<PAGE>
THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT RELATE TO THE REGISTRATION STATEMENT
UNDER FILE NO. 333-62849 AND ARE BEING FILED PURSUANT TO RULE 424(b)(5) OF THE
SECURITIES ACT OF 1933.
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 9, 1999
$112,000,000 6.22% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-1
$52,500,000 6.55% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2
$10,500,000 7.41% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUST 1999-3
ISSUER
HARLEY-DAVIDSON CREDIT CORP.
SELLER AND SERVICER
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV
TRUST DEPOSITOR
------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-12 HEREOF AND ON PAGE 12
OF THE PROSPECTUS.
The Notes will represent obligations of, and the Certificates will represent
interests in, the Harley-Davidson Eaglemark Motorcycle Trust 1999-3 only, and
will not represent obligations of or interests in Harley-Davidson Financial
Services, Inc., Harley-Davidson Credit Corp., Eaglemark Customer Funding
Corporation-IV, Harley-Davidson, Inc. or any of their respective affiliates.
This Prospectus Supplement may be used to offer and sell the Notes and
Certificates only if accompanied by the Prospectus.
------------------------
The Trust will issue Notes and Certificates as described below:
<TABLE>
<CAPTION>
HARLEY-DAVIDSON HARLEY-DAVIDSON HARLEY-DAVIDSON
MOTORCYCLE CONTRACT MOTORCYCLE CONTRACT MOTORCYCLE CONTRACT
BACKED CLASS A-1 NOTES BACKED CLASS A-2 NOTES BACKED CERTIFICATES TOTAL
---------------------- ---------------------- ------------------- ------------
<S> <C> <C> <C> <C>
Principal Amount..... $112,000,000 $52,500,000 $10,500,000 $175,000,000
Interest Rate/
Pass-Through
Rate............... 6.22% 6.55% 7.41%
Frequency of
Scheduled
Payments........... Monthly Monthly Monthly
Date of First
Scheduled Payment.. December 15, 1999 December 15, 1999 December 15, 1999
Underwriters'
Discounts and
Commissions........ 0.210% 0.270% 0.575% $ 437,325
Price to Public...... 99.99094% 99.97545% 99.98070% $174,974,938
Net Proceeds to the
Trust (1)(2)....... 99.78094% 99.70545% 99.40570% $174,537,613
</TABLE>
- ------------------------
(1) Plus accrued interest, if any, from November 17, 1999.
(2) Before deducting expenses, estimated to be $250,000.
The underwriters named below will offer these securities to the public at
the price to public set forth above and they will receive the discount listed
above.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR CERTIFICATES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SALOMON SMITH BARNEY BANC ONE CAPITAL MARKETS, INC.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS NOVEMBER 9, 1999.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF TERMS........................................................ S-5
RISK FACTORS............................................................ S-12
Reinvestment Risk Associated with the Pre-Funding Account............. S-12
The Trust Depositor and Seller Do Not Have Any Obligations to You
Except As Described Below........................................... S-12
Certificates are Subordinated to the Notes............................ S-12
The Trust Assets are Limited.......................................... S-12
Future Delinquency and Loan Loss Experience with
Motorcycle Contracts Not Predicted by Past Performance.............. S-13
Security Interests and Other Aspects of the Contracts................. S-13
Limited Liquidity..................................................... S-13
Company Bankruptcy Considerations..................................... S-13
Yield and Prepayment Considerations................................... S-13
Tax Status............................................................ S-13
Risk of Commingling................................................... S-13
Year 2000............................................................. S-13
FORMATION OF THE TRUST.................................................. S-14
USE OF PROCEEDS......................................................... S-14
THE CONTRACTS........................................................... S-14
HARLEY-DAVIDSON MOTORCYCLES............................................. S-23
YIELD AND PREPAYMENT CONSIDERATIONS..................................... S-23
HARLEY-DAVIDSON FINANCIAL SERVICES, INC.; HARLEY-DAVIDSON CREDIT CORP... S-23
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV............................... S-24
DESCRIPTION OF THE NOTES................................................ S-24
General............................................................... S-24
Payments of Interest.................................................. S-24
Payments of Principal................................................. S-25
Optional Redemption................................................... S-25
Mandatory Redemption Following the Funding Period..................... S-25
The Indenture Trustee................................................. S-25
Events of Default..................................................... S-25
DESCRIPTION OF THE CERTIFICATES......................................... S-26
General............................................................... S-26
Distributions of Interest............................................. S-26
Distributions of Principal............................................ S-26
Optional Prepayment................................................... S-27
Mandatory Prepayment.................................................. S-27
Paying Agents......................................................... S-27
CERTAIN INFORMATION REGARDING THE NOTES AND CERTIFICATES................ S-27
Form, Exchange, Registration and Title................................ S-27
Conveyance of Contracts............................................... S-30
The Accounts.......................................................... S-33
Determination of Outstanding Principal Balances....................... S-35
Distributions on the Notes and Certificates........................... S-35
Payment Priorities of the Notes and the Certificates.................. S-36
Payments from the Reserve Fund........................................ S-37
Statements to Noteholders and Certificateholders...................... S-37
Voting Interests...................................................... S-38
Amendment............................................................. S-39
List of Noteholders and Certificateholders............................ S-40
Termination........................................................... S-41
S-2
<PAGE>
Payment in Full of Notes.............................................. S-41
The Trustees.......................................................... S-41
Duties of the Trustees................................................ S-42
Trust Depositor Liability............................................. S-42
Administration Agreement.............................................. S-42
Collection and Other Servicing Procedures............................. S-43
Servicing Compensation and Payment of Expenses........................ S-43
Individual Motorcycle Insurance....................................... S-43
Evidence as to Compliance............................................. S-44
Events of Termination................................................. S-44
Rights upon an Event of Termination................................... S-45
Advances.............................................................. S-45
SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS;
REPURCHASE OBLIGATIONS................................................ S-45
FEDERAL INCOME TAX CONSEQUENCES......................................... S-48
ERISA CONSIDERATIONS.................................................... S-49
UNDERWRITING............................................................ S-50
RATINGS OF THE SECURITIES............................................... S-52
LEGAL MATTERS........................................................... S-52
REPORTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS........................... S-52
ANNEX I................................................................. S-53
GLOSSARY OF TERMS....................................................... S-56
PROSPECTUS
REPORTS TO SECURITYHOLDERS.............................................. 2
AVAILABLE INFORMATION................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... 2
SUMMARY OF TERMS........................................................ 3
RISK FACTORS............................................................ 12
THE TRUSTS.............................................................. 17
HARLEY-DAVIDSON MOTORCYCLES............................................. 18
OTHER MANUFACTURERS..................................................... 19
THE CONTRACTS........................................................... 19
WEIGHTED AVERAGE LIFE OF THE SECURITIES................................. 20
POOL FACTORS AND TRADING INFORMATION.................................... 20
USE OF PROCEEDS......................................................... 21
HARLEY-DAVIDSON FINANCIAL SERVICES, INC.; HARLEY-DAVIDSON
CREDIT CORP.; 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......................... 33
DESCRIPTION OF THE SALE AND SERVICING AGREEMENTS AND POOLING AND
SERVICING AGREEMENTS.................................................. 35
CERTAIN LEGAL ASPECTS OF THE CONTRACTS.................................. 44
FEDERAL INCOME TAX CONSEQUENCES......................................... 47
OWNER TRUSTS............................................................ 49
GRANTOR TRUSTS.......................................................... 56
TAX TREATMENT OF A FASIT................................................ 58
CERTAIN STATE TAX CONSEQUENCES.......................................... 59
ERISA CONSIDERATIONS.................................................... 59
PLAN OF DISTRIBUTION.................................................... 60
LEGAL MATTERS........................................................... 61
</TABLE>
S-3
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the Notes and Certificates in
two separate documents -- this Prospectus Supplement and the accompanying
Prospectus. The Prospectus provides general information, some of which may
not apply to the Notes or Certificates, and the Prospectus Supplement
provides specific information relating to the terms of the Notes and
Certificates. To the extent that any statements in the Prospectus Supplement
differ from or modify statements in the Prospectus, you should rely on the
information in this Prospectus Supplement.
We include cross-references in this Prospectus Supplement and the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The Table of Contents beginning on page S-2 of
this Prospectus Supplement provides pages on which these captions are located.
You can find a glossary of the principal capitalized terms used in
this Prospectus Supplement beginning on page S-56 of this Prospectus
Supplement. Additionally, you can find a listing of the pages where principal
capitalized terms used in the accompanying Prospectus are defined under an
Index of Terms beginning on page 62 of the Prospectus.
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.
The underwriters may engage in transactions that stabilize, maintain
or otherwise affect the price of the Notes and Certificates. Such
transactions may include stabilizing and the purchase of the Notes and
Certificates to cover syndicate short positions. For a description of these
activities, see "UNDERWRITING" herein.
S-4
<PAGE>
______________________________________________________________________________
SUMMARY OF TERMS
This summary highlights selected information from this Prospectus
Supplement and does not contain all the information that you need to consider
in making an investment decision. To understand all of the terms of the
offering of the Notes and Certificates, you should read this entire
Prospectus Supplement and the accompanying Prospectus before making an
investment decision.
<TABLE>
<S> <C>
The Issuer or the Trust......... Harley-Davidson Eaglemark Motorcycle Trust
1999-3. The Trust's principal offices will
be in care of Wilmington Trust Company, as
Owner Trustee, at its Corporate Trust
Office, 1100 North Market Street,
Wilmington, Delaware 19890; telephone
(302) 651-1000.
Seller and Servicer............. Harley-Davidson Credit Corp., a 100% owned
subsidiary of Harley-Davidson Financial
Services, Inc.
Trust Depositor................. Eaglemark Customer Funding Corporation-IV, a
100% owned subsidiary of Harley-Davidson
Credit Corp.
Owner Trustee................... Wilmington Trust Company, a Delaware banking
corporation, will be the Owner Trustee for
the Trust.
Indenture Trustee............... Harris Trust and Savings Bank, an Illinois
banking corporation. The Indenture Trustee
will also act as Paying Agent under the
Indenture and the Trust Agreement.
Offered Notes and
Certificates.................. The Harley-Davidson Eaglemark Motorcycle
Trust 1999-3 is offering:
- $112,000,000 aggregate principal amount
of 6.22% Harley-Davidson Motorcycle
Contract Backed Notes, Class A-1;
- $52,500,000 aggregate principal amount
of 6.55% Harley-Davidson Motorcycle
Contract Backed Notes, Class A-2; and
- 7.41% Harley-Davidson Motorcycle
Contract Backed Certificates having an
initial aggregate certificate balance of
$10,500,000.
The Notes represent indebtedness of the
Trust secured by the assets of the Trust
(other than the Certificate Distribution
Account). The Certificates represent
fractional undivided equity interests in the
Trust.
The Notes and the Certificates will be
issued in minimum denominations of $1,000
and will be available in book-entry form
only. Noteholders and Certificateholders
will be able to receive physical securities
issued in registered form only in the
limited circumstances described herein. See
"CERTAIN INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- FORM, EXCHANGE, REGISTRATION
AND TITLE" herein.
The Contracts and Other
Assets of the Trust........... The property of the Trust will be a pool of
fixed-rate, simple interest, conditional
sales contracts relating to motorcycles
manufactured by Harley-Davidson, Inc. and a
limited number of motorcycles manufactured
by Buell Motorcycle Company, an affiliate of
Harley-Davidson, Inc. Such contracts were
originated by the Seller indirectly through
Harley-Davidson motorcycle dealers. Included
in the Trust's assets are security interests
in the Harley-Davidson and a
S-5
<PAGE>
limited number of Buell motorcycles securing
such Contracts and proceeds, if any, from
certain insurance policies with respect to
such motorcycles.
The Closing Date................ On or about November 17, 1999.
Terms of the Notes.............. The principal terms of the Notes will be as
described below:
A. Distribution Date..... Distributions of interest and principal 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) commencing
December 15, 1999.
B. Interest.............. The Class A-1 Notes will bear interest at
the rate of 6.22% per annum on the
outstanding principal amount of the Class
A-1 Notes. The Class A-2 Notes will bear
interest at the rate of 6.55% per annum on
the outstanding principal amount of the
Class A-2 Notes. On each Distribution Date,
payments of interest on the Class A-1 Notes
and Class A-2 Notes will be made from
available collections received 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 NOTES AND
CERTIFICATES -- DISTRIBUTIONS ON THE NOTES
AND CERTIFICATES" and "DESCRIPTION OF THE
NOTES -- PAYMENTS OF INTEREST" for a
discussion of the determination of the
amounts available to pay 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
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. However, the first interest
period will begin on and include the Closing
Date and end on and include December 14,
1999.
