to sell
to the underwriters named therein and in the related Prospectus Supplement, and
each of such underwriters will severally agree to purchase, the principal amount
of each class of Notes and Certificates, as the case may be, of the related
series set forth in such underwriting agreements and in such Prospectus
Supplement.
In each of the Underwriting Agreements with respect to any given series
of Securities, the several underwriters will agree, subject to the terms and
conditions set forth therein, to purchase all the Notes and Certificates, as the
case may be, described therein which are offered hereby and by the related
Prospectus Supplement if any of such Notes and Certificates, as the case may be,
are purchased.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Notes and Certificates, as the case may be, being offered thereby
will be offered to the public and any concessions that may be offered to certain
broker-dealers participating in the offering of such Notes and Certificates or
(ii) specify that the related Notes and Certificates, as the case may be, are to
be resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
such Notes and Certificates, such public offering prices and such concessions
may be changed.
Each Underwriting Agreement will provide that the Trust Depositor will
indemnify the underwriters against certain civil liabilities, including
liabilities under the Securities Act, or contribute to payments the several
underwriters may be required to make in respect thereof.
Each Trust may, from time to time, invest the funds in its Trust
Accounts in Eligible Investments acquired from such underwriters or from the
Trust Depositor.
65
<PAGE>
Pursuant to each Underwriting Agreement with respect to a given series
of Securities, the closing of the sale of any class of Securities subject to
such Underwriting Agreement will be conditioned on the closing of the sale of
all other such classes of Securities of that series.
The place and time of delivery for the Securities in respect of which
this Prospectus is delivered will be set forth in the related Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust, the Trust Depositor, the Servicer and the
Administrator by Winston & Strawn, Chicago, Illinois including providing an
unqualified opinion with respect to the legality of the Securities issued by a
Trust, and for the underwriters for such series by Brown & Wood LLP, New York,
New York.
66
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
Administration Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Administration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Applicable Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Base Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Buell. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Calculation Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Calculation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27-29
CD Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
CD Rate Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . 26
CD Rate Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Certificate Balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Distribution Account . . . . . . . . . . . . . . . . . . . . . . 35
Certificate Pool Factor. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Certificateholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Collateral Reinvestment Account. . . . . . . . . . . . . . . . . . . . . . . 6
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Collection Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Commercial Paper Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Commercial Paper Rate Determination Date . . . . . . . . . . . . . . . . . . 27
Commercial Paper Rate Security . . . . . . . . . . . . . . . . . . . . . . . 26
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Composite Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6, 7
Cutoff Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Definitive Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Definitive Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Definitive Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Depositor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Distribution Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
DTC Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Due Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Eaglemark. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Eaglemark Financial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Early Amortization Event . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Eligible Deposit Account . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
FASIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 47, 48
Federal Funds Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Federal Funds Rate Determination Date. . . . . . . . . . . . . . . . . . . . 27
Federal Funds Rate Security. . . . . . . . . . . . . . . . . . . . . . . . . 26
Federal Tax Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Fixed Rate Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
67
<PAGE>
<TABLE>
<S> <C>
Floating Rate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
FTC Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
H.15(519). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Index Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Indirect Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Initial Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Cutoff Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Insolvency Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Interest Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Interest Reset Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Interest Reset Period. . . . . . . . . . . . . . . . . . . . . . . . . . .25, 26
Investment Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46, 47
LIBOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
LIBOR Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
LIBOR Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . 28
LIBOR Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Lien Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Mandatory Special Redemption . . . . . . . . . . . . . . . . . . . . . . . . 11
Money Market Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Motorcycles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 46
Note Distribution Account. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Note Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Noteholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Obligor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 12, 14
OID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Other Manufacturers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 46
Owner Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Pass-Through Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 25
Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14, 19
Pooling and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . 3
Pre-Funded Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Purchase Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Rating Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10, 15
Registrar of Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Related Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Sale and Servicing Agreements. . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule of Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Security Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Securityholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Servicer Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
68
<PAGE>
<TABLE>
<S> <C>
Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Spread Multiplier. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Strip Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Strip Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Subsequent Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Subsequent Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . 13
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Telerate Page 3750 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Transfer and Sale Agreement. . . . . . . . . . . . . . . . . . . . . . . . 6, 7
Treasury bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Treasury Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Treasury Rate Determination Date . . . . . . . . . . . . . . . . . . . . . . 29
Treasury Rate Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11, 13, 29
Underwriting Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
69
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Expenses in connection with the offering of the Securities being
registered herein are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . $ 354,000
Legal fees and expenses. . . . . . . . . . . . . . . . . . . $ 150,000
Accounting fees and expenses . . . . . . . . . . . . . . . . $ 30,000
Blue sky fees and expenses . . . . . . . . . . . . . . . . . $ 8,000
Rating agency fees . . . . . . . . . . . . . . . . . . . . . $ 30,000
Trustee's fees and expenses. . . . . . . . . . . . . . . . . $ 12,500
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . $ 30,000
Total. . . . . . . . . . . . . . . . . . . . . . . $ 659,000
</TABLE>
___________________
* All amounts except the SEC Registration Fee are estimates of expenses
incurred or to be incurred in connection with the issuance and
distribution of a Series of Securities in an aggregate principal amount
assumed for these purposes to be equal to $1,200,000,000 of Securities
registered hereby.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Eaglemark, Inc. has undertaken in its certificate of incorporation and
bylaws to indemnify, to the maximum extent permitted by the Nevada General
Corporation Law as from time to time amended, any currently acting or former
director, officer, employee and agent of Eaglemark, Inc. against any and all
liabilities incurred in connection with their services in such capacities.
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit
3.1 to the Registration Statement on Form S-3 (File No. 333-21793) and
incorporated herein by reference)
3.2 Bylaws of the Company (filed as Exhibit 3.2 to the Registration
Statement on Form S-3 (File No. 333-21793) and incorporated herein by
reference)
4.1 Form of Trust Agreement (including form of Certificates)
4.2 Form of Pooling and Servicing Agreement (including form of Certificates)
4.3 Form of Indenture (including form of Notes)
5.1 Opinion of Winston & Strawn with respect to legality
8.1 Opinion of Winston & Strawn with respect to tax matters
10.1 Form of Sale and Servicing Agreement
10.2 Form of Administration Agreement
10.3 Form of Transfer and Sale Agreement
23.1 Consent of Winston & Strawn (included in Exhibits 5.1 and 8.1)
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification of Indenture Trustee
99.1 Form of Agreement to Deposit Contracts
99.2 Form of Security Agreement
</TABLE>
_________________________
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "CALCULATION OF REGISTRATION
FEE" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
<PAGE>
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago, the State of Illinois, on
September 3, 1998.
EAGLEMARK, INC.
By:/s/ Donna F. Zarcone
----------------------------
Name: Donna F. Zarcone
Title: President and Chief
Operating Officer
POWER OF ATTORNEY
The undersigned directors and officers of Eaglemark, Inc. do hereby
constitute and appoint Michael E. Sulentic and Perry A. Glassgow, and each of
them, with full power of substitution, our true and lawful attorneys-in-fact and
agents to do any and all acts and things in our name and behalf in our
capacities as directors and officers, and to execute any and all instruments for
us and in our names in the capacities indicated below which such person may deem
necessary or advisable to enable the Registrant to comply with the Securities
Act of 1933 (the "ACT"), as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but not limited to, power and authority to
sign for us, or any of us, in the capacities indicated below and any and all
amendments (including pre-effective and post-effective amendments or any other
registration statement filed pursuant to the provisions of Rule 462(b) under the
Act) hereto; and we do hereby ratify and confirm all that such person or persons
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Donna F. Zarcone President and Chief Operating Officer September 3, 1998
- ------------------------ (Principal Executive Officer)
Donna F. Zarcone
/s/ Michael E. Sulentic Vice President and Chief Financial Officer September 3, 1998
- ------------------------ (Principal Financial and Accounting Officer)
Michael E. Sulentic
/s/ Perry A. Glassgow Treasurer and Assistant Secretary September 3, 1998
- ------------------------
Perry A. Glassgow
/s/ Steven F. Deli Director September 3, 1998
- ------------------------
Steven F. Deli
</TABLE>
<PAGE>
Registration No. 333 -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUSTS
(Issuer with respect to the Securities)
EAGLEMARK, INC.
(Sponsor of the Trusts described herein)
(Exact name of Registrant as specified in its charter)
_____________________
EXHIBIT VOLUME
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit
3.1 to the Registration Statement on Form S-3 (File No. 333-21793) and
incorporated herein by reference)
3.2 Bylaws of the Company (filed as Exhibit 3.2 to the Registration
Statement on Form S-3 (File No. 333-21793) and incorporated herein by
reference)
4.1 Form of Trust Agreement (including form of Certificates)
4.2 Form of Pooling and Servicing Agreement (including form of Certificates)
4.3 Form of Indenture (including form of Notes)
5.1 Opinion of Winston & Strawn with respect to legality
8.1 Opinion of Winston & Strawn with respect to tax matters
10.1 Form of Sale and Servicing Agreement
10.2 Form of Administration Agreement
10.3 Form of Transfer and Sale Agreement
23.1 Consent of Winston & Strawn (included in Exhibits 5.1 and 8.1)
24.1 Power of Attorney (included on signature page)
25.1 Statement of Eligibility and Qualification of Indenture Trustee
99.1 Form of Agreement to Deposit Contracts
99.2 Form of Security Agreement
</TABLE>
_________________________
<PAGE>
Exhibit 1.1
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST 199__-__
$___________ _____% HARLEY-DAVIDSON MOTORCYCLE CONTRACT
BACKED NOTES, CLASS A-1
$___________ _____% HARLEY-DAVIDSON MOTORCYCLE CONTRACT
BACKED NOTES, CLASS A-2
$___________ _____% HARLEY-DAVIDSON MOTORCYCLE CONTRACT
BACKED CERTIFICATES
EAGLEMARK CUSTOMER FUNDING CORPORATION-__
Trust Depositor
EAGLEMARK, INC.
Seller and Servicer
FORM OF
UNDERWRITING AGREEMENT
__________, 199__
Salomon Smith Barney Inc.
_________________________
c/o Salomon Smith Barney Inc.
7 World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Eaglemark Customer Funding Corporation-___, a Nevada corporation (the
"Trust Depositor") and a wholly-owned subsidiary of Eaglemark, Inc., a Nevada
corporation ("Eaglemark"), proposes to cause Harley-Davidson Eaglemark
Motorcycle Trust 199__-__ (the "Trust") to issue and sell to you (the
"Underwriters") $___________ principal amount of its ____% Harley-Davidson
Motorcycle Contract Backed Notes, Class A-1 (the "Class A-1 Notes"),
$__________ principal amount of its ____% Harley-Davidson Motorcycle Contract
Backed Notes, Class A-2 (the "Class A-2 Notes" and, collectively with the
Class A-1 Notes, the "Notes") and $__________ principal amount of its ____%
Harley-Davidson Motorcycle Contract Backed Certificates (the "Certificates").
The assets of the Trust will include a pool of Harley-Davidson motorcycle
conditional sales contracts and Buell Motorcycle Company ("Buell") motorcycle
conditional sales contracts (the "Initial Contracts"), certain monies
received thereon on and after _______, 199__ (the "Initial Cutoff Date"), all
insurance proceeds and liquidation proceeds with respect thereto, security
interests in the motorcycles financed thereby, the related Initial Contracts
files, the Trust Accounts, proceeds of the foregoing, certain rights with
respect to
<PAGE>
funds on deposit from time to time in the Reserve Fund and the
Pre-Funding Account and certain other property. The Initial Contracts will
be serviced for the Trust by Eaglemark. The Notes will be issued pursuant to
the Indenture to be dated as of _________, 199__ (as amended and supplemented
from time to time, the "Indenture") between the Trust and
_______________________, as indenture trustee (the "Indenture Trustee"). The
Notes will be secured by the assets of the Trust pursuant to the Indenture.
The Certificates will be issued pursuant to the Trust Agreement to be dated
as of _________, 199__ (as amended and supplemented from time to time, the
"Trust Agreement"), between the Trust Depositor and ____________________, as
owner trustee (the "Owner Trustee"). The Certificates will represent
fractional undivided interests in the Trust. The Notes and the Certificates
are hereinafter referred to collectively as the "Offered Securities."
The Trust will acquire the Initial Contracts from the Trust Depositor
pursuant to a Sale and Servicing Agreement to be dated as of ___________,
199__ (as amended and supplemented from time to time, the "Sale and Servicing
Agreement"), among the Trust, the Trust Depositor, Eaglemark, as servicer,
and _________________, as Indenture Trustee. Eaglemark will also agree to
perform certain administrative functions on behalf of the Trust pursuant to
the Administration Agreement, dated as of ___________, 199__ (as amended and
supplemented from time to time, the "Administration Agreement") among
Eaglemark, as administrator, the Trust and the Indenture Trustee. The Trust
Depositor will acquire the Initial Contracts from Eaglemark on the Closing
Date (as defined herein) pursuant to a Transfer and Sale Agreement to be
dated as of _________, 199__ (as amended and supplemented from time to time,
the "Transfer and Sale Agreement") among the Trust Depositor, as purchaser,
and Eaglemark, as seller. All of the assets conveyed to the Trust pursuant to
the Sale and Servicing Agreement are referred to herein as the "Trust
Property". Capitalized terms that are used and not otherwise defined herein
shall have the respective meanings assigned thereto in the Sale and Servicing
Agreement.
On the Closing Date (as defined herein) $_____________ will be deposited
in the Pre-Funding Account. It is intended that additional motorcycle
conditional sales contracts, including all rights to receive payments thereon
on or after their related Subsequent Cutoff Dates and security interests in
the Harley-Davidson and Buell motorcycles financed thereby (such contracts,
together with all such rights and interests, the "Subsequent Contracts" and,
together with the Initial Contracts, the "Contracts"), will be purchased by
the Trust Depositor from Eaglemark pursuant to one or more related Subsequent
Purchase Agreements and further transferred and assigned by the Trust
Depositor to the Trust and pledged by the Trust to the Indenture Trustee
pursuant to one or more related Subsequent Transfer Agreements from funds on
deposit in the Pre-Funding Account from time to time on or before the date
which is 90 days from and including the Closing Date.
In connection with the sale of the Offered Securities, the Trust
Depositor and Eaglemark have prepared a Prospectus (as defined herein) dated
_________, 199__. The Prospectus sets forth certain information concerning
the Trust Depositor, Eaglemark, the Trust and the Offered Securities. The
Trust Depositor and Eaglemark hereby confirm that they have authorized the
use of the Prospectus, and any amendment or supplement thereto, in connection
with the offer and sale of the Offered Securities by the Underwriters.
Unless stated to the contrary, all references
2
<PAGE>
herein to the Prospectus are to the Prospectus (as defined herein) and are
not meant to include any amendment or supplement thereto.
1. REPRESENTATIONS AND WARRANTIES OF EAGLEMARK AND THE TRUST
DEPOSITOR. Eaglemark and the Trust Depositor jointly and severally represent
and warrant to each Underwriter as set forth below in this Section 1:
(a) Eaglemark meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Act"), and has filed with the
Securities and Exchange Commission (the "Commission") a registration
statement (Registration No. 333-______) on such Form, including a
related preliminary base prospectus and a preliminary prospectus
supplement, for the registration under the Act of the offering and
sale of the Offered Securities. Eaglemark may have filed one or more
amendments thereto, each of which amendments has previously been
furnished to you. Eaglemark will next file with the Commission
(i) prior to the effectiveness of such registration statement, an
amendment thereto (including the form of final base prospectus and the
form of final prospectus supplement relating to the Offered
Securities) or (ii) after the effectiveness of such registration
statement, either (A) a final base prospectus relating to the Offered
Securities in accordance with Rules 430A and 424(b)(1) or (4) under
the Act or (B) a final base prospectus and a final prospectus
supplement relating to the Offered Securities in accordance with Rules
415 and 424(b)(2) or (5).
In the case of clauses (ii) (A) and (B) above, Eaglemark has included
in such registration statement, as amended at the Effective Date (as
defined herein), all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in the
Prospectus with respect to the Offered Securities and the offering
thereof. As filed, such amendment and form of final prospectus
supplement, or such final prospectus supplement, shall include all
Rule 430A Information, together with all other required information,
with respect to the Offered Securities and the offering thereof and,
except to the extent that the Underwriters shall agree in writing to a
modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest preliminary base prospectus and preliminary prospectus
supplement, if any, that have previously been furnished to you) as
Eaglemark has advised you, prior to the Execution Time, will be
included or made therein. If the Registration Statement contains the
undertaking specified by Regulation S-K Item 512(a), the Registration
Statement, at the Execution Time, meets the requirements set forth in
Rule 415(a)(1)(x).
For purposes of this Agreement, "Effective Time" means the date and
time as of which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared effective by
the Commission, and "Effective Date" means the date of the
Effective Time. "Execution Time" shall mean the date and time that
this Agreement is executed and delivered by the parties hereto.
Such
3
<PAGE>
registration statement, as amended at the Effective Time, including
all information deemed to be a part of such registration statement
as of the Effective Time pursuant to Rule 430A(b) under the Act,
and including the exhibits thereto and any material incorporated by
reference therein, is hereinafter referred to as the "Registration
Statement." "Base Prospectus" shall mean the base prospectus
referred to in the first paragraph of this Section 1(a) contained
in the Registration Statement at the Effective Date; PROVIDED,
THAT, if the Base Prospectus used in connection with any
Preliminary Prospectus Supplement or the Prospectus shall differ
from the Base Prospectus contained in the Registration Statement at
the Effective Date, then "Base Prospectus" shall mean the Base
Prospectus included with such Preliminary Prospectus Supplement or
the Prospectus, as filed pursuant to Rule 424(b). "Preliminary
Prospectus Supplement" shall mean a preliminary prospectus
supplement, if any, to the Base Prospectus which describes the
Offered Securities and the offering thereof and is used prior to
the filing of the Prospectus. "Prospectus" shall mean the
prospectus supplement relating to the Offered Securities that is
first filed pursuant to Rule 424(b) after the Execution Time,
together with the Base Prospectus or, if no filing pursuant to Rule
424(b) is required, shall mean the prospectus supplement relating
to the Offered Securities, including the Base Prospectus, included
in the Registration Statement at the Effective Date including in
each such case any material and documents incorporated by reference
therein. "Rule 430A Information" means information with respect to
the Offered Securities and the offering of the Offered Securities
permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. "Rule 415", "Rule 424",
"Rule 430A" and "Regulation S-K" refer to such rules or regulations
under the Act. Any reference herein to the Registration Statement,
the Base Prospectus, a Preliminary Prospectus Supplement or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), on or before the Effective Date of
the Registration Statement or the issue date of the Base
Prospectus, such Preliminary Prospectus Supplement or the
Prospectus, as the case may be; and any reference herein to the
terms "amend", "amendment" or "supplement" with respect to the
Registration Statement, the Base Prospectus, any Preliminary
Prospectus Supplement or the Prospectus shall be deemed to refer to
and include the filing of any document under the Exchange Act after
the Effective Date of the Registration Statement or the issue date
of the Base Prospectus, any Preliminary Prospectus Supplement or
the Prospectus, as the case may be, deemed to be incorporated
therein by reference.
(b) On the Effective Date and on the date of this Agreement, the
Registration Statement did or will, and, when the Prospectus is first
filed (if required) in accordance with Rule 424(b) and on the Closing
Date, the Prospectus (and any supplements thereto) will, comply in all
material respects with the applicable requirements of the Act, the
Exchange Act and the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the respective rules and regulations of
the Commission thereunder (the "Rules and Regulations"); on the
Effective
4
<PAGE>
Date, the Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, on the Effective Date,
the Prospectus, if not filed pursuant to Rule 424(b), did not or
will not, and on the date of any filing pursuant to Rule 424(b) and
on the Closing Date, the Prospectus (together with any supplement
thereto) will not, include any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that Eaglemark
makes no representations or warranties as to the information
contained in or omitted from (x) the Registration Statement or the
Prospectus or any supplement thereto in reliance upon and in
conformity with information furnished in writing to Eaglemark by or
on behalf of the Underwriters through Salomon Smith Barney Inc.
specifically for use in connection with the preparation of the
Registration Statement or the Prospectus or any supplement thereto
and (y) any Derived Information set forth in the Computational
Materials (each as defined in Section 11 below), or in any
amendment thereof or supplement thereto, incorporated by reference
in such Registration Statement or such Prospectus (or any amendment
thereof or supplement thereto) except to the extent such Derived
Information results from an error or omission in any
Seller-Provided Information (as defined in Section 11 below).
(c) It is not necessary to qualify the Trust Agreement under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
(d) Immediately prior to the assignment of the Initial Contracts to
the Trust as contemplated by the Sale and Servicing Agreement, the
Trust Depositor (i) had good title to, and was the sole owner of, each
Initial Contract and the other property purported to be transferred by
it to the Trust pursuant to the Sale and Servicing Agreement free and
clear of any pledge, mortgage, lien, security interest or other
encumbrance (collectively, "Liens"), (ii) had not assigned to any
person any of its right, title or interest in such Contracts or
property or in the Transfer and Sale Agreement and (iii) will have the
power and authority to sell such Contracts and property to the Trust,
and upon the execution and delivery of the Sale and Servicing
Agreement by the Owner Trustee on behalf of the Trust, the Trust will
have acquired all of the Trust Depositor's right, title and interest
in and to such Contracts and property free and clear of any Lien
(except for the Lien of the Indenture).
(e) Upon the execution and delivery of the Transfer and Sale
Agreement, the Sale and Servicing Agreement and the Indenture by the
respective parties thereto and the filing with the Secretaries of
State of Illinois and Nevada of UCC-1 financing statements evidencing
the conveyance of the Initial Contracts (i) by Eaglemark to the Trust
Depositor, (ii) by the Trust Depositor to the Trust and (iii) by the
Trust to the Indenture Trustee for the benefit of the Noteholders, the
Trust's conveyance of the Trust Property to the Indenture Trustee
pursuant to the
5
<PAGE>
Indenture will vest in the Indenture Trustee, for the benefit of
the Noteholders, a first priority perfected security interest
therein, subject to no prior Lien.
(f) Immediately prior to the assignment of any Subsequent Contract to
the Trust as contemplated by a Subsequent Purchase Agreement, the
Trust Depositor (i) had good title to, and was the sole owner of, each
Subsequent Contract and the other property purported to be transferred
by it to the Trust pursuant to such Subsequent Purchase Agreement free
and clear of any Liens, (ii) had not assigned to any person any of its
right, title or interest in such Contracts or property or in the
Transfer and Sale Agreement and (iii) will have the power and
authority to sell such Contracts and property to the Trust, and upon
the execution and delivery of such Subsequent Purchase Agreement by
the Owner Trustee on behalf of the Trust, the Trust will have acquired
all of the Trust Depositor's right, title and interest in and to such
Contracts and property free and clear of any Lien (except for the Lien
of the Indenture).
(g) Upon the execution and delivery of a Subsequent Transfer
Agreement and a Subsequent Purchase Agreement by the respective
parties thereto and the filing with the Secretaries of State of
Illinois and Nevada of UCC-1 financing statements evidencing the
conveyance of such Subsequent Contracts (i) by Eaglemark to the Trust
Depositor, (ii) by the Trust Depositor to the Trust and (iii) by the
Trust to the Indenture Trustee for the benefit of the Noteholders, the
Trust's conveyance of the Trust Property to the Indenture Trustee
pursuant to the Indenture will vest in the Indenture Trustee, for the
benefit of the Noteholders, a first priority perfected security
interest therein, subject to no prior Lien.
(h) Neither the Trust Depositor nor the Trust is, and neither the
issuance and sale of the Offered Securities nor the activities of the
Trust pursuant to the Indenture or the Trust Agreement will cause the
Trust Depositor or the Trust to be, an "investment company" or under
the "control" of an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "Investment
Company Act").
(i) This Agreement has been duly authorized, executed and delivered
by Eaglemark and the Trust Depositor.
(j) None of Eaglemark, the Trust Depositor, any of their Affiliates
or anyone acting on behalf of Eaglemark, the Trust Depositor or any of
their Affiliates has taken any action that would require qualification
of the Trust Agreement under the Trust Indenture Act or registration
of the Trust Depositor under the Investment Company Act, nor will
Eaglemark, the Trust Depositor or any of their Affiliates act, nor
have they authorized or will they authorize any person to act, in such
manner.
(k) Neither the Trust Depositor nor Eaglemark is in violation of any
provision of any existing law or regulation or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract,
6
<PAGE>
indenture, mortgage, deed of trust, loan agreement, note, lease or
other instrument to which it is a party or by which it is bound or
to which any of its property is subject, which violations or
defaults separately or in the aggregate would have a material
adverse effect on the Trust Depositor, Eaglemark or the Trust.
(l) Neither the issuance and sale of the Offered Securities, nor the
execution and delivery by the Trust Depositor or Eaglemark of this
Agreement, the Offered Securities, the Sale and Servicing Agreement,
the Transfer and Sale Agreement, the Trust Agreement, the
Administration Agreement, the Lockbox Agreement, each Subsequent
Purchase Agreement, the Indenture or each Subsequent Transfer
Agreement, nor the incurrence by the Trust Depositor or Eaglemark of
the obligations herein and therein set forth, nor the consummation of
the transactions contemplated hereunder or thereunder, nor the
fulfillment of the terms hereof or thereof does or will (i) violate
any existing law or regulation, applicable to it or its properties or
by which it or its properties are or may be bound or affected, (ii)
conflict with, or result in a breach of, or constitute a default
under, any indenture, contract, agreement, deed, lease, mortgage or
instrument to which it is a party or by which it or its properties are
bound or (iii) result in the creation or imposition of any lien upon
any of its property or assets, except for those encumbrances created
under the Transfer and Sale Agreement, the Sale and Servicing
Agreement, the Trust Agreement, the Indenture, each Subsequent
Purchase Agreement or each Subsequent Transfer Agreement.
(m) All consents, approvals, authorizations, orders, filings,
registrations or qualifications of or with any court or any other
governmental agency, board, commission, authority, official or body
required in connection with the execution and delivery by the Trust
Depositor and Eaglemark of this Agreement, the Offered Securities, the
Sale and Servicing Agreement, the Transfer and Sale Agreement, the
Trust Agreement, the Administration Agreement, the Indenture, the
Lockbox Agreement, each Subsequent Purchase Agreement or each
Subsequent Transfer Agreement, or to the consummation of the
transactions contemplated hereunder and thereunder, or to the
fulfillment of the terms hereof and thereof, have been or will have
been obtained on or before the Closing Date (and on or before each
Subsequent Transfer Date in the case of Subsequent Contracts being
transferred to the Trust).
(n) All actions required to be taken by the Trust Depositor and
Eaglemark as a condition to the offer and sale of the Offered
Securities as described herein or the consummation of any of the
transactions described in the Prospectus have been or, prior to the
Closing Date (or each Subsequent Transfer Date in the case of
Subsequent Contracts being transferred to the Trust), will be taken.
(o) The representations and warranties of each of the Trust Depositor
and Eaglemark in (or incorporated in) the Sale and Servicing
Agreement, the Transfer and Sale Agreement, the Trust Agreement, the
Indenture, the Administration Agreement, the Lockbox Agreement, each
Subsequent Purchase Agreement and each Subsequent Transfer Agreement
and made in any Officers' Certificate of the
7
<PAGE>
Trust Depositor or Eaglemark delivered pursuant to the Sale and
Servicing Agreement, the Indenture, the Transfer and Sale
Agreement, each Subsequent Purchase Agreement and each Subsequent
Transfer Agreement will be true and correct at the time made and on
and as of the Closing Date (and on each Subsequent Transfer Date in
the case of Subsequent Contracts being transferred to the Trust) as
if set forth herein.
(p) The Initial Contracts conveyed to the Trust had aggregate
outstanding balances determined as of the Initial Cutoff Date in the
amount set forth in the Prospectus.
(q) Each of the Trust Depositor and Eaglemark agrees it shall not
grant, assign, pledge or transfer to any Person a security interest
in, or any other right, title or interest in, the Contracts, except as
provided in the Sale and Servicing Agreement, the Trust Agreement, the
Indenture, the Transfer and Sale Agreement, each Subsequent Purchase
Agreement and each Subsequent Transfer Agreement, and each agrees to
take all action necessary in order to maintain the security interest
in the Contracts granted pursuant to the Sale and Servicing Agreement,
the Trust Agreement, the Indenture, the Transfer and Sale Agreement,
each Subsequent Purchase Agreement and each Subsequent Transfer
Agreement.
(r) There are no actions, proceedings or investigations pending, or
to the best knowledge of either the Trust Depositor or Eaglemark,
threatened against the Trust Depositor or Eaglemark before any court
or before any governmental authority of arbitration board or tribunal
which, if adversely determined, could materially and adversely affect,
either in the individual or in the aggregate, the financial position,
business, operations or prospects of the Trust Depositor or Eaglemark.
(s) For Illinois income, franchise and excise tax purposes, under the
provisions of Illinois law as of the Closing Date, the Trust will not
be classified as an association taxable as a corporation. Each
Certificateholder will instead be treated for Illinois income,
franchise and excise tax purposes as the owner of an interest in the
Trust, in conformity with the federal income tax treatment of such
Certificateholder. For Certificateholders who are not residents of,
or otherwise subject to tax in Illinois, ownership of a Certificate
will not be a factor in determining whether such Certificateholders
are subject to Illinois income, franchise or excise taxes as the case
may be.
(t) Under generally accepted accounting principles, Eaglemark will
report its transfer of the Contracts to the Trust Depositor pursuant
to the Transfer and Sale Agreement as a sale of the Contracts.
2. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. Each Underwriter
represents and warrants to, and agrees with, the Trust Depositor that:
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(a) It has not offered or sold, and will not offer or sell, any Offered
Security 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 that have not resulted and will not result in an
offer to the public in the United Kingdom for the purposes of the Public
Offers of Securities Regulation 1995.
(b) It has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation
to the Offered Securities in, from or otherwise involving the United
Kingdom.
(c) It has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the Offered Securities to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom such document may otherwise
lawfully be issued or passed on.
3. PURCHASE AND SALE. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Trust
Depositor agrees to sell to each Underwriter, and each Underwriter agrees to
purchase from the Trust Depositor, each of the Offered Securities in the
principal amounts and at the purchase prices set forth opposite the name of
each Underwriter in Schedule I hereto.
4. DELIVERY AND PAYMENT. Delivery of and payment for the Offered
Securities shall be made at 10:00 AM, Chicago time, on __________, 199__, or
such later date (not later than _________, 199__) as the Underwriters shall
designate, which date and time may be postponed by agreement among the
Underwriters and the Trust Depositor (such date and time of delivery and
payment for the Offered Securities being herein called the "Closing Date").
Delivery of the Offered Securities shall be made to the Underwriters for the
account of the Underwriters against payment by the Underwriters of the
purchase price thereof payable in same day funds wired to such bank as may be
designated by the Trust Depositor, or such other manner of payment as may be
agreed by the Trust Depositor and the Underwriters. Delivery of the Offered
Securities shall be made at such location as the Underwriters shall
reasonably designate at least one business day in advance of the Closing
Date, and payment for the Offered Securities shall be made at the office of
Winston & Strawn, 35 Wacker Drive, Chicago, Illinois. The Offered Securities
shall be registered in such names and in such denominations as the
Underwriters may request not less than three full business days in advance of
the Closing Date.
The Trust Depositor agrees to authorize and direct the Trustee to have
the Offered Securities available for inspection, checking and packaging by
the Underwriters in New York, New York, not later than 1:00 PM on the
business day prior to the Closing Date.
5. OFFERING BY THE UNDERWRITERS: It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public
(which may include selected dealers), as set forth in the Prospectus.
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6. AGREEMENTS. The Trust Depositor and Eaglemark, jointly and
severally, agree with the Underwriters that:
(a) Eaglemark and the Trust Depositor will use their respective best
efforts to cause the Registration Statement, and any amendment
thereto, if not effective at the Execution Time, to become effective.
Prior to the termination of the offering of the Offered Securities,
Eaglemark will not file any amendment of the Registration Statement or
supplement to the Prospectus unless Eaglemark has furnished you a copy
for your review prior to filing and will not file any such proposed
amendment or supplement to which you reasonably object. Subject to
the foregoing sentence, if the Registration Statement has become or
becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), Eaglemark will file the
Prospectus, properly completed, and any supplement thereto, with the
Commission pursuant to and in accordance with the applicable paragraph
of Rule 424(b) within the time period prescribed and will provide
evidence satisfactory to you of such timely filing.
(b) Eaglemark will advise you promptly of any proposal to amend or
supplement the Registration Statement, as filed, or the Prospectus and
will not effect such amendment or supplement without your consent,
which consent will not unreasonably be delayed or withheld; Eaglemark
will also advise you promptly of any request by the Commission for any
amendment of or supplement to the Registration Statement or the
Prospectus or for any additional information; and Eaglemark will also
advise you promptly of the effectiveness of the Registration Statement
(unless the Registration Statement has become effective prior to
Execution Time) and any amendment thereto, when the Prospectus, and
any supplement thereto, shall have been filed with the Commission
pursuant to Rule 424(b) and of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or the institution or threat of any proceeding for that purpose, and
Eaglemark will use its best efforts to prevent the issuance of any
such stop order and to obtain as soon as possible the lifting of any
issued stop order.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
or if it is necessary at any time to amend the Registration Statement
or supplement the Prospectus to comply with the Act or the Exchange
Act or the respective rules thereunder, Eaglemark promptly will notify
you and will prepare and file, or cause to be prepared and filed, with
the Commission, subject to the second sentence of paragraph (a) of
this Section 6, an amendment or supplement that will correct such
statement or omission or effect such compliance. Any such filing
shall not operate as a waiver or limitation of any right of the
Underwriters hereunder.
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(d) As soon as practicable, but not later than fourteen months after
the Closing Date, the Trust Depositor will cause the Trust to make
generally available to holders of the Offered Securities an earning
statement of the Trust covering a period of at least twelve months
beginning after the Closing Date that will satisfy the provisions of
Section 11(a) of the Act.
(e) Eaglemark will furnish to the Underwriters copies of the
Registration Statement (one of which will be signed and will include
all exhibits), each related preliminary prospectus (including the
Preliminary Prospectus Supplement, if any), the Prospectus and all
amendments and supplements to such documents, in each case as soon as
available and in such quantities as the Underwriters request.
Eaglemark will pay the expenses of printing or other production of all
documents relating to the offering.
(f) The Trust Depositor or Eaglemark will furnish to the Underwriters
and to Counsel for the Underwriters, without charge, during the period
referred to in paragraph (c) below, as many copies of the Prospectus
and any amendments and supplements thereto as the Underwriters may
reasonably request. The Trust Depositor will pay the expenses of
printing or other production of all documents relating to the
offering.
(g) The Trust Depositor will arrange for the qualification of the
Offered Securities for sale by the Underwriters under the laws of such
jurisdictions as the Underwriters may designate and will maintain such
qualifications in effect so long as required for the sale of the
Offered Securities. The Trust Depositor will promptly advise the
Underwriters of the receipt by the Trust Depositor of any notification
with respect to the suspension of the qualification of the Offered
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(h) The Trust Depositor and Eaglemark will cooperate with the
Underwriters and use their best efforts to permit the Offered
Securities to be eligible for clearance and settlement through The
Depository Trust Company.
(i) For a period from the date of this Agreement until the retirement
of the Offered Securities, the Servicer will deliver to you the
monthly servicing report, the annual statements of compliance and the
annual independent certified public accountants' reports furnished to
the Indenture Trustee or the Owner Trustee pursuant to the Sale and
Servicing Agreement, the Indenture, the Trust Agreement or the
Administration Agreement, as soon as such statements and reports are
furnished to the Indenture Trustee or the Owner Trustee.
(j) So long as any of the Offered Securities is outstanding,
Eaglemark will furnish to you (i) as soon as practicable after the end
of the fiscal year all documents required to be distributed to holders
of Offered Securities or filed with the Commission pursuant to the
Exchange Act or any order of the Commission thereunder and (ii) from
time to time, any other information concerning
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Eaglemark or the Trust Depositor filed with any government or
regulatory authority that is otherwise publicly available, as you
may reasonably request.
(k) To the extent, if any, that the rating provided with respect to
the Offered Securities by Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Ratings Service ("S&P" and together with Moody's,
the "Rating Agencies") is conditional upon the furnishing of documents
or the taking of any actions by the Trust Depositor, the Trust
Depositor shall furnish such documents and take such actions.
(l) Until 30 days following the Closing Date, neither the Trust
Depositor nor any trust or other entity originated, directly or
indirectly, by the Trust Depositor or Eaglemark will, without the
prior written consent of the Underwriters, offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or announce the
offering of, any asset-backed securities collateralized by motorcycle
contracts originated in the United States (other than the Offered
Securities).
(m) The Trust Depositor will enter into the Trust Agreement,
Eaglemark will enter into the Administration Agreement, the Trust
Depositor, Eaglemark, the Indenture Trustee and the Trust will enter
into the Sale and Servicing Agreement and Eaglemark and the Trust
Depositor will enter into the Transfer and Sale Agreement on or prior
to the Closing Date.
(n) Eaglemark will cause any Computational Materials (as defined in
Section 11 hereof) with respect to the Offered Securities which are
delivered by the Underwriters to Eaglemark pursuant to Section 11
hereof to be filed with the Commission on a Current Report on Form 8-K
on or before the date of the filing of the Prospectus pursuant to Rule
424.
(o) The Trust Depositor and Eaglemark will cause Winston & Strawn to
deliver to the Underwriters or on before each Subsequent Transfer
Date, one or more opinions, addressed to the Underwriters, with
respect to the transfer of Subsequent Contracts substantially in the
form of the opinions delivered by Winston & Strawn on the Closing Date
with respect to the transfer of the Initial Contracts.
(p) The Trust Depositor will deliver to the Underwriters on or before
each Subsequent Transfer Date each Officer's Certificate required to
be furnished to the Indenture Trustee pursuant to Section 2.04(b) of
the Sale and Servicing Agreement.
7. PAYMENT OF EXPENSES, ETC. If the transactions contemplated by this
Agreement are consummated or this Agreement is terminated pursuant to Section
12, the Trust Depositor will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the printing and filing
of the Registration Statement as originally filed and of each amendment
thereto, (ii) the printing of the Preliminary Prospectus Supplement, the
Prospectus and each amendment thereto, (iii) the fees of the Trustee and its
counsel, (iv) the preparation,
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issuance and delivery of the Offered Securities to the Underwriters, (v) the
fees and disbursements of the Trust Depositor's accountants, (vi) the
qualification of the Offered Securities under securities laws in accordance
with the provisions of Section 6(g), including filing fees in connection
therewith, (vii) the printing and delivery to the Underwriters of copies of
the Registration Statement as originally filed and of each amendment thereto,
(vii) the printing and delivery to the Underwriters of copies of the
Prospectus and of each amendment thereto, (ix) the printing and delivery to
the Underwriters of copies of any blue sky or legal investment survey
prepared in connection with the Offered Securities and (x) any fees charged
by Rating Agencies for the rating of the Offered Securities.
8. CONDITIONS TO THE OBLIGATION OF THE UNDERWRITERS. The obligation
of the Underwriters to purchase the Offered Securities shall be subject to
the accuracy of the representations and warranties on the part of the Trust
Depositor and Eaglemark contained herein at the Execution Time and the
Closing Date, to the accuracy of the statements of the Trust Depositor and
Eaglemark made in any certificates pursuant to the provisions hereof, to the
performance by the Trust Depositor and Eaglemark of their respective
obligations hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Underwriters agree in writing to a
later time, the Registration Statement shall have become effective not
later than (i) 6:00 P.M. New York City time on the date of
determination of the public offering price, if such determination
occurs at or prior to 3:00 P.M. New York City time on such date or
(ii) 12:00 noon New York City time on the business day following the
day on which the public offering price was determined, if such
determination occurs after 3:00 P.M. New York City time on such date.
(b) The Prospectus and any supplements thereto shall have been filed
(if required) with the Commission in accordance with the Rules and
Regulations and Sections 1(a) and 1(b) hereof, and prior to the
Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or, to the knowledge of the
Trust Depositor or you, shall be contemplated by the Commission or by
any authority administering any state securities or blue sky law.
(c) The Trust Depositor shall have furnished to the Underwriters the
opinion of Winston & Strawn, counsel for the Trust Depositor, dated
the Closing Date and satisfactory in form and substance to the
Underwriters and Counsel for the Underwriters, to the effect that:
(i) the Trust Depositor has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Nevada, with full corporate power and authority to own
its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of the State of
Illinois;
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(ii) each of the Transfer and Sale Agreement, the Sale and
Servicing Agreement and the Trust Agreement have been duly authorized,
executed and delivered by the Trust Depositor, and constitutes a
legal, valid and binding obligation of the Trust Depositor enforceable
against the Trust Depositor in accordance with its terms (subject, as
to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect);
(iii) this Agreement has been duly authorized, executed and
delivered by the Trust Depositor;
(iv) The direction by the Trust Depositor to the Owner Trustee
to authenticate the Certificates has been duly authorized by the Trust
Depositor and, when the Certificates have been duly executed,
authenticated and delivered by the Owner Trustee in accordance with
the Trust Agreement and delivered and paid for to the Trust Depositor
pursuant to the Sale and Servicing Agreement, the Certificates will be
validly issued and outstanding and entitled to the benefits of the
Trust Agreement;
(v) The direction by the Trust Depositor to the Indenture
Trustee to authenticate the Notes has been duly authorized by the
Trust Depositor and, when the Notes have been duly executed and
delivered by the Owner Trustee and when authenticated by the Indenture
Trustee in accordance with the Indenture and delivered and paid for
pursuant to this Agreement, the Notes will constitute legal, valid and
binding obligations of the Trust (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditor's rights generally from
time to time in effect) and will be entitled to the benefits of the
Indenture;
(vi) no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
consummation of the transactions contemplated herein or in the
Transfer and Sale Agreement, the Sale and Servicing Agreement, and the
Indenture (collectively, the "Basic Documents"), except such as may be
required under the blue sky or securities laws of any jurisdiction in
connection with the purchase and sale of the Offered Securities by the
Underwriters, the filing of the UCC-1 financing statements relating to
the conveyance of the Contracts by Eaglemark to the Trust Depositor
and of the Contracts and the other Trust Property by the Trust
Depositor to the Trust and by the Trust to the Indenture Trustee on
behalf of the Noteholders, and such other approvals (which shall be
specified in such opinion) as have been obtained and filings as have
been made or are in the process of being made;
(vii) none of the sale of the Contracts by Eaglemark to the
Trust Depositor pursuant to the Transfer and Sale Agreement, the sale
of the Trust Property to the Trust pursuant to the Sale and Servicing
Agreement, the pledge of the Trust Property to the Indenture Trustee,
the issue and sale of the Notes or the Certificates, the execution and
delivery of this Agreement, the Sale and Servicing
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Agreement, the Transfer and Sale Agreement, the Trust Agreement or
the Indenture Agreement, the consummation of any other of the
transactions herein or therein contemplated or the fulfillment of
the terms hereof or thereof will conflict with, result in a breach
or violation of, or constitute a default under, any law binding on
the Trust Depositor or the charter or bylaws of the Trust Depositor
or the terms of any indenture or other agreement or instrument
known to such counsel and to which the Trust Depositor is a party
or by which it is bound, or any judgment, order or decree known to
such counsel to be applicable to the Trust Depositor of any court,
regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Trust Depositor;
(viii) there are no actions, proceedings or investigations
pending or, to the best of such counsel's knowledge after due inquiry,
threatened before any court, administrative agency or other tribunal
(A) asserting the invalidity of any of the Basic Documents,
(B) seeking to prevent the consummation of any of the transactions
contemplated by any of the Basic Documents or the execution and
delivery thereof or (C) that might materially and adversely affect the
performance by the Trust Depositor of its obligations under, or the
validity or enforceability of, this Agreement or any Basic Document;
(ix) to the best knowledge of such counsel and except as set
forth in the Prospectus, no default exists and no event has occurred
which, with notice, lapse of time or both, would constitute a default
in the due performance and observance of any term, covenant or
condition of any agreement to which the Trust Depositor is a party or
by which it is bound, which default is or would have a material
adverse effect on the financial condition, earnings, prospects,
business or properties of the Trust Depositor, taken as a whole;
(x) the provisions of the Transfer and Sale Agreement are
effective to transfer to the Trust Depositor all right, title and
interest of Eaglemark in and to the Contracts, and to the knowledge of
such counsel, the other Trust Property will be owned by the Trust
Depositor free and clear of any Lien except for the Lien of the Sale
and Servicing Agreement and the Indenture;
(xi) the provisions of the Sale and Servicing Agreement are
effective to transfer to the Trust all right, title and interest of
the Trust Depositor in and to the Collateral and the Contracts and to
the knowledge of such counsel, the other Collateral, will be owned by
the Trust free and clear of any Lien except for the Lien of the
Indenture;
(xii) the provisions of the Indenture are effective to create,
in favor of the Indenture Trustee for the benefit of the Noteholders
as security for the Trust's obligations under the Notes, a valid
security interest in the Contracts and that portion of the other
Collateral which is subject to Article 9 of the Illinois Uniform
Commercial Code (the "UCC Collateral") and the proceeds thereof;
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(xiii) the form UCC-1 financing statements naming (A) Eaglemark
as seller and the Trust Depositor as purchaser, (B) the Trust
Depositor as seller and the Trust as purchaser and (C) the Trust, as
debtor, and the Indenture Trustee, as secured party are in appropriate
form for filing with the Secretary of State of the State of Nevada,
the Secretary of State of the State of Illinois; the interest of the
Indenture Trustee in the Contracts and the proceeds thereof and, to
the extent that the filing of a financing statement is effective to
perfect an interest in the other Trust Property under Article 9 of the
Illinois Uniform Commercial Code and the Nevada Uniform Commercial
Code, the other Trust Property will be perfected upon the filing of
such financing statements in such filing offices; and no other
interest of any other purchaser from or creditor of Eaglemark, the
Trust Depositor or the Trust is equal or prior to the interest of the
Trustee in the Contracts and such other Trust Property;
(xiv) the Contracts are "chattel paper" under Article 9 of the
Illinois Uniform Commercial Code and the Nevada Uniform Commercial
Code;
(xv) the Basic Documents conform in all material respects with
the descriptions thereof contained in the Prospectus;
(xvi) the statements in the Prospectus under the headings "Risk
Factors" and "Certain Legal Aspects of the Contracts", to the extent
they constitute matters of law or legal conclusions with respect
thereto, have been reviewed by such counsel and are correct in all
material respects;
(xvii) the statements contained in the Prospectus under the
headings "Description of the Notes", "Description of the Certificates"
and "Certain Information Regarding the Offered Securities", insofar as
such statements constitute a summary of the Offered Securities and the
Basic Documents, constitute a fair summary of such documents;
(xviii) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended;
(xix) the Trust has been duly formed and is validly existing as
a statutory business trust and is in good standing under the laws of
the State of Delaware, with full power and authority to execute,
deliver and perform its obligations under the Sale and Servicing
Agreement, the Indenture, the Administration Agreement, and the Notes
and the Certificates;
(xx) the Indenture, the Sale and Servicing Agreement and the
Administration Agreement have been duly authorized and, when duly
executed and delivered by the Owner Trustee, will constitute the
legal, valid and binding obligations of the Trust, enforceable against
the Trust in accordance with their terms, except (A) the
enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and (B) the remedy of specific
performance and
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injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought;
(xxi) the Trust Depositor is not, nor will the Trust Depositor
become as a result of the offer and sale of the Offered Securities as
contemplated in the Prospectus and the Basic Documents, an "investment
company" as defined in the Investment Company Act or a company
"controlled by" an "investment company" within the meaning of the
Investment Company Act;
(xxii) to the best knowledge of such counsel, the Trust
Depositor has obtained all material licenses, permits and other
governmental authorizations that are necessary to the conduct of
its business; such licenses, permits and other governmental
authorizations are in full force and effect, and the Trust
Depositor is in all material respects complying therewith; and the
Trust Depositor is otherwise in compliance with all laws, rules,
regulations and statutes of any jurisdiction to which it is
subject, except where non-compliance would not have a material
adverse effect on the Trust Depositor;
(xxiii) all actions required to be taken, and all filings
required to be made, by the Trust Depositor or Eaglemark under the Act
and the Exchange Act prior to the sale of the Offered Securities have
been duly taken or made;
(xxiv) to the best of such counsel's knowledge and information,
there are no legal or governmental proceedings pending or threatened
that are required to be disclosed in the Registration Statement, other
than those disclosed therein;
(xxv) to the best of such counsel's knowledge and information,
there are no contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described or referred to in
the Registration Statement or to be filed as exhibits thereto other
than those described or referred to therein or filed or incorporated
by reference as exhibits thereto, the descriptions thereof or
references thereto are correct, and no default exists in the due
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other instrument so described, referred
to, filed or incorporated by reference;
(xxvi) the Registration Statement has become effective under the
Act, any required filings of the Base Prospectus, any preliminary Base
Prospectus, any Preliminary Prospectus Supplement and the Prospectus,
and any supplements thereto, pursuant to Rule 424(b) have been made in
the manner and within the time period required by Rule 424(b), and, to
the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued, and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and the Registration Statement and the
Prospectus, and each amendment or supplement thereto, as of their
respective effective or issue dates, complied as to form in all
material respects with the requirements of
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the Act, the Exchange Act, the Trust Indenture Act and the Rules and
Regulations; and
(xxvii) such counsel has examined the Registration Statement and
the Prospectus and nothing has come to such counsel's attention that
would lead such counsel to believe that the Registration Statement
(exclusive of any Computational Materials or any financial, numerical
and statistical information contained therein or omitted therefrom, as
to which such counsel may make no statement), at the time the
Registration Statement became effective, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus (exclusive of any
Computational Materials or any financial, numerical and statistical
information contained therein or omitted therefrom, as to which such
counsel may make no statement), at the date thereof or at the Closing
Date, included or includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading.
Such counsel shall also state that such counsel has no reason to believe
that at the Execution Time the Prospectus contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading or that, at the Closing Date, the Prospectus
includes an untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
Illinois, the State of New York, the State of Delaware or the United States,
to the extent such counsel deems proper and specifies in such opinion, upon
the opinion of other counsel of good standing whom such counsel believes to
be reliable and who are satisfactory to Counsel for the Underwriters and (B)
as to matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Trust Depositor and public
officials.
All references in this Section 8(c) to the Prospectus shall be deemed to
include any amendment or supplement thereto at the Closing Date.
(d) The Underwriters shall have received the opinion of
______________., General Counsel for Eaglemark, dated the Closing Date
and satisfactory in form and substance to the Underwriters and to
Counsel for the Underwriters, to the effect that:
(i) Eaglemark is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction wherein it owns or leases material properties or conducts
material business and which requires such qualification;
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(ii) Eaglemark has obtained all material licenses, permits and
other governmental authorizations that are necessary to the conduct of
its business; such licenses, permits and other governmental
authorizations are in full force and effect, and Eaglemark is in all
material respects complying therewith and Eaglemark is otherwise in
compliance with all laws, rules, regulations and statutes of any
jurisdiction to which it is subject, except where non-compliance would
not have a material adverse effect on Eaglemark;
(iii) none of the execution and delivery of this Agreement or
the Transfer and Sale Agreement, the consummation of any of the
transactions therein contemplated or the fulfillment of the terms
thereof will conflict with, result in a breach or violation of, or
constitute a default under, any law or the charter or bylaws of
Eaglemark or the terms of any indenture or other agreement or
instrument known to such counsel and to which Eaglemark or the Trust
Depositor is a party or by which it is bound or any judgment, order or
decree known to such counsel to be applicable to Eaglemark or the
Trust Depositor of any court, regulatory body, administrative agency,
governmental body, or arbitrator having jurisdiction over Eaglemark or
the Trust Depositor.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
Illinois or the United States, to the extent such counsel deems proper and
specifies in such opinion, upon the opinion of other counsel of good standing
whom such counsel believes to be reliable and who are satisfactory to Counsel
for the Underwriters and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers of Eaglemark and public
officials.
(e) The Underwriters shall have received the opinion of Winston &
Strawn, counsel for Eaglemark, dated the Closing Date and satisfactory
in form and substance to the Underwriters and to Counsel for the
Underwriters, to the effect that:
(i) Eaglemark has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Nevada, with full corporate power and authority to own its properties
and conduct its business as described in the Prospectus;
(ii) this Agreement has been duly authorized, executed and
delivered by Eaglemark;
(iii) the Sale and Servicing Agreement has been duly authorized,
executed and delivered by Eaglemark and constitutes a legal, valid and
binding obligation of Eaglemark, enforceable against Eaglemark in
accordance with its terms (subject, as to the enforcement of remedies,
to applicable bankruptcy, reorganization, insolvency, moratorium, or
other laws affecting creditors' rights generally from time to time in
effect);
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(iv) the Transfer and Sale Agreement has been duly authorized,
executed and delivered by Eaglemark and constitutes a legal, valid and
binding obligation of Eaglemark, enforceable against Eaglemark in
accordance with its terms (subject, as to the enforcement of remedies,
to applicable bankruptcy, reorganization, insolvency, moratorium, or
other laws affecting creditors' rights generally from time to time in
effect);
(v) no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
consummation of the transactions contemplated herein or in any Basic
Document, except such as may be required under the blue sky or
securities laws of any jurisdiction in connection with the purchase
and sale of the Offered Securities by the Underwriters, the filing of
the UCC-1 financing statements relating to the conveyance of the
Contracts by Eaglemark to the Trust Depositor pursuant to the Transfer
and Sale Agreement and of the Contracts and other Trust Property to
the Trust and of the Contracts and other Trust Property to the
Indenture Trustee for the benefit of the Noteholders pursuant to the
Sale and Servicing Agreement, the Trust Agreement and the Indenture,
and such other approvals (which shall be specified in such opinion) as
have been obtained and filings as have been made or are in the process
of being made; and
(vi) none of the execution and delivery of this Agreement, the
Sale and Servicing Agreement, the Transfer and Sale Agreement, the
consummation of any of the transactions therein contemplated or the
fulfillment of the terms thereof will conflict with, result in a
breach or violation of, or constitute a default under, the charter or
bylaws of Eaglemark.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York, the State of Delaware, the State of Illinois or the United States, to
the extent such counsel deems proper and specifies in such opinion, upon the
opinion of other counsel of good standing whom such counsel believes to be
reliable and who are satisfactory to Counsel for the Underwriters and (B) as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of Eaglemark and public officials.
All references in this Section 8(e) to the Prospectus shall be deemed to
include any amendment or supplement thereto at the Closing Date.
(f) The Underwriters shall have received an opinion addressed to it
of Winston & Strawn, in its capacity as federal tax counsel for the
Trust Depositor, to the effect that the statements in the Prospectus
under the headings "Summary -- Tax Status" and "Federal Income Tax
Consequences" accurately describe the material federal income tax
consequences to holders of the Offered Securities. Winston & Strawn,
in its capacity as special ERISA counsel to the Trust Depositor, shall
have delivered an opinion to the effect that the statements in the
Prospectus under the headings "Summary -- ERISA Considerations" and
"ERISA Considerations", to the extent that they constitute statements
of matters
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of law or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and accurately describe the
material consequences to holders of the Offered Securities under
ERISA.
(g) The Underwriters shall have received from Counsel for the
Underwriters such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Offered Securities, the
Prospectus (as amended or supplemented at the Closing Date) and other
related matters as the Underwriters may reasonably require, and the
Trust Depositor shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such
matters.
(h) The Underwriters shall have received an opinion addressed to the
Underwriters, the Trust Depositor and the Servicer of
_____________________, counsel to the Owner Trustee and special
Delaware counsel for the Trust, dated the Closing Date and
satisfactory in form and substance to the Underwriters and Counsel for
the Underwriters, to the effect that:
(i) The Trust has been duly organized and is validly existing in
good standing as a "business trust" within the meaning of the Delaware
Business Trust Act, 12 Del. C. c.38.
(ii) The Trust Company is a Delaware banking corporation, duly
organized and validly existing in good standing under the laws of the
State of ___________ and has all necessary power and authority to
enter into, to deliver and perform its obligations under the Trust
Agreement and to act as the Owner Trustee and to enter into, deliver
and perform its obligations as Owner Trustee under each of the other
Operative Documents to which the Trust or the Owner Trustee, as the
case may be, is a party.
(iii) The execution, delivery and performance by the Trust of
each of the Operative Documents to which it is a party (i) has been
duly authorized by the Trust Agreement, and (ii) does not require the
consent or approval of, or the giving of notice to, the registration
with, or the taking of any other action in respect of any governmental
authority or agency of the United States federal government or the
State of Delaware regulating the banking and trust powers of the Trust
Company, other than the filing with the Secretary of State of a
certificate of trust pursuant to 12 Del.C. Section 3810, which filing
has been made. Upon the due execution and delivery of the Trust
Agreement by the Trust Company, the Trust Agreement duly authorizes
the Trust Company, acting alone, to execute and deliver, on behalf of
the Trust, each of the Operative Documents.
(iv) The Trust Agreement and each other Operative Document to
which the Trust is a party have been duly authorized, executed and
delivered by the Trust, and the Trust Agreement and each such other
Operative Document to the extent entered into by the Trust constitutes
a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with the terms thereof. The
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Trust Agreement constitutes the legal, valid and binding obligation
of the Trust Company enforceable against the Trust Company in
accordance with its terms.
(v) To the knowledge of such counsel, no litigation,
investigation or proceeding of or before any arbitrator, court,
tribunal or governmental authority is pending or threatened by or
against the Trust or the Trust Company (a) with respect to any of the
Operative Documents or any of the transactions contemplated thereby,
or (b) which if determined adversely against the Trust or the Trust
Company, as the case may be, individually or in the aggregate, would
materially and adversely affect the Trust Estate or the validity of,
or the right, power or authority of the Trust to enter into or perform
its obligations under, the Operative Documents.
(vi) To the knowledge of such counsel, there exist no liens
affecting the interests of the Trust in and to the Trust Estate
resulting from acts or omissions to act of or claims against the
Trust, except liens created by the Operative Documents.
(vii) Neither the execution and delivery by the Trust Company or
the Trust, as the case may be, of the Operative Documents, nor the
fulfillment of or compliance by the Trust Company or the Trust, as the
case may be, with the respective provisions thereof, conflicts with,
or results in a breach of the terms, conditions or provisions of, or
constitutes a default under, or results in a violation of, the charter
or by-laws of the Trust Company, any law of the State of Delaware or
any federal law of the United States of America governing the banking
and trust powers of the Trust Company or, to the best knowledge of
such counsel, any agreement, indenture, instrument, order, judgment or
decree to which the Trust Company, the Trust or any of their
respective properties is subject.
(viii) Insofar as Article 9 of the Uniform Commercial Code as in
effect in the State of Delaware (the "UCC") is applicable (without
regard to conflict of laws principles), and assuming that the security
interest in Eaglemark's rights in the Contracts and the proceeds
thereof that may be perfected under the UCC solely by the filing of a
financing statement with the Secretary of State (the "Eaglemark
Collateral"), has been duly created and has attached, upon the filing
of the Eaglemark Financing Statement with the Secretary of State, the
Trust Depositor will have a perfected security interest in all right,
title and interest of Eaglemark in the Eaglemark Collateral identified
in the Eaglemark Financing Statement.
(ix) Insofar as Article 9 of the UCC is applicable (without
regard to conflict of laws principles), and assuming that the security
interest in the Trust Depositor's rights in the Contracts and the
proceeds thereof that may be perfected under the UCC solely by the
filing of a financing statement with the Secretary of State (the
"Trust Depositor Collateral"), has been duly created and has attached,
upon the filing of the Trust Depositor Financing Statement with the
Secretary of State, the Trust will have a perfected security interest
in all right, title and interest
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of the Trust Depositor in the Trust Depositor Collateral identified
in the Trust Depositor Financing Statement.
(x) Insofar as Article 9 of the UCC is applicable (without
regard to conflict of laws principles), and assuming that the security
interest in the Trust's rights in the Contracts and the proceeds
thereof that may be perfected under the UCC solely by the filing of a
financing statement with the Secretary of State (the "Trust
Collateral"), has been duly created and has attached, upon the filing
of the Trust Financing Statement with the Secretary of State, the
Indenture Trustee will have a perfected security interest in all
right, title and interest of the Trust in the Trust Collateral
identified in the Trust Financing Statement.
(xi) Under 12 Del. C. Section 3805(b), no creditor of any
Certificateholder (including creditors of the Trust Depositor, as
Certificateholder) shall have any right to obtain possession of, or
otherwise exercise legal or equitable remedies with respect to, the
property of the Trust.
(xii) the Certificates have been duly authorized, executed and
authenticated by the Owner Trustee on behalf of the Trust and, when
the Certificates have been issued and delivered in accordance with the
instructions of the Trust Depositor, the Certificates will be validly
issued and entitled to the benefits of the Trust Agreement.
(i) The Underwriters shall have received an opinion addressed to the
Underwriters and the Trust Depositor of ____________________, counsel
to ____________________________ (the "Bank"), dated the Closing Date
and satisfactory in form and substance to the Underwriters and Counsel
for the Underwriters, to the effect that:
(i) the Bank is a banking corporation duly incorporated and
validly existing under the laws of the State of __________;
(ii) the Bank has the full corporate trust power to accept the
office of Indenture Trustee under the Indenture and to enter into and
perform its obligations under the Indenture and the Sale and Servicing
Agreement;
(iii) the execution and delivery of the Indenture, the Sale and
Servicing Agreement and the performance by the Bank of its obligations
under the Indenture and the Sale and Servicing Agreement have been
duly authorized by all necessary corporate action of the Bank and each
has been duly executed and delivered by the Bank;
(iv) the Indenture and the Sale and Servicing Agreement
constitute valid and binding obligations of the Bank enforceable
against the Bank in accordance with their terms under the laws of the
State of _________ and the federal law of the United States;
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<PAGE>
(v) the execution and delivery by the Bank of the Indenture and
the Sale and Servicing Agreement do not require any consent, approval
or authorization of, or any registration or filing with, any
___________ or United States federal governmental authority;
(vi) each of the Notes has been duly authenticated by the Bank,
as Indenture Trustee;
(vii) neither the consummation by the Bank of the transactions
contemplated in the Indenture or the Sale and Servicing Agreement nor
the fulfillment of the terms thereof by the Bank will conflict with,
result in a breach or violation of, or constitute a default under, any
law or the charter, bylaws or other organizational documents of the
Bank, or the terms of any indenture or other agreement or instrument
known to such counsel and to which the Bank or any of its subsidiaries
is a party or by which it is bound, or any judgment, order or decree
known to such counsel to be applicable to the Bank or any of its
subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Bank or
any of its subsidiaries;
(viii) to the knowledge of such counsel there is no action, suit
or proceeding pending or threatened against the Bank (as Indenture
Trustee under the Indenture or in its individual capacity) before or
by any governmental authority that, if adversely decided, would
materially and adversely affect the ability of the Bank to perform its
obligations under the Indenture or the Sale and Servicing Agreement;
and
(ix) the execution and delivery by the Bank of, and the
performance by the Bank of its obligations under, the Indenture and
the Sale and Servicing Agreement will not subject any of the property
or assets of the Trust, or any portion thereof, to any lien created by
or arising under the Bank that are unrelated to the transactions
contemplated in such Agreements.
(j) The Underwriters shall have received such opinions, addressed to
the Underwriters and dated the Closing Date, as are delivered to the
Rating Agencies.
(k) The Underwriters shall have received an opinion from Winston &
Strawn, counsel for the Trust Depositor, dated the Closing Date and
satisfactory in form and substance to the Underwriters and Counsel for
the Underwriters regarding 1) the true-sale of the Contracts by
Eaglemark to the Trust Depositor and 2) the true-sale or first
perfected security interest by the Trust Depositor to the Trust and
the conveyance by the Trust of the Contracts and other Trust Property
to the Indenture Trustee for the benefit of the Noteholders.
(l) The Underwriters shall have received an opinion from Winston &
Strawn, counsel for the Trust Depositor, dated the Closing Date and
satisfactory in form and substance to the Underwriters and Counsel for
the Underwriters regarding substantive consolidation.
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<PAGE>
(m) The Underwriters shall have received a certificate dated the
Closing Date of any of the Chairman of the Board, the President, the
Executive Vice President, any Vice President, the Treasurer, any
Assistant Treasurer, the principal financial officer or the principal
accounting officer of the Trust Depositor in which such officer shall
state that, to the best of his or her knowledge after reasonable
investigation:
(i) the representations and warranties of the Trust Depositor
contained in this Agreement and the Basic Documents are true and
correct; the Trust Depositor has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
under such agreements at or prior to the Closing Date;
(ii) since the date of the Prospectus, no material adverse
change, or any development involving a prospective material adverse
change, in or affecting particularly the business or properties of the
Trust Depositor has occurred; and
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission.
(n) The Underwriters shall have received a certificate dated the
Closing Date of any of the Chairman of the Board, the President, the
Executive Vice President, any Vice President, the Treasurer, any
Assistant Treasurer, the principal financial officer or the principal
accounting officer of Eaglemark in which such officer shall state
that, to the best of his or her knowledge after reasonable
investigation:
(i) the representations and warranties of Eaglemark contained in
this Agreement and the Basic Documents are true and correct; Eaglemark
has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied under such agreements at or prior to
the Closing Date;
(ii) since the date of the most recent financial information
included in the Prospectus, no material adverse change, or any
development involving a prospective material adverse change, in or
affecting particularly the business or properties of Eaglemark has
occurred; and
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission.
(o) The Underwriters shall have received evidence satisfactory to it
that, on or before the Closing Date, UCC-1 financing statements have
been or are being filed in the office of the Secretary of State of the
State of Nevada, the Secretary of State of the State of Illinois
reflecting the sale of the Contracts by Eaglemark to the Trust
Depositor and of the Contracts and other Trust Property by the Trust
Depositor to the Trust and the conveyance by the Trust of the
contracts and other Trust Property to the Indenture Trustee for the
benefit of the Noteholders.
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<PAGE>
(p) At the Execution Time and at the Closing Date, Arthur Andersen &
Co. shall have furnished to the Underwriters a letter or letters,
dated respectively as of the Execution Time and as of the Closing
Date, substantially in the forms of the drafts to which the
Underwriters have previously agreed and otherwise in form and
substance satisfactory to the Underwriters and to Counsel for the
Underwriters.
(q) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Prospectus, there shall not have
been any change or any development involving a prospective change in
or affecting the business or properties of Eaglemark or the Trust
Depositor the effect of which is, in the judgment of the Underwriters,
so material and adverse as to make it impractical or inadvisable to
market the Offered Securities as contemplated by the Prospectus.
(r) The Notes shall have been rated "Aaa" by Moody's and "AAA" by
S&P.
(s) The Certificates shall have been rated at least "___" by Moody's
and "____" by S&P.
(t) On or prior to the Closing Date, the Offered Securities shall
have been accepted for settlement through the facilities of the
Depository Trust Company.
(u) On the Closing Date, $___________ aggregate principal amount of
the Certificates shall have been issued and delivered to the Trust
Depositor.
(v) Prior to the Closing Date, the Trust Depositor shall have
furnished to the Underwriters such further information, certificates
and documents as the Underwriters may reasonably request.
If any of the conditions specified in this Section 8 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Underwriters and Counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Underwriters. Notice of such
cancellation shall be given to the Trust Depositor in writing or by telephone or
telegraph confirmed in writing.
9. REIMBURSEMENT OF EXPENSES. If the sale of the Offered Securities
provided for herein is not consummated because any condition to the obligation
of the Underwriters set forth in Section 8 hereof is not satisfied, because of
any refusal, inability or failure on the part of Eaglemark or the Trust
Depositor to perform any agreement herein or to comply with any provision hereof
other than by reason of a default by the Underwriters in payment for the Offered
Securities on the Closing Date, Eaglemark and the Trust Depositor will reimburse
the Underwriters upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
it in connection with the proposed purchase and sale of the Offered Securities.
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<PAGE>
10. INDEMNIFICATION AND CONTRIBUTION. (a) The Trust Depositor and
Eaglemark, jointly and severally, agree to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person who controls each Underwriter within the meaning of either the
Securities Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, Preliminary Prospectus Supplement,
the Prospectus or any information provided by the Trust Depositor or Eaglemark
to any holder or prospective purchaser of Offered Securities or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Trust Depositor
and Eaglemark will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made (x)
in the Preliminary Prospectus Supplement or the Prospectus, or in any amendment
thereof or supplement thereto, in reliance upon and in conformity with written
information furnished to Eaglemark by or on behalf of the Underwriters through
Salomon Smith Barney Inc. specifically for inclusion therein or (y) in any
Derived Information (as defined in Section 11 below) included by the
Underwriters in any Computational Materials provided by the Underwriters to
Eaglemark or any amendment or supplement thereof unless such untrue statement or
alleged untrue statement or omission or alleged omission made in any Derived
Information results from an error or omission in any Seller-Provided Information
(as defined herein). This indemnity agreement will be in addition to any
liability that the Trust Depositor or Eaglemark may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Trust Depositor and Eaglemark, their directors, their officers
and each person who controls the Trust Depositor or Eaglemark within the meaning
of either the Securities Act or the Exchange Act, to the same extent as the
foregoing indemnity from the Trust Depositor and Eaglemark to each Underwriter,
but only with reference to (x) written information relating to the Underwriters
furnished to the Trust Depositor by the Underwriters through Salomon Smith
Barney Inc. specifically for inclusion in the Registration Statement, the
Preliminary Prospectus Supplement or the Prospectus (or in any amendment or
supplement thereto) or (y) any Derived Information included by such Underwriter
in any Computational Materials provided by such Underwriter to Eaglemark or any
amendment or supplement thereof; PROVIDED, HOWEVER that the indemnity with
respect to clause (y) above shall not apply to any untrue statement or alleged
untrue statement or omission or alleged omission made in any Derived Information
that results from an error or omission in any Seller-Provided Information. This
indemnity agreement will be in addition to any liability that an Underwriter may
otherwise have. For the purpose of clause (x) of this indemnity, the Trust
Depositor and Eaglemark acknowledge that the statements set forth in the first
sentence of the next to the last paragraph and in the last paragraph of the
cover page and under the heading "Plan of Distribution" in the Preliminary
Prospectus Supplement and the
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Prospectus constitute the only information furnished in writing by or on
behalf of the Underwriters through Salomon Smith Barney Inc. for inclusion in
the Registration Statement, the Preliminary Prospectus Supplement or the
Prospectus (or in any amendment or supplement thereto).
(c) Upon receipt by an indemnified party under this Section 10 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
this Section 10, promptly notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at
the indemnifying party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying
party shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except as set
forth below); PROVIDED, HOWEVER, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party would present
such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
parties and the indemnifying party and the indemnified parties shall have
reasonably concluded that there may be legal defenses available to them
and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the
institution of such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit
or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 10 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Trust Depositor, Eaglemark and each
Underwriter agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which the Trust Depositor, Eaglemark and the several Underwriters may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Trust Depositor and Eaglemark on the one hand and by the
several Underwriters on the other from the offering of the Offered
Securities; PROVIDED, HOWEVER, that in no case shall any Underwriter be
responsible for any amount in excess of the
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purchase discount or commission applicable to the Offered Securities
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Trust
Depositor, Eaglemark and each Underwriter shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of the Trust Depositor and Eaglemark on the one hand and of
the several Underwriters on the other in connection with the statements or
omissions that resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Trust Depositor and
Eaglemark shall be deemed to be equal to the total net proceeds from the
offering (before deducting expenses), and benefits received by any
Underwriter shall be deemed to be equal to the total purchase discounts and
commissions received by such Underwriter from the Trust Depositor in
connection with the purchase of the Offered Securities hereunder. Relative
fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Trust Depositor
and Eaglemark on the one hand or the several Underwriters on the other. The
Trust Depositor, Eaglemark and the several Underwriters agree that it would
not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation that does not take account of
the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 10, each person
who controls any Underwriter within the meaning of either the Securities Act
or the Exchange Act and each director, officer, employee and agent of such
Underwriter shall have the same rights to contribution as such Underwriter,
and each person who controls the Trust Depositor or Eaglemark within the
meaning of either the Securities Act or the Exchange Act and each officer and
director of the Trust Depositor or Eaglemark shall have the same rights to
contribution as the Trust Depositor or Eaglemark, subject in each case to the
applicable terms and conditions of this paragraph (d).
11. COMPUTATIONAL MATERIALS. It is understood that the Underwriters
may provide to prospective investors certain Computational Materials and ABS
Term Sheets in connection with offering of the Offered Securities, subject to
the following conditions:
(a) Each Underwriter hereby agrees to comply with applicable laws
and regulations in connection with the use of Computational Materials,
including the No-Action Letter of May 20, 1994 issued by the Commission to
Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated
and Kidder Structured Asset Corporation, as made applicable to other issuers
and underwriters by the Commission in response to the request of the Public
Securities Association dated May 24, 1994 (collectively, the "Kidder/PSA
Letter"), as well as the PSA Letter referred to below. Each Underwriter
hereby agrees to comply with applicable laws and regulations in connection
with the use of ABS Term Sheets, including the No Action Letter of February
17, 1995 issued by the Commission to the Public Securities Association (the
PSA Letter" and, together with the Kidder/PSA Letter, the "No-Action
Letters").
(b) For purposes hereof, "Computational Materials" as used herein
shall have the meaning given such term in the No-Action Letters, but shall
include only those Computational Materials that have been prepared or
delivered to prospective investors by or at
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the direction of the Underwriters. For purposes hereof, "ABS Term Sheets"
and "Collateral Term Sheets" as used herein shall have the meanings given
such terms in the PSA Letter but shall include only those ABS Term Sheets or
Collateral Term Sheets that have been prepared or delivered to prospective
investors by or at the direction of the Underwriters.
(c) (i) All Computational Materials and ABS Term Sheets provided
to prospective investors that are required to be filed with the Commission
pursuant to the No-Action Letters shall bear a legend including the following
statement:
"THE INFORMATION HEREIN IS PRELIMINARY, AND WILL BE SUPERSEDED BY THE
APPLICABLE PROSPECTUS SUPPLEMENT AND BY ANY OTHER INFORMATION
SUBSEQUENTLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION."
(ii) In the case of Collateral Term Sheets, such legend shall also
include the following statement:
"THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY THE
DESCRIPTION OF THE ASSETS CONTAINED IN THE PROSPECTUS SUPPLEMENT
RELATING TO THE SECURITIES AND [EXCEPT WITH RESPECT TO THE INITIAL
COLLATERAL TERM SHEET] SUPERSEDES ALL INFORMATION CONTAINED IN ANY
COLLATERAL TERM SHEETS RELATING TO THE COLLATERAL PREVIOUSLY PROVIDED
BY SALOMON SMITH BARNEY INC."
Eaglemark shall have the right to require additional specific legends or
notations to appear on any Computational Materials or ABS Term Sheets, the right
to require changes regarding the use of terminology and the right to determine
the types of information appearing therein. Notwithstanding the foregoing, this
subsection (c) will be satisfied if all Computational Materials and ABS Term
Sheets referred to therein bear a legend in a form previously approved in
writing by Eaglemark.
(d) The Underwriters shall provide Eaglemark with representative
forms of all Computational Materials and ABS Term Sheets prior to their first
use, to the extent such forms have not previously been approved by Eaglemark for
use by the Underwriters. The Underwriters shall provide to Eaglemark, for
filing on Form 8-K, copies (in such format as required by Eaglemark) of all
Computational Materials and ABS Term Sheets that are required to be filed with
the Commission pursuant to the No-Action Letters. The Underwriters may provide
copies of the foregoing in a consolidated or aggregated form including all
information required to be filed. All Computational Materials and ABS Term
Sheets described in this subsection (d) must be provided to Eaglemark not later
than 10:00 AM New York time one business day before filing thereof is required
pursuant to the terms of this Agreement. Each Underwriter agrees that it will
not provide to any investor or prospective investor in the Notes or Certificates
any Computational Materials or ABS Term Sheets on or after the day on which
Computational Materials and ABS Term Sheets are required to be provided to
Eaglemark pursuant to this Section 11(d) (other than copies of Computational
Materials or ABS Term Sheets previously submitted to Eaglemark in accordance
with this Section 11(d) for filing with the Commission),
30
<PAGE>
unless such Computational Materials or ABS Term Sheets are preceded or
accompanied by the delivery of a Prospectus to such investor or prospective
investor.
(e) All information included in the Computational Materials and
ABS Term Sheets shall be generated based on substantially the same
methodology and assumptions that are used to generate the information in the
Prospectus Supplement as set forth therein; PROVIDED, HOWEVER, that the
Computational Materials and ABS Term Sheets may include information based on
alternative methodologies or assumptions if specified therein. If any
Computational Materials or ABS Term Sheets that are required to be filed were
based on assumptions with respect to the contracts included in the Trust that
differ from the final Pool Information in any material respect or on
structuring terms of the Offered Securities that were revised in any material
respect prior to the printing of the Prospectus, the Underwriters shall
prepare revised Computational Materials or ABS Term Sheets, as the case may
be, based on the final Pool Information and structuring assumptions,
circulate such revised Computational Materials and ABS Term Sheets to all
recipients of the preliminary versions thereof that indicated or subsequently
indicate orally to the Underwriters they will purchase all or any portion of
the Offered Securities, and include such revised Computational Materials and
ABS Term Sheets (marked, "as revised") in the materials delivered to
Eaglemark pursuant to subsection (d) above. As used herein, "Pool
Information" means information with respect to the characteristics of the
contracts , as provide by or on behalf of Eaglemark to the Underwriters in
final form and set forth in the Prospectus Supplement.
(f) Eaglemark shall not be obligated to file any Computational
Materials or ABS Term Sheets that have been determined to contain any
material error or omission; PROVIDED, HOWEVER, that, at the request of the
Underwriters, Eaglemark will file Computational Materials or ABS Term Sheets
that contain a material error or omission if clearly marked "superseded by
materials dated _____" and accompanied by corrected Computational Materials
or ABS Term Sheets that are marked, "material previously dated _____, as
corrected." In the event that, within the period during which the Prospectus
is required to be delivered under the Act, any Computational Materials or ABS
Term Sheets are determined, in the reasonable judgment of Eaglemark or the
Underwriters, to contain a material error or omission, the Underwriters shall
prepare a corrected version of such Computational Materials or ABS Term
Sheets, shall circulate such corrected Computational Materials and ABS Term
Sheets to all recipients of the prior versions thereof that either indicated
orally to the Underwriters they would purchase all or any portion of the
Offered Securities, or actually purchased all or any portion thereof, and
shall deliver copies of such corrected Computational Materials and ABS Term
Sheets (marked, "as corrected") to Eaglemark for filing with the Commission
in a subsequent Form 8-K submission.
(g) Eaglemark and the Underwriters shall receive a letter from
Arthur Andersen & Co., certified public accountants, satisfactory in form and
substance to Eaglemark and the Underwriters, to the effect that such
accountants have performed certain specified procedures agreed to by
Eaglemark and the Underwriters, as a result of which they determined that the
specified information that is included in the Computational Materials and ABS
Term Sheets (if any) provided by the Underwriters to Eaglemark for filing on
Form 8-K as provided in this Section 11 has been accurately computed or
compiled from the Seller Provided Information.
(h) If the Underwriters do not provide any Computational Materials
or ABS Term Sheets to Eaglemark pursuant to subsection (d) above, each
Underwriter shall be deemed
31
<PAGE>
to have represented, as of the Closing Date, that it did not provide any
prospective investors with any information in written or electronic form in
connection with the offering of the Offered Securities that is required to be
filed with the Commission in accordance with the No-Action Letters.
(i) In the event of any delay in the delivery by the Underwriters
to Eaglemark of all Computational Materials and ABS Term Sheets required to
be delivered in accordance with subsection (d) above, or in the delivery of
the accountant's comfort letter in respect thereof pursuant to Section 11(g),
Eaglemark shall have the right to delay the release of the Prospectus to
investors or to the Underwriters, to delay the Closing Date and to take other
appropriate actions in each case as necessary in order to allow Eaglemark to
comply with its obligation to file the Computational Materials and ABS Term
Sheets with the Commission.
(j) For purposes of this Agreement, as to the Underwriters, the
term "Derived Information" means such portion, if any, of the information
that:
(i) is delivered to Eaglemark by the Underwriters pursuant to
this Section 11 for filing with the Commission on Form 8-K;
(ii) is not contained in the Prospectus without taking into
account information incorporated therein by reference; and
(iii) does not constitute Seller-Provided Information.
"Seller-Provided Information" means any computer tape concerning the assets
comprising the Trust and any other information with respect to the Offered
Securities or such assets furnished to the Underwriters by Eaglemark for use
as contemplated herein.
12. TERMINATION. This Agreement shall be subject to termination in the
absolute discretion of the Underwriters, by notice given to the Trust
Depositor prior to delivery of and payment for the Offered Securities, if
prior to such time (i) trading in securities generally on the New York Stock
Exchange or the Nasdaq Stock Market's National Market shall have been
suspended or limited or minimum prices shall have been established on either
such exchange, (ii) a banking moratorium shall have been declared either by
federal or New York State authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war, or other calamity or crisis the effect of which on
financial markets is such as to make it, in the judgment of the Underwriters,
impracticable or inadvisable to proceed with the offering or delivery of the
Offered Securities as contemplated by the Prospectus.
13. NO BANKRUPTCY PETITION. Each Underwriter covenants and agrees
that, prior to the date which is one year and one day after the payment in
full of all securities issued by the Trust Depositor or by a trust for which
the Trust Depositor was the depositor, which securities were rated by any
nationally recognized statistical rating organization, it will not institute
against, or join any other Person in instituting against, the Trust Depositor
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other proceedings under any federal or state bankruptcy or
similar law.
32
<PAGE>
14. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of
the Trust Depositor and Eaglemark and their respective officers and of the
several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or
on behalf of any Underwriter, the Trust Depositor or Eaglemark or any of the
officers, directors or controlling persons referred to in Section 12 hereof,
and will survive delivery of and payment for the Offered Securities. The
provisions of Sections 9 and 10 hereof shall survive the termination or
cancellation of this Agreement.
15. NOTICES. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Underwriters, will be mailed,
delivered or telegraphed and confirmed to them c/o Salomon Smith Barney Inc.,
Seven World Trade Center, New York, New York 10048, Attention: Asset-Backed
Securities Desk; or if sent to the Trust Depositor, will be mailed, delivered
or telegraphed and confirmed to it at Eaglemark Customer Funding
Corporation-___, 4150 Technology Way, Carson City, Nevada 89706, Attention:
President; or if sent to Eaglemark, will be mailed, delivered, telegraphed
and confirmed to it at Eaglemark, Inc., 4150 Technology Way, Carson City,
Nevada 89706, Attention: President.
16. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 10
hereof, and, except as expressly set forth herein, no other person will have
any right or obligation hereunder.
17. APPLICABLE LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
18. BUSINESS DAY. For purposes of this Agreement, "business day" means
each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which national banking associations in the cities of Chicago, Illinois or New
York, New York are authorized or obligated by law, executive order or
regulation to close.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
Counterparts will together constitute one and the same agreement.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding
agreement among the Trust Depositor, Eaglemark and the several Underwriters.
Very truly yours,
EAGLEMARK CUSTOMER FUNDING
CORPORATION-___
By: ___________________________
Name:
Title:
EAGLEMARK, INC.
By: ___________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON SMITH BARNEY INC.
__________________________________
By: SALOMON SMITH BARNEY INC.
By: ______________________________
Name:
Title:
34
<PAGE>
SCHEDULE I
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST 199__-__
OFFERED SECURITY PRINCIPAL AMOUNT PRICE
CLASS A-1 NOTES
Salomon Smith Barney Inc. $__________ _______%
_________________________ $__________ _______%
CLASS A-2 NOTES
Salomon Smith Barney Inc. $__________ _______%
_________________________ $__________ _______%
CERTIFICATES
Salomon Smith Barney Inc. $__________ _______%
_________________________ $__________ _______%
35
<PAGE>
EXHIBIT 4.1
===============================================================================
FORM OF
TRUST AGREEMENT
by and between
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV,
as Trust Depositor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
Dated as of [ ]
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE ONE PAGE
<S> <C> <C>
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. CAPITALIZED TERMS. . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS. . . . . . . . . . . . . . 3
SECTION 1.03. USAGE OF TERMS . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.04. SECTION REFERENCES . . . . . . . . . . . . . . . . . . . 3
SECTION 1.05. ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . 3
ARTICLE TWO
ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.01. NAME . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.02. OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03. PURPOSES AND POWERS. . . . . . . . . . . . . . . . . . . 4
SECTION 2.04. APPOINTMENT OF OWNER TRUSTEE . . . . . . . . . . . . . . 4
SECTION 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE . . . 5
SECTION 2.06. DECLARATION OF TRUST . . . . . . . . . . . . . . . . . . 5
SECTION 2.07. LIABILITY OF TRUST DEPOSITOR . . . . . . . . . . . . . . 5
SECTION 2.08. TITLE TO TRUST PROPERTY. . . . . . . . . . . . . . . . . 5
SECTION 2.09. SITUS OF TRUST . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.10. REPRESENTATIONS AND WARRANTIES OF THE TRUST DEPOSITOR. . 6
SECTION 2.11. FEDERAL INCOME TAX ALLOCATIONS . . . . . . . . . . . . . 6
ARTICLE THREE
TRUST CERTIFICATES AND TRANSFER OF INTEREST. . . . . . . . . . . . . . . . 8
SECTION 3.01. INITIAL OWNERSHIP. . . . . . . . . . . . . . . . . . . . 8
SECTION 3.02. THE TRUST CERTIFICATES . . . . . . . . . . . . . . . . . 8
SECTION 3.03. AUTHENTICATION AND DELIVERY OF TRUST CERTIFICATES. . . . 8
SECTION 3.04. REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST CERTIFICATES. 9
SECTION 3.06. PERSONS DEEMED OWNERS. . . . . . . . . . . . . . . . . . 9
SECTION 3.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.08. MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . . 9
SECTION 3.09. TEMPORARY TRUST CERTIFICATES . . . . . . . . . . . . . . 9
SECTION 3.10. APPOINTMENT OF PAYING AGENT. . . . . . . . . . . . . . .10
SECTION 3.11. OWNERSHIP BY TRUST DEPOSITOR OF TRUST CERTIFICATES . . .10
ARTICLE FOUR . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
ACTIONS BY OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 4.01. Prior Notice to Owners with Respect to Certain Matters .12
SECTION 4.02. ACTION BY OWNERS WITH RESPECT TO CERTAIN MATTERS . . . .12
SECTION 4.03. ACTION BY OWNERS WITH RESPECT TO BANKRUPTCY. . . . . . .12
SECTION 4.04. RESTRICTIONS ON OWNERS' POWER. . . . . . . . . . . . . .12
SECTION 4.05. MAJORITY CONTROL . . . . . . . . . . . . . . . . . . . .13
ARTICLE FIVE
APPLICATION OF TRUST FUNDS;
CERTAIN DUTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
i
<PAGE>
SECTION 5.01. ESTABLISHMENT OF TRUST ACCOUNT . . . . . . . . . . . . .14
SECTION 5.02. APPLICATION OF TRUST FUNDS . . . . . . . . . . . . . . .14
SECTION 5.03. METHOD OF PAYMENT. . . . . . . . . . . . . . . . . . . .14
SECTION 5.04. NO SEGREGATION OF MONEYS; NO INTEREST. . . . . . . . . .14
SECTION 5.05. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS,
OWNERS, THE INTERNAL REVENUE SERVICE AND OTHERS. . . .14
SECTION 5.06. SIGNATURE ON RETURNS; TAX MATTERS PARTNER. . . . . . . .15
ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE. . . . . . . . . . . . . . . . . . .16
SECTION 6.01. GENERAL AUTHORITY. . . . . . . . . . . . . . . . . . . .16
SECTION 6.02. GENERAL DUTIES . . . . . . . . . . . . . . . . . . . . .16
SECTION 6.03. ACTION UPON INSTRUCTION. . . . . . . . . . . . . . . . .16
SECTION 6.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN
INSTRUCTIONS . . . . . . . . . . . . . . . . . . . . .17
SECTION 6.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS . . . . . . . . . . . . . . . . . . . . .17
SECTION 6.06. RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 7.01. ACCEPTANCE OF TRUSTS AND DUTIES. . . . . . . . . . . . .18
SECTION 7.02. FURNISHING OF DOCUMENTS. . . . . . . . . . . . . . . . .18
SECTION 7.03. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . .19
SECTION 7.04. RELIANCE; ADVICE OF COUNSEL. . . . . . . . . . . . . . .19
SECTION 7.05. NOT ACTING IN INDIVIDUAL CAPACITY. . . . . . . . . . . .19
SECTION 7.06. OWNER TRUSTEE NOT LIABLE FOR TRUST CERTIFICATES, NOTES
OR CONTRACTS . . . . . . . . . . . . . . . . . . . . .19
SECTION 7.07. OWNER TRUSTEE MAY OWN TRUST CERTIFICATES AND NOTES . . .20
ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 8.01. OWNER TRUSTEE'S FEES AND EXPENSES. . . . . . . . . . . .21
SECTION 8.02. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . .21
SECTION 8.03. PAYMENTS TO THE OWNER TRUSTEE. . . . . . . . . . . . . .21
ARTICLE NINE
TERMINATION OF TRUST AGREEMENT . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.01. TERMINATION OF TRUST AGREEMENT . . . . . . . . . . . . .22
SECTION 9.02. DISSOLUTION UPON BANKRUPTCY OF TRUST DEPOSITOR
OR WITHDRAWAL OR REMOVAL OF TRUST DEPOSITOR. . . . . .22
ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES . . . . . . . . . .24
SECTION 10.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE . . . . . . .24
SECTION 10.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. . . . . . . . .24
SECTION 10.03. SUCCESSOR OWNER TRUSTEE. . . . . . . . . . . . . . . . .24
SECTION 10.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE . . . . . . . .25
SECTION 10.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. . . . . .25
ii
<PAGE>
ARTICLE ELEVEN
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 11.01. SUPPLEMENTS AND AMENDMENTS . . . . . . . . . . . . . . .27
SECTION 11.02. NO LEGAL TITLE TO TRUST ESTATE IN OWNERS . . . . . . . .27
SECTION 11.03. LIMITATIONS ON RIGHTS OF OTHERS. . . . . . . . . . . . .28
SECTION 11.04. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 11.05. SEVERABILITY OF PROVISIONS . . . . . . . . . . . . . . .29
SECTION 11.06. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . .29
SECTION 11.07. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . .29
SECTION 11.09. NO PETITION. . . . . . . . . . . . . . . . . . . . . . .30
SECTION 11.10. NO RECOURSE. . . . . . . . . . . . . . . . . . . . . . .30
SECTION 11.11. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 11.12. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . .30
SECTION 11.13. TRUST CERTIFICATE TRANSFER RESTRICTIONS. . . . . . . . .30
SECTION 11.14. TRUST DEPOSITOR PAYMENT OBLIGATION . . . . . . . . . . .30
EXHIBITS
Exhibit A - Form of Certificate of Trust. . . . . . . . . . . . . . . . A-1
Exhibit B - Form of Trust Certificate . . . . . . . . . . . . . . . . . B-1
</TABLE>
iii
<PAGE>
TRUST AGREEMENT dated as of [ ], between EAGLEMARK CUSTOMER
FUNDING CORPORATION-IV, a Nevada corporation, as Trust Depositor (the "TRUST
DEPOSITOR"), and Wilmington Trust Company, a Delaware banking corporation, as
owner trustee (the "OWNER TRUSTEE").
WHEREAS, in connection herewith, the Trust Depositor is willing to assume
certain obligations pursuant hereto; and
WHEREAS, in connection herewith, the Trust Depositor is willing to
purchase the Trust Depositor Certificate (as defined herein) to be issued
pursuant to this Agreement and to assume certain obligations pursuant hereto;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. CAPITALIZED TERMS. Except as otherwise provided in
this Agreement, whenever used in this Agreement the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
"ADMINISTRATION AGREEMENT" means the administration agreement, dated as
of the date hereof, among the Trust, the Trust Depositor, the Indenture Trustee
and Eaglemark, as administrator.
"AGREEMENT" means this Trust Agreement, as the same may be amended and
supplemented from time to time.
"APPLICANT" shall have the meaning set forth in Section 3.07.
"BENEFIT PLAN" means (i) an employee benefit plan (as such term is
defined in Section 3(3) of ERISA) that is subject to the provisions of Title I
of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or (iii) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity.
"BOOK-ENTRY TRUST CERTIFICATE" means a beneficial interest in the Trust
Certificates, the ownership of which shall be evidenced by, and transfers of
which shall be made through book entries by a Clearing Agency as described in
Section 3.12.
"BUSINESS TRUST STATUTE" means Chapter 38 of Title 12 of the Delaware
Code, 12 DEL. CODE Section 3801 ET SEQ., as the same may be amended from time
to time.
"CERTIFICATE DEPOSITORY AGREEMENT" means the agreement dated as of the
Closing Date, by and among the Trust, the Owner Trustee, the Administrator and
DTC, as the initial Clearing Agency, substituting, in the form attached hereto
as Exhibit A, relating to the Trust Certificates, other than the Trust
Depositor Certificate, as the same may be amended and supplemented from time to
time.
"CERTIFICATE DISTRIBUTION ACCOUNT" means the account established and
maintained as such pursuant to Section 5.01.
"CERTIFICATE OF TRUST" means the Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Business Trust Statute, substantially in the
form of EXHIBIT A hereto.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" mean the register
maintained and the register (or any successor thereto) appointed pursuant to
Section 3.04.
1
<PAGE>
"CERTIFICATEHOLDER" or "HOLDER" means with respect to Definitive Trust
Certificates the Person in whose name a Trust Certificate is registered in the
Certificate Register and with respect to a Book-Entry Trust Certificate, the
Person who is the owner of such Book-Entry Trust Certificate, as reflected on
the books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly or as an indirect participant, in
either case, in accordance with the rules of such Clearing Agency), except
that, solely for the purposes of giving any consent, waiver, request or demand
pursuant to this Agreement, the interest evidenced by any Trust Certificate
registered in the name of the Trust Depositor, Eaglemark or any of their
respective Affiliates shall not be taken into account in determining whether
the requisite percentage necessary to effect any such consent, waiver, request
or demand in respect of the Trust Certificate shall have been obtained.
"CLEARING AGENCY" means an organization registered as a "CLEARING AGENCY"
pursuant to Section 17A of the Exchange Act.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"CLOSING DATE" means on or about [ ].
"CODE" means the Internal Revenue Code of 1986, as amended.
"DEFINITIVE TRUST CERTIFICATES" shall have the meaning set forth in
Section 3.12.
"EAGLEMARK" means Eaglemark, Inc., a Nevada Corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXPENSES" shall have the meaning assigned to such term in Section 8.02.
"INDEMNIFIED PARTIES" shall have the meaning assigned to such term in
Section 8.02.
"INDENTURE" means the Indenture dated as of the date hereof between the
Trust and Harris Trust and Savings Bank, as Indenture Trustee.
"INITIAL CERTIFICATE BALANCE" means $[ ].
"NOTE DEPOSITORY AGREEMENT" means the Agreement dated as of the Closing
Date among the Trust, the Indenture Trustee, the Administrator and DTC, as the
initial Clearing Agency, relating to the Notes, as the same may be amended and
supplemented from time to time.
"NOTES" means the Class A-1 Notes and the Class A-2 Notes, in each case
issued pursuant to the Indenture.
"OWNER" means each Holder of a Trust Certificate.
"OWNER TRUSTEE" means Wilmington Trust Company, a Delaware corporation,
not in its individual capacity but solely as owner trustee under this
Agreement, and any successor Owner Trustee hereunder.
"OWNER TRUSTEE CORPORATE TRUST OFFICE" means the office of the Owner
Trustee at which its corporate trust business shall be administered, which
initially shall be Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001 Attn: Corporate Trust Administration, or such other office
at such other address as the Owner
2
<PAGE>
Trustee may designate from time to time by notice to the Certificateholders,
the Servicer, the Trust Depositor and Eaglemark.
"PAYING AGENT" means any paying agent or co-paying agent appointed
pursuant to Section 3.10.
"PERSON" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof) unincorporated organization or government or any agency or political
subdivision thereof.
"RECORD DATE" means, with respect to any Distribution Date, the last
Business Day of the preceding calendar month.
"SALE AND SERVICING AGREEMENT" means the sale and servicing agreement,
dated as of the date hereof, among the Trust, as Issuer, the Trust Depositor,
Eaglemark, as servicer, and Harris Trust and Savings Bank, as Indenture Trustee
as the same may be amended or supplemented from time to time.
"SECRETARY OF STATE" means the Secretary of State of the State of
Delaware.
"TAX MATTERS PARTNER" shall have the meaning provided in Section 5.06(b)
hereof.
"TREASURY REGULATIONS" means regulations, including proposed or temporary
regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"TRUST" means the trust established by this Agreement.
"TRUST CERTIFICATES" means the trust certificates evidencing the
beneficial equity interest of an Owner in the Trust, substantially in the form
of EXHIBIT B hereto.
"TRUST DEPOSITOR" means Eaglemark Customer Funding Corporation-IV in its
capacity as Trust Depositor hereunder, and its successors.
"TRUST DEPOSITOR CERTIFICATE" means the Trust Certificate purchased by
the Trust Depositor on the Closing Date pursuant to Section 3.11, having an
initial principal balance equal to $[ ].
"TRUST ESTATE" means all right, title and interest of the Trust in and to
the property and rights assigned to the Trust pursuant to Article Two of the
Sale and Servicing Agreement, all funds on deposit from time to time in the
Trust Accounts and the Certificate Distribution Account and all other property
of the Trust from time to time, including any rights of the Owner Trustee and
the Trust pursuant to the Sale and Servicing Agreement and the Administration
Agreement.
"UNDERWRITERS" means Salomon Smith Barney Inc. and [ ].
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS. Capitalized terms used
that are not otherwise defined herein shall have the meanings ascribed thereto
in the Sale and Servicing Agreement or, if not defined therein, in the
Indenture.
SECTION 1.03. USAGE OF TERMS. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "WRITING" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein
entered into in accordance with their respective terms and not prohibited by
this Agreement; references to Persons include their permitted successors and
assigns; and the term "INCLUDING" means "INCLUDING WITHOUT LIMITATION".
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SECTION 1.04. SECTION REFERENCES. All section references, unless
otherwise indicated, shall be to Sections in this Agreement.
SECTION 1.05. ACCOUNTING TERMS. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
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ARTICLE TWO
ORGANIZATION
SECTION 2.01. NAME. The Trust created hereby shall be known as
"HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ]", in which name the
Owner Trustee may conduct the activities of the Trust, make and execute
contracts and other instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. OFFICE. The office of the Trust shall be in care of
the Owner Trustee at the Owner Trustee Corporate Trust Office or at such other
address in Delaware as the Owner Trustee may designate by written notice to the
Owners and the Trust Depositor.
