<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1998
REGISTRATION NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION
(SPONSOR OF THE TRUSTS DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 91-1904587
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION
OF INCORPORATION OR ORGANIZATION) NO.)
655 MARYVILLE CENTRE DRIVE
ST. LOUIS, MISSOURI 63141
(314) 523-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD C. GOLDMAN
SENIOR VICE PRESIDENT AND CHIEF LEGAL OFFICER
DEUTSCHE FINANCIAL SERVICES CORPORATION
655 MARYVILLE CENTRE DRIVE
ST. LOUIS, MISSOURI 63141
(314) 523-3905
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MARC L. KLYMAN, ESQ. STUART M. LITWIN, ESQ.
MAYER, BROWN & PLATT MAYER, BROWN & PLATT
190 S. LASALLE STREET 190 S. LASALLE STREET
CHICAGO, ILLINOIS 60603 CHICAGO, ILLINOIS 60603
(312) 701-8053 (312) 701-7373
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined
by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Asset Backed Securities.......... $1,000,000 100% $1,000,000 $295
</TABLE>
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(1) The Registration Statement relates to the initial offering from time to
time of the Asset Backed Notes and Asset Backed Certificates and to any
resales thereof in market making transactions by an underwriter to the
extent required.
(2) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INTRODUCTORY NOTE
This Registration Statement contains three forms of Prospectus relating to
the offering by various Trusts of series of Asset Backed Notes and/or Asset
Backed Certificates secured by (i) recreational vehicle and boat receivables
("Prospectus Version #1"), (ii) recreational vehicle receivables ("Prospectus
Version #2") or (iii) boat receivables ("Prospectus Version #3"), created from
time to time by Deutsche Recreational Asset Funding Corporation, and seven
forms of Prospectus Supplement relating to the offering by a Trust of the
particular series of Asset Backed Notes and Asset Backed Certificates or of
Asset Backed Certificates, as applicable, described therein. Prospectus
Supplement Versions #1A and #1B relate to recreational vehicle and boat
receivables in the case of an owner trust and a grantor trust, respectively,
and correspond to Prospectus Version #1. Prospectus Supplement Versions #2A
and #2B relate to recreational vehicle receivables in the case of an owner
trust and a grantor trust, respectively, and correspond to Prospectus Version
#2. Prospectus Supplement Versions #3A and #3B relate to boat receivables in
the case of an owner trust and a grantor trust, respectively, and correspond
to Prospectus Version #3. Prospectus Supplement Version #4 is a form of market
making prospectus supplement. Each form of Prospectus Supplement relates only
to the securities described therein and is a form that may be used, among
others, by the registrant to offer Asset Backed Notes and/or Asset Backed
Certificates under this Registration Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS +
+SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO +
+REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
VERSION #1
[BOATS AND RECREATIONAL VEHICLES]
SUBJECT TO COMPLETION, DATED [ ], 1998
PROSPECTUS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
(EACH ISSUABLE IN SERIES)
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DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION
DEPOSITOR
-----------
The Asset Backed Notes (the "Notes") and the Asset 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 may include one or more classes of Notes and/or one or more
classes of Certificates, will be issued by a trust 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 Deutsche Recreational Asset
Funding Corporation (the "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 Depositor and Deutsche
Financial Services Corporation, as servicer (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. The related Prospectus Supplement
will specify which class or classes of Notes, if any, and which class or
classes of Certificates, if any, of the related series are being offered
thereby. The property of each Trust will include a pool of retail installment
sale contracts, installment loans, or notes (the "Receivables") secured by new
or used (i) recreational vehicles and/or (ii) recreational sport and power
boats (including any boat motors and accompanying trailers) and yachts (both
power and sail), certain monies due or received thereunder on and after the
applicable Cutoff Date set forth in the related Prospectus Supplement, security
interests in the items financed thereby and certain other property, all as
described herein and in the related Prospectus Supplement. 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") to be
established with the Indenture Trustee, which may be used to acquire additional
Receivables (the "Subsequent Receivables") from the Depositor from time to time
during the Funding Period specified in the related Prospectus Supplement.
Each class of Securities of any series will represent the right to receive a
specified amount of payments on the related Receivables, at the rates, on the
dates and in the manner described herein and in the related Prospectus
Supplement. If a series includes multiple classes of Securities, the rights of
one or more classes of Securities to receive payments may be senior or
subordinate to the rights of one or more of the other classes of such series.
Distributions on Certificates of a series may be subordinated in priority to
payments due on any related Notes 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 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 distributions in respect of the Certificate Balance 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 Receivables) on the related Receivables. 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 REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [19] HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
ANY NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED BY,
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEUTSCHE FINANCIAL SERVICES
CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES, THE
CERTIFICATES OR THE RECEIVABLES ARE GUARANTEED OR INSURED BY ANY GOVERNMENT
AGENCY OR INSTRUMENTALITY.
-----------
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.
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, 199 .
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AVAILABLE INFORMATION
Deutsche Recreational Asset Funding Corporation (the "Depositor") has filed
with the Securities and Exchange Commission (the "Commission") a Registration
Statement (together with all amendments and exhibits thereto, referred to
herein as the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Notes and the Certificates
offered pursuant to this Prospectus. For further information, reference is
made to the Registration Statement which may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; and at the Commission's regional offices 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 the Registration Statement may be obtained from the Public Reference
Section of the Commission at 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, including Deutsche Recreational Asset Funding
Corporation, that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor as originator of the Trust referred to
in the accompanying Prospectus Supplement, pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), subsequent to the date of this Prospectus and prior to the termination
of the offering of the Securities offered by such Trust shall be deemed to be
incorporated by reference in this Prospectus. 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 any subsequently filed
document which 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 Depositor will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any or
all of the documents incorporated herein or in any related Prospectus
Supplement by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to Secretary, Deutsche
Recreational Asset Funding Corporation, 655 Maryville Centre Drive, St. Louis,
Missouri 63141, telephone number (314) [523-3000].
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2
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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".
Issuer........................ With respect to each series of Securities, the
trust (referred to herein as the "Trust" or the
"Issuer") to be formed pursuant to either a
Trust Agreement (as amended and supplemented
from time to time, a "Trust Agreement") between
the Depositor and the trustee specified in the
related Prospectus Supplement (the "Trustee")
or a Pooling and Servicing Agreement (as
amended and supplemented from time to time, the
"Pooling and Servicing Agreement") among the
Trustee, the Depositor and the Servicer.
Depositor..................... Deutsche Recreational Asset Funding
Corporation.
Transferor.................... Ganis Credit Corporation ("Ganis").
Servicer...................... Deutsche Financial Services Corporation (the
"Servicer").
Trustee....................... With respect to each series of Securities, the
Trustee will be specified in the related
Prospectus Supplement.
Indenture Trustee............. With respect to any applicable series of
Securities, the Indenture Trustee will be
specified in the related Prospectus Supplement.
The Notes..................... A series of Securities may include one or more
classes of Notes, which will be issued pursuant
to an Indenture between the Trust and the
Indenture Trustee (as amended and supplemented
from time to time, an "Indenture"). The related
Prospectus Supplement will specify which class
or classes, if any, of Notes of the related
series are being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be available
for purchase in minimum denominations of $1,000
and will be available in book-entry form only.
Unless otherwise specified in the related
Prospectus Supplement, Noteholders will be able
to receive Definitive Notes only in the limited
circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the Securities--
Definitive Securities".
Except in the case of any Strip Notes, as
described below, each class of Notes will have
a stated principal amount and will bear
interest at a specified rate or rates
3
<PAGE>
(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 the Interest Rate.
With respect to a series that includes two or
more classes of Notes, each class may differ as
to the timing and priority of payments,
seniority, allocations of losses, Interest Rate
or amount of payments of principal or interest,
or 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 Receivables Pool. 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.
If the Servicer exercises its option to
purchase the Receivables of a Trust (or, if not
and, if and to the extent provided in the
related Prospectus Supplement, satisfactory
bids for the purchase of such Receivables are
received), in the manner and on the respective
terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination", 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 a Pre-Funding
Account (as such term is defined in the related
Prospectus Supplement, the "Pre-Funding
Account"), one or more classes of the
outstanding Notes may be subject to partial
redemption on or immediately following the end
of the Funding Period (as such term is defined
in the related Prospectus Supplement, the
"Funding Period") in an amount and manner
specified in the related 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.............. A series may include one or more classes of
Certificates and may or may not include any
Notes. The related Prospectus Supplement will
specify which class or classes, if any, of the
Certificates are being offered thereby.
4
<PAGE>
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in a minimum
denomination of $1,000 and will be available in
book-entry form only. Unless otherwise
specified in the related Prospectus Supplement,
Certificateholders will be able to receive
Definitive Certificates only in the limited
circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the Securities--
Definitive Securities".
Except in the case of any Strip Certificates,
as described below, each class of Certificates
will have a stated Certificate Balance
specified in the related Prospectus Supplement
(the "Certificate Balance") and will accrue
interest on such Certificate Balance at a
specified rate (with respect to each class of
Certificates, the "Pass Through Rate"). Each
class of Certificates may have a different Pass
Through Rate, which may be a fixed, variable or
adjustable Pass Through Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the Pass
Through Rate for each class of Certificates or
the method for determining the Pass Through
Rate.
With respect to a series that includes two or
more classes of Certificates, each class may
differ as to 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 Receivables Pool.
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 in respect of the
Certificates may be subordinated in priority of
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
If the Servicer exercises its option to
purchase the Receivables of a Trust (or, if
not, and if and to the extent
5
<PAGE>
provided in the related Prospectus Supplement,
satisfactory bids for the purchase of such
Receivables are received), in the manner and on
the respective terms and conditions described
under "Description of the Transfer and
Servicing Agreements--Termination",
Certificateholders will receive as a prepayment
an amount in respect of the Certificates as
specified in the related Prospectus Supplement.
In addition, if the related Prospectus
Supplement provides that the property of a
Trust will include a Pre-Funding Account,
Certificateholders may receive a partial
prepayment of principal on or immediately
following the end of the Funding Period in an
amount and manner specified in the related
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.
Trust Property................ The property of each Trust will include a pool
of retail installment sale contracts,
installment loans, or notes (the "Receivables")
secured by new or used (i) recreational
vehicles (the "Financed Recreational Vehicles")
and/or (ii) recreational sport and power boats
(including any boat motors and accompanying
trailers) and yachts (both power and sail) (the
"Financed Boats"; the Financed Recreational
Vehicles and Financed Boats being referred to
collectively as the "Financed Assets"),
collections and other payments with respect to
the Receivables received after the date
specified in the related Prospectus Supplement
(the ("Cutoff Date") and monies on deposit in
certain trust accounts. On or prior to the
Closing Date specified in the related
Prospectus Supplement with respect to a Trust,
the Transferor will transfer Receivables (the
"Initial Receivables") having an aggregate
principal balance as of the Cutoff Date to the
Depositor, which will transfer the Initial
Receivables to such Trust on or prior to the
Closing Date pursuant to either a Transfer and
Servicing Agreement among the Depositor, the
Servicer and the Trustee (as amended and
supplemented from time to time, a "Transfer and
Servicing Agreement") or, if the Trust is to be
treated as a grantor trust for federal income
tax purposes, the related Pooling and Servicing
Agreement among the Depositor, the Servicer and
the Trustee. The property of each Trust will
also include amounts on deposit in certain
trust accounts, including the related
Collection Account, any Pre-Funding Account,
and any other account identified in the
applicable Prospectus Supplement.
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<PAGE>
To the extent provided in the related
Prospectus Supplement, the Transferor will be
obligated (subject only to the availability
thereof) to transfer to the Depositor which
will be obligated to acquire and transfer to
the related Trust, and such Trust will then be
obligated to acquire (subject to the
satisfaction of certain conditions described in
the applicable Transfer and Servicing Agreement
or Pooling and Servicing Agreement), additional
Receivables (the "Subsequent Receivables") from
time to time (as frequently as daily) during
the Funding Period specified in the related
Prospectus Supplement having an aggregate
principal balance approximately equal to the
amount on deposit in the Pre-Funding Account
(the "Pre-Funded Amount") on such Closing Date.
With respect to any Trust that is to be treated
as a grantor trust for federal income tax
purposes, the Funding Period, if any, will not
exceed 90 days in length from the Closing Date,
and with respect to any other Trust will not
exceed one year in length from the Closing Date
unless otherwise specified in the applicable
Prospectus Supplement. With respect to each
Trust, the Pre-Funded Amount on the Closing
Date will not exceed 25% of the aggregate
initial principal balance of the Securities
unless otherwise specified in the applicable
Prospectus Supplement.
Credit and Cash Flow If and to the extent specified in the related
Enhancement................... Prospectus Supplement, credit and cash flow
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, a
Reserve Account, 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 or
accounts, other agreements with respect to
third party payments or other support, cash
deposits or other arrangements. Unless
otherwise specified in the related Prospectus
Supplement, any form of credit or cash flow
enhancement will have certain limitations and
exclusions from coverage thereunder, which will
be described in the related Prospectus
Supplement.
Transfer and Servicing With respect to each Trust, the Transferor will
Agreements.................... transfer the related Receivables to the
Depositor, which, in turn, will transfer the
related Receivables to such Trust pursuant to a
Transfer and Servicing Agreement or a Pooling
and Servicing Agreement. The rights and
benefits of any Trust under a Transfer and
Servicing Agreement will be transferred to the
Indenture Trustee
7
<PAGE>
as collateral for the Notes of the related
series. If so specified in the related
Prospectus Supplement, the person specified
therein as Administrator will undertake certain
administrative duties under an Administration
Agreement with respect to any Trust that has
issued Notes, which duties would in the absence
of an Administrator be performed for the
related Trust primarily by the related
Indenture Trustee or by the Depositor.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will
advance any interest shortfall with respect to
a Receivable to the extent that the Servicer,
in its sole discretion, expects to recoup the
advance from subsequent payments on or with
respect to the Receivables (a "Servicer
Advance"). The Servicer shall be entitled to
reimbursement of Servicer Advances from
subsequent payments on or with respect to the
Receivables to the extent described herein and
in the related Prospectus Supplement.
Unless otherwise provided in the related
Prospectus Supplement, the Depositor will be
obligated to purchase any Receivable from the
Trust, and the Transferor will be obligated to
simultaneously purchase such Receivable from
the Depositor, if the interest of the
applicable Trust in such Receivable is
materially adversely affected by a breach of
any representation or warranty made by the
Transferor with respect to the Receivable, if
the breach has not been cured following the
discovery by or notice to the Transferor and
the Depositor of the breach. If so specified in
the related Prospectus Supplement, the
Transferor or the Depositor will be permitted,
in a circumstance where it would otherwise be
required to purchase a Receivable as described
in the preceding sentence, to instead
substitute a comparable Receivable for the
Receivable otherwise requiring purchase,
subject to certain conditions and eligibility
criteria for the substitution to be summarized
in such Prospectus Supplement.
Unless otherwise provided in the related
Prospectus Supplement, the Servicer will be
obligated to purchase a Receivable if, among
other things, it extends the date for final
payment by the Obligor of such Receivable
beyond the applicable Final Scheduled Maturity
Date (as defined in the related Prospectus
Supplement, the "Final Scheduled Maturity
Date"), changes the annual percentage rate
("APR") or amount of a scheduled payment of
such Receivable or fails to maintain a
perfected security interest in the related
Financed Asset.
8
<PAGE>
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be
entitled to receive a fee for servicing the
Receivables of each Trust plus certain late
fees, prepayment charges and other
administrative fees or similar charges. See
"Description of the Transfer and Servicing
Agreements--Servicing Compensation and Payment
of Expenses" herein and in the related
Prospectus Supplement.
Certain Legal Aspects of the
Receivables..................
In connection with the transfer of Receivables
to a Trust, security interests in the Financed
Assets securing such Receivables will be
transferred by the Transferor to the Depositor
(or by the related Dealer or an Originator to
the Transferor and by the Transferor to the
Depositor) and by the Depositor to such Trust.
Due to administrative burden and expense, the
certificates of title to those Financed
Recreational Vehicles and Financed Boats
financed in states where security interests in
recreational vehicles or boats, as applicable,
are subject to certificate of title statutes
will not be amended to reflect any such
transfers, the Uniform Commercial Code ("UCC")
financing statements in respect of those
Financed Recreational Vehicles and Financed
Boats financed in states where security
interests in recreational vehicles or boats, as
applicable, are perfected by filing a UCC-1
financing statement will not be amended to
reflect such transfers, and the transfer of
liens perfected pursuant to federal law
("Preferred Mortgages") in respect of Financed
Boats documented under federal law will not be
filed as required under federal law to reflect
such transfers. In the absence of such
procedures, such Trust may not have a perfected
security interest in the Financed Recreational
Vehicles or Financed Boats in some states and
will not have a perfected security interest in
Financed Boats documented under federal law. If
such Trust does not have a perfected security
interest in a Financed Asset, its ability to
realize on such Financed Asset may be adversely
affected. To the extent the security interest
is perfected, such Trust will have a prior
claim over subsequent purchasers of such
Financed Asset and holders of subsequently
perfected security interests. However, as
against liens for repairs of Financed Assets or
for taxes unpaid by an Obligor under a
Receivable, or because of fraud or negligence,
such Trust could lose the priority of its
security interest or its security interest in
Financed Assets.
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 a transferee of
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such a loan liable to the obligor thereon for
any violation by the lender which made such
loan. Unless otherwise specified in the related
Prospectus Supplement, the Depositor will be
obligated to purchase from the Trust and the
Transferor will be obligated to simultaneously
purchase from the Depositor any Receivable
which fails to comply with such requirements if
such failure materially and adversely affects
the interest of the Trust or the Indenture
Trustee in such Receivable. The Depositor's
obligation to make such purchase is contingent
upon the Transferor performing its obligation
to purchase such Receivable from the Depositor
on account of such failure.
Tax Status.................... Unless the Prospectus Supplement specifies that
the related Trust will be treated as a grantor
trust, upon the issuance of the related series
of Securities Tax Counsel to such Trust will
deliver an opinion to the effect that, for
federal income tax purposes: (i) all or certain
specified classes of Notes of such series will
be characterized as debt and (ii) such Trust
will not be characterized as an association (or
a publicly traded partnership) taxable as a
corporation.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor
trust, upon the issuance of the related series
of Certificates, Tax Counsel to such Trust will
deliver an opinion to the effect that such
Trust will be treated as a grantor trust for
federal income tax purposes and will not be
subject to federal income tax.
See "Federal Income Tax Consequences" herein
for additional information concerning the
application of federal and state tax laws.
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
related Prospectus Supplement, and unless
otherwise specified therein, any Notes of a
series and any Certificates that are issued by
a Trust that is a grantor trust and are not
subordinated to any other class of Certificates
are eligible for purchase by employee benefit
plans.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates of any
series that are subordinated to any other
Security of that series may not be acquired by
any employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or by any
individual retirement account. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
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RISK FACTORS
CERTAIN LEGAL ASPECTS--SECURITY INTERESTS IN FINANCED ASSETS. Trusts May Not
Have A Perfected Security Interest in Certain Financed Assets. In connection
with the transfer of Receivables to a Trust, security interests in the
Financed Assets securing such Receivables will be, or will have been,
transferred by the Transferor to the Depositor and by the Depositor to such
Trust simultaneously with the transfer of such Receivables to such Trust. Due
to administrative burden and expense, (i) the certificates of title to those
Financed Recreational Vehicles and Financed Boats financed in states where
security interests in recreational vehicles or boats, as applicable, are
subject to certificate of title statutes will not be amended to reflect such
transfers, (ii) UCC financing statements in respect of those Financed
Recreational Vehicles and Financed Boats financed in states where security
interests in recreational vehicles or boats, as applicable, are perfected by
filing a UCC-1 financing statement will not be amended to reflect such
transfers and (iii) the transfer of liens created pursuant to Preferred
Mortgages in respect of Financed Boats documented under federal law will not
be filed as required by federal law to reflect such transfers. In the absence
of such procedures, such Trust may not have a perfected security interest in
the Financed Assets in some states and will not have a perfected security
interest in the Financed Boats documented under federal law.
Unless otherwise provided in the related Prospectus Supplement, the
Depositor will be obligated to purchase from the related Trust and the
Transferor will be obligated to simultaneously purchase from the Depositor any
Receivable transferred to such Trust as to which a perfected security interest
in the name of the Transferor in the Financed Asset securing such Receivable
shall not exist as of the date such Receivable is transferred to such Trust,
if such failure shall materially adversely affect the interest of such Trust
in such Receivable and if such failure shall not have been cured by the last
day of the second month following the discovery by or notice to the Transferor
of such breach. The Depositor's obligation to make such purchase is contingent
upon the Transferor performing its obligation to purchase such Receivable from
the Depositor on account of such failure. Moreover, such purchase obligations
will not address or remedy the circumstance where a perfected security
interest in the name of the Transferor in the Financed Asset securing a
Receivable has not been perfected in the related Trust as a result of the
absence of the procedures described in the preceding paragraph or for any
other reason. If such Trust does not have a perfected security interest in a
Financed Recreational Vehicle or Financed Boat, its ability to realize on such
Financed Asset in the event of a default may be adversely affected. This could
adversely affect the amount available for distribution to the Securityholders.
CERTAIN LIENS WILL HAVE PRIORITY OVER A PERFECTED SECURITY INTEREST. To the
extent the security interest is perfected, such Trust will have a prior claim
over subsequent purchasers of such Financed Asset and holders of subsequently
perfected security interests. However, as against liens for repairs of a
Financed Asset or for taxes unpaid by an Obligor under a Receivable, or
through fraud or negligence, such Trust could lose the priority of its
security interest or its security interest in a Financed Asset. In addition,
in the case of a Financed Boat, certain additional liens, including a lien for
damages arising out of a maritime tort, for wages of a stevedore when employed
directly by the owner, operator, master, ship's husband, or agent of the
vessel, for wages of the crew of a vessel, for general average, or a lien for
salvage may, as a matter of law, have priority over perfected first priority
liens. The above described risk for crew wages exists in the case of the
Financed Boats because, although not typical, there exists the possibility
that recreational boat owners will utilize crew members and because liens for
wages owed to such crew members could, as described above, have priority over
the Trust's lien in such asset. None of the Transferor, the Servicer or the
Depositor will have any obligation to purchase a Receivable as to which any of
the aforementioned occurrences result in such
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Trust's losing the priority of its security interest or its security interest
in such Financed Asset after the date such security interest was conveyed to
such Trust. See "Certain Legal Aspects of the Receivables--Security Interest
in Vehicles" and "--Security Interest in Boats" herein.
CERTAIN LEGAL ASPECTS--SECURITY INTEREST IN THE RECEIVABLES. The Receivables
will be treated by each Trust as "chattel paper" as defined in the UCC.
Pursuant to the UCC, the transfer of chattel paper is treated in a manner
similar to a security interest in chattel paper. Perfection of a security
interest in chattel paper may generally be made by filing UCC-1 financing
statements in respect thereof or by possession of the chattel paper. In order
to protect each Trust's ownership or security interest in its Receivables, the
Depositor will file UCC-1 financing statements with the appropriate
authorities in any state deemed advisable by the Depositor to give notice of
such Trust's ownership interest (and any related Indenture Trustee's security
interest) in the Receivables and proceeds thereof. Under each Transfer and
Servicing Agreement and Pooling and Servicing Agreement, the Servicer will be
appointed custodian of the Receivables by the Trustee and the Servicer will
otherwise be obligated to maintain the perfection of each Trust's and any
related Indenture Trustee's interest in the Receivables. The filing of UCC-1
financing statements as described above and possession of the chattel paper by
the Servicer will reduce but not eliminate the risks involved in perfection. A
Trust could lose priority of its security interest in the Receivables to
certain liens arising by operation of law or in certain cases by fraud or
negligence. Moreover, if the Servicer should lose or inadvertently give up
possession of the chattel paper, a good faith purchaser of the chattel paper
without knowledge who gives new value and takes possession of it in the
ordinary course of such purchaser's business has priority over a security
interest (including an ownership interest) in the chattel paper that is
perfected by filing UCC-1 financing statements. In addition, the Receivables
will not be stamped to reflect the transfer of the Receivables to the Trust.
Therefore, any good faith purchaser of the chattel paper described above would
not be deemed to have knowledge of a security interest (including an ownership
interest) therein because such purchaser would not learn of the transfer of or
security interest in the Receivables from a review of the chattel paper.
CERTAIN LEGAL ASPECTS--CONSUMER PROTECTION LAWS. 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 a transferee of such a loan (such as such Trust) liable to
the obligor thereon for any violation by the lender. The application of such
laws could render a Receivable unenforceable or otherwise uncollectible. The
inability of Trust to realize amounts owed in respect of such Receivable could
adversely affect the amount available for distribution to the Securityholders.
Unless otherwise specified in the related Prospectus Supplement, the Depositor
will be obligated to purchase from the Trust and the Transferor will be
obligated to simultaneously purchase from the Depositor any Receivable which
fails to comply with such requirements. The Depositor's obligation to make
such purchase is contingent upon the Transferor performing its obligation to
purchase such Receivable from the Depositor on account of such failure. See
"Certain Legal Aspects of the Receivables--Consumer Protection Laws" herein.
CERTAIN LEGAL ASPECTS--INSOLVENCY CONSIDERATIONS. The Transferor will
represent and warrant that, immediately prior to transferring Receivables to
the Depositor, the Transferor owns such Receivables and that the transfer of
the Receivables by it to the Depositor will constitute a conveyance of such
Receivables. The applicable Receivables Transfer Agreement will set forth
whether such transfer is intended to be a "sale" or a "capital contribution"
of such Receivable by the Transferor to the Depositor. The Depositor intends
that the transfer of Receivables by it to a Trust will constitute either a
conveyance of such Receivables or a pledge of such Receivables.
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CONSIDERATIONS RELATING TO THE INSOLVENCY, CONSERVATORSHIP OR RECEIVERSHIP
OF A BANK ORIGINATOR. In the case of an Originator (a "Bank Originator") that
is a depository institution, if such Bank Originator becomes insolvent or is
in an unsound condition, or under certain other circumstances, the applicable
banking regulators may appoint a conservator or receiver for such Bank
Originator. In most instances, the conservator or receiver would be the
Federal Deposit Insurance Corporation (the "FDIC").
In the event that the FDIC were to assert that the transfer of Receivables
by a Bank Originator that is subject to the Federal Deposit Insurance Act, as
amended (the "FDIA"), constituted a grant of a security interest rather than a
sale, the FDIA sets forth certain powers that the FDIC, in its capacity as
conservator or receiver for a Bank Originator, could exercise. Positions taken
by the FDIC do not suggest that the FDIC, if appointed as conservator or
receiver for a Bank Originator, would interfere with the timely transfer to
the Transferor of payments collected on the Receivables or interfere with the
timely liquidation of Receivables, provided that certain conditions, as
described below, had been satisfied. To the extent that such Bank Originator
has granted a security interest in the Receivables to the Transferor and that
interest was validly perfected before the appointment of the FDIC as
conservator or receiver and before such Bank Originator's insolvency, was not
taken in contemplation of the insolvency of such Bank Originator, and was not
taken with the intent to hinder, delay or defraud such Bank Originator or the
creditors of such Bank Originator, such security interest should not be
subject to avoidance if the Originator Agreement and related documents are
approved by such Bank Originator and are continuously maintained records of
such Bank Originator (as required by the FDIA) and the transactions represent
bona fide and arm's length transactions undertaken for adequate consideration
in the ordinary course of business and the secured party is neither an insider
nor an affiliate of such Bank Originator. If the foregoing conditions are
satisfied and transfers of the Receivables constitute neither voidable
preferences nor fraudulent conveyances, payments to the Transferor with
respect to the Receivables should not be subject to recovery by the FDIC, as
conservator or receiver of such Bank Originator. The foregoing conclusion is
based upon policy statements of the FDIC and opinions of a former general
counsel of the FDIC. No assurance can be given, however, that all such
conditions have been satisfied with respect to any Bank Originator and the
Receivables transferred by such Bank Originator. If such conditions were not
satisfied or the FDIC, as conservator or receiver for a Bank Originator, were
to assert a position contrary to the policy statements, or were to require the
Transferor, the Depositor, the Trustee or the Indenture Trustee to establish
its right to those payments by submitting to and completing the administrative
claims procedure established under the FDIA, or the conservator or receiver
were to request a stay of proceedings with respect to such Bank Originator as
provided under the FDIA, delays in payments on the related Securities and
possible reductions in the amount of those payments could occur.
Notwithstanding the foregoing, the FDIA provides that the FDIC may repudiate
contracts determined by it to be burdensome. If the FDIC were to repudiate an
Originator Agreement, the claims (and any security interest securing such
claims) of the affected party thereof would be limited to actual, direct
compensatory damages and any security securing such claims would be
enforceable only to the extent of such damages. The FDIA does not define the
term "actual direct compensatory damages", but requires such damages to be
determined as of the date of the appointment of the conservator or receiver.
The FDIC, as conservator or receiver, would also have the rights and powers
conferred under applicable state or Federal law (including laws regarding bank
insolvencies and applicable laws regarding preferences or fraudulent
conveyances). In addition, the appointment of a receiver or conservator could
result in administrative expenses of the receiver or conservator having
priority over the interest of the Trustee or the Indenture Trustee in the
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Receivables. In addition, if the FDIC were appointed as conservator or
receiver of a Bank Originator, certain administrative expenses of the
conservator, receiver or banking authorities may have priority over the
Transferor's, the Depositor's, the Trustee's or the Indenture Trustee's
interest in the Receivables.
CONSIDERATIONS RELATING TO THE INSOLVENCY OF A DEALER, A NONBANK ORIGINATOR,
THE TRANSFEROR OR THE DEPOSITOR. If a Dealer, the Transferor, an Originator
other than a Bank Originator (a "Nonbank Originator") or the Depositor were to
become a debtor in a bankruptcy case (or if the parent of a Dealer, the
Transferor, a Nonbank Originator or the Depositor were to become a debtor in a
bankruptcy case and the assets of such Dealer, the Transferor, such Nonbank
Originator or the Depositor, as applicable, were consolidated with those of
its parent) and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to take the position that the transfer of Receivables by
such Dealer, such Nonbank Originator, or the Depositor, as the case may be,
should be treated as a pledge of such Receivables to secure a borrowing of
such debtor, then delays in payments of collections of Receivables to the
related Securityholders could occur or (should the court rule in favor of any
such trustee, debtor or creditor) reductions in the amounts of such payments
could result. If the transfer of Receivables by a Dealer, an Originator, the
Transferor or the Depositor is treated as a pledge instead of a conveyance, a
tax or government lien on the property of the Dealer, the Originator, the
Transferor or the Depositor, as applicable, arising before such Receivables
transfer may have priority over the interest of the Transferor, the Depositor
or the Trust in such Receivables. If all of the transactions contemplated
herein are treated as conveyances, the Receivables would not be part of the
bankruptcy estate of a Nonbank Originator, the Transferor or the Depositor and
would not be available to their respective creditors.
CONSIDERATIONS RELATING TO AN INSOLVENCY EVENT OF THE DEPOSITOR RELATED TO
CERTAIN TRUSTS. With respect to each Trust that is not a grantor trust, if the
related Prospectus Supplement so provides, upon the occurrence of an
Insolvency Event of the Depositor, the Indenture Trustee or Trustee for such
Trust will promptly sell, dispose of or otherwise liquidate the related
Receivables in a commercially reasonable manner on commercially reasonable
terms, except under certain limited circumstances. The proceeds from any such
sale, disposition or liquidation of Receivables will be treated as collections
on the Receivables and deposited in the Collection Account of such Trust. If
the proceeds from the liquidation of the Receivables and any amounts on
deposit in the Reserve Account, if any, the Note Distribution Account, if any,
and the Certificate Distribution Account with respect to any such Trust and
any amounts available from any credit enhancement are not sufficient to pay
any Notes and the Certificates of the related series in full, the amount of
principal returned to any Noteholders or the Certificateholders will be
reduced and such Noteholders and Certificateholders will incur a loss.
OCTAGON GAS CASE. In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th
Cir. 1993), the U.S. Court of Appeals for the 10th Circuit determined that
"accounts," a defined term under the Uniform Commercial Code, would be
included in the bankruptcy estate of a transferor regardless of whether the
transfer is treated as a transfer or a secured loan. Although the Receivables
are likely to be viewed as "chattel paper," as defined under the Uniform
Commercial Code, rather than as accounts, the Octagon holding is equally
applicable to chattel paper. The circumstances under which the Octagon ruling
would apply are not fully known and the extent to which the Octagon decision
will be followed in other courts or outside of the Tenth Circuit is not
certain. If the holding in the Octagon case were applied in a bankruptcy of a
Dealer, an Originator, the Transferor or the Depositor, however, even if the
transfers of Receivables by the Dealer, by the Originator, by the Transferor
and by the Depositor were treated as conveyances, the Receivables would be
part of the bankruptcy estate of the Dealer, the Originator, the Transferor or
the Depositor (as applicable) and would be subject to claims of certain
creditors, and delays and reductions in payments to the Securityholders could
result.
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RISK OF SUBSTANTIVE CONSOLIDATION. The Transferor has taken steps in
structuring the transactions described herein that are intended to ensure that
the voluntary or involuntary application for the relief by the Transferor
under the United States Bankruptcy Code or similar state insolvency laws
(collectively, "Insolvency Laws") will not result in consolidation of the
assets and liabilities of the Transferor with those of the Depositor. These
steps include the creation of the Depositor as a separate, bankruptcy-remote,
special-purpose corporation under a certificate of incorporation containing
certain limitations (including restrictions on the nature of its business and
a restriction on its ability to commence a voluntary case or proceeding under
any Insolvency Law without the consent of an independent director). However,
there can be no assurance that the activities of the Depositor would not
result in a court's concluding that the assets and liabilities of the
Depositor should be consolidated with those of the Transferor in a proceeding
under any Insolvency Law.
OBLIGOR INSOLVENCY-RELATED RISKS. Numerous statutory provisions, including
Insolvency Laws, may interfere with or affect the ability of a creditor to
collect payments due under a contract or to enforce a deficiency judgment
against an Obligor. For example, a bankruptcy court may reduce the monthly
payments of an Obligor due under a Receivable or change the rate of interest
applicable to such Receivable. Such actions could result in delays in payments
on the Securities and possible reductions in the amount of those payments.
RELIANCE ON REPRESENTATIONS AND WARRANTIES BY THE DEPOSITOR, THE TRANSFEROR
AND THE SERVICER. None of the Transferor, the Servicer, the Depositor or any
of their respective affiliates will generally be obligated to make any
payments in respect of any Notes, the Certificates or the Receivables of a
Trust. However, in connection with the transfer of Receivables by the
Transferor to the Depositor and the Depositor to a Trust, the Transferor will
make representations and warranties with respect to the characteristics of
such Receivables and, in certain circumstances, the Depositor may be required
to purchase from the Trust and the Transferor would be required to
simultaneously purchase from the Depositor Receivables with respect to which
such representations and warranties have been breached. Alternatively, if so
specified in the related Prospectus Supplement, the Transferor or the
Depositor will be permitted, in a circumstance where it would otherwise be
required to purchase a Receivable as described in the preceding sentence, to
instead substitute a comparable Receivable for the Receivable otherwise
requiring purchase, subject to certain conditions and eligibility criteria for
the substitute Receivable to be summarized in the related Prospectus
Supplement. The Depositor's obligation to make such purchase or substitution
is contingent upon the Transferor performing its obligation to purchase or
substitute for such Receivable from the Depositor. See "Description of the
Transfer and Servicing Agreements--Transfer of Receivables". In addition,
under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing Agreements--
Servicing Procedures". If collections on any Receivable were reduced as a
result of any matter giving rise to a purchase obligation on the part of the
Depositor, the Transferor and/or the Servicer, as the case may be, and the
Depositor, the Transferor and/or the Servicer failed for any reason to perform
in accordance with that obligation, then delays in payments on the Securities
and possible reductions in the amount of those payments could occur.
Moreover, if the Servicer were to cease acting as Servicer, the performance
of the Receivables could be adversely affected. In addition, delays in
processing payments on the Receivables and information in respect thereof
could occur and result in delays in payments to the Securityholders.
SUBORDINATION. To the extent specified in the related Prospectus Supplement,
distributions of interest and principal on one or more classes of Certificates
of a series may be subordinated
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in priority of payment to interest and principal due on the Notes, if any, of
such series or one or more other classes of Certificates of such series.
LIMITED ASSETS. Moreover, each Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and, to the extent provided in the related Prospectus Supplement,
a Pre-Funding Account, a Reserve Account and any other credit enhancement. 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 any of the Transferor, the Depositor, the Servicer, any Trustee,
any Indenture Trustee or any other person or entity. Consequently, holders of
the Securities of any series must rely for repayment upon payments on the
related Receivables and, if and to the extent available, amounts on deposit in
the Pre-Funding Account (if any), the Reserve Account (if any) and any other
credit enhancement, all as specified in the related Prospectus Supplement. If
such amounts and credit enhancement are exhausted (and not replenished), the
related Trust will depend solely on payments on the Receivables to make
distributions on the Securities, and the Securities will bear the risk of
delinquency, loan loss and repossessions with respect to the Receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS. All the Receivables are prepayable
at any time. (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) and liquidations due to
default, as well as receipts of proceeds from physical damage, credit life and
disability insurance policies and certain other Receivables repurchased for
administrative reasons). The rate of prepayments on the Receivables may be
influenced by a variety of economic, social and other factors, including the
fact that an Obligor generally may not sell or transfer the Financed Asset
securing a Receivable without causing the related loan to become due and
payable. The rate of prepayment on the Receivables may also be influenced by
the structure of the loan evidencing the Receivable. In addition, under
certain circumstances, the Depositor will be obligated to purchase from the
Trust, and the Transferor will be obligated to simultaneously purchase from
the Depositor (or in either case, if so specified in the related Prospectus
Supplement and subject to the conditions summarized therein, substitute for)
Receivables pursuant to a Transfer and Servicing Agreement or Pooling and
Servicing Agreement as a result of certain breaches of representations and
warranties and, under certain circumstances, the Servicer will be obligated to
purchase Receivables pursuant to such Transfer and Servicing Agreement or
Pooling and Servicing Agreement as a result of breaches of certain covenants.
See "Description of the Transfer and Servicing Agreements--Transfer of
Receivables" herein. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables held by a given Trust will be borne
entirely by the Securityholders of the related series of Securities. See also
"Description of the Transfer and Servicing Agreements--Termination" herein
regarding the Servicer's option to purchase the Receivables of a given
Receivables Pool. In addition, as described above under "Considerations
Relating to an Insolvency Event of the Depositor Related to Certain Trusts",
in the case of a Trust that is not a grantor trust if so specified in the
related Prospectus Supplement, as described in such supplement, the sale of
the Receivables owned by such Trust will be required if an Insolvency Event
with respect to the Depositor occurs.
RISK OF COMMINGLING. With respect to each Trust, the Servicer will deposit
all payments on the related Receivables (from whatever source) and all
proceeds of such Receivables collected during each Collection Period into the
Collection Account of such Trust within two business days of receipt thereof.
However, in the event that the Servicer satisfies certain requirements for
monthly or less frequent remittances and the Rating Agencies (as such term is
defined in the related Prospectus Supplement, the "Rating Agencies") affirm
their ratings of the related
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Securities at the initial level, then for so long as the servicer specified in
the related Prospectus Supplement is the Servicer and provided that (i) there
exists no Servicer Default and (ii) each other condition to making such
monthly or less frequent deposits as may be specified by the Rating Agencies
and described in the related 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 or Payment Date. The Servicer will deposit the aggregate Purchase Amount
of Receivables purchased by the Servicer into the applicable Collection
Account on or before the business day preceding each Distribution Date or
Payment 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, such funds will not be available for distribution to the
applicable Securityholders and such 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 Receivables and payment of the
aggregate Purchase Amount with respect to Receivables purchased by the
Servicer.
RISK ASSOCIATED WITH SUBSEQUENT RECEIVABLES AND THE PRE-FUNDING ACCOUNT. If
so specified in the related Prospectus Supplement, the Transferor will be
obligated to transfer, and the Depositor will be obligated to acquire and then
transfer to the related Trust which Trust will then be obligated to acquire,
Subsequent Receivables from time to time during the Funding Period specified
in the related Prospectus Supplement. With respect to any Trust that is to be
treated as a grantor trust for federal income tax purposes, the Funding
Period, if any, will not exceed 90 days in length from the Closing Date, and
with respect to any other Trust will not exceed one year in length from the
Closing Date unless otherwise specified in the related Prospectus Supplement.
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement the Pre-Funded Amount on the Closing Date will not
exceed 25% of the aggregate initial principal balance of the Securities.
CHANGES IN CHARACTERISTICS OF RECEIVABLES POOL DUE TO SUBSEQUENT
RECEIVABLES. Amounts on deposit in any Pre-Funding Account may be invested
only in Eligible Investments. Subsequent Receivables may be originated by the
Dealers, by Originators or by the Transferor at a later date using credit
criteria different from those which were applied to any Initial Receivables
and may be of a different credit quality and seasoning. In addition, following
the transfer of Subsequent Receivables to the applicable Trust, the
characteristics of the entire pool of Receivables included in such Trust may
vary from those of the Initial Receivables transferred to such Trust. As a
result, it is possible that the credit quality of the Receivables in a Trust,
as a whole, may decline as a result of the inclusion of Subsequent Receivables
and may result in a higher rate of payment to the applicable Securityholders
as a result of an increased level of defaults on such Receivables.
USE OF BALANCE IN PRE-FUNDING ACCOUNT TO PREPAY SECURITIES. To the extent
that amounts on deposit in the Pre-Funding Account have not been distributed
to the Transferor by the end of the Funding Period and such amount exceeds the
applicable amount described in the related Prospectus Supplement, the holders
of Securities issued by the related Trust will receive, on the Distribution
Date or Payment Date on or immediately following the last day of the
applicable Funding Period, a prepayment of principal in an amount equal to the
amount remaining in the Pre-Funding Account. It is anticipated that the
principal balance of Subsequent Receivables transferred to a Trust will not be
exactly equal to the amount on deposit in the Pre-Funding Account, and that
therefore there will be at least a nominal amount of principal prepaid to the
holders of the Securities issued by such Trust. Securityholders will bear all
reinvestment risk
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associated with distribution to Securityholders of amounts on deposit in the
Pre-Funding Account after termination of the applicable Funding Period. Any
such distribution will have the effect of a prepayment on the related
Receivables and may result in a reduction in the yield to maturity of any
class of Securities to which such amounts are distributed.
RIGHTS OF THE NOTEHOLDERS TO DIRECT CERTAIN MATTERS AFFECTING THE
CERTIFICATEHOLDERS. In general, with respect to any Trust issuing Notes, until
the Notes have been paid in full, the ability to direct the related Trust with
respect to certain actions permitted to be taken under the related Transfer
and Servicing Agreements rests with the related Indenture Trustee and the
Noteholders instead of the Certificateholders.
For example, unless otherwise provided in the related Prospectus Supplement
with respect to a Trust issuing Notes, in the event a Servicer Default occurs,
the Indenture Trustee or the Noteholders with respect to such series, as
described under "Description of the Transfer and Servicing Agreements--Rights
upon Servicer Default" herein, may remove the Servicer without the consent of
the Trustee or any of the Certificateholders with respect to such series. The
Trustee or the Certificateholders with respect to such series will not have
the ability to remove the Servicer if a Servicer Default occurs. In addition,
the Noteholders of such series have the ability, with certain specified
exceptions, to waive defaults by the Servicer, including defaults that could
materially adversely affect the Certificateholders of such series. See
"Description of the Transfer and Servicing Agreements--Waiver of Past
Defaults" herein.
BOOK-ENTRY REGISTRATION. Unless otherwise specified in the related
Prospectus Supplement, 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 the related 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 for such series are issued, holders of
such Securities will not be recognized by the Trustee or any applicable
Indenture Trustee as "Certificateholders", "Noteholders" or "Securityholders",
as the case may be (as such terms are used herein or in the related Pooling
and Servicing Agreement or related Indenture and Trust Agreement, as
applicable). Hence, until Definitive Securities are issued, holders of such
Securities will only be able to exercise the rights of Securityholders
indirectly through DTC and its participating organizations. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--
Definitive Securities" herein. The Noteholders and the Certificateholders are
referred to collectively as the "Securityholders".
THE TRUSTS
With respect to each series of Securities, the 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 (a "Receivables Pool") of retail installment sales contracts,
installment loans or notes (i) between dealers (the "Dealers") and Obligors,
(ii) between Originators and Obligors and/or (iii) between the Transferor and
Obligors, and all payments received thereunder on and after the applicable
closing date (as such term is defined in the related Prospectus Supplement, a
"Closing Date"). "Obligors" are purchasers of new and used recreational
vehicles ("Financed Recreational Vehicles," and the Receivables with respect
thereto, "Recreational Vehicle Receivables") and/or recreational sport and
power boats (including any boat motors and accompanying trailers) and yachts
(both power and sail) ("Financed Boats," and the Receivables with respect
thereto, "Boat Receivables"). A Receivables Pool may consist solely of
Recreational Vehicle Receivables or Boat Receivables, or
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any combination of such Receivables, all as specified in the related
Prospectus Supplement. The Receivables of each Receivables Pool were or will
be originated by the Transferor, Originators and/or Dealers, acquired by the
Transferor, pursuant to agreements between the Transferor and Dealers ("Dealer
Agreements"), or pursuant to agreements between the Transferor and one or more
Originators, and transferred to the Depositor. Such Receivables will be
serviced by the Servicer. On or prior to the applicable Closing Date, the
Transferor will transfer the Receivables to the Depositor. On or prior to the
applicable Closing Date, the Depositor will transfer the Initial Receivables
of the applicable Receivables Pool to the Trust. To the extent so provided in
the related Prospectus Supplement, Subsequent Receivables will be transferred
to the Trust as frequently as daily during the Funding Period. Any Subsequent
Receivables so transferred will also be assets of the applicable Trust,
subject to the prior rights of the related Indenture Trustee and the
Noteholders, if any, therein. 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 Transfer and Servicing
Agreement or Pooling and Servicing Agreement and the proceeds of such
accounts, as described herein and in the related Prospectus Supplement; (ii)
the Depositor's rights with respect to security interests in the Financed
Assets; (iii) the Depositor's rights with respect to proceeds from claims on
certain physical damage, credit life and disability insurance policies
covering the Financed Assets or the Obligors, as the case may be; (iv) any
property that shall have secured a Receivable and that shall have been
acquired by the applicable Trust; and (v) any and all proceeds of the
foregoing. To the extent specified in the related Prospectus Supplement, a
Pre-Funding Account, a Reserve Account or other form of credit enhancement 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.
Although the property of each Trust will include any interest of the
Depositor in proceeds from claims on physical damage insurance policies
covering the Financed Assets, the Servicer typically allows Obligors (unless
the Financed Asset is a total loss) to use such proceeds to repair or replace
Financed Assets instead of making corresponding prepayments of the applicable
Receivables. The applicable Trust Agreement or Pooling and Servicing Agreement
will permit the Servicer, subject to the servicing standards referred to
therein, to allow Obligors to use proceeds from such claims to repair or
replace Financed Assets rather than making prepayments of Receivables in the
related Trust.