C. Principal............. On each Distribution Date, payments of
principal on the Class A-1 Notes and Class
A-2 Notes will be made from available
collections received on the Contracts, and
from certain other available amounts as
described herein. Generally, principal
payments will be made first on the Class A-1
Notes until the Class A-1 Notes have been
repaid in full, 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. See "CERTAIN INFORMATION
REGARDING THE NOTES AND CERTIFICATES --
DISTRIBUTIONS ON THE NOTES AND CERTIFICATES"
and "DESCRIPTION OF THE NOTES -- PAYMENTS OF
PRINCIPAL" for a discussion of the
determination of amounts available to pay
principal.
Holders of Class A-1 Notes are entitled to
receive payment of principal in full no
later than February 2004. Holders of Class
A-2 Notes are entitled to receive payment of
principal in full no later than October
2005. You should note, however, that certain
circumstances could cause principal to be
paid earlier or later, or in reduced
amounts. See "DESCRIPTION OF THE NOTES --
OPTIONAL REDEMPTION," "DESCRIPTION OF THE
NOTES -- MANDATORY SPECIAL REDEMPTION" and
"THE NOTES -- EVENTS OF DEFAULT."
D. Optional
Redemption............ In the event that the aggregate outstanding
principal balance of the Contracts owned by
the Trust declines to less than 10% of the
sum of (i) the aggregate outstanding
principal balance of the Contracts owned by
the Trust as of the Closing Date and (ii)
the initial Pre-Funded Amount, and the
Seller, through the Trust Depositor, has
elected to purchase all of the Contracts
owned by the Trust, the Class A-2 Notes will
be redeemed in whole, but not in part. The
redemption price will be equal to the unpaid
principal amount of the Class A-2 Notes plus
S-6
<PAGE>
accrued interest thereon at the related
interest rate. See "DESCRIPTION OF THE NOTES
-- OPTIONAL REDEMPTION."
E. Mandatory
Special
Redemption............ The Class A-1 Notes and Class A-2 Notes 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. The
aggregate principal amount of Class A-1
Notes and Class A-2 Notes to be prepaid will
generally be an amount equal to the amount
then on deposit in the Pre-Funding Account
allocated pro rata.
Terms of the Certificates....... The principal terms of the Certificates will
be as described below:
A. Distribution Date..... Distributions of interest and principal 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) commencing
December 15, 1999.
B. Interest.............. The Certificates will accrue interest at the
rate of 7.41% per annum on the Certificate
Balance. On each Distribution Date, payments
of interest on the Certificates will be made
from available collections received on the
Contracts, and from certain other available
amounts as described herein. Distributions
of interest on the Certificates will be
subordinated to payments of interest on the
Notes. See "CERTAIN INFORMATION REGARDING
THE NOTES AND CERTIFICATES -- DISTRIBUTIONS
ON THE NOTES AND CERTIFICATES" and
"DESCRIPTION OF THE CERTIFICATES --
DISTRIBUTIONS OF INTEREST" for a discussion
of the determination of amounts available to
pay interest.
Interest on the outstanding Certificate
Balance will accrue at the related interest
rate 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. However, the first
interest period will begin on and include
the Closing Date and end on and include
December 14, 1999.
C. Principal............. No principal will be paid on the
Certificates until the Distribution Date on
which the principal amounts of the Notes
have been reduced to zero. Payments of
principal on the Certificates will be made
from available collections on the Contracts,
and from certain other available amounts as
described herein. Each principal payment
will be calculated to reflect the reduction
in the aggregate principal balance of the
Contracts. Distributions of principal on the
Certificates will be subordinated to
payments of principal on the Notes. See
"CERTAIN INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- DISTRIBUTIONS ON THE NOTES
AND CERTIFICATES" and "THE CERTIFICATES --
DISTRIBUTIONS OF PRINCIPAL" for a discussion
of the determination of amounts available to
pay principal.
Holders of Certificates are entitled to
receive payment of principal in full no
later than September 2007. You should note,
however, that certain circumstances could
cause principal to be paid earlier or later,
or in reduced amounts. See "DESCRIPTION OF
THE CERTIFICATES -- OPTIONAL PREPAYMENT" and
"DESCRIPTION OF THE CERTIFICATES --
MANDATORY PREPAYMENT."
S-7
<PAGE>
D. Optional Prepayment... In the event that the aggregate outstanding
principal balances of the Contracts owned by
the Trust declines to less than 10% of the
sum of (i) the aggregate outstanding
principal balance of the Contracts owned by
the Trust as of the Closing Date and (ii)
the initial Pre-Funded Amount, and the
Seller, through the Trust Depositor, has
elected to purchase all of the Contracts
owned by the Trust, the Certificates will be
prepaid in whole, but not in part. The
repayment price will be equal to the
Certificate Balance plus accrued interest
thereon at the Certificate interest rate.
See "Description of the Certificates --
Optional Prepayment."
Security for the Notes and
Certificates.................. The principal security for the Notes and
Certificates will be as described below:
A. The Contracts............... The Contracts sold to the Trust will be
selected from 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. The
last scheduled payment on the Initial
Contract with the latest maturity will occur
in December 2006. No Contract (including any
Subsequent Contract) will have a scheduled
maturity later than March 2007. However, an
Obligor can generally prepay its Contract at
any time without penalty.
COMPOSITION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
</TABLE>
<TABLE>
<S> <C>
Aggregate Principal Balance ............................. $127,443,773.17
Number of Contracts ..................................... 10,731
Average Principal Balance ............................... $ 11,876.23
Weighted Average Annual Percentage Rate ("APR") ......... 13.32%
(Range) ............................................... 8.50-23.99%
Weighted Average Original Term (in months) .............. 70.90
(Range) ............................................... 12 to 84
Weighted Average Calculated Remaining Term (in months) .. 68.11
(Range) ............................................... 6 to 84
</TABLE>
<TABLE>
<S> <C>
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. 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 above and in "THE
CONTRACTS" herein.
B. Reserve Fund................ You will have certain limited protection
against losses in respect of the Contracts
by the establishment of an account, referred
to as the Reserve Fund.
The Reserve Fund Initial Deposit of
$637,218.87 will be deposited into the
Reserve Fund on the Closing Date.
In addition, on each Subsequent Transfer
Date, 0.50% of the balance of each
Subsequent Contract conveyed to the Trust
will be deposited into the Reserve Fund. On
each Distribution Date, the Reserve Fund
will be supplemented by the deposit of
certain Excess Amounts up to the Specified
Reserve Fund Balance.
S-8
<PAGE>
On each Distribution Date, the Reserve Fund
Available Amount will be paid to Noteholders
and Certificateholders in the event there is
a shortfall in interest and principal
required to be paid on the Notes or
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 NOTES AND CERTIFICATES --
PAYMENT PRIORITIES OF THE NOTES AND THE
CERTIFICATES; THE RESERVE FUND."
C. Pre-Funding
Account..................... On the Closing Date, the Trust Depositor
will fund the Pre-Funding Account by
depositing $47,556,226.83. During the
Funding Period, the Pre-Funding Account will
secure the Trust Depositor's obligations to
purchase and transfer Subsequent Contracts
to the Trust. The amount in the Pre-Funding
Account will be reduced by the amount used
to purchase Subsequent Contracts from the
Trust Depositor. The Trust Depositor expects
that the Pre-Funded Amount will be reduced
to less than $150,000 by the Distribution
Date occurring in February 2000. Any
Pre-Funded Amount remaining at the end of
the Funding Period will be paid to the
Noteholders as described above in "SUMMARY
OF TERMS -- MANDATORY SPECIAL REDEMPTION."
D. Interest Reserve
Account..................... On the Closing Date, the Trust Depositor
will fund the Interest Reserve Account by
depositing $453,299.61. The Interest Reserve
Account will provide additional funds for
payment of Carrying Charges. 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.
The Interest Reserve Account will be
established to account for the fact that the
monthly investment earnings on amounts in
the Pre-Funding Account (until such amounts
have been used to purchase Subsequent
Contracts) are expected to be less than the
weighted average of the interest payments on
the Notes and the Certificates, as well as
the amount necessary to pay 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.
Ratings......................... The Notes and Certificates must, prior to
their issuance, receive ratings from
Standard & Poor's Ratings Services, A
Division of The McGraw-Hill Companies, and
Moody's Investors Service, Inc. as set forth
below:
</TABLE>
<TABLE>
<CAPTION>
STANDARD & POOR'S MOODY'S
----------------- -------
<S> <C> <C>
Class A-1 Notes AAA Aaa
Class A-2 Notes AAA Aaa
Certificates BBB Baa1
</TABLE>
<TABLE>
<S> <C>
See "RATINGS OF THE NOTES AND CERTIFICATES."
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 be
entitled to reimbursement of its outstanding
advances on any Distribution Date by means
of a first priority withdrawal of certain
funds
S-9
<PAGE>
then held in the Collection Account. See
"CERTAIN INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- ADVANCES."
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. See "CERTAIN
INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- CONVEYANCE OF CONTRACTS."
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):
- 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);
- 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
- 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 securing the Contracts. 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 relating to the Contracts
will not be amended or reissued to reflect
the conveyance and assignment of the
Seller's security interest in such
motorcycles 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 such 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
S-10
<PAGE>
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."
Servicing Fees.................. The Servicer will be entitled to receive a
monthly servicing fee equal to 1/12th of 1%
of the principal balance of the Contracts.
The Servicer will also be entitled to
receive any extension fees or late payment
penalty fees paid by Obligors. All such fees
will be paid to the Servicer prior to any
payments to the Noteholders or the
Certificateholders. See "CERTAIN INFORMATION
REGARDING THE NOTES AND
CERTIFICATES -- 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, (ii) individual retirement
accounts and other retirement plans subject
to Section 4975 of the Code or (iii) persons
investing on behalf of, or with assets of,
such a plan or account.
</TABLE>
______________________________________________________________________________
S-11
<PAGE>
RISK FACTORS
REINVESTMENT RISK Associated WITH THE PRE-FUNDING ACCOUNT. On the
Closing Date, the Trust Depositor will transfer $127,443,773.17 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 you. The Trust Depositor will transfer $47,556,226.83 pursuant to the
Agreement, into the Pre-Funding Account established and maintained in the
name of the Indenture Trustee on behalf of the Noteholders and
Certificateholders. Amounts in the Pre-Funding Account will be pledged to the
Indenture Trustee in order to 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 such initial deposit into the Pre-Funding Account
at or before the end of the Funding Period. There can be no assurance that
the Seller will continue to generate Contracts that satisfy the criteria set
forth in the Transfer and Sale Agreement and the Agreement or the criteria
described in "THE CONTRACTS" in this Prospectus Supplement. See "RISK FACTORS
- -- SALES OF SUBSEQUENT CONTRACTS AND EFFECTS ON POOL CHARACTERISTICS" in the
Prospectus.
If the Seller fails to originate a principal amount of eligible
Contracts during the Funding Period which is at least equal to the amount
initially deposited into the Pre-Funding Account, the Trust Depositor may be
unable to acquire sufficient Subsequent Contracts to transfer to the Trust
during the Funding Period. As a result, the funds remaining in the
Pre-Funding Account at the end of the Funding Period may be used to prepay
outstanding principal of the Notes. The 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
amount remaining in the Pre-Funding Account is less than $150,000 such amount
shall be allocated solely to the holders of the Class A-1 Notes. See also
"RISK FACTORS -- REINVESTMENT RISK ASSOCIATED WITH PRE-FUNDING ACCOUNTS AND
COLLATERAL REINVESTMENT ACCOUNTS" in the Prospectus. You should note 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. Therefore, you
should expect that there will be at least a nominal amount of principal
prepaid to the holders of the Class A-1 Notes 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.
THE TRUST DEPOSITOR AND SELLER DO NOT HAVE ANY OBLIGATIONS TO YOU
EXCEPT AS DESCRIBED BELOW. 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
has any other obligations to you (other than in respect of the transfer of
Subsequent Contracts as described herein). See also "RISK FACTORS -- TRUST'S
RELATIONSHIP TO HARLEY-DAVIDSON CREDIT CORP., THE TRUST DEPOSITORS, AND THEIR
AFFILIATES" and "-- RISKS ASSOCIATED WITH NON-RECOURSE NATURE OF THE NOTES
AND CERTIFICATES" in the Prospectus.