SECTION 2.03. PURPOSES AND POWERS.
(a) The sole purpose of the Trust is to manage the Trust Estate and
collect and disburse the periodic income therefrom for the use and benefit of
the Owners, and in furtherance of such purpose to engage in the following
ministerial activities:
(i) to issue the Notes pursuant to the Indenture and the
Trust Certificates pursuant to this Agreement and to sell the Notes and
the Trust Certificates;
(ii) with the proceeds of the sale of the Notes and the
Trust Certificates, to purchase the Contracts, to fund the Pre-Funding
Account and to pay the organizational, start-up and transactional
expenses of the Trust and to pay the balance to the Trust Depositor
pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant to the Sale and Servicing Agreement any
portion of the Trust Estate released from the Lien of, and remitted to
the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the
Transaction Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Transaction Documents,
to engage in such other activities as may be required in connection with
conservation of the Trust Estate and the making of distributions to the
Owners and the Noteholders.
The Trust shall not engage in any activities other than in connection with the
foregoing. Nothing contained herein shall be deemed to authorize the Owner
Trustee to engage in any business operations or any activities other than those
set forth in the introductory sentence of this Section. Specifically, the
Owner Trustee shall have no authority to engage in any business operations, or
acquire any assets other than those specifically included in the Trust Estate
under Section 1.01, or otherwise vary the assets held by the Trust. Similarly,
the Owner Trustee shall have no discretionary duties other than performing
those ministerial acts set forth above necessary to accomplish the purpose of
this Trust as set forth in the introductory sentence of this Section.
SECTION 2.04. APPOINTMENT OF OWNER TRUSTEE. The Trust Depositor
hereby appoints the Owner Trustee as trustee of the Trust effective as of the
date hereof, to have all the rights, powers and duties set forth herein, and
the Owner Trustee hereby accepts such appointment.
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SECTION 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE.
The Trust Depositor hereby sells, assigns, transfers, conveys and sets over to
the Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee
hereby acknowledges receipt in trust from the Trust Depositor, as of the date
hereof, of the foregoing contribution, which shall constitute the initial Trust
Estate and shall be deposited in the Certificate Distribution Account. The
Trust Depositor shall pay organizational expenses of the Trust as they may
arise or shall, upon the request of the Owner Trustee, promptly reimburse the
Owner Trustee for any such expenses paid by the Owner Trustee.
SECTION 2.06. DECLARATION OF TRUST. The Owner Trustee hereby
declares that it will hold the Trust Estate in trust upon and subject to the
conditions set forth herein for the sole purpose of conserving the Trust Estate
and collecting and disbursing the periodic income therefrom for the use and
benefit of the Owners, subject to the obligations of the Trust under the
Transaction Documents. It is the intention of the parties hereto that the
Trust constitute a business trust under the Business Trust Statute and that
this Agreement constitute the governing instrument of such business trust. It
is the intention of the parties hereto that, solely for income and franchise
tax purposes, the Trust shall be treated as a partnership, with the assets of
the partnership being the Contracts and other assets held by the Trust, the
partners of the partnership being the Certificateholders (including the Trust
Depositor) and the Notes being debt of the partnership. The parties agree
that, unless otherwise required by a final determination to the contrary, the
Trust will file or cause to be filed annual or other necessary returns, reports
and other forms consistent with the characterization of the Trust as a
partnership, the partners of the partnership being the Certificateholders
(including the Trust Depositor) and the Notes being debt of the partnership,
for such tax purposes. The Tax Matters Partner shall prepare and the Owner
Trustee shall file, on behalf of the Trust and Certificateholders, IRS Form
8832 making the protective election for the Trust to be treated as a
partnership for federal income tax purposes as of the Closing Date. Effective
as of the date hereof, the Owner Trustee shall have all rights, powers and
duties set forth herein and in the Business Trust Statute for the sole purpose
and to the extent necessary to accomplish the purpose of this Trust as set
forth in the introductory sentence of Section 2.03.
SECTION 2.07. LIABILITY OF TRUST DEPOSITOR.
(a) Pursuant to Section 3803(a) of the Business Trust Statute, the
Trust Depositor shall be liable directly to and will indemnify any injured
party or any other creditor of the Trust for all losses, claims, damages,
liabilities and expenses of the Trust to the extent that the Trust Depositor
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which Trust Depositor were a general partner
(including any Illinois personal property replacement tax that is imposed on
the Trust as a partnership); PROVIDED, HOWEVER, that Trust Depositor shall not
be liable for any losses incurred by a Certificateholder in the capacity of an
investor in the Trust Certificates or a Noteholder in the capacity of an
investor in the Notes. In addition, any third party creditors of the Trust
(other than in connection with the obligations described in the immediately
preceding sentence for which the Trust Depositor shall not be liable) shall be
deemed third party beneficiaries of this paragraph. The obligations of the
Trust Depositor under this paragraph shall be evidenced by the Trust
Certificates described in Section 3.11, which for purposes of the Business
Trust Statute shall be deemed to be a separate class of Trust Certificates from
all other Trust Certificates issued by the Trust; provided that the rights and
obligations evidenced by all Trust Certificates, regardless of class, shall,
except as provided in this Section, be identical.
(b) Other than to the extent set forth in Section 2.07(a), no Owner,
solely by virtue of its being the Holder of a Trust Certificate, shall have any
personal liability for any liability or obligation of the Trust.
SECTION 2.08. TITLE TO TRUST PROPERTY. Legal title to the Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Trust Estate to be vested in an Owner Trustee or Owner Trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
SECTION 2.09. SITUS OF TRUST. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of Illinois
or the State of Delaware. The Trust shall not have any employees in any
state other than Delaware; PROVIDED, HOWEVER, that nothing herein shall
restrict or prohibit the Owner Trustee from having employees within or
without the State of Delaware.
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Payments will be received by the Trust only in Delaware and payments will be
made by the Trust only from Delaware. The only office of the Trust will be
at the Owner Trustee Corporate Trust Office.
SECTION 2.10. REPRESENTATIONS AND WARRANTIES OF THE TRUST DEPOSITOR.
The Trust Depositor hereby represents and warrants to the Owner Trustee
that:
(i) The Trust Depositor is duly organized and validly existing as
a corporation organized and existing and in good standing under the laws
of the State of Nevada, with power and authority to own its properties
and to conduct its business and had at all relevant times, and has,
power, authority and legal right to acquire and own the Contracts.
(ii) The Trust Depositor is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires such
qualifications.
(iii) The Trust Depositor has the power and authority to execute
and deliver this Agreement and to carry out its terms; the Trust
Depositor has full power and authority to sell and assign the property to
be sold and assigned to and deposited with the Owner Trustee on behalf of
the Trust as part of the Trust Estate and has duly authorized such sale
and assignment and deposit with the Owner Trustee on behalf of the Trust
by all necessary corporate action; and the execution, delivery and
performance of this Agreement have been duly authorized by the Trust
Depositor by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of the Trust Depositor, or any
indenture, agreement or other instrument to which the Trust Depositor is
a party or by which it is bound; nor result in the creation or imposition
of any Lien upon any of the properties of the Trust Depositor pursuant to
the terms of any such indenture, agreement or other instrument (other
than pursuant to the Transaction Documents); nor violate any law or any
order, rule or regulation applicable to the Trust Depositor of any court
or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Trust
Depositor or its properties.
(v) There are no proceedings or investigations pending, or to the
Trust Depositor's best knowledge threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Trust Depositor or its properties: (A) asserting
the invalidity of this Agreement, any of the other Transaction Documents
or the Trust Certificates, (B) seeking to prevent the issuance of the
Trust Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the other Transaction Documents,
(C) seeking any determination or ruling that might materially and
adversely affect the performance by the Trust Depositor of its
obligations under, or the validity or enforceability of, this Agreement,
any of the other Transaction Documents or the Trust Certificates or (D)
involving the Trust Depositor and which might adversely affect the
federal income tax or other federal, state or local tax attributes of the
Trust Certificates.
SECTION 2.11. FEDERAL INCOME TAX ALLOCATIONS.
(a) Trust items of income, gain, loss and deduction for any month as
determined for federal income tax purposes shall be allocated as follows:
(i) The Certificateholders, as of the first Record Date following
the end of such month, shall be allocated the following items in
proportion to their ownership of the principal amount of Trust
Certificates on such date: (A) interest equal to the Certificate
Interest Distributable Amount for such month, (B) accrued interest on the
excess, if any, of the Certificate Interest Distributable Amount for the
preceding Distribution
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Date over the amount in respect of interest that is actually deposited
in the Certificate Distribution Account on such preceding Distribution
Date, to the extent permitted by law, at the Pass-Through Rate from
such preceding Distribution Date through the current Distribution Date,
(C) the portion of the market discount on the Contracts accrued during
such quarter that is allocable to the excess, if any, of the initial
aggregate principal amount of the Trust Certificates over their initial
aggregate issue price and (D) any other items of income and gain
payable to the Certificateholders for such month; such sum to be
reduced by any amortization deduction by the Trust of premium on
Contracts that corresponds to any excess of the issue price of Trust
Certificates over their principal amount; and
(ii) to the Trust Depositor to the extent of any remaining items
of income, gain, loss and deduction.
If the items of income or gain of the Trust for any calendar quarter are
insufficient for the allocations described in Section 2.11(a)(i), subsequent
items of income or gain shall first be allocated to make up such shortfall
before being allocated as provided in Section 2.11(a)(ii).
(b) To the extent that the Trust Depositor would be allocated
cumulative items of loss and deduction in excess of the sum of (A) the
cumulative items of income and gain, if any, allocated to the Trust Depositor,
PLUS (B) the cumulative contributions made by the Trust Depositor to the
Trust, PLUS (C) the amount of Trust liabilities or claims, if any, for which
the Trust Depositor is liable pursuant to Section 2.07 or otherwise allocated
under Section 752 of the Code, LESS (D) the cumulative distributions made to
the Trust Depositor pursuant to Section 5.02 hereof, then such excess items of
loss and deduction shall instead be allocated among the Certificateholders
(other than the Trust Depositor) as of the first Record Date following the end
of such quarter in proportion to their ownership of the principal amount of
Trust Certificates on such Record Date until the cumulative items of loss and
deduction allocated to such Certificateholders equal the sum of (I) the
cumulative items of income and gain allocated to such Certificateholders, PLUS
(II) the cumulative contributions made by such Certificateholders to the Trust,
PLUS (III) the amount of Trust liabilities allocated to such Certificateholders
under Section 752 of the Code, LESS (IV) the cumulative distributions made to
the Trust Depositor pursuant to Section 5.02 hereof. Thereafter, any such
excess items of loss and deduction shall be allocated among the Trust Depositor
and the other Certificateholders in accordance with how such Persons are
reasonably expected to bear the economic burden of such items.
(c) The provisions of this Agreement relating to the allocations are
intended to comply with Treasury Regulation Sections 1.704-1 and 1.704-2. The
Trust Depositor and Eaglemark are authorized to modify the allocations in this
paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the Trust
Depositor or to the Certificateholders, or as otherwise to cause such
allocations to have substantial economic effect within the meaning of
Regulations Section 1.704-1(b)(2) or to be deemed to be in accordance with the
interests in the Trust under such Treasury Regulations.
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ARTICLE THREE
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.01. INITIAL OWNERSHIP. Upon the formation of the Trust by
the contribution by the Trust Depositor pursuant to Section 2.05 and until the
issuance of the Trust Certificates, the Trust Depositor shall be the sole
beneficiary of the Trust.
SECTION 3.02. THE TRUST CERTIFICATES. The Trust Certificates shall
be substantially in the form of EXHIBIT B hereto. The Trust Certificates shall
be issuable in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof; PROVIDED, HOWEVER, that the Trust Certificates issued to the
Trust Depositor pursuant to Section 3.11 may be issued in such denomination as
required to include any residual amount. The Trust Certificates shall be
executed by the Owner Trustee on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee and shall be deemed to
have been validly issued when so executed. Trust Certificates bearing the
manual or facsimile signature of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Owner Trustee
shall be valid and binding obligations of the Trust, notwithstanding that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Trust Certificates or did not hold such
offices at the date of such Trust Certificates. All Trust Certificates shall
be dated the date of their authentication.
SECTION 3.03. AUTHENTICATION AND DELIVERY OF TRUST CERTIFICATES. The
Owner Trustee shall cause to be authenticated and delivered upon the order of
the Trust Depositor, in exchange for the Contracts and the other assets of the
Trust, simultaneously with the sale, assignment and transfer to the Trust of
the Contracts, and the constructive delivery to the Owner Trustee of the
Contract Files and the other assets of the Trust, Trust Certificates duly
authenticated by the Owner Trustee, in authorized denominations equaling in the
aggregate the Initial Certificate Balance evidencing the entire ownership of
the Trust and Notes issued by the Owner Trustee and authenticated by the
Indenture Trustee in aggregate principal amount of, in the case of (i) Class
A-1 Notes, $[ ], and (ii) Class A-2 Notes,
$[ ]. No Trust Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there appears on
such Trust Certificate a certificate of authentication substantially in the
form set forth in the form of Trust Certificate attached hereto as EXHIBIT B,
executed by the Owner Trustee or its authenticating agent, by manual
signature, and such certificate upon any Trust Certificate shall be
conclusive evidence, and the only evidence, that such Trust Certificate has
been duly authenticated and delivered hereunder. Upon issuance,
authorization and delivery pursuant to the terms hereof, the Trust
Certificates will be entitled to the benefits of this Agreement.
SECTION 3.04. REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST
CERTIFICATES.
(a) The Certificate Registrar shall keep or cause to be kept, a
Certificate Register, subject to such reasonable regulations as it may
prescribe. The Certificate Register shall provide for the registration of
Trust Certificates and transfers and exchanges of Trust Certificates as
provided herein. The Owner Trustee is hereby initially appointed Certificate
Registrar for the purpose of registering Trust Certificates and transfers and
exchanges of Trust Certificates as herein provided. In the event that,
subsequent to the Closing Date, the Owner Trustee notifies the Servicer that it
is unable to act as Certificate Registrar, the Servicer shall appoint another
bank or trust company, having an office or agency located in the City of
Chicago, Illinois, agreeing to act in accordance with the provisions of this
Agreement applicable to it, and otherwise acceptable to the Owner Trustee, to
act as successor Certificate Registrar hereunder.
(b) Upon surrender for registration of transfer of any Trust
Certificate at the Owner Trustee Corporate Trust Office, the Owner Trustee
shall execute, authenticate and deliver (or shall cause its authenticating
agent to authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Trust Certificates in authorized denominations of
a like aggregate principal amount.
(c) At the option of a Certificateholder, Trust Certificates may be
exchanged for other Trust Certificates in authorized denominations of a like
aggregate principal amount, upon surrender of the Trust Certificates to be
exchanged at any such office or agency. Whenever any Trust Certificates are so
surrendered for exchange, the Owner Trustee on behalf of the Trust shall
execute, authenticate and deliver (or shall cause its authenticating agent to
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authenticate and deliver) the Trust Certificates that the Certificateholder
making the exchange is entitled to receive. Every Trust Certificate presented
or surrendered for registration of transfer or exchange shall be accompanied by
a written instrument of transfer in form satisfactory to the Owner Trustee and
the Certificate Registrar duly executed by the Holder thereof or his attorney
duly authorized in writing.
(d) No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Trust Certificates.
(e) All Trust Certificates surrendered for registration of transfer or
exchange shall be canceled and subsequently destroyed by the Owner Trustee.
SECTION 3.05. MUTILATED, DESTROYED, LOST OR STOLEN TRUST
CERTIFICATES. If (i) any mutilated Trust Certificate is surrendered to the
Certificate Registrar, or the Certificate Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate, and
(ii) there is delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice that such Trust Certificate has been acquired by
a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute
and the Owner Trustee or its authenticating agent shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Trust Certificate, a new Trust Certificate of like tenor and fractional
undivided interest. In connection with the issuance of any new Trust
Certificate under this Section, the Owner Trustee may require the payment by
the Holder of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto. Any duplicate Trust Certificate
issued pursuant to this Section shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Trust Certificate shall be found at any time.
SECTION 3.06. PERSONS DEEMED OWNERS. Prior to due presentation of a
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar and any of their respective agents may treat the Person
in whose name any Trust Certificate is registered as the owner of such Trust
Certificate for the purpose of receiving distributions pursuant to Section 5.02
and for all other purposes whatsoever, and none of the Owner Trustee, the
Certificate Registrar, any Paying Agent or any of their respective agents shall
be affected by any notice of the contrary.
SECTION 3.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Owner Trustee shall furnish or cause to be furnished to the
Servicer and the Trust Depositor, within 15 days after receipt by the
Certificate Registrar of a written request therefor from the Servicer or the
Trust Depositor, a list, in such form as the Servicer or the Trust Depositor
may reasonably require, of the names and addresses of the Certificateholders as
of the most recent Record Date. If three or more Certificateholders, or one or
more Certificateholders of Trust Certificates evidencing not less than 25% of
the percentage interests of the Trust Certificates (hereinafter referred to as
"APPLICANTS"), apply in writing to the Owner Trustee, and such application
states that the Applicants desire to communicate with other Certificateholders
with respect to their rights hereunder or under the Trust Certificates and such
application is accompanied by a copy of the communication that such Applicants
propose to transmit, then the Owner Trustee shall, within five Business Days
after the receipt of such application, afford such Applicants access, during
normal business hours, to the current list of Certificateholders. Every
Certificateholder, by receiving and holding a Trust Certificate, agrees with
the Servicer, the Trust Depositor and the Owner Trustee that none of the
Servicer, the Trust Depositor or the Owner Trustee shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Certificateholders hereunder, regardless of the source from which such
information was derived.
SECTION 3.08. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee
shall maintain in Wilmington, Delaware, an office or offices or agency or
agencies where Trust Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Owner Trustee
in respect of the Trust Certificates and this Agreement may be served. The
Owner Trustee hereby designates the Owner Trustee Corporate Trust Office as its
office for such purposes. The Owner Trustee shall give prompt written notice
to the Trust Depositor, the Servicer and to Certificateholders of any change in
the location of the Certificate Register or any such office or agency.
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SECTION 3.09. TEMPORARY TRUST CERTIFICATES. Pending the preparation
of definitive Trust Certificates, the Owner Trustee, on behalf of the Trust,
may execute, authenticate and deliver, temporary Trust Certificates that are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Trust
Certificates in lieu of which they are issued. If temporary Trust Certificates
are issued, the Trust Depositor will cause definitive Trust Certificates to be
prepared without unreasonable delay. After the preparation of definitive Trust
Certificates, the temporary Trust Certificates shall be exchangeable for
definitive Trust Certificates upon surrender of the temporary Trust
Certificates at the office or agency to be maintained as provided in Section
3.08, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Trust Certificates, the Owner Trustee shall execute and
authenticate and deliver in exchange therefor a like principal amount of
definitive Trust Certificates in authorized denominations. Until so exchanged,
the temporary Trust Certificates shall in all respects be entitled to the same
benefits hereunder as definitive Trust Certificates.
SECTION 3.10. APPOINTMENT OF PAYING AGENT. The Paying Agent shall
make distributions to Certificateholders from the Certificate Distribution
Account pursuant to Section 5.02(a) and shall report the amounts of such
distributions to the Owner Trustee. Any Paying Agent shall have the revocable
power to withdraw funds from the Certificate Distribution Account for the
purpose of making the distributions referred to above. The Owner Trustee may
revoke such power and remove the Paying Agent if the Owner Trustee determines
in its sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. The Paying Agent
initially shall be Harris Trust and Savings Bank, and any co-paying agent
chosen by the Paying Agent that is acceptable to the Owner Trustee. Each
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Owner Trustee. In the event that Harris Trust and Savings Bank
shall no longer be the Paying Agent, the Owner Trustee shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company). The
Owner Trustee shall cause such successor Paying Agent or any additional Paying
Agent appointed by the Owner Trustee to execute and deliver to the Owner
Trustee an instrument in which such successor Paying Agent or additional Paying
Agent shall agree with the Owner Trustee that, as Paying Agent, such successor
Paying Agent or additional Paying Agent will hold all sums, if any, held by it
for payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Owner Trustee. The provisions of
Sections 7.01, 7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its
role as Paying Agent, for so long as the Owner Trustee shall act as Paying
Agent and, to the extent applicable, to any other paying agent appointed
hereunder. Any reference in this Agreement to the Paying Agent shall include
any co-paying agent unless the context requires otherwise.
SECTION 3.11. OWNERSHIP BY TRUST DEPOSITOR OF TRUST CERTIFICATES.
The Trust Depositor shall on the Closing Date purchase from the Underwriters
Trust Certificates representing at least 1% of the Initial Certificate Balance
and shall thereafter retain beneficial and record ownership of Trust
Certificates representing at least 1% of the Certificate Balance. Any
attempted transfer of any Trust Certificate that would reduce such interest of
the Trust Depositor below 1% of the Certificate Balance shall be void. The
Owner Trustee shall cause any Trust Certificate issued to the Trust Depositor
on the Closing Date (and any Trust Certificate issued in exchange therefor) to
contain a legend stating "THIS CERTIFICATE IS NON-TRANSFERABLE".
SECTION 3.12. BOOK-ENTRY CERTIFICATES. The Trust Certificates upon
original issuance will be issued in the form of one or more typewritten
certificates representing the Book-Entry Trust Certificates, to be delivered to
DTC, the initial Clearing Agency, by, or on behalf of, the Trust; provided,
however, that one definitive Trust Certificate (as defined below) may be issued
to the Trust Depositor pursuant to Section 3.11. The certificate or
certificates delivered to DTC evidencing such Trust Certificates shall
initially be registered on the Certificate Register in the name of CEDE & CO.,
the nominee of the initial Clearing Agency, and no Certificateholder (other
than the Company) will receive a definitive certificate representing such
Certificateholders' interest in the Trust Certificates, except as provided in
Section 3.14. Unless and until definitive, fully registered Trust Certificates
(the "DEFINITIVE TRUST CERTIFICATES") have been issued to Certificateholders
pursuant to section 3.14:
(i) the provisions of this Section shall be in full force and effect;
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(ii) the Trust Depositor, the Servicer, the Certificate Registrar and
the Owner Trustee, subject to the provisions and limitations of Sections
2.03 and 2.06, may deal with the Clearing Agency for all purposes
(including the making of distributions on the Trust Certificates) as the
authorized representative of the Certificateholders;
(iii) to the extent that the provisions of this section conflict with any
other provisions of this agreement, the provisions of this Section shall
control;
(iv) the rights of Certificateholder shall be exercised only through the
Clearing Agency (or through procedures established by the Clearing
agency) and shall be limited to those established by law and agreements
between the Holder and the Clearing Agency and/or the Clearing Agency
Participants; pursuant to the Certificate Depository Agreement, unless
and until Definitive Trust Certificates are issued pursuant to Section
3.14, the Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit distributions of
principal and interest on the Trust Certificates to such Clearing Agency
Participants; and
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Certificateholders evidencing a
specified percentage of the percentage interests thereof, the Clearing
Agency shall be deemed to represent such percentage only to the extent
that it has received instructions to such effect from Certificateholders
and/or Clearing Agency Participants owning or representing, respectively,
such required percentage of the beneficial interest in Trust Certificates
and has delivered such instructions to the Owner Trustee.
SECTION 3.13. NOTICES TO CLEARING AGENCY. Whenever notice or other
communication to the Certificateholders is required hereunder, unless and until
Definitive Trust Certificates shall have been issued to Certificateholders
pursuant to Section 3.14, the Owner Trustee and the Master Servicer shall give
all such notices and communications specified herein to be given to
Certificateholders to the Clearing Agency.
SECTION 3.14. DEFINITIVE TRUST CERTIFICATES. If (i)(A) the
Administrator advises the Owner Trustee in writing that the Clearing Agency is
no longer willing or able to properly discharge its responsibilities as
described in the Certificate Depository Agreement and (B) the Owner Trustee or
the Administrator is unable to locate a qualified successor, (ii) the
Administrator, at its option, advises the Owner Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency, or (iii)
after the occurrence of an Event of Default or a Termination Event,
Certificateholders representing beneficial interests aggregating more than 50%
of the Certificate Balance advise the Owner Trustee and the Clearing Agency
through the Clearing Agency Participants in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the best
interests of the Trust, then the Clearing Agency shall notify all
Certificateholders and the Owner Trustee of the occurrence of any such event
and of the availability of Definitive Trust Certificates to Certificateholders
requesting the same. Upon surrender to the Owner Trustee by the Clearing
Agency of the certificates evidencing the Book-Entry Trust Certificates,
accompanied by registration instructions from the Clearing Agency for
registration, the Owner Trustee shall issue the Definitive Trust Certificates
and deliver such Definitive Trust Certificates in accordance with the
instructions of the Clearing Agency. Neither the Trust Depositor, the
Certificate Registrar nor the Owner Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Trust Certificates, the Owner Trustee shall recognize the Certificateholders of
the Definitive Trust Certificates as Certificateholders hereunder. The Owner
Trustee shall not be liable if the Owner Trustee or the Administrator is unable
to locate a qualified successor Clearing Agency. The Definitive Trust
Certificates shall be printed, lithographed or engraved or may be produced in
any manner as is reasonably acceptable to the Owner Trustee, as evidenced by
its execution thereof.
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ARTICLE FOUR
ACTIONS BY OWNER TRUSTEE
SECTION 4.01. PRIOR NOTICE TO OWNERS WITH RESPECT TO CERTAIN MATTERS.
Subject to the provisions and limitation of Section 4.04, with respect to the
following matters, the Owner Trustee shall not take action unless at least 30
days before the taking of such action, the Owner Trustee shall have notified
the Certificateholders in writing of the proposed action, the Indenture Trustee
shall have consented to such action in the event any Notes are outstanding and
the Owners shall not have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Owners have withheld consent or
provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except
claims or lawsuits brought in connection with the collection of the
Contracts) and the compromise of any action, claim or lawsuit brought by
or against the Trust (except with respect to the aforementioned claims or
lawsuits for collection of the Contracts);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under
the Business Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and
such amendment materially and adversely affects the interest of the
Owners;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any
provision in a manner or add any provision that would not materially and
adversely affect the interests of the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this
Agreement of a successor Certificate Registrar, or the consent to the
assignment by the Note Registrar, Paying Agent, Indenture Trustee or
Certificate Registrar of its obligations under the Indenture or the
Agreement, as applicable.
SECTION 4.02. ACTION BY OWNERS WITH RESPECT TO CERTAIN MATTERS.
Subject to the provisions and limitations of Section 4.04, the Owner Trustee
shall not have the power, except upon the direction of the Owners, to (a)
remove the Administrator pursuant to Section 8 of the Administration Agreement,
(b) appoint a successor Administrator pursuant to Section 8 of the
Administration Agreement, (c) remove the Servicer pursuant to Section 8.01 of
the Sale and Servicing Agreement, (d) except as expressly provided in the
Transaction Documents, sell the Contracts after the termination of the
Indenture, (e) initiate any claim, suit or proceeding by the Trust or
compromise any claim, suit or proceeding brought by or against the Trust, (f)
authorize the merger or consolidation of the Trust with or into any other
business trust or entity (other than in accordance with Section 3.10 of the
Indenture) or (g) amend the Certificate of Trust. The Owner Trustee shall take
the actions referred to in the preceding sentence only upon written
instructions assigned by the Owners.
SECTION 4.03. ACTION BY OWNERS WITH RESPECT TO BANKRUPTCY. The Owner
Trustee shall not have the power to commence a voluntary proceeding in a
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a
certificate certifying that such Owner reasonably believes that the Trust is
insolvent.
SECTION 4.04. RESTRICTIONS ON OWNERS' POWER. The Owners shall not
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the
Owner
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Trustee under this Agreement or any of the Transaction Documents or would
be contrary to the purpose of this Trust as set forth in Section 2.03, nor
shall the Owner Trustee be obligated to follow any such direction, if given.
SECTION 4.05. MAJORITY CONTROL. Except as expressly provided herein,
any action that may be taken by the Owners under this Agreement may be taken by
the Holder of Trust Certificates evidencing not less than a majority of the
Certificate Balance. Except as expressly provided herein, any written notice
of the Owners delivered pursuant to this Agreement shall be effective if signed
by Holder of Trust Certificates evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
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ARTICLE FIVE
APPLICATION OF TRUST FUNDS;
CERTAIN DUTIES
SECTION 5.01. ESTABLISHMENT OF TRUST ACCOUNT. The Owner Trustee, for
the benefit of the Certificateholders, shall establish and maintain in the name
of the Trust an Eligible Account (the "CERTIFICATE DISTRIBUTION ACCOUNT"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account and
in all proceeds thereof. Except as otherwise expressly provided herein, the
Certificate Distribution Account shall be under the sole dominion and control
of the Owner Trustee for the benefit of the Certificateholders. If, at any
time, the Certificate Distribution Account ceases to be an Eligible Account,
the Owner Trustee (or the Trust 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 within ten Business Days (or such longer period,
not to exceed 30 calendar days, as to which each Rating Agency may consent)
establish a new Certificate Distribution Account as an Eligible Account and
shall transfer any cash and/or any investments to such new Certificate
Distribution Account.
SECTION 5.02. APPLICATION OF TRUST FUNDS.
(a) On each Distribution Date, the Owner Trustee will distribute to
Certificateholders, on a pro rata basis, amounts deposited in the Certificate
Distribution Account pursuant to Section 7.05 of the Sale and Servicing
Agreement with respect to such Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 9.06 of the Sale and Servicing Agreement with
respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocation of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance with
this Section. The Owner Trustee is hereby authorized and directed to retain
from amounts otherwise distributable to the Owners sufficient funds for the
payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Owner Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed
with respect to a Certificateholder shall be treated as cash distributed to
such Certificateholder at the time it is withheld by the Trust and remitted to
the appropriate taxing authority. If there is a possibility that withholding
tax is payable with respect to a distribution, the Owner Trustee may in its
sole discretion withhold such amounts in accordance with the paragraph (c).
SECTION 5.03. METHOD OF PAYMENT. Subject to Section 9.01(c)
respecting the final payment upon retirement of each Certificate, distributions
required to be made to each Certificateholder of record on the related Record
Date shall be made by check mailed to such Certificateholder at the address of
such Holder appearing in the Certificate Register the amount to be distributed
to such Certificateholder pursuant to such Holder's Certificates.
SECTION 5.04. NO SEGREGATION OF MONEYS; NO INTEREST. Subject to
Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need not
be segregated in any manner except to the extent required by law or the Sale
and Servicing Agreement and may be deposited under such general conditions as
may be prescribed by law, and the Owner Trustee shall not be liable for any
interest thereon.
SECTION 5.05. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS,
OWNERS, THE INTERNAL REVENUE SERVICE AND OTHERS. The Owner Trustee shall (a)
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis and the accrual method of accounting, (b) deliver to each Owner, as may
be required by the Code and applicable Treasury Regulations, such information
as may be required (including Schedule K-1) to enable each Owner to prepare
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its federal and state income tax returns, (c) file such tax returns relating
to the Trust (including a partnership information return, IRS Form 1065) and
make such elections as from time to time may be required or appropriate under
any applicable state or federal statute or any rule or regulation thereunder
so as to maintain the Trust's characterization as a partnership for federal
income tax purposes, (d) cause such tax returns to be signed in the manner
required by law and (e) collect or cause to be collected any withholding tax
as described in and in accordance with Section 5.02(c) with respect to income
or distributions to Owners. The Owner Trustee shall elect under Section 1278
of the Code to include in income currently any market discount that accrues
with respect to the Contracts. The Owner Trustee shall not make the election
provided under Section 754 or Section 761 of the Code.
SECTION 5.06. SIGNATURE ON RETURNS; TAX MATTERS PARTNER.
(a) The Trust Depositor shall sign on behalf of the Trust the tax
returns of the Trust.
(b) The Trust Depositor shall be designated the "TAX MATTERS PARTNER"
of the Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable
Treasury Regulations.
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ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.01. GENERAL AUTHORITY. Subject to the provisions and
limitations of Sections 2.03 and 2.06, the Owner Trustee is authorized and
directed to execute and deliver the Transaction Documents to which the Trust is
to be a party and each certificate or other document attached as an exhibit to
or contemplated by the Transaction Documents to which the Trust is to be a
party and any amendment or other agreement, as evidenced conclusively by the
Owner Trustee's execution thereof. In addition to the foregoing, the Owner
Trustee is authorized, but shall not be obligated, to take all actions required
of the Trust pursuant to the Transaction Documents. The Owner Trustee is
further authorized from time to time to take such action as the Administrator
recommends with respect to the Transaction Documents.
SECTION 6.02. GENERAL DUTIES. Subject to the provisions and
limitations of Sections 2.03 and 2.06, it shall be the duty of the Owner
Trustee to discharge (or cause to be discharged through the Administrator all
of its responsibilities pursuant to the terms of this Agreement and the
Transaction Documents to which the Trust is a party and to administer the Trust
in the interest of the Owners, subject to the Transaction Documents and in
accordance with the provisions of this Agreement. Without limiting the
foregoing, the Owner Trustee shall on behalf of the Trust file and prove any
claim or claims that may exist against Eaglemark in connection with any claims
paying procedure as part of an insolvency or receivership proceeding involving
Eaglemark. Notwithstanding the foregoing, the Owner Trustee shall be deemed to
have discharged its duties and responsibilities hereunder and under the
Transaction Documents to the extent the Administrator has agreed in the
Administration Agreement to perform any act or to discharge any duty of the
Owner Trustee hereunder or under any Transaction Document, and the Owner
Trustee shall not be held liable for the default or failure of the
Administrator to carry out its obligations under the Administration Agreement.
SECTION 6.03. ACTION UPON INSTRUCTION.
(a) Subject to Article Four, in accordance with the terms of the
Transaction Documents the Owners may by written instruction direct the Owner
Trustee in the management of the Trust.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any other Transaction Document if the Owner Trustee shall
have reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner Trustee or is
contrary to the terms hereof or of any other Transaction Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any other Transaction Document, the Owner Trustee shall promptly give notice
(in such form as shall be appropriate under the circumstances) to the Owners
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owners received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within ten days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Agreement and the
other Transaction Documents, as it shall deem to be in the best interests of
the Owners, and shall have no liability to any Person for such action or
inaction.
(d) In the event that the Owner Trustee is unsure as to the
applicability of any provision of this Agreement or any other Transaction
Document or any such provision is ambiguous as to its application, or is, or
appears to be, in conflict with any other applicable provision, or in the event
that this Agreement permits any determination by the Owner Trustee or is silent
or in incomplete as to the course of action that the Owner Trustee is required
to take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Owners requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within ten days
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of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Agreement or the other Transaction Documents, as it
shall deem to be in the best interests of the Owners, and shall have no
liability to any Person for such action or inaction.
SECTION 6.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN
INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated
hereby to which the Owner Trustee is a party, except as expressly provided by
the terms of this Agreement or any document or written instruction received by
the Owner Trustee pursuant to Section 6.03; and no implied duties or
obligations shall be read into this Agreement or any other Transaction Document
against the Owner Trustee. The Owner Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or to otherwise perfect or maintain the perfection of any security interest or
lien granted to it hereunder or to prepare or file any Commission filing for
the Trust or to record this Agreement or any other Transaction Document. The
Owner Trustee nevertheless agrees that it will, at its own cost and expense,
promptly take all action as may be necessary to discharge any liens on any part
of the Trust Estate that result from actions by, or claims against, the Owner
Trustee that are not related to the ownership or the administration of the
Trust Estate.
SECTION 6.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of the Trust Estate except (i) in accordance
with the powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (ii) in accordance with the other Transaction
Documents and (iii) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to Section 6.03.
SECTION 6.06. RESTRICTIONS. The Owner Trustee shall not take any
action (i) that is inconsistent with the purposes of the Trust set forth in
Section 2.03 or (ii) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for federal or state
income tax purposes. The Owners shall not direct the Owner Trustee to take
action that would violate the provisions of this Section.
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ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE
SECTION 7.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Trust Estate upon the terms of the Transaction
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any other Transaction Document under any
circumstances, except (i) for its own willful misconduct or negligence or (ii)
in the case of the inaccuracy of any representation or warranty contained in
Section 7.03 expressly made by the Owner Trustee. In particular, but not by
way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
instructions of the Administrator or any Owner;
(c) no provision of this Agreement or any other Transaction
Document shall require the Owner Trustee to expend or risk funds or
otherwise incur any financial liability in the performance of any of its
rights or powers hereunder or under any Transaction Document if the Owner
Trustee shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Transaction
Documents, including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution
hereof by the Trust Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Trust Estate, or for or in
respect of the validity or sufficiency of the Transaction Documents,
other than the certificate of authentication on the Trust Certificates,
and the Owner Trustee shall in no event assume or incur any liability,
duty, or obligation to any Noteholder or to any Owner, other than as
expressly provided for herein or expressly agreed to in the Transaction
Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Trust Depositor, the Indenture
Trustee or the Servicer under any of the Transaction Documents or
otherwise and the Owner Trustee shall have no obligation or liability to
perform the obligations of the Trust under this Agreement or the other
Transaction Documents that are required to be performed by the
Administrator under the Administration Agreement, the Indenture Trustee
under the Indenture or the Servicer, or the Trust Depositor under the
Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by the Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any other Transaction
Document, at the request, order or direction of the Owners, unless such
Owners have offered to the Owner Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may
be incurred by the Owner Trustee therein or thereby. The right of the
Owner Trustee to perform any discretionary act enumerated in this
Agreement or in any other Transaction Document shall not be construed as
a duty, and the Owner Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of any such act.
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SECTION 7.02. FURNISHING OF DOCUMENTS. The Owner Trustee shall
furnish to the Owner promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Transaction Documents.
SECTION 7.03. REPRESENTATIONS AND WARRANTIES. The Owner Trustee
hereby represents and warrants to the Trust Depositor and the Owners that:
(a) It is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution an delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or Delaware law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee or
any judgment or order binding on it, or constitute any default under its
charter documents or bylaws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound or result in the creation or imposition of any
lien, charge or encumbrance on the Trust Estate resulting from actions by
or claims against the Owner Trustee individually which are unrelated to
this Agreement or the other Transaction Documents.
SECTION 7.04. RELIANCE; ADVICE OF COUNSEL.
(a) The Owner Trustee shall incur no liability to anyone in acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the other
Transaction Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into by any of them, and the
Owner Trustee shall not be liable for the conduct or misconduct of such agents
or attorneys shall have been selected by the Owner Trustee with reasonable
care, and (ii) may consult with counsel, accountants and other skilled persons
to be selected with reasonable care and employed by it. The Owner Trustee
shall not be liable for anything done, suffered or omitted in good faith by it
in accordance with the written opinion or advice of any such counsel,
accountants or other such persons.
SECTION 7.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided
in this Article Seven, in accepting the trusts hereby created, Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity, and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any other Transaction
Document shall look only to the Trust Estate for payment or satisfaction
thereof.
SECTION 7.06. OWNER TRUSTEE NOT LIABLE FOR TRUST CERTIFICATES, NOTES
OR CONTRACTS. The recitals contained herein and in the Trust Certificates
(other than the signature and countersignature of the Owner Trustee and the
certificate of authentication on the Trust Certificates) shall be taken as the
statements of the Trust Depositor, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity
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or sufficiency of this Agreement, any other Transaction Document or the Trust
Certificates (other than the signature and countersignature of the Owner
Trustee and the certificate of authentication on the Trust Certificates) or
the Notes, or of any Contract or related documents. The Owner Trustee shall
at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Contract, or the perfection and
priority of any security interest created by any Contract in any Motorcycle
or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Trust Estate or its ability to generate the
payments to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including, without limitation, the
existence, condition and ownership of any Motorcycle; the existence and
enforceability of any insurance thereon; the existence and contents of any
Contract on any computer or other record thereof; the validity of the
assignment of any Contract to the Trust or of any intervening assignment; the
completeness of any Contract; the performance or enforcement of any Contract;
the compliance by the Trust Depositor or the Servicer with any warranty or
representation made under any Transaction Document or in any related document
or the accuracy of any such warranty or representation; or any action of the
Administrator, the Indenture Trustee or the Servicer or any subservicer taken
in the name of the Owner Trustee.
SECTION 7.07. OWNER TRUSTEE MAY OWN TRUST CERTIFICATES AND NOTES.
The Owner Trustee in its individual or any other capacity may become the owner
or pledgee of Trust Certificates or Notes and may deal with the Trust
Depositor, the Administrator, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Owner
Trustee.
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ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE
SECTION 8.01. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon and which shall be paid consistent with Section 7.05(a)
of the Sale and Servicing Agreement. Additionally, the Owner Trustee shall be
entitled to be reimbursed by the Trust Depositor for its other reasonable
expenses hereunder, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the Owner
Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder.
SECTION 8.02. INDEMNIFICATION. The Trust Depositor shall be liable
as primary obligor for, and shall indemnify the Owner Trustee and its
successors, assigns and servants (collectively, the "INDEMNIFIED PARTIES") from
and against, any and all liabilities, obligations, losses, damages, taxes,
claims, actions and suits, and any and all reasonable costs, expenses and
disbursements (including reasonable legal fees and expenses) of any kind and
nature whatsoever (collectively, "EXPENSES") which may at any time be imposed
on, incurred by or asserted against the Owner Trustee or any Indemnified Party
in any way relating to or arising out of this Agreement, the other Transaction
Documents, the Trust Estate, the administration of the Trust Estate or the
action or inaction of the Owner Trustee hereunder, except only that the Trust
Depositor shall not be liable for or required to indemnify an Indemnified Party
from and against Expenses arising or resulting from any of the matters
described in the third sentence of Section 7.01. The indemnities contained in
this Section shall survive the resignation or termination of the Owner Trustee
or the termination of this Agreement. In the event of any claim, action or
proceeding for which indemnity will be sought pursuant to this Section, the
Owner Trustee's choice of legal counsel shall be subject to the approval of the
Trust Depositor, which approval shall not be unreasonably withheld.
SECTION 8.03. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the
Owner Trustee pursuant to this Article shall be deemed not to be a part of the
Trust Estate immediately after such payment.
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ARTICLE NINE
TERMINATION OF TRUST AGREEMENT
SECTION 9.01. TERMINATION OF TRUST AGREEMENT.
(a) This Agreement (other than Article Eight) and the Trust shall
terminate and be of no further force or effect upon the earlier of (i) final
distribution by the Owner Trustee of all moneys or other property or proceeds
of the Trust Estate in accordance with terms of the Indenture, the Sale and
Servicing Agreement and Article Five, (ii) the expiration of 21 years from the
death of the survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the Court of St. James's, living on the date
hereof and (iii) the time provided in Section 9.02. The bankruptcy,
liquidation, dissolution, death or incapacity of any Owner, other than the
Trust Depositor as described in Section 9.02, shall not (i) operate to
terminate this Agreement or the Trust, (ii) entitle such Owner's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or Trust Estate or (iii) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), neither the Trust Depositor
nor any Holder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates to
the Paying Agent for payment of the final distribution and cancellation, shall
be given by the Owner Trustee by letter to Certificateholders mailed within
five Business Days of receipt of notice of such termination from the Servicer
given pursuant to Section 10.01 of the Sale and Servicing Agreement, stating
(i) the Distribution Date upon or with respect to which final payment of the
Trust Certificates shall be made upon presentation and surrender of the Trust
Certificates at the office of the Paying Agent therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made
only upon presentation and surrender of the Trust Certificates at the office of
the Paying Agent therein specified. The Owner Trustee shall give such notice
to the Certificate Registrar (if other than the Owner Trustee) and the Paying
Agent at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Trust Certificates, the Paying Agent shall
cause to be distributed to Certificateholders amounts distributable on such
Distribution Date pursuant to Section 5.02.
(d) In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Trust Certificates for cancellation and receive the final distribution with
respect thereto. If within one year after the second notice all the Trust
Certificates shall not have been surrendered for cancellation, the Owner
Trustee may take appropriate steps, or may appoint an agent to take appropriate
steps, to contact the remaining Certificateholders concerning surrender of
their Trust Certificates, and the cost thereof shall be paid out of the funds
and other assets that shall remain subject to this Agreement. Any funds
remaining in the Trust after exhaustion of such remedies shall be distributed
by the Owner Trustee to the Trust Depositor.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. DISSOLUTION UPON BANKRUPTCY OF TRUST DEPOSITOR OR
WITHDRAWAL OR REMOVAL OF TRUST DEPOSITOR. In the event that an Insolvency
Event shall occur with respect to the Trust Depositor or the Trust Depositor
shall withdraw, liquidate or be removed from the Trust, this Agreement shall
be terminated in accordance with Section 9.01 90 days after the date of such
event, unless before the end of such 90-day period, the Owner Trustee shall
have received written instructions from (a) Certificateholders (other than
the Trust Depositor) representing more than 50% of the Certificate Balance
(not including the Certificate Balance of the Trust Certificate held by the
Trust Depositor) and (b) each of the (i) Holders (as defined in the
Indenture) of Class A-1 Notes representing more than 50% of the Outstanding
Amount of the Class A-1 Notes and (ii) Holders (as defined in the Indenture)
of Class A-2 Notes
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representing more than 50% of the Outstanding Amount of the Class A-2 Notes,
to the effect that each such party disapproves of the liquidation of the
Collateral and termination of the Trust. Promptly after the occurrence of
any Insolvency Event with respect to the Trust Depositor, (A) the Trust
Depositor shall give the Indenture Trustee and the Owner Trustee written
notice of such Insolvency Event, (B) the Owner Trustee shall, upon the
receipt of such written notice from the Trust Depositor, give prompt written
notice to the Certificateholders and the Indenture Trustee, of the occurrence
of such event and (C) the Indenture Trustee shall, upon receipt of written
notice of such Insolvency Event from the Owner Trustee or the Trust
Depositor, give prompt written notice to the Noteholders of the occurrence of
such event; PROVIDED, HOWEVER, that any failure to give a notice required by
this sentence shall not prevent or delay, in any manner, a termination of the
Trust pursuant to the first sentence of this Section 9.02. Upon a
termination pursuant to this Section, the Owner Trustee shall direct the
Indenture Trustee promptly to sell the assets of the Trust (other than the
Trust Accounts and the Certificate Distribution Account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds of such
a sale of the assets of the Trust shall be treated as collections under the
Sale and Servicing Agreement.
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ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute; authorized to exercise
corporate trust powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authorities; and having (or having a parent that has) a rating of at least Baa3
by Moody's. If such corporation shall publish reports of condition at least
annually pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of this Section, the Owner Trustee shall resign immediately
in the manner and with the effect specified in Section 10.02.
SECTION 10.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator. Upon receiving such
notice of resignation, the Administrator shall promptly appoint a successor
Owner Trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Owner Trustee and one copy to the successor
Owner Trustee. If no successor Owner Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.01 and shall fail to resign after written
request therefor by the Administrator, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or
a receiver of the Owner Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Administrator, may remove the Owner Trustee. If the
Administrator shall remove the Owner Trustee under the authority of the
immediately preceding sentence, the Administrator shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee, and shall pay all fees owed to the
outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency.
SECTION 10.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Administrator, and to its predecessor Owner Trustee an instrument accepting
such appointment under this Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective, and such successor
Owner Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Agreement, with like effect as if originally named as Owner Trustee.
The predecessor Owner Trustee shall upon payment of its fees and expenses
deliver to the successor Owner Trustee all documents and statements and monies
held by it under this Agreement; and the Administrator and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and each Rating
Agency. If the
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Administrator shall fail to mail such notice within ten days after acceptance
of such appointment by the successor Owner Trustee, the successor Owner
Trustee shall cause such notice to be mailed at the expense of the
Administrator.
SECTION 10.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, without the execution or filing of any instrument or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; PROVIDED, that such corporation shall be eligible pursuant to
Section 10.01 and, PROVIDED, FURTHER, that the Owner Trustee shall mail notice
of such merger or consolidation to each Rating Agency.
SECTION 10.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or any financed Motorcycle may at the time be located, the
Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator and Owner Trustee to act as co-trustee, jointly
with the Owner Trustee, or as separate trustee or separate trustees, of all or
any part of the Trust Estate, and to vest in such Person, in such capacity,
such title to the Trust or any part thereof and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Administrator and the Owner Trustee may consider necessary or desirable.
If the Administrator shall not have joined in such appointment within 15 days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as a
successor Owner Trustee pursuant to Section 10.01 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Owner Trustee joining in
such act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed, the Owner Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding
of title to the Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Owner Trustee;
(b) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(c) the Administrator and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article. Each separate trustee and co-trustee,
upon its acceptance of the trusts conferred, shall be vested with the estates
or property specified in its instrument of appointment, either jointly with
the Owner Trustee or separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of or
affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Administrator.
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Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Owner Trustee, to the extent permitted by law, without the appointment
of a new or successor co-trustee or separate trustee.
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. SUPPLEMENTS AND AMENDMENTS.
(a) The Agreement may be amended by the Trust Depositor, and the Owner
Trustee, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or to add any other provisions with respect to
matters or questions arising under this Agreement that shall not be
inconsistent with the provisions of this Agreement; PROVIDED, HOWEVER, that any
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time by the Trust
Depositor, and the Owner Trustee, with the consent of the Holders (as such
term is defined in the Indenture) of Notes evidencing not less than 66 2/3% of
the Outstanding Amount of the Notes, each voting as a separate Class and the
consent of the Holders of Trust Certificates evidencing not less than 66 2/3%
of the Certificate Balance (which consent of any Holder of a Note or Trust
Certificate given pursuant to this Section or pursuant to any other provision
of this Agreement shall be conclusive and binding on such Holders and on all
future Holder of such Note or Trust Certificate, as the case may be, issued
upon the transfer thereof or in exchange thereof or in lieu thereof whether or
not notation of such consent is made thereon), for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Noteholders or
the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, (i) collections of payments on Contracts or distributions that shall
be required to be made for the benefit of the Noteholders or the
Certificateholders or any Interest Rate or the Pass-Through Rate or (ii) reduce
the aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance required to consent to any such amendment, without the
consent of the Holders of all outstanding Notes and Trust Certificates.
(c) Prior to the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment
or consent, together with a copy thereof, to the Indenture Trustee, the
Administrator and each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder. It shall not be necessary for
the consent of Certificateholders, Noteholders or the Indenture Trustee
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents (and any other
consents of Certificateholders provided for in this Agreement or in any other
Transaction Document) and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable requirements
as the Owner Trustee may prescribe.
(e) Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
(f) Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall
not be obligated to, enter into any such amendment that affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. NO LEGAL TITLE TO TRUST ESTATE IN OWNERS. The Owners
shall not have legal title to any part of the Trust Estate. The Owners shall
be entitled to receive distributions with respect to their undivided ownership
interest herein only in accordance with Articles Five and Nine. No transfer,
by operation of law or otherwise, of any right, title or interest of the Owners
to and in their ownership interest in the Trust Estate shall operate to
terminate this Agreement or the trusts hereunder or entitle any transferee to
an accounting or to the transfer to it of legal title to any part of the Trust
Estate.
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SECTION 11.03. LIMITATIONS ON RIGHTS OF OTHERS. Except for Section
2.07, the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Trust Depositor, the Owners, the Administrator and, to the extent
expressly provided herein, the Indenture Trustee and the Noteholders, and
nothing in this Agreement (other than Section 2.07), whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.04. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("NOTICES") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or
(d) on the date transmitted by legible telecopier transmission with a
confirmation of receipt, in all cases addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Eaglemark, Inc.
150 South Wacker Drive, Suite 3100
Chicago, Illinois 60606
Attention: Michael E. Sulentic
Telecopier No.: (312) 368-4372
(ii) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-IV
4150 Technology Way
Carson City, Nevada 89706
Telecopier No.: (702) 884-4469
(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iv) If to the Owner Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
(v) If to Moody's:
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Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, A
Division of The McGraw Hill Companies
25 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
(vii) If to the Underwriters:
Salomon Smith Barney Inc.
Seven World Trade Center
New York, New York 10048
Attention: Asset-Backed Securities Group
Telecopier No.: (212) 783-3848
[ ]
Telecopier No.: [ ]
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11.05. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the Trust
Certificates or the rights of the Holders thereof.
SECTION 11.06. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 11.07. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of
the Trust Depositor, and the Owner Trustee and their respective successors and
permitted assigns and each Owner and its successors and permitted assigns, all
as herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of such
Owner.
SECTION 11.08. COVENANTS OF THE TRUST DEPOSITOR. In the event that
(a) the Certificate Balance shall be reduced by Realized Losses and (b) any
litigation with claims in excess of $1,000,000 to which the Trust Depositor
is a party which shall be reasonably likely to result in a material judgment
against the Trust Depositor that the Trust Depositor will not be able to
satisfy shall be commenced, during the period beginning immediately following
the
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commencement of such litigation and continuing until such litigation is
dismissed or otherwise terminated (and, if such litigation has resulted in a
final judgment against the Trust Depositor, such judgment has been
satisfied), the Trust Depositor shall not pay any dividend to the Servicer,
or make any distribution on or in respect of its capital stock to the
Servicer, or repay the principal amount of any indebtedness of the Trust
Depositor held by the Servicer, unless (i) after giving effect to such
payment, distribution or repayment, the Trust Depositor's liquid assets shall
not be less than the amount of actual damages claimed in such litigation or
(ii) the Rating Agencies shall not downgrade the then existing rating on the
Certificates with respect to any such payment, distribution or repayment.
The Trust Depositor will not at any time institute against the Trust any
bankruptcy proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates,
the Notes, the Trust Agreement or any of the Transaction Documents.
SECTION 11.09. NO PETITION.
(a) The Trust Depositor will not at any time institute against the
Trust any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Trust Certificates, the Notes, this Agreement or any of the other Transaction
Documents.
(b) The Owner Trustee, by entering into this Agreement, each
Certificateholder, by accepting a Trust Certificate, and the Indenture Trustee
and each Noteholder, by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Trust
Depositor or the Trust, or join in any institution against the Trust Depositor,
or the Trust of, any bankruptcy proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Trust Certificates, the Notes, this Agreement or any of the other
Transaction Documents.
SECTION 11.10. NO RECOURSE. Each Certificateholder by accepting a
Trust Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Trust Depositor, the Servicer, the Seller, the
Administrator, the Owner Trustee, the Indenture Trustee or any of the
respective Affiliates and no recourse may be had against such parties or their
assets, except as my be expressly set forth or contemplated in this Agreement,
the Trust Certificates or the other Transaction Documents.
SECTION 11.11. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. TRUST CERTIFICATE TRANSFER RESTRICTIONS. The Trust
Certificates may not be acquired by or for the account of a Benefit Plan. By
accepting and holding a Trust Certificate, the Holder thereof shall be deemed
to have represented and warranted that it is not a Benefit Plan nor will it
hold such Trust Certificate for the account of a Benefit Plan. By accepting
and holding a Trust Certificate, the Holder thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
SECTION 11.14. TRUST DEPOSITOR PAYMENT OBLIGATION. The Trust
Depositor shall be responsible for payment of the Administrator's compensation
pursuant to Section 3 of the Administration Agreement and shall reimburse the
Administrator for all expenses and liabilities of the Administrator incurred
thereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV,
as Trust Depositor
By:
--------------------------------------------
Printed Name:
-------------------------
Title:
---------------------------------
WILMINGTON TRUST COMPANY, as Owner Trustee
By:
--------------------------------------------
Printed Name:
-------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST OF
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ]
This Certificate of Trust of Harley-Davidson Eaglemark Motorcycle Trust
[ ] (the "TRUST"), dated [ ], is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as Owner Trustee, to
form a business trust under the Delaware Business Trust Act (12 DEL. CODE,
Section 3801 ET SEQ.).
1. NAME. The name of the business trust formed hereby is
Harley-Davidson Eaglemark Motorcycle Trust [ ].
2. DELAWARE TRUSTEE. The name and business address of the Owner
Trustee of the Trust in the State of Delaware is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware l9890.
IN WITNESS WHEREOF, the undersigned, being the sole Owner Trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By:
----------------------------------------
Printed Name:
-----------------------
Title:
------------------------------
A-1
<PAGE>
EXHIBIT B
[TO BE INSERTED ON CEDE & CO. CERTIFICATE -
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS TRUST CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE NOTES TO THE
EXTENT DESCRIBED IN THE SALE AND SERVICING AGREEMENT AND INDENTURE REFERRED TO
HEREIN.
THIS TRUST CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV, EAGLEMARK, INC. OR ANY AFFILIATE
THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE TRUST AGREEMENT. THIS TRUST
CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN UNLESS THE
CONDITIONS SET FORTH IN SECTION 3.04 OF THE TRUST AGREEMENT HAVE BEEN COMPLIED
WITH.
[TO BE INSERTED ON COMPANY CERTIFICATE--
THIS CERTIFICATE IS NON-TRANSFERABLE]
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ] CERTIFICATE
NO. ___________
Initial Trust Certificate
Principal Balance $______________
Fractional Interest _________%
THIS CERTIFIES THAT is the registered owner of equity
$ nonassessable, fully-paid, fractional undivided interest in
the Harley-Davidson Eaglemark Motorcycle Trust [ ] (the "TRUST") formed by
Eaglemark Customer Funding Corporation-IV, a Nevada corporation (the "TRUST
DEPOSITOR").
The Trust was created pursuant to a Trust Agreement, dated as of [ ]
(as amended and supplemented from time to time, the "TRUST AGREEMENT"), among
Eaglemark Customer Funding Corporation-IV, as Trust Depositor (the "TRUST
DEPOSITOR"), Eaglemark, Inc. (the "SELLER") and Wilmington Trust Company, as
owner trustee (the "OWNER TRUSTEE"), a summary of certain of the pertinent
provisions of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them in
(i) the Trust Agreement, (ii) the Sale and Servicing Agreement, dated as of [
] (the "SALE AND SERVICING AGREEMENT"), among the Trust, Eaglemark
Customer Funding Corporation-IV, as depositor (the "TRUST DEPOSITOR"),
Eaglemark, Inc. ("EAGLEMARK"), as Servicer (in such capacity, the "SERVICER")
and Harris Trust and Savings Bank, as Indenture Trustee (the "Indenture
Trustee") or (iii) the Indenture, dated as of [ ] (the
"INDENTURE"), between the Trust and the Indenture Trustee.
This Trust Certificate is one of the duly authorized Trust Certificates
designated as "___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES"
(the "TRUST CERTIFICATES"). Also issued under the Indenture are two classes of
notes designated as "___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES,
CLASS A-1" and "___% HARLEY-
B-1
<PAGE>
DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2" (collectively, the
"NOTES"). This Trust Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the Holder of this Trust Certificate by virtue of its acceptance
hereof assents and by which such Holder is bound. The property of the Trust
includes, among other things, (i) all the right, title and interest of the
Trust Depositor in and to the Initial Contracts listed on the initial List of
Contracts delivered on the Closing Date (including, without limitation, all
security interests and all rights to receive payments which are collected
pursuant thereto on or after the Initial Cutoff Date, including any
liquidation proceeds therefrom, but excluding any rights to receive payments
which were collected pursuant thereto prior to the Initial Cutoff Date), (ii)
all rights of the Trust Depositor under any physical damage or other
individual insurance policy (and rights under a "FORCED PLACED" policy, if
any) relating to any such Contract, an Obligor or a Motorcycle securing such
Contract, (iii) all security interests in each such Motorcycle, (iv) all
documents contained in the related Contract Files, (v) all rights (but not
the obligations) of the Trust Depositor under any related motorcycle dealer
agreements between dealers (i.e., the originators of such Contracts) and the
Trust Depositor, (vi) all rights of the Trust Depositor in the Lockbox, the
Lockbox Account and related Lockbox Agreement to the extent they relate to
such Contracts, (vii) all rights (but not the obligations) of the Trust
Depositor under the Transfer and Sale Agreement, including but not limited to
the Trust Depositor's rights under Article V thereof, (viii) the remittances,
deposits and payments made into the Trust Accounts from time to time and
amounts in the Trust Accounts from time to time (and any investments of such
amounts), and (ix) all proceeds and products of the foregoing (the property
in clauses (i)-(viii) above.
Under the Trust Agreement, there will be distributed on the fifteenth day
of each month or if such day is not a Business Day the next succeeding Business
Day commencing [ ] (each, a "DISTRIBUTION DATE") and ending no later
than the Distribution Date in ___ to the person in whose name this Trust
Certificate is registered as of the last Business Day immediately preceding the
calendar month in which such Distribution Date occurs (each, a "RECORD DATE"),
such Certificateholder's fractional undivided interest in the amount to be
distributed to Certificateholders on such Distribution Date.
The holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders to the extent described in the
Sale and Servicing Agreement and the Indenture.
It is the intent of the Seller, the Servicer, the Trust Depositor, Owner
Trustee, Indenture Trustee and the Certificateholders that, for purposes of
federal income, state and local income and single business tax and any other
income taxes, the Trust will be treated as a partnership and the
Certificateholders (including the Trust Depositor) will be treated as partners
in that partnership. The Trust Depositor and the other Certificateholders, by
acceptance of a Trust Certificate, agree to treat, and to take no action
inconsistent with the treatment of, the Trust Certificates for such tax
purposes as partnership interests in the Trust and the Certificateholders
(including the Trust Depositor) as partners in that partnership.
Each Certificateholder, by its acceptance of a Trust Certificate or
beneficial interest in a Trust Certificate, covenants and agrees that such
Certificateholder will not at any time institute against the Trust or the Trust
Depositor, or join in any institution against the Trust or the Trust Depositor,
Eaglemark or the Servicer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Trust Certificates, the Notes, the Trust Agreement
or any of the other Transaction Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee or its Agent by wire transfer or check
mailed to the Certificateholder of record in the Certificate Register without
the presentation or surrender of this Trust Certificate or the making of any
notation hereon, except that with respect to Trust Certificates registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Except
as otherwise provided in the Trust Agreement and notwithstanding the above, the
final distribution on this Trust Certificate will be made after due notice by
the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Trust Certificate at the office or agency
maintained for that purpose by the Owner Trustee in the City of Wilmington,
Delaware.
B-2
<PAGE>
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed
by an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the holder hereof to any benefit under the Trust
Agreement or any other Transaction Document or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
B-3
<PAGE>
[REVERSE OF CERTIFICATE]
The Trust Certificate does not represent an obligation of, or an interest
in the Trust Depositor, Eaglemark, as the Seller or Servicer, the Owner
Trustee, the Indenture Trustee or any of their respective Affiliates and no
recourse may be had against such parties or their assets, except as expressly
set forth or contemplated herein or in the Trust Agreement or the other
Transaction Documents. In addition, this Trust Certificate is not guaranteed
by any governmental agency or instrumentality and is limited in right of
payment to certain collections and recoveries with respect to the Contracts and
certain other amounts, in each case as more specifically set forth herein and
in the Sale and Servicing Agreement. A copy of each of the Sale and Servicing
Agreement and the Trust Agreement may be examined by any Certificateholder upon
written request during normal business hours at the principal office of the
Trust Depositor and at such other places, if any, designated by the Trust
Depositor.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Trust Depositor and the rights of the Certificateholders under the Trust
Agreement at any time by the Trust Depositor and the Owner Trustee with the
consent of the Holders of the Trust Certificates and the Notes, each voting as
a separate class, evidencing not less than 66 2/3% of the Certificate Balance
and 66 2/3% of the Outstanding Amount of the Notes. Any such consent by the
Holder of this Trust Certificate shall be conclusive and binding on such Holder
and on all future Holders of this Trust Certificate and of any Trust
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent is made upon this Trust
Certificate. The Trust Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in
the Certificate Register upon surrender of this Trust Certificate for
registration of transfer at the offices or agencies of the Certificate
Registrar maintained by the Owner Trustee in Wilmington, Delaware, accompanied
by a written instrument of transfer in form satisfactory to the Owner Trustee
and the Certificate Registrar in Chicago, Illinois executed by the Holder
hereof or such Holder's attorney duly authorized in writing, and thereupon one
or more new Trust Certificates of authorized denominations evidencing the same
aggregate interest in the Trust will be issued to the designated transferee.
The initial Certificate Registrar appointed under the Trust Agreement is Harris
Trust and Savings Bank.
Except as provided in the Trust Agreement, the Trust Certificates are
issuable only as registered Trust Certificates without coupons in denominations
of $1,000 and in integral multiples of $1,000 in excess thereof. As provided
in the Trust Agreement and subject to certain limitations therein set forth,
Trust Certificates are exchangeable for new Trust Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar and any of their respective
agents may treat the Person in whose name this Trust Certificate is registered
as the owner hereof for all purposes, and none of the Owner Trustee, the
Certificate Registrar or any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Sale and Servicing Agreement and the deposition of all
property held as part of the Trust Estate. The Trust Depositor may at its
option purchase the Trust Estate at a price specified in the Sale and Servicing
Agreement, and such purchase of the Contracts and other property of the Trust
will affect early retirement of the Trust Certificates; however, such right of
purchase is exercisable only as of any Distribution Date on which the Pool
Balance has declined to less than 10% of the Initial Pool Balance.
B-4
<PAGE>
The Trust Certificates may not be acquired by a Benefit Plan. By
accepting and holding this Trust Certificate, the Holder hereof or, in the case
of Book-Entry Trust Certificate, by accepting a beneficial interest in this
Trust Certificate, the related Certificate Owner, shall be deemed to have
represented and warranted that it is not a Benefit Plan and is not acquiring
this Trust Certificate or an interest therein for the account of such an
entity.
B-5
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.
Dated: HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ]
By: WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Owner Trustee
By:
--------------------------------------------------
Authorized Signatory
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned
Trust Agreement.
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By:
-------------------------------
Authorized Signatory
B-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- ------------------------------------------------------------------------------
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- ------------------------------------------------------------------------------
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
----------
Signature Guaranteed:
- ------------------------------------
NOTICE: Signature(s) must be
guaranteed by an eligible guarantor
institution.
- ------------------------------------
NOTICE: The signature to this
assignment must correspond with the
name of the registered owner as it
appears on the face of the within
Trust Certificate in every
particular, without alteration or
enlargement or any change whatever.
B-7
<PAGE>
Exhibit 4.2
- -------------------------------------------------------------------------------
FORM OF
CERTIFICATES FOR HARLEY-DAVIDSON MOTORCYCLE CONTRACTS
[_____] GRANTOR TRUST
[___]% CLASS A CERTIFICATES
[___]% CLASS B CERTIFICATES
POOLING AND SERVICING AGREEMENT
BY AND AMONG
EAGLEMARK CUSTOMER FUNDING CORPORATION-[___]
as Trust Depositor
EAGLEMARK, INC.
as Servicer
AND
HARRIS TRUST AND SAVINGS BANK
not in its individual capacity but solely as Trustee of
EAGLEMARK TRUST [___]
Dated as of [________]
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01. General. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Specific Terms.. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS. . . . . . . . . . . . . . .19
Section 2.01. Closing. . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 2.02. Conditions to the Closing. . . . . . . . . . . . . . . . .19
Section 2.03. Acceptance by Trustee. . . . . . . . . . . . . . . . . . .21
Section 2.04. Conveyance of Subsequent Contracts.. . . . . . . . . . . .21
Section 2.05. Tax Treatment. . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . .24
Section 3.01. Representations and Warranties Regarding the Trust
Depositor. . . . . . . . . . . . . . . . . . . . . . . .24
Section 3.02. Representations and Warranties Regarding the Servicer. . .26
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS. . . . . . . .27
Section 4.01. Custody of Contracts . . . . . . . . . . . . . . . . . . .27
Section 4.02. Filing . . . . . . . . . . . . . . . . . . . . . . . . . .29
Section 4.03. Name Change or Relocation. . . . . . . . . . . . . . . . .29
Section 4.04. Chief Executive Office.. . . . . . . . . . . . . . . . . .30
Section 4.05. Costs and Expenses . . . . . . . . . . . . . . . . . . . .30
ARTICLE V
SERVICING OF CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 5.01. Responsibility for Contract Administration . . . . . . . .30
Section 5.02. Standard of Care . . . . . . . . . . . . . . . . . . . . .30
Section 5.03. Records. . . . . . . . . . . . . . . . . . . . . . . . . .30
Section 5.04. Inspection . . . . . . . . . . . . . . . . . . . . . . . .30
Section 5.05. Trust Accounts . . . . . . . . . . . . . . . . . . . . . .31
Section 5.06. Enforcement. . . . . . . . . . . . . . . . . . . . . . . .32
Section 5.07. Trustee to Cooperate . . . . . . . . . . . . . . . . . . .33
Section 5.08. Costs and Expenses . . . . . . . . . . . . . . . . . . . .34
Section 5.09. Maintenance of Security Interests in Motorcycles . . . . .34
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VI
REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 6.01. Monthly Reports. . . . . . . . . . . . . . . . . . . . . .35
Section 6.02. Officer's Certificate. . . . . . . . . . . . . . . . . . .35
Section 6.03. Other Data . . . . . . . . . . . . . . . . . . . . . . . .35
Section 6.04. Annual Report of Accountants . . . . . . . . . . . . . . .35
Section 6.05. Annual Statement of Compliance From Servicer . . . . . . .36
Section 6.06. Statements to Certificateholders . . . . . . . . . . . . .36
ARTICLE VII
EVENTS OF TERMINATION; SERVICE TRANSFER. . . . . . . . . . . . . . . . . .38
Section 7.01. Events of Termination. . . . . . . . . . . . . . . . . . .38
Section 7.02. Service Transfer . . . . . . . . . . . . . . . . . . . . .39
Section 7.03. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . .40
Section 7.04. Notification to Certificateholders . . . . . . . . . . . .40
Section 7.05. Effect of Transfer . . . . . . . . . . . . . . . . . . . .40
Section 7.06. Database File. . . . . . . . . . . . . . . . . . . . . . .40
Section 7.07. Replacement Servicer Indemnification.. . . . . . . . . . .40
ARTICLE VIII
PAYMENTS AND RESERVE FUND. . . . . . . . . . . . . . . . . . . . . . . . .41
Section 8.01. Monthly Payments . . . . . . . . . . . . . . . . . . . . .41
Section 8.02. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Section 8.03. Advances; Realization of Carrying Charge.. . . . . . . . .41
Section 8.04. Payments . . . . . . . . . . . . . . . . . . . . . . . . .42
Section 8.05. Withdrawal from Reserve Fund to Cover a Shortfall. . . . .43
Section 8.06. Repurchases of Contracts for Breach of Representations
and Warranties . . . . . . . . . . . . . . . . . . . . .43
SECTION 8.07. Reassignment of Repurchased Contracts. . . . . . . . . . .44
SECTION 8.08. Seller's Repurchase Option . . . . . . . . . . . . . . . .44
ARTICLE IX
THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Section 9.01. The Certificates . . . . . . . . . . . . . . . . . . . . .45
Section 9.02. Authentication of Certificates . . . . . . . . . . . . . .45
Section 9.03. Registration of Transfer and Exchange. . . . . . . . . . .45
Section 9.04. Certain Transfer Restrictions. . . . . . . . . . . . . . .46
Section 9.05. Mutilated, Destroyed, Lost or Stolen Certificates. . . . .46
Section 9.06. Persons Deemed Owners. . . . . . . . . . . . . . . . . . .47
Section 9.07. Access to List of Certificateholders' Names and
Addresses. . . . . . . . . . . . . . . . . . . . . . . .47
Section 9.08. Book-Entry Certificates. . . . . . . . . . . . . . . . . .47
Section 9.09. Notices to Clearing Agency.. . . . . . . . . . . . . . . .48
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE X
INDEMNITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Section 10.01. Servicer Indemnification . . . . . . . . . . . . . . . . .48
Section 10.02. Liabilities to Obligors. . . . . . . . . . . . . . . . . .49
Section 10.03. Tax Indemnification. . . . . . . . . . . . . . . . . . . .49
Section 10.04. Servicer's Indemnities . . . . . . . . . . . . . . . . . .49
Section 10.05. Operation of Indemnities . . . . . . . . . . . . . . . . .49
ARTICLE XI
THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Section 11.10. Merger or Consolidation of Trustee . . . . . . . . . . . .55
Section 11.11. Tax Returns. . . . . . . . . . . . . . . . . . . . . . . .55
Section 11.12. Obligor Claims . . . . . . . . . . . . . . . . . . . . . .56
Section 11.13. Appointment of Co-Trustee or Separate Trustee. . . . . . .56
Section 11.14. Representations and Warranties of Trustee. . . . . . . . .57
ARTICLE XII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Section 12.01. Servicer Not to Resign . . . . . . . . . . . . . . . . . .58
Section 12.02. Prohibited Transactions with Respect to the Trust. . . . .59
Section 12.03. Maintenance of Office or Agency. . . . . . . . . . . . . .59
Section 12.04. Termination. . . . . . . . . . . . . . . . . . . . . . . .59
Section 12.05. Acts of Certificateholders . . . . . . . . . . . . . . . .59
Section 12.06. Calculations . . . . . . . . . . . . . . . . . . . . . . .60
Section 12.07. Assignment or Delegation by Trust Depositor. . . . . . . .60
Section 12.08. Amendment. . . . . . . . . . . . . . . . . . . . . . . . .60
Section 12.09. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .62
Section 12.10. Merger and Integration . . . . . . . . . . . . . . . . . .63
Section 12.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . .63
Section 12.12. Governing Law. . . . . . . . . . . . . . . . . . . . . . .63
Section 12.13. No Insolvency Petition . . . . . . . . . . . . . . . . . .63
Section 12.14. Third Party Beneficiary. . . . . . . . . . . . . . . . . .63
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 12.15. No Additional Securities . . . . . . . . . . . . . . . . .63
Section 12.16. No Additional Indebtedness by the Trust Depositor. . . . .64
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit A-1 -- Form of Certificate for Motorcycle Contracts [_____]
Grantor Trust
Class A Certificates
Exhibit A-2 -- Form of Certificate for Motorcycle Contracts [_____]
Grantor Trust
Class B Certificates
Exhibit B -- Form of Assignment
Exhibit C-1 -- Form of Closing Certificate of Trust Depositor
Exhibit C-2 -- Form of Closing Certificate of Servicer/Seller
Exhibit D-1 -- Form of Opinion of Counsel for Trust Depositor
Regarding General Corporate matters (including
perfection opinion)
Exhibit D-2 -- Form of Opinion of Counsel for Trust Depositor
regarding the "true sale" nature of the transaction
Exhibit D-3 -- Form of Opinion of Counsel for Trust Depositor
regarding non-consolidation
Exhibit E -- Form of Reserve Account Agreement
Exhibit F -- Form of Certificate of Servicing Officer
Exhibit G -- Form of Certificate Regarding Repurchased Contracts
Exhibit H -- [Reserved]
Exhibit I -- List of Contracts
Exhibit J -- Form of Monthly Report to Certificateholders
Exhibit K -- Seller's Representations and Warranties
Exhibit L -- Lockbox Bank and Lockbox Account
Exhibit M -- Form of Contract Stamp
Exhibit N -- Form of Subsequent Transfer Agreement
</TABLE>
-v-
<PAGE>
This Agreement, dated as of [_____], is made by and among eaglemark
Customer Funding Corporation-[___], a nevada corporation (the "TRUST
DEPOSITOR"), Eaglemark, Inc., a Nevada corporation, as Servicer (in such
capacity, the "SERVICER") and Harris Trust and Savings Bank, an Illinois banking
corporation ("HARRIS") not in its individual capacity but solely as Trustee (in
such capacity, the "TRUSTEE") of Eaglemark Trust [_____] (the "TRUST").
In consideration of the premises and the mutual agreements hereinafter
set forth, the Trust Depositor, the Servicer and the Trustee agree as provided
herein:
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL. For the purpose of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Article include the plural as well as the singular, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular article, section or other
subdivision, and Section references refer to Sections of this Agreement.
SECTION 1.02. SPECIFIC TERMS.
"ACT" HAS THE MEANING ASSIGNED IN SECTION 9.02 (b).
"ADDITION NOTICE" means, with respect to any transfer of Subsequent
Contracts to the Trust pursuant to Section 2.04 and the Deposit Agreement and
the Trust Depositor's corresponding prior purchase of such Contracts from the
Seller, a notice, which shall be given at least 10 days prior to the related
Subsequent Transfer Date, identifying the Subsequent Contracts to be transferred
and the aggregate Principal Balance of such Subsequent Contracts.
"ADVANCE" means, with respect to any Payment Date, the amounts, if any,
deposited by the Servicer in the Collection Account for such Payment Date
pursuant to Section 8.03.
"AFFILIATE" of any specified Person means any other Person controlling or
controlled by, or under common control with, such specified Person. For the
purposes of this definition, "CONTROL" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "CONTROLLING" or "CONTROLLED" have meanings
correlative to the foregoing.
"AGREEMENT" means this Pooling and Servicing Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"APPLICANTS" has the meaning assigned in Section 9.06.
-1-
<PAGE>
"AUTHENTICATING AGENT" means any authenticating agent appointed pursuant
to Section 9.07.
"AVAILABLE FUNDS" means, with respect to any Payment Date, the sum of the
Available Interest and the Available Principal for such Payment Date.
"AVAILABLE INTEREST" means, with respect to any Payment Date, the total
(without duplication) of the following amounts received by the Servicer on or in
respect of the Contracts during the related Due Period: (i) all amounts received
in respect of interest on the Contracts (as well as Late Payment Penalty Fees
and Extension Fees), (ii) the interest component of all Net Liquidation
Proceeds, (iii) the interest component of the aggregate of the Repurchase Prices
for Contracts repurchased by the Seller pursuant to Section 8.06, (iv) all
Advances made by the Servicer pursuant to Section 8.03, (v) the interest
component of all amounts paid by the Seller in connection with an optional
repurchase of the Contracts pursuant to Section 8.08, (vi) all amounts received
in respect of Carrying Charges transferred from the Interest Reserve Account
pursuant to Section 8.03, and (vii) all amounts received in respect of interest,
dividends, gains, income and earnings on investment of funds in the Trust
Accounts as contemplated in the last sentence of Section 5.05(d).
"AVAILABLE PRINCIPAL" means, with respect to any Payment Date, the total
(without duplication) of the following amounts received by the Servicer on or in
respect of the Contracts during the related Due Period: (i) all amounts received
in respect of principal on the Contracts, (ii) the principal component of all
Net Liquidation Proceeds, (iii) the principal component of the aggregate of the
Repurchase Prices for Contracts repurchased by the Seller pursuant to Section
8.06, and (iv) the principal component of all amounts paid by the Seller in
connection with an optional repurchase of the Contracts pursuant to Section
8.08.
"AVERAGE DEFAULT RATIO" means, for any Payment Date, the arithmetic
average of the Default Ratios for such Payment Dates and the two immediately
preceding Payment Dates.
"AVERAGE DELINQUENCY RATIO" means, the arithmetic average of the
Delinquency Ratios for that Payment Date and the two immediately preceding
Payment Dates.
"AVERAGE LOSS RATIO" means, for a Payment Date is equal to the arithmetic
average of the Loss Ratios for such Payment Date and the two immediately
preceding Payment Dates.
"BOOK-ENTRY CERTIFICATES" means beneficial interests in Class A
Certificates or Class B Certificates, ownership and transfers of which shall be
registered through book entries by a Clearing Agency as described in Section
9.08.
"BUELL" means Buell Motorcycle Company.
-2-
<PAGE>
"BUSINESS DAY" means any day other than (a) a Saturday or a Sunday, or
(b) another day on which banking institutions in the city of Chicago, Illinois
are authorized or obligated by law, executive order, or governmental decree to
be closed.
"CARRYING CHARGES" means the sum of (i) the product of (A) one-twelfth
of the sum of (x) the Class A Pass-Through Rate and (y) [___]% times (B) the
Class A Percentage of the Pre-Funded Amount as of the beginning of the
related Due Period plus (ii) the product of (A) one-twelfth of the sum of (x)
the Class B Pass-Through Rate and (y) [___]% times (B) the Class B Percentage
of the Pre-Funded Amount as of the beginning of the related Due Period.
"CERTIFICATEHOLDER" or "HOLDER" means the person in whose name either a
Class A Certificate or a Class B Certificate is registered on the Certificate
Register, except that, solely for the purposes of giving any consent, waiver,
request or demand pursuant to this Agreement, any Certificate registered in the
name of the Trust Depositor or any Affiliate of the Trust Depositor shall be
deemed not to be outstanding and the Fractional Interest evidenced thereby shall
not be taken into account in determining whether the requisite Fractional
Interest necessary to effect any such consent, request, waiver or demand has
been obtained; PROVIDED, HOWEVER, that in determining whether the Trustee shall
be protected in relying upon any such consent, waiver, request or demand only
Certificates which the Trustee knows to be so owned shall be so disregarded.
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate, the
Person who is the beneficial owner of such Book-Entry Certificate, as reflected
on the books of the Clearing Agency or on the books of a Person maintaining an
account with the Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of the
Clearing Agency).
"CERTIFICATE REGISTER" means the register maintained pursuant to Section
9.02(a).
"CERTIFICATE REGISTRAR" or "REGISTRAR" means the registrar appointed
pursuant to Section 9.02.
"CERTIFICATES" means the Class A Certificates and the Class B
Certificates.
"CLASS" means all Certificates whose form is identical except for
variation in denomination, principal amount or Holder.
"CLASS A CERTIFICATE" means a Certificate for Harley-Davidson Motorcycle
Contracts evidencing a Fractional Interest executed and delivered by the Trustee
substantially in the form of EXHIBIT A-1.
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"CLASS A CERTIFICATE BALANCE" shall initially equal the Class A Initial
Certificate Balance and, on any date thereafter, shall equal the Class A
Certificate Balance, reduced by all amounts previously distributed to Class A
Certificateholders and allocable to principal.
"CLASS A DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date,
the sum of the Class A Principal Distributable Amount and the Class A Interest
Distributable Amount.
"CLASS A INITIAL CERTIFICATE BALANCE" means $[_____], which is equal to
the aggregate Principal Balance of the Initial Contracts as of the Initial
Cutoff Date plus the Pre-Funded Amount as of the Closing Date multiplied by the
Class A Percentage, and with respect to a particular Certificate means the
amount set forth on the face thereof.
"CLASS A INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date, (i) the excess of the Class A Interest Distributable Amount for the
preceding Payment Date over the amount of interest that was actually distributed
to Class A Certificateholders on such preceding Payment Date, plus (ii) 30 days
of interest on the amount specified in clause (i), to the extent permitted by
law, at the Class A Pass-Through Rate.
"CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date (other than the first Payment Date), the sum of (i) the product of
(A) one-twelfth (or, with respect to the first Payment Date, a fraction, the
numerator of which equals the number of days from and including the Closing Date
to but excluding the first Payment Date and the denominator of which equals 360)
of the Class A Pass-Through Rate and (B) the Class A Certificate Balance as of
the immediately preceding Payment Date (after giving effect to distributions of
principal made on such immediately preceding Payment Date) or, in the case of
the first Payment Date, the Class A Initial Certificate Balance plus (ii) the
Class A Interest Carryover Shortfall for such Payment Date.
"CLASS A PASS-THROUGH RATE" means [___]% per annum computed on the basis
of a 360-day year consisting of twelve 30-day months.
"CLASS A PERCENTAGE" means [___]%.
"CLASS A POOL FACTOR" means, at any time, the percentage (carried out to
seven decimal places) derived from a fraction, the numerator of which is the
Class A Certificate Balance at such time and the denominator of which is the
Class A Initial Certificate Balance.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Payment Date, (i) the excess of the Class A Principal Distributable Amount over
(ii) the amount of principal that was actually distributed to Class A
Certificateholders on such preceding Payment Date.
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"CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date, the sum of (i) the product of (a) the Class A Percentage and (b)
the Monthly Principal for such Payment Date plus (ii) the Class A Principal
Carryover Shortfall for such Payment Date.
"CLASS B CERTIFICATE" means a Certificate for Harley-Davidson Motorcycle
Contracts evidencing a Fractional Interest executed and delivered by the Trustee
substantially in the form of EXHIBIT A-2.
"CLASS B CERTIFICATE BALANCE" shall initially equal the Class B Initial
Certificate Balance and, on any Payment Date (after giving effect to all
payments made to Certificateholders on such date) shall equal the amount by
which the sum of (i) the Pool Balance as of the last day of the related Due
Period and (ii) the Pre-Funded Amount as of such day exceeds the Class A
Certificate Balance on such Payment Date (after giving effect to all payments
made to the Class A Certificateholders on such date).
"CLASS B DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date,
the sum of the Class B Principal Distributable Amount and the Class B Interest
Distributable Amount.
"CLASS B INITIAL CERTIFICATE BALANCE" means $[____], which is equal to
the aggregate Principal Balance of the Initial Contracts as of the Initial
Cutoff Date plus the Pre-Funded Amount as of the Closing Date multiplied by the
Class B Percentage, and with respect to a particular Certificate means the
amount set forth on the face thereof.
"CLASS B INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date, (i) the excess of the Class B Interest Distributable Amount for the
preceding Payment Date over the amount of interest that was actually distributed
to Class B Certificateholders on such preceding Payment Date, plus (ii) 30 days
of interest on the amount specified in clause (i), to the extent permitted by
law, at the Class B Pass-Through Rate.
"CLASS B INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date (other than the first Payment Date), the sum of (i) the product of
(A) one-twelfth (or, with respect to the first Payment Date, a fraction the
numerator of which equals the number of days from and including the Closing Date
to but excluding the first Payment Date and the denominator of which equals 360)
of the Class B Pass-Through Rate and (B) the Class B Certificate Balance as of
the immediately preceding Payment Date (after giving effect to distributions of
principal made on such immediately preceding Payment Date) or, in the case of
the first Payment Date, the Class B Initial Certificate Balance plus (ii) the
Class B Interest Carryover Shortfall for such Payment Date.
"CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
Payment Date, (i) the excess of the Class B Principal Distributable Amount over
(ii) the amount of principal that was actually distributed to Class B
Certificateholders on such preceding Payment Date.
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"CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date, the sum of (i) the product of (A) the Class B Percentage and (B)
the Monthly Principal for such Payment Date plus (ii) the Class B Principal
Carryover Shortfall for such Payment Date.
"CLASS B PASS-THROUGH RATE" means [___]% per annum computed on the
basis of a 360-day year consisting of twelve 30-day months. The Class B
Pass-Through Rate includes (i) at any time during the Funding Period, the sum
of (a) the Class A Pass-Through Rate multiplied by the Class B Percentage
multiplied by the Pool Balance, (b) 1.75 basis points on the Pool Balance and
(c) a portion of the amount deposited to the Collection Account from the
Interest Reserve Account during the Funding Period equal to the difference
between the Class B Pass-Through Rate multiplied by the Class B Certificate
Balance and the sum of items (a) and (b) above and (ii) at any time after the
Funding Period, the sum of (a) the Class A Pass-Through Rate multiplied by
the Class B Certificate Balance and (b) 1.75 basis points on the Pool
Balance. In no event will the Class B Pass-Through Rate exceed 7.00% per
annum.
"CLASS B PERCENTAGE" means [___]%
"CLASS B POOL FACTOR" means, at any time, the percentage (carried out to
seven decimal places) derived from a fraction, the numerator of which is the
Class B Certificate Balance at such time and the denominator of which is the
Class B Initial Certificate Balance.
"CLEARING AGENCY" means an organization registered as a "CLEARING AGENCY"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"CLOSING DATE" means [_______].
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL AGENT" means the Collateral Agent named in the Security
Agreement and any successor thereto pursuant to the terms of the Security
Agreement.
"COLLECTION ACCOUNT" means a trust account as described in Section 5.05
maintained in the name of the Trust which shall be an Eligible Account.
"COMPUTER DISK" means the computer disk generated by the Servicer which
provides information relating to the Contracts and which was used by the Seller
in selecting the Contracts sold to the Trust Depositor pursuant to the Transfer
and Sale Agreement (and any Subsequent Purchase Agreement) by the Trust
Depositor in selecting the Contracts sold to the Trust pursuant
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to this Agreement (and any Subsequent Transfer Agreement), and includes the
master file and the history file as well as servicing information with
respect to the Contracts.
"CONTRACT ASSETS" has the meaning assigned in Section 2.01 (and 2.04, as
applicable in the case of Subsequent Contracts) of the Transfer and Sale
Agreement.
"CONTRACT FILE" means, as to each Contract, (a) the original copy of the
Contract, including the executed conditional sales contract or other evidence of
the obligation of the Obligor, (b) the original title certificate to the
Motorcycle and, where applicable, the certificate of lien recordation, or, if
such title certificate has not yet been issued, an application for such title
certificate, or other appropriate evidence of a security interest in the covered
Motorcycle; (c) the assignments of the Contract; (d) the original copy of any
agreement(s) modifying the Contract including, without limitation, any extension
agreement(s) and (e) documents evidencing the existence of physical damage
insurance covering such Motorcycle.
"CONTRACT RATE" means, as to any Contract, the annual rate of interest
specified in the Contract.
"CONTRACTS" means the motorcycle conditional sales contracts described in
the List of Contracts and constituting part of the Trust Corpus (as such list
may be supplemented from time to time to reflect transfers of Subsequent
Contracts), and includes, without limitation, all related security interests and
any and all rights to receive payments which are collected pursuant thereto on
or after the Initial Cutoff Date or, with respect to any Subsequent Contracts,
any related Subsequent Cutoff Date, but excluding any rights to receive payments
which are collected pursuant thereto prior to the Initial Cutoff Date, or with
respect to any Subsequent Contracts, any related Subsequent Cutoff Date.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of the execution of this Agreement is located at the
address set forth in Section 12.09.
"CRAM DOWN LOSS" means, with respect to a Contract, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Principal Balance of such Contract the amount of such reduction
(with a "CRAM DOWN LOSS" being deemed to have occurred on the date of issuance
of such order).
"CUMULATIVE LOSS RATIO" means, as of any Payment Date, the fraction
(expressed as a percentage) computed by the Servicer by dividing (i) the
aggregate Net Liquidation Losses for all Contracts since the Cutoff Date through
the end of the related Due Period by (ii) the sum of (A) the Principal Balance
of the Contracts as of the Cutoff Date plus (B) the Principal Balance of any
Subsequent Contracts as of the related Subsequent Cutoff Date.
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"CUTOFF DATE" means either or both (as the context may require) the
Initial Cutoff Date and any Subsequent Cutoff Date.
"DEFAULTED CONTRACT" means a Contract with respect to which there has
occurred one or more of the following: (i) all or some portion of any payment
under the Contract is 120 days or more delinquent, (ii) repossession (and
expiration of any redemption period) of a Motorcycle securing a Contract or
(iii) the Servicer has determined in good faith that an Obligor is not likely to
resume payment under a Contract.
"DEFAULT RATIO" means, as of any Payment Date, the fraction (expressed as
a percentage) derived by dividing (x) the Principal Balance for all Contracts
that become Defaulted Contracts during the immediately preceding Due Period
multiplied by twelve by (y) the outstanding Principal Balances of all Contracts
as of the beginning of the related Due Period.
"DELINQUENCY AMOUNT" means, as of any Payment Date means the Principal
Balance of all Contracts that were delinquent 60 days or more as of the end of
the related Due Period (including Contracts in respect of which the related
Motorcycles have been repossessed and are still inventory).
"DELINQUENT INTEREST" means, for each Contract and each Determination
Date as to which the full payment due in the related Due Period has not been
paid (any such payment being "DELINQUENT" for purposes of this definition), all
interest accrued on such Contract from the Due Date in the Due Period one month
prior to the Due Period in which the payment is delinquent.
"DELINQUENCY RATIO" means, for any Payment Date, the fraction (expressed
as a percentage) computed by dividing (a) the Delinquency Amount during the
immediately preceding Due Period multiplied by twelve by (b) the Principal
Balance of the Contracts as of the beginning of the related Due Period.
"DEPOSIT AGREEMENT" means the Agreement to Deposit Contracts, dated as of
[___], from the Trust Depositor in favor of the Trustee for the benefit of the
Trust, which comprises part of the Trust Corpus.
"DETERMINATION DATE" means the fourth Business Day following the
conclusion of a Due Period during the term of this Agreement.
"DUE DATE" means, with respect to any Contract, the day of the month on
which each scheduled payment of principal and interest is due on such Contract,
exclusive of days of grace.
"DUE PERIOD" means a calendar month during the term of this Agreement,
and the Due Period related to a Determination Date or Payment Date shall be the
calendar month immediately preceding such date; PROVIDED, however, that with
respect to the Initial Determination Date or
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Initial Payment Date, the Due Period shall be the period from the Initial
Cutoff Date to and including [_____].
"EAGLEMARK FINANCIAL" has the meaning assigned in Section 5.15.
"ELIGIBLE ACCOUNT" means a segregated direct deposit account maintained
with a depository institution or trust company organized under the laws of the
United States of America, or any of the States thereof, or the District of
Columbia, having a certificate of deposit, short-term deposit or commercial
paper rating of at least A-1+ by Standard & Poor's and P-1 by Moody's.
"ELIGIBLE INVESTMENTS" means any one or more of the following types of
investments:
(a) (i) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal
and interest by, the United States or any agency or instrumentality of
the United States the obligations of which are backed by the full faith
and credit of the United States; and (ii) direct interest-bearing
obligations of, and interest-bearing obligations guaranteed as to timely
payment of principal and interest by, the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation, but only if,
at the time of investment, such obligations are assigned the highest
credit rating by each Rating Agency;
(b) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depositary institution or trust
company organized under the laws of the United States or any State and
subject to supervision and examination by federal and/or State banking
authorities (including, if applicable, the Trustee or any agent of the
Trustee acting in their respective commercial capacities); PROVIDED that
the short-term unsecured debt obligations of such depositary institution
or trust company at the time of such investment, or contractual
commitment providing for such investment, are assigned the highest credit
rating by each Rating Agency;
(c) repurchase obligations pursuant to a written agreement (i)
with respect to any obligation described in clause (a) above, where the
Trustee has taken actual or constructive delivery of such obligation in
accordance with Section 5.05, and (ii) entered into with a depositary
institution or trust company organized under the laws of the United
States or any State thereof, the deposits of which are insured by the
Federal Deposit Insurance Corporation and the short-term unsecured debt
obligations of which are rated "A-1+" by Standard & Poor's and "P-1" by
Moody's (including, if applicable, the Trustee or any agent of the
Trustee acting in their respective commercial capacities);
(d) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States or any
State whose long-term unsecured debt obligations are assigned the highest
credit rating by each Rating Agency at the time
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of such investment or contractual commitment providing for such
investment; PROVIDED, HOWEVER, that securities issued by any
particular corporation will not be Eligible Investments to the extent
that an investment therein will cause the then outstanding principal
amount of securities issued by such corporation and held as part of
the Trust to exceed 10% of the Eligible Investments held in the Trust
(with Eligible Investments valued at par);
(e) commercial paper that (i) is payable in United States
dollars and (ii) is rated in the highest credit rating category by each
Rating Agency;
(f) money market mutual funds registered under the Investment
Company Act of 1940, as amended, having a rating, at the time of such
investment, from each of the Rating Agencies in the highest investment
category granted thereby; and
(g) any other demand or time deposit, obligation, security or
investment as may be acceptable to each Rating Agency and as may from
time to time be confirmed in writing to the Trustee by each Rating
Agency;
PROVIDED, HOWEVER, that securities issued by any entity (except as provided in
paragraph (a)) will not be Eligible Investments to the extent that an investment
therein will cause the then outstanding principal amount of securities issued by
such entity and held in the Pre-Funding Account to exceed $10 million (with
Eligible Investments held in the Pre-Funding Account valued at par).
"EVENT OF TERMINATION" has the meaning assigned to such term in Section
7.01.
"EXTENSION FEE" means any extension fee paid by the Obligor on a
Contract.
"FINAL SCHEDULED PAYMENT DATE" means [____].
"FRACTIONAL INTEREST" means an undivided interest in the Trust and, as to
a particular Certificateholder, means the undivided interest in the Trust owned
by that Certificateholder equal to the percentage obtained by dividing (a) the
Certificate Balance of all Certificates held by such Certificateholder at the
time of determination by (b) the aggregate of the Certificate Balance of all of
the Certificates held by all Certificateholders at such time.
"FUNDING PERIOD" means the period beginning on the Closing Date and
ending on the first to occur of (a) the Payment Date on which the amount on
deposit in the Pre-Funding Account (after giving effect to any transfers
therefrom in connection with the transfer of Subsequent Contracts to the Trust
on such Payment Date) is less than $100,000, (b) the date on which an Event of
Termination occurs, (c) the date on which an Insolvency Event occurs with
respect to the Seller and (d) the close of business on the date which is 90 days
from and including the Closing Date.
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"HOLDER" means a Person in whose name a Certificate is registered in the
Certificate Register.
"INITIAL CONTRACTS" means those Contracts conveyed to the Trust on the
Closing Date.
"INITIAL CUTOFF DATE" means [_____].
"INSOLVENCY EVENT" means with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"INTEREST RESERVE ACCOUNT" means the account designated as the Interest
Reserve Account in, and which is established and maintained pursuant to, Section
3.01 of the Security Agreement.
"INTEREST RESERVE AMOUNT" means, as of any date of determination, the
amount on deposit in the Interest Reserve Account on such date, and as of the
Closing Date shall be $[___].
"Late Payment Penalty Fees" means any late payment fees paid by Obligors
on Contracts after all sums received have been allocated first to regular
installments due or overdue and all such installments are then paid in full.
"LIQUIDATED CONTRACT" means a Contract with respect to which there has
occurred one or more of the following: (i) 90 days have elapsed following the
date of repossession (and expiration of any redemption period) with respect to
the Motorcycle securing such Contract, (ii) such Contract is a Defaulted
Contract with respect to which the Servicer has determined in good faith that
all amounts expected to be recovered have been received, or (iii) all or any
portion of any payment is delinquent 150 days or more.
"LIQUIDATED DAMAGES" means the amounts payable by the Trust Depositor to
the Trust upon the end of the Funding Period under Section 2.02 of the Deposit
Agreement, to be derived
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from any remaining Pre-Funded Amount at the end of the Funding Period, and
described as "Liquidated Damages" in Section 2.02 of the Deposit Agreement.
"LIST OF CONTRACTS" means the list identifying each Contract constituting
part of the Trust Corpus, which list shall consist of the initial List of
Contracts reflecting the Initial Contracts transferred to the Trust on the
Closing Date, together with any Subsequent List of Contracts reflecting the
Subsequent Contracts transferred to the Trust on the related Subsequent Transfer
Date, and which list (a) identifies each Contract and (b) sets forth as to each
Contract (i) the Principal Balance as of the applicable Cutoff Date, (ii) the
amount of monthly payments due from the Obligor, (iii) the Contract Rate and
(iv) the maturity date, and which list (as in effect on the Closing Date) is
attached to this Agreement as EXHIBIT I.