With respect to each series of Securities, if so specified in the related
Prospectus Supplement, prior to its transfer of Receivables to the Trust, the
Depositor may hold such assets in the form of one or more participation
certificates, issued by the Transferor, evidencing the entire undivided
ownership interest in each related Receivable (each, a "Participation"). In
such event, immediately upon the transfer of the Receivables to the related
Trust, the Participation will be terminated and dissolved by mutual agreement
of the Transferor, the Trust and the Depositor and the Trust will then own the
Receivables directly.
The Servicer will continue to service the Receivables held by each Trust and
will receive fees for such services. See "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" herein
and in the related Prospectus Supplement. To facilitate the servicing of the
Receivables, each Trustee will authorize the Servicer to retain physical
possession of the Receivables 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 or UCC financing statements, as applicable,
to the Financed Assets will not be amended to reflect the transfer of the
security interest in the Financed Assets to each Trust, and transfers to the
Trust of the Preferred Mortgages in respect of federally documented Financed
Boats will not be filed. In the absence of such an amendment or filing, a
Trust may not have a perfected
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security interest in the Financed Assets in all states and will not have a
perfected security interest in federally documented Financed Boats. See "Risk
Factors--Certain Legal Aspects--Security Interest in Financed Assets,"
"Certain Legal Aspects of the Receivables" and "Description of the Transfer
and Servicing Agreements--Transfer of Receivables".
If the protection provided to any Noteholders of a series by the
subordination of the related Certificates and by the Reserve Account, if any,
or other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Account or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be,
would have to look principally to payments on the related Receivables, the
proceeds from the repossession and sale of Financed Assets which secure
[defaulted] Receivables and the proceeds from any recourse against Dealers
with respect to such Receivables. In such event, certain factors, such as the
applicable Trust's not having perfected security interests in the Financed
Assets in all states or, if applicable, under federal law, may affect the
Servicer's ability to repossess and sell the collateral securing the
Receivables, and thus may reduce the proceeds to be distributed to the holders
of the Securities of such series. See "Description of the Transfer and
Servicing Agreements--Distributions", "--Credit and Cash Flow Enhancement" and
"Certain Legal Aspects of the Receivables".
The principal offices of each Trust and the related Trustee will be
specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale
of the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Transfer and
Servicing Agreement or the related Pooling and Servicing Agreement, as
applicable. A Trustee may resign at any time, in which event the Servicer, or
its successor, will be obligated to appoint a successor trustee. The
Administrator, if any, of a Trust that is not a grantor trust and the Servicer
in respect of a Trust that is a grantor trust may also remove the Trustee if
the Trustee ceases to be eligible to continue as Trustee under the related
Trust Agreement or Pooling and Servicing Agreement, as applicable, or if the
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 and appointment of a successor trustee
will not become effective until acceptance of the appointment by the successor
trustee.
THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool are and will be retail installment
sales contracts, installment loans, or notes that have been or will be
originated by the Transferor, and/or originated by Dealers, and/or originated
or acquired by Deutsche Financial Services Corporation ("DFS") and/or other
entities (DFS and such other entities being referred to herein as
"Originators"), and (with respect to Receivables which were not originated by
the Transferor) acquired by the Transferor from such Dealers and/or
Originators, and will be Recreational Vehicle Receivables or Boat Receivables.
Receivables held by any Originator may have been acquired by such Originator
from Dealers or from other Originators. An Originator (such as DFS) may be an
affiliate of the Transferor. The Originators will be entities involved in the
origination, secondary market purchasing and/or servicing of retail
installment sales contracts, installment
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loans, loans and other receivables secured by boats and/or recreational
vehicles. A Receivables Pool may consist solely of Recreational Vehicle
Receivables or Boat Receivables, or any combination of such Receivables, all
as specified in the related Prospectus Supplement. In addition, to the extent
described in any Prospectus Supplement, the related Receivables Pool may
include Receivables acquired by an Affiliate of the Transferor through
acquisitions. Receivables will be transferred by the Transferor to the
Depositor pursuant to a Receivables Transfer Agreement and then will be
transferred by the Depositor to the applicable Trust.
The Receivables to be held by each Trust will be acquired by the Depositor
from the portfolio of the Transferor for inclusion in a Receivables Pool in
accordance with several criteria, including that each Receivable (i) is
secured by a new or used recreational vehicle or boat, (ii) was originated in
the United States, and (iii) as of the Cutoff Date (a) had an outstanding
principal balance of at least the amount set forth in the related Prospectus
Supplement, (b) was not more than 59 days (or such other number of days
specified in the related Prospectus Supplement) past due, (c) had a remaining
number of scheduled payments not more than the number set forth in the related
Prospectus Supplement, (d) had an original number of scheduled payments not
more than the number set forth in the related Prospectus Supplement and (e)
had an APR of not less than the rate per annum set forth in the related
Prospectus Supplement. No selection procedures believed by the Depositor to be
adverse to the Securityholders of any series were or will be used in selecting
the related Receivables.
All of the Receivables will be Simple Interest Receivables. "Simple Interest
Receivables" are receivables that provide for the amortization of the amount
financed under each receivable over a series of fixed level payments,
generally in monthly installments. Each such installment consists of an amount
of interest which is calculated on the basis of the outstanding principal
balance of the receivable multiplied by the stated APR and further multiplied
by the period elapsed (as a fraction of a calendar year) since the preceding
payment of interest was made. As payments are received under a Simple Interest
Receivable, the amount received is applied, first, to interest accrued to the
date of payment, second, to reduce the unpaid principal balance, and third, to
late fees and other fees and charges, if any. Accordingly, if an Obligor pays
a fixed monthly installment before its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment was
made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an Obligor
pays a fixed monthly installment after its scheduled due date, the portion of
the payment allocable to interest for the period since the preceding payment
was made will be greater than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly less. In either case, the Obligor
pays a fixed monthly installment until the final scheduled payment date, at
which time the amount of the final installment is increased or decreased as
necessary to repay the then outstanding principal balance and unpaid accrued
interest. If a Simple Interest Receivable is prepaid, the Obligor is required
to pay interest only to the date of prepayment.
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
geographic distribution and distribution by APR [and the portion of such
Receivables Pool made up by Recreational Vehicle Receivables and Boat
Receivables and the portion of each category secured by new Financed Assets
and by used Financed Assets].
SUBSEQUENT RECEIVABLES
Subsequent Receivables may be originated by Dealers, Originators or the
Transferor at a later date using credit criteria different from those which
were applied to any Initial Receivables
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and may be of a different credit quality and seasoning. In addition, following
the transfer of Subsequent Receivables to the applicable Trust, the
characteristics of the entire pool of Receivables included in such Trust may
vary significantly from those of the Initial Receivables transferred to such
Trust. Each Prospectus Supplement will describe the effects that including
such Subsequent Receivables may have on the Receivables Pool included in the
Trust Property of each Trust issuing Securities.
UNDERWRITING
For a description of certain underwriting procedures and guidelines of the
Transferor and of DFS (in its capacity as an Originator), see "Underwriting
Procedures and Guidelines."
SERVICING AND COLLECTIONS
For a description of the Servicer's servicing procedures, see "The Servicer"
and "Description of the Transfer and Servicing Agreements--Servicing
Procedures."
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the Transferor's loss and delinquency
experience with respect to its portfolio of recreational vehicle loans and
boat loans will be set forth in each Prospectus Supplement. There can be no
assurance that the delinquency, repossession and net loss experience on any
Receivables Pool 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, if
any, of any series will generally be influenced by the rate at which the
principal balances of the related Receivables 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, as well as receipts of
proceeds from physical damage, credit life and disability insurance policies
and certain other Receivables repurchased by the Depositor or the Servicer for
administrative reasons.) All of the Receivables are prepayable at any time
without penalty to the Obligor. The rate of prepayment of recreational vehicle
and boat receivables is influenced by a variety of economic, social and other
factors, including the fact that an Obligor generally may not sell or transfer
the Financed Asset securing a Receivable without the consent of the Servicer.
The rate of prepayment on the Receivables may also be influenced by the
structure of the loan. In addition, under certain circumstances, the Depositor
will be obligated to purchase from a Trust and the Transferor will be
obligated to simultaneously purchase from the Depositor (or in either case, if
so specified in the related Prospectus Supplement and subject to the
conditions summarized therein, substitute for) Receivables pursuant to the
related Transfer and Servicing Agreement or Pooling and Servicing Agreement as
a result of breaches of representations and warranties and the Servicer will
be obligated to purchase Receivables from such Trust pursuant to such Transfer
and Servicing Agreement or Pooling and Servicing Agreement as a result of
breaches of certain covenants. In the case of any Security purchased at a
discount to its principal amount, a slower than anticipated rate of principal
payments is likely to result in a lower than anticipated yield. In the case of
a Security purchased at a premium to its principal amount, a faster than
anticipated rate of principal payments is likely to result in a lower than
anticipated yield. See "Description of the Transfer and Servicing Agreements--
Transfer of Receivables" and "--Servicing Procedures".
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See also "Description of the Transfer and Servicing Agreements--Termination"
herein regarding the Servicer's option to purchase the Receivables from a
given Trust. No prediction can be made as to the rate of prepayment that the
Receivables will experience.
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, if any, of a given series on each Payment Date or Distribution
Date, as applicable, since such amount will depend, in part, on the amount of
principal collected on the related Receivables Pool during the applicable
Collection Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables 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 Receivables Pool 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 Payment Date (after giving effect to
payments to be made on such Payment 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 with respect
to a Trust, the Noteholders and the Certificateholders, as applicable, will
receive reports on or about each Payment Date concerning (i) with respect to
the Collection Period immediately preceding such Payment Date, payments
received on the Receivables, the Pool Balance (as such term is defined in the
related Prospectus Supplement, the "Pool Balance"), each Certificate Pool
Factor or Note Pool Factor, as applicable, and various other items of
information, and (ii) with respect to the Collection Period second preceding
such Payment Date, as applicable, amounts allocated or distributed on the
preceding Payment Date and any reconciliation of such amounts with information
provided by the Servicer prior to such current Payment Date. 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" herein.
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USE OF PROCEEDS
Unless the related Prospectus Supplement provides for other applications,
the net proceeds from the sale of the Securities of a given series will be
applied by the applicable Trust (i) to acquire Receivables from the Depositor
or otherwise to make a distribution to the Depositor, (ii) to make the initial
deposit into the Reserve Account, if any, and (iii) to make the deposit of the
Pre-Funded Amount into the Pre-Funding Account, if any. Unless otherwise
specified in the related Prospectus Supplement, the Depositor will use that
portion of such net proceeds paid to it with respect to any such Trust to
acquire Receivables from the Transferor or otherwise to make a distribution to
the Transferor and for general corporate purposes.
THE DEPOSITOR
Deutsche Recreational Asset Funding Corporation (the "Depositor") was
incorporated in the State of Nevada on May 1, 1998 as a wholly-owned
subsidiary of the Transferor. The Depositor maintains its principal office at
655 Maryville Centre Drive, St. Louis, Missouri 63141. Its telephone number is
(314) [523-3000].
The only obligations, if any, of the Depositor with respect to a Series of
Certificates and/or Notes may be pursuant to certain limited representations
and warranties and limited undertakings to purchase (or, if so specified in
related Prospectus Supplement, substitute for) Receivables under certain
circumstances, but only to the extent the Transferor simultaneously performs
its obligation to purchase such Receivables. The Depositor will have no
ongoing servicing obligations or responsibilities with respect to any Financed
Asset. The Depositor does not have, nor is required to have, nor is expected
in the future to have, any significant assets.
Neither the Depositor nor the Transferor nor any of their respective
affiliates will insure or guarantee the Receivables or the Certificates and/or
Notes of any series.
THE TRANSFEROR
Ganis Credit Corporation ("Ganis" or the "Transferor"), a Delaware
corporation headquartered in Newport Beach, California, is a wholly-owned
subsidiary of DFS. Ganis was founded in 1980 and provides financing to
recreational vehicle and boat consumers nationwide. In February 1995,
BankBoston, N.A. ("BankBoston") acquired Ganis and established it as a
division of BankBoston. Following such acquisition, Ganis originated loans
exclusively for the portfolio of BankBoston. In June 1997, BankBoston sold
Ganis to DFS. Certain of the Receivables were underwritten prior to the sale
of Ganis to DFS.
UNDERWRITING PROCEDURES AND GUIDELINES
DFS engages in indirect consumer lending through its consumer finance
headquarters in Newport Beach, California and its regional offices in Tampa,
Florida, Harrisburg, Pennsylvania and Irving, Texas. Ganis engages in direct
consumer lending through its headquarters and its district offices. "Direct
lending" refers to financing provided directly to an Obligor. "Indirect
lending" refers to acquisitions of Receivables from Dealers and from
Originators (which Originators may be DFS or other affiliates of the
Transferor).
Dealers who seek to enter into financing arrangements with DFS are required
to submit an application and provide, among other things, evidence of licenses
by the appropriate state agencies, financial information and resumes of key
personnel. DFS investigates the creditworthiness, licensing and general
business reputation of the Dealer prior to entering into a financing
arrangement with such Dealer. The regional offices of DFS maintain
relationships
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with the Dealers and coordinate the underwriting and settlement process
relating to Receivables originated by such Dealers.
Credit applications are initially reviewed by an underwriter located at the
consumer headquarters or in one of the regional offices of DFS or, if
applicable, located at the headquarters or in one of the district offices of
Ganis. Such review of an application is intended to determine the customer's
willingness and ability to repay and the adequacy of the underlying
collateral. Applicants are required to provide information pertaining to their
income, employment history, financial liabilities, personal status and a
description or invoice of the asset for which the loan is requested. In
addition, DFS or Ganis, as the case may be, requires one or more credit
reports on each applicant from a national reporting company. Once a loan
request passes a preliminary review the underwriter, where appropriate, seeks
verification of, among other things, income, employment, outstanding debt and
the value of the asset. Loans in excess of an underwriter's authority require
approval by a more senior credit underwriting employee.
The criteria considered by DFS or Ganis, as the case may be, in evaluating a
credit application include, among other things: (i) years of employment, (ii)
income, (iii) home ownership, (iv) credit history, (v) debt to gross income
analysis and (vi) loan-to-value ratios. DFS or Ganis, as the case may be, also
includes credit scores derived from one or more credit bureau reports in
assessing a borrower's creditworthiness. The "value" of a new recreational
vehicle to be financed is determined based upon the manufacturer's invoice
price, and the "value" of a used recreational vehicle to be financed is
determined based on retail value reported in the Kelly Blue Book or reported
in the used recreational vehicle guidebooks of the National Automobile Dealers
Association ("NADA"). The "value" of a new boat to be financed is determined
based on the invoice price, and the "value" of a used boat to be financed is
determined based on the average retail value reported in the NADA used boat
guide or reported in the "BUC" guide, or based on an appraisal of the boat.
DFS or Ganis, as the case may be, generally will not finance more than 110% of
the "value" of the boat or recreational vehicle plus related amounts financed
in connection therewith, if any, such as equipment, title and licensing fees,
taxes and extended warranties.
In general, the underwriting standards of DFS or Ganis, as the case may be,
are not a fixed set of criteria which are required to be met by all loans.
Applications for loans which do not meet the customary guidelines of DFS or
Ganis, as the case may be, require review and approval by a more senior credit
underwriting employee than loans which conform to such guidelines.
THE SERVICER
Deutsche Financial Services Corporation ("DFS") was incorporated in Nevada
in 1969. It is an indirect, wholly-owned subsidiary of Deutsche Bank AG. DFS
was formerly known as ITT Commercial Finance Corp. The stock of ITT Commercial
Finance Corp. was acquired by Deutsche Financial Services Holding Corporation
in 1995. In January 1997, Deutsche Financial Services Holding Corporation
merged into DFS; DFS was the surviving corporation. DFS is a financial
services company which provides inventory financing, retail financing,
accounts receivable financing and asset based financing to dealers,
distributors and manufacturers of consumer and commercial durable goods.
Industries served by DFS include, but are not limited to: computers and
computer products, manufactured housing, recreational vehicles, boats and
motors, consumer electronics and appliances, keyboards and other musical
instruments, industrial and agricultural equipment, office automation
products, snowmobiles, and motorcycles. DFS also is in the business of
providing equipment loans and leases, franchisee loans, vendor finance
programs and private label retail finance programs.
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DFS has offices in major metropolitan areas of the United States. Its
principal executive offices are located at 655 Maryville Centre Drive, St.
Louis, Missouri 63141-5832. The telephone number of such office is (314) 523-
3000.
The Servicer's servicing operations are conducted from its servicing centers
in Newport Beach, California and Bannockburn, Illinois.
The Servicer generally commences collections activities by phone or written
correspondence with respect to delinquent contracts when payment is more than
10 days past due. At 45 days past due, collection personnel issue notices of
intent to repossess unless a secured payment promise is obtained. The Servicer
continues to work the account until the account is 65 days past due, at which
time the repossession process is initiated for those accounts which remain
delinquent. The collateral is generally disposed of 40 to 45 days following
repossession. The benchmark for recovery values is 95% of the NADA or Kelly
guidebook value for the collateral on a gross basis, with expenses ranging up
to 5% depending on the type of collateral. Delinquent contracts, including
those due to bankruptcies, are generally charged-off at 120 days delinquent.
For a discussion of collection procedures with respect to the Receivables, see
"Description of the Transfer and Servicing Agreements--Servicing Procedures"
herein.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Notes and the Indenture.
Unless otherwise specified in the related Prospectus Supplement, 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.
Unless otherwise specified in the related Prospectus Supplement, the Notes
will be available for purchase in denominations of $1,000 and integral
multiples thereof in book-entry form only. The Depositor 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 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" herein.
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
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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. To the extent 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" herein. 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 at the
end of the Funding Period (if any) or as a result of the Servicer's exercising
its option to purchase the related Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes of
Notes of a series may have fixed principal payment schedules. Noteholders of
such Notes would be entitled to receive as payments of principal on any
Payment 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.
Unless otherwise specified in the related Prospectus Supplement, payments to
Noteholders 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 "Payment Date"), in which case each class of Noteholders will receive
its ratable share (based upon the aggregate amount of interest due to such
class of Noteholders) of the aggregate amount available to be distributed in
respect of interest on the Notes of such series. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Credit and Cash Flow
Enhancement" herein.
In the case of a series of Notes 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 and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
THE INDENTURE
MODIFICATION OF INDENTURE. With respect to each Trust that has issued Notes
pursuant to an Indenture, the Trust and the Indenture Trustee may, with the
consent of the holders of a majority of the outstanding Notes of the related
series, execute a supplemental indenture to add provisions to, change in any
manner or eliminate any provisions of, the related Indenture, or modify
(except as provided below) in any manner the rights of the related
Noteholders.
Unless otherwise specified in the related Prospectus Supplement with respect
to a series of Notes, in the absence of the consent of the holder of each such
outstanding Note affected thereby, no supplemental indenture will: (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
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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 the related Indenture or
of certain defaults thereunder and their consequences as provided for in such
Indenture; (iv) modify or alter the provisions of the related Indenture
regarding the voting of Notes held by the applicable Trust, any other obligor
on such Notes, the Depositor, the Transferor 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 Receivables 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) decrease the percentage
of the aggregate principal amount of such Notes required to amend the sections
of the related Indenture which specify the applicable percentage of aggregate
principal amount of the Notes of such series 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 related 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, the 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.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will consist of:
(i) a default for five days (or such longer period specified in the related
Prospectus Supplement) in the payment of any interest on any such Note; (ii) a
default in the payment of the principal of 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 the related Indenture and the continuation of any such default for a
period of 30 days (or such other period specified in the related Prospectus
Supplement) 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% (or such other percentage specified in the related Prospectus
Supplement) in principal amount of such Notes then outstanding; (iv) any
representation or warranty made by such Trust in the related Indenture or in
any certificate delivered pursuant thereto or in connection therewith having
been incorrect in a material respect as of the time made, and such breach not
having been cured within 30 days (or such other period specified in the
related Prospectus Supplement) 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% (or such other percentage specified in the
related Prospectus Supplement) 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, unless otherwise specified in the
related Prospectus Supplement, 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 Payment Date for such class of Notes.
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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 a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in
the related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount
of such Notes then outstanding.
If the Notes of any series are 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 Receivables or elect to have the applicable
Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from selling the related
Receivables 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 Receivables 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 66 2/3% 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 such Indenture that cannot be modified
without the waiver or consent of all the holders of such outstanding Notes.
Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given
to the applicable Indenture Trustee written notice of a continuing Event of
Default, (ii) the holders of not less than 25% in principal amount of the
outstanding Notes of such series have made written request to such Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee,
(iii) such holder or holders have offered such Indenture Trustee reasonable
indemnity, (iv) such Indenture Trustee has for 60 days failed to institute
such proceeding and (v) no direction inconsistent with such written request
has been given to such Indenture Trustee during such 60-day period by the
holders of a majority in principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the applicable Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
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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 (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 the performance or
observance of 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 or 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 and (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.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements
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 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) dissolve or
liquidate in whole or in part, (iv) permit the validity or effectiveness of
the related 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 (v) 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.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust". 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 Servicer Advances made to it by the Servicer or otherwise in accordance
with the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust 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 Trust 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
such 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.
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SATISFACTION AND DISCHARGE OF INDENTURE. An Indenture will be discharged
with respect to the collateral securing the related Notes upon 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.
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 Depositor will be obligated to appoint a successor
trustee for such series. The Depositor 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, the Depositor will be obligated to appoint a successor
trustee for the applicable series of Notes. Any resignation or removal of the
Indenture Trustee and appointment of a successor trustee for any series of
Notes does not become effective until acceptance of the appointment by the
successor trustee for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
The following summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement or Pooling and Servicing Agreement, as
applicable.
Unless otherwise specified in the related Prospectus Supplement and except
for the Certificates, if any, of a given series purchased by the 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. Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the
Depositor, the Certificates will be available for purchase in minimum
denominations of $1,000 in book-entry form only. The Depositor 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 Depositor. Unless and until Definitive Certificates are
issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificateholder (other than the 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" herein. Any
Certificates of a given series owned by the Depositor 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 have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents.
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PRINCIPAL AND INTEREST ON THE CERTIFICATES
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 and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related
Prospectus Supplement (each, a "Distribution Date") and will be made prior to
distributions with respect to principal of such Certificates. With respect to
any Trust that issues both Notes and Certificates, the Distribution Date for
the Certificates may coincide with the Payment Date for the Notes, in which
case such date will be referred to in the related Prospectus Supplement as a
Payment Date with respect to both the Notes and 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" herein. Unless otherwise provided in the related Prospectus
Supplement, distributions in respect of the Certificates of a given series
that includes Notes may be subordinate to payments in respect of the Notes of
such series as more fully described 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.
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--Principal and Interest on the
Certificates" herein.
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, the
"Interest Reset Period") 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 the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-
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hundredth of one percent) 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. Unless otherwise specified in
the applicable Prospectus Supplement, all percentages resulting from any
calculation of the rate of interest on a Floating Rate Security will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security
and in the applicable Prospectus Supplement.
Unless otherwise specified 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 pertaining to such CD Rate Determination Date, then
the "CD Rate" for such Interest Reset
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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 and the Spread or Spread
Multiplier, if any, specified in such Security and in the applicable
Prospectus Supplement.
Unless otherwise specified 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 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" with respect to finance companies. In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date 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 and the Spread or Spread Multiplier, if
any, specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified 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
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 and the
Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
Unless otherwise specified 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 determined by the Calculation
Agent for any LIBOR Security as follows:
(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the Calculation
Agent for such LIBOR Security
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will determine the arithmetic mean of the offered rates for deposits in
U.S. dollars for the period of the Index Maturity specified in the
applicable Prospectus Supplement, commencing on such Interest Reset Date,
which appear on the Telerate Page 3750 ("LIBOR Telerate") at approximately
11:00 a.m., London time, on such LIBOR Determination Date. For purposes of
calculating LIBOR, "London Banking Day" means any business day on which
dealings in deposits in United States dollars are transacted in the London
interbank market; and "Telerate Page 3750" means the display designated as
page "3750" on the Telerate Service (or such other page as may replace the
3750 page on that service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits).
(ii) If no rate appears on the Telerate Page 3750, as applicable, on such
LIBOR Determination Date, the Calculation Agent for such LIBOR Security
will request the principal London offices of each of four major banks in
the London interbank market selected by such Calculation Agent to provide
such Calculation Agent with its offered quotations for deposits in U.S.
dollars for the period of the specified Index Maturity, commencing on such
Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Determination Date and
in a principal amount equal to an amount of not less than $1,000,000 that,
in the Calculation Agent's judgment, is representative of a single
transaction in such market at such time. If at least two such quotations
are provided, "LIBOR" for such Interest Reset Period will be the arithmetic
mean of such quotations. If fewer than two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of rates
quoted by three major banks in The City of New York selected by the
Calculation Agent for such LIBOR Security at approximately 11:00 a.m., New
York City time, on such LIBOR Determination Date for loans in U.S. dollars
to leading European banks, for the period of the specified Index Maturity,
commencing on such Interest Reset Date, and in a principal amount equal to
an amount of not less than $1,000,000 that, in the Calculation Agent's
judgment, is representative of a single transaction in such market at such
time; provided, however, that if the banks selected as aforesaid by such
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period.
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 and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date 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 pertaining to such Treasury Rate Determination Date, 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
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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
Holders of the Certificates or the Notes may hold through DTC (in the United
States) or, solely in the case of the Notes, Cedel or Euroclear (in Europe) if
they are participants of such systems, or indirectly through organizations
that are participants in such systems. The Certificates may not be held,
directly or indirectly, through Cedel or Euroclear. Cede, as nominee for DTC,
will hold the Securities. Cedel and Euroclear will hold omnibus positions in
the Notes on behalf of the Cedel Participants and the Euroclear Participants,
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 UCC and a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-
entries, thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust companies
and clearing corporations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Transfers between DTC's participating organizations (the "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.
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Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant Cedel Participant or Euroclear Participant on such business day. Cash
received in Cedel or Euroclear as a result of sales of securities by or
through a Cedel Participant or a Euroclear Participant to a Participant will
be received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Securities may do so only through Participants and Indirect Participants. In
addition, Securityholders will receive all distributions of principal and
interest from the related Indenture Trustee or the related Trustee, as
applicable (the "Applicable Trustee"), through Participants. Under a book-
entry format, Securityholders 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 forward such payments to its Participants, which
thereafter will forward them to Indirect Participants or Securityholders.
Except to the extent the Depositor holds Certificates with respect to any
series of Securities, it is anticipated that the only "Securityholder",
"Noteholder" and "Certificateholder" will be DTC's nominee. Noteholders will
not be recognized by each Indenture Trustee as Noteholders, as such term is
used in each Indenture, and Noteholders will be permitted to exercise the
rights of Noteholders only indirectly through DTC and its Participants.
Similarly, Certificateholders will not be recognized by each Trustee as
Certificateholders as such term is used in each Trust Agreement or Pooling and
Servicing Agreement, and Certificateholders will be permitted to exercise the
rights of Certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities 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
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments
on behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or
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entities that do not participate in the DTC system, or to otherwise act with
respect to such Securities, may be limited due to the lack of a physical
certificate for such Securities.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement or Pooling and Servicing Agreement only at the
direction of one or more Participants to whose accounts with DTC the
applicable Notes or Certificates 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.
Cedel Bank, societe anonyme ("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,
thereby eliminating the need for physical movement of certificates.
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
depository, Cedel is subject to regulation by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriter(s) for the related Notes. 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.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in Euroclear 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. 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
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriter(s). 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 State 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").
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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 certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear Participants and has no record of or relationship with
persons holding through Euroclear Participants.
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 Income Tax Consequences" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
Prospectus Supplement. 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 Notes among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Administrator, if any, or the Applicable Trustee would seek an
alternative depository (if available) or cause the issuance of Definitive
Securities to the owners thereof or their nominees in the manner described in
the Prospectus under "Certain Information Regarding the Securities--Definitive
Securities".
Except as required by law, neither the Administrator, if any, nor 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
the 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
If so specified in the related Prospectus Supplement, the Notes, if any, and
the Certificates of a 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 Applicable Trustee, determines that DTC is no
longer willing or able to discharge properly its responsibilities as
depository with respect to such Securities and such Applicable Trustee is
unable to locate a qualified successor, (ii) the Applicable Trustee, 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, holders 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
holders of such Securities.
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Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders 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 Securityholders.
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.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with respect
to the Notes of any series, three or more holders of the Notes of such series
or one or more holders of such Notes evidencing not less than 25% of the
aggregate outstanding principal balance of such Notes 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.
Unless otherwise specified in the related Prospectus Supplement 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.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Payment Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on
such Payment Date. With respect to each series of Securities, 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
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related Prospectus Supplement) as to the Notes of such series with respect to
such Payment Date or the period since the previous Payment 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 the related 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 Collection 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 after
giving effect to all payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect to
the related Collection Period or Collection Periods, as the case may be;
(vi) the Interest Rate or Pass Through Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
(vii) the amount of the aggregate realized losses, if any, for the
related Collection Period;
(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each
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 Receivables, if any, that were
repurchased or substituted for in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after
giving effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the remaining
Pre-Funded Amount; and
(xii) for the first such date that is on or immediately following the end
of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been distributed to the Transferor and is being passed
through as payments of principal on the Securities of such series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
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 Securityholder with respect to such Trust and received any payment
thereon a statement containing certain information for the purposes of
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such Securityholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Consequences" herein.
In addition, the filing with the Commission of periodic reports with respect
to each Trust will cease following completion of the reporting period required
by Rule 15d-1 of Regulation 15D under the Exchange Act.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Transfer and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
acquire Receivables from the Depositor and the Servicer will agree to service
such Receivables, each Trust Agreement (in the case of a grantor trust, the
Pooling and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued and each Administration Agreement pursuant to
which the Servicer (or such other person named in the related Prospectus
Supplement) will undertake certain administrative duties with respect to a
Trust that issues Notes (collectively, the "Transfer and Servicing
Agreements"). Forms of the Transfer and Servicing Agreements have been filed
as exhibits to the Registration Statement of which this Prospectus forms a
part. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements.
TRANSFER OF RECEIVABLES
On or prior to the closing date (the "Closing Date") specified in the
Prospectus Supplement for a Trust, the Transferor will transfer, without
recourse, to the Depositor its entire interest in the related Initial
Receivables and its security interests in the related Financed Assets pursuant
to a receivables transfer agreement (a "Receivables Transfer Agreement"). On
or prior to such Closing Date, the Depositor will transfer to the Applicable
Trustee, without recourse, pursuant to a Transfer and Servicing Agreement or a
Pooling and Servicing Agreement, as applicable, its entire interest in such
Initial Receivables, including its security interests in the related Financed
Assets. Each such Receivable will be identified in a schedule appearing as an
exhibit to such Pooling and Servicing Agreement or Transfer and Servicing
Agreement (a "Schedule of Receivables"). The Applicable Trustee will,
concurrently with such transfer, execute and deliver the related Notes and/or
Certificates. The Applicable Trustee will not verify the existence of the
Receivables or review the Receivables files. 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
acquisition of the related Receivables from the Transferor (or otherwise
distributed to the Transferor) and, to the extent specified in the related
Prospectus Supplement, to the deposit of the Pre-Funded Amount into the Pre-
Funding Account or to the deposit of a specified amount into the Reserve
Account. The related Prospectus Supplement for a given Trust will specify
whether, and the terms, conditions and manner under which, Subsequent
Receivables will be transferred by the Transferor to the Depositor and by the
Depositor to the applicable Trust from time to time during any Funding Period
on each date specified as a transfer date in the related Prospectus Supplement
(each, a "Subsequent Transfer Date").
In each Receivables Transfer Agreement the Transferor will represent and
warrant to the Depositor and, in each Transfer and Servicing Agreement or
Pooling and Servicing Agreement, the Depositor will represent and warrant to
the applicable Trust, among other things, that: (i) the information provided
in the related Schedule of Receivables is correct in all material respects;
(ii) the Obligor on each related Receivable is required to maintain physical
damage insurance covering the Financed Asset in accordance with the
Transferor's normal requirements
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(iii) as of the applicable Closing Date or the applicable Subsequent Transfer
Date, if any, to the best of its knowledge, the related Receivables 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 Receivables is or will be secured by a first perfected security
interest in favor of the Transferor in the Financed Asset; (v) each related
Receivable, 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 (vi) any other representations and warranties that may be
set forth in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Transferor elects, the first) month
following the discovery by or notice to the Transferor of a breach of any
representation or warranty of the Transferor that materially and adversely
affects the interests of the related Trust in any Receivable, the Depositor,
unless the breach is cured, will purchase such Receivable from such Trust and
the Transferor will be obligated to simultaneously purchase such Receivable
from the Depositor at a price equal to the unpaid principal balance owed by
the Obligor thereon plus interest thereon at the respective APR to the last
day of the month of purchase (the "Purchase Amount"). Alternatively, if so
specified in the related Prospectus Supplement, the Transferor or the
Depositor will be permitted, in a circumstance where it would otherwise be
required to purchase a Receivable as described in the preceding sentence, to
instead substitute a comparable Receivable for the Receivable otherwise
requiring purchase, subject to certain conditions and eligibility criteria for
the substitute Receivable to be summarized in the related Prospectus
Supplement. The purchase obligation (or, if applicable, the substitution
alternative with respect thereto) constitutes the sole remedy available to the
Certificateholders or the Trustee and any Noteholders or Indenture Trustee in
respect of such Trust for any such uncured breach. The Depositor's obligation
to make such purchase or substitution is contingent upon the Transferor
performing its corresponding obligation to purchase (or, if applicable,
substitute for) such Receivable from the Depositor.
Pursuant to each Transfer and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables and to
reduce administrative costs, each Trust will designate the Servicer as
custodian to maintain possession, as such Trust's agent, of the related retail
installment sale or loan contracts, and any other documents relating to the
Receivables. The Depositor's and the Transferor's accounting records and
computer systems will reflect the transfer of the related Receivables to the
applicable Trust, and Uniform Commercial Code ("UCC") financing statements
reflecting such transfers will be filed. The Receivables will not be
segregated, stamped or otherwise marked to indicate that they have been
transferred to the related Trust. If through inadvertence or otherwise,
another party purchases (or takes a security interest in) the Receivables for
new value in the ordinary course of business and takes possession of the
Receivables without actual knowledge of the related Trust's interest, the
purchaser (or secured party) will acquire an interest in the Receivables
superior to the interest of the related Trust.
ACCOUNTS
With respect to each Trust that issues 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 Receivables will be deposited (the "Collection Account"). The
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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, Reserve Account 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"). The Servicer will
establish and maintain with the related Trustee an account, in the name of
such Trustee on behalf of such Certificateholders, into which amounts released
from the Collection Account and any Pre-Funding Account, Reserve Account 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 Trust that does not issue Notes, the Servicer will also
establish and maintain the Collection Account and any other Trust Account in
the name of the related Trustee on behalf of the related Certificateholders.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account or any Reserve Account, will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account and any Pre-Funding Account, Reserve Account and other
accounts identified as such in the related Prospectus Supplement
(collectively, the "Trust Accounts") will be invested as provided in the
related Transfer and Servicing Agreement or Pooling and Servicing Agreement in
Eligible Investments. "Eligible Investments" are generally limited to
investments acceptable to the Rating Agencies rating such Securities as being
consistent with the rating of such Securities and may include recreational
vehicle and/or boat retail sale contracts or installment loans. 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 Account 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 Account at any time may be less than
the balance of the Reserve Account. If the amount required to be withdrawn
from any Reserve Account to cover shortfalls in collections on the related
Receivables (as provided in the related Prospectus Supplement) exceeds the
amount of cash in the Reserve Account, 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. Investment earnings on funds deposited in the
Trust Accounts, net of losses and investment expenses (collectively,
"Investment Earnings"), shall be allocated in the manner described in the
related Prospectus Supplement.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as
any of the securities of such depository institution have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade. "Eligible Institution" means, with respect to a Trust, (a)
the corporate trust department of the related Indenture Trustee or the related
Trustee, as applicable, or (b) a depository institution organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank), (i) which has
either (A) a long-term unsecured debt rating acceptable to the Rating Agencies
or
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(B) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (ii) whose deposits are insured by the
FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Transfer and Servicing Agreement or Pooling and Servicing Agreement,
follow such collection procedures as it follows with respect to recreational
vehicle or marine retail installment sale contracts, installment loans, or
notes that it services for itself or others and that are comparable to such
Receivables. Consistent with its normal procedures, the Servicer may, in its
discretion, arrange with the Obligor on a Receivable to extend or modify the
payment schedule, but no such arrangement will, for purposes of any Transfer
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 Receivable beyond the Final Scheduled Maturity Date (as
such term is defined with respect to any Receivables Pool in the related
Prospectus Supplement). Some of such arrangements may result in the Servicer
purchasing the Receivable for the Purchase Amount. The Servicer may sell the
Financed Asset securing the respective Receivable at public or private sale,
or take any other action permitted by applicable law. See "Certain Legal
Aspects of the Receivables" herein.
The Servicer may from time to time perform any portion of its servicing
obligations under the applicable Transfer and Servicing Agreement or Pooling
and Servicing Agreement through subservicing agreements with third-party
servicers approved by the Rating Agencies. Each applicable Transfer and
Servicing Agreement and Pooling and Servicing Agreement will provide that,
notwithstanding the use of subservicers, the Servicer will remain liable for
its servicing duties and obligations as if the Servicer were servicing the
Receivable directly.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such
Receivables collected during each collection period specified in the related
Prospectus Supplement (each, a "Collection Period") into the related
Collection Account within two business days after receipt thereof. However, at
any time that and for so long as (i) the Servicer (or its successor) is the
Servicer, (ii) there exists no Servicer Default and (iii) each other condition
to making deposits less frequently than daily as may be specified by the
Rating Agencies or set forth in the related Prospectus Supplement is
satisfied, the Servicer will not be required to deposit such amounts into the
Collection Account until on or before the applicable Distribution Date or
Payment Date. Pending deposit into the Collection Account, collections may be
invested by the Servicer at its own risk and for its own benefit and will not
be segregated from its own funds. If the Servicer were unable to remit such
funds, 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 Receivables and payment of the aggregate Purchase Amount with
respect to Receivables purchased by the Servicer.
SERVICER ADVANCES
Unless otherwise provided in the related Prospectus Supplement, on or before
the business day prior to each applicable Distribution Date or Payment Date,
the Servicer shall deposit into the related Collection Account as a Servicer
Advance (but only to the extent that the Servicer, in its sole discretion,
expects to recoup such Servicer Advance from subsequent payments on
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or with respect to the Receivables) an amount equal to the amount of interest
due on the related Receivables at their respective APRs for the related
Collection Period (assuming that such Receivables are paid on their respective
due dates) minus the amount of interest actually received on such Receivables
during the related Collection Period. If such calculation results in a
negative number, an amount equal to such amount shall be paid to the Servicer
in reimbursement of outstanding Servicer Advances. In addition, in the event
that a Receivable becomes a Liquidated Receivable (as such term is defined in
the related Prospectus Supplement), the amount of accrued and unpaid interest
thereon (but not including interest for the then current Collection Period)
shall be withdrawn from the Collection Account and paid to the Servicer in
reimbursement of outstanding Servicer Advances. No advances of principal will
be made with respect to Receivables.
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
Collection Period in an amount equal to a 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 Collection Period (the
"Servicing Fee"). The Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior Distribution Dates or Payment
Dates) will be paid out of available funds for the related Collection Period
prior to the distributions on the related Distribution Date or Payment Date to
the Noteholders or the Certificateholders of the given series. [To follow:
description of Servicing Suspense Account and Supplemental Servicing Fee.]
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 Receivables 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 recreational vehicle and boat receivables as an
agent for their beneficial owner, including collecting and posting all
payments, responding to inquiries of Obligors on the Receivables,
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 administering the particular Receivables Pool, including
accounting for collections and furnishing monthly and annual statements to the
related Trustee and Indenture Trustee with respect to distributions and
generating federal income tax information for such Trust and for the related
Noteholders and Certificateholders. The Servicing Fee also will reimburse the
Servicer for certain taxes, the fees of the related Trustee and Indenture
Trustee, if any, accounting fees, outside auditor fees, data processing costs
and other costs incurred in connection with administering the applicable
Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment Date or
Distribution Date, as applicable, 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, priorities of
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and requirements for all payments to each class of Noteholders and all
distributions to each class of Certificateholders of such series will be set
forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables 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 Account, 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 subordinate 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 subordinate to payments in respect of
Notes, if any, of such series or other classes of Certificates of such series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities
of a given series, if any, 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 Accounts, over-
collateralization, 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 the
related 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 Account 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 may not provide protection
against all risks of loss and may not guarantee repayment of the entire
principal balance and interest thereon; any such limitations will be described
in the related Prospectus Supplement. 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 ACCOUNT. If so provided in the related Prospectus Supplement,
pursuant to the related Transfer and Servicing Agreement or Pooling and
Servicing Agreement, the Depositor will establish for a series or class of
Securities an account, as specified in the related Prospectus Supplement (the
"Reserve Account"), which will be maintained with the related Trustee or
Indenture Trustee, as applicable. Unless otherwise provided in the related
Prospectus Supplement, the Reserve Account will be funded by an initial
deposit by the Depositor or such
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other person specified in the related Prospectus Supplement on the Closing
Date in the amount set forth in the related Prospectus Supplement and, if the
related series has a Funding Period, will also be funded on each Subsequent
Transfer Date to the extent described in the related Prospectus Supplement. As
further described in the related Prospectus Supplement, the amount on deposit
in the Reserve Account will be increased on each Distribution Date or Payment
Date thereafter up to the Specified Reserve Account Balance (as defined in the
related Prospectus Supplement) by the deposit therein of the amount of
collections on the related Receivables remaining on each such Distribution
Date or Payment Date after the payment of all other required payments and
distributions on such date. The related Prospectus Supplement will describe
the circumstances and manner under which distributions may be made out of the
Reserve Account, either to holders of the Securities covered thereby, to the
Depositor, to the Servicer or such other person specified in the related
Prospectus Supplement.
NET DEPOSITS
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 Servicer Advances and Purchase
Amounts for any Trust for or with respect to the related Collection Period net
of distributions to be made to the Servicer for such Trust with respect to
such Collection Period. The Servicer, however, will account to the Trustee,
any Indenture 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 Payment Dates do not coincide with
Distribution Dates, all distributions, deposits or other remittances made on a
Payment Date will be treated as having been distributed, deposited or remitted
on the Distribution Date for the applicable Collection Period for purposes of
determining other amounts required to be distributed, deposited or otherwise
remitted on such Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date or Payment Date with respect to each series
of Securities, the Servicer will provide to each Applicable Trustee as of the
close of business on the last day of the preceding Collection 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 Transfer and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such certificate, from the applicable Closing
Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will also provide for delivery to the related Trust and Indenture Trustee or
Trustee, as applicable, 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 Transfer 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 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 Indenture Trustee
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and each Trustee notice of certain Servicer Defaults under the related
Transfer 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 Transfer and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer may not resign from its obligations and duties
as Servicer thereunder, except upon determination that the Servicer's
performance of such duties is no longer permissible under applicable law. No
such resignation will become effective until the related Indenture Trustee or
Trustee, as applicable, or a successor servicer has assumed the Servicer's
servicing obligations and duties under such Transfer and Servicing Agreement
or Pooling and Servicing Agreement.
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will further provide that neither the Servicer nor any of its directors,
officers, employees and agents will be under any liability to the related
Trust or the related Noteholders or Certificateholders for taking any action
or for refraining from taking any action pursuant to such Transfer and
Servicing Agreement or Pooling and Servicing Agreement or for errors in
judgment; except that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of the
Servicer's duties thereunder or by reason of reckless disregard of its
obligations and duties thereunder. In addition, each Transfer and Servicing
Agreement and Pooling and Servicing Agreement will provide that the Servicer
is under no obligation to appear in, prosecute or defend any legal action that
is not incidental to the Servicer's servicing responsibilities under such
Transfer 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 Transfer 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, 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 Transfer and Servicing Agreement or Pooling and
Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement, "Servicer
Default" under each Transfer and Servicing Agreement and Pooling and Servicing
Agreement will consist of (i) any failure by the Servicer to deliver to the
Applicable Trustee for deposit in any of the Trust Accounts or the Certificate
Distribution Account any required payment or to direct the Applicable Trustee
to make any required distributions therefrom, which failure continues
unremedied for three business days after written notice from the Applicable
Trustee is received by the Servicer or after discovery of such failure by the
Servicer; (ii) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement in such Transfer and
Servicing Agreement or Pooling and Servicing Agreement, which failure
materially and adversely affects the rights of the Noteholders or the
Certificateholders of the related series and which continues unremedied for 60
days after the giving of written notice of such failure (A) to the Servicer or
the Depositor, as the case may be, by the Applicable Trustee or (B) to the
Servicer and to the Applicable Trustee by holders of Notes or Certificates of
such series, as applicable, evidencing not less than 25% in principal amount
of such outstanding Notes or of
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such Certificate Balance; 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 any Trust that has issued Notes, unless otherwise provided in
the related Prospectus Supplement, as long as a Servicer Default under a
Transfer and Servicing Agreement remains unremedied, the related Indenture
Trustee or holders of Notes of the related series evidencing not less than 25%
of the principal amount of such Notes then outstanding may terminate all the
rights and obligations of the Servicer under such Transfer 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 Transfer and Servicing Agreement and
will be entitled to similar compensation arrangements. In the case of any
Trust that has not issued 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 such Indenture Trustee, such Noteholders, such Trustee or
such Certificateholders from effecting a transfer of servicing. In the event
that such Indenture Trustee or Trustee is unwilling or unable to so act, it
may appoint, or petition a court of competent jurisdiction for the appointment
of, a successor with a net worth of at least $100,000,000 and whose regular
business includes the servicing of the type of receivables included in the
Trust. 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 Transfer and Servicing Agreement or
Pooling and Servicing Agreement.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, the holders of Notes evidencing at least
a majority in principal amount of the then outstanding Notes of the related
series (or the holders of the Certificates of such series evidencing not less
than a majority of the outstanding Certificate Balance, in the case of any
Servicer Default which does not adversely affect the related Indenture Trustee
or such Noteholders) may, on behalf of all such Noteholders and
Certificateholders, waive any default by the Servicer in the performance of
its obligations under the related Transfer and Servicing Agreement and its
consequences, except a Servicer Default in making any required deposits to or
payments from any of the Trust Accounts or to the Certificate Distribution
Account in accordance with such Transfer and Servicing Agreement. With respect
to each Trust that has not issued Notes, holders of Certificates of such
series evidencing not less than a majority of the principal amount of such
Certificates then outstanding may, on behalf of all such Certificateholders,
waive any default by the Servicer in the performance of its obligations under
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the related Pooling and Servicing Agreement, except a Servicer Default in
making any required deposits to or payments from the Certificate Distribution
Account or the related Trust Accounts in accordance with such Pooling and
Servicing Agreement. No such waiver will impair such Noteholders' or
Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements 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 Transfer and Servicing Agreements 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.