CERTIFICATES ARE SUBORDINATED TO THE NOTES. See "Certain
Information Regarding the Notes and Certificates -- Payment Priorities of the
Notes and Certificates; Reserve Fund." Distributions of interest on the
Certificates will be subordinated to payments of interest on the Notes, and
distributions of principal on the Certificates will be subordinated to
payments of principal on the Notes, each 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 that
you assumed, the yield to maturity of the Certificates you purchased may be
lower than you anticipated.
THE TRUST ASSETS ARE LIMITED. 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. You 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
S-12
<PAGE>
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.
FUTURE DELINQUENCY AND LOAN LOSS EXPERIENCE WITH MOTORCYCLE
CONTRACTS NOT PREDICTED BY PAST PERFORMANCE. Harley-Davidson Credit Corp.'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. See "RISK FACTORS -- SOCIAL, ECONOMIC AND OTHER
FACTORS AFFECTING THE PERFORMANCE OF THE CONTRACTS OR GENERATION OF
SUBSEQUENT CONTRACTS" in the Prospectus.
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
Notes and Certificates offered hereby. The underwriters currently intend to
make a market in the Notes and Certificates, but they are under no obligation
to do so. There can be no assurance that a secondary market will develop or,
if a secondary market does develop, that it will provide you with a liquid
investment or that it will continue while you own Notes or Certificates. As a
result, you may not be able to resell your Notes or Certificates prior to
maturity.
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 NOTES AND CERTIFICATES" 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 and remitted on a daily basis to a lockbox
account and transferred from such lockbox 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 Collection Account such funds will not be segregated from
other funds of the Seller held in the account. See generally "RISK
FACTORS -- RISK OF COMMINGLING" and "CERTAIN INFORMATION REGARDING THE NOTES
AND CERTIFICATES -- THE ACCOUNTS" in thE Prospectus.
YEAR 2000. See generally "RISK FACTORS -- RISKS RELATED TO YEAR 2000
ISSUES" in the Prospectus.
S-13
<PAGE>
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 engage in only a
limited set of activities. The Trust's activities are limited to: (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 that are incidental to or connected with the foregoing
purposes.
On the Closing Date, the Trust Depositor will sell and assign the
Contracts to the Trust. Harley-Davidson Credit Corp. will act as Servicer of
the Contracts and will receive compensation and fees for such services. See
"CERTAIN INFORMATION REGARDING THE NOTES AND CERTIFICATES -- 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
$10,500,000 representing 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 Notes and
Certificates had taken place, on such date:
<TABLE>
<S> <C>
Class A-1 Notes..................................... $112,000,000
Class A-2 Notes..................................... $ 52,500,000
Certificates........................................ $ 10,500,000
------------
Total.......................................... $175,000,000
</TABLE>
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 NOTES AND CERTIFICATES -- THE
TRUSTEES" and "-- DUTIES OF THE TRUSTEES."
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
The Contracts are (or will be, in the case of Subsequent Contracts)
fixed-rate simple interest conditional sales contracts relating to
motorcycles manufactured by Harley-Davidson or in a limited number of cases,
S-14
<PAGE>
motorcycles manufactured by Buell Motorcycle Company, an affiliate of
Harley-Davidson. The Contracts were originated by the Seller indirectly
through Harley-Davidson motorcycle dealers.
Each Contract (a) is (or will be) secured by a motorcycle
manufactured by Harley-Davidson or Buell Motorcycle Company, (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, and (c) with respect to the Initial Contracts,
has its last scheduled payment due no later than December 2006, 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 March 2007. The first scheduled payment date of
Contracts representing approximately 99.01% of the aggregate principal
balance of the Initial Contracts is due no later than December 1999; the
first scheduled payment date of Contracts representing approximately 0.99% of
the aggregate principal balance of the Initial Contracts is due no later than
December 2000. The first scheduled payment date of Contracts representing
approximately 99.01% of the aggregate principal balance of the Subsequent
Contracts will be due no later than March 2000; the first scheduled payment
date of Contracts representing approximately 0.99% of the aggregate principal
balance of the Subsequent Contracts will be due no later than March 2001. 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. (For general composition of the
Initial Contracts see Table 1 below). Approximately 61.85% 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 38.15% 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 8.50% per annum and
not more than 23.99% per annum and the weighted average contractual rate of
interest of the Initial Contracts as of the initial Cutoff Date is
approximately 13.32% 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 84 months and original maturities of at least 12 months but
not more than 84 months. The Initial Contracts had a weighted average term to
scheduled maturity, as of origination, of approximately 70.90 months, and a
weighted average term to scheduled maturity as of the initial Cutoff Date of
approximately 68.11 months (see Tables 3 and 4 below). The average principal
balance per Initial Contract as of the initial Cutoff Date was approximately
$11,876.23 and the principal balances on the Initial Contracts as of the
initial Cutoff Date ranged from $716.54 to $33,764.16 (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: 12.32% in California, 9.38% in Texas and 8.33%
in Florida (see Table 6 below). No other state represented more than 5.00% by
aggregate principal balance of the Initial Contracts.
Subsequent Contracts will not need to satisfy any criteria except
for the criteria described in the preceding paragraph and under "RISK FACTORS
- -- THE CONTRACTS AND THE PRE-FUNDING ACCOUNT." 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; this dealer obligation to repurchase 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 repurchase motorcycles under
such motorcycle dealer agreements if and when required to do so.
S-15
<PAGE>
TABLE 1
COMPOSITION OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<S> <C>
Aggregate Principal Balance................................. $127,443,773.17
Number of Contracts......................................... 10,731
Average Principal Balance................................... $11,876.23
Weighted Average Annual Percentage
Rate ("APR")........................................... 13.32%
(Range)................................................ 8.50% - 23.99%
Weighted Average Original Term (in months).................. 70.90
(Range)................................................ 12-84
Weighted Average Calculated Remaining Term (in months)...... 68.11
(Range)................................................ 6-84
</TABLE>
TABLE 2
DISTRIBUTION BY APR OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
NUMBER OF NUMBER OF TOTAL OUTSTANDING POOL
RATE CONTRACTS CONTRACTS(1) PRINCIPAL BALANCE BALANCE(1)
---- --------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
8.500 - 9.000% 76 0.71% $ 731,121.20 0.57%
9.001 - 10.000 268 2.50 3,136,116.78 2.48
10.001 - 11.000 979 9.12 12,496,388.19 9.81
11.001 - 12.000 1,915 17.85 23,964,238.89 18.80
12.001 - 13.000 2,714 25.29 32,980,808.52 25.88
13.001 - 14.000 2,629 24.50 30,760,734.09 24.14
14.001 - 15.000 907 8.45 9,814,898.12 7.70
15.001 - 16.000 421 3.92 4,256,727.62 3.34
16.001 - 17.000 106 0.99 1,023,063.13 0.80
17.001 - 18.000 265 2.47 3,102,936.27 2.43
18.001 - 19.000 28 0.26 380,505.61 0.30
19.001 - 20.000 203 1.89 2,356,831.11 1.85
20.001 - 21.000 70 0.65 783,799.87 0.62
21.001 - 22.000 147 1.37 1,598,017.99 1.25
22.001 - 23.000 2 0.02 24,367.54 0.02
23.001 - 23.990 1 0.01 6,218.24 0.00
------ ------ --------------- ------
Totals: 10,731 100.00% $127,443,773.17 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
S-16
<PAGE>
TABLE 3
DISTRIBUTION BY CALCULATED REMAINING TERM
OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
CALCULATED PERCENT OF PERCENT OF
REMAINING NUMBER OF NUMBER OF TOTAL OUTSTANDING POOL
TERM (MONTHS) CONTRACTS CONTRACTS(1) PRINCIPAL BALANCE BALANCE(1)
------------- --------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
6 - 12 317 2.95% $ 795,641.20 0.62%
13 - 24 545 5.08 2,643,863.56 2.07
25 - 36 400 3.73 2,829,414.60 2.22
37 - 48 434 4.04 3,903,910.42 3.06
49 - 60 1,684 15.69 17,487,582.50 13.72
61 - 72 6,116 56.99 77,323,866.23 60.67
73 - 84 1,235 11.51 22,459,494.66 17.62
------ ------ --------------- ------
TOTALS: 10,731 100.00% $127,443,773.17 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
TABLE 4
DISTRIBUTION BY CALCULATED ORIGINAL
TERM TO MATURITY OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
ORIGINAL NUMBER OF NUMBER OF TOTAL OUTSTANDING POOL
TERM (MONTHS) CONTRACTS CONTRACTS(1) PRINCIPAL BALANCE BALANCE(1)
------------- --------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
0 - 12 9 0.08% $ 58,048.57 0.05%
13 - 24 110 1.03 573,027.73 0.45
25 - 36 258 2.40 1,902,475.90 1.49
37 - 48 419 3.90 3,758,469.22 2.95
49 - 60 2,032 18.94 18,229,431.05 14.30
61 - 72 6,661 62.07 80,368,389.16 63.06
73 - 84 1,242 11.57 22,553,931.54 17.70
------ ------ --------------- ------
TOTALS: 10,731 100.00% $127,443,773.17 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
S-17
<PAGE>
TABLE 5
DISTRIBUTION BY CURRENT BALANCE OF THE INITIAL CONTRACTS
(AS OF THE INITIAL CUTOFF DATE)
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
NUMBER OF NUMBER OF TOTAL OUTSTANDING POOL
CURRENT BALANCE CONTRACTS CONTRACTS(1) PRINCIPAL BALANCE BALANCE(1)
- --------------- --------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
$ 716.54 - 1,000.00 10 0.09% $ 8,628.37 0.01%
$ 1,000.01 - 2,000.00 130 1.21 208,780.62 0.16
$ 2,000.01 - 3,000.00 247 2.30 622,978.46 0.49
$ 3,000.01 - 4,000.00 277 2.58 971,617.08 0.76
$ 4,000.01 - 5,000.00 311 2.90 1,414,250.22 1.11
$ 5,000.01 - 6,000.00 479 4.46 2,657,222.01 2.09
$ 6,000.01 - 7,000.00 696 6.49 4,556,108.82 3.57
$ 7,000.01 - 8,000.00 725 6.76 5,460,735.37 4.28
$ 8,000.01 - 9,000.00 715 6.66 6,093,672.52 4.78
$ 9,000.01 - 10,000.00 716 6.67 6,815,107.52 5.35
$10,000.01 - 11,000.00 548 5.11 5,755,029.71 4.52
$11,000.01 - 12,000.00 567 5.28 6,514,723.88 5.11
$12,000.01 - 13,000.00 580 5.40 7,257,446.09 5.69
$13,000.01 - 14,000.00 614 5.72 8,298,389.44 6.51
$14,000.01 - 15,000.00 751 7.00 10,902,714.18 8.55
$15,000.01 - 16,000.00 758 7.06 11,758,603.09 9.23
$16,000.01 - 17,000.00 727 6.77 11,994,246.56 9.41
$17,000.01 - 18,000.00 605 5.64 10,590,157.24 8.31
$18,000.01 - 19,000.00 471 4.39 8,710,673.31 6.83
$19,000.01 - 20,000.00 318 2.96 6,186,515.73 4.85
$20,000.01 - 21,000.00 189 1.76 3,869,568.96 3.04
$21,000.01 - 22,000.00 134 1.25 2,874,818.77 2.26
$22,000.01 - 23,000.00 68 0.63 1,527,085.11 1.20
$23,000.01 - 24,000.00 28 0.26 657,015.37 0.52
$24,000.01 - 25,000.00 33 0.31 807,870.31 0.63
$25,000.01 - 26,000.00 13 0.12 330,277.97 0.26
$26,000.01 - 27,000.00 8 0.07 211,329.60 0.17
$27,000.01 - 28,000.00 3 0.03 82,662.70 0.06
$28,000.01 - 29,000.00 2 0.02 56,255.21 0.04
$29,000.01 - 30,000.00 2 0.02 59,324.49 0.05
$30,000.01 - 31,000.00 3 0.03 91,793.47 0.07
$31,000.01 - 32,000.00 1 0.01 31,436.42 0.02
$32,000.01 - 33,000.00 1 0.01 32,970.41 0.03
$33,000.01 - 33,764.16 1 0.01 33,764.16 0.03
------ ------ --------------- ------
TOTALS: 10,731 100.00% $127,443,773.17 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
S-18
<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 154 1.44% $ 1,924,060.50 1.51%
ALASKA 22 0.21 237,210.14 0.19
ARIZONA 339 3.16 4,500,561.55 3.53
ARKANSAS 51 0.48 591,641.93 0.46
CALIFORNIA 1,320 12.30 15,698,767.86 12.32
COLORADO 206 1.92 2,552,705.47 2.00
CONNECTICUT 186 1.73 1,922,738.16 1.51
DELAWARE 58 0.54 670,791.11 0.53
DISTRICT OF COLUMBIA 11 0.10 128,405.56 0.10
FLORIDA 816 7.60 10,620,026.01 8.33
GEORGIA 354 3.30 4,754,203.54 3.73
HAWAII 78 0.73 867,753.48 0.68
IDAHO 17 0.16 189,659.13 0.15
ILLINOIS 373 3.48 4,348,497.54 3.41
INDIANA 230 2.14 2,725,860.19 2.14
IOWA 78 0.73 875,664.25 0.69
KANSAS 82 0.76 1,041,196.64 0.82
KENTUCKY 99 0.92 1,167,992.83 0.92
LOUISANA 115 1.07 1,427,826.38 1.12
MAINE 33 0.31 361,367.84 0.28
MARYLAND 245 2.28 2,771,330.02 2.17
MASSACHUSETTS 192 1.79 2,039,501.33 1.60
MICHIGAN 183 1.71 2,290,366.78 1.80
MINNESOTA 80 0.75 882,068.38 0.69
MISSISSIPPI 31 0.29 400,780.84 0.31
MISSOURI 149 1.39 1,787,266.45 1.40
MONTANA 19 0.18 235,908.28 0.19
NEBRASKA 42 0.39 454,789.56 0.36
NEVADA 184 1.71 2,401,866.71 1.88
NEW HAMPSHIRE 108 1.01 1,123,086.75 0.88
NEW JERSEY 364 3.39 4,071,263.08 3.19
NEW MEXICO 128 1.19 1,581,342.22 1.24
NEW YORK 363 3.38 4,062,226.29 3.19
NORTH CAROLINA 407 3.79 4,776,002.95 3.75
NORTH DAKOTA 6 0.06 49,282.54 0.04
OHIO 452 4.21 4,863,007.07 3.82
OKLAHOMA 104 0.97 1,175,554.33 0.92
OREGON 148 1.38 1,654,645.22 1.30
PENNSYLVANIA 577 5.38 5,946,600.89 4.67
S-19
<PAGE>
TABLE 6
GEOGRAPHIC DISTRIBUTION OF THE INITIAL CONTRACTS
(CONTINUED)
PERCENT OF PERCENT OF
NUMBER OF NUMBER OF TOTAL OUTSTANDING POOL
STATE CONTRACTS CONTRACTS(1) PRINCIPAL BALANCE BALANCE(1)
----- --------- ------------ ----------------- ----------
<S> <C> <C> <C> <C>
RHODE ISLAND 16 0.15 182,339.32 0.14
SOUTH CAROLINA 205 1.91 2,578,287.45 2.02
SOUTH DAKOTA 36 0.34 379,632.40 0.30
TENNESSEE 253 2.36 3,125,876.46 2.45
TEXAS 954 8.89 11,959,303.01 9.38
UTAH 31 0.29 349,443.32 0.27
VERMONT 15 0.14 175,715.84 0.14
VIRGINIA 287 2.67 3,390,926.55 2.66
WASHINGTON 246 2.29 2,879,930.32 2.26
WEST VIRGINIA 47 0.44 562,148.80 0.44
WISCONSIN 190 1.77 2,218,088.37 1.74
WYOMING 19 0.18 190,252.78 0.15
OTHER 28 0.26 278,008.75 0.22
------ ------ --------------- ------
TOTALS: 10,731 100.00% $127,443,773.17 100.00%
</TABLE>
(1) Percentages may not add to 100.00% because of rounding.