"LOCKBOX" means the Lockbox maintained by the Lockbox Bank identified on
EXHIBIT L hereto.
"LOCKBOX ACCOUNT" means the account maintained with the Lockbox Bank and
identified on EXHIBIT L hereto.
"LOCKBOX AGREEMENT" means the Fourth Amended and Restated Lockbox
Administration Agreement dated as of April 1, 1998 by and among the Servicer,
the Trust Depositor, Eaglemark Customer Funding Corporation-II, Eaglemark
Customer Funding Corporation--III, Norwest Bank Minnesota, National
Association (the "PREDECESSOR TRUSTEE"), the Trustee, Financial Security
Assurance Inc. ("FSA," with respect to certain prior trusts, the "PRIOR
TRUSTS"), with respect to the Lockbox Account, unless such agreement shall be
terminated in accordance with its terms, in which event "LOCKBOX AGREEMENT"
shall mean such other agreement, in form and substance acceptable to the
above-described parties and FSA, or if an Insurer Default (as defined in
FSA's documentation relating to such Prior Trusts) shall have occurred and be
continuing or FSA is owed no obligation with respect to such Prior Trusts,
the majority of the Certificateholders with respect to such Prior Trusts),
the Servicer, the Trustee and the Lockbox Bank.
"LOCKBOX BANK" means the financial institution maintaining the Lockbox
Account and identified on EXHIBIT L hereto or any successor thereto acceptable
to a majority of the Certificateholders.
"LOSS RATIO" means, for any Payment Date, the fraction (expressed as a
percentage) derived by dividing (x) Net Liquidation Losses for all Contracts
that became Liquidated Contracts during the immediately preceding Due Period
multiplied by twelve by (y) the outstanding Principal Balances of all Contracts
as of the beginning of the Due Period.
"MONTHLY PRINCIPAL" means, as to any Payment Date, the following amount
calculated as of the related Determination Date: the difference between (i) the
sum of (A) the Principal Balance of the Contracts as of the first day of the Due
Period preceding the Due Period in which
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such Payment Date occurs (or, in the case of the first Payment Date, the
Principal Balance of the Contracts as of the Initial Cutoff Date), plus (B)
the Pre-Funded Amount on such date (or, in the case of the first Payment
Date, the Pre-Funded Amount on the Closing Date) and (ii) the sum of (A) the
Principal Balance of the Contracts as of the first day of the Due Period in
which such Payment Date occurs, plus (B) the Pre-Funded Amount on such day,
plus (C) the amount of any Special Distribution occurring from the day
referred to in clause (i)(A) above to the day referred to in clause (ii)(A)
above; provided, that on the Final Scheduled Payment Date, Monthly Principal
shall equal the aggregate of the Class A Certificate Balance and the Class B
Certificate Balance. For purposes of determining the amount in clause
(ii)(C) above as to any particular Payment Date and with respect to the Due
Period preceding such Payment Date, if the Funding Period ends during such
Due Period and Liquidated Damages (as defined in the Security Agreement) are
consequently paid from the Pre-Funding Account during such Due Period but
will not be distributed as a Special Distribution until the Payment Date
occurring in the following Due Period (i.e., the particular Payment Date
referred to above), then the amount calculated in clause (ii)(C) for such
preceding Due Period shall be deemed to include such Special Distribution, in
such amount (although paid as a Special Distribution) on the Payment Date
occurring during the following Due Period) will not be included in the next
calculation of clause (ii)(C) to be made with respect to the following Due
Period.
"MONTHLY REPORT" has the meaning assigned in Section 6.01.
"MONTHLY SERVICING FEE" means, as to any Payment Date, one-twelfth of the
product of 1% and the Principal Balance of the Contracts as of the beginning of
the related Due Period.
"MOODY'S" means Moody's Investors Service, Inc. or any successor thereto.
"MOTORCYCLE" means a motorcycle manufactured by Harley-Davidson, Inc. (or
in certain limited instances Buell) securing a Contract.
"NET LIQUIDATION LOSSES" means, as of any Payment Date, with respect to a
Liquidated Contract, the amount, if any, by which (a) the outstanding Principal
Balance of such Liquidated Contract plus accrued and unpaid interest thereon at
the Contract Rate to the date on which such Liquidated Contract became a
Liquidated Contract exceeds (b) the Net Liquidation Proceeds for such Liquidated
Contract.
"NET LIQUIDATION PROCEEDS" means, as to any Liquidated Contract, the
proceeds realized on the sale or other disposition of the related Motorcycle,
including proceeds realized on the repurchase of such Motorcycle by the
originating dealer for breach of warranties, and the proceeds of any insurance
relating to such Motorcycle, after payment of all reasonable expenses incurred
thereby, together, in all instances, with the expected or actual proceeds of any
recourse rights relating to such Contract as well as any post-disposition
proceeds received by the Servicer.
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"OBLIGOR" means a Motorcycle buyer or other person who owes payments
under a Contract.
"OFFICER'S CERTIFICATE" means a certificate signed by the Chairman of the
Board, President, or any Vice President of the Seller, the Trust Depositor or
the Servicer and delivered to the Trustee.
"PAYING AGENT" has the meaning assigned in Section 8.01(b).
"PAYMENT DATE" means the fifteenth day of each calendar month during the
term of this Agreement, or if such day is not a Business Day, the next
succeeding Business Day, with the first such Payment Date hereunder being
[_____].
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"POOL BALANCE" means, as of any date, the aggregate Principal Balance of
Contracts as of the close of business on such date.
"PRE-FUNDED AMOUNT" means as of any date, the amount on deposit in the
Pre-Funding Account at the close of business on such date.
"PRE-FUNDING ACCOUNT" means the account designated as the Pre-Funding
Account in, and which is established and maintained pursuant to, Section 3.01 of
the Security Agreement.
"PRINCIPAL BALANCE" means (a) with respect to any Contract as of any
date, an amount equal to the unpaid principal balance of such Contract as of the
opening of business on the Initial Cutoff Date or related Subsequent Cutoff
Date, as applicable, reduced by the sum of (x) all payments received by the
Servicer as of such date allocable to principal and (y) any Cram Down Loss in
respect of such Contract; provided, however, that (i) if (x) a Contract is
repurchased by the Seller pursuant to Section 5.01 of the Transfer and Sale
Agreement and Section 8.06 hereof because of a breach of representation or
warranty, or if (y) the Seller gives notice of its intent to purchase the
Contracts in connection with an optional termination of the Trust pursuant to
Section 5.02 of the Transfer and Sale Agreement and Section 8.08 hereof, in each
case the Principal Balance of such Contract or Contracts shall be deemed as of
the related Determination Date to be zero for the Due Period in which such event
occurs and for each Due Period thereafter, (ii) from and after the third Due
Period succeeding the final Due Period in which the Obligor is required to make
the final scheduled payment on a Contract, the Principal Balance, if any, of
such Contract shall be deemed to be zero, and (iii) from and after the Due
Period in which a Contract becomes a Liquidated Contract, the Principal Balance
of such Contract shall be deemed to be zero; and (b) where the context requires,
the aggregate of the Principal Balances described in clause (a) for all such
Contracts.
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"RATING AGENCY" means each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Certificates; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Certificates, such other
nationally recognized statistical rating organization selected by the Trust
Depositor.
"RECORD DATE" means, with respect to any Payment Date, the last Business
Day of the preceding calendar month.
"REIMBURSEMENT AMOUNT" has the meaning assigned in Section 8.03 hereof.
"REPURCHASE PRICE" means, with respect to a Contract to be repurchased
hereunder, an amount equal to (a) the remaining principal balance of such
Contract, plus (b) accrued and unpaid interest at the Contract Rate on such
Contract through the end of the immediately preceding Due Period.
"REQUISITE INTEREST RESERVE AMOUNT" means, as of the Closing Date,
$[_____] and as of any Payment Date thereafter during the Funding Period an
amount equal to the product of (i) a fraction, the numerator of which equals the
difference between (x) the sum of the weighted average of the Class A
Pass-Through Rate and the Class B Pass-Through Rate and ___% and (y) ___%, and
the denominator of which equals 360, times (ii) the Pre-Funded Amount on such
date times (iii) the number of days remaining in the Funding Period. The
Requisite Interest Reserve Amount for any Subsequent Transfer Date shall be
calculated after taking into account the transfer of Subsequent Contracts to the
Trust on such Payment Date.
"RESERVE AGENT" means the Reserve Agent named in the Reserve Fund
Agreement, and any successor thereto pursuant to the terms of the Reserve Fund
Agreement.
"RESERVE FUND" means with respect to the Trust, the Reserve Fund
established and maintained pursuant to the Reserve Fund Agreement. The Reserve
Fund shall in no event be deemed part of the Trust Corpus.
"RESERVE FUND ADDITIONAL DEPOSITS" means, with respect to any transfer of
Subsequent Contracts to the Trust, the amount (if any) required to be deposited
in the Reserve Fund on or prior to such transfer in satisfaction of the
condition set forth in Section 2.04(b)(vi) hereof.
"RESERVE FUND AGREEMENT" means the Reserve Fund Agreement, dated as of
[____] among the Trust Depositor, the Reserve Agent and the Trustee (as amended,
supplemented or otherwise modified from time to time).
"RESERVE FUND DEPOSITS" shall have the meaning provided in the Reserve
Fund Agreement.
"RESERVE FUND INITIAL DEPOSIT" means $[____].
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"RESERVE FUND TRIGGER EVENT" means as of any particular Payment Date (i)
the Average Delinquency Ratio is equal to or greater than ___%; (ii) the Average
Loss Ratio is equal to or greater than ___%, (iii) the Cumulative Loss Ratio is
equal to or greater than (a) ___% with respect to any Payment Date which occurs
within the period from the Closing Date to, and inclusive of, the first
anniversary of the Closing Date, (b) ___% with respect to any Payment Date which
occurs within the period from the day after the first anniversary of the Closing
Date to, and inclusive of, the second anniversary of the Closing Date, or (c)
___% for any Payment Date following the second anniversary of the Closing Date
or (iv) the Average Default Ratio is equal to or greater than ___%.
"RESERVE FUND REQUISITE AMOUNT" means, with respect to any Payment Date,
an amount equal to ___% of the Principal Balance of the Contracts in the Trust
as of the first day of the immediately preceding Due Period or, upon the
occurrence of a Reserve Fund Trigger Event which has not terminated for three
consecutive Payment Dates (inclusive of the respective Payment Date), an amount
equal to ___% of the Principal Balance of the Contracts in the Trust as of the
first day of the immediately preceding Due Period; provided, however, in no
event, after the Funding Period, shall the Reserve Fund Requisite Amount be less
than ___% of the aggregate of the Initial Class A Certificate Balance and
Initial Class B Certificate Balance.
"RESPONSIBLE OFFICER" means, with respect to the Trustee, the chairman
and any vice chairman of the board of directors, the president, the chairman and
vice chairman of any executive committee of the board of directors, every vice
president, assistant vice president, the secretary, every assistant secretary,
cashier or any assistant cashier, controller or assistant controller, the
treasurer, every assistant treasurer, every trust officer, assistant trust
officer and every other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by persons who at the time shall
be such officers, respectively, or to whom a corporate trust matter is referred
because of knowledge of, familiarity with, and authority to act with respect to
a particular matter.
"SECURITY AGREEMENT" means the Security Agreement, dated as of [____]
among the Trust Depositor, the Collateral Agent and the Trustee, securing the
Trust Depositor's obligations to the Trust under the Deposit Agreement.
"SELLER" means Eaglemark, Inc., a Nevada corporation, or its successor,
in its capacity as Seller of Contract Assets under the Transfer and Sale
Agreement and any Subsequent Purchase Agreement.
"SERVICER" means Eaglemark, Inc., a Nevada corporation, or its successor,
until any Service Transfer hereunder and thereafter means the [____] appointed
pursuant to Article VII below with respect to the duties and obligations
required of the Servicer under this Agreement.
"SERVICE TRANSFER" has the meaning assigned in Section 7.02(a).
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"SERVICING FEE" means, on any Determination Date, the sum of (a) the
Monthly Servicing Fee payable on the related Payment Date, (b) Late Payment
Penalty Fees received by the Servicer during the related Due Period, and (c)
Extension Fees received by the Servicer during the related Due Period.
"SERVICING OFFICER" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Trustee by the Servicer, as the same may be amended from time
to time.
"SHORTFALL" means, with respect to a Payment Date as determined in
accordance with Section 8.04(b), the amounts described in clauses (v) through
(viii) thereof over Available Funds (after the payment of amounts described in
clauses (i) through (iv) of Section 8.04(b) on such Payment Date) in the
Collection Account with respect to the related Due Period.
"SPECIAL DISTRIBUTION" means a distribution on a Payment Date of amounts
deposited in the Special Distribution Subaccount derived from the payment of
Liquidated Damages under the Deposit Agreement, which shall be deemed a
distribution of principal with respect to the Certificates.
"SPECIAL DISTRIBUTION SUBACCOUNT" means the account described in Section
5.05(a) established for the purpose of Special Distributions.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division
of The McGraw Hill Company or any successor thereto.
"SUBSEQUENT CONTRACTS" means all Contracts sold and transferred to the
Trust pursuant to Section 2.04 hereof and Section 2.01 of the Deposit Agreement.
"SUBSEQUENT CUTOFF DATE" means the date specified as such for Subsequent
Contracts in the related Subsequent Transfer Agreement.
"SUBSEQUENT LIST OF CONTRACTS" means a list, in the form of the initial
List of Contracts delivered on the Closing Date, but listing each Subsequent
Contract transferred to the Trust pursuant to the related Subsequent Transfer
Agreement.
"SUBSEQUENT PURCHASE AGREEMENT" means, with respect to any Subsequent
Contracts, the agreement between the Seller and the Trust Depositor pursuant to
which the Seller transferred the Subsequent Contracts to the Trust Depositor,
the form of which is attached to the Transfer and Sale Agreement as EXHIBIT C.
"SUBSEQUENT TRANSFER AGREEMENT" means the agreement described in Section
2.04 hereof and Section 2.01 of the Deposit Agreement.
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"SUBSEQUENT TRANSFER DATE" means any date during the Funding Period on
which Subsequent Contracts are transferred to the Trust.
"TRANSACTION DOCUMENTS" means this Agreement, the Transfer and Sale
Agreement, the Reserve Fund Agreement, the Deposit Agreement, the Security
Agreement, the Lockbox Agreement, any Subsequent Transfer Agreement and any
Subsequent Purchase Agreement.
"TRANSFER AND SALE AGREEMENT" means the Transfer and Sale Agreement dated
as of [____] by and between the Trust Depositor and the Seller, as amended,
supplemented or otherwise modified from time to time.
"TRUST" means the trust created by this Agreement, comprised of the Trust
Corpus.
"TRUST ACCOUNTS" means, collectively, the Collection Account and the
Special Distribution Subaccount therein, or any of them.
"TRUST CORPUS" has the meaning given to such term in Section 2.01(b)
hereof (and in Section 2.04(a) hereof in respect of Subsequent Contracts and
related assets transferred to the Trust pursuant to Subsequent Transfer
Agreements). Although the Trust Depositor has pledged the Reserve Fund to the
Trustee pursuant to the Reserve Fund Agreement, the Reserve Fund shall not under
any circumstances be deemed to be a part of or otherwise includable in the Trust
or the Trust Corpus.
"TRUST DEPOSITOR" has the meaning assigned such term in the preamble
hereunder or any successor thereto.
"TRUSTEE'S FEE" means, with respect to any Payment Date, one-twelfth of
the product of ___% and the sum of (i) the Principal Balance of the Contracts as
of the beginning of the related Due Period and (ii) the Pre-Funded Amount as of
the beginning of such period; provided, however, in no event shall such fee be
less than $200.00 per month.
"UCC" means the Uniform Commercial Code as enacted in Illinois or Nevada,
as applicable.
"UNCOLLECTIBLE ADVANCE" means with respect to any Determination Date and
any Contract, the amount, if any, advanced by the Servicer pursuant to Section
8.03 which the Servicer has as of such Determination Date determined in good
faith will not be ultimately recoverable by the Servicer from insurance policies
on the related Motorcycle, the related Obligor or out of Net Liquidation
Proceeds with respect to such Contract. The determination by the Servicer that
it has made an Uncollectible Advance shall be evidenced by an Officer's
Certificate delivered to the Trustee.
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ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
SECTION 2.01. CLOSING. (a) There is hereby created by the Trust
Depositor, as settlor, a separate trust which shall be known as the Eaglemark
Trust [_____]. The Trust shall be administered pursuant to the provisions of
this Agreement for the benefit of the Certificateholders. The Trustee is hereby
specifically empowered to conduct business dealings on behalf of the Trust in
accordance with the terms hereof.
(b) On the Closing Date, the Trust Depositor shall sell, transfer,
assign, set over and otherwise convey to the Trust by execution of an assignment
substantially in the form of EXHIBIT B hereto, without recourse other than as
expressly provided herein, (i) all the right, title and interest of the Trust
Depositor in and to the Initial Contracts listed on the initial List of
Contracts delivered on the Closing Date (including, without limitation, all
security interests and all rights to receive payments which are collected
pursuant thereto on or after the Initial Cutoff Date, including any liquidation
proceeds therefrom, but excluding any rights to receive payments which were
collected pursuant thereto prior to the Initial Cutoff Date), (ii) all rights of
the Trust Depositor under any physical damage or other individual insurance
policy (and rights under a "forced placed" policy, if any) relating to any such
Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security
interests in each such Motorcycle, (iv) all documents contained in the related
Contract Files, (v) all rights (but not the obligations) of the Trust Depositor
under any related motorcycle dealer agreements between dealers (i.e., the
originators of such Contracts) and the Seller, (vi) all rights of the Trust
Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to
the extent they relate to such Contracts, (vii) all rights (but not the
obligations) of the Trust Depositor under the Transfer and Sale Agreement,
including but not limited to the Trust Depositor's rights under Article V
thereof, (viii) the remittances, deposits and payments made into the Trust
Accounts from time to time and amounts in the Trust Accounts from time to time
(and any investments of such amounts), and (ix) all proceeds and products of the
foregoing (the property in clauses (i)-(ix) above, along with the Deposit
Agreement (which has been executed directly in favor of the Trustee for the
benefit of the Trust), being the "TRUST CORPUS"). Although the Trust Depositor
and the Trustee agree that such transfer is intended to be a sale of ownership
of the Trust Corpus, rather than the granting of a security interest to secure a
borrowing, and that the Trust Corpus shall not be property of the Trust
Depositor, in the event such transfer is deemed to be of a mere security
interest to secure a borrowing, the Trust Depositor shall be deemed to have
granted the Trustee for the benefit of the Trust a perfected first priority
security interest in such Trust Corpus and this Agreement shall constitute a
security agreement under applicable law.
SECTION 2.02. CONDITIONS TO THE CLOSING. On or before the Closing Date,
the Trust Depositor shall deliver or cause to be delivered the following
documents to the Trustee:
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(a) The initial List of Contracts, certified by the Chairman of
the Board, President or any Vice President of the Trust Depositor,
together with an assignment substantially in the form of EXHIBIT B
hereto.
(b) A certificate of an officer of the Seller substantially in
the form of EXHIBIT B to the Transfer and Sale Agreement and of an
Officer of the Trust Depositor substantially in the form of EXHIBIT C
hereto.
(c) Opinions of counsel for the Seller and the Trust Depositor
substantially in the form of EXHIBITS D-1, D-2 and D-3 hereto (and
including as an addressee thereof each Rating Agency).
(d) A letter from Arthur Andersen LLP, or another nationally
recognized accounting firm, addressed to the Trustee and stating that
such firm has reviewed a sample of the Initial Contracts and performed
specific procedures for such sample with respect to certain contract
terms and which identifies those Initial Contracts which do not conform.
(e) Copies of resolutions of the Board of Directors of each of
the Seller/Servicer and the Trust Depositor or of the Executive Committee
of the Board of Directors of each of the Seller/Servicer and the Trust
Depositor approving the execution, delivery and performance of this
Agreement and the other Transaction Documents to which any of them is a
party, as applicable, and the transactions contemplated hereunder and
thereunder, certified in each case by the Secretary or an Assistant
Secretary of the Seller/Servicer and the Trust Depositor.
(f) Officially certified recent evidence of due incorporation
and good standing of each of the Seller and the Trust Depositor under the
laws of Nevada.
(g) Evidence of proper filing with the appropriate offices in
Nevada and Illinois of UCC financing statements executed by the Seller,
as debtor, naming the Trust Depositor as secured party (and the Trustee
as assignee) and identifying the Contract Assets as collateral; and
evidence of proper filing with the appropriate offices in Nevada and
Illinois of UCC financing statements executed by the Trust Depositor, as
debtor, (i) naming the Trustee as secured party and identifying the Trust
Corpus as collateral, and (ii) naming the Trustee as secured party and
identifying the Reserve Fund Deposits therein as collateral, and (iii)
naming the Trustee as secured party and identifying the Collateral (as
defined in the Security Agreement) as collateral.
(h) An Officer's Certificate listing the Servicer's Servicing
Officers.
(i) Evidence of deposit in the Collection Account of all funds
received with respect to the Initial Contracts on or after the Initial
Cutoff Date to the Closing Date,
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together with an Officer's Certificate from the Seller to the effect that
such amount is correct.
(j) The Officer's Certificate of the Seller specified in
Section 2.02(i) of the Transfer and Sale Agreement.
(k) A fully executed copy of the Reserve Fund Agreement,
together with evidence of deposit in the Reserve Fund of the Reserve Fund
Initial Deposit by the Depositor in accordance with the Reserve Fund
Agreement.
(l) Evidence of deposit in the Interest Reserve Account of
$[_____].
(m) A fully executed Deposit Agreement.
(n) A fully executed Security Agreement.
(o) A fully executed Transfer and Sale Agreement.
SECTION 2.03. ACCEPTANCE BY TRUSTEE. On the Closing Date, if the
conditions set forth in Section 2.02 have been satisfied, the Trustee shall
issue on behalf of the Trust to, or upon the order of, the Trust Depositor the
Class A Certificates and Class B Certificates representing ownership of a
beneficial interest in 100% of the Trust.
SECTION 2.04. CONVEYANCE OF SUBSEQUENT CONTRACTS. (a) Subject to the
conditions set forth in paragraph (b) below, the Trust Depositor, pursuant to
the mutually agreed upon terms contained in the Deposit Agreement and pursuant
to one or more Subsequent Transfer Agreements, shall sell, transfer, assign, set
over and otherwise convey to the Trust, without recourse other than as expressly
provided herein and therein, (i) all the right, title and interest of the Trust
Depositor in and to the Subsequent Contracts (including, without limitation, all
security interests and all rights to receive payments which are collected
pursuant thereto on or after the related Subsequent Cutoff Date, including any
liquidation proceeds therefrom, but excluding any rights to receive payments
which were collected pursuant thereto prior to such Subsequent Cutoff Date),
(ii) all rights of the Trust Depositor under any physical damage or other
individual insurance policy (or a "forced placed" policy, if any) relating to
any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all
security interests in each such Motorcycle, (iv) all documents contained in the
related Contract Files, (v) all rights (but not the obligations) of the Trust
Depositor under any related motorcycle dealer agreements between dealers (i.e.,
the originators of such Contracts) and the Seller, (vi) all rights of the Trust
Depositor in the Lockbox, the Lockbox Account and related Lockbox Agreement to
the extent they relate to such Contracts, (vii) all rights (but not the
obligations) of the Trust Depositor under the Transfer and Sale Agreement
related to such Contracts (to the extent not already conveyed under Section
2.01(b)), including but not limited to the Trust Depositor's related rights
under Article V thereof, as well as all rights, but not the obligations, of the
Trust Depositor under the Subsequent
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Purchase Agreement related to such Contracts, (viii) the remittances,
deposits and payments made into the Trust Accounts from time to time and
amounts in the Trust Accounts from time to time related to such Contracts (to
the extent not already conveyed under Section 2.01(b)) (and any investments
of such amounts), and (ix) all proceeds and products of the foregoing (the
property in clauses (i)-(ix) above, upon such transfer, becoming part of the
"TRUST CORPUS"). Although the Trust Depositor and the Trustee agree that
such transfer is intended to be a sale of ownership, rather than the granting
of a security interest to secure a borrowing, and that the Trust Corpus
following such transfer shall not be property of the Trust Depositor, in the
event such transfer is deemed to be of a mere security interest to secure a
borrowing, the Trust Depositor shall be deemed to have granted the Trustee
for the benefit of the Trust a perfected first priority security interest in
such Trust Corpus and this Agreement shall constitute a security agreement
under applicable law.
(b) The Trust Depositor shall transfer to the Trust the Subsequent
Contracts and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) The Seller shall have provided the Trustee, the Placement
Agent and the Rating Agencies with a timely Addition Notice and shall
have provided any information reasonably requested by any of the
foregoing with respect to the Subsequent Contracts;
(ii) the Funding Period shall not have terminated;
(iii) the Trust Depositor shall have delivered to the Trustee a
duly executed written assignment (including an acceptance by the Trustee)
in substantially the form of EXHIBIT N hereto (the "SUBSEQUENT TRANSFER
AGREEMENT"), which shall include a Subsequent List of Contracts listing
the Subsequent Contracts;
(iv) the Trust Depositor shall have deposited or caused to be
deposited in the Collection Account all collections received with respect
to the Subsequent Contracts on or after the related Subsequent Cutoff
Date;
(v) as of each Subsequent Transfer Date, neither the Seller nor
the Trust Depositor was insolvent nor will either of them have been made
insolvent by such transfer nor is either of them aware of any pending
insolvency;
(vi) the applicable Reserve Fund Additional Deposit for such
Subsequent Transfer Date (if any is required) shall have been made;
(vii) each Rating Agency shall have notified the Trust Depositor
and the Trustee in writing that following such transfer the Class A
Certificates will be rated in the
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highest rating category by such Rating Agency and the Class B
Certificates will be rated at least "BBB" by Standard & Poor's and
Baa2 by Moody's;
(viii) such addition will not result in a material adverse tax
consequence to the Trust or the Certificateholders as evidenced by an
Opinion of Counsel to be delivered by the Seller to the Trustee, the
Rating Agency and the Placement Agent;
(ix) the Trust Depositor shall have delivered to the Trustee an
Officers' Certificate confirming the satisfaction of each condition
precedent specified in this paragraph (b);
(x) the Trust Depositor shall have delivered to the Rating
Agencies and the Placement Agent one or more opinions of counsel with
respect to the transfer of the Subsequent Contracts substantially in the
form of the opinions of counsel delivered to such Persons on the Closing
Date;
(xi) the Trust Depositor shall have taken any action necessary
to maintain the first perfected ownership interest of the Trust in the
Trust Corpus and the first perfected security interest of the Reserve
Agent in the Reserve Fund Deposits;
(xii) no selection procedures believed by the Trust Depositor to
be adverse to the interests of the Certificateholders shall have been
utilized in selecting the Subsequent Contracts;
(xiii) the Trust Depositor shall have delivered to the Rating
Agencies evidence that (A) the weighted average annual percentage rate of
the Contracts collectively, following the transfer of the Subsequent
Contracts, is not less than ___%, and (B) that the weighted average
calculated remaining term to maturity of the Contracts collectively,
following the transfer of the Subsequent Contracts, does not exceed 66
months ; and
(xiv) the Trust Depositor shall have delivered to the Rating
Agencies, a report with respect tocertain agreed-upon procedures relating
to the Subsequent Contracts being transferred, confirming that procedures
were performed substantially similar to such procedures as were performed
in connection with the transfer of the Initial Contracts.
(c) As provided in the Deposit Agreement, the Trust Depositor
covenants to transfer (at or prior to the end of the Funding Period) to the
Trust pursuant thereto Subsequent Contracts with an aggregate Principal Balance
equal to $[_____]; PROVIDED, HOWEVER, that in complying with such covenant the
Trust Depositor agrees to make no more than one separate transfer of Subsequent
Contracts per monthly period (as measured by the corresponding Payment Dates),
and PROVIDED FURTHER, HOWEVER, that the sole remedy of the Trust or the
Certificateholders with respect to a failure to comply with such covenant shall
be to enforce the provisions of Section 2.02 of the Deposit Agreement by
demanding the payment of Liquidated Damages thereunder.
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SECTION 2.05. TAX TREATMENT. It is the intention of the Trust Depositor
that, for federal income tax purposes, the Trust will be classified as a grantor
trust and not as an association taxable as a corporation. The Trust Depositor
and the Servicer by entering into this Agreement, and each Certificateholder by
the purchase of a Certificate, agree to report such transactions for federal
income tax purposes in a manner consistent with such characterization.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Seller under the Transfer and Sale Agreement has made, and upon execution of
each Subsequent Purchase Agreement is deemed to remake, each of the
representations and warranties set forth in EXHIBIT K hereto and has consented
to the assignment by the Trust Depositor to the Trustee of the Trust Depositor's
rights with respect thereto. Such representations speak as of the execution and
delivery of this Agreement and as of the Closing Date in the case of the Initial
Contracts, and as of the applicable Subsequent Transfer Date in the case of the
Subsequent Contracts, but shall survive the sale, transfer and assignment of the
Contracts to the Trust. Pursuant to Section 2.01 of this Agreement, the Trust
Depositor has sold, assigned, transferred and conveyed to the Trustee as part of
the Trust Corpus its rights under the Transfer and Sale Agreement, including
without limitation, the representations and warranties of the Seller therein as
set forth in EXHIBIT K attached hereto, together with all rights of the Trust
Depositor with respect to any breach thereof including any right to require the
Seller to repurchase any Contract in accordance with the Transfer and Sale
Agreement. It is understood and agreed that the representations and warranties
set forth or referred to in this Section shall survive delivery of the Contract
Files to the Trustee or any custodian.
The Trust Depositor hereby represents and warrants to the Trustee that it
has entered into the Transfer and Sale Agreement with the Seller, that the
Seller has made the representations and warranties in the Transfer and Sale
Agreement as set forth in EXHIBIT K hereto, that such representations and
warranties run to and are for the benefit of the Trust Depositor, and that
pursuant to Section 2.01 of this Agreement the Trust Depositor has transferred
and assigned to the Trustee all rights of the Trust Depositor to cause the
Seller under the Transfer and Sale Agreement to repurchase Contracts in the
event of a breach of such representations and warranties.
SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE TRUST
DEPOSITOR. By its execution of this Agreement and each Subsequent Transfer
Agreement, the Trust Depositor represents and warrants to the Trustee and the
Certificateholders that:
(a) ASSUMPTION OF SELLER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in EXHIBIT K are true and
correct.
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(b) ORGANIZATION AND GOOD STANDING. The Trust Depositor is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the corporate
power to own its assets and to transact the business in which it is
currently engaged. The Trust Depositor is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in
which the character of the business transacted by it or properties owned
or leased by it requires such qualification and in which the failure so
to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Trust
Depositor or the Trust.
(c) AUTHORIZATION; VALID SALE; BINDING OBLIGATIONS. The Trust
Depositor has the power and authority to make, execute, deliver and
perform this Agreement and the other Transaction Documents to which it is
a party and all of the transactions contemplated under this Agreement and
the other Transaction Documents to which it is a party, and to create the
Trust and cause it to make, execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is a
party and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party and to cause the Trust to be
created. This Agreement and the related Subsequent Transfer Agreement,
if any, shall effect a valid sale, transfer and assignment of the Trust
Corpus, enforceable against the Trust Depositor and creditors of and
purchasers from the Trust Depositor. This Agreement and the other
Transaction Documents to which the Trust Depositor is a party constitute
the legal, valid and binding obligation of the Trust Depositor
enforceable in accordance with their terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally and by the availability of
equitable remedies.
(d) NO CONSENT REQUIRED. The Trust Depositor is not required
to obtain the consent of any other party or any consent, license,
approval or authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement or the other Transaction Documents to which it is a party.
(e) NO VIOLATIONS. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party
by the Trust Depositor, and the consummation of the transactions
contemplated hereby and thereby, will not violate any provision of any
existing law or regulation or any order or decree of any court or of any
Federal or state regulatory body or administrative agency having
jurisdiction over the Trust Depositor or any of its properties or the
Articles of Incorporation or Bylaws of the Trust Depositor, or constitute
a material breach of any mortgage, indenture, contract or other agreement
to which the Trust Depositor is a party or by which the Trust Depositor
or any of the Trust Depositor's properties may be bound, or result in the
creation or imposition of any security interest, lien, charge, pledge,
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preference, equity or encumbrance of any kind upon any of its properties
pursuant to the terms of any such mortgage, indenture, contract or other
agreement, other than as contemplated by the Transaction Documents.
(f) LITIGATION. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Trust Depositor threatened, against the Trust
Depositor or any of its properties or with respect to this Agreement, the
other Transaction Documents to which it is a party or the Certificates
(1) which, if adversely determined, would in the opinion of the Trust
Depositor have a material adverse effect on the business, properties,
assets or condition (financial or otherwise) of the Trust Depositor or
the Trust or the transactions contemplated by this Agreement or the other
Transaction Documents to which the Trust Depositor is a party or (2)
seeking to adversely affect the federal income tax or other federal,
state or local tax attributes of the Certificates.
(g) PLACE OF BUSINESS; NO CHANGES. The Trust Depositor's sole
place of business (within the meaning of Article 9 of the UCC) is as set
forth in Section 12.09 below. The Trust Depositor has not changed its
name, whether by amendment of its Articles of Incorporation, by
reorganization or otherwise, and has not changed the location of its
place of business, within the four months preceding the Closing Date.
Such representations speak as of the execution and delivery of this Agreement
and as of the Closing Date in the case of the Initial Contracts, and as of the
applicable Subsequent Transfer Date in the case of the Subsequent Contracts, but
shall survive the sale, transfer and assignment of the Contracts to the Trust.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER. The
Servicer represents and warrants to the Trustee and the Certificateholders that:
(a) ORGANIZATION AND GOOD STANDING. The Servicer is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the corporate
power to own its assets and to transact the business in which it is
currently engaged. The Servicer is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
the character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure so to
qualify would have a material adverse effect on the business, properties,
assets, or condition (financial or otherwise) of the Servicer or the
Trust. The Servicer is properly licensed in each jurisdiction to the
extent required by the laws of such jurisdiction to service the Contracts
in accordance with the terms hereof.
(b) AUTHORIZATION; BINDING OBLIGATIONS. The Servicer has the
power and authority to make, execute, deliver and perform this Agreement
and the other Transaction Documents to which the Servicer is a party and
all of the transactions contemplated under
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this Agreement and the other Transaction Documents to which the
Servicer is a party, and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement
and the other Transaction Documents to which the Servicer is a party.
This Agreement and the other Transaction Documents to which the
Servicer is a party constitute the legal, valid and binding obligation
of the Servicer enforceable in accordance with their terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and by the availability of equitable remedies.
(c) NO CONSENT REQUIRED. The Servicer is not required to
obtain the consent of any other party or any consent, license, approval
or authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement and the other Transaction Documents to which the Servicer is a
party.
(d) NO VIOLATIONS. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Servicer
is a party by the Servicer will not violate any provisions of any
existing law or regulation or any order or decree of any court or of any
Federal or state regulatory body or administrative agency having
jurisdiction over the Servicer or any of its properties or the Articles
of Incorporation or Bylaws of the Servicer, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which
the Servicer is a party or by which the Servicer or any of the Servicer's
properties may be bound, or result in the creation of or imposition of
any security interest, lien, pledge, preference, equity or encumbrance of
any kind upon any of its properties pursuant to the terms of any such
mortgage, indenture, contract or other agreement, other than this
Agreement.
(e) LITIGATION. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Servicer threatened, against the Servicer or
any of its properties or with respect to this Agreement, any other
Transaction Document to which the Servicer is a party or the Certificates
which, if adversely determined, would in the opinion of the Servicer have
a material adverse effect on the business, properties, assets or
condition (financial or otherwise) of the Servicer or the Trust or the
transactions contemplated by this Agreement or any other Transaction
Document to which the Servicer is a party.
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS;
SECTION 4.01. CUSTODY OF CONTRACTS. (a) Subject to the terms and
conditions of this Section 4.01, the contents of each Contract File shall be
held in the custody of the Servicer for the benefit of, and as agent for, the
Certificateholders and the Trustee as the owner thereof.
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(b) The Servicer agrees to maintain the related Contract Files at its
offices where they are currently maintained, or at such other offices of the
Servicer in the State of Nevada as shall from time to time be identified to the
Trustee by written notice. The Servicer may temporarily move individual
Contract Files or any portion thereof without notice as necessary to conduct
collection and other servicing activities in accordance with its customary
practices and procedures; PROVIDED, HOWEVER, that the Servicer will take all
action necessary to maintain the perfection of the Trust's interest in the
Contracts and the proceeds thereof. It is intended that by the Servicer's
agreement pursuant to Section 4.01(a) above and this Section 4.01(b) the Trustee
shall be deemed to have possession of the Contract Files for purposes of Section
9-305 of the Uniform Commercial Code of the State in which the Contract Files
are located.
(c) As custodian, the Servicer shall have and perform the following
powers and duties:
(i) hold the Contract Files on behalf of the Certificateholders
and the Trustee, maintain accurate records pertaining to each Contract to
enable it to comply with the terms and conditions of this Agreement,
maintain a current inventory thereof, conduct annual physical inspections
of Contract Files held by it under this Agreement and certify to the
Trustee annually that it continues to maintain possession of such
Contract Files;
(ii) implement policies and procedures in writing and signed by
a Servicing Officer with respect to persons authorized to have access to
the Contract Files on the Servicer's premises and the receipting for
Contract Files taken from their storage area by an employee of the
Servicer for purposes of servicing or any other purposes;
(iii) attend to all details in connection with maintaining
custody of the Contract Files on behalf of the Certificateholders and the
Trustee;
(iv) at all times maintain the original of the fully executed
Contract and store such original Contract in a fireproof vault;
(v) stamp each Contract on both the first and the signature
page (if different) as of the Closing Date (or Subsequent Transfer Date,
as the case may be) in the form attached hereto as EXHIBIT M;
(vi) within 30 days of the Closing Date (or Subsequent Transfer
Date, as the case may be) deliver an Officer's Certificate to the Trustee
certifying that as of a date no earlier than the Closing Date (or
Subsequent Transfer Date, as the case may be) it has conducted an
inventory of the Contract Files (which in the case of Subsequent
Contracts, need be only of the Contract Files related to such Subsequent
Contracts) and that there exists a Contract File for each Contract and
stating all exceptions to such statement, if any; and
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(vii) within 185 days of the Closing Date (or Subsequent Transfer
Date, as the case may be) deliver an Officer's Certificate to the Trustee
listing each Contract with respect to which there did not exist as of 180
days of the Closing Date (or Subsequent Transfer Date, as the case may
be) an original title certificate to the motorcycle and the certificate
of lien recordation relating thereto.
(d) In performing its duties under this Section 4.01, the Servicer
agrees to act with reasonable care, using that degree of skill and care that it
exercises with respect to similar contracts for the installment purchase of
consumer goods owned and/or serviced by it, and in any event with no less degree
of skill and care than would be exercised by a prudent servicer of motorcycle
conditional sales contracts. The Servicer shall promptly report to the Trustee
any failure by it to hold the Contract Files as herein provided and shall
promptly take appropriate action to remedy any such failure. In acting as
custodian of the Contract Files, the Servicer further agrees not to assert any
legal or beneficial ownership interest in the Contracts or the Contract Files,
except as provided in Section 5.06. The Servicer agrees to indemnify the
Certificateholders, the Trustee for any and all liabilities, obligations,
losses, damages, payments, costs, or expenses of any kind whatsoever which may
be imposed on, incurred by or asserted against the Certificateholders, or the
Trustee as the result of any act or omission by the Servicer relating to the
maintenance and custody of the Contract Files; PROVIDED, HOWEVER, that the
Servicer will not be liable for any portion of any such amount resulting from
the gross negligence or willful misconduct of any Certificateholder, or the
Trustee. The Trustee shall have no duty to monitor or otherwise oversee the
Servicer's performance as custodian hereunder.
SECTION 4.02. FILING. On or prior to the Closing Date, the Servicer
shall cause the UCC financing statement(s) referred to in Section 2.02(g) hereof
to be filed and from time to time the Servicer shall take and cause to be taken
such actions and execute such documents as are necessary or desirable or as the
Trustee may reasonably request to perfect and protect the Trust's first priority
perfected interest in the Trust Corpus against all other persons, including,
without limitation, the filing of financing statements, amendments thereto and
continuation statements, the execution of transfer instruments and the making of
notations on or taking possession of all records or documents of title.
SECTION 4.03. NAME CHANGE OR RELOCATION. (a) During the term of this
Agreement, neither the Seller nor the Trust Depositor shall change its name,
identity or structure or relocate its chief executive office without first
giving at least 30 days' prior written notice to the Trustee.
(b) If any change in either the Seller's or the Trust Depositor's
name, identity or structure or other action would make any financing or
continuation statement or notice of lien filed under this Agreement seriously
misleading within the meaning of applicable provisions of the UCC or any title
statute, the Servicer, no later than five days after the effective date of such
change, shall file such amendments as may be required to preserve and protect
the Trust's interests in the Trust Corpus and the proceeds thereof. In
addition, neither the Seller nor the Trust Depositor shall change its place of
business (within the meaning of Article 9 of the UCC)
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from the location specified in Section 12.09 below unless it has first taken
such action as is advisable or necessary to preserve and protect the Trust's
interest in the Trust Corpus. Promptly after taking any of the foregoing
actions, the Servicer shall deliver to the Trustee an opinion of counsel
reasonably acceptable to the Trustee stating that, in the opinion of such
counsel, all financing statements or amendments necessary to preserve and
protect the interests of the Trustee in the Trust Corpus have been filed, and
reciting the details of such filing.
SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this Agreement,
the Trust Depositor will maintain its chief executive office in one of the
States of the United States, except Louisiana, Tennessee, Colorado, Kansas, New
Mexico, Oklahoma, Utah or Wyoming.
SECTION 4.05. COSTS AND EXPENSES. The Servicer agrees to pay all
reasonable costs and disbursements in connection with the perfection and the
maintenance of perfection, as against all third parties, of the Trust's right,
title and interest in and to the Contracts (including, without limitation, the
security interest in the Motorcycles granted thereby).
ARTICLE V
SERVICING OF CONTRACTS
SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION. The Servicer
will have the sole obligation to manage, administer, service and make
collections on the Contracts and perform or cause to be performed all
contractual and customary undertakings of the holder of the Contracts to the
Obligor. The Trustee, at the written request of a Servicing Officer, shall
furnish the Servicer with any powers of attorney or other documents necessary or
appropriate in the opinion of the Trustee to enable the Servicer to carry out
its servicing and administrative duties hereunder. The Servicer is hereby
appointed the servicer hereunder until such time as any Service Transfer may be
effected under Article VII.
SECTION 5.02. STANDARD OF CARE. In managing, administering, servicing
and making collections on the Contracts pursuant to this Agreement, the Servicer
will exercise that degree of skill and care consistent with the skill and care
that the Servicer exercises with respect to similar contracts serviced by the
Servicer, and, in any event no less degree of skill and care than would be
exercised by a prudent servicer of motorcycle conditional sales contracts;
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not
release or waive the right to collect the unpaid balance on any Contract.
SECTION 5.03. RECORDS. The Servicer shall, during the period it is
servicer hereunder, maintain such books of account and other records as will
enable the Trustee to determine the status of each Contract.
SECTION 5.04. INSPECTION. (a) At all times during the term hereof, the
Servicer shall afford the Trustee and its respective authorized agents
reasonable access during normal business hours to the Servicer's records
relating to the Contracts and will cause its personnel to assist in
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any examination of such records by the Trustee, or such authorized agents and
allow copies of the same to be made. The examination referred to in this
Section will be conducted in a manner which does not unreasonably interfere
with the Servicer's normal operations or customer or employee relations.
Without otherwise limiting the scope of the examination the Trustee may,
using generally accepted audit procedures, verify the status of each Contract
and review the Computer Disk and records relating thereto for conformity to
Monthly Reports prepared pursuant to Article VI and compliance with the
standards represented to exist as to each Contract in this Agreement.
(b) At all times during the term hereof, the Servicer shall keep
available a copy of the List of Contracts at its principal executive office for
inspection by Certificateholders.
SECTION 5.05. TRUST ACCOUNTS. (a) On or before the Closing Date, the
Trust Depositor shall establish the Collection Account and the Special
Distribution Subaccount therein, each in the name of the Trustee for the benefit
of the Certificateholders. The Trustee is hereby required to ensure that each
of the Trust Accounts is established and maintained as an Eligible Account.
(b) The Trustee shall deposit (or the Servicer shall deposit, with
respect to payments by or on behalf of the Obligors received directly by the
Servicer), without deposit into any intervening account, into the Collection
Account as promptly as practical (but in any case not later than the second
Business Day following the receipt thereof):
(i) With respect to principal and interest on the Contracts (as
well as Late Payment Penalty Fees and Extension Fees) received on or
after the Initial Cutoff Date or Subsequent Cutoff Date, as applicable
(which for the purpose of this paragraph (b)(i) shall include those
monies in the Lockbox Account allocable to principal and interest on the
Contracts), all such amounts received by the Trustee or Servicer;
(ii) All Net Liquidation Proceeds related to the Contracts;
(iii) The aggregate of the Repurchase Prices for Contracts
repurchased by the Seller as described in Section 8.06;
(iv) All Advances made by the Servicer pursuant to Section
8.03(a);
(v) All amounts paid by the Seller in connection with an
optional repurchase of the Contracts described in Section 8.08;
(vi) All amounts realized in respect of Carrying Charges
transferred from the Interest Reserve Account as contemplated in Section
8.03(b); and
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(vii) All amounts received in respect of interest, dividends,
gains, income and earnings on investments of funds in the Trust Accounts
as contemplated in the last sentence of Section 5.05(d) hereof.
(c) The Trustee shall, if amounts remain on deposit in the Pre-Funding
Account at the expiration of the Funding Period, make demand, immediately upon
expiration of the Funding Period, upon the Trust Depositor and the Collateral
Agent for the payment of Liquidated Damages as contemplated in Section 2.02 of
the Deposit Agreement and Section 3.03 of the Security Agreement. The Trustee
shall deposit the amounts received from the Deposit Collateral Agent in respect
of such Liquidated Damages into the Special Distribution Subaccount in the
Collection Account to be distributed on the next upcoming Payment Date as
contemplated in Section 8.04(b) hereof.
(d) If the Servicer so directs, in writing, the Trustee shall in its
capacity as Trustee hereunder, invest the amounts in the Trust Accounts in
Eligible Investments that mature not later than one Business Day prior to the
next succeeding Payment Date. Once such funds are invested, the Trustee shall
not change the investment of such funds. Any loss on such investments shall be
deposited in the applicable Trust Account by the Servicer out of its own funds
immediately as realized. Funds in the Trust Accounts not so invested must be
insured to the extent permitted by law by the Bank Insurance Fund or the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation.
Subject to the restrictions herein, the Trustee may purchase an Eligible
Investment from itself or an Affiliate. Any investment of funds in the Trust
Accounts shall be made in Eligible Investments (a) held in the possession of the
Trustee or maintained with another institution as an Eligible Account with
respect to which such institution has noted the Trustee's interest therein on
its books and records and a confirmation of the Trustee's interest has been sent
to the Trustee by such institution, and (b) with respect to Eligible Investments
comprised of securities, the Trustee has purchased such securities for value in
good faith without notice of any adverse claim thereto, and which securities (A)
if certificated and in bearer form, have been delivered to the Trustee, or in
registered form, have been issued or endorsed to the Trustee or in blank, (B) if
uncertificated, the transfer of which is registered on the books of the issuer
thereof, or (C) have been transferred (x) through acquisition or possession by a
financial intermediary of a certificated security specially endorsed to or
issued in the name of the Trustee, or (y) through confirmation by a financial
intermediary (not a clearing corporation) of the Trustee's purchase of a
certificated security and appropriate identification of its interest in the
records of such intermediary, or (z) through the making of appropriate entries
to the Trustee's (or its designee's) account on the books of a clearing
corporation in accordance with Section 8-320 of the applicable Uniform
Commercial Code. Subject to the other provisions hereof, the Trustee shall have
sole control over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment, if any, shall be
delivered directly to the Trustee or its agent, together with each document of
transfer, if any, necessary to transfer title to such investment to the Trustee
in a manner which complies with this Section 5.05(d). All interest, dividends,
gains upon sale and other income from, or earnings on, investments of funds in
the Trust Accounts shall be deposited
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in the Collection Account pursuant to Section 5.05(b)(ii) and distributed on
the next Payment Date pursuant to Section 8.04(b).
SECTION 5.06. ENFORCEMENT. (a) The Servicer will, consistent with
Section 5.02, act with respect to the Contracts in such manner as will maximize
the receipt of principal and interest on such Contracts. However, nothing
provided herein will give the Servicer the power to vary the investment of the
Certificateholders in such a way as to cause the trust not to be treated as an
investment trust under the regulations promulgated under Code Section 7701.
(b) The Servicer may sue to enforce or collect upon Contracts, in its
own name, if possible, or as agent for the Trustee. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of commencement shall
be deemed to be an automatic assignment of the Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the ground
that it is not a real party in interest or a holder entitled to enforce the
Contract, the Trustee on behalf of the Trust shall, at the Servicer's expense,
take such steps as the Servicer deems reasonably necessary to enforce the
Contract, including bringing suit in its name or the names of the
Certificateholders.
(c) The Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Contract in accordance with the
Servicer's usual practice. In exercising recourse rights, the Servicer is
authorized on the Trustee's behalf to reassign the defaulted Contract or the
related Motorcycle to the person against whom recourse exists at the price set
forth in the document creating the recourse; PROVIDED, HOWEVER, the Servicer in
exercising recourse against any third persons as described in the immediately
preceding sentence shall do so in such manner as to maximize the aggregate
recovery with respect to the Contract; and PROVIDED FURTHER, HOWEVER, that
notwithstanding the foregoing the Servicer in its capacity as such may exercise
such recourse only if such Contract was not required to be repurchased by the
Seller pursuant to the Transfer and Sale Agreement or was required to be
repurchased by the Seller and the Seller has defaulted on such repurchase
obligation.
(d) The Servicer will not permit any rescission or cancellation of any
Contract due to the acts or omissions of the Servicer.
(e) The Servicer may grant to the Obligor on any Contract an extension
of payments due under such Contract, PROVIDED that (i) the extension period is
limited to 45 days, (ii) the Obligor has been in good standing for the previous
twelve-month period, (iii) such extension is consistent with the Servicer's
customary servicing procedures and is consistent with Section 5.02, (iv) such
extension does not extend the maturity date of the Contract beyond the latest
maturity date of any of the Contracts as of the Initial Cutoff Date (or, if a
transfer of Subsequent Contracts to the Trust occurs, beyond the latest maturity
date of such Subsequent Contracts) and (v) the aggregate Principal Balances of
Contracts which have had extensions granted does not
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exceed more than 3.00% of the aggregate of the Class A Initial Certificate
Balance and the Class B Initial Certificate Balance.
(f) The Servicer will not add to the outstanding Principal Balance of
any Contract the premium of any physical damage or other individual insurance on
a Motorcycle securing such Contract it obtains on behalf of the Obligor under
the terms of such Contract, but may create a separate Obligor obligation with
respect to such premium if and as provided by the Contract.
(g) If the Servicer shall have repossessed a Motorcycle on behalf of
the Trust, the Servicer shall either (i) maintain at its expense physical damage
insurance with respect to such Motorcycle, or (ii) indemnify the Trust against
any damage to such Motorcycle prior to resale or other disposition. The
Servicer shall not allow such repossessed Motorcycles to be used in an active
trade or business, but rather shall dispose of the Motorcycle in a reasonable
time in accordance with the Servicer's normal business practices.
SECTION 5.07. TRUSTEE TO COOPERATE. Upon payment in full on any
Contract, the Servicer will notify the Trustee and the Trust Depositor on the
next succeeding Payment Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that all amounts received
in connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 5.05 have been so deposited) and shall
(if the Servicer is not then in possession of the Contracts and Contract Files)
request delivery of the Contract and Contract File to the Servicer. Upon
receipt of such delivery and request, the Trustee shall promptly release or
cause to be released such Contract and Contract File to the Servicer. Upon
receipt of such Contract and Contract File, each of the Trust Depositor and the
Servicer is authorized to execute an instrument in satisfaction of such Contract
and to do such other acts and execute such other documents as the Servicer deems
necessary to discharge the Obligor thereunder and eliminate the security
interest in the Motorcycle related thereto. The Servicer shall determine when a
Contract has been paid in full; to the extent that insufficient payments are
received on a Contract credited by the Servicer as prepaid or paid in full and
satisfied, the shortfall shall be paid by the Servicer out of its own funds.
From time to time as appropriate for servicing and repossession in connection
with any Contract, if the Servicer is not then in possession of the Contracts
and Contract Files, the Trustee shall, upon written request of a Servicing
Officer and delivery to the Trustee of a receipt signed by such Servicing
Officer, cause the original Contract and the related Contract File to be
released to the Servicer and shall execute such documents as the Servicer shall
deem reasonably necessary to the prosecution of any such proceedings. Such
receipt shall obligate the Servicer to return the original Contract and the
related Contract File to the Trustee when the need by the Servicer has ceased
unless the Contract shall be repurchased as described in Section 8.09. Upon
request of a Servicing Officer, the Trustee shall perform such other acts as
reasonably requested by the Servicer and otherwise cooperate with the Servicer
in the enforcement of the Certificateholders' rights and remedies with respect
to Contracts.
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SECTION 5.08. COSTS AND EXPENSES. All costs and expenses incurred by the
Servicer in carrying out its duties hereunder, fees and expenses of accountants
and payments of all fees and expenses incurred in connection with the
enforcement of Contracts (including enforcement of defaulted Contracts and
repossessions of Motorcycles securing such Contracts when such Contracts are not
repurchased pursuant to Section 8.06) and all other fees and expenses not
expressly stated hereunder to be for the account of the Trust shall be paid by
the Servicer and the Servicer shall not be entitled to reimbursement hereunder.
SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN MOTORCYCLES. The
Servicer shall take such steps as are necessary to maintain continuous
perfection and the first priority of the security interest created by each
Contract in the related Motorcycle. The Trustee hereby authorizes the Servicer
to take such steps as are necessary to perfect such security interest and to
maintain the first priority thereof in the event of a relocation of a Motorcycle
or for any other reason.
ARTICLE VI
REPORTS
SECTION 6.01. MONTHLY REPORTS. No later than 10:00 a.m. Chicago,
Illinois time two Business Days following each Determination Date, the Servicer
shall cause the Trustee and each Rating Agency to receive a "Monthly Report"
substantially in the form of EXHIBIT J hereto.
SECTION 6.02. OFFICER'S CERTIFICATE. Each Monthly Report delivered
pursuant to Section 6.01 shall be accompanied by a certificate of a Servicing
Officer substantially in the form of EXHIBIT F, certifying the accuracy of the
Monthly Report and that no Event of Termination or event that with notice or
lapse of time or both would become an Event of Termination has occurred, or if
such event has occurred and is continuing, specifying the event and its status.
SECTION 6.03. OTHER DATA. In addition, the Trust Depositor and the
Servicer shall, on request of the Trustee, Moody's or Standard & Poor's, furnish
the Trustee, Moody's or Standard & Poor's, as the case may be, such underlying
data as may be reasonably requested.
SECTION 6.04. ANNUAL REPORT OF ACCOUNTANTS.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "INDEPENDENT ACCOUNTANTS"), who
may also render other services to the Servicer, Eaglemark Financial or to the
Trust Depositor, to deliver to the Trustee, the Placement Agent and each Rating
Agency, on or before March 31 (or 90 days after the end of the Servicer's fiscal
year, if other than December 31) of each year, beginning on March 31, 1997, with
respect to the twelve months ended the immediately preceding December 31 (or
other applicable date), a statement (the "ACCOUNTANT'S REPORT") addressed to the
Board of Directors of the Servicer to the Trustee to the effect that such firm
has audited the financial statements of Eaglemark Financial and issued its
report thereon and that such audit
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(1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records
and such other auditing procedures as such firm considered necessary in
the circumstances;
(2) included an examination of documents and records relating
to the servicing of motorcycle conditional sales contracts under pooling
and servicing agreements substantially similar to one another (such
statement to have attached thereto a schedule setting forth the pooling
and servicing agreements covered thereby, including this Agreement);
(3) included an examination of the delinquency and loss
statistics relating to Eaglemark Financial's portfolio of motorcycle
conditional sales contracts; and
(4) except as described in the statement, disclosed no
exceptions or errors in the records relating to motorcycle loans serviced
for others that, in the firm's opinion, generally accepted auditing
standards requires such firm to report.
The Accountant's Report shall further state that
(1) a review in accordance with agreed upon procedures was made
of one randomly selected Monthly Report and
(2) except as disclosed in the Report, no exceptions or errors
in the Monthly Report so examined were found.
(b) The Accountant's Report shall also indicate that the firm is
independent of Eaglemark Financial within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
SECTION 6.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER. The Servicer
will deliver to the Trustee and each of the Rating Agencies, on or before
January 31 of each year commencing January 31, 19__, an Officer's Certificate
stating that (a) a review of the activities of the Servicer during the prior
calendar year and of its performance under this Agreement was made under the
supervision of the officer signing such certificate and (b) to such officer's
knowledge, based on such review, the Servicer has fully performed all its
obligations under this Agreement, or, if there has been a default in the
performance of any such obligation, specifying each such default known to such
officer and the nature and status thereof. A copy of such certificate may be
obtained by any Certificateholder by a request in writing to the Trustee.
SECTION 6.06. STATEMENTS TO CERTIFICATEHOLDERS. (a) On or before two
Business Days prior to each Payment Date, the Servicer shall prepare and,
concurrently with each distribution to Certificateholders pursuant to Article
VIII, the Trustee, in its capacity as Certificate Registrar and Paying Agent,
shall cause to be delivered and mailed to each Holder of a Class A Certificate
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and each Holder of a Class B Certificate at the address appearing on the
Certificate Register a statement as of the related Payment Date setting forth:
(i) the amount distributed on such date and allocable to
principal of the Class A Certificates and the Class B Certificates;
(ii) the amount distributed on such date and allocable to
interest on the Class A Certificates and the Class B Certificates;
(iii) the amount of the Class A and Class B Principal and
Interest Carryover Shortfalls, if any, for such Payment Date and the
change in the Class A and Class B Principal and Interest Carryover
Shortfalls from the immediately preceding Payment Date;
(iv) the amount otherwise distributable to the Class B
Certificateholders that will be distributed to the Class A
Certificateholders on such Payment Date;
(v) the amount of the distributions described in (i) or (ii)
above payable pursuant to a claim on the Reserve Fund or from any other
source not constituting Available Funds and the amount remaining in the
Reserve Fund after giving effect to all deposits and withdrawals from the
Reserve Fund on such date;
(vi) the amount of any Special Distribution to be made on such
Payment Date;
(vii) for each Payment Date during the Funding Period, the
remaining Pre-Funded Amount;
(viii) for each Payment Date to and including the Payment Date
immediately following the end of the Funding Period, the Principal
Balance and number of Subsequent Contracts conveyed to the Trust during
the related Due Period;
(ix) the remaining Class A Certificate Balance and Class B
Certificate Balance after giving effect to the distribution of principal
(and Special Distribution, if any) to be made on such Payment Date;
(x) the Pool Balance as of the close of business on the last
day of the related Due Period;
(xi) the Class A Pool Factor and the Class B Pool Factor
immediately before and immediately after such Payment Date;
(xii) the amount of fees payable out of the Trust, separately
identifying the Monthly Servicing Fee and the Trustee Fee;
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(xiii) the number and aggregate Principal Balance of Contracts
delinquent 31-59 days, 60-89 days and 90 or more days, computed as of the
end of the related Due Period;
(xiv) the number and aggregate Principal Balance of Contracts
that became Liquidated Contracts during the immediately preceding Due
Period, the amount of liquidation proceeds for such Due Period, the
amount of liquidation expenses being deducted from liquidation proceeds
for such Due Period, and the Net Liquidation Proceeds for such Due
Period;
(xv) the Loss Ratio, Average Loss Ratio, Cumulative Loss Ratio,
Default Ratio, Average Default Ratio, Delinquency Ratio and Average
Delinquency Ratio each as of such Payment Date;
(xvi) the number of Contracts and the aggregate Principal Balance
of such Contracts, as of the first day of the Due Period relating to such
Payment Date and as of the end of such Payment Date (after giving effect
to payments received during such Due Period and to any transfers of
Subsequent Contracts to the Trust occurring on or prior to such Payment
Date);
(xvii) the aggregate Principal Balance and number of Contracts
that were repurchased by the Seller pursuant to Section 8.06 with respect
to the related Due Period, identifying such Contracts and the Repurchase
Price for such Contracts; and
(xix) such other customary factual information as is available to
the Servicer as the Servicer deems necessary and can reasonably obtain
from its existing data base to enable Certificateholders to prepare their
tax returns.
(b) Within 75 days after the end of each calendar year, the Servicer
shall prepare and the Certificate Registrar shall mail to each Certificateholder
of record at any time during such year a report as to the aggregate amounts
reported pursuant to subsections (a)(i), (ii) and (xii) of this Section 6.06,
attributable to such Certificateholder.
ARTICLE VII
EVENTS OF TERMINATION; SERVICE TRANSFER
SECTION 7.01. EVENTS OF TERMINATION. "EVENT OF TERMINATION" means the
occurrence of any of the following:
(a) Any failure by the Servicer or the Seller to make any
payment or deposit required to be made hereunder or in the Transfer and
Sale Agreement (or in any Subsequent Purchase Agreement or Subsequent
Transfer Agreement) and the continuance of such failure for a period of
four Business Days after the date on which such payment or deposit was
due;
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(b) Failure on the Servicer's or the Seller's part to observe
or perform in any material respect any covenant or agreement in the
Certificates, this Agreement or in the Transfer and Sale Agreement (or in
any Subsequent Purchase Agreement or Subsequent Transfer Agreement)
(other than a covenant or agreement, the breach of which is specifically
addressed elsewhere in this Section) which continues unremedied for 30
days after the date on which such failure commences;
(c) Any assignment by the Servicer or the Seller of its duties
or rights hereunder or under the Transfer and Sale Agreement (or under
any Subsequent Purchase Agreement or Subsequent Transfer Agreement),
except as specifically permitted hereunder or thereunder, or any attempt
to make such an assignment;
(d) An involuntary case under any applicable bankruptcy,
insolvency or other similar law shall have been commenced in respect of
the Servicer or Trust Depositor and shall not have been dismissed within
90 days, or a court having jurisdiction in the premises shall have
entered a decree or order for relief in respect of either the Servicer or
Trust Depositor in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of either the Servicer or Trust Depositor, or for any
substantial liquidation or winding up of their respective affairs;
(e) The Servicer or Trust Depositor shall have commenced a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall have consented to the
entry of an order for relief in an involuntary case under any such law,
or shall have consented to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian or sequestrator (or
other similar official) of the Servicer or Trust Depositor, as the case
may be, or for any substantial part of their respective property, or
shall have made any general assignment for the benefit of their
respective creditors, or shall have failed to, or admitted in writing its
inability to, pay its debts as they become due, or shall have taken any
corporate action in furtherance of the foregoing;
(f) Any failure by the Servicer to deliver to the Trustee the
Monthly Report pursuant to the terms of this Agreement which remains
uncured for five Business Days after the date which such failure
commences;
(g) Any representation, warranty or statement of the Servicer
made in this Agreement, in any Subsequent Transfer Agreement or any
certificate, report or other writing delivered pursuant hereto shall
prove to be incorrect in any material respect as of the time when the
same shall have been made and the incorrectness of such representation,
warranty or statement has a material adverse effect on the Trust and,
within 30 days after written notice thereof shall have been given to the
Servicer or the Trust Depositor by the Trustee, the circumstances or
condition in respect of which such
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representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured.
SECTION 7.02. SERVICE TRANSFER. (a) If an Event of Termination has
occurred and is continuing, (x) Certificateholders with aggregate Fractional
Interests representing 25% or more of the Trust or (y) the Trustee may, by
written notice delivered to the parties hereto, terminate all (but not less than
all) of the Servicer's management, administrative, servicing, custodial and
collection functions (such termination being herein called a "SERVICE
TRANSFER").
(b) Upon receipt of the notice required by Section 7.02(a) (or, if
later, on a date designated therein), all rights, benefits, fees, indemnities,
authority and power of the Servicer under this Agreement, whether with respect
to the Contracts, the Contract Files or otherwise, shall pass to and be vested
in the [ ] (the "REPLACEMENT SERVICER") pursuant to and under this Section
7.02; and, without limitation, the Replacement Servicer is authorized and
empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination. The Servicer agrees to cooperate with the Replacement Servicer in
effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the Replacement
Servicer for administration by it of all cash amounts which shall at the time be
held by the Servicer for deposit, or have been deposited by the Servicer, in the
Collection Account, or for its own account in connection with its services
hereafter or thereafter received with respect to the Contracts. The Servicer
shall transfer to the Replacement Servicer all records held by the Servicer
relating to the Contracts in such electronic form as the Replacement Servicer
may reasonably request and (ii) any Contract Files in the Servicer's possession.
In addition, the Servicer shall permit access to its premises (including all
computer records and programs) to the Replacement Servicer or its designee, and
shall pay the reasonable transition expenses of the Replacement Servicer. Upon
a Service Transfer, the Replacement Servicer shall also be entitled to receive
the Servicing Fee for performing the obligations of the Servicer.
SECTION 7.03. [RESERVED]
SECTION 7.04. NOTIFICATION TO CERTIFICATEHOLDERS. (a) Promptly
following the occurrence of any Event of Termination, the Servicer shall give
written notice thereof to the Trustee, the Trust Depositor, the Back-up Servicer
and each Rating Agency at the addresses described in Section 12.09 hereof and to
the Certificateholders at their respective addresses appearing on the
Certificate Register.
(b) Within 10 days following any termination or appointment of a
Back-up Servicer pursuant to this Article VII, the Trustee shall give written
notice thereof to each Rating Agency and the Trust Depositor at the addresses
described in Section 12.09 hereof, and to the Certificateholders at their
respective addresses appearing on the Certificate Register.
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SECTION 7.05. EFFECT OF TRANSFER. (a) After a Service Transfer, the
terminated Servicer shall have no further obligations with respect to the
management, administration, servicing, custody or collection of the Contracts
and the Replacement Servicer appointed pursuant to Section [___] shall have all
of such obligations, except that the terminated Servicer will transmit or cause
to be transmitted directly to the Replacement Servicer for its own account,
promptly on receipt and in the same form in which received, any amounts
(properly endorsed where required for the Replacement Servicer to collect them)
received as payments upon or otherwise in connection with the Contracts.
(b) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer
and the Seller pursuant to Article X and Section 11.06), other than those
relating to the management, administration, servicing, custody or collection of
the Contracts.
SECTION 7.06. DATABASE FILE. The Servicer will provide the Replacement
Servicer with a magnetic tape containing the database file for each Contract (i)
as of the Cutoff Date, (ii) the Subsequent Cutoff Date, (iii) thereafter, as of
the last day of the preceding Due Period on each Determination Date prior to a
Servicer Termination Event and (iv) on and as of the Business Day before the
actual commencement of servicing functions by the Replacement Servicer following
the occurrence of a Servicer Termination Event.
SECTION 7.07. REPLACEMENT SERVICER INDEMNIFICATION. The Servicer shall
defend, indemnify and hold the Replacement Servicer and any officers, directors,
employees or agents of the Replacement Servicer harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments and any other costs, fees, and expenses that the Replacement Servicer
may sustain in connection with the claims asserted at any time by third parties
against the Replacement Servicer which result from (i) any willful or grossly
negligent act taken or omission by the Servicer or (ii) a breach of any
representations of the Servicer in Section 3.02 hereof. The indemnification
provided by this Section 7.07 shall survive the termination of this Agreement.
ARTICLE VIII
PAYMENTS AND RESERVE FUND
SECTION 8.01. MONTHLY PAYMENTS. (a) Each Certificateholder as of the
related Record Date shall be paid on the next succeeding Payment Date by check
mailed to such Certificateholder at the address for such Certificateholder
appearing on the Certificate Register or by wire transfer if such
Certificateholder provides written instructions to the Trustee at least ten days
prior to such Payment Date.
(b) The Trustee shall serve as the paying agent hereunder (the "PAYING
AGENT") and shall make the payments to the Certificateholders required
hereunder. The Trustee hereby agrees
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that all amounts held by it for payment hereunder will be held in trust for
the benefit of the Certificateholders.
SECTION 8.02. FEES. The Trustee shall be paid the Trustee's Fee and the
Servicer shall be paid the Monthly Servicing Fee, each of which shall be paid
solely from the monies and in accordance with the priorities described in
Section 8.04(b). No recourse may be had to the Seller, Trust Depositor,
Trustee, Servicer, or any of their respective Affiliates in the event that
amounts available under Section 8.04(b) are insufficient for payment of the
Trustee Fee and the Monthly Servicing Fee.
SECTION 8.03. ADVANCES; REALIZATION OF CARRYING CHARGE. (a) On each
Determination Date, the Servicer shall compute the amount of Delinquent
Interest, if any, on the Contracts for the immediately preceding Due Period.
Not later than each Determination Date, the Servicer shall advance (each, an
"ADVANCE") such Delinquent Interest by depositing the aggregate amount of such
Delinquent Interest in the Collection Account, PROVIDED, HOWEVER, that the
Servicer shall be obligated to advance Delinquent Interest only to the extent
that the Servicer, in its sole discretion, expects that such Advance will not
become an Uncollectible Advance. The Servicer shall indicate on each Monthly
Report (i) the amount of Delinquent Interest, if any, on the Contracts for the
related Due Period and (ii) the amount of the Advance, if any, made by the
Servicer in respect of such Delinquent Interest pursuant to this Section 8.03.
If the amount of such Advance is less than the amount of the Delinquent
Interest, the relevant Monthly Report shall be accompanied by a certificate of a
Servicing Officer setting forth in reasonable detail the basis for the
determination by the Servicer that the portion of the Delinquent Interest not
advanced would become an Uncollectible Advance. By each Determination Date, the
Servicer shall determine the amount of prior unreimbursed Advances for which it
desires to be reimbursed pursuant to the provisions of Section 8.03 (such
amount, the "REIMBURSEMENT AMOUNT"). The Servicer shall be entitled to be
reimbursed for any outstanding Advance with respect to a Contract by means of a
first priority withdrawal from the Collection Account of such Reimbursement
Amount as provided in Section 8.04(b)(i).
(b) The Servicer shall determine no later than 12:00 noon, New York
City time, on the second Business Day prior to a Payment Date the Carrying
Charges in respect of the upcoming Payment Date. To the extent of such amount,
the Trustee shall, pursuant to the Deposit Agreement, make demand upon the Trust
Depositor for payment of the Carrying Charges, to be satisfied from (and solely
to the extent of) the amount then on deposit in the Interest Reserve Account.
Such demand shall be effected by giving the notice to the Collateral Agent
described in Section 3.03 of the Security Agreement. Amounts realized from such
demand shall be deposited immediately into the Collection Account as
contemplated in Section 5.05(b)(vi) hereof.
SECTION 8.04. PAYMENTS. (a) On each Determination Date, the Servicer
shall determine the amount of the Available Funds for the related Payment Date
and shall calculate the Available
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Interest, the Available Principal, the Class A Distributable Amount, the
Class B Distributable Amount, and all other distributions to be made on the
related Payment Date.
(b) On each Payment Date, the Trustee will, based on the information
in the Monthly Report, distribute as a Special Distribution from the Special
Distribution Subaccount (a) to the Holders of the Class A Certificateholders,
pro rata, in an amount equal to the Class A Percentage multiplied by the amount
in the Special Distribution Subaccount and (b) to the Class B
Certificateholders, pro rata, in an amount equal to the Class B Percentage
multiplied by the amount in the Special Distribution Subaccount, and shall also
distribute the following amounts in the following order of priority:
(i) from Available Funds, the Reimbursement Amount to the
Servicer;
(ii) from Available Interest, the Servicing Fee for the related
Due Period to the Servicer;
(iii) from Available Interest, the Trustee's Fee for the related
Due Period to the Trustee;
(iv) to the Class A Certificateholders of record, from Available
Interest, an amount equal to the Class A Interest Distributable Amount
for such Payment Date and, if such Available Interest is insufficient,
the Class A Certificateholders will receive such shortfall first, from
the Class B Percentage of Available Principal and second, if such amounts
are still insufficient, from monies on deposit in the Reserve Fund;
(v) to the Class B Certificateholders of record, from Available
Interest, an amount equal to the Class B Interest Distributable Amount
for such Payment Date and, if such Available Interest is insufficient,
the Class B Certificateholders will receive such shortfall from monies on
deposit in the Reserve Fund;
(vi) to the Class A Certificateholders of record, from Available
Principal, an amount equal to the Class A Principal Distributable Amount
for such Payment Date and, if such Available Principal is insufficient,
the Class A Certificateholders will receive such shortfall first, from
Available Interest, and second, if such amounts are still insufficient,
from monies on deposit in the Reserve Fund;
(vii) to the Class B Certificateholders of record, from Available
Principal, an amount equal to the Class B Principal Distributable Amount
for such Payment Date and, if such Available Principal is insufficient,
the Class B Certificateholders will receive such shortfall first, from
Available Interest, and second, if such amounts are still insufficient,
from monies on deposit in the Reserve Fund; and
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(viii) any remaining Available Funds after the payments described
in clauses (i) through (vii) above shall be paid to the Reserve Agent for
deposit in the Reserve Fund.
Any monies intended for the payment of Class A Distributable Amounts or
Class B Distributable Amounts but which remain unclaimed by Certificateholders
for a period of two years after the Final Scheduled Payment Date shall, upon the
written request of the Trust Depositor, be paid to the Trust Depositor, and such
Certificateholders shall thereafter look only to the Trust Depositor for
payment, and then only to the extent of the amounts so received without interest
thereon; PROVIDED, HOWEVER, that within thirty days prior to the expiration of
the two-year period mentioned above, the Trustee, before being required to make
any such repayment, may, at the expense of the Trust Depositor, cause to be
published in a financial journal a notice that after a date named therein said
monies will be returned to the Trust Depositor.
SECTION 8.05. WITHDRAWAL FROM RESERVE FUND TO COVER A SHORTFALL. The
Trustee shall determine no later than 10:00 a.m., Chicago, Illinois time, on the
Payment Date (but after making, and taking into account, the determination,
demand and transfer of funds contemplated in Section 8.03(b) above) whether
there exists a Shortfall with respect to the upcoming Payment Date. In the
event that the Trustee determines that there exists a Shortfall, the Trustee
shall furnish to the Reserve Agent no later than 12:00 noon, Chicago, Illinois
time, on such Payment Date a written notice specifying the Shortfall for such
Payment Date and directing the Reserve Agent to remit monies in respect of such
Shortfall (to the extent of funds available to be so distributed pursuant to the
Reserve Fund Agreement) to the Trustee for deposit in the Collection Account.
Upon receipt of any such funds the Trustee shall deposit such amounts into the
Collection Account.
SECTION 8.06. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND
WARRANTIES. Upon a discovery by the Servicer, the Trust Depositor or the
Trustee of a breach of a representation or warranty of the Seller as set forth
in EXHIBIT K hereto or as made in any Subsequent Purchase Agreement relating to
Subsequent Contracts that materially adversely affects the Trust's interest in
such Contract (without regard to the benefits of the Reserve Fund), the party
discovering the breach shall give prompt written notice to the other parties
PROVIDED, that the Trustee shall have no duty or obligation to inquire or to
investigate the breach by the Seller of any of such representations or
warranties. The Seller, as provided in the Transfer and Sale Agreement and in
accordance with this Section 8.06, shall repurchase a Contract at its Repurchase
Price, two Business Days prior to the first Determination Date after the Seller
becomes aware, or should have become aware, or receives written notice from the
Trustee, the Servicer or the Trust Depositor of any breach of a representation
or warranty of the Seller set forth in Article III of the Transfer and Sale
Agreement that materially adversely affects such Contract or the Trust's
interest in such Contract and which breach has not been cured; PROVIDED,
HOWEVER, that with respect to any Contract incorrectly described on the List of
Contracts with respect to unpaid Principal Balance which the Seller would
otherwise be required to repurchase under the Transfer and Sale Agreement, the
Seller may, in lieu of repurchasing such Contract,
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deposit in the Collection Account not later than one Business Day after such
Determination Date cash in an amount sufficient to cure such deficiency or
discrepancy, and PROVIDED FURTHER that with respect to a breach of
representation or warranty relating to the Contracts in the aggregate and not
to any particular Contract the Seller may select Contracts (without adverse
selection) to repurchase such that had such Contracts not been included as
part of the Trust Corpus there would have been no breach of such
representation or warranty; PROVIDED FURTHER that (a) the failure of a
Contract File to be complete or of the original certificate of title and
evidence of recordation of such certificate to be included in the Contract
File as of 180 days after the Closing Date (or Subsequent Transfer Date, in
the case of Subsequent Contracts) or (b) the failure to maintain perfection
of the security interest in the Motorcycle securing a Contract in accordance
with Section 5.09, shall be deemed to be a breach materially and adversely
affecting the Trust's interest in the Contract or in the related Contracts.
Notwithstanding any other provision of this Agreement, the obligation of the
Seller under the Transfer and Sale Agreement and described in this Section
8.06 shall not terminate or be deemed released by any party hereto upon a
Service Transfer pursuant to Article VII. The repurchase obligation
described in this Section 8.06 is in no way to be satisfied with monies in
the Reserve Fund.
SECTION 8.07. REASSIGNMENT OF REPURCHASED CONTRACTS. Upon receipt by the
Trustee for deposit in the Collection Account of the Repurchase Price as
described in Section 8.06 or Section 8.08, and upon receipt of a certificate of
a Servicing Officer in the form attached hereto as EXHIBIT G, the Trustee shall
assign to the Seller all of the Trust's right, title and interest in the
repurchased Contract without recourse, representation or warranty, except as to
the absence of liens, charges or encumbrances created by or arising as a result
of actions of the Trustee.
SECTION 8.08. SELLER'S REPURCHASE OPTION. As provided in the Transfer
and Sale Agreement, on written notice to the Trustee at least 20 days prior to a
Payment Date, and provided that aggregate of the Class A Certificate Balance and
Class B Certificate Balance is then less than 10% of the Class A Initial
Certificate Balance and Class B Initial Certificate Balance, and provided a
valuation letter is delivered as required in Section 5.02 of the Transfer and
Sale Agreement, the Seller may (but is not required to) repurchase on that
Payment Date all outstanding Contracts at a price equal to the aggregate of the
Class A and Class B Certificate Balance on the previous Payment Date plus the
aggregate of the Class A Interest Distributable Amount and the Class B Interest
Distributable Amount for the current Payment Date thereon, the Reimbursement
Amount (if any) as well as accrued and unpaid Monthly Servicing Fees and Trustee
Fees to the date of such repurchase. Such price is to be deposited in the
Collection Account one Business Day before such Payment Date, against the
Trustee's release of the Contracts and the Contract Files to the Seller in the
manner described in Section 8.07 above.
ARTICLE IX
THE CERTIFICATES
SECTION 9.01 THE CERTIFICATES. The Class A Certificates and the Class
B Certificates shall be substantially in the form of Exhibit A-1 and Exhibit
A-2, respectively. The Certificates
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shall be issued in fully registered form in minimum denominations of $[ ] and
integral multiples of $[ ] in excess thereof, except that one Class A
Certificate and one Class B Certificate may be issued in a denomination
representing the remainder of the Class A Certificate Balance or Class B
Certificate Balance, as applicable. The Certificates shall be executed on
behalf of the Trust by manual or facsimile signature of an authorized officer
of the Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures were affixed,
authorized to sign on behalf of the Trustee shall be validly issued and
entitled to the benefit of this Agreement, notwithstanding the fact that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices
at the date of authentication and delivery of such Certificates.
SECTION 9.02 AUTHENTICATION OF CERTIFICATES. Concurrently with the
conveyance of the Contracts to the Trust, the Trustee shall cause the
Certificates to be executed on behalf of the Trust by an authorized Trust
officer, and authenticated and delivered to or upon the written order of the
Trust Depositor, without further corporate action by the Trust Depositor, in
authorized denominations. No Certificate shall entitle its Holder to any
benefit under this Agreement or be valid for any purpose unless there shall
appear on such Certificate a certificate of authentication, executed by the
Trustee by manual signature. Such authentication shall constitute conclusive
evidence that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
SECTION 9.03 REGISTRATION OF TRANSFER AND EXCHANGE. (a) The Trustee
shall cause to be kept a register (the "CERTIFICATE REGISTER") in which, subject
to such reasonable regulations as it may prescribe, the Trustee shall provide
for the registration of Certificates and the registration of transfers of
Certificates. The Trustee shall be the initial "CERTIFICATE REGISTRAR" for the
purpose of registering Certificates and transfers of Certificates as herein
provided. Upon the resignation of any Certificate Registrar, the Trustee shall
promptly appoint a successor or, if it elects not to make such an appointment,
assume the duties of Certificate Registrar.
If a Person other than the Trustee is appointed as Certificate Registrar,
the Trustee shall give prompt written notice of the appointment of such
Certificate Registrar and of the location, and any change in the location, of
the Certificate Register, and the Trustee shall have the right to inspect the
Certificate Register at all reasonable times, to obtain copies thereof and to
rely conclusively upon a certificate executed on behalf of the Certificate
Registrar by an authorized officer thereof as to the names and addresses of the
Certificateholders and the principal amounts and number of the Certificates.
Upon surrender for registration of transfer of any Certificate at the
office or agency of the Trustee to be maintained as provided in Section 6.08,
the Trustee shall execute, authenticate and deliver to the designated transferee
or transferees, one or more new Certificates in any authorized denominations of
a like aggregate principal amount.
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At the option of the Certificateholder, Certificates may be exchanged for
other Certificates in any authorized denominations of a like aggregate principal
amount. Whenever any Certificates are so surrendered for exchange, the Trustee
shall execute, authenticate and deliver to the Certificateholder the
Certificates that the Certificateholder making the exchange is entitled to
receive.
All Certificates issued upon any registration of transfer or exchange of
Certificates shall be the valid obligations of the Trust, evidencing the same
interest in the Trust and entitled to the same benefits under this Agreement as
the Certificates surrendered upon such registration of transfer or exchange.
(b) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
holder thereof or such holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located or having a
correspondent located in [________] or the city in which the Corporate Trust
Office is located or by a member firm of a national securities exchange, and
such other documents as the Trustee may require.
(c) No service charge shall be made to a Certificateholder for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates.
SECTION 9.04 CERTAIN TRANSFER RESTRICTIONS. [RESERVED]
SECTION 9.05 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar and the Trustee such security or indemnity as may
be required by them to save each of them harmless, then in the absence of notice
that such Certificate has been acquired by a bona fide purchaser, the Trustee on
behalf of the Trust shall execute, and the Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and denomination. In
connection with the issuance of any new Certificate under this Section, the
Trustee and the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Certificate issued pursuant to this Section
shall constitute conclusive evidence of ownership of a beneficial interest in
the Trust, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
SECTION 9.06 PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose
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name any Certificate is registered in the Certificate Register as the owner
of such Certificate for the purpose of receiving distributions pursuant to
Section 8.04 and for all other purposes whatsoever, and neither the Trustee
nor the Certificate Registrar shall be bound by any notice to the contrary.
SECTION 9.07 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Certificate Registrar will furnish to the Trustee, the Trust Depositor and
the Servicer, within five days after receipt by the Certificate Registrar of a
request therefor from the Trustee or the Certificateholder in writing, a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Certificateholders as of the most recent Record Date. If Class A
Certificateholders or Class B Certificateholders with aggregate Fractional
Interests representing 25% or more of the Class A Certificate Balance or Class B
Certificate Balance, respectively, (hereinafter referred to as "APPLICANTS")
apply in writing to the Trustee, and such application states that the Applicants
desire to communicate with other Certificateholders with respect to their rights
under this Agreement or under the Certificates and is accompanied by a copy of
the communication which such Applicants propose to transmit, then the Trustee
shall, within five Business Days after the receipt of such application, afford
such Applicants access during normal business hours to the most recent list of
Certificateholders held by the Trustee. If such list is as of a date more than
90 days prior to the date of receipt of such Applicants' request, the Trustee
shall promptly request from the Certificate Registrar a current list as provided
above, and shall afford such Applicants access to such list promptly upon
receipt. Every Certificateholder, by receiving and holding a Certificate,
agrees with the Certificate Registrar and the Trustee that none of the Trust
Depositor, the Certificate Registrar or the Trustee shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Certificateholders
SECTION 9.08 BOOK-ENTRY CERTIFICATES. Unless the Holder thereof
requests that Class A Certificates be delivered in definitive, fully
registered form ("DEFINITIVE CERTIFICATES"), the Class A Certificates, upon
original issuance, will be issued in the form of one or more typewritten
Certificates representing Book-Entry Certificates, to be delivered to the
Depository Trust Company, the initial Clearing Agency, by or on behalf of the
Trust. The Book-Entry Certificates shall be registered initially on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency. With respect to the Book-Entry Certificates:
(1) the provisions of this Section shall be in full force and effect;
(2) the Depositor, the Servicer, the Certificate Registrar and the
Trustee may deal with the Clearing Agency for all purposes
(including the making of distributions on the Book-Entry
Certificates) as the sole Holder of such Book-Entry Certificates
and shall have no obligation to the related Certificate Owner;
(3) to the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this
Section shall control;
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(4) the rights of such Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those
established by law and agreements between such Certificate Owners
and the Clearing Agency and/or the Clearing Agency Participants
pursuant to the Depository Agreement. The initial Clearing Agency
will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal
and interest on the Book-Entry Certificates to such Clearing
Agency Participants; and
(5) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Certificateholders
evidencing a specified percentage of the Certificate Balance, the
Clearing Agency shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect
from Certificate Owners and/or Clearing Agency Participants owning
or representing, respectively, such required percentage of the
beneficial interest in the Book-Entry Certificates and has
delivered such instructions in writing to the Trustee.
Neither the Trustee nor the Certificate Registrar shall have any responsibility
to monitor or restrict the transfer of beneficial ownership in any Certificate
an interest in which is transferable through the facilities of the Depository.
SECTION 9.09 NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to Holders of the Book-Entry Certificates is required under this
Agreement, the Trustee and the Servicer shall give all such notices and
communications specified herein to be given to Holders of Certificates to the
Clearing Agency.
ARTICLE X
INDEMNITIES
SECTION 10.01. SERVICER INDEMNIFICATION. The Servicer agrees to defend
and indemnify the Trust, the Trustee the Paying Agent, the Certificateholders
and any agents of the Trustee, and the Certificateholders against any and all
costs, expenses, losses, damages, claims and liabilities, and shall also assume
the obligations of the Trust Depositor to pay expenses and costs incurred
pursuant to the terms of the Security Agreement (which expenses and costs shall
not be borne by the Collateral as defined therein), including reasonable fees
and expenses of counsel and expenses of litigation arising out of or resulting
from this Agreement or any of the related Transaction Documents, or the use,
ownership or operation of any Motorcycle by the Servicer or any Affiliate of the
Servicer. Notwithstanding any other provision of this Agreement, the obligation
of the Servicer described in this Section 10.01 shall not terminate or be deemed
released upon a Service Transfer pursuant to Article VII and shall survive any
termination of this Agreement.
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SECTION 10.02. LIABILITIES TO OBLIGORS. No obligation or liability to
any Obligor under any of the Contracts is intended to be assumed by the Trust or
the Certificateholders under or as a result of this Agreement and the
transactions contemplated hereby and, to the maximum extent permitted and valid
under mandatory provisions of law, the Trust and the Certificateholders
expressly disclaim any such assumption.
SECTION 10.03. TAX INDEMNIFICATION. As provided in the Transfer and
Sale Agreement, the Seller has agreed to pay, and to indemnify, defend and hold
harmless the Trust, the Trustee and the Certificateholders from, any taxes which
may at any time be asserted with respect to, and as of the date of, the transfer
of the Contracts to the Trust, including, without limitation, any sales, gross
receipts, general corporation, personal property, privilege or license taxes
(but not including any federal, state or other taxes arising out of the creation
of the Trust and the issuance of the Certificates) and costs, expenses and
reasonable counsel fees in defending against the same, whether arising by reason
of the acts to be performed by the Trust Depositor, the Seller or the original
Servicer under this Agreement or imposed against the Trust, a Certificateholder
or otherwise. Notwithstanding any other provision of this Agreement, the
obligation of the Seller described in this Section 10.03 shall not terminate or
be deemed released upon a Service Transfer pursuant to Article VII and shall
survive any termination of this Agreement.
SECTION 10.04. SERVICER'S INDEMNITIES. The Servicer shall defend and
indemnify the Trust, the Trustee and the Certificateholders against any and all
costs, expenses, losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel and expenses of litigation, in respect of any
action taken by such Servicer with respect to any Contract. This indemnity
shall survive any Service Transfer (but the original Servicer's obligations
under this Section 10.04 shall not relate to any actions of any subsequent
Servicer after a Service Transfer) and any payment of the amount owing under, or
any repurchase by the Seller of, any such Contract and shall survive any
termination of this Agreement.
SECTION 10.05. OPERATION OF INDEMNITIES. Indemnification under this
Article X shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If the Servicer has made any indemnity
payments to the Trustee pursuant to this Article X and the Trustee thereafter
collects any of such amounts from others, the Trust will repay such amounts
collected to the Servicer, without interest.
ARTICLE XI
THE TRUSTEE
SECTION 11.01. DUTIES OF TRUSTEE. The Trustee, prior to the occurrence
of an Event of Termination and after the curing of all Events of Termination
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement. If an Event of Termination has
occurred (which has not been cured), the Trustee shall exercise such of the
rights and powers vested in it by this Agreement, and use the same
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degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement and shall promptly
notify the Servicer and each Certificateholder of any failure of any of the
foregoing to so conform.
Subject to Section 11.03, no provision of this Agreement shall be
construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act (including actions or omissions within its
control resulting in the failure of Certificateholders to receive timely payment
of either the Class A Distributable Amount or the Class B Distributable Amount)
or its own misconduct; PROVIDED, HOWEVER, that:
(a) Prior to the occurrence of an Event of Termination, and
after the curing of all such Events of Termination which may have
occurred, the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall not
be liable except for the performance of such duties and obligations as
are specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and, in
the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Agreement;
(b) The Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the
pertinent facts;
(c) The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Certificateholders with aggregate
Fractional Interests representing 25% or more of the Trust relating to
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Agreement; and
(d) The Trustee shall not be charged with knowledge of any
event referred to in Section 7.01 unless a Responsible Officer of the
Trustee at the Corporate Trust Office obtains actual knowledge of such
event or the Trustee receives written notice of such event from the
Seller, the Trust Depositor, the Servicer or the Certificateholders with
aggregate Fractional Interests representing 25% or more of the Trust.
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The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it,
PROVIDED, HOWEVER, that nothing contained herein shall relieve the Trustee of
the obligations, upon the occurrence of an Event of Termination (which has not
been cured), to exercise such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
None of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Seller, the Trust Depositor or the Servicer
under this Agreement.
Without limiting the generality of this Section 11.01, the Trustee shall
have no duty (i) to see to any recording, filing or depositing of this Agreement
or any agreement referred to herein or any financing statement evidencing a
security interest in the Motorcycles or to see to the maintenance of any such
recording or filing or depositing or to any re-recording, refiling or
redepositing of any thereof, (ii) to see to any insurance of the Motorcycles or
Obligors or to effect or maintain any such insurance, (iii) to see to the
payment or discharge of any tax, assessment or other governmental charge or any
lien or encumbrance of any kind owing with respect to, assessed or levied
against any part of the Trust, (iv) to confirm or verify the contents of any
reports or certificates delivered to the Trustee pursuant to this Agreement
believed by the Trustee to be genuine and to have been signed or presented by
the proper party or parties, or (v) to inspect the Motorcycles at any time or
ascertain or inquire as to the performance or observance of any of the Seller's
or the Servicer's representations, warranties or covenants or the Servicer's
duties and obligations as Servicer and as custodian of the Contract Files under
this Agreement.
SECTION 11.02. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as
otherwise provided in Section 11.01 and provided the Paying Agent shall also
benefit from the provisions of this Section 11.02:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate, certificate
of a Servicing Officer, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) The Trustee may consult with counsel and any opinion of any
counsel for the Seller, the Trust Depositor or the Servicer shall be full and
complete authorization and protection in respect of any action taken or suffered
or omitted by the Trustee hereunder in good faith and in accordance with such
opinion of counsel;
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(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at the request, order or
direction of any of the Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; PROVIDED, HOWEVER, that nothing
contained herein shall relieve the Trustee of the obligations, upon the
occurrence of an Event of Termination (which has not been cured), to exercise
such of the rights and powers vested in it by this Agreement, and to use the
same degree of care and skill in their exercise as a prudent man would exercise
or use under the circumstances in the conduct of his own affairs;
(d) Prior to the occurrence of an Event of Termination and after the
curing of all Events of Termination which may have occurred, the Trustee shall
not be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing so to do by Certificateholders with aggregate Fractional
Interests representing 25% or more of the Trust; PROVIDED, HOWEVER, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense or liability as a condition to
so proceeding. The reasonable expense of every such examination shall be paid
by the Servicer or, if paid by the Trustee, shall be reimbursed by the Servicer
upon demand; and
(e) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or co-trustees or a custodian and shall not be liable for any acts or
omissions of such agents, attorneys or co-trustees or custodians if appointed by
it with due care hereunder; PROVIDED, HOWEVER, if the Servicer is acting as
custodian, the Servicer is deemed by all parties to have been appointed with due
care.
SECTION 11.03. TRUSTEE NOT LIABLE FOR CERTIFICATES OR CONTRACTS. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein or in the Certificates (other than the Trustee's execution thereof). The
Trustee makes no representations as to the validity or sufficiency of this
Agreement, the Trust or of the Certificates (other than its execution thereof)
or of any Contract, Contract File or related document. The Trustee shall not be
accountable for the use or application by the Servicer or the Trust Depositor of
funds paid to the Trust Depositor in consideration of conveyance of the
Contracts to the Trust by the Trust Depositor or deposited in or withdrawn from
the Collection Account by the Servicer.
SECTION 11.04. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or other capacity may become the owner or pledgee of Certificates
representing less than all the beneficial interest in the Trust with the same
rights as it would have if it were not Trustee.
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SECTION 11.05. RIGHTS TO DIRECT TRUSTEE AND TO WAIVE EVENTS OF
TERMINATION. Certificateholders with aggregate Fractional Interests
representing 25% or more of the Trust shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee under this Agreement or any Transaction Document assigned to the
Trustee, or exercising any trust or power conferred on the Trustee under this
Agreement or any Transaction Document assigned to the Trustee; PROVIDED,
HOWEVER, that, subject to Section 11.01, the Trustee shall have the right to
decline to follow any such direction if the Trustee being advised by counsel
determines that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a Responsible Officer or Responsible Officers of
the Trustee, determine that the proceedings so directed would be illegal or
involve the Trustee in personal liability or (in the case of directions by the
Certificateholders) be unduly prejudicial to the rights of Certificateholders
not parties to such direction; and PROVIDED FURTHER that nothing in this
Agreement shall impair the right of the Trustee to take any action deemed proper
by the Trustee and which is not inconsistent with such direction by the
Certificateholders. Certificateholders with aggregate Fractional Interests
representing 51% or more of the Trust may waive any past Event of Termination
hereunder and its consequences, and upon any such waiver, such Event of
Termination shall cease to exist and shall be deemed to have been cured for
every purpose of this Agreement; but no such waiver shall extend to any
subsequent or other Event of Termination or impair any right consequent thereon.
The Trustee shall have no liability for acting upon the direction of the
Certificateholders.
SECTION 11.06. THE SERVICER TO PAY TRUSTEE'S EXPENSES. The Servicer
agrees to indemnify the Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on the Trustee's
part, arising out of or in connection with the acceptance or administration of
this trust and its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.
This Section 11.06 shall be for the benefit of the Trustee in its
capacities as Trustee, Paying Agent, and Certificate Registrar hereunder, and
shall not terminate or be deemed released upon a Service Transfer pursuant to
Article VII and shall survive the termination of this Agreement.
SECTION 11.07. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee
hereunder shall at all times be a financial institution organized and doing
business under the laws of the United States of America or any state, authorized
under such laws to exercise corporate trust powers, whose long term Unsecured
debt is rated at least Baa3 by Moody's and shall have a combined capital and
surplus of at least $50,000,000 or shall be a member of a bank holding system
the aggregate combined capital and surplus of which is $50,000,000 and subject
to supervision or examination by Federal or state authority, PROVIDED that the
Trustee's separate capital and surplus shall at all times be at least the amount
required by Section 310(a)(2) of the Trust Indenture Act of 1939, as amended.
If such Person publishes reports of condition at least annually, pursuant to law
or to the requirements of a supervising or examining authority, then for the
purposes of this Section
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11.07, the combined capital and surplus of such Person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 11.07, the Trustee
shall resign immediately in the manner and with the effect specified in
Section 11.08.
SECTION 11.08. RESIGNATION OR REMOVAL OF TRUSTEE. The Trustee may at
any time resign and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer with a copy to the Trust Depositor, the
Seller, and the Certificateholders. Upon receiving such notice of resignation,
the Servicer shall promptly appoint a successor Trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to each of the
Trust Depositor, the Seller, and the Certificateholders and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and
shall have accepted such appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 11.07 and shall fail to resign after written request
therefor by the Servicer, or if at any time the Trustee shall be legally unable
to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Servicer may remove the
Trustee. If the Servicer shall have removed the Trustee under the authority of
the immediately preceding sentence, the Servicer shall promptly appoint a
successor Trustee by written instrument one copy of which instrument shall be
delivered to the Trustee so removed, the Trust Depositor and the Seller and one
copy to the successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 11.08 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 11.09.
Any resigning or removed Trustee shall be entitled to payment of all
Trustee's Fees earned and reimbursement for all expenses incurred by it up to
the date of resignation. All indemnification obligations of the Servicer and
the Seller shall survive such resignation or removal.
SECTION 11.09. SUCCESSOR TRUSTEE. Any successor Trustee appointed as
provided in Section 11.08 shall execute, acknowledge and deliver to the
Servicer, the Trust Depositor and to its predecessor Trustee, with a copy to the
Certificateholders, an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The predecessor Trustee shall
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deliver or cause to be delivered to the successor Trustee the Contracts and
the Contract Files (if any such Contracts and Contract Files are in the
Trustee's possession) and any related documents and statements held by it
hereunder; and, if the Contracts are then held by a custodian pursuant to a
custodial agreement, the predecessor Trustee and the custodian shall amend
such custodial agreement to make the successor Trustee the successor to the
predecessor Trustee thereunder; and the Servicer, the Trust Depositor and
the predecessor Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly
vesting and confirming in the successor Trustee all such rights, powers,
duties and obligations.