Unless otherwise specified in the related Prospectus Supplement, the Transfer
and Servicing Agreements may also be amended by the 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 Transfer 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
Receivables 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 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 Depositor) of such Trust and the delivery to such Trustee by
each such Certificateholder (including the 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 Transfer and Servicing Agreement, except as
otherwise provided therein.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Depositor,
the related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the
disposition of any amounts received upon liquidation of any such remaining
Receivables, (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 Transfer and Servicing Agreements and (iii) the occurrence of either event
described below.
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Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will be permitted at its
option to purchase from each Trust, as of the end of any applicable Collection
Period, if the then outstanding Pool Balance with respect to the Receivables
held by such Trust is less than 10% of the Initial Pool Balance (as defined in
the related Prospectus Supplement, the "Initial Pool Balance"), all remaining
related Receivables at a price equal to the aggregate of the Purchase Amounts
thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within ten days following a
Distribution Date or Payment Date as of which the Pool Balance is equal to or
less than the percentage of the Initial Pool Balance specified in the related
Prospectus Supplement, solicit bids for the purchase of the Receivables
remaining in such Trust, in the manner and subject to the terms and conditions
set forth in such Prospectus Supplement. If the Applicable Trustee receives
satisfactory bids as described in such Prospectus Supplement, then the
Receivables remaining in such Trust will be sold to the highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above, and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
ADMINISTRATION AGREEMENT
If so specified in the related Prospectus Supplement, the person named as
such in the related Prospectus Supplement (the "Administrator"), will enter
into an agreement (as amended and supplemented from time to time, an
"Administration Agreement") with each 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.
Unless otherwise specified in the related Prospectus Supplement with respect
to any such Trust, 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 in such amount as may be set forth in the related
Prospectus Supplement (the "Administration Fee").
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Receivables will be treated by each Trust as "chattel paper" as defined
in the UCC. Pursuant to the UCC, the transfer of chattel paper is treated in a
manner similar to a security interest in chattel paper. In order to protect
each Trust's ownership or security interest in its Receivables, the Depositor
will file UCC-1 financing statements with the appropriate authorities in any
state deemed advisable by the Depositor to give notice of such Trust's and any
related Indenture Trustee's ownership of and security interest in the
Receivables and their proceeds. Under each Transfer and Servicing Agreement
and Pooling and Servicing Agreement, the Servicer will be obligated to
maintain the perfection of each Trust's and any related Indenture Trustee's
interest in the Receivables. It should be noted, however, that a purchaser of
chattel paper who gives new value and takes possession of it in the ordinary
course of such purchaser's business has priority over a security interest,
including an ownership interest, in the chattel
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paper that is perfected by filing UCC-1 financing statements, and not by
possession of such chattel paper by the original secured party, if such
purchaser acts in good faith without knowledge that the related chattel paper
is subject to a security interest, including an ownership interest. Any such
purchaser would not be deemed to have such knowledge because there are UCC
filings and would not learn of the transfer of or security interest in the
Receivables from a review of the Receivables since they would not be marked to
show such transfer.
SECURITY INTEREST IN VEHICLES
In states in which retail installment sale contracts and installment loans
such as the Recreational Vehicle Receivables evidence the credit sale of
recreational vehicles by dealers to obligors, the contracts or loans also
constitute personal property security agreements and include grants of
security interests in the vehicles under the applicable UCC. Perfection of
security interests in recreational vehicles is generally governed by the motor
vehicle registration laws of the state in which the vehicle is located. In
most states in which the Receivables have been originated, a security interest
in Financed Recreational Vehicles is perfected by obtaining the certificate of
title to the Financed Recreational Vehicle or notation of the secured party's
lien on the Financed Recreational Vehicle's certificate of title. In certain
states, however, folding camping trailers and/or slide-in campers, which may
constitute the Financed Recreational Vehicle with respect to certain
Recreational Vehicle Receivables, are not subject to state titling and vehicle
registration laws and a security interest in such recreational vehicles is
perfected by filing pursuant to the provisions of the UCC. However, in some
jurisdictions, a purchase money lien in consumer goods is perfected without
any filing requirement.
Unless otherwise specified in the related Prospectus Supplement, the
Transferor will be obligated to have taken all actions necessary under the
laws of the state in which the Financed Recreational Vehicle is located to
perfect its security interest in the Financed Recreational Vehicle securing
the related Receivable purchased by it from a Dealer, including, where
applicable, by having a notation of its lien recorded on such vehicle's
certificate of title or, if appropriate, by perfecting its security interest
in the related recreational vehicles under the UCC. Because the Servicer will
continue to service the contracts and loans, the Obligors on the contracts and
loans will not be notified of the transfers from the Transferor to the
Depositor or from the Depositor to the Trust, and no action will be taken to
record the transfer of the security interest from the Transferor to the
Depositor or from the Depositor to the Trust by amendment of the certificates
of title for the Financed Recreational Vehicles or Financed Boats or
otherwise.
Pursuant to each Receivables Transfer Agreement, the Transferor will
transfer to the Depositor its interests in the Financed Recreational Vehicles
securing the Recreational Vehicle Receivables transferred by that Transferor
to the Depositor and, with respect to each Trust, pursuant to the related
Transfer and Servicing Agreement or Pooling and Servicing Agreement, the
Depositor will transfer its interests in the Financed Recreational Vehicles
securing the related Receivables to such Trust. However, because of the
administrative burden and expense, none of the Transferor, the applicable
Originator, the Depositor, the Servicer or the related Trustee will amend any
certificate of title to identify either the Depositor or such Trust as the new
secured party on such certificate of title relating to a Financed Recreational
Vehicle nor will any such entity execute and file any transfer instrument
(including, among other instruments, UCC-3 transfers for those Financed
Recreational Vehicles for which perfection is governed by the UCC).
In most states, a transfer such as that under each Receivables Transfer
Agreement, Transfer and Servicing Agreement or Pooling and Servicing Agreement
is an effective conveyance of a security interest without amendment of any
lien noted on a vehicle's certificate of title or the execution or filing of
any transfer instrument, and the transferee succeeds thereby to the
transferor's rights as secured party. In some states, however, in the absence
of such an amendment, execution or filing, the transfer to the Applicable
Trustee of a security interest in
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Financed Recreational Vehicles registered therein may not be effective or such
security interest may not be perfected. If any otherwise effectively
transferred security interest in favor of the Applicable Trustee is not
perfected, such transfer of the security interest to such Trustee may not be
effective against creditors or a trustee in bankruptcy of the Transferor or
the applicable Originator, which continues to be specified as lienholder on
any certificates of title or as secured party on any UCC filing. The Servicer
will continue to hold any certificates of title relating to the Financed
Recreational Vehicles in its possession as custodian for such Trust pursuant
to the related Transfer and Servicing Agreement or Pooling and Servicing
Agreement. See "Description of the Transfer and Servicing Agreements--Transfer
of Receivables" herein.
In addition, even in those states where a transfer such as that under each
Receivables Transfer Agreement, Transfer and Servicing Agreement or Pooling
and Servicing Agreement is an effective conveyance of a security interest
without amendment of any lien noted on a vehicle's certificate of title, by
not identifying a Trust as the secured party on the certificate of title, the
security interest of such Trust in the vehicle could be defeated through fraud
or negligence. In such states, in the absence of fraud or forgery by the
vehicle owner or the Transferor (or the Originator, if the Transferor acquired
the applicable Receivable from an Originator) or administrative error by state
or local agencies, the notation of the lien of the Transferor (or the
Originator, if applicable) on the certificates of title will be sufficient to
protect a Trust against the rights of subsequent purchasers of a Financed
Recreational Vehicle or subsequent lenders who take a security interest in a
Financed Recreational Vehicle. If there are any Financed Recreational Vehicles
as to which the Transferor or the applicable Originator failed to obtain a
perfected security interest, the security interest of the related Trust would
be subordinate to, among others, the interests of subsequent purchasers of the
Financed Recreational Vehicles and holders of perfected security interests
therein. Such a failure, however, would constitute a breach of the warranties
of the Depositor under the related Transfer and Servicing Agreement or Pooling
and Servicing Agreement and of the Transferor under the Receivables Transfer
Agreement and would create an obligation of the Depositor to purchase the
related Receivable from the Trust and of the Transferor to simultaneously
purchase the related Receivable from the Depositor unless the breach were
cured. See "Description of the Transfer and Servicing Agreements--Transfer of
Receivables" and "Risk Factors--Certain Legal Aspects--Security Interests in
Financed Assets" herein.
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after the vehicle is moved to a state other
than the state in which it is initially registered and thereafter until the
owner thereof re-registers the vehicle in the new state. A majority of states
generally require surrender of a certificate of title to re-register 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, the secured party would
receive notice of surrender if the security interest is noted on the
certificate of title. Thus, the secured party would have the opportunity to
re-perfect its security interest in the vehicle in the state of relocation.
However, these procedural safeguards will not protect the secured party if
through fraud, forgery or administrative error, the debtor somehow procures a
new certificate of title that does not list the secured party's lien.
Additionally, in states that do not require a certificate of title for
registration of a recreational vehicle, re-registration could defeat
perfection. In the ordinary course of servicing recreational vehicle
receivables, the Servicer 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 vehicle, the Servicer must surrender
possession of the certificate of title or will
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receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related loan before release of
the lien. Under each Transfer and Servicing Agreement and Pooling and
Servicing Agreement, the Servicer will be obligated to take appropriate steps,
at the Servicer's expense, to maintain perfection of security interests in the
Financed Recreational Vehicles and is obligated to purchase the related
Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a recreational
vehicle and liens for unpaid taxes take priority over even a perfected
security interest in such vehicle. The Code also grants priority to certain
federal tax liens over the lien of a secured party. Certain state laws and
federal law permit the confiscation of vehicles by governmental authorities
under certain circumstances if used in unlawful activities, which may result
in the loss of a secured party's perfected security interest in the
confiscated vehicle. Under each Receivables Transfer Agreement, the Transferor
will represent to the related Trust that, as of the date the related
Receivable is transferred to such Trust, each security interest in a Financed
Vehicle is or will be prior to all other present liens (other than tax liens
and other liens that arise by operation of law) upon and security interests in
such Financed Recreational Vehicle. However, liens for repairs or taxes could
arise, or the confiscation of a Financed Recreational Vehicle could occur, at
any time during the term of a Receivable. No notice will be given to the
Trustee, any Indenture Trustee, any Noteholders or the Certificateholders in
respect of a given Trust if such a lien arises or confiscation occurs and any
such lien or confiscation arising after the applicable Closing Date would not
give rise to the Transferor's purchase obligation under the applicable
Receivables Transfer Agreement.
SECURITY INTERESTS IN BOATS
Generally, security interests in boats may be perfected in one of three
ways: (a) in "title" states, a security interest is perfected by notation of
the secured party's lien on the certificate of title issued by an applicable
state motor vehicle department or other appropriate state agency; (b) in other
states, a security interest may be perfected by filing a UCC-1 financing
statement, however, in some jurisdictions a purchase money lien in consumer
goods may be perfected without any filing requirement; and (c) if a boat
qualifies for documentation under Federal law, a preferred mortgage (a
"Preferred Mortgage") may be obtained under the federal ship mortgage statutes
by filing the Preferred Mortgage with the Secretary of Transportation of the
United States, who conducts such function through the United States Coast
Guard (the "Coast Guard").
To qualify for documentation under Federal law, a boat must measure at least
five net tons, which is a measure not of weight but of units of 100 cubic feet
of enclosed, internal volume after certain deductions of space, as measured
under Federal law. If a boat with a security interest perfected under state
law is later documented under Federal law (or an application for documentation
is duly filed), the exclusive method of perfecting a security interest in it
is to have the boat owner sign a Preferred Mortgage and for the Preferred
Mortgage to be filed with the Coast Guard. When a boat becomes documented
under federal law (or an application therefor is duly filed) the state law
security interest becomes unperfected unless it is continued by the filing of
a Preferred Mortgage under Federal law.
The Transferor will represent that it has taken such measures necessary to
perfect its security interest in each related Financed Boat under the
applicable state or Federal law. Typically arrangements are made so that the
necessary documents to grant and perfect the desired security interest or
mortgage are signed by the consumer and are filed by the Dealer or the
Transferor (or the applicable Originator, if the Transferor acquired the
applicable Receivable from an Originator). In the event of clerical error or
otherwise, the necessary actions will not
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have been taken, or taken in a timely fashion. In such event, the Transferor
may not have a perfected security interest in the Financed Boat or the
security interest may be subordinate to the interests of subsequent purchasers
of the Financed Boat, other lienholders, or bankruptcy trustees or receivers
of the owner of the Financed Boat. The Transferor's security interest or
Preferred Mortgage may also be subordinate to such third parties in the event
of fraud or forgery by the Obligor or administrative error by state or federal
recording and filing officials. In addition, under certain state certificate
of title statutes the Transferor must separately perfect its security interest
in boat motors, unless the Financed Boat is properly documented under Federal
law and, as a matter of Federal law, the particular boat motor is considered
to be an appurtenance of the Financed Boat.
A security interest perfected by a Preferred Mortgage has a nationwide scope
and no further action is necessary when an Obligor moves or relocates the
collateral. Security interests perfected under state law may have to be
refiled if the Obligor moves to a state other than the state in which a
security interest is originally perfected and in addition if the security
interest is perfected under the UCC, a new filing must be made under the UCC
in order to continue the perfected security interest.
If the security interest in the boat is perfected under a title statute and
the related Obligor moves to a state other than the state in which the boat is
registered, under the laws of most title states the perfection of the security
interest in the boat would continue for a brief period of time after such
relocation. Some states issuing certificates of title on boats require
surrender of a certificate of title to reregister a boat. In those states that
also provide for possession of the certificate of title by the secured party,
the Transferor must surrender possession of the certificate of title in such
circumstance for any related Financed Boat to be reregistered. Some states do
not give the secured party possession of the certificate of title, but
indicate the secured party on the certificate of title and provide notice to
such secured party of surrender of the certificate of title by another person.
If either the Servicer is in possession of a certificate of title that must be
surrendered to reregister the Financed Boat or the Servicer receives notice of
any surrender of the certificate of title by another person, the Servicer
would then have the opportunity to continue the perfection of the security
interest in the Financed Boat in the state of registration. If the Obligor
moves to a state which does not require surrender of a certificate of title
for reregistration of a boat, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of boat contracts, the Servicer
generally takes steps to effect such perfection upon receipt of notice of
surrender or information from the Obligor as to relocation in those states
that require any action to be taken. Similarly, when an Obligor sells a boat,
under the laws of many states, the purchaser cannot reregister the boat unless
the related lienholder of record (which in the case of the Financed Boats
covered by such laws would be the Transferor or, if the Transferor acquired
the Receivables from an Originator, would be such Originator or other entity,
if applicable, which acquired such Receivable from the related Dealer)
surrenders possession of the certificate of title and accordingly the
Servicer, in such circumstance, would have an opportunity to require
satisfaction of the related Receivable before release of the lien.
If the Transferor has perfected its security interest by the filing of a
UCC-1 financing statement, or the Obligor moves from a title state to a non-
title state, the Servicer will be required to file a UCC-1 financing statement
in the new state of the Obligor as soon as possible after receiving notice of
the Obligor's change of residence. If the Servicer does not learn of the
change or act in time, the perfection of the security interest could lapse.
UCC-1 financing statements expire after five years. When the term of a loan
exceeds five years, the filing must
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be continued in order to maintain the Transferor's perfected security interest.
The Servicer will be required to take steps to effect such continuation. In the
event that an Obligor moves to a state other than the state in which the UCC-1
financing statement is filed or in certain states to a different county in such
state, under the laws of most states the perfection of the security interest in
the Financed Boat would continue for four months after such relocation, unless
the perfection in the original jurisdiction would have expired earlier. A new
financing statement must be filed in the state of relocation or, if such state
is a title state, a notation on the certificate of title must be made in order
to continue the Transferor's security interest.
Unless otherwise specified in the related Prospectus Supplement, due to the
administrative burden and expense of (i) endorsing the certificate of title of
each Financed Boat to reflect a Trust's interest therein and delivering each
such certificate of title to the Trustee for filing (and the payment of related
filing fees), in the case of Financed Boats licensed in states where security
interests in boats are subject to certificate of title statutes; (ii) filing
amendments to or assignments of records of UCC-1 financing statements relating
to each Financed Boat (and the payment of related filing fees) to reflect the
Trust's interest therein, in the case of Financed Boats licensed in states
where security interests in boats are perfected by filing a UCC-1 financing
statement; and (iii) filing each transfer of the Preferred Mortgages (and the
payment of related filing fees) as required under Federal law to perfect the
Trust's interest therein, in the case of Financed Boats which are documented
under Federal law, none of such certificates of title will be endorsed,
delivered and filed, UCC-1 financing statements amended or assigned of record,
or transfers of Preferred Mortgages filed. In the absence of such procedures,
neither the Depositor nor the Trust may have a perfected security interest in
the Financed Boats licensed in certificate of title or UCC states, and will not
have a perfected security interest in Financed Boats documented under Federal
law, but the failure to make such endorsements, filings or recordations will
not affect the validity of the original security interest as against the
Obligor under a Receivable in UCC states.
In the case of "title" states, in the absence of the step described in clause
(i) above, the Transferor (or, if the Transferor acquired the related
Receivable from an Originator, such Originator) will continue to be named as
the secured party on the certificates of title relating to the Financed Boats
registered in such states. In most such states, a transfer of such Receivable
would be an effective conveyance of such a security interest and the new
secured party would succeed to the rights of the Transferor (or, if the
Transferor acquired the related Receivable from an Originator, the rights of
such Originator) as the secured party. In the absence of fraud or forgery by
the Obligor or administrative error by Federal, state or local recording
officials, the notation of the lien of the Transferor (or, if the Transferor
acquired the related Receivable from an Originator, the lien of such
Originator) on the certificate of title will be sufficient to protect the Trust
against the rights of subsequent purchasers of a Financed Boat covered by the
laws of such state or subsequent lenders who take a security interest in the
Financed Boat. There exists a risk, however, in not identifying the Trust as
the new secured party on the certificate of title, that the Trust may in some
states be subordinate to claims of creditors or the receiver of the Transferor
or an Originator, as the case may be, in the event of the insolvency of the
Transferor or such Originator, as the case may be, and that, through fraud or
negligence, the security interest of such Trust could be released by the
Transferor or such Originator, as the case may be, as security holder of
record.
Similarly, neither the Transferor nor an Originator will, as the case may be,
cause the documentation for Financed Boats which are subject to a Preferred
Mortgage to be endorsed to reflect the Trust's interest therein nor will the
transfer be filed with the Secretary of
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Transportation, and under Federal law no transfer of a Preferred Mortgage is
valid against a third party without notice until the transfer is recorded.
While the interpretation of this provision by a court might depend upon the
factual circumstances, under the terms of the Federal statute, a Trust's
security interest in federally documented Financed Boats is subordinate to
creditors and the receiver or trustee of the Transferor, an Originator or any
other holder of the related Receivable, as the case may be, in the event of
the insolvency of the Transferor (and, if the Transferor acquired the related
Receivable from an Originator, in the event of an insolvency of such
Originator or any other holder of the related Receivable), as the case may be,
and to the rights of subsequent purchasers of such a Financed Boat, subsequent
lenders who take a security interest in the Financed Boat and the bankruptcy
trustee of the Obligor. This provision does not affect the validity of the
original security interest as against the Obligor. As a general rule a
Preferred Mortgage on a Financed Boat is subordinate to the costs incurred by
the court and the custodian of the Financed Boat incurred during foreclosure
proceedings; liens for crew wages, salvage, general average, and tort claims,
whenever they arise; Preferred Mortgages granted and perfected prior in time
to the mortgage in question; liens under Federal law for "necessaries" (which
are generally goods and services rendered or delivered to the Financed Boat)
furnished before the Preferred Mortgage in question is perfected; and certain
stevedoring charges (which are a type of "necessaries" claims) whenever they
arise.
A security interest perfected under state law is subordinate to the same
costs and liens, and is also subordinate to liens for necessaries (including
stevedoring charges) whenever they arise; previously perfected state law
security interests; and certain other liens, including liens for storage,
repairs and taxes.
The priority of all security interests, mortgages, and liens is subject to
the application of principles of equitable subordination and other changes due
to the exercise by courts of their equitable discretion in appropriate cases.
Certain state laws and Federal law permit the confiscation of boats by
governmental authorities under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected
security interest in the confiscated boat. Federal law protects a Preferred
Mortgage from this result for violation of Federal laws if the mortgagor did
not authorize, consent or conspire with respect to the unlawful act.
The enforceability and priority of security interests in boats that journey
outside the United States are subject to the laws of each country where such
boats go, which laws vary from place to place.
The holder of a preferred maritime lien who arrests a boat under Federal law
to enforce that lien is required to give notice of the suit to all lienholders
of record. However, if the holder of a Preferred Mortgage does not receive
notice of the suit (e.g., because a transfer of the Preferred Mortgage was not
recorded and the current holder did not receive notice of the arrest) and
consequently does not intervene in the arrest action, or otherwise fails to so
intervene, the boat can be sold free and clear of the Preferred Mortgage. If
the holder of the Preferred Mortgage does not arrest the boat and foreclose
the mortgage under Federal law in Federal court, but rather repossesses and
resells the boat under state law, any preferred maritime liens on the boat are
not terminated by such sale and may impair the Preferred Mortgage holder's
ability to transfer clear title to the Boat.
The Transferor will warrant in the related Receivables Transfer Agreement
that there shall exist a valid, subsisting and enforceable first priority
security interest in each Financed Boat in favor of the Transferor as of the
Closing Date, and that such security interest will be transferred to the
related Trust albeit unaccompanied by any of the procedures described in
clauses (i), (ii) and (iii) of the [third] preceding paragraph above. In the
event of a material adverse breach of such warranty, the only recourse of the
Trust would be to require the Transferor to purchase
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the related Receivables. See "Risk Factors--Certain Legal Aspects--Security
Interests in the Receivables" herein. However, liens that take priority over a
perfected security interest in a Financed Boat could arise, or the
confiscation of a Financed Boat could occur, at any time during the term of a
Receivable. No notice will be given to the Trustee, any Indenture Trustee, any
Noteholders or the Certificateholders in respect of a given Trust if such a
lien arises or confiscation occurs and any such lien or confiscation arising
after the applicable Closing Date would not give rise to the Transferor's
purchase obligation under the applicable Receivables Transfer Agreement.
REPOSSESSION
In the event of default by vehicle or boat purchasers, the holder of the
recreational vehicle or boat 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 or federal laws. Among the 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 Servicer in most cases and is accomplished simply by retaking
possession of the financed vehicle or boat. 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 may cure the default prior
to repossession. Generally, the right of reinstatement 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, or if otherwise required by
applicable state law, a court order must be obtained from the appropriate
state court, and the vehicle or boat must then be repossessed in accordance
with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws generally require the secured party to provide
the obligor with reasonable notice of the date, time and place of any public
sale and/or the date after which any private sale of the collateral may be
held. The obligor 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, or, in some states, by payment of
delinquent installments or the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Financed Assets 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. However, the deficiency
judgment would be a personal judgment against the obligor for the shortfall,
and a defaulting obligor can be expected to have very little capital or
sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount.
Occasionally, after resale of a vehicle or boat and payment of all expenses
and all indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a lien with
respect to the vehicle or boat or if no such lienholder exists or there are
remaining funds, the UCC requires the creditor to remit the surplus to the
former owner of the vehicle or boat.
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CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of
the National Consumer Act and of the Uniform Consumer Credit Code, and retail
installment sales acts, lending acts and other similar laws. Also, state laws
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply with their provisions. In some cases, this liability could
affect a transferee's ability to enforce consumer finance contracts such as
the Receivables.
The Fair Debt Collection Practices Act contains provisions that restrict
where a legal action against a consumer may be filed. In the case of personal
property, this is where the consumer resides or where the applicable contract
was signed. When the consumer keeps the personal property collateral outside
the court jurisdiction where the consumer resides or where the applicable
contract was signed, the statue could require that the Trustee enforce the
security interest or preferred mortgage in the Financed Asset by means of
private repossession and sale, which is not always available in each case,
depending upon the circumstances.
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, other statutes or the common law, has the effect
of subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses which the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract
and the holder of the contract may also be unable to collect any balance
remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, each Trust, as holder of the related Receivables, will be subject
to any claims or defenses that the purchaser of the applicable Financed
Recreational Vehicle or Financed Boat may assert against the seller of the
Financed Recreational Vehicle or Financed Boat. Such claims are limited to a
maximum liability equal to the amounts paid by the Obligor on the Receivable.
If an Obligor were successful in asserting any such claim or defense, such
claim or defense would constitute a breach of the Transferor's warranties
under the related Transfer and Servicing Agreement or Pooling and Servicing
Agreement and would create an obligation of the Transferor to purchase the
Receivable unless the breach is cured. See "Description of the Transfer and
Servicing Agreements--Transfer of Receivables" herein.
Courts have applied general equitable principles to secured parties pursuing
repossession and 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 certain cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to 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 borrowers.
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Under each Receivables Transfer Agreement, the Transferor will warrant to
the Depositor (which will in turn transfer its rights under such warranty to
the applicable Trust under the related Transfer and Servicing Agreement or
Pooling and Servicing Agreement) that each Receivable complies with all
requirements of law in all material respects. Accordingly, if an Obligor has a
claim against such Trust for violation of any law and such claim materially
and adversely affects such Trust's interest in a Receivable, such violation
would constitute a breach of the warranties of the Transferor under such
Receivables Transfer Agreement and would create an obligation of the
Transferor to purchase the Receivable unless the breach is cured. See
"Description of the Transfer and Servicing Agreements--Transfer of
Receivables" herein.
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 to enforce a deficiency judgment. For
example, in a Chapter 13 proceeding under the federal bankruptcy law, a court
may prevent a creditor from repossessing a vehicle or boat, and, as part of
the rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the vehicle at the time of bankruptcy (as determined by the
court), leaving the creditor 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
The following is a general summary of material federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. The following summary represents the opinion of Tax Counsel
subject to the qualifications set forth herein. An opinion of Tax Counsel,
however, is not binding on the Internal Revenue Service ("IRS") or the courts.
No ruling on any of the issues discussed below will be sought from the IRS.
The following summary is intended as an explanatory discussion of the possible
effects of certain federal income tax consequences to holders generally, but
does not purport to furnish information in the level of detail or with the
attention to a holder's specific tax circumstances that would be provided by a
holder's own tax advisor. For example, it does not discuss the tax treatment
of Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. In addition, the discussion
regarding the Notes is limited to the federal income tax consequences of the
initial Noteholders and not a purchaser in the secondary market. Moreover,
there are no cases or IRS rulings on similar transactions involving both debt
and equity interests issued by a trust with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or a
part of the discussion below. Prospective investors are urged to consult their
own tax advisors in determining the federal, state, local, foreign and any
other tax consequences to them of the purchase, ownership and disposition of
the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive.
SCOPE OF THE TAX OPINIONS
In the opinion of Tax Counsel, the Trust will not be classified as a
separate entity that is an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. Further, with
respect to the Notes, Tax Counsel is of the opinion that the Notes will be
characterized as debt for federal income tax purposes.
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In addition, Tax Counsel has prepared or reviewed the statements under the
heading "Summary of Terms--Tax Status" as they relate to federal income tax
matters and under the heading "Federal Income Tax Consequences" herein and in
the Prospectus and is of the opinion that such statements are correct in all
material respects. Such statements are intended as an explanatory discussion
of the possible effects of the classification of the Trust as a partnership
for federal income tax purposes on investors generally and of related tax
matters affecting investors generally, but do not purport to furnish
information in the level of detail or with the attention to the investor's
specific tax circumstances that would be provided by an investor's own tax
adviser. Accordingly, each investor is advised to consult its own tax advisers
with regard to the tax consequences to it of investing in the Notes and the
Certificates.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CLASSIFICATION OF THE TRUST AS A PARTNERSHIP
Tax Counsel is of the opinion that the Trust (which the Trust Agreement
specifies is intended to be treated as a partnership) will not be classified
as a separate entity that is an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. A copy of such
opinion of Tax Counsel will be filed with the Commission as an exhibit to a
Form 8-K prior to an issuance of Securities by the Trust. This opinion is
based on the assumption that the terms of the Trust Agreement and related
documents will be complied with, and on Tax Counsel's conclusion that the
nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables,
reduced by its interest expense on the Notes provided the Notes are respected
as debt for federal income tax purposes (see discussion in the following
paragraph). 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.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Transferor will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal, state and local income and franchise tax purposes. In the opinion
of Tax Counsel, the Notes will be characterized as debt for federal income tax
purposes. A copy of such opinion of Tax Counsel will be filed with the
Commission with a Form 8-K following the issuance of the Notes. The discussion
below assumes this characterization of the Notes is correct.
The discussion below assumes that all payments on the Notes are denominated
in U.S. dollars, and that the Notes are not Strip Notes. Moreover, the
discussion assumes that the interest formula for the Notes meets the
requirements for "qualified stated interest" under Treasury regulations (the
"OID regulations") relating to original issue discount ("OID"), and that any
OID on the Notes (I.E., any excess of the principal amount of the Notes over
their issue price) does not exceed a DE MINIMIS amount (I.E., 1/4% of their
principal amount multiplied by the number of full years included in their
term), all within the meaning of the OID regulations.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered 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
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a pro rata basis, as principal payments are made on the Note. It is believed
that any prepayment premium paid as a result of a mandatory redemption will be
taxable as contingent interest when it becomes fixed and unconditionally
payable. 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.
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 for the Note, increased by any market 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 by a corporate taxpayer only to offset
capital gains, and by an individual taxpayer only to the extent of capital
gains plus $3,000 of other income.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-United States 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 or the Depositor (including a holder of 10% of the
outstanding Certificates) or a "controlled foreign corporation" with respect
to which the Trust or the Depositor is a "related person" within the meaning
of the Code and (ii) provides the Trustee or other person who is otherwise
required to withhold U.S. tax with respect to the Notes with an appropriate
statement (on IRS Form W-8 or a similar form), 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 withholding tax at a rate of 31 percent,
unless that rate is reduced or eliminated pursuant to an applicable tax treaty
and the foreign person provides the trustee or other payor of the interest
with a copy of IRS Form 1001, or if the interest is effectively connected with
the conduct of a U.S. trade or business and the foreign person provides a copy
of IRS Form 4224.
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.
On October 6, 1997, final Treasury regulations (the "Withholding Tax
Regulations") were issued that modify certain of the filing requirements with
which foreign persons must comply in order to be entitled to an exemption from
U.S. withholding tax or a reduction to the applicable U.S. withholding tax
rate. Those persons currently required to file Form W-8 generally will
continue to be required to file that form. However, the requirement that
foreign
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persons submit Form W-8 is extended to most foreign persons who wish to seek
an exemption from withholding tax on the basis that income from the Notes is
not effectively connected with the conduct of a U.S. trade or business (in
lieu of Form 4224) and to foreign persons wishing to rely on a tax treaty to
reduce the withholding tax rate (in lieu of Form 1001). The Withholding Tax
Regulations generally are effective for payments of interest due after
December 31, 1998, but Forms 4224 and 1001 filed prior to that date will
continue to be effective until the earlier of December 31, 1999 or the current
expiration date of those forms. Prospective investors are urged to consult
their tax advisors with respect to the effect of the Withholding Tax
Regulations.
BACKUP WITHHOLDING. Each holder of a 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 penalties 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 backup withholding. Should a nonexempt Noteholder
fail to provide the required certification, the Trust will be required to
withhold 31 percent 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. Noteholders should consult with their tax advisors as to their
eligibility for exemption from backup withholding and the procedure for
obtaining the exemption, and the potential impact of the Withholding Tax
Regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion of
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 taxable
corporation would not be able to reduce its taxable income by deductions for
interest expense on Notes recharacterized as equity). Alternatively, and most
likely in the view of Tax Counsel, the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) would be "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, and individual holders
might be subject to certain limitations on their ability to deduct their share
of Trust expenses. Furthermore, such a characterization could subject holders
to state and local taxation in jurisdictions in which they are not currently
subject to tax.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Depositor, the Servicer and the
Trustee, and the Certificateholders by their purchase of Certificates, will
agree 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 Depositor,
and the Servicer is not clear because there is no authority on transactions
closely comparable to that contemplated herein.
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 Depositor or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the intended 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.
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The following discussion assumes that all payments on the Certificates are
denominated in U.S. dollars, none of the Certificates are Strip Certificates,
and that a series of Securities includes a single class of Certificates.
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 accruals of guaranteed payments
from the Trust and its allocated share of other income, gains, losses,
deductions and credits of the Trust. The Trust's income will consist primarily
of interest and finance charges earned on the Receivables (including
appropriate adjustments for market discount, OID and bond premium) and any
gain upon collection or disposition of Receivables. The Trust's deductions
will consist primarily of interest accruing with respect to the Notes,
guaranteed payments on the Certificates, servicing and other fees, and losses
or deductions upon collection or disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). Under the Trust Agreement, interest
payments on the Certificates at the Pass Through Rate (including interest on
amounts previously due on the Certificates but not yet distributed) will be
treated as "guaranteed payments" under Section 707(c) of the Code. Guaranteed
payments are payments to partners for the use of their capital and, in the
present circumstances, are treated as deductible to the Trust and ordinary
income to the Certificateholders. The Trust will have a calendar year tax year
and will deduct the guaranteed payments under the accrual method of
accounting. Certificateholders with a calendar year tax year are required to
include the accruals of guaranteed payments in income in their taxable year
that corresponds to the year in which the Trust deducts the payments, and
Certificateholders with a different taxable year are required to include the
payments in income in their taxable year that includes the December 31 of the
Trust year in which the Trust deducts the payments. It is possible that
guaranteed payments will not be treated as interest for all purposes of the
Code.
In addition, the Trust Agreement will provide, in general, that the
Certificateholders will be allocated taxable income of the Trust for each
Collection Period equal to the sum of (i) any Trust income attributable to
discount on the Receivables that corresponds to any excess of the principal
amount of the Certificates over their initial issue price, (ii) prepayment
premium, if any, payable to the Certificateholders for such month and (iii)
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
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining items of taxable income, gain, loss
and deduction of the Trust, if any, will be allocated to the Depositor.
Based on the economic arrangement of the parties, this approach for
allocating Trust income arguably 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
would, in effect, be required to report income from the Certificates on the
accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes.
In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable
income that is greater or less than the amount reported to them by the Trust.
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All of the guaranteed payments and taxable income allocated to a
Certificateholder that is a pension, profit sharing or employee benefit plan
or other tax-exempt entity (including an individual retirement account) will
constitute "unrelated business taxable income" generally taxable to such a
holder under the Code.
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. It is not clear whether these rules would be applicable to
a Certificateholder accruing guaranteed payments.
The Trust intends to 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 Receivable, 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 Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, upon
transfer of the Receivables to the Trust, the value of the Receivables may be
greater or less than the remaining principal balance of the Receivables at the
time of transfer. If so, the Receivables may 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
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it
accrues over the life of the Receivables or to offset any such premium against
interest income on the Receivables. As indicated above, a portion of such
market discount income or premium deduction may be allocated to
Certificateholders.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. If such a termination occurs, under current Treasury regulations
the Trust (the "old partnership") will be considered to contribute its assets
to a new partnership (the "new partnership") in exchange for interest in the
new partnership. Such interests would be deemed distributed to the partners of
the old partnership in liquidation thereof, which would not constitute a sale
or exchange. The Trust will not comply with certain technical requirements
that might apply when such a constructive termination occurs. As a result, the
Trust may be subject to certain tax penalties and may incur additional
expenses if it is required to comply with those requirements. Furthermore, the
Trust might not be able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Subject to the discussion in the immediately
following paragraph, 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 seller'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 (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the
amount realized on a sale of a Certificate would include the holder's share of
the Notes and other liabilities of the Trust. A holder acquiring Certificates
at different prices may be required to maintain a single aggregate adjusted
tax basis in such Certificates, and,
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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 Receivables 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 purchase.
The use of such a monthly convention may not be permitted by existing
Treasury 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
Depositor is 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 Trust 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
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information includes (i) the name, address and taxpayer identification number
of the nominee and (ii) as to each beneficial owner (x) the name, address and
identification number of such person, (y) whether such person is a United
States person, a tax-exempt entity or a foreign government, an international
organization, or any wholly-owned agency or instrumentality of either of the
foregoing, and (z) certain information on Certificates that were held, bought
or sold on behalf of such person throughout the year. In addition, brokers and
financial institutions that hold Certificates through a nominee are required
to furnish directly to the Trust information as to themselves and their
ownership of Certificates. A clearing agency registered under Section 17A of
the Exchange Act is not required to furnish any such information statement to
the Trust. The information referred to above for any calendar year must be
furnished to the Trust on or before the following January 31. Nominees,
brokers and financial institutions that fail to provide the Trust with the
information described above may be subject to penalties.
The Depositor will be designated as the tax matters partner in the related
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.
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. Although it is not
expected that the Trust would be engaged in a trade or business in the United
States for such purposes, 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
Certificateholder's withholding status, the Trust may 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 Certificateholder might be required to file a U.S. individual
or corporate income tax return and pay U.S. income tax on the amount computed
therein (including, in the case of a corporation, the branch profits tax) on
its share of accruals of guaranteed payments and the Trust's income. Each
foreign Certificateholder 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 Certificateholder
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. However,
the IRS may assert additional taxes are due, and no assurance can be given as
to the appropriate amount of tax liability.
The Withholding Tax Regulations alter, in certain respects, the foregoing
certification rules and generally are effective for periods after December 31,
1998. Prospective investors are urged to consult their tax advisors with
respect to the effect of the Withholding Tax Regulations.
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BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds from
the sale of the Certificates will be subject to a "backup" 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. Certificateholders should consult with
their tax advisors as to their eligibility for exemption to backup
withholding, the procedure for obtaining the exemption, and the potential
impact of the Withholding Tax Regulations.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CLASSIFICATION OF THE TRUST AS A GRANTOR TRUST. Tax Counsel is of the
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part 1 of subchapter J of the Code. A copy of such opinion of Tax
Counsel will be filed with the Commission as an exhibit to a Form 8-K prior to
the issuance of the Certificates by the Trust. Owners of Certificates
(referred to herein as "Grantor Trust Certificateholders") will be treated for
federal income tax purposes as owners of a portion of the Trust's assets as
described below. The Certificates issued by the Trust are referred to herein
as "Grantor Trust Certificates."
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will
be considered the equitable owner of a pro rata undivided interest in each of
the Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable
because of a default or delinquency in payment will be treated for federal
income tax purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire
income from the Receivables in the Trust represented by the Grantor Trust
Certificates, including interest, OID, if any, market discount, if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Servicer. Under Sections 162 or 212 of
the Code each Grantor Trust Certificateholder will be entitled to deduct its
pro rata share of servicing fees, prepayment fees, assumption fees, any loss
recognized upon an assumption and late payment charges retained by the
Servicer, provided that such amounts are reasonable compensation for services
rendered to the Trust. Grantor Trust Certificateholders that are individuals,
estates or trusts will be entitled to deduct their share of expenses only to
the extent such expenses plus all other miscellaneous itemized deductions
exceed two percent of its adjusted gross income. In addition, the Code
provides that the amount of itemized deductions otherwise allowable for the
taxable year for an individual whose adjusted gross income exceeds a threshold
amount specified in the Code adjusted for inflation ($117,950 in 1996, in the
case of a joint return) will be reduced by the lesser of (i) 3% of the excess
of adjusted gross income over the specified threshold amount or (ii) 80% of
the amount of itemized deductions otherwise allowable for such taxable year. A
Grantor Trust Certificateholder using the cash method of accounting must take
into account its pro rata share of income and deductions as and when collected
by or paid to the Servicer. A Grantor Trust Certificateholder using an accrual
method of accounting must take into account its pro rata share of income and
deductions as they become due or are paid to the Servicer, whichever is
earlier. If the servicing fees paid to the Servicer are deemed to exceed
reasonable servicing compensation ("excess servicing"), the amount of such
excess could be considered as an ownership interest retained by the Servicer
(or any person to whom the Servicer assigned for value all or a portion of the
servicing fees) in a portion of the interest payments on the Receivables. The
Receivables would then be subject to the "coupon stripping" rules of the Code
discussed below.
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STRIPPED BONDS AND STRIPPED COUPONS. To the extent a transaction is
determined to involve "excess servicing" (as described above), or that the
classes of Certificates represent stripped interests in the underlying
Receivables, the Grantor Trust Certificates will represent interests in
stripped bonds for federal income tax purposes. Although the tax treatment of
stripped bonds is not entirely clear, based on recent guidance by the IRS,
each purchaser of a Grantor Trust Certificate will be treated as the purchaser
of a stripped bond which generally should be treated as a single debt
instrument issued on the day it is purchased for purposes of calculating any
OID. Generally, under Treasury regulations (the "Section 1286 Treasury
Regulations"), if the discount on a stripped bond is larger than a DE MINIMIS
amount (as calculated for purposes of the OID rules of the Code) such stripped
bond will be considered to have been issued with OID. If OID rules were to
apply, all of the taxable income to be recognized with respect to the
Certificates would be includible in income as OID but would not be includible
again when the interest is actually received. Regulations do not adequately
address the circumstances in which payment of interest on Certificates such as
the Grantor Trust Certificates would be considered unconditionally payable,
and thus, Tax Counsel is unable to opine as to the extent to which interest
payments on the Certificates would be treated as qualified stated interest.
MARKET DISCOUNT. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules
of Sections 1276 through 1278 of the Code to the extent an undivided interest
in a Receivable is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Receivable allocable to such holder's
undivided interest over such holder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than
0.25% of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Sections 1276 through 1278 of the Code.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history likely will apply. Under those rules, the holder
of a market discount bond may elect to accrue market discount on the basis of
a constant yield method.
A holder who acquired a Grantor Trust Certificate at a market discount may
be required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry
such Grantor Trust Certificate purchased with market discount. For these
purposes, the DE MINIMIS rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the
year in which such market discount is includible in income. If such holder
elects to include market discount in income currently as it accrues on all
market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
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PREMIUM. The price paid for a Grantor Trust Certificate by a holder will be
allocated to such holder's undivided interest in each Receivable based on each
Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant yield method. Amortizable bond
premium will be treated as an offset to interest income on such Grantor Trust
Certificate. The basis for such Grantor Trust Certificate will be reduced to
the extent that amortizable premium is applied to offset interest payments. It
is not clear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code. A
Grantor Trust Certificateholder that makes this election for a Grantor Trust
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Grantor Trust Certificateholder held at the
beginning of the year of the election or acquired thereafter. Absent such an
election, the premium will be deductible as an ordinary loss only upon
disposition of the Certificate or pro rata as principal is paid on the
Receivables.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the
difference between the portion of the prepaid principal amount of such
Receivable that is allocable to the Grantor Trust Certificate and the portion
of the adjusted basis of the Grantor Trust Certificate that is allocable to
such Receivable. If a reasonable prepayment assumption is used to amortize
such premium, it appears that such a loss would be available, if at all, only
if prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
ELECTION TO TREAT ALL INTEREST AS OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including
DE MINIMIS market or OID) and premium in income as interest, based on a
constant yield method. If such an election were to be made with respect to a
Grantor Trust Certificate with market discount, the Certificateholder would be
deemed to have made an election to include in income currently market discount
with respect to all other debt instruments having market discount that such
Grantor Trust Certificateholder acquires during the year of the election or
thereafter. Similarly, a Grantor Trust Certificateholder that makes this
election for a Grantor Trust Certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that such Grantor Trust
Certificateholder held at the beginning of the year of the election or
acquired thereafter. See "Premium." The election to accrue interest, discount
and premium on a constant yield method with respect to a Grantor Trust
Certificate is generally irrevocable.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221 of the Code, and will be
long-term or short-term depending on whether the Grantor Trust Certificate has
been owned for the long-term capital gain holding period (currently more than
one year).
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Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from
the sale of a Grantor Trust Certificate by a bank or a thrift institution to
which such section applies will be treated as ordinary income or loss.
NON-U.S. PERSONS. Generally, interest or OID paid by the person required to
withhold tax under Section 1441 or 1442 of the Code to (i) an owner that is
not a U.S. Person (as defined below) or (ii) a Grantor Trust Certificateholder
holding on behalf of an owner that is not a U.S. Person would not be subject
to withholding if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that
such Grantor Trust Certificateholder is not a U.S. Person and providing the
name and address of such Grantor Trust Certificateholder).
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership 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 includible in gross income for federal income tax purposes
regardless of its source.
The Withholding Tax Regulations alter, in certain respects, the foregoing
certification rules and generally are effective for periods after December 31,
1998. Prospective investors are urged to consult their tax advisors with
respect to the effect of the Withholding Tax Regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year,
to each person who was a Grantor Trust Certificateholder at any time during
such year, such information as may be deemed necessary or desirable to assist
Grantor Trust Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold Grantor Trust Certificates as
nominees on behalf of beneficial owners. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income
tax return, 31% backup withholding may be required with respect to any
payments. Any amounts deducted and withheld from a distribution to a recipient
would be allowed as a credit against such recipient's federal income tax
liability. Prospective investors are urged to consult their tax advisors
concerning the potential impact of the Withholding Tax Regulations.
FASIT LEGISLATION. The "Small Business Job Protection Act of 1996" (the
"Act") created a new type of entity for federal income tax purposes called a
"financed asset securitization investment trust" or "FASIT." The Act generally
enables certain arrangements similar to a trust that is treated as a
partnership to elect to be treated as a FASIT. Under 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 provided in
the related Prospectus Supplement, the Trust Agreement and Indenture will set
forth certain conditions which, if satisfied, will permit the Depositor to
amend such Trust Agreement and Indenture in order to enable all or a portion
of the Trust to qualify as a FASIT and to permit a FASIT election to be made
with respect thereto, and to make such modifications to such Trust Agreement
and Indenture as may be permitted by reason of the making of such an election.
However, there can be no assurance that the Depositor will or will not cause
any permissible FASIT election to be made with respect to a Trust or amend the
related Trust Agreement and Indenture in connection with any election.
Furthermore, any such election will be made only if an opinion of Tax Counsel
is rendered that such election will not have material adverse consequences to
any holder of a Note or Certificate.
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THE FEDERAL AND STATE DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S OR
CERTIFICATEHOLDER'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 certain types of Keogh Plans (each a "Benefit 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 Benefit 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. ERISA also imposes certain duties and certain
prohibitions on persons who are fiduciaries of plans subject to ERISA.
Generally, any person who exercises any authority or control with respect to
the management or disposition of the assets of a plan subject to ERISA is
considered to be a fiduciary of such plan.
If the assets of a Trust were deemed to constitute plan assets of a Benefit
Plan, the Benefit Plan's investment in Notes or Certificates might be deemed
to constitute delegation under ERISA of the duty to manage plan assets by the
fiduciaries making the decision on behalf of the Benefit Plan to make the
investment, and transactions involving the Trust might be deemed as
transactions with the Benefit Plan for the purpose of ERISA's fiduciary and
prohibited transaction rules. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a Trust
would be treated as plan assets of a Benefit Plan for the purposes of ERISA
and the Code only if the Benefit 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. The likely
treatment in this context of Notes and Certificates of a given series will be
discussed in the related Prospectus Supplement.