S-20
<PAGE>
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
The Seller was organized in January 1993 and is a 100% owned
subsidiary of Harley-Davidson Financial. The Seller began purchasing and
servicing conditional sales contracts for motorcycles manufactured by
Harley-Davidson and Buell Motorcycle Company 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 -- FUTURE DELINQUENCY AND LOAN LOSS EXPERIENCE WITH MOTORCYCLE
CONTRACTS NOT PREDICTED BY PAST PERFORMANCE."
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.
DELINQUENCY EXPERIENCE(1)/
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------------------
1998 1997 1996
---- ---- ----
NUMBER NUMBER NUMBER
OF OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Portfolio..................... 67,137 $651,248.7 45,258 $434,890.7 32,574 $303,682.4
Period of Delinquency(2)/
30-59 Days.................. 1,970 $ 17,768.1 1,264 $ 11,454.6 904 $ 8,002.9
60-89 Days.................. 745 6,153.9 559 5,112.1 374 3,170.7
90 Days or more............. 304 2,591.0 269 2,196.5 213 1,880.6
------ --------- ----- ---------- ------ ----------
Total Delinquencies........... 3,019 $26,513.0 2,092 $ 18,763.2 1,491 $ 13,054.2
====== ========= ===== ========== ====== ==========
Total Delinquencies as a
Percent of Total Portfolio.. 4.50% 4.07% 4.62% 4.31% 4.58% 4.30%
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
--------------------------------------------------
1999 1998
---- ----
NUMBER NUMBER
OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Portfolio..................... 86,998 $871,024.6 56,434 $553,838.3
Period of Delinquency(2)/
30-59 Days.................. 2,190 $ 21,222.3 1,295 $ 11,679.5
60-89 Days.................. 678 6,423.3 318 2,935.1
90 Days or more............. 248 2,294.2 99 853.9
------ ---------- ------ ----------
Total Delinquencies........... 3,116 $ 29,398.8 1,712 $ 15,468.5
====== ========== ====== ==========
Total Delinquencies as a
Percent of Total Portfolio.. 3.58% 3.43% 3.03% 2.79%
</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-21
<PAGE>
LOAN LOSS/REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Principal Balance of All
Contracts Serviced(1)/.......... $653,836.0 $436,771.0 $304,730.9
Contract Liquidations(2)/......... 1.54% 1.42% 0.74%
Net Losses:
Dollars(3)/..................... $ 5,245.3 $ 3,781.1 $ 1,639.5
Percentage(4)/.................. 0.80% 0.87% 0.54%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
Principal Balance of All
Contracts Serviced(1)/.......... $873,860.6 $555,597.4
Contract Liquidations(2)/......... 1.50% 1.47%
Net Losses:
Dollars(3)/..................... $ 3,894.7 $ 2,770.0
Percentage(4)/.................. 0.59% 0.66%
</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.
S-22
<PAGE>
HARLEY-DAVIDSON MOTORCYCLES
Generally, no more than 5% of the aggregate principal balance of
contracts financed from time to time by Harley-Davidson Credit Corp. 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. The
percentage of Contracts (including all Subsequent Contracts) in this pool
secured by motorcycles manufactured by Buell cannot be determined.
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 largest 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. Each Contract also contains a provision which permits the Seller
to require full prepayment in the event of a sale of the related 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. Repurchases of Contracts from the
Trust by the Trust Depositor, and concurrently from the Trust Depositor by
the Seller, could also occur if the Trust Depositor exercises its limited
option to repurchase the Contracts from the Trust when the aggregate
outstanding principal balances of the Contracts owned by the Trust has
declined to less than 10% of the sum of (i) the aggregate outstanding
principal balances of the Contracts owned by the Trust as of the Closing Date
and (ii) the initial Pre-Funded Amount. Any prepayments and repurchases of
Contracts will reduce the average life of the Notes and Certificates and the
interest received by the holders of the Notes and Certificates 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,
funds remaining in the Pre-Funding Account at the end of the Funding Period
will be used to prepay outstanding principal of the Notes and as a result,
the interest received by Noteholders over the life of the Notes will be
reduced.
Interest distributions on the Certificates will be subordinated to
interest payments on the Notes, and principal distributions on the
Certificates will be subordinated to principal payments on the Notes.
Accordingly, you should expect that the yield on the Certificates will be
sensitive to the loss experience on the Contracts and the timing of such
losses. The yield to maturity of the Certificates may be lower than you
anticipated, if the actual rate and amount of losses experienced on the
Contracts exceed the rate and amount of losses you expected when you
purchased the Certificates.
The last scheduled payment on the Initial Contract with the latest
maturity will occur in December 2006. The last scheduled payment on the
Contract with the latest maturity among the Contracts as a whole, including
any Subsequent Contracts, will not occur later than March 2007.
HARLEY-DAVIDSON FINANCIAL SERVICES, INC.;
HARLEY-DAVIDSON CREDIT CORP.
HARLEY-DAVIDSON FINANCIAL SERVICES, INC.
Harley-Davidson Financial Services, Inc. (formerly known as
Eaglemark Financial Services, Inc.) was formed in June 1992 with a capital
infusion of $10,000,000 from Harley-Davidson and an additional $15,000,000
S-23
<PAGE>
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 of December 31, 1998 Harley-Davidson Financial
Services, Inc. is a wholly-owned subsidiary of Harley-Davidson. The business
of Harley-Davidson Financial Services, Inc., through its 100% ownership of
Harley-Davidson Credit Corp., has been to provide wholesale and retail
financing, credit card and insurance services to dealers and customers of
Harley-Davidson.
HARLEY-DAVIDSON CREDIT CORP.
Harley-Davidson Credit Corp. (formerly known as Eaglemark, Inc.) is
a Nevada corporation and is a wholly-owned subsidiary of Harley-Davidson
Financial Services, Inc. Harley-Davidson Credit Corp. began operations in
January 1993 when it purchased the $85 million wholesale financing portfolio
of certain Harley-Davidson dealers from ITT Commercial Finance; subsequently,
Harley-Davidson Credit Corp. entered the retail consumer finance business.
Harley-Davidson Credit Corp. 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 Credit
Corp. also finances extended service contracts on Harley-Davidson and Buell
motorcycles. Harley-Davidson Credit Corp.'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 Harley-Davidson Credit Corp. while
improving revenue and profits over time. Harley-Davidson Credit Corp.'s
principal executive offices are located at 4150 Technology Way, Carson City,
Nevada 89706 (telephone 702/886-3200). As of December 31, 1998,
Harley-Davidson Credit Corp. had total assets of $695.4 million, and
stockholder's equity of $94.7 million.
EAGLEMARK CUSTOMER FUNDING CORPORATION-IV
The Trust Depositor is a special purpose corporation incorporated in
the State of Nevada in October 1996. 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 the 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.
However, the following fees will be paid out of Available Monies before such
funds are used to make interest payments on the Notes:
- monthly servicing fee to be paid to the Servicer which equals
1/12th of 1% of the principal balance of the Contracts as of the
beginning of such Due Period and any accrued and unpaid monthly
servicing fees;
- any extension fees or late payment penalty fees paid by Obligors
are payable to the Servicer; and
- all accrued and unpaid fees of the Indenture Trustee or Owner
Trustee.
See "Certain Information Regarding the Notes and Certificates --
Distributions on the Notes and Certificates -- Deposits to the Note and
Certificate Distribution Account; Priority of Payments."
S-24
<PAGE>
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
Percentage of the related Note Principal Distributable Amount, in each case
calculated as described under "CERTAIN INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- DISTRIBUTIONS ON THE NOTES AND CERTIFICATES -- DEPOSITS TO
ThE NOTE AND CERTIFICATE DISTRIBUTION ACCOUNT; PRIORITY OF PAYMENTS."
Principal payments on the Notes will be made from Available Monies after all
of the Trust's fees and expenses have been paid, and after distribution of
the Note Interest Distributable Amount and the Certificate Interest
Distributable Amount. See "CERTAIN INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- DISTRIBUTIONS ON THE NOTES AND CERTIFICATES -- DEPOSITS TO THE
NOTE AND CERTIFICATE 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 February 2004 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 October 2005.
However, the aggregate outstanding principal amount of any class of Notes is
paid may be earlier than the dates set forth in the prior sentence as a
result of a variety of factors, including the factors described under "YIELD
AND PREPAYMENT CONSIDERATIONS."
To the extent that the Aggregate Principal Balance Decline is
greater than the principal balance of the Class A-1 Notes on any Distribution
Date, the Aggregate Principal Balance Decline 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.