No successor Trustee shall accept appointment as provided in this Section
11.09 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 11.07.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 11.09, the Servicer shall cause notice of the succession of such Trustee
hereunder to be mailed to each Rating Agency and to each Certificateholder at
their addresses as shown in the Certificate Register. If the Servicer fails to
mail such notice within ten days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Servicer.
SECTION 11.10. MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 11.07, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. Upon such occasion, the Servicer shall cause notice thereof to
be mailed to each Rating Agency and each Certificateholder. If the Servicer
fails to mail such notice within ten days after such succession, the successor
Trustee shall cause such notice to be mailed at the expense of the Servicer with
a copy to each Certificateholder.
SECTION 11.11. TAX RETURNS.
(a) The Servicer, on behalf of the Trust, shall request that the
Trustee furnish the Servicer with all such information in the Trustee's
possession as may be reasonably required in connection with the preparation of
all tax returns of the Trust and the Trustee shall, upon such request, furnish
such information and execute such returns; and
(b) As directed by the Servicer in writing, the Trustee shall take all
action specified in such writing relating to (i) certain withholding
requirements applicable to non-U.S. persons; (ii) backup withholding
requirements; and (iii) certain taxpayer certification requirements relating to
clauses (i) and (ii) above.
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SECTION 11.12. OBLIGOR CLAIMS. In connection with any offset defenses,
or affirmative claims for recovery, asserted in legal actions brought by
Obligors under one or more Contracts based upon provisions therein complying
with, or upon other rights or remedies arising from, any legal requirements
applicable to the Contracts, including, without limitation, the Federal Trade
Commission's Trade Regulation Rule Concerning Preservation of Consumers' Claims
and Defenses (16 C.F.R. Section 433) as amended from time to time:
(a) The Trustee is not, and shall not be deemed to be, either
in any individual capacity, as trustee hereunder or otherwise, a
creditor, or a joint venturer with or an Affiliate of, or acting in
concert or cooperation with, any seller of Motorcycles, in the
arrangement, origination or making of Contracts. The Trustee is the
holder of the Contracts only as trustee on behalf of the
Certificateholders, and not as a principal or in any individual or
personal capacity;
(b) The Trustee shall not be personally liable for or obligated
to pay Obligors any affirmative claims asserted thereby, or responsible
to Certificateholders for any offset defense amounts applied against
Contract payments pursuant to such legal actions;
(c) The Trustee will pay, solely from available Trust monies,
affirmative claims for recovery by Obligors only pursuant to final
judicial orders or judgments, or judicially approved settlement
agreements, resulting from such legal actions; and
(d) The Servicer has agreed to indemnify, hold harmless and
defend the Trustee and Certificateholders from and against any and all
liability, loss, costs and expenses of the Trustee and Certificateholders
resulting from any affirmative claims for recovery asserted or collected
by Obligors under the Contracts. Notwithstanding any other provision of
this Agreement, the obligation of the Servicer described in this Section
11.12(d) shall not terminate or be deemed released upon a Service
Transfer pursuant to Article VII and shall survive termination of this
Agreement.
SECTION 11.13 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions hereof, at any time, for the purpose of
meeting any legal requirements of any jurisdiction having authority over the
Trust, the Contracts or the Obligors, the Servicer and Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity,
such title to the Trust, or any part thereof, and, subject to the other
provisions of this Section 11.13, such powers, duties, obligations, rights and
trusts as the Servicer and the Trustee may consider necessary or desirable. If
the Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request to do so, or in case an Event of Termination shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 11.07
hereunder and
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no notice to Certificateholders of the appointment of co-trustee(s) or
separate trustee(s) shall be required under Section 11.09 hereof; PROVIDED,
HOWEVER, that notice of appointment of any co-trustee or separate trustee
shall be provided to Moody's, and any co-trustee or separate trustee shall
have a long-term debt rating from Moody's of Baa3 or higher.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 11.13, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such co-trustee or separate trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such co-trustee or separate trustee at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then co-trustees and separate trustees, as
effectively as if given to each of them. Every instrument appointing any
co-trustee or separate trustee shall refer to this Agreement and the conditions
of this Article XI. Each co-trustee and separate trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
Any co-trustee or separate trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any co-trustee or separate trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 11.14 REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee,
solely in its capacity as Trustee, makes the following representations and
warranties:
(a) The Trustee is duly organized and validly existing as an
Illinois banking corporation in good standing under the laws of the State
of Illinois, with trust powers and with power and authority to own its
properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted.
(b) The Trustee has the power and authority to execute and
deliver this Agreement and to carry out its terms; and the execution,
delivery, and performance of this Agreement has been duly authorized by
the Trustee by all necessary corporate action.
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(c) This Agreement constitutes a legal, valid, and binding
obligation of the Trustee, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights in general and by general principles of equity,
regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
(d) The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms hereof, do not conflict with,
result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
charter or by-laws of the Trustee or any indenture, agreement, or other
instrument to which the Trustee is a party or by which it is bound; nor
result in the creation or imposition of any lien upon any of its
properties pursuant to terms of any such indenture, agreement, or other
instrument; nor violate any law or any order, rule, or regulation
applicable to the Trustee of any court or of any Federal or state
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Trustee or its properties.
(e) There are no proceedings or investigations pending or, to
the best knowledge of the Trustee, threatened before any court,
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Trustee or its properties
(i) asserting the invalidity of this Agreement, or (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement, or (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Trustee of its
obligations under, or the validity or enforceability of, this Agreement.
(f) In no event shall the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of
the Servicer, or any other party, under this Agreement.
(g) The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Agreement, the
Trust Corpus or the Certificates, it shall not be accountable for the
Trust Depositor's use of the proceeds from the Certificates, and it shall
not be responsible for any statement of the Trust Depositor in the
Agreement or in any document issued in connection with the sale of the
Certificates or in the Certificates other than the Trustee's certificate
of authentication.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. SERVICER NOT TO RESIGN. The Servicer shall not resign
from the obligations and duties hereby imposed on it except upon a determination
that the performance of its duties hereunder is no longer permissible under
applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced by an opinion of counsel for the Servicer to such
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effect delivered to the Trustee. No such resignation shall become effective
until a Replacement Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 7.03.
SECTION 12.02. PROHIBITED TRANSACTIONS WITH RESPECT TO THE TRUST.
Neither the Servicer nor the Trust Depositor shall:
(a) Provide credit to any Certificateholder for the purpose of
enabling such Certificateholder to purchase Certificates;
(b) Purchase any Certificates in an agency or trustee capacity;
or
(c) Except as provided herein, lend any money to the Trust.
SECTION 12.03. MAINTENANCE OF OFFICE OR AGENCY. The Trustee shall
maintain an office or agency in Chicago, Illinois where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee in respect of the Certificates and this Agreement
may be served. On the date hereof the Trustee's office for such purposes is
located at the address set forth in Section 12.09. The Trustee will give prompt
written notice to Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 12.04. TERMINATION. This Agreement shall terminate (after
distribution of all Class A Distributable Amounts and Class B Distributable
Amounts due to Certificateholders pursuant to Sections 8.01 and 8.04) on the
Payment Date on which the Class A Certificate Balance and Class B Certificate
Balance is reduced to zero; PROVIDED, that in no event shall the trust created
hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the
United States to the Court of St. James, living on the date hereof, and
PROVIDED, FURTHER, that the Servicer's and the Trust Depositor's representations
and warranties and the indemnities by the Seller and Servicer shall survive
termination. Upon such termination, the Trustee shall provide each Rating
Agency written notice of such termination. Additionally, upon such termination
any amounts remaining in the Collection Account after distribution of all
amounts payable to the Certificateholders in respect of Class A Distributable
Amounts and Class B Distributable Amounts and payment of all other amounts owed
to the Certificateholders shall be paid to the Seller.
SECTION 12.05. ACTS OF CERTIFICATEHOLDERS. (a) Except as otherwise
specifically provided herein, whenever Certificateholder approval,
authorization, direction, notice, consent, waiver or other action is required
hereunder, such approval, authorization, direction, notice, consent, waiver or
other action shall be deemed to have been given or taken on behalf of, and shall
be binding upon, all Certificateholders if agreed to by Certificateholders with
aggregate Fractional Interests representing 51% or more of the Trust.
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(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
an agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where required, to the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and (subject to Section 11.01)
conclusive in favor of the Trustee, the Servicer, the Trust Depositor and the
Seller if made in the manner provided in this Section 12.05.
(c) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.
(d) The ownership of Certificates shall be proved by the Certificate
Register, absent manifest error.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be done
by the Trustee, the Servicer or the Trust Depositor in reliance thereon, whether
or not notation of such action is made upon such security.
(f) The Trustee may require such additional proof of any matter
referred to in this Section 12.05 as it shall deem necessary.
SECTION 12.06. CALCULATIONS. Except as otherwise provided in this
Agreement, all interest rate and basis point calculations under this Agreement
will be made on the basis of a 360-day year comprised of twelve 30-day months
and will be carried out to at least three decimal places.
SECTION 12.07. ASSIGNMENT OR DELEGATION BY TRUST DEPOSITOR. Except as
specifically authorized hereunder, the Trust Depositor may not convey and assign
or delegate any of its rights or obligations hereunder absent the prior written
consent of 100% of the Class A Certificateholders and the Class B
Certificateholders, and any attempt to do so without such consent shall be void.
SECTION 12.08. AMENDMENT. (a) This Agreement may be amended from time
to time by the Servicer, the Trust Depositor and the Trustee, without the
consent of any of the Certificateholders, to correct manifest error, to cure any
ambiguity, to correct or supplement any provisions herein or therein which may
be inconsistent with any other provisions herein or therein, as the case may be,
or to add any other provisions with respect to matters or questions arising
under this Agreement which shall not be inconsistent with the provisions of this
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Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an
opinion of Counsel for the Trust Depositor, adversely affect the interests of
any Certificateholder.
(b) This Agreement may also be amended from time to time by the
Servicer, the Trust Depositor and the Trustee, with the consent of
Certificateholders with aggregate Fractional Interests representing 66-2/3% or
more of each Class voting as a separate Class, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the
Certificateholders; and any Event of Termination may be waived by the
Certificateholders with aggregate Fractional Interests representing 51% of the
Trust; PROVIDED, HOWEVER, that no such amendment or waiver described above shall
(a) reduce in any manner the amount of, or delay the timing of, collections of
payments on the Contracts or distributions which are required to be made on any
Certificate or (b) reduce the aforesaid percentage required to consent to any
such amendment, without the consent of the holders of all Certificates then
outstanding. Notwithstanding anything to the contrary contained herein, the
Depositor may, from time to time after the date of this Agreement, request each
Rating Agency to approve a formula for determining the Reserve Fund Requisite
Amount that is different from that on the Closing Date and would result in a
decrease in the Reserve Fund Requisite Amount or the manner by which the Reserve
Fund is funded. In the event each Rating Agency delivers a letter to the
Trustee to the effect that the use of any such new formulation will not result
in a qualification, reduction or withdrawal of its then-current rating of the
Class A Certificates and the Class B Certificates, then either the Reserve Fund
Requisite Amount will be determined in accordance with such new formula or the
manner by which the Reserve Fund is funded will be modified.
(c) Promptly after the execution of any amendment or consent pursuant
to this Section 12.08, the Trustee shall furnish written notification of the
substance of such amendment and a copy of such amendment to each
Certificateholder, and to each Rating Agency.
(d) It shall not be necessary for the consent of Certificateholders
under this Section 12.08 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
(e) The Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Trustee's own rights, duties or immunities
under this Agreement or otherwise.
(f) In connection with any amendment pursuant to this Section 12.08,
the Trustee shall be entitled to receive an opinion of counsel to the Servicer
and acceptable to the Trustee to the effect that such amendment is authorized or
permitted by this Agreement.
(g) Upon the execution of any amendment or consent pursuant to this
Section 12.08, this Agreement shall be modified in accordance therewith, and
such amendment or consent shall
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form a part of this Agreement for all purposes, and every holder of
Certificates theretofore or thereafter issued hereunder shall be bound
thereby.
SECTION 12.09. NOTICES. All communications and notices pursuant hereto
to the Servicer, the Trust Depositor, the Servicer, the Trustee, the Seller,
Standard & Poor's, Moody's and the Placement Agent shall be in writing and
delivered or mailed to it at the appropriate following address:
<TABLE>
<CAPTION>
<S> <C>
If to the Servicer: Eaglemark, Inc.
150 South Wacker Drive
Chicago, Illinois 60606
Attention: [ ]
If to the Trust Depositor: Eaglemark Customer Funding
Corporation-[___]
4150 Technology Way
Carson City, Nevada 89706
Attention: President
If to the Trustee: Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust
Administration
If to the Seller: Eaglemark, Inc.
4150 Technology Way
Carson City, Nevada 89706
Attention: [ ]
If to Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
If to Standard & Poor's: Standard & Poor's Ratings Services, a
division of The McGraw Hill Company,
25 Broadway
New York, New York 10004
Attention: Asset Backed Securities
Surveillance
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
If to the Placement Agent [ ]
</TABLE>
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder
shall be in writing and delivered or mailed at the address shown in the
Certificate Register.
SECTION 12.10. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 12.11. HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 12.12. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Illinois.
SECTION 12.13. NO INSOLVENCY PETITION. The Trustee and the Servicer
hereby covenant and agree that, prior to the date which is one year and one day
after the payment in full of the Certificates, they will not institute against,
or join with any other Person in instituting against the Trust Depositor or the
Trust any involuntary insolvency proceedings under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or requesting the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official), or for the substantial liquidation of their
respective affairs. This Section 12.13 shall survive the termination of this
Agreement.
SECTION 12.14. THIRD PARTY BENEFICIARY. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this Article
XII, no other Person shall have any right or obligation hereunder.
SECTION 12.15. NO ADDITIONAL SECURITIES. Notwithstanding anything to
the contrary contained herein, the Trust shall not issue any additional
Certificates or issue any other form of securities. Moreover, except as
provided for herein during the Funding Period or in Section 5.05(d), the Trust
will not purchase, or otherwise obtain any assets after the Closing Date or
reinvest amounts received with respect to the assets in the Trust.
SECTION 12.16. NO ADDITIONAL INDEBTEDNESS BY THE TRUST DEPOSITOR. The
Trust Depositor hereby covenants that it shall not incur any indebtedness other
than indebtedness necessary to meet its obligations under the Transaction
Documents or any other similar documentation relating to any future grantor
trusts in which the Trust Depositor participates.
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<PAGE>
In WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
EAGLEMARK CUSTOMER FUNDING
CORPORATION-[ ], as Trust Depositor
By
--------------------------------------
Name:
Title:
EAGLEMARK, INC.,
as Servicer
By
--------------------------------------
Name:
Title:
HARRIS TRUST AND SAVINGS BANK,
an Illinois banking corporation, not in its
individual capacity but solely as Trustee
By
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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EXHIBIT A-1
CERTIFICATE FOR HARLEY-DAVIDSON MOTORCYCLE CONTRACTS
Harley-Davidson Eaglemark Trust ___
___.% Certificate, Class A
This Class A Certificate does not represent an obligation of or an
interest in Eaglemark Customer Funding Corporation-__, Eaglemark, Inc. or any
affiliate thereof, except to the extent set forth in the Agreement. This Class
A Certificate has not been registered under the Securities Act of 1933 or any
state securities laws and may not be sold, transferred or pledged in the absence
of an effective Registration Statement under such Act and laws or unless the
conditions set forth in Section 9.02 of the Agreement have been complied with.
The principal represented by this Class A Certificate is payable in
installments, as described herein and in the Agreement. Accordingly, the unpaid
Class A Certificate Balance of this Class A Certificate may be less than that
set forth below. Anyone acquiring this Class A Certificate may ascertain the
current unpaid Class A Certificate Balance represented by this certificate by
inquiry of the Trustee.
No. Class A Initial Certificate Principal Balance:$_________
Fractional Interest: ______%
This certifies that ____________________________ is the registered owner of the
undivided Fractional Interest represented by the Class A Initial Certificate
Principal Balance set forth above in Harley-Davidson Eaglemark Trust _____ (the
"TRUST"), which includes among its assets a pool of fixed-rate, simple interest
Harley-Davidson motorcycle conditional sales contracts (including, without
limitation, all security interests and any and all rights to receive payments
which are collected pursuant thereto on or after the Initial Cutoff Date or the
related Subsequent Cutoff Date in respect of Subsequent Contracts as described
below) (the "CONTRACTS") and rights under the Deposit Agreement described
herein. The Trust has been created pursuant to a Pooling and Servicing
Agreement (the "AGREEMENT"), dated as of _______________, by and among Eaglemark
Customer Funding Corporation-__, as trust depositor (the "TRUST DEPOSITOR"),
Eaglemark, Inc., as servicer (in such capacity, the "SERVICER"), and Harris
Trust and Savings Bank, as Trustee of the Trust (in such capacity, the
"TRUSTEE"). This Class A Certificate is one of the Class A Certificates
described in the Agreement and is issued, together with the Class B
Certificates, pursuant and subject to the Agreement. By acceptance of this
Class A Certificate the holder assents to and becomes bound by the Agreement.
The Agreement provides that the holder of a Class A Certificate agrees to report
the income on the Class A Certificate in a manner consistent with the intended
characterization of the Trust as a grantor trust. To the extent not defined
herein, all capitalized terms have the meanings assigned to such terms in the
Agreement and all Section references, unless otherwise specified, are to
Sections of the Agreement.
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<PAGE>
It is contemplated by the Transaction Documents that the proceeds from
the issuance of the Certificates will be used in their entirety to purchase
Contracts, including the Subsequent Contracts. To the extent that proceeds from
the Certificates are intended to purchase Subsequent Contracts, those proceeds
shall be deposited at Closing in the Pre-Funding Account and will be withdrawn
therefrom from time to time during the Funding Period only to purchase
Subsequent Contracts. Any funds remaining in the Pre-Funding Account at the end
of the Funding Period shall be distributed as a Special Distribution of
principal to the Class A Certificateholders in an amount equal to the Class A
Percentage multiplied by the amount on deposit in the Special Distribution
Account. The Pre-Funding Account and the funds therein are not a part of the
Trust but will be held by the Collateral Agent for the benefit of the Trustee
pursuant to the Security Agreement.
The Agreement contemplates, subject to its terms, payment on the
fifteenth day (or if such day is not a Business Day, the next succeeding
Business Day) (each, a "PAYMENT DATE") of each calendar month commencing
_________, so long as the Agreement has not been terminated, by check from funds
drawn from the Collection Account (or in certain instances the Special
Distribution Account) to the registered Class A Certificateholder at the address
appearing on the Certificate Register (or by wire transfer if the Class A
Certificateholder delivers written instructions to the Trustee at least ten days
prior to such Payment Date) as of the last Business Day of the immediately
preceding calendar month (each such month during the term of the Agreement
constituting a "DUE PERIOD"), an amount equal to the Class A Certificateholder's
Fractional Interest of the Class A Principal Distributable Amount and the
Class A Interest Distributable Amount (as well as, in certain instances, the
Fractional Interest of Special Distributions). The final scheduled Payment
Date of this Certificate is_________________, which relates to the month
following the latest maturity date of the Contracts (including any Subsequent
Contracts).
This Class A Certificate does not represent an obligation of or an
interest in the Trust Depositor, the Servicer, the Back-up Servicer or the
Trustee and the Trustee in its individual capacity is not personally liable to
the Class A Certificateholder for any amounts payable under this Class A
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement.
This Class A Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Class A Certificateholder
free of charge upon a written request to the Trustee, at its Corporate Trust
Department, 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606.
"CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date (other than the first Payment Date), the sum of (i) the product of
(A) one-twelfth (or, with respect to the first Payment Date, a fraction, the
numerator of which equals the number of days from and
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including the Closing Date to but excluding the first Payment Date and the
denominator of which equals 360) of the Class A Pass-Through Rate and (B) the
Class A Certificate Balance as of the immediately preceding Payment Date
(after giving effect to distributions of principal made on such immediately
preceding Payment Date) or, in the case of the first Payment Date, the Class
A Initial Certificate Balance plus (ii) the Class A Interest Carryover
Shortfall for such Payment Date. "CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT"
means, with respect to any Payment Date, the sum of (i) the product of (a)
the Class A Percentage and the (b) Monthly Principal for such Payment Date
plus (ii) the Class A Principal Carryover Shortfall for such Payment Date.
"AVAILABLE INTEREST" means, with respect to any Payment Date, the total
(without duplication) of the following amounts received by the Servicer on or
in respect of the Contracts during the related Due Period: (i) all amounts
received in respect of interest on the Contracts (as well as Late Payment
Penalty Fees and Extension Fees), (ii) the interest component of all Net
Liquidation Proceeds, (iii) the interest component of the aggregate of the
Repurchase Prices for Contracts repurchased by the Seller pursuant to Section
8.06, (iv) all Advances made by the Servicer pursuant to Section 8.03, (v)
the interest component of all amounts paid by the Seller in connection with
an optional repurchase of the Contracts pursuant to Section 8.08, (vi) all
amounts received in respect of Carrying Charges transferred from the Interest
Reserve Account pursuant to Section 8.03, and (vii) all amounts received in
respect of interest, dividends, gains, income and earnings on investment of
funds in the Trust Accounts as contemplated in the last sentence of Section
5.05(d). "AVAILABLE PRINCIPAL" means, with respect to any Payment Date, the
total (without duplication) of the following amounts received by the Servicer
on or in respect of the Contracts during the related Due Period: (i) all
amounts received in respect of principal on the Contracts, (ii) the principal
component of all Net Liquidation Proceeds, (iii) the principal component of
the aggregate of the Repurchase Prices for Contracts repurchased by the
Seller pursuant to Section 8.06, and (iv) the principal component of all
amounts paid by the Seller in connection with an optional repurchase of the
Contracts pursuant to Section 8.08. "CLASS A INTEREST CARRYOVER SHORTFALL"
means, with respect to any Payment Date, (i) the excess of the Class A
Interest Distributable Amount for the preceding Payment Date over the amount
of interest that was actually distributed to Class A Certificateholders on
such preceding Payment Date, plus (ii) 30 days of interest on the amount
specified in clause (i), to the extent permitted by law, at the Class A
Pass-Through Rate. "CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, with
respect to any Payment Date, (i) the excess of the Class A Principal
Distributable Amount over (ii) the amount of principal that was actually
distributed to Class A Certificateholders on such preceding Payment Date.
"PRINCIPAL BALANCE" means (a) with respect to any Contract as of any date, an
amount equal to the unpaid principal balance of such Contract as of the
opening of business on the Initial Cutoff Date or related Subsequent Cutoff
Date, as applicable, reduced by the sum of (x) all payments received by the
Servicer as of such date allocable to principal and (y) any Cram Down Loss in
respect of such Contract; PROVIDED, HOWEVER, that (i) if (x) a Contract is
repurchased by the Seller pursuant to Section 5.01 of the Transfer and Sale
Agreement and Section 8.06 because of a breach of representation or warranty
or if (y) the Seller gives notice of its intent to purchase the Contracts in
connection with an optional termination of the Trust pursuant to Section 5.02
of the Transfer and Sale Agreement and Section 8.08, in each case the
Principal Balance of such Contract or Contracts shall be deemed as of the
related Determination
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Date to be zero for the Due Period in which such event occurs and for each
Due Period thereafter, (ii) from and after the third Due Period succeeding
the final Due Period in which the Obligor is required to make the final
scheduled payment on a Contract, the Principal Balance, if any, of such
Contract shall be deemed to be zero, and (iii) from and after the Due Period
in which a Contract becomes a Liquidated Contract, the Principal Balance of
such Contract shall be deemed to be zero; and (b) where the context requires,
the aggregate of the Principal Balances described in clause (a) for all such
Contracts. "MONTHLY PRINCIPAL" means, as to any Payment Date, the following
amount calculated as of the related Determination Date: the difference
between (i) the sum of (A) the Principal Balance of the Contracts as of the
first day of the Due Period preceding the Due Period in which such Payment
Date occurs (or, in the case of the first Payment Date, the Principal Balance
of the Contracts as of the Initial Cutoff Date), plus (B) the Pre-Funded
Amount on such date (or, in the case of the first Payment Date, the
Pre-Funded Amount on the Closing Date) and (ii) the sum of (A) the
Principal Balance of the Contracts as of the first day of the Due Period in
which such Payment Date occurs, plus (B) the Pre-Funded Amount on such day,
plus (C) the amount of any Special Distribution occurring from the day
referred to in clause (i)(A) above to the day referred to in clause (ii)(A)
above; provided, that on the Final Scheduled Payment Date, Monthly Principal
shall equal the aggregate of the Class A Certificate Balance and the Class B
Certificate Balance. For purposes of determining the amount in clause
(ii)(C) above as to any particular Payment Date and with respect to the Due
Period preceding such Payment Date, if the Funding Period ends during such
Due Period and Liquidated Damages (as defined in the Security Agreement) are
consequently paid from the Pre-Funding Account during such Due Period but
will not be distributed as a Special Distribution until the Payment Date
occurring in the following Due Period (i.e., the particular Payment Date
referred to above), then the amount calculated in clause (ii)(C) for such
preceding Due Period shall be deemed to include such Special Distribution in
such amount (although paid as a Special Distribution on the Payment Date
occurring during the following Due Period) will not be included in the next
calculation of clause (ii)(C) to be made with respect to the following Due
Period.
On each Payment Date, the Trustee will cause to be distributed from
Available Funds, Available Interest and Available Principal for such Payment
Date in the Collection Account to the Certificateholders the following amounts
(after the payment of the Reimbursement Amount, the Servicing Fee, the Trustee's
Fee and the Back-up Servicer Fee) in the following priorities (which includes
the benefit of (a) the subordination (as described below) of the Class B
Percentage of Available Interest and Available Principal and (b) the Reserve
Fund) (l) to the Class A Certificateholders of record, from Available Interest,
an amount equal to the Class A Interest Distributable Amount for such Payment
Date and, if such Available Interest is insufficient, the Class A
Certificateholders will receive such shortfall first, from the Class B
Percentage of Available Principal and second, if such amounts are still
insufficient, from monies on deposit in the Reserve Fund; (2) to the Class B
Certificateholders of record, from Available Interest, an amount equal to the
Class B Interest Distributable Amount for such Payment Date and, if such
Available Interest is insufficient, the Class B Certificateholders will receive
such shortfall from monies on deposit in the Reserve Fund; (3) to the Class A
Certificateholders of
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record, from Available Principal, an amount equal to the Class A Principal
Distributable Amount for such Payment Date and, if such Available Principal
is insufficient, the Class A Certificateholders will receive such shortfall
first, from Available Interest, and second, if such amounts are still
insufficient, from monies on deposit in the Reserve Fund; and (4) to the
Class B Certificateholders of record, from Available Principal, an amount
equal to the Class B Principal Distributable Amount for such Payment Date
and, if such Available Principal is insufficient, the Class B
Certificateholders will receive such shortfall first, from Available
Interest, and second, if such amounts are still insufficient, from monies on
deposit in the Reserve Fund. Any Available Funds remaining in the Collection
Account after such distributions will be paid to the Trust Depositor subject
to the conditions of the Reserve Fund Agreement.
The Seller will repurchase a Contract by depositing the Repurchase Price
for such Contract into the Collection Account no later than two Business Days
prior to the Determination Date which is more than ninety days after the Trust
Depositor becomes aware, or should have become aware or receives written notice
from the Trustee, of breach of a warranty of the Seller set forth in Article III
of the Transfer and Sale Agreement that materially adversely affects the Trust's
interest in such Contract, which breach has not been cured (the Seller's
obligation to repurchase such Contract constituting the Certificateholders' sole
remedy with respect to such a breach of a representation and warranty set forth
in the Transfer and Sale Agreement).
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement at any time by the Servicer, the Back-up Servicer, the Trust
Depositor, and the Trustee with the consent of the holders of Class A
Certificates evidencing Fractional Interests representing 66-2/3% or more of
such Class voting as a separate Class and holders of Class B Certificates
evidencing Fractional Interests representing 66-2/3% or more of the Class B
Certificates voting as a separate Class. Any such consent by the holder of
this Class A Certificate shall be conclusive and binding on such holder and upon
all future holders of this Class A Certificate and of any Class A Certificate
issued upon the transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent is made upon this Class A Certificate. The
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of any of the Certificateholders.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Class A Certificate is registrable in the
Certificate Register of the Certificate Registrar upon surrender of this Class A
Certificate for registration of transfer at the office or agency maintained by
the Trustee in Chicago, Illinois as previously described, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder thereof or his or her attorney
duly authorized in writing, and upon receipt by the Trustee of either (i)
evidence of the effectiveness or continued effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to this
Class A Certificate, and registration under the applicable state laws, or (ii) a
certificate in writing of the transferee satisfactory to the Trust Depositor
regarding the facts surrounding such disposition;
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<PAGE>
PROVIDED, HOWEVER, at the election of the Trust Depositor, the Trust
Depositor may, in addition, if such certification is not substantially in the
form of Exhibit H-2 to the Agreement, require the delivery of an opinion of
counsel satisfactory to the Trustee (which shall not be at the expense of the
Trust Depositor or the Trustee) that no such registration is required, and
thereupon one or more new Class A Certificates evidencing the same aggregate
Fractional Interest will be issued to the designated transferee or
transferees.
As provided in the Agreement and subject to certain limitations therein
set forth, Class A Certificates are exchangeable for new Class A Certificates of
authorized denominations evidencing the same aggregate Fractional Interest as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Certificate Registrar
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The Trust Depositor, the Servicer, the Back-up Servicer, the Trustee, the
Paying Agent and the Certificate Registrar and any agent of the Trust Depositor,
the Servicer, the Back-up Servicer, the Trustee, the Paying Agent or the
Certificate Registrar may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trust
Depositor, the Servicer, the Back-up Servicer, the Trustee, the Paying Agent,
the Certificate Registrar nor any such agent shall be affected by any notice to
the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate (after distribution of all Class A
Distributable Amounts and Class B Distributable Amounts) on the Payment Date on
which the Class A Certificate Balance and Class B Certificate Balance is reduced
to zero; PROVIDED, that in no event shall the trust created thereby continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof.
-71-
<PAGE>
IN WITNESS WHEREOF, Harley-Davidson Eaglemark Trust _____ has caused this
Class A Certificate to be duly executed by the manual signature of a duly
authorized officer of the Trustee or of a duly appointed Authenticating Agent.
HARLEY-DAVIDSON EAGLEMARK TRUST ______
DATED:
------------ HARRIS TRUST AND SAVINGS BANK, NOT IN ITS
INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE
BY
--------------------------------
AUTHORIZED OFFICER
-72-
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_____________________________________________ the within ___% Certificate, Class
A for Harley-Davidson Motorcycle Contracts, Eaglemark Trust _____, and does
hereby irrevocably constitute and appoint _____________________________________
Attorney to transfer the said certificate on the Certificate Register maintained
by the Trustee, with full power of substitution in the premises.
--------------------------------
Signature
-73-
<PAGE>
EXHIBIT A-2
CERTIFICATE FOR HARLEY-DAVIDSON MOTORCYCLE CONTRACTS
Harley-Davidson Eaglemark Trust ____
_____% Certificate, Class B
This Class B Certificate does not represent an obligation of or an
interest in Eaglemark Customer Funding Corporation-___, Eaglemark, Inc. or any
affiliate thereof, except to the extent set forth in the Agreement. This Class
B Certificate has not been registered under the Securities Act of 1933 or any
state securities laws and may not be sold, transferred or pledged in the absence
of an effective Registration Statement under such Act and laws or unless the
conditions set forth in Section 9.02 of the Agreement have been complied with.
Distributions on this Class B Certificate are subordinate to distributions on
the Class A Certificates as described in the Agreement.
The principal represented by this Class B Certificate is payable in
installments, as described herein and in the Agreement. Accordingly, the unpaid
Class B Certificate Balance of this Class B Certificate may be less than that
set forth below. Anyone acquiring this Class B Certificate may ascertain the
current unpaid Class B Certificate Balance represented by this certificate by
inquiry of the Trustee.
No. Class B Initial Certificate Principal Balance:$________
Fractional Interest: _______%
This certifies that ______________________________ is the registered owner of
the undivided Fractional Interest represented by the Class B Initial Certificate
Principal Balance set forth above in Eaglemark Trust _____ (the "TRUST"), which
includes among its assets a pool of fixed-rate, simple interest Harley-Davidson
motorcycle conditional sales contracts (including, without limitation, all
security interests and any and all rights to receive payments which are
collected pursuant thereto on or after the Initial Cutoff Date or the related
Subsequent Cutoff Date in respect of Subsequent Contracts as described below)
(the "CONTRACTS") and rights under the Deposit Agreement described herein. The
Trust has been created pursuant to a Pooling and Servicing Agreement (the
"AGREEMENT"), dated as of ________, by and among Eaglemark Customer Funding
Corporation-___, as trust depositor (the "TRUST DEPOSITOR"), Eaglemark, Inc.,
as servicer (in such capacity, the "SERVICER"), and Harris Trust and Savings
Bank, as Trustee of the Trust (the "TRUSTEE"). This Class B Certificate is one
of the Class B Certificates described in the Agreement and is issued, together
with the Class A Certificates, pursuant and subject to the Agreement. By
acceptance of this Class B Certificate the holder assents to and becomes bound
by the Agreement. The Agreement provides that the holder of a Class B
Certificate agrees to report the income on the Class B Certificate in a manner
consistent with the intended
-1-
<PAGE>
characterization of the Trust as a grantor trust. To the extent not defined
herein, all capitalized terms have the meanings assigned to such terms in the
Agreement and all Section references, unless otherwise specified, are to
Sections of the Agreement.
It is contemplated by the Transaction Documents that the proceeds from
the issuance of the Certificates will be used in their entirety to purchase
Contracts, including the Subsequent Contracts. To the extent that proceeds from
the Certificates are intended to purchase Subsequent Contracts, those proceeds
shall be deposited at Closing in the Pre-Funding Account and will be withdrawn
therefrom from time to time during the Funding Period only to purchase
Subsequent Contracts. Any funds remaining in the Pre-Funding Account at the end
of the Funding Period shall be distributed as a Special Distribution of the
Class B percentage of principal to the Class B Certificateholders in an amount
equal to the Class B Percentage multiplied by the amount on deposit in the
Special Distribution Account. The Pre-Funding Account and the funds therein are
not a part of the Trust but will be held by the Collateral Agent for the benefit
of the Trustee pursuant to the Security Agreement.
The Agreement contemplates, subject to its terms, payment on the
fifteenth day (or if such day is not a Business Day, the next succeeding
Business Day) (each, a "PAYMENT DATE") of each calendar month commencing
__________, so long as the Agreement has not been terminated, by check from
funds drawn from the Collection Account (or in certain instances the Special
Distribution Account) to the registered Class B Certificateholder at the address
appearing on the Certificate Register (or by wire transfer, if the Class B
Certificateholder delivers written instructions to the Trustee at least ten days
prior to such Payment Date) as of the last Business Day of the immediately
preceding calendar month (each such month during the term of the Agreement
constituting a "DUE PERIOD"), an amount equal to the Class B Certificateholder's
Fractional Interest of the Class B Principal Distributable Amount and the Class
B Interest Distributable Amount (as well as, in certain instances, the
Fractional Interest of Special Distributions). The final scheduled Payment
Date of this Certificate is ____________, which relates to the month following
the latest maturity date of the Contracts (including any Subsequent Contracts).
This Class B Certificate does not represent an obligation of or an
interest in the Trust Depositor, the Servicer, the Back-up Servicer or the
Trustee and the Trustee in its individual capacity is not personally liable to
the Class B Certificateholder for any amounts payable under this Class B
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement.
This Class B Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Class B Certificateholder
free of charge upon a written request to the Trustee, at its Corporate Trust
Department, 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606.
-2-
<PAGE>
"CLASS B INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date (other than the first Payment Date), the sum of (i) the product of
(A) one-twelfth (or, with respect to the first Payment Date, a fraction, the
numerator of which equals the number of days from and including the Closing Date
to but excluding the first Payment Date and the denominator of which equals 360)
of the Class B Pass-Through Rate and (B) the Class B Certificate Balance as of
the immediately preceding Payment Date (after giving effect to distributions of
principal made on such immediately preceding Payment Date) or, in the case of
the first Payment Date, the Class B Initial Certificate Balance plus (ii) the
Class B Interest Carryover Shortfall for such Payment Date. "CLASS B PRINCIPAL
DISTRIBUTABLE AMOUNT" means, with respect to any Payment Date, the sum of (i)
the product of (a) the Class B Percentage and (b) the Monthly Principal for such
Payment Date plus (ii) the Class B Principal Carryover Shortfall for such
Payment Date. "AVAILABLE INTEREST" means, with respect to any Payment Date,
the total (without duplication) of the following amounts received by the
Servicer on or in respect of the Contracts during the related Due Period:
(i) all amounts received in respect of interest on the Contracts (as well as
Late Payment Penalty Fees and Extension Fees), (ii) the interest component of
all Net Liquidation Proceeds, (iii) the interest component of the aggregate of
the Repurchase Prices for Contracts repurchased by the Seller pursuant to
Section 8.06, (iv) all Advances made by the Servicer pursuant to Section 8.03,
(v) the interest component of all amounts paid by the Seller in connection with
an optional repurchase of the Contracts pursuant to Section 8.08, (vi) all
amounts received in respect of Carrying Charges transferred from the Interest
Reserve Account pursuant to Section 8.03, and (vii) all amounts received in
respect of interest, dividends, gains, income and earnings on investment of
funds in the Trust Accounts as contemplated in the last sentence of Section
5.05(d). "AVAILABLE PRINCIPAL" means, with respect to any Payment Date, the
total (without duplication) of the following amounts received by the Servicer on
or in respect of the Contracts during the related Due Period: (i) all amounts
received in respect of principal on the Contracts, (ii) the principal component
of all Net Liquidation Proceeds, (iii) the principal component of the aggregate
of the Repurchase Prices for Contracts repurchased by the Seller pursuant to
Section 8.06, and (iv) the principal component of all amounts paid by the Seller
in connection with an optional repurchase of the Contracts pursuant to Section
8.08. "CLASS B INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date, (i) the excess of the Class B Interest Distributable Amount for the
preceding Payment Date over the amount of interest that was actually distributed
to Class B Certificateholders on such preceding Payment Date, plus (ii) 30 days
of interest on the amount specified in clause (i), to the extent permitted by
law, at the Class B Pass-Through Rate. "CLASS B PRINCIPAL CARRYOVER SHORTFALL"
means, with respect to any Payment Date, (i) the excess of the Class B Principal
Distributable Amount over (ii) the amount of principal that was actually
distributed to Class B Certificateholders on such preceding Payment Date.
"PRINCIPAL BALANCE" means (a) with respect to any Contract as of any date, an
amount equal to the unpaid principal balance of such Contract as of the opening
of business on the Initial Cutoff Date or related Subsequent Cutoff Date, as
applicable, reduced by the sum of (x) all payments received by the Servicer as
of such date allocable to principal and (y) any Cram Down Loss in respect of
such Contract; PROVIDED, HOWEVER, that (i) if (x) a Contract is repurchased by
the Seller pursuant to Section 5.01 of the Transfer and Sale Agreement and
-3-
<PAGE>
Section 8.06 because of a breach of representation or warranty or if (y) the
Seller gives notice of its intent to purchase the Contracts in connection with
an optional termination of the Trust pursuant to Section 5.02 of the Transfer
and Sale Agreement and Section 8.08, in each case the Principal Balance of such
Contract or Contracts shall be deemed as of the related Determination Date to be
zero for the Due Period in which such event occurs and for each Due Period
thereafter, (ii) from and after the third Due Period succeeding the final Due
Period in which the Obligor is required to make the final scheduled payment on a
Contract, the Principal Balance, if any, of such Contract shall be deemed to be
zero, and (iii) from and after the Due Period in which a Contract becomes a
Liquidated Contract, the Principal Balance of such Contract shall be deemed to
be zero; and (b) where the context requires, the aggregate of the Principal
Balances described in clause (a) for all such Contracts. "MONTHLY PRINCIPAL"
means, as to any Payment Date, the following amount calculated as of the related
Determination Date: the difference between (i) the sum of (A) the Principal
Balance of the Contracts as of the first day of the Due Period preceding the Due
Period in which such Payment Date occurs (or, in the case of the first Payment
Date, the Principal Balance of the Contracts as of the Initial Cutoff Date),
plus (B) the Pre-Funded Amount on such date (or, in the case of the first
Payment Date, the Pre-Funded Amount on the Closing Date) and (ii) the sum of
(A) the Principal Balance of the Contracts as of the first day of the Due
Period in which such Payment Date occurs, plus (B) the Pre-Funded Amount on such
day, plus (C) the amount of any Special Distribution occurring from the day
referred to in clause (i)(A) above to the day referred to in clause (ii)(A)
above; provided, that on the Final Scheduled Payment Date, Monthly Principal
shall equal the aggregate of the Class A Certificate Balance and the Class B
Certificate Balance. For purposes of determining the amount in clause (ii)(C)
above as to any particular Payment Date and with respect to the Due Period
preceding such Payment Date, if the Funding Period ends during such Due Period
and Liquidated Damages (as defined in the Security Agreement) are consequently
paid from the Pre-Funding Account during such Due Period but will not be
distributed as a Special Distribution until the Payment Date occurring in the
following Due Period (i.e., the particular Payment Date referred to above), then
the amount calculated in clause (ii)(C) for such preceding Due Period shall be
deemed to include such Special Distribution in such amount (although paid as a
Special Distribution on the Payment Date occurring during the following Due
Period) will not be included in the next calculation of clause (ii)(C) to be
made with respect to the following Due Period
On each Payment Date, the Trustee will cause to be distributed from
Available Funds, Available Interest and Available Principal for such Payment
Date in the Collection Account to the Certificateholders the following amounts
(after the payment of the Reimbursement Amount, the Servicing Fee, the Trustee's
Fee and the Back-up Servicer Fee) in the following priorities (subject to the
subordination of the Class B Certificates as described below but including the
benefit of the Reserve Fund) (l) to the Class A Certificateholders of record,
from Available Interest, an amount equal to the Class A Interest Distributable
Amount for such Payment Date and, if such Available Interest is insufficient,
the Class A Certificateholders will receive such shortfall first, from the Class
B Percentage of Available Principal and second, if such amounts are still
insufficient, from monies on deposit in the Reserve Fund; (2) to the Class B
-4-
<PAGE>
Certificateholders of record, from Available Interest, an amount equal to the
Class B Interest Distributable Amount for such Payment Date and, if such
Available Interest is insufficient, the Class B Certificateholders will receive
such shortfall from monies on deposit in the Reserve Fund; (3) to the Class A
Certificateholders of record, from Available Principal, an amount equal to the
Class A Principal Distributable Amount for such Payment Date and, if such
Available Principal is insufficient, the Class A Certificateholders will receive
such shortfall first, from Available Interest, and second, if such amounts are
still insufficient, from monies on deposit in the Reserve Fund; and (4) to the
Class B Certificateholders of record, from Available Principal, an amount equal
to the Class B Principal Distributable Amount for such Payment Date and, if such
Available Principal is insufficient, the Class B Certificateholders will receive
such shortfall first, from Available Interest, and second, if such amounts are
still insufficient, from monies on deposit in the Reserve Fund. Any Available
Funds remaining in the Collection Account after such distributions will be paid
to the Trust Depositor subject to the conditions of the Reserve Fund Agreement.
The Seller will repurchase a Contract by depositing the Repurchase Price
for such Contract into the Collection Account no later than two Business Days
prior to the Determination Date which is more than ninety days after the Trust
Depositor becomes aware, or should have become aware or receives written notice
from the Trustee, of breach of a warranty of the Seller set forth in Article III
of the Transfer and Sale Agreement that materially adversely affects the Trust's
interest in such Contract, which breach has not been cured (the Seller's
obligation to repurchase such Contract constituting the Certificateholders' sole
remedy with respect to such a breach of a representation and warranty set forth
in the Transfer and Sale Agreement).
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights of the Certificateholders
under the Agreement at any time by the Servicer, the Back-up Servicer, the Trust
Depositor and the Trustee with the consent of the holders of Class B
Certificates evidencing Fractional Interests representing 66-2/3% or more of
such Class voting as a separate Class and holders of Class A Certificates
evidencing Fractional Interests representing 66-2/3% or more of the Class A
Certificates voting as a separate Class. Any such consent by the holder of this
Class B Certificate shall be conclusive and binding on such holder and upon all
future holders of this Class B Certificate and of any Class B Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon this Class B Certificate. The Agreement
also permits the amendment thereof, in certain limited circumstances, without
the consent of any of the Certificateholders.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Class B Certificate is registrable in the
Certificate Register of the Certificate Registrar upon surrender of this Class B
Certificate for registration of transfer at the office or agency maintained by
the Trustee in Chicago, Illinois as previously described, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder thereof or his or her attorney
duly authorized in writing, and upon receipt
-5-
<PAGE>
by the Trustee of either (i) evidence of the effectiveness or continued
effectiveness of a registration statement under the Securities Act of 1933,
as amended, with respect to this Class B Certificate, and registration under
the applicable state laws, or (ii) a certificate in writing of the transferee
satisfactory to the Trust Depositor regarding the facts surrounding such
disposition; PROVIDED, HOWEVER, at the election of the Trust Depositor, the
Trust Depositor may, in addition, if such certification is not substantially
in the form of Exhibit H-2 to the Agreement, require the delivery of an
opinion of counsel satisfactory to the Trustee (which shall not be at the
expense of the Trust Depositor or the Trustee) that no such registration is
required, and thereupon one or more new Class B Certificates evidencing the
same aggregate Fractional Interest will be issued to the designated
transferee or transferees.
As provided in the Agreement and subject to certain limitations therein
set forth, Class B Certificates are exchangeable for new Class B Certificates of
authorized denominations evidencing the same aggregate Fractional Interest as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Certificate Registrar
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The Trust Depositor, the Servicer, the Back-up Servicer, the Trustee, the
Paying Agent and the Certificate Registrar and any agent of the Trust Depositor,
the Servicer, the Back-up Servicer, the Trustee, the Paying Agent or the
Certificate Registrar may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trust
Depositor, the Servicer, the Back-up Servicer, the Trustee, the Paying Agent,
the Certificate Registrar nor any such agent shall be affected by any notice to
the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate (after distribution of all Class A
Distributable Amounts and Class B Distributable Amounts on the Payment Date on
which the Class A Certificate Balance and Class B Certificate Balance is reduced
to zero; PROVIDED, that in no event shall the trust created thereby continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James, living on the date hereof.
-6-
<PAGE>
IN WITNESS WHEREOF, Harley-Davidson Eaglemark Trust _____ has caused this Class
B Certificate to be duly executed by the manual signature of a duly authorized
officer of the Trustee or of a duly appointed Authenticating Agent.
HARLEY-DAVIDSON EAGLEMARK TRUST _________
DATED:
---------- HARRIS TRUST AND SAVINGS BANK, NOT IN ITS
INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE
BY
--------------------------------
AUTHORIZED OFFICER
-7-
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_____________________________________________ the within ___% Certificate, Class
B for Harley-Davidson Motorcycle Contracts, Harley-Davidson Eaglemark Trust
_____, and does hereby irrevocably constitute and appoint
_____________________________________ Attorney to transfer the said certificate
on the Certificate Register maintained by the Trustee, with full power of
substitution in the premises.
--------------------------------
Signature
-8-
<PAGE>
EXHIBIT 4.3
===============================================================================
FORM OF
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ],
as Issuer,
and
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely in its capacity
as Indenture Trustee
___________________________________
INDENTURE
Dated as of [ ]
___________________________________
$[ ] [ ]% Harley-Davidson Motorcycle Contract Backed Notes,
Class A-1
$[ ] [ ]% Harley-Davidson Motorcycle Contract Backed Notes,
Class A-2
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.10
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08; 6.11; 11.04
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.13
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.13
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.01; 7.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.02
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.04
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.04
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.04
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.03
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.06
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . 2.02; 6.02; 11.01
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.05
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.12; 6.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.14
316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.02
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.08
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.03; 5.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.03
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.18
</TABLE>
_______________________
* N.A. means Not Applicable
* This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. . . . 7
SECTION 1.03. RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . 7
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY . . . . . . . . . 9
SECTION 2.03. TEMPORARY NOTES. . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND
EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES . . . . . . .11
SECTION 2.06. PERSONS DEEMED OWNER . . . . . . . . . . . . . . . . . .11
SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED
INTEREST . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 2.08. CANCELLATION . . . . . . . . . . . . . . . . . . . . . .12
SECTION 2.09. BOOK-ENTRY NOTES.. . . . . . . . . . . . . . . . . . . .12
SECTION 2.10. NOTICES TO CLEARING AGENCY . . . . . . . . . . . . . . .13
SECTION 2.11. DEFINITIVE NOTES.. . . . . . . . . . . . . . . . . . . .13
SECTION 2.12. RELEASE OF COLLATERAL. . . . . . . . . . . . . . . . . .13
SECTION 2.13. TAX TREATMENT. . . . . . . . . . . . . . . . . . . . . .13
ARTICLE THREE
COVENANTS
SECTION 3.01. PAYMENT OF PRINCIPAL AND INTEREST. . . . . . . . . . . .14
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . .14
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST . . . . . . . . .14
SECTION 3.04. EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 3.05. PROTECTION OF COLLATERAL . . . . . . . . . . . . . . . .15
SECTION 3.06. OPINIONS AS TO COLLATERAL. . . . . . . . . . . . . . . .16
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . .16
SECTION 3.08. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . .17
SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. . . . . . . . . . . .17
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN
TERMS. . . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 3.11. SUCCESSOR OR TRANSFEREE. . . . . . . . . . . . . . . . .19
SECTION 3.12. NO OTHER BUSINESS. . . . . . . . . . . . . . . . . . . .19
SECTION 3.13. NO BORROWING . . . . . . . . . . . . . . . . . . . . . .19
SECTION 3.14. SERVICER'S OBLIGATIONS . . . . . . . . . . . . . . . . .19
SECTION 3.15. GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES . . . .19
SECTION 3.16. CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . . .20
SECTION 3.17. RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . .20
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. . . . . . . . . . . . . . .20
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS . . . . . . . . . . . . . .20
SECTION 3.20. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . .20
SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND
TRUST AGREEMENT. . . . . . . . . . . . . . . . . . . .20
SECTION 3.22. REMOVAL OF ADMINISTRATOR . . . . . . . . . . . . . . . .20
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. . . . . . . . .21
SECTION 4.02. APPLICATION OF TRUST MONEY . . . . . . . . . . . . . . .21
SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT . . . . . . . .22
SECTION 4.04. RELEASE OF COLLATERAL. . . . . . . . . . . . . . . . . .22
ARTICLE FIVE
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . .23
SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT . . . . . . . . . . . . . .23
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY INDENTURE TRUSTEE; AUTHORITY
OF INDENTURE TRUSTEE.. . . . . . . . . . . . . . . . .24
SECTION 5.04. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 5.05. OPTIONAL PRESERVATION OF THE CONTRACTS . . . . . . . . .26
SECTION 5.06. PRIORITIES.. . . . . . . . . . . . . . . . . . . . . . .26
SECTION 5.07. LIMITATION OF SUITS. . . . . . . . . . . . . . . . . . .27
SECTION 5.08. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE
PRINCIPAL AND INTEREST . . . . . . . . . . . . . . . .27
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES . . . . . . . . . . .27
SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE . . . . . . . . . . . . .28
SECTION 5.11. DELAY OR OMISSION NOT A WAIVER . . . . . . . . . . . . .28
SECTION 5.12. CONTROL BY NOTEHOLDERS . . . . . . . . . . . . . . . . .28
SECTION 5.13. WAIVER OF PAST DEFAULTS. . . . . . . . . . . . . . . . .28
SECTION 5.14. UNDERTAKING FOR COSTS. . . . . . . . . . . . . . . . . .28
SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS . . . . . . . . . . . .29
SECTION 5.16. ACTION ON NOTES. . . . . . . . . . . . . . . . . . . . .29
SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.. . .29
ARTICLE SIX
THE INDENTURE TRUSTEE
SECTION 6.01. DUTIES OF INDENTURE TRUSTEE. . . . . . . . . . . . . . .30
SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE. . . . . . . . . . . . . . .31
SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE . . . . . . . . .31
SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER . . . . . . . . . . . . .32
SECTION 6.05. NOTICE OF DEFAULTS . . . . . . . . . . . . . . . . . . .32
SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS. . . . . . . . .32
SECTION 6.07. COMPENSATION AND INDEMNITY . . . . . . . . . . . . . . .32
SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE . . . . . . . . . . . .32
SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. . . . . . . . . .33
SECTION 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE
INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . .33
SECTION 6.11. ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . .34
SECTION 6.12. PENNSYLVANIA MOTOR VEHICLE SALES FINANCE ACT
LICENSES . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER . . . .35
ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND
ADDRESSES OF NOTEHOLDERS . . . . . . . . . . . . . . .36
SECTION 7.02. PRESERVATION OF INFORMATION: COMMUNICATION TO
NOTEHOLDERS. . . . . . . . . . . . . . . . . . . . . .36
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<PAGE>
SECTION 7.03. REPORTS BY ISSUER. . . . . . . . . . . . . . . . . . . .36
SECTION 7.04. REPORTS BY INDENTURE TRUSTEE.. . . . . . . . . . . . . .36
ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. COLLECTION OF MONEY. . . . . . . . . . . . . . . . . . .38
SECTION 8.02. TRUST ACCOUNTS.. . . . . . . . . . . . . . . . . . . . .38
SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS. . . . . . . . . .39
SECTION 8.04. RELEASE OF COLLATERAL. . . . . . . . . . . . . . . . . .39
SECTION 8.05. OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . .39
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
NOTEHOLDERS. . . . . . . . . . . . . . . . . . . . . .41
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF
NOTEHOLDERS. . . . . . . . . . . . . . . . . . . . . .42
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES . . . . . . . . . .43
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE . . . . . . . . . . . .43
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. . . . . . . . . . .43
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. . . . . .43
ARTICLE TEN
REDEMPTION OF NOTES
SECTION 10.01. REDEMPTION . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 10.02. FORM OF REDEMPTION NOTICE. . . . . . . . . . . . . . . .44
SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE . . . . . . . . . . . .45
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. . . . . . . .46
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE . . . .47
SECTION 11.03. ACTS OF NOTEHOLDERS . . . . . . . . . . . . . . . . . .47
SECTION 11.04. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER . . . . . . . . . . . . .49
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS . . . . . . . .50
SECTION 11.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS . . . . . . . .50
SECTION 11.08. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . .50
SECTION 11.09. SEPARABILITY . . . . . . . . . . . . . . . . . . . . . .50
SECTION 11.10. BENEFITS OF INDENTURE. . . . . . . . . . . . . . . . . .50
SECTION 11.11. LEGAL HOLIDAYS . . . . . . . . . . . . . . . . . . . . .50
SECTION 11.12. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . .50
SECTION 11.13. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . .50
SECTION 11.14. RECORDING OF INDENTURE . . . . . . . . . . . . . . . . .50
SECTION 11.15. TRUST OBLIGATION . . . . . . . . . . . . . . . . . . . .51
SECTION 11.16. NO PETITION. . . . . . . . . . . . . . . . . . . . . . .51
SECTION 11.17. INSPECTION . . . . . . . . . . . . . . . . . . . . . . .51
SECTION 11.18. CONFLICT WITH TRUST INDENTURE ACT. . . . . . . . . . . .51
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EXHIBITS
PAGE
Exhibit A - Form of Sale and Servicing Agreement . . . . . . . . . A-1
Exhibit B - Form of Class A-1 Note . . . . . . . . . . . . . . . . B-1
Exhibit C - Form of Class A-2 Note . . . . . . . . . . . . . . . . C-1
Exhibit D - Form of Note Assignment. . . . . . . . . . . . . . . . D-1
Exhibit E - Form of Note Depository Agreement. . . . . . . . . . . E-1
</TABLE>
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Indenture, dated as of [ ] (this "INDENTURE"), between
Harley-Davidson Eaglemark Motorcycle Trust [ ], a Delaware business trust
(the "ISSUER") and Harris Trust and Savings Bank, in its capacity as indenture
trustee (the "INDENTURE TRUSTEE") and not in its individual capacity.
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Issuer's [ ]%
Harley-Davidson Motorcycle Contract Backed Notes, Class A-1 (the "CLASS A-1
NOTES") and [ ]% Harley-Davidson Motorcycle Contract Backed Notes, Class
A-2 (the "CLASS A-2 NOTES" and, together with the Class A-1 Notes, the
"NOTES"):
GRANTING CLAUSE
The Issuer hereby grants, transfers, assigns and otherwise conveys to
the Indenture Trustee on the Closing Date, on behalf of and for the benefit
of the Holders of the Notes, without recourse, all of the Issuer's right,
title and interest (exclusive of the amount, if any, allocable to any
rebatable insurance premium financed by any Contract) in, to and under: (i)
the Initial Contracts and Subsequent Contracts secured by the Motorcycles
(which Contracts shall be listed in the List of Contracts and Subsequent List
of Contracts); (ii) certain monies due under the Initial Contracts and
Subsequent Contracts on and after the Initial Cut-Off Date and Subsequent
Cut-Off Date, respectively, including, without limitation, all payments of
principal and interest with respect to any Motorcycles to which a Contract
relates received on or after the Initial Cut-Off Date or Subsequent Cut-Off
Date and all other proceeds received on or in respect of such Contracts
(other than payments of principal and interest due prior to the Initial
Cut-Off Date or Subsequent Cut-Off Date); (iii) security interests in the
Motorcycles; (iv) amounts on deposit in the Collection Account, the Note
Distribution Account, the Reserve Fund, the Pre-Funding Account and the
Interest Reserve Account, including all Eligible Investments therein and all
income from the investment of funds therein and all proceeds therefrom; (v)
proceeds from claims under certain insurance policies in respect of
individual Motorcycles or obligors under the Contracts; (vi) certain rights
under the Sale and Servicing Agreement; (vii) the protective security
interest in certain of the above-described property granted by the Trust
Depositor in favor of the Issuer; (viii) all present and future claims,
demands, causes of and choses in action in respect of any or all of the
foregoing; and (ix) all payments on or under and all proceeds of every kind
and nature whatsoever in respect of any or all of the foregoing, including
all proceeds of the conversion, voluntary or involuntary, into cash of other
liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and
other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds
of any of the foregoing (as each such defined term is defined in Section
1.01) (collectively, the "COLLATERAL").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction and all other
sums owing by the Issuer hereunder or under any other Transaction Document, and
to secure compliance with the provisions of this Indenture, all as provided in
this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of
the Notes, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Holders of the Notes may be adequately and effectively
protected.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
(a) Except as otherwise specified herein or as the context may
otherwise require, the following terms have the respective meanings set forth
below for all purposes of this Indenture.
<PAGE>
"ACT" shall have the meaning specified in Section 11.03(a).
"ADMINISTRATION AGREEMENT" means the Administration Agreement, dated as
of the date hereof, among the Administrator, the Issuer, the Trust Depositor and
the Indenture Trustee.
"ADMINISTRATOR" means Eaglemark, Inc. or any successor Administrator
under the Administration Agreement.
"AFFILIATE" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "CONTROL" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
"AUTHORIZED OFFICER" means, with respect to the Issuer, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter) and, so
long as the Administration Agreement is in effect, any Vice President or more
senior officer of the Administrator who is authorized to act for the
Administrator in matters relating to the Issuer and to be acted upon by the
Administrator pursuant to the Administration Agreement and who is identified on
the list of Authorized Officers delivered by the Administrator to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"BOOK ENTRY NOTES" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.09.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banking institutions in the city of Chicago, Illinois, Wilmington,
Delaware or New York, New York are authorized or obligated by law, executive
order or governmental decree to be closed.
"CERTIFICATE FINAL DISTRIBUTION DATE" means the [ ]
Distribution Date.
"CERTIFICATE OF TRUST" means the Certificate of Trust of the Issuer
substantially in the form of EXHIBIT B to the Trust Agreement.
"CLASS" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"CLASS A-1 FINAL DISTRIBUTION DATE" means the [ ]
Distribution Date.
"CLASS A-1 RATE" means [ ]% per annum (computed on the basis of a
360-day year of twelve 30-day months).
"CLASS A-1 NOTES" means the Class A-1 Notes, substantially in the form of
EXHIBIT A.
"CLASS A-2 FINAL DISTRIBUTION DATE" means the [ ]
Distribution Date.
"CLASS A-2 RATE" means [ ]% per annum (computed on the basis of a
360-day year of twelve 30-day months).
"CLASS A-2 NOTES" means the Class A-2 Notes, substantially in the form of
EXHIBIT B.
2
<PAGE>
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"CLOSING DATE" means [ ].
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Collateral Granted to the Indenture Trustee under
this Indenture, including all proceeds thereof.
"COMMISSION" means the Securities and Exchange Commission.
"CORPORATE TRUST OFFICE" means the principal office of the Indenture
Trustee at which at any particular time its corporate trusts business shall be
administered which office at date of the execution of this Agreement is located
at 311 West Monroe Street, 12th Floor, Chicago, Illinois 60606, Attention:
Indenture Trust Administration; or at such other address as the Indenture
Trustee may designate from time to time by notice to the Noteholders and the
Issuer, or the principal corporate trust office of any successor Indenture
Trustee (the address of which the successor Indenture Trustee will notify the
Noteholders and the Issuer).
"DEFAULT" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"DEFINITIVE NOTES" shall have the meaning specified in Section 2.09.
"DISTRIBUTION DATE" means the fifteenth day of each month or, if such
date shall not be a Business Day, the next succeeding Business Day, commencing
[ ].
"DTC" means The Depository Trust Company, and its successors.
"EAGLEMARK" means Eaglemark, Inc., and its successors and assigns.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" shall have the meaning specified in Section 5.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"GENERAL PARTNER" means each Certificateholder obligated to pay the
expenses of the Issuer pursuant to Section 2.07 of the Trust Agreement.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of
3
<PAGE>
the Collateral and all other moneys payable thereunder, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring Proceedings in the name of the
granting party or otherwise and generally to do and receive anything that the
granting party is or may be entitled to do or receive thereunder or with
respect thereto.
"HOLDER" or "NOTEHOLDER" OR "NOTE OWNER" means, with respect to a
Book-Entry Note, the Person who is the owner of such Book-Entry Note, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing
Agency participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency) and with respect to a Definitive Note
the Person in whose name a Note is registered on the Note Register.
"INDEBTEDNESS" means, with respect to any Person at any time, (i)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (ii)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (iii) current liabilities of such Person in respect of
unfunded vested benefits under plans covered by Title IV of ERISA; (iv)
obligations issued for or liabilities incurred on the account of such Person;
(v) obligations or liabilities of such Person arising under acceptance
facilities; (vi) obligations of such Person under any guaranties, endorsements
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person or otherwise to assure a creditor against
loss; (vii) obligations of such Person secured by any lien on property or assets
of such Person, whether or not the obligations have been assumed by such Person;
or (viii) obligations of such Person under any interest rate or currency
exchange agreement.
"INDENTURE" means this Indenture, as amended or supplemented from time to
time.
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Noteholder.
"INDENTURE TRUSTEE" means Harris Trust and Savings Bank, as Indenture
Trustee under this Indenture, or any successor Indenture Trustee under this
Indenture.
"INDEPENDENT" means, when used with respect to any specified Person, that
the Person (i) is in fact independent of the Issuer, any other obligor upon the
Notes, the Trust Depositor, the Seller and any of their respective Affiliates,
(ii) does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Seller or any of
their respective Affiliates, and (iii) is not connected with the Issuer, any
such other obligor, the Seller or any Affiliate of any of the foregoing Persons
as an officer, employee, promoter, underwriters, trustee, partner, director or
person performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Indenture Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "INDEPENDENT"
in this Indenture and that the signer is Independent within the meaning thereof.
"INTEREST PERIOD" means, with respect to any Distribution Date and any
Class of Notes, the period from and including the fifteenth day of the month of
the Distribution Date immediately preceding such Distribution Date (or, in the
case of the first Distribution Date, the Closing Date) to but excluding the
fifteenth day of the month of such Distribution Date.
"INTEREST RATE" means the Class A-1 Rate and the Class A-2 Rate, as
applicable.
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<PAGE>
"ISSUER" means Harley-Davidson Eaglemark Motorcycle Trust [ ]
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the Notes.
"ISSUER ORDER" and "ISSUER REQUEST" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"NOTE" means a Class A-1 Note or a Class A-2 Note.
"NOTE DEPOSITORY AGREEMENT" means the agreement dated as of the Closing
Date, among the Issuer, the Administrator, the Indenture Trustee and DTC, as the
initial Clearing Agency, relating to the Notes, substantially in the form of
Exhibit E hereto.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings
specified in Section 2.04.
"OFFICER'S CERTIFICATE" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to,
the Indenture Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's Certificate of
any Authorized Officer of the Issuer.
"OPINION OF COUNSEL" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Indenture Trustee
and which shall comply with any applicable requirements of Section 11.01, and
shall be in form and substance satisfactory to the Indenture Trustee.
"OUTSTANDING" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
for such notice has been made, satisfactory to the Indenture Trustee, has
been made); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes
are held by a bona fide purchaser;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
Outstanding Amount have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any other Transaction Document,
Notes owned by the Issuer, any other obligor upon the Notes, the Trust
Depositor, Eaglemark or any of their respective Affiliates shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Indenture Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the
Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned
that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes, the Trust Depositor, Eaglemark or any
of their respective Affiliates.
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"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes of
one Class or of all Classes, as the case may be, Outstanding at the date of
determination.
"OWNER TRUSTEE" means Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, or any successor
trustee under the Trust Agreement.
"PAYING AGENT" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11
and is authorized by the Issuer to make the distributions from the Note
Distribution Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"PERSON" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"PROCEEDING" means any suit in equity, action at law or other judicial or
administrative proceeding.
"RATING AGENCY" means each of Moody's and Standard & Poor's.
"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have been given ten days (or such shorter period as is
acceptable to each Rating Agency) prior notice thereof and that each Rating
Agency shall have notified the Trust Depositor, the Servicer and the Issuer in
writing that such action will not result in a qualification, reduction or
withdrawal of its then-current rating of any Class of Notes.
"RATING EVENT" means the qualification, reduction or withdrawal by either
Rating Agency of its then-current rating of any Class of Notes.
"RECORD DATE" means, with respect to a Distribution Date or Redemption
Date, the close of business on the last Business Day of the immediately
preceding month.
"REDEMPTION DATE" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section
10.01(b), the Distribution Date specified by the Servicer or the Issuer pursuant
to Section 10.01(a) or 10.01(b), as the case may be and (b) in the case of a
redemption of Notes pursuant to Section 10.01, the Distribution Date specified
in Section 7.07 of the Sale and Servicing Agreement on which the Indenture
Trustee shall withdraw any amount remaining in the Pre-funding Account and
deposit the applicable amount in the Note Distribution Account.
"REDEMPTION DATE AMOUNT" means (i) in the case of a redemption of the
Notes pursuant to Section 10.01(a), an amount equal to the unpaid principal
amount of the Notes redeemed plus accrued and unpaid interest thereon at the
weighted average of the Interest Rate for each Class of Notes being so redeemed
to but excluding the Redemption Date, or (ii) in the case of a payment made to
Noteholders pursuant to Section 10.01(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (i)
above.
"REGISTERED HOLDER" means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
"RESPONSIBLE OFFICER" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office (or any successor group of the
Indenture Trustee), including any Vice President, assistant secretary or other
officer or assistant officer of the Indenture Trustee customarily performing
functions similar to those performed
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by the people who at such time shall be officers, respectively, or to whom
any corporate trust matter is referred at the Corporate Trust Office of the
Indenture Trustee because of his knowledge of and familiarity with the
particular subject.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement,
dated as of the date hereof, among the Issuer, the Trust Depositor and the
Servicer, substantially in the form of EXHIBIT A hereto.
"SELLER" means Eaglemark, in its capacity as Seller under the Sale and
Servicing Agreement, and any successors and assigns.
"SERVICER" means Eaglemark, in its capacity as Servicer under the Sale
and Servicing Agreement, and any Successor Servicer thereunder.
"STATE" means any one of the 50 states of the United States or any of its
territories, or the District of Columbia.
"SUCCESSOR SERVICER" shall have the meaning specified in Section 3.07(e).
"TERMINATION DATE" means the date on which the Indenture Trustee shall
have received payment and performance of all amounts and obligations which the
Issuer may owe to or on behalf of the Indenture Trustee for the benefit of the
Noteholders under this Indenture or the Notes.
"TRUST AGREEMENT" means the Trust Agreement, dated as of the date hereof,
between the Trust Depositor and the Owner Trustee.
"TRUST DEPOSITOR" shall mean Eaglemark Customer Funding Corporation-IV,
in its capacity as trust depositor under the Sale and Servicing Agreement, and
its successors.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"UNITED STATES" means the United States of America.
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used herein that are not otherwise defined
shall have the meanings ascribed thereto in the Sale and Servicing Agreement.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the Securities and Exchange Commission.
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Noteholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Indenture
Trustee.
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"OBLIGOR" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "OR" is not exclusive;
(iv) "INCLUDING" means including without limitation;
(v) words in the singular include the plural and words
in the plural include the singular.
(vi) any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered in
connection herewith means such agreement, instrument or statute as from
time to time amended, modified or supplemented and includes (in the case
of agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns; and
(vii) the words "HEREOF," "HEREIN" and "HEREUNDER" and
words of similar import when used in this Indenture shall refer to this
Indenture as a whole and not to any particular provision of this
Indenture; Section, subsection and Schedule references contained in this
Indenture are references to Sections, subsections and Schedules in or to
this Indenture unless otherwise specified.
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ARTICLE TWO
THE NOTES
SECTION 2.01. FORM. The Class A-1 Notes and the Class A-2 Notes, in each
case together with the Indenture Trustee's certificate of authentication, shall
be in substantially the forms set forth as EXHIBITS to this Indenture with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their execution of the Notes. Any portion of the text of any
Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibits hereto are part of the terms of this Indenture.
SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile. Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall, upon receipt of an Issuer Order,
authenticate and deliver for original issue (i) Class A-1 Notes in an aggregate
principal amount of $[ ], and (ii) Class A-2 Notes in an aggregate
principal amount of $[ ]. The aggregate principal amount of
Class A-1 Notes and Class A-2 Notes Outstanding at any time may not exceed such
respective amounts, except as otherwise provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes shall
be issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein by the Indenture
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03. TEMPORARY NOTES. Pending the preparation of Book-Entry
Notes or Definitive Notes, the Issuer may execute, and upon receipt of an Issuer
Order the Indenture Trustee shall authenticate and deliver, temporary Notes that
are printed, lithographed, typewritten, mimeographed or otherwise produced, of
the tenor of the definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture as the officers
executing such Notes may determine, as evidenced by their execution of such
Notes.
If temporary Notes are issued, the Issuer will cause Book-Entry Notes or
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Book-Entry Notes or Definitive Notes, the temporary Notes shall
be exchangeable for Book-Entry Notes or Definitive Notes upon surrender of the
temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more Notes, the Issuer shall execute and the
Indenture Trustee shall authenticate and deliver in exchange therefor a like
tenor and principal amount of definitive Notes of authorized denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as Book-Entry Notes or Definitive Notes.
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SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "NOTE REGISTER") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "NOTE REGISTRAR" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and the amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Issuer shall execute, and the
Indenture Trustee shall authenticate and the Noteholder shall obtain from the
Indenture Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by a commercial bank or trust company located, or having a
correspondent located in the city in which the Corporate Trust Office is
located, or by a member firm of a national securities exchange, and such other
documents as the Indenture Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Indenture Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.03 not involving
any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
(i) the Note Registrar and the Trustee will be entitled to deal with
the Clearing Agency for all purposes of this Indenture (including the payment of
principal of and interest on the Notes and the giving of instructions or
directions hereunder) as the sole holder of the Notes, and shall have no
obligation to the Note Owners;
(ii) the rights of Note Owners will be exercised only through the
Clearing Agency and will be limited to those established by law and agreements
between such Note Owners and the Clearing Agency and/or the Clearing Agency
Participants pursuant to the Depository Agreement;
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(iii) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a specified
percentage of the Outstanding Amount of the Notes, the Clearing Agency will be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the Trustee; and
(iv) without the consent of the Issuer and the Trustee, no such Note
may be transferred by the Depository except to a successor Depository that
agrees to hold such Note for the account of the Owners or except upon the
election of the Owner thereof or a subsequent transferee to hold such Note in
physical form.
Neither the Trustee nor the Registrar shall have any responsibility to monitor
or restrict the transfer of beneficial ownership in any Note an interest in
which is transferable through the facilities of the Depository.
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by them to hold the Issuer and the Indenture
Trustee, then, in the absence of notice to the Issuer, the Note Registrar or the
Indenture Trustee that such Note has been acquired by a bona fide purchaser, the
Issuer shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class; PROVIDED,
HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer, and the Indenture Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
or the Indenture Trustee may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee or the Note Registrar) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost of stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06. PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee, and any
of their respective agents may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Indenture Trustee nor any of their respective agents
shall be affected by notice to the contrary.
SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST.
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(a) Each Class of Notes shall accrue interest at the related Interest
Rate, and such interest shall be payable on each Distribution Date as specified
therein, subject to Section 3.01. Any installment of interest or principal, if
any, payable on any Note which is punctually paid or duly provided for by the
Issuer on the applicable Distribution Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered on the Record
Date, by wire transfer in immediately available funds to the account designated
by such nominee and except for the final installment of principal payable with
respect to such Note on a Distribution Date or on the related Final Distribution
Date, as the case may be (and except for the Redemption Price for any Note
called for redemption pursuant to Section 10.01(a)), which shall be payable as
provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable on each Distribution
Date to the extent provided in the form of the related Note set forth as an
Exhibit hereto. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, unless
the Holders of Notes representing not less than 66-2/3% of the Outstanding
Amount have waived such Event of Default in the manner provided in Section 5.02.
All principal payments on each Class of Notes shall be made pro rata to the
Noteholders of such Class entitled thereto. The Indenture Trustee shall notify
the Person in whose name a Note is registered at the close of business on the
Record Date preceding the Distribution Date on which the Issuer expects that the
final installment of principal of and interest on such Note will be paid. Such
notice shall be mailed within five Business Days of receipt of notice of
termination of the Trust pursuant to Section 9.01(c) of the Trust Agreement and
shall specify that such final installment will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in
connection with redemptions of Notes shall be mailed to Noteholders as provided
in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the related payment date. The Issuer shall fix or cause to be fixed
any such special record date and payment date and, at least 15 days before any
such special record date, the Issuer shall mail to the Indenture Trustee and
each Noteholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.08. CANCELLATION. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided that such Issuer Order
is timely and the Notes have not been previously disposed of by the Indenture
Trustee.
SECTION 2.09. BOOK-ENTRY NOTES. The Notes, upon original issuance, will
be issued in the form of a typewritten Note or Notes representing the Book-Entry
Notes, to be delivered to DTC, the initial Depository, by, or on behalf of, the
Issuer. Such Notes shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency, and no
Noteholder will receive a Definitive Note representing such Noteholder's
interest in such Note, except as provided in Section 2.11. Unless and until
definitive, fully registered Notes (the "DEFINITIVE NOTES") have been issued to
Noteholders pursuant to Section 2.11:
(i) the provisions of this Section shall be in full
force and effect;
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(ii) the Note Registrar and the Indenture Trustee shall
be entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the sole
holder of the Notes, and shall have no obligation to the Noteholders;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Noteholders shall be exercised only
through the Clearing Agency and shall be limited to those established by
law and agreements between such Noteholders and the Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the Note Depository
Agreement, unless and until Definitive Notes are issued pursuant to
Section 2.11, the Clearing Agency will make book-entry transfers among
the Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Notes to such Clearing Agency
Participants; and
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of Noteholders
evidencing a specified percentage of the Outstanding Amount, the Clearing
Agency shall be deemed to represent such percentage only to the extent
that it has received instructions to such effect from Noteholders and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Indenture Trustee.
SECTION 2.10. NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Noteholders pursuant to Section
2.11, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders of the Notes to the Clearing Agency,
and shall have no obligation to the Noteholders.
SECTION 2.11. DEFINITIVE NOTES. If (i)(A) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities as described in the Note
Depository Agreement, and (B) Indenture Trustee or the Administrator is unable
to locate a qualified successor, (ii) the Administrator at its option advises
the Indenture Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency, or (iii) after the occurrence of an Event of
Default, the Noteholders representing not less than 66 2/3% of the Outstanding
Amount of such Class of Notes advises the Indenture Trustee and the Clearing
Agency through the Clearing Agency Participants in writing that the continuation
of a book-entry system through the Clearing Agency is no longer in the best
interests of the related Noteholders, then the Indenture Trustee shall notify
all Noteholders of the related Class of Notes, through the Clearing Agency, of
the occurrence of any such event and of the availability of Definitive Notes of
the related Class of Notes to Noteholders requesting the same. Upon surrender
to the Indenture Trustee of the Note or Notes representing the Book-Entry Notes
by the Clearing Agency, accompanied by registration instructions, the Issuer
shall execute and the Indenture Trustee shall authenticate the Definitive Notes
in accordance with the instructions of the Clearing Agency. None of the Issuer,
the Note Registrar or the Indenture Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes of a Class, the Indenture Trustee shall recognize the Noteholders of the
Definitive Notes as Noteholders hereunder.
The Indenture Trustee shall not be liable if the Indenture Trustee or the
Administrator is unable to locate a qualified successor Clearing Agency. The
Definitive Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
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SECTION 2.12. RELEASE OF COLLATERAL. Subject to Sections 4.04, 8.04 and
11.01 and the terms of the Transaction Documents, the Indenture Trustee shall
release property from the lien of this Indenture only upon receipt of an Issuer
Request accompanied by an Officer's Certificate.
SECTION 2.13. TAX TREATMENT. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness of the Issuer secured by the Collateral. The Issuer, by
entering into this Indenture, and each Noteholder, by its acceptance of its Note
agree to treat the Notes for federal, state and local income, single business
and franchise tax purposes as indebtedness of the Issuer.
ARTICLE THREE
COVENANTS
SECTION 3.01. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly
and punctually pay the principal of and interest, if any, on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, subject to Section 8.02(c), the Issuer will cause to be distributed
all amounts on deposit in the Note Distribution Account on a Distribution Date
deposited therein pursuant to the Sale and Servicing Agreement (i) for the
benefit of the Class A-1 Notes, to the Class A-1 Noteholders, and (ii) for the
benefit of the Class A-2 Notes, to the Class A-2 Noteholders. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
in Wilmington, Delaware, an office or agency where Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. The Issuer will give prompt written notice to the Indenture
Trustee of the location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Collection Account and the
Note Distribution Account pursuant to Section 8.02(b) shall be made on behalf of
the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts
so withdrawn from the Collection Account and the Note Distribution Account for
payments of Notes shall be paid over to the Issuer except as provided in this
Section.
On or before the Business Day immediately preceding each Distribution
Date and Redemption Date, the Issuer shall deposit or cause to be deposited in
the Note Distribution Account an aggregate sum sufficient to pay the amounts
then becoming due, such sum to be held in trust for the benefit of the Persons
entitled thereto and (unless the Paying Agent is the Indenture Trustee) shall
promptly notify the Indenture Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
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(i) hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by
the Issuer (or any other obligor upon the Notes) in the making of any
payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith pay
to the Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the payment
of Notes if at any time it ceases to meet the standards required to be
met by a Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any Notes of
any applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and upon receipt of an Issuer Request shall be deposited by the Indenture
Trustee in the Collection Account; and the Holder of such Note shall thereafter,
as an unsecured general creditor, look only to the Issuer for payment thereof,
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; PROVIDED, HOWEVER, that if such money or
any portion thereof had been previously deposited by the Issuer with the
Indenture Trustee for the payment of principal or interest on the Notes; and
PROVIDED, FURTHER, that the Indenture Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Issuer cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to or for the
account of the Issuer. The Indenture Trustee may also adopt and employ, at the
expense of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but not have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Paying Agent, at the last address of record for each such Holder).
SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States, in which
case the Issuer will keep in full effect its existence, rights and franchises
under the laws of such other jurisdiction) and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Collateral.
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SECTION 3.05. PROTECTION OF COLLATERAL. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Indenture Trustee on
behalf of the Noteholders to be prior to all other liens in respect of the
Collateral, and the Issuer shall take all actions necessary to obtain and
maintain, for the benefit of the Indenture Trustee on behalf of the Noteholders,
a first lien on and a first priority, perfected security interest in the
Collateral. The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
all as prepared by the Servicer and delivered to the Issuer, and will take such
other action necessary or advisable to:
(i) Grant more effectively all or any portion of the
Collateral;
(ii) maintain or preserve the lien and security interest
(and the priority thereof) created by this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity
of any Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Collateral and the
rights of the Indenture Trustee and the Noteholders in such Collateral
against the claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon
the Collateral when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute all financing statements, continuation statements
or other instruments required to be executed pursuant to this Section.
SECTION 3.06. OPINIONS AS TO COLLATERAL.
(a) Promptly after the execution and delivery of this Indenture, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel to the
effect that, in the opinion of such counsel, either (i) all financing statements
and continuation statements have been executed and filed that are necessary to
create and continue the Indenture Trustee's first priority perfected security
interest in the collateral for the benefit of the Noteholders, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) no such action shall be necessary to perfect such
security interest; and
(b) Within 90 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the Cut-Off
Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel,
dated as of a date during such 90-day period, to the effect that, in the opinion
of such counsel, either (i) all financing statements and continuation statements
have been executed and filed that are necessary to create and continue the
Indenture Trustee's first priority perfected security interest in the collateral
(subject to the rights of the Insurer under the Insurance Agreement) for the
benefit of the Noteholders, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (ii)
no such action shall be necessary to perfect such security interest.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF CONTRACTS.
(a) The Issuer will not take any action and will use its best efforts
not to permit any action to be taken by others that would release any Person
from any such Person's material covenants or obligations under any instrument or
agreement included in the Collateral or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in the Transaction Documents or such other instrument or
agreement.
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(b) The Issuer may contract with other Persons to assist it in
performing its duties and obligations under this Indenture, and any performance
of such duties by a Person identified to the Indenture Trustee in an Officer's
Certificate shall be deemed to be action taken by the Issuer. The Indenture
Trustee shall not be responsible for the action or inaction of the Servicer or
the Administrator. Initially, the Issuer has contracted with the Servicer and
the Administrator to assist the Issuer in performing its duties under this
Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Transaction
Documents and in the instruments and agreements included in the Collateral,
including but not limited to filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture and the Sale and Servicing Agreement in accordance with and within the
time periods provided for herein and therein. Except as otherwise expressly
provided therein, the Issuer shall not waive, amend, modify, supplement or
terminate any Transaction Document or any provision thereof without the consent
of the Indenture Trustee or the Holders of at least a majority of the
Outstanding Amount.
(d) If the Issuer shall have knowledge of the occurrence of an Event
of Termination, the Issuer shall promptly notify the Indenture Trustee and each
Rating Agency thereof. Upon any termination of the Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee. As soon as a successor Servicer is appointed, the Issuer
shall notify the Indenture Trustee and the Rating Agencies of such appointment,
specifying in such notice the name and address of such successor Servicer.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Transaction Documents if the effect thereof would adversely affect the Holders
of the Notes.
SECTION 3.08. NEGATIVE COVENANTS. Until the Termination Date, the Issuer
shall not:
(i) except as expressly permitted by the Transaction
Documents, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the
Collateral, unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code or applicable
state law) or assert any claim against any present or former Noteholder
by reason of the payment of the taxes levied or assessed upon any part of
the Collateral; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien created by this Indenture to
be amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenant; or obligations with
respect to the Notes under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Collateral or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens and other liens
that arise by operation of law, in each case on a Motorcycle and arising
solely as a result of an action or omission of the related Obligor), (C)
permit the lien created by this Indenture not to constitute a valid first
priority (other than with respect to any such tax, mechanics' or other
lien) security interest in the Collateral, or (D) amend, modify or fail
to comply with the provisions of the Transaction Documents without the
prior written consent of the Indenture Trustee, except where the
Transaction Documents allow for amendment or modification without the
consent or approval of the Indenture Trustee; or
(iv) dissolve or liquidate in whole or in part.
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SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Indenture Trustee, on or before 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year ended December 31, 1998), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that:
(i) a review of the activities of the Issuer during such
year and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form and substance satisfactory to
the Indenture Trustee, the due and punctual payment of the principal of
and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture and each other Transaction
Document on the part of the Issuer to be performed or observed, all as
provided herein;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
which shall be delivered to and shall be satisfactory to the Indenture
Trustee to the effect that such transaction will not have any material
adverse tax consequence to the Trust, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel (which shall
describe the actions taken as required by clause (v) above or that no
such actions will be taken) each stating that such consolidation or
merger and such supplemental indenture comply with this Article Three and
that all conditions precedent herein provided for relating to such
transaction have been compiled with; and
(vii) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger has a net worth, immediately after
such consolidation or merger, that is (A) greater than zero and (B) not
less than the net worth of the Issuer immediately prior to giving effect
to such consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially all
of its properties or assets, including those included in the Collateral, to any
Person (except as expressly permitted by the Transaction Documents), unless:
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(i) the Person that acquires by conveyance to transfer
the properties and assets of the Issuer shall (A) be a United States
citizen or a Person organized and existing under the laws of the United
States or any State, (B) expressly assume, by an indenture supplemental
hereto, executed and delivered to the Indenture Trustee, in form and
substance satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on all Notes and the performance
or observance of every agreement and covenant of this Indenture and each
other Transaction Document on the part of the Issuer to be performed or
observed, all as provided herein, (C) expressly agree by means of such
supplemental indenture that all right, title and interest so conveyed or
transferred shall be subject and subordinate to the rights of Holders of
the Notes and (D) unless otherwise provided in such supplemental
indenture, expressly agree to indemnify, defend and hold harmless the
Issuer against and from any loss, liability or expense arising under or
related to this Indenture and the Notes.
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
which shall be delivered to and shall be satisfactory to the Indenture
Trustee to the effect that such transaction will not have any material
adverse tax consequence to the Trust, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel (which shall
describe the actions taken as required by clause (v) above or that no
such actions will be taken) each stating that such conveyance or transfer
and such supplemental indenture comply with this Article Three and that
all conditions precedent herein provided for relating to such transaction
have been complied with (including any filings required by Exchange Act);
and
(vii) the Issuer has a net worth, immediately after such
conveyance or transfer, that is (A) greater than zero and (B) not less
than the net worth of the Issuer immediately prior to giving effect to
such conveyance or transfer.
SECTION 3.11. SUCCESSOR OR TRANSFEREE.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with same
effect as if such Person has been named as the Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all the
assets or properties of the Issuer pursuant to Section 3.10(b), the Issuer will
be released from every covenant and agreement of this Indenture to be observed
or performed on the part of the Issuer with respect to the Notes immediately
upon the delivery of written notice to the Indenture Trustee stating that the
Issuer is to be so released.
SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Contracts in the manner contemplated by this Indenture and the other Transaction
Documents and activities incidental thereto.
SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes and (ii) any other Indebtedness permitted
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by or arising under the other Transaction Documents. The proceeds of the Notes
and the Certificates shall be used exclusively to fund the Issuer's purchase of
the Contracts and the other assets specified in the Sale and Servicing
Agreement, to fund the Reserve Fund and to pay the transactional expenses of the
Issuer.
SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause the
Servicer to comply with Sections 4.09, 4.10, 4.11, as well as Article Five and
Article Nine of the Sale and Servicing Agreement.
SECTION 3.15. GUARANTEES, LOANS ADVANCES AND OTHER LIABILITIES. Except
as otherwise contemplated by the Transaction Documents, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuming another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of,
any other interest in, or make any capital contribution to, any other Person.
SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. RESTRICTED PAYMENTS. Except as permitted by the
Transaction Documents, the Issuer shall not, directly or indirectly, (i) pay any
dividend or make any distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, to the Owner
Trustee or any owner of a beneficial interest in the Issuer or otherwise with
respect to any ownership or equity interest or security in or of the Issuer or
to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value
any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that
the Issuer may make, or cause to be made, (A) distributions to the Servicer, the
Owner Trustee and the Certificateholders as contemplated by, and to the extent
funds are available for such purpose under, the Sale and Servicing Agreement or
the Trust Agreement and (B) payments to the Indenture Trustee and the Owner
Trustee pursuant to Section 1(a)((ii) of the Administration Agreement. The
Issuer will not, directly or indirectly, make payments to or distributions from
the Collection Account except in accordance with this Indenture and the other
Transaction Documents.
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the
Indenture Trustee and each Rating Agency prompt written notice of each Event of
Default hereunder and an Event of Termination under the Sale and Servicing
Agreement.
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
SECTION 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
other Transaction Document.
SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST
AGREEMENT. The Issuer shall not agree to any amendment to Section 11.01 of the
Trust Agreement to eliminate the requirements thereunder that the Indenture
Trustee or the Holders of the Notes consent to amendments thereto as provided
therein.
SECTION 3.22. REMOVAL OF ADMINISTRATOR. So long as any Notes are issued
and outstanding, the Issuer shall not remove the Administrator without cause
unless the Rating Agency Condition shall have been satisfied in connection with
such removal.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.01, 3.03, 3.04,
3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.20 and 3.21, (v) the rights, obligations
and immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.07 and the obligations of the Indenture
Trustee under Section 4.02) and (vi) the rights of Noteholders as beneficiaries
hereof with respect to the property so deposited with the Indenture Trustee
payable to all or any of them, and the Indenture Trustee, on demand of and at
the expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes therefore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen and
that have been replaced or paid as provided in Section 2.05 and
(ii) Notes for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Issuer and
thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.03) have been delivered to the Indenture
Trustee for cancellation;
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the
Class A-2 Final Distribution Date within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the Indenture
Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of the
Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with
the Indenture Trustee cash or direct obligations of or obligations
guaranteed by the United States (which will mature prior to the
date such amounts are payable), in trust in an Eligible Account
for such purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Note not theretofore delivered to the
Indenture Trustee for cancellation when due to the final scheduled
Distribution Date (if Notes shall have been called for redemption
pursuant to Section 10.01(a)), as the case may be;
(B) the Issuer has paid or performed or caused to be paid or
performed all amounts and obligations which the Issuer may owe to or on
behalf of the Indenture Trustee for the benefit of the Noteholders under
this Indenture or the Notes; and
(C) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel and (if required by the
TIA or the Indenture Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.01(a) and, subject to Section 11.02, stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with and the Rating Agency
Condition has been satisfied.
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SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited with the
Indenture Trustee pursuant to Section 4.01 shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Indenture Trustee
may determine, to the Holders of the particular Notes for the payment or
redemption of which such moneys have been deposited with the Indenture Trustee,
of all sums due and to become due thereon for principal and interest; but such
moneys need not be segregated from other funds except to the extent required
herein or in the Sale and Servicing Agreement or required by law.
SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
SECTION 4.04. RELEASE OF COLLATERAL. Subject to Section 11.01 and the
terms of the Transaction Documents, the Indenture Trustee shall release property
from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate and an Opinion of Counsel and
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or
an Opinion of Counsel in lieu of such Independent Certificates to the effect
that the TIA does not require any such Independent Certificates.
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ARTICLE FIVE
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. "EVENT OF DEFAULT," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note
when the same becomes due and payable, and such default shall continue
for a period of five days;
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable;
(iii) default in the observance or performance of any
covenant or agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in any
certificate or other writing delivered pursuant hereto or in connection
herewith proving to have been incorrect in any material respect as of the
time when the same shall have been made, and such default shall continue
or not be cured, or the circumstance or condition in respect of which
such misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days after there shall
have been given, by registered or certified mail, to the Indenture
Trustee by the Holders of at least 25% of the Outstanding Amount of the
Notes, taken together as a single class, a written notice specifying such
default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "NOTICE OF DEFAULT" hereunder;
(iv) the filing of a decree or order for relief by a
court having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Collateral in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Collateral, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(v) the commencement by the Issuer of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer to
the entry of an order for relief in an involuntary case under any such
law, or the consent by the Issuer to the appointment or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the
Collateral, or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of action by the Issuer in
furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee within five days after
obtaining knowledge of the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with the giving of notice and the lapse
of time would become an Event of Default under clause (iii) above, its status
and what action the Issuer is taking or proposes to take with respect thereto.
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SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT
If an Event of Default shall have occurred and be continuing, the Notes
shall become immediately due and payable at par, together with accrued interest
thereon, unless Holders holding Notes representing not less than 66-2/3% of the
aggregate Outstanding Amount shall, upon prior written notice to each Rating
Agency, waive such Event of Default.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE; AUTHORITY OF INDENTURE TRUSTEE.
(a) The Issuer covenants that if the Notes are accelerated following
the occurrence of an Event of Default, the Issuer will, upon demand of the
Indenture Trustee, pay to it, for the benefit of the Holders of the Notes, the
whole amount then due and payable on such Notes for principal and interest, with
interest, with interest upon the overdue principal, and, to the extent payment
at such rate of interest shall be legally enforceable, upon overdue installments
of interest, at the applicable Interest Rate and in addition thereto such
further amount as shall be sufficient to cover costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Indenture Trustee and its agents and counsel.
(b) The Indenture Trustee following the occurrence of an Event of
Default, shall have full right, power and authority to take, or defer from
taking, any and all acts with respect to the administration, maintenance or
disposition of the Collateral.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may in its discretion (except as provided in Section 5.03(d)), proceed
to protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this
Indenture, if an Event of Default shall have occurred and be continuing, if the
Issuer fails to perform its obligations under Section 10.01(b) when and as due,
the Indenture Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Noteholders by such appropriate proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any such
rights, whether for specific performance of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy or legal or equitable right vested in the Indenture
Trustee by this Indenture or by law, provided that the Indenture Trustee shall
only be entitled to take any such actions to the extent such actions (i) are
taken only to enforce the Issuer's obligations to redeem the principal amount of
Notes, and (ii) are taken only against the Collateral any investments therein
and any proceeds thereof.
(e) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Collateral, Proceedings under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the Notes
and to file such other papers or documents as may be
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necessary or advisable in order to have the claims of the Indenture
Trustee (including any claim for reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence or bad faith) and of the Noteholders allowed in
such Proceedings;
(ii) unless prohibited by applicable law and regulations,
to vote on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of
the Indenture Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Trustee except as a result of negligence or bad faith.
(f) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
compensation affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(g) All rights of action and of asserting claims under this Indenture
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any Proceedings brought by the Indenture Trustee (including any
Proceedings involving the interpretation of any provision of this Indenture),
the Indenture Trustee shall be held to represent all of the Holders of the
Notes, and it shall not be necessary to make any Noteholder a party to any such
proceedings.
SECTION 5.04. REMEDIES. If an Event of Default shall have occurred and
be continuing, the Indenture Trustee (subject to Section 5.05) shall:
(i) institute Proceedings in its own name and as or on
behalf of a trustee of an express trust for the collection of all amounts
then payable on the Notes or under this Indenture with respect thereto,
whether by declaration or otherwise, enforce any judgment obtained, and
collect from the Issuer and any other obligor upon such Notes moneys
adjudged due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Collateral;
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(iii) exercise any remedies of a secured party under the
UCC and any other remedy available to the Indenture Trustee and take any
other appropriate action to protect and enforce the rights and remedies
of the Indenture Trustee on behalf of the Noteholders under this
Indenture or the Notes; and
(iv) direct the Owner Trustee to sell the Collateral or
any portion thereof or rights or interest therein, at one or more public
or private sales called and conducted in any manner permitted by law;
PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise
liquidate the Collateral following an Event of Default, other than an
Event of Default described in Section 5.01(i) or (ii), unless (A) the
Holders of 100% of the Outstanding Amount of the Notes, consent thereto,
(B) the proceeds of such sale or liquidation distributable to the
Noteholders are sufficient to discharge in full all amounts then due and
unpaid upon such Notes for principal and interest or (C) the Indenture
Trustee determines that the Collateral will not continue to provide
sufficient funds for the payment of principal of and interest on the
Notes as they would have become due if the Notes had not been declared
due and payable, and the Indenture Trustee provides prior written notice
to each Rating Agency and obtains the consent of Holders representing not
less than 66-2/3% of the Outstanding Amount of the Notes. In determining
such sufficiency or insufficiency with respect to clauses (B) and (C),
the Indenture Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Collateral for such purpose; PROVIDED, HOWEVER, upon
the occurrence of an Event of Default described in Section 5.01(iv) or
(v), caused solely from an event described in such subparagraphs
occurring with respect to the Trust Depositor, the related Contracts of
the Trust will be liquidated by the Indenture Trustee and the Trust will
be terminated 90 days after the date of such Insolvency Event, unless,
before the end of such 90-day period, the related Trustee shall have
received written instructions from (i) holders of each class of
Certificates (excluding any Certificates held by the Trust Depositor)
with respect to such Trust representing more than 50% of the aggregate
unpaid principal amount of each such class (not including the principal
amount of such Certificates held by the Trust Depositor) and (ii) holders
of each class of Notes, if any, with respect to such Trust representing
more than 50% of the aggregate unpaid principal amount of each such
class, to the effect that each such party disapproves of the liquidation
of such Contracts and termination of such Trust.
SECTION 5.05. OPTIONAL PRESERVATION OF THE CONTRACTS. Following an
Event of Default and such Event of Default has not been rescinded and annulled,
the Indenture Trustee may, but need not, elect to maintain possession of the
Collateral,. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal and interest
on the Notes, and the Indenture Trustee shall take such desire into account when
determining whether or not to maintain possession of the Collateral. In
determining whether to maintain possession of the Collateral, the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Collateral
for such purpose.
SECTION 5.06. PRIORITIES.