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. Accordingly, assets of such
plans may be invested in Notes or Certificates without regard to the ERISA
considerations discussed herein, subject to the provisions of other applicable
federal, state, and local law.
A plan fiduciary considering the purchase of Securities of a given series
should consult its tax and/or legal advisors regarding the applicability of
the fiduciary responsibility provisions of ERISA to such investment, 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.
SENIOR CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
Unless otherwise specified in the related Prospectus Supplement, the
following discussion applies only to nonsubordinated Certificates (referred to
herein as "Senior Certificates") issued by a Trust that does not issue Notes.
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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 Benefit 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 receivables covered by the Exemption
include installment sales contracts such as the Receivables. In general, the
Exemption will apply to the acquisition, holding and resale of the Senior
Certificates by a Benefit Plan, provided that specific conditions (certain of
which are described below) are met. However, it is not clear whether the
Exemption applies to those Benefit Plans which are participant directed plans
as described in Section 404(c) of ERISA or plans that are subject to Section
4975 of the Code but that are not subject to Title I of ERISA, such as certain
Keogh plans and certain individual retirement accounts.
Among the conditions which must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The acquisition of the Senior Certificates by a Benefit Plan is on
terms (including the price for the Senior Certificates) that are at least
as favorable to the Benefit Plan as they would be in an arm's length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Benefit Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's Structured Rating
Group, Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. or
Fitch Investors Service, L.P. (each a "Rating Agency");
(4) The Trustee is not an affiliate of any other member of the Restricted
Group (as defined in the Exemption);
(5) The sum of all payments made to the Underwriters in connection with
the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates; the sum
of all payments made to and retained by the Transferor pursuant to the
transfer of the Contracts to the Trust represents not more than the fair
market value of such Contracts; and the sum of all payments made to and
retained by the Servicer represents not more than reasonable compensation
for the Servicer's services under the Agreement and reimbursement of the
Servicer's reasonable expenses in connection therewith;
(6) The Benefit Plan investing in the Senior Certificates is an
"accredited investor" as defined in Rule 501 (a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933; and
(7) The Trust satisfies the following requirements:
(a) the corpus of the Trust consists solely of assets of the type
which have been included in other investment pools,
(b) certificates in such other investment pools have been rated in
one of the three highest generic rating categories of a Rating Agency
for at least one year prior to the Benefit Plan's acquisition of the
Senior Certificates, and
(c) certificates evidencing interests in such other investment pools
have been purchased by investors other than Benefit Plans for at least
one year prior to any Benefit Plan's acquisition of Senior
Certificates.
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Furthermore, if the related Prospectus Supplement provides that the property
of the Trust will include a Pre-Funding Account, certain additional conditions
must be met in order for the Exemption to apply to the acquisition, holding
and resale of the Senior Certificates by a Benefit Plan.
The Exemption does not provide an exemption from ERISA Sections
406(a)(1)(E), 406(a)(2) or 407 for the purchase or holding of Senior
Certificates by fiduciaries investing assets of Benefit Plans sponsored by any
member of the Restricted Group or any affiliate of such person.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of interest or prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the
Senior Certificates are acquired by persons independent of the Restricted
Group and at least 50% of the aggregate interest in the Trust is acquired by
persons independent of the Restricted Group, (ii) the Benefit Plan's
investment in Senior Certificates does not exceed twenty-five (25) percent of
all of the Senior Certificates outstanding at the time of the acquisition, and
(iii) immediately after the acquisition, no more than twenty-five (25) percent
of the assets of the Benefit Plan are invested in certificates representing an
interest in one or more trusts containing assets sold or serviced by the same
entity. The Exemption does not apply to Plans sponsored by the Depositor, the
Transferor, any Underwriter, the Trustee, the Servicer, any obligor with
respect to Contracts included in the Trust constituting more than five percent
of the aggregate unamortized principal balance of the assets in the Trust, or
any affiliate of such parties (the "Restricted Group").
The Depositor believes that the Exemption will apply to the acquisition and
holding by Benefit 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 have been met.
In addition, as of the date hereof, no obligor with respect to Contracts
included in the Trust constitutes more than five percent of the aggregate
unamortized principal balance of the assets of the Trust.
Any Benefit Plan fiduciary considering the purchase of Senior Certificates
should consult with its counsel with respect to the applicability of the
Exemption and other issues and determine on its own whether all conditions
have been satisfied and whether the Senior Certificates are an appropriate
investment for a Benefit Plan under ERISA and the Code. Each purchaser that
purchases Senior Certificates with the assets of one or more Benefit Plans
shall be deemed to represent that each such Plan qualifies as an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D under the Securities
Act.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Securities of a given series the ("Underwriting Agreement"),
the 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 therein and in the related Prospectus Supplement.
In the Underwriting Agreement 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.
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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 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 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 Depositor.
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 OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust and the Depositor by Mayer, Brown & Platt,
Chicago, Illinois and for the Underwriter for such series by Mayer, Brown &
Platt. Certain federal income tax matters will be passed upon for each Trust
by Mayer, Brown & Platt.
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INDEX OF TERMS
[TO BE CONFORMED]
<TABLE>
<S> <C>
accounts.............................................................. 21
accredited investor................................................... 96
Act................................................................... 94
Administration Agreement.............................................. 69
Administration Fee.................................................... 70
Administrator......................................................... 69
Applicable Trustee.................................................... 51
APR................................................................... 14
Base Rate............................................................. 45
Benefit Plan.......................................................... 94
Boat Receivables...................................................... 27
Calculation Agent..................................................... 45
Calculation Date...................................................... 46-48, 50
capital asset......................................................... 93
CD Rate............................................................... 46
CD Rate Determination Date............................................ 46
CD Rate Security...................................................... 45
Cede.................................................................. 27
Cedel................................................................. 52
Cedel Participants.................................................... 52
Certificate Balance................................................... 8
Certificate Distribution Account...................................... 59
Certificate Pool Factor............................................... 33
Certificateholder..................................................... 51
Certificateholders.................................................... 27
Certificates.......................................................... 1
chattel paper......................................................... 19
clearing corporation.................................................. 50
Closing Date.......................................................... 57
Code.................................................................. 80
Collection Account.................................................... 59
Collection Period..................................................... 61
Commercial Paper Rate................................................. 46
Commercial Paper Rate Determination Date.............................. 46
Commercial Paper Rate Security........................................ 45
Commission............................................................ 4
Composite Quotations.................................................. 45
Cooperative........................................................... 53
Cutoff Date........................................................... 27
Dealer Agreements..................................................... 27
Dealers............................................................... 11, 27
Definitive Certificates............................................... 54
Definitive Notes...................................................... 54
Definitive Securities................................................. 54
Depositaries.......................................................... 50
Depositor............................................................. 4, 34
Depository............................................................ 37
Distribution Date..................................................... 43
</TABLE>
78
<PAGE>
<TABLE>
<S> <C>
DTC................................................................... 27
DTC's Nominee......................................................... 27
Eligible Deposit Account.............................................. 60
Eligible Institution.................................................. 60
Eligible Investments.................................................. 60
equity interest....................................................... 95
ERISA................................................................. 17
Euroclear............................................................. 53
Euroclear Operator.................................................... 53
Euroclear Participants................................................ 53
Events of Default..................................................... 39
Exchange Act.......................................................... 4
Exemption............................................................. 95
FASIT................................................................. 94
Federal Funds Rate.................................................... 47
Federal Funds Rate Determination Date................................. 48
Federal Funds Rate Security........................................... 45
Final Scheduled Maturity Date......................................... 14
Financed Assets....................................................... 10
Financed Boats........................................................ 10
Financed Recreational Vehicles........................................ 10
Fixed Rate Securities................................................. 44
Floating Rate Securities.............................................. 44
foreign person........................................................ 82
FTC Rule.............................................................. 78
Funding Period........................................................ 7
Ganis................................................................. 5
Grantor Trust Certificateholders...................................... 89
Grantor Trust Certificates............................................ 89
H.15(519)............................................................. 45
Holder-in-Due-Course.................................................. 78
Indenture............................................................. 6
Indenture Trustee..................................................... 1
Index Maturity........................................................ 45
Indirect Participants................................................. 51
Cutoff Date........................................................... 10
Initial Pool Balance.................................................. 69
Initial Receivables................................................... 10
Insolvency Event...................................................... 66
Interest Rate......................................................... 6
Interest Reset Date................................................... 45
Interest Reset Period................................................. 45
Investment Earnings................................................... 60
IRS................................................................... 80
Issuer................................................................ 5
LIBOR................................................................. 48, 49
LIBOR Determination Date.............................................. 48
LIBOR Security........................................................ 45
LIBOR Telerate........................................................ 48
London Banking Day.................................................... 48
market discount....................................................... 91
Money Market Yield.................................................... 47
</TABLE>
79
<PAGE>
<TABLE>
<S> <C>
new partnership....................................................... 86
Note Distribution Account............................................. 59
Note Pool Factor...................................................... 32
Noteholder............................................................ 51
Noteholders........................................................... 27
Notes................................................................. 1
Obligors.............................................................. 27
OID................................................................... 81
OID regulations....................................................... 81
old partnership....................................................... 86
Participants.......................................................... 51
parties in interest................................................... 94
Pass Through Rate..................................................... 8
Payment Date.......................................................... 38
Plan Assets Regulation................................................ 95
Pool Balance.......................................................... 33
Pooling and Servicing Agreement....................................... 5
Portfolio interest.................................................... 82
Pre-Funded Amount..................................................... 11
Pre-Funding Account................................................... 2
Preferred Mortgages................................................... 15
prepayments........................................................... 24, 32
prohibited transaction................................................ 94
Prospectus Supplement................................................. 1
Purchase Amount....................................................... 59
Rating Agency......................................................... 96
Receivables........................................................... 2
Receivables Pool...................................................... 27
Receivables Purchase Agreement........................................ 58
Recreational Vehicle Receivables...................................... 27
Registration Statement................................................ 4
Related Documents..................................................... 41
Reserve Account....................................................... 64
Restricted Group...................................................... 97
Rules................................................................. 52
Schedule of Receivables............................................... 58
Section 1286 Treasury Regulations..................................... 90
Securities............................................................ 1
Securities Act........................................................ 4
Securityholder........................................................ 51
Securityholders....................................................... 27
Seller................................................................ 5
Senior Certificates................................................... 95
Servicer.............................................................. 5
Servicer Advance...................................................... 13
Servicer Default...................................................... 66
Servicing Fee......................................................... 62
Servicing Fee Rate.................................................... 62
Simple Interest Receivables........................................... 30
Spread................................................................ 45
Spread Multiplier..................................................... 45
Strip Certificates.................................................... 9
</TABLE>
80
<PAGE>
<TABLE>
<S> <C>
Strip Notes........................................................... 7
Subsequent Receivables................................................ 2
Subsequent Transfer Date.............................................. 58
Telerate Page 3750.................................................... 48
Terms and Conditions.................................................. 53
Transfer and Servicing Agreement...................................... 10
Treasury bills........................................................ 49
Treasury Rate......................................................... 49
Treasury Rate Determination Date...................................... 50
Treasury Rate Security................................................ 45
Trust................................................................. 1, 5
Trust Accounts........................................................ 60
Trust Agreement....................................................... 5
Trustee............................................................... 1, 5
U.S. Person........................................................... 93
UCC................................................................... 15, 59
</TABLE>
81
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Securities
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, CEDEL and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior debt issues. Investors'
securities custody accounts will be credited with their holdings against
payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payments in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
82
<PAGE>
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear, as applicable, will instruct its Depositary to receive the Global
Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by such Depositary to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
applicable clearing system and by the clearing system, in accordance with its
usual procedures, to the CEDEL Participant's or Euroclear Participant's
account. The Global Securities credit will appear the next day (European time)
and the cash debit will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debit
will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each CEDEL Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing systems, through
their respective Depositaries, 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 their respective Depositaries, as
appropriate, to deliver the bonds to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities from
and including the last coupon payment date to and excluding the settlement
date. The payment will then be reflected in the account of the CEDEL
Participant or Euroclear
83
<PAGE>
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 clearing system and elect to be in debit in anticipation of
receipt of the sale proceeds in its account, the back-valuation will
extinguish any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade
fails), receipt of the cash proceeds in the CEDEL Participant's or Euroclear
Participant's account would instead be valued as of the actual settlement
date. Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue 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 OF NON-U.S. PERSONS (FORM W-8). Beneficial owners of Notes that
are non-U.S. Persons generally 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. PERSON WITH 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 beneficial owners of Notes
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 beneficial owner of Notes or such owner's agent.
84
<PAGE>
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 PROCEDURE. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person
through whom it holds the security (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 a citizen or resident of the United States,
a corporation or a partnership organized in or under the laws of the United
States or any political subdivision thereof or an estate, the income of
which from sources outside the United States is includible in gross income
for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States or a trust if a
court within the United States is able to exercise primary supervision of
the administration of the trust and one or more United States fiduciaries
have the authority to control all substantial decisions of the trust.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax
advice concerning their holding and disposing of the Global Securities.
85
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT +
+RELATES SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER +
+TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH +
+SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED [ ], 1998
VERSION #1A
[BOATS AND RECREATIONAL VEHICLES]
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED , 199 )
$( )
( ) TRUST 199-( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
-----------
( ) Trust 199 ( ) (the "Trust") will be governed pursuant to a
Trust Agreement to be dated as of , 199 , between Deutsche
Recreational Asset Funding Corporation (the "Depositor") and ( ), as
(Owner) Trustee. The Trust will issue $ aggregate principal amount of
( %) Asset Backed Notes, Class ( ) (the "Class ( ) Notes") and $
aggregate principal amount of ( %) Asset Backed Notes, Class ( ) (the "Class
( ) Notes" and, together with the Class ( ) Notes, the "Notes") pursuant to an
Indenture to be dated as of , 199 , between the Trust and ,
as Indenture Trustee. (No principal payments will be made in the Class ( )
Notes until the Class ( ) Notes have been paid in full, and to that extent,
the rights of the holders of the Class ( ) Notes to receive distributions with
respect to the Receivables are subordinated to the rights of the holders of the
Class ( ) Notes, as more fully described herein.)
(Cover continued on following page)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [S-10] HEREIN AND ON PAGE [19] IN THE ACCOMPANYING PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS
IN DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, THE TRANSFEROR, THE
SERVICER OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES, THE
CERTIFICATES OR THE RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
ORIGINAL PROCEEDS TO
PRINCIPAL PRICE TO UNDERWRITING THE DEPOSITOR
AMOUNT PUBLIC (1) DISCOUNT (1) (2)
<S> <C> <C> <C> <C>
Class ( ) Notes................. $ % % %
Class ( ) Notes................. % % %
Certificates.................... % % %
Total........................... $ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
The Notes and the Certificates are offered by Deutsche Bank Securities Inc.
(the "Underwriter") subject to prior sale, when, as and if issued and accepted
by the Underwriter and subject to the Underwriter's right to reject any order
in whole or in part and to approval of certain legal matters by its counsel. It
is expected that the Notes and the Certificates will be delivered in book-entry
form only through the facilities of The Depository Trust Company and, in the
case of the Notes, Cedel Bank, societe anonyme, and the Euroclear System, in
each case against payment therefor, in immediately available funds on or about
, 199 .
DEUTSCHE BANK SECURITIES INC.
, 199 .
<PAGE>
The Trust will also issue $ aggregate principal amount of ( %)
Asset Backed Certificates (the "Certificates" and, together with the Notes,
the "Securities"). The assets of the Trust will include a pool of retail
installment sale contracts and/or retail installment loans (the
"Receivables"), secured by security interests in new or used recreational
vehicles and recreational sport and power boats (including any boat motors and
accompanying trailers) and yachts (both power and sail) (the "Financed
Assets"), collections and other payments with respect to the Receivables
received after the Cutoff Date described herein and monies on deposit in
certain trust accounts. The Notes will be secured by the assets of the Trust
pursuant to the Indenture.
Interest on each class of Notes will be payable on the day of each month
or, if any such day is not a Business Day, on the next succeeding Business Day
(each, a "Distribution Date"), commencing , 199 . Principal of the
Notes will be payable on each Distribution Date to the extent described
herein; however, no principal payments will be made on the Class ( ) Notes
until the Class ( ) Notes have been paid in full.
The Certificates will represent fractional undivided interests in the Trust.
Interest, to the extent of the Pass Through Rate specified above, will be
distributed to the Certificateholders on each Distribution Date. Distributions
of interest on the Certificates will be subordinated in priority of payment to
interest due on the Notes as and to the extent described herein. In addition,
no distributions of principal on the Certificates will be made until all the
Notes have been paid in full. See "Risk Factors--Subordination of the
Certificates to the Notes" herein.
Each class of the Notes and the Certificates will be payable in full on the
applicable final scheduled Distribution Date as set forth herein. However,
payment in full of a class of Notes or of the Certificates could occur earlier
than such dates as described herein. In addition, the Class ( ) Notes will be
subject to redemption in whole, but not in part, and the Certificates will be
subject to prepayment in whole, but not in part, on any Distribution Date on
which the Servicer exercises its option to purchase the Receivables. The
Servicer may purchase the Receivables when the aggregate principal balance of
the Receivables shall have declined to less than 10% of the initial aggregate
principal balance of the Receivables acquired by the Trust.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS
CONTAINED IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR
THE CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN
THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE
STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF SECURITIES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" HEREIN.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are issued,
monthly and annual unaudited reports containing information concerning the
Receivables will be prepared by the Servicer and sent on behalf of the Trust
only to Cede & Co. ("Cede"), as nominee of The
S-2
<PAGE>
Depository Trust Company ("DTC") and registered holder of the Notes and the
Certificates. See "Certain Information Regarding the Securities--Book-Entry
Registration" and "--Reports to Securityholders" in the accompanying
Prospectus (the "Prospectus"). Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. The Depositor, as originator of the Trust, will file with the
Securities and Exchange Commission (the "Commission") such periodic reports as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Delinquencies,
Repossessions and Net Losses" and "Weighted Average Life of the Securities"
herein may constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and as such may involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Receivables to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
S-3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer........................ ( ) Trust 199 -( ) (the
"Trust" or the "Issuer"), a ( ) a
business trust to be governed pursuant to a
Trust Agreement dated as of ,
199 (as amended and supplemented from time to
time, the "Trust Agreement"), between the
Depositor and the Owner Trustee.
Transferor.................... Ganis Credit Corporation
Depositor..................... Deutsche Recreational Asset Funding Corporation
(the "Depositor").
Servicer...................... Deutsche Financial Services Corporation (the
"Servicer").
Indenture Trustee............. , as trustee under the
Indenture (the "Indenture Trustee").
Owner Trustee................. , as trustee under the Trust
Agreement (the "Owner Trustee").
Closing Date.................. On or about , 199 .
Cutoff Date................... , 199 .
The Notes..................... The Trust will issue Asset Backed Notes
pursuant to an Indenture to be dated as of
, 199 (as amended and supplemented from
time to time, the "Indenture"), between the
Trust and the Indenture Trustee, as follows:
(i) ( %) Asset Backed Notes, Class ( ) (the
"Class ( ) Notes") in the aggregate initial
principal amount of $ ; and (ii) ( %)
Asset Backed Notes, Class ( ) (the "Class ( )
Notes") in the aggregate initial principal
amount of $ . The Class ( ) Notes and the
Class ( ) Notes are collectively referred to
herein as the "Notes".
The Notes will be secured by the assets of the
Trust pursuant to the Indenture.
The Certificates.............. The Trust will issue ( %) Asset Backed
Certificates (the "Certificates" and, together
with the Notes, the "Securities") with an
aggregate initial Certificate Balance of
$ . The Certificates will represent
fractional undivided interests in the Trust and
will be issued pursuant to the Trust Agreement.
S-4
<PAGE>
The Receivables............... The Receivables will have an aggregate
principal balance of approximately $ (the
"Initial Pool Balance") as of the Cutoff Date.
The Receivables will consist of retail
installment sale contracts and/or retail
installment loans between Obligors and Dealers,
between Originators and Dealers and/or between
the Transferor and Obligors, secured by new or
used recreational vehicles and recreational
sport and power boats (including any boat
motors and accompanying trailers) and yachts
(both power and sail) (the "Financed Assets").
The Receivables were originated by the
Transferor [and/or] were acquired by the
Transferor from Dealers [or Originators]. The
Receivables will be transferred by the
Transferor to the Depositor on or prior to the
Closing Date, and will be transferred by the
Depositor to the Trust on the Closing Date. As
of the Cutoff Date, the weighted average annual
percentage rate of the Receivables was
approximately %, the weighted average
remaining maturity of the Receivables was
approximately months, and the weighted
average original maturity of the Receivables
was approximately months. No Receivable
has a scheduled maturity later than ,
20 (the "Final Scheduled Maturity Date"). See
"The Receivables Pool" herein.
The "Pool Balance" at any time will represent
the aggregate principal balance of the
Receivables at the end of the preceding
Collection Period, after giving effect to all
payments received from Obligors, Servicer
Advances and Purchase Amounts to be remitted by
the Servicer or the Depositor, as the case may
be, all for such Collection Period, and all
losses realized on Receivables liquidated
during such Collection Period.
Terms of the Notes
A. Distribution Dates....... Payments of interest and principal on the Notes
will be made on the day of each month or, if
any such day is not a Business Day, on the next
succeeding Business Day (each, a "Distribution
Date"), commencing , 199 . Each
reference to a "Payment Date" in the Prospectus
shall refer to a Distribution Date herein.
Payments will be made to holders of record of
the Notes (the "Noteholders") as of the day
immediately preceding such Distribution Date
or, if Definitive Notes are issued, as of the
[ ] day of the preceding month (a "Record
Date"). A "Business Day" is a day other than a
Saturday, a Sunday or a day on which banking
institutions or trust companies in the States
of ( ) are authorized by law,
regulation or executive order to be closed.
S-5
<PAGE>
B. Interest Rates........... The Class ( ) Notes will bear interest at a
per annum rate of % (the "Class ( ) Rate")
and the Class ( ) Notes will bear interest at
a per annum rate of % (the "Class ( )
Rate").
The interest rates for the various classes of
Notes are referred to herein collectively as
"Interest Rates" and for each class of Notes as
the "Interest Rate" for such class.
C. Interest................. Interest on the outstanding principal amount of
the Notes will accrue at the applicable
Interest Rate from the Closing Date (in the
case of the first Distribution Date) or from
the day of the month preceding the month
of a Distribution Date to and including the
day of the month of such Distribution Date
(each an "Interest Accrual Period"). Interest
on the Notes will be calculated on the basis of
a 360-day year consisting of twelve 30-day
months. See "Description of the Notes--Payments
of Interest" herein.
D. Principal................ Principal of the Notes will be payable on each
Distribution Date in an amount equal to the
Noteholders' Principal Distributable Amount for
the calendar month (the "Collection Period")
preceding such Distribution Date (or in the
case of the first Distribution Date, the period
from and including the Cutoff Date to and
including , 199 ) to the extent of funds
available therefor. The "Noteholders' Principal
Distributable Amount" will equal the sum of (i)
the Regular Principal Distribution Amount plus
(ii) the Accelerated Principal Distribution
Amount. The "Regular Principal Distribution
Amount" with respect to any Distribution Date
will equal the amount of principal paid [or, in
certain circumstances, scheduled to be paid]
with respect to the Receivables plus, in
certain circumstances, the principal balance of
[defaulted] Receivables, as calculated by the
Servicer as described under "Description of the
Transfer and Servicing Agreements--
Distributions" herein. The "Accelerated
Principal Distribution Amount" with respect to
a Distribution Date will equal the portion, if
any, of the Total Distribution Amount for the
related Collection Period that remains after
payment of (a) the Servicing Fee (together with
any portion of the Servicing Fee that remains
unpaid from prior Distribution Dates), (b) the
interest due on the Notes, (c) the Regular
Principal Distribution Amount, (d) the interest
due on the Certificates, and (e) the amount, if
any, required to be deposited in the Reserve
Account on such Distribution Date.
S-6
<PAGE>
On the Business Day immediately preceding each
Distribution Date (a "Determination Date"), the
Indenture Trustee shall determine the amount in
the Collection Account available for
distribution on the related Distribution Date.
Payments to Securityholders will be made on
each Distribution Date in accordance with such
determination. The Servicing Fee in respect of
a Collection Period (together with any portion
of the Servicing Fee that remains unpaid from
prior Distribution Dates) will be paid at the
beginning of such Collection Period out of
collections for such Collection Period.
No principal payments will be made on the Class
( ) Notes until the Class ( ) Notes have been
paid in full.
The outstanding principal amount of the Class
( ) Notes, to the extent not previously paid,
will be payable on the (199 )(20 )
Distribution Date (the "Class ( ) Final
Scheduled Distribution Date"); and the
outstanding principal amount of the Class ( )
Notes, to the extent not previously paid, will
be payable on the (199 )(20 ) Distribution Date
(the "Class ( ) Final Scheduled Distribution
Date").
E. Optional Redemption...... The Notes will be redeemed in whole, but not in
part, on any Distribution Date on which the
Servicer exercises its option to purchase the
Receivables. The Servicer will have the option
to purchase all of the Receivables on any
Distribution Date on or after the Distribution
Date on which the Pool Balance has declined to
less than 10% of the Initial Pool Balance. The
price at which the Servicer will be required to
purchase the Receivables in order to exercise
such option will be equal to the aggregate of
the Purchase Amounts of the Receivables as of
the end of the related Collection Period. The
Servicer will be required to give not less than
( ) days notice to the Trustee of its
intention to exercise such option. In addition,
the Servicer will not be permitted to exercise
such option unless the resulting distribution
would be sufficient to retire the Notes at a
redemption price equal to the unpaid principal
amount of the Class ( ) Notes plus accrued and
unpaid interest thereon. See "Description of
the Notes--Optional Redemption" herein.
Terms of the Certificates
A. Distribution Dates....... Distributions with respect to the Certificates
will be made on each Distribution Date,
commencing , 199 . Distributions will
be made to holders of record of the
Certificates (the "Certificateholders" and,
together with the Noteholders, the
"Securityholders")
S-7
<PAGE>
as of the related Record Date (which will be
the [ ] day of the preceding month if
Definitive Certificates are issued).
B. Pass Through Rate........ ( )% per annum (the "Pass Through Rate").
C. Interest................. On each Distribution Date, the Owner Trustee
will distribute pro rata to Certificateholders
30 days of accrued interest at the Pass Through
Rate on the outstanding Certificate Balance
generally to the extent of funds available
following payment of the Servicing Fee and
distributions in respect of the Notes from the
Total Distribution Amount and the Reserve
Account. Interest will be calculated on the
basis of a 360-day year consisting of twelve
30-day months. Interest in respect of a
Distribution Date will accrue from the Closing
Date (in the case of the first Distribution
Date) or from the [ ] day of the month
preceding the month of the Distribution Date to
and including the [ ] day of the month of such
Distribution Date.
D. Principal................ No distributions of principal on the
Certificates will be made until all of the
Notes have been paid in full. On each
Distribution Date commencing on the
Distribution Date on which the Class ( ) Notes
are paid in full, principal of the Certificates
will be payable in an amount generally equal to
the Certificateholders' Principal Distributable
Amount for the Collection Period preceding such
Distribution Date, to the extent of funds
available therefor following payment of the
Servicing Fee, payments of interest and
principal, if any, due in respect of the Notes
and the distribution of interest in respect of
the Certificates. The "Certificateholders'
Principal Distributable Amount" will be the
Regular Principal Distribution Amount (less, on
the Distribution Date on which the Notes are
paid in full, the portion thereof payable on
the Notes), and will be calculated by the
Servicer in the manner described under
"Description of the Transfer and Servicing
Agreements--Distributions" herein.
E. Optional Prepayment........ If the Servicer exercises its option to
purchase the Receivables, the terms of which
option are summarized under "Terms of the
Notes--E. Optional Redemption" above, the
Certificates will be retired. The Servicer will
not be permitted to exercise such option unless
the resulting distribution to
Certificateholders would be equal to the
outstanding Certificate Balance together with
accrued interest at the Pass Through Rate. See
"Description of the Certificates--Optional
Prepayment" herein.
S-8
<PAGE>
Reserve Account............... (DESCRIBE RESERVE ACCOUNT FORMULA)
Collection Account; Priority
of Payments...................
Except under certain conditions described
herein or as otherwise acceptable to each
Rating Agency, the Servicer will be required to
remit collections received with respect to the
Receivables within [ ] Business Days of
receipt thereof to one or more accounts in the
name of the Indenture Trustee (the "Collection
Account"). At the beginning of each Collection
Period the Indenture Trustee will apply
collections in the Collection Account to pay to
the Servicer the Servicing Fee for such
Collection Period and any overdue Servicing
Fees. Pursuant to the Transfer and Servicing
Agreement, the Servicer will have the revocable
power to instruct the Indenture Trustee to
withdraw funds on deposit in the Collection
Account and to apply such funds on each
Distribution Date to the following (in the
priority indicated): (i) the Servicing Fee,
together with any unpaid Servicing Fees from
prior Distribution Dates (if for any reason
such amount was not paid at the beginning of
the Collection Period as described above), to
the Servicer, (ii) the Noteholders' Interest
Distributable Amount and the Noteholders'
Principal Distributable Amount into the Note
Distribution Account, (iii) the
Certificateholders' Interest Distributable
Amount and, after the Notes have been paid in
full, the Certificateholders' Principal
Distributable Amount into the Certificate
Distribution Account and (iv) the remaining
balance, if any, to the Reserve Account.
Tax Status.................... In the opinion of Mayer, Brown & Platt, counsel
to the Trust ("Tax Counsel"), 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 and state income tax purposes.
Alternative characterizations of the Trust and
the Certificates are possible, but would not
result in materially adverse tax consequences
to Certificateholders. See "Federal Income Tax
Consequences" herein and "Federal Income Tax
Consequences" in the Prospectus for additional
information concerning the application of
federal income and state tax laws to the Trust
and the Securities.
S-9
<PAGE>
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes are eligible for purchase
by employee benefit plans. Except as provided
herein under "ERISA Considerations," the
Certificates may not be acquired by any
employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the
"Code"), or by an individual retirement
account. See "ERISA Considerations" herein and
in the Prospectus.
Rating of the Notes........... It is a condition to the issuance of the Notes
that they be rated " " by at least one Rating
Agency. The rating of the Notes by a Rating
Agency reflects such Rating Agency's assessment
of the likelihood that the Noteholders will
receive payments and interest, however, the
rating on the Notes does not address the timing
of distributions of principal of the Notes
prior to the Final Scheduled Distribution Date.
A rating is not a recommendation to buy, sell
or hold securities and may be subject to
revision or withdrawal at any time by the
assigning Rating Agency. Each rating should be
evaluated independently of any other rating.
See "Risk Factors--Ratings of the Securities"
herein.
Rating of the Certificates.... It is a condition to the issuance of the
Certificates that they be rated at least in the
" " category or its equivalent by at least one
Rating Agency. The rating of the Certificates
by a Rating Agency reflects such Rating
Agency's assessment of the likelihood that the
Certificateholders will receive payments of
principal and interest, however, the rating on
the Certificates does not address the timing of
the distributions of principal in respect of
the Certificates prior to the Final Scheduled
Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Each
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Securities" herein.
S-10
<PAGE>
RISK FACTORS
Investors should consider, among other things, the matters discussed under
"Risk Factors" in the Prospectus and the following risk factors in connection
with purchases of the Notes and/or Certificates.
LIMITED LIQUIDITY; ABSENCE OF A SECONDARY MARKET. There is currently no
secondary market for the Securities. Each Underwriter currently intends to
make a market in the Securities, but it is under no obligation to do so. There
can be no assurance that a secondary market will develop or, if a secondary
market does develop, that it will provide the Securityholders with liquidity
of investment or that it will continue for the life of the Securities offered
hereby.
(GEOGRAPHIC CONCENTRATION. Economic conditions in states where Obligors
reside may affect the delinquency, loan loss and repossession experience of
the Trust with respect to the Receivables. Obligors on Receivables
representing approximately % by principal balance of the Receivables were
located in ( ) at the Cutoff Date. As a result, economic
conditions in such states may have a disproportionate affect on prepayments
and/or defaults in respect of the Receivables and thus potentially adversely
affect the amount available for distribution to the Securityholders. In
particular, an economic downturn in one or more of such states could adversely
affect the performance of the Trust as a whole (even if national economic
conditions remain unchanged or improve) as Obligors in such state or states
experience the effects of such a downturn and face greater difficulty in
making payments on their Financed Assets. See "The Receivables Pool" herein.)
SUBORDINATION OF THE CERTIFICATES TO THE NOTES. Distributions of interest
and principal on the Certificates will be subordinated in priority of payment
to interest and principal due on the Notes. Consequently, the
Certificateholders will not receive any distributions with respect to a
Collection Period until the full amount of interest on and principal of the
Notes due on such Distribution Date has been deposited in the Note
Distribution Account. The Certificateholders will not receive any
distributions of principal until the Distribution Date on which all of the
Notes have been paid in full.
LIMITED ASSETS OF THE TRUST. The Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and the Reserve Account. Holders of the Notes and the Certificates
must rely for repayment upon payments on the Receivables and, if and to the
extent available, amounts on deposit in the Reserve Account. Although funds in
the Reserve Account will be available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Notes and the
Certificates, amounts to be deposited in the Reserve Account are limited in
amount. If the Reserve Account is exhausted, the Trust will depend solely on
current distributions on the Receivables to make payments on the Notes and the
Certificates.
RATINGS OF THE SECURITIES. It is a condition to the issuance of the
Securities that each class of the Notes be rated in the highest investment
rating category, and that the Certificates be rated at least in the " "
category or its equivalent, by at least one nationally recognized rating
agency (the "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. The ratings of the Securities
address the likelihood of the payment of principal and interest on the
Securities pursuant to their terms. There can be no assurance that a rating
will remain for any 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.
S-11
<PAGE>
THE TRUST
GENERAL
The Issuer, ( ) Trust 199 -( ), is a
business trust formed under the laws of the State of ( ) pursuant to
the Trust Agreement for the transactions described in this Prospectus
Supplement. After its formation, the Trust will not engage in any activity
other than (i) acquiring, holding and managing the Receivables 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 or are incidental thereto or connected therewith.
The Trust will initially be capitalized with equity equal to the Certificate
Balance of $ , excluding amounts deposited in the Reserve Account. The
equity of the Trust, together with the net proceeds from the sale of the
Notes, may be used by the Trust to acquire the Receivables from the Depositor
pursuant to the Transfer and Servicing Agreement or otherwise will be
distributed to the Depositor.
If the protection provided to the investment of the Securityholders by the
Reserve Account is insufficient, the Trust will look only to the Obligors on
the Receivables and the proceeds from the repossession and sale of Financed
Assets which secure defaulted Receivables. In such event, certain factors,
such as the Trust's not having first priority perfected security interests in
some of the Financed Assets, may affect the Trust's ability to realize on the
collateral securing the Receivables, and thus may reduce the proceeds to be
distributed to Securityholders with respect to the Securities. See
"Description of the Transfer and Servicing Agreements--Distributions" and "--
Subordination; Reserve Account" herein and "Certain Legal Aspects of the
Receivables" in the Prospectus.
The Trust's principal offices are in , , in care of
( ), as Owner Trustee, at the address listed below under "--The
Owner Trustee."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes and the Certificates
had taken place on such date:
<TABLE>
<S> <C>
Class ( ) Notes.................................................
Class ( ) Notes.................................................
Certificates......................................................
-------
Total......................................................... $
=======
</TABLE>
THE OWNER TRUSTEE
Trustee under the Trust Agreement. is the Owner
(state) banking corporation and its principal offices are located
at , , . The
Depositor and its affiliates may maintain normal commercial banking relations
with the Owner Trustee and its affiliates.
S-12
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables transferred to the Trust on the Closing Date. The Receivables
(will be)(have been) acquired by the Depositor from the Transferor. The
Transferor originated the Receivables or acquired the Receivables from Dealers
[or Originators] in the ordinary course of business. The Receivables were
selected from the Transferor's portfolio for transfer to the Depositor, and
were selected from the Depositor's portfolio for inclusion in the Receivables
Pool, by several criteria, some of which are set forth in the Prospectus under
"The Receivables Pools", as well as the requirement that, as of the Cutoff
Date, each Receivable (i) had an outstanding gross balance of at least $
and (ii) was not more than 59 days past due (a Receivable is not considered
past due if the amount past due is less than % of the scheduled monthly
payment). As of the Cutoff Date, no Obligor on any Receivable was noted in the
related records of the Servicer as being the subject of a bankruptcy
proceeding. No selection procedures believed by the Depositor to be adverse to
Securityholders were used in selecting the Receivables.
Set forth in the following tables is information concerning the composition,
distribution by annual percentage rate ("APR") and the geographic distribution
of the Receivables Pool as of the Cutoff Date.
( ) TRUST 199 -( )
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE APR AGGREGATE AVERAGE AVERAGE AVERAGE
OF PRINCIPAL NUMBER OF REMAINING ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TERM TERM BALANCE
- ----------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
( ) TRUST 199 -( )
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE RECEIVABLES BALANCE BALANCE(1)
- --------- ----------- --------- ----------
<S> <C> <C> <C>
0.00% - 5.00%.................................. $ %
5.01% - 6.00%..................................
6.01% - 7.00%..................................
7.01% - 8.00%..................................
8.01% - 9.00%..................................
9.01% -10.00%..................................
10.01% -11.00%.................................
11.01% -12.00%.................................
12.01% -13.00%.................................
13.01% -14.00%.................................
14.01% -15.00%.................................
15.01% -16.00%.................................
16.01% -17.00%.................................
17.01% -18.00%.................................
Greater than 18.00%............................
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
S-13
<PAGE>
( ) TRUST 199 -( )
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENTAGE
AGGREGATE
PRINCIPAL
STATE BALANCE
(2) (1)
- ----- ----------
<S> <C>
---
%
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
(2) Based on billing addresses of the Obligors, as reflected in the Servicer's
records as of the Cutoff Date.
Approximately % of the aggregate principal balance of the Receivables,
constituting % of the number of the Receivables, represent previously
titled boats or vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of the
Transferor pertaining to retail new and used boat and recreational receivables
[, including those previously sold which the Servicer continues to service].
There can be no assurance that the delinquency, repossession and net loss
experience on the Receivables will be comparable to that set forth below. [To
follow: reference to repurchases by Dealers for (i) breaches of
representations and warranties by Dealers or (ii) rescissions and attempted
rescissions by customers.]
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT ,
-------------------------------------- --------------------------------------
199 199 199 199
------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $ $
Period of Delinquency $ $ $ $
31-60 Days.............
61 Days or More........
Total..................
Delinquencies.......... % % % % % % % %
Total...................
Delinquencies as a
Percent of the
Portfolio.............
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------
199 199 199
----------------- ----------------- -----------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $
Period of
Delinquency............
31-60 Days.............
61 Days or More........
Total................. $ $ $
Delinquencies.........
Total...................
Delinquencies as a
Percent of the
Portfolio............ % % % % % %
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract.
S-14
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE (1)
<TABLE>
<CAPTION>
ENDED [ ] YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------
199 199 199 199 199 199 199
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Amount
Outstanding During the
Period................. $ $ $ $ $ $ $
Average Number of
Contracts Outstanding
During the Period......
Repossessions as a
Percent of Average
Number of Contracts
Outstanding............ % % % % % % %
Net Losses as a Percent
of Liquidations (3)(4). % % % % % % %
Net Losses as a Percent
of Average Amount
Outstanding (2)(3)..... % % % % % % %
</TABLE>
- --------
(1) (Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract.)
(2) Percentages have been annualized for the [ ] months ended [ ],
199 and 199 and are not necessarily indicative of the experience for the
year.
(3) (Net losses are equal to the aggregate of the balances of all contracts
which are determined to be uncollectible in the period, less any
recoveries on contracts charged off in the period or any prior periods,
including any losses resulting from disposition expenses.)
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
THE TRANSFEROR
For a description of the Transferor and its underwriting standards, see "The
Transferor" in the Prospectus.
THE SERVICER
For a description of the Servicer and its servicing standards, see "The
Servicer" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations with
respect to the Securities is set forth under "Weighted Average Life of the
Securities" in the Prospectus. No principal payments will be made on the Class
( ) Notes until all Class ( ) Notes have been paid in full. In addition, no
principal payments on the Certificates will be made until all of the Notes
have been paid in full. See "Description of the Notes--Payments of Principal"
and "Description of the Certificates--Distributions of Principal" herein. As
the rate of payment of principal of each class of Notes and the Certificates
depends primarily on the rate of payment (including prepayments) of the
principal balance of the Receivables, final payment of any class of the Notes
and the final distribution in respect of the Certificates could occur
significantly earlier than
S-15
<PAGE>
their respective final scheduled Distribution Dates. In addition, the rate of
payment of principal of each class of Notes will be affected by the
Accelerated Principal Distribution Amounts applied to the payment of the
principal of the Notes. Securityholders will bear the risk of being able to
reinvest principal payments on the Securities at yields at least equal to the
yields on their respective Securities.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of
the Indenture will be filed with the Commission following the issuance of the
Securities. The following summary describes certain terms of the Notes and the
Indenture. The summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the Notes
and the Indenture. The following summary supplements, and to the extent
inconsistent therewith, replaces the description of the general terms and
provisions of the Notes of any given series and the related Indenture set
forth in the Prospectus, to which description reference is hereby made.
, a , will be the Indenture Trustee under the
Indenture.
PAYMENTS OF INTEREST
The Notes will constitute Fixed Rate Securities, as such term is defined
under "Certain Information Regarding the Securities -- Fixed Rate Securities"
in the Prospectus. Interest on the principal balances of the classes of the
Notes will accrue at their respective per annum Interest Rates and will be
payable to the Noteholders monthly on each Distribution Date, commencing
, 199 . Interest on the outstanding principal amount of the Notes
will accrue at the applicable Interest Rate from the Closing Date (in the case
of the first Distribution Date) or from the day of the month preceding the
month of a Distribution Date to and including the [ ] day of the month of the
Distribution Date (each an "Interest Accrual Period"). Interest on the Notes
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. Interest payments on the Notes will generally be derived from the
Total Distribution Amount remaining after the payment of the Servicing Fee and
from the Reserve Account. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Subordination; Reserve Account" herein.
Interest payments to all classes of Noteholders will have the same priority.
Under certain circumstances, the amount available for interest payments could
be less than the amount of interest payable on the Notes on any Distribution
Date, in which case each class of Noteholders will receive their ratable share
(based upon the aggregate amount of interest due to such class of Noteholders)
of the aggregate amount available to be distributed in respect of interest on
the Notes.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution Date
in an amount generally equal to the sum of (i) the Regular Principal
Distribution Amount plus (ii) the Accelerated Principal Distribution Amount.
The "Regular Principal Distribution Amount" with respect to any Distribution
Date will equal the sum of principal payments received with respect to the
Receivables during the preceding Collection Period or, in certain cases,
scheduled to be paid during such Collection Period plus the principal balances
of [defaulted] Receivables written
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off in respect of such Collection Period, subject to certain limitations. The
"Accelerated Principal Distribution Amount" with respect to any Distribution
Date will equal the portion, if any, of the Total Distribution Amount for the
related Collection Period that remains after payment of (a) the Servicing Fee,
(b) the Noteholders' Interest Distributable Amount, (c) the Regular Principal
Distribution Amount, (d) the Certificateholders' Interest Distributable
Amount, and (e) the amount, if any, required to be deposited in the Reserve
Account on such Distribution Date. Principal payments on the Notes will
generally be derived from the Total Distribution Amount and the amount, if
any, in the Reserve Account up to the Available Amount remaining after the
payment of the Servicing Fee and the Noteholders' Interest Distributable
Amount and, in the case of any Accelerated Principal Distribution Amount, the
Certificateholders' Interest Distributable Amount and the amount, if any,
required to be deposited into the Reserve Account. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Subordination;
Reserve Account" herein.
On the Business Day immediately preceding each Distribution Date (a
"Determination Date"), the Indenture Trustee shall determine the amount in the
Collection Account for the related Collection Period allocable to interest and
the amount allocable to principal on an actual basis, and payments to
Securityholders on the following Distribution Date will be based on such
allocation.
On each Distribution Date, principal payments on the Notes will be applied
in the following order of priority: (i) to the principal balance of the Class
( ) Notes until the principal balance of the Class ( ) Notes is reduced to
zero; and (ii) to the principal balance of the Class ( ) Notes until the
principal balance of the Class ( ) Notes is reduced to zero. The principal
balance of the Class ( ) Notes, to the extent not previously paid, will be due
on the Class ( ) Final Scheduled Distribution Date; and the principal balance
of the Class ( ) Notes, to the extent not previously paid, will be due on the
Class ( ) Final Scheduled Distribution Date. The actual date on which the
aggregate outstanding principal amount of any class of Notes is paid may be
earlier than the respective Final Scheduled Distribution Dates set forth above
based on a variety of factors, including those described under "Weighted
Average Life of the Securities" herein and in the Prospectus.
OPTIONAL REDEMPTION
The Class ( ) Notes will be redeemed in whole, but not in part, on any
Distribution Date after all the other classes of Notes have been paid in full
on which the Servicer exercises its option to purchase the Receivables. The
Servicer will have the option to purchase all, but not less than all, of the
Receivables on any Distribution Date on or after the Distribution Date on
which the Pool Balance has declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will be required to purchase the
Receivables in order to exercise such option will be equal to the aggregate of
the Purchase Amounts of the Receivables as of the end of the related
Collection Period. The Servicer will be required to give not less than ( )
days notice to the Trustee of its intention to exercise such option. In
addition, the Servicer will not be permitted to exercise such option unless
the resulting distribution would be sufficient to retire the Notes at a
redemption price equal to the unpaid principal amount of such Notes plus
accrued and unpaid interest thereon (the "Redemption Price"). See "Description
of the Transfer and Servicing Agreements--Termination" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Trust Agreement
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will be filed with the Commission following the issuance of the Securities.
The following summary describes certain terms of the Certificates and the
Trust Agreement. The summary does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement. The following summary supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Certificates of any given series and the related
Trust Agreement set forth in the Prospectus, to which description reference is
hereby made.
DISTRIBUTIONS OF INTEREST
On each Distribution Date, commencing , (199 )(20 ), the
Certificateholders will be entitled to distributions in an amount equal to the
amount of interest that would accrue on the Certificate Balance at the Pass
Through Rate. The Certificates will constitute Fixed Rate Securities, as such
term is defined under "Certain Information Regarding the Securities--Fixed
Rate Securities" in the Prospectus. Interest in respect of a Distribution Date
will accrue from the Closing Date (in the case of the first Distribution Date)
or from the day of the month preceding the month of the Distribution Date to
and including the day of the month of such Distribution Date. Interest in
respect of the Certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest distributions due for any
Distribution Date but not distributed on such Distribution Date will be due on
the next Distribution Date increased by an amount equal to interest on such
amount at the Pass Through Rate (to the extent lawful). Interest distributions
with respect to the Certificates will generally be funded from the portion of
the Total Distribution Amount and the funds in the Reserve Account remaining
after the distribution of the Servicing Fee and the Noteholders' Distributable
Amount. See "Description of the Transfer and Servicing Agreements--
Distributions" and "--Subordination; Reserve Account" herein.