OPTIONAL REDEMPTION
In the event the aggregate outstanding principal balance of the
Contracts owned by the Trust declines to less than 10% of the sum of (i) the
aggregate outstanding principal balance of the Contracts owned by the Trust
as of the Closing Date and (ii) the initial Pre-Funded Amount, and the
Seller, through the Trust Depositor, has elected to purchase all of the
Contracts owned by the Trust, the Class A-2 Notes will be subject to
redemption in whole, but not in part, on any Distribution Date. The
redemption price will equal the unpaid principal amount of the Class A-2
Notes plus accrued interest thereon at 6.55%. See "CERTAIN INFORMATION
REGARDING THE NOTES AND CERTIFICATES -- TERMINATION."
MANDATORY REDEMPTION FOLLOWING THE FUNDING PERIOD
The Class A-1 Noteholders and 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. 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
amount on deposit in the Pre-Funding Account 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 Notes and Certificates -- The
Trustees" and "-- Duties of the Trustees."
EVENTS OF DEFAULT
"EVENTS OF DEFAULT" under the Indenture will have occurred when:
(i) interest on any class of Notes is not paid on the date it is
due and payable and is not paid for five days or more after
such date;
(ii) principal of or any installment of principal on any Class of
Notes is not paid on the date it is due and payable;
S-25
<PAGE>
(iii) the Trust fails to comply with or perform any of its covenants
or agreements in the Indenture and such default continues 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 together as a single class;
(iv) any representation or warranty made by the Trust in the
Indenture or in any certificate delivered pursuant thereto or
in connection therewith was incorrect in a material respect as
of the time made, and such default continues 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 together as a single class; and
(iv) certain events of bankruptcy, insolvency, receivership or
liquidation relating to the Trust have occurred.
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 66 2/3% 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 66 2/3% of the voting interests thereof, voting together as a
single class, consent to such sale or liquidation.
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 7.41% 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 7.41%. Interest distributions with
respect to the Certificates will be made from Available Interest after all of
the Trust's fees and expenses have been paid and after the Note Interest
Distributable Amount has been distributed. See "CERTAIN INFORMATION REGARDING
THE NOTES AND CERTIFICATES -- DISTRIBUTION ON THE NOTES AND CERTIFICATES --
DEPOSITS TO THE NOTE AND CERTIFICATE 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 NOTES AND CERTIFICATES -- DISTRIBUTIONS ON THE NOTES AND
CERTIFICATES -- DEPOSITS TO THE NOTE AND CERTIFICATE DISTRIBUTION ACCOUNT;
PRIORITY OF PAYMENTS" but not in excess of the outstanding principal balance
on the Certificates. Distributions with respect to principal on the
Certificates will be made from Available Principal after all of the Trust's
fees and expenses have been paid and after the Note Interest Distributable
Amount, the Certificate Interest Distributable Amount and the Note Principal
Distributable Amount have been distributed. See "CERTAIN INFORMATION
REGARDING THE NOTES AND CERTIFICATES -- DISTRIBUTIONS ON THE NOTES AND
CERTIFICATES -- DEPOSITS TO THE NOTE AND CERTIFICATE DISTRIBUTION ACCOUNT;
PRIORITY OF PAYMENTS."
S-26
<PAGE>
OPTIONAL PREPAYMENT
In the event the aggregate outstanding principal balance of the
Contracts owned by the Trust declines to less than 10% of the sum of (i) the
aggregate outstanding principal balance of the Contracts owned by the Trust
as of the Closing Date and (ii) the initial Pre-Funded Amount, and the
Seller, through the Trust Depositor, has elected to purchase all of the
Contracts owned by the Trust, the Certificates will be subject to prepayment
in whole, but not in part, on any Distribution Date. The prepayment amount
will equal the Certificate Balance plus accrued interest thereon at 7.41%.
See "CERTAIN INFORMATION REGARDING THE NOTES AND CERTIFICATES -- TERMINATION."
MANDATORY PREPAYMENT
As more fully described under "DESCRIPTION OF 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.
CERTAIN INFORMATION REGARDING THE NOTES AND CERTIFICATES
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").
Noteholders and Certificateholders may hold their Notes or Certificates in
the United States through DTC, or, solely in the case of the Notes, in
Europe, through Cedelbank ("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
S-27
<PAGE>
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.
Noteholders and Certificateholders who are not Participants but
desire to purchase, sell or otherwise transfer, ownership of the Notes or
Certificates may do so only through Participants (unless and until physical
Notes or Certificates, as applicable are issued in registered form). In
addition, Noteholders and Certificateholders will receive all distributions
of principal of and interest on the Notes and Certificates from the Indenture
Trustee or Owner Trustee (collectively, the "TRUSTEES"), as applicable,
through DTC and Participants. Neither the Noteholders nor the
Certificateholders receive or be entitled to receive physical securities
representing their respective interests in the Notes or Certificates, except
under the limited circumstances described below.
Unless and until physical Notes and Certificates are issued in
registered form, it is anticipated that the only Noteholders and
Certificateholders will be Cede, as nominee of DTC. Beneficial owners of the
Notes and Certificates 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 Notes and Certificates 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 Notes and Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Notes and Certificates.
Unless and until physical Notes and Certificates are issued in registered
form, beneficial owners who are not Participants may transfer ownership of
Notes and Certificates only through Participants by instructing such
Participants to transfer the Securities only through Participants by
instructing such Participants to transfer the Notes or Certificates by
book-entry transfer through DTC for the account of the purchasers of such
Notes or Certificates, which account is maintained with their respective
Participants. Under the Rules and in accordance with DTC's normal procedures,
transfers of ownership of the Notes and Certificates 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
Noteholders and Certificateholders, or their nominees, rather than to DTC,
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 Notes or Certificates 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 in registered form of physical Notes and
Certificates, 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 physical Notes and Certificates are issued in registered form, 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 such securities are credited. DTC has
advised the Seller that DTC will take such action with respect to any holders
of the Notes and Certificates only at the direction of and on behalf of the
Participants to whose DTC account such securities are credited. DTC may take
actions, at the direction of the related Participants, with respect to some
Notes and Certificates that conflict with actions taken with respect to other
Notes and Certificates.
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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 the Notes or Certificates. 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.
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 Notes and Certificates
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.
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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 physical Notes and Certificates to Noteholders and
Certificateholders or their nominees in the manner described above.
Issuance of the Notes and Certificates in book-entry form rather
than as physical securities may adversely affect the liquidity of the Notes
and Certificates in the secondary market and the ability of holders of such
securities to pledge them. In addition, since distributions on such
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, holders of such securities may
experience delays in the receipt of such distributions.
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 documents that the Seller has customarily kept on file relating to
the Contracts, including the certificates of title to, or other evidence of a
perfected security interest in, the related motorcycles, and confirmed 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 Noteholders and
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.
In addition to the Initial Contracts, the Trust's assets 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 Cutoff
Date. Any conveyance of Subsequent Contracts 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 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 Cutoff
Date, no Contract in the Trust, including the Subsequent Contracts that the
Trust Depositor will be conveying as of such Cutoff Date, will have a
scheduled maturity date later than March 2007; (iii) the Trust Depositor
shall have executed and delivered in favor of the Trust a Subsequent Transfer
Agreement (as defined in and executed under the 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 Underwriters 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 Standard & Poor's Rating Services and "Aaa" by Moody's
Investors Service, Inc. and the Certificates will be rated at least "BBB" by
Standard & Poor's Rating Services and "Baa1" by Moody's Investors Service,
Inc.
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 securing such Contracts. 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
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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 securing such Contracts
will not be amended to reflect the assignment of the Seller's security
interest in such motorcycles to the Trust Depositor, the assignment of the
Trust Depositor's security interest in such 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 securing the
Contracts. See "RISK FACTORS -- RISK OF UNPERFECTED SECURITY INTERESTS IN
FINANCED 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 date such Subsequent Contracts are transferred to
the Trust Depositor):
(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;
(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 files customarily
maintained by the Servicer for each Contract;
(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";
(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 securing such Contract; such security interest has
been conveyed and assigned by the Seller to the Trust
Depositor;
(k) 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 such motorcycles is recorded on the original certificate of
title; and the original certificate of title for each such
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);
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(l) the Seller's security interest has been validly assigned by
the Seller to the Trust Depositor in order that immediately
after the sale, each Contract will be secured by an
enforceable and perfected first priority security interest in
the related 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);
(m) all parties to each Contract had capacity to execute such
Contract;
(n) no Contract has been sold, conveyed and assigned or pledged to
any other person other than the Trust Depositor, as transferee
of the Seller and the Trust as transferee of the Trust
Depositor and prior to the transfer of the Contract to the
Trust Depositor, the Seller had 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 Trust and the Owner Trustee will have a
first priority perfected security interest therein;
(o) 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;
(p) 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;
(q) 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;
(r) 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;
(s) the description of each Contract set forth in the list
delivered to the Trustees is true and correct; and
(t) 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:
(a) the aggregate principal amount payable by the Obligors as of
the initial Cutoff Date plus the initial deposit into the
Pre-Funding Account as of the Closing Date equals the sum of
the initial principal amount of the Notes and the initial
Certificate Balance;
(b) each Initial Contract has a contractual rate of interest of at
least 8.50%;
(c) all motorcycles securing the Contracts are Harley-Davidson or
Buell motorcycles;
(d) approximately 61.85% of the aggregate Principal Balance of the
Initial Contracts is attributable to loans to purchase new
motorcycles and approximately 38.15% of the aggregate
principal balance of the Initial Contracts is attributable to
loans to purchase used motorcycles;
(e) no Initial Contract has a remaining maturity of more than 84
months;
(f) the first scheduled payment date of Contracts representing
approximately 99.01% of the aggregate principal balance of the
Initial Contracts is due no later than December 1999; the
first scheduled payment date of Contracts representing
approximately 0.99% of the aggregate principal balance of the
Initial Contracts is due no later than December 2000; and
(g) 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 executed thereunder, 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 not later than two Business Days prior
to the first Determination Date after the Seller becomes aware or receives
written notice from the Trust Depositor, Owner Trustee, Indenture Trustee or
Servicer of such breach unless such breach is cured. The repurchase price
shall be an amount equal to (i) the remaining principal balance of such
Contract plus (ii) accrued and unpaid interest at the annual rate of interest
specified in the Contract through the end of the
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immediately preceding Due Period. 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 Owner
Trustee. Under the Indenture, 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 only remedy that
You and the Trust have for a breach of the Seller's representations and
warranties are the repurchase obligations of the Seller described above.
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
THE COLLECTION ACCOUNT. Pursuant to the Agreement, the Indenture
Trustee will establish an account referred to herein as 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 the
Collection Account. 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. 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. Pursuant to the Agreement, the Indenture
Trustee will establish a trust account referred to herein as the Pre-Funding
Account. During the Funding Period, the Pre-Funding Account will be
maintained by the Indenture Trustee for your benefit 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 Trustee. On the
Closing Date, the Trust Depositor will deposit $47,556,226.83 into the
Pre-Funding Account. During the Funding Period, amounts on deposit in the
Pre-Funding Account 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 $150,000 by the Distribution
Date occurring in February 2000. 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. You will be afforded certain limited protection
against losses in respect of the Contracts by the establishment of an
account, referred to herein as the Reserve Fund, in the name of the Indenture
Trustee for your benefit. The Reserve Fund will be created with the an
initial deposit by the Trust Depositor of $637,218.87 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 and Subsequent
Reserve Fund Amounts, until the amount in the Reserve Fund reaches the
Specified Reserve Fund Balance. On each Distribution Date, funds will be
withdrawn from the Reserve Fund, up to the Reserve Fund Available Amount, for
distribution to you to cover any shortfalls in interest and principal
required to be paid on 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. Upon any such distributions to the Trust
Depositor, you will have no further rights in, or claims to, such amounts.
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.
CALCULATION OF SPECIFIED RESERVE FUND BALANCE. On the Closing Date,
the Trust Depositor will deposit a total of $637,218.87 into the Reserve
Fund. With respect to any Distribution Date, the Specified Reserve Fund
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Balance will equal the greater of (a) 2.50% of the Principal Balance of the
Contracts in the Trust as of the first day of the immediately preceding Due
Period; PROVIDED, HOWEVER, that if certain trigger events occur (as more
specifically described in the Prospectus Supplement), the Specified Reserve
Fund Balance will be equal to 6.00% of the Principal Balance of the Contracts
in the Trust as of the first day of the immediately preceding Due Period and
(b) 1.00% of the aggregate of the Initial Class A-1 Note Balance, Initial
Class A-2 Note Balance and Initial Certificate Balance; PROVIDED, HOWEVER, in
no event shall the Specified Reserve Fund Balance be greater than the
aggregate outstanding principal balance of the Securities. 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 for
such Distribution Date is equal to or greater than (a) 2.50% 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) 3.00%
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) 3.50% 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) 4.00% for any Distribution Date following the third
anniversary of the Closing Date; (ii) the Average Loss Ratio for such
Distribution Date is equal to or greater than (a) 2.75% 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) 3.25%
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) 0.75% 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) 1.50%
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) 2.00% 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) 2.50% following the third anniversary of the Closing Date.