(a) If the Indenture Trustee collects any money or property pursuant
to this Article Five, it shall pay out the money or property in the following
order and priority:
(i) to the Holders of the Class A-1 Notes and Class A-2
Notes for amounts as described in Section 7.05(a)(i) of the Sale and
Servicing Agreement;
(ii) amounts due and owing and required to be distributed
to the Servicer, the Owner Trustee and the Indenture Trustee,
respectively, pursuant to priorities described in Section 7.05(a) of the
Sale and Servicing Agreement and not previously distributed, in the order
of such priorities and without preference or priority of any kind within
such priorities;
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(iii) to the Holders of the Class A-1 Notes and Class A-2
Notes for amounts representing due and unpaid interest thereon;
(iv) to Holders of the Notes for amounts due and unpaid
on the Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Notes for
principal, until the Outstanding Amount of the Notes is reduced to zero;
(v) amounts due and unpaid on the Certificates for
interest and principal, to the Owner Trustee for distribution to
Certificateholders in accordance with Section 5.02(a) of the Trust
Agreement; and
(vi) any excess amounts remaining after making the
distributions described in paragraphs (i) through (iv) above shall be
distributed in the following order of priority: into the Reserve Fund,
until the amounts on deposit therein equal the Specified Reserve Fund
Balance, with any excess being distributed to the Trust Depositor.
(b) The Indenture Trustee may fix a record date and payment date for
any payment to Noteholders pursuant to this Section. At least 15 days before
such record date, the Issuer shall mail to each Noteholder and the Indenture
Trustee a notice that states the record date, the payment date and the amount to
be paid.
SECTION 5.07. LIMITATION OF SUITS. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to
the Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding
Amount of the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and liabilities
to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to institute
such Proceedings; and
(v) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by the
Holders of a majority of the Outstanding Amount of the Notes, voting
together as a single class.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Indenture Trustee in its sole discretion may determine that action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.08. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in the Indenture, the Holder
of any Note shall have the right, which is absolute and
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unconditional, to receive payment of the principal of and interest on such
Note on or after the respective due dates thereof expressed in such Note or
in this Indenture (or, in the case of redemption, on or after the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Indenture Trustee
and the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. DELAY OR OMISSION NOT A WAIVER. No delay or omission of
the Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default of Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article Five or by
law to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.12. CONTROL BY NOTEHOLDERS. The Holders representing more than
50% of the Outstanding Amount of the Notes shall have the right to direct the
time, method and place of conducting any Proceeding for any remedy available to
the Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; PROVIDED that:
(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii) subject to the terms of Section 5.04, any direction
to the Indenture Trustee to sell or liquidate the Collateral shall be by
the Holders of Notes representing not less than 100% of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have
been satisfied and the Indenture Trustee elects to retain the Collateral
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Outstanding Amount of
the Notes to sell or liquidate the Collateral shall be of no force and
effect; and
(iv) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially and adversely affect the
rights of any Noteholders not consenting to such action.
SECTION 5.13. WAIVER OF PAST DEFAULTS. In the case of any waiver of an
Event of Default, the Issuer, the Indenture Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder,
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respectively; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereto. Upon any such waiver, such
Default shall cease to exist and be deemed to have been cured and not to have
occurred, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto.
SECTION 5.14. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (i) any suit instituted by the
Indenture Trustee, (ii) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (iii) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waivers
all benefit or advantages of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Indenture Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.
SECTION 5.16. ACTION ON NOTES. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Collateral or
upon any of the assets of the Issuer. Any money or property collected by the
Indenture Trustee shall be applied in accordance with Section 5.06.
SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS.
(a) Promptly following a request from the Indenture Trustee to do so
and at the Administrator's expense, the Issuer shall take all such lawful action
as the Indenture Trustee may request to compel or secure the performance and
observance by the Trust Depositor and the Servicer, as applicable, of each of
their obligations to the Issuer under or in connection with the Sale and
Servicing Agreement in accordance with the terms thereof, and to exercise any
and all rights, remedies, powers and privileges lawfully available to the Issuer
under or in connection with the Sale and Servicing Agreement to the extent and
in the manner directed by the Indenture Trustee, including the transmission of
notices of default on the part of the Trust Depositor or the Servicer thereunder
and the institution of legal of administrative actions or proceedings to compel
or secure performance by the Trust Depositor or the Servicer of each of their
obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in
writing, including facsimile) of the Holders representing not less than 66-2/3%
of the Outstanding Amount of the Notes shall exercise all rights, remedies,
powers, privileges and claims of the Issuer against the Trust Depositor or the
Servicer under or in connection with the Sale and Servicing Agreement, including
the right or power to take any action to compel or secure performance or
observance by the Trust Depositor or the Servicer of each of their obligations
to the Issuer thereunder and to give any consent, request,
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notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
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ARTICLE SIX
THE INDENTURE TRUSTEE
SECTION 6.01. DUTIES OF INDENTURE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and in the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into this
Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the Indenture
Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture and the other
Transaction Documents to which the Indenture Trustee is a party.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) this paragraph does not limit the effect of Section
6.01(b);
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.12.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Issuer.
(f) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms of
this Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) The Indenture Trustee shall have no discretionary duties other
than performing those ministerial acts set forth above necessary to accomplish
the purpose of this Trust as set forth in this Indenture.
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(i) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this section and to the provisions of the
TIA.
SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE.
(a) The Indenture Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate (with respect to factual matters) or an Opinion
of Counsel, as applicable. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the Officer's
Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes,
pursuant to the provisions of this Indenture, unless such Holders of Notes shall
have offered to the Indenture Trustee reasonable security or indemnity against
the costs, expenses and liabilities that may be incurred therein or thereby;
PROVIDED, HOWEVER, that the Indenture Trustee shall, upon the occurrence of an
Event of Default (that has not been cured), exercise the rights and powers
vested in it by this Indenture in a manner consistent with Section 6.01.
(g) The Indenture Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless so requested by the Holders of Notes evidencing
not less than 25% of the Outstanding Amount of the Notes; PROVIDED, HOWEVER,
that if the payment within a reasonable time to the Indenture Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Indenture Trustee, not reasonably
assured to the Indenture Trustee by the security afforded to it by the terms of
this Indenture or the Sale and Servicing Agreement, the Indenture Trustee may
require reasonable indemnity against such cost, expense or liability as a
condition to so proceeding; the reasonable expense of every such examination
shall be paid by the Person making such request, or, if paid by the Indenture
Trustee, shall be reimbursed by the Person making such request upon demand.
SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee is required to comply with Section 6.11.
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SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Collateral or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuer in this Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication.
SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment of principal
of or interest on any Note (including payments pursuant to the redemption of
such Notes), the Indenture Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of Noteholders.
SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS. The Indenture
Trustee shall deliver to each Noteholder such information, including without
limitation, IRS Form 1099, as may be required to enable such holder to prepare
its federal and state income tax returns.
SECTION 6.07. COMPENSATION AND INDEMNITY. The Issuer shall pay or shall
cause the Administrator to pay to the Indenture Trustee from time to time
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall or shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall indemnify or shall cause the
Administrator to indemnify the Indenture Trustee against any and all loss,
liability or expense (including attorneys' fees) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder. The Indenture Trustee shall notify the Issuer and the Administrator
promptly of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer and the Administrator shall not relieve the
issuer or the Administrator of its obligations hereunder. The Issuer shall
defend or shall cause the Administrator to defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall pay or shall
cause the Administrator to pay the fees and expenses of such counsel. Neither
the Issuer nor the Administrator need reimburse any expense or indemnify against
any loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of an Event of Default specified in
Section 5.01(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE. The Indenture Trustee
may resign at any time by so notifying the Issuer and the Servicer. The Issuer
may remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section
6.11;
(ii) a court having jurisdiction in the premises in
respect of the Indenture Trustee in an involuntary case or proceeding
under federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, shall have entered a decree or order
granting relief or appointing a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or similar official) for
the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or ordering the winding-up or liquidation of the
Indenture Trustee's affairs, provided any such decree or order shall have
continued unstayed and in effect for a period of 30 consecutive days;
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(iii) the Indenture Trustee commences a voluntary case
under any federal or state banking or bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator or other similar official
for the Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or makes any assignment for the benefit of creditors
or fails generally to pay its debts as such debts become due or takes any
corporate action in furtherance of any of the foregoing; or
(iv) the Indenture Trustee otherwise becomes incapable of
acting.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The Issuer or the successor
Indenture Trustee shall mail a notice of its succession to Noteholders. The
retiring Indenture Trustee shall promptly transfer all property held by it as
Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Any resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Indenture Trustee pursuant to this Section and payment of all fees and expenses
owed to the outgoing Indenture Trustee. Notwithstanding the replacement of the
Indenture Trustee pursuant to this Section, the retiring Indenture Trustee shall
be entitled to payment or reimbursement of such amounts as such Person is
entitled pursuant to Section 6.07.
SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; PROVIDED, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Insurer
and each Rating Agency prompt notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture, any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor Indenture Trustee, and deliver such Notes
so authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE
TRUSTEE.
(a) Notwithstanding any other provision of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Collateral may at the time be located, the Indenture
Trustee and the Administrator acting jointly shall have the power and may
execute and deliver all
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instruments to appoint one or more Persons to act as a co-Indenture Trustee
or co-Indenture Trustees, jointly with the Indenture Trustee, or separate
Indenture Trustee or separate Indenture Trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Collateral, or any part hereof,
and, subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee and the Administrator
may consider necessary or desirable. If the Administrator shall not have
joined in such appointment within 15 days after the receipt by it of a
request so to do, the Indenture Trustee alone shall have the power to make
such appointment. No co-Indenture Trustee or separate Indenture Trustee
hereunder shall be required to meet the terms of eligibility of a successor
Indenture Trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-Indenture Trustee or separate Indenture Trustee shall
be required under Section 6.08
(b) Every separate Indenture Trustee and co-Indenture Trustee shall,
to the extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
Indenture Trustee or co-Indenture Trustee jointly (it being understood
that such separate Indenture Trustee or co-Indenture Trustee is not
authorized to act separately without the Indenture Trustee joining in
such act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed the Indenture
Trustee shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and obligations (including the
holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
Indenture Trustee or co-Indenture Trustee, but solely at the direction of
the Indenture Trustee;
(ii) no Indenture Trustee hereunder shall be personally
liable by reason of any act or omission of any other Indenture Trustee
hereunder; and
(iii) the Indenture Trustee and the Administrator may at
any time accept the resignation of or remove any separate Indenture
Trustee or co-Indenture Trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate
Indenture Trustees and co-Indenture Trustees, as effectively as if given to
each of them. Every instrument appointing any separate Indenture Trustee or
co-Indenture Trustee shall refer to this Agreement and the conditions of this
Article. Each separate Indenture Trustee and co-Indenture Trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of co-appointment, either jointly with
the Indenture Trustee or separately, as may be provided therein, subject to
all the provisions of this Indenture, specifically including every provision
of this Indenture relating to the conduct of, affecting the liability of or
affording protection to, the Indenture Trustee. Every such instrument shall
be filed with the Indenture Trustee and a copy thereof given to the
Administrator.
(d) Any separate Indenture Trustee or co-Indenture Trustee may at any
time constitute the Indenture Trustee, its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do any lawful act
under or in respect of this Agreement on its behalf and in its name. If any
separate Indenture Trustee or co-Indenture Trustee shall die, become incapable
of acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Indenture Trustee, to
the extent permitted by law, without the appointment of a new or successor
Indenture Trustee. Notwithstanding anything to the contrary in this Indenture,
the appointment of any separate Indenture Trustee or co-Indenture Trustee shall
not relieve the Indenture Trustee of its obligations and duties under this
Indenture.
SECTION 6.11. ELIGIBILITY. The Indenture Trustee shall at all times
satisfy the requirements of TIA Section 310(a). The Indenture Trustee hereunder
shall at all times be a financial institution organized and doing business under
the laws of the United States of America or any state, authorized under such
laws to exercise corporate trust powers, whose long term unsecured debt is rated
at least Baa3 by Moody's and shall have a combined capital and
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surplus of at least $50,000,000 or shall be a member of a bank holding system
the aggregate combined capital and surplus of which is $50,000,000 and
subject to supervision or examination by federal or state authority, provided
that the Trustee's separate capital and surplus shall at all times be at
least the amount required by Section 310(a)(2) of the TIA. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of a supervising or examining authority, then for the purposes
of this Section 6.ll, the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
6.ll, the Trustee shall resign immediately in the manner and with the effect
specified in Section 6.08. The Indenture Trustee shall comply with TIA
Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 6.12. PENNSYLVANIA MOTOR VEHICLE SALES FINANCE ACT LICENSES. The
Indenture Trustee shall use its best efforts to maintain the effectiveness of
all licenses required under the Pennsylvania Motor Vehicle Sales Finance Act in
connection with this Indenture and the transactions contemplated hereby until
the lien and security interest of this Indenture shall no longer be in effect in
accordance with the terms hereof.
SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
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ARTICLE SEVEN
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (i) not more than five days after the earlier of (a) each Record Date
and (b) three months after the last Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and addresses of the
Noteholders as of such Record Date and (ii) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
ten days prior to the time such list is furnished; PROVIDED, HOWEVER, that so
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished.
SECTION 7.02. PRESERVATION OF INFORMATION: COMMUNICATION TO NOTEHOLDERS.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Noteholders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.01 and the names and addresses of Noteholders received by the Indenture
Trustee in its capacity as Note Registrar and shall otherwise comply with TIA
Section 312(a). The Indenture Trustee may destroy any list furnished to it as
provided in such Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA Section 312(c).
SECTION 7.03. REPORTS BY ISSUER. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer
is required (if at all) to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the Commission such
additional information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations;
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA Section 313(c)) such
summaries of any information, documents and reports required to be filed by the
issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) and by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA
Section 313(a), within 60 days after January 31 beginning with January 31,
[ ], the Indenture Trustee shall mail to each Noteholder as required by TIA
Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Indenture Trustee also shall comply with TIA Section
313(b).
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A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
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ARTICLE EIGHT
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it as provided in this
Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under any agreement
or instrument that is part of the Collateral, the Indenture Trustee may take
such action as may be appropriate to enforce such payment or performance,
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and any right to proceed thereafter as provided in
Article Five.
SECTION 8.02. TRUST ACCOUNTS.
(a) On or prior to the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Indenture Trustee, for
the benefit of the Noteholders and the Certificateholders, the Trust Accounts as
provided in Section 5.05 of the Sale and Servicing Agreement.
(b) All Available Monies with respect to each Due Period will be
deposited in the Collection Account as provided in Section 5.05 of the Sale and
Servicing Agreement. On or before each Distribution Date, all amounts required
to be deposited in the Note Distribution Account with respect to the preceding
Due Period pursuant to Section 7.05 of the Sale and Servicing Agreement will be
transferred from the Collection Account and/or the Reserve Account to the Note
Distribution Account.
(c) On each Distribution Date, the Indenture Trustee shall distribute
all amounts on deposit in the Note Distribution Account to Noteholders in
respect of the Notes to the extent of amounts due and unpaid on the Notes for
principal and interest as follows:
(i) to the Class A-1 Noteholders, accrued and unpaid
interest on the outstanding principal amount of the Class A-1 Notes at
the Class A-1 Rate and to the Class A-2 Noteholders, accrued and unpaid
interest on the outstanding principal amount of the Class A-2 Notes at
the Class A-2 Rate;
(ii) only to the extent of funds withdrawn from the
Pre-Funding Account and deposited in the Note Distribution Account by
the Indenture Trustee pursuant to Section 7.07 of the Sale and
Servicing Agreement:
(A) if the amount of such funds is equal to or
less than $150,000, to the Holders of the Class A-1 Notes on account of
principal up to the Outstanding Amount thereof; and
(B) if the amount of such funds is greater than
$150,000, pro rata, calculated on the then current principal balance of
the Class A-1 and Class A-2 Notes, to the Holders of the Class A-1 Notes
and the Holders of the Class A-2 Notes;
(iii) to the Class A-1 Noteholders in reduction of the
Outstanding Amount of the Class A-1 Notes until the Outstanding Amount of
the Class A-1 Notes is reduced to zero; and
(iv) to the Class A-2 Noteholders in reduction of the
Outstanding Amount of the Class A-2 Notes until the Outstanding Amount of
the Class A-2 Notes is reduced to zero.
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SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS.
(a) So long as no Default or Event of Default shall have occurred and
be continuing, all or a portion of the funds in the Trust Accounts shall be
invested in Eligible Investments and reinvested by the Indenture Trustee upon
receipt of an Issuer Order, subject to the provisions of Section 5.05 of the
Sale and Servicing Agreement. Except as otherwise provided in Section 5.05 of
the Sale and Servicing Agreement, all income or other gain from investments of
moneys deposited in such Trust Accounts shall be deposited by the Indenture
Trustee in the Collection Account, and any loss resulting from such investments
shall be charged to the related Trust Account. The Issuer will not direct the
Indenture Trustee to make any investment of any funds or to sell any investment
held in any of the Trust Accounts unless the security interest granted and
perfected in such account will continue to be perfected in such investment or
the proceeds of such sale, in either case without any further action by any
Person, and, in connection with any direction to the Indenture Trustee to make
any such investment or sale, if requested by the Indenture Trustee, the Issuer
shall deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor and not as Indenture Trustee, in accordance with their
terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00
a.m., New York City time (or such other time as may be agreed by the Issuer and
Indenture Trustee), on any Business Day or (ii) a Default or Event of Default
shall have occurred and be continuing with respect to the Notes but the Notes
shall not have been declared due and payable pursuant to Section 5.02 or (iii)
if such Notes shall have been declared due and payable following an Event of
Default, amounts collected or receivable from the Collateral are being applied
in accordance with Section 5.05 as if there had not been such a declaration,
then the Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts in one or more Eligible Investments.
SECTION 8.04. RELEASE OF COLLATERAL.
(a) Subject to the payment of its fees and expenses pursuant to
Section 6.07, the Indenture Trustee may, and when required by the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article shall be bound to ascertain the Indenture
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Collateral that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA as so stated in the Opinion of Counsel) Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.01.
SECTION 8.05. OPINION OF COUNSEL. The Indenture Trustee shall receive at
least seven days notice when requested by the Issuer to take any action pursuant
to Section 8.04(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form
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and substance satisfactory to the Indenture Trustee, stating the legal effect
of any such action, outlining the steps required to complete the same, and
concluding that all conditions precedent to the taking of such action have
been complied with and such action will not materially and adversely impair
the security for the Notes or the rights of the Noteholders in contravention
of the provisions for this Indenture; PROVIDED, HOWEVER, that such Opinion of
Counsel shall not be required to express an opinion as to the fair value of
the Collateral. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any
such action.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
(a) Without the consent of the Holders of any Notes and with prior
notice to each Rating Agency, the Issuer and the Indenture Trustee, when
authorized by an Issuer Order, and the other parties hereto at any time from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the TIA as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee, for any of
the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of this Indenture, or better to
assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subjected to the lien created by this
Indenture, or to subject additional property to the lien created by this
Indenture;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any right or power
herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or the Transaction Documents or to make any other provisions
with respect to matters or questions arising under this Indenture or in
any supplemental indenture; provided that such action shall not adversely
affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor Indenture Trustee with respect to
the Notes and to add to or change any of the provisions of this Indenture
as shall be necessary to facilitate the administration of the trusts
hereunder by more than one Indenture Trustee, pursuant to the
requirements of Article Six;
(vii) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such other
provisions as may be expressly required by the TIA; and
(viii) to elect into the FASIT provisions of the Code,
provided an Opinion of Counsel to the effect that such election will not
adversely affect the Noteholders, is delivered to the Issuer and Indenture
Trustee.
The Indenture Trustee is hereby authorized to join in the exemption of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes and with
prior notice to each Rating Agency, enter into an indenture or
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indentures supplemental hereto for the purpose of adding any provisions to,
or changing in any manner or eliminating any of the provisions of, this
Indenture or of modifying in any manner the rights of the Holders of the
Notes under this Indenture; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Noteholder.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to each Rating Agency, and with the consent of the Holders of
not less than 66 2/3% of the Outstanding Amount of the Notes, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; PROVIDED, HOWEVER, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Note, or reduce the principal amount
thereof, the interest rate thereon or the Redemption Date Amount with
respect thereto, change the provisions of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the
Collateral to payment of principal of or interest on the Notes, or change
any place of payment where, or the coin or currency in which, any Note or
the interest thereon is payable, or impair the right to institute suit
for the enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article Five, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or after
the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of
the Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the second proviso
to the definition of the term "OUTSTANDING";
(iv) reduce the percentage of the Outstanding Amount of
the Notes required to direct the Indenture Trustee to sell or liquidate
the Collateral pursuant to Section 5.04 or amend the provisions of this
Article which specify the percentage of the Outstanding Amount of the
Notes required to amend this Indenture or the other Transaction
Documents;
(v) modify any provision of this Section except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the other Transaction
Documents cannot be modified or waived without the consent of the Holder
of each Outstanding Note affected thereby; or
(vi) permit the creation of any lien ranking prior to or
on a parity with the lien created by this Indenture with respect to any
part of the Collateral or, except as otherwise permitted or contemplated
herein, terminate the lien created by this Indenture on any property at
any time subject hereto or deprive the Holder of any Note of the security
provided by the lien created by this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of the Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
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It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the parties hereto of any supplemental
indenture pursuant to this Section, the Indenture Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Indenture Trustee shall be entitled to receive, and subject
to Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the parties hereto and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act as then in
effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture. If
the Issuer or the Indenture Trustee shall so determine, new notes so modified as
to conform, in the opinion of the Indenture Trustee and the Issuer, to any such
supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Indenture Trustee in exchange for Outstanding
Notes.
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ARTICLE TEN
REDEMPTION OF NOTES
SECTION 10.01. REDEMPTION.
(a) In the event that the Seller pursuant to Section 7.10 of the Sale
and Servicing Agreement purchases the corpus of the Trust, the Class A-2 Notes
are subject to redemption in whole, but not in part, on the Distribution Date on
which such repurchase occurs, for a purchase price equal to the outstanding
principal, and accrued interest on the Class A-2 Notes; PROVIDED, HOWEVER, that
the Issuer has available funds sufficient to pay such amounts. Seller, the
Servicer or the Issuer shall furnish each Rating Agency notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a),
the Servicer or the Issuer shall furnish notice of such election to the
Indenture Trustee not later than 20 days prior to the Redemption Date and the
Issuer shall deposit with the Indenture Trustee in the Note Distribution Account
the Redemption Price of the Notes to be redeemed whereupon all such Notes shall
be due and payable on the Redemption Date upon the furnishing of a notice
complying with Section 10.02 to each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to
Section 9.02 of the Trust Agreement or Section 5.03(b) of this Indenture, the
proceeds of such sale shall be distributed as provided in Section 5.06. If
amounts are to be paid to Noteholders pursuant to this Section 10.01(b), the
Servicer or the Issuer shall, to the extent practicable, furnish notice of such
event to the Indenture Trustee not later than 20 days prior to the Redemption
Date whereupon all such amounts shall be payable on the Redemption Date.
(c) If (x) the Pre-Funded Amount has not been reduced to zero on the
Distribution Date on which the Funding Period ends (or, if the funding Period
does not end on a Distribution Date, on the first Distribution Date following
the end of the Funding Period) or (y) the Pre-Funded Amount has been reduced to
$150,000 or less on any Distribution Date, in either case after giving effect to
any reductions in the Pre-Funded Amount on such Distribution Date pursuant to
Section 7.07 of the Sale and Servicing Agreement, one or more classes of Notes
then outstanding will be redeemed, in whole or in part, as described in
Section 8.02(c) in a principal amount described therein.
SECTION 10.02. FORM OF REDEMPTION NOTICE.
(a) Notice of redemption under Section 10.01(a) shall be given by the
Indenture Trustee by first-class mail, postage prepaid, mailed not less than
five days prior to the applicable Redemption Date to each Holder of Notes, as of
the close of business on the Record Date preceding the applicable Redemption
Date, at such Holder's address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Date Amount; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Date Amount (which shall be the office or
agency of the Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note shall not impair or
affect the validity of the redemption of any other Note.
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(b) Prior notice of redemption under Section 10.01(b) is not required
to be given to Noteholders.
SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes or portions
thereof to be redeemed shall, following notice of redemption (if any) as
required by Section 10.02, on the Redemption Date become due and payable at the
Redemption Date Amount and (unless the Issuer shall default in the payment of
the Redemption Date Amount) no interest shall accrue on the Redemption Date
Amount for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Date Amount.
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC.
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, and (iii) (if required by the TIA as so stated in the Opinion of
Counsel) an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this section and TIA Section 314(c),
except that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished. No
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the definitions
herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to enable
such signatory to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for
authentication and delivery of the Notes or the release of any property subject
to the lien created by this Indenture, the Issuer shall, in addition to any
obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish
to the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of the signer thereof such certificate as to the fair value (within 90
days of such deposit) to the Issuer of the Collateral or other property or
securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (i) above, the Issuer shall also
deliver to the Indenture Trustee an Independent Certificate as to the named
matters, if the fair value to the Issuer of the property to be so deposited and
of all other such property made the basis of any such withdrawal or release
since the commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or more of the Outstanding Amount of the Notes, but such a
certificate need not be furnished with respect to any property so deposited, if
the fair value thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the Outstanding
Amount of the Notes.
(iii) Other than with respect to any release described in clause
(A) or (B) of Section 11.01(b)(v), whenever any property or securities are to be
released from the lien created by this Indenture, the Issuer shall also furnish
to the Indenture Trustee an Officer's Certificate certifying or stating the
opinion of each
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person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security created by this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (iii) above, the Issuer shall also
furnish to the Indenture Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and of all other
property or securities (other than property described in clauses (A) or (B) of
Section 11.01(b)(v)) released from the lien created by this Indenture since the
commencement of the then current fiscal year, as set forth in the certificates
required by clause (iii) above and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not be furnished in
the case of any release of property or securities if the fair value thereof as
set forth in the related Officer's Certificate is less than $25,000 or less than
one percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the
Issuer may, without compliance with the other provisions of this Section, (A)
collect, liquidate, sell or otherwise dispose of the Contracts as and to the
extent permitted or required by the Transaction Documents, (B) make cash
payments out of the Trust Accounts as and to the extent permitted or required by
the Transaction Documents, so long as the Issuer shall deliver to the Indenture
Trustee every six months, commencing December 15, 1998, an Officer's Certificate
stating that all the dispositions of Collateral described in clauses (A) or (B)
that occurred during the preceding six calendar months were in the ordinary
course of the Issuer's business and that the proceeds thereof were applied in
accordance with the Transaction Documents.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Person as to other matters, and any such Person may certify or given an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Servicer, the
Seller or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller or the Issuer, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, opinions or other instruments
under this Indenture, they may, but need not, be consolidated and form one
instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article Six.
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SECTION 11.03. ACTS OF NOTEHOLDERS.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by agents
duly appointed in writing; and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "ACT" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section.
(c) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(d) The ownership of Notes shall be proved by the Note Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.04. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("NOTICES") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Eaglemark, Inc.
150 South Wacker Drive, Suite 3100
Chicago, Illinois 60606
Attention: Michael E. Sulentic
Telecopier No.: (312) 368-4372
(ii) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-IV
4150 Technology Way
Carson City, Nevada 89706
Telecopier No.: (702) 884-4469
(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
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(iv) If to the Owner Trustee or the Issuer:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, A
Division of The McGraw Hill Companies
25 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
(vii) If to the Underwriters:
Salomon Smith Barney Inc.
Seven World Trade Center
New York, New York 10048
Attention: Asset-Backed Securities Group
Telecopier No.: (212) 783-3848
[ ]
Telecopier No.: [ ]
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of
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such notice. Waivers of notice by Noteholders shall be filed with the
Indenture Trustee but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event of Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding
any provisions of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreements.
SECTION 11.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.08. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee
in this Indenture shall bind its successors, co-Indenture Trustees and agents.
SECTION 11.09. SEPARABILITY. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.10. BENEFITS OF INDENTURE. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 11.11. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. COUNTERPARTS. This Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SECTION 11.14. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) to the effect that such
recording is necessary either for the protection of
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the Noteholders or any other Person secured hereunder or for the enforcement
of any right or remedy granted to the Indenture Trustee under this Indenture.
SECTION 11.15. TRUST OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficiary interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes
of this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article Six, Seven and Eight of the Trust
Agreement.
SECTION 11.16. NO PETITION. The parties hereto, by entering into this
Indenture, and each Noteholder, by accepting a Note or a beneficial interest in
a Note, hereby covenant and agree that they will not at any time institute
against the Seller, the Issuer or any General Partner, or join in any
institution against the Seller, the Issuer or any General Partner of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the other Transaction Documents.
SECTION 11.17. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested, the Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
SECTION 11.18. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered as of the day and year first above written.
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST
[ ]
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on behalf of
the Issuer as Owner Trustee under the Trust
Agreement
By:
-------------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
HARRIS TRUST AND SAVINGS BANK, not in its individual
capacity but solely as Indenture Trustee
By:
-------------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
<PAGE>
STATE OF )
) ss
COUNTY OF )
On____________________ before me, _____________________________________ ,
[insert date] [Here insert name and title of notary]
personally appeared ___________________________________________________________,
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature [Seal]
--------------------------------
<PAGE>
STATE OF )
) ss
COUNTY OF )
On _______________________ before me, __________________________________,
[insert date] [Here insert name and title of notary]
personally appeared __________________________________________________________,
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument,
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ties), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which such person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature [Seal]
---------------------------------
<PAGE>
EXHIBIT A
FORM OF SALE AND SERVICING AGREEMENT
A-1
<PAGE>
EXHIBIT B
FORM OF CLASS A-1 NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ]
___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT, CLASS A-1
REGISTERED $ ________________
No. R- CUSIP No. ___________________
Harley-Davidson Eaglemark Motorcycle Trust [ ], a business
trust organized and existing under the laws of the State of Delaware (herein
referred to as the "ISSUER"), for value received, hereby promises to pay to
[________], or registered assigns, the principal sum of ___________ ($_____)
payable on the earlier of _______, ____ (the "CLASS A-1 FINAL DISTRIBUTION
DATE") and the Redemption Date, if any, pursuant to Section 10.01 of the
Indenture referred to on the reverse hereof.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained on Section 3.01 of the Indenture. Interest on this Note will accrue
for each Distribution Date from the most recent Distribution Date on which
interest has been paid to but excluding such Distribution Date or, if no
interest has yet been paid, from the Closing Date. Interest will be computed on
the basis of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
B-1
<PAGE>
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
B-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by an Authorized Officer, as of the date set forth
below.
Date: ____________ HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE
TRUST [ ]
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on
behalf of the Issuer as Owner Trustee,
under the Trust Agreement
By:
--------------------------------------
Printed Name:
----------------------
Title:
-----------------------------
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK
not in its individual capacity but
solely as Indenture Trustee
By:
----------------------------------
Authorized Signatory
B-3
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its ___% Harley-Davidson Motorcycle Contract Backed Notes, Class
A-1 (the "CLASS A-1 NOTES"), all issued under an Indenture, dated as of
[ ] (the "INDENTURE"), among the Issuer and Harris Trust and Savings
Bank, as Indenture Trustee (the "INDENTURE TRUSTEE"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Class A-1 Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes and the Class A-2 Notes (collectively, the "NOTES")
are and will be equally and ratably secured by the collateral pledged as
security therefor as provided in the Indenture subject to the subordination of
the Class A-2 Notes under certain circumstances.
Principal of the Class A-1 Notes will be payable on the earlier of the
Class A-1 Final Distribution Date and the Redemption Date, if any, selected
pursuant to the Indenture. Notwithstanding the foregoing, the entire unpaid
principal amount of the Class A-1 Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing and the
Indenture Trustee or the Holders of the Notes representing not less than 66 2/3%
of the Outstanding Amount of the Notes, voting together as a single class, have
declared the Notes to be immediately due and payable in the manner provided in
the Indenture. All principal payments on the Class A-1 Notes shall be made pro
rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date shall be made by wire transfer to the account to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, payments
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) affected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed within five days of such Distribution Date
and the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Corporate Trust Office of the Indenture Trustee or
at the office of the Indenture Trustee's agent appointed for such purposes
located in the City of Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new program, and
such other documents as the Indenture Trustee may require, and thereupon one or
more new Notes of authorized denominations and in the same aggregate principal
amount will be issued to the designated transferee or transferees. No service
charge will be charged for any registration of transfer or exchange of this
Note, but the
B-4
<PAGE>
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such
registration of transfer or exchange.
Each Noteholder by acceptance of a Note or a beneficial interest in a
Note covenants and agrees that no recourse may be taken, directly or indirectly,
with respect to the obligations of the Issuer, the Owner Trustee or the
Indenture Trustee on the Notes or under the Indenture or any certificate or
other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign
of the Indenture Trustee or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Each Noteholder, by acceptance of a Note or a beneficial interest in a
Note covenants and agrees that by accepting the benefits of the Indenture and
such Note that such Noteholder will not at any time institute against the Seller
or the Issuer, or join in any institution against the Trust Depositor or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. Each Noteholder, by acceptance of a Note (and each
Noteholder by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for the federal, state and local income, single business and franchise
tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer and the Indenture Trustee and any agent of the Issuer and the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer and the Noteholders representing not less than 66 2/3% of the Outstanding
Amount of the Notes. The Indenture also contains provisions permitting the
Noteholders representing specified percentages of the Outstanding Amount of the
Notes, on behalf of the Noteholders, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Noteholder
(or any one of more Predecessor Notes) shall be conclusive and binding upon such
Holders and upon all future Noteholders and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Indenture Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Noteholders issued
thereunder.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of Illinois, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws.
B-5
<PAGE>
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
B-6
<PAGE>
EXHIBIT C
FORM OF CLASS A-2 NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE UNITED STATES OR ANY AGENCY OF FUND OF THE UNITED STATES.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN FULL ON THE DATE SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ]
___% HARLEY-DAVIDSON MOTORCYCLE CONTRACT, CLASS A-2
REGISTERED $ ___________
No. R- CUSIP No. ____________
Harley-Davidson Eaglemark Motorcycle Trust [ ], a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "ISSUER"), for value received, hereby promises to pay to
[___________], or registered assigns, the principal sum of ___________
($__________) payable on the earlier of _______, ____ (the "CLASS A-2 FINAL
DISTRIBUTION DATE") and the Redemption Date, if any, pursuant to Section 10.01
of the Indenture referred to on the reverse hereof. No payments of principal of
the Class A-2 Notes shall be made until the principal on the Class A-1 Notes
have been paid in full.
The Issuer will pay interest on this Note at the rate per annum shown
above on each Distribution Date until the principal of this Note is paid or made
available for payment, on the principal amount of this Note outstanding on the
preceding Distribution Date (after giving effect to all payments of principal
made on the preceding Distribution Date), subject to certain limitations
contained in the Indenture. Interest on this Note will accrue for each
Distribution Date from the most recent Distribution Date on which interest has
been paid to but excluding such Distribution Date or, if no interest has yet
been paid, from the Closing Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
C-1
<PAGE>
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the indenture referred to on the reverse
hereof, or be valid or obligatory for any purpose.
C-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ___________ HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE
TRUST [ ]
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely on
behalf of the Issuer as Owner Trustee,
under the Trust Agreement
By:
---------------------------------
Printed Name:
---------------------
Title:
----------------------------
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK
not in its individual capacity but
solely as Indenture Trustee
By:
---------------------------------
Authorized Signatory
C-3
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its ___% Harley-Davidson Motorcycle Contract, Class A-2 (the
"CLASS A-2 NOTES"), all issued under an Indenture, dated as of
[ ] (the "INDENTURE"), among the Issuer and Harris Trust and
Savings Bank, as Indenture Trustee (the "INDENTURE TRUSTEE"), to which Indenture
and all indentures supplemental thereto reference is hereby made for a statement
of the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Holders of the Notes. The Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-2 Notes and the Class A-1 Notes (collectively, the "NOTES")
are and will be equally and ratably secured by the collateral pledged as
security therefor as provided in the Indenture subject to no payment of
principal on the Class A-2 Notes until all principal has been paid on the Class
A-1 Notes.
Principal of the Class A-2 Notes will be payable on the earlier of the
Class A-2 Final Distribution Date and the Redemption Date, if any, pursuant to
Section 10.01(a) or 10.01(b) of the Indenture. Notwithstanding the foregoing,
the entire unpaid principal amount of the Class A-2 Notes shall be due and
payable on the date on which an Event of Default shall have occurred and be
continuing unless the Holders of the Notes representing not less than 66 2/3 of
the Outstanding Amount of the Notes, voting together as a single class, waive
such Event of Default. All principal payments on the Class A-2 Notes shall be
made pro rata to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Distribution
Date shall be made by check mailed to the Person whose name appears as the
Registered Holder of this Note (or one or more Predecessor Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) affected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such
Distribution Date by notice mailed within five days of such Distribution Date
and the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Indenture Trustee's principal Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in the City of Chicago, Illinois.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to
Section 10.01(a) of the Indenture, in whole, but not in part, at the option of
the Seller, any Distribution Date on or after the date on which the Pool Balance
is less than 10% of the Initial Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an eligible guarantor
institution which is a participant in the Securities Transfer Agent's Medallion
Program (STAMP) or similar signature guarantee program, and such other documents
as the Indenture Trustee may require, and thereupon one or more new program,
C-4
<PAGE>
and such other documents as the Indenture Trustee may require, and thereupon
one or more new Class A-2 Notes of authorized denomination and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any such registration of transfer or exchange.
Each Noteholder, by acceptance of a Note or a beneficial interest in a
Note covenants and agrees that no recourse may be taken, directly or indirectly,
with respect to the obligations of the Issuer, the Owner Trustee or the
Indenture Trustee on the Notes or under the Indenture or any certificate or
other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in their individual capacities, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee or the Owner
Trustee in their individual capacities, any holder of a beneficial interest in
the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in their individual
capacities, except as any such Person may have expressly agreed and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
Each Noteholder, by acceptance of a Note or a beneficial interest in a
Note covenants and agrees that by accepting the benefits of the Indenture and
such Note that such Noteholder will not at any time institute against the Seller
or the Issuer, or join in any institution against the Trust Depositor or the
Issuer of any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, the Indenture or the
Transaction Documents.
The Issuer has entered into the Indenture, and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. Each Noteholder, by acceptance of a Note or of a
beneficial interest in a Note, agrees to treat the Notes for the federal, state
and local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer and the Indenture Trustee and any agent of the Issuer, the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the of Holders of Notes representing not
less than 66 2/3% of the Outstanding Amount of all of the Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holders and upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made upon this Note.
The Indenture also permits the Indenture Trustee to amend or waive certain terms
and conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
C-5
<PAGE>
This Note and the Indenture shall be construed in accordance with the
laws of the State of Illinois, and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
C-6
<PAGE>
EXHIBIT D
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- ------------------------------------------------------------------------------
the within Note, and all rights thereunder, hereby irrevocably constituting and
appointing
- ------------------------------------------------------------------------------
to transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated:
Signature Guaranteed:
- -----------------------------------
Signature must be guaranteed by an
eligible guarantor institution
which is a participant in the
Securities Transfer Agent's
Medallion Program (STAMP) or
similar signature guarantee
program.
- ----------------------------------
Notice: The signature(s) on this
assignment must correspond with the
name(s) as it appears on the face
of the within Note in every
particular, without alteration or
enlargement or any change
whatsoever.
- ------------------------------------
(Authorized Officer)
D-1
<PAGE>
EXHIBIT E
FORM OF NOTE DEPOSITORY AGREEMENT
E-1
<PAGE>
Exhibit 5.1
September 3, 1998
Eaglemark, Inc.
4150 Technology Way
Carson City, Nevada 89706
Re: Harley-Davidson Motorcycle Contract Backed Notes and
----------------------------------------------------
Harley-Davidson Motorcycle Contract Backed Certificates
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to the Harley-Davidson Eaglemark
Motorcycle Trusts (each, a "TRUST") referred to below in connection with the
filing by Eaglemark, Inc., a Nevada corporation (the "COMPANY"), as sponsor
of the Trusts, of the registration statement on Form S-3 (such registration
statement, together with the exhibits and any amendments thereto, the
"REGISTRATION STATEMENT"), registering up to $1,200,000,000 aggregate
principal amount of asset-backed notes (the "NOTES") and asset-backed
certificates (the "CERTIFICATES" and, together with the Notes, the
"SECURITIES"). The Registration Statement has been filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"SECURITIES ACT"). As described in the Registration Statement, the
Securities will be issued from time to time in one or more series (each, a
"SERIES"). Each Series of Securities is to be issued under and pursuant to
the terms of a separate Pooling and Servicing Agreement or Sale and Servicing
Agreement, Trust Agreement and Indenture and sold from time to time pursuant
to certain underwriting agreements (collectively, the "AGREEMENTS" and each,
individually, an "AGREEMENT"). Capitalized terms used but not defined herein
have the meanings given to them in the Registration Statement.
This opinion letter is being delivered to you pursuant to the
requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.
We are familiar with the proceedings to date with respect to the
proposed issuance and delivery of the Securities and have examined copies of
the Certificate of Incorporation and By-Laws of the Company, the Registration
Statement, the Prospectus and the form of Prospectus Supplements included
therein, the form of each Agreement and such other documents, records and
questions of law, and satisfied ourselves as to such matters of fact, as we
have considered relevant and necessary as a basis for this opinion letter.
<PAGE>
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents that have been or will be executed in connection
with the issuance of each Series of Securities, we have assumed that the
parties to such documents had or will have at the time of execution of such
documents, the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect of such
documents. As to any facts material to the opinions expressed herein which
we did not independently establish or verify, we have relied upon oral and
written statements and representations of officers and other representatives
of the Company and others. In addition, we have also relied upon the
accuracy and completeness of all certificates and other statements,
representations, documents, records, financial statements and papers reviewed
by us, and the accuracy and completeness of all representations, warranties,
schedules and exhibits contained in such documents, with respect to the
factual matters set forth therein.
Based on the foregoing, and assuming that the terms of each Series
of Securities are otherwise in compliance with applicable law at the time of
issuance of such Securities, we are of the opinion that:
1. When (i) the Registration Statement, as finally amended, has become
effective under the Securities Act, (ii) the amount, price, interest rate and
other principal terms of the Notes relating to such Series have been duly
approved by Board of Directors of the Company, (iii) the applicable
Agreements relating to such Series have been duly executed and delivered by
the parties thereto in substantially the form filed as exhibits to the
Registration Statement, (iv) the related Certificate of Trust has been duly
executed and filed by the Owner Trustee with the Secretary of State of the
State of Delaware, (v) the Indenture has been qualified under the Trust
Indenture Act of 1939, as amended, and (vi) the Notes have been duly executed
and authenticated in accordance with the applicable Agreements, the Notes
will constitute valid and binding obligations of the related Trust as issuer
thereof enforceable in accordance with their terms, and entitled to the
benefits of the applicable Agreements (subject to the effect of bankruptcy,
fraudulent conveyance or transfer, insolvency, reorganization, arrangement,
liquidation, conservatorship and moratorium laws and subject to the
limitations imposed by other laws and judicial decisions relating to or
affecting the rights of creditors generally, to general principles of equity,
regardless of whether enforcement is considered in proceedings in equity or
at law, and to an implied covenant of good faith and fair dealing).
2. When (i) the Registration Statement, as finally amended, has become
effective under the Securities Act, (ii) the amount, price, interest rate and
other principal terms of the Certificates relating to such Series have been
duly approved by the Board of Directors of the Company, (iii) the applicable
Agreements relating to such Series have been duly executed and delivered by
the parties thereto in substantially the form filed as exhibits to the
Registration Statement, and (iv) the Certificates have been duly and validly
executed in accordance with the applicable Agreements, the Certificates will
constitute valid and binding obligations of the applicable Trust as issuer
thereof enforceable in accordance with their terms, and entitled to the
benefits of the applicable Agreements
<PAGE>
(subject to the effect of bankruptcy, fraudulent conveyance or transfer,
insolvency, reorganization, arrangement, liquidation, conservatorship and
moratorium laws and subject to the limitations imposed by other laws and
judicial decisions relating to or affecting the rights of creditors
generally, to general principles of equity, regardless of whether enforcement
is considered in proceedings in equity or at law, and to an implied covenant
of good faith and fair dealing).
We do not find it necessary for the purposes of this opinion letter
to cover, and accordingly we express no opinion as to, the application of the
securities or blue sky laws of the various states to the offer and sale of
the Securities.
This opinion letter is limited to the laws of the United States of
America, the State of Illinois and Title 12, Chapter 38 of the Delaware Code,
and we express no opinion with respect to the laws of any other state or
jurisdiction.
Our opinions set forth in this letter are based on the facts in
existence and the laws in effect on the date hereof and we expressly disclaim
any obligation to update our opinions herein, regardless of whether changes
in such facts or laws come to our attention after the delivery hereof.
We hereby consent to the filing of this opinion letter as an
exhibit to the Registration Statement and to all references to our firm
included in or made a part of the Registration Statement. In giving such
consent, we do not concede that we are experts within the meaning of the
Securities Act or the rules and regulations thereunder or that this consent
is required by Section 7 of the Securities Act or the rules and regulations
thereunder.
Very truly yours,
/s/ Winston & Strawn
<PAGE>
Exhibit 8.1
September 3, 1998
Eaglemark, Inc.
4150 Technology Way
Carson City, Nevada 89706
Re: Harley-Davidson Motorcycle Contract Backed Notes and
----------------------------------------------------
Harley-Davidson Motorcycle Contract Backed Certificates
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as special federal tax counsel to the Harley-Davidson
Eaglemark Motorcycle Trusts (each, a "TRUST") referred to below in connection
with the filing by Eaglemark, Inc., a Nevada corporation (the "COMPANY"), as
sponsor of the Trusts, of the registration statement on Form S-3 (such
registration statement, together with the exhibits and any amendments
thereto, the "REGISTRATION STATEMENT"), registering up to $1,200,000,000
aggregate principal amount of asset-backed notes (the "NOTES") and
asset-backed certificates (the "CERTIFICATES" and, together with the Notes,
the "SECURITIES"). The Registration Statement has been filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "SECURITIES ACT"). As described in the Registration Statement,
the Securities will be issued from time to time in one or more series (each,
a "SERIES"). Each Series of Securities is to be issued under and pursuant to
the terms of a separate Pooling and Servicing Agreement or Sale and Servicing
Agreement, Trust Agreement and Indenture and sold from time to time pursuant
to certain underwriting agreements (collectively, the "AGREEMENTS" and each,
individually, an "AGREEMENT"). Capitalized terms used but not defined herein
have the meanings given to them in the Registration Statement.
We have advised the Registrant with respect to certain federal income
tax consequences of the proposed issuance of the Securities. This advice is
summarized under the headings "Summary of Terms -- Tax Status" and "Certain
Federal Income Tax Consequences" in the prospectus relating to the Securities
(the "Prospectus"), all a part of the Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Act"),
for the registration of the Securities under the Act. Such description does
not purport to discuss all possible federal income tax ramifications of the
proposed issuance, but with respect to those tax consequences that are
discussed, in our opinion, the description is accurate in all material
respects. Furthermore, we hereby confirm that, as specified in the
Prospectus, we will provide an opinion to the trust specified in the related
prospectus supplement that (i) with respect to a trust as to which a
partnership election is made, the trust will not be classified as an
association taxable as a corporation or a publicly traded partnership
<PAGE>
taxable as a corporation, (ii) with respect to a trust as to which no
partnership election is made, the trust will not be classified as an
association taxable as a corporation and that such trust will be classified
as a grantor trust under Internal Revenue Code of 1986, as amended, and (iii)
unless otherwise specified in the related prospectus supplement, the Notes
will be classified as debt for federal income tax purposes.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to a reference to this firm (as counsel to the
Registrant) under the headings "Summary of Terms --Tax Status" and "Legal
Matters" in the Prospectus forming a part of the Registration Statement,
without implying or admitting that we are "experts" within the meaning of the
Act or the rules and regulations of the Commission issued thereunder, with
respect to any part of the Registration Statement, including this exhibit.
Very truly yours,
/s/ Winston & Strawn
<PAGE>
EXHIBIT 10.1
===============================================================================
FORM OF
SALE AND SERVICING AGREEMENT
among
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ],
as Issuer,
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV,
as Trust Depositor,
EAGLEMARK, INC.,
as Servicer
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
Dated as of [ ]
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
PAGE
TABLE OF CONTENTS
<S> <C>
ARTICLE ONE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. USAGE OF TERMS.. . . . . . . . . . . . . . . . . . . . .15
SECTION 1.03. SECTION REFERENCES.. . . . . . . . . . . . . . . . . . .15
SECTION 1.04. CALCULATIONS.. . . . . . . . . . . . . . . . . . . . . .15
SECTION 1.05. ACCOUNTING TERMS.. . . . . . . . . . . . . . . . . . . .15
ARTICLE TWO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS . . . . . . . . . . . . . .16
SECTION 2.01. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 2.02. CONDITIONS TO THE CLOSING. . . . . . . . . . . . . . . .17
SECTION 2.03. ACCEPTANCE BY OWNER TRUSTEE. . . . . . . . . . . . . . .18
SECTION 2.04. CONVEYANCE OF SUBSEQUENT CONTRACTS.. . . . . . . . . . .18
ARTICLE THREE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . .21
SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE TRUST
DEPOSITOR. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE
SERVICER.. . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE FOUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS . . . . . . .24
SECTION 4.01. CUSTODY OF CONTRACTS.. . . . . . . . . . . . . . . . . .24
SECTION 4.02. FILING.. . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 4.03. NAME CHANGE OR RELOCATION. . . . . . . . . . . . . . . .25
SECTION 4.04. CHIEF EXECUTIVE OFFICE.. . . . . . . . . . . . . . . . .25
SECTION 4.05. COSTS AND EXPENSES.. . . . . . . . . . . . . . . . . . .25
ARTICLE FIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
SERVICING OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION.. . . . . . .26
SECTION 5.02. STANDARD OF CARE.. . . . . . . . . . . . . . . . . . . .26
SECTION 5.03. RECORDS. . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 5.04. INSPECTION.. . . . . . . . . . . . . . . . . . . . . . .26
SECTION 5.05. TRUST ACCOUNTS.. . . . . . . . . . . . . . . . . . . . .26
SECTION 5.06. ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . .27
SECTION 5.07. TRUSTEES TO COOPERATE. . . . . . . . . . . . . . . . . .28
SECTION 5.08. COSTS AND EXPENSES.. . . . . . . . . . . . . . . . . . .28
SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN MOTORCYCLES.. . . .29
SECTION 5.10. SUCCESSOR SERVICER/LOCKBOX AGREEMENTS. . . . . . . . . .29
ARTICLE SIX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
THE TRUST DEPOSITOR . . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 6.01. CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . . .30
SECTION 6.02. LIABILITY OF TRUST DEPOSITOR; INDEMNITIES. . . . . . . .30
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, TRUST DEPOSITOR; CERTAIN
LIMITATIONS. . . . . . . . . . . . . . . . . . . . . .31
SECTION 6.04. LIMITATION ON LIABILITY OF TRUST DEPOSITOR AND
OTHERS.. . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 6.05. TRUST DEPOSITOR NOT TO RESIGN. . . . . . . . . . . . . .32
i
<PAGE>
PAGE
SECTION 6.06. TRUST DEPOSITOR WILL OWN CERTIFICATES. . . . . . . . . .32
ARTICLE SEVEN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
DISTRIBUTIONS; RESERVE FUND . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 7.01. MONTHLY DISTRIBUTIONS. . . . . . . . . . . . . . . . . .33
SECTION 7.02. FEES.. . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 7.03. ADVANCES; REALIZATION OF CARRYING CHARGE.. . . . . . . .33
SECTION 7.04. INTEREST RESERVE ACCOUNT.. . . . . . . . . . . . . . . .33
SECTION 7.05. DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . .34
SECTION 7.06. RESERVE FUND; CERTIFICATE RESERVE AMOUNT.. . . . . . . .35
SECTION 7.07. ESTABLISHMENT OF PRE-FUNDING ACCOUNT.. . . . . . . . . .35
SECTION 7.08. REPURCHASES OF CONTRACTS FOR BREACH OF
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . .36
SECTION 7.09. REASSIGNMENT OF REPURCHASED CONTRACTS. . . . . . . . . .36
SECTION 7.10. SELLER'S REPURCHASE OPTION.. . . . . . . . . . . . . . .37
ARTICLE EIGHT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
EVENTS OF TERMINATION; SERVICE TRANSFER . . . . . . . . . . . . . . . . .38
SECTION 8.01. EVENTS OF TERMINATION. . . . . . . . . . . . . . . . . .38
SECTION 8.02. SERVICE TRANSFER.. . . . . . . . . . . . . . . . . . . .38
SECTION 8.03. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF SUCCESSOR
SERVICER.. . . . . . . . . . . . . . . . . . . . . . .39
SECTION 8.04. NOTIFICATION TO CERTIFICATEHOLDERS.. . . . . . . . . . .39
SECTION 8.05. EFFECT OF TRANSFER.. . . . . . . . . . . . . . . . . . .39
SECTION 8.06. DATABASE FILE. . . . . . . . . . . . . . . . . . . . . .40
SECTION 8.07. SUCCESSOR SERVICER INDEMNIFICATION.. . . . . . . . . . .40
SECTION 8.08. RESPONSIBILITIES OF THE SUCCESSOR SERVICER.. . . . . . .40
ARTICLE NINE. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 9.01. MONTHLY REPORTS. . . . . . . . . . . . . . . . . . . . .41
SECTION 9.02. OFFICER'S CERTIFICATE. . . . . . . . . . . . . . . . . .41
SECTION 9.03. OTHER DATA.. . . . . . . . . . . . . . . . . . . . . . .41
SECTION 9.04. ANNUAL REPORT OF ACCOUNTANTS.. . . . . . . . . . . . . .41
SECTION 9.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER.. . . . . .42
SECTION 9.06. MONTHLY REPORTS TO SECURITYHOLDERS.. . . . . . . . . . .42
ARTICLE TEN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 10.01. SALE OF TRUST ASSETS.. . . . . . . . . . . . . . . . . .44
ARTICLE ELEVEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 11.01. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 11.02. PROTECTION OF TITLE TO TRUST.. . . . . . . . . . . . . .45
SECTION 11.03. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . .47
SECTION 11.04. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 11.05. SEVERABILITY OF PROVISIONS.. . . . . . . . . . . . . . .48
SECTION 11.06. ASSIGNMENT.. . . . . . . . . . . . . . . . . . . . . . .48
SECTION 11.07. THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . . . .48
SECTION 11.08. COUNTERPARTS.. . . . . . . . . . . . . . . . . . . . . .48
SECTION 11.09. HEADINGS.. . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 11.10. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND
INDENTURE TRUSTEE. . . . . . . . . . . . . . . . . . .49
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
Exhibit A
<S> <C>
[Form of Assignment]. . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B
[Form of Closing Certificate of Trust Depositor]. . . . . . . . . . . . B-1
Exhibit C
[Form of Closing Certificate of Servicer/Seller]. . . . . . . . . . . . C-1
Exhibit D
[Form of Opinion of Counsel for Trust Depositor
Regarding General Corporate Matters
(Including Perfection Opinion). . . . . . . . . . . . . . . . . . . . . D-1
Exhibit E
[Form of Opinion of Counsel for Trust
Depositor Regarding the "TRUE SALE" Nature
of the Transaction] . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
Exhibit F
[Form of Opinion of Counsel for Trust
Depositor Regarding Non-consolidation]. . . . . . . . . . . . . . . . . F-1
Exhibit G
[Form of Certificate Regarding Repurchased Contracts] . . . . . . . . . G-1
Exhibit H
[List of Contracts] . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
Exhibit I
[Form of Monthly Report to Noteholders And Certificateholders]. . . . . I-1
Exhibit J
[Seller's Representations and Warranties] . . . . . . . . . . . . . . . J-1
iii
<PAGE>
PAGE
Exhibit K
[Lockbox Bank and Lockbox Account]. . . . . . . . . . . . . . . . . . . K-1
Exhibit L
[Form of Contract Stamp]. . . . . . . . . . . . . . . . . . . . . . . . L-1
Exhibit M
[Form of Subsequent Transfer Agreement] . . . . . . . . . . . . . . . . M-1
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
EXHIBITS
<S> <C> <C>
Exhibit A Form of Assignment . . . . . . . . . . . . . . . . . . . A-1
Exhibit B Form of Closing Certificate of Trust Depositor . . . . . B-1
Exhibit C Form of Closing Certificate of Seller/Servicer . . . . . C-1
Exhibit D Form of Opinion of Counsel for Trust Depositor
regarding general corporate matters (including
perfection opinion). . . . . . . . . . . . . . . . . . D-1
Exhibit E Form of Opinion of Counsel for Trust Depositor
regarding the "TRUE SALE" nature of the
transaction . . . . . . . . . . . . . . . . . . . . . E-1
Exhibit F Form of Opinion of Counsel for Trust Depositor
regarding non-consolidation. . . . . . . . . . . . . . F-1
Exhibit G Form of Certificate Regarding Repurchased Contracts. . . G-1
Exhibit H List of Contracts. . . . . . . . . . . . . . . . . . . . H-1
Exhibit I Form of Monthly Report to Noteholders and
Certificateholders . . . . . . . . . . . . . . . . . . I-1
Exhibit J Seller's Representations and Warranties . . . . . . . . J-1
Exhibit K Lockbox Bank and Lockbox Account . . . . . . . . . . . . K-1
Exhibit L Form of Contract Stamp . . . . . . . . . . . . . . . . . L-1
Exhibit M Form of Subsequent Transfer Agreement. . . . . . . . . . M-1
</TABLE>
v
<PAGE>
SALE AND SERVICING AGREEMENT, dated as of [ ], among
Harley-Davidson Eaglemark Motorcycle Trust [ ] (together with its
successors and assigns, the "ISSUER" or the "TRUST"), Eaglemark Customer Funding
Corporation-IV (together with its successor and assigns, the "TRUST DEPOSITOR"),
Harris Trust and Savings Bank (solely in its capacity as Indenture Trustee
together with its successors and assigns, the "INDENTURE TRUSTEE") and
Eaglemark, Inc. (solely in its capacity as Servicer together with its successor
and assigns, "EAGLEMARK" or the "SERVICER").
WHEREAS the Issuer desires to purchase from the Trust Depositor an
initial and subsequent pool of fixed-rate, simple interest motorcycle
conditional sales contracts relating to Harley-Davidson motorcycles or, in
certain limited instances, motorcycles manufactured by an affiliate of
Harley-Davidson, Buell Motorcycle Company, (collectively, the "CONTRACTS")
originated by Eaglemark and subsequently sold by Eaglemark to the Trust
Depositor;
WHEREAS the Trust Depositor is willing to sell the Contracts to the
Issuer pursuant to the terms hereof; and
WHEREAS the Servicer is willing to service the Contracts pursuant to the
terms hereof;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. DEFINITIONS. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"ADDITION NOTICE" means, with respect to any transfer of Subsequent
Contracts to the Issuer pursuant to Section 2.04 and the Trust Depositor's
corresponding prior purchase of such Contracts from the Seller, a notice, which
shall be given at least 10 days prior to the related Subsequent Transfer Date,
identifying the Subsequent Contracts to be transferred and the aggregate
Principal Balance of such Subsequent Contracts.
"ADVANCE" means, with respect to any Distribution Date, the amounts, if
any, deposited by the Servicer in the Collection Account for such Distribution
Date pursuant to Section 7.03.
"AFFILIATE" of any specified Person means any other Person controlling or
controlled by, or under common control with, such specified Person. For the
purposes of this definition, "CONTROL" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "CONTROLLING" or "CONTROLLED" have meanings
correlative to the foregoing.
"AGREEMENT" means this Sale and Servicing Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.
"AGGREGATE PRINCIPAL BALANCE" will equal the sum of the Principal
Balances of each outstanding Contract and the Pre-Funded Amount, if any. At the
time of initial issuance of the Securities, the initial aggregate principal
amount of the Securities will equal the Initial Pool Balance plus the initial
Pre-Funded Amount.
"AGGREGATE PRINCIPAL BALANCE DECLINE" means, with respect to any
Distribution Date, the amount by which the Aggregate Principal Balance as of the
Distribution Date immediately preceding such Distribution Date (or as of the
Cutoff Date in the case of the first Distribution Date) exceeds the Aggregate
Principal Balance as of such Distribution Date.
<PAGE>
"AVAILABLE AMOUNT" means, with respect to any Distribution Date, the
amount of funds on deposit in the Reserve Fund on such Distribution Date less
the Certificate Reserve Amount with respect to such Distribution Date before
giving effect to any reduction thereto on such date.
"AVAILABLE MONIES" means, with respect to any Distribution Date, the sum
of the Available Interest and the Available Principal for such Distribution
Date.
"AVAILABLE INTEREST" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer on
or in respect of the Contracts during the related Due Period: (i) all amounts
received in respect of interest on the Contracts (as well as Late Payment
Penalty Fees and Extension Fees), (ii) the interest component of all Net
Liquidation Proceeds, (iii) the interest component of the aggregate of the
Repurchase Prices for Contracts repurchased by the Trust Depositor pursuant to
Section 7.08, (iv) all Advances made by the Servicer pursuant to Section 7.03,
(v) the interest component of all amounts paid by the Trust Depositor in
connection with an optional repurchase of the Contracts pursuant to Section
7.10, (vi) all amounts received in respect of Carrying Charges transferred from
the Interest Reserve Account pursuant to Section 7.03, and (vii) all amounts
received in respect of interest, dividends, gains, income and earnings on
investment of funds in the Trust Accounts as contemplated in Section 5.05(d).
"AVAILABLE PRINCIPAL" means, with respect to any Distribution Date, the
total (without duplication) of the following amounts received by the Servicer on
or in respect of the Contracts during the related Due Period: (i) all amounts
received in respect of principal on the Contracts, (ii) the principal component
of all Net Liquidation Proceeds, (iii) the principal component of the aggregate
of the Repurchase Prices for Contracts repurchased by the Trust Depositor
pursuant to Section 7.08, and (iv) the principal component of all amounts paid
by the Trust Depositor in connection with an optional repurchase of the
Contracts pursuant to Section 7.10.
"AVERAGE DELINQUENCY RATIO" means, for any Distribution Date, the
arithmetic average of the Delinquency Ratios for such Distribution Date and the
two immediately preceding Distribution Dates.
"AVERAGE LOSS RATIO" means, for any Distribution Date, the arithmetic
average of the Loss Ratios for such Distribution Date and the two immediately
preceding Distribution Dates.
"BASE PROSPECTUS" means the Prospectus dated August [ ], 1998 relating
to the Harley-Davidson Eaglemark Motorcycle Trusts.
"BUELL" means Buell Motorcycle Company.
"BUSINESS DAY" means any day other than a Saturday or a Sunday, or
another day on which banking institutions in the city of Chicago, Illinois,
Wilmington, Delaware or New York, New York are authorized or obligated by law,
executive order, or governmental decree to be closed.
"CALCULATION DAY" means the last day of each calendar month.
"CARRYING CHARGES" means (i) the product of (x) the weighted average of
the Class A-1 Rate, the Class A-2 Rate and the Pass-Through Rate and (y) the
undisbursed funds (excluding investment earnings) in the Pre-Funding Account (as
of the last day of the related Due Period) over (ii) the amount of any
investment earnings on funds in the Pre-Funding Account which was transferred to
the Interest Reserve Account, as well as interest earnings on amounts in the
Interest Reserve Account.
"CERTIFICATE BALANCE" equals $[ ] on the Closing Date, and,
thereafter, equals the Initial Certificate Balance, reduced by all amounts
allocable to principal previously distributed to Certificateholders.
"CERTIFICATE DEPOSITORY AGREEMENT" has the meaning specified in the Trust
Agreement.
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"CERTIFICATE DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Principal Distributable Amount and
the Certificate Interest Distributable Amount for such Distribution Date.
"CERTIFICATE DISTRIBUTION ACCOUNT" shall have the meaning specified in
the Trust Agreement.
"CERTIFICATE FINAL DISTRIBUTION DATE" means the [ ]
Distribution Date.
"CERTIFICATE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date, the excess of the sum of the Certificate Monthly Interest
Distributable Amount for the immediately preceding Distribution Date and any
outstanding Certificate Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest on the Certificates
that is actually deposited in the Certificate Distribution Account on such
preceding Distribution Date, plus interest on such excess, to the extent
permitted by law, at the Pass-Through Rate for the related Interest Period.
"CERTIFICATE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Monthly Interest Distributable
Amount for such Distribution Date and the Certificate Interest Carryover
Shortfall for such Distribution Date.
"CERTIFICATE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect
to any Distribution Date, 30 days of interest (or in the case of the first
Distribution Date, interest accrued from and including the Closing Date to but
excluding such Distribution Date) at the Pass-Through Rate on the outstanding
principal amount of the Certificates on the immediately preceding Distribution
Date, after giving effect to all payments of principal to the Certificateholders
on such preceding Distribution Date (or, in the case of the first Distribution
Date, on the original principal amount of the Certificates).
"CERTIFICATE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" will mean, with
respect to any Distribution Date, the Certificate Percentage of the Principal
Distributable Amount for such Distribution Date.
"CERTIFICATE PERCENTAGE" means (i) for each Distribution Date to but
excluding the Distribution Date on which the principal amount of the Class A-2
Notes is reduced to zero, 0%; (ii) on the Distribution Date on which the
principal amount of the Class A-2 Notes is reduced to zero, such percentage that
equals 100% minus the Note Percentage for such Distribution Date; and (iii) 100%
thereafter.
"CERTIFICATE POOL FACTOR" means, as of the close of business on any
Distribution Date, a seven-digit decimal figure equal to the Certificate Balance
(after giving effect to any reductions therein to be made on such Distribution
Date) divided by the Certificate Initial Balance. The Certificate Pool Factor
will be 1.0000000 as of the Closing Date; thereafter, the Certificate Pool
Factor will decline to reflect reductions in the Certificate Balance.
"CERTIFICATE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
Distribution Date, the excess of the sum of the Certificate Monthly Principal
Distributable Amount and any outstanding Certificate Principal Carryover
Shortfall from the immediately preceding Distribution Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account on such Distribution Date.
"CERTIFICATE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Certificate Monthly Principal Distributable
Amount and (ii) any outstanding Certificate Principal Carryover Shortfall as of
the close of the immediately preceding Distribution Date; PROVIDED, HOWEVER,
that the Certificate Principal Distributable Amount shall not exceed the
Certificate Balance. In addition, on the Certificate Final Distribution Date,
the principal required to be deposited into the Certificate Distribution Account
will include the amount necessary to reduce the Certificate Balance to zero.
"CERTIFICATE REGISTER" shall have the meaning specified in the Trust
Agreement.
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"CERTIFICATE RESERVE AMOUNT" means the sum of the Initial Certificate
Reserve Amount and the Subsequent Certificate Reserve Amount, as such amount may
be reduced or restored from time to time pursuant to Section 7.05.
"CERTIFICATEHOLDERS" shall have the meaning specified in the Trust
Agreement.
"CERTIFICATES" means the Trust Certificates (as such term is defined in
the Trust Agreement).
"CLASS" means all Notes whose form is identical except for variation in
denomination, principal amount or owner.
"CLASS A-1 FINAL DISTRIBUTION DATE" means the [ ]
Distribution Date.
"CLASS A-1 NOTEHOLDER" means the Person in whose name a Class A-1 Note is
registered in the Note Register, as such term is defined in the Indenture.
"CLASS A-1 RATE" means [ ]% per annum.
"CLASS A-2 FINAL DISTRIBUTION DATE" means the [ ]
Distribution Date.
"CLASS A-2 NOTEHOLDER" means the Person in whose name a Class A-2 Note is
registered in the Note Register.
"CLASS A-2 RATE" means [ ]% per annum.
"CLOSING DATE" means [ ].
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means as defined in the "granting clause" of the Indenture.
"COLLECTION ACCOUNT" means a trust account as described in Section 5.05
maintained in the name of the Indenture Trustee and which shall be an Eligible
Account.
"COMPUTER DISK" means the computer disk generated by the Servicer which
provides information relating to the Contracts and which was used by the Seller
in selecting the Contracts sold to the Trust Depositor pursuant to the Transfer
and Sale Agreement (and any Subsequent Purchase Agreement) by the Trust
Depositor in selecting the Contracts sold to the Trust pursuant to this
Agreement (and any Subsequent Transfer Agreement), and includes the master file
and the history file as well as servicing information with respect to the
Contracts.
"CONTRACT ASSETS" has the meaning assigned in Section 2.01 (and 2.04, as
applicable in the case of Subsequent Contracts) of the Transfer and Sale
Agreement.
"CONTRACT FILE" means, as to each Contract, (a) the original copy of the
Contract, including the executed conditional sales contract or other evidence of
the obligation of the Obligor, (b) the original title certificate to the
Motorcycle and, where applicable, the certificate of lien recordation, or, if
such title certificate has not yet been issued, an application for such title
certificate, or other appropriate evidence of a security interest in the covered
Motorcycle; (c) the assignments of the Contract; (d) the original copy of any
agreement(s) modifying the Contract including, without limitation, any extension
agreement(s) and (e) documents evidencing the existence of physical damage
insurance covering such Motorcycle.
"CONTRACT RATE" means, as to any Contract, the annual rate of interest
specified in the Contract.
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"CONTRACTS" means the motorcycle conditional sales contracts described
in the List of Contracts and constituting part of the Trust Corpus (as such list
may be supplemented from time to time to reflect transfers of Subsequent
Contracts), and includes, without limitation, all related security interests and
any and all rights to receive payments which are collected pursuant thereto on
or after the Initial Cutoff Date or, with respect to any Subsequent Contracts,
any related Subsequent Cutoff Date, but excluding any rights to receive payments
which are collected pursuant thereto prior to the Initial Cutoff Date, or with
respect to any Subsequent Contracts, any related Subsequent Cutoff Date.
"CORPORATE TRUST OFFICE" means the office of the Indenture Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Agreement is
located at the address set forth in Section 11.04.
"CRAM DOWN LOSS" means, with respect to a Contract, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the Principal Balance of such Contract the amount of such reduction
(with a "CRAM DOWN LOSS" being deemed to have occurred on the date of issuance
of such order).
"CUMULATIVE LOSS RATIO" means, as of any Distribution Date, the fraction
(expressed as a percentage) computed by the Servicer by dividing (i) the
aggregate Net Liquidation Losses for all Contracts since the Cutoff Date through
the end of the related Due Period by (ii) the sum of (A) the Principal Balance
of the Contracts as of the Cutoff Date plus (B) the Principal Balance of any
Subsequent Contracts as of the related Subsequent Cutoff Date.
"CUTOFF DATE" means either or both (as the context may require) the
Initial Cutoff Date and any Subsequent Cutoff Date.
"DEFAULTED CONTRACT" means a Contract with respect to which there has
occurred one or more of the following: (i) all or some portion of any payment
under the Contract is 120 days or more delinquent, (ii) repossession (and
expiration of any redemption period) of a Motorcycle securing a Contract or
(iii) the Servicer has determined in good faith that an Obligor is not likely to
resume payment under a Contract.
"DELINQUENCY AMOUNT" means, as of any Distribution Date, the Principal
Balance of all Contracts that were delinquent 60 days or more as of the end of
the related Due Period (including Contracts in respect of which the related
Motorcycles have been repossessed and are still inventory).
"DELINQUENT INTEREST" means, for each Contract and each Determination
Date as to which the full payment due in the related Due Period has not been
paid (any such payment being "DELINQUENT" for purposes of this definition), all
interest accrued on such Contract from the Due Date in the Due Period one month
prior to the Due Period in which the payment is delinquent.
"DELINQUENCY RATIO" means, for any Distribution Date, the fraction
(expressed as a percentage) computed by dividing (a) the Delinquency Amount
during the immediately preceding Due Period by (b) the Principal Balance of the
Contracts as of the beginning of the related Due Period.
"DETERMINATION DATE" means the fourth Business Day following the
conclusion of a Due Period during the term of this Agreement.
"DISTRIBUTION DATE" means the fifteenth day of each calendar month during
the term of this Agreement, or if such day is not a Business Day, the next
succeeding Business Day, with the first such Distribution Date hereunder being
[ ].
"DUE DATE" means, with respect to any Contract, the day of the month on
which each scheduled payment of principal and interest is due on such Contract,
exclusive of days of grace.
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"DUE PERIOD" means a calendar month during the term of this Agreement,
and the Due Period related to a Determination Date or Distribution Date shall be
the calendar month immediately preceding such date; PROVIDED, HOWEVER, that with
respect to the Initial Determination Date or Initial Distribution Date, the Due
Period shall be the period from the Initial Cutoff Date to and including
[ ].
"EAGLEMARK FINANCIAL" has the meaning assigned in Section 5.10 hereof.
"ELIGIBLE ACCOUNT" means a segregated direct deposit account maintained
with a depository institution or trust company organized under the laws of the
United States of America, or any of the States thereof, or the District of
Columbia, having a certificate of deposit, short-term deposit or commercial
paper rating of at least A-1+ by Standard & Poor's and P-1 by Moody's.
"ELIGIBLE INVESTMENTS" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as
to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit
of any depository institution or trust company incorporated under the
laws of the United States of America or any State (or any domestic branch
of a foreign bank) and subject to supervision and examination by Federal
or State banking or depository institution authorities; PROVIDED,
HOWEVER, that at the time of the investment or contractual commitment to
invest therein, the commercial paper or other short-term senior unsecured
debt obligations (other than such obligations the rating of which is
based on the credit of a Person other than such depository institution or
trust company) thereof shall have a credit rating from the Rating Agency
in the highest investment category granted thereby;
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from the Rating Agency
in the highest investment category granted thereby;
(d) investments in money market funds having a rating from the
Rating Agency in the highest investment category granted thereby
(including funds for which the Indenture Trustee or the Trustee or any of
their respective Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution
or trust company referred to in CLAUSE (b); and
(f) repurchase obligations with respect to any security that is
a direct obligation of, or fully guaranteed as to timely payment by, the
United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a depository
institution or trust company (acting as principal) described in CLAUSE
(b).
"EVENT OF TERMINATION" means an event specified in Section 8.01.
"EXCESS AMOUNTS" shall have the meaning specified in Section 7.05(b).
"FINAL DISTRIBUTION DATE" means with respect to (i) the Notes, the Class
A-1 Final Distribution Date or the Class A-2 Final Distribution Date, as the
case may be or (ii) the Certificates, the Certificate Final Distribution Date.
"FUNDING PERIOD" means the period beginning on the Closing Date and
ending on the first to occur of (a) the Distribution Date on which the amount on
deposit in the Pre-Funding Account (after giving effect to any transfers
therefrom in connection with the transfer of Subsequent Contracts to the Trust
on such Distribution Date) is less than $150,000, (b) the date on which an Event
of Termination occurs, (c) the date on which an Insolvency Event occurs with
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respect to the Trust Depositor and (d) the close of business on the date which
is 90 days from and including the Closing Date.
"HOLDER" means, with respect to a (i) Certificate, the Person in whose
name such Certificate is registered in the Certificate Register and (ii) Note,
the Person in whose name such Note is registered in the Note Register.
"INDENTURE" means the Indenture, dated as of the date hereof, between the
Issuer and the Indenture Trustee.
"INDENTURE TRUSTEE" means the Person acting as Indenture Trustee under
the Indenture, its successors in interest and any successor trustee under the
Indenture.
"INDENTURE TRUSTEE FEE" means, with respect to any Distribution Date,
one-twelfth of the product of .009% and the sum of (i) the Principal Balance
of the Contracts as of the beginning of the related Due Period and (ii) the
Pre-Funded Amount as of the beginning of such period; PROVIDED, HOWEVER, in
no event shall such fee be less than $200.00 per month.
"INDEPENDENT", when used with respect to any specified Person, means such
a Person who (i) is in fact independent of the Issuer, the Trust Depositor or
the Servicer, (ii) is not a director, officer or employee of any Affiliate of
the Issuer, the Trust Depositor or the Servicer, (iii) is not a person related
to any officer or director of the Issuer, the Trust Depositor or the Servicer or
any of their respective Affiliates, (iv) is not a holder (directly or
indirectly) of more than 10% of any voting securities of Issuer, the Trust
Depositor or the Servicer or any of their respective Affiliates, and (v) is not
connected with the Issuer, the Trust Depositor or the Servicer as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
"INITIAL CLASS A-1 NOTE BALANCE" means $[ ].
"INITIAL CLASS A-2 NOTE BALANCE" means $[ ].
"INITIAL CERTIFICATE BALANCE" means $[ ].
"INITIAL CERTIFICATE RESERVE AMOUNT" means $[ ].
"INITIAL CONTRACTS" means those Contracts conveyed to the Trust on the
Closing Date.
"INITIAL CUTOFF DATE" means [ ].
"INITIAL POOL BALANCE" means the Principal Balance of the Contracts as of
the Initial Cutoff Date and on each Subsequent Cutoff Date the Principal Balance
of the Contracts on such subsequent Cutoff Date.
"INSOLVENCY EVENT" means, with respect to a specified Person, (i) the
entry of a decree or order for relief by a court or regulatory authority having
jurisdiction in respect of such Person in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future,
federal or state, bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person's affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; (ii) the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law and such case is
not dismissed within 60 days; or (iii) the commencement by such Person of a
voluntary case under the federal bankruptcy laws, as now or hereinafter in
effect, or any other present or future federal or state, bankruptcy, insolvency
or similar law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or other similar official for such Person or for any substantial part of its
property, or the making by such Person of an assignment for the benefit of
creditors or the failure by such Person generally to pay its debts as such debts
become due or the taking of corporate action by such Person in furtherance of
any the foregoing.
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"INTEREST PERIOD" means, with respect to any Distribution Date, the
period from and including the fifteenth day of the month of the Distribution
Date immediately preceding such Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) to but excluding the fifteenth day of the
month of such Distribution Date.
"INTEREST RATE" means the Class A-1 Rate or the Class A-2 Rate, as
applicable.
"INTEREST RESERVE ACCOUNT" means the account designated as the Interest
Reserve Account in, and which is established and maintained pursuant to, Section
7.04 hereof.
"INTEREST RESERVE AMOUNT" means, as of any date of determination, the
amount on deposit in the Interest Reserve Account on such date, and as of the
Closing Date shall be $[ ].
"INVESTMENT EARNINGS" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts, other than the Pre-Funding Account, to be
deposited into the Collection Account on such Distribution Date pursuant to
Section 5.05(b).
"ISSUER" means the Harley-Davidson Eaglemark Motorcycle Trust [ ].
"LATE PAYMENT PENALTY FEES" means any late payment fees paid by Obligors
on Contracts after all sums received have been allocated first to regular
installments due or overdue and all such installments are then paid in full.
"LIEN" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Contract by operation of law.
"LIQUIDATED CONTRACT" means a Contract with respect to which there has
occurred one or more of the following: (i) 90 days have elapsed following the
date of repossession (and expiration of any redemption period) with respect to
the Motorcycle securing such Contract, (ii) such Contract is a Defaulted
Contract with respect to which the Servicer has determined in good faith that
all amounts expected to be recovered have been received, or (iii) all or any
portion of any payment is delinquent 150 days or more.
"LIST OF CONTRACTS" means the list identifying each Contract constituting
part of the Trust Corpus, which list shall consist of the initial List of
Contracts reflecting the Initial Contracts transferred to the Trust on the
Closing Date, together with any Subsequent List of Contracts reflecting the
Subsequent Contracts transferred to the Trust on the related Subsequent Transfer
Date, and which list (a) identifies each Contract and (b) sets forth as to each
Contract (i) the Principal Balance as of the applicable Cutoff Date, (ii) the
amount of monthly payments due from the Obligor, (iii) the Contract Rate and
(iv) the maturity date, and which list (as in effect on the Closing Date) is
attached to this Agreement as EXHIBIT J.
"LOCKBOX" means the Lockbox maintained by the Lockbox Bank identified on
EXHIBIT K hereto.
"LOCKBOX ACCOUNT" means the account maintained with the Lockbox Bank and
identified on EXHIBIT K hereto.
"LOCKBOX AGREEMENT" means the Fourth Amended and Restated Lockbox
Administration Agreement dated as of April 1, 1998 by and among the Servicer,
the Trust Depositor, Eaglemark Customer Funding Corporation-II, Eaglemark
Customer Funding Corporation-III, Norwest Bank Minnesota, National Association
(the "PREDECESSOR TRUSTEE"), the Trustee and Financial Security Assurance Inc.
("FSA", with respect to certain prior trusts, the "PRIOR TRUSTS"), with respect
to the Lockbox Account, unless such agreement shall be terminated in accordance
with its terms, in which event "LOCKBOX AGREEMENT" shall mean such other
agreement, in form and substance acceptable to the above-described parties and
FSA, or if an Insurer Default (as defined in FSA's documentation relating to
such Prior Trusts) shall have occurred and be continuing or FSA is owed no
obligation with respect to such Prior Trusts, the majority of the
Certificateholders with respect to such Prior Trusts), the Servicer, the Trustee
and the Lockbox Bank.
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"LOCKBOX BANK" means the financial institution maintaining the Lockbox
Account and identified on EXHIBIT K hereto or any successor thereto acceptable
to a majority of the Certificateholders.
"LOSS RATIO" means, for any Distribution Date, the fraction (expressed as
a percentage) derived by dividing (x) Net Liquidation Losses for all Contracts
that became Liquidated Contracts during the immediately preceding Due Period
multiplied by twelve by (y) the outstanding Principal Balances of all Contracts
as of the beginning of the Due Period.
"MANDATORY SPECIAL REDEMPTION" means the prepayment, in part, made to the
Class A-1 Noteholders and Class A-2 Noteholders without premium made on the
Distribution Date on or immediately following the last day of the Funding Period
in the event that any amount remains on deposit in the Pre-Funding Account after
giving effect to the purchase of all Subsequent Contracts, including any such
purchase on such date.
"MONTHLY REPORT" shall have the meaning specified in Section 9.06.
"MONTHLY SERVICING FEE" means, as to any Distribution Date, one-twelfth
of the product of 1% and the Principal Balance of the Contracts as of the
beginning of the related Due Period.
"MOODY'S" means Moody's Investors Service, Inc. or any successor thereto.
"MOTORCYCLE" means a motorcycle manufactured by Harley-Davidson, Inc. (or
in certain limited instances Buell) securing a Contract.
"NET LIQUIDATION LOSSES" means, as of any Distribution Date, with respect
to a Liquidated Contract, the amount, if any, by which (a) the outstanding
Principal Balance of such Liquidated Contract plus accrued and unpaid interest
thereon at the Contract Rate to the date on which such Liquidated Contract
became a Liquidated Contract exceeds (b) the Net Liquidation Proceeds for such
Liquidated Contract.
"NET LIQUIDATION PROCEEDS" means, as to any Liquidated Contract, the
proceeds realized on the sale or other disposition of the related Motorcycle,
including proceeds realized on the repurchase of such Motorcycle by the
originating dealer for breach of warranties, and the proceeds of any insurance
relating to such Motorcycle, after payment of all reasonable expenses incurred
thereby, together, in all instances, with the expected or actual proceeds of any
recourse rights relating to such Contract as well as any post-disposition
proceeds received by the Servicer.
"NOTE DEPOSITORY AGREEMENT" shall have the meaning specified in the
Indenture.
"NOTE DISTRIBUTABLE AMOUNT" means, with respect to any Distribution Date,
the sum of the Note Principal Distributable Amount and the Note Interest
Distributable Amount for such Distribution Date.
"NOTE DISTRIBUTION ACCOUNT" means the account established and maintained
as such pursuant to Section 5.05.
"NOTE INTEREST CARRYOVER SHORTFALL" means, with respect to any
Distribution Date and a Class of Notes, the excess, if any, of the sum of the
Note Interest Distributable Amount for such Class for the immediately preceding
Distribution Date plus any outstanding Note Interest Carryover Shortfall for
such Class on such preceding Distribution Date, over the amount in respect of
interest that is actually deposited in the Note Distribution Account with
respect to such Class on such preceding Distribution Date, plus, interest on
such excess to the extent permitted by applicable law, at the related Interest
Rate for the related Interest Period.
"NOTE INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date and a Class of Notes, the sum of the Note Monthly Interest
Distributable Amount and the Note Interest Carryover Shortfall for such Class of
Notes for such Distribution Date.
"NOTE MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any Distribution Date, interest accrued from and including the fifteenth day
of the month of the preceding calendar month to, but excluding, the fifteenth
day
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of the calendar month in which such Distribution Date occurs (or in the case
of the first Distribution Date, interest accrued from and including the
Closing Date to but excluding such Distribution Date) at the related Interest
Rate for each Class of Notes on the outstanding principal amount of the Notes
of such Class on the immediately preceding Distribution Date, after giving
effect to all payments of principal to Noteholders of such Class on or prior
to such preceding Distribution Date (or, in the case of the first
Distribution Date, on the original principal amount of such Class of Notes).
"NOTE MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the Note Percentage of the Principal Distributable Amount for
such Distribution Date.
"NOTE PERCENTAGE" means, (i) for each Distribution Date to but excluding
the Distribution Date on which the principal amount of the Class A-2 Notes is
reduced to zero, 100%; (ii) on the Distribution Date on which the principal
amount of the Class A-2 Notes is reduced to zero, such percentage which
represents the fraction of the Principal Distributable Amount necessary to
reduce the principal amount of the Class A-2 Notes to zero; and (iii) 0.0%
thereafter.
"NOTE POOL FACTOR" means with the respect to any Class of Notes as of the
close of business on any Distribution Date, a seven-digit decimal figure equal
to the outstanding principal amount of such Class of Notes (after giving effect
to any reductions thereof to be made on such Distribution Date) divided by the
original outstanding principal amount of such Class of Notes.
"NOTE PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
Distribution Date, the excess of the sum of the Note Principal Distributable
Amount and any outstanding Note Principal Carryover Shortfall from the
immediately preceding Distribution Date over the amount in respect of principal
that is actually deposited in the Note Distribution Account on such Distribution
Date.
"NOTE PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, the sum of the Note Monthly Principal Distributable Amount
for such Distribution Date and the Note Principal Carryover Shortfall as of the
close of the immediately preceding Distribution Date; PROVIDED, HOWEVER, that
the Note Principal Distributable Amount shall not exceed the outstanding
principal amount of the Notes; and provided, further, that the Note Principal
Distributable Amount (i) on the Class A-1 Final Distribution Date shall not be
less than the amount that is necessary (after giving effect to other amounts to
be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal amount of the Class
A-1 Notes to zero, and (ii) on the Class A-2 Final Distribution Date shall not
be less than the amount that is necessary (after giving effect to other amounts
to be deposited in the Note Distribution Account on such Distribution Date and
allocable to principal) to reduce the outstanding principal amount of the Class
A-2 Notes to zero.
"NOTE REGISTER" shall have the meaning specified in the Indenture.
"OBLIGEE" means the Person to whom an Obligor is indebted under a
Contract.
"OBLIGOR" means a Motorcycle buyer or other person who owes payments
under a Contract.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary of
any Person delivering such certificate and delivered to the Person to whom such
certificate is required to be delivered. In the case of an Officers'
Certificate of the Servicer, at least one of the signing officers must be a
Servicing Officer. Unless otherwise specified, any reference herein to an
Officers' Certificate shall be to an Officers' Certificate of the Servicer.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be
counsel to the Trust Depositor or the Servicer) acceptable to the Indenture
Trustee or the Owner Trustee, as the case may be.
"OWNER TRUSTEE" means the Person acting, not in its individual capacity,
but solely as Owner Trustee under the Trust Agreement, its successors in
interest and any successor owner trustee under the Trust Agreement.
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"OWNER TRUSTEE'S FEE" means $[ ] per month.
"PASS-THROUGH RATE" means [ ]% per annum.
"PAYING AGENT" means as described in Section 6.11 of the Indenture and
Section 3.10 of the Trust Agreement.
"PERSON" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"POOL BALANCE" means as of any date, the Principal Balance of Contracts
as of the close of business on such date.
"PRE-FUNDED AMOUNT" means as of any date, the amount on deposit in the
Pre-Funding Account at the close of business on such date.
"PRE-FUNDING ACCOUNT" means the account designated as the Pre-Funding
Account in, and which is established and maintained pursuant to Section 7.07.
"PRINCIPAL BALANCE" means (a) with respect to any Contract as of any
date, an amount equal to the unpaid principal balance of such Contract as of the
opening of business on the Initial Cutoff Date or related Subsequent Cutoff
Date, as applicable, reduced by the sum of (x) all payments received by the
Servicer as of such date allocable to principal and (y) any Cram Down Loss in
respect of such Contract; PROVIDED, HOWEVER, that (i) if (x) a Contract is
repurchased by the Seller pursuant to Section 5.01 of the Transfer and Sale
Agreement and Section 7.08 hereof because of a breach of representation or
warranty, or if (y) the Trust Depositor gives notice of its intent to purchase
the Contracts in connection with an optional termination of the Trust pursuant
to Section 5.02 of the Transfer and Sale Agreement and Section 7.10 hereof, in
each case the Principal Balance of such Contract or Contracts shall be deemed as
of the related Determination Date to be zero for the Due Period in which such
event occurs and for each Due Period thereafter, (ii) from and after the third
Due Period succeeding the final Due Period in which the Obligor is required to
make the final scheduled payment on a Contract, the Principal Balance, if any,
of such Contract shall be deemed to be zero, and (iii) from and after the Due
Period in which a Contract becomes a Liquidated Contract, the Principal Balance
of such Contract shall be deemed to be zero; and (b) where the context requires,
the aggregate of the Principal Balances described in clause (a) for all such
Contracts.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Distribution
Date, the Aggregate Principal Balance Decline for such Distribution Date.
"PROSPECTUS" means the Base Prospectus together with the Supplement.
"QUALIFIED ELIGIBLE INVESTMENTS" means Eligible Investments acquired by
the Indenture Trustee in its name and in its capacity as Indenture Trustee,
which are held by the Indenture Trustee in the Pre-Funding Account, the Interest
Reserve Account or the Reserve Fund and with respect to which (a) the Indenture
Trustee has noted its interest therein on its books and records, and (b) the
Indenture Trustee has purchased such investments for value without notice of any
adverse claim thereto (and, if such investments are securities or other
financial assets or interests therein, within the meaning of Section 8-102 of
the UCC as enacted in Illinois, without acting in collusion with a securities
intermediary in violating such securities intermediary's obligations to
entitlement holders in such assets, under Section 8-504 of such UCC, to maintain
a sufficient quantity of such assets in favor of such entitlement holders), and
(c) either (i) such investments are in the possession of the Indenture Trustee,
or (ii) such investments, (A) if certificated securities and in bearer form,
have been delivered to the Indenture Trustee, or in registered form, have been
delivered to the Indenture Trustee and either registered by the issuer in the
name of the Indenture Trustee or endorsed by effective endorsement to the
Indenture Trustee or in blank; (B) if uncertificated securities, the ownership
of which has been registered to the Indenture Trustee on the books of the issuer
thereof (or another person, other than a securities intermediary, either becomes
the registered owner of the uncertified security on behalf of the Indenture
Trustee or, having previously become
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the registered owner, acknowledges that it holds for the Indenture Trustee);
or (C) if securities entitlements (within the meaning of Section 8-102 of the
UCC as enacted in Illinois) representing interests in securities or other
financial assets (or interests therein) held by a securities intermediary
(within the meaning of said Section 8-102), a securities intermediary
indicates by book entry that a security or other financial asset has been
credited to the Indenture Trustee's securities account with such securities
intermediary. Any such Qualified Eligible Investment may be purchased by or
through the Indenture Trustee or any of its affiliates.
"RATING AGENCY" means each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Certificates; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Certificates, such other
nationally recognized statistical rating organization selected by the Trust
Depositor.
"RECORD DATE" means, with respect to any Distribution Date, the Business
Day immediately preceding such date.
"REIMBURSEMENT AMOUNT" has the meaning assigned in Section 7.03 hereof.
"REPURCHASE PRICE" means, with respect to a Contract to be repurchased
hereunder an amount equal to (a) the remaining principal balance of such
Contract, plus (b) accrued and unpaid interest at the Contract Rate on such
Contract through the end of the immediately preceding Due Period.
"RESERVE FUND" means the Reserve Fund established and maintained pursuant
to Section 7.06 hereof.
"RESERVE FUND INITIAL DEPOSIT" means $[ ].
"RESERVE FUND DEPOSITS" means all moneys deposited in the Reserve Fund
from time to time including, but not limited to, the Reserve Fund Initial
Deposit and the Reserve Fund Additional Deposits as well as any monies deposited
therein pursuant to Section 7.05(b), all investments and reinvestments thereof,
earnings thereon, and proceeds of the foregoing, whether now or hereafter
existing.
"RESERVE FUND TRIGGER EVENT" means the occurrence with respect to any
Distribution Date (i) the Average Delinquency Ratio for such Distribution Date
is equal to or greater than (a) [ ]% with respect to any Distribution Date
which occurs within the period from the Closing Date to, and inclusive of, the
first anniversary of the Closing Date, (b) [ ]% with respect to any
Distribution Date which occurs within the period from the day after the first
anniversary of the Closing Date to, and inclusive of, the second anniversary of
the Closing Date, or (c) [ ]% with respect to any Distribution Date which
occurs within the period from the day after the second anniversary of the
Closing Date to, and inclusive of, the third anniversary of the Closing Date or
(d) [ ]% with respect to any Distribution Date occurring after the third
anniversary of the Closing Date; (ii) the Average Loss Ratio for such
Distribution Date is equal to or greater than (a) [ ]% with respect to any
Distribution Date which occurs within the period from the Closing Date to, and
inclusive of, the eighteen months following the Closing Date or (b) [ ]%
with respect to any Distribution Date which occurs following the eighteen month
period following the Closing Date; or (iii) the Cumulative Loss Ratio for such
Distribution Date is equal to or greater than (a) [ ]% with respect to any
Distribution Date which occurs within the period from the Closing Date to, and
inclusive of, the first anniversary of the Closing Date, (b) [ ]% with
respect to any Distribution Date which occurs within the period from the day
after the first anniversary of the Closing Date to, and inclusive of, the second
anniversary of the Closing Date, (c) [ ]% with respect to any Distribution
Date which occurs within the period from the day after the second anniversary of
the Closing Date to, and inclusive of, the third anniversary of the Closing
Date, or (d) [ ]% with respect to any Distribution Date occurring after the
third anniversary of the Closing Date.
"RESPONSIBLE OFFICER" means, with respect to the Owner Trustee, any
officer in its Corporate Trust Administration Department (or any similar group
of a successor Owner Trustee) and with respect to the Indenture Trustee, the
chairman and any vice chairman of the board of directors, the president, the
chairman and vice chairman of any executive committee of the board of directors,
every vice president, assistant vice president, the secretary, every assistant
secretary, cashier or any assistant cashier, controller or assistant controller,
the treasurer, every assistant
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treasurer, every trust officer, assistant trust officer and every other
officer or assistant officer of the Trustee customarily performing functions
similar to those performed by persons who at the time shall be such officers,
respectively, or to whom a corporate trust matter is referred because of
knowledge of, familiarity with, and authority to act with respect to a
particular matter.
"SECURITIES" means the Notes and the Certificates.
"SECURITYHOLDERS" means the Holders of the Notes or the Certificates.
"SELLER" means Eaglemark, Inc., a Nevada corporation, or its successor,
in its capacity as Seller of Contract Assets under the Transfer and Sale
Agreement and any Subsequent Purchase Agreement.
"SERVICER" means Eaglemark, Inc., a Nevada corporation, or its successor,
until any Service Transfer hereunder and thereafter means the Successor Servicer
appointed pursuant to Article VIII below with respect to the duties and
obligations required of the Servicer under this Agreement.
"SERVICE TRANSFER" has the meaning assigned in Section 8.02(a).
"SERVICING FEE" means, on any Determination Date, the sum of (a) the
Monthly Servicing Fee payable on the related Distribution Date, (b) Late Payment
Penalty Fees received by the Servicer during the related Due Period, and (c)
extension fees received by the Servicer during the related Due Period.
"SERVICING OFFICER" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officer's Certificate
furnished to the Indenture Trustee by the Servicer, as the same may be amended
from time to time.
"SHORTFALL" means, with respect to a Distribution Date as determined in
accordance with Section 7.05(a), the amounts described in clauses (v) through
(viii) thereof over Available Monies (after the payment of amounts described in
clauses (i) through (iv) of Section 7.05 on such Distribution Date) in the
Collection Account with respect to the related Due Period.
"SPECIFIED RESERVE FUND BALANCE" means with respect to any Distribution
Date will be an amount equal to the sum of (i) [ ]% of the Principal
Balance of the Contracts in the Trust as of the first day of the immediately
preceding Due Period and (ii) $[ ]; PROVIDED, HOWEVER, in the event a
Reserve Fund Trigger Event occurs with respect to a Distribution Date and has
not terminated for three consecutive Distribution Dates (inclusive of the
respective Distribution Date), the Specified Reserve Fund Balance shall be equal
to the sum of (i) [ ]% of the Principal Balance of the Contracts in the
Trust as of the first day of the immediately preceding Due Period and (ii) $[
]. Notwithstanding the foregoing, in no event shall the Specified Reserve
Fund Balance be less than the sum of (i) [ ]% of the aggregate of the
Initial Class A-1 Note Balance, Initial Class A-2 Note Balance and the Initial
Certificate Balance and (ii) $[ ]. As of any Distribution Date, the
amount of funds actually on deposit in the Reserve Fund may, in certain
circumstances, be less than the Specified Reserve Fund Balance.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, A Division
of The McGraw Hill Companies, or any successor thereto.
"SUBSEQUENT CERTIFICATE RESERVE AMOUNT" means the amount on each
Subsequent Transfer Date equal to [ ]% of the aggregate balance of the
Subsequent Contracts conveyed by the Trust.
"SUBSEQUENT CONTRACTS" means all Contracts sold and transferred to the
Trust pursuant to Section 2.04.
"SUBSEQUENT CUTOFF DATE" means the date specified as such for Subsequent
Contracts in the related Subsequent Transfer Agreement.
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"SUBSEQUENT LIST OF CONTRACTS" means a list, in the form of the initial
List of Contracts delivered on the Closing Date, but listing each Subsequent
Contract transferred to the Trust pursuant to the related Subsequent Transfer
Agreement.
"SUBSEQUENT PURCHASE AGREEMENT" means, with respect to any Subsequent
Contracts, the agreement between the Seller and the Trust Depositor pursuant to
which the Seller will transfer the Subsequent Contracts to the Trust Depositor,
the form of which is attached to the Transfer and Sale Agreement as EXHIBIT C.
"SUBSEQUENT RESERVE FUND AMOUNT" means the amount on each Subsequent
Transfer Date equal to [ ]% of the aggregate balance of the Subsequent
Contracts conveyed to the Trust.
"SUBSEQUENT TRANSFER AGREEMENT" means the agreement described in Section
2.04 hereof.
"SUBSEQUENT TRANSFER DATE" means any date during the Funding Period on
which Subsequent Contracts are transferred to the Trust.
"SUCCESSOR SERVICER" means a servicer described in Section 8.02(b).
"SUPPLEMENT" means the Prospectus Supplement dated
[ ].