DISTRIBUTIONS OF PRINCIPAL
Certificateholders will be entitled to distributions of principal on each
Distribution Date, commencing with the Distribution Date on which the Notes
are paid in full, in an amount generally equal to the Regular Principal
Distribution Amount (less, on the Distribution Date on which the Notes are
paid in full, the portion thereof payable on the Notes). Distributions with
respect to principal payments will generally be funded from the portion of the
Total Distribution Amount and funds in the Reserve Account remaining after the
distribution of the Servicing Fee, the Noteholders' Distributable Amount (on
the Distribution Date on which the Notes are paid in full) and the
Certificateholders' Interest Distributable Amount. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Subordination;
Reserve Account" herein.
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables, the terms
of which option are described under "Description of the Notes--Optional
Redemption" herein, the Certificates will be retired. The Servicer will not be
permitted to exercise such option unless the resulting distribution to the
Certificateholders would be equal to the outstanding Certificate Balance
together with accrued interest at the Pass Through Rate. See "Description of
the Transfer and Servicing Agreements--Termination" in the Prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Transfer and Servicing
Agreement, the Administration Agreement and the Trust Agreement (collectively,
the "Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as
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exhibits to the Registration Statement. A copy of the Transfer and Servicing
Agreement will be filed with the Commission following the issuance of the
Securities. The summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements. The following summary supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Transfer and Servicing Agreements set forth in the
Prospectus, to which description reference is hereby made.
TRANSFER OF RECEIVABLES
Certain information regarding the transfer of the Receivables by the
Depositor to the Trust on the Closing Date pursuant to the Transfer and
Servicing Agreement is set forth in the Prospectus under "Description of the
Transfer and Servicing Agreements--Transfer of Receivables".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be % per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection Period
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid at the beginning of such Collection Period
out of collections for such Collection Period. [To follow: description of
Supplemental Servicing Fee and Servicing Suspense Account.] See "Description
of the Transfer and Servicing Agreements--Servicing Compensation and Payment
of Expenses" in the Prospectus.
DISTRIBUTIONS
DEPOSITS TO COLLECTION ACCOUNT. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for a Distribution Date shall be the sum of the Interest
Distribution Amount and the Regular Principal Distribution Amount (other than
the portion thereof attributable to Realized Losses). "Realized Losses" means
the excess of the principal balance of any Liquidated Receivable over
Liquidation Proceeds to the extent allocable to principal [received in the
Collection Period in which the Receivable became a Liquidated Receivable].
The "Interest Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of [defaulted] Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Liquidated Receivables ("Liquidation
Proceeds"), to the extent attributable to interest due thereon in accordance
with the Servicer's customary servicing procedures, and all recoveries in
respect of Liquidated Receivables which were written off in prior Collection
Periods; (iii) all Servicer Advances made by the Servicer; (iv) the Purchase
Amount of each Receivable that was purchased by the Depositor or purchased by
the Servicer under an obligation which arose during the related Collection
Period, to the extent attributable to accrued interest thereon; and (v)
Investment Earnings for such Distribution Date. The Interest Distribution
Amount shall be determined on the related Determination Date [on an actual
basis].
The "Regular Principal Distribution Amount" on any Distribution Date will
generally be the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
allocable to principal; (ii) all Liquidation Proceeds attributable
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to the principal amount of Receivables which became Liquidated Receivables
during such Collection Period in accordance with the Servicer's customary
servicing procedures, plus the amount of Realized Losses with respect to such
Liquidated Receivables; (iii) to the extent attributable to principal, the
Purchase Amount received with respect to each Receivable purchased by the
Transferor or purchased by the Servicer under an obligation which arose during
the related Collection Period; and (iv) partial prepayments relating to
refunds of extended warranty protection plan costs or of physical damage,
credit life or disability insurance policy premiums, but only if such costs or
premiums were financed by the respective Obligor as of the date of the
original contract. The Regular Principal Distribution Amount shall be
determined on the related Determination Date [on an actual basis].
The Interest Distribution Amount and the Regular Principal Distribution
Amount on any Distribution Date shall exclude the following:
(i) all payments and proceeds (including Liquidation Proceeds) of any
Receivables, the Purchase Amount of which has been included in the Total
Distribution Amount in a prior Collection Period;
(ii) amounts received in respect of interest on Receivables during the
preceding Collection Period in excess of the amount of interest that would
have been due during the Collection Period on the Receivables at their
respective APRs (assuming that a payment is received on each Receivable on
the due date thereof); and
(iii) Liquidation Proceeds attributable to accrued and unpaid interest on
the Receivables (but not including interest for the then current Collection
Period) but only to the extent of any unreimbursed Servicer Advances.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS. At the beginning of each Collection
Period, the Indenture Trustee will apply funds available in the Collection
Account to pay to the Servicer the Servicing Fee for such Collection Period
and any overdue Servicing Fees. On each Distribution Date, the Servicer will
instruct the Indenture Trustee to make the following deposits and
distributions, to the extent of the amount then on deposit in the Collection
Account, in the following order of priority:
(i) to the Servicer, from the Interest Distribution Amount (as so
allocated) the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods, to the extent, if any, such amounts are not paid at the
beginning of the related Collection Period;
(ii) to the Note Distribution Account, from the Total Distribution Amount
remaining after the payment of the Servicing Fee for such Collection Period
and all unpaid Servicing Fees from prior Collection Periods, the
Noteholders' Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) and (ii), the
Noteholders' Principal Distributable Amount;
(iv) to the Certificate Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (iii), the
Certificateholders' Interest Distributable Amount;
(v) after all of the Notes have been paid in full, to the Certificate
Distribution Account, from the Total Distribution Amount remaining after
the application of clauses (i) through (iv), the Certificateholders'
Principal Distributable Amount; and
(vi) the remaining balance, if any, to the Reserve Account.
For purposes hereof, the following terms shall have the following meanings:
"Noteholders' Distributable Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount.
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"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued for the related Interest Accrual
Period on each class of Notes at the respective Interest Rate for such class
on the outstanding principal balance of the Notes of such class on the
immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments
of principal to the Noteholders of such class on or prior to such Distribution
Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Noteholders' Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus interest on the
amount of interest due but not paid to Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the respective Interest
Rates borne by each class of the Notes for the related Interest Accrual
Period.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date; provided,
however, that the Noteholders' Principal Distributable Amount shall not exceed
the outstanding principal balance of the Notes; and provided, further, that
(i) the Noteholders' Principal Distributable Amount on the Class ( ) Final
Scheduled 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 balance of the Class ( ) Notes to zero; and
(ii) the Noteholders' Principal Distributable Amount on the Class ( ) Final
Scheduled 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 balance of the Class ( ) Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means, with respect to
each Distribution Date, the sum of (i) the Regular Principal Distribution
Amount and (ii) the Accelerated Principal Distribution Amount.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' 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
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accrued from and including the Closing Date to but excluding such Distribution
Date, calculated on the basis of a 360-day year consisting of twelve 30-day
months) at the Pass Through Rate on the Certificate Balance on the immediately
preceding Distribution Date, after giving effect to all payments allocable to
the reduction of the Certificate Balance made on or prior to such Distribution
Date (or, in the case of the first Distribution Date, on the Closing Date).
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus interest on such excess, to the extent permitted by
law, at the Pass Through Rate for the related Interest Accrual Period.
"Certificateholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the
Distribution Date immediately following the Final Scheduled Maturity Date (the
"Final Scheduled Distribution Date"), the principal required to be deposited
into the Certificate Distribution Account will include the lesser of (a) any
principal due and remaining unpaid on each Receivable in the Trust as of the
Final Scheduled Distribution Date and (b) the amount that is necessary (after
giving effect to the other amounts to be deposited in the Certificate
Distribution Account on the Final Scheduled Distribution Date and allocable to
principal) to reduce the Certificate Balance to zero.
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Distribution Date
commencing on the Distribution Date on which the Notes are paid in full, the
Regular Principal Distribution Amount (less, on the Distribution Date on which
the Notes are paid in full, the portion thereof payable on the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account.
"Certificate Balance" equals, initially, $ and, thereafter, equals
the initial Certificate Balance, reduced by all amounts allocable to principal
previously distributed to Certificateholders.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account (other than Investment Earnings) will be generally paid in the
following order of priority:
(i) to the applicable Noteholders, accrued and unpaid interest on the
outstanding principal balance of the applicable class of Notes at the
applicable Interest Rate;
(ii) the Noteholders' Principal Distributable Amount in the following
order of priority:
(a) to the Class ( ) Noteholders in reduction of principal until the
principal balance of the Class ( ) Notes has been reduced to zero; and
(b) to the Class ( ) Noteholders in reduction of principal until the
principal balance of the Class ( ) Notes has been reduced to zero.
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On each Distribution Date, all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certificateholders.
SUBORDINATION; RESERVE ACCOUNT
The rights of the Certificateholders to receive distributions with respect
to the Receivables generally will be subordinated to the rights of the
Noteholders in the event of defaults and delinquencies on the Receivables as
provided in the Transfer and Servicing Agreement. The protection afforded to
the Noteholders through subordination will be effected both by the
preferential right of the Noteholders to receive current distributions with
respect to the Receivables and by the establishment of the Reserve Account.
The Reserve Account will be created with an initial deposit by the Depositor
on the Closing Date of cash or Eligible Investments in the amount of $ .
(DESCRIBE RESERVE ACCOUNT FORMULA)
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits therein or other withdrawals therefrom on
such Distribution Date) is greater than the Specified Reserve Account Balance
for such Distribution Date, except as described below and subject to certain
limitations, the Servicer shall instruct the Indenture Trustee to distribute
such excess to the Depositor. Upon any distribution to the Depositor of
amounts from the Reserve Account, neither the Noteholders nor the
Certificateholders will have any rights in, or claims to, such amounts.
Subsequent to any reduction or withdrawal by any Rating Agency of its rating
of any class of Notes, unless such rating has been restored, any such excess
released from the Reserve Account on a Distribution Date will be deposited in
the Note Distribution Account for payment to Noteholders as an accelerated
payment of principal on such Distribution Date.
Amounts held from time to time in the Reserve Account will continue to be
held for the benefit of Noteholders and Certificateholders. On each
Distribution Date, funds will be withdrawn from the Reserve Account up to the
Available Amount to the extent that the Total Distribution Amount (after the
payment of the Servicing Fee) with respect to any Collection Period is less
than the Noteholders' Distributable Amount and will be deposited in the Note
Distribution Account. In addition, after giving effect to such withdrawal,
funds will be withdrawn from the Reserve Account up to the Available Amount
(as reduced by any withdrawal pursuant to the preceding sentence) to the
extent that the portion of the Total Distribution Amount remaining after the
payment of the Servicing Fee and the deposit of the Noteholders' Distributable
Amount in the Note Distribution Account is less than the Certificateholders'
Distributable Amount and will be deposited in the Certificate Distribution
Account. If funds applied in accordance with the preceding sentence are
insufficient to distribute interest due on the Certificates, subject to
certain limitations, funds will be withdrawn from the Reserve Account and
applied to distribute interest due on the Certificates to the extent of the
Certificate Interest Reserve Amount. On each Distribution Date, the Reserve
Account will be reinstated up to the Specified Reserve Account Balance to the
extent of the portion, if any, of the Total Distribution Amount remaining
after payment of the Servicing Fee, the deposit of the Noteholders'
Distributable Amount into the Note Distribution Account and the deposit of the
Certificateholders' Distributable Amount into the Certificate Distribution
Account.
"Available Amount" means, with respect to any Distribution Date, the amount
of funds on deposit in the Reserve Account on such Distribution Date (other
than Investment Earnings) less the Certificate Interest Reserve Amount with
respect to such Distribution Date, in each case, before giving effect to any
reduction thereto on such Distribution Date.
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"Certificate Interest Reserve Amount" means the lesser of (i) $ less
the amount of any application of the Certificate Interest Reserve Amount to
pay interest on the Certificates on any prior Distribution Date and (ii) %
of the Certificate Balance on such Distribution Date (before giving effect to
any reduction thereof on such Distribution Date); provided, however, that the
Certificate Interest Reserve Amount shall be zero subsequent to any reduction
by any Rating Agency to less than" "or its equivalent, or withdrawal by any
Rating Agency, of its rating of any class of Notes, unless such rating has
been restored.
If on any Distribution Date the entire Noteholders' Distributable Amount for
such Distribution Date (after giving effect to any amounts withdrawn from the
Reserve Account) is not deposited in the Note Distribution Account, the
Certificateholders generally will not receive any distributions other than
those, if any, in respect of interest made from the Certificate Interest
Reserve Amount.
After the payment in full, or the provision for such payment, of (i) all
accrued and unpaid interest on the Securities and (ii) the outstanding
principal balance of the Securities, any funds remaining on deposit in the
Reserve Account, subject to certain limitations, will be paid to the
Depositor.
The subordination of the Certificates and the Reserve Account are intended
to enhance the likelihood of receipt by Noteholders of the full amount of
principal and interest due them and to decrease the likelihood that the
Noteholders will experience losses. In addition, the Reserve Account is
intended to enhance the likelihood of receipt by Certificateholders of the
full amount of principal and interest due them and to decrease the likelihood
that the Certificateholders will experience losses. However, in certain
circumstances, the Reserve Account could be depleted. If the amount required
to be withdrawn from the Reserve Account to cover shortfalls in collections on
the Receivables exceeds the amount of available cash in the Reserve Account,
Noteholders or Certificateholders could incur losses or a temporary shortfall
in the amounts distributed to the Noteholders or the Certificateholders could
result, which could, in turn, increase the average life of the Notes or the
Certificates.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Mayer, Brown & Platt, counsel for the Trust, 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. The Notes, including the Class ( ) Notes, will not
be issued with original issue discount ("OID"). For additional information
regarding federal income tax consequences, see "Federal Income Tax
Consequences" in the Prospectus.
ERISA CONSIDERATIONS
THE NOTES
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Trust were
deemed to be assets of an employee benefit plan or an individual retirement
account (each a "Benefit Plan") subject to ERISA or Section 4975 of the Code.
Under a regulation issued by the United States Department of Labor (the "Plan
Asset Regulations"), the assets of the Trust would be treated as assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquires an "equity interest" in the Trust and none of the exceptions
contained in the Plan Asset Regulations is applicable. An equity interest is
defined under the Plan Asset Regulations as an interest other
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than an instrument which is treated as indebtedness under applicable local law
and which has no substantial equity features. Although there is little
guidance on the subject, assuming that the Notes would be treated as debt
under applicable local law, the Depositor believes that the Notes should be
treated as indebtedness without substantial equity features for purposes of
the Plan Asset Regulations. This determination is based in part upon the
traditional debt features of the Notes, including the reasonable expectation
of purchasers of Notes that the Notes will be repaid when due, as well as the
absence of conversion rights, warrants and other typical equity features. The
debt treatment of the Notes for ERISA purposes could change if the Trust
incurred losses. However, without regard to whether the Notes are treated as
an equity interest for such purposes, the acquisition or holding of Notes by
or on behalf of a Benefit Plan could be considered to give rise to a
prohibited transaction if the Trust, the Owner Trustee or the Indenture
Trustee, the Servicer, the owner of collateral, or any of their respective
affiliates is or becomes a party in interest or a disqualified person with
respect to such Benefit Plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to purchase a Note.
Included among these exemptions are: Prohibited Transaction Class Exemption
("PTCE") 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 91-38, regarding investments by bank collective investment
funds; PTCE 96-23, regarding transactions by in-house asset managers; and PTCE
84-14, regarding transactions by "qualified professional asset managers." Each
investor using the assets of a Benefit Plan which acquires the Notes, or to
whom the Notes are transferred by its acceptance and holding of any Notes or
an interest therein, will be deemed to represent and warrant that its
acquisition and continued holding of the Notes will not, throughout the term
of the holding, result in a non-exempt prohibited transaction under Section
406(a) of ERISA or Section 4975 of the Code. A fiduciary of a Benefit Plan
must determine that the purchase of a Note is consistent with its fiduciary
duties under ERISA and does not result in a nonexempt prohibited transaction
as defined in Section 406 of ERISA or Section 4975 of the Code. For additional
information regarding treatment of the Notes under ERISA, see "ERISA
Considerations" in the Prospectus.
THE CERTIFICATES
No sale, pledge or transfer of a Certificate or any interest therein may be
made to any Benefit Plan or any person who is directly or indirectly
purchasing such Certificate or interest therein on behalf of, as named
fiduciary of, as trustee of, or with assets of a Benefit Plan, unless the
purchase and holding of such Certificate is exempt under Section III of
Prohibited Transaction Class Exemption 95-60 (applicable to certain insurance
company general accounts). Each person who acquires any Class B Certificate or
interest therein shall be deemed to have certified that the foregoing
conditions have been satisfied.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Depositor has agreed to cause the Trust to
sell to the Underwriter, and the Underwriter has agreed to purchase, the
entire principal amount of the Notes and the Certificates. [UNDERWRITING
SYNDICATE LANGUAGE AND TABLE TO BE ADDED IF APPLICABLE]
The Depositor has been advised by the Underwriter that it proposes initially
to offer the Notes to the public at the prices set forth herein, and to
certain dealers at such prices less the
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initial concession not in excess of % per Class ( ) Note and % per
Class ( ) Note. The Underwriter may allow and such dealers may reallow a
concession not in excess of % per Class ( ) Note and % per Class ( )
Note to certain other dealers. After the initial public offering of the Notes,
the public offering price and such concessions may be changed.
The Depositor has been advised by the Underwriter that it proposes initially
to offer the Certificates to the public at the price set forth herein and to
certain dealers at such price less the initial concession not in excess of
% per Certificate. The Underwriter may allow and such dealers may reallow
a concession not in excess of % per Certificate to certain other dealers.
After the initial public offering of the Certificates, the public offering
price and such concessions may be changed.
Until the distribution of the Notes and Certificates is completed, rules of
the Commission may limit the ability of the Underwriter and certain selling
group members to bid for and purchase the Notes and Certificates. As an
exception to these rules, the Underwriter is 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 Certificates.
If the Underwriter creates 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
Underwriter may reduce that short position by purchasing Notes and
Certificates in the open market.
In general, the purchase of a security for the purpose of stabilization or
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 Depositor nor [any] Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Notes and
Certificates. In addition, neither the Depositor nor any Underwriter makes any
representation that the Underwriter will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell, any Notes to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of
the Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the Notes in,
from or otherwise involving the United Kingdom and (c) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document in
connection with the issue of the Notes 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 the document
may otherwise lawfully be issued or passed on.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the 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 Transferor
or the Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
S-26
<PAGE>
Deutsche Bank Securities Inc., the Transferor, the Servicer and the
Depositor are each indirect, wholly-owned subsidiaries of Deutsche Bank AG.
Any obligations of Deutsche Bank Securities Inc. are the sole responsibility
of Deutsche Bank Securities Inc. and do not create any obligation on the part
of any affiliate of Deutsche Bank Securities Inc.
LEGAL OPINIONS
Certain legal matters relating to the Notes and the Certificates, certain
federal income tax matters will be passed upon for the Depositor by Mayer,
Brown & Platt, Chicago, Illinois. (Certain legal matters relating to the Notes
and the Certificates will be passed upon for the Underwriter by Mayer, Brown &
Platt.) Certain California [and Illinois] income tax matters relating to the
Notes and Certificates will be passed upon for the Depositor by Bryan Cave
LLP, St. Louis, Missouri.
S-27
<PAGE>
INDEX OF TERMS
[TO BE CONFORMED]
<TABLE>
<S> <C>
"APR"................................................................. S-12
"Available Amount".................................................... S-22
"Business Day"........................................................ S-5
"Cede"................................................................ S-3
"Certificate Balance"................................................. S-21
"Certificate Interest Reserve Amount"................................. S-22
"Certificateholders".................................................. S-7
"Certificateholders' Distributable Amount"............................ S-20
"Certificateholders' Interest Carryover Shortfall".................... S-21
"Certificateholders' Interest Distributable Amount"................... S-20
"Certificateholders' Monthly Interest Distributable Amount"........... S-20
"Certificateholders' Monthly Principal Distributable Amount".......... S-21
"Certificateholders' Principal Carryover Shortfall"................... S-21
"Certificateholders' Principal Distributable Amount".................. S-21
"Certificates"........................................................ S-4
"Class ( ) Final Scheduled Distribution Date"........................ S-6
"Class ( ) Notes".................................................... S-1
"Closing Date"........................................................ S-5
"Code"................................................................ S-8
"Collection Account".................................................. S-7
"Collection Period"................................................... S-5
"Commission".......................................................... S-3
"Depositor"........................................................... S-1
"Determination Date".................................................. S-6
"Distribution Date"................................................... S-2
"DTC"................................................................. S-3
"ERISA"............................................................... S-8
"Exchange Act"........................................................ S-3
"Final Scheduled Distribution Date"................................... S-19
"Final Scheduled Maturity Date"....................................... S-5
"Financed Assets"..................................................... S-2
"Indenture Trustee"................................................... S-4
"Indenture"........................................................... S-4
"Initial Pool Balance"................................................ S-4
"Interest Accrual Period"............................................. S-5
"Interest Distribution Amount"........................................ S-18
"Interest Rates"...................................................... S-5
"Issuer".............................................................. S-4
"Liquidated Receivables".............................................. S-18
"Liquidation Proceeds"................................................ S-18
"Noteholders"......................................................... S-5
"Noteholders' Distributable Amount"................................... S-20
"Noteholders' Interest Carryover Shortfall"........................... S-20
"Noteholders' Interest Distributable Amount".......................... S-20
"Noteholders' Monthly Interest Distributable Amount".................. S-20
"Noteholders' Monthly Principal Distributable Amount"................. S-20
"Noteholders' Principal Carryover Shortfall".......................... S-20
"Noteholders' Principal Distributable Amount"......................... S-6, S-20
"Notes"............................................................... S-1
</TABLE>
S-28
<PAGE>
<TABLE>
<S> <C>
"OID"................................................................. S-23
"Owner Trustee"....................................................... S-4
"Pass Through Rate"................................................... S-7
"Payment Date"........................................................ S-5
"Pool Balance"........................................................ S-5
"Prospectus".......................................................... S-3
"Rating Agency"....................................................... S-10
"Realized Losses"..................................................... S-18
"Receivables Pool".................................................... S-11
"Receivables"......................................................... S-2
"Record Date"......................................................... S-5
"Redemption Price".................................................... S-17
"Regular Principal Distribution Amount"............................... S-18
"Securities".......................................................... S-2
"Securityholders"..................................................... S-7
"Servicer"............................................................ S-4
"Tax Counsel"......................................................... S-8
"Total Distribution Amount"........................................... S-18
"Transfer and Servicing Agreements"................................... S-18
"Trust Agreement"..................................................... S-4
"Trust"............................................................... S-1
"Underwriter"......................................................... S-2
"Underwriting Agreement".............................................. S-24
</TABLE>
S-29
<PAGE>
No dealer, salesperson or other person has been authorized to give any infor-
mation or to make any representations, other than those contained in this Pro-
spectus Supplement or the Prospectus, and, if given or made, such information
or representation must not be relied upon as having been authorized by the de-
positor or by the underwriter(s). This Prospectus Supplement and the Prospec-
tus do not constitute an offer to sell, or a solicitation of an offer to buy,
the securities offered hereby to anyone in any jurisdiction in which the per-
son making such offer or solicitation is not qualified to do so or to anyone
to whom it is unlawful to make any such offer or solicitation. Neither the de-
livery of this Prospectus Supplement and the Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that informa-
tion herein or therein is correct as of any time subsequent to the date of
this Prospectus Supplement or the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement
[To Be Conformed]
Reports To Securityholders................................................. S-3
Summary of Terms........................................................... S-4
Risk Factors............................................................... S-10
The Trust.................................................................. S-11
Capitalization of the Trust................................................ S-11
The Owner Trustee.......................................................... S-11
The Receivables Pool....................................................... S-11
Delinquencies, Repossessions and Net Losses................................ S-13
The Transferor............................................................. S-15
The Servicer............................................................... S-15
Weighted Average Life of the Securities.................................... S-15
Description of the Notes................................................... S-15
Description of the Certificates............................................ S-17
Description of the Transfer and Servicing Agreements....................... S-18
Federal Income Tax Consequences............................................ S-23
ERISA Considerations....................................................... S-23
Underwriting............................................................... S-24
Legal Opinions............................................................. S-25
Index of Terms S-26
Prospectus
[To Be Conformed]
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Summary of Terms........................................................... 4
Risk Factors............................................................... 12
The Trusts................................................................. 17
The Receivables Pools...................................................... 18
Weighted Average Life of the Certificates.................................. 20
Pool Factors and Trading Information....................................... 21
Use of Proceeds............................................................ 21
The Depositor.............................................................. 21
Description of the Notes................................................... 22
Description of the Certificates............................................ 25
Certain Information Regarding the Securities............................... 27
Description of the Transfer and Servicing Agreements....................... 35
Certain Legal Aspects of the Receivables................................... 44
Federal Income Tax Consequences............................................ 50
ERISA Considerations....................................................... 60
Plan of Distribution....................................................... 61
Legal Opinions............................................................. 62
Index of Terms............................................................. 63
</TABLE>
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS EF-
FECTING 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 OB-
LIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
WHEN ACTING AS UNDERWRITER(S) AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$( )
( ) TRUST
199 -( )
$
[ ]%
ASSET BACKED NOTES, CLASS ( )
$
[ ]%
ASSET BACKED NOTES, CLASS ( )
$
[ ]%
ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE BANK SECURITIES INC.
PROSPECTUS SUPPLEMENT
, 199
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT +
+RELATES SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER +
+TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH +
+SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998
VERSION #1B
[BOATS AND RECREATIONAL VEHICLES]
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED , 199 )
$( )
( ) TRUST 199-( )
( %) ASSET BACKED CERTIFICATES, CLASS A
( %) ASSET BACKED CERTIFICATES, CLASS B
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
The Asset Backed Certificates, Series 199 - (the "Certificates") will consist
of two Classes of Certificates, the Class A Certificates and the Class B
Certificates. The Class A Certificates will evidence in the aggregate an
undivided ownership interest of approximately % in a trust (the "Trust") to
be formed pursuant to a Pooling and Servicing Agreement to be entered into
among Deutsche Recreational Asset Funding Corporation, as Depositor (the
"Depositor"), Deutsche Financial Services Corporation, as Servicer (the
"Servicer"), and , as Trustee (the "Trustee"). The Class B
Certificates will evidence in the aggregate an undivided ownership interest of
approximately % in the Trust. The rights of the Class B Certificateholders to
receive distributions with respect to the Receivables are subordinated to the
rights of the Class A Certificateholders, to the extent described herein. The
Trust property will include a pool of retail installment sale contracts
[and/or] retail installment loans (the "Receivables") secured by new or used
recreational vehicles and recreational sport and power boats (including any
boat motors and accompanying trailers) and yachts (both power and sail) (the
"Financed Assets"), collections and other payments with respect to the
Receivables received after the Cutoff Date described herein and monies on
deposit in certain trust accounts.
Principal, and interest to the extent of the Pass Through Rate of % per
annum, will be distributed on the th day of each month (or the next following
business day) beginning , 199 (the "Distribution Date"). The Final
Scheduled Distribution Date on the Certificates will be .
(Cover continued on following page)
Prospective investors should review the information set forth under "Risk
Factors" on page
[S-9] herein and on page [19] in the accompanying Prospectus.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN DEUTSCHE RECREATIONAL ASSET FUNDING
CORPORATION, THE TRANSFEROR, THE SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES. NONE OF THE CERTIFICATES OR THE RECEIVABLES ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
ORIGINAL PROCEEDS TO
PRINCIPAL PRICE TO UNDERWRITING THE DEPOSITOR
AMOUNT PUBLIC (1) DISCOUNT (1) (2)
<S> <C> <C> <C> <C>
Class A Certificates............ $ % % %
Class B Certificates............ % % %
Total........................... $ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
The Certificates are offered by Deutsche Bank Securities Inc. (the
"Underwriter") subject to prior sale and subject to the Underwriter's right to
reject any order in whole or in part and to approval of certain legal matters
by its counsel. It is expected that when, as and if issued and accepted by the
Underwriter the Certificates will be delivered in book-entry form only through
the facilities of The Depository Trust Company, Cedel Bank, societe anonyme,
and the Euroclear System, in each case against payment therefor in immediately
available funds on or about , 199 .
DEUTSCHE BANK SECURITIES INC.
, 199 .
<PAGE>
(Continued from previous page)
The Servicer may purchase the Receivables when the aggregate principal
balance of the Receivables shall have declined to less than 10% of the initial
aggregate principal balance of the Receivables acquired by the Trust.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT
CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF CERTIFICATES TO
COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" HEREIN.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the Certificates. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Reports to Securityholders" in the
accompanying Prospectus (the "Prospectus"). Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Depositor, as originator of the Trust, will file with the
Securities and Exchange Commission (the "Commission") such periodic reports as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Delinquencies,
Repossessions and Net Losses" and "Weighted Average Life of the Certificates"
herein may constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and as such may involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Receivables to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer........................ Trust 199-( ) (the "Trust" or
the "Issuer"), to be formed pursuant to a
Pooling and Servicing Agreement to be dated as
of , 199 among the Depositor, the
Servicer and the Trustee (the "Pooling and
Servicing Agreement")
Transferor.................... Ganis Credit Corporation.
Depositor..................... Deutsche Recreational Asset Funding Corporation
(the "Depositor").
Servicer...................... Deutsche Financial Services Corporation (the
"Servicer").
Trustee....................... , as trustee under the Pooling and
Servicing Agreement (the "Trustee").
Closing Date.................. On or about , 199 .
Cutoff Date................... , 199 .
The Certificates.............. The Certificates will consist of two classes,
entitled % Asset Backed Certificates, Class
A (the "Class A Certificates") and % Asset
Backed Certificates, Class B (the "Class B
Certificates"). Each Certificate will represent
a fractional undivided ownership interest in
the Trust.
The Class A Certificates will evidence in the
aggregate an undivided ownership interest (the
"Class A Percentage") of approximately % of
the Trust (initially representing $ )
and the Class B Certificates will evidence in
the aggregate an undivided ownership interest
(the "Class B Percentage") of approximately
% of the Trust (initially representing
$ ). The Class B Certificates are
subordinated to the Class A Certificates, to
the extent described herein.
The Receivables............... will have an aggregate principal balance of
approximately $ (the "Initial Pool
Balance") as of , 199 (the "Cutoff
Date"). The Receivables will consist of retail
installment sale contracts and/or installment
loans between the Transferor and Obligors,
between Originators and Obligors, or between
Obligors and Dealers, secured by new or used
recreational vehicles and recreational sport
and power boats
S-3
<PAGE>
(including any boat motors and accompanying
trailers) and yachts (both power and sail) (the
"Financed Assets"). The Receivables were
originated by the Transferor or were acquired
by the Transferor from Dealers [or
Originators]. The Receivables will be
transferred by the Transferor to the Depositor
on or prior to the Closing Date, and will be
transferred by the Depositor to the Trust on
the Closing Date. As of the Cutoff Date, the
weighted average annual percentage rate of the
Receivables was approximately %, the weighted
average remaining maturity of the Receivables
was approximately months, and the weighted
average original maturity of the Receivables
was approximately months. No Receivable has
a scheduled maturity later than , 20
(the "Final Scheduled Maturity Date"). See "The
Receivables Pool" herein.
The "Pool Balance" at any time will represent
the aggregate principal balance of the
Receivables at the end of the preceding
Collection Period, after giving effect to all
payments received from Obligors, Servicer
Advances and Purchase Amounts to be remitted by
the Servicer or the Depositor, as the case may
be, all for such Collection Period, and all
losses realized on Receivables liquidated
during such Collection Period.
Distribution Dates............ Distributions with respect to the Certificates
will be made on the day of each month or,
if any such day is not a Business Day, on the
next succeeding Business Day (each, a
"Distribution Date") commencing , 199 .
The Servicer shall determine the amount to be
distributed on the Distribution Date on or
before the Business Day preceding such
Distribution Date (the "Determination Date").
Distributions will be made to holders of the
Certificates (the "Certificateholders") of
record as of the day immediately preceding such
Distribution Date or, if Definitive
Certificates are issued, as of the day of the
preceding month (a "Record Date").
Class A Pass Through Rate..... % per annum.
Class B Pass Through Rate..... % per annum.
Interest...................... On each Distribution Date, the Trustee will
distribute to the Class A Certificateholders 30
days of interest at the Class A Pass-Through
Rate on the Class A Certificate Balance as of
the last day of the preceding calendar month
(before giving effect to distributions of
principal on the related Distribution Date)
generally to the extent of funds available from
(i) the Class A Percentage of the Interest
Distribution Amount; (ii) the Reserve Account
and (iii) the Class B Percentage of the Total
Distribution
S-4
<PAGE>
Amount. The "Class A Certificate Balance" shall
equal, initially, the Class A Percentage of the
Pool Balance as of the Cutoff Date and
thereafter shall equal the initial Class A
Certificate Balance, reduced by all principal
distributions on the Class A Certificates.
Interest on the Certificates will be calculated
on the basis of a 360-day year consisting of
twelve 30-day months.
Class A Principal............. On each Distribution Date, the Trustee will
distribute to Class A Certificateholders an
amount equal to the Class A Percentage of the
Principal Distribution Amount for the
Collection Period preceding such Distribution
Date to the extent of funds available therefor.
The "Principal Distribution Amount" is the
amount of principal paid or, in certain
circumstances, the principal balance of
defaulted Receivables, as calculated by the
Servicer as described under "Description of the
Certificates--Distributions." The Class A
Percentage of the Principal Distribution Amount
will be passed through on each Distribution
Date to the Class A Certificateholders to the
extent of funds available from (i) the Class A
Percentage of the Principal Distribution Amount
(exclusive of the portion thereof attributable
to Realized Losses), (ii) the Reserve Account
and (iii) the Class B Percentage of the Total
Distribution Amount. "Realized Losses" means
the excess of the principal balance of any
Liquidated Receivable over Liquidation Proceeds
to the extent allocable to principal received
in the Collection Period in which the
Receivable became a Liquidated Receivable. A
"Collection Period" with respect to a
Distribution Date will be the calendar month
preceding the month in which such Distribution
Date occurs.
Class B Interest.............. On each Distribution Date, the Trustee will
distribute to the Class B Certificateholders 30
days of interest at the Class B Pass Through
Rate on the Class B Certificate Balance as of
the last day of the preceding calendar month
(before giving effect to distributions of
principal on such Distribution Date) generally
to the extent of funds available, after giving
effect to the prior rights of the Class A
Certificateholders to receive the distribution
of principal and interest due them as described
above, from (i) the Class B Percentage of the
Interest Distribution Amount and (ii) the
Reserve Account. The "Class B Certificate
Balance" will equal, initially, $ and,
thereafter, will equal the initial Class B
Certificate Balance reduced by all amounts
previously distributed to Class B
Certificateholders (or deposited in the Reserve
Account, exclusive of the Reserve Account
Initial Deposit) and allocable to principal and
by Realized Losses.
S-5
<PAGE>
Class B Principal............. On each Distribution Date, the Trustee will
distribute the Class B Percentage of the
Principal Distribution Amount to the Class B
Certificateholders to the extent of funds
available (after giving effect to the
distribution of the interest and principal due
to the Class A Certificateholders and the
interest due to the Class B Certificateholders)
from (i) the Class B Percentage of the
Principal Distribution Amount (exclusive of the
portion thereof attributable to Realized
Losses) and (ii) the Reserve Account.
Optional Prepayment........... The Servicer will have the option to purchase
all, but not less than all, of the Receivables
on any Distribution Date on or after the
Distribution Date on which the Pool Balance has
declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will
be required to purchase the Receivables in
order to exercise such option will be equal to
the aggregate of the Purchase Amounts of the
Receivables as of the end of the related
Collection Period. The Servicer will be
required to give not less than ( ) days
notice to the Trustee of its intention to
exercise such option. In addition, the Servicer
will not be permitted to exercise such option
unless the resulting distribution would be
sufficient to distribute to the Class A
Certificateholders an amount equal to the Class
A Certificate Balance together with accrued
interest at the Class A Pass Through Rate, and
to the Class B Certificateholders an amount
equal to the Class B Certificate Balance
together with accrued interest at the Class B
Pass Through Rate. Upon such a distribution the
Certificates will be retired.
Reserve Account............... On the Closing Date, the Depositor will deposit
in the Reserve Account cash or Eligible
Investments having a value of at least $ .
Certain amounts in the Reserve Account on any
Distribution Date (after giving effect to all
distributions to be made on such Distribution
Date) in excess of the Specified Reserve
Account Balance for such Distribution Date will
be released to the Depositor.
The "Specified Reserve Account Balance" with
respect to any Distribution Date generally will
be equal to (state formula). The amount in the
Reserve Account will be increased by the
deposit thereto on each Distribution Date of
the amount, if any, of the Total Distribution
Amount remaining after the payment of the
Servicing Fee and any prior unpaid Servicing
Fee, the Class A Distributable Amount and the
Class B Distributable Amount until the amount
in the Reserve Account equals the Specified
Reserve Account Balance. Amounts in the
S-6
<PAGE>
Reserve Account on any Distribution Date (after
giving effect to all distributions made on such
Distribution Date) in excess of the Specified
Reserve Account Balance for such Distribution
Date generally will be released to the
Depositor and will no longer be available to
the Certificateholders. The Reserve Account
will be maintained with the Trustee as a
segregated trust account, but will not be part
of the Trust.
Collection Account............ Except under certain conditions described
herein, the Servicer will be required to remit
collections received with respect to the
Receivables within two Business Days of receipt
thereof to one or more accounts in the name of
the Trustee (the "Collection Account").
Pursuant to the Pooling and Servicing
Agreement, the Servicer will have the revocable
power to instruct the Trustee to withdraw funds
on deposit in the Collection Account and to
apply such funds on each Distribution Date to
the following (in the priority indicated):
(i) the Servicing Fee for the prior
Collection Period and any overdue Servicing
Fees to the Servicer,
(ii) the Class A Distributable Amount to the
Class A Certificateholders,
(iii) the Class B Distributable Amount to
the Class B Certificateholders, and
(iv) the remaining balance, if any, to the
Reserve Account.
Tax Status.................... In the opinion of Mayer, Brown & Platt, counsel
to the Trust ("Tax Counsel") the Trust will be
treated as a grantor trust for federal income
tax purposes and will not be subject to federal
income tax. Certificate Owners will report
their pro rata share of all income earned on
the Receivables (other than amounts, if any,
treated as "stripped coupons") and, subject to
certain limitations in the case of Certificate
Owners who are individuals, trusts, or estates,
may deduct their pro rata share of reasonable
servicing and other fees. See "Federal Income
Tax Consequences" in the Prospectus for
additional information concerning the
application of federal income tax laws to the
Trust and the Certificates.
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Class A Certificates are
eligible for purchase by employee benefit
plans.
The Class B Certificates may not be acquired by
any employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended
S-7
<PAGE>
("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"),
or by an individual retirement account. See
"ERISA Considerations" herein and in the
Prospectus.
Ratings of the Class A It is a condition to the issuance of the Class
Certificates.................. A Certificates that they be rated " " by at
least one Rating Agency. The rating of the
Class A Certificates by a Rating Agency
reflects such Rating Agency's assessment of the
likelihood that the holders of the Class A
Certificates will receive payments of principal
and interest, however, the rating on the Class
A Certificates does not address the timing of
distributions of principal in respect of the
Class A Certificates prior to the Final
Scheduled Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Each
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Certificates" herein.
Ratings of the Class B It is a condition to the issuance of the Class
Certificates.................. B Certificates that they be rated at least in
the " " category or its equivalent by at least
one Rating Agency. The rating of the Class B
Certificates by a Rating Agency reflects such
Rating Agency's assessment of the likelihood
that the holders of the Class B Certificates
will receive payments of principal and
interest, however, the rating on the Class B
Certificates does not address the timing of
distributions of principal in respect of the
Certificates prior to the Final Scheduled
Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Such
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Certificates" herein.
S-8
<PAGE>
RISK FACTORS
Investors should consider, among other things, the matters discussed under
"Risk Factors" in the Prospectus and the following risk factors in connection
with purchases of the Certificates.
LIMITED LIQUIDITY; ABSENCE OF A SECONDARY MARKET. There is currently no
secondary market for the Certificates. Each Underwriter currently intends to
make a market in the Certificates, but it is under no obligation to do so.
There can be no assurance that a secondary market will develop or, if a
secondary market does develop, that it will provide the Certificateholders
with liquidity of investment or that it will continue for the life of the
Certificates offered hereby.
(GEOGRAPHIC CONCENTRATION. Economic conditions in states where Obligors
reside may affect the delinquency, loan loss and repossession experience of
the Trust with respect to the Receivables. Obligors on Receivables
representing approximately % by principal balance of the Receivables were
located in ( ) as of the Cutoff Date. As a result, economic conditions in such
states may have a disproportionate effect on prepayments and/or defaults in
respect of the Receivables and thus potentially adversely affect the amount
available for distribution to Certificateholders. In particular, an economic
downturn in one or more of such states could adversely affect the performance
of the Trust as a whole (even if national economic conditions remain unchanged
or improve) as Obligors in such state or states experience the effects of such
a downturn and face greater difficulty in making payments on their Financed
Assets. See "The Receivables Pool" herein.)
SUBORDINATION. Distributions of interest and principal on the Class B
Certificates will be subordinated in priority of payment to interest and
principal due on the Class A Certificates. Consequently, the Class B
Certificateholders will not receive any distributions with respect to a
Collection Period until the full amount of interest on and principal of the
Class A Certificates due on such Distribution Date has been deposited in the
Certificate Distribution Account.
LIMITED ASSETS OF THE TRUST. The Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and the Reserve Account. Holders of the Certificates must rely for
repayment upon payments on the Receivables and, if and to the extent
available, amounts on deposit in the Reserve Account. Although funds in the
Reserve Account will be available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Certificates,
amounts to be deposited in the Reserve Account are limited in amount. If the
Reserve Account is exhausted, the Trust will depend solely on current
distributions on the Receivables to make payments on the Certificates.
PAYMENT DELAY. The effective yield on the Certificates will be reduced below
the yield otherwise produced because interest accrued through the end of each
calendar month will not be distributed until the Distribution Date in the
following month, and the amount distributable on such Distribution Date will
not bear interest during such delay. As a result, the market value of the
Certificates will be lower than would be the case if there was no such delay.
RATINGS OF THE CERTIFICATES. It is a condition to the issuance of the
Certificates that the Class A Certificates be rated in the highest investment
rating category, and that the Class B Certificates be rated at least in the
" " category or its equivalent, by at least one nationally recognized rating
agency (the "Rating Agency"). A rating is not a recommendation to purchase,
hold or sell Certificates, inasmuch as such rating does not comment as to
market price or suitability for a particular investor. The ratings of the
Certificates address the likelihood of the payment of principal and interest
on the Certificates pursuant to their terms. There can be no assurance that a
rating will remain for any 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.
S-9
<PAGE>
THE TRUST
GENERAL
The Depositor will establish the Trust by transferring the Trust property,
as described below, to the Trustee in exchange for the Certificates. The
Servicer will service the Receivables pursuant to the Pooling and Servicing
Agreement and will be compensated for acting as the Servicer. See "Description
of the Certificates--Servicing Compensation and Payment of Expenses" herein.
To facilitate servicing and to minimize administrative burden and expense, the
Servicer will be appointed custodian for the Receivables by the Trustee, but
will not stamp the Receivables to reflect the transfer of the Receivables to
the Trust. In addition, due to administrative burden and expense, (i) the
certificates of title to those Financed Recreational Vehicles and Financed
Boats financed in states where security interests in recreational vehicles or
boats, as applicable, are subject to certificate of title statutes will not be
amended to reflect such transfers, (ii) UCC financing statements in respect of
those Financed Recreational Vehicles and Financed Boats financed in states
where security interests in recreational vehicles or boats, as applicable, are
perfected by filing a UCC-1 financing statement will not be amended to reflect
such assignments and (iii) and the transfer of liens created pursuant to
Preferred Mortgages in respect of Financed Boats documented under federal law
will not be filed as required by federal law to reflect such assignments. In
the absence of such procedures, such Trust may not have a perfected security
interest in the Financed Assets in some states and will not have a perfected
security interest in the Financed Boats documented under Federal law. See
"Certain Legal Aspects of the Receivables" in the Prospectus.
If the protection provided to the Certificateholders by the Reserve Account
and, in the case of the Class A Certificateholders, the subordination of the
Class B Certificates is insufficient, the Trust will look only to the Obligors
on the Receivables and the proceeds from the repossession and sale of Financed
Assets which secure defaulted Receivables. In such event, certain factors,
such as the Trust's not having first priority perfected security interests in
some of the Financed Assets, may affect the Trust's ability to realize on the
Financed Assets securing the Receivables, and thus may reduce the proceeds to
be distributed to Certificateholders with respect to the Certificates. See
"Description of the Certificates--Distributions" and "--Subordination of the
Class B Certificates; Reserve Account" herein and "Certain Legal Aspects of
the Receivables" in the Prospectus.
Each Certificate represents a fractional undivided ownership interest in the
Trust. The Trust property includes retail installment sale contracts between
Dealers and Obligors, and all payments received thereunder on or after the
Cutoff Date. The Trust property also includes (i) such amounts as from time to
time may be held in one or more trust accounts established and maintained by
the Servicer pursuant to the Pooling and Servicing Agreement, as described in
the Prospectus under "Description of the Transfer and Servicing Agreement--
Accounts"; (ii) the Depositor's rights with respect to security interests in
the Financed Assets; (iii) the Depositor's rights with respect to proceeds
from claims on certain physical damage, credit life and disability insurance
policies covering the Financed Assets or the Obligors, as the case may be;
(iv) the Depositor's rights in any proceeds with respect to the Receivables
from recourse, if any, to Dealers on Receivables or Financed Assets with
respect to which the Servicer has determined that eventual repayment in full
is unlikely; (v) any property that shall have secured a Receivable and that
shall have been acquired by the Trustee; and (vi) any and all proceeds of the
foregoing. The Reserve Account will be maintained by the Trustee for the
benefit of the Certificateholders, but will not be part of the Trust.
S-10
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables acquired by the Trust on the Closing Date. The Receivables (will
be) (have been) acquired by the Depositor from the Transferor, which
originated the Receivables or acquired the Receivables from Dealers [or
Originators] in the ordinary course of business or in acquisitions. The
Receivables were selected from the Depositor's portfolio for inclusion in the
Receivables Pool by several criteria, some of which are set forth in the
Prospectus under "The Receivables Pools", as well as the requirement that, as
of the Cutoff Date, each Receivable (i) had an outstanding gross balance of at
least $ and (ii) was not more than [59 days past due (an account is
not considered past due if the amount past due is less than % of the
scheduled monthly payment)]. As of the Cutoff Date, no Obligor on any
Receivable was noted in the related records of the Servicer as being the
subject of a bankruptcy proceeding. No selection procedures believed by the
Depositor to be adverse to Certificateholders were used in selecting the
Receivables.
Set forth in the following tables is information concerning the composition,
distribution by annual percentage rate ("APR") and the geographic distribution
of the Receivables Pool as of the Cutoff Date.