A Reserve Fund Trigger Event will be deemed to have terminated with
respect to a Distribution Date if no Reserve Fund Trigger Event shall exist
with respect to three consecutive Distribution Dates (inclusive of the
respective Distribution Date).
The Servicer may, from time to time after the date of this
Prospectus Supplement request each Rating Agency that rated any of the Notes
and Certificates 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 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 Notes and Certificates 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.
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 rather than invested in
Contracts, and the monthly investment earnings on amounts in the Pre-Funding
Account (until such amounts have been used to purchase Subsequent Contracts)
are expected to be less than the weighted average of the interest rates of
the Class A-1 Notes, Class A-2 Notes and Certificates with respect to the
corresponding portion of the principal balances of the Class A-1 Notes, Class
A-2 Notes and Certificates, as well as the amount necessary to pay the
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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.
THE NOTE AND CERTIFICATE DISTRIBUTION ACCOUNT. The Indenture
Trustee will establish and maintain with itself the Note Distribution
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 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.
DETERMINATION OF OUTSTANDING PRINCIPAL BALANCES
Prior to each Distribution Date, the Servicer will calculate a
six-digit decimal factor which represents the unpaid principal amount of the
Class A-1 Notes, after giving effect to payments to be made on such
Distribution Date, as a fraction of the initial outstanding principal amount
of the Class A-1 Notes. Prior to each Distribution Date, the Servicer will
calculate a six-digit decimal factor which represents the unpaid principal
amount of the Class A-2 Notes, after giving effect to payments to be made on
such Distribution Date, as a fraction of the initial outstanding principal
amount of the Class A-2 Notes. Similarly, prior to each Distribution Date,
the Servicer will calculate a six-digit decimal factor which represents the
remaining Certificate Balance, after giving effect to distributions to be
made on such Distribution Date, as a fraction of the initial Certificate
Balance. If the Servicer were to perform such calculations on the Closing
Date, the resulting decimal factor for each of the Class A-1 Note, Class A-2
Notes and Certificates would be 1.000000. Thereafter, these decimal factors
will decline in correspondence with reductions in the outstanding principal
amount of the Class A-1 Notes or Class A-2 Notes, as applicable, or the
Certificate Balance. Your portion of the aggregate outstanding principal
amount of Class A-1 Notes or Class A-2 Notes will be the product of (i) the
original denomination of the Class A-1 Notes or Class A-2 Notes you own and
(ii) the decimal factor relating to the Class A-1 Notes or Class A-2 Notes,
as applicable, at the time of determination (calculated as described above).
Similarly, your portion of the aggregate outstanding Certificate Balance will
be the product of (i) the original denomination of the Certificates you own
and (ii) the decimal factor applicable to Certificates at the time of
determination (calculated as described above).
As a holder of Notes or Certificates, you will receive reports on or
about each Distribution Date concerning payments received on the Contracts,
the aggregate outstanding principal balance of the Contracts owned by the
Trust, the decimal factors described above and various other items of
information. In addition, Noteholders and Certificateholders 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 NOTES AND CERTIFICATES -- STATEMENTS TO HOLDERS."
DISTRIBUTIONS ON THE NOTES AND CERTIFICATES
GENERAL. On the fourth Business Day of each month, 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 Certificate Interest
Distributable Amount; (iv) the Note Principal Distributable Amount; (v) the
Certificate Principal Distributable Amount; (vi) the Servicing Fee; and (vii)
the Trustees' Fees.
DEPOSITS TO THE NOTE AND CERTIFICATE 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) on or immediately following the last day of the
Funding Period, the amount that remains on deposit in the
Pre-Funding Account after giving effect to the purchase of all
Subsequent Contracts, including any such purchase on such
Distribution Date, pro rata, calculated on the then current
principal balance of the Class A-1 and Class A-2 Notes; PROVIDED,
HOWEVER, in the event the Mandatory Special
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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 it previously made to the Collection
Account for accrued and unpaid interest on the Contracts which was
delinquent with respect to the prior Due Period;
(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 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;
(vii) 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;
(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
(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 as set forth in the Indenture and until the principal amount
of the Notes is reduced to zero, no distributions of interest or principal
will be made on the Certificates. See "DESCRIPTION OF THE NOTES -- EVENTS OF
DEFAULT."
PAYMENT PRIORITIES OF THE NOTES AND THE CERTIFICATES
GENERAL. Your rights 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 of its outstanding advances
for delinquent accrued and unpaid interest 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 fees and expenses
payable to them). In addition, your rights to receive distributions with
respect to the Contracts will be subject to the priorities set forth under
"-- DISTRIBUTIONS ON THE NOTES AND CERTIFICATES -- DEPOSITS TO THE NOTE AND
CERTIFICATE 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, to a lesser extent, 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. 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 the subordination of
principal payments on the Certificates and by the Reserve Fund will be
exhausted and the Noteholders will bear directly the risks associated with
ownership of the Contracts.
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Neither the Noteholders, Certificateholders, 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 Noteholders and Certificateholders.
PAYMENTS FROM THE RESERVE FUND
Amounts held from time to time in the Reserve Fund will be held for
your benefit and will be deposited in either the Note Distribution Account or
the Certificate Distribution Account in the following order of priority:
(i) on each Distribution Date on which the Note Interest
Distributable Amount exceeds the amount then on deposit in the Note
Distribution Account, the Noteholders will be entitled to receive
such deficiency from amounts on deposit in the Reserve Fund;
(ii) on each Distribution Date on which the Certificate
Interest Distributable Amount exceeds the amount then on deposit in
the Certificate Distribution Account, the Certificateholders will be
entitled to receive such deficiency from amounts on deposit in the
Reserve Fund;
(iii) on each Distribution Date on which the Note
Principal Distributable Amount exceeds the amount then on deposit in
the Note Distribution Account (after application of clause (i)
above), 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 final Distribution
Date for such class of Notes); and
(iv) on each Distribution Date on which the Certificate
Principal Distributable Amount exceeds the amount then on deposit in
the Certificate Distribution Account (after application of clause
(ii) above), the Certificateholders will be entitled to receive such
deficiency (including amounts necessary to reduce the balance of the
Certificates to zero on the final Distribution Date for the
Certificates).
STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS
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, 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;
(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 six-digit decimal factors which represent the
unpaid principal amount of each of the Class A-1 Notes, Class A-2
Notes and Certificates, after giving effect to payments to be made
on such Distribution Date, as a fraction of the initial outstanding
principal amount of the Class A-1 Notes, Class A-2 Notes and
Certificates, respectively (see "DETERMINATION OF OUTSTANDING
PRINCIPAL BALANCES");
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(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) for the Distribution Date following the end of the
Funding Period, the amount of the Notes to be redeemed with funds
remaining in the Pre-Funding Account, to the extent that funds
remain in the Pre-Funding Account after giving effect to any
purchases of Subsequent Contracts on such Distribution Date;
(viii) for each Distribution Date during the Funding
Period, the remaining amounts in the Pre-Funding Account;
(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 any redemption of the Notes
described in (vii), 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 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) each class of Notes will be
allocated among the Noteholders, in accordance with the unpaid principal
amount of the Notes of such class and (ii) Certificates will be allocated
among the Certificateholders, in accordance with the Certificate Balance
represented thereby; except that in certain
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circumstances any Notes and Certificates 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
your consent, 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 the
Agreement which are not inconsistent with the provisions thereof, to add or
provide for any credit enhancement for any class of Notes and Certificates 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 interest of any Noteholder or
Certificateholders, 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 Notes and Certificates to the effect that its then-current
rating on each class of Notes and Certificates 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
of 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 a class of
Noteholders or Certificateholders; 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 Notes and Certificates, 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 Notes and Certificates are required to
consent to any such amendment, without the consent of the holders of all of
the relevant classes of Notes and Certificates.
AMENDMENT OF THE TRUST AGREEMENT. The Trust Agreement may be
amended without your consent 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 Noteholders and Certificateholders 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
Noteholders or Certificateholders, 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 Notes and Certificates or the interest rate of
the Notes and Certificates or (ii) reduce the aforesaid percentage of the
voting interests of which the holders of any class of Notes and Certificates
are required to consent to any such amendment, without the consent of the
holders of all of the relevant class of Notes and Certificates.
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;
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(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 NOTEHOLDERS AND CERTIFICATEHOLDERS
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
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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.
Neither the Trust Agreement nor the Indenture will provide for the
holding of any annual or other meetings of Noteholders or Certificateholders.
TERMINATION
The obligations of the Servicer, the Trust Depositor, the Owner
Trustee and Indenture Trustee with respect to you 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 all Noteholders and
Certificateholders 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 (each a
"TERMINATION EVENT"). 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 Noteholder and Certificateholder of record. The final
distribution to you will be made only upon surrender and cancellation of your
Notes and Certificates 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 you 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 Notes and
Certificates 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
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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.
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 Notes and
Certificates 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 Notes and Certificates 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 (as defined in "CERTAIN INFORMATION REGARDING
THE NOTES AND CERTIFICATES -- TERMINATION") 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 Noteholders or Certificateholders, unless such
Noteholders or Certificateholders have offered to such Trustee reasonable
security or indemnity against the costs, expenses and liabilities that may be
incurred therein or thereby. No Noteholder or Certificateholders 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 Notes and
Certificates evidencing not less than 25% of the voting interests of all of
the related Notes and Certificates, 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 parby for the entire amount of any losses,
claims, damages or liabilities (other than those incurred by a Noteholder or
Certificateholder 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
Harley-Davidson Credit Corp., 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,
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 Cutoff Date, if
any); 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 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 1% 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 Notes and
Certificates. See "CERTAIN INFORMATION REGARDING THE NOTES AND CERTIFICATES
- -- DISTRIBUTIONS ON THE NOTES AND 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 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 Noteholders and 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 each motorcycle securing the Contracts are covered by physical damage
insurance (i) in an amount not less than the
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value of the motorcycle at the time the related Contract was originated and
(ii) that all premiums due on such insurance have been paid in full from the
date of the Contract's 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. 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.
See "CERTAIN INFORMATION REGARDING THE NOTES AND 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
Pursuant to the Agreement, on or before March 31 of each year,
beginning on March 31, 2001, 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 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 Harley-Davidson Financial Services, Inc. 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 Harley-Davidson Financial Services, Inc. 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. Such statement 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 Notes and 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 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
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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.
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 such 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 related 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 related
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 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
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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 such
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 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 such motorcycles to the Trust pursuant to the Agreement and the Trust will
pledge its security interest in such 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 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 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 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 securing the Contracts.
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.
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
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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 such
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 NOTES AND
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 "CERTAIN
INFORMATION REGARDING THE NOTES AND 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 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 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.
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GENERAL TAX TREATMENT OF A HOLDER OF A NOTE
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 under "FEDERAL INCOME TAX
CONSEQUENCES -- OWNER TRUSTS."
GENERAL TAX TREATMENT OF A HOLDER OF 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 under "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 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.
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<PAGE>
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.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated November 9, 1999, among the Seller, the Trust Depositor and
the underwriters named below (the "UNDERWRITING AGREEMENT"), the Seller has
agreed to cause the Trust to sell to each of the underwriters named below,
and the underwriters have severally agreed to purchase, the principal amount
of the Notes and Certificates set forth opposite its name below.
<TABLE>
<CAPTION>
Principal Amount of Principal Amount of Principal Amount of
Underwriters Class A-1 Notes Class A-2 Notes Certificates
<S> <C> <C> <C>
Salomon Smith Barney Inc. $ 56,000,000 $26,250,000 $ 5,250,000
Banc One Capital Markets, Inc. 56,000,000 26,250,000 5,250,000
------------ ----------- -----------
Total $112,000,000 $52,500,000 $10,500,000
============ =========== ===========
</TABLE>
The Seller has been advised by the underwriters that they propose
initially to offer the Notes and Certificates to the public at the prices set
forth herein, and to certain dealers at such prices less the initial
concession not in excess of 0.13% per Class A-1 Note, 0.16% per Class A-2
Note and 0.35% per Certificate. The underwriters may allow and such dealers
may reallow a concession not in excess of 0.09% per Class A-1 Note, 0.12% per
Class A-2 Note and 0.26% per Certificate to certain other dealers. After the
initial public offering of the Notes and Certificates, the public offering
price and such concessions may be changed.