"TRANSACTION DOCUMENTS" means this Agreement, the Transfer and Sale
Agreement, the Lockbox Agreement, the Indenture, the Trust Agreement, the
Administration Agreement, the Note Depository Agreement, the Certificate
Depository Agreement, any Subsequent Transfer Agreement and any Subsequent
Purchase Agreement.
"TRANSFER AND SALE AGREEMENT" means the Transfer and Sale Agreement
dated as of the date hereof by and between the Seller and the Trust
Depositor, as amended, supplemented or otherwise modified from time to time.
"TRUST" means the trust created by this Agreement, comprised of the
Trust Corpus.
"TRUST ACCOUNTS" means, collectively, the Collection Account, the
Pre-Funding Account, the Note Distribution Account and the Reserve Fund, or
any of them.
"TRUST ACCOUNT PROPERTY" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form
of deposit accounts, physical property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Fund Initial Deposit, and all
proceeds of the foregoing.
"TRUST AGREEMENT" means the Trust Agreement, dated as of the date hereof,
among the Trust Depositor and the Owner Trustee.
"TRUST CORPUS" has the meaning given to such term in Section 2.01(b)
hereof (and in Section 2.04(a) hereof in respect of Subsequent Contracts and
related assets transferred to the Trust pursuant to Subsequent Transfer
Agreements).
"TRUST DEPOSITOR" has the meaning assigned such term in the preamble
hereunder or any successor thereto.
"TRUST ESTATE" shall have the meaning specified in the Trust Agreement.
"TRUSTEES" means the Owner Trustee and the Indenture Trustee.
"TRUSTEES' FEES" means the Owner Trustee's Fee and the Indenture
Trustee's Fee.
"UCC" means the Uniform Commercial Code as enacted in Illinois or Nevada,
as applicable.
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"UNCOLLECTIBLE ADVANCE" means with respect to any Determination Date and
any Contract, the amount, if any, advanced by the Servicer pursuant to Section
7.03 which the Servicer has as of such Determination Date determined in good
faith will not be ultimately recoverable by the Servicer from insurance policies
on the related Motorcycle, the related Obligor or out of Net Liquidation
Proceeds with respect to such Contract. The determination by the Servicer that
it has made an Uncollectible Advance shall be evidenced by an Officer's
Certificate delivered to the Trustee.
"UNDERWRITERS" means Salomon Brothers Inc and [ ].
"UNITED STATES" means the United States of America.
"VICE PRESIDENT" of any Person means any vice president of such Person,
whether or not designated by a number or words before or after the title "VICE
PRESIDENT," who is a duly elected officer of such Person.
"WTC" means Wilmington Trust Company, in its individual capacity.
SECTION 1.02. USAGE OF TERMS. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "WRITING" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
amendments, modifications and supplements thereto or any changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "INCLUDING" means "INCLUDING WITHOUT LIMITATION."
SECTION 1.03. SECTION REFERENCES. All section references, unless
otherwise indicated, shall be to Sections in this Agreement.
SECTION 1.04. CALCULATIONS. Except as otherwise provided herein, all
interest rate and basis point calculations hereunder will be made on the basis
of a 360-day year and twelve 30-day months and will be carried out to at least
three decimal places.
SECTION 1.05. ACCOUNTING TERMS. All accounting terms used but not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States.
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ARTICLE TWO
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
SECTION 2.01. CLOSING. (a) There is hereby created by the Trust
Depositor, as settlor, a separate trust which shall be known as the
Harley-Davidson Eaglemark Motorcycle Trust [ ]. The Trust shall
be administered pursuant to the provisions of this Agreement for the benefit
of the Noteholders and Certificateholders. The Owner Trustee is hereby
specifically empowered to conduct business dealings on behalf of the Trust in
accordance with the terms hereof.
(b) On the Closing Date, the Trust Depositor shall sell, transfer,
assign, set over and otherwise convey to the Trust by execution of an assignment
substantially in the form of EXHIBIT J hereto, without recourse other than as
expressly provided herein, (i) all the right, title and interest of the Trust
Depositor in and to the Initial Contracts listed on the initial List of
Contracts delivered on the Closing Date (including, without limitation, all
security interests and all rights to receive payments which are collected
pursuant thereto on or after the Initial Cutoff Date, including any liquidation
proceeds therefrom, but excluding any rights to receive payments which were
collected pursuant thereto prior to the Initial Cutoff Date), (ii) all rights of
the Trust Depositor under any physical damage or other individual insurance
policy (and rights under a "FORCED PLACED" policy, if any) relating to any such
Contract, an Obligor or a Motorcycle securing such Contract, (iii) all security
interests in each such Motorcycle, (iv) all documents contained in the related
Contract Files, (v) all rights (but not the obligations) of the Trust Depositor
under any related motorcycle dealer agreements between dealers (i.e., the
originators of such Contracts) and the Trust Depositor, (vi) all rights of the
Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox
Agreement to the extent they relate to such Contracts, (vii) all rights (but not
the obligations) of the Trust Depositor under the Transfer and Sale Agreement,
including but not limited to the Trust Depositor's rights under Article V
thereof, (viii) the remittances, deposits and payments made into the Trust
Accounts from time to time and amounts in the Trust Accounts (other than the
Reserve Fund) from time to time (and any investments of such amounts), and (ix)
all proceeds and products of the foregoing (the property in clauses (i)-(ix)
above, being the "TRUST CORPUS"). Although the Trust Depositor and the Owner
Trustee agree that such transfer is intended to be a sale of ownership of the
Trust Corpus, rather than the granting of a security interest to secure a
borrowing, and that the Trust Corpus shall not be property of the Trust
Depositor, in the event such transfer is deemed to be of a mere security
interest to secure a borrowing, the Trust Depositor shall be deemed to have
granted the Owner Trustee for the benefit of the Trust a perfected first
priority security interest in such Trust Corpus and this Agreement shall
constitute a security agreement under applicable law.
(c) The Trust Depositor also hereby pledges and grants a first
priority perfected security interest in, in favor of the Indenture Trustee for
the benefit of the Securityholders, all its right, title and interest in and to
the following (all being collectively referred to herein as the "OTHER
COLLATERAL"):
(i) the Reserve Fund (including the Certificate Reserve Amount)
established pursuant to Section 7.06 hereof (including, without
limitation, the Reserve Fund Initial Deposit, as well as the Initial
Certificate Reserve Amount, made therein by the Trust Depositor on the
Closing Date, and all additional monies, checks, securities, investments
and other items or documents at any time held in or evidencing the
Reserve Fund, including all rights to receive any amounts to be deposited
from time to time therein);
(ii) all of the Trust Depositor's right, title and interest in
and to investments made with proceeds of the property described in clause
(i) above; and
(iii) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the
foregoing;
in each case as collateral security for the obligations of the Trust in respect
of the Notes and the Certificates which, in accordance with and subject to the
limitations and provisions hereof, may be satisfied or paid from such Other
Collateral.
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SECTION 2.02. CONDITIONS TO THE CLOSING. On or before the Closing Date,
the Trust Depositor shall deliver or cause to be delivered the following
documents to the Owner Trustee:
(a) The initial List of Contracts, certified by the Chairman of
the Board, President or any Vice President of the Trust Depositor,
together with an assignment substantially in the form of EXHIBIT A
hereto.
(b) A certificate of an officer of the Seller substantially in
the form of EXHIBIT B to the Transfer and Sale Agreement and of an
officer of the Trust Depositor substantially in the form of EXHIBIT B
hereto.
(c) Opinions of counsel for the Seller and the Trust Depositor
substantially in the form of EXHIBITS D, E and F hereto (and including as
an addressee thereof each Rating Agency).
(d) A letter from Arthur Andersen LLP, or another nationally
recognized accounting firm, addressed to the Seller and the Underwriters
and stating that such firm has reviewed a sample of the Initial Contracts
and performed specific procedures for such sample with respect to certain
contract terms and which identifies those Initial Contracts which do not
conform.
(e) Copies of resolutions of the Board of Directors of each of
the Seller/Servicer and the Trust Depositor or of the Executive Committee
of the Board of Directors of each of the Seller/Servicer and the Trust
Depositor approving the execution, delivery and performance of this
Agreement and the other Transaction Documents to which any of them is a
party, as applicable, and the transactions contemplated hereunder and
thereunder, certified in each case by the Secretary or an Assistant
Secretary of the Seller/Servicer and the Trust Depositor.
(f) Officially certified, recent evidence of due incorporation
and good standing of each of the Seller and the Trust Depositor under the
laws of Nevada.
(g) Evidence of proper filing with the appropriate offices in
Nevada and Illinois of UCC financing statements executed by the Seller,
as debtor, naming the Trust Depositor as secured party (and the Owner
Trustee as assignee) and identifying the Contract Assets as collateral;
and evidence of proper filing with the appropriate offices in Nevada and
Illinois of UCC financing statements executed by the Trust Depositor, as
debtor, naming the Owner Trustee as secured party and identifying the
Trust Corpus as collateral; and evidence of proper filing with
appropriate officers in Delaware of UCC financing statements executed by
the Trust and naming the Indenture Trustee, as secured party and
identifying the Collateral, as collateral; and evidence of proper filing
with the appropriate offices in Nevada and Illinois of UCC financing
statements executed by the Trust Depositor, as debtor, naming the
Indenture Trustee, as secured party and identifying the Other Collateral,
as collateral.
(h) An Officer's Certificate listing the Servicer's Servicing
Officers.
(i) Evidence of deposit in the Collection Account of all funds
received with respect to the Initial Contracts on or after the Initial
Cutoff Date to the Closing Date, together with an Officer's Certificate
from the Trust Depositor to the effect that such amount is correct.
(j) The Officer's Certificate of the Seller specified in
Section 2.02(h) of the Transfer and Sale Agreement.
(k) Evidence of deposit in the Reserve Fund of the Reserve Fund
Initial Deposit by the Trust Depositor.
(l) A fully executed Transfer and Sale Agreement.
(m) A fully executed Trust Agreement.
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(n) A fully executed Administration Agreement.
(o) A fully executed Indenture.
SECTION 2.03. ACCEPTANCE BY OWNER TRUSTEE. On the Closing Date, if the
conditions set forth in Section 2.02 have been satisfied, the Owner Trustee
shall issue on behalf of the Trust to, or upon the order of, the Trust Depositor
the Certificates representing ownership of a beneficial interest in 100% of the
Trust and the Indenture Trustee shall issue to, or upon the order of, the Trust
Depositor the Notes secured by the Collateral.
SECTION 2.04. CONVEYANCE OF SUBSEQUENT CONTRACTS. (a) Subject to the
conditions set forth in paragraph (b) below, the Trust Depositor, shall sell,
transfer, assign, set over and otherwise convey to the Trust, without recourse
other than as expressly provided herein and therein, (i) all the right, title
and interest of the Trust Depositor in and to the Subsequent Contracts listed on
the Subsequent List of Contracts (including, without limitation, all security
interests and all rights to receive payments which are collected pursuant
thereto on or after the related Subsequent Cutoff Date, including any
liquidation proceeds therefrom, but excluding any rights to receive payments
which were collected pursuant thereto prior to such Subsequent Cutoff Date),
(ii) all rights of the Trust Depositor under any physical damage or other
individual insurance policy (or a "FORCED PLACED" policy, if any) relating to
any such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all
security interests in each such Motorcycle, (iv) all documents contained in the
related Contract Files, (v) all rights (but not the obligations) of the Trust
Depositor under any related motorcycle dealer agreements between dealers (i.e.,
the originators of such Contracts) and the Trust Depositor, (vi) all rights of
the Trust Depositor in the Lockbox, the Lockbox Account and related Lockbox
Agreement to the extent they relate to such Contracts, (vii) all rights (but not
the obligations) of the Trust Depositor under the Transfer and Sale Agreement
related to such Contracts (to the extent not already conveyed under Section
2.01(b)), including but not limited to the Trust Depositor's related rights
under Article V thereof, as well as all rights, but not the obligations, of the
Trust Depositor under the Subsequent Purchase Agreement related to such
Contracts, (viii) the remittances, deposits and payments made into the Trust
Accounts from time to time and amounts in the Trust Accounts from time to time
related to such Contracts (to the extent not already conveyed under Section
2.01(b)) (and any investments of such amounts), and (ix) all proceeds and
products of the foregoing (the property in clauses (i)-(ix) above, upon such
transfer, becoming part of the "TRUST CORPUS"). Although the Trust Depositor
and the Owner Trustee agree that such transfer is intended to be a sale of
ownership, rather than the granting of a security interest to secure a
borrowing, and that the Trust Corpus following such transfer shall not be
property of the Trust Depositor, in the event such transfer is deemed to be of a
mere security interest to secure a borrowing, the Trust Depositor shall be
deemed to have granted the Owner Trustee for the benefit of the Trust a
perfected first priority security interest in such Trust Corpus and this
Agreement shall constitute a security agreement under applicable law.
(b) The Trust Depositor shall transfer to the Trust the Subsequent
Contracts and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) The Trust Depositor shall have provided the Owner Trustee,
the Indenture Trustee, the Underwriters and the Rating Agencies with a
timely Addition Notice and shall have provided any information reasonably
requested by any of the foregoing with respect to the Subsequent
Contracts;
(ii) the Funding Period shall not have terminated;
(iii) the Trust Depositor shall have delivered to the Owner
Trustee a duly executed written assignment (including an acceptance by
the Owner Trustee) in substantially the form of EXHIBIT M hereto (the
"SUBSEQUENT TRANSFER AGREEMENT"), which shall include a Subsequent List
of Contracts listing the Subsequent Contracts;
(iv) the Trust Depositor shall have deposited or caused to be
deposited in the Collection Account all collections received with respect
to the Subsequent Contracts on or after the related Subsequent Cutoff
Date;
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(v) as of each Subsequent Transfer Date, neither the Seller nor
the Trust Depositor was insolvent nor will either of them have been made
insolvent by such transfer nor is either of them aware of any pending
insolvency;
(vi) the applicable Subsequent Reserve Fund Amount and the
Subsequent Certificate Reserve Amount for such Subsequent Transfer Date
shall have been deposited by the Indenture Trustee from the Pre-Funding
Account to the Reserve Fund;
(vii) each Rating Agency shall have notified the Trust Depositor,
the Owner Trustee and the Indenture Trustee in writing that following
such transfer the Class A-1 Notes and Class A-2 Notes will be rated in
the highest rating category by such Rating Agency and the Certificates
will be rated at least its rating as of the Closing Date by Standard &
Poor's and Moody's;
(viii) such addition will not result in a material adverse tax
consequence to the Trust or the Certificateholders as evidenced by an
Opinion of Counsel to be delivered by the Trust Depositor to the Owner
Trustee, Indenture Trustee, the Rating Agencies and the Underwriters;
(ix) the Trust Depositor shall have delivered to the Owner
Trustee and the Indenture Trustee an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this paragraph (b);
(x) the Trust Depositor shall have delivered to the Rating
Agencies and the Underwriters one or more opinions of counsel with
respect to the transfer of the Subsequent Contracts substantially in the
form of the opinions of counsel delivered to such Persons on the Closing
Date;
(xi) no selection procedures believed by the Trust Depositor to
be adverse to the interests of the Noteholders or Certificateholders
shall have been utilized in selecting the Subsequent Contracts;
(xii) the Trust Depositor shall have delivered to the Rating
Agencies evidence that (A) the weighted average annual percentage rate of
the Contracts collectively, following the transfer of the Subsequent
Contracts, is not less than [ ]%, (B) that the weighted average
calculated remaining term to maturity of the Contracts collectively,
following the transfer of the Subsequent Contracts, does not exceed [
] months, and (C) the Principal Balance of all Contracts from Buell
motorcycles as conveyed to the Trust (including all Subsequent Contracts)
does not exceed 2.5% of the Principal Balance of all Contracts conveyed
by the Trust;
(xiii) the Trust Depositor shall have delivered to the Rating
Agencies, a report with respect to certain agreed-upon procedures
relating to the Subsequent Contracts being transferred, confirming that
procedures were performed substantially similar to such procedures as
were performed in connection with the transfer of the Initial Contracts;
(xiv) each of the representations and warranties made by the
Seller pursuant to Section 3.01 of the Transfer and Sale Agreement with
respect to the Subsequent Receivables shall be true and correct as of the
related Subsequent Transfer Date, and the Seller shall have performed all
obligations to be performed by it hereunder on or prior to such
Subsequent Transfer Date;
(xv) the Seller shall, at its own expense, on or prior to the
Subsequent Transfer Date indicate in its Computer Disk that the
Subsequent Receivables identified on the Subsequent List of Contracts in
the Subsequent Transfer Agreement have been sold to the Issuer pursuant
to this Agreement and the Transfer and Sale Agreement; and
(xvi) the Seller shall have taken any action required to maintain
the first perfected ownership interest of the Issuer in the Owner Trust
Estate and the first perfected security interest of the Indenture Trustee
in the Collateral.
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(c) The Trust Depositor covenants to transfer (at or prior to the end
of the Funding Period) to the Trust pursuant thereto Subsequent Contracts with
an aggregate Principal Balance equal to $[ ]; PROVIDED,
HOWEVER, that in complying with such covenant, the Trust Depositor agrees to
make no more than one separate transfer of Subsequent Contracts per monthly
period (as measured by the corresponding Distribution Dates). In the event that
the Trust Depositor shall fail to deliver and sell to the Trust any or all of
such Subsequent Receivables by the date on which the Funding Period ends and the
Pre-Funded Amount is greater than $150,000 on such date, the Trust Depositor
shall cause to be deposited into the Collection Account the amount then on
deposit in the Pre-Funding Account; PROVIDED, HOWEVER, that the foregoing shall
be the sole remedy of the Trust, the Owner Trustee, the Indenture Trustee or the
Securityholders with respect to a failure of the Trust Depositor to comply with
such covenant.
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ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
The Seller under the Transfer and Sale Agreement has made, and upon
execution of each Subsequent Purchase Agreement is deemed to remake, each of the
representations and warranties set forth in EXHIBIT J hereto and has consented
to the assignment by the Trust Depositor to the Issuer of the Trust Depositor's
rights with respect thereto. Such representations speak as of the execution and
delivery of this Agreement and as of the Closing Date in the case of the Initial
Contracts, and as of the applicable Subsequent Transfer Date in the case of the
Subsequent Contracts, but shall survive the sale, transfer and assignment of the
Contracts to the Trust. Pursuant to Section 2.01 of this Agreement, the Trust
Depositor has sold, assigned, transferred and conveyed to the Issuer as part of
the Trust Corpus its rights under the Transfer and Sale Agreement, including
without limitation, the representations and warranties of the Seller therein as
set forth in EXHIBIT J attached hereto, together with all rights of the Trust
Depositor with respect to any breach thereof including any right to require the
Seller to repurchase any Contract in accordance with the Transfer and Sale
Agreement. It is understood and agreed that the representations and warranties
set forth or referred to in this Section shall survive delivery of the Contract
Files to the Owner Trustee or any custodian.
The Trust Depositor hereby represents and warrants to the Owner Trustee
that it has entered into the Transfer and Sale Agreement with the Seller, that
the Seller has made the representations and warranties in the Transfer and Sale
Agreement as set forth in EXHIBIT J hereto, that such representations and
warranties run to and are for the benefit of the Trust Depositor, and that
pursuant to Section 2.01 of this Agreement the Trust Depositor has transferred
and assigned to the Owner Trustee all rights of the Trust Depositor to cause the
Seller under the Transfer and Sale Agreement to repurchase Contracts in the
event of a breach of such representations and warranties.
SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING THE TRUST
DEPOSITOR. By its execution of this Agreement and each Subsequent Transfer
Agreement, the Trust Depositor represents and warrants to the Owner Trustee, the
Indenture Trustee, the Noteholders and the Certificateholders that:
(a) ASSUMPTION OF TRUST DEPOSITOR'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties set forth in EXHIBIT J
are true and correct.
(b) ORGANIZATION AND GOOD STANDING. The Trust Depositor is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the corporate
power to own its assets and to transact the business in which it is
currently engaged. The Trust Depositor is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in
which the character of the business transacted by it or properties owned
or leased by it requires such qualification and in which the failure so
to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Trust
Depositor or the Trust.
(c) AUTHORIZATION; VALID SALE; BINDING OBLIGATIONS. The Trust
Depositor has the power and authority to make, execute, deliver and
perform this Agreement and the other Transaction Documents to which it is
a party and all of the transactions contemplated under this Agreement and
the other Transaction Documents to which it is a party, and to create the
Trust and cause it to make, execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is a
party and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party and to cause the Trust to be
created. This Agreement and the related Subsequent Transfer Agreement,
if any, shall effect a valid sale, transfer and assignment of the Trust
Corpus, enforceable against the Trust Depositor and creditors of and
purchasers from the Trust Depositor. This Agreement and the other
Transaction Documents to which the Trust Depositor is a party constitute
the legal, valid and binding obligation of the Trust Depositor
enforceable in accordance with their terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally and by the availability of
equitable remedies.
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(d) NO CONSENT REQUIRED. The Trust Depositor is not required
to obtain the consent of any other party or any consent, license,
approval or authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement or the other Transaction Documents to which it is a party.
(e) NO VIOLATIONS. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party
by the Trust Depositor, and the consummation of the transactions
contemplated hereby and thereby, will not violate any provision of any
existing law or regulation or any order or decree of any court or of any
Federal or state regulatory body or administrative agency having
jurisdiction over the Trust Depositor or any of its properties or the
Articles of Incorporation or Bylaws of the Trust Depositor, or constitute
a material breach of any mortgage, indenture, contract or other agreement
to which the Trust Depositor is a party or by which the Trust Depositor
or any of the Trust Depositor's properties may be bound, or result in the
creation or imposition of any security interest, lien, charge, pledge,
preference, equity or encumbrance of any kind upon any of its properties
pursuant to the terms of any such mortgage, indenture, contract or other
agreement, other than as contemplated by the Transaction Documents.
(f) LITIGATION. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Trust Depositor threatened, against the Trust
Depositor or any of its properties or with respect to this Agreement, the
other Transaction Documents to which it is a party or the Certificates
(1) which, if adversely determined, would in the opinion of the Trust
Depositor have a material adverse effect on the business, properties,
assets or condition (financial or otherwise) of the Trust Depositor or
the Trust or the transactions contemplated by this Agreement or the other
Transaction Documents to which the Trust Depositor is a party or (2)
seeking to adversely affect the federal income tax or other federal,
state or local tax attributes of the Certificates or Notes.
(g) PLACE OF BUSINESS; NO CHANGES. The Trust Depositor's sole
place of business (within the meaning of Article 9 of the UCC) is as set
forth in Section 11.04 below. The Trust Depositor has not changed its
name, whether by amendment of its Articles of Incorporation, by
reorganization or otherwise, and has not changed the location of its
place of business, within the four months preceding the Closing Date.
(h) The Trust Depositor will always own a Certificate equal to
at least one percent (1.00%) of the outstanding certificate balance.
Such representations speak as of the execution and delivery of this Agreement
and as of the Closing Date in the case of the Initial Contracts, and as of the
applicable Subsequent Transfer Date in the case of the Subsequent Contracts, but
shall survive the sale, transfer and assignment of the Contracts to the Trust.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER. The
Servicer represents and warrants to the Owner Trustee, the Indenture Trustee,
the Noteholders and the Certificateholders that:
(a) ORGANIZATION AND GOOD STANDING. The Servicer is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the corporate
power to own its assets and to transact the business in which it is
currently engaged. The Servicer is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
the character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure so to
qualify would have a material adverse effect on the business, properties,
assets, or condition (financial or otherwise) of the Servicer or the
Trust. The Servicer is properly licensed in each jurisdiction to the
extent required by the laws of such jurisdiction to service the Contracts
in accordance with the terms hereof.
(b) AUTHORIZATION; BINDING OBLIGATIONS. The Servicer has the
power and authority to make, execute, deliver and perform this Agreement
and the other Transaction Documents to which the Servicer is a party and
all of the transactions contemplated under this Agreement and the other
Transaction Documents to which the Servicer is a party, and has taken all
necessary corporate action to authorize the execution, delivery
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and performance of this Agreement and the other Transaction Documents
to which the Servicer is a party. This Agreement and the other
Transaction Documents to which the Servicer is a party constitute the
legal, valid and binding obligation of the Servicer enforceable in
accordance with their terms, except as enforcement of such terms may
be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by the availability of
equitable remedies.
(c) NO CONSENT REQUIRED. The Servicer is not required to
obtain the consent of any other party or any consent, license, approval
or authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement and the other Transaction Documents to which the Servicer is a
party.
(d) NO VIOLATIONS. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Servicer
is a party by the Servicer will not violate any provisions of any
existing law or regulation or any order or decree of any court or of any
Federal or state regulatory body or administrative agency having
jurisdiction over the Servicer or any of its properties or the Articles
of Incorporation or Bylaws of the Servicer, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which
the Servicer is a party or by which the Servicer or any of the Servicer's
properties may be bound, or result in the creation of or imposition of
any security interest, lien, pledge, preference, equity or encumbrance of
any kind upon any of its properties pursuant to the terms of any such
mortgage, indenture, contract or other agreement, other than this
Agreement.
(e) LITIGATION. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Servicer threatened, against the Servicer or
any of its properties or with respect to this Agreement, any other
Transaction Document to which the Servicer is a party which, if adversely
determined, would in the opinion of the Servicer have a material adverse
effect on the business, properties, assets or condition (financial or
otherwise) of the Servicer or the Trust or the transactions contemplated
by this Agreement or any other Transaction Document to which the Servicer
is a party.
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ARTICLE FOUR
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS;
SECTION 4.01. CUSTODY OF CONTRACTS. (a) Subject to the terms and
conditions of this Section 4.01, the contents of each Contract File shall be
held in the custody of the Servicer for the benefit of, and as agent for, the
Noteholders, the Certificateholders, the Indenture Trustee and the Owner Trustee
as the owner thereof.
(b) The Servicer agrees to maintain the related Contract Files at its
offices where they are currently maintained, or at such other offices of the
Servicer in the State of Nevada as shall from time to time be identified to the
Trustees by written notice. The Servicer may temporarily move individual
Contract Files or any portion thereof without notice as necessary to conduct
collection and other servicing activities in accordance with its customary
practices and procedures; PROVIDED, HOWEVER, that the Servicer will take all
action necessary to maintain the perfection of the Trust's interest in the
Contracts and the proceeds thereof. It is intended that by the Servicer's
agreement pursuant to Section 4.01(a) above and this Section 4.01(b) the
Trustees shall be deemed to have possession of the Contract Files for purposes
of Section 9-305 of the Uniform Commercial Code of the State in which the
Contract Files are located.
(c) As custodian, the Servicer shall have and perform the following
powers and duties:
(i) hold the Contract Files on behalf of the Noteholders and
the Certificateholders and the Owner Trustee and the Indenture Trustee,
maintain accurate records pertaining to each Contract to enable it to
comply with the terms and conditions of this Agreement, maintain a
current inventory thereof, conduct annual physical inspections of
Contract Files held by it under this Agreement and certify to the Owner
Trustee and the Indenture Trustee annually that it continues to maintain
possession of such Contract Files;
(ii) implement policies and procedures in writing and signed by
a Servicing Officer with respect to persons authorized to have access to
the Contract Files on the Servicer's premises and the receipting for
Contract Files taken from their storage area by an employee of the
Servicer for purposes of servicing or any other purposes;
(iii) attend to all details in connection with maintaining
custody of the Contract Files on behalf of the Noteholders and the
Certificateholders, the Owner Trustee and the Indenture Trustee;
(iv) at all times maintain the original of the fully executed
Contract and store such original Contract in a fireproof vault;
(v) stamp each Contract on both the first and the signature
page (if different) as of the Closing Date (or Subsequent Transfer Date,
as the case may be) in the form attached hereto as EXHIBIT L;
(vi) within 30 days of the Closing Date (or Subsequent Transfer
Date, as the case may be) deliver an Officer's Certificate to the Owner
Trustee and the Indenture Trustee certifying that as of a date no earlier
than the Closing Date (or Subsequent Transfer Date, as the case may be)
it has conducted an inventory of the Contract Files (which in the case of
Subsequent Contracts, need be only of the Contract Files related to such
Subsequent Contracts) and that there exists a Contract File for each
Contract and stating all exceptions to such statement, if any; and
(vii) within 185 days of the Closing Date (or Subsequent Transfer
Date, as the case may be) deliver an Officer's Certificate to the Owner
Trustee listing each Contract with respect to which there did not exist
as of 180 days of the Closing Date (or Subsequent Transfer Date, as the
case may be) an original title certificate to the motorcycle and the
certificate of lien recordation relating thereto.
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(d) In performing its duties under this Section 4.01, the Servicer
agrees to act with reasonable care, using that degree of skill and care that it
exercises with respect to similar contracts for the installment purchase of
consumer goods owned and/or serviced by it, and in any event with no less degree
of skill and care than would be exercised by a prudent servicer of motorcycle
conditional sales contracts. The Servicer shall promptly report to the Owner
Trustee and the Indenture Trustee any failure by it to hold the Contract Files
as herein provided and shall promptly take appropriate action to remedy any such
failure. In acting as custodian of the Contract Files, the Servicer further
agrees not to assert any legal or beneficial ownership interest in the Contracts
or the Contract Files, except as provided in Section 5.06. The Servicer agrees
to indemnify the Noteholders, the Certificateholders, the Owner Trustee and the
Indenture Trustee for any and all liabilities, obligations, losses, damages,
payments, costs, or expenses of any kind whatsoever which may be imposed on,
incurred by or asserted against the Noteholders, the Certificateholders, the
Owner Trustee and the Indenture Trustee as the result of any act or omission by
the Servicer relating to the maintenance and custody of the Contract Files;
PROVIDED, HOWEVER, that the Servicer will not be liable for any portion of any
such amount resulting from the gross negligence or willful misconduct of any
Noteholder, Certificateholder, the Owner Trustee or the Indenture Trustee. The
Trustees shall have no duty to monitor or otherwise oversee the Servicer's
performance as custodian hereunder.
SECTION 4.02. FILING. On or prior to the Closing Date, the Servicer
shall cause the UCC financing statement(s) referred to in Section 2.02(g) hereof
to be filed and from time to time the Servicer shall take and cause to be taken
such actions and execute such documents as are necessary or desirable or as the
Owner Trustee or Indenture Trustee may reasonably request to perfect and protect
the Trust's first priority perfected interest in the Trust Corpus against all
other persons, including, without limitation, the filing of financing
statements, amendments thereto and continuation statements, the execution of
transfer instruments and the making of notations on or taking possession of all
records or documents of title.
SECTION 4.03. NAME CHANGE OR RELOCATION. (a) During the term of this
Agreement, neither the Seller nor the Trust Depositor shall change its name,
identity or structure or relocate its chief executive office without first
giving at least 30 days' prior written notice to the Owner Trustee and the
Indenture Trustee.
(b) If any change in either the Seller's or the Trust Depositor's
name, identity or structure or other action would make any financing or
continuation statement or notice of lien filed under this Agreement seriously
misleading within the meaning of applicable provisions of the UCC or any title
statute, the Servicer, no later than five days after the effective date of such
change, shall file such amendments as may be required to preserve and protect
the Trust's interests in the Trust Corpus and the proceeds thereof. In
addition, neither the Seller nor the Trust Depositor shall change its place of
business (within the meaning of Article 9 of the UCC) from the location
specified in Section 11.04 below unless it has first taken such action as is
advisable or necessary to preserve and protect the Trust's interest in the Trust
Corpus. Promptly after taking any of the foregoing actions, the Servicer shall
deliver to the Owner Trustee and the Indenture Trustee an opinion of counsel
reasonably acceptable to the Owner Trustee stating that, in the opinion of such
counsel, all financing statements or amendments necessary to preserve and
protect the interests of the Owner Trustee in the Trust Corpus have been filed,
and reciting the details of such filing.
SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this Agreement,
the Trust Depositor will maintain its chief executive office in one of the
States of the United States, except Louisiana, Tennessee, Colorado, Kansas, New
Mexico, Oklahoma, Utah or Wyoming.
SECTION 4.05. COSTS AND EXPENSES. The Servicer agrees to pay all
reasonable costs and disbursements in connection with the perfection and the
maintenance of perfection, as against all third parties, of the Trust's right,
title and interest in and to the Contracts (including, without limitation, the
security interest in the Motorcycles granted thereby).
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ARTICLE FIVE
SERVICING OF CONTRACTS
SECTION 5.01. RESPONSIBILITY FOR CONTRACT ADMINISTRATION. The Servicer
will have the sole obligation to manage, administer, service and make
collections on the Contracts and perform or cause to be performed all
contractual and customary undertakings of the holder of the Contracts to the
Obligor. The Owner Trustee, at the written request of a Servicing Officer,
shall furnish the Servicer with any powers of attorney or other documents
necessary or appropriate in the opinion of the Owner Trustee to enable the
Servicer to carry out its servicing and administrative duties hereunder. The
Servicer is hereby appointed the servicer hereunder until such time as any
Service Transfer may be effected under Article VIII.
SECTION 5.02. STANDARD OF CARE. In managing, administering, servicing
and making collections on the Contracts pursuant to this Agreement, the Servicer
will exercise that degree of skill and care consistent with the skill and care
that the Servicer exercises with respect to similar contracts serviced by the
Servicer, and, in any event no less degree of skill and care than would be
exercised by a prudent servicer of motorcycle conditional sales contracts;
PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not
release or waive the right to collect the unpaid balance on any Contract.
SECTION 5.03. RECORDS. The Servicer shall, during the period it is
servicer hereunder, maintain such books of account and other records as will
enable the Owner Trustee and the Indenture Trustee to determine the status of
each Contract.
SECTION 5.04. INSPECTION. (a) At all times during the term hereof, the
Servicer shall afford the Owner Trustee and the Indenture Trustee and their
respective authorized agents reasonable access during normal business hours to
the Servicer's records relating to the Contracts and will cause its personnel to
assist in any examination of such records by the Owner Trustee or the Indenture
Trustee, or such authorized agents and allow copies of the same to be made. The
examination referred to in this Section will be conducted in a manner which does
not unreasonably interfere with the Servicer's normal operations or customer or
employee relations. Without otherwise limiting the scope of the examination the
Owner Trustee or the Indenture Trustee may, using generally accepted audit
procedures, verify the status of each Contract and review the Computer Disk and
records relating thereto for conformity to Monthly Reports prepared pursuant to
Article IX and compliance with the standards represented to exist as to each
Contract in this Agreement.
(b) At all times during the term hereof, the Servicer shall keep
available a copy of the List of Contracts at its principal executive office for
inspection by Certificateholders.
SECTION 5.05. TRUST ACCOUNTS. (a) On or before the Closing Date, the
Trust Depositor shall establish the Collection Account, Note Distribution
Account, Pre-Funding Account and Reserve Fund, each in the name of the Indenture
Trustee for the benefit of the Noteholders and the Certificateholders,
respectively. The Indenture Trustee is hereby required to ensure that each of
the Trust Accounts is established and maintained as an Eligible Account.
(b) The Indenture Trustee shall deposit (or the Servicer shall
deposit, with respect to payments by or on behalf of the Obligors received
directly by the Servicer), without deposit into any intervening account, into
the Collection Account as promptly as practical (but in any case not later than
the second Business Day following the receipt thereof):
(i) With respect to principal and interest on the Contracts (as
well as Late Payment Penalty Fees and extension fees) received on or
after the Initial Cutoff Date or Subsequent Cutoff Date, as applicable
(which for the purpose of this paragraph (b)(i) shall include those
monies in the Lockbox Account allocable to principal and interest on the
Contracts), all such amounts received by the Owner Trustee or Servicer;
(ii) All Net Liquidation Proceeds related to the Contracts;
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(iii) The aggregate of the Repurchase Prices for Contracts
repurchased by the Trust Depositor as described in Section 7.08;
(iv) All Advances made by the Servicer pursuant to Section
7.03(a);
(v) All amounts paid by the Trust Depositor in connection with
an optional repurchase of the Contracts described in Section 7.10;
(vi) All amounts realized in respect of Carrying Charges
transferred from the Interest Reserve Account as contemplated in Section
7.03(b); and
(vii) All amounts received in respect of interest, dividends,
gains, income and earnings on investments of funds in the Trust Accounts
(except the Reserve Fund) as contemplated herein.
(c) The Indenture Trustee shall, if amounts remain on deposit in the
Pre-Funding Account at the expiration of the Funding Period, make a demand,
immediately upon expiration of the Funding Period, upon the Trust Depositor to
cause to be deposited into the Collection Account the amount then in deposit in
the Pre-Funding Account.
(d) If the Servicer so directs, in writing, the Indenture Trustee
shall invest the amounts in the Trust Accounts in Qualified Eligible Investments
that mature not later than one Business Day prior to the next succeeding
Distribution Date. Once such funds are invested, the Indenture Trustee shall
not change the investment of such funds. Any loss on such investments shall be
deposited in the applicable Trust Account by the Servicer out of its own funds
immediately as realized. Funds in the Trust Accounts not so invested must be
insured to the extent permitted by law by the Bank Insurance Fund or the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation.
Subject to the restrictions herein, the Indenture Trustee may purchase a
Qualified Eligible Investment from itself or an Affiliate. Subject to the
other provisions hereof, the Indenture Trustee shall have sole control over each
such investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the
Indenture Trustee or its agent, together with each document of transfer, if any,
necessary to transfer title to such investment to the Indenture Trustee in a
manner which complies with this Section 5.05(d). All interest, dividends, gains
upon sale and other income from, or earnings on, investments of funds in the
Trust Accounts shall be deposited in the Collection Account pursuant to Section
5.05(b) and distributed on the next Distribution Date pursuant to Section 7.05.
The Trust Depositor and the Trust agree and acknowledge that the Indenture
Trustee is to have "CONTROL" (within the meaning of Section 8-102 of the UCC as
enacted in Illinois) of collateral comprised of "INVESTMENT PROPERTY" (within
the meaning of Section 9-115 of the UCC as enacted in Illinois) for all purposes
of this Agreement.
SECTION 5.06. ENFORCEMENT. (a) The Servicer will, consistent with
Section 5.02, act with respect to the Contracts in such manner as will maximize
the receipt of principal and interest on such Contracts.
(b) The Servicer may sue to enforce or collect upon Contracts, in its
own name, if possible, or as agent for the Trustees. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of commencement shall
be deemed to be an automatic assignment of the Contract to the Servicer for
purposes of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the ground
that it is not a real party in interest or a holder entitled to enforce the
Contract, the Owner Trustee (or the Indenture Trustee) on behalf of the Trust
shall, at the Servicer's expense, take such steps as the Servicer deems
reasonably necessary to enforce the Contract, including bringing suit in its
name or the names of the Noteholders under the Indenture and the
Certificateholders as owners of the Trust.
(c) The Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Contract in accordance with the
Servicer's usual practice. In exercising recourse rights, the Servicer is
authorized on the Owner Trustee's behalf to reassign the defaulted Contract or
the related Motorcycle to the person against whom recourse exists at the price
set forth in the document creating the recourse; PROVIDED, HOWEVER, the Servicer
in exercising recourse against any third persons as described in the immediately
preceding sentence shall do so in such manner as to maximize the aggregate
recovery with respect to the Contract; and PROVIDED FURTHER, HOWEVER, that
notwithstanding the
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foregoing the Servicer in its capacity as such may exercise such recourse
only if such Contract was not required to be repurchased by the Seller
pursuant to the Transfer and Sale Agreement or was required to be repurchased
by the Seller and the Seller has defaulted on such repurchase obligation.
(d) The Servicer will not permit any rescission or cancellation of any
Contract due to the acts or omissions of the Trust Depositor.
(e) The Servicer may grant to the Obligor on any Contract an
extension of payments due under such Contract; PROVIDED that (i) the
extension period is limited to 45 days, (ii) the Obligor has not received an
extension during the previous twelve-month period, (iii) the evidence
supports the Obligor's willingness and capability to resume monthly payments,
(iv) such extension is consistent with the Servicer's customary servicing
procedures and is consistent with Section 5.02, (v) such extension does not
extend the maturity date of the Contract beyond the latest maturity date of
any of the Contracts as of the Initial Cutoff Date (or, if a transfer of
Subsequent Contracts to the Trust occurs, beyond the latest maturity date of
such Subsequent Contracts) and (vi) the aggregate Principal Balances of
Contracts which have had extensions granted does not exceed more than 3.00%
of the aggregate of the Initial Class A-1 Note Balance, the Initial Class
A-2 Note Balance and the Initial Certificate Balance.
(f) The Servicer will not add to the outstanding Principal Balance of
any Contract the premium of any physical damage or other individual insurance on
a Motorcycle securing such Contract it obtains on behalf of the Obligor under
the terms of such Contract, but may create a separate Obligor obligation with
respect to such premium if and as provided by the Contract.
(g) If the Servicer shall have repossessed a Motorcycle on behalf of
the Trust, the Servicer shall either (i) maintain at its expense physical damage
insurance with respect to such Motorcycle, or (ii) indemnify the Trust against
any damage to such Motorcycle prior to resale or other disposition. The
Servicer shall not allow such repossessed Motorcycles to be used in an active
trade or business, but rather shall dispose of the Motorcycle in a reasonable
time in accordance with the Servicer's normal business practices.
SECTION 5.07. TRUSTEES TO COOPERATE. Upon payment in full on any
Contract, the Servicer will notify the Trustees and the Trust Depositor on the
next succeeding Distribution Date by certification of a Servicing Officer (which
certification shall include a statement to the effect that all amounts received
in connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 5.05 have been so deposited) and shall
(if the Servicer is not then in possession of the Contracts and Contract Files)
request delivery of the Contract and Contract File to the Servicer. Upon
receipt of such delivery and request, the Trustees shall promptly release or
cause to be released such Contract and Contract File to the Servicer. Upon
receipt of such Contract and Contract File, each of the Trust Depositor and the
Servicer is authorized to execute an instrument in satisfaction of such Contract
and to do such other acts and execute such other documents as the Servicer deems
necessary to discharge the Obligor thereunder and eliminate the security
interest in the Motorcycle related thereto. The Servicer shall determine when a
Contract has been paid in full; to the extent that insufficient payments are
received on a Contract credited by the Servicer as prepaid or paid in full and
satisfied, the shortfall shall be paid by the Servicer out of its own funds.
From time to time as appropriate for servicing and repossession in connection
with any Contract, if the Servicer is not then in possession of the Contracts
and Contract Files, the Indenture Trustee shall, upon written request of a
Servicing Officer and delivery to the Indenture Trustee of a receipt signed by
such Servicing Officer, cause the original Contract and the related Contract
File to be released to the Servicer and shall execute such documents as the
Servicer shall deem reasonably necessary to the prosecution of any such
proceedings. Such receipt shall obligate the Servicer to return the original
Contract and the related Contract File to the Indenture Trustee when the need by
the Servicer has ceased unless the Contract shall be repurchased as described in
Section 7.10. Upon request of a Servicing Officer, the Indenture Trustee shall
perform such other acts as reasonably requested by the Servicer and otherwise
cooperate with the Servicer in the enforcement of the Certificateholders' rights
and remedies with respect to Contracts.
SECTION 5.08. COSTS AND EXPENSES. All costs and expenses incurred by the
Servicer in carrying out its duties hereunder, fees and expenses of accountants
and payments of all fees and expenses incurred in connection with the
enforcement of Contracts (including enforcement of defaulted Contracts and
repossessions of Motorcycles securing such Contracts when such Contracts are not
repurchased pursuant to Section 7.08) and all other fees and expenses not
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expressly stated hereunder to be for the account of the Trust shall be paid by
the Servicer and the Servicer shall not be entitled to reimbursement hereunder.
SECTION 5.09. MAINTENANCE OF SECURITY INTERESTS IN MOTORCYCLES. The
Servicer shall take such steps as are necessary to maintain continuous
perfection and the first priority of the security interest created by each
Contract in the related Motorcycle. The Owner Trustee hereby authorizes the
Servicer to take such steps as are necessary to perfect such security interest
and to maintain the first priority thereof in the event of a relocation of a
Motorcycle or for any other reason.
SECTION 5.10. SUCCESSOR SERVICER/LOCKBOX AGREEMENTS. The Servicer shall
use its best efforts to cause Obligors to make all payments on the Contracts
directly to one or more Lockbox Banks, acting as agent for the Trust pursuant to
a Lockbox Agreement. In the event the Servicer shall for any reason no longer
be acting as such, the Successor Servicer shall thereupon assume all of the
rights and obligations of the outgoing servicer under the Lockbox Agreement;
PROVIDED, HOWEVER, that the Successor Servicer shall not be liable for any acts
or obligations of the Servicer prior to such succession. In such event, the
Successor Servicer shall be deemed to have assumed all of the outgoing
Servicer's interest therein and to have replaced the outgoing Servicer as a
party to each such Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the Successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability or obligations on the
part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.
The outgoing Servicer shall, upon the request of the Owner Trustee, but at the
expense of the outgoing Servicer, deliver to the Successor Servicer all
documents and records relating to each such Lockbox Agreement and an accounting
of amounts collected and held by the Lockbox Bank and otherwise use its best
efforts to effect the orderly and efficient transfer of any Lockbox Agreement to
the Successor Servicer. In connection with its assumption of all of the rights
and obligations of the outgoing Servicer, the Successor Servicer shall deliver a
written notice to Norwest Financial Information Services Group to the effect
that the outgoing Servicer has been terminated as Servicer or has resigned as
Servicer hereunder. Such notice shall also include a request to Norwest
Financial Information Services Group to assign to the Successor Servicer the
rights under that certain Agreement between Norwest Financial Information
Services Group and Eaglemark Financial Services, Inc., a Delaware corporation
("EAGLEMARK FINANCIAL"), dated as of November 4, 1992 (the "NORWEST AGREEMENT")
insofar as such rights relate to the Contracts, and an agreement on the part of
the Successor Servicer to assume the obligations under the Norwest Agreement
insofar as such obligations relate to the servicing of the Contracts. No such
assignment and assumption will relieve the Trust Depositor or Eaglemark
Financial of its obligations under the Norwest Agreement.
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ARTICLE SIX
THE TRUST DEPOSITOR
SECTION 6.01. CORPORATE EXISTENCE. During the term of this Agreement,
the Trust Depositor will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the other Transaction
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby. In addition, all transactions and dealings between the Trust Depositor
and its Affiliates will be conducted on an arm's-length basis.
SECTION 6.02. LIABILITY OF TRUST DEPOSITOR; INDEMNITIES. The Trust
Depositor shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Trust Depositor under this Agreement.
The Trust Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, WTC, the Indenture Trustee and the Servicer from and against
any taxes that may at any time be asserted against any such Person with respect
to the transactions contemplated herein and in the other Transaction Documents,
including any sales, gross receipts, general corporation, tangible personal
property, Illinois personal property replacement privilege or license taxes
(but, in the case of the Issuer, not including any taxes asserted with respect
to, and as of the date of, the sale of the Contracts to the Issuer or the
issuance and original sale of the Securities, or asserted with respect to
ownership of the Contracts, or federal or other income taxes arising out of
distributions on the Certificates or the Notes) and costs and expenses in
defending against the same.
The Trust Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, WTC, the Indenture Trustee and the Securityholders from and
against any loss, liability or expense incurred by reason of the Trust
Depositor's willful misfeasance, bad faith or negligence (other than errors in
judgment) in the performance of its duties under this Agreement, or by reason of
reckless disregard of its obligations and duties under this Agreement.
The Trust Depositor shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, WTC and the Indenture Trustee from and against all costs,
expenses, losses, claims, damages and liabilities arising out of or incurred in
connection with the acceptance or performance of the trusts and duties herein
and, in the case of the Owner Trustee, in the Trust Agreement and, in the case
of the Indenture Trustee, in the Indenture, except to the extent that such cost,
expense, loss, claim, damage or liability in the case of (i) the Owner Trustee
or WTC, as the case may be, shall be due to the willful misfeasance, bad faith
or negligence of the Owner Trustee or WTC, as the case may be, or shall arise
from the breach by the Owner Trustee or WTC, as the case may be, of any of its
representations or warranties set forth in Section 7.03 of the Trust Agreement,
or (ii) the Indenture Trustee, shall be due to the willful misfeasance, bad
faith or negligence of the Indenture Trustee.
The Trust Depositor shall be liable directly to and will indemnify any
injured party or any other creditor of the Trust for all losses, claims,
damages, liabilities and expenses of the Trust to the extent that Trust
Depositor would be liable if the Trust were a partnership under the Delaware
Revised Uniform Limited Partnership Act in which Trust Depositor were a general
partner; PROVIDED, HOWEVER, that Trust Depositor shall not be liable for any
losses incurred by a Certificateholder in the capacity of an investor in the
Trust Certificates or a Noteholder in the capacity of an investor in the Notes.
In addition, any third party creditors of the Trust (other than in connection
with the obligations described in the immediately preceding sentence for which
Trust Depositor shall not be liable) shall be deemed third party beneficiaries
of this paragraph. The obligations of Trust Depositor under this paragraph
shall be evidenced by the Trust Certificates described in the Trust Agreement,
which for purposes of the Business Trust Statute shall be deemed to be a
separate class of Trust Certificates from all other Trust Certificates issued by
the Trust; provided that the rights and obligations evidenced by all Trust
Certificates, regardless of class, shall, except as provided in this Section, be
identical.
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Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If the
Trust Depositor shall have made any indemnity payments pursuant to this Section
and the Person to or on behalf of whom such payments are made thereafter shall
collect any of such amounts from others, such Person shall promptly repay such
amounts to the Trust Depositor, without interest.
SECTION 6.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, TRUST DEPOSITOR; CERTAIN LIMITATIONS.
(a) The Trust Depositor shall not consolidate with or merge into any
other corporation or convey, transfer or lease substantially all of its assets
as an entirety to any Person unless the corporation formed by such consolidation
or into which the Trust Depositor has merged or the Person which acquires by
conveyance, transfer or lease substantially all the assets of the Trust
Depositor as an entirety, can lawfully perform the obligations of the Trust
Depositor hereunder and executes and delivers to the Owner Trustee and the
Indenture Trustee an agreement in form and substance reasonably satisfactory to
the Owner Trustee and the Indenture Trustee which contains an assumption by such
successor entity of the due and punctual performance and observance of each
covenant and condition to be performed or observed by the Trust Depositor under
this Agreement. The Trust Depositor shall provide notice of any merger,
consolidation or succession pursuant to this Section to each Rating Agency and
shall receive from each Rating Agency a letter to the effect that such merger,
consolidation or succession will not result in a qualification, downgrading or
withdrawal of the then-current ratings of each Class of Notes or the
Certificates. The Trust Depositor and Eaglemark shall maintain separate
corporate offices.
(b) Notwithstanding any other provision of this Section and any
provision of law, the Trust Depositor shall not do any of the following:
(i) engage in any business or activity other than as set forth
in its Articles of Incorporation;
(ii) without the affirmative vote of a majority of the members
of the Board of Directors of the Trust Depositor (which must include the
affirmative vote of at least two duly appointed Independent directors)
(A) dissolve or liquidate, in whole or in part, or institute proceedings
to be adjudicated bankrupt or insolvent, (B) consenting to the
institution of bankruptcy or insolvency proceedings against it, (C) file
a petition seeking or consent to reorganization or relief under any
applicable federal or state law relating to bankruptcy, (D) consent to
the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the corporation or a
substantial part of its property, (E) make a general assignment for the
benefit of creditors, (F) admit in writing its inability to pay its debts
generally as they become due, or (G) take any corporate action in
furtherance of the actions set forth in clauses (A) through (F) above;
PROVIDED, HOWEVER, that no director may be required by any shareholder of
the Trust Depositor to consent to the institution of bankruptcy or
insolvency proceedings against the Trust Depositor so long as it is
solvent; or
(iii) merge or consolidate with any other corporation, company or
entity or sell all or substantially all of its assets or acquire all or
substantially all of the assets or capital stock or other ownership
interest of any other corporation, company or entity.
SECTION 6.04. LIMITATION ON LIABILITY OF TRUST DEPOSITOR AND OTHERS. The
Trust Depositor and any director or officer or employee or agent of the Trust
Depositor may rely in good faith on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Trust Depositor and any director or officer or employee or agent
of the Trust Depositor shall be reimbursed by the Owner Trustee or the Indenture
Trustee, as the case may be, for any contractual damages, liability or expense
incurred by reason of the Owner Trustee's or the Indenture Trustee's willful
misfeasance, bad faith or negligence (except errors in judgment) in the
performance of their respective duties hereunder, or by reason of reckless
disregard of their respective obligations and duties hereunder. The Trust
Depositor shall not be under any obligation to appear in, prosecute or defend
any legal action that shall not be incidental to its obligations under this
Agreement, and that in its opinion may involve it in any expense or liability.
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SECTION 6.05. TRUST DEPOSITOR NOT TO RESIGN. Subject to the provisions
of Section 6.03, the Trust Depositor shall not resign from the obligations and
duties hereby imposed on it as Trust Depositor hereunder.
SECTION 6.06. TRUST DEPOSITOR WILL OWN CERTIFICATES. The Trust Depositor
and any Affiliate thereof will in its individual or any other capacity become
the owner or pledgee of Certificates with the same rights as it would have if it
were not the Trust Depositor or an Affiliate thereof, except as expressly
provided herein or in any Transaction Document. Certificates so owned by or
pledged to the Trust Depositor or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority or distinction as among all of the Certificates, as the
case may be.
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ARTICLE SEVEN
DISTRIBUTIONS; RESERVE FUND
SECTION 7.01. MONTHLY DISTRIBUTIONS. (a) Each Noteholder and
Certificateholder as of the related Record Date shall be paid on the next
succeeding Distribution Date by check mailed to such Noteholder or
Certificateholder at the address for such Noteholder or Certificateholder
appearing on the Note Register or Certificate Register or by wire transfer if
such Noteholder or Certificateholder provides written instructions to the
Indenture Trustee, respectively, at least ten days prior to such Distribution
Date.
(b) The Indenture Trustee shall serve as the paying agent hereunder
(the "PAYING AGENT") and shall make the payments to the Noteholders and
Certificateholders required hereunder. The Indenture Trustee hereby agrees that
all amounts held by it for payment hereunder will be held in trust for the
benefit of the Noteholders and Certificateholders.
SECTION 7.02. FEES. The Trustees shall be paid the Trustees' Fees and
the Servicer shall be paid the Monthly Servicing Fee, each of which shall be
paid solely from the monies and in accordance with the priorities described in
Section 7.05(a). No recourse may be had to the Seller, Trust Depositor,
Trustees, Servicer, or any of their respective Affiliates in the event that
amounts available under Section 7.05(a) are insufficient for payment of the
Trustees' Fee and the Monthly Servicing Fee.
SECTION 7.03. ADVANCES; REALIZATION OF CARRYING CHARGE. (a) On each
Determination Date, the Servicer shall compute the amount of Delinquent
Interest, if any, on the Contracts for the immediately preceding Due Period.
Not later than each Determination Date, the Servicer shall advance (each, an
"ADVANCE") such Delinquent Interest by depositing the aggregate amount of such
Delinquent Interest in the Collection Account; PROVIDED, HOWEVER, that the
Servicer shall be obligated to advance Delinquent Interest only to the extent
that the Servicer, in its sole discretion, expects that such Advance will not
become an Uncollectible Advance. The Servicer shall indicate on each Monthly
Report (i) the amount of Delinquent Interest, if any, on the Contracts for the
related Due Period and (ii) the amount of the Advance, if any, made by the
Servicer in respect of such Delinquent Interest pursuant to this Section 7.03.
If the amount of such Advance is less than the amount of the Delinquent
Interest, the relevant Monthly Report shall be accompanied by a certificate of a
Servicing Officer setting forth in reasonable detail the basis for the
determination by the Servicer that the portion of the Delinquent Interest not
advanced would become an Uncollectible Advance. By each Determination Date, the
Servicer shall determine the amount of prior unreimbursed Advances for which it
desires to be reimbursed pursuant to the provisions of this Section (such
amount, the "REIMBURSEMENT AMOUNT"). The Servicer shall be entitled to be
reimbursed for any outstanding Advance with respect to a Contract by means of a
first priority withdrawal from the Collection Account of such Reimbursement
Amount as provided in Section 7.05(a)(ii).
(b) The Servicer shall determine no later than 12:00 noon, New York
City time, on the second Business Day prior to a Distribution Date the Carrying
Charges in respect of the upcoming Distribution Date. To the extent of such
amount, the Indenture Trustee shall transfer an amount equal to the Carrying
Charges from the Interest Reserve Account (solely to the extent of the amount
then on deposit) into the Collection Account as contemplated in Section
5.05(b)(vi) hereof.
SECTION 7.04. INTEREST RESERVE ACCOUNT.
(a) On or prior to the Closing Date, the Trust Depositor shall
establish in the name of the Indenture Trustee on behalf of the Securityholders,
an Eligible Account designated "EAGLEMARK CUSTOMER FUNDING-IV INTEREST RESERVE
ACCOUNT - HARLEY DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ] - HARRIS
TRUST AND SAVINGS BANK, AS INDENTURE TRUSTEE" (such account being the "Interest
Reserve Account").
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(b) No withdrawals may be made of funds in the Interest Reserve
Account except as provided in (c) below. Except as specifically provided, funds
in the Interest Reserve Account shall not be commingled with funds in any other
account established with respect to the Notes, Certificates or with any other
monies.
(c) All investment earnings realized in respect of amounts in the Pre-
Funding Account shall be deposited when and as received in the Interest Reserve
Account, such that the Pre-Funded Amount shall never exceed the amount initially
deposited into the Pre-Funding Account on the Closing Date. With respect to
amounts on deposit in the Interest Reserve Account, the Indenture Trustee shall
disburse from such funds the amount specified in respect of Carrying Charges in
accordance with Section 7.03 herein. In the event that (i) the Funding Period
has terminated, (ii) all amounts on deposit in the Pre-Funding Account have been
disbursed, (iii) a Distribution Date has elapsed following the occurrence of
both (i) and (ii), and (iv) all amounts referred to in clause (ii) have been
applied, then any amounts remaining in the Interest Reserve Account shall be
allocated and distributed to the Trust Depositor.
SECTION 7.05. DISTRIBUTIONS.
(a) On each Distribution Date, the Servicer will allocate Available
Monies in the following order of priority:
(i) to the Mandatory Special Redemption subaccount in the Note
Distribution Account to the Class A-1 Noteholders and Class A-2 Noteholders, the
amount of any Mandatory Special Redemption, pro rata, calculated on the then
current principal balance of the Class A-1 and Class A-2 Notes with the amounts
derived from draws on the Pre-Funding Account (which amounts are available for
payment of such Mandatory Special Redemptions and not for any other purpose), to
be distributed (i) to the Class A-1 Noteholders, in an amount equal to the Class
A-1 Percentage multiplied by the amount in the Mandatory Special Redemption
Subaccount and (ii) to the Class A-2 Noteholders, in an amount equal to the
Class A-2 Percentage multiplied by the amount in the Mandatory Special
Redemption Subaccount with the amounts derived from draws on the Pre-Funding
Account (which amounts are available solely for payment of such Mandatory
Special Redemptions and not for any other purpose); PROVIDED, HOWEVER, in the
event the amount in the Mandatory Special Redemption subaccount is less than
$150,000 such amount shall be distributed solely to the Class A-1 Noteholders;
(ii) to the Servicer from Available Monies, the Reimbursement Amount to
the Servicer for Advances previously made;
(iii) to the Servicer from Available Monies, the Servicing Fee,
including any unpaid Servicing Fee with respect to one or more prior Due
Periods;
(iv) to the Indenture Trustee and the Owner Trustee from Available
Monies, any accrued and unpaid Indenture Trustee's Fees and Owner Trustee's
Fees, respectively, with respect to one or more prior Due Periods;
(v) to the Note Distribution Account from Available Monies, together
with any amounts deposited therein pursuant to Section 7.06, the Note Interest
Distributable Amount to the holders of the Notes at their respective Interest
Rates;
(vi) to the Note Distribution Account from Available Monies, together
with any amounts deposited therein pursuant to Section 7.06, the Note Principal
Distributable Amount to the holders of the Class A-1 Notes until the principal
amount of the Class A-1 Notes has been reduced to zero, and second to the
holders of the Class A-2 Notes until the principal amount of the Class A-2 Notes
has been reduced to zero;
(vii) to the Certificate Distribution Account from Available Interest,
together with any amounts deposited therein pursuant to Section 7.06, the
Certificate Interest Distributable Amount to the holders of the Certificates;
provided, however, in the event Available Interest is insufficient to make such
payment, from such other monies as may be available to the Trust.
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(viii) to the Certificate Distribution Account from Available Principal,
together with any amounts deposited therein pursuant to Section 7.06, the
Certificate Principal Distributable Amount to the holders of the Certificates;
provided, however, in the event Available Principal is insufficient to make such
payment, from such monies as may be available to the Trust; and
(b) in the event that the distributions described in clauses (i)
through (viii) above have been funded exclusively from Available Monies, any
remaining Available Monies ("EXCESS AMOUNTS") will be deposited into the
Reserve Fund, until the amount on deposit therein equals the Specified Reserve
Fund Balance, with any excess over the Specified Reserve Fund Balance being
distributed to the Trust Depositor. The Servicer shall at the written direction
of the Trust Depositor invest the funds in the Reserve Fund in Qualified
Eligible Investments. Funds in the Reserve Fund shall be invested in
investments that mature on or before the Business day prior to each Distribution
Date. Once such funds are invested, the Indenture Trustee shall not change the
investment of such funds prior to maturity. Upon any such investment, the
Indenture Trustee shall, consistent with the definition of Qualified Eligible
Investment herein, make an appropriate notation of security interest in such
Qualified Eligible Investment on the Indenture Trustee's records, by book entry
or otherwise. All income and gain realized from any such investments as well as
any interest earned on Reserve Fund Deposits shall be deposited and retained in
the Reserve Fund (subject to Section 7.06(e)). Losses, if any, realized on
amounts in the Reserve Fund invested pursuant to this paragraph shall first be
credited against undistributed investment earnings on amounts in the Reserve
Fund invested pursuant to this paragraph, and shall thereafter be deemed to
reduce the amount on deposit in the Reserve Fund. The Trust Depositor and the
Indenture Trustee shall not be liable for the amount of any loss incurred in
respect of any investment, or lack of investment, of funds held in the Reserve
Fund. All income or loss on funds held in the Reserve Fund shall be taxable to
the Trust Depositor.
SECTION 7.06. RESERVE FUND; CERTIFICATE RESERVE AMOUNT.
(a) On or prior to the Closing Date, the Owner Trustee, on behalf of
the Trust Depositor shall deposit the Reserve Fund Initial Deposit and the
Initial Certificate Reserve Amount into the Reserve Fund from the net proceeds
of the Securities. The Reserve Fund will be held by the Indenture Trustee for
the benefit of the Securityholders in order to effectuate the subordination of
the rights of the Securityholders to the extent described above.
(b) The Indenture Trustee shall determine no later than 10:00 a.m.,
Chicago, Illinois time, on the Distribution Date (but after making, and taking
into account, the determination, demand and transfer of funds contemplated in
Section 7.05 above) whether there exists a Shortfall with respect to the
upcoming Distribution Date. In the event that the Indenture Trustee determines
that there exists a Shortfall, the Indenture Trustee shall no later than 12:00
noon, Chicago, Illinois time, on such Distribution Date remit monies from the
Reserve Fund in respect of such Shortfall for deposit in the Note Distribution
Account or Certificate Distribution Account, as applicable.
(c) If funds, up to the Available Amount, in the Reserve Fund are
insufficient to distribute the interest or principal due on the Certificates,
funds available from the Certificate Reserve Amount will be withdrawn from the
Reserve Fund and deposited into the Certificate Distribution Account, solely to
distribute interest on the Certificates on each Distribution Date and to
distribute interest or principal on the Certificates on the Certificate Final
Distribution Date.
(d) Any Excess Amounts will be applied first to the Specified Reserve
Fund Balance (other than the Certificate Reserve Amount) and second to restore
the Certificate Reserve Amount to $[ ].
(e) On each Distribution Date on which the amount on deposit in the
Reserve Fund (after giving effect to all deposits thereto and withdrawals
therefrom on such Distribution Date) is greater than the Specified Spread
Account Balance, the Indenture Trustee shall release its lien on any remaining
amounts to the Trust Depositor.
SECTION 7.07. ESTABLISHMENT OF PRE-FUNDING ACCOUNT.
(a) On or prior to the Closing Date, the Trust Depositor shall
establish in the name of the Indenture Trustee on behalf of the Securityholders,
an Eligible Account designated "EAGLEMARK CUSTOMER FUNDING-IV PRE-FUNDING
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ACCOUNT - HARLEY DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ] - HARRIS TRUST
AND SAVINGS BANK, AS INDENTURE TRUSTEE" (such account being the "Pre-Funding
Account").
(b) During the Funding Period, following receipt from the Trust
Depositor of an Addition Notice, and upon further receipt of a written demand
from the Trust Depositor for a disbursement of funds from the Pre-Funding
Account to be made on or before the date on which the Funding Period terminates
(which written demand must be delivered not later than one Business Day prior to
the requested date of funding and must be accompanied by the written consent of
the Indenture Trustee), the Indenture Trustee will disburse the amount demanded
from the Pre-Funding Account to Eaglemark upon the order of the Trust Depositor
for the purpose of purchasing Subsequent Contracts from Eaglemark pursuant to a
Subsequent Purchase Agreement. With respect to amounts still remaining on
deposit in the Pre-Funding Account on the date upon which the Funding Period
ends (and provided a timely written demand for funding as described above has
not been received requesting funding on such date) the Indenture Trustee shall
immediately transfer all funds remaining in the Pre-Funding Account to the Note
Distribution Account.
(c) If (x) the Pre-Funded Amount has not been reduced to zero on
the Distribution Date on which the Funding Period ends (or, if the Funding
Period does not end on a Distribution Date, on the first Distribution Date
following the end of the Funding Period) or (y) the Pre-Funded Amount has
been reduced to $150,000 or less on any Determination Date, in either case
after giving effect to any reductions in the Pre-Funded Amount on such
Distribution Date or Determination Date pursuant to paragraph (a) above, the
Trust Depositor shall instruct the Indenture Trustee to withdraw from the
Pre-Funding Account the Pre-Funded Amount and, in the case of (x), on such
Distribution Date or, in the Determination Date (i) if the Pre-Funded Amount
is equal to or less than $150,000, deposit the Pre-Funded Amount in the Note
Distribution Account for payment as principal of the Class A-1 Notes up to
the Outstanding Amount thereof and then for payment of principal of the Class
A-2 Notes and (ii) if the Pre-Funded Amount is greater than $150,000, deposit
the Pre-Funded Amount in the Note Distribution Account for payment as
principal of the Class A-1 Notes and Class A-2 Notes, pro rata, calculated on
the then current principal balance of the Class A-1 and Class A-2 Notes.
SECTION 7.08. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND
WARRANTIES.
Upon a discovery by the Servicer, the Trust Depositor or the Trustees of
a breach of a representation or warranty of the Seller as set forth in EXHIBIT J
hereto or as made in any Subsequent Purchase Agreement relating to Subsequent
Contracts that materially adversely affects the Trust's interest in such
Contract (without regard to the benefits of the Reserve Fund), the party
discovering the breach shall give prompt written notice to the other parties;
PROVIDED, that the Trustees shall have no duty or obligation to inquire or to
investigate the breach by the Seller of any of such representations or
warranties. The Seller, as provided in the Transfer and Sale Agreement and in
accordance with this Section 7.08, shall repurchase a Contract at its Repurchase
Price, two Business Days prior to the first Determination Date after the Seller
becomes aware, or should have become aware, or receives written notice from the
Trustee, the Servicer or the Trust Depositor of any breach of a representation
or warranty of the Seller set forth in Article III of the Transfer and Sale
Agreement that materially and adversely affects such Contract or the Trust's
interest in such Contract and which breach has not been cured; PROVIDED,
HOWEVER, that with respect to any Contract incorrectly described on the List of
Contracts with respect to unpaid Principal Balance which the Seller would
otherwise be required to repurchase under the Transfer and Sale Agreement, the
Seller may, in lieu of repurchasing such Contract, deposit in the Collection
Account not later than one Business Day after such Determination Date cash in an
amount sufficient to cure such deficiency or discrepancy; and PROVIDED FURTHER
that with respect to a breach of representation or warranty relating to the
Contracts in the aggregate and not to any particular Contract the Seller may
select Contracts (without adverse selection) to repurchase such that had such
Contracts not been included as part of the Trust Corpus there would have been no
breach of such representation or warranty; PROVIDED FURTHER that (a) the failure
of a Contract File to be complete or of the original certificate of title and
evidence of recordation of such certificate to be included in the Contract File
as of 180 days after the Closing Date (or Subsequent Transfer Date, in the case
of Subsequent Contracts) or (b) the failure to maintain perfection of the
security interest in the Motorcycle securing a Contract in accordance with
Section 5.09, shall be deemed to be a breach materially and adversely affecting
the Trust's interest in the Contract or in the related Contracts.
Notwithstanding any other provision of this Agreement, the obligation of the
Seller under the Transfer and Sale Agreement and described in this Section 7.08
shall not terminate or be deemed released by any party hereto upon a
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Service Transfer pursuant to Article VIII. The repurchase obligation
described in this Section 7.08 is in no way to be satisfied with monies in
the Reserve Fund.
SECTION 7.09. REASSIGNMENT OF REPURCHASED CONTRACTS. Upon receipt by the
Indenture Trustee for deposit in the Collection Account of the Repurchase Price
as described in Section 7.08 or Section 7.10, and upon receipt of a certificate
of a Servicing Officer in the form attached hereto as EXHIBIT G, the Indenture
Trustee shall assign to the Seller all of the Trust's right, title and interest
in the repurchased Contract without recourse, representation or warranty, except
as to the absence of liens, charges or encumbrances created by or arising as a
result of actions of the Trustee.
SECTION 7.10. SELLER'S REPURCHASE OPTION. As provided in the Transfer
and Sale Agreement, on written notice to the Indenture Trustee at least 20 days
prior to a Distribution Date, and provided that the Pool Balance is then less
than 10% of the Initial Pool Balance, and provided a valuation letter is
delivered as required in Section 5.02 of the Transfer and Sale Agreement, the
Seller, through the Trust Depositor, may (but is not required to) repurchase on
that Distribution Date all outstanding Contracts at a price equal to the
aggregate of the Class A-2 Principal Balance and the Certificate Balance on the
previous Distribution Date plus the aggregate of the Note Interest Distributable
Amount and the Certificate Interest Distributable Amount for the current
Distribution Date thereon, the Reimbursement Amount (if any) as well as accrued
and unpaid Monthly Servicing Fees and Trustees' Fees to the date of such
repurchase. Such price is to be deposited in the Collection Account one
Business Day before such Distribution Date, against the Owner Trustee's and
Indenture Trustee's release of the Contracts and the Contract Files to the
Seller.
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ARTICLE EIGHT
EVENTS OF TERMINATION; SERVICE TRANSFER
SECTION 8.01. EVENTS OF TERMINATION. "EVENT OF TERMINATION" means the
occurrence of any of the following:
(a) Any failure by the Servicer or the Seller to make any payment or
deposit required to be made hereunder or in the Transfer and Sale Agreement (or
in any Subsequent Purchase Agreement or Subsequent Transfer Agreement) and the
continuance of such failure for a period of four Business Days after the date on
which such payment or deposit was due;
(b) Failure on the Servicer's or the Seller's part to observe or
perform in any material respect any covenant or agreement in the Certificates,
this Agreement or in the Transfer and Sale Agreement (or in any Subsequent
Purchase Agreement or Subsequent Transfer Agreement) (other than a covenant or
agreement, the breach of which is specifically addressed elsewhere in this
Section) which continues unremedied for 30 days after the date on which such
failure commences;
(c) Any assignment by the Servicer or the Seller of its duties or
rights hereunder or under the Transfer and Sale Agreement (or under any
Subsequent Purchase Agreement or Subsequent Transfer Agreement), except as
specifically permitted hereunder or thereunder, or any attempt to make such an
assignment;
(d) An involuntary case under any applicable bankruptcy, insolvency or
other similar law shall have been commenced in respect of the Servicer or Trust
Depositor and shall not have been dismissed within 90 days, or a court having
jurisdiction in the premises shall have entered a decree or order for relief in
respect of either the Servicer or Trust Depositor in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of either the Servicer or Trust Depositor, or
for any substantial liquidation or winding up of their respective affairs;
(e) The Servicer or Trust Depositor shall have commenced a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have consented to the entry of an order for relief
in an involuntary case under any such law, or shall have consented to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of the Servicer
or Trust Depositor, as the case may be, or for any substantial part of their
respective property, or shall have made any general assignment for the benefit
of their respective creditors, or shall have failed to, or admitted in writing
its inability to, pay its debts as they become due, or shall have taken any
corporate action in furtherance of the foregoing;
(f) Any failure by the Servicer to deliver to the Trustees the Monthly
Report pursuant to the terms of this Agreement which remains uncured for five
Business Days after the date which such failure commences;
(g) Any representation, warranty or statement of the Servicer made in
this Agreement, in any Subsequent Transfer Agreement or any certificate, report
or other writing delivered pursuant hereto shall prove to be incorrect in any
material respect as of the time when the same shall have been made and the
incorrectness of such representation, warranty or statement has a material
adverse effect on the Trust and, within 30 days after written notice thereof
shall have been given to the Servicer or the Trust Depositor by the Indenture
Trustee, the circumstances or condition in respect of which such representation,
warranty or statement was incorrect shall not have been eliminated or otherwise
cured.
SECTION 8.02. SERVICE TRANSFER. (a) If an Event of Termination has
occurred and is continuing, (x) Noteholders representing more than 50% of the
outstanding balance of the Notes voting as a single class and Certificateholders
with aggregate fractional interests representing more than 50% or more of the
Trust or (y) the Indenture Trustee may, by written notice delivered to the
parties hereto, terminate all (but not less than all) of the Servicer's
management, administrative, servicing, custodial and collection functions (such
termination being herein called a "SERVICE TRANSFER").
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(b) Upon receipt of the notice required by Section 8.02(a) (or, if
later, on a date designated therein), all rights, benefits, fees, indemnities,
authority and power of the Servicer under this Agreement, whether with respect
to the Contracts, the Contract Files or otherwise, shall pass to and be vested
in the Indenture Trustee (the "SUCCESSOR SERVICER") pursuant to and under this
Section 8.02; and, without limitation, the Successor Servicer is authorized and
empowered to execute and deliver on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination. The Servicer agrees to cooperate with the Successor Servicer in
effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the Successor Servicer
for administration by it of all cash amounts which shall at the time be held by
the Servicer for deposit, or have been deposited by the Servicer, in the
Collection Account, or for its own account in connection with its services
hereafter or thereafter received with respect to the Contracts. The Servicer
shall transfer to the Successor Servicer all records held by the Servicer
relating to the Contracts in such electronic form as the Successor Servicer may
reasonably request and (ii) any Contract Files in the Servicer's possession. In
addition, the Servicer shall permit access to its premises (including all
computer records and programs) to the Successor Servicer or its designee, and
shall pay the reasonable transition expenses of the Successor Servicer. Upon a
Service Transfer, the Successor Servicer shall also be entitled to receive the
Servicing Fee for performing the obligations of the Servicer.
SECTION 8.03. SUCCESSOR SERVICER TO ACT; APPOINTMENT OF SUCCESSOR
SERVICER. On or after a Service Transfer pursuant to Section 8.02, the
Successor Servicer shall be the successor in all respects to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and the terminated Servicer shall be relieved of such responsibilities,
duties and liabilities arising after such Service Transfer; PROVIDED, HOWEVER,
that (i) the Successor Servicer will not assume any obligations of the Servicer
described in Section 8.03 and (ii) the Successor Servicer shall not be liable
for any acts or omissions of the Servicer occurring prior to such Service
Transfer or for any breach by the Servicer of any of its representations and
warranties contained herein or in any related document or agreement.
Notwithstanding the above, if the Successor Servicer is legally unable or
unwilling to act as Servicer, Noteholders representing more than 50% or more of
the outstanding balance of each Class of Notes and Certificateholders with
aggregate fractional interests representing more than 50% or more of the Trust,
may appoint a successor servicer (other than the original Servicer or an
Affiliate of the original Servicer) to act as Servicer. As compensation
therefor, the successor servicer shall be entitled to receive reasonable
compensation equal to the Monthly Servicing Fee. The Owner Trustee, Noteholders
and the Indenture Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
To the extent the terminated Servicer has made Advances, it shall be entitled to
reimbursement of the same notwithstanding its termination hereunder, to the same
extent as if it had continued to service the Contracts hereunder.
SECTION 8.04. NOTIFICATION TO CERTIFICATEHOLDERS. (a) Promptly
following the occurrence of any Event of Termination, the Servicer shall give
written notice thereof to the Trustees, the Trust Depositor and each Rating
Agency at the addresses described in Section 11.04 hereof and to the Noteholders
and Certificateholders at their respective addresses appearing on the Note
Register and the Certificate Register, respectively.
(b) Within 10 days following any termination or appointment of a
Successor Servicer pursuant to this Article VIII, the Indenture Trustee shall
give written notice thereof to each Rating Agency and the Trust Depositor at the
addresses described in Section 11.04 hereof, and to the Noteholders and
Certificateholders at their respective addresses appearing on the Note Register
and the Certificate Register, respectively.
SECTION 8.05. EFFECT OF TRANSFER. (a) After a Service Transfer, the
terminated Servicer shall have no further obligations with respect to the
management, administration, servicing, custody or collection of the Contracts
and the Successor Servicer appointed pursuant to Section 8.03 shall have all of
such obligations, except that the terminated Servicer will transmit or cause to
be transmitted directly to the Successor Servicer for its own account, promptly
on receipt and in the same form in which received, any amounts (properly
endorsed where required for the Successor Servicer to collect them) received as
payments upon or otherwise in connection with the Contracts.
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(b) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer)
other than those relating to the management, administration, servicing, custody
or collection of the Contracts.
SECTION 8.06. DATABASE FILE. The Servicer will provide the Successor
Servicer with a magnetic tape containing the database file for each Contract (i)
as of the Cutoff Date, (ii) the Subsequent Cutoff Date, (iii) thereafter, as of
the last day of the preceding Due Period on each Determination Date prior to a
Servicer Termination Event and (iv) on and as of the Business Day before the
actual commencement of servicing functions by the Successor Servicer following
the occurrence of a Servicer Termination Event.
SECTION 8.07. SUCCESSOR SERVICER INDEMNIFICATION. The Servicer shall
defend, indemnify and hold the Successor Servicer and any officers, directors,
employees or agents of the Successor Servicer harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments and any other costs, fees, and expenses that the Successor Servicer
may sustain in connection with the claims asserted at any time by third parties
against the Successor Servicer which result from (i) any willful or grossly
negligent act taken or omission by the Servicer or (ii) a breach of any
representations of the Servicer in Section 3.02 hereof. The indemnification
provided by this Section 8.07 shall survive the termination of this Agreement.
SECTION 8.08. RESPONSIBILITIES OF THE SUCCESSOR SERVICER. The Successor
Servicer will not be responsible for delays attributable to the Servicer's
failure to deliver information, defects in the information supplied by the
Servicer or other circumstances beyond the control of the Successor Servicer.
The Successor Servicer will make arrangements with the Servicer for the
prompt and safe transfer of, and the Servicer shall provide to the Successor
Servicer, all necessary servicing files and records, including (as deemed
necessary by the Successor Servicer at such time): (i) microfiche loan
documentation, (ii) servicing system tapes, (iii) Contract payment history, (iv)
collections history and (v) the trial balances, as of the close of business on
the day immediately preceding conversion to the Successor Servicer, reflecting
all applicable loan information.
The Successor Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information. The
Successor Servicer shall have no responsibility, shall not be in default and
shall incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Trust Depositor or the Trustees or for any
inaccuracy or omission in a notice or communication received by the Successor
Servicer from any third party or (ii) which is due to or results from the
invalidity, unenforceability of any Contract with applicable law or the breach
or the inaccuracy of any representation or warrant made with respect to any
Contract.
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ARTICLE NINE
REPORTS
SECTION 9.01. MONTHLY REPORTS. No later than 10:00 a.m. Chicago,
Illinois time two Business Days following each Determination Date, the Servicer
shall cause the Trustees and each Rating Agency to receive a "MONTHLY REPORT"
substantially in the form of EXHIBIT I hereto.
SECTION 9.02. OFFICER'S CERTIFICATE. Each Monthly Report delivered
pursuant to Section 9.01 shall be accompanied by a certificate of a Servicing
Officer certifying the accuracy of the monthly report and that no event of
termination or event that with notice or lapse of time or both would become an
event of termination has occurred, or if such event has occurred and is
continuing, specifying the event and its status.
SECTION 9.03. OTHER DATA. In addition, the Trust Depositor and the
Servicer shall, upon the request of the Trustees, Moody's or Standard & Poor's,
furnish the Trustees, Moody's or Standard & Poor's, as the case may be, such
underlying data as may be reasonably requested.
SECTION 9.04. ANNUAL REPORT OF ACCOUNTANTS.
(a) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (the "INDEPENDENT ACCOUNTANTS"), who
may also render other services to the Servicer, Eaglemark Financial or to the
Trust Depositor, to deliver to the Trustees, the Underwriters and each Rating
Agency, on or before March 31 (or 90 days after the end of the Servicer's
fiscal year, if other than December 31) of each year, beginning on March 31,
[ ], with respect to the twelve months ended the immediately preceding
December 31 (or other applicable date), a statement (the "ACCOUNTANT'S
REPORT") addressed to the Board of Directors of the Servicer and to the
Trustees to the effect that such firm has audited the financial statements of
Eaglemark Financial and issued its report thereon and that such audit:
(1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records
and such other auditing procedures as such firm considered necessary in
the circumstances;
(2) included an examination of documents and records relating
to the servicing of motorcycle conditional sales contracts under pooling
and servicing agreements substantially similar to one another (such
statement to have attached thereto a schedule setting forth the pooling
and servicing agreements covered thereby, including this Agreement);
(3) included an examination of the delinquency and loss
statistics relating to Eaglemark Financial's portfolio of motorcycle
conditional sales contracts; and
(4) except as described in the statement, disclosed no
exceptions or errors in the records relating to motorcycle loans serviced
for others that, in the firm's opinion, generally accepted auditing
standards requires such firm to report.
The Accountant's Report shall further state that:
(1) a review in accordance with agreed upon procedures was made
of one randomly selected Monthly Report; and
(2) except as disclosed in the Report, no exceptions or errors
in the Monthly Report so examined were found.
(b) The Accountant's Report shall also indicate that the firm is
independent of Eaglemark Financial within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
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SECTION 9.05. ANNUAL STATEMENT OF COMPLIANCE FROM SERVICER. The
Servicer will deliver to the Trustees, the Underwriters and each of the
Rating Agencies, on or before January 31 of each year commencing January 31,
[ ], an Officer's Certificate stating that (a) a review of the
activities of the Servicer during the prior calendar year and of its
performance under this Agreement was made under the supervision of the
officer signing such certificate and (b) to such officer's knowledge, based
on such review, the Servicer has fully performed all its obligations under
this Agreement, or, if there has been a default in the performance of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. A copy of such certificate may be obtained by any
Certificateholder by a request in writing to the Trustee.
SECTION 9.06. MONTHLY REPORTS TO SECURITYHOLDERS. (a) On or before two
Business Days prior to each Distribution Date, the Servicer shall prepare and,
concurrently with each distribution to Certificateholders and Noteholders
pursuant to Article VII, deliver to the Indenture Trustee, in its capacity as
Note Registrar and Certificate Registrar and Paying Agent, shall cause to be
delivered and mailed to each Holder of a Class A-1 Notes, Class A-2 Notes and
each Certificateholder at the address appearing on the Note Register and
Certificate Register, respectively a statement as of the related Distribution
Date setting forth (the "MONTHLY REPORT"):
(i) the amount of Certificateholder's distribution allocable to
principal of the Certificates and the amount of Noteholder's principal
distribution;
(ii) the amount of the Certificateholder's distribution
allocable to interest and the amount of Noteholder's interest
distribution;
(iii) the amount of fees payable out of the Trust, separately
identifying the Monthly Servicing Fee and the Trustees' Fees;
(iv) the amount of any Note Interest Carryover Shortfall, Note
Principal Carryover Shortfall, Certificate Interest Carryover Shortfall
and Certificate Principal Carryover Shortfall on such Distribution Date
and the change in such amounts from those with respect to the immediately
preceding Distribution Date;
(v) the Note Pool Factor for each Class of Notes and the
Certificate Pool Factor, in each case of such Distribution Date;
(vi) the amount of the distributions described in (i) or (ii)
above payable pursuant to a claim on the Reserve Fund or from any other
source not constituting Available Monies and the amount remaining in the
Reserve Fund after giving effect to all deposits and withdrawals from the
Reserve Fund on such date;
(vii) the amount of any Mandatory Special Redemption to be made
on such Distribution Date;
(viii) for each Distribution Date during the Funding Period, the
remaining Pre-Funded Amount;
(ix) for each Distribution Date during the Funding Period to and
including the Distribution Date immediately following the end of the
Funding Period, the Principal Balance and number of Subsequent Contracts
conveyed to the Trust during the related Due Period;
(x) the remaining Principal Balance after giving effect to the
distribution of principal (and Mandatory Special Redemption, if any) to
each class of Notes and Certificates to be made on such Distribution
Date;
(xi) the number and aggregate principal balance of Contracts
delinquent 31-59 days, 60-89 days and 90 or more days, computed as of the
end of the related Due Period;
(xii) the number and aggregate principal balance of Contracts
that became Liquidated Contracts during the immediately preceding Due
Period, the amount of liquidation proceeds for such Due Period, the
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amount of liquidation expenses being deducted from liquidation proceeds
for such Due Period, the Net Liquidation Proceeds and the Net Liquidation
Losses for such Due Period;
(xiii) the Loss Ratio, Average Loss Ratio, Cumulative Loss Ratio,
the Delinquency Ratio and the Average Delinquency Ratio as of such
Distribution Date;
(xiv) the number of Contracts and the aggregate Principal Balance
of such Contracts, as of the first day of the Due Period relating to such
Distribution Date (after giving effect to payments received during such
Due Period and to any transfers of Subsequent Contracts to the Trust
occurring on or prior to such Distribution Date);
(xv) the aggregate Principal Balance and number of Contracts
that were repurchased by the Seller pursuant to the Agreement with
respect to the related Due Period, identifying such Contracts and the
Repurchase Price for such Contracts; and
(xvi) such other customary factual information as is available to
the Servicer as the Servicer deems necessary and can reasonably obtain
from its existing data base to enable the Noteholders and
Certificateholders to prepare their tax returns.
(b) Within 75 days after the end of each calendar year, the Servicer
shall prepare and the Note Register and Certificate Registrar, respectively
shall mail to each Noteholder or Certificateholder of record at any time during
such year a report as to the aggregate amounts reported pursuant to subsections
(i), (ii), (iii) and (iv) of this Section, attributable to such Noteholder or
Certificateholder.
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ARTICLE TEN
TERMINATION
SECTION 10.01. SALE OF TRUST ASSETS.
(a) Upon any sale of the assets of the Trust pursuant to Section 9.02
of the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "INSOLVENCY PROCEEDS") in the Collection Account. On the
Distribution Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Distribution
Date, on the Distribution Date immediately following such deposit), the Servicer
shall instruct the Indenture Trustee to make the following deposits (after the
application on such Distribution Date of Available Monies and funds on deposit
in the Reserve Fund pursuant to Section 7.06) from the Insolvency Proceeds and
any funds remaining on deposit in the Reserve Fund (including the proceeds of
any sale of investments therein as described in the following sentence):
(i) to the Note Distribution Account, any portion of the Note
Interest Distributable Amount not otherwise deposited into the Note
Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the outstanding principal
amount of the Notes (after giving effect to the reduction in the
outstanding principal amount of the Notes to result from the deposits
made in the Note Distribution Account on such Distribution Date and on
prior Distribution Dates);
(iii) to the Certificate Distribution Account, any portion of the
Certificate Interest Distributable Amount not otherwise deposited into
the Certificate Distribution Account on such Distribution Date; and
(iv) to the Certificate Distribution Account, the Certificate
Balance (after giving effect to the reduction in the Certificate Balance
to result from the deposits made in the Certificate Distribution Account
on such Distribution Date).
(b) As described in Article Nine of the Trust Agreement, notice of any
termination of the Trust shall be given by the Servicer to the Owner Trustee and
the Indenture Trustee as soon as practicable after the Servicer has received
notice thereof.
(c) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. AMENDMENT.
(a) This Agreement may be amended by the Trust Depositor, the
Servicer, the Indenture Trustee and the Owner Trustee on behalf of the Issuer,
collectively, without the consent of any Securityholders, (i) to cure any
ambiguity, to correct or supplement any provisions in this Agreement which are
inconsistent with the provisions herein, or to add any other provisions with
respect to matters or questions arising under this Agreement that shall not be
inconsistent with the provisions of this Agreement, (ii) to add or provide any
credit enhancement for any Class of Notes or the Certificates and (iii) to
change any provision applicable for determining the Specified Reserve Fund
Balance or the manner in which the Reserve Fund is funded (in each case with the
approval of the Insurer); PROVIDED, HOWEVER that any such action shall not, as
evidenced by an Opinion of Counsel, adversely affect in any material respect the
interests of any Securityholder and provided, further, that in connection with
any amendment pursuant to clause (iii) above, the Servicer shall deliver to the
Owner Trustee and the Indenture Trustee a letter from Standard & Poor's (so long
as Standard & Poor's is a Rating Agency) and Moody's (so long as Moody's is a
Rating Agency) to the effect that such amendment will not cause its then-current
rating on any Class of Notes or the Certificates to be qualified, reduced or
withdrawn.
(b) This Agreement may also be amended from time to time by the
Trust Depositor, the Servicer, the Indenture Trustee and the Owner Trustee on
behalf of the Issuer, with the consent of the Holders of Notes evidencing
more than 50% of the Outstanding Amount of the Notes, and the consent of
Certificateholders evidencing more than 50% of the Certificate Balance, for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; PROVIDED,
HOWEVER, that no such amendment shall increase or reduce in any manner the
amount of, or accelerate or delay the timing of (i)(a) collections of
payments on the Contracts or distributions that shall be required to be made
on any Note or Certificate or any Interest Rate or the Pass-Through Rate, (b)
except as otherwise provided in Section 10.01(a), the Specified Reserve Fund
Balance or the manner in which the Reserve Fund is funded or (ii) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all Notes and Certificates
of the relevant Class then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Indenture Trustee shall furnish written notification of the substance of such
amendment or consent, together with a copy thereof, to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish
written notification of the substance of such amendment or consent to each
Certificateholder and Noteholder, respectively. It shall not be necessary for
the consent of Noteholders and Certificateholders pursuant to Section 11.01(b)
to approve the particular form of any proposed amendment or consent, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization by
Noteholders and Certificateholders of the execution thereof shall be subject to
such reasonable requirements as the Owner Trustee or the Indenture Trustee may
prescribe.
(e) Prior to the execution of any amendment to this Agreement, the
Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
SECTION 11.02. PROTECTION OF TITLE TO TRUST.
(a) The Servicer shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
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protect the interest of the Issuer, the Securityholders, the Indenture Trustee
and the Owner Trustee in the Contracts and in the proceeds thereof. The
Servicer shall deliver (or cause to be delivered) to the Owner Trustee and the
Indenture Trustee file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing.
(b) Neither the Seller, the Trust Depositor nor the Servicer shall
change its name, identity or corporate structure in any manner that would, could
or might make any financing statement or continuation statement filed in
accordance with Section 4.02(a) seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Issuer, the Owner
Trustee and the Indenture Trustee at least 60 days' prior written notice thereof
and shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements.
(c) The Seller, the Trust Depositor and the Servicer shall give the
Issuer, the Owner Trustee and the Indenture Trustee at least 60 days' prior
written notice of any relocation of the principal executive office of Eaglemark
or the Trust Depositor and the Servicer (in the case of notice provided by the
Servicer) if, as a result of such relocation, the applicable provisions of the
UCC would require filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment or new financing statement. The Servicer shall at all times
maintain each office from which it shall service Contracts, and its principal
executive office, within the United States.
(d) The Servicer shall maintain or cause to be maintained accounts and
records as to each Contract accurately and in sufficient detail to permit (i)
the reader thereof to know at any time the status of such Contract, including
payments and recoveries made and payments owing (and the nature of each) and
(ii) reconciliation between payments or recoveries on (or with respect to) each
Contract and the amounts from time to time deposited in or credited to the
Collection Account in respect of each Contract.
(e) The Servicer shall maintain or cause to be maintained its computer
systems so that, from and after the time of sale under this Agreement of the
Contracts, the Servicer's master computer records (including any backup
archives) that shall refer to a Contract indicate clearly the interest of the
Issuer and the Indenture Trustee in such Contract and that such Contract is
owned by the Issuer and has been pledged to the Indenture Trustee. Indication
of the Issuer's ownership of and the Indenture Trustee's interest in a Contract
shall be deleted from or modified on the Servicer's computer systems when, and
only when, the related Contract shall have been paid in full or repurchased or
shall have become a Liquidated Contract.
(f) If at any time the Trust Depositor or the Servicer shall propose
to sell, grant a security interest in, or otherwise transfer any interest in
automotive retail installment sales contracts to any prospective purchaser,
lender or other transferee, the Servicer shall give or cause to be given to such
prospective purchaser, lender or other transferee computer tapes, records or
print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any Contract, shall indicate clearly that such
Contract has been sold and is owned by the Issuer and has been pledged to the
Indenture Trustee.
(g) The Servicer shall permit the Owner Trustee and the Insurer and
its agents, at any time during normal business hours, to inspect, audit and make
copies of and abstracts from the Servicer's records regarding any Contract.
(h) Upon request, the Servicer shall furnish to the Owner Trustee and
the Indenture Trustee, within five Business Days, a list of all Contracts then
held as part of the Trust Estate, together with a reconciliation of such list to
the Schedule of Contracts and to each of the Monthly Reports furnished before
such request indicating removal of Contracts from the Trust.
(i) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee and each Rating Agency promptly after the execution and delivery of this
Agreement and of each amendment hereto, an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Owner Trustee and the Indenture Trustee and
46
<PAGE>
reciting the details of each filings or referring to prior Opinions of
Counsel in which such details are given, or (B) stating that, in the opinion
of such counsel, no such action shall be necessary to preserve and protect
such interest.
SECTION 11.03. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Illinois and the obligations, rights,
and remedies of the parties under the Agreement shall be determined in
accordance with such laws, except that the duties of the Owner Trustee shall be
governed by the laws of the State of Delaware.
SECTION 11.04. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:
(i) If to the Servicer or Seller:
Eaglemark, Inc.
150 South Wacker Drive, Suite 3100
Chicago, Illinois 60606
Attention: Michael E. Sulentic
Telecopier No.: (312) 368-4372
(ii) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-IV
4150 Technology Way
Carson City, Nevada 89706
Telecopier No.: (702) 884-4469
(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iv) If to the Owner Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
47
<PAGE>
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, A
Division of The McGraw Hill Companies
25 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
(vii) If to the Underwriters:
Salomon Smith Barney Inc.
Seven World Trade Center
New York, New York 10048
Attention: Asset-Backed Securities Group
Telecopier No.: (212) 783-3848
[ ]
Telecopier No.: [ ]
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11.05. SEVERABILITY OF PROVISIONS. If one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or
Certificates or the rights of the Holders thereof.
SECTION 11.06. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, as provided in Sections 6.03 and 8.02, this Agreement may not
be assigned by the Trust Depositor or the Servicer without the prior written
consent of Holders of Notes aggregating not less than 66-2/3% of each Class and
Certificateholders evidencing not less than 66-2/3% of the Certificate Balance.
SECTION 11.07. THIRD PARTY BENEFICIARIES. Except as otherwise
specifically provided herein, the parties hereto hereby manifest their intent
that no third party other than the Insurer shall be deemed a third party
beneficiary of this Agreement, and specifically that the Obligors are not third
party beneficiaries of this Agreement.
SECTION 11.08. COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
together constitute but one and the same instrument.
48
<PAGE>
SECTION 11.09. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.10. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE
TRUSTEE.
(a) Notwithstanding anything contained herein to the contrary, this
instrument has been countersigned by Wilmington Trust Company, not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer,
and in no event shall Wilmington Trust Company in its individual capacity or any
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder,
as to all of which recourse shall be had solely to the assets of the Issuer.
For all purposes of this Agreement, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles Six, Seven and
Eight of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Harris Trust and Savings Bank, not in its
individual capacity but solely as Indenture Trustee, and in no event shall
Harris Trust and Savings Bank have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
49
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ]
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee on behalf of the Trust
By:
----------------------------------------
Printed Name
-------------------------
Title:
------------------------------
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV, as
Trust Depositor
By:
----------------------------------------
Printed Name
-------------------------
Title:
------------------------------
EAGLEMARK INC, as Servicer
By:
----------------------------------------
Printed Name
-------------------------
Title:
------------------------------
HARRIS TRUST AND SAVINGS BANK, not in its
individual capacity but solely as Indenture
Trustee
By:
----------------------------------------
Printed Name
-------------------------
Title:
------------------------------
50
<PAGE>
EXHIBIT A
[Form of Assignment]
In accordance with the Sale and Servicing Agreement (the "SALE AND
SERVICING AGREEMENT") dated as of [ ] made by and between
the undersigned, as Trust Depositor ("TRUST DEPOSITOR"), Eaglemark, Inc., as
Servicer, Harris Trust and Savings Bank, as Indenture Trustee and
Harley-Davidson Eaglemark Motorcycle Trust [ ] (the "TRUST"), as
assignee thereunder, the undersigned does hereby sell, transfer, convey and
assign, set over and otherwise convey to the Trust (i) all the right, title
and interest of the Trust Depositor in and to the Initial Contracts listed on
the initial List of Contracts delivered on the Closing Date (including,
without limitation, all security interests and all rights to receive payments
which are collected pursuant thereto on or after the Initial Cutoff Date,
including any liquidation proceeds therefrom, but excluding any rights to
receive payments which were collected pursuant thereto prior to the Initial
Cutoff Date), (ii) all rights of the Trust Depositor under any physical
damage or other individual insurance policy (and rights under a "FORCED
PLACED" policy, if any) relating to any such Contract, an Obligor or a
Motorcycle securing such Contract, (iii) all security interests in each such
Motorcycle, (iv) all documents contained in the related Contract Files, (v)
all rights (but not the obligations) of the Trust Depositor under any related
motorcycle dealer agreements between dealers (i.e., the originators of such
Contracts) and the Trust Depositor, (vi) all rights of the Trust Depositor in
the Lockbox, the Lockbox Account and related Lockbox Agreement to the extent
they relate to such Contracts, (vii) all rights (but not the obligations) of
the Trust Depositor under the Transfer and Sale Agreement, including but not
limited to the Trust Depositor's rights under Article V thereof, (viii) the
remittances, deposits and payments made into the Trust Accounts from time to
time and amounts in the Trust Accounts (other than the Reserve Fund) from
time to time (and any investments of such amounts), and (ix) all proceeds and
products of the foregoing
This Assignment is made pursuant to and in reliance upon the
representation and warranties on the part of the undersigned contained in
Article III of the Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this _____ day of [ ].