TRUST 199 -( )
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE APR AGGREGATE AVERAGE AVERAGE AVERAGE
OF PRINCIPAL NUMBER OF REMAINING ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TERM TERM BALANCE
- ----------- --------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
S-11
<PAGE>
TRUST 199 -( )
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE RECEIVABLES BALANCE BALANCE(1)
--------- ----------- --------- ----------
<S> <C> <C> <C>
0.00%-5.00% .................................. $ %
5.01%-6.00% ..................................
6.01%-7.00% ..................................
7.01%-8.00% ..................................
8.01%-9.00% ..................................
9.01%-10.00% .................................
10.01%-11.00% ................................
11.01%-12.00% ................................
12.01%-13.00% ................................
13.01%-14.00% ................................
14.01%-15.00% ................................
15.01%-16.00% ................................
16.01%-17.00% ................................
17.01%-18.00% ................................
Greater than 18.00% ..........................
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
TRUST 199 -( )
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF AGGREGATE
STATE(2) PRINCIPAL BALANCE(1)
- -------- --------------------
<S> <C>
%
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
----
%
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
(2) Based on billing addresses of the Obligors, as reflected in the Servicer's
records as of the Cutoff Date.
Approximately % of the aggregate principal balance of the Receivables,
constituting % of the number of the Receivables, represent previously
titled boats or vehicles.
S-12
<PAGE>
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of the
Transferor pertaining to retail new and used recreational vehicle receivables
and boat receivables[, including those previously sold which the Servicer
continues to service]. There can be no assurance that the delinquency,
repossession and net loss experience on the Receivables will be comparable to
that set forth below.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT , AT DECEMBER 31,
------------------------------------ ------------------------------------
199 199 199 199
----------------- ----------------- ----------------- -----------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $ $
Period of Delinquency
31-60 Days.............
61 Days or More........
------ ------- ------ ------- ------ ------- ------ -------
Total Delinquencies.... $ $ $ $
Total Delinquencies as a
Percent of the
Portfolio.............. % % % % % % % %
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------
199 199 199
----------------- ----------------- -----------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $
Period of Delinquency
31-60 Days.............
61 Days or More........
------ ------- ------ ------- ------ -------
Total Delinquencies...
Total Delinquencies as a
Percent of the
Portfolio.............. % % % % % %
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract.
S-13
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
ENDED , YEAR ENDED DECEMBER 31,
---------------------- -------------------------------------------
199 199 199 199 199 199 199
---------- ---------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Amount
Outstanding During the
Period................. $ $ $ $ $ $ $
Average Number of
Contracts Outstanding
During the Period......
Percent of Contracts
Acquired During the
Period with Recourse to
the Dealer............. % % % % % % %
Repossessions as a
Percent of Average
Number of Contracts
Outstanding............ % % % % % % %
Net Losses as a Percent
of Liquidations (3)(4). % % % % % % %
Net Losses as a Percent
of Average Amount
Outstanding (2)(3)..... % % % % % % %
</TABLE>
- --------
(1) (Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract.)
(2) Percentages have been annualized for the months ended ,
199 and 199 and are not necessarily indicative of the experience for the
year.
(3) (Net losses are equal to the aggregate of the balances of all contracts
which are determined to be uncollectible in the period, less any
recoveries on contracts charged off in the period or any prior periods,
including any losses resulting from disposition expenses.)
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
THE TRANSFEROR
For a description of the Transferor and its underwriting standards, see "The
Transferor" in the Prospectus.
THE SERVICER
For a description of the Servicer and its servicing standards, see "The
Servicer" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Information regarding certain maturity and prepayment considerations with
respect to the Certificates is set forth under "Weighted Average Life of the
Securities" in the Prospectus. As the rate of payment of principal of the
Certificates depends primarily on the rate of payment (including prepayments
on liquidations due to default) of the principal balance of the Receivables,
the final distribution in respect of the Certificates could occur
significantly earlier than their final scheduled Distribution Date.
Certificateholders will bear the risk of being able to reinvest principal
payments on the Certificates at yields at least equal to the yields on their
respective Certificates.
S-14
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Pooling and
Servicing Agreement, a form of which has been filed as an exhibit to the
Registration Statement. A copy of the Pooling and Servicing Agreement will be
filed with the Commission following the issuance of the Certificates. The
following summary describes certain terms of the Certificates and the Pooling
and Servicing Agreement. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of the Certificates and the Pooling and Servicing Agreement. The following
summary supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Certificates of any
given series and the related Pooling and Servicing Agreement set forth in the
Prospectus, to which description reference is hereby made.
In general, it is intended that Class A Certificateholders receive, on each
Distribution Date, the Class A Percentage of the Principal Distribution Amount
plus interest at the Class A Pass Through Rate on the Class A Certificate
Balance. Subject to the prior rights of the Class A Certificateholders, it is
intended that the Class B Certificateholders receive, on each Distribution
Date, the Class B Percentage of the Principal Distribution Amount plus
interest at the Class B Pass Through Rate on the Class B Certificate Balance.
The Certificates will evidence interests in the Trust created pursuant to
the Pooling and Servicing Agreement. The Class A Certificates will evidence in
the aggregate an undivided ownership interest (the "Class A Percentage") of
approximately % of the Trust and the Class B Certificates will evidence in the
aggregate an undivided ownership interest (the "Class B Percentage") of
approximately % of the Trust.
OPTIONAL PREPAYMENT
The Servicer will have the option to purchase all, but not less than all, of
the Receivables on any Distribution Date on or after the Distribution Date on
which the Pool Balance has declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will be required to purchase the
Receivables in order to exercise such option will be equal to the aggregate of
the Purchase Amounts of the Receivables as of the end of the related
Collection Period. The Servicer will be required to give not less than ( )
days notice to the Trustee of its intention to exercise such option. In
addition, the Servicer will not be permitted to exercise such option unless
the resulting distribution would be sufficient to distribute to the Class A
Certificateholders an amount equal to the Class A Certificate Balance together
with accrued interest at the Class A Pass Through Rate, and to the Class B
Certificateholders an amount equal to the Class B Certificate Balance together
with accrued interest at the Class B Pass Through Rate. Upon such a
distribution, the Certificates will be retired.
TRANSFER OF RECEIVABLES
Certain information regarding the transfer of the Receivables by the
Depositor to the Trust on the Closing Date pursuant to the Pooling and
Servicing Agreement is set forth in the Prospectus under "Description of the
Transfer and Servicing Agreements--Transfer of Receivables".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be % per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection Period
(together with any portion of the Servicing Fee that remains
S-15
<PAGE>
unpaid from prior Distribution Dates) will be paid at the beginning of such
Collection Period out of collections for such Collection Period. See
"Description of the Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses" in the Prospectus. [To follow: description of
Supplemental Servicing Fee and Servicing Suspense Account.]
DISTRIBUTIONS
DEPOSITS TO COLLECTION ACCOUNT. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for a Distribution Date shall be the sum of the Interest
Distribution Amount and the Principal Distribution Amount (other than the
portion thereof attributable to Realized Losses). "Realized Losses" means the
excess of the principal balance of any Liquidated Receivable over Liquidation
Proceeds to the extent allocable to principal received in the Collection
Period in which the Receivable became a Liquidated Receivable.
The "'Interest Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of [defaulted] Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Liquidated Receivables ("Liquidation
Proceeds"), to the extent attributable to interest due thereon in accordance
with the Servicer's customary servicing procedures, and all recoveries in
respect of Liquidated Receivables which were written off in prior Collection
Periods; (iii) all Servicer Advances made by the Servicer of interest due on
the Receivables; (iv) the Purchase Amount of each Receivable that was
purchased by the Transferor or purchased by the Servicer under an obligation
which arose during the related Collection Period, to the extent attributable
to accrued interest thereon; and (v) Investment Earnings for such Distribution
Date. The Interest Distribution Amount shall be determined on the related
Determination Date.
The "Principal Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
principal; (ii) all Liquidation Proceeds attributable to the principal amount
of Receivables which became Liquidated Receivables during such Collection
Period in accordance with the Servicer's customary servicing procedures, plus
the amount of Realized Losses with respect to such Liquidated Receivables;
(iii) to the extent attributable to principal, the Purchase Amount received
with respect to each Receivable purchased by the Transferor or purchased by
the Servicer under an obligation which arose during the related Collection
Period; and (iv) partial prepayments relating to refunds of extended warranty
protection plan costs or of physical damage, credit life or disability
insurance policy premiums, but only if such costs or premiums were financed by
the respective Obligor as of the date of the original contract. The Regular
Principal Distribution Amount shall be determined on the related Determination
Date.
The Interest Distribution Amount and the Regular Principal Distribution
Amount on any Distribution Date shall exclude the following:
(i) all payments and proceeds (including Liquidation Proceeds) of any
Receivables, the Purchase Amount of which has been included in the Total
Distribution Amount in a prior Collection Period;
(ii) amounts received in respect of interest on Receivables during the
preceding Collection Period in excess of the amount of interest that would
have been due during the Collection Period on the Receivables at their
respective APRs (assuming that a payment is received on each Receivable on
the due date thereof); and
S-16
<PAGE>
(iii) Liquidation Proceeds attributable to accrued and unpaid interest on
the Receivables (but not including interest for the then current Collection
Period) but only to the extent of any unreimbursed Servicer Advances.
CALCULATION OF DISTRIBUTABLE AMOUNTS. The "Class A Distributable Amount"
with respect to a Distribution Date will be an amount equal to the sum of (i)
the "Class A Principal Distributable Amount", consisting of the Class A
Percentage of the Principal Distribution Amount, plus (ii) the "Class A
Interest Distributable Amount", consisting of thirty (30) days' interest at
the Class A Pass Through Rate on the Class A Certificate Balance as of the
close of business on the last day of the preceding Collection Period. In
addition, on the Distribution Date immediately following the Final Scheduled
Maturity Date (the "Final Scheduled Distribution Date"), the Class A Principal
Distributable Amount will include the lesser of (A) the Class A Percentage of
any payments of principal due and remaining unpaid on each Receivable in the
Trust as of the last day of the preceding Collection Period and (B) the
portion of such amount necessary (after giving effect to the other amounts
described above to be distributed to the Class A Certificateholders on such
Distribution Date and allocable to principal) to reduce the Class A
Certificate Balance to zero.
The "Class A Certificate Balance" will equal, initially, $ and,
thereafter, shall equal the initial Class A Certificate Balance reduced by all
amounts previously distributed to Class A Certificateholders and allocable to
principal.
The "Class B Distributable Amount" with respect to a Distribution Date shall
be an amount equal to the sum of (i) the "Class B Principal Distributable
Amount", consisting of the Class B Percentage of the Principal Distribution
Amount plus (ii) the "Class B Interest Distributable Amount", consisting of
thirty (30) days' interest at the Class B Pass Through Rate to the Class B
Certificate Balance as of the close of business on the last day of the
preceding Collection Period. In addition, on the Final Scheduled Distribution
Date, the principal required to be distributed on the Class B
Certificateholders will include the lesser of (i) the Class B Percentage of
any payments of principal due and remaining unpaid with respect to the
Receivables in the Trust as of the last day of the preceding Collection Period
and (ii) the portion of the amount in clause (i) above that is necessary
(after giving effect to all other amounts distributed to Class A and Class B
Certificateholders on such Distribution Date and allocable to principal) to
reduce the Class B Certificate Balance to zero.
The "Class B Certificate Balance" shall equal, initially, $ and,
thereafter, shall equal the initial Class B Certificate Balance, reduced by
all amounts previously distributed to Class B Certificateholders [(or
deposited in the Reserve Account, but not including the Reserve Account
Initial Deposit)] and allocable to principal and by Realized Losses.
CALCULATION OF AMOUNTS TO BE DISTRIBUTED. Prior to each Distribution Date,
the Servicer will calculate the Total Distribution Amount, the Class A
Distributable Amount and the Class B Distributable Amount.
The holders of the Class A Certificates will receive on any Distribution
Date, to the extent of available funds, the Class A Distributable Amount and
any outstanding Class A Interest Carryover Shortfall and Class A Principal
Carryover Shortfall as of the close of the preceding Distribution Date. On
each Distribution Date on which the sum of the Class A Interest Distributable
Amount and any outstanding Class A Interest Carryover Shortfall from the
preceding Distribution Date (plus interest on such Class A Interest Carryover
Shortfall at the Class A Pass Through Rate from such preceding Distribution
Date to the current Distribution Date, to the extent permitted by law) exceeds
the Class A Percentage of the Interest Distribution Amount (after payment of
the Servicing Fee) on such Distribution Date, the Class A
S-17
<PAGE>
Certificateholders shall be entitled generally to receive such amounts, first,
from the Class B Percentage of the Interest Distribution Amount; second, if
such amounts are insufficient, from the amounts available in the Reserve
Account; and third, if such amounts are insufficient, from the Class B
Percentage of the Principal Distribution Amount (other than the portion
thereof attributable to Realized Losses). The "Class A Interest Carryover
Shortfall" as of the close of any Distribution Date means the excess of the
Class A Interest Distributable Amount for such Distribution Date, plus any
outstanding Class A Interest Carryover Shortfall from the preceding
Distribution Date, plus interest on such outstanding Class A Interest
Carryover Shortfall, to the extent permitted by law, at the Class A Pass
Through Rate from such preceding Distribution Date through the current
Distribution Date, over the amount of interest that the holders of the Class A
Certificates actually received on such current Distribution Date.
On each Distribution Date on which the sum of the Class A Principal
Distributable Amount and any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class A Percentage of the
Principal Distribution Amount (exclusive of the portion thereof attributable
to Realized Losses) on such Distribution Date, the Class A Certificateholders
shall be entitled to receive such amounts, first, from the Class B Percentage
of the Principal Distribution Amount (other than the portion thereof
attributable to Realized Losses); second, if such amounts are insufficient,
from amounts available in the Reserve Account; and third, if such amounts are
insufficient, from the Class B Percentage of the Interest Distribution Amount.
The "Class A Principal Carryover Shortfall" as of the close of any
Distribution Date means the excess of the Class A Principal Distributable
Amount plus any outstanding Class A Principal Carryover Shortfall from the
preceding Distribution Date over the amount of principal that the holders of
the Class A Certificates actually received on such current Distribution Date.
The holders of the Class B Certificates will receive on any Distribution
Date, to the extent of available funds, the Class B Distributable Amount and
any outstanding Class B Interest Carryover Shortfall and Class B Principal
Carryover Shortfall as of the close of the preceding Distribution Date. On
each Distribution Date on which the sum of the Class B Interest Distributable
Amount and any outstanding Class B Interest Carryover Shortfall from the
preceding Distribution Date (plus interest on such Class B Interest Carryover
Shortfall at the Class B Pass Through Rate from such preceding Distribution
Date to the current Distribution Date, to the extent permitted by law) exceeds
the Class B Percentage of the Interest Distribution Amount (after payment of
the Servicing Fee) on such Distribution Date less any portion thereof required
to be distributed to the Class A Certificateholders pursuant to their prior
rights as described above, the Class B Certificateholders shall be entitled
generally to receive such amounts, first, from the Class A Percentage of the
Interest Distribution Amount that is not otherwise required to be distributed
to the Class A Certificateholders as described above and, second, from the
amount, if any, available in the Reserve Account (after giving effect to any
withdrawals therefrom for distribution to the Class A Certificateholders on
such Distribution Date). The "Class B Interest Carryover Shortfall" as of the
close of any Distribution Date means the excess of the Class B Interest
Distributable Amount for such Distribution Date, plus any outstanding Class B
Interest Carryover Shortfall from the preceding Distribution Date, plus
interest on such outstanding Class B Interest Carryover Shortfall, to the
extent permitted by law, at the Class B Pass Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class B Certificates actually received on
such current Distribution Date.
On each Distribution Date on which the sum of the Class B Principal
Distributable Amount and any outstanding Class B Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class B Percentage of the
Principal Distribution Amount (exclusive of the portion thereof attributable
to Realized Losses) on such Distribution Date less any portion thereof
S-18
<PAGE>
required to be distributed to the Class A Certificateholders pursuant to their
prior rights as described above, the Class B Certificateholders shall be
entitled to receive such amounts, first, from the Interest Distribution Amount
that is not otherwise required to be distributed to the Class A or Class B
Certificateholders as described above and, second, from amounts available in
the Reserve Account (after giving effect to any withdrawals therefrom on such
Distribution Date for distribution to the Class A Certificateholders and for
distribution of interest to the Class B Certificateholders). The "Class B
Principal Carryover Shortfall" as of the close of any Distribution Date means
the excess of the Class B Principal Distributable Amount plus any outstanding
Class B Principal Carryover Shortfall from the preceding Distribution Date
over the amount of principal that the holders of Class B Certificates actually
received on such current Distribution Date.
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE ACCOUNT
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables generally will be subordinated to the rights of the
Class A Certificateholders in the event of defaults and delinquencies on the
Receivables as described herein and provided in the Pooling and Servicing
Agreement. The protection afforded to the Class A Certificateholders through
subordination will be effected both by the preferential right of the Class A
Certificateholders to receive current distributions with respect to the
Receivables and by the establishment of the Reserve Account. The Reserve
Account will be created with an initial deposit by the Depositor of the
Reserve Account Initial Deposit and will be augmented by deposit therein on
each Distribution Date of the amount, if any, remaining from the Total
Distribution Amount after the distributions due to the Certificateholders have
been made until the amount in the Reserve Account reaches the Specified
Reserve Account Balance for such Distribution Date.
The Reserve Account will not be part of or otherwise includible in the Trust
and will be a segregated trust account held by the Trustee. On each
Distribution Date, (i) if the amounts on deposit in the Reserve Account are
less than the Specified Reserve Account Balance for such Distribution Date,
the Trustee will, after payment of any amounts required to be distributed to
Certificateholders and the payment of the Servicing Fee due with respect to
the related Collection Period (including any unpaid Servicing Fees with
respect to prior Collection Periods), withdraw from the Collection Account and
deposit in the Reserve Account the amount, if any, remaining in the Collection
Account that would otherwise be distributed to the Depositor, or such lesser
portion thereof as is sufficient to restore the amount in the Reserve Account
to such Specified Reserve Account Balance for such Distribution Date, and (ii)
if the amount on deposit in the Reserve Account on such Distribution Date
(after giving effect to all deposits or withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Account Balance for
such Distribution Date, the Trustee will release and distribute any such
excess to the Depositor. Upon any such distribution to the Depositor, the
Certificateholders will have no rights in, or claims to, such amounts.
Amounts held from time to time in the Reserve Account will continue to be
held for the benefit of holders of the Class A Certificates and holders of the
Class B Certificates. Funds in the Reserve Account shall be invested as
provided in the Pooling and Servicing Agreement in Eligible Investments. The
Depositor will be entitled to receive all investment earnings on amounts in
the Reserve Account. Investment income on amounts in the Reserve Account will
not be available for distribution to the Certificateholders or otherwise
subject to any claims or rights of the Certificateholders.
The time necessary for the Reserve Account to reach and maintain the
Specified Reserve Account Balance at any time after the Closing Date will be
affected by the delinquency, credit loss, repossession and prepayment
experience of the Receivables and, therefore, cannot be accurately predicted.
S-19
<PAGE>
The subordination of the Class B Certificates and the Reserve Account
described above are intended to enhance the likelihood of receipt by Class A
Certificateholders of the full amount of principal and interest on the Class A
Certificates due them and to decrease the likelihood that the Class A
Certificateholders will experience losses. However, in certain circumstances,
the Reserve Account could be depleted and shortfalls could result.
If on any Distribution Date the holders of the Class A Certificates do not
receive the sum of the Class A Distributable Amount, the Class A Interest
Carryover Shortfall and the Class A Principal Carryover Shortfall for such
Distribution Date (after giving effect to any amounts withdrawn from the
Reserve Account and the Class B Percentage of the Total Distribution Amount
and applied to such deficiency, as described above), the holders of the Class
B Certificates generally will not receive any portion of the Total
Distribution Amount. While the Class B Certificateholders are entitled to
receive amounts from the Reserve Account as described above, such entitlement
is subordinated to the rights of the Class A Certificateholders to receive
amounts from the Reserve Account as described above. If the Reserve Account
becomes depleted, the Class B Certificateholders may experience shortfalls in
the distributions due them and incur a loss on their investment.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Tax Counsel, the Trust will be treated as a grantor trust
for federal income tax purposes and will not be subject to federal income tax.
For additional information regarding federal income tax consequences, see
"Federal Income Tax Consequences" in the Prospectus.
ERISA CONSIDERATIONS
THE CLASS A CERTIFICATES
Subject to the considerations set forth under "ERISA Considerations--Senior
Certificates Issued by Trusts That Do Not Issue Notes" in the Prospectus, the
Class A Certificates may be purchased by an employee benefit plan or an
individual retirement account (a "Benefit Plan") subject to ERISA or Section
4975 of the Code. A fiduciary of a Benefit Plan must determine that the
purchase of a Class A Certificate is consistent with its fiduciary duties
under ERISA and does not result in a nonexempt prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the Code. For additional
information regarding treatment of the Class A Certificates under ERISA, see
"ERISA Considerations" in the Prospectus.
No sale pledge, or transfer of a Class A Certificate or any interest therein
shall be made (i) to any Benefit Plan, or (ii) to any person who is directly
or indirectly purchasing such Certificate or interest therein on behalf of, as
named fiduciary of, as trustee of, or with assets of a Benefit Plan, unless
(1) such Benefit Plan qualifies as an accredited investor within the meaning
of the Exemption described in the Prospectus, and (2) at the time of such
sale, pledge or transfer, the Class A Certificates continue to be rated in one
of the top three rating categories by at least one Rating Agency, as defined
in the Prospectus, or (3) the purchase and holding of the Class A Certificates
is exempt under Section III of Prohibited Transaction Class Exemption 95-60
(applicable to certain insurance company general accounts). Each person who
acquires any Class A Certificates or interest therein shall be deemed to have
certified that the foregoing conditions will be satisfied.
THE CLASS B CERTIFICATES
No sale, pledge, or transfer of a Class B Certificate or any interest
therein shall be made to any Benefit Plan or any person who is directly or
indirectly purchasing such Certificate or interest therein on behalf of, as
named fiduciary of, as trustee of, or with assets of a Benefit
S-20
<PAGE>
Plan, unless the purchase and holding of such Certificate is exempt under
Section III of Prohibited Transaction Class Exemption 95-60 (applicable to
certain insurance company general accounts). Each person who acquires any
Class B Certificate or interest therein shall be deemed to have certified that
the foregoing conditions will be satisfied.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Depositor has agreed to cause the Trust to
sell to the Underwriter, and the Underwriter has agreed to purchase, the
entire principal amount of the Certificates. [UNDERWRITING SYNDICATE LANGUAGE
AND TABLE TO BE ADDED IF APPLICABLE]
The Depositor has been advised by the Underwriter that it proposes initially
to offer the 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
% per Class A Certificate and % per Class B Certificate. The Underwriter
may allow and such dealers may reallow a concession not in excess of % per
Class A Certificate and % per Class B Certificate to certain other dealers.
After the initial public offering of the Certificates, the public offering
prices and such concessions may be changed.
Until the distribution of the Certificates is completed, rules of the
Commission may limit the ability of the Underwriter and certain selling group
members to bid for and purchase the Certificates. As an exception to these
rules, the Underwriter is permitted to engage in certain transactions that
stabilize the price of the Certificates. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Certificates.
If the Underwriter creates a short position in the Certificates in
connection with the offering, i.e., if it sells more Certificates than are set
forth on the cover page of this Prospectus Supplement, the Underwriter may
reduce that short position by purchasing Certificates in the open market.
In general, the purchase of a security for the purpose of stabilization or
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 Depositor nor [any] Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Certificates. In
addition, neither the Depositor nor [any] Underwriter makes any representation
that the Underwriter will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
The Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell, any Certificates to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of
the Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document in connection with the issue of the Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom the
document may otherwise lawfully be issued or passed on.
S-21
<PAGE>
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the 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 Transferor
or the Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
Deutsche Bank Securities Inc., the Transferor, the Servicer and the
Depositor are each indirect, wholly-owned subsidiaries of Deutsche Bank AG.
Any obligations of Deutsche Bank Securities Inc. are the sole responsibility
of Deutsche Bank Securities Inc. and do not create any obligation on the part
of any affiliate of Deutsche Bank Securities Inc.
LEGAL OPINIONS
Certain legal matters relating to the Certificates, certain federal income
tax matters and certain Illinois income tax matters will be passed upon for
the Depositor by Mayer, Brown & Platt, Chicago, Illinois. (Certain legal
matters relating to the Certificates will be passed upon for the Underwriter
by Mayer, Brown & Platt.) Certain California income tax matters will be passed
upon for the Depositor by Bryan Cave LLP, St. Louis, Missouri.
S-22
<PAGE>
INDEX OF TERMS
[TO BE CONFORMED]
<TABLE>
<S> <C>
APR................................................................... S-11
Cede.................................................................. S-3
Certificateholders.................................................... S-5
Certificates.......................................................... S-1
Class A Certificate Balance........................................... S-5, S-18
Class A Certificates.................................................. S-4
Class A Distributable Amount.......................................... S-18
Class A Interest Carryover Shortfall.................................. S-18
Class A Interest Distributable Amount................................. S-18
Class A Percentage.................................................... S-4, S-16
Class A Principal Carryover Shortfall................................. S-19
Class A Principal Distributable Amount................................ S-18
Class B Certificate Balance........................................... S-6, S-18
Class B Certificates.................................................. S-4
Class B Distributable Amount.......................................... S-18
Class B Interest Carryover Shortfall.................................. S-19
Class B Interest Distributable Amount................................. S-18
Class B Percentage.................................................... S-4, S-16
Class B Principal Carryover Shortfall................................. S-19
Class B Principal Distributable Amount................................ S-18
Code.................................................................. S-8
Collection Account.................................................... S-7
Collection Period..................................................... S-5
Commission............................................................ S-3
Cutoff Date........................................................... S-4
Depositor............................................................. S-1, S-4
Determination Date.................................................... S-5
Distribution Date..................................................... S-1, S-5
DTC................................................................... S-3
ERISA................................................................. S-8
Exchange Act.......................................................... S-3
Final Scheduled Distribution Date..................................... S-17
Final Scheduled Maturity Date......................................... S-5
Financed Assets....................................................... S-1, S-4
Initial Pool Balance.................................................. S-4
Interest Distribution Amount.......................................... S-17
Issuer................................................................ S-4
Liquidated Receivables................................................ S-17
Liquidation Proceeds.................................................. S-17
Plan.................................................................. S-21
Pool Balance.......................................................... S-5
Pooling and Servicing Agreement....................................... S-4
Principal Distribution Amount......................................... S-5, S-17
Prospectus............................................................ S-3
Rating Agency......................................................... S-9
Realized Losses....................................................... S-6, S-17
Receivables........................................................... S-1
Receivables Pool...................................................... S-10
</TABLE>
S-23
<PAGE>
<TABLE>
<S> <C>
Record Date............................................................ S-5
Servicer............................................................... S-1
Specified Reserve Account Balance...................................... S-7
stripped coupons....................................................... S-7
Tax Counsel............................................................ S-7
Total Distribution Amount.............................................. S-17
Transferor............................................................. S-4
Trust.................................................................. S-1, S-4
Trustee................................................................ S-1, S-4
Underwriter............................................................ S-3
Underwriting Agreement................................................. S-21
</TABLE>
S-24
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DE-
POSITOR OR BY THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
CERTIFICATES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUN-
DER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Reports To Certificateholders.............................................. S-3
Summary of Terms........................................................... S-4
Risk Factors............................................................... S-9
The Trust.................................................................. S-10
The Receivables Pool....................................................... S-10
Delinquencies, Repossessions and Net Losses................................ S-14
The Transferor............................................................. S-16
The Servicer............................................................... S-16
Weighted Average Life of the Certificates.................................. S-16
Description of the Certificates............................................ S-16
Federal Income Tax Consequences............................................ S-21
ERISA Consideration........................................................ S-21
Underwriting............................................................... S-21
Legal Opinions............................................................. S-22
Index of Terms............................................................. S-23
PROSPECTUS
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Summary of Terms........................................................... 4
Risk Factors............................................................... 12
The Trusts................................................................. 17
The Receivables Pools...................................................... 18
Weighted Average Life of the Certificates.................................. 20
Pool Factors and Trading Information....................................... 21
Use of Proceeds............................................................ 21
The Depositor.............................................................. 21
Description of the Notes................................................... 22
Description of the Certificates............................................ 25
Certain Information Regarding the Securities............................... 27
Description of the Transfer and Servicing Agreements....................... 35
Certain Legal Aspects of the Receivables................................... 44
Federal Income Tax Consequences............................................ 50
ERISA Considerations....................................................... 60
Plan of Distribution....................................................... 61
Legal Opinions............................................................. 62
Index of Terms............................................................. 63
</TABLE>
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS EF-
FECTING TRANSACTIONS IN THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLE-
MENT, 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 PRO-
SPECTUS WHEN ACTING AS UNDERWRITER(S) AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
$( )
TRUST
199 -( )
$
% ASSET BACKED CERTIFICATES, CLASS A
$
% ASSET BACKED CERTIFICATES, CLASS B
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE BANK SECURITIES INC.
PROSPECTUS SUPPLEMENT
, 199
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS +
+SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO +
+REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Version #2
[Recreational Vehicles]
Subject to completion, dated [ ], 1998
PROSPECTUS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
(EACH ISSUABLE IN SERIES)
-----------
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION
DEPOSITOR
-----------
The Asset Backed Notes (the "Notes") and the Asset 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 may include one or more classes of Notes and/or one or more
classes of Certificates, will be issued by a trust 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 Deutsche Recreational Asset
Funding Corporation (the "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 Depositor and Deutsche
Financial Services Corporation, as servicer (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. The related Prospectus Supplement
will specify which class or classes of Notes, if any, and which class or
classes of Certificates, if any, of the related series are being offered
thereby. The property of each Trust will include a pool of retail installment
sale contracts, installment loans, or notes (the "Receivables") secured by new
or used recreational vehicles, certain monies due or received thereunder on and
after the applicable Cutoff Date set forth in the related Prospectus
Supplement, security interests in the items financed thereby and certain other
property, all as described herein and in the related Prospectus Supplement. 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") to be established with the Indenture Trustee, which may be used to
acquire additional Receivables (the "Subsequent Receivables") from the
Depositor from time to time during the Funding Period specified in the related
Prospectus Supplement.
Each class of Securities of any series will represent the right to receive a
specified amount of payments on the related Receivables, at the rates, on the
dates and in the manner described herein and in the related Prospectus
Supplement. If a series includes multiple classes of Securities, the rights of
one or more classes of Securities to receive payments may be senior or
subordinate to the rights of one or more of the other classes of such series.
Distributions on Certificates of a series may be subordinated in priority to
payments due on any related Notes 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 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
<PAGE>
of payment in respect of principal of any class of Notes and distributions in
respect of the Certificate Balance 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
Receivables) on the related Receivables. 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 REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [19] HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
ANY NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED
BY, DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEUTSCHE FINANCIAL
SERVICES CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES,
THE CERTIFICATES OR THE RECEIVABLES ARE GUARANTEED OR INSURED BY ANY
GOVERNMENT AGENCY OR INSTRUMENTALITY.
----------------
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.
----------------
, 199 .
2
<PAGE>
AVAILABLE INFORMATION
Deutsche Recreational Asset Funding Corporation (the "Depositor") has filed
with the Securities and Exchange Commission (the "Commission") a Registration
Statement (together with all amendments and exhibits thereto, referred to
herein as the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Notes and the Certificates
offered pursuant to this Prospectus. For further information, reference is
made to the Registration Statement which may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; and at the Commission's regional offices 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 the Registration Statement may be obtained from the Public Reference
Section of the Commission at 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, including Deutsche Recreational Asset Funding
Corporation, that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor as originator of the Trust referred to
in the accompanying Prospectus Supplement, pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), subsequent to the date of this Prospectus and prior to the termination
of the offering of the Securities offered by such Trust shall be deemed to be
incorporated by reference in this Prospectus. 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 any subsequently filed
document which 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 Depositor will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any or
all of the documents incorporated herein or in any related Prospectus
Supplement by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to Secretary, Deutsche
Recreational Asset Funding Corporation, 655 Maryville Centre Drive, St. Louis,
Missouri 63141, telephone number (314) [523-3000].
----------------
3
<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".
ISSUER...................... With respect to each series of Securities, the
trust (referred to herein as the "Trust" or the
"Issuer") to be formed pursuant to either a Trust
Agreement (as amended and supplemented from time
to time, a "Trust Agreement") between the
Depositor and the trustee specified in the
related Prospectus Supplement (the "Trustee") or
a Pooling and Servicing Agreement (as amended and
supplemented from time to time, the "Pooling and
Servicing Agreement") among the Trustee, the
Depositor and the Servicer.
DEPOSITOR................... Deutsche Recreational Asset Funding Corporation.
TRANSFEROR.................. Ganis Credit Corporation ("Ganis").
SERVICER.................... Deutsche Financial Services Corporation (the
"Servicer").
TRUSTEE..................... With respect to each series of Securities, the
Trustee will be specified in the related
Prospectus Supplement.
INDENTURE TRUSTEE........... With respect to any applicable series of
Securities, the Indenture Trustee will be
specified in the related Prospectus Supplement.
THE NOTES................... A series of Securities may include one or more
classes of Notes, which will be issued pursuant
to an Indenture between the Trust and the
Indenture Trustee (as amended and supplemented
from time to time, an "Indenture"). The related
Prospectus Supplement will specify which class or
classes, if any, of Notes of the related series
are being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be available
for purchase in minimum denominations of $1,000
and will be available in book-entry form only.
Unless otherwise specified in the related
Prospectus Supplement, Noteholders will be able
to receive Definitive Notes only in the limited
circumstances described herein or in the related
Prospectus Supplement. See "Certain Information
Regarding the Securities--Definitive Securities".
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Except in the case of any Strip Notes, as
described below, each class of Notes will have a
stated principal amount and will bear interest at
a specified rate or rates (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 the Interest
Rate.
With respect to a series that includes two or
more classes of Notes, each class may differ as
to the timing and priority of payments,
seniority, allocations of losses, Interest Rate
or amount of payments of principal or interest,
or 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 Receivables Pool. 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.
If the Servicer exercises its option to purchase
the Receivables of a Trust (or, if not and, if
and to the extent provided in the related
Prospectus Supplement, satisfactory bids for the
purchase of such Receivables are received), in
the manner and on the respective terms and
conditions described under "Description of the
Transfer and Servicing Agreements--Termination",
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 a Pre-Funding Account (as such term is
defined in the related Prospectus Supplement, the
"Pre-Funding Account"), one or more classes of
the outstanding Notes may be subject to partial
redemption on or immediately following the end of
the Funding Period (as such term is defined in
the related Prospectus Supplement, the "Funding
Period") in an amount and manner specified in the
related 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............ A series may include one or more classes of
Certificates and may or may not include any
Notes. The related Prospectus Supplement will
specify which class or classes, if any, of the
Certificates are being offered thereby.
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Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in a minimum denomination
of $1,000 and will be available in book-entry
form only. Unless otherwise specified in the
related Prospectus Supplement, Certificateholders
will be able to receive Definitive Certificates
only in the limited circumstances described
herein or in the related Prospectus Supplement.
See "Certain Information Regarding the
Securities--Definitive Securities".
Except in the case of any Strip Certificates, as
described below, each class of Certificates will
have a stated Certificate Balance specified in
the related Prospectus Supplement (the
"Certificate Balance") and will accrue interest
on such Certificate Balance at a specified rate
(with respect to each class of Certificates, the
"Pass Through Rate"). Each class of Certificates
may have a different Pass Through Rate, which may
be a fixed, variable or adjustable Pass Through
Rate, or any combination of the foregoing. The
related Prospectus Supplement will specify the
Pass Through Rate for each class of Certificates
or the method for determining the Pass Through
Rate.
With respect to a series that includes two or
more classes of Certificates, each class may
differ as to 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 Receivables Pool.
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 in respect of the
Certificates may be subordinated in priority of
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
If the Servicer exercises its option to purchase
the Receivables of a Trust (or, if not, and if
and to the extent provided in the related
Prospectus Supplement, satisfactory bids for the
purchase of such Receivables
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<PAGE>
are received), in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination", Certificateholders will
receive as a prepayment an amount in respect of
the Certificates as specified in the related
Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding
Account, Certificateholders may receive a partial
prepayment of principal on or immediately
following the end of the Funding Period in an
amount and manner specified in the related
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.
TRUST PROPERTY.............. The property of each Trust will include a pool of
retail installment sale contracts, installment
loans, or notes (the "Receivables") secured by
new or used recreational vehicles (the "Financed
Recreational Vehicles" or the "Financed Assets"),
collections and other payments with respect to
the Receivables received after the date specified
in the related Prospectus Supplement (the "Cutoff
Date") and monies on deposit in certain trust
accounts. On or prior to the Closing Date
specified in the related Prospectus Supplement
with respect to a Trust, the Transferor will
transfer Receivables (the "Initial Receivables")
having an aggregate principal balance as of the
Cutoff Date to the Depositor, which will transfer
the Initial Receivables to such Trust on or prior
to the Closing Date pursuant to either a Transfer
and Servicing Agreement among the Depositor, the
Servicer and the Trustee (as amended and
supplemented from time to time, a "Transfer and
Servicing Agreement") or, if the Trust is to be
treated as a grantor trust for federal income tax
purposes, the related Pooling and Servicing
Agreement among the Depositor, the Servicer and
the Trustee. The property of each Trust will also
include amounts on deposit in certain trust
accounts, including the related Collection
Account, any Pre-Funding Account, and any other
account identified in the applicable Prospectus
Supplement.
To the extent provided in the related Prospectus
Supplement, the Transferor will be obligated
(subject only to the availability thereof) to
transfer to the Depositor which will be obligated
to acquire and transfer to the related Trust, and
such Trust will then be obligated to acquire
(subject to the satisfaction of certain
conditions described in the applicable Transfer
and Servicing
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<PAGE>
Agreement or Pooling and Servicing Agreement),
additional Receivables (the "Subsequent
Receivables") from time to time (as frequently as
daily) during the Funding Period specified in the
related Prospectus Supplement having an aggregate
principal balance approximately equal to the
amount on deposit in the Pre-Funding Account (the
"Pre-Funded Amount") on such Closing Date. With
respect to any Trust that is to be treated as a
grantor trust for federal income tax purposes,
the Funding Period, if any, will not exceed 90
days in length from the Closing Date, and with
respect to any other Trust will not exceed one
year in length from the Closing Date unless
otherwise specified in the applicable Prospectus
Supplement. With respect to each Trust, the Pre-
Funded Amount on the Closing Date will not exceed
25% of the aggregate initial principal balance of
the Securities unless otherwise specified in the
applicable Prospectus Supplement.
CREDIT AND CASH FLOW
ENHANCEMENT.................
If and to the extent specified in the related
Prospectus Supplement, credit and cash flow
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, a Reserve
Account, 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 or accounts, other
agreements with respect to third party payments
or other support, cash deposits or other
arrangements. Unless otherwise specified in the
related Prospectus Supplement, any form of credit
or cash flow enhancement will have certain
limitations and exclusions from coverage
thereunder, which will be described in the
related Prospectus Supplement.
TRANSFER AND SERVICING
AGREEMENTS..................
With respect to each Trust, the Transferor will
transfer the related Receivables to the
Depositor, which, in turn, will transfer the
related Receivables to such Trust pursuant to a
Transfer and Servicing Agreement or a Pooling and
Servicing Agreement. The rights and benefits of
any Trust under a Transfer and Servicing
Agreement will be transferred to the Indenture
Trustee as collateral for the Notes of the
related series. If so specified in the related
Prospectus Supplement, the person specified
therein as Administrator will undertake certain
administrative duties under an Administration
Agreement with respect to any
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<PAGE>
Trust that has issued Notes, which duties would
in the absence of an Administrator be performed
for the related Trust primarily by the related
Indenture Trustee or by the Depositor.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will advance
any interest shortfall with respect to a
Receivable to the extent that the Servicer, in
its sole discretion, expects to recoup the
advance from subsequent payments on or with
respect to the Receivables (a "Servicer
Advance"). The Servicer shall be entitled to
reimbursement of Servicer Advances from
subsequent payments on or with respect to the
Receivables to the extent described herein and in
the related Prospectus Supplement.
Unless otherwise provided in the related
Prospectus Supplement, the Depositor will be
obligated to purchase any Receivable from the
Trust, and the Transferor will be obligated to
simultaneously purchase such Receivable from the
Depositor, if the interest of the applicable
Trust in such Receivable is materially adversely
affected by a breach of any representation or
warranty made by the Transferor with respect to
the Receivable, if the breach has not been cured
following the discovery by or notice to the
Transferor and the Depositor of the breach. If so
specified in the related Prospectus Supplement,
the Transferor or the Depositor will be
permitted, in a circumstance where it would
otherwise be required to purchase a Receivable as
described in the preceding sentence, to instead
substitute a comparable Receivable for the
Receivable otherwise requiring purchase, subject
to certain conditions and eligibility criteria
for the substitution to be summarized in such
Prospectus Supplement.
Unless otherwise provided in the related
Prospectus Supplement, the Servicer will be
obligated to purchase a Receivable if, among
other things, it extends the date for final
payment by the Obligor of such Receivable beyond
the applicable Final Scheduled Maturity Date (as
defined in the related Prospectus Supplement, the
"Final Scheduled Maturity Date"), changes the
annual percentage rate ("APR") or amount of a
scheduled payment of such Receivable or fails to
maintain a perfected security interest in the
related Financed Asset.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be
entitled to receive a fee for servicing the
Receivables of each Trust plus certain late fees,
prepayment charges and other administrative fees
or similar charges. See "Description of the
Transfer
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<PAGE>
and Servicing Agreements--Servicing Compensation
and Payment of Expenses" herein and in the
related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF
THE RECEIVABLES.............
In connection with the transfer of Receivables to
a Trust, security interests in the Financed
Assets securing such Receivables will be
transferred by the Transferor to the Depositor
(or by the related Dealer or an Originator to the
Transferor and by the Transferor to the
Depositor) and by the Depositor to such Trust.
Due to administrative burden and expense, the
certificates of title to those Financed
Recreational Vehicles financed in states where
security interests in recreational vehicles are
subject to certificate of title statutes will not
be amended to reflect any such transfers, and the
Uniform Commercial Code ("UCC") financing
statements in respect of those Financed
Recreational Vehicles financed in states where
security interests in recreational vehicles are
perfected by filing a UCC-1 financing statement
will not be amended to reflect such transfers. In
the absence of such procedures, such Trust may
not have a perfected security interest in the
Financed Recreational Vehicles in some states. If
such Trust does not have a perfected security
interest in a Financed Asset, its ability to
realize on such Financed Asset may be adversely
affected. To the extent the security interest is
perfected, such Trust will have a prior claim
over subsequent purchasers of such Financed Asset
and holders of subsequently perfected security
interests. However, as against liens for repairs
of Financed Assets or for taxes unpaid by an
Obligor under a Receivable, or because of fraud
or negligence, such Trust could lose the priority
of its security interest or its security interest
in Financed Assets.
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
a transferee of such a loan liable to the obligor
thereon for any violation by the lender which
made such loan. Unless otherwise specified in the
related Prospectus Supplement, the Depositor will
be obligated to purchase from the Trust and the
Transferor will be obligated to simultaneously
purchase from the Depositor any Receivable which
fails to comply with such requirements if such
failure materially and adversely affects the
interests of the Trust or the Indenture Trustee
in such Receivable. The Depositor's obligation to
make such purchase is contingent upon the
Transferor performing its obligation to purchase
such Receivable from the Depositor on account of
such failure.
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<PAGE>
TAX STATUS.................. Unless the Prospectus Supplement specifies that
the related Trust will be treated as a grantor
trust, upon the issuance of the related series of
Securities Tax Counsel to such Trust will deliver
an opinion to the effect that, for federal income
tax purposes: (i) all or certain specified
classes of Notes of such series will be
characterized as debt and (ii) such Trust will
not be characterized as an association (or a
publicly traded partnership) taxable as a
corporation.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor trust,
upon the issuance of the related series of
Certificates, Tax Counsel to such Trust will
deliver an opinion to the effect that such Trust
will be treated as a grantor trust for federal
income tax purposes and will not be subject to
federal income tax.
See "Federal Income Tax Consequences" herein for
additional information concerning the application
of federal and state tax laws.
ERISA CONSIDERATIONS........ Subject to the considerations discussed under
"ERISA Considerations" herein and in the related
Prospectus Supplement, and unless otherwise
specified therein, any Notes of a series and any
Certificates that are issued by a Trust that is a
grantor trust and are not subordinated to any
other class of Certificates are eligible for
purchase by employee benefit plans.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates of any
series that are subordinated to any other
Security of that series may not be acquired by
any employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or by any individual
retirement account. See "ERISA Considerations"
herein and in the related Prospectus Supplement.
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<PAGE>
RISK FACTORS
CERTAIN LEGAL ASPECTS--SECURITY INTERESTS IN FINANCED ASSETS. Trusts May Not
Have A Perfected Security Interest in Certain Financed Assets. In connection
with the transfer of Receivables to a Trust, security interests in the
Financed Assets securing such Receivables will be, or will have been,
transferred by the Transferor to the Depositor and by the Depositor to such
Trust simultaneously with the transfer of such Receivables to such Trust. Due
to administrative burden and expense, (i) the certificates of title to those
Financed Recreational Vehicles financed in states where security interests in
recreational vehicles are subject to certificate of title statutes will not be
amended to reflect such transfers, and (ii) UCC financing statements in
respect of those Financed Recreational Vehicles financed in states where
security interests in recreational vehicles are perfected by filing a UCC-1
financing statement will not be amended to reflect such transfers. In the
absence of such procedures, such Trust may not have a perfected security
interest in the Financed Assets in some states.
Unless otherwise provided in the related Prospectus Supplement, the
Depositor will be obligated to purchase from the related Trust and the
Transferor will be obligated to simultaneously purchase from the Depositor any
Receivable transferred to such Trust as to which a perfected security interest
in the name of the Transferor in the Financed Asset securing such Receivable
shall not exist as of the date such Receivable is transferred to such Trust,
if such failure shall materially adversely affect the interest of such Trust
in such Receivable and if such failure shall not have been cured by the last
day of the second month following the discovery by or notice to the Transferor
of such breach. The Depositor's obligation to make such purchase is contingent
upon the Transferor performing its obligation to purchase such Receivable from
the Depositor on account of such failure. Moreover, such purchase obligations
will not address or remedy the circumstance where a perfected security
interest in the name of the Transferor in the Financed Asset securing a
Receivable has not been perfected in the related Trust as a result of the
absence of the procedures described in the preceding paragraph or for any
other reason. If such Trust does not have a perfected security interest in a
Financed Recreational Vehicle, its ability to realize on such Financed Asset
in the event of a default may be adversely affected. This could adversely
affect the amount available for distribution to the Securityholders.
Certain Liens Will Have Priority Over a Perfected Security Interest. To the
extent the security interest is perfected, such Trust will have a prior claim
over subsequent purchasers of such Financed Asset and holders of subsequently
perfected security interests. However, as against liens for repairs of a
Financed Asset or for taxes unpaid by an Obligor under a Receivable, or
through fraud or negligence, such Trust could lose the priority of its
security interest or its security interest in a Financed Asset. None of the
Transferor, the Servicer or the Depositor will have any obligation to purchase
a Receivable as to which any of the aforementioned occurrences result in such
Trust's losing the priority of its security interest or its security interest
in such Financed Asset after the date such security interest was conveyed to
such Trust. See "Certain Legal Aspects of the Receivables--Security Interest
in Vehicles" herein.