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<PAGE>
Until the distribution of the Notes and Certificates is completed,
rules of the Commission may limit the ability of the underwriters and certain
selling group members to bid for and purchase the Notes and Certificates. As
an exception to these rules, the underwriters are permitted to engage in
certain transactions that stabilize the price of the Notes and Certificates.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Notes and Certificates.
There is currently no secondary market for the Notes or Certificates
and you should not assume that one will develop. The underwriters currently
expect, but are not obligated to make a market in the Notes and Certificates.
You should not assume 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 Notes and Certificates. Such
transactions may include the purchase of Notes and/or Certificates to cover
syndicate short positions. If the underwriters create a short position in the
Notes and Certificates in connection with the offering, I.E., if it sells
more Notes and Certificates than are set forth on the cover page of this
Prospectus Supplement, the underwriters may reduce that short position by
purchasing Notes and 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.
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
Notes and Certificates. 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
Notes and 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 Notes and Certificates 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 it in relation to the Notes and 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 Notes and 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 the Trust
Depositor will indemnify the underwriters against certain liabilities,
including liabilities under the Notes and Certificates Act, or contribute to
payments the underwriters may be required to make in respect thereof.
In the ordinary course of their respective businesses, the
underwriters and their respective affiliates have engaged and may in the
future engage in investment banking or commercial banking transactions with
Harley-Davidson, Inc., Harley-Davidson Credit Corp., Harley-Davidson
Financial Services, Inc. or any of their respective affiliates.
S-51
<PAGE>
RATINGS OF THE SECURITIES
It is a condition of issuance that each of the Class A-1 Notes and
Class A-2 Notes be rated "AAA" by Standard & Poor's Rating Services and "Aaa"
by Moody's Investors Services, Inc. and the Certificates be rated at least
"BBB" by Standard & Poor's Rating Services and "Baa1" by Moody's Investors
Services, Inc.
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 Notes and Certificates.
LEGAL MATTERS
Certain legal matters with respect to the Notes and Certificates,
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.
REPORTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS
Unless and until the Notes and Certificates are issued in physical
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
Notes and Certificates. No financial reports will be sent to you. See
"CERTAIN INFORMATION REGARDING THE NOTES AND CERTIFICATES -- BOOK-ENTRY
REGISTRATION" and "-- STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS" in
this Prospectus Supplement. 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" or the "SEC") such periodic reports with respect
to the Trust as are required under the Securities Exchange Act of 1934, as
amended and the rules and regulations of the Securities and Exchange
Commission thereunder.
We filed a registration statement relating to the Notes and
Certificates with the Commission. This Prospectus is part of the registration
statement, but the registration statement includes additional information.
The Servicer will file with the Commission all required reports and
other information about the Trust.
You may read and copy any reports, statements or other information
we file at the Commission's reference room in Washington, D.C. You can
request copies of these documents, upon payment of a duplicating fee, by
writing to the Commission. Please call the Commission at (800) SEC-0330 for
further information on the operation of the public reference rooms. Our
filings with the Commission are also available to the public on the SEC
Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this Prospectus. Information that we file later
with the SEC will automatically update the information in this Prospectus. In
all cases, you should rely on the later information over different
information included in this Prospectus or the accompanying Prospectus
Supplement. We incorporate by reference any future annual, monthly and
special SEC reports and proxy materials filed by or on behalf of the Trust
until we terminate our offering of the Notes and Certificates.
As a recipient of this Prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents
(unless the exhibits are specifically incorporated by reference), at no cost,
by writing or calling us at:
Harley-Davidson Financial Services, Inc.
150 South Wacker, Suite 3100
Chicago, Illinois 60606
Attention: Treasurer (telephone (312) 368-9501;
facsimile (312) 368-4372).
S-52
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes
and Certificates (the "GLOBAL NOTES AND CERTIFICATES") will be available only
in book-entry form. Investors in the Global Notes and Certificates may hold
such Global Notes and Certificates through DTC and, in the case of the Notes,
Cedel or Euroclear. The Global Notes and Certificates 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 Notes and
Certificates 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 Notes
and Certificates 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 Notes and Certificates 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 Notes and Certificates 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 Notes and Certificates will be held in book-entry form by
DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the
Global Notes and Certificates 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 Notes and Certificates
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 Notes and Certificates
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 Notes and
Certificates 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.
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 Notes and Certificates 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 Notes and Certificates against
payment. Payment will include interest
S-53
<PAGE>
accrued on the Global Notes and Certificates 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 Notes and Certificates. After settlement has been
completed, the Global Notes and Certificates 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 Notes and Certificates credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest
on the Global Notes and Certificates 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 Notes and Certificates 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 Notes and Certificates would incur overdraft
charges for one day, assuming they cleared the overdraft when the Global
Notes and Certificates were credited to their accounts. However, interest on
the Global Notes and Certificates would accrue from the value date.
Therefore, in many cases the investment income on the Global Notes and
Certificates 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 Notes
and Certificates 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 Notes and Certificates 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
Notes and Certificates 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 Notes and Certificates from 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;
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<PAGE>
(b) borrowing the Global Notes and Certificates in the U.S. from a
DTC Participant no later than one day prior to settlement,
which would give the Global Notes and Certificates 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 Notes and Certificates 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 Notes and Certificates 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.
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 Notes and Certificates. Investors are advised to consult their
own tax advisors for specific tax advice concerning their holding and
disposing of the Global Notes and Certificates.
S-55
<PAGE>
GLOSSARY OF TERMS
AGGREGATE PRINCIPAL BALANCE is the sum of the Principal Balances of each
outstanding Contract and the amounts in the Pre-Funding Account. At the time
of initial issuance of the Notes and Certificates, the initial aggregate
principal amount of the Notes and Certificates will equal the Aggregate
Principal Balance plus the initial deposit into the Pre-Funding Account.
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.
AGREEMENT means the Sale and Servicing Agreement dated as of November 1, 1999
among the Trust Depositor, the Trust, the Indenture Trustee and
Harley-Davidson Credit Corp., as Servicer.
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 a repurchase of the Contracts when the aggregate principal
balance of the Contracts owned by the Trust has declined to less than 10% of
the aggregate principal balance of the Contracts owned by the Trust as of the
Closing Date, (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 the sum of 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 a repurchase of the Contracts when the aggregate principal balance of
the Contracts owned by the Trust has declined to less than 10% of the
aggregate principal balance of the Contracts owned by the Trust as of the
Closing Date.
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
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. 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.
BUSINESS DAY means 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.
CARRYING CHARGES are equal to the sum of (i) the product of (x) the weighted
average of the Class A-1 Note interest rate, the Class A-2 Note interest rate
and the Certificate interest 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) and (ii) trustees' fees due for the
related Distribution Date, minus (iii) the amount of any investment earnings
on funds in
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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 $10,500,000 on the Closing Date and thereafter
shall equal $10,500,000 reduced by all amounts allocable to principal
previously distributed to Certificateholders.
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 means the Certificate Distribution Account
described in this Prospectus Supplement under "CERTAIN INFORMATION REGARDING
THE NOTES AND CERTIFICATES -- THE ACCOUNTS -- THE NOTE AND CERTIFICATE
DISTRIBUTION ACCOUNT."
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.
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 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.
CERTIFICATES means the 7.41% Harley-Davidson Motorcycle Contract Backed
Certificates described in this Prospectus Supplement.
CLASS A-1 NOTEHOLDERS means the holders of the Class A-1 Notes.
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CLASS A-2 NOTEHOLDERS means the holders of the Class A-2 Notes.
CLASS A-1 NOTES means the 6.22% Harley-Davidson Motorcycle Contract Backed
Notes, Class A-1 described in this Prospectus Supplement.
CLASS A-2 NOTES means the 6.55% Harley-Davidson Motorcycle Contract Backed
Notes, Class A-2 described in this Prospectus Supplement.
CLOSING DATE is on or about November 17, 1999.
COLLECTION ACCOUNT means the Collection Account described in this Prospectus
Supplement under "CERTAIN INFORMATION REGARDING THE NOTES AND CERTIFICATES
- -- THE ACCOUNTS."
CONTRACTS are fixed-rate simple interest conditional sales contracts relating
to motorcycles manufactured by Harley-Davidson or, in a limited number of
instances, motorcycles manufactured by Buell Motorcycle Company, an affiliate
of Harley-Davidson
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.
CUTOFF DATE means November 1, 1999 or a subsequent date designated by the
Trust Depositor as the date as of which Subsequent Contracts are deemed sold
to the Trust and pledged to the Indenture Trustee.
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).
DETERMINATION DATE is 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.
DISTRIBUTION DATE means the fifteenth day of each calendar month during the
term of the Agreement (or, if such day is not a Business Day, on the next
succeeding Business Day) commencing December 15, 1999.
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
November 30, 1999.
ELIGIBLE INVESTMENTS means investments 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 Notes and Certificates
EXCESS AMOUNTS has the meaning given such term in this Prospectus Supplement
under "CERTAIN INFORMATION REGARDING NOTES AND CERTIFICATES -- DISTRIBUTIONS
ON THE NOTES AND CERTIFICATES -- DEPOSITS TO THE NOTE AND CERTIFICATE
DISTRIBUTION ACCOUNT; PRIORITY OF PAYMENTS."
FUNDING PERIOD is the 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 $150,000, (b) the date on which an Event of
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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.
HARLEY-DAVIDSON means Harley-Davidson, Inc., a Wisconsin corporation.
INITIAL CONTRACTS are the Contracts that the Trust Depositor will sell,
transfer and assign to the Trust pursuant to the Agreement, and that the
Trust will pledge to the Trust pursuant to the Indenture on the Closing Date.
INDENTURE means the Indenture dated as of November 1, 1999 between the
Indenture Trustee and the Trust.
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.
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 annual
interest rate stated in such Liquidated Contract 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.
NOTE DISTRIBUTION ACCOUNT means the Note Distribution Account described in
this Prospectus Supplement under "CERTAIN INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- THE ACCOUNTS -- THE NOTE AND CERTIFICATE DISTRIBUTION
ACCOUNT."
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 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 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
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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 is (i) 100%, 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; (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.
NOTES means the Class A-1 Notes and Class A-2 Notes.
OBLIGORS means the obligors on the Contracts which are from time to time
sold, transferred and assigned to the Trust.
OWNER TRUSTEE means Wilmington Trust Company, a Delaware banking corporation.
PRE-FUNDING ACCOUNT means the Pre-Funding Account described in this
Prospectus Supplement under "CERTAIN INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- THE ACCOUNTS."
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.
PRINCIPAL DISTRIBUTABLE AMOUNT means, with respect to any Distribution Date,
the Aggregate Principal Balance Decline for such Distribution date.
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RATING AGENCIES means Standard & Poor's Ratings Services, A Division of The
McGraw-Hill Companies and Moody's Investors Service, Inc.
RESERVE FUND means the Reserve Fund described in this Prospectus Supplement
under "CERTAIN INFORMATION REGARDING THE NOTES AND CERTIFICATES -- THE
ACCOUNTS."
RESERVE FUND AVAILABLE AMOUNT equals the amount of all funds on deposit in
the Reserve Fund.
RESERVE FUND DEPOSITS are collectively, Excess Amounts, Subsequent Reserve
Fund Amounts and the Reserve Fund Initial Deposit.
SELLER means Harley-Davidson Credit Corp., a Nevada corporation.
Harley-Davidson Credit Corp. is a 100% owned subsidiary of Harley-Davidson
Financial Services, Inc.
SERVICER means Harley-Davidson Credit Corp., a Nevada corporation.
Harley-Davidson Credit Corp. is a 100% owned subsidiary of Harley-Davidson
Financial Services, Inc.
SPECIFIED RESERVE FUND BALANCE is the amount calculated under "CERTAIN
INFORMATION REGARDING THE NOTES AND CERTIFICATES -- THE ACCOUNTS -- THE
RESERVE FUND."
SUBSEQUENT CONTRACTS means the Contracts that the Trust Depositor will be
obligated to purchase pursuant to the Transfer and Sale Agreement and that
the Trust will be obligated to purchase and pledge pursuant to the Agreement
and the Indenture during the period between the Closing Date and the last day
of the Funding Period.
SUBSEQUENT RESERVE FUND AMOUNT is the amount on each Subsequent Transfer Date
equal to 0.50% of the aggregate balance of the Subsequent Contracts conveyed
to the Trust.