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV
By:
----------------------------------------
Printed Name
-------------------------
Title:
------------------------------
A-1
<PAGE>
EXHIBIT B
[Form of Closing Certificate of Trust Depositor]
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV
PRESIDENT'S CERTIFICATE
The undersigned certifies that he is President of Eaglemark Customer
Funding Corporation-IV, a Nevada corporation (the "TRUST DEPOSITOR"), and
that as such is duly authorized to execute and deliver this certificate on
behalf of the Trust Depositor in connection with the Sale and Servicing
Agreement (the "AGREEMENT") dated as of [ ] (the "EFFECTIVE
DATE") by and among the Trust Depositor, Harris Trust and Savings Bank (the
"INDENTURE TRUSTEE"), as Indenture Trustee, Eaglemark, Inc. ("EAGLEMARK"),
as Servicer, and Harley-Davidson Eaglemark Motorcycle Trust [ ]
("ISSUER") (all capitalized terms used herein without definition have the
respective meanings set forth in the Agreement), and further certifies as
follows:
(1) Attached hereto as EXHIBIT I is a true and correct copy of
the Articles of Incorporation of the Trust Depositor, together with all
amendments thereto as in effect on the date hereof.
(2) There has been no other amendment or other document filed
affecting the Articles of Incorporation of the Trust Depositor since
_____, and no such amendment has been authorized by the Board of
Directors or shareholders of the Trust Depositor.
(3) Attached hereto as EXHIBIT II is a Certificate of the
Secretary of State of the State of Nevada dated [ ]
stating that the Trust Depositor is duly incorporated under the laws of
the State of Nevada and is in good standing.
(4) Attached hereto as EXHIBIT III is a true and correct copy
of the By-laws of the Trust Depositor, as amended, which were in full
force and effect on [ ], and at all times subsequent
thereto.
(5) Attached hereto as EXHIBIT IV is a true and correct copy of
resolutions adopted pursuant to the unanimous written consent of the
Board of Directors of the Trust Depositor relating to the execution,
delivery and performance of the Agreement; the Transfer and Sale
Agreement dated as of the Effective Date between the Trust Depositor and
Eaglemark; the Trust Agreement dated as of the Effective Date between the
Trust Depositor and the Wilmington Trust Company (the "Owner Trustee"),
as Owner Trustee; the Administrative Agreement dated as of the Effective
Date between the Trust Depositor, the Issuer, the Indenture Trustee,
Eaglemark, as Administrator; the Underwriting Agreement dated
[ ] among the Trust Depositor, Eaglemark and Salomon
Brothers Inc and [ ] (collectively, the "PROGRAM
AGREEMENTS"). Said resolutions have not been amended, modified,
annulled or revoked, and are on the date hereof in full force and
effect and are the only resolutions relating to these matters which
have been adopted by the Board of Directors.
(6) No event with respect to the Trust Depositor has occurred
and is continuing which would constitute an Event of Termination or an
event that, with notice or the passage of time or both, would become an
Event of Termination under the Agreement. To the best of my knowledge
after reasonable investigation, there has been no material adverse change
in the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Trust Depositor, whether or not
arising in the ordinary course of business since the respective dates as
of which information is given in the Offering Memorandum and except as
set forth therein.
(7) All federal, state and local taxes of the Trust Depositor
due and owing as of the date hereof have been paid.
B-1
<PAGE>
(8) All representations and warranties of the Trust Depositor
contained in the Program Agreements or any other related documents, or in
any document, certificate or financial or other statement delivered in
connection therewith are true and correct as of the date hereof.
(9) There is no action, investigation or proceeding pending or,
to our knowledge, threatened against the Trust Depositor before any
court, administrative agency or other tribunal (a) asserting the
invalidity of the Program Agreements; (b) seeking to prevent the
consummation of any of the transactions contemplated by the Program
Agreements; or (c) which is likely materially and adversely to affect the
Trust Depositor's performance of its obligations under, or the validity
or enforceability of, the Program Agreements.
(10) No consent, approval, authorization or order of, and no
notice to or filing with, any governmental agency or body or state or
federal court is required to be obtained by the Trust Depositor for the
Trust Depositor's consummation of the transactions contemplated by the
Program Agreements, except such as have been obtained or made and such as
may be required under the blue sky laws of any jurisdiction in connection
with the issuance and sale of the Certificates.
(11) The Trust Depositor is not a party to any agreements or
instruments evidencing or governing indebtedness for money borrowed or by
which the Trust Depositor or its property is bound (other than the
Program Agreements). Neither Eaglemark's transfer and assignment of the
Contract Assets to the Trust Depositor, the Trust Depositor's concurrent
transfer and assignment of the Trust Corpus to the Trust, nor the
concurrent transfer and assignment of the Collateral by the Trust to the
Indenture Trustee nor the issuance and sale of the Certificates and the
Notes, nor the execution and delivery of the Program Agreements, nor the
consummation of any other of the transactions contemplated therein, will
violate or conflict with any agreement or instrument to which the Trust
Depositor is a party or by which it is otherwise bound.
(12) In connection with the transfer of Contracts and related
collateral contemplated in the Agreement, (a) the Trust Depositor has not
made such transfer with actual intent to hinder, delay or defraud any
creditor of the Trust Depositor, and (b) the Trust Depositor has not
received less than a reasonably equivalent value in exchange for such
transfer, is not on the date thereof insolvent (nor will become insolvent
as a result thereof), is not engaged (or about to engage) in a business
or transaction for which it has unreasonably small capital, and does not
intend to incur or believe it will incur debts beyond its ability to pay
when matured.
(13) Each of the agreements and conditions of the Trust
Depositor to be performed on or before the Closing Date pursuant to the
Program Agreements have been performed in all material respects.
* * * *
B-2
<PAGE>
IN WITNESS WHEREOF, I have affixed my signature hereto this ___ day
of [ ].
By:
--------------------------------------
Printed Name:
----------------------
Title: President
-----------------------------
<PAGE>
EXHIBIT C
[Form of Closing Certificate of Servicer/Seller]
EAGLEMARK, INC.
PRESIDENT'S CERTIFICATE
The undersigned certifies that he is President of Eaglemark, Inc.
("EAGLEMARK"), and that as such he is duly authorized to execute and deliver
this certificate on behalf of Eaglemark, as Servicer, in connection with the
Sale and Servicing Agreement (the "SALE AND SERVICING AGREEMENT") dated as of
[ ] (the "EFFECTIVE DATE") by and among Eaglemark, as Servicer,
Eaglemark Customer Funding Corporation-IV ("CFC"), Harris Trust and Savings
Bank, as Indenture Trustee and Harley-Davidson Eaglemark Motorcycle Trust
[ ]("ISSUER"), in connection with the Transfer and Sale Agreement
dated as of the Effective Date (the "TRANSFER AND SALE AGREEMENT") by and
between Eaglemark and CFC (all capitalized terms used herein without
definition having the respective meanings set forth in the Sale and Servicing
Agreement), and further certifies as follows:
(1) Attached hereto as EXHIBIT I is a true and correct copy of
the Articles of Incorporation of Eaglemark, together with all amendments
thereto as in effect on the date hereof.
(2) There has been no other amendment or other document filed
affecting the Articles of Incorporation of Eaglemark since July 6, 1995,
and no such amendment has been authorized by the Board of Directors or
shareholders of Eaglemark.
(3) Attached hereto as EXHIBIT II is a Certificate of the
Secretary of State of the State of Nevada dated [ ]
stating that Eaglemark is duly incorporated under the laws of the State
of Nevada and is in good standing.
(4) Attached hereto as EXHIBIT III is a true and correct copy
of the By-laws of Eaglemark which were in full force and effect on
November 5, 1992 and at all times subsequent thereto.
(5) Attached hereto as EXHIBIT IV is a true and correct copy of
resolutions adopted pursuant to a unanimous written consent of the Board
of Directors of Eaglemark and relating to the authorization, execution,
delivery and performance of the Transfer and Sale Agreement; the Sale and
Servicing Agreement; the Underwriting Agreement dated [ ] among
Eaglemark, CFC and Salomon Brothers Inc and [ ] (the
"UNDERWRITING AGREEMENT"); and the Administration Agreement dated
[ ]among Eaglemark, CFC, the Issuer and Harris Trust and
Savings Bank, as Indenture Trustee (the "INDENTURE TRUSTEE") (the
"ADMINISTRATION AGREEMENT"). Said resolutions have not been amended,
modified, annulled or revoked, and are on the date hereof in full
force and effect and are the only resolutions relating to these
matters which have been adopted by the Board of Directors.
(6) No event with respect to Eaglemark has occurred and is
continuing which would constitute an Event of Termination or an event
that, with notice or the passage of time, would constitute an Event of
Termination under the Sale and Servicing Agreement. To the best of my
knowledge after reasonable investigation, there has been no material
adverse change in the condition, financial or otherwise, or the earnings,
business affairs or business prospects of Eaglemark, whether or not
arising in the ordinary course of business, since the respective dates as
of which information is given in the Offering Memorandum and except as
set forth therein.
(7) All federal, state and local taxes of Eaglemark due and
owing as of the date hereof have been paid.
C-1
<PAGE>
(8) All representations and warranties of Eaglemark contained
in the Transfer and Sale Agreement, the Sale and Servicing Agreement, the
Underwriting Agreement and the Administration Agreement (collectively,
the "PROGRAM AGREEMENTS") or in any document, certificate or financial or
other statement delivered in connection therewith are true and correct as
of the date hereof.
(9) There is no action, investigation or proceeding pending or,
to my knowledge, threatened against Eaglemark before any court,
administrative agency or other tribunal (a) asserting the invalidity of
any Program Agreement to which Eaglemark is a party; or (b) which is
likely materially and adversely to affect Eaglemark's performance of its
obligations under, or the validity or enforceability of, the Program
Agreements.
(10) No consent, approval, authorization or order of, and no
notice to or filing with, any governmental agency or body or state or
federal court is required to be obtained by Eaglemark for Eaglemark's
consummation of the transactions contemplated by the Program Agreements,
except such as have been obtained or made and such as may be required
under the blue sky laws of any jurisdiction in connection with the
issuance and sale of the Notes or Certificates.
(11) SCHEDULE A hereto contains a complete list of all material
agreements (other than the Transfer and Sale Agreement) or instruments
evidencing or governing indebtedness for money borrowed to which
Eaglemark is a party or by which Eaglemark or its property is bound.
Neither Eaglemark's transfer and assignment of the Contract Assets to
CFC, CFC's concurrent transfer and assignment of the Trust Corpus to the
Trust, nor the concurrent transfer and assignment by the Trust of the
Collateral to the Indenture Trustee, nor the issuance and sale of the
Notes or Certificates or the entering into of the Program Agreements, nor
the consummation of any other of the transactions contemplated therein,
will violate or conflict with any agreement or instrument to which
Eaglemark is a party or by which it is otherwise bound.
(12) In connection with the transfers of Contracts and related
assets contemplated in the Transfer and Sale Agreement, (a) Eaglemark has
not made such transfer with actual intent to hinder, delay or defraud any
creditor of Eaglemark, and (b) Eaglemark has not received less than a
reasonably equivalent value in exchange for such transfer, is not on the
date hereof insolvent (nor will Eaglemark become insolvent as a result
thereof), is not engaged (or about to engage) in a business or
transaction for which it has unreasonably small capital, and does not
intend to incur or believe it will incur debts beyond its ability to pay
when matured.
(13) The sole shareholder of Eaglemark is Eaglemark Financial
Services, Inc., a Delaware corporation, which has its chief executive
office and only office in Chicago, Illinois, and has no other offices in
any other state.
(14) Each of the agreements and conditions of Eaglemark to be
performed or satisfied on or before the Closing Date under the Program
Agreements has been performed or satisfied in all material respects.
(15) Each Contract being transferred pursuant to the Transfer
and Sale Agreement is evidenced by a written agreement providing for a
repayment obligation as well as a security interest in the related
Motorcycle securing such obligation, and conforms as to these matters in
all material respects with the form of written Contract provided as
EXHIBIT A hereto (with such minor variations as to specific terms as may
be required or deemed desirable in respect of the laws or requirements of
particular states).
(16) Eaglemark has not executed for filing any UCC financing
statements listing the Contract Assets as collateral other than financing
statements relating to the transactions contemplated in the Transfer and
Sale Agreement and in the agreements listed on SCHEDULE A hereto.
* * * * * *
C-2
<PAGE>
IN WITNESS WHEREOF, I have affixed my signature hereto this ___ day
of [ ].
By:
--------------------------------------------
Printed Name:
Title: President
<PAGE>
EXHIBIT D
[Form of Opinion of Counsel for Trust Depositor
Regarding General Corporate Matters
(Including Perfection Opinion)]
D-1
<PAGE>
EXHIBIT E
[Form of Opinion of Counsel for Trust
Depositor Regarding the "TRUE SALE" Nature
of the Transaction]
E-1
<PAGE>
EXHIBIT F
[Form of Opinion of Counsel for Trust
Depositor Regarding Non-consolidation]
F-1
<PAGE>
EXHIBIT G
[Form of Certificate Regarding Repurchased Contracts]
Eaglemark, Inc.
Certificate Regarding Repurchased Contracts
The undersigned certifies that he is a Vice President of Eaglemark, Inc.,
a Nevada corporation (the "SERVICER"), and that as such is duly authorized to
execute and deliver this certificate on behalf of the Servicer pursuant to
Section 7.08 of the Sale and Servicing Agreement (the "AGREEMENT") dated as of [
] by and among Eaglemark Customer Funding Corporation-IV, as Trust
Depositor, the Servicer, Harris Trust and Savings Bank, as Indenture Trustee,
and Harley-Davidson Eaglemark Motorcycle Trust [ ] (all capitalized
terms used herein without definition having the respective meanings specified in
the Agreement), and further certifies that:
1. The Contracts on the attached schedule are to be repurchased by
the Seller on the date hereof pursuant to Section 7.08 of the
Agreement and Section 5.01 of the Transfer and Sale Agreement.
2. Upon deposit of the Repurchase Price for such Contracts, such
Contracts may, pursuant to Section 7.08 of the Agreement, be
assigned by the Trustee to the Seller.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ______ day
of _____________.
Eaglemark, Inc.
By:
-------------------------------------------
Printed Name:
--------------------
Title:
---------------------------
G-1
<PAGE>
EXHIBIT H
[List of Contracts]
H-1
<PAGE>
EXHIBIT I
[Form of Monthly Report to Noteholders And Certificateholders]
Harley-Davidson Eaglemark Motorcycle Trust [ ]
$[ ] [ ]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-1
$[ ] [ ]% Harley-Davidson Motorcycle Contract Backed Notes, Class A-2
$[ ] [ ]% Harley-Davidson Motorcycle Contract Backed Certificates
Monthly Report
For the [ ] Distribution Date
<TABLE>
<CAPTION>
A. Calculation of Available Monies
<S> <C> <C>
1. Available Principal (as defined in Article I of the
Sale and Servicing Agreement) $____________
2. Available Interest (as defined in Article I of the
Sale and Servicing Agreement) $____________
3. Available Monies (l. plus 2.) $____________
B. Calculation of Principal Distributable Amount (as
defined in Article I of the Sale and Servicing
Agreement) $____________
C. Calculation of Available Interest (as defined in Article
I of the Sale and Servicing Agreement). $___________
D. Calculation of Note Monthly Principal Distributable
Amount $___________
1. Note Percentage for such Distribution Date
(a) for each Distribution Date to but
excluding the Distribution Date on which
the principal amount of the Class A-1
Notes is reduced to zero 100.00%
(b) on the Distribution Date on which the
principal amount of the Class A-1 Notes is
reduced to zero, such percentage which
represents the fraction of the Principal
Distributable Amount necessary to reduce
the principal amount of the Class A-2 Notes
to zero 100.00%
(c) after the principal amount of the Class A-2
Notes have been reduced to zero 0.00%
2. Principal Distributable Amount (from B) $__________
I-1
<PAGE>
3. Note Monthly Principal Distributable Amount for
(a) Class A-1 Notes (D.1(a) multiplied by D.2
until Principal Balance of Class A-1 Notes
Principal Balance is zero) $__________
(b) Class A-2 Notes (D.1(b) multiplied by D.2
until Class A-2 Notes Principal Balance is
zero) $___________
(c) Note Principal Carryover Shortfall $___________
(d) Special Mandatory Redemption Amounts (from Pre-
Funding Account as defined in Article I of the
Sale and Servicing Agreement) $___________
(e) Note Monthly Principal Distributable Amount
(the sum of items 3(a), 3(b) and 3(c) $__________
E. Calculation of Note Monthly Interest Distributable
Amount.
1. Class A-l Interest Rate ___%
2. Class A-2 Interest Rate ___%
3. One-twelfth of the Class A-1 Interest Rate times the
Class A-1 Note Balance from and including the
fifteenth day of the month based on a 360-day year
of 12 months of 30 days each (or from and including
the Closing Date with respect to the first
Distribution Date) to but excluding the fifteenth
day of the month of the current Distribution Date $__________
4. One-twelfth of the Class A-2 Note Interest Rate
times the Class A-2 Note Balance from and including
the fifteenth day of the month based on a 360-day
year of 12 months of 30 days each (or from and
including the Closing Date with respect to the
first Distribution Date) to but excluding the
fifteenth day of the month of the current
Distribution Date $__________
5. Interest Carryover Shortfall for such
Distribution Date $__________
6. Note Monthly Interest Distributable Amount (the sum
of items 3, 4 and 5) $__________
F. Calculation of Note Distributable Amount (sum of D.3(e)
plus E.6.) $_________
I-2
<PAGE>
G. Calculation of Certificate Principal
Distributable Amount
1. Certificate Balance $___________
2. Available Principal $__________
3. Certificate Percentage for each respective
Distribution Date
3(a). for each Distribution Date to but excluding the
Distribution Date on which the Principal Amount of
the Class A-2 Notes is reduced to zero 0.00%
3(b). on any Distribution Date until the Principal
Amount of the Class A-2 Notes is reduced to zero,
such percentage that equals 100% minus the Note
Percentage for such Distribution Date ____%
3(c). thereafter 100.00%
4(a). Available Principal multiplied by the Certificate
Percentage for such Distribution Date $__________
4(b). Certificate Principal Carryover Shortfall for
such Distribution Date $__________
5. Certificate Principal Distributable Amount (the
sum of 4.(a) and 4.(b)) $_________
H. Calculation of Certificate Interest Distributable Amount
1. Certificate Pass-Through Rate ___%
2(a). One-twelfth of the Certificate Pass-Through Rate
times the Certificate Balance on the immediately
preceding Distribution Date, after giving effect to
all payments of principal to the Certificateholders
and such preceding Distribution Date (or in case of
the first Distribution Date on the original
Principal Amount of the Certificates) based on a
360-day year of 12 months of 30 days each. $__________
2(b). Certificate Interest Carryover Shortfall for such
Distribution Date $__________
3. Certificate Interest Distributable Amount (sum of
2.(a) and 2.(b)) $__________
I. Calculation of Certificate Distributable Amount (sum of $__________
G.5 and H.3)
J. Fees
1. The Monthly Servicing Fee for such Distribution
Date (1/12 of the product of 1% and the Principal
Balance of the Contracts as of the beginning of
the related Due Period) $___________
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2. Late Payment Penalty Fees for such Distribution
Date $___________
3. Extension Fees for such Distribution Date $___________
4. Owner Trust Fee equal to $[ ] per month $___________
5. Trustee's Fee for such Distribution Date excluding
expense component (1/12 of the product of .009% and
the sum of (i) the Principal Balance of the
Contracts as of the beginning of the related Due
Period and (ii) the Pre-Funded Amount as of the
beginning of such Period; provided, however, in no
event shall such fee be less than $200.00 per
month) $___________
K. CALCULATION OF THE AVAILABLE MONIES FOR SUCH DISTRIBUTION
DATE
1. The amount of funds deposited into the Collection
Account pursuant to Section 5.05(b) of the Sale
and Servicing Agreement with respect to the
related Due Period $__________
a. All amounts received by the Indenture Trustee
or the Servicer with respect to principal and
interest on the Contracts, as well as Late
Payment Penalty Fees and Extensions Fees for
the related Due Period $__________
b. All Net Liquidation Proceeds $__________
c. The aggregate of the Repurchase Prices for
Contracts required to be repurchased by the
Seller as described in Section 7.08 of the
Sale and Servicing Agreement $__________
d. All Advances made by Servicer pursuant to
Section 7.03(a) of the Sale and Servicing
Agreement $__________
e. All amounts paid by the Seller in connection
with an optional repurchase of the Contracts
described in Section 7.10 of the Sale and
Servicing Agreement $__________
f. All amounts obtained from the Indenture
Trustee in respect of Carrying Charges to be
deposited into the Collection Account for the
upcoming Distribution Date as contemplated in
Section 7.03(b) of the Sale and Servicing
Agreement $___________
g. All amounts received in respect of interest,
dividends, gains, income and earnings on
investments of funds in the Trust Accounts as
contemplated in Section 5.05(b)(viii) of the
Sale and Servicing Agreement $__________
h. Total amount of funds deposited into the
Collection Account pursuant to Section
5.05(b) (the sum of a. through g.) $__________
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2. The amount of funds permitted to be withdrawn from
the Collection Account pursuant to clauses (ii)
through (iv) of Section 7.05(a) of the Sale and
Servicing Agreement with respect to the related
Due Period $___________
a. Amounts to be paid to the Servicer as the
Reimbursement Amount in accordance with
Section 7.03(a) of the Sale and Servicing
Agreement $___________
b. Amounts to be paid to the Servicer in respect
to the Servicing Fee for the related Due
Period $__________
c. Amounts to be paid to the Indenture Trustee
in respect of the Indenture Trustee's Fee
for the related Due Period $___________
d. Amounts to be paid to the Owner Trustee in
respect of the Owner Trustee Fee for the
related Due Period $___________
e. Total amount of funds permitted to be
withdrawn from the Collection Account
pursuant to clauses (ii) through (iv) Section
7.05(a) of the Sale and Servicing Agreement
with respect to the related Due Period (sum
of a. through d.) $_________
3. The Available Monies (not including amounts
from Reserve Fund Account) for such
Distribution Date available to pay Note
Distributable Amounts and Certificate
Distributable Amounts (1(h) minus 2(e)) $_____________
4. The Available Monies otherwise distributable to
the Certificateholders that will be distributed
to the Noteholders on such Distribution Date $__________
L. The shortfall of Available Monies for such Distribution
Date to pay either the Note Distributable Amount or the
Certificate Distributable Amount (the Available Monies
for such Distribution Date minus the sum of the Note
Distributable Amount as set forth in F. and the
Certificate Distributable Amount as set forth in I.) $__________
M. The amount to be withdrawn from the Reserve Fund (or
Certificate Reserve Fund) on such Distribution Date to
cover the Note Distributable Amount or the Certificate
Distributable Amount for such Distribution Date $__________
N. Interest Earnings on the Reserve Fund. $____________
O. The amount on deposit in the Reserve Fund after giving
effect to deposits and withdrawals therefrom on such
Distribution Date $__________
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P. The Reserve Fund Requisite Amount for such Distribution
Date will be an amount equal to the sum of (i) [
]% of the Principal Balance of the Contracts in the
Trust as of the first day of the immediately preceding
Due Period and (ii) $[ ]; provided,
however, in the event a Reserve Fund Trigger Event
occurs with respect to a Distribution Date and has not
terminated for three (3) consecutive Distribution Dates
(inclusive) such amount shall be equal to the sum of
(i) [ ]% of the Principal Balance of the
Contracts in the Trust as of the first day of the
immediately preceding Due Period) and, (ii) $[
]. Notwithstanding the foregoing, in no event
shall the Specified Reserve Fund Balance be less than
the sum of (i) [ ]% of the aggregate of the
Initial Class A-1 Note Balance, Initial Class A-2 Note
Balance and Initial Certificate Balance and (ii) $[ ] $__________
Q. The Pool Factor
1. The Class A-1 Note Pool Factor immediately before such
Distribution Date ____________
2. The Class A-2 Note Pool Factor immediately after such
Distribution Date ____________
3. The Certificate Pool Factor immediately after such
Distribution Date ____________
4. The Class A-1 Note Pool Factor immediately before such
Distribution Date ____________
5. The Class A-2 Note Pool Factor immediately after such
Distribution Date ____________
6. The Certificate Pool Factor
immediately after such Distribution Date ____________
R. Delinquent Contracts
1. 31-59 Days #______ $___________
2. 60-89 Days #______ $___________
3. 90 or More Days #______ $___________
S. Liquidated Contracts
1. Total Liquidated Contracts #______ $___________
2. Identity (attach)
3. Liquidation proceeds for the Due Period $___________
4. Liquidation expenses for the Due Period $___________
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<PAGE>
5. Net Liquidation Proceeds for the Due Period $___________
6. Net Liquidation Losses for the Due Period $___________
T. Advances
1. Unreimbursed Advances prior to such Distribution Date $___________
2. Amount paid to Servicer on such Distribution Date to
reimburse Servicer for such unreimbursed Advances $___________
3. Amount of Delinquent Interest for such Distribution $___________
Date
4. Amount of new Advances on such Distribution Date (if
such amount is less than the amount of Delinquent
Interest, attach the certificate required by Section
7.03 of the Sale and Servicing Agreement) $___________
5. Total of unreimbursed Advances after new Advances on
such Distribution Date $___________
U. Repurchased Contracts
1. Number of Contracts to be repurchased by the Seller
pursuant to Section 7.08 of the Sale and Servicing
Agreement $___________
2. Principal Amount of such Contracts $__________
3. Related Repurchase Price of such Contracts $__________
V. Contracts
1. Number of Contracts as of beginning of Due Period $___________
2. Principal Balance of Contracts as of beginning of Due
Period $_________
3. Number of Contracts as of end of Due Period $__________
4. Principal Balance of Contracts as of end of Due Period $__________
5. Pre-Funded Amount as of beginning of Due Period $__________
6. Pre-Funded Amount as of end of Due Period $_________
W. Interest Reserve Account
1. Interest Reserve Amount as of previous Distribution
Date $_________
2. Carrying Charges (if any) to be paid on upcoming
Distribution Date $_________
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<PAGE>
3. Interest Reserve Amount as of upcoming Distribution
Date $_________
X. Ratios
1. Cumulative Loss Ratio
a. The aggregate Net Liquidation Losses for all
Contracts since the Cutoff Date through the
end of the related Due Period $_________
b. The sum of the Principal Balance of the
Contracts as of the Cutoff Date plus the
Principal Balance of any Subsequent Contracts
as of the related Subsequent Cutoff Date $_________
c. The Cumulative Loss Ratio for such
Distribution Date (the quotient of a. divided
by b., expressed as a percentage) $_________
2. Average Delinquency Ratio for such Distribution Date
(a) The Delinquency Amount (the Principal Balance
of all Contracts that were delinquent 60 days
or more as of the end of the Due Period) $________
(b) The Delinquency Ratio (the fraction (expressed
as a percentage) computed by dividing (a) the
Delinquency Amount during the immediately
preceding Due Period by (b) the Principal
Balance of the Contracts as of the beginning
of the related Due Period) for such
Distribution Date _____%
(c) The Delinquency Ratio for the prior
Distribution Date _____%
(d) The Delinquency Ratio for the second prior
Distribution Date _____%
(e) The Average Delinquency Ratio (the arithmetic
average of a. through c.) _____%
3. Average Loss Ratio for such Distribution Date
(a) Net Liquidation Losses $________
(b) The Loss Ratio for (the fraction (expressed as
a percentage) derived by dividing (x) Net
Liquidation Losses for all Contracts that
became Liquidated Contracts during the
immediately preceding Due Period multiplied by
twelve by (y) the outstanding Principal
Balances of all Contracts as of the beginning
of the Due Period) such Distribution Date _____%
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<PAGE>
(c) The Loss Ratio for the prior Distribution Date _____%
(d) The Loss Ratio for the second prior
Distribution Date _____%
(e) The Average Loss Ratio (the arithmetic average
of a. through c.) _____%
4. Computation of Reserve Fund Requisite Amount
Trigger Events
(1) Average Delinquency Ratio (if (a) (i) Average
Delinquency Ratio greater than or equal to [ ]% with
respect to any Distribution Date which occurs within the
period from the Closing Date to, and inclusive
of, the first anniversary of the Closing Date,
(ii) [ ]% with respect to any Distribution Date
which occurs within the period from the day after the first
anniversary of the Closing Date to, and inclusive of, the
second anniversary of the Closing Date or (iii) [ ]%
for any Distribution Date which occurs within the period from
the day after the second anniversary of the Closing Date to,
and inclusive of, the third anniversary of the Closing Date
or (iv) [ ]% for any Distribution Date following the
third anniversary of the Closing Date, then a Reserve Fund
Trigger Event) ____%
(2) Average Loss Ratio (if Average Loss Ratio is
large than (i) [ ]% with respect to any
Distribution Date which occurs within the
period from the Closing Date to, and inclusive
of, the eighteen months following the Closing
Date or (ii) [ ]% with respect to any
Distribution Date which occurs following the
eighteen month period following the Closing
Date, then a Reserve Fund Trigger Event) _____%
(3) Cumulative Loss Ratio (if Cumulative Loss
Ratio is greater than or equal to (i) [ ]% with
respect to any Distribution Date which occurs within the
period from the Closing Date to, and inclusive
of, the first anniversary of the Closing Date,
(ii) [ ]% with respect to any Distribution Date
which occurs within the period from the day
after the first anniversary of the Closing Date to, and
inclusive of, the second anniversary of the
Closing Date, (iii) [ ]% for any
Distribution Date following the second anniversary
of the Closing Date Ratio equal to or greater
than a Reserve Fund Trigger Event), or (iv) [ ]%
following the third anniversary of the Closing
Date _____%
</TABLE>
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<PAGE>
EXHIBIT J
[Seller's Representations and Warranties]
(1) REPRESENTATIONS AND WARRANTIES REGARDING SELLER. Seller
represents and warrants, as of the execution and delivery of this Agreement and
as of the Closing Date, in the case of the Initial Contracts, and as of the
applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that:
(a) ORGANIZATION AND GOOD STANDING. Seller is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and has the corporate power to own
its assets and to transact the business in which it is currently engaged.
Seller is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires
such qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or condition
(financial or otherwise) of Seller or Trust Depositor. Seller is
properly licensed in each jurisdiction to the extent required by the laws
of such jurisdiction to service the Contracts in accordance with the
terms of the Sale and Servicing Agreement.
(b) AUTHORIZATION; BINDING OBLIGATION. Seller has the power
and authority to make, execute, deliver and perform this Agreement and
the other Transaction Documents to which the Seller is a party and all of
the transactions contemplated under this Agreement and the other
Transaction Documents to which the Seller is a party, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the other Transaction Documents to
which the Seller is a party. This Agreement and the other Transaction
Documents to which the Seller is a party constitute the legal, valid and
binding obligation of Seller enforceable in accordance with their terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
(c) NO CONSENT REQUIRED. Seller is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement and the other
Transaction Documents to which the Seller is a party.
(d) NO VIOLATIONS. Seller's execution, delivery and
performance of this Agreement and the other Transaction Documents to
which the Seller is a party will not violate any provision of any
existing law or regulation or any order or decree of any court or the
Articles of Incorporation or Bylaws of Seller, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which
Seller is a party or by which Seller or any of Seller's properties may be
bound.
(e) LITIGATION. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending,
or to the knowledge of Seller threatened, against Seller or any of its
properties or with respect to this Agreement or any other Transaction
Document to which the Seller is a party which, if adversely determined,
would in the opinion of Seller have a material adverse effect on the
business, properties, assets or condition (financial or other) of Seller
or the transactions contemplated by this Agreement or any other
Transaction Document to which the Seller is a party.
(f) PLACE OF BUSINESS; NO CHANGES. Seller's sole place of
business (within the meaning of Article 9 of the UCC) is as follows:
Eaglemark, Inc.
4150 Technology Way
Carson City, Nevada 89706
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<PAGE>
Seller has not changed its name whether by amendment of its Articles of
Incorporation, by reorganization or otherwise, and has not changed the
location of its place of business (except within Carson City, Nevada),
within the four months preceding the Closing Date.
(2) REPRESENTATIONS AND WARRANTIES REGARDING EACH CONTRACT. Seller
represents and warrants as to each Contract as of the execution and delivery of
this Agreement and as of the Closing Date, in the case of the Initial Contracts,
and as of the applicable Subsequent Transfer Date, in the case of Subsequent
Contracts, that:
(a) LIST OF CONTRACTS. The information set forth in the List
of Contracts (or Subsequent List of Contracts, in the case of Subsequent
Contracts) is true, complete and correct as of the Initial Cutoff Date or
applicable Subsequent Cutoff Date, as the case may be.
(b) PAYMENTS. As of the Initial Cutoff Date or applicable
Subsequent Cutoff Date, as the case may be, the most recent scheduled
payment with respect to any Contract either had been made or was not
delinquent for more than 30 days. To the best of Seller's knowledge, all
payments made on each Contract were made by the respective Obligor.
(c) NO WAIVERS. As of the Closing Date (or the applicable
Subsequent Transfer Date, in the case of Subsequent Contracts), the terms
of the Contracts have not been waived, altered or modified in any
respect, except by instruments or documents included in the related
Contract File.
(d) BINDING OBLIGATION. Each Contract is the genuine, legal,
valid and binding obligation of the Obligor thereunder and is enforceable
in accordance with its terms, except as such enforceability may be
limited by laws affecting the enforcement of creditors' rights generally.
(e) NO DEFENSES. No Contract is subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of such Contract or the
exercise of any right thereunder will not render the Contract
unenforceable in whole or in part or subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and no
such right of rescission, setoff, counterclaim or defense has been
asserted with respect thereto.
(f) INSURANCE. As of the Closing Date (or the applicable
Subsequent Transfer Date in the case of Subsequent Contracts), the
related Motorcycle securing each Contract is covered by physical damage
insurance (i) in an amount not less than the value of the Motorcycle at
the time of origination of the Contract, (ii) naming Seller as a loss
payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks covered by comprehensive
coverage, and all premiums due on such insurance have been paid in full
from the date of the Contract's origination.
(g) ORIGINATION. Each Contract was originated by a
Harley-Davidson motorcycle dealer in the regular course of its business
which dealer had all necessary licenses and permits to originate the
Contracts in the state where such dealer was located, was fully and
properly executed by the parties thereto, and has been purchased by
Seller in the regular course of its business. Each Contract was sold by
such motorcycle dealer to the Seller without any fraud or
misrepresentation on the part of such motorcycle dealer.
(h) LAWFUL ASSIGNMENT. No Contract was originated in or is
subject to the laws of any jurisdiction whose laws would make the sale,
transfer and assignment of the Contract under this Agreement or under the
Sale and Servicing Agreement or under the Indenture or pursuant to
transfers of the Certificates unlawful, void or voidable.
(i) COMPLIANCE WITH LAW. None of the Contracts, the
origination of the Contracts by the dealers, the purchase of the
Contracts by the Seller, the sale of the Contracts by the Seller to the
Trust Depositor or by the Trust Depositor to the Trust, or any
combination of the foregoing, violated as of the Closing Date or as of
any Subsequent Transfer Date, as applicable, any requirement of any
federal, state or local law and regulations thereunder, including,
without limitation, usury, truth in lending, motor vehicle installment
loan and equal credit
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<PAGE>
opportunity laws, applicable to the Contracts and the sale of
Motorcycles. Seller shall, for at least the period of this Agreement,
maintain in its possession, available for the Trust Depositor's, and
the Trustee's inspection, and shall deliver to Trust Depositor or the
Trustee upon demand, evidence of compliance with all such requirements.
(j) CONTRACT IN FORCE. As of the Closing Date (or the
applicable Subsequent Transfer Date in the case of Subsequent Contracts),
no Contract has been satisfied or subordinated in whole or in part or
rescinded, and the related Motorcycle securing any Contract has not been
released from the lien of the Contract in whole or in part.
(k) VALID SECURITY INTEREST. Each Contract creates a valid,
subsisting and enforceable first priority perfected security interest in
favor of Seller in the Motorcycle covered thereby, and such security
interest has been assigned by Seller to the Trust Depositor. The
original certificate of title, certificate of lien or other notification
(the "LIEN CERTIFICATE") issued by the body responsible for the
registration of, and the issuance of certificates of title relating to,
motor vehicles and liens thereon (the "REGISTRAR OF TITLES") of the
applicable state to a secured party which indicates the lien of the
secured party on the Motorcycle is recorded on the original certificate
of title, and original certificate of title for each Motorcycle, show, or
if a new or replacement Lien Certificate is being applied for with
respect to such Motorcycle the Lien Certificate will be received within
180 days of the Closing Date (or the applicable Subsequent Transfer Date
in the case of Subsequent Contracts) and will show, the Seller as
original secured party under each Contract as the holder of a first
priority security interest in such Motorcycle. With respect to each
Contract for which the Lien Certificate has not yet been returned from
the Registrar of Titles, the Seller has received written evidence from
the related dealer that such Lien Certificate showing the Seller as
lienholder has been applied for, the Seller's security interest has been
validly assigned by the Seller to the Trust Depositor and by the Trust
Depositor to the Issuer and Owner Trustee pursuant to this Agreement.
Immediately after the sale, each Contract will be secured by an
enforceable and perfected first priority security interest in the
Motorcycle in favor of the Trust as secured party, which security
interest is prior to all other liens upon and security interests in such
Motorcycle which now exist or may hereafter arise or be created (except,
as to priority, for any lien for taxes, labor, materials or of any state
law enforcement agency affecting a Motorcycle).
(1) CAPACITY OF PARTIES. All parties to any Contract had
capacity to execute such Contract and all other documents related thereto
and to grant the security interest purported to be granted thereby.
(m) GOOD TITLE. Each Contract was purchased by Seller for
value and taken into possession prior to the Cutoff Date (or the
applicable Subsequent Cutoff Date in the case of Subsequent Contracts) in
the ordinary course of its business, without knowledge that the Contract
was subject to a security interest. No Contract has been sold,
assigned or pledged to any person other than Trust Depositor and the
Trustee as the transferee of Trust Depositor, and prior to the transfer
of the Contract to Trust Depositor, Seller had good and marketable title
to each Contract free and clear of any encumbrance, equity, loan, pledge,
charge, claim or security interest (other than the extinguished interest
of BofA described above) and was the sole owner thereof and had full
right to transfer the Contract to Trust Depositor and to permit Trust
Depositor to transfer the same to the Issuer and Owner Trustee, and, as
of the Closing Date (or the applicable Subsequent Transfer Date in the
case of Subsequent Contracts), the Issuer and the Owner Trustee will have
a first priority perfected security interest therein.
(n) NO DEFAULTS. As of the Initial Cutoff Date (or the
applicable Subsequent Cutoff Date in the case of Subsequent Contracts),
no default, breach, violation or event permitting acceleration existed
with respect to any Contract and no event had occurred which, with notice
and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such
Contract. Seller has not waived any such default, breach, violation or
event permitting acceleration, and Seller has not granted any extension
of payment terms on any Contract. As of the Initial Cutoff Date (or the
applicable Subsequent Cutoff Date in the case of Subsequent Contracts),
no Motorcycle had been repossessed.
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<PAGE>
(o) NO LIENS. As of the Closing Date (or the applicable
Subsequent Transfer Date in the case of Subsequent Contracts) there are,
to the best of Seller's knowledge, no liens or claims which have been
filed for work, labor or materials affecting the Motorcycle securing any
Contract which are or may be liens prior to, or equal with, the lien of
such Contract.
(p) INSTALLMENTS. Each Contract has a fixed Contract Rate and
provides for monthly payments of principal and interest which, if timely
made, would fully amortize the loan on a simple-interest basis over its
term.
(q) ENFORCEABILITY. Each Contract contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the collateral of the
benefits of the security.
(r) ONE ORIGINAL. Each Contract is evidenced by only one
original executed Contract, which original has been delivered to the
Issuer and the Owner Trustee or its designee on or before the Closing
Date (or the applicable Subsequent Transfer Date in the case of
Subsequent Contracts).
(s) NO GOVERNMENT CONTRACTS. No Obligor is the United States
government or an agency, authority, instrumentality or other political
subdivision of the United States government.
(t) LOCKBOX BANK. The Lockbox Bank is the only institution
holding any Lockbox Account for receipt of payments from Obligors, and
all Obligors, and only such Obligors, have been instructed to make
payments to the Lockbox Account, and no person claiming through or under
Seller has any claim or interest in the Lockbox Account other than the
Lockbox Bank; PROVIDED, HOWEVER, NBD Bank, N.A. ("NBD"), Eagle Credit
Trust 1994-1, Eagle Credit Trust 1994-2, Eagle Credit Trust 1994-3, Eagle
Credit Trust 1994-4, Eaglemark Trust 1995-1, Eaglemark Trust 1995-2,
Eaglemark Trust 1996-1, Eaglemark Trust 1996-2 and any other Trusts (as
that term is defined in the Fourth Amended and Restated Lockbox Agreement
dated as of April 1, 1998 by and among Seller, Eaglemark Customer
Funding Corporation-II, Eaglemark Customer Funding Corporation-III,
Purchaser, and acknowledged by Norwest in its capacity as Trustee of
Eagle Credit Trust 1994-1, Eagle Credit Trust 1994-2, Eagle Credit Trust
1994-3, Eagle Credit Trust 1994-4 and Eaglemark Trust 1995-1, Eaglemark
Trust 1995-2 and Harris Trust and Savings Bank with respect to Future
Trusts (as defined therein)), shall have an interest in certain other
collections therein not related to the Contracts.
(u) OBLIGOR BANKRUPTCY. At the Cutoff Date (or the applicable
Subsequent Cutoff Date in the case of Subsequent Contracts), no Obligor
was subject to a bankruptcy proceeding within the one year preceding such
Cutoff Date.
(v) CHATTEL PAPER. The Contracts constitute chattel paper
within the meaning of the UCC as in effect in the States of Nevada and
Illinois.
(w) NO IMPAIRMENT. Neither the Seller nor the Trust Depositor
has done anything to convey any right to any Person that would result in
such Person having a right to payments due under the Contract or
otherwise to impair the rights of the Trust and the Certificateholders in
any Contract or the proceeds thereof.
(x) CONTRACT NOT ASSUMABLE. No Contract is assumable by
another Person in a manner which would release the Obligor thereof from
such Obligor's obligations to the Trust Depositor with respect to such
Contract.
(3) REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACTS IN THE
AGGREGATE. Seller represents and warrants, as of the execution and delivery of
this Agreement and as of the Closing Date, in the case of the Initial Contracts,
and as of the applicable Subsequent Transfer Date, in the case of Subsequent
Contracts, that:
(a) AMOUNTS. The sum of the aggregate Principal Balances
payable by Obligors under the Contracts as of the Initial Cutoff Date (or
the applicable Subsequent Cutoff Date in the case of Subsequent
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<PAGE>
Contracts), plus the Pre-Funded Amount as of such date, equals the sum of
the principal balance of the Class A-1 Certificate Notes, the Class A-2
Notes and Certificates on the Closing Date or the related Subsequent
Transfer Date, as applicable.
(b) CHARACTERISTICS. The Initial Contracts have the following
characteristics: (i) all the Contracts are secured by Motorcycles; (ii)
no Initial Contract has a remaining maturity of more than 72 months; and
(iii) the final scheduled Distribution Date on the Initial Contract with
the latest maturity is not later than [ ]. Approximately
[ ]% of the Principal Balance of the Initial Contracts as of the
Initial Cutoff Date is attributable to loans for purchases of new
Motorcycles and approximately [ ]% is attributable to loans for
purchases of used Motorcycles. No Initial Contract was originated after
the Initial Cutoff Date. No Initial Contract has a Contract Rate less
than [ ]%. The first payment on each Initial Contract is due on or
before [ ].
(c) MARKING RECORDS. As of the Closing Date (or the applicable
Subsequent Transfer Date in the case of Subsequent Contracts), Seller has
caused the Computer Disk relating to the Contracts sold hereunder and
concurrently reconveyed by Trust Depositor to the Trust and by the Trust
to the Indenture Trustee to be clearly and unambiguously marked to
indicate that such Contracts constitute part of the Trust, are owned by
the Trust and constitute security for the Notes.
(d) NO ADVERSE SELECTION. No selection procedures adverse to
Noteholders and Certificateholders have been employed in selecting the
Contracts.
(e) TRUE SALE. The transaction contemplated by this Agreement
constitutes a valid sale, transfer and assignment from Seller to Trust
Depositor and from Trust Depositor to the Trust of all of Seller's right,
title and interest in the Contract Assets as of the Closing Date and any
Subsequent Transfer Date, as applicable.
(f) ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to
give the Trustee a first priority perfected lien on, or ownership
interest in, the Contracts and the proceeds thereof and the rest of the
Trust Corpus have been made, taken or performed.
(4) REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACT FILES.
Seller represents and warrants as of the execution and delivery of this
Agreement and as of the Closing Date, in the case of the Initial Contracts, and
as of the applicable Subsequent Transfer Date, in the case of Subsequent
Contracts, that:
(a) POSSESSION. Immediately prior to the Closing Date or any
Subsequent Transfer Date, Seller will have possession of each original
Contract and the related complete Contract File, and there are and there
will be no custodial agreements relating to the same in effect. Each of
such documents which is required to be signed by the Obligor has been
signed by the Obligor in the appropriate spaces. All blanks on any form
have been properly filled in and each form has otherwise been correctly
prepared. The complete Contract File for each Contract currently is in
the possession of the Servicer.
(b) BULK TRANSFER LAWS. The transfer, assignment and
conveyance of the Contracts and the Contract Files by Seller pursuant to
this Agreement or any Subsequent Purchase Agreement and by Trust
Depositor pursuant to the Sale and Servicing Agreement is not subject to
the bulk transfer or any similar statutory provisions in effect in any
applicable jurisdiction.
J-5
<PAGE>
EXHIBIT K
[Lockbox Bank and Lockbox Account]
LOCKBOX
Eaglemark, Inc. P. O. Box 52220
Phoenix, Arizona 85072-2220
LOCKBOX BANK
National City Processing Company
d/b/a NPC
1231 Durrett Lane
Louisville, Kentucky 40285-0001
K-1
<PAGE>
EXHIBIT L
[Form of Contract Stamp]
This Contract/Note is subject to a security interest granted to
Harley-Davidson Eaglemark Motorcycle Trust [ ]. UCC-1 Financing
Statements covering this Contract/Note have been filed with the Secretary of
State of the State of Nevada and the Secretary of State of the State of
Illinois. Such lien will be released only in connection with appropriate
filings in such offices. Consequently, potential purchasers of this
Contract/Note must refer to such filings to determine whether such lien has
been released.
L-1
<PAGE>
EXHIBIT M
[Form of Subsequent Transfer Agreement]
[see EXHIBIT C of the Transfer and Sale Agreement]
M-1
<PAGE>
EXHIBIT 10.2
- --------------------------------------------------------------------------------
FORM OF
ADMINISTRATION AGREEMENT
among
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ],
as Issuer,
EAGLEMARK, INC.,
as Administrator
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV,
as Trust Depositor,
and
HARRIS TRUST AND SAVINGS BANK,
as Indenture Trustee
Dated as of [ ]
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1. DUTIES OF THE ADMINISTRATOR.. . . . . . . . . . . . . . . . . . 1
SECTION 2. RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3. COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. . . . . . 6
SECTION 5. INDEPENDENCE OF THE ADMINISTRATOR . . . . . . . . . . . . . . . 6
SECTION 6. NO JOINT VENTURE. . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 7. OTHER ACTIVITIES OF ADMINISTRATOR . . . . . . . . . . . . . . . 6
SECTION 8. TERM OF AGREEMENT; RESIGNATION AND REMOVAL OF ADMINISTRATOR . . 6
SECTION 9. ACTION UPON TERMINATION, RESIGNATION OR REMOVAL . . . . . . . . 7
SECTION 10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 11. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 12. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . 8
SECTION 13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 14. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 15. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 16. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 17. NOT APPLICABLE TO EAGLEMARK IN OTHER CAPACITIES . . . . . . . . 9
SECTION 18. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE
TRUSTEE.. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 19. THIRD-PARTY BENEFICIARY . . . . . . . . . . . . . . . . . . . . 9
SECTION 20. SURVIVABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 9
i
<PAGE>
This Administration Agreement, dated as of [ ], among
Harley-Davidson Eaglemark Motorcycle Trust [ ] (the "ISSUER"),
Eaglemark, Inc. (together with its successors and assigns "EAGLEMARK") in its
capacity as administrator, the "ADMINISTRATOR"), Eaglemark Customer Funding
Corporation-IV (the "TRUST DEPOSITOR") and Harris Trust and Savings Bank, not
in its individual capacity but solely as Indenture Trustee (together with its
successors and assigns, the "INDENTURE TRUSTEE").
W I T N E S S E T H:
WHEREAS, the Issuer is issuing [ ]% Harley-Davidson Motorcycle
Contract, Class A-1 Notes and [ ]% Harley-Davidson Motorcycle Contract,
Class A-2 Notes, (collectively, the "NOTES") pursuant to the Indenture, dated
as of the date hereof (the "INDENTURE"), between the Issuer and the Indenture
Trustee (capitalized terms used herein that are not otherwise defined shall have
the meanings ascribed thereto in the Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Notes and of certain beneficial ownership interests of
the Issuer, including (i) a Sale and Servicing Agreement, dated as of the date
hereof (the "SALE AND SERVICING AGREEMENT"), among the Issuer, Harris Trust and
Savings Bank, not in its individual capacity but as Indenture Trustee, the Trust
Depositor and Eaglemark, as servicer (in such capacity, the "SERVICER"), and
(ii) the Indenture (collectively referred to hereinafter as the "TRANSACTION
DOCUMENTS");
WHEREAS, pursuant to the Transaction Documents, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (i) the Notes
and the collateral therefor pledged pursuant to the Indenture (the "COLLATERAL")
and (ii) the beneficial ownership interests in the Issuer (the registered
holders of such interests being referred to herein as the "OWNERS");
WHEREAS, the Issuer and the Owner Trustee desire to have the
Administrator perform certain of the duties of the Issuer and the Owner Trustee
referred to in the preceding clause and to provide such additional services
consistent with the terms of this Agreement and the Transaction Documents as the
Issuer and the Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
NOW, THEREAFTER, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DUTIES OF THE ADMINISTRATOR.
(a) Duties with respect to the Indenture.
(i) The Administrator agrees to perform all its duties as
Administrator and the duties of the Issuer and the Owner Trustee under
the Transaction Documents. In addition, the Administrator shall consult
with the Owner Trustee regarding the duties of the Issuer or the Owner
Trustee under the Indenture. The Administrator shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action
is necessary to comply with the respective duties of the Issuer and the
Owner Trustee under the Indenture. The Administrator shall prepare for
execution by the Issuer or shall cause the preparation by other
appropriate persons of, all such documents, reports, filings,
instruments, certificates and opinions that it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to the
Indenture. In furtherance of the foregoing, the Administrator shall take
all appropriate action that the Issuer or the Owner Trustee is required
to take pursuant to the Indenture including, without limitation, such of
the foregoing as are required with respect to the following matters under
the Indenture (references are to Sections of the Indenture):
1
<PAGE>
(A) the duty to cause the Note Register to be kept and to give
the Indenture Trustee notice of any appointment of a new Note Registrar
and the location, or change in location, of the Note Register (Section
2.04);
(B) the notification of Noteholders of the final principal
payment on their Notes (Section 2.07(b));
(C) the fixing or causing to be fixed of any special record
date and the notification of the Indenture Trustee and Noteholders with
respect to special payment dates, if any (Section 2.07(c));
(D) the preparation of or obtaining of the documents and
instruments required for execution and authentication of the Notes and
delivery of the same to the Indenture Trustee (Section 2.02);
(E) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the release of
Collateral (Section 2.12);
(F) the maintenance of an office in the City of Chicago,
Illinois, for registration of transfer or exchange of Notes (Section
3.02);
(G) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee the instrument specified in the
Indenture regarding funds held in trust (Section 3.03);
(H) the direction to the Indenture Trustee to deposit monies
with Paying Agents, if any, other than the Indenture Trustee (Section
3.03);
(I) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes, the collateral and each other
instrument and agreement included in the Collateral (Section 3.04);
(J) the preparation of all supplements and amendments to the
Indenture and all financing statements, continuation statements,
instruments of further assurance and other instruments and the taking of
such other action as is necessary or advisable to protect the Collateral
other than as prepared by the Servicer (Section 3.05);
(K) the delivery of the Opinion of Counsel on the Closing Date
and certain other statements as to compliance with the Indenture
(Sections 3.06 and 3.09);
(L) the identification to the Indenture Trustee in an Officer's
Certificate of a Person with whom the Issuer has contracted to perform
its duties under the Indenture (Section 3.07(b));
(M) the notification of the Indenture Trustee and each Rating
Agency of an Event of Termination under the Sale and Servicing Agreement;
(N) the duty to cause the Servicer to comply with Sections
4.09, 4.10, 4.11 and 5.07 and Article Five and Article Nine of the Sale
and Servicing Agreement (Section 3.14);
(O) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10(b) and Section 3.11(b));
2
<PAGE>
(P) the delivery of written notice to the Indenture Trustee and
each Rating Agency of each Event of Default under the Indenture and each
Event of Termination by the Servicer under the Sale and Servicing
Agreement (Section 3.18);
(Q) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officer's Certificate and the obtaining of the Opinion of Counsel and the
Independent Certificate relating thereto (Section 4.01);
(R) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Collateral in a commercially
reasonable manner if an Event of Default shall have occurred and be
continuing (Section 5.04);
(S) the preparation and delivery of notice to Noteholders of
the removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee (Section 6.08);
(T) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee
and any written instruments necessary in connection with the resignation
or removal of the Indenture Trustee or any co-trustee or separate trustee
(Sections 6.08 and 6.10);
(U) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee is
not the Note Registrar (Section 7.01);
(V) the opening of one or more accounts in the Indenture
Trustee's name, the preparation and delivery of Issuer Orders, Officer's
Certificates and Opinions of Counsel and all other actions necessary with
respect to investment and reinvestment of funds in the Trust Accounts
(Sections 8.02 and 8.03);
(W) the preparation of an Issuer Request and Officer's
Certificate and the obtaining of an Opinion of Counsel and Independent
Certificates, if necessary, for the release of the Collateral (Sections
8.04 and 8.05);
(X) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures and the mailing to the Noteholders of notices with respect to
such supplemental indentures (Sections 9.01, 9.02 and 9.03);
(Y) the execution and delivery of new Notes conforming to any
supplemental indenture (Section 9.06);
(Z) the duty to notify Noteholders of redemption of the Notes
or to cause the Indenture Trustee to provide such notification (Section
10.02);
(AA) the preparation and delivery of all Officer's Certificates,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Indenture Trustee to take any action under
the Indenture (Section 11.01(a));
(BB) the preparation and delivery of Officer's Certificates and
the obtaining of Independent Certificates, if necessary, for the release
of property from the lien of the Indenture (Section 11.01(b));
(CC) the notification of the Rating Agencies, upon the failure
of the Issuer, the Owner Trustee or the Indenture Trustee to provide
notification;
3
<PAGE>
(DD) the preparation and delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate payment and
notice provisions (Section 11.06); and
(EE) the recording of the Indenture, if applicable (Section
11.14).
(ii) The Administrator will:
(A) except as otherwise expressly provided in the Indenture,
pay the Indenture Trustee's Fees and reimburse the Indenture Trustee upon
its request for all reasonable expenses, disbursements and advances
incurred or made by the Indenture Trustee in accordance with any
provision of the Indenture (including the reasonable compensation,
expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence
or bad faith;
(B) indemnify the Indenture Trustee and its agents for, and
hold them harmless against, any loss, liability or expense incurred
without negligence or bad faith on their part, arising out of or in
connection with the acceptance or administration of the transactions
contemplated by the Indenture, including the reasonable costs and
expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers or
duties under the Indenture; and
(C) indemnify the Owner Trustee and its agents for, and hold
them harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection
with the acceptance or administration of the transactions contemplated by
the Trust Agreement, including the reasonable costs and expenses of
defending themselves against any claim or liability in connection with
the exercise or performance of any of their powers or duties under the
Trust Agreement.
(b) Additional Duties.
(i) In addition to the duties set forth in Section 1(a)(i), the
Administrator shall perform such calculations and shall prepare or shall
cause the preparation by other appropriate persons of, and shall execute
on behalf of the Issuer or the Owner Trustee, all such documents,
reports, filings, instruments, certificates and opinions that the Issuer
or the Owner Trustee are required to prepare, file or deliver pursuant to
the Transaction Documents or Section 5.05 of the Trust Agreement, and at
the request of the Owner Trustee shall take all appropriate action that
the Issuer or the Owner Trustee are required to take pursuant to the
Transaction Documents. In furtherance thereof, the Owner Trustee shall,
on behalf of itself and of the Issuer, execute and deliver to the
Administrator and to each successor Administrator appointed pursuant to
the terms hereof, one or more powers of attorney substantially in the
form of EXHIBIT A hereto, appointing the Administrator the
attorney-in-fact of the Owner Trustee and the Issuer for the purpose of
executing on behalf of the Owner Trustee and the Issuer all such
documents, reports, filings, instruments, certificates and opinions.
Subject to Section 5, and in accordance with the directions of the
Issuer, the Administrator shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Transaction Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer and
are reasonably within the capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the
Transaction Documents to the contrary, the Administrator shall be
responsible for promptly notifying the Owner Trustee in the event that
any withholding tax is imposed on the Trust's payments (or allocations of
income) to an Owner as contemplated in Section 5.02(c) of the Trust
Agreement. Any such notice shall specify the amount of any withholding
tax required to be withheld by the Owner Trustee pursuant to such
provision.
4
<PAGE>
(iii) Notwithstanding anything in this Agreement or the
Transaction Documents to the contrary, the Administrator shall be
responsible for performance of the duties of the Owner Trustee set forth
in Section 5.05(a), (b), (c) and (d), the penultimate sentence of Section
5.05 and Section 5.06(a) of the Trust Agreement with respect to, among
other things, accounting and reports to Owners; PROVIDED, HOWEVER, that
the Owner Trustee shall retain responsibility for the distribution of the
Schedule K-1s necessary to enable each Owner to prepare its federal and
state income tax returns.
(iv) The Administrator shall satisfy its obligations with
respect to clauses (ii) and (iii) above by retaining, at the expense of
the Trust payable by the Administrator, a firm of independent public
accountants (the "ACCOUNTANTS") acceptable to the Owner Trustee, which
shall perform the obligations of the Administrator thereunder.
(v) The Administrator shall perform the duties of the
Administrator specified in Section 10.02 of the Trust Agreement required
to be performed in connection with the resignation or removal of the
Owner Trustee, and any other duties expressly required to be performed by
the Administrator under the Trust Agreement.
(vi) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Administrator may enter into
transactions or otherwise deal with any of its Affiliates; PROVIDED,
HOWEVER, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in
the Administrator's opinion, no less favorable to the Issuer than would
be available from unaffiliated parties.
(c) Non-Ministerial Matters.
(i) With respect to matters that in the reasonable judgment of
the Administrator are non-ministerial, the Administrator shall not take
any action unless within a reasonable time before the taking of such
action, the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding
sentence, "NON-MINISTERIAL MATTERS" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against the
Issuer (other than in connection with the collection of the Contracts);
(C) the amendment, change or modification of the Transaction
Documents;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the Indenture
or the appointment of successor Administrators or a successor Servicer,
or the consent to the assignment by the Note Registrar, Paying Agent or
Indenture Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement,
the Administrator shall not be obligated to, and shall not, (A) make any
payments to the Noteholders under the Transaction Documents, (B) sell the
Collateral pursuant to clause (iv) of Section 5.04 of the Indenture, (C)
take any other action that the Issuer directs the Administrator not to
take on its behalf or (D) take any other action which may be construed as
having the effect of varying the investment of the Holders.
5
<PAGE>
SECTION 2. RECORDS. The Administrator shall maintain appropriate
books of account and records relating to services performed hereunder, which
books of account and records shall be accessible for inspection by the Issuer
and the Owner Trustee at any time during normal business hours.
SECTION 3. COMPENSATION. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to a monthly fee
which shall be solely an obligation of the Trust Depositor and shall be
agreeable to the Trust Depositor and the Administrator.
SECTION 4. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
SECTION 5. INDEPENDENCE OF THE ADMINISTRATOR. For all purposes of
this Agreement, the Administrator shall be an independent contractor and shall
not be subject to the supervision of the Issuer or the Owner Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by the Issuer, the
Administrator shall have no authority to act for or represent the Issuer or the
Owner Trustee in any way and shall not otherwise be deemed an agent of the
Issuer or the Owner Trustee.
SECTION 6. NO JOINT VENTURE. Nothing contained in this Agreement (i)
shall constitute the Administrator and either of the Issuer or the Owner Trustee
as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 7. OTHER ACTIVITIES OF ADMINISTRATOR. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other business or,
in its sole discretion, from acting in a similar capacity as an administrator
for any other Person or entity even though such person or entity may engage in
business activities similar to those of the Issuer, the Owner Trustee or the
Indenture Trustee.
SECTION 8. TERM OF AGREEMENT; RESIGNATION AND REMOVAL OF
ADMINISTRATOR. This Agreement shall continue in force until the dissolution of
the Issuer, upon which event this Agreement shall automatically terminate.
(a) Subject to Section 8(d) and Section 8(e), the Administrator may
resign its duties hereunder by providing the Issuer with at least
60 days' prior written notice.
(b) Subject to Section 8(d) and Section 8(e), the Issuer may remove
the Administrator without cause by providing the Administrator
with at least 60 days' prior written notice.
(c) Subject to Section 8(d) and Section 8(e), at the sole option of
the Issuer, the Administrator may be removed immediately upon
written notice of termination from the Issuer to the Administrator
if any of the following events shall occur:
(i) the Administrator shall default in the performance of any
of its duties under this Agreement and, after notice of such
default, shall not cure such default within ten days (or, if such
default cannot be cured in such time, shall not give within ten
days such assurance of cure as shall be reasonably satisfactory to
the Issuer);
(ii) a court having jurisdiction in the premises shall enter a
decree or order for relief, and such decree or order shall not
have been vacated within 60 days, in respect of the Administrator
in any involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect or
appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Administrator or any
substantial part of its property or order the winding-up or
liquidation of its affairs; or
6
<PAGE>
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for
relief in an involuntary case under any such law, or shall consent
to the appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator or similar official for the Administrator
or any substantial part of its property, shall consent to the
taking of possession by any such official of any substantial part
of its property, shall make any general assignment for the benefit
of creditors or shall fail generally to pay its debts as they
become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) above shall occur, it shall give written notice thereof to the
Issuer and the Indenture Trustee within seven days after the occurrence of such
event.
(d) No resignation or removal of the Administrator pursuant to this
Section shall be effective until (i) a successor Administrator
shall have been appointed by the Issuer and (ii) such successor
Administrator shall have agreed in writing to be bound by the
terms of this Agreement in the same manner as the Administrator is
bound hereunder.
(e) The appointment of any successor Administrator shall be effective
only after the satisfaction of the Rating Agency Condition with
respect to the proposed appointment.
(f) Subject to Section 8(d) and 8(e), the Administrator acknowledges
that upon the appointment of a Successor Servicer pursuant to the
Sale and Servicing Agreement, the Administrator shall immediately
resign and such Successor Servicer shall automatically become the
Administrator under this Agreement.
SECTION 9. ACTION UPON TERMINATION, RESIGNATION OR REMOVAL. Promptly
upon the effective date of termination of this Agreement pursuant to Section 8
or the resignation or removal of the Administrator pursuant to Section 8(a), (b)
or (c) respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such termination
pursuant to Section 8 deliver to the Issuer all property and documents of or
relating to the Collateral then in the custody of the Administrator. In the
event of the resignation or removal of the Administrator pursuant to Section
(a), (b) or (c), respectively, the Administrator shall cooperate with the Issuer
and take all reasonable steps requested to assist the Issuer in making an
orderly transfer of the duties of the Administrator.
SECTION 10. NOTICES. All notices, demands, certificates, requests
and communications hereunder ("notices") shall be in writing and shall be
effective (a) upon receipt when sent through the U.S. mails, registered or
certified mail, return receipt requested, postage prepaid, with such receipt to
be effective the date of delivery indicated on the return receipt, or (b) one
Business Day after delivery to an overnight courier, or (c) on the date
personally delivered to an Authorized Officer of the party to which sent, or (d)
on the date transmitted by legible telecopier transmission with a confirmation
of receipt, in all cases addressed to the recipient as follows:
(i) If to the Administrator:
Eaglemark, Inc.
150 South Wacker Drive, Suite 3100
Chicago, Illinois 60606
Attention: Michael E. Sulentic
Telecopier No.: (312) 368-4372
7
<PAGE>
(ii) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-IV
4150 Technology Way
Carson City, Nevada 89706
Telecopier No.: (702) 884-4469
(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iv) If to the Issuer or the Owner Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 11. AMENDMENTS. This Agreement may be amended from time to
time by a written amendment duly executed and delivered by the parties hereto,
with the written consent of the Owner Trustee but without the consent of the
Noteholders and the Certificateholders, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Noteholders or
Certificateholders; provided that such amendment will not, in the Opinion of
Counsel satisfactory to the Indenture Trustee, materially and adversely affect
the interest of any Noteholder or Certificateholder. This Agreement may also be
amended by the parties hereto with the written consent of the Owner Trustee and
the holders of Notes evidencing at least a majority in the Outstanding Amount of
the Notes and the holders of Certificates evidencing at least a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of Noteholders or the Certificateholders;
PROVIDED, HOWEVER, that no such amendment may (i) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on the Contracts or distributions that are required to be made for the
benefit of the Noteholders or Certificateholders or (ii) reduce the aforesaid
percentage of the holders of Notes and Certificates which are required to
consent to any such amendment, without the consent of the Insurer and the
holders of all outstanding Notes and Certificates. Notwithstanding the
foregoing, the Administrator may not amend this Agreement without the permission
of the Trust Depositor, which permission shall not be unreasonably withheld.
SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned
by the Administrator unless such assignment is previously consented to in
writing by the Issuer, the Indenture Trustee and the Owner Trustee and subject
to the satisfaction of the Rating Agency Condition in respect thereof. An
assignment with such consent and satisfaction, if accepted by the assignee,
shall bind the assignee hereunder in the same manner as the Administrator is
bound hereunder. Notwithstanding the foregoing, this Agreement may be assigned
by the Administrator without the
8
<PAGE>
consent of the Issuer or the Owner Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided that such successor organization
executes and delivers to the Issuer, the Owner Trustee and the Indenture
Trustee an agreement, in form and substance reasonably satisfactory to the
Owner Trustee and the Indenture Trustee, in which such corporation or other
organization agrees to be bound hereunder by the terms of said assignment in
the same manner as the Administrator is bound hereunder. Subject to the
foregoing, this Agreement shall bind any successors or assigns of the parties
hereto.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 14. HEADINGS. The section and subsection headings hereof have
been inserted for convenience of reference only and shall not be construed to
affect the meaning, construction or effect of this Agreement.
SECTION 15. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same agreement.
SECTION 16. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 17. NOT APPLICABLE TO EAGLEMARK IN OTHER CAPACITIES. Nothing
in this Agreement shall affect any obligation Eaglemark may have in any other
capacity.
SECTION 18. LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE
TRUSTEE.
(a) Notwithstanding anything contained herein to the contrary, this
instrument has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or any
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder,
as to all of which recourse shall be had solely to the assets of the Issuer.
For all purposes of this Agreement, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles Six, Seven and
Eight of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Harris Trust and Savings Bank not in its
individual capacity but solely as Indenture Trustee and in no event shall Harris
Trust and Savings Bank have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
SECTION 19. THIRD-PARTY BENEFICIARY. The Owner Trustee is a
third-party beneficiary to this Agreement and is entitled to the rights and
benefits hereunder and may enforce the provisions hereof as if it were a
party hereto.
SECTION 20. SURVIVABILITY. The obligations of the Administrator
described in Section 1(a)(ii) hereof shall survive termination of this
Agreement.
[this portion of page intentionally left blank]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST [ ]
By: Wilmington Trust Company, not in
its individual capacity but solely as
Owner Trustee
By: ________________________________________
Printed Name: __________________________
Title: _________________________________
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV,
as Trust Depositor
By: ________________________________________
Printed Name: ________________________
Title: _____________________________
HARRIS TRUST AND SAVINGS BANK, not in its individual
capacity but solely as Indenture Trustee
By: _________________________________________
Printed Name: ________________________
Title: _____________________________
EAGLEMARK, INC., as Administrator
By: ___________________________________________
Printed Name: ________________________
Title: _____________________________
10
<PAGE>
EXHIBIT A
LIMITED POWER OF ATTORNEY
State of Illinois )
) SS.
County of Cook )
KNOW ALL PERSONS BY THESE PRESENTS, that Wilmington Trust Company, a
Delaware banking corporation (the "OWNER TRUSTEE"), whose principal executive
office is located at Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, Delaware Attention: Trust Administration, by and
through its duly elected and authorized officer, ________________________, a
___________________, on behalf of itself and of Harley-Davidson Eaglemark
Motorcycle Trust [ ] (the "TRUST") as Issuer under the Administration
Agreement, dated as of [ ] (the "ADMINISTRATION AGREEMENT"),
among the Trust, Eaglemark Customer Funding Corporation-IV, Harris Trust and
Savings Bank, as Indenture Trustee, and Eaglemark, Inc., as Administrator, does
hereby nominate, constitute and appoint Eaglemark, Inc., a Nevada corporation,
each of its officers from time to time and each of its employees authorized by
it from time to time to act hereunder, jointly and each of them severally,
together or acting alone, its true and lawful attorney-in-fact, for the Owner
Trustee and the Issuer in their name, place and stead, in the sole discretion of
such attorney-in-fact, to perform such calculations and prepare or cause the
preparation by other appropriate persons of, and to execute on behalf of the
Issuer or the Owner Trustee, all such documents, reports, filings, instruments,
certificates and opinions that the Issuer or the Owner Trustee is required to
prepare, file or deliver pursuant to the Administration Agreement, and to take
any and all other action, as such attorney-in-fact may deem necessary or
desirable in accordance with the directions of the Owner Trustee and in
connection with its duties as Administrator or successor Administrator under the
Administration Agreement. Capitalized terms used herein that are not otherwise
defined shall have the meanings ascribed thereto in the Administration
Agreement.
The Owner Trustee hereby ratifies and confirms the execution, delivery
and performance (whether before or after the date hereof) of the above-mentioned
documents, reports, filings, instruments, certificates and opinions, by the
attorney-in-fact and all that the attorney-in-fact shall lawfully do or cause to
be done by virtue hereof.
The Owner Trustee hereby agrees that no person or other entity dealing
with the attorney-in-fact shall be bound to inquire into such attorney-in-fact's
power and authority hereunder and any such person or entity shall be fully
protected in relying on such power of authority.
This Limited Power of Attorney may not be assigned without the prior
written consent of the Owner Trustee. It is effective immediately and will
continue until it is revoked.
This Limited Power of Attorney shall be governed and construed in
accordance with the laws of the State of Illinois without reference to
principles of conflicts of law.
Executed as of this _____ day of [ ].
Wilmington Trust Company,
not in its individual capacity but solely as
Owner Trustee,
By: ______________________________________
Printed Name: ________________________
Title: _______________________________
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT OF
NOTARY PUBLIC
State of Delaware )
) SS.
County of New Castle )
On [ ] before me, ________________________________________
[Here insert name and title of notary]
personally appeared ________________________________________________________
/ / personally known to me, or
/ / proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ties), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature __________________________________________________ [SEAL]
<PAGE>
EXHIBIT 10.3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FORM OF
TRANSFER AND SALE AGREEMENT
by and between
EAGLEMARK, INC.,
as Seller and Servicer
AND
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV,
as Purchaser
Dated as of [ ]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT. . . . . . . . . . . . . . 1
Section 2.01. Closing.. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.02. Conditions to the Closing.. . . . . . . . . . . . . . . 2
Section 2.03. Assignment of Agreement.. . . . . . . . . . . . . . . . 3
Section 2.04. Subsequent Contracts. . . . . . . . . . . . . . . . . . 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 4
Section 3.01. Representations and Warranties Regarding Seller.. . . . 4
Section 3.02. Representations and Warranties Regarding Each Contract. 5
Section 3.03. Representations and Warranties Regarding the
Contracts in the Aggregate. . . . . . . . . . . . . . 8
Section 3.04. Representations and Warranties Regarding the
Contract Files. . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS . . . . . . . 9
Section 4.01. Custody of Contracts. . . . . . . . . . . . . . . . . . 9
Section 4.02. Filing. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.03. Name Change or Relocation.. . . . . . . . . . . . . . . 9
Section 4.04. Chief Executive Office. . . . . . . . . . . . . . . . .10
Section 4.05. Costs and Expenses. . . . . . . . . . . . . . . . . . .10
Section 4.06. Sale Treatment. . . . . . . . . . . . . . . . . . . . .10
ARTICLE V
REMEDIES UPON MISREPRESENTATION . . . . . . . . . . . . . . . . . . . . .10
Section 5.01. Repurchases of Contracts for Breach of
Representations and Warranties. . . . . . . . . . . .10
Section 5.02. Seller's Repurchase Option. . . . . . . . . . . . . . .10
ARTICLE VI
INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 6.01. Seller Indemnification. . . . . . . . . . . . . . . . .11
Section 6.02. Liabilities to Obligors.. . . . . . . . . . . . . . . .11
Section 6.03. Tax Indemnification.. . . . . . . . . . . . . . . . . .11
Section 6.04. Operation of Indemnities. . . . . . . . . . . . . . . .11
ARTICLE VII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 7.01. Prohibited Transactions with Respect to the
Trust.. . . . . . . . . . . . . . . . . . . . . . . .11
Section 7.02. Merger or Consolidation.. . . . . . . . . . . . . . . .12
Section 7.03. Termination.. . . . . . . . . . . . . . . . . . . . . .12
Section 7.04. Assignment or Delegation by Seller. . . . . . . . . . .12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Section 7.05. Amendment.. . . . . . . . . . . . . . . . . . . . . . .12
Section 7.06. Notices. . . . . . . . . . . . . . . . . . . . . . . .13
Section 7.07. Merger and Integration. . . . . . . . . . . . . . . . .14
Section 7.08. Headings. . . . . . . . . . . . . . . . . . . . . . . .14
Section 7.09. Governing Law.. . . . . . . . . . . . . . . . . . . . .14
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Form of Assignment
Exhibit B Form of Officer's Certificate
Exhibit C Form of Subsequent Purchase Agreement
</TABLE>
<PAGE>
THIS AGREEMENT, dated as of [ ], is made by and between
Eaglemark, Inc., a Nevada corporation, as seller hereunder (together with its
successors and assigns "EAGLEMARK" or "SELLER"), and Eaglemark Customer Funding
Corporation-IV, a Nevada corporation and wholly-owned subsidiary of Seller
(together with its successors and assigns "TRUST DEPOSITOR"), as purchaser
hereunder.
WHEREAS, in the regular course of its business, Seller purchases and
services motorcycle conditional sales contracts from Harley-Davidson motorcycle
retailers, each of which contracts provides for installment payment obligations
by or on behalf of the retailer's customer/purchaser and grants a security
interest in a Harley-Davidson motorcycle in order to secure such obligations;
WHEREAS, Seller and Trust Depositor wish to set forth the terms and
conditions pursuant to which Trust Depositor will acquire from time to time the
"CONTRACT ASSETS," as hereinafter defined; and
WHEREAS, Trust Depositor intends concurrently with its purchases from
time to time of Contract Assets hereunder to convey all right, title and
interest in such Contract Assets to Harley-Davidson Eaglemark Motorcycle Trust
[ ] (the "TRUST") pursuant to the Sale and Servicing Agreement dated as
of [ ] by and among Trust Depositor, Eaglemark, as Servicer, and
Harley-Davidson Eaglemark Motorcycle Trust [ ], as issuer (the "ISSUER")
(as amended, supplemented or otherwise modified from time to time, the "SALE AND
SERVICING AGREEMENT"), executed concurrently herewith;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, Seller and Trust Depositor agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL. Unless otherwise defined in this Agreement,
capitalized terms used herein (including in the preamble above) shall have the
meanings assigned to them in the Sale and Servicing Agreement.
ARTICLE II
TRANSFER OF CONTRACTS; ASSIGNMENT OF AGREEMENT
SECTION 2.01. CLOSING. Subject to and upon the terms and conditions set
forth in this Agreement, Seller hereby sells, transfers, assigns, sets over and
otherwise conveys to Trust Depositor, in consideration of Trust Depositor's
payment of $[ ] in cash as the Purchase Price therefor,
(i) all the right, title and interest of Seller in and to the Initial Contracts
listed on the initial List of Contracts in effect on the Closing Date
(including, without limitation, all security interests and all rights to receive
payments which are collected pursuant thereto on or after the Cutoff Date,
including any liquidation proceeds therefrom, but excluding any rights to
receive payments which were collected pursuant thereto prior to the Cutoff
Date), (ii) all rights of Seller under any physical damage or other individual
insurance policy (including a "FORCED PLACED" policy, if any) relating to any
such Contract, an Obligor or a Motorcycle securing such Contract, (iii) all
security interests in each such Motorcycle, (iv) all documents contained in the
related Contract Files, (v) all rights of Seller in the Lockbox, Lockbox Account
and related Lockbox Agreement to the extent they relate to the Contracts, (vi)
all rights (but not the obligations) of the Seller under any motorcycle dealer
agreements between the dealers (i.e. the originators of the Contracts) and the
Seller, and (vii) all proceeds and products of the foregoing (items (i) - (vii),
together with the additional assets referred to in Section 2.04 below which may
be transferred from time to time in respect of Subsequent Contracts, being
collectively referred to herein as the "CONTRACT ASSETS"). Although Seller and
Trust Depositor agree that any such transfer is intended to be a sale of
ownership in the Contract Assets, rather than the mere granting of a security
interest to secure a borrowing, in the event such transfer is deemed to be of a
mere security interest to secure indebtedness, Seller shall be deemed to have
granted Trust Depositor a perfected first priority security interest in such
Contract Assets and this Agreement shall constitute a security agreement under
applicable law. If such transfer is deemed to be the mere granting of a
security interest to secure a borrowing, Trust Depositor may, to
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<PAGE>
secure Trust Depositor's own borrowing under the Sale and Servicing Agreement
(to the extent that the transfer of the Contract Assets thereunder is deemed
to be a mere granting of a security interest to secure a borrowing) repledge
and reassign (i) all or a portion of the Contract Assets pledged to Trust
Depositor and not released from the security interest of this Agreement at
the time of such pledge and assignment, and (ii) all proceeds thereof. Such
repledge and reassignment may be made by Trust Depositor with or without a
repledge and reassignment by Trust Depositor of its rights under this
Agreement, and without further notice to or acknowledgment from Seller.
Seller waives, to the extent permitted by applicable law, all claims, causes
of action and remedies, whether legal or equitable (including any right of
setoff), against Trust Depositor or any assignee of Trust Depositor relating
to such action by Trust Depositor in connection with the transactions
contemplated by the Sale and Servicing Agreement.
SECTION 2.02. CONDITIONS TO THE CLOSING. On or before the Closing Date,
Seller shall deliver or cause to be delivered to Trust Depositor each of the
documents, certificates and other items as follows:
(a) The initial List of Contracts, certified by the Chairman of
the Board, President or any Vice President of Seller together with an
Assignment substantially in the form attached as EXHIBIT A hereto.
(b) A certificate of an officer of Seller substantially in the
form of EXHIBIT B hereto.
(c) An opinion of counsel for Seller substantially in the form
of EXHIBIT D to the Sale and Servicing Agreement.
(d) A letter from Arthur Andersen LLP, or another nationally
recognized accounting firm, addressed to Trust Depositor and the Issuer
and the Trustees and stating that such firm has reviewed a sample of the
Initial Contracts and performed specific procedures for such sample with
respect to certain contract terms and identifying those Initial Contracts
which do not so conform.
(e) Copies of resolutions of the Board of Directors of Seller
or of the Executive Committee of the Board of Directors of Seller
approving the execution, delivery and performance of this Agreement and
the transactions contemplated hereunder, certified in each case by the
Secretary or an Assistant Secretary of Seller.
(f) Officially certified recent evidence of due incorporation
and good standing of Seller under the laws of Nevada.
(g) Evidence of proper filing with the appropriate offices in
Nevada and Illinois of UCC financing statements executed by Seller as
debtor/seller, naming Trust Depositor as secured party/purchaser and the
Owner Trust as assignee, and listing the Contract Assets as collateral as
well as evidence of proper filing with the appropriate offices in
Delaware of UCC Financing statements executed by the Issuer as debtor,
naming the Indenture Trustee, as assignee, and listing the Contract
Assets as collateral.
(h) An Officer's Certificate from Seller confirming that
Seller's compliance officer has reviewed the original of each Initial
Contract and each related Contract File, that each Initial Contract and
related Contract File conforms in all material respects with the initial
List of Contracts and each such Contract File is complete, that each
document required be an original, and that the face of each original
Initial Contract has been stamped with the following notation:
"This Contract/Note is subject to a security interest
granted to Harley-Davidson Eaglemark Motorcycle Trust
[ ]. UCC-1 Financing Statements covering this
Contract/Note have been filed with the Secretary of State of
the State of Nevada and the Secretary of State of the State of
Illinois. Such lien will be released only in connection with
appropriate filings in such offices. Consequently, potential
purchasers of this Contract/Note must refer to such filings to
determine whether such lien has been released."
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<PAGE>
(i) The documents, certificates and other items described in
Section 2.02 of the Sale and Servicing Agreement, to the extent not
already described above.
SECTION 2.03. ASSIGNMENT OF AGREEMENT. Trust Depositor has the right to
assign its interest under this Agreement to the Issuer and Owner Trustee as may
be required to effect the purposes of the Sale and Servicing Agreement, without
further notice to, or consent of, Seller, and the Issuer and the Trustees shall
succeed to such of the rights of Trust Depositor hereunder as shall be so
assigned. Seller acknowledges that, pursuant to the Sale and Servicing
Agreement, Trust Depositor will assign all of its right, title and interest in
and to the Contract Assets and its right to exercise the remedies created by
Section 5.01 hereof for breaches of representations and warranties of Seller
contained in Sections 3.01, 3.02, 3.03 and 3.04 hereof to the Issuer and the
Trustees for the benefit of the Noteholders and Certificateholders. Seller
agrees that, upon such assignment to the Issuer and the Trustees, such
representations will run to and be for the benefit of the Issuer and the
Trustees and the Issuer and the Trustees may enforce directly without joinder
of Trust Depositor, the repurchase obligations of Seller set forth herein with
respect to breaches of such representations and warranties as set forth herein
and in Section 7.08 of the Sale and Servicing Agreement.
SECTION 2.04. SUBSEQUENT CONTRACTS. (a) Subject to and upon the terms
and conditions set forth in paragraph (b) below and in the related Subsequent
Purchase Agreement, Seller hereby agrees to sell, transfer, assign, set over and
otherwise convey to Trust Depositor, in consideration of Trust Depositor's
payment on the related Subsequent Transfer Date of the purchase price therefor
(as set forth in the related Subsequent Purchase Agreement), and Trust Depositor
hereby agrees to purchase, (i) all the right, title and interest of Seller in
and to the Subsequent Contracts listed on the related Subsequent List of
Contracts (including, without limitation, all security interests and all rights
to receive payments which are collected pursuant thereto on or after the
applicable Subsequent Cutoff Date, including any liquidation proceeds therefrom,
but excluding any rights to receive payments which were collected pursuant
thereto prior to such Subsequent Cutoff Date), (ii) all rights of Seller under
any physical damage or other individual insurance policy (including a "FORCED
PLACED" policy, if any) relating to any such Contract, an Obligor or a
Motorcycle securing such Contract, (iii) all security interests in each such
Motorcycle, (iv) all documents contained in the related Contract Files, (v) all
rights of Seller in the Lockbox, Lockbox Account and related Lockbox Agreement
to the extent they relate to the Contracts, (vi) all rights (but not the
obligations) of the Seller under any motorcycle dealer agreements between the
dealers (I.E. the originators of such Subsequent Contracts) and the Seller, and
(vii) all proceeds and products of the foregoing (items (i) - (vii), upon
consummation of any above-described purchase, becoming part of the "CONTRACT
ASSETS"). Seller agrees, subject to the terms and conditions herein applicable
to transfers of Subsequent Contracts, to sell an aggregate Principal Balance of
Subsequent Contracts at or prior to the end of the Funding Period equal to the
Pre-Funded Amount on the Closing Date.
(b) Seller shall transfer to Trust Depositor, and Trust
Depositor shall purchase, the Subsequent Contracts and related assets to be
transferred on any Subsequent Transfer Date only upon the satisfaction of each
of the following conditions on or prior to the Subsequent Transfer Date:
(i) The Seller shall have provided the Trustees, the Initial
Purchaser and the Rating Agencies with a timely Addition Notice and shall
have provided any information reasonably requested by any of the
foregoing with respect to the Subsequent Contracts;
(ii) the Funding Period shall not have terminated;
(iii) the Seller shall have delivered to the Trust Depositor a
duly executed Purchase Agreement and Assignment in substantially the form
of EXHIBIT C hereto (the "SUBSEQUENT PURCHASE AGREEMENT"), which shall
include a Subsequent List of Contracts listing the Subsequent Contracts
being purchased;
(iv) as of each Subsequent Transfer Date, neither the Seller nor
the Trust Depositor was insolvent nor will either of them have been made
insolvent by such transfer nor is either of them aware of any pending
insolvency;
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<PAGE>
(v) each Rating Agency shall have notified the Trust Depositor
and the Trustees in writing that following such transfer, and the
transfer immediately thereafter of the Subsequent Contracts to the Trust,
the Class A-1 Notes and the Class A-2 Notes will be rated in the highest
rating category by such Rating Agency and the Certificates will be rated
at least "BBB" by Standard & Poor's and "Baa2" by Moody's;
(vi) such addition will not result in a material adverse tax
consequence to the Issuer, the Noteholders or the Certificateholders as
evidenced by an Opinion of Counsel to be delivered by the Seller to the
Issuer, the Trustees, and the Initial Purchaser;
(vii) the Seller shall have delivered to the Rating Agencies and
to the Initial Purchaser one or more opinions of counsel with respect to
the transfer of the Subsequent Contracts substantially in the form of the
opinions of counsel delivered to such Persons on the Closing Date;
(viii) the Seller shall have taken any action necessary to
maintain the first perfected ownership interest of the Trust in the Trust
Corpus and the first perfected security interest of the Trust Depositor
in the Contract Assets, the Trust in the Trust Corpus and the Indenture
Trustee in the Reserve Fund Deposits; and
(ix) no selection procedures believed by the Seller to be
adverse to the interests of the Noteholders and Certificateholders shall
have been utilized in selecting the Subsequent Contracts.
(c) Seller agrees to pay all reasonable out-of-pocket expenses in
connection with any request for the conveyance of Subsequent Contracts, whether
or not such conveyance is actually consummated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Seller makes the following representations and warranties, on which Trust
Depositor will rely in purchasing the initial Contract Assets on the Closing
Date (and any Subsequent Contracts on the related Subsequent Transfer Date) and
concurrently reconveying the same to the Trust, and on which the Trust, the
Noteholders and Certificateholders will rely under the Sale and Servicing
Agreement. Such representations speak as of the execution and delivery of this
Agreement and as of the Closing Date in the case of the Initial Contracts, and
as of the applicable Subsequent Transfer Date in the case of Subsequent
Contracts, but shall survive the sale, transfer and assignment of the Contracts
to the Trust. The repurchase obligation of Seller set forth in Section 5.01
below and in Section 7.08 of the Sale and Servicing Agreement constitutes the
sole remedy available for a breach of a representation or warranty of Seller set
forth in Section 3.02, 3.03 or 3.04 of this Agreement.
SECTION 3.01. REPRESENTATIONS AND WARRANTIES REGARDING SELLER. Seller
represents and warrants, as of the execution and delivery of this Agreement and
as of the Closing Date, in the case of the Initial Contracts, and as of the
applicable Subsequent Transfer Date, in the case of Subsequent Contracts, that:
(a) ORGANIZATION AND GOOD STANDING. Seller is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and has the corporate power to own
its assets and to transact the business in which it is currently engaged.
Seller is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires
such qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or condition
(financial or otherwise) of Seller or Trust Depositor. Seller is
properly licensed in each jurisdiction to the extent required by the laws
of such jurisdiction to service the Contracts in accordance with the
terms of the Sale and Servicing Agreement.
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<PAGE>
(b) AUTHORIZATION; BINDING OBLIGATION. Seller has the power
and authority to make, execute, deliver and perform this Agreement and
the other Transaction Documents to which the Seller is a party and all of
the transactions contemplated under this Agreement and the other
Transaction Documents to which the Seller is a party, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the other Transaction Documents to
which the Seller is a party. This Agreement and the other Transaction
Documents to which the Seller is a party constitute the legal, valid and
binding obligation of Seller enforceable in accordance with their terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
(c) NO CONSENT REQUIRED. Seller is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement and the other
Transaction Documents to which the Seller is a party.
(d) NO VIOLATIONS. Seller's execution, delivery and
performance of this Agreement and the other Transaction Documents to
which the Seller is a party will not violate any provision of any
existing law or regulation or any order or decree of any court or the
Articles of Incorporation or Bylaws of Seller, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which
Seller is a party or by which Seller or any of Seller's properties may be
bound.
(e) LITIGATION. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending,
or to the knowledge of Seller threatened, against Seller or any of its
properties or with respect to this Agreement or any other Transaction
Document to which the Seller is a party which, if adversely determined,
would in the opinion of Seller have a material adverse effect on the
business, properties, assets or condition (financial or other) of Seller
or the transactions contemplated by this Agreement or any other
Transaction Document to which the Seller is a party.
(f) PLACE OF BUSINESS; NO CHANGES. Seller's sole place of
business (within the meaning of Article 9 of the UCC) is as set forth in
Section 7.06 below. Seller has not changed its name whether by amendment
of its Articles of Incorporation, by reorganization or otherwise, and has
not changed the location of its place of business, within the four months
preceding the Closing Date.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES REGARDING EACH CONTRACT.
Seller represents and warrants as to each Contract as of the execution and
delivery of this Agreement and as of the Closing Date, in the case of the
Initial Contracts, and as of the applicable Subsequent Transfer Date, in the
case of Subsequent Contracts, that:
(a) LIST OF CONTRACTS. The information set forth in the List
of Contracts (or Subsequent List of Contracts, in the case of Subsequent
Contracts) is true, complete and correct as of the Initial Cutoff Date or
applicable Subsequent Cutoff Date, as the case may be.
(b) PAYMENTS. As of the Initial Cutoff Date or applicable
Subsequent Cutoff Date, as the case may be, the most recent scheduled
payment with respect to any Contract either had been made or was not
delinquent for more than 30 days. To the best of Seller's knowledge, all
payments made on each Contract were made by the respective Obligor.
(c) NO WAIVERS. As of the Closing Date (or the applicable
Subsequent Transfer Date, in the case of Subsequent Contracts), the terms
of the Contracts have not been waived, altered or modified in any
respect, except by instruments or documents included in the related
Contract File.
(d) BINDING OBLIGATION. Each Contract is the genuine, legal,
valid and binding obligation of the Obligor thereunder and is enforceable
in accordance with its terms, except as such enforceability may be
limited by laws affecting the enforcement of creditors' rights generally.
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(e) NO DEFENSES. No Contract is subject to any right of
rescission, setoff, counterclaim or defense, including the defense of
usury, and the operation of any of the terms of such Contract or the
exercise of any right thereunder will not render the Contract
unenforceable in whole or in part or subject to any right of rescission,
setoff, counterclaim or defense, including the defense of usury, and no
such right of rescission, setoff, counterclaim or defense has been
asserted with respect thereto.
(f) INSURANCE. As of the Closing Date (or the applicable
Subsequent Transfer Date in the case of Subsequent Contracts), the
related Motorcycle securing each Contract is covered by physical damage
insurance (i) in an amount not less than the value of the Motorcycle at
the time of origination of the Contract, (ii) naming Seller as a loss
payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks covered by comprehensive
coverage, and all premiums due on such insurance have been paid in full
from the date of the Contract's origination.
(g) ORIGINATION. Each Contract was originated by a
Harley-Davidson motorcycle dealer in the regular course of its business
which dealer had all necessary licenses and permits to originate the
Contracts in the state where such dealer was located, was fully and
properly executed by the parties thereto, and has been purchased by
Seller in the regular course of its business. Each Contract was sold by
such motorcycle dealer to the Seller without any fraud or
misrepresentation on the part of such motorcycle dealer.
(h) LAWFUL ASSIGNMENT. No Contract was originated in or is
subject to the laws of any jurisdiction whose laws would make the sale,
transfer and assignment of the Contract under this Agreement or under the
Sale and Servicing Agreement or under the Indenture or pursuant to
transfers of the Certificates unlawful, void or voidable.
(i) COMPLIANCE WITH LAW. None of the Contracts, the
origination of the Contracts by the dealers, the purchase of the
Contracts by the Seller, the sale of the Contracts by the Seller to the
Trust Depositor or by the Trust Depositor to the Trust, or any
combination of the foregoing, violated as of the Closing Date or as of
any Subsequent Transfer Date, as applicable, any requirement of any
federal, state or local law and regulations thereunder, including,
without limitation, usury, truth in lending, motor vehicle installment
loan and equal credit opportunity laws, applicable to the Contracts and
the sale of Motorcycles. Seller shall, for at least the period of this
Agreement, maintain in its possession, available for the Trust
Depositor's and the Trustees' inspection, and shall deliver to Trust
Depositor or the Trustee upon demand, evidence of compliance with all
such requirements.
(j) CONTRACT IN FORCE. As of the Closing Date (or the
applicable Subsequent Transfer Date in the case of Subsequent Contracts),
no Contract has been satisfied or subordinated in whole or in part or
rescinded, and the related Motorcycle securing any Contract has not been
released from the lien of the Contract in whole or in part.
(k) VALID SECURITY INTEREST. Each Contract creates a valid,
subsisting and enforceable first priority perfected security interest in
favor of Seller in the Motorcycle covered thereby, and such security
interest has been assigned by Seller to the Trust Depositor. The
original certificate of title, certificate of lien or other notification
(the "LIEN CERTIFICATE") issued by the body responsible for the
registration of, and the issuance of certificates of title relating to,
motor vehicles and liens thereon (the "REGISTRAR OF TITLES") of the
applicable state to a secured party which indicates the lien of the
secured party on the Motorcycle is recorded on the original certificate
of title, and the original certificate of title for each Motorcycle,
show, or if a new or replacement Lien Certificate is being applied for
with respect to such Motorcycle the Lien Certificate will be received
within 180 days of the Closing Date (or the applicable Subsequent
Transfer Date in the case of Subsequent Contracts) and will show, the
Seller as original secured party under each Contract as the holder of a
first priority security interest in such Motorcycle. With respect to
each Contract for which the Lien Certificate has not yet been returned
from the Registrar of Titles, the Seller has received written evidence
from the related dealer that such Lien Certificate showing the Seller as
lienholder has been applied for. The Seller's security interest has been
validly assigned by the Seller to the Trust Depositor and by the Trust
Depositor to the Issuer and Owner Trustee
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pursuant to this Agreement. Immediately after the sale, each Contract
will be secured by an enforceable and perfected first priority
security interest in the Motorcycle in favor of the Trust as secured
party, which security interest is prior to all other liens upon and
security interests in such Motorcycle which now exist or may hereafter
arise or be created (except, as to priority, for any lien for taxes,
labor, materials or of any state law enforcement agency affecting a
Motorcycle).
(1) CAPACITY OF PARTIES. All parties to any Contract had
capacity to execute such Contract and all other documents related thereto
and to grant the security interest purported to be granted thereby.
(m) GOOD TITLE. Each Contract was purchased by Seller for
value and taken into possession prior to the Cutoff Date (or the
applicable Subsequent Cutoff Date in the case of Subsequent Contracts) in
the ordinary course of its business, without knowledge that the Contract
was subject to a security interest. No Contract has been sold, assigned
or pledged to any person other than Trust Depositor and the Trustee as
the transferee of Trust Depositor, and prior to the transfer of the
Contract to Trust Depositor, Seller had good and marketable title to each
Contract free and clear of any encumbrance, equity, loan, pledge, charge,
claim or security interest (other than the extinguished interest of BofA
described above) and was the sole owner thereof and had full right to
transfer the Contract to Trust Depositor and to permit Trust Depositor to
transfer the same to the Issuer and the Owner Trustee, and, as of the
Closing Date (or the applicable Subsequent Transfer Date in the case of
Subsequent Contracts), the Issuer and the Owner Trustee will have a first
priority perfected security interest therein.
(n) NO DEFAULTS. As of the Initial Cutoff Date (or the
applicable Subsequent Cutoff Date in the case of Subsequent Contracts),
no default, breach, violation or event permitting acceleration existed
with respect to any Contract and no event had occurred which, with notice
and the expiration of any grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration under such
Contract. Seller has not waived any such default, breach, violation or
event permitting acceleration, and Seller has not granted any extension
of payment terms on any Contract. As of the Initial Cutoff Date (or the
applicable Subsequent Cutoff Date in the case of Subsequent Contracts),
no Motorcycle had been repossessed.
(o) NO LIENS. As of the Closing Date (or the applicable
Subsequent Transfer Date in the case of Subsequent Contracts) there are,
to the best of Seller's knowledge, no liens or claims which have been
filed for work, labor or materials affecting the Motorcycle securing any
Contract which are or may be liens prior to, or equal with, the lien of
such Contract.
(p) INSTALLMENTS. Each Contract has a fixed Contract Rate and
provides for monthly payments of principal and interest which, if timely
made, would fully amortize the loan on a simple-interest basis over its
term.
(q) ENFORCEABILITY. Each Contract contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the collateral of the
benefits of the security.
(r) ONE ORIGINAL. Each Contract is evidenced by only one
original executed Contract, which original has been delivered to the
Issuer and the Owner Trustee or its designee on or before the Closing
Date (or the applicable Subsequent Transfer Date in the case of
Subsequent Contracts).