CERTAIN LEGAL ASPECTS--SECURITY INTEREST IN THE RECEIVABLES. The Receivables
will be treated by each Trust as "chattel paper" as defined in the UCC.
Pursuant to the UCC, the transfer of chattel paper is treated in a manner
similar to a security interest in chattel paper. Perfection of a security
interest in chattel paper may generally be made by filing UCC-1 financing
statements in respect thereof or by possession of the chattel paper. In order
to protect each Trust's ownership or security interest in its Receivables, the
Depositor will file UCC-1 financing statements with the appropriate
authorities in any state deemed advisable by the Depositor to give notice of
such Trust's ownership interest (and any related Indenture Trustee's security
interest) in the Receivables and proceeds thereof. Under each Transfer and
Servicing
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<PAGE>
Agreement and Pooling and Servicing Agreement, the Servicer will be appointed
custodian of the Receivables by the Trustee and the Servicer will otherwise be
obligated to maintain the perfection of each Trust's and any related Indenture
Trustee's interest in the Receivables. The filing of UCC-1 financing
statements as described above and possession of the chattel paper by the
Servicer will reduce but not eliminate the risks involved in perfection. A
Trust could lose priority of its security interest in the Receivables to
certain liens arising by operation of law or in certain cases by fraud or
negligence. Moreover, if the Servicer should lose or inadvertently give up
possession of the chattel paper, a good faith purchaser of the chattel paper
without knowledge who gives new value and takes possession of it in the
ordinary course of such purchaser's business has priority over a security
interest (including an ownership interest) in the chattel paper that is
perfected by filing UCC-1 financing statements. In addition, the Receivables
will not be stamped to reflect the transfer of the Receivables to the Trust.
Therefore, any good faith purchaser of the chattel paper described above would
not be deemed to have knowledge of a security interest (including an ownership
interest) therein because such purchaser would not learn of the transfer of or
security interest in the Receivables from a review of the chattel paper.
CERTAIN LEGAL ASPECTS--CONSUMER PROTECTION LAWS. 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 a transferee of such a loan (such as such Trust) liable to
the obligor thereon for any violation by the lender. The application of such
laws could render a Receivable unenforceable or otherwise uncollectible. The
inability of Trust to realize amounts owed in respect of such Receivable could
adversely affect the amount available for distribution to the Securityholders.
Unless otherwise specified in the related Prospectus Supplement, the Depositor
will be obligated to purchase from the Trust and the Transferor will be
obligated to simultaneously purchase from the Depositor any Receivable which
fails to comply with such requirements. The Depositor's obligation to make
such purchase is contingent upon the Transferor performing its obligation to
purchase such Receivable from the Depositor on account of such failure. See
"Certain Legal Aspects of the Receivables--Consumer Protection Laws" herein.
CERTAIN LEGAL ASPECTS--INSOLVENCY CONSIDERATIONS. The Transferor will
represent and warrant that, immediately prior to transferring Receivables to
the Depositor, the Transferor owns such Receivables and that the transfer of
the Receivables by it to the Depositor will constitute a conveyance of such
Receivables. The applicable Receivables Transfer Agreement will set forth
whether such transfer is intended to be a "sale" or a "capital contribution"
of such Receivable by the Transferor to the Depositor. The Depositor intends
that the transfer of Receivables by it to a Trust will constitute either a
conveyance of such Receivables or a pledge of such Receivables.
Considerations Relating to the Insolvency, Conservatorship or Receivership
of a Bank Originator. In the case of an Originator (a "Bank Originator") that
is a depository institution, if such Bank Originator becomes insolvent or is
in an unsound condition, or under certain other circumstances, the applicable
banking regulators may appoint a conservator or receiver for such Bank
Originator. In most instances, the conservator or receiver would be the
Federal Deposit Insurance Corporation (the "FDIC").
In the event that the FDIC were to assert that the transfer of Receivables
by a Bank Originator that is subject to the Federal Deposit Insurance Act, as
amended (the "FDIA"), constituted a grant of a security interest rather than a
sale, the FDIA sets forth certain powers that the FDIC, in its capacity as
conservator or receiver for a Bank Originator, could exercise. Positions taken
by the FDIC do not suggest that the FDIC, if appointed as conservator or
receiver
13
<PAGE>
for a Bank Originator, would interfere with the timely transfer to the
Transferor of payments collected on the Receivables or interfere with the
timely liquidation of Receivables, provided that certain conditions, as
described below, had been satisfied. To the extent that such Bank Originator
has granted a security interest in the Receivables to the Transferor and that
interest was validly perfected before the appointment of the FDIC as
conservator or receiver and before such Bank Originator's insolvency, was not
taken in contemplation of the insolvency of such Bank Originator, and was not
taken with the intent to hinder, delay or defraud such Bank Originator or the
creditors of such Bank Originator, such security interest should not be
subject to avoidance if the Originator Agreement and related documents are
approved by such Bank Originator and are continuously maintained records of
such Bank Originator (as required by the FDIA) and the transactions represent
bona fide and arm's length transactions undertaken for adequate consideration
in the ordinary course of business and the secured party is neither an insider
nor an affiliate of such Bank Originator. If the foregoing conditions are
satisfied and transfers of the Receivables constitute neither voidable
preferences nor fraudulent conveyances, payments to the Transferor with
respect to the Receivables should not be subject to recovery by the FDIC, as
conservator or receiver of such Bank Originator. The foregoing conclusion is
based upon policy statements of the FDIC and opinions of a former general
counsel of the FDIC. No assurance can be given, however, that all such
conditions have been satisfied with respect to any Bank Originator and the
Receivables transferred by such Bank Originator. If such conditions were not
satisfied or the FDIC, as conservator or receiver for a Bank Originator, were
to assert a position contrary to the policy statements, or were to require the
Transferor, the Depositor, the Trustee or the Indenture Trustee to establish
its right to those payments by submitting to and completing the administrative
claims procedure established under the FDIA, or the conservator or receiver
were to request a stay of proceedings with respect to such Bank Originator as
provided under the FDIA, delays in payments on the related Securities and
possible reductions in the amount of those payments could occur.
Notwithstanding the foregoing, the FDIA provides that the FDIC may repudiate
contracts determined by it to be burdensome. If the FDIC were to repudiate an
Originator Agreement, the claims (and any security interest securing such
claims) of the affected party thereof would be limited to actual, direct
compensatory damages and any security securing such claims would be
enforceable only to the extent of such damages. The FDIA does not define the
term "actual direct compensatory damages", but requires such damages to be
determined as of the date of the appointment of the conservator or receiver.
The FDIC, as conservator or receiver, would also have the rights and powers
conferred under applicable state or Federal law (including laws regarding bank
insolvencies and applicable laws regarding preferences or fraudulent
conveyances). In addition, the appointment of a receiver or conservator could
result in administrative expenses of the receiver or conservator having
priority over the interest of the Trustee or the Indenture Trustee in the
Receivables. In addition, if the FDIC were appointed as conservator or
receiver of a Bank Originator, certain administrative expenses of the
conservator, receiver or banking authorities may have priority over the
Transferor's, the Depositor's, the Trustee's or the Indenture Trustee's
interest in the Receivables.
Considerations Relating to the Insolvency of a Dealer, a Nonbank Originator,
the Transferor or the Depositor. If a Dealer, the Transferor, an Originator
other than a Bank Originator (a "Nonbank Originator") or the Depositor were to
become a debtor in a bankruptcy case (or if the parent of a Dealer, the
Transferor, a Nonbank Originator or the Depositor were to become a debtor in a
bankruptcy case and the assets of such Dealer, the Transferor, such Nonbank
Originator or the Depositor, as applicable, were consolidated with those of
its parent) and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to take the position
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<PAGE>
that the transfer of Receivables by such Dealer, such Nonbank Originator, or
the Depositor, as the case may be, should be treated as a pledge of such
Receivables to secure a borrowing of such debtor, then delays in payments of
collections of Receivables to the related Securityholders could occur or
(should the court rule in favor of any such trustee, debtor or creditor)
reductions in the amounts of such payments could result. If the transfer of
Receivables by a Dealer, an Originator, the Transferor or the Depositor is
treated as a pledge instead of a conveyance, a tax or government lien on the
property of the Dealer, the Originator, the Transferor or the Depositor, as
applicable, arising before such Receivables transfer may have priority over
the interest of the Transferor, the Depositor or the Trust in such
Receivables. If all of the transactions contemplated herein are treated as
conveyances, the Receivables would not be part of the bankruptcy estate of a
Nonbank Originator, the Transferor or the Depositor and would not be available
to their respective creditors.
Considerations Relating to an Insolvency Event of the Depositor Related to
Certain Trusts. With respect to each Trust that is not a grantor trust, if the
related Prospectus Supplement so provides, upon the occurrence of an
Insolvency Event of the Depositor, the Indenture Trustee or Trustee for such
Trust will promptly sell, dispose of or otherwise liquidate the related
Receivables in a commercially reasonable manner on commercially reasonable
terms, except under certain limited circumstances. The proceeds from any such
sale, disposition or liquidation of Receivables will be treated as collections
on the Receivables and deposited in the Collection Account of such Trust. If
the proceeds from the liquidation of the Receivables and any amounts on
deposit in the Reserve Account, if any, the Note Distribution Account, if any,
and the Certificate Distribution Account with respect to any such Trust and
any amounts available from any credit enhancement are not sufficient to pay
any Notes and the Certificates of the related series in full, the amount of
principal returned to any Noteholders or the Certificateholders will be
reduced and such Noteholders and Certificateholders will incur a loss.
Octagon Gas Case. In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th
Cir. 1993), the U.S. Court of Appeals for the 10th Circuit determined that
"accounts," a defined term under the Uniform Commercial Code, would be
included in the bankruptcy estate of a transferor regardless of whether the
transfer is treated as a transfer or a secured loan. Although the Receivables
are likely to be viewed as "chattel paper," as defined under the Uniform
Commercial Code, rather than as accounts, the Octagon holding is equally
applicable to chattel paper. The circumstances under which the Octagon ruling
would apply are not fully known and the extent to which the Octagon decision
will be followed in other courts or outside of the Tenth Circuit is not
certain. If the holding in the Octagon case were applied in a bankruptcy of a
Dealer, an Originator, the Transferor or the Depositor, however, even if the
transfers of Receivables by the Dealer, by the Originator, by the Transferor
and by the Depositor were treated as conveyances, the Receivables would be
part of the bankruptcy estate of the Dealer, the Originator, the Transferor or
the Depositor (as applicable) and would be subject to claims of certain
creditors, and delays and reductions in payments to the Securityholders could
result.
Risk of Substantive Consolidation. The Transferor has taken steps in
structuring the transactions described herein that are intended to ensure that
the voluntary or involuntary application for the relief by the Transferor
under the United States Bankruptcy Code or similar state insolvency laws
(collectively, "Insolvency Laws") will not result in consolidation of the
assets and liabilities of the Transferor with those of the Depositor. These
steps include the creation of the Depositor as a separate, bankruptcy-remote,
special-purpose corporation under a certificate of incorporation containing
certain limitations (including restrictions on the nature of its business and
a restriction on its ability to commence a voluntary case or proceeding under
any Insolvency Law without the consent of an independent director). However,
there can be no assurance that the activities of the Depositor would not
result in a court's concluding that the
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assets and liabilities of the Depositor should be consolidated with those of
the Transferor in a proceeding under any Insolvency Law.
Obligor Insolvency-Related Risks. Numerous statutory provisions, including
Insolvency Laws, may interfere with or affect the ability of a creditor to
collect payments due under a contract or to enforce a deficiency judgment
against an Obligor. For example, a bankruptcy court may reduce the monthly
payments of an Obligor due under a Receivable or change the rate of interest
applicable to such Receivable. Such actions could result in delays in payments
on the Securities and possible reductions in the amount of those payments.
RELIANCE ON REPRESENTATIONS AND WARRANTIES BY THE DEPOSITOR, THE TRANSFEROR
AND THE SERVICER. None of the Transferor, the Servicer, the Depositor or any
of their respective affiliates will generally be obligated to make any
payments in respect of any Notes, the Certificates or the Receivables of a
Trust. However, in connection with the transfer of Receivables by the
Transferor to the Depositor and the Depositor to a Trust, the Transferor will
make representations and warranties with respect to the characteristics of
such Receivables and, in certain circumstances, the Depositor may be required
to purchase from the Trust and the Transferor would be required to
simultaneously purchase from the Depositor Receivables with respect to which
such representations and warranties have been breached. Alternatively, if so
specified in the related Prospectus Supplement, the Transferor or the
Depositor will be permitted, in a circumstance where it would otherwise be
required to purchase a Receivable as described in the preceding sentence, to
instead substitute a comparable Receivable for the Receivable otherwise
requiring purchase, subject to certain conditions and eligibility criteria for
the substitute Receivable to be summarized in the related Prospectus
Supplement. The Depositor's obligation to make such purchase or substitution
is contingent upon the Transferor performing its obligation to purchase or
substitute for such Receivable from the Depositor. See "Description of the
Transfer and Servicing Agreements--Transfer of Receivables". In addition,
under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing Agreements--
Servicing Procedures". If collections on any Receivable were reduced as a
result of any matter giving rise to a purchase obligation on the part of the
Depositor, the Transferor and/or the Servicer, as the case may be, and the
Depositor, the Transferor and/or the Servicer failed for any reason to perform
in accordance with that obligation, then delays in payments on the Securities
and possible reductions in the amount of those payments could occur.
Moreover, if the Servicer were to cease acting as Servicer, the performance
of the Receivables could be adversely affected. In addition, delays in
processing payments on the Receivables and information in respect thereof
could occur and result in delays in payments to the Securityholders.
SUBORDINATION. To the extent specified in the related Prospectus Supplement,
distributions of interest and principal on one or more classes of Certificates
of a series may be subordinated in priority of payment to interest and
principal due on the Notes, if any, of such series or one or more other
classes of Certificates of such series.
LIMITED ASSETS. Moreover, each Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and, to the extent provided in the related Prospectus Supplement,
a Pre-Funding Account, a Reserve Account and any other credit enhancement. 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 any of the Transferor, the Depositor, the Servicer, any Trustee,
any Indenture Trustee or any other person or entity. Consequently, holders of
the Securities of any series must rely for repayment upon payments
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on the related Receivables and, if and to the extent available, amounts on
deposit in the Pre-Funding Account (if any), the Reserve Account (if any) and
any other credit enhancement, all as specified in the related Prospectus
Supplement. If such amounts and credit enhancement are exhausted (and not
replenished), the related Trust will depend solely on payments on the
Receivables to make distributions on the Securities, and the Securities will
bear the risk of delinquency, loan loss and repossessions with respect to the
Receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS. All the Receivables are prepayable
at any time. (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) and liquidations due to
default, as well as receipts of proceeds from physical damage, credit life and
disability insurance policies and certain other Receivables repurchased for
administrative reasons). The rate of prepayments on the Receivables may be
influenced by a variety of economic, social and other factors, including the
fact that an Obligor generally may not sell or transfer the Financed Asset
securing a Receivable without causing the related loan to become due and
payable. The rate of prepayment on the Receivables may also be influenced by
the structure of the loan evidencing the Receivable. In addition, under
certain circumstances, the Depositor will be obligated to purchase from the
Trust, and the Transferor will be obligated to simultaneously purchase from
the Depositor (or in either case, if so specified in the related Prospectus
Supplement and subject to the conditions summarized therein, substitute for)
Receivables pursuant to a Transfer and Servicing Agreement or Pooling and
Servicing Agreement as a result of certain breaches of representations and
warranties and, under certain circumstances, the Servicer will be obligated to
purchase Receivables pursuant to such Transfer and Servicing Agreement or
Pooling and Servicing Agreement as a result of breaches of certain covenants.
See "Description of the Transfer and Servicing Agreements-- Transfer of
Receivables" herein. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables held by a given Trust will be borne
entirely by the Securityholders of the related series of Securities. See also
"Description of the Transfer and Servicing Agreements--Termination" herein
regarding the Servicer's option to purchase the Receivables of a given
Receivables Pool. In addition, as described above under "Considerations
Relating to an Insolvency Event of the Depositor Related to Certain Trusts",
in the case of a Trust that is not a grantor trust if so specified in the
related Prospectus Supplement, as described in such supplement, the sale of
the Receivables owned by such Trust will be required if an Insolvency Event
with respect to the Depositor occurs.
RISK OF COMMINGLING. With respect to each Trust, the Servicer will deposit
all payments on the related Receivables (from whatever source) and all
proceeds of such Receivables collected during each Collection Period into the
Collection Account of such Trust within two business days of receipt thereof.
However, in the event that the Servicer satisfies certain requirements for
monthly or less frequent remittances and the Rating Agencies (as such term is
defined in the related Prospectus Supplement, the "Rating Agencies") affirm
their ratings of the related Securities at the initial level, then for so long
as the servicer specified in the related Prospectus Supplement is the Servicer
and provided that (i) there exists no Servicer Default and (ii) each other
condition to making such monthly or less frequent deposits as may be specified
by the Rating Agencies and described in the related 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 or Payment Date. The Servicer will deposit the
aggregate Purchase Amount of Receivables purchased by the Servicer into the
applicable Collection Account on or before the business day preceding each
Distribution Date or Payment 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, such funds will not be
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available for distribution to the applicable Securityholders and such
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 Receivables and payment of the aggregate Purchase Amount with respect
to Receivables purchased by the Servicer.
RISK ASSOCIATED WITH SUBSEQUENT RECEIVABLES AND THE PRE-FUNDING ACCOUNT. If
so specified in the related Prospectus Supplement, the Transferor will be
obligated to transfer, and the Depositor will be obligated to acquire and then
transfer to the related Trust which Trust will then be obligated to acquire,
Subsequent Receivables from time to time during the Funding Period specified
in the related Prospectus Supplement. With respect to any Trust that is to be
treated as a grantor trust for federal income tax purposes, the Funding
Period, if any, will not exceed 90 days in length from the Closing Date, and
with respect to any other Trust will not exceed one year in length from the
Closing Date unless otherwise specified in the related Prospectus Supplement.
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement the Pre-Funded Amount on the Closing Date will not
exceed 25% of the aggregate initial principal balance of the Securities.
Changes in Characteristics of Receivables Pool Due to Subsequent
Receivables. Amounts on deposit in any Pre-Funding Account may be invested
only in Eligible Investments. Subsequent Receivables may be originated by the
Dealers, by Originators or by the Transferor at a later date using credit
criteria different from those which were applied to any Initial Receivables
and may be of a different credit quality and seasoning. In addition, following
the transfer of Subsequent Receivables to the applicable Trust, the
characteristics of the entire pool of Receivables included in such Trust may
vary from those of the Initial Receivables transferred to such Trust. As a
result, it is possible that the credit quality of the Receivables in a Trust,
as a whole, may decline as a result of the inclusion of Subsequent Receivables
and may result in a higher rate of payment to the applicable Securityholders
as a result of an increased level of defaults on such Receivables.
Use of Balance in Pre-Funding Account to Prepay Securities. To the extent
that amounts on deposit in the Pre-Funding Account have not been distributed
to the Transferor by the end of the Funding Period and such amount exceeds the
applicable amount described in the related Prospectus Supplement, the holders
of Securities issued by the related Trust will receive, on the Distribution
Date or Payment Date on or immediately following the last day of the
applicable Funding Period, a prepayment of principal in an amount equal to the
amount remaining in the Pre-Funding Account. It is anticipated that the
principal balance of Subsequent Receivables transferred to a Trust will not be
exactly equal to the amount on deposit in the Pre-Funding Account, and that
therefore there will be at least a nominal amount of principal prepaid to the
holders of the Securities issued by such Trust. Securityholders will bear all
reinvestment risk associated with distribution to Securityholders of amounts
on deposit in the Pre-Funding Account after termination of the applicable
Funding Period. Any such distribution will have the effect of a prepayment on
the related Receivables and may result in a reduction in the yield to maturity
of any class of Securities to which such amounts are distributed.
RIGHTS OF THE NOTEHOLDERS TO DIRECT CERTAIN MATTERS AFFECTING THE
CERTIFICATEHOLDERS. In general, with respect to any Trust issuing Notes, until
the Notes have been paid in full, the ability to direct the related Trust with
respect to certain actions permitted to be taken under the related Transfer
and Servicing Agreements rests with the related Indenture Trustee and the
Noteholders instead of the Certificateholders.
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For example, unless otherwise provided in the related Prospectus Supplement
with respect to a Trust issuing Notes, in the event a Servicer Default occurs,
the Indenture Trustee or the Noteholders with respect to such series, as
described under "Description of the Transfer and Servicing Agreements--Rights
upon Servicer Default" herein, may remove the Servicer without the consent of
the Trustee or any of the Certificateholders with respect to such series. The
Trustee or the Certificateholders with respect to such series will not have
the ability to remove the Servicer if a Servicer Default occurs. In addition,
the Noteholders of such series have the ability, with certain specified
exceptions, to waive defaults by the Servicer, including defaults that could
materially adversely affect the Certificateholders of such series. See
"Description of the Transfer and Servicing Agreements--Waiver of Past
Defaults" herein.
BOOK-ENTRY REGISTRATION. Unless otherwise specified in the related
Prospectus Supplement, 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 the related 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 for such series are issued, holders of
such Securities will not be recognized by the Trustee or any applicable
Indenture Trustee as "Certificateholders", "Noteholders" or "Securityholders",
as the case may be (as such terms are used herein or in the related Pooling
and Servicing Agreement or related Indenture and Trust Agreement, as
applicable). Hence, until Definitive Securities are issued, holders of such
Securities will only be able to exercise the rights of Securityholders
indirectly through DTC and its participating organizations. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--
Definitive Securities" herein. The Noteholders and the Certificateholders are
referred to collectively as the "Securityholders".
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THE TRUSTS
With respect to each series of Securities, the 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 (a "Receivables Pool") of retail installment sales contracts,
installment loans or notes (i) between dealers (the "Dealers") and Obligors,
(ii) between Originators and Obligors and/or (iii) between the Transferor and
Obligors, and all payments received thereunder on and after the applicable
closing date (as such term is defined in the related Prospectus Supplement, a
"Closing Date"). "Obligors" are purchasers of new and used recreational
vehicles ("Financed Recreational Vehicles," and the Receivables with respect
thereto, "Recreational Vehicle Receivables"). The Receivables of each
Receivables Pool were or will be originated by the Transferor, Originators
and/or Dealers, acquired by the Transferor, pursuant to agreements between the
Transferor and Dealers ("Dealer Agreements"), or pursuant to agreements
between the Transferor and one or more Originators, and transferred to the
Depositor. Such Receivables will be serviced by the Servicer. On or prior to
the applicable Closing Date, the Transferor will transfer the Receivables to
the Depositor. On or prior to the applicable Closing Date, the Depositor will
transfer the Initial Receivables of the applicable Receivables Pool to the
Trust. To the extent so provided in the related Prospectus Supplement,
Subsequent Receivables will be transferred to the Trust as frequently as daily
during the Funding Period. Any Subsequent Receivables so transferred will also
be assets of the applicable Trust, subject to the prior rights of the related
Indenture Trustee and the Noteholders, if any, therein. 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
Transfer and Servicing Agreement or Pooling and Servicing Agreement and the
proceeds of such accounts, as described herein and in the related Prospectus
Supplement; (ii) the Depositor's rights with respect to security interests in
the Financed Assets; (iii) the Depositor's rights with respect to proceeds
from claims on certain physical damage, credit life and disability insurance
policies covering the Financed Assets or the Obligors, as the case may be;
(iv) any property that shall have secured a Receivable and that shall have
been acquired by the applicable Trust; and (v) any and all proceeds of the
foregoing. To the extent specified in the related Prospectus Supplement, a
Pre-Funding Account, a Reserve Account or other form of credit enhancement 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.
Although the property of each Trust will include any interest of the
Depositor in proceeds from claims on physical damage insurance polices
covering the Financed Assets, the Servicer typically allows Obligors (unless
the Financed Asset is a total loss) to use such proceeds to repair or replace
Financed Assets instead of making corresponding prepayments of the applicable
Receivables. The applicable Trust Agreement or Pooling and Servicing Agreement
will permit the Servicer, subject to the servicing standards referred to
therein, to allow Obligors to use proceeds from such claims to repair or
replace Financed Assets rather than making prepayments of Receivables in the
related Trust.
With respect to each series of Securities, if so specified in the related
Prospectus Supplement, prior to its transfer of Receivables to the Trust, the
Depositor may hold such assets in the form of one or more participation
certificates, issued by the Transferor, evidencing the entire undivided
ownership interest in each related Receivable (each, a "Participation"). In
such event, immediately upon the transfer of the Receivables to the related
Trust, the Participation will be terminated and dissolved by mutual agreement
of the Transferor, the Trust and the Depositor and the Trust will then own the
Receivables directly.
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The Servicer will continue to service the Receivables held by each Trust and
will receive fees for such services. See "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" herein
and in the related Prospectus Supplement. To facilitate the servicing of the
Receivables, each Trustee will authorize the Servicer to retain physical
possession of the Receivables 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 or UCC financing statements, as applicable,
to the Financed Assets will not be amended to reflect the transfer of the
security interest in the Financed Assets to each Trust. In the absence of such
an amendment, a Trust may not have a perfected security interest in the
Financed Assets in all states. See "Risk Factors--Certain Legal Aspects--
Security Interest in Financed Assets," "Certain Legal Aspects of the
Receivables" and "Description of the Transfer and Servicing Agreements--
Transfer of Receivables".
If the protection provided to any Noteholders of a series by the
subordination of the related Certificates and by the Reserve Account, if any,
or other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Account or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be,
would have to look principally to payments on the related Receivables, the
proceeds from the repossession and sale of Financed Assets which secure
[defaulted] Receivables and the proceeds from any recourse against Dealers
with respect to such Receivables. In such event, certain factors, such as the
applicable Trust's not having perfected security interests in the Financed
Assets in all states or, if applicable, under federal law, may affect the
Servicer's ability to repossess and sell the collateral securing the
Receivables, and thus may reduce the proceeds to be distributed to the holders
of the Securities of such series. See "Description of the Transfer and
Servicing Agreements--Distributions", "--Credit and Cash Flow Enhancement" and
"Certain Legal Aspects of the Receivables".
The principal offices of each Trust and the related Trustee will be
specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale
of the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Transfer and
Servicing Agreement or the related Pooling and Servicing Agreement, as
applicable. A Trustee may resign at any time, in which event the Servicer, or
its successor, will be obligated to appoint a successor trustee. The
Administrator, if any, of a Trust that is not a grantor trust and the Servicer
in respect of a Trust that is a grantor trust may also remove the Trustee if
the Trustee ceases to be eligible to continue as Trustee under the related
Trust Agreement or Pooling and Servicing Agreement, as applicable, or if the
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 and appointment of a successor trustee
will not become effective until acceptance of the appointment by the successor
trustee.
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THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool are and will be retail installment
sales contracts, installment loans, or notes that have been or will be
originated by the Transferor, and/or originated by Dealers, and/or originated
or acquired by Deutsche Financial Services Corporation ("DFS") and/or other
entities (DFS and such other entities being referred to herein as
"Originators"), and (with respect to Receivables which were not originated by
the Transferor) acquired by the Transferor from such Dealers and/or
Originators, and will be Recreational Vehicle Receivables. Receivables held by
any Originator may have been acquired by such Originator from Dealers or from
other Originators. An Originator (such as DFS) may be an affiliate of the
Transferor. The Originators will be entities involved in the origination,
secondary market purchasing and/or servicing of retail installment sales
contracts, installment loans, loans and other receivables secured by
recreational vehicles. In addition, to the extent described in any Prospectus
Supplement, the related Receivables Pool may include Receivables acquired by
an Affiliate of the Transferor through acquisitions. Receivables will be
transferred by the Transferor to the Depositor pursuant to a Receivables
Transfer Agreement and then will be transferred by the Depositor to the
applicable Trust.
The Receivables to be held by each Trust will be acquired by the Depositor
from the portfolio of the Transferor for inclusion in a Receivables Pool in
accordance with several criteria, including that each Receivable (i) is
secured by a new or used recreational vehicle, (ii) was originated in the
United States, and (iii) as of the Cutoff Date (a) had an outstanding
principal balance of at least the amount set forth in the related Prospectus
Supplement, (b) was not more than 59 days (or such other number of days
specified in the related Prospectus Supplement) past due, (c) had a remaining
number of scheduled payments not more than the number set forth in the related
Prospectus Supplement, (d) had an original number of scheduled payments not
more than the number set forth in the related Prospectus Supplement and (e)
had an APR of not less than the rate per annum set forth in the related
Prospectus Supplement. No selection procedures believed by the Depositor to be
adverse to the Securityholders of any series were or will be used in selecting
the related Receivables.
All of the Receivables will be Simple Interest Receivables. "Simple Interest
Receivables" are receivables that provide for the amortization of the amount
financed under each receivable over a series of fixed level payments,
generally in monthly installments. Each such installment consists of an amount
of interest which is calculated on the basis of the outstanding principal
balance of the receivable multiplied by the stated APR and further multiplied
by the period elapsed (as a fraction of a calendar year) since the preceding
payment of interest was made. As payments are received under a Simple Interest
Receivable, the amount received is applied, first, to interest accrued to the
date of payment, second, to reduce the unpaid principal balance, and third, to
late fees and other fees and charges, if any. Accordingly, if an Obligor pays
a fixed monthly installment before its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment was
made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an Obligor
pays a fixed monthly installment after its scheduled due date, the portion of
the payment allocable to interest for the period since the preceding payment
was made will be greater than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly less. In either case, the Obligor
pays a fixed monthly installment until the final scheduled payment date, at
which time the amount of the final installment is increased or decreased as
necessary to repay the then outstanding principal balance and unpaid accrued
interest. If a Simple Interest Receivable is prepaid, the Obligor is required
to pay interest only to the date of prepayment.
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Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
geographic distribution and distribution by APR [and the portion of such
Receivables Pool secured by new Financed Assets and by used Financed Assets].
SUBSEQUENT RECEIVABLES
Subsequent Receivables may be originated by Dealers, Originators or the
Transferor at a later date using credit criteria different from those which
were applied to any Initial Receivables and may be of a different credit
quality and seasoning. In addition, following the transfer of Subsequent
Receivables to the applicable Trust, the characteristics of the entire pool of
Receivables included in such Trust may vary significantly from those of the
Initial Receivables transferred to such Trust. Each Prospectus Supplement will
describe the effects that including such Subsequent Receivables may have on
the Receivables Pool included in the Trust Property of each Trust issuing
Securities.
UNDERWRITING
For a description of certain underwriting procedures and guidelines of the
Transferor and of DFS (in its capacity as an Originator), see "Underwriting
Procedures and Guidelines."
SERVICING AND COLLECTIONS
For a description of the Servicer's servicing procedures, see "The Servicer"
and "Description of the Transfer and Servicing Agreements--Servicing
Procedures."
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the Transferor's loss and delinquency
experience with respect to its portfolio of recreational vehicle loans will be
set forth in each Prospectus Supplement. There can be no assurance that the
delinquency, repossession and net loss experience on any Receivables Pool 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, if
any, of any series will generally be influenced by the rate at which the
principal balances of the related Receivables 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, as well as receipts of
proceeds from physical damage, credit life and disability insurance policies
and certain other Receivables repurchased by the Depositor or the Servicer for
administrative reasons.) All of the Receivables are prepayable at any time
without penalty to the Obligor. The rate of prepayment of recreational vehicle
receivables is influenced by a variety of economic, social and other factors,
including the fact that an Obligor generally may not sell or transfer the
Financed Asset securing a Receivable without the consent of the Servicer. The
rate of prepayment on the Receivables may also be influenced by the structure
of the loan. In addition, under certain circumstances, the Depositor will be
obligated to purchase from a Trust and the Transferor will be obligated to
simultaneously purchase from the Depositor (or in either case, if so specified
in the related Prospectus Supplement and subject to the conditions summarized
therein, substitute for)
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Receivables pursuant to the related Transfer and Servicing Agreement or
Pooling and Servicing Agreement as a result of breaches of representations and
warranties and the Servicer will be obligated to purchase Receivables from
such Trust pursuant to such Transfer and Servicing Agreement or Pooling and
Servicing Agreement as a result of breaches of certain covenants. In the case
of any Security purchased at a discount to its principal amount, a slower than
anticipated rate of principal payments is likely to result in a lower than
anticipated yield. In the case of a Security purchased at a premium to its
principal amount, a faster than anticipated rate of principal payments is
likely to result in a lower than anticipated yield. See "Description of the
Transfer and Servicing Agreements--Transfer of Receivables" and "--Servicing
Procedures". See also "Description of the Transfer and Servicing Agreements--
Termination" herein regarding the Servicer's option to purchase the
Receivables from a given Trust. No prediction can be made as to the rate of
prepayment that the Receivables will experience.
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, if any, of a given series on each Payment Date or Distribution
Date, as applicable, since such amount will depend, in part, on the amount of
principal collected on the related Receivables Pool during the applicable
Collection Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables 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 Receivables Pool 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 Payment Date (after giving effect to
payments to be made on such Payment 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 with respect
to a Trust, the Noteholders and the Certificateholders, as applicable, will
receive reports on or about each Payment Date concerning (i) with respect to
the Collection Period immediately preceding such Payment Date, payments
received on the Receivables, the Pool Balance (as such term is defined in the
related Prospectus Supplement, the "Pool Balance"), each Certificate Pool
Factor or Note Pool Factor, as applicable, and various other items of
information, and (ii) with respect to the Collection Period second preceding
such Payment Date, as applicable, amounts allocated or
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distributed on the preceding Payment Date and any reconciliation of such
amounts with information provided by the Servicer prior to such current
Payment Date. 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" herein.
USE OF PROCEEDS
Unless the related Prospectus Supplement provides for other applications,
the net proceeds from the sale of the Securities of a given series will be
applied by the applicable Trust (i) to acquire Receivables from the Depositor
or otherwise to make a distribution to the Depositor, (ii) to make the initial
deposit into the Reserve Account, if any, and (iii) to make the deposit of the
Pre-Funded Amount into the Pre-Funding Account, if any. Unless otherwise
specified in the related Prospectus Supplement, the Depositor will use that
portion of such net proceeds paid to it with respect to any such Trust to
acquire Receivables from the Transferor or otherwise to make a distribution to
the Transferor and for general corporate purposes.
THE DEPOSITOR
Deutsche Recreational Asset Funding Corporation (the "Depositor") was
incorporated in the State of Nevada on May 1, 1998 as a wholly-owned
subsidiary of the Transferor. The Depositor maintains its principal office at
655 Maryville Centre Drive, St. Louis, Missouri 63141. Its telephone number is
(314) [523-3000].
The only obligations, if any, of the Depositor with respect to a Series of
Certificates and/or Notes may be pursuant to certain limited representations
and warranties and limited undertakings to purchase (or, if so specified in
related Prospectus Supplement, substitute for) Receivables under certain
circumstances, but only to the extent the Transferor simultaneously performs
its obligation to purchase such Receivables. The Depositor will have no
ongoing servicing obligations or responsibilities with respect to any Financed
Asset. The Depositor does not have, nor is required to have, nor is expected
in the future to have, any significant assets.
Neither the Depositor nor the Transferor nor any of their respective
affiliates will insure or guarantee the Receivables or the Certificates and/or
Notes of any series.
THE TRANSFEROR
Ganis Credit Corporation ("Ganis" or the "Transferor"), a Delaware
corporation headquartered in Newport Beach, California, is a wholly-owned
subsidiary of DFS. Ganis was founded in 1980 and provides financing to
recreational vehicle and boat consumers nationwide. In February 1995,
BankBoston, N.A. ("BankBoston") acquired Ganis and established it as a
division of BankBoston. Following such acquisition, Ganis originated loans
exclusively for the portfolio of BankBoston. In June 1997, BankBoston sold
Ganis to DFS. Certain of the Receivables were underwritten prior to the sale
of Ganis to DFS.
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UNDERWRITING PROCEDURES AND GUIDELINES
DFS engages in indirect consumer lending through its consumer finance
headquarters in Newport Beach, California and its regional offices in Tampa,
Florida, Harrisburg, Pennsylvania and Irving, Texas. Ganis engages in direct
consumer lending through its headquarters and its district offices. "Direct
lending" refers to financing provided directly to an Obligor. "Indirect
lending" refers to acquisitions of Receivables from Dealers and from
Originators (which Originators may be DFS or other affiliates of the
Transferor).
Dealers who seek to enter into financing arrangements with DFS are required
to submit an application and provide among other things, evidence of licenses
by the appropriate state agencies, financial information and resumes of key
personnel. DFS investigates the creditworthiness, licensing and general
business reputation of the Dealer prior to entering into a financing
arrangement with such Dealer. The regional offices of DFS maintain
relationships with the Dealers and coordinate the underwriting and settlement
process relating to Receivables originated by such Dealers.
Credit applications are initially reviewed by an underwriter located at the
consumer headquarters or in one of the regional offices of DFS or, if
applicable, located at the headquarters or in one of the district offices of
Ganis. Such review of an application is intended to determine the customer's
willingness and ability to repay and the adequacy of the underlying
collateral. Applicants are required to provide information pertaining to their
income, employment history, financial liabilities, personal status and a
description or invoice of the asset for which the loan is requested. In
addition, DFS or Ganis, as the case may be, requires one or more credit
reports on each applicant from a national reporting company. Once a loan
request passes a preliminary review the underwriter, where appropriate, seeks
verification of, among other things, income, employment, outstanding debt and
the value of the asset. Loans in excess of an underwriter's authority require
approval by a more senior credit underwriting employee.
The criteria considered by DFS or Ganis, as the case may be, in evaluating a
credit application include, among other things: (i) years of employment, (ii)
income, (iii) home ownership, (iv) credit history, (v) debt to gross income
analysis and (vi) loan-to-value ratios. DFS or Ganis, as the case may be, also
includes credit scores derived from one or more credit bureau reports in
assessing a borrower's creditworthiness. The "value" of a new recreational
vehicle to be financed is determined based upon the manufacturer's invoice
price, and the "value" of a used recreational vehicle to be financed is
determined based on retail value reported in the Kelly Blue Book or reported
in the used recreational vehicle guidebooks of the National Automobile Dealers
Association ("NADA"). DFS or Ganis, as the case may be, generally will not
finance more than 110% of the "value" of the recreational vehicle plus related
amounts financed in connection therewith, if any, such as equipment, title and
licensing fees, taxes and extended warranties.
In general, the underwriting standards of DFS or Ganis, as the case may be,
are not a fixed set of criteria which are required to be met by all loans.
Applications for loans which do not meet the customary guidelines of DFS or
Ganis, as the case may be, require review and approval by a more senior credit
underwriting employee than loans which conform to such guidelines.
THE SERVICER
Deutsche Financial Services Corporation ("DFS") was incorporated in Nevada
in 1969. It is an indirect, wholly-owned subsidiary of Deutsche Bank AG. DFS
was formerly known as ITT Commercial Finance Corp. The stock of ITT Commercial
Finance Corp. was acquired by Deutsche Financial Services Holding Corporation
in 1995. In January 1997, Deutsche Financial
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Services Holding Corporation merged into DFS; DFS was the surviving
corporation. DFS is a financial services company which provides inventory
financing, retail financing, accounts receivable financing and asset based
financing to dealers, distributors and manufacturers of consumer and
commercial durable goods. Industries served by DFS include, but are not
limited to: computers and computer products, manufactured housing,
recreational vehicles, boats and motors, consumer electronics and appliances,
keyboards and other musical instruments, industrial and agricultural
equipment, office automation products, snowmobiles, and motorcycles. DFS also
is in the business of providing equipment loans and leases, franchisee loans,
vendor finance programs and private label retail finance programs.
DFS has offices in major metropolitan areas of the United States. Its
principal executive offices are located at 655 Maryville Centre Drive, St.
Louis, Missouri 63141-5832. The telephone number of such office is (314) 523-
3000.
The Servicer's servicing operations are conducted from its servicing centers
in Newport Beach, California and Bannockburn, Illinois.
The Servicer generally commences collections activities by phone or written
correspondence with respect to delinquent contracts when payment is more than
10 days past due. At 45 days past due, collection personnel issue notices of
intent to repossess unless a secured payment promise is obtained. The Servicer
continues to work the account until the account is 65 days past due, at which
time the repossession process is initiated for those accounts which remain
delinquent. The collateral is generally disposed of 40 to 45 days following
repossession. The benchmark for recovery values is 95% of the NADA or Kelly
guidebook value for the collateral on a gross basis, with expenses ranging up
to 5% depending on the type of collateral. Delinquent contracts, including
those due to bankruptcies, are generally charged-off at 120 days delinquent.
For a discussion of collection procedures with respect to the Receivables, see
"Description of the Transfer and Servicing Agreements--Servicing Procedures"
herein.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following summary does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Notes and the Indenture.
Unless otherwise specified in the related Prospectus Supplement, 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.
Unless otherwise specified in the related Prospectus Supplement, the Notes
will be available for purchase in denominations of $1,000 and integral
multiples thereof in book-entry form only. The Depositor 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 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
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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" herein.
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. To the extent
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" herein. 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 at the end of the Funding Period (if any) or
as a result of the Servicer's exercising its option to purchase the related
Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes of
Notes of a series may have fixed principal payment schedules. Noteholders of
such Notes would be entitled to receive as payments of principal on any
Payment 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.
Unless otherwise specified in the related Prospectus Supplement, payments to
Noteholders 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 "Payment Date"), in which case each class of Noteholders will receive
its ratable share (based upon the aggregate amount of interest due to such
class of Noteholders) of the aggregate amount available to be distributed in
respect of interest on the Notes of such series. See "Description of the
Transfer and Servicing Agreements-- Distributions" and "--Credit and Cash Flow
Enhancement" herein.
In the case of a series of Notes 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 and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
THE INDENTURE
MODIFICATION OF INDENTURE. With respect to each Trust that has issued Notes
pursuant to an Indenture, the Trust and the Indenture Trustee may, with the
consent of the holders of a
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majority of the outstanding Notes of the related series, execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the related Indenture, or modify (except as provided below)
in any manner the rights of the related Noteholders.
Unless otherwise specified in the related Prospectus Supplement with respect
to a series of Notes, in the absence of the consent of the holder of each such
outstanding Note affected thereby, no supplemental indenture will: (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 the related Indenture or
of certain defaults thereunder and their consequences as provided for in such
Indenture; (iv) modify or alter the provisions of the related Indenture
regarding the voting of Notes held by the applicable Trust, any other obligor
on such Notes, the Depositor, the Transferor 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 Receivables 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) decrease the percentage
of the aggregate principal amount of such Notes required to amend the sections
of the related Indenture which specify the applicable percentage of aggregate
principal amount of the Notes of such series 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 related 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, the 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.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will consist of:
(i) a default for five days (or such longer period specified in the related
Prospectus Supplement) in the payment of any interest on any such Note; (ii) a
default in the payment of the principal of 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 the related Indenture and the continuation of any such default for a
period of 30 days (or such other period specified in the related Prospectus
Supplement) 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% (or such other percentage specified in the related Prospectus
Supplement) in principal amount of such Notes then outstanding; (iv) any
representation or warranty made by such Trust in the related Indenture or in
any certificate delivered pursuant thereto or in connection therewith having
been incorrect in a material respect as of the time made, and such breach not
having been cured within 30 days (or such other period specified in the
related
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Prospectus Supplement) 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% (or such other percentage specified in the related
Prospectus Supplement) 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, unless otherwise specified in the related
Prospectus Supplement, 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 Payment 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 a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in
the related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount
of such Notes then outstanding.
If the Notes of any series are 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 Receivables or elect to have the applicable
Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from selling the related
Receivables 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 Receivables 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 66 2/3% 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 such Indenture that cannot be modified
without the waiver or consent of all the holders of such outstanding Notes.
Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given
to the applicable Indenture Trustee written notice of
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a continuing Event of Default, (ii) the holders of not less than 25% in
principal amount of the outstanding Notes of such series have made written
request to such Indenture Trustee to institute such proceeding in its own name
as Indenture Trustee, (iii) such holder or holders have offered such Indenture
Trustee reasonable indemnity, (iv) such Indenture Trustee has for 60 days
failed to institute such proceeding and (v) no direction inconsistent with
such written request has been given to such Indenture Trustee during such 60-
day period by the holders of a majority in principal amount of such
outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the 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 (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 the performance or
observance of 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 or 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 and (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.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements
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 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) dissolve or
liquidate in whole or in part, (iv) permit the validity or effectiveness of
the related 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 (v) 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.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust". 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 Servicer Advances made to it by the Servicer or otherwise in accordance
with the Related Documents.
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ANNUAL COMPLIANCE STATEMENT. Each Trust 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 Trust 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
such 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 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.
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 Depositor will be obligated to appoint a successor
trustee for such series. The Depositor 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, the Depositor will be obligated to appoint a successor
trustee for the applicable series of Notes. Any resignation or removal of the
Indenture Trustee and appointment of a successor trustee for any series of
Notes does not become effective until acceptance of the appointment by the
successor trustee for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
The following summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement or Pooling and Servicing Agreement, as
applicable.
Unless otherwise specified in the related Prospectus Supplement and except
for the Certificates, if any, of a given series purchased by the 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. Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the
Depositor, the Certificates will be available for purchase in minimum
denominations of $1,000 in book-entry form only. The Depositor 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 Depositor. Unless and until Definitive Certificates are
issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificateholder (other than the Depositor) will be
entitled to receive a physical certificate representing a Certificate. All
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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" herein. Any
Certificates of a given series owned by the Depositor 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 have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents.
PRINCIPAL AND INTEREST ON THE CERTIFICATES
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 and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related
Prospectus Supplement (each, a "Distribution Date") and will be made prior to
distributions with respect to principal of such Certificates. With respect to
any Trust that issues both Notes and Certificates, the Distribution Date for
the Certificates may coincide with the Payment Date for the Notes, in which
case such date will be referred to in the related Prospectus Supplement as a
Payment Date with respect to both the Notes and 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" herein. Unless otherwise provided in the related Prospectus
Supplement, distributions in respect of the Certificates of a given series
that includes Notes may be subordinate to payments in respect of the Notes of
such series as more fully described 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.
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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--Principal and Interest on the
Certificates" herein.
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, the
"Interest Reset Period") 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 the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of one percent) 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
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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. Unless otherwise specified in the applicable
Prospectus Supplement, all percentages resulting from any calculation of the
rate of interest on a Floating Rate Security will be rounded, if necessary, to
the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a
percentage point rounded upward.
CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security
and in the applicable Prospectus Supplement.
Unless otherwise specified 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 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 and the Spread or Spread
Multiplier, if any, specified in such Security and in the applicable
Prospectus Supplement.