SUBSEQUENT TRANSFER DATE means each date on which Subsequent Contracts are
conveyed to the Trust and simultaneously pledged to the Indenture Trustee.
TERMINATION EVENT shall have the meaning given to it in this Prospectus
Supplement under "CERTAIN INFORMATION REGARDING THE NOTES AND
CERTIFICATES -- TERMINATION."
TRANSFER AND SALE AGREEMENT means the Transfer and Sale Agreement dated as of
November 1, 1999 between the Seller and the Trust Depositor.
TRUST means the Harley-Davidson Eaglemark Motorcycle Trust 1999-3.
TRUST AGREEMENT means the Trust Agreement dated as of November 1, 1999
between the Trust Depositor and the Owner Trustee.
TRUST DEPOSITOR means Eaglemark Customer Funding Corporation-IV, a 100% owned
subsidiary of Harley-Davidson Credit Corp.
TRUSTEES means the Owner Trustee and the Indenture Trustee.
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<PAGE>
PROSPECTUS
HARLEY-DAVIDSON EAGLEMARK MOTORCYCLE TRUSTS
HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES
HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES
HARLEY-DAVIDSON CREDIT CORP.
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 Harley-Davidson
Credit Corp. (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.
Except as otherwise provided in the related 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 12 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, HARLEY-DAVIDSON FINANCIAL SERVICES, INC., HARLEY-DAVIDSON CREDIT CORP., 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 November 9, 1999.
<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, Harley-Davidson Credit Corp., 4150 Technology
Way, Carson City, Nevada 89706; telephone (702) 886-3200.
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<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 62.
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 Harley-Davidson Credit Corp.,
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 . . . . . . . . . . . . . Harley-Davidson Credit Corp. (also referred
to herein as the "SELLER" or the "COMPANY"),
a Nevada corporation, a 100% owned subsidiary
of Harley-Davidson Financial Services, Inc.
("HARLEY-DAVIDSON 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 "HARLEY-DAVIDSON
FINANCIAL SERVICES, INC.; HARLEY-DAVIDSON
CREDIT CORP.; AND THE TRUST DEPOSITORS".
Trust Depositor. . . . . . . . . With respect to each series of Securities, a
special-purpose finance subsidiary of the
Company.
Servicer . . . . . . . . . . . . Harley-Davidson Credit Corp. (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
Prospectus Supplement will specify which
class or classes of Notes and/or Certificates
of the related series are being offered
thereby.
3
<PAGE>
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 Notes will
be redeemed as set forth in the related
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 (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 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
4
<PAGE>
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.
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).
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<PAGE>
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
"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)
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<PAGE>
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 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.
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<PAGE>
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 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.
Harley-Davidson Credit Corp., as Seller under
the related
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<PAGE>
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 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.
9
<PAGE>
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
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
10
<PAGE>
"SUMMARY OF TERMS -- RATINGS" herein and
"RISK FACTORS - RATINGS OF THE SECURITIES"
in the related Prospectus Supplement.
11
<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 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
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be amended to reflect the conveyance and assignment of Harley-Davidson
Credit Corp.'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, Harley-Davidson Credit
Corp. 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 Harley-Davidson Credit Corp. to repurchase such
Contract from the Trust Depositor (which right of the Trust Depositor against
Harley-Davidson Credit Corp. 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 Harley-Davidson Credit Corp. 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.
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
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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 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
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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."
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 Harley-Davidson Credit Corp.
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 Harley-Davidson Credit Corp. 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
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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 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.
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Harley-Davidson Financial, the parent of Harley-Davidson Credit
Corp., is addressing the Year 2000 issue from a corporate perspective. In
1997, Harley-Davidson Credit Corp. 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. Harley-Davidson Credit Corp. has completed an investigation of
the impact of Year 2000 on its internal applications that include PC-based
and mid-range platforms and products. Harley-Davidson Credit Corp. currently
does not support mainframe systems in-house. As of June 30, 1999,
Harley-Davidson Credit Corp. believes it is fully Year 2000 compliant with
its internal, critical systems. As a prerequisite to purchase, all new or
replacement systems acquired by Harley-Davidson Credit Corp. 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, Harley-Davidson Credit Corp. is tracking the progress of its
third-party processors for Year 2000 compliance. Harley-Davidson Credit
Corp. 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.
Harley-Davidson Credit Corp. expects all of its third-party
providers to find and correct Year 2000 deficiencies. To this end,
Harley-Davidson Credit Corp. is continuing to assess the readiness of its
third-party providers whose system disruptions or data delivery would be
problematic to Harley-Davidson Credit Corp.. Harley-Davidson Credit Corp.
has sent its third-party providers a Year 2000 questionnaire to assist in its
evaluation of their Year 2000 compliance efforts. Harley-Davidson Credit
Corp. is in the process of finalizing a critical supplier list for additional
inquiries and follow-up until their Year 2000 readiness is confirmed.
Management does not anticipate that the total cost to Harley-Davidson
Credit Corp. 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 1999 budgets and none of the costs relating to such activities
will be paid out of the Trust Property.
If Harley-Davidson Credit Corp., 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.
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 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
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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
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
Generally, no more than 5% of the aggregate principal balance of
contracts financed by Harley-Davidson Credit Corp. are secured by Motorcycles
manufactured by Buell. The percentage of Contracts in a Trust secured by
motorcycles manufactured by Buell cannot be determined. Not more than 10.0%
of the Contracts (including all
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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
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.
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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
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
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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.
HARLEY-DAVIDSON FINANCIAL SERVICES, INC.; HARLEY-DAVIDSON CREDIT CORP.;
AND THE TRUST DEPOSITORS
HARLEY-DAVIDSON FINANCIAL SERVICES, INC.
Harley-Davidson Financial Services, Inc. (formerly known as Eaglemark
Financial Services, Inc.) 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 Harley-Davidson Financial is a 97.8% owned subsidiary
of Harley-Davidson. The business of Harley-Davidson Financial, through its 100%
ownership of Harley-Davidson Credit Corp., has been to provide wholesale and
retail financing, credit card and insurance services to Dealers and customers of
Harley-Davidson.
HARLEY-DAVIDSON CREDIT CORP.
Harley-Davidson Credit Corp. was incorporated as a Nevada
corporation in 1992 and is a wholly-owned subsidiary of Harley-Davidson
Financial. Harley-Davidson Credit Corp. began operations in January 1993
when it purchased the $85 million wholesale financing portfolio of certain
Harley-Davidson Dealers from ITT Commercial Finance; subsequently,
Harley-Davidson Credit Corp. entered the retail consumer finance business.
Harley-Davidson Credit Corp. 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." Harley-Davidson Credit Corp. also finances
extended service contracts on Motorcycles. Harley-Davidson Credit Corp.'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
Harley-Davidson Credit Corp. while improving revenue and profits over time.
Harley-Davidson Credit Corp.'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 Harley-Davidson Credit Corp..
All of the officers and directors of each Trust Depositor will be employed by
Harley-Davidson Credit Corp. or Harley-Davidson Financial, except that at
least two directors of each Trust Depositor shall at all times be independent
of Harley-Davidson Credit Corp., Harley-Davidson 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.
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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
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
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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".
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 interest or a default in respect of a covenant or provision of
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such Indenture that cannot be modified without the waiver or consent of all the
holders of each such outstanding Note.
No holder of a Not`Lof any series will have the rielt to institute
any proceeding p_th respect to the related Indei,ure, unless (i) such holder
pra&iously has given to the applicc_le Indenture Trustee written nh_ice of a
continuing Event of D`_ault, (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.
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
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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.
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.
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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 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
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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 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.
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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.
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.
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"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 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
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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, 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
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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 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
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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
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;
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(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;
(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) or each such date during the Funding Period (if any), the
remaining Pre-Funded Amount;
(xii) or 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) or each such date during the Revolving Period (if any), the
remaining amount in the Collateral Reinvestment Account; and
(xiv) or 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
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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
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
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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 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.
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
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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 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
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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 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
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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.
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
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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.
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
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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.
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 Harley-Davidson
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 Harley-Davidson Credit Corp.'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
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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.
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 tht 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
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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.
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.
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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 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
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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 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
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
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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.
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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, 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.
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
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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 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
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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 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
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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, 2000, 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 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
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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 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
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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 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
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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 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
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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,
2000, 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 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.
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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 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.
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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 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,
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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 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,
2000, 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
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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.
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.
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SENIOR CERTIFICATES
The following discussion applies only to nonsubordinate Certificates
(referred to herein as "SENIOR CERTIFICATES") issued by a Grantor Trust.
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.
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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.
61
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
ADMINISTRATION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ADMINISTRATION FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ADMINISTRATOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ADVANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
APPLICABLE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
BASE RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
BUELL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
CALCULATION AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CALCULATION DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28, 29, 30
CD RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CD RATE DETERMINATION DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CD RATE SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CERTIFICATE BALANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
CERTIFICATE DISTRIBUTION ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . 36
CERTIFICATE POOL FACTOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
CERTIFICATEHOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
COLLATERAL REINVESTMENT ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . .6
COLLECTION ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
COMMERCIAL PAPER RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
COMMERCIAL PAPER RATE DETERMINATION DATE . . . . . . . . . . . . . . . . . . . . . 28
COMMERCIAL PAPER RATE SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . 27
COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
COMPOSITE QUOTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7
CUTOFF DATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DEFINITIVE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
DEFINITIVE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
DEFINITIVE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
DEPOSITORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
DISTRIBUTION DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DUE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
EAGLEMARK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
EAGLEMARK FINANCIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
EARLY AMORTIZATION EVENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
ELIGIBLE DEPOSIT ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ELIGIBLE INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
FASIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
FEDERAL FUNDS RATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
FEDERAL FUNDS RATE DETERMINATION DATE. . . . . . . . . . . . . . . . . . . . . . . 29
FEDERAL FUNDS RATE SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
FEDERAL TAX COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
FIXED RATE SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
FLOATING RATE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
FOREIGN PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
FTC RULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
FUNDING PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
GRANTOR TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
H.15(519). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
62
<PAGE>
INDENTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
INDEX MATURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
INDIRECT PARTICIPANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
INITIAL CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
INITIAL CUTOFF DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
INITIAL POOL BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
INSOLVENCY EVENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
INTEREST RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
INTEREST RESET DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
INTEREST RESET PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
INVESTMENT EARNINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
LIBOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
LIBOR BUSINESS DAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
LIBOR DETERMINATION DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
LIBOR SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
LIEN CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
MANDATORY SPECIAL REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
MONEY MARKET YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
MOTORCYCLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
NOTE DISTRIBUTION ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
NOTE POOL FACTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
NOTEHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
OBLIGOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
OID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
OTHER MANUFACTURERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
OWNER TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
PASS-THROUGH RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
POOL BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
POOLING AND SERVICING AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .3
PRE-FUNDED AMOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
PRE-FUNDING ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
PURCHASE AMOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
RATING AGENCY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
REGISTRAR OF TITLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
RELATED DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
RESERVE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
REVOLVING PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SALE AND SERVICING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
SCHEDULE OF CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECURITY OWNERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECURITYHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SERVICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
SERVICER DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SERVICING FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SERVICING FEE RATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SPREAD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SPREAD MULTIPLIER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
STRIP CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
STRIP NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SUBSEQUENT CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
63
<PAGE>
SUBSEQUENT PURCHASE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SUBSEQUENT TRANSFER DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TELERATE PAGE 3750 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
TRANSFER AND SALE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
TREASURY BILLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
TREASURY RATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
TREASURY RATE DETERMINATION DATE . . . . . . . . . . . . . . . . . . . . . . . . . 30
TREASURY RATE SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
TRUST ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
TRUST AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
UNDERWRITING AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
64
<PAGE>
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.
$175,000,000
HARLEY-DAVIDSON EAGLEMARK
MOTORCYCLE TRUST 1999-3
$112,000,000 6.22% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-1
$52,500,000 6.55% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED NOTES, CLASS A-2
$10,500,000 7.41% HARLEY-DAVIDSON MOTORCYCLE CONTRACT BACKED CERTIFICATES
HARLEY-DAVIDSON CREDIT CORP.
SELLER AND SERVICER
EAGLEMARK CUSTOMER
FUNDING CORPORATION-IV
TRUST DEPOSITOR
---------------------
PROSPECTUS SUPPLEMENT
---------------------
SALOMON SMITH BARNEY
BANC ONE CAPITAL MARKETS, INC.