(s) NO GOVERNMENT CONTRACTS. No Obligor is the United States
government or an agency, authority, instrumentality or other political
subdivision of the United States government.
(t) LOCKBOX BANK. The Lockbox Bank is the only institution
holding any Lockbox Account for receipt of payments from Obligors, and
all Obligors, and only such Obligors, have been instructed to make
payments to the Lockbox Account, and no person claiming through or under
Seller has any claim or interest in the Lockbox Account other than the
Lockbox Bank; PROVIDED, HOWEVER, NBD Bank, N.A. ("NBD"), Eagle
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Credit Trust 1994-1, Eagle Credit Trust 1994-2, Eagle Credit Trust
1994-3, Eagle Credit Trust 1994-4, Eaglemark Trust 1995-1, Eaglemark
Trust 1995-2, Eaglemark Trust 1996-1, Eaglemark Trust 1996-2,
Harley-Davidson Eaglemark Owner Trust 1996-3 and any other Future
Trusts (as that term is defined in the Fourth Amended and Restated
Lockbox Agreement dated as of April 1, 1998 by and among Seller,
Eaglemark Customer Funding Corporation-II, Eaglemark Customer Funding
Corporation-III, Purchaser and acknowledged by Norwest in its
capacity as Trustee of Eagle Credit Trust 1994-1, Eagle Credit Trust
1994-2, Eagle Credit Trust 1994-3, Eagle Credit Trust 1994-4,
Eaglemark Trust 1995-1, Eaglemark Trust 1995-2 and Harris Trust and
Savings Bank with respect to Future Trusts (as defined therein)) shall
have an interest in certain other collections therein not related to
the Contracts.
(u) OBLIGOR BANKRUPTCY. At the Cutoff Date (or the applicable
Subsequent Cutoff Date in the case of Subsequent Contracts), no Obligor
was subject to a bankruptcy proceeding within the one year preceding such
Cutoff Date.
(v) CHATTEL PAPER. The Contracts constitute chattel paper
within the meaning of the UCC as in effect in the States of Nevada and
Illinois.
(w) NO IMPAIRMENT. Neither the Seller nor the Trust Depositor
has done anything to convey any right to any Person that would result in
such Person having a right to payments due under the Contract or
otherwise to impair the rights of the Trust and the Certificateholders in
any Contract or the proceeds thereof.
(x) CONTRACT NOT ASSUMABLE. No Contract is assumable by
another Person in a manner which would release the Obligor thereof from
such Obligor's obligations to the Trust Depositor with respect to such
Contract.
SECTION 3.03. REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACTS IN
THE AGGREGATE. Seller represents and warrants, as of the execution and delivery
of this Agreement and as of the Closing Date, in the case of the Initial
Contracts, and as of the applicable Subsequent Transfer Date, in the case of
Subsequent Contracts, that:
(a) AMOUNTS. The sum of the aggregate Principal Balances
payable by Obligors under the Contracts as of the Initial Cutoff Date (or
the applicable Subsequent Cutoff Date in the case of Subsequent
Contracts), plus the Pre-Funded Amount as of such date, equals the sum of
the principal balance of the Class A-1 Notes, the Class A-2 Notes and
Certificates on the Closing Date or the related Subsequent Transfer Date,
as applicable.
(b) CHARACTERISTICS. The Initial Contracts have the following
characteristics: (i) all the Contracts are secured by Motorcycles; (ii)
no Initial Contract has a remaining maturity of more than 72 months; and
(iii) the final scheduled Distribution Date on the Initial Contract with
the latest maturity is not later than [ ].
Approximately [ ]% of the Principal Balance of the Initial Contracts
as of the Initial Cutoff Date is attributable to loans for purchases of
new Motorcycles and approximately [ ]% is attributable to loans for
purchases of used Motorcycles. No Initial Contract was originated after
the Initial Cutoff Date. No Initial Contract has a Contract Rate less
than [ ]%. The first payment on each Initial Contract is due on or
before [ ].
(c) MARKING RECORDS. As of the Closing Date (or the applicable
Subsequent Transfer Date in the case of Subsequent Contracts), Seller has
caused the Computer Disk relating to the Contracts sold hereunder and
concurrently reconveyed by Trust Depositor to the Trust and by the Trust
to the Indenture Trustee to be clearly and unambiguously marked to
indicate that such Contracts constitute part of the Trust, are owned by
the Trust and constitute security for the Notes.
(d) NO ADVERSE SELECTION. No selection procedures adverse to
Noteholders and Certificateholders have been employed in selecting the
Contracts.
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(e) TRUE SALE. The transaction contemplated by this Agreement
constitutes a valid sale, transfer and assignment from Seller to Trust
Depositor and from Trust Depositor to the Trust of all of Seller's right,
title and interest in the Contract Assets as of the Closing Date and any
Subsequent Transfer Date, as applicable.
(f) ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to
give the Trustee a first priority perfected lien on, or ownership
interest in, the Contracts and the proceeds thereof and the rest of the
Trust Corpus have been made, taken or performed.
SECTION 3.04. REPRESENTATIONS AND WARRANTIES REGARDING THE CONTRACT
FILES. Seller represents and warrants as of the execution and delivery of this
Agreement and as of the Closing Date, in the case of the Initial Contracts, and
as of the applicable Subsequent Transfer Date, in the case of Subsequent
Contracts, that:
(a) POSSESSION. Immediately prior to the Closing Date or any
Subsequent Transfer Date, Seller will have possession of each original
Contract and the related complete Contract File, and there are and there
will be no custodial agreements relating to the same in effect. Each of
such documents which is required to be signed by the Obligor has been
signed by the Obligor in the appropriate spaces. All blanks on any form
have been properly filled in and each form has otherwise been correctly
prepared. The complete Contract File for each Contract currently is in
the possession of the Servicer.
(b) BULK TRANSFER LAWS. The transfer, assignment and
conveyance of the Contracts and the Contract Files by Seller pursuant to
this Agreement or any Subsequent Purchase Agreement and by Trust
Depositor pursuant to the Sale and Servicing Agreement is not subject to
the bulk transfer or any similar statutory provisions in effect in any
applicable jurisdiction.
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
SECTION 4.01. CUSTODY OF CONTRACTS. Subject to the terms and conditions
of this Section 4.01, the contents of each Contract File shall be held in the
custody of Seller in its capacity as Servicer for the benefit of the Owner
Trustee as the owner thereof. Seller agrees to comply with all its obligations
under the Sale and Servicing Agreement in respect of the Contract Assets, which
agreement it is executing concurrently herewith in its capacity as Servicer
thereunder, and acknowledges and consents to the transactions contemplated
therein.
SECTION 4.02. FILING. On or prior to the Closing Date and each
Subsequent Transfer Date, Seller shall cause the UCC financing statement(s)
referred to in Section 2.02(g) hereof and in Section 2.02(h) of the Sale and
Servicing Agreement to be filed and from time to time Seller shall take and
cause to be taken such actions and execute such documents as are necessary or
desirable or as Trust Depositor or the Owner Trustee may reasonably request to
perfect and protect the Owner Trustee's ownership interest in the Trust against
all other persons, including, without limitation, the filing of financing
statements, amendments thereto and continuation statements, the execution of
transfer instruments and the making of notations on or taking possession of all
records or documents of title.
SECTION 4.03. NAME CHANGE OR RELOCATION. (a) During the term of this
Agreement, Seller shall not change its name, identity or structure or relocate
its chief executive office without first giving at least 30 days' prior written
notice to Trust Depositor and to the Trustees.
(b) If any change in Seller's name, identity or structure or other
action would make any financing or continuation statement or notice of ownership
interest or lien filed under this Agreement seriously misleading within the
meaning of applicable provisions of the UCC or any title statute, Seller, no
later than five days after the effective date of such change, shall file such
amendments as may be required to preserve and protect the Trustees' interests in
the Trust and proceeds thereof. In addition, Seller shall not change its place
of business or its chief executive office (within the
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meaning of Article 9 of the UCC) from the location specified in Section 7.06
below unless it has first taken such action as is advisable or necessary to
preserve and protect the Issuer's and Trustees' interest in the Contract
Assets. Promptly after taking any of the foregoing actions, Seller shall
deliver to Trust Depositor and the Trustees an opinion of counsel stating
that, in the opinion of such counsel, all financing statements or amendments
necessary to preserve and protect the interests of the Trustees in the
Contract Assets have been filed, and reciting the details of such filing.
SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this Agreement,
Seller will maintain its chief executive office in one of the States of the
United States, except Louisiana, Tennessee, Colorado, Kansas, New Mexico,
Oklahoma, Utah or Wyoming.
SECTION 4.05. COSTS AND EXPENSES. Seller agrees to pay all reasonable
costs and disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of (i) Trust Depositor's and the
Trustees' right, title and interest in and to the Contract Assets (including,
without limitation, the security interest in the Motorcycles related thereto)
and (ii) the security interests provided for in the Indenture.
SECTION 4.06. SALE TREATMENT. Each of Seller and Trust Depositor shall
treat the transfer of Contract Assets made hereunder (including in respect of
Subsequent Contracts) for all purposes (including tax and financial accounting
purposes) as a sale and purchase on all of its relevant books, records,
financial statements and other applicable documents.
ARTICLE V
REMEDIES UPON MISREPRESENTATION
SECTION 5.01. REPURCHASES OF CONTRACTS FOR BREACH OF REPRESENTATIONS AND
WARRANTIES. Seller hereby agrees, for the benefit of the Trustees and the Trust
Depositor, that it shall repurchase a Contract including any Subsequent
Contracts (together with all related Contract Assets), at its Repurchase Price,
not later than two Business Days prior to the first Determination Date after
Seller becomes aware, or should have become aware, or receives written notice
from Trust Depositor, either of the Trustees or the Servicer of any breach of a
representation or warranty of Seller set forth in Article III of this Agreement
that materially adversely affects Trust Depositor's or the Trust's interest in
such Contract (without regard to the benefits of the Reserve Fund) and which
breach has not been cured; PROVIDED, HOWEVER, that with respect to any Contract
incorrectly described on the List of Contracts with respect to unpaid Principal
Balance which Seller would otherwise be required to repurchase pursuant to this
Section 5.01 and Section 7.08 of the Sale and Servicing Agreement, Seller may,
in lieu of repurchasing such Contract, deposit in the Collection Account not
later than two Business Days prior to such Determination Date cash in an amount
sufficient to cure such deficiency or discrepancy; and PROVIDED FURTHER that
with respect to a breach of a representation or warranty relating to the
Contracts in the aggregate and not to any particular Contract, Seller may select
Contracts (without adverse selection) to repurchase such that had such Contracts
not been reconveyed by Trust Depositor and included as part of the Trust there
would have been no breach of such representation or warranty; PROVIDED FURTHER
that (a) the failure of a Contract File to be complete or of the original
certificate of title and evidence of recordation of such certificate to be
included in the Contract File as of 180 days after the Closing Date (or
Subsequent Transfer Date, in the case of Subsequent Contracts), or (b) the
failure to maintain perfection of the security interest in the Motorcycle
securing a Contract in accordance with the Sale and Servicing Agreement, shall
be deemed to be a breach materially and adversely affecting the Trust's interest
in the Contracts or in the related Contract Assets. Notwithstanding any other
provision of this Agreement, the obligation of Seller under this Section 5.01
and under Section 7.08 of the Sale and Servicing Agreement shall not terminate
upon a Service Transfer pursuant to Article VIII of the Sale and Servicing
Agreement.
SECTION 5.02. SELLER'S REPURCHASE OPTION. On written notice to the Owner
Trustee and the Indenture Trustee at least 20 days prior to a Distribution Date,
provided the Pool Balance is then less than 10% of the Initial Pool Balance,
Seller may (but is not required to) repurchase from the Trust on that
Distribution Date all outstanding Contracts (and related Contract Assets) at a
price equal to the Class A-2 Notes and the principal balance of the Certificates
on the previous Distribution Date plus the aggregate of the Note Interest
Distributable Amount and the Certificate Interest Distributable Amount for the
current Distribution Date as well as the accrued and unpaid Monthly Servicing
Fee and
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Trustees' Fees to the date of such repurchase, provided the Seller is in
receipt of a valuation letter by the Seller's financial advisor that the
Seller's repurchase is for fair and adequate consideration. Such price will
be deposited in the Collection Account not later than one Business Day before
such Distribution Date, against the Trustees' release of the Contracts and
Contract Files as described in Section 7.10 of the Sale and Servicing
Agreement.
ARTICLE VI
INDEMNITIES
SECTION 6.01. SELLER INDEMNIFICATION. Seller will defend and indemnify
Trust Depositor, the Trust, the Trustees, any agents of the Trustees and the
Certificateholders and Noteholders against any and all costs, expenses, losses,
damages, claims and liabilities, joint or several, including reasonable fees and
expenses of counsel and expenses of litigation arising out of or resulting from
(i) this Agreement or the use, ownership or operation of any Motorcycle by
Seller or the Servicer or any Affiliate of either, (ii) any representation or
warranty or covenant made by Seller in this Agreement being untrue or incorrect
(subject to the second sentence of the preamble to Article III of this Agreement
above), and (iii) any untrue statement or alleged untrue statement of a material
fact contained in the Offering Memorandum or in any amendment thereto or the
omission or alleged omission to state therein a material fact necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement was made in conformity with
information furnished to Trust Depositor by Seller specifically for use therein.
Notwithstanding any other provision of this Agreement, the obligation of Seller
under this Section 6.01 shall not terminate upon a Service Transfer pursuant to
Article VIII of the Sale and Servicing Agreement and shall survive any
termination of that agreement or this Agreement.
SECTION 6.02. LIABILITIES TO OBLIGORS. No obligation or liability to any
Obligor under any of the Contracts is intended to be assumed by the Trustees,
the Trust, the Noteholders or the Certificateholders under or as a result of
this Agreement and the transactions contemplated hereby.
SECTION 6.03. TAX INDEMNIFICATION. Seller agrees to pay, and to
indemnify, defend and hold harmless the Trust Depositor, the Trust, the
Trustees, the Noteholders or the Certificateholders from, any taxes which may at
any time be asserted with respect to, and as of the date of, the transfer of the
Contracts to Trust Depositor hereunder and the concurrent reconveyance to the
Trust and the further pledge by the Trust to the Indenture Trustee, including,
without limitation, any sales, gross receipts, general corporation, personal
property, privilege or license taxes (but not including any federal, state or
other taxes arising out of the creation of the Trust and the issuance of the
Notes and Certificates) and costs, expenses and reasonable counsel fees in
defending against the same, whether arising by reason of the acts to be
performed by Seller or the Servicer under this Agreement or the Sale and
Servicing Agreement or imposed against the Trust, a Noteholder, a
Certificateholder or otherwise. Notwithstanding any other provision of this
Agreement, the obligation of Seller under this Section 6.03 shall not terminate
upon a Service Transfer pursuant to Article VIII of the Sale and Servicing
Agreement and shall survive any termination of this Agreement.
SECTION 6.04. OPERATION OF INDEMNITIES. Indemnification under this
Article VI shall include, without limitation, reasonable fees and expenses of
counsel and expenses of litigation. If Seller has made any indemnity payments
to Trust Depositor or the Trustees pursuant to this Article VI and Trust
Depositor or the Trustees thereafter collects any of such amounts from others,
Trust Depositor or the Trustees will repay such amounts collected to Seller,
except that any payments received by Trust Depositor or the Trustees from an
insurance provider as a result of the events under which the Seller's indemnity
payments arose shall be repaid prior to any repayment of the Seller's indemnity
payment.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. PROHIBITED TRANSACTIONS WITH RESPECT TO THE TRUST. Seller
shall not:
(a) Provide credit to any Noteholder or Certificateholder for
the purpose of enabling such Noteholder or Certificateholder to purchase
Notes or Certificates, respectively;
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(b) Purchase any Notes or Certificates in an agency or trustee
capacity; or
(c) Except in its capacity as Servicer as provided in the Sale
and Servicing Agreement, lend any money to the Trust.
SECTION 7.02. MERGER OR CONSOLIDATION. (a) Except as otherwise provided
in this Section 7.02, Seller will keep in full force and effect its existence,
rights and franchises as a Nevada corporation, and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and of any of the Contracts and to perform its
duties under this Agreement.
(b) Any person into which Seller may be merged or consolidated, or any
corporation resulting from such merger or consolidation to which Seller is a
party, or any person succeeding to the business of Seller, shall be the
successor to Seller hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
(c) Upon the merger or consolidation of the Seller as described in
this Section 7.02, the Seller shall provide Standard & Poor's and Moody's notice
of such merger or consolidation within thirty (30) days after completion of the
same.
SECTION 7.03. TERMINATION. This Agreement shall terminate (after
distribution of any Note Distributable Amount and Certificate Distributable
Amount due pursuant to Section 7.05 of the Sale and Servicing Agreement) on the
Distribution Date on which the principal balance of the Class A-1 Notes, Class
A-2 Notes and the Certificates is reduced to zero; PROVIDED, that Seller's
representations and warranties and indemnities by Seller shall survive
termination.
SECTION 7.04. ASSIGNMENT OR DELEGATION BY SELLER. Except as specifically
authorized hereunder, Seller may not convey and assign or delegate any of its
rights or obligations hereunder absent the prior written consent of Trust
Depositor and the Trustees, and any attempt to do so without such consent shall
be void.
SECTION 7.05. AMENDMENT. (a) This Agreement may be amended from time to
time by Seller and Trust Depositor, with notice to the Rating Agencies, but
without the consent of the Trustees or any of the Noteholders or
Certificateholders, to correct manifest error, to cure any ambiguity, to correct
or supplement any provisions herein or therein which may be inconsistent with
any other provisions herein or therein, as the case may be, or to add any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an opinion of Counsel for
Seller acceptable to the Trustees, adversely affect the interests of any
Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time by Seller and
Trust Depositor, with consent of Certificateholders with aggregate fractional
interests representing beneficial interests of not less than 66-2/3% or more and
aggregate principal of the Class A-1 Notes and the Class A-2 Notes representing
not less than 66-2/3% or more of each Class voting as a separate Class, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Trustees for the benefit of Noteholders or Certificateholders; PROVIDED,
HOWEVER, that no such amendment or waiver shall (a) reduce in any manner the
amount of, or delay the timing of, collections of payments on the Contracts or
distributions which are required to be made on any Note or Certificate or (b)
reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the holders of all Certificates then outstanding.
(c) Promptly after the execution of any amendment or consent pursuant
to this Section 7.05, Trust Depositor shall furnish written notification of the
substance of such amendment and a copy of such amendment to each Trustee,
Moody's and Standard & Poor's.
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(d) It shall not be necessary for the consent of Noteholders or
Certificateholders under this Section 7.05 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Noteholders and Certificateholders
shall be subject to such reasonable requirements as the Trustees may prescribe.
(e) Upon the execution of any amendment or consent pursuant to this
Section 7.05, this Agreement shall be modified in accordance therewith, and such
amendment or consent shall form a part of this Agreement for all purposes, and
every holder of Notes and Certificates theretofore or thereafter issued
hereunder shall be bound thereby.
SECTION 7.06. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
<TABLE>
<CAPTION>
<S> <C>
(i) If to the Seller:
Eaglemark, Inc.
150 South Wacker Drive, Suite 3100
Chicago, Illinois 60606
Attention: Michael E. Sulentic
Telecopier No.: (312) 368-4372
(ii) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-IV
4150 Technology Way
Carson City, Nevada 89706
Telecopier No.: (702) 884-4469
(iii) If to the Indenture Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iv) If to the Owner Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies
25 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
</TABLE>
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
All communications and notices pursuant hereto to a Noteholders or
Certificateholder shall be in writing and delivered or mailed at the address
shown in the Note Register or Certificate Register, respectively.
SECTION 7.07. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 7.08. HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 7.09. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Illinois.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV
By:
----------------------------------------------
Printed Name:
------------------------------
Title:
-------------------------------------
EAGLEMARK, INC.
By:
----------------------------------------------
Printed Name:
------------------------------
Title:
-------------------------------------
15
<PAGE>
Exhibit A
Transfer and Sale
Agreement
FORM OF ASSIGNMENT
In accordance with the Transfer and Sale Agreement (the "AGREEMENT")
dated as of [ ] made by and between the undersigned, as seller
thereunder ("SELLER"), and Eaglemark Customer Funding Corporation-IV, a Nevada
corporation and wholly-owned subsidiary of Seller ("TRUST DEPOSITOR"), as
purchaser thereunder, the undersigned does hereby sell, transfer, convey and
assign, set over and otherwise convey to Trust Depositor (i) all right, title
and interest in and to the Initial Contracts (including, without limitation, all
security interests and any and all rights to receive payments which are
collected pursuant thereto on or after the Initial Cutoff Date (including
liquidation proceeds therefrom) but excluding any rights to receive payments
which were collected pursuant thereto prior to the Initial Cutoff Date)
identified in the initial List of Contracts delivered pursuant to Section
2.02(a) of the Agreement, (ii) all rights under any physical damage or other
individual insurance policy (including a "FORCED PLACED" policy, if any)
relating to any such Contract, an Obligor or a Motorcycle securing a Contract,
(iii) all security interests in each Motorcycle, (iv) all documents contained in
the Contract Files, (v) all rights of the Seller in the Lockbox, Lockbox Account
and related Lockbox Agreement, (vi) all rights (but not the obligations) of the
Seller under any motorcycle dealer agreements between the dealers originating
the Contracts and the Seller, and (vii) all proceeds and products of the
foregoing.
This Assignment is made pursuant to and in reliance upon the
representation and warranties on the part of the undersigned contained in
Article III of the Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ___ day of [ ].
EAGLEMARK, INC.
By:
----------------------------------------------
Printed Name:
------------------------------
Title:
-------------------------------------
A-1
<PAGE>
Exhibit B
Transfer and Sale
Agreement
FORM OF OFFICER'S CERTIFICATE
(See Exhibit C-2 to the Sale and Servicing Agreement)
B-1
<PAGE>
Exhibit C
Transfer and Sale
Agreement
FORM OF SUBSEQUENT PURCHASE AGREEMENT
SUBSEQUENT PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
[ ], by and among Eaglemark Customer Funding Corporation-IV, a
Nevada corporation (the "TRUST DEPOSITOR"), and Eaglemark, Inc., a Nevada
corporation (the "SELLER"), pursuant to the Transfer and Sale Agreement referred
to below.
WITNESSETH:
WHEREAS, the Trust Depositor and the Seller are parties to the Transfer
and Sale Agreement, dated as of [ ] (the "TRANSFER AND SALE
AGREEMENT");
WHEREAS, pursuant to the Transfer and Sale Agreement, the Seller wishes
to sell the Subsequent Contracts to the Trust Depositor, and the Trust Depositor
wishes to purchase the same, for the purchase price set forth in SECTION 3
below; and
WHEREAS, the Seller has timely delivered an Addition Notice related to
such conveyance as required in the Sale and Servicing Agreement dated as of
[ ] among the Seller (in the capacity of Servicer thereunder),
the Trust Depositor and the Trustee as defined therein (the "SALE AND
SERVICING AGREEMENT").
NOW, THEREFORE, the Trust Depositor and the Seller hereby agree as
follows:
SECTION 1. Capitalized terms used herein shall have the meanings
ascribed to them in the Sale and Servicing Agreement unless otherwise defined
herein.
"SUBSEQUENT CUTOFF DATE" shall mean, with
respect to the Subsequent Contracts transferred
hereby, [ ] .
"SUBSEQUENT CONTRACTS" shall mean, for
purposes of this Agreement, the Subsequent Contracts
listed in the Subsequent List of Contracts attached
hereto as Exhibit A.
"SUBSEQUENT TRANSFER DATE" shall mean, with
respect to the Subsequent Contracts transferred
hereby, [ ].
SECTION 2. SUBSEQUENT LIST OF CONTRACTS. THE SUBSEQUENT LIST OF
CONTRACTS ATTACHED HERETO AS EXHIBIT A is a supplement to the initial List of
Contracts attached as EXHIBIT I to the Sale and Servicing Agreement. The
Contracts listed in the Subsequent List of Contracts constitute the Subsequent
Contracts to be transferred pursuant to this Agreement on the subsequent
Transfer Date.
SECTION 3. TRANSFER OF SUBSEQUENT CONTRACTS. Subject to and upon the
terms and conditions set forth in Section 2.04(b) of the Transfer and Sale
Agreement and this Agreement, Seller hereby sells, transfers, assigns, sets over
and otherwise conveys to Trust Depositor, in consideration of Trust Depositor's
payment of $[_______] as the purchase price therefor, (i) all the right, title
and interest of Seller in and to the Subsequent Contracts listed on the
Subsequent List of Contracts (including, without limitation, all security
interests and all rights to receive payments which are collected pursuant
thereto on or after the Subsequent Cutoff Date, including any liquidation
proceeds therefrom, but excluding any rights to receive payments which were
collected pursuant thereto prior to the Subsequent Cutoff Date), (ii) all rights
of Seller under any physical damage or other individual insurance policy (and
rights under a "FORCED PLACED" policy, if any) relating to any such Contracts,
an Obligor or a Motorcycle securing such Contract, (ii) all security interests
in each
C-1
<PAGE>
such Motorcycle, (iv) all documents contained in the related Contract Files,
(v) all rights of the Seller in the Lockbox, the Lockbox Account and the
related Lockbox Agreement to the extent they relate to such Contracts, (vi)
all rights (but not the obligations) of Seller under any related motorcycle
dealer agreements between dealers (i.e., the originators of such Contracts)
and the Seller, and (vii) all proceeds and products of the foregoing. It is
the intention of the Seller and the Trust Depositor that the transfer
contemplated by this Agreement shall constitute a sale of the Subsequent
Contracts from the Seller to the Trust Depositor, conveying good title
thereto free and clear of any Liens, and that the Subsequent Contracts shall
not be part of the Seller's estate in the event of the filing of a bankruptcy
petition by or against Seller under any bankruptcy or similar law.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. (a) Seller
hereby represents and warrants to the Trust Depositor that the representations
and warranties of Seller in Section 3.01 of the Transfer and Sale Agreement are
true and correct as of the Subsequent Transfer Date.
(b) Seller hereby repeats and remakes with respect to the Subsequent
Contracts as of the Subsequent Transfer Date (i) the representations and
warranties of Seller in Sections 3.02, 3.03 and 3.04 of the Transfer and Sale
Agreement, except that, with respect to subsection (b) of Section 3.03, (A)
approximately _____% of the Principal Balance of the Contracts as of the
Subsequent Cutoff Date is attributable to loans for purchases of used
Motorcycles, and (B) no Contract was originated after the Subsequent Cutoff
Date, as well as (ii) covenants to provide the certificate required by Section
2.02(h) (solely with respect to the Subsequent Contracts).
(c) Seller hereby represents and warrants that (a) the aggregate
Principal Balance of the Subsequent Contracts listed on the Subsequent List of
Contracts and conveyed to the Trust Depositor pursuant to this Agreement is
$[ ] as of the Subsequent Cutoff Date, and (b) the conditions set
forth in Section 2.04(b) of the Transfer and Sale Agreement have been satisfied
as of the Subsequent Transfer Date.
SECTION 5. RATIFICATION OF AGREEMENT. As supplemented by this
Agreement, the Transfer and Sale Agreement is in all respects ratified and
confirmed and, as so supplemented by this Agreement, shall be read, taken and
construed as one and the same instrument.
SECTION 6. COUNTERPARTS. This Agreement may be executed in two or
more counterparts (and by different parties in separate counterparts), each of
which shall be an original but all of which together shall constitute one and
the same instrument.
SECTION 7. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Illinois, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
C-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV
By:
----------------------------------------------
Printed Name:
------------------------------
Title:
-------------------------------------
EAGLEMARK, INC.
By:
----------------------------------------------
Printed Name:
------------------------------
Title:
-------------------------------------
C-3
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) _______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Keith R. Richardson, Harris Trust and Savings Bank,
111 West Monroe Street, Chicago, Illinois, 60603
312-461-2647
(Name, address and telephone number for agent for service)
Harley-Davidson Eaglemark Motorcycle Trusts
(Name of obligor)
Nevada 88-0292891
(State of Incorporation) (I.R.S. Employer Identification No.)
4150 Technology Way
Carson City, NV 89706
(Address of principal executive offices)
Harley-Davidson Motorcycle Contract Backed Notes
(Title of indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164 West
Jackson Boulevard, Chicago, Illinois; Federal Deposit Insurance
Corporation, Washington, D.C.; The Board of Governors of the Federal
Reserve System,Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such
affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee is now in effect
which includes the authority of the trustee to commence business and
to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between Harris
Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which
constitutes the articles of association of the Trustee as now in effect and
includes the authority of the Trustee to commence business and to exercise
corporate trust powers was filed in connection with the Registration
Statement of Louisville Gas and Electric Company, File No. 2-44295, and is
incorporated herein by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of Commercial Federal Corporation; File No.
333-20711, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 31st day of August, 1998.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Keith R. Richardson
-----------------------------------
Keith R. Richardson
Assistant Vice President
EXHIBIT A
The consents of the trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Keith R. Richardson
-----------------------------------
Keith R. Richardson
Assistant Vice President
3
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of September 30, 1997, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on September 30, 1997, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C>
CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS:
NON-INTEREST BEARING BALANCES AND CURRENCY AND COIN... $1,188,709
INTEREST BEARING BALANCES............................. $550,173
SECURITIES:................................................
A. HELD-TO-MATURITY SECURITIES $0
B. AVAILABLE-FOR-SALE SECURITIES $3,685,983
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER
AGREEMENTS TO RESELL I $396,400
LOANS AND LEASE FINANCING RECEIVABLES:
LOANS AND LEASES, NET OF UNEARNED INCOME............... $8,401,048
LESS: ALLOWANCE FOR LOAN AND LEASE LOSSES............. $107,180
----------
LOANS AND LEASES, NET OF UNEARNED INCOME, ALLOWANCE,
AND RESERVE (ITEM 4.A MINUS 4.B).................... $8,293,868
ASSETS HELD IN TRADING ACCOUNTS........................... $98,368
PREMISES AND FIXED ASSETS (INCLUDING CAPITALIZED LEASES)... $213,612
OTHER REAL ESTATE OWNED.................................... $778
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED
COMPANIES.................................................. $86
CUSTOMER'S LIABILITY TO THIS BANK ON ACCEPTANCES
OUTSTANDING................................................ $41,205
INTANGIBLE ASSETS.......................................... $283,839
OTHER ASSETS.............................................. $603,886
-----------
TOTAL ASSETS $15,356,907
-----------
-----------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
DEPOSITS:
IN DOMESTIC OFFICES.......................................... $8,374,055
NON-INTEREST BEARING......................................... $2,770,029
INTEREST BEARING............................................. $5,604,026
IN FOREIGN OFFICES, EDGE AND AGREEMENT SUBSIDIARIES, AND IBF'S. $1,991,659
NON-INTEREST BEARING.......................................... $27,364
INTEREST BEARING............................................... $1,964,295
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE IN DOMESTIC OFFICES OF THE BANK AND OF ITS EDGE AND
AGREEMENT SUBSIDIARIES, AND IN IBF'S:
FEDERAL FUNDS PURCHASED.& SECURITES SOLD UNDER AGREEMENTS TO $2,549,328
REPURCHASE.............
TRADING LIABILITIES 62,186
OTHER BORROWED MONEY:..............................................
A. WITH REMAINING MATURITY OF ONE YEAR OR LESS $630,911
B. WITH REMAINING MATURITY OF MORE THAN ONE YEAR $0
BANK'S LIABILITY ON ACCEPTANCES EXECUTED AND OUTSTANDING $41,205
SUBORDINATED NOTES AND DEBENTURES.................................. $325,000
OTHER LIABILITIES.................................................. $132,188
------------
TOTAL LIABILITIES $14,106,532
------------
------------
EQUITY CAPITAL
COMMON STOCK......................................................... $100,000
SURPLUS.............................................................. $600,853
A. UNDIVIDED PROFITS AND CAPITAL RESERVES........................... $553,257
B. NET UNREALIZED HOLDING GAINS (LOSSES) ON AVAILABLE-FOR-SALE
SECURITIES ($3,735)
------------
TOTAL EQUITY CAPITAL $1,250,375
------------
------------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND EQUITY CAPITAL.... $15,356,907
------------
------------
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
10/29/97
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
JAMES J. GLASSER
Directors.
5
<PAGE>
Exhibit 99.1
===============================================================================
FORM OF
EAGLEMARK TRUST [___]
______________________________
AGREEMENT TO DEPOSIT CONTRACTS
Between
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ]
AS TRUST DEPOSITOR
AND
HARRIS TRUST AND SAVINGS BANK
As Trustee for Eaglemark Trust [ ]
dated as of
[_____]
______________________________
===============================================================================
<PAGE>
AGREEMENT TO DEPOSIT CONTRACTS
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
AGREEMENT TO DEPOSIT CONTRACTS. . . . . . . . . . . . . . . . . . 2
Section 2.01. Deposit of Contracts.. . . . . . . . . . . . . . . 2
Section 2.02. Remedy for Breach. . . . . . . . . . . . . . . . . 2
ARTICLE III
CARRYING CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3.01. Payment of Carrying Charges. . . . . . . . . . . . 2
Section 3.02. Demand on Collateral Agent . . . . . . . . . . . . 3
ARTICLE IV
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . 3
Section 4.01. Amendments; Waivers. . . . . . . . . . . . . . . . 3
Section 4.02. Severability.. . . . . . . . . . . . . . . . . . . 3
Section 4.03. Nonpetition Covenant.. . . . . . . . . . . . . . . 3
Section 4.04. Notices. . . . . . . . . . . . . . . . . . . . . . 3
Section 4.05. Governing Law. . . . . . . . . . . . . . . . . . . 5
Section 4.06. Limitation of Trustee Responsibility.. . . . . . . 5
Section 4.07. Counterparts . . . . . . . . . . . . . . . . . . . . 5
Section 4.08. Headings.. . . . . . . . . . . . . . . . . . . . . 5
__________________________
-i-
<PAGE>
AGREEMENT TO DEPOSIT CONTRACTS dated as of [_____], between EAGLEMARK
CUSTOMER FUNDING CORPORATION-III, as Trust Depositor (the "TRUST DEPOSITOR"),
and HARRIS TRUST AND SAVINGS BANK, as Trustee (the "TRUSTEE").
WITNESSETH that:
WHEREAS, the Trust Depositor has acquired and, concurrently with the
execution and delivery hereof and pursuant to a Pooling and Servicing Agreement,
dated as of [_____] (the "POOLING AND SERVICING AGREEMENT"), has deposited,
transferred, assigned and set over in trust to the Trustee certain Contract
Assets in partial consideration of the Trust's issuance of the Certificates,
which the Trust Depositor has sold to investor(s); and
WHEREAS, the Trust Depositor has applied certain of the proceeds of such
sale to pay for its purchase of Contract Assets on the Closing Date from the
Seller, but will retain the remainder of the proceeds pending their application
for the purchase of Subsequent Contracts from the Seller; and
WHEREAS, the Trustee for the benefit of the Trust and the
Certificateholders has issued the Certificates to or upon the order of the Trust
Depositor, in consideration of the Trust Depositor's conveyance pursuant to the
Pooling and Servicing Agreement of the Contract Assets and in consideration of
the Trust Depositor's agreement hereunder to purchase and transfer the
Subsequent Contracts and related assets to the Trust, and to pay certain
Carrying Charges (as defined below); and
WHEREAS, the Trust Depositor has agreed pursuant to the Security Agreement
to secure the payment and performance of its obligations hereunder in accordance
with the terms thereof;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the Trust Depositor and the Trustee agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Capitalized terms used in this Agreement (including in the
recitals above) and not specifically defined shall have the meaning given such
terms in the Pooling and Servicing Agreement. Whenever used in this Agreement,
the following words and phrases shall have the following meanings:
"CARRYING CHARGES" means the amount which the Trust Depositor is obligated
to pay to the Trust hereunder in accordance with Section 3.01 below.
1
<PAGE>
"LIQUIDATED DAMAGES" means the amount which is payable as liquidated
damages to the Trust hereunder in the event of the Trust Depositor's failure to
timely transfer Subsequent Contracts to the Trust in accordance with Section
2.02 below.
ARTICLE II
AGREEMENT TO DEPOSIT CONTRACTS
SECTION 2.01. DEPOSIT OF CONTRACTS. The Trust Depositor hereby undertakes
and agrees, not later than the end of the Funding Period, to acquire from the
Seller by purchase for cash pursuant to one or more Subsequent Purchase
Agreements, and thereupon transfer to the Trust pursuant to one or more
Subsequent Transfer Agreements, Subsequent Contracts in an aggregate Principal
Balance, as of the respective Subsequent Cutoff Dates, equal to $[____] which is
equal to the amount deposited with the Collateral Agent on the Closing Date in
respect of the Pre-Funded Amount. The Trust Depositor shall effect such
purchases from the Seller using the funds on deposit in the Pre-Funding Account
in accordance with the terms of the Security Agreement.
SECTION 2.02. REMEDY FOR BREACH. If the Trust Depositor fails to perform
the obligation described in Section 2.01 in its entirety by the end of the
Funding Period, the Trustee shall take remedial action upon the expiration of
the Funding Period by giving written notice of non-performance to the Trust
Depositor, accompanied by written demand upon the Trust Depositor for the
payment of liquidated damages ("LIQUIDATED DAMAGES") hereunder in respect of
such non-performance. Such Liquidated Damages shall be payable immediately upon
demand. Liquidated Damages shall in all events equal the amount then on deposit
in the Pre-Funding Account, and such written demand shall concurrently be made
upon the Collateral Agent as provided in Section 3.03 of the Security Agreement.
The Trustee shall deposit all amounts received from the Collateral Agent in
respect of Liquidated Damages into the Special Distribution Subaccount
established under the Pooling and Servicing Agreement. The right to payment of
Liquidated Damages from the Pre-Funding Account shall be the sole remedy of the
Trustee for the Trust Depositor's failure to perform its obligations as
described above.
ARTICLE III
CARRYING CHARGES
SECTION 3.01. PAYMENT OF CARRYING CHARGES. The Trust Depositor hereby
agrees to pay to the Trustee for the benefit of the Trust, immediately upon
demand, Carrying Charges to the extent that the Trustee demands payment of such
Carrying Charges in accordance with, and subject to the limitations of, Section
8.03(b) of the Pooling and Servicing Agreement. No such Carrying Charges shall
be payable on or after the second Payment Date succeeding the date on which the
Pre-Funded Amount shall be zero.
2
<PAGE>
SECTION 3.02. DEMAND ON COLLATERAL AGENT. The Trust Depositor agrees that
the Trustee may effect demand for payment of Carrying Charges by making demand
directly upon the Collateral Agent instead of the Trust Depositor, and consents
to the Collateral Agent's payment of such Carrying Charges from amounts on
deposit in the Interest Reserve Account.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01. AMENDMENTS; WAIVERS. No amendment, modification, waiver or
supplement to this Agreement or any provision of this Agreement shall in any
event be effective unless the same shall have been made or consented to in
writing by each of the parties hereto and the Rating Agencies shall have
received written notification of such amendment modification, waiver or
supplement.
SECTION 4.02. SEVERABILITY. In the event that any provision of this
Agreement or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Agreement shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable and the remainder of this Agreement, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Agreement.
SECTION 4.03. NONPETITION COVENANT. Notwithstanding any prior termination
of this Agreement, each of the parties hereto agrees that it shall not, prior to
one year and one day after the Payment Date first occurring following the final
disbursement of funds under the Security Agreement, acquiesce, petition or
otherwise invoke or cause the Trust Depositor to invoke the process of the
United States of America, any State or other political subdivision thereof or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government for the purpose of
commencing or sustaining a case by or against the Trust Depositor or the Trust
under a Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Trust Depositor or the Trust or all or any part of its
property or assets or ordering the winding up or liquidation of the affairs of
the Trust Depositor or the Trust. The parties agree that damages will be an
inadequate remedy for breach of this covenant and that this covenant may be
specifically enforced.
SECTION 4.04. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("NOTICES") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to the
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party to which sent, or (d) on the date transmitted by legible telecopier
transmission with a confirmation of receipt, in all cases addressed to the
recipient as follows:
(i) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-[ ]
4150 Technology Way
Carson City, Nevada 89706
Attention: President
Telecopier No.: (702) 884-4469
(ii) If to the Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iii) If to the Collateral Agent:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iv) If to Moody's:
Moody's Investor's Service, Inc.
99 Church Street
New York New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
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(v) If to Standard & Poor's:
Standard & Poor's Ratings Group, a
division of The McGraw Hill Companies
26 Broadway - 15th Floor
New York, New York 10004
Attention: Asset-Backed Securities Surveillance
Telecopier No.: (212) 208-1582
A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication), the Trust Depositor, the Trustee and the Collateral
Agent. Each party hereto may, by notice given in accordance herewith to each of
the other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 4.05. GOVERNING LAW. This Agreement shall be governed by and
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with, the laws of the State of Illinois.
SECTION 4.06. LIMITATION OF TRUSTEE RESPONSIBILITY. It is expressly
understood and agreed by the parties hereto that (a) Harris Trust and Savings
Bank is executing this Agreement not in its individual capacity but solely in
its capacity as Trustee of the Trust pursuant to the Pooling and Servicing
Agreement, and (b) in no case whatsoever shall Harris Trust and Savings Bank be
personally liable on, or for any loss in respect of, any of the statements,
representations, warranties, covenants, agreements or obligations of the Trust
(if any) hereunder, all such liability, if any, being expressly waived by the
parties hereto, except and to the extent such loss is caused by gross
negligence, bad faith or willful misconduct of the Trustee.
SECTION 4.07. COUNTERPARTS. This Agreement may be executed in two or more
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
SECTION 4.08. HEADINGS. The headings of sections and paragraphs and the
Table of Contents contained in this Agreement are provided for convenience only.
They form no part of this Agreement and shall not affect its construction or
interpretation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth on the first page hereof.
EAGLEMARK CUSTOMER FUNDING
CORPORATION-[ ]
By _____________________________
Printed Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as Trustee
By _____________________________
Printed Name: ____________________
Title: ___________________________
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Exhibit 99.2
===============================================================================
FORM OF
SECURITY AGREEMENT
dated as of [_____]
between
EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ],
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee and as Collateral Agent
===============================================================================
<PAGE>
TABLE OF CONTENTS
RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.01. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.02. RULES OF INTERPRETATION . . . . . . . . . . . . . . . . . . . .4
ARTICLE II
THE COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 2.01. GRANT OF SECURITY INTEREST BY THE TRUST DEPOSITOR . . . . . . .4
SECTION 2.02. PRIORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 2.03. TRUST DEPOSITOR REMAINS LIABLE. . . . . . . . . . . . . . . . .5
SECTION 2.04. MAINTENANCE OF COLLATERAL . . . . . . . . . . . . . . . . . . .5
SECTION 2.05. TERMINATION AND RELEASE OF RIGHTS . . . . . . . . . . . . . . .6
SECTION 2.06. NON-RECOURSE OBLIGATIONS OF TRUST DEPOSITOR . . . . . . . . . .6
ARTICLE III
THE ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
SECTION 3.01. ESTABLISHMENT OF ACCOUNTS; INITIAL DEPOSITS INTO ACCOUNTS . . .7
SECTION 3.02. INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 3.03. DISTRIBUTIONS FROM ACCOUNTS . . . . . . . . . . . . . . . . . .9
SECTION 3.04. GENERAL PROVISIONS REGARDING ACCOUNTS . . . . . . . . . . . . .9
SECTION 3.05. REPORTS BY THE COLLATERAL AGENT . . . . . . . . . . . . . . . 10
ARTICLE IV
COLLATERAL AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.01. APPOINTMENT AND POWERS. . . . . . . . . . . . . . . . . . . . 11
SECTION 4.02. PERFORMANCE OF DUTIES . . . . . . . . . . . . . . . . . . . . 11
SECTION 4.03. LIMITATION ON LIABILITY . . . . . . . . . . . . . . . . . . . 11
SECTION 4.04. RELIANCE UPON DOCUMENTS . . . . . . . . . . . . . . . . . . . 12
SECTION 4.05. SUCCESSOR COLLATERAL AGENT. . . . . . . . . . . . . . . . . . 12
SECTION 4.06. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.07. COMPENSATION AND REIMBURSEMENT. . . . . . . . . . . . . . . . 14
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SECTION 4.08. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT. . . . 14
SECTION 4.09. WAIVER OF SETOFFS . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.10. CONTROL BY THE SECURED PARTY. . . . . . . . . . . . . . . . . 15
ARTICLE V
COVENANTS OF THE TRUST DEPOSITOR. . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.01. PRESERVATION OF COLLATERAL. . . . . . . . . . . . . . . . . . 15
SECTION 5.02. OPINIONS AS TO COLLATERAL . . . . . . . . . . . . . . . . . . 16
SECTION 5.03. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.04. WAIVER OF STAY OR EXTENSION LAWS; MARSHALLING OF ASSETS . . . 16
SECTION 5.05. NONINTERFERENCE, ETC. . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.06. TRUST DEPOSITOR CHANGES . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI
[RESERVED]
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII
REMEDIES UPON DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.01. REMEDIES UPON A DEFAULT . . . . . . . . . . . . . . . . . . . 18
SECTION 7.02. WAIVER OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.03. RESTORATION OF RIGHTS AND REMEDIES. . . . . . . . . . . . . . 18
SECTION 7.04. NO REMEDY EXCLUSIVE. . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.01. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.02. WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.03. AMENDMENTS; WAIVERS IN WRITING. . . . . . . . . . . . . . . . 19
SECTION 8.04. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.05. NONPETITION COVENANT. . . . . . . . . . . . . . . . . . . . . 19
SECTION 8.06. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.07. TERM OF THIS AGREEMENT. . . . . . . . . . . . . . . . . . . . 21
SECTION 8.08. ASSIGNMENTS: THIRD-PARTY RIGHTS; REINSURANCE . . . . . . . . 21
SECTION 8.09. CONSENT OF SECURED PARTY. . . . . . . . . . . . . . . . . . . 22
SECTION 8.10. TRIAL BY JURY WAIVED. . . . . . . . . . . . . . . . . . . . . 22
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SECTION 8.11. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.12. CONSENTS TO JURISDICTION. . . . . . . . . . . . . . . . . . . 22
SECTION 8.13. LIMITATION OF TRUSTEE RESPONSIBILITY. . . . . . . . . . . . . 23
SECTION 8.14. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.15. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of [_____] (the "AGREEMENT"), is by and
between EAGLEMARK CUSTOMER FUNDING CORPORATION-[ ], a Nevada corporation
(the "TRUST DEPOSITOR"), and HARRIS TRUST AND SAVINGS BANK, an Illinois banking
corporation in its capacities as Trustee under the Series [_____] Pooling and
Servicing Agreement referred to below (the "TRUSTEE") and as Collateral Agent
(as defined below).
RECITALS
1. Eaglemark Trust [ ] (the "[ ] TRUST") is being formed
contemporaneously herewith pursuant to a Pooling and Servicing Agreement, dated
as of [_____] (the "SERIES [ ] POOLING AND SERVICING AGREEMENT"), by and
among the parent and sole shareholder of the Trust Depositor, Eaglemark, Inc.
("EAGLEMARK") (in its capacity as Servicer), the Trust Depositor and the
Trustee.
2. Pursuant to the Series [ ] Pooling and Servicing Agreement, the
Trust Depositor is transferring to the [ ]Trust all of its right, title and
interest in and to the Initial Contracts, certain related assets and certain
other assets including an Agreement to Deposit Contracts, dated as of [_____]
between the Trust Depositor and the Trustee for the benefit of the Trust (the
"DEPOSIT AGREEMENT") in exchange for the Series [ ] Certificates.
3. Upon sale of the Series [ ] Certificates to investor(s), the Trust
Depositor is applying part of the proceeds thereof to the purchase of Contract
Assets relating to the Initial Contracts from Eaglemark (in an aggregate
Principal Balance of $[____] as of the related Cutoff Date) to be concurrently
transferred to the [ ] Trust on the Closing Date, but is retaining the
remainder of the proceeds of such sale (in the amount of $[____]) to use for
purchases of Subsequent Contracts from Eaglemark (or to pay Liquidated Damages)
in order to satisfy its obligations to the [ ] Trust under the Deposit
Agreement.
4. In order to secure the payment and performance of the Secured
Obligations (as defined below) of the Trust Depositor under the Deposit
Agreement, and in consideration of the [ ] Trust's issuance of the Class A
Certificates and the Class B Certificates (collectively, the "SERIES [ ]
CERTIFICATES") to or upon the order of the Trust Depositor, the Trust Depositor
has agreed to pledge the Collateral (as defined below) to the Collateral Agent
for the benefit of the Secured Party (as defined below).
AGREEMENTS
In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Unless defined in this Agreement, capitalized
terms used in this Agreement (including in the recitals above) shall have the
meaning given such terms in the Series [ ] Pooling and Servicing Agreement.
The following terms shall have the following respective meanings:
"ACCOUNTS" means, collectively, the Pre-Funding Account and the Interest
Reserve Account, or either of them as the context requires.
"AUTHORIZED OFFICER" means, (i) with respect to the Trustee or the
Collateral Agent, any Vice President or Trust Officer thereof, (ii) with respect
to Eaglemark, the President or any Vice President thereof, and (iii) with
respect to the Trust Depositor, the President or any Vice President thereof.
"COLLATERAL" has the meaning specified in Section 2.01(a) hereof.
"COLLATERAL AGENT" means, initially, Harris Trust and Savings Bank, in its
capacity as collateral agent on behalf of the Secured Party, including its
successors in interest, until a successor Person shall have become the
Collateral Agent pursuant to Section 4.05 hereof, and thereafter "COLLATERAL
AGENT" shall mean such successor Person.
"DEFAULT" means, at any time, any failure by the Trust Depositor to make
payment or render performance when due hereunder or under the Deposit Agreement.
"EAGLEMARK" means Eaglemark, Inc., a Nevada corporation.
"ELIGIBLE INVESTMENTS" has the meaning given such term in the Series 1996-2
Pooling and Servicing Agreement, but with references, respectively, to the
Trustee and the Trust in the definition thereof contained therein being deemed,
for purposes of this Agreement, to be references to, respectively, the
Collateral Agent and (collectively) the Interest Reserve Account and Pre-Funding
Account.
"INTEREST RESERVE ACCOUNT" has the meaning given such term in Section 3.01
below.
"LIEN" means, as applied to the property or assets (or the income,
proceeds, products, rents or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by contract, operation
of law, legal process or otherwise: (a) any mortgage, lien, pledge, attachment,
charge, lease, conditional sale or other title retention agreement, or other
security interest or encumbrance of any kind; or (b) any arrangement,
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express or implied, under which such property or assets (and/or such income,
proceeds, products, rents or profits) are transferred, sequestered or
otherwise identified for the purpose of subjecting or making available the
same for payment of debt or performance of any other obligation in priority
to the payment of the general, unsecured creditors of such Person.
"PRE-FUNDING ACCOUNT" has the meaning given such term in Section 3.01
below.
"PRINCIPAL BALANCE" with respect to a Contract or Contracts in the
aggregate, has the meaning given such term in the Series [_____] Pooling and
Servicing Agreement.
"SECURED OBLIGATIONS" means all obligations and amounts of the Trust
Depositor owed or owing at any time hereunder or under the Deposit Agreement.
"SECURED PARTY" means the Trustee for the benefit of the 1996-2 Trust.
"SECURITY INTERESTS" means the security interest and Lien in the Collateral
granted pursuant to Section 2.01 hereof.
"QUALIFIED ELIGIBLE INVESTMENTS" means Eligible Investments acquired by the
Collateral Agent in its name and in the capacity of Collateral Agent hereunder,
which are held by the Collateral Agent in the Pre-Funding Account or the
Interest Reserve Account and with respect to which (a) the Collateral Agent has
noted the Secured Party's interest therein on its books and records, and (b) the
Collateral Agent has purchased such investments for value without notice of any
adverse claim thereto (and, if such investments are securities or other
financial assets or interests therein, within the meaning of Section 8-102 of
the UCC as enacted in Illinois, without acting in collusion with a securities
intermediary in violating such securities intermediary's obligations to
entitlement holders in such assets, under Section 8-504 of such UCC, to maintain
a sufficient quantity of such assets in favor of such entitlement holders), and
(c) either (i) such investments are in the possession of the Collateral Agent,
or (ii) such investments, (A) if certificated securities and in bearer form,
have been delivered to the Collateral Agent, or in registered form, have been
delivered to the Collateral Agent and either registered by the issuer in the
name of the Collateral Agent or endorsed by effective endorsement to the
Collateral Agent or in blank; (B) if uncertificated securities, the ownership of
which has been registered to the Collateral Agent on the books of the issuer
thereof (or another person, other than a securities intermediary, either becomes
the registered owner of the uncertified security on behalf of the Collateral
Agent or, having previously become the registered owner, acknowledges that it
holds for the Collateral Agent); or (C) if securities entitlements (within the
meaning of Section 8-102 of the UCC as enacted in Illinois) representing
interests in securities or other financial assets (or interests therein) held by
a securities intermediary (within the meaning of said Section 8-102), a
securities intermediary indicates by book entry that a security or other
financial asset has been credited to the Collateral Agent's securities account
with such securities intermediary. Any such Qualified Eligible Investment may
be purchased by or through the Collateral Agent or any of its affiliates.
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"TRUSTEE TERMINATION DATE" means the date on which the Trustee shall have
received, as Trustee for the holders of the Series [ ] Certificates, payment
and performance in full of all Secured Obligations hereunder.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code in
effect in the relevant jurisdiction, as the same may be amended from time to
time.
SECTION 1.02. RULES OF INTERPRETATION. The terms "HEREOF," "HEREIN" or
"HEREUNDER," unless otherwise modified by more specific reference, shall refer
to this Agreement in its entirety. Unless otherwise indicated in context, the
terms "ARTICLE," "SECTION," "APPENDIX," "EXHIBIT" or "ANNEX" shall refer to an
Article or Section of, or Appendix, Exhibit or Annex to, this Agreement. The
definition of a term shall include the singular, the plural, the past, the
present, the future, the active and the passive forms of such term.
ARTICLE II
THE COLLATERAL
Section 2.01. Grant of Security Interest by the Trust Depositor. (a) In
order to secure the performance of the Secured Obligations, the Trust Depositor
hereby pledges, assigns, grants, transfers and conveys to the Collateral Agent,
on behalf of and for the benefit of the Secured Party to secure such Secured
Obligations, a lien on and security interest in (which lien and security
interest is intended to be prior to all other Liens), all of its right, title
and interest in and to the following (all being collectively referred to herein
as the "COLLATERAL"):
(i) the Pre-Funding Account established pursuant to Section 3.01
hereof (including, without limitation, the initial deposit of $[____] (the
"INITIAL PRE-FUNDED AMOUNT") therein on the Closing Date, and all
additional monies, checks, securities, investments and other items or
documents at any time held in or evidencing the Pre-Funding Account);
(ii) the Interest Reserve Account established pursuant to Section
3.01 hereof (including, without limitation, the initial deposit of $[____]
therein by the Trust Depositor on the Closing Date, and all additional
monies, checks, securities, investments and other items or documents at any
time held in or evidencing the Interest Reserve Account);
(iii) all of the Trust Depositor's right, title and interest in and
to investments made with proceeds of the property described in clauses (i)
and (ii) above; and
(iv) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the foregoing.
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(b) In order to effectuate the provisions and purposes of this Agreement,
including for the purpose of perfecting the security interests granted
hereunder, the Trust Depositor represents and warrants that it has, prior to (or
coterminously with) the execution of this Agreement, executed and filed (or
submitted for filing) an appropriate Uniform Commercial Code financing statement
in Nevada and Illinois sufficient to assure that the Collateral Agent, as agent
for the Secured Party, has a first priority perfected security interest in all
Collateral which can be perfected by the filing of a financing statement. The
Trust Depositor agrees and acknowledges that the Collateral Agent is to have
"control" (within the meaning of Section 8-102 of the UCC as enacted in
Illinois) of Collateral comprised of "Investment Property" (within the meaning
of Section 9-115 of the UCC as enacted in Illinois) for all purposes of this
Agreement.
SECTION 2.02. PRIORITY. The Trust Depositor intends the security interests
in favor of the Secured Party to be prior to all other Liens in respect of the
Collateral, and the Trust Depositor shall take all actions necessary to obtain
and maintain, in favor of the Collateral Agent, for the benefit of the Secured
Party's, a first lien on and a first priority, perfected security interest in
the Collateral. Subject to the provisions hereof, the Collateral Agent for the
benefit of the Secured Party shall have all of the rights, remedies and recourse
with respect to the Collateral afforded a secured party under the Uniform
Commercial Code, and all other applicable law in addition to, and not in
limitation of, the other rights, remedies and recourse granted to the Collateral
Agent for the benefit of the Secured Party by this Agreement or any other law
relating to the creation and perfection of liens on, and security interests in,
the Collateral.
Section 2.03. Trust Depositor Remains Liable. The Security Interest is
granted as security only and shall not (i) transfer or in any way affect or
modify, or relieve the Trust Depositor from, any obligation to perform or
satisfy any term, covenant, condition or agreement to be performed or satisfied
by the Trust Depositor under or in connection with this Agreement or any other
Transaction Document to which it is a party or (ii) impose any obligation on any
of the Secured Party or the Collateral Agent to perform or observe any such
term, covenant, condition or agreement or impose any liability on any of the
Secured Party or the Collateral Agent for any act or omission on its part
relative thereto or for any breach of any representation or warranty on its part
contained therein or made in connection therewith, except, in each case, to the
extent provided herein and in the other Transaction Documents.
SECTION 2.04. MAINTENANCE OF COLLATERAL. (a) SAFEKEEPING. The
Collateral Agent on behalf of and for the benefit of the Secured Party agrees to
maintain the Collateral received by it (or evidence thereof, in the case of
book-entry securities in the name of the Collateral Agent) and all records and
documents relating thereto at the office of the Collateral Agent specified in
Section 8.06 hereof or such other address within the State of Illinois (unless
all filings have been made or other action taken to continue the perfection of
the security interest in the Collateral to the extent such security interest can
be perfected by filing a financing statement or taking such other action, as
evidenced by an Opinion of Counsel delivered to the Trustee). The Collateral
Agent shall keep all Collateral and related documentation in its possession
separate and apart from all other property that it is holding in its possession
and from its own general
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<PAGE>
assets and shall maintain accurate records pertaining to the initial deposits
to the Accounts, the Accounts themselves and the Qualified Eligible
Investments therein included in the Collateral in such a manner as shall
enable the Collateral Agent and the Secured Party to verify the accuracy of
such record-keeping. The Collateral Agent's books and records shall at all
times show that the Collateral is held by the Collateral Agent as agent of
the Secured Party and is not the property of the Collateral Agent. The
Collateral Agent will promptly report to the Secured Party and the Trust
Depositor any failure on its part to hold the Collateral as provided in this
Section 2.04(a) and will promptly take appropriate action to remedy any such
failure.
(b) ACCESS. The Collateral Agent shall permit the Secured Party, or its
duly authorized representatives, attorneys, auditors or designees, to inspect
the Collateral in the possession of or otherwise under the control of the
Collateral Agent pursuant hereto at such reasonable times during normal business
hours as any such Secured Party may reasonably request upon not less than one
Business Day's prior written notice. The costs and expenses associated with any
such inspection will be paid by the party making such inspection.
SECTION 2.05. TERMINATION AND RELEASE OF RIGHTS. Upon the occurrence of
both (i) the termination of the Funding Period and the payment (and receipt by
the Trust) of all associated Liquidated Damages or, if earlier, upon the
exhaustion of the Pre-Funding Account in its entirety for the purpose of
acquiring Subsequent Contracts from Eaglemark at or prior to the termination of
the Funding Period, (ii) the elapsing of a Payment Date following the event
described in clause (i), and (iii) the application of such funds as provided
under the Series [ ] Pooling and Servicing Agreement, the rights, remedies,
powers, duties, authority and obligations conferred upon the Collateral Agent
for the benefit of the Secured Party pursuant to this Agreement in respect of
the Collateral shall terminate and be of no further force and effect and all
rights, remedies, powers, duties, authority and obligations of the Collateral
Agent for the benefit of the Secured Party with respect to such Collateral shall
be automatically released. The Secured Party in such event agrees, at the
expense of the Trust Depositor, to execute and deliver such instruments as the
Trust Depositor may reasonably request to effectuate such release, and any such
instruments so executed and delivered shall be fully binding on the Secured
Party.
SECTION 2.06. NON-RECOURSE OBLIGATIONS OF TRUST DEPOSITOR.
Notwithstanding anything herein or in the other Transaction Documents to the
contrary, the parties hereto agree that the obligations of the Trust Depositor
hereunder (without limiting the obligation to apply distributions from the
respective Accounts hereunder in accordance with Section 3.03) shall be recourse
only to the extent of the Collateral available hereunder. The Trust Depositor
agrees that it shall not declare or make payment of (i) any dividend or other
payment on or in respect of any shares of its capital stock or (ii) any payment
on account of the purchase, redemption, retirement or acquisition of (x) any
shares of its capital stock or (y) any option, warrant or other right to acquire
shares of its capital stock, unless (in each case) at the time of such
declaration or payment (and after giving effect thereto) no amount payable by
the Trust Depositor under any
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Transaction Document is then due and owing but unpaid. Nothing contained
herein shall be deemed to limit the rights of the Certificateholders under
any other Transaction Document.
ARTICLE III
THE ACCOUNTS
Section 3.01. Establishment of Accounts; Initial Deposits into Accounts.
(a) On or prior to the Closing Date, the Trust Depositor shall direct the
Collateral Agent to establish, and the Collateral Agent shall establish, in its
name and at its office or at another depository institution or trust company,
separate Eligible Accounts, designated respectively the "Eaglemark Customer
Funding [ ] Pre-Funding Account - Series [ ] - Harris Trust and Savings
Bank, as Collateral Agent for the benefit of the Secured Party" (such account
being the "PRE-FUNDING ACCOUNT") and the "Eaglemark Customer Funding [ ]
Interest Reserve Account - Series [ ] - Harris Trust and Savings Bank, as
Collateral Agent for the Secured Party" (such account being the "INTEREST
RESERVE ACCOUNT"). All Accounts established under this Agreement shall be
maintained at the same depository institution (which depository institution may
be changed by the Collateral Agent from time to time in accordance with Section
3.04 of this Agreement).
(b) No withdrawals may be made of funds in any Account except as provided
in Section 3.03 of this Agreement. Except as specifically provided in this
Agreement, funds in any Account shall not be commingled with funds in any other
account or accounts established with respect to the Series [ ] Certificates,
another series of trust certificates, or with any other moneys. All moneys
deposited from time to time in such Accounts and all investments made with such
moneys shall be held by the Collateral Agent as part of the Collateral
hereunder.
(c) On the Closing Date, the Collateral Agent shall deposit the initial
Pre-Funded Amount, if any, received from the Trust Depositor into the
Pre-Funding Account, and shall deposit any amounts received from the Trust
Depositor in respect of the Interest Reserve Amount in the Interest Reserve
Account.
(d) Each Account shall be separate from the [ ] Trust and amounts on
deposit therein will not constitute a part of the Trust Corpus. The Accounts
shall be maintained by the Collateral Agent at all times separate and apart from
any other account of the Trust Depositor, Eaglemark, the Servicer or the [ ]
Trust. All income or loss on investments of funds in any Account shall be
reported by the Trust Depositor as taxable income or loss of the Trust
Depositor.
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SECTION 3.02. INVESTMENTS. (a) The Collateral Agent shall invest and
reinvest funds which may at any time be held in any Account established
hereunder, at the written direction (which may include, subject to the
provisions hereof, general standing instructions) of the Trust Depositor or its
designee received by the Collateral Agent by 1:00 P.M. New York City time on the
Business Day prior to the date on which such investment shall be made, in one or
more Qualified Eligible Investments. If no written direction with respect to
any portion of such Account is received by the Collateral Agent, the Collateral
Agent shall invest such funds overnight in such Qualified Eligible Investments
as the Collateral Agent may select, provided that the Collateral Agent shall not
be liable for any loss or absence of income resulting from such investment.
(b) Each investment made pursuant to this Section 3.02 on any date shall
mature not later than (i) in the case of the Interest Reserve Account, the
Business Day immediately preceding the Payment Date next succeeding the day such
investment is made, and (ii) in the case of the Pre-Funding Account, the
Business Day immediately preceding a Subsequent Transfer Date or the end of the
Funding Period; PROVIDED that any investment of funds held in any Account
maintained with the Collateral Agent (which shall be qualified as a Qualified
Eligible Investment) in any investment as to which the Collateral Agent in its
individual capacity is the obligor (including any repurchase agreement on which
the Collateral Agent in its commercial capacity is liable as principal) may
mature upon the succeeding Payment Date, Subsequent Transfer Date or end of the
Funding Period, as the case may be, rather than on the Business Day immediately
preceding such dates.
(c) Subject to the other provisions hereof, the Collateral Agent shall
have sole control over each Qualified Eligible Investment and the income
thereon, and any certificate or other instrument evidencing any such investment,
if any, shall be delivered directly to the Collateral Agent or its agent,
together with each document of transfer, if any, necessary to transfer title to
such investment to the Collateral Agent in a manner which complies with Section
2.04 and the requirements of the definition of "Qualified Eligible Investments"
herein.
(d) If amounts on deposit in any Account are at any time invested in a
Qualified Eligible Investment payable on demand, the Collateral Agent shall (i)
consistent with any notice required to be given thereunder, demand that payment
thereon be made on the last day such Qualified Eligible Investment is permitted
to mature under the provisions hereof and (ii) demand payment of all amounts due
thereunder promptly upon receipt of written notice from the Trustee to the
effect that such investment does not constitute a Qualified Eligible Investment.
(e) Subject to Section 4.03 hereof, the Collateral Agent shall not be
liable by reason of any insufficiency in any Account resulting from any loss on
any Qualified Eligible Investment included therein except for losses
attributable to the Collateral Agent's failure to make payments on Qualified
Eligible Investments as to which the Collateral Agent, in its individual
capacity, is obligated.
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SECTION 3.03. DISTRIBUTIONS FROM ACCOUNTS. All investment earnings
realized in respect of amounts in the Pre-Funding Account shall be deposited
when and as received in the Interest Reserve Account, such that the Pre-Funded
Amount shall never exceed the amount initially deposited into the Pre-Funding
Account on the Closing Date. Following receipt from the Trust Depositor of an
Addition Notice, and upon further receipt of a written demand from the Trust
Depositor for a disbursement of funds from the Pre-Funding Account to be made on
or before the date on which the Funding Period terminates (which written demand
must be delivered not later than one Business Day prior to the requested date of
funding, and must be accompanied by the written consent of the Trustee), the
Collateral Agent will disburse the amount demanded from the Pre-Funding Account
to Eaglemark upon the order of the Trust Depositor for the purpose of purchasing
Subsequent Contracts from Eaglemark pursuant to a Subsequent Purchase Agreement.
With respect to amounts still remaining on deposit in the Pre-Funding Account on
the date upon which the Funding Period ends (and provided a timely written
demand for funding as described above has not been received requesting funding
on such date), and upon receipt from the Trustee of a written demand for payment
in respect of Liquidated Damages, the Collateral Agent shall immediately
disburse all funds remaining in the Pre-Funding Account to the Trustee for
deposit in the Special Distribution Account maintained by the Trustee. With
respect to amounts on deposit in the Interest Reserve Account, the Collateral
Agent shall disburse from such funds to the Trustee immediately upon receipt of
the Trustee's written demand therefor, the amount specified in such demand in
respect of Carrying Charges in accordance with Section 8.03(b) of the Series
[ ] Pooling and Servicing Agreement. In addition, on the Payment Date with
respect to which such disbursement of Carrying Charges was made, and following
such disbursement and the distribution thereof pursuant to the Series [_____]
Pooling and Servicing Agreement, the Collateral Agent shall release to the Trust
Depositor, free and clear of the Lien and security interest established
hereunder, an amount equal to the excess (if any) of the Interest Reserve Amount
at such time over the Requisite Interest Reserve Amount for such Payment Date.
In the event that (i) the Funding Period has terminated, (ii) all amounts on
deposit in the Pre-Funding Account have been disbursed, (iii) a Payment Date has
elapsed following the occurrence of both (i) and (ii), and (iv) all amounts
referred to in clause (ii) have been applied in accordance with the Series
1996-2 Pooling and Servicing Agreement, then any amounts remaining in the
Interest Reserve Account shall be distributed to the Trust Depositor free and
clear of the Lien and security interest established hereunder.
SECTION 3.04. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) Promptly upon
the establishment (initially or upon any relocation) of an Account hereunder,
the Collateral Agent shall advise the Trust Depositor and the Secured Party in
writing of the name and address of the depository institution or trust company
where such Account has been established (if not Harris Trust and Savings Bank or
any successor Collateral Agent in its commercial banking capacity), the name of
the officer of the depository institution who is responsible for overseeing such
Account, the account number and the individuals whose names appear on the
signature cards for such Account. The Trust Depositor shall cause each such
depository institution or trust company to execute a written agreement, in form
and substance satisfactory to the Trustee, waiving, and
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the Collateral Agent by its execution of this Agreement hereby waives (except
to the extent expressly provided herein), except for amounts or fees due the
Collateral Agent hereunder in each case to the extent permitted under
applicable law, (i) any banker's or other statutory or similar Lien, and (ii)
any right of set-off or other similar right under applicable law with respect
to such Account and any other Account and agreeing, and the Collateral Agent
by its execution of this Agreement hereby agrees, to notify the Trust
Depositor, the Collateral Agent, and the Secured Party of any charge or claim
against or with respect to such Account. The Collateral Agent shall give the
Trust Depositor and the Secured Party at least ten Business Days' prior
written notice of any change in the location of such Account or in any
related account information. If the Collateral Agent changes the location of
any Account, it shall change the location of each other Account, so that all
Accounts shall at all times be located at the same depository institution.
Anything herein to the contrary notwithstanding, unless otherwise consented
(not to be unreasonably withheld) to by the Secured Party in writing, the
Collateral Agent shall have no right to change the location of any Account.
(b) Upon the written request of the Secured Party or the Trust Depositor
and at the expense of the Trust Depositor, the Collateral Agent shall cause, at
the expense of the Trust Depositor, the depository institution at which any
Account is located to forward to the requesting party copies of all monthly
account statements for such Account.
(c) If at any time any Account ceases to be an Eligible Account, the
Collateral Agent shall, upon obtaining actual knowledge of such event, notify
the Secured Party of such fact and shall establish within ten Business Days of
such determination, in accordance with paragraph (a) of this Section, a
successor Account thereto, which shall be an Eligible Account, at another
depository institution acceptable to the Secured Party and shall establish
successor Accounts with respect to all other Accounts, each of which shall be an
Eligible Account, at the same depository institution.
(d) No passbook, certificate of deposit or other similar instrument
evidencing an Account shall be issued, and all contracts, receipts and other
papers, if any, governing or evidencing an Account shall be held by the
Collateral Agent.
SECTION 3.05. REPORTS BY THE COLLATERAL AGENT. The Collateral Agent shall
report to the Trust Depositor, the Trustee and the Servicer on a monthly basis
no later than each Payment Date with respect to the amount on deposit in each
Account and the identity of the investments included therein as of the last day
of the related Due Period. The Collateral Agent shall provide accountings of
deposits into and withdrawals from the Accounts, and of the investments made
therein, upon the written request of the Trustee, Servicer and the Trust
Depositor.
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ARTICLE IV
COLLATERAL AGENT
SECTION 4.01. APPOINTMENT AND POWERS. Subject to the terms and conditions
hereof, the Secured Party hereby appoints Harris Trust and Savings Bank as the
Collateral Agent with respect to the Collateral, and Harris Trust and Savings
Bank hereby accepts such appointment and agrees to act as Collateral Agent with
respect to the Collateral for the Secured Party, to maintain custody and
possession of such Collateral (except as otherwise provided hereunder) and to
perform the other duties of the Collateral Agent in accordance with the
provisions of this Agreement, and the Collateral Agent in accepting such
appointment affirms that it is not acting as an agent for Eaglemark or the Trust
Depositor for such purposes. The Secured Party hereby authorizes the Collateral
Agent to take such action on its behalf, and to exercise such rights, remedies,
powers and privileges hereunder, as the Secured Party may in writing direct and
as are specifically authorized to be exercised by the Collateral Agent by the
terms hereof, together with such actions, rights, remedies, powers and
privileges as are reasonably incidental thereto. The Collateral Agent shall act
upon and in compliance with the written instructions of the Secured Party
delivered pursuant to this Agreement promptly following receipt of such written
instructions; provided that the Collateral Agent shall not act in accordance
with any instructions (i) which are not authorized by, or in violation of the
provisions of, this Agreement, (ii) which are in violation of any applicable
law, rule or regulation or (iii) for which the Collateral Agent has not received
reasonable indemnity.
SECTION 4.02. PERFORMANCE OF DUTIES. The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement
and the other Transaction Documents to which the Collateral Agent is a party or,
subject to Section 4.01 above, as directed in writing by the Secured Party in
accordance with this Agreement. The Collateral Agent shall not be required to
take any discretionary actions hereunder except at the written direction and
with the indemnification of the Secured Party.
SECTION 4.03. LIMITATION ON LIABILITY. Neither the Collateral Agent nor
any of its directors, officers or employees, shall be liable for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith,
except that the Collateral Agent shall be liable for its negligence, bad faith
or willful misconduct; nor shall the Collateral Agent be responsible for the
validity, effectiveness, value, sufficiency or enforceability against the Trust
Depositor of this Agreement or any of the Collateral (or any part thereof).
Notwithstanding any term or provision of this Agreement, the Collateral Agent
shall incur no liability to the Trust Depositor or the Secured Party for any
action taken or omitted by the Collateral Agent in connection with the
Collateral, except for the negligence or willful misconduct on the part of the
Collateral Agent, and, further, shall incur no liability to the Secured Party
except for negligence or willful misconduct in carrying out its duties to the
Secured Party. Subject to Section 4.04, the Collateral Agent shall be protected
and shall incur no liability to any such party in relying upon the accuracy,
acting in reliance upon the contents, and assuming the genuineness of any
notice,
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demand, certificate, signature, instrument or other document reasonably
believed by the Collateral Agent to be genuine and to have been duly executed
by the appropriate signatory, and (absent actual knowledge to the contrary)
the Collateral Agent shall not be required to make any independent
investigation with respect thereto. The Collateral Agent shall at all times
be free independently to establish to its reasonable satisfaction, but shall
have no duty to independently verify, the existence or nonexistence of facts
that are a condition to the exercise or enforcement of any right or remedy
hereunder or under any of the Transaction Documents. The Collateral Agent
may consult with counsel, and shall not be liable for any action taken or
omitted to be taken by it hereunder in good faith and in accordance with the
written advice of such counsel. The Collateral Agent shall not be under any
obligation to exercise any of the remedial rights or powers vested in it by
this Agreement or to follow any direction from the Secured Party unless it
shall have received reasonable security or indemnity satisfactory to the
Collateral Agent against the costs, expenses and liabilities which might be
incurred by it.
SECTION 4.04. RELIANCE UPON DOCUMENTS. In the absence of bad faith or
negligence on its part, the Collateral Agent shall be entitled to rely on any
communication, instrument, paper or other document reasonably believed by it to
be genuine and correct and to have been signed or sent by the proper Person or
Persons and shall have no liability in acting, or omitting to act, where such
action or omission to act is in reasonable reliance upon any statement or
opinion contained in any such document or instrument.
SECTION 4.05. SUCCESSOR COLLATERAL AGENT. (a) MERGER. Any Person into
which the Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its trust business and assets
as a whole or substantially as a whole, or any Person resulting from any such
conversion, merger, consolidation, sale or transfer to which the Collateral
Agent is a party, shall (provided it is otherwise qualified to serve as the
Collateral Agent hereunder) be and become a successor Collateral Agent hereunder
and be vested with all of the title to and interest in the Collateral and all of
the trusts, powers, discretions, immunities, privileges and other matters as was
its predecessor without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding, except to the extent, if any, that any
such action is necessary to perfect, or continue the perfection of, the security
interest of the Secured Party in the Collateral.
(b) RESIGNATION. The Collateral Agent and any successor Collateral Agent
may resign only (i) upon a determination that by reason of a change in legal
requirements the performance of its duties under this Agreement would cause it
to be in violation of such legal requirements in a manner which would result in
a material adverse effect on the Collateral Agent, and the Secured Party does
not elect to waive the Collateral Agent's obligation to perform those duties
which render it legally unable to act or elect to delegate those duties to
another Person, or (ii) with the prior written consent of the Secured Party not
to be unreasonably withheld. The Collateral Agent shall give not less than 60
days' prior written notice of any such permitted resignation by registered or
certified mail to the Secured Party and the Trust Depositor;
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PROVIDED, that such resignation shall take effect only upon the date which is
the latest of (i) the effective date of the appointment of a successor
Collateral Agent and the acceptance in writing by such successor Collateral
Agent of such appointment and of its obligation to perform its duties
hereunder in accordance with the provisions hereof, (ii) delivery of the
Collateral to such successor to be held in accordance with the procedures
specified in Article II hereof, and (iii) receipt by the Secured Party of an
Opinion of Counsel to the effect described in Section 5.02. Notwithstanding
the preceding sentence, if by the contemplated date of resignation specified
in the written notice of resignation delivered as described above no
successor Collateral Agent or temporary successor Collateral Agent has been
appointed Collateral Agent or becomes the Collateral Agent pursuant to
subsection (d) hereof, the resigning Collateral Agent may petition a court of
competent jurisdiction in New York, New York for the appointment of a
successor.
(c) REMOVAL. The Collateral Agent may be removed by the Secured Party at
any time, with or without cause, by an instrument or concurrent instruments in
writing delivered to the Collateral Agent and the Trust Depositor. A temporary
successor may be removed at any time to allow a successor Collateral Agent to be
appointed pursuant to subsection (d) below. Any removal pursuant to the
provisions of this subsection (c) shall take effect only upon the date which is
the latest of (i) the effective date of the appointment of a successor
Collateral Agent and the acceptance in writing by such successor Collateral
Agent of such appointment and of its obligation to perform its duties hereunder
in accordance with the provisions hereof, (ii) delivery of the Collateral to
such successor to be held in accordance with the procedures specified in Article
II hereof and (iii) receipt by the Secured Party of an Opinion of Counsel to the
effect described in Section 5.02.
(d) ACCEPTANCE BY SUCCESSOR. The Secured Party shall have the sole right
to appoint each successor Collateral Agent. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and to the Secured Party and the Trust Depositor an
instrument in writing accepting such appointment hereunder and the relevant
predecessor shall execute, acknowledge and deliver such other documents and
instruments as will effectuate the delivery of all Collateral to the successor
Collateral Agent to be held in accordance with the procedures specified in
Article II hereof, whereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all the estates, properties, rights,
powers, duties and obligations of its predecessor and such predecessor shall be
relieved and released of its obligations hereunder. Such predecessor shall,
nevertheless, on the written request of either the Secured Party or the Trust
Depositor, execute and deliver an instrument transferring to such successor all
the estates, properties, rights and powers of such predecessor hereunder. In
the event that any instrument in writing from the Trust Depositor or the Secured
Party is reasonably required by a successor Collateral Agent to more fully and
certainly vest in such successor the estates, properties, rights, powers, duties
and obligations vested or intended to be vested hereunder in the Collateral
Agent, any and all such written instruments shall, at the request of the
temporary or permanent successor Collateral Agent, be forthwith executed,
acknowledged and delivered by the Trust Depositor. The designation of any
successor Collateral Agent and the instrument or instruments removing any
Collateral Agent and
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appointing a successor hereunder, together with all other instruments
provided for herein, shall be maintained with the records relating to the
Collateral and, to the extent required by applicable law, filed or recorded
by the successor Collateral Agent in each place where such filing or
recording is necessary to effect the transfer of the Collateral to the
successor Collateral Agent or to protect or continue the perfection of the
security interests granted hereunder.
SECTION 4.06. INDEMNIFICATION. The Trust Depositor shall indemnify the
Collateral Agent, its directors, officers, employees and agents for, and hold
the Collateral Agent, its directors, officers, employees and agents harmless
against, any loss, liability or expense (including the costs and expenses of
defending against any claim of liability) arising out of or in connection with
the Collateral Agent's acting as Collateral Agent hereunder, except such loss,
liability or expense as shall result from the negligence, bad faith or willful
misconduct of the Collateral Agent or its officers or agents. The obligation of
the Trust Depositor under this Section shall survive the termination of this
Agreement and the resignation or removal of the Collateral Agent. The
Collateral Agent covenants and agrees that the obligations of the Trust
Depositor hereunder and under Section 4.07 shall be limited to the extent
provided in Section 2.06, and further covenants not to take any action to
enforce its rights to indemnification hereunder with respect to the Trust
Depositor and to payment under Section 4.07 except in accordance with the
provisions of Section 8.05, or otherwise to assert any Lien or take any other
action in respect of the Collateral or the Trust Corpus.
SECTION 4.07. COMPENSATION AND REIMBURSEMENT. The Trust Depositor agrees
for the benefit of the Secured Party and as part of the Secured Obligations (a)
to pay to the Collateral Agent, from time to time, reasonable compensation for
all services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a collateral trustee);
and (b) to reimburse the Collateral Agent upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Collateral Agent in
accordance with any provision of, or carrying out its duties and obligations
under, this Agreement (including the reasonable compensation and fees and the
expenses and disbursements of its agents, any independent certified public
accountants and counsel), except any expense, disbursement or advances as may be
attributable to negligence, bad faith or willful misconduct on the part of the
Collateral Agent.
SECTION 4.08. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT. The
Collateral Agent represents and warrants to the Trust Depositor and to the
Secured Party in its capacity as Collateral Agent as follows:
(a) DUE ORGANIZATION. The Collateral Agent is an Illinois banking
corporation, duly organized, validly existing and in good standing under
the laws of the United States and is duly authorized and licensed under
applicable law to conduct its business as presently conducted.
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(b) CORPORATE POWER. The Collateral Agent has all requisite
right, power and authority to execute and deliver this Agreement and to
perform all of its duties as Collateral Agent hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the
Collateral Agent of this Agreement and the other Transaction Documents to
which it is a party, and the performance by the Collateral Agent of its
duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and delivery
by the Collateral Agent, or the performance by the Collateral Agent, of
this Agreement and such other Transaction Documents.
(d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly
executed and delivered this Agreement and each other Transaction Document
to which it is a party, and each of this Agreement and each such other
Transaction Document constitutes the legal, valid and binding obligation of
the Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, except as (i) such enforceability may be limited
by bankruptcy, insolvency, reorganization and similar laws relating to or
affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles
of general applicability.
SECTION 4.09. WAIVER OF SETOFFS. The Collateral Agent hereby expressly
waives any and all rights of setoff that the Collateral Agent may otherwise at
any time have under applicable law with respect to any Account and agrees that
amounts in the Accounts shall at all times be held and applied solely in
accordance with the provisions hereof.
SECTION 4.10. CONTROL BY THE SECURED PARTY. The Collateral Agent shall
comply with notices and instructions given by the Trust Depositor only if
accompanied by the written consent of the Secured Party, except that if any
Default shall have occurred and be continuing, the Collateral Agent shall act
upon and comply with written notices and instructions given by the Secured Party
alone in the place and stead of the Trust Depositor.
ARTICLE V
COVENANTS OF THE TRUST DEPOSITOR
SECTION 5.01. PRESERVATION OF COLLATERAL. Subject to the rights, powers
and authorities granted to the Collateral Agent and the Secured Party in this
Agreement, the Trust Depositor shall take such action as is necessary and proper
with respect to the Collateral in order to preserve and maintain such Collateral
and to cause (subject to the rights of the Secured Party) the Collateral Agent
to perform its obligations with respect to such Collateral as provided herein.
The Trust Depositor will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, such instruments of transfer or take
such other steps or actions as
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may be necessary, or required by the Secured Party, to perfect the Security
Interests granted hereunder in the Collateral, to ensure that such Security
Interests rank prior to all other Liens and to preserve the priority of such
Security Interests and the validity and enforceability thereof. Upon any
delivery or substitution of Collateral, the Trust Depositor shall be
obligated to execute such documents and perform such actions as are necessary
to create in the Collateral Agent for the benefit of the Secured Party a
valid first Lien on, and valid and perfected, first priority security
interest in, the Collateral so delivered and to deliver such Collateral to
the Collateral Agent, free and clear of any other Lien, together with
satisfactory assurances thereof, and to pay any reasonable costs incurred by
any of the Secured Party or the Collateral Agent (including its agents) or
otherwise in connection with such delivery.
SECTION 5.02. OPINIONS AS TO COLLATERAL. Not less than 10 days prior to
each date on which the Trust Depositor proposes to take any action contemplated
by Section 5.06, the Trust Depositor shall, at its own cost and expense, furnish
to the Secured Party and the Collateral Agent an Opinion of Counsel reasonably
acceptable to such parties stating either (a) that, in the opinion of such
counsel, such action has been taken with respect to the execution and filing of
any financing statements and continuation statements and other actions as are
necessary to perfect, maintain and protect the lien and security interest of the
Collateral Agent (and the priority thereof), on behalf of the Secured Party,
with respect to such Collateral against all creditors of and purchasers from the
Trust Depositor and reciting the details of such action, or (b) stating that, in
the opinion of such counsel, no such action is necessary to maintain such
perfected lien and security interest. Such Opinion of Counsel shall further
describe each execution and filing of any financing statements and continuation
statements and such other actions as will, in the opinion of such counsel, be
required to perfect, maintain and protect the lien and security interest of the
Collateral Agent, on behalf of the Secured Party, with respect to such
Collateral against all creditors of and purchasers from the Trust Depositor for
a period, specified in such Opinion, continuing until a date not earlier than
eighteen months from the date of such Opinion.
SECTION 5.03. NOTICES. In the event that the Trust Depositor acquires
knowledge of the occurrence and continuance of any event of default or like
event, howsoever described or called, under any of the Transaction Documents,
the Trust Depositor shall immediately give notice thereof to the Collateral
Agent and the Secured Party.
Section 5.04. Waiver of Stay or Extension Laws; Marshalling of Assets.
The Trust Depositor covenants, to the fullest extent permitted by applicable
law, that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption law wherever enacted, now or at any
time hereafter in force, in order to prevent or hinder the enforcement of this
Agreement or any absolute sale of the Collateral or any part thereof, or the
possession thereof by any purchaser at any sale under Article VII of this
Agreement; and the Trust Depositor, to the fullest extent permitted by
applicable law, for itself and all who may claim under it, hereby waives the
benefit of all such laws, and covenants that it will not hinder, delay or impede
the execution of any
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power herein granted to the Collateral Agent, but will suffer and permit the
execution of every such power as though no such law had been enacted. The
Trust Depositor, for itself and all who may claim under it, waives, to the
fullest extent permitted by applicable law, all right to have the Collateral
marshalled upon any foreclosure or other disposition thereof.
SECTION 5.05. NONINTERFERENCE, ETC. The Trust Depositor shall not (i)
waive or alter any of its rights under the Collateral (or any agreement or
instrument relating thereto) without the prior written consent of the Collateral
Agent and the Secured Party; or (ii) fail to pay any tax, assessment, charge or
fee levied or assessed against the Collateral, or to defend any action, if such
failure to pay or defend may adversely affect the priority or enforceability of
the Trust Depositor's right, title or interest in and to the Collateral or the
Collateral Agent's lien on, and security interest in, the Collateral for the
benefit of the Secured Party; or (iii) take any action, or fail to take any
action, if such action or failure to take action will interfere with the
enforcement of any rights under the Transaction Documents.
SECTION 5.06. TRUST DEPOSITOR CHANGES.
(a) CHANGE IN NAME, STRUCTURE, ETC. The Trust Depositor shall not change
its name, identity or corporate structure unless it shall have given the Secured
Party and the Collateral Agent at least 10 days' prior written notice thereof,
shall have effected any necessary or appropriate assignments or amendments
thereto and filings of financing statements or amendments thereto, and shall
have delivered to the Collateral Agent and the Secured Party an Opinion of
Counsel of the type described in Section 5.02.
(b) RELOCATION OF THE TRUST DEPOSITOR. The Trust Depositor shall not
change its principal executive office unless it gives the Secured Party and the
Collateral Agent at least 10 days' prior written notice of any relocation of its
principal executive office. If the Trust Depositor relocates its principal
executive office or principal place of business from Nevada, the Trust Depositor
shall give prior notice thereof to the Secured Party and the Collateral Agent
and shall effect whatever appropriate recordations and filings are necessary and
shall provide an Opinion of Counsel to the Secured Party and the Collateral
Agent, to the effect that, upon the recording of any necessary assignments or
amendments to previously-recorded assignments and filing of any necessary
amendments to the previously filed financing or continuation statements or upon
the filing of one or more specified new financing statements, and the taking of
such other actions as may be specified in such opinion, the security interests
in the Collateral shall remain, after such relocation, valid and perfected.
ARTICLE VI
[RESERVED]
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ARTICLE VII
REMEDIES UPON DEFAULT
SECTION 7.01. REMEDIES UPON A DEFAULT. If a Default has occurred and is
continuing, the Collateral Agent shall, at the written direction of the Secured
Party, take whatever action at law or in equity as may appear necessary or
desirable in the judgment of the Secured Party to collect and satisfy all
outstanding Secured Obligations including, but not limited to, foreclosure upon
the Collateral and all other rights available to Secured Party under applicable
law or to enforce performance and observance of any obligation, agreement or
covenant under any of the Transaction Documents.
SECTION 7.02. WAIVER OF DEFAULT. The Secured Party shall have the sole
right, to be exercised in its complete discretion, to waive any Default in
respect of a failure to pay Carrying Charges under the Deposit Agreement, but no
waiver is permitted with respect to the Trust Depositor's obligation, on or
prior to the end of the Funding Period, either to transfer to the 1996-2 Trust
Subsequent Contracts with an aggregate Principal Balance equal to the initial
Pre-Funded Amount or to pay Liquidated Damages in the event of a failure to do
so. Any waiver permitted hereunder shall be binding upon the Collateral Agent.
Unless such writing expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence which gave rise to the
Default so waived and not to any other similar event or occurrence which occurs
subsequent to the date of such waiver.
SECTION 7.03. RESTORATION OF RIGHTS AND REMEDIES. If the Collateral Agent
has instituted any proceeding to enforce any right or remedy under this
Agreement, and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to such Collateral Agent, then and in
every such case the Trust Depositor, the Collateral Agent and the Secured Party
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Collateral Agent and the Secured Party shall continue as
though no such proceeding had been instituted.
SECTION 7.04. NO REMEDY EXCLUSIVE. No right or remedy herein conferred
upon or reserved to the Collateral Agent or the Secured Party is intended to be
exclusive of any other right or remedy, and every right or remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law, in equity or
otherwise (but, in each case, shall be subject to the provisions of this
Agreement limiting such remedies), and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised from
time to time and as often and in such order as may be deemed expedient by the
Secured Party, and the exercise of or the beginning of the exercise of any right
or power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. FURTHER ASSURANCES. Each party hereto shall take such
action and deliver such instruments to any other party hereto, in addition to
the actions and instruments specifically provided for herein, as may be
reasonably requested or required to effectuate the purpose or provisions of this
Agreement or to confirm or perfect any transaction described or contemplated
herein.
SECTION 8.02. WAIVER. Any waiver by any party of any provision of this
Agreement or any right, remedy or option hereunder shall only prevent and stop
such party from thereafter enforcing such provision, right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances, or in a course of dealing,
upon the strict performance of any of the terms or provisions of this Agreement
by any party hereto or the partial exercise of any right, remedy or option
hereunder shall not be construed as a waiver or relinquishment of any such term
or provision, but the same shall continue in full force and effect.
SECTION 8.03. AMENDMENTS, WAIVERS in Writing. No amendment, modification,
waiver or supplement to this Agreement or any provision of this Agreement shall
in any event be effective unless the same shall have been made or consented to
in writing by each of the parties hereto and each Rating Agency shall have
confirmed in writing that such amendment will not cause a reduction or
withdrawal of a rating on the Series [ ] Certificates.
SECTION 8.04. SEVERABILITY. In the event that any provision of this
Agreement or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Agreement shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable and the remainder of this Agreement, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Agreement. The
parties hereto further agree that the holding by any court of competent
jurisdiction that any remedy pursued by the Collateral Agent or the Secured
Party, hereunder is unavailable or unenforceable shall not affect in any way the
ability of the Collateral Agent or the Secured Party to pursue any other remedy
available to it or them (subject, however, to the provisions of this Agreement
limiting such remedies).
SECTION 8.05. NONPETITION COVENANT. Notwithstanding any prior termination
of this Agreement, each of the parties hereto agrees that it shall not, prior to
one year and one day after the Final Scheduled Payment Date with respect to the
Series [ ] Certificates, acquiesce,
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petition or otherwise invoke or cause the Trust Depositor to invoke the
process of the United States of America, any State or other political
subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government for the purpose of commencing or sustaining a case by or against
the Trust Depositor or the Trust under a Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Trust
Depositor or the Trust or all or any part of its property or assets or
ordering the winding up or liquidation of the affairs of the Trust Depositor
or the Trust. The parties agree that damages will be an inadequate remedy
for breach of this covenant and that this covenant may be specifically
enforced.
SECTION 8.06. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("NOTICES") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
(i) If to the Trust Depositor:
Eaglemark Customer Funding Corporation-[ ]
4150 Technology Way
Carson City, Nevada 89706
Attention: President
Telecopier No.: (702) 884-4469
(iii) If to the Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(iv) If to the Collateral Agent:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
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<PAGE>
Chicago, Illinois 60606
Attention: Indenture Trust Administration
Telecopier No.: (312) 461-3525
(v) If to Moody's:
Moody's Investor's Service, Inc.
99 Church Street
New York New York 10007
Attention: ABS Monitoring Department
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies
25 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication), the Trust Depositor, the Trustee and the Collateral
Agent. Each party hereto may, by notice given in accordance herewith to each of
the other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 8.07. TERM OF THIS AGREEMENT;. This Agreement shall take effect
on the Closing Date of the Series [ ] Certificates and shall continue in
effect until the Trustee Termination Date. On such date, this Agreement shall
terminate, all obligations of the parties hereunder shall cease and terminate
and the Collateral, if any, held hereunder and not to be used or applied in
discharge of any obligations of the Trust Depositor in respect of the Secured
Obligations or otherwise under this Agreement, shall be released to and in favor
of the Trust Depositor, PROVIDED that the provisions of Sections 4.06, 4.07 and
8.05 shall survive any termination of this Agreement and the release of any
Collateral upon such termination.
SECTION 8.08. ASSIGNMENTS. This Agreement shall be a continuing
obligation of the parties hereto and shall (i) be binding upon the parties and
their respective successors and assigns, and (ii) inure to the benefit of the
Secured Party and be enforceable by the Secured Party and the Collateral Agent,
and by their respective successors, transferees and assigns. The Trust
Depositor may not assign this Agreement, or delegate any of its duties
hereunder, without the prior written consent of the Secured Party.
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<PAGE>
SECTION 8.09. CONSENT OF SECURED PARTY. In the event that the Secured
Party's consent is required under the terms hereof or under the terms of any
Transaction Document, it is understood and agreed that, except as otherwise
provided expressly herein, the determination whether to grant or withhold such
consent shall be made solely by the Secured Party in its sole discretion.
SECTION 8.10. TRIAL BY JURY WAIVED. Each of the parties hereto waives, to
the fullest extent permitted by law, any right it may have to a trial by jury in
respect of any litigation arising directly or indirectly out of, under or in
connection with this Agreement, any of the other Transaction Documents or any of
the transactions contemplated hereunder or thereunder. Each of the parties
hereto (a) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such other party would not,
in the event of litigation, seek to enforce the foregoing waiver and (b)
acknowledges that it has been induced to enter into this Agreement and the other
Transaction Documents to which it is a party, by among other things, this
waiver.
SECTION 8.11. GOVERNING LAW. This Agreement shall be governed by and
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with, the laws of the State of Illinois.
SECTION 8.12. CONSENTS TO JURISDICTION. Each of the parties hereto
irrevocably submits to the jurisdiction of the United States District Court for
the Northern District of Illinois, any court in the state of Illinois located in
the city of Chicago, and any appellate court from any thereof, in any action,
suit or proceeding brought against it and related to or in connection with this
Agreement, the other Transaction Documents or the transactions contemplated
hereunder or thereunder or for recognition or enforcement of any judgment and
each of the parties hereto irrevocably and unconditionally agrees that all
claims in respect of any such suit or action or proceeding may be heard or
determined in such Illinois state court or, to the extent permitted by law, in
such federal court. Each of the parties hereto agrees that a final judgment in
any such action, suit or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. To the extent permitted by applicable law, each of the parties hereby
waives and agrees not to assert by way of motion, as a defense or otherwise in
any such suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such courts, that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or any of the other Transaction
Documents or the subject matter hereof or thereof may be litigated in or by such
courts. The Trust Depositor hereby irrevocably appoints and designates Harris
Trust and Savings Bank, as its true and lawful attorney and duly authorized
agent for acceptance of service of legal process. The Trust Depositor agrees
that service of such process upon such Person shall constitute personal service
of such process upon it. Subject to Section 8.05 hereof, nothing contained in
this Agreement shall limit or affect the rights of any party hereto to serve
process in any other manner permitted by law or to start proceedings
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relating to any of the Transaction Documents against the Trust Depositor or
their respective property in the courts of any jurisdiction.
SECTION 8.13. LIMITATION OF TRUSTEE RESPONSIBILITY. It is expressly
understood and agreed by the parties hereto that (a) Harris Trust and Savings
Bank is entering into and executing this Agreement solely in its capacity as
Trustee of the [ ] Trust pursuant to the Series [ ] Pooling and
Servicing Agreement and as Collateral Agent, and (b) in no case whatsoever
shall Harris Trust and Savings Bank be personally liable on, or for any loss
in respect of, any of the statements, representations, warranties, covenants,
agreements or obligations of the [ ] Trust (if any) hereunder, all such
liability, if any, being expressly waived by the parties hereto.
SECTION 8.14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
SECTION 8.15. HEADINGS. The headings of sections and paragraphs and the
Table of Contents contained in this Agreement are provided for convenience only.
They form no part of this Agreement and shall not affect its construction or
interpretation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth on the first page hereof.
EAGLEMARK CUSTOMER FUNDING
CORPORATION-[ ]
By_____________________________________
Printed Name: ___________________________
Title: __________________________________
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By ____________________________________
Printed Name: ___________________________
Title: __________________________________
HARRIS TRUST AND SAVINGS BANK,
as Collateral Agent
By ______________________________________
Printed Name: ____________________________
Title: ___________________________________