Unless otherwise specified 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
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for such Interest Reset Period (a "Commercial Paper Rate Determination Date")
and shall be the Money Market Yield 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" with respect to
finance companies. In the event that such rate is not published prior to 3:00
p.m., New York City time, on the Calculation Date pertaining to such
Commercial Paper Rate Determination Date, then the "Commercial Paper Rate" for
such Interest Reset Period shall be the Money Market Yield on such Commercial
Paper Rate Determination Date of the rate for commercial paper of the
specified Index Maturity as published in Composite Quotations under the
heading "Commercial Paper". If by 3:00 p.m., New York City time, on such
Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, then the "Commercial Paper Rate" for such Interest Reset
Period shall be the Money Market Yield of the arithmetic mean of the offered
rates, as of 11:00 a.m., New York City time, on such Commercial Paper Rate
Determination Date of three leading dealers of commercial paper in The City of
New York selected by the Calculation Agent for such Commercial Paper Rate
Security for commercial paper of the specified Index Maturity placed for an
industrial issuer whose bonds are rated "AA" or the equivalent by a nationally
recognized rating agency; provided, however, that if the dealers selected as
aforesaid by such Calculation Agent are not quoting offered rates as mentioned
in this sentence, the "Commercial Paper Rate" for such Interest Reset Period
will be the same as the Commercial Paper Rate for the immediately preceding
Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such
Commercial Paper Rate Determination Date or, if such day is not a business
day, the next succeeding business day or (b) the second business day preceding
the date any payment is required to be made for any period following the
applicable Interest Reset Date.
FEDERAL FUNDS RATE SECURITIES. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if
any, specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified 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
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
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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 and the
Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
Unless otherwise specified 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 determined by the Calculation
Agent for any LIBOR Security as follows:
(i) On the second London Banking Day prior to the Interest Reset Date for such
Interest Reset Period (a "LIBOR Determination Date"), the Calculation
Agent for such LIBOR Security will determine the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period of the Index
Maturity specified in the applicable Prospectus Supplement, commencing on
such Interest Reset Date, which appear on the Telerate Page 3750 ("LIBOR
Telerate") at approximately 11:00 a.m., London time, on such LIBOR
Determination Date. For purposes of calculating LIBOR, "London Banking
Day" means any business day on which dealings in deposits in United States
dollars are transacted in the London interbank market; and "Telerate Page
3750" means the display designated as page "3750" on the Telerate Service
(or such other page as may replace the 3750 page on that service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits).
(ii) If no rate appears on the Telerate Page 3750, as applicable, on such
LIBOR Determination Date, the Calculation Agent for such LIBOR Security
will request the principal London offices of each of four major banks in
the London interbank market selected by such Calculation Agent to provide
such Calculation Agent with its offered quotations for deposits in U.S.
dollars for the period of the specified Index Maturity, commencing on
such Interest Reset Date, to prime banks in the London interbank market
at approximately 11:00 a.m., London time, on such LIBOR Determination
Date and in a principal amount equal to an amount of not less than
$1,000,000 that, in the Calculation Agent's judgment, is representative
of a single transaction in such market at such time. If at least two such
quotations are provided, "LIBOR" for such Interest Reset Period will be
the arithmetic mean of such quotations. If fewer than two such quotations
are provided, "LIBOR" for such Interest Reset Period will be the
arithmetic mean of rates quoted by three major banks in The City of New
York selected by the Calculation Agent for such LIBOR Security at
approximately 11:00 a.m., New York City time, on such LIBOR Determination
Date for loans in U.S. dollars to leading European banks, for the period
of the specified Index Maturity, commencing on such Interest Reset Date,
and in a principal amount equal to an amount of not less than $1,000,000
that, in the Calculation Agent's judgment, is representative of a single
transaction in such market at such time; provided, however, that if the
banks selected
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as aforesaid by such Calculation Agent are not quoting rates as mentioned
in this sentence, "LIBOR" for such Interest Reset Period will be the same
as LIBOR for the immediately preceding Interest Reset Period.
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 and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date 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 pertaining to such Treasury Rate Determination Date, 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.
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BOOK-ENTRY REGISTRATION
Holders of the Certificates or the Notes may hold through DTC (in the United
States) or, solely in the case of the Notes, Cedel or Euroclear (in Europe) if
they are participants of such systems, or indirectly through organizations
that are participants in such systems. The Certificates may not be held,
directly or indirectly, through Cedel or Euroclear. Cede, as nominee for DTC,
will hold the Securities. Cedel and Euroclear will hold omnibus positions in
the Notes on behalf of the Cedel Participants and the Euroclear Participants,
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 UCC and a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-
entries, thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust companies
and clearing corporations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Transfers between DTC's participating organizations (the "Participants")
will occur in accordance with DTC rules. Transfers between Cedel Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant Cedel Participant or Euroclear Participant on such business day. Cash
received in Cedel or Euroclear as a result of sales of securities by or
through a Cedel Participant or a Euroclear Participant to a Participant will
be received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Securities may do so only through Participants and Indirect
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Participants. In addition, Securityholders will receive all distributions of
principal and interest from the related Indenture Trustee or the related
Trustee, as applicable (the "Applicable Trustee"), through Participants. Under
a book-entry format, Securityholders 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 forward such payments to its Participants,
which thereafter will forward them to Indirect Participants or
Securityholders. Except to the extent the Depositor holds Certificates with
respect to any series of Securities, it is anticipated that the only
"Securityholder", "Noteholder" and "Certificateholder" will be DTC's nominee.
Noteholders will not be recognized by each Indenture Trustee as Noteholders,
as such term is used in each Indenture, and Noteholders will be permitted to
exercise the rights of Noteholders only indirectly through DTC and its
Participants. Similarly, Certificateholders will not be recognized by each
Trustee as Certificateholders as such term is used in each Trust Agreement or
Pooling and Servicing Agreement, and Certificateholders will be permitted to
exercise the rights of Certificateholders only indirectly through DTC and its
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities 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
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments
on behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement or Pooling and Servicing Agreement only at the
direction of one or more Participants to whose accounts with DTC the
applicable Notes or Certificates 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.
Cedel Bank, societe anonyme ("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,
thereby eliminating the need for physical movement of certificates.
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
depository, Cedel is subject to regulation by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriter(s) for the related Notes. Indirect access to Cedel is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
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The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in Euroclear 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. 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
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriter(s). 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 State 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 certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding through
Euroclear Participants.
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 Income Tax Consequences" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
Prospectus Supplement. 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 Notes among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Administrator, if any, or the Applicable Trustee would seek an
alternative depository (if
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available) or cause the issuance of Definitive Securities to the owners
thereof or their nominees in the manner described in the Prospectus under
"Certain Information Regarding the Securities--Definitive Securities".
Except as required by law, neither the Administrator, if any, nor 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
the 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
If so specified in the related Prospectus Supplement, the Notes, if any, and
the Certificates of a 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 Applicable Trustee, determines that DTC is no
longer willing or able to discharge properly its responsibilities as
depository with respect to such Securities and such Applicable Trustee is
unable to locate a qualified successor, (ii) the Applicable Trustee, 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, holders 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
holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders 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 Securityholders.
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.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with respect
to the Notes of any series, three or more holders of the Notes of such series
or one or more holders of such
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Notes evidencing not less than 25% of the aggregate outstanding principal
balance of such Notes 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.
Unless otherwise specified in the related Prospectus Supplement 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.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Payment Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on
such Payment Date. With respect to each series of Securities, 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 Payment Date or the period
since the previous Payment 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 the related
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 Collection 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 after giving effect
to all payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect to the
related Collection Period or Collection Periods, as the case may be;
(vi) the Interest Rate or Pass Through Rate for the next period for any class
of Notes or Certificates of such series with variable or adjustable
rates;
(vii) the amount of the aggregate realized losses, if any, for the related
Collection Period;
(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest
Carryover Shortfall and the Certificateholders'
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Principal Carryover Shortfall (each 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 Receivables, if any, that were
repurchased or substituted for in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after giving
effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the remaining Pre-
Funded Amount; and
(xii) for the first such date that is on or immediately following the end of
the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been distributed to the Transferor and is being
passed through as payments of principal on the Securities of such
series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
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 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 "Certain
Federal Income Tax Consequences" herein.
In addition, the filing with the Commission of periodic reports with respect
to each Trust will cease following completion of the reporting period required
by Rule 15d-1 of Regulation 15D under the Exchange Act.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Transfer and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
acquire Receivables from the Depositor and the Servicer will agree to service
such Receivables, each Trust Agreement (in the case of a grantor trust, the
Pooling and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued and each Administration Agreement pursuant to
which the Servicer (or such other person named in the related Prospectus
Supplement) will undertake certain administrative duties with respect to a
Trust that issues Notes (collectively, the "Transfer and Servicing
Agreements"). Forms of the Transfer and Servicing Agreements have been filed
as exhibits to the Registration Statement of which this Prospectus forms a
part. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements.
TRANSFER OF RECEIVABLES
On or prior to the closing date (the "Closing Date") specified in the
Prospectus Supplement for a Trust, the Transferor will transfer, without
recourse, to the Depositor its entire interest in the related Initial
Receivables and its security interests in the related Financed Assets pursuant
to a receivables transfer agreement (a "Receivables Transfer Agreement"). On
or prior to such
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Closing Date, the Depositor will transfer to the Applicable Trustee, without
recourse, pursuant to a Transfer and Servicing Agreement or a Pooling and
Servicing Agreement, as applicable, its entire interest in such Initial
Receivables, including its security interests in the related Financed Assets.
Each such Receivable will be identified in a schedule appearing as an exhibit
to such Pooling and Servicing Agreement or Transfer and Servicing Agreement (a
"Schedule of Receivables"). The Applicable Trustee will, concurrently with
such transfer, execute and deliver the related Notes and/or Certificates. The
Applicable Trustee will not verify the existence of the Receivables or review
the Receivables files. 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 acquisition of the related
Receivables from the Transferor (or otherwise distributed to the Transferor)
and, to the extent specified in the related Prospectus Supplement, to the
deposit of the Pre-Funded Amount into the Pre-Funding Account or to the
deposit of a specified amount into the Reserve Account. The related Prospectus
Supplement for a given Trust will specify whether, and the terms, conditions
and manner under which, Subsequent Receivables will be transferred by the
Transferor to the Depositor and by the Depositor to the applicable Trust from
time to time during any Funding Period on each date specified as a transfer
date in the related Prospectus Supplement (each, a "Subsequent Transfer
Date").
In each Receivables Transfer Agreement the Transferor will represent and
warrant to the Depositor and, in each Transfer and Servicing Agreement or
Pooling and Servicing Agreement, the Depositor will represent and warrant to
the applicable Trust, among other things, that: (i) the information provided
in the related Schedule of Receivables is correct in all material respects;
(ii) the Obligor on each related Receivable is required to maintain physical
damage insurance covering the Financed Asset in accordance with the
Transferor'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 Receivables 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 Receivables is or will be
secured by a first perfected security interest in favor of the Transferor in
the Financed Asset; (v) each related Receivable, 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 (vi) any other
representations and warranties that may be set forth in the related Prospectus
Supplement.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Transferor elects, the first) month
following the discovery by or notice to the Transferor of a breach of any
representation or warranty of the Transferor that materially and adversely
affects the interests of the related Trust in any Receivable, the Depositor,
unless the breach is cured, will purchase such Receivable from such Trust and
the Transferor will be obligated to simultaneously purchase such Receivable
from the Depositor at a price equal to the unpaid principal balance owed by
the Obligor thereon plus interest thereon at the respective APR to the last
day of the month of purchase (the "Purchase Amount"). Alternatively, if so
specified in the related Prospectus Supplement, the Transferor or the
Depositor will be permitted, in a circumstance where it would otherwise be
required to purchase a Receivable as described in the preceding sentence, to
instead substitute a comparable Receivable for the Receivable otherwise
requiring purchase, subject to certain conditions and eligibility criteria for
the substitute Receivable to be summarized in the related Prospectus
Supplement. The purchase obligation (or, if applicable, the substitution
alternative with respect thereto) constitutes the sole remedy available to the
Certificateholders or the Trustee and any
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Noteholders or Indenture Trustee in respect of such Trust for any such uncured
breach. The Depositor's obligation to make such purchase or substitution is
contingent upon the Transferor performing its corresponding obligation to
purchase (or, if applicable, substitute for) such Receivable from the
Depositor.
Pursuant to each Transfer and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables and to
reduce administrative costs, each Trust will designate the Servicer as
custodian to maintain possession, as such Trust's agent, of the related retail
installment sale or loan contracts, and any other documents relating to the
Receivables. The Depositor's and the Transferor's accounting records and
computer systems will reflect the transfer of the related Receivables to the
applicable Trust, and Uniform Commercial Code ("UCC") financing statements
reflecting such transfers will be filed. The Receivables will not be
segregated, stamped or otherwise marked to indicate that they have been
transferred to the related Trust. If through inadvertence or otherwise,
another party purchases (or takes a security interest in) the Receivables for
new value in the ordinary course of business and takes possession of the
Receivables without actual knowledge of the related Trust's interest, the
purchaser (or secured party) will acquire an interest in the Receivables
superior to the interest of the related Trust.
ACCOUNTS
With respect to each Trust that issues 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 Receivables 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,
Reserve Account 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"). The Servicer will establish and
maintain with the related Trustee an account, in the name of such Trustee on
behalf of such Certificateholders, into which amounts released from the
Collection Account and any Pre-Funding Account, Reserve Account 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
Trust that does not issue Notes, the Servicer will also establish and maintain
the Collection Account and any other Trust Account in the name of the related
Trustee on behalf of the related Certificateholders.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account or any Reserve Account, will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account and any Pre-Funding Account, Reserve Account and other
accounts identified as such in the related Prospectus Supplement
(collectively, the "Trust Accounts") will be invested as provided in the
related Transfer and Servicing Agreement or Pooling and Servicing Agreement in
Eligible Investments. "Eligible Investments" are generally limited to
investments acceptable to the Rating Agencies rating such Securities as being
consistent with the rating of such Securities and may include recreational
vehicle retail sale contracts or installment loans. 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 Account may be invested in securities that will
not mature prior to the date of the next distribution with respect to such
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Certificates or Notes and will not be sold to meet any shortfalls. Thus, the
amount of cash in any Reserve Account at any time may be less than the balance
of the Reserve Account. If the amount required to be withdrawn from any
Reserve Account to cover shortfalls in collections on the related Receivables
(as provided in the related Prospectus Supplement) exceeds the amount of cash
in the Reserve Account, 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. Investment earnings on funds deposited in the Trust Accounts, net of
losses and investment expenses (collectively, "Investment Earnings"), shall be
allocated in the manner described in the related Prospectus Supplement.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as
any of the securities of such depository institution have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade. "Eligible Institution" means, with respect to a Trust, (a)
the corporate trust department of the related Indenture Trustee or the related
Trustee, as applicable, or (b) a depository institution organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank), (i) which has
either (A) a long-term unsecured debt rating acceptable to the Rating Agencies
or (B) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (ii) whose deposits are insured by the
FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Transfer and Servicing Agreement or Pooling and Servicing Agreement,
follow such collection procedures as it follows with respect to recreational
vehicle or boat retail installment sale contracts, installment loans, or notes
that it services for itself or others and that are comparable to such
Receivables. Consistent with its normal procedures, the Servicer may, in its
discretion, arrange with the Obligor on a Receivable to extend or modify the
payment schedule, but no such arrangement will, for purposes of any Transfer
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 Receivable beyond the Final Scheduled Maturity Date (as
such term is defined with respect to any Receivables Pool in the related
Prospectus Supplement). Some of such arrangements may result in the Servicer
purchasing the Receivable for the Purchase Amount. The Servicer may sell the
Financed Asset securing the respective Receivable at public or private sale,
or take any other action permitted by applicable law. See "Certain Legal
Aspects of the Receivables" herein.
The Servicer may from time to time perform any portion of its servicing
obligations under the applicable Transfer and Servicing Agreement or Pooling
and Servicing Agreement through subservicing agreements with third-party
servicers approved by the Rating Agencies. Each applicable Transfer and
Servicing Agreement and Pooling and Servicing Agreement will provide that,
notwithstanding the use of subservicers, the Servicer will remain liable for
its servicing duties and obligations as if the Servicer were servicing the
Receivable directly.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such
Receivables collected during each collection
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period specified in the related Prospectus Supplement (each, a "Collection
Period") into the related Collection Account within two business days after
receipt thereof. However, at any time that and for so long as (i) the Servicer
(or its successor) is the Servicer, (ii) there exists no Servicer Default and
(iii) each other condition to making deposits less frequently than daily as
may be specified by the Rating Agencies or set forth in the related Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account until on or before the applicable
Distribution Date or Payment Date. Pending deposit into the Collection
Account, collections may be invested by the Servicer at its own risk and for
its own benefit and will not be segregated from its own funds. If the Servicer
were unable to remit such funds, 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 Receivables and payment of the
aggregate Purchase Amount with respect to Receivables purchased by the
Servicer.
SERVICER ADVANCES
Unless otherwise provided in the related Prospectus Supplement, on or before
the business day prior to each applicable Distribution Date or Payment Date,
the Servicer shall deposit into the related Collection Account as a Servicer
Advance (but only to the extent that the Servicer, in its sole discretion,
expects to recoup such Servicer Advance from subsequent payments on or with
respect to the Receivables) an amount equal to the amount of interest due on
the related Receivables at their respective APRs for the related Collection
Period (assuming that such Receivables are paid on their respective due dates)
minus the amount of interest actually received on such Receivables during the
related Collection Period. If such calculation results in a negative number,
an amount equal to such amount shall be paid to the Servicer in reimbursement
of outstanding Servicer Advances. In addition, in the event that a Receivable
becomes a Liquidated Receivable (as such term is defined in the related
Prospectus Supplement), the amount of accrued and unpaid interest thereon (but
not including interest for the then current Collection Period) shall be
withdrawn from the Collection Account and paid to the Servicer in
reimbursement of outstanding Servicer Advances. No advances of principal will
be made with respect to Receivables.
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
Collection Period in an amount equal to a 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 Collection Period (the
"Servicing Fee"). The Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior Distribution Dates or Payment
Dates) will be paid out of available funds for the related Collection Period
prior to the distributions on the related Distribution Date or Payment Date to
the Noteholders or the Certificateholders of the given series. [To follow:
description of Servicing Suspense Account and Supplemental Servicing Fee.]
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 Receivables 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.
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The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of recreational vehicle receivables as an agent for
their beneficial owner, including collecting and posting all payments,
responding to inquiries of Obligors on the Receivables, 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 administering the particular Receivables Pool, including accounting for
collections and furnishing monthly and annual statements to the related
Trustee and Indenture Trustee with respect to distributions and generating
federal income tax information for such Trust and for the related Noteholders
and Certificateholders. The Servicing Fee also will reimburse the Servicer for
certain taxes, the fees of the related Trustee and Indenture Trustee, if any,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the applicable Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment Date or
Distribution Date, as applicable, 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, priorities of and requirements for all payments to each class of
Noteholders and all distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables 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 Account, 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 subordinate 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 subordinate to payments in respect of
Notes, if any, of such series or other classes of Certificates of such series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities
of a given series, if any, 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 Accounts, over-
collateralization, 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 the
related 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.
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The presence of a Reserve Account 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 may not provide protection
against all risks of loss and may not guarantee repayment of the entire
principal balance and interest thereon; any such limitations will be described
in the related Prospectus Supplement. 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 ACCOUNT. If so provided in the related Prospectus Supplement,
pursuant to the related Transfer and Servicing Agreement or Pooling and
Servicing Agreement, the Depositor will establish for a series or class of
Securities an account, as specified in the related Prospectus Supplement (the
"Reserve Account"), which will be maintained with the related Trustee or
Indenture Trustee, as applicable. Unless otherwise provided in the related
Prospectus Supplement, the Reserve Account will be funded by an initial
deposit by the Depositor or such other person specified in the related
Prospectus Supplement on the Closing Date in the amount set forth in the
related Prospectus Supplement and, if the related series has a Funding Period,
will also be funded on each Subsequent Transfer Date to the extent described
in the related Prospectus Supplement. As further described in the related
Prospectus Supplement, the amount on deposit in the Reserve Account will be
increased on each Distribution Date or Payment Date thereafter up to the
Specified Reserve Account Balance (as defined in the related Prospectus
Supplement) by the deposit therein of the amount of collections on the related
Receivables remaining on each such Distribution Date or Payment Date after the
payment of all other required payments and distributions on such date. The
related Prospectus Supplement will describe the circumstances and manner under
which distributions may be made out of the Reserve Account, either to holders
of the Securities covered thereby, to the Depositor, to the Servicer or such
other person specified in the related Prospectus Supplement.
NET DEPOSITS
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 Servicer Advances and Purchase
Amounts for any Trust for or with respect to the related Collection Period net
of distributions to be made to the Servicer for such Trust with respect to
such Collection Period. The Servicer, however, will account to the Trustee,
any Indenture 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 Payment Dates do not coincide with
Distribution Dates, all distributions, deposits or other remittances made on a
Payment Date will be treated as having been distributed, deposited or remitted
on the Distribution Date for the applicable Collection Period for purposes of
determining other amounts required to be distributed, deposited or otherwise
remitted on such Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date or Payment Date with respect to each series
of Securities, the Servicer will provide to each Applicable Trustee as of the
close of business on the last day
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of the preceding Collection 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 Transfer and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such certificate, from the applicable Closing
Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will also provide for delivery to the related Trust and Indenture Trustee or
Trustee, as applicable, 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 Transfer 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 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 Indenture Trustee and
each Trustee notice of certain Servicer Defaults under the related Transfer
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 Transfer and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer may not resign from its obligations and duties
as Servicer thereunder, except upon determination that the Servicer's
performance of such duties is no longer permissible under applicable law. No
such resignation will become effective until the related Indenture Trustee or
Trustee, as applicable, or a successor servicer has assumed the Servicer's
servicing obligations and duties under such Transfer and Servicing Agreement
or Pooling and Servicing Agreement.
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will further provide that neither the Servicer nor any of its directors,
officers, employees and agents will be under any liability to the related
Trust or the related Noteholders or Certificateholders for taking any action
or for refraining from taking any action pursuant to such Transfer and
Servicing Agreement or Pooling and Servicing Agreement or for errors in
judgment; except that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of the
Servicer's duties thereunder or by reason of reckless disregard of its
obligations and duties thereunder. In addition, each Transfer and Servicing
Agreement and Pooling and Servicing Agreement will provide that the Servicer
is under no obligation to appear in, prosecute or defend any legal action that
is not incidental to the Servicer's servicing responsibilities under such
Transfer 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 Transfer and Servicing Agreement
and Pooling and Servicing Agreement, any entity into which the Servicer may be
merged or consolidated,
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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, 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
Transfer and Servicing Agreement or Pooling and Servicing Agreement.
SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement, "Servicer
Default" under each Transfer and Servicing Agreement and Pooling and Servicing
Agreement will consist of (i) any failure by the Servicer to deliver to the
Applicable Trustee for deposit in any of the Trust Accounts or the Certificate
Distribution Account any required payment or to direct the Applicable Trustee
to make any required distributions therefrom, which failure continues
unremedied for three business days after written notice from the Applicable
Trustee is received by the Servicer or after discovery of such failure by the
Servicer; (ii) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement in such Transfer and
Servicing Agreement or Pooling and Servicing Agreement, which failure
materially and adversely affects the rights of the Noteholders or the
Certificateholders of the related series and which continues unremedied for 60
days after the giving of written notice of such failure (A) to the Servicer or
the Depositor, as the case may be, by the Applicable Trustee or (B) to the
Servicer and to the Applicable Trustee by holders of Notes or Certificates of
such series, as applicable, evidencing not less than 25% in principal amount
of such outstanding Notes or of such Certificate Balance; 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 any Trust that has issued Notes, unless otherwise provided in
the related Prospectus Supplement, as long as a Servicer Default under a
Transfer and Servicing Agreement remains unremedied, the related Indenture
Trustee or holders of Notes of the related series evidencing not less than 25%
of the principal amount of such Notes then outstanding may terminate all the
rights and obligations of the Servicer under such Transfer 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 Transfer and Servicing Agreement and
will be entitled to similar compensation arrangements. In the case of any
Trust that has not issued 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 such Indenture Trustee, such Noteholders, such Trustee or
such Certificateholders from effecting a transfer of servicing. In the event
that such Indenture Trustee or Trustee is unwilling or unable to so act, it
may appoint, or petition a court of competent jurisdiction for the appointment
of, a successor with a net worth
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of at least $100,000,000 and whose regular business includes the servicing of
the type of receivables included in the Trust. 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 Transfer and Servicing Agreement or Pooling and Servicing Agreement.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, the holders of Notes evidencing at least
a majority in principal amount of the then outstanding Notes of the related
series (or the holders of the Certificates of such series evidencing not less
than a majority of the outstanding Certificate Balance, in the case of any
Servicer Default which does not adversely affect the related Indenture Trustee
or such Noteholders) may, on behalf of all such Noteholders and
Certificateholders, waive any default by the Servicer in the performance of
its obligations under the related Transfer and Servicing Agreement and its
consequences, except a Servicer Default in making any required deposits to or
payments from any of the Trust Accounts or to the Certificate Distribution
Account in accordance with such Transfer and Servicing Agreement. With respect
to each Trust that has not issued Notes, holders of Certificates of such
series evidencing not less than a majority of the principal amount of such
Certificates then outstanding may, on behalf of all such Certificateholders,
waive any default by the Servicer in the performance of its obligations under
the related Pooling and Servicing Agreement, except a Servicer Default in
making any required deposits to or payments from the Certificate Distribution
Account or the related Trust Accounts in accordance with such Pooling and
Servicing Agreement. No such waiver will impair such Noteholders' or
Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements 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 Transfer and Servicing Agreements 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.
Unless otherwise specified in the related Prospectus Supplement, the Transfer
and Servicing Agreements may also be amended by the 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 Transfer 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
Receivables 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 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
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unanimous prior approval of all Certificateholders (including the Depositor)
of such Trust and the delivery to such Trustee by each such Certificateholder
(including the 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 Transfer and Servicing Agreement, except as
otherwise provided therein.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Depositor,
the related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the
disposition of any amounts received upon liquidation of any such remaining
Receivables, (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 Transfer and Servicing Agreements and (iii) the occurrence of either event
described below.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will be permitted at its
option to purchase from each Trust, as of the end of any applicable Collection
Period, if the then outstanding Pool Balance with respect to the Receivables
held by such Trust is less than 10% of the Initial Pool Balance (as defined in
the related Prospectus Supplement, the "Initial Pool Balance"), all remaining
related Receivables at a price equal to the aggregate of the Purchase Amounts
thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within ten days following a
Distribution Date or Payment Date as of which the Pool Balance is equal to or
less than the percentage of the Initial Pool Balance specified in the related
Prospectus Supplement, solicit bids for the purchase of the Receivables
remaining in such Trust, in the manner and subject to the terms and conditions
set forth in such Prospectus Supplement. If the Applicable Trustee receives
satisfactory bids as described in such Prospectus Supplement, then the
Receivables remaining in such Trust will be sold to the highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above, and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
ADMINISTRATION AGREEMENT
If so specified in the related Prospectus Supplement, the person named as
such in the related Prospectus Supplement (the "Administrator"), will enter
into an agreement (as amended and supplemented from time to time, an
"Administration Agreement") with each 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.
Unless otherwise specified
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in the related Prospectus Supplement with respect to any such Trust, 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 in such amount as may be set forth in the related
Prospectus Supplement (the "Administration Fee").
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Receivables will be treated by each Trust as "chattel paper" as defined
in the UCC. Pursuant to the UCC, the transfer of chattel paper is treated in a
manner similar to a security interest in chattel paper. In order to protect
each Trust's ownership or security interest in its Receivables, the Depositor
will file UCC-1 financing statements with the appropriate authorities in any
state deemed advisable by the Depositor to give notice of such Trust's and any
related Indenture Trustee's ownership of and security interest in the
Receivables and their proceeds. Under each Transfer and Servicing Agreement
and Pooling and Servicing Agreement, the Servicer will be obligated to
maintain the perfection of each Trust's and any related Indenture Trustee's
interest in the Receivables. It should be noted, however, that a purchaser of
chattel paper who gives new value and takes possession of it in the ordinary
course of such purchaser's business has priority over a security interest,
including an ownership interest, in the chattel paper that is perfected by
filing UCC-1 financing statements, and not by possession of such chattel paper
by the original secured party, if such purchaser acts in good faith without
knowledge that the related chattel paper is subject to a security interest,
including an ownership interest. Any such purchaser would not be deemed to
have such knowledge because there are UCC filings and would not learn of the
transfer of or security interest in the Receivables from a review of the
Receivables since they would not be marked to show such transfer.
SECURITY INTEREST IN VEHICLES
In states in which retail installment sale contracts and installment loans
such as the Recreational Vehicle Receivables evidence the credit sale of
recreational vehicles by dealers to obligors, the contracts or loans also
constitute personal property security agreements and include grants of
security interests in the vehicles under the applicable UCC. Perfection of
security interests in recreational vehicles is generally governed by the motor
vehicle registration laws of the state in which the vehicle is located. In
most states in which the Receivables have been originated, a security interest
in Financed Recreational Vehicles is perfected by obtaining the certificate of
title to the Financed Recreational Vehicle or notation of the secured party's
lien on the Financed Recreational Vehicle's certificate of title. In certain
states, however, folding camping trailers and/or slide-in campers, which may
constitute the Financed Recreational Vehicle with respect to certain
Recreational Vehicle Receivables, are not subject to state titling and vehicle
registration laws and a security interest in such recreational vehicles is
perfected by filing pursuant to the provisions of the UCC. However, in some
jurisdictions, a purchase money lien in consumer goods is perfected without
any filing requirement.
Unless otherwise specified in the related Prospectus Supplement, the
Transferor will be obligated to have taken all actions necessary under the
laws of the state in which the Financed Recreational Vehicle is located to
perfect its security interest in the Financed Recreational Vehicle securing
the related Receivable purchased by it from a Dealer, including, where
applicable, by having a notation of its lien recorded on such vehicle's
certificate of title or, if appropriate, by perfecting its security interest
in the related recreational vehicles under the UCC.
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Because the Servicer will continue to service the contracts and loans, the
Obligors on the contracts and loans will not be notified of the transfers from
the Transferor to the Depositor or from the Depositor to the Trust, and no
action will be taken to record the transfer of the security interest from the
Transferor to the Depositor or from the Depositor to the Trust by amendment of
the certificates of title for the Financed Recreational Vehicles or otherwise.
Pursuant to each Receivables Transfer Agreement, the Transferor will
transfer to the Depositor its interests in the Financed Recreational Vehicles
securing the Recreational Vehicle Receivables transferred by that Transferor
to the Depositor and, with respect to each Trust, pursuant to the related
Transfer and Servicing Agreement or Pooling and Servicing Agreement, the
Depositor will transfer its interests in the Financed Recreational Vehicles
securing the related Receivables to such Trust. However, because of the
administrative burden and expense, none of the Transferor, the applicable
Originator, the Depositor, the Servicer or the related Trustee will amend any
certificate of title to identify either the Depositor or such Trust as the new
secured party on such certificate of title relating to a Financed Recreational
Vehicle nor will any such entity execute and file any transfer instrument
(including, among other instruments, UCC-3 transfers for those Financed
Recreational Vehicles for which perfection is governed by the UCC).
In most states, a transfer such as that under each Receivables Transfer
Agreement, Transfer and Servicing Agreement or Pooling and Servicing Agreement
is an effective conveyance of a security interest without amendment of any
lien noted on a vehicle's certificate of title or the execution or filing of
any transfer instrument, and the transferee succeeds thereby to the
transferor's rights as secured party. In some states, however, in the absence
of such an amendment, execution or filing, the transfer to the Applicable
Trustee of a security interest in Financed Recreational Vehicles registered
therein may not be effective or such security interest may not be perfected.
If any otherwise effectively transferred security interest in favor of the
Applicable Trustee is not perfected, such transfer of the security interest to
such Trustee may not be effective against creditors or a trustee in bankruptcy
of the Transferor or the applicable Originator, which continues to be
specified as lienholder on any certificates of title or as secured party on
any UCC filing. The Servicer will continue to hold any certificates of title
relating to the Financed Recreational Vehicles in its possession as custodian
for such Trust pursuant to the related Transfer and Servicing Agreement or
Pooling and Servicing Agreement. See "Description of the Transfer and
Servicing Agreements--Transfer of Receivables" herein.
In addition, even in those states where a transfer such as that under each
Receivables Transfer Agreement, Transfer and Servicing Agreement or Pooling
and Servicing Agreement is an effective conveyance of a security interest
without amendment of any lien noted on a vehicle's certificate of title, by
not identifying a Trust as the secured party on the certificate of title, the
security interest of such Trust in the vehicle could be defeated through fraud
or negligence. In such states, in the absence of fraud or forgery by the
vehicle owner or the Transferor (or the Originator, if the Transferor acquired
the applicable Receivable from an Originator) or administrative error by state
or local agencies, the notation of the lien of the Transferor (or the
Originator, if applicable) on the certificates of title will be sufficient to
protect a Trust against the rights of subsequent purchasers of a Financed
Recreational Vehicle or subsequent lenders who take a security interest in a
Financed Recreational Vehicle. If there are any Financed Recreational Vehicles
as to which the Transferor or the applicable Originator failed to obtain a
perfected security interest, the security interest of the related Trust would
be subordinate to, among others, the interests of subsequent purchasers of the
Financed Recreational Vehicles and holders of perfected security interests
therein. Such a failure, however, would constitute a breach of the warranties
of the Depositor under the related Transfer and Servicing Agreement or Pooling
and Servicing Agreement and of the Transferor under the Receivables Transfer
Agreement and would create an obligation of the Depositor to
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purchase the related Receivable from the Trust and of the Transferor to
simultaneously purchase the related Receivable from the Depositor unless the
breach were cured. See "Description of the Transfer and Servicing Agreements--
Transfer of Receivables" and "Risk Factors--Certain Legal Aspects--Security
Interests in Financed Assets" herein.
Under the laws of most states, the perfected security interest in a vehicle
would continue for four months after the vehicle is moved to a state other
than the state in which it is initially registered and thereafter until the
owner thereof re-registers the vehicle in the new state. A majority of states
generally require surrender of a certificate of title to re-register 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, the secured party would
receive notice of surrender if the security interest is noted on the
certificate of title. Thus, the secured party would have the opportunity to
re-perfect its security interest in the vehicle in the state of relocation.
However, these procedural safeguards will not protect the secured party if
through fraud, forgery or administrative error, the debtor somehow procures a
new certificate of title that does not list the secured party's lien.
Additionally, in states that do not require a certificate of title for
registration of a recreational vehicle, re-registration could defeat
perfection. In the ordinary course of servicing recreational vehicle
receivables, the Servicer 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 vehicle, 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 loan before release of the lien. Under each
Transfer and Servicing Agreement and Pooling and Servicing Agreement, the
Servicer will be obligated to take appropriate steps, at the Servicer's
expense, to maintain perfection of security interests in the Financed
Recreational Vehicles and is obligated to purchase the related Receivable if
it fails to do so.
Under the laws of most states, liens for repairs performed on a recreational
vehicle and liens for unpaid taxes take priority over even a perfected
security interest in such vehicle. The Code also grants priority to certain
federal tax liens over the lien of a secured party. Certain state laws and
federal law permit the confiscation of vehicles by governmental authorities
under certain circumstances if used in unlawful activities, which may result
in the loss of a secured party's perfected security interest in the
confiscated vehicle. Under each Receivables Transfer Agreement, the Transferor
will represent to the related Trust that, as of the date the related
Receivable is transferred to such Trust, each security interest in a Financed
Vehicle is or will be prior to all other present liens (other than tax liens
and other liens that arise by operation of law) upon and security interests in
such Financed Recreational Vehicle. However, liens for repairs or taxes could
arise, or the confiscation of a Financed Recreational Vehicle could occur, at
any time during the term of a Receivable. No notice will be given to the
Trustee, any Indenture Trustee, any Noteholders or the Certificateholders in
respect of a given Trust if such a lien arises or confiscation occurs and any
such lien or confiscation arising after the applicable Closing Date would not
give rise to the Transferor's purchase obligation under the applicable
Receivables Transfer Agreement.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the
recreational vehicle 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 the UCC remedies, the
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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 Servicer in most cases and is accomplished simply by retaking possession
of the financed vehicle. 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 may cure the default prior to repossession.
Generally, the right of reinstatement 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, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the vehicle
must then be repossessed in accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws generally require the secured party to provide
the obligor with reasonable notice of the date, time and place of any public
sale and/or the date after which any private sale of the collateral may be
held. The obligor 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, or, in some states, by payment of
delinquent installments or the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Financed Assets 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. However, the deficiency
judgment would be a personal judgment against the obligor for the shortfall,
and a defaulting obligor can be expected to have very little capital or
sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exists or there are remaining funds, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of
the National Consumer Act and of the Uniform Consumer Credit Code, and retail
installment sales acts, lending acts and other similar laws. Also, state laws
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply with their provisions. In some cases, this liability could
affect a transferee's ability to enforce consumer finance contracts such as
the Receivables.
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The Fair Debt Collection Practices Act contains provisions that restrict
where a legal action against a consumer may be filed. In the case of personal
property, this is where the consumer resides or where the applicable contract
was signed. When the consumer keeps the personal property collateral outside
the court jurisdiction where the consumer resides or where the applicable
contract was signed, the statute could require that the Trustee enforce the
security interest in the Financed Recreational Vehicle by means of private
repossession and sale, which is not always available in each case, depending
upon the circumstances.
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, other statutes or the common law, has the effect
of subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses which the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract
and the holder of the contract may also be unable to collect any balance
remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, each Trust, as holder of the related Receivables, will be subject
to any claims or defenses that the purchaser of the applicable Financed
Recreational Vehicle may assert against the seller of the Financed
Recreational Vehicle. Such claims are limited to a maximum liability equal to
the amounts paid by the Obligor on the Receivable. If an Obligor were
successful in asserting any such claim or defense, such claim or defense would
constitute a breach of the Transferor's warranties under the related Transfer
and Servicing Agreement or Pooling and Servicing Agreement and would create an
obligation of the Transferor to purchase the Receivable unless the breach is
cured. See "Description of the Transfer and Servicing Agreements--Transfer of
Receivables" herein.
Courts have applied general equitable principles to secured parties pursuing
repossession and 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 certain cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to 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 borrowers.
Under each Receivables Transfer Agreement, the Transferor will warrant to
the Depositor (which will in turn transfer its rights under such warranty to
the applicable Trust under the related Transfer and Servicing Agreement or
Pooling and Servicing Agreement) that each Receivable complies with all
requirements of law in all material respects. Accordingly, if an Obligor has a
claim against such Trust for violation of any law and such claim materially
and adversely affects such Trust's interest in a Receivable, such violation
would constitute a breach of the warranties of the Transferor under such
Receivables Transfer Agreement and would create an obligation of the
Transferor to purchase the Receivable unless the breach is cured. See
"Description of the Transfer and Servicing Agreements--Transfer of
Receivables" herein.
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 to enforce a deficiency
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judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy
law, a court may prevent a creditor from repossessing a vehicle and, as part
of the rehabilitation plan, reduce the amount of the secured indebtedness to
the market value of the vehicle at the time of bankruptcy (as determined by
the court), leaving the creditor 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
The following is a general summary of material federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. The following summary represents the opinion of Tax Counsel
subject to the qualifications set forth herein. An opinion of Tax Counsel,
however, is not binding on the Internal Revenue Service ("IRS") or the courts.
No ruling on any of the issues discussed below will be sought from the IRS.
The following summary is intended as an explanatory discussion of the possible
effects of certain federal income tax consequences to holders generally, but
does not purport to furnish information in the level of detail or with the
attention to a holder's specific tax circumstances that would be provided by a
holder's own tax advisor. For example, it does not discuss the tax treatment
of Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. In addition, the discussion
regarding the Notes is limited to the federal income tax consequences of the
initial Noteholders and not a purchaser in the secondary market. Moreover,
there are no cases or IRS rulings on similar transactions involving both debt
and equity interests issued by a trust with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or a
part of the discussion below. Prospective investors are urged to consult their
own tax advisors in determining the federal, state, local, foreign and any
other tax consequences to them of the purchase, ownership and disposition of
the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive.
SCOPE OF THE TAX OPINIONS
In the opinion of Tax Counsel, the Trust will not be classified as a
separate entity that is an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. Further, with
respect to the Notes, Tax Counsel is of the opinion that the Notes will be
characterized as debt for federal income tax purposes.
In addition, Tax Counsel has prepared or reviewed the statements under the
heading "Summary of TermsCTax Status" as they relate to federal income tax
matters and under the heading "Federal Income Tax Consequences" herein and in
the Prospectus and is of the opinion that such statements are correct in all
material respects. Such statements are intended as an explanatory discussion
of the possible effects of the classification of the Trust as a partnership
for federal income tax purposes on investors generally and of related tax
matters affecting investors generally, but do not purport to furnish
information in the level of detail or with the attention to the investor's
specific tax circumstances that would be provided by an investor's own tax
adviser. Accordingly, each investor is advised to consult its own tax advisers
with regard to the tax consequences to it of investing in the Notes and the
Certificates.
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TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CLASSIFICATION OF THE TRUST AS A PARTNERSHIP
Tax Counsel is of the opinion that the Trust (which the Trust Agreement
specifies is intended to be treated as a partnership) will not be classified
as a separate entity that is an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. A copy of such
opinion of Tax Counsel will be filed with the Commission as an exhibit to a
Form 8-K prior to an issuance of Securities by the Trust. This opinion is
based on the assumption that the terms of the Trust Agreement and related
documents will be complied with, and on Tax Counsel's conclusion that the
nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables,
reduced by its interest expense on the Notes provided the Notes are respected
as debt for federal income tax purposes (see discussion in the following
paragraph). 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.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Transferor will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal, state and local income and franchise tax purposes. In the opinion
of Tax Counsel, the Notes will be characterized as debt for federal income tax
purposes. A copy of such opinion of Tax Counsel will be filed with the
Commission with a Form 8-K following the issuance of the Notes. The discussion
below assumes this characterization of the Notes is correct.
The discussion below assumes that all payments on the Notes are denominated
in U.S. dollars, and that the Notes are not Strip Notes. Moreover, the
discussion assumes that the interest formula for the Notes meets the
requirements for "qualified stated interest" under Treasury regulations (the
"OID regulations") relating to original issue discount ("OID"), and that any
OID on the Notes (I.E., any excess of the principal amount of the Notes over
their issue price) does not exceed a DE MINIMIS amount (I.E., 1/4% of their
principal amount multiplied by the number of full years included in their
term), all within the meaning of the OID regulations.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered 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. It is
believed that any prepayment premium paid as a result of a mandatory
redemption will be taxable as contingent interest when it becomes fixed and
unconditionally payable. 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.
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 for the Note, increased by any market discount, OID and gain
previously
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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 by a corporate taxpayer only to offset capital gains,
and by an individual taxpayer only to the extent of capital gains plus $3,000
of other income.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-United States 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 or the Depositor (including a holder of 10% of the
outstanding Certificates) or a "controlled foreign corporation" with respect
to which the Trust or the Depositor is a "related person" within the meaning
of the Code and (ii) provides the Trustee or other person who is otherwise
required to withhold U.S. tax with respect to the Notes with an appropriate
statement (on IRS Form W-8 or a similar form), 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 withholding tax at a rate of 31 percent,
unless that rate is reduced or eliminated pursuant to an applicable tax treaty
and the foreign person provides the trustee or other payor of the interest
with a copy of IRS Form 1001, or if the interest is effectively connected with
the conduct of a U.S. trade or business and the foreign person provides a copy
of IRS Form 4224.
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.
On October 6, 1997, final Treasury regulations (the "Withholding Tax
Regulations") were issued that modify certain of the filing requirements with
which foreign persons must comply in order to be entitled to an exemption from
U.S. withholding tax or a reduction to the applicable U.S. withholding tax
rate. Those persons currently required to file Form W-8 generally will
continue to be required to file that form. However, the requirement that
foreign persons submit Form W-8 is extended to most foreign persons who wish
to seek an exemption from withholding tax on the basis that income from the
Notes is not effectively connected with the conduct of a U.S. trade or
business (in lieu of Form 4224) and to foreign persons wishing to rely on a
tax treaty to reduce the withholding tax rate (in lieu of Form 1001). The
Withholding Tax Regulations generally are effective for payments of interest
due after December 31, 1998, but Forms 4224 and 1001 filed prior to that date
will continue to be effective until the earlier of December 31, 1999 or the
current expiration date of those forms. Prospective investors are urged to
consult their tax advisors with respect to the effect of the Withholding Tax
Regulations.
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BACKUP WITHHOLDING. Each holder of a 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 penalties 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 backup withholding. Should a nonexempt Noteholder
fail to provide the required certification, the Trust will be required to
withhold 31 percent 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. Noteholders should consult with their tax advisors as to their
eligibility for exemption from backup withholding and the procedure for
obtaining the exemption, and the potential impact of the Withholding Tax
Regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion of
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 taxable
corporation would not be able to reduce its taxable income by deductions for
interest expense on Notes recharacterized as equity). Alternatively, and most
likely in the view of Tax Counsel, the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) would be "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, and individual holders
might be subject to certain limitations on their ability to deduct their share
of Trust expenses. Furthermore, such a characterization could subject holders
to state and local taxation in jurisdictions in which they are not currently
subject to tax.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Depositor, the Servicer and the
Trustee, and the Certificateholders by their purchase of Certificates, will
agree 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 Depositor,
and the Servicer is not clear because there is no authority on transactions
closely comparable to that contemplated herein.
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 Depositor or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the intended 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.
The following discussion assumes that all payments on the Certificates are
denominated in U.S. dollars, none of the Certificates are Strip Certificates,
and that a series of Securities includes a single class of Certificates.
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
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accruals of guaranteed payments from the Trust and its allocated share of
other income, gains, losses, deductions and credits of the Trust. The Trust's
income will consist primarily of interest and finance charges earned on the
Receivables (including appropriate adjustments for market discount, OID and
bond premium) and any gain upon collection or disposition of Receivables. The
Trust's deductions will consist primarily of interest accruing with respect to
the Notes, guaranteed payments on the Certificates, servicing and other fees,
and losses or deductions upon collection or disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). Under the Trust Agreement, interest
payments on the Certificates at the Pass Through Rate (including interest on
amounts previously due on the Certificates but not yet distributed) will be
treated as "guaranteed payments" under Section 707(c) of the Code. Guaranteed
payments are payments to partners for the use of their capital and, in the
present circumstances, are treated as deductible to the Trust and ordinary
income to the Certificateholders. The Trust will have a calendar year tax year
and will deduct the guaranteed payments under the accrual method of
accounting. Certificateholders with a calendar year tax year are required to
include the accruals of guaranteed payments in income in their taxable year
that corresponds to the year in which the Trust deducts the payments, and
Certificateholders with a different taxable year are required to include the
payments in income in their taxable year that includes the December 31 of the
Trust year in which the Trust deducts the payments. It is possible that
guaranteed payments will not be treated as interest for all purposes of the
Code.
In addition, the Trust Agreement will provide, in general, that the
Certificateholders will be allocated taxable income of the Trust for each
Collection Period equal to the sum of (i) any Trust income attributable to
discount on the Receivables that corresponds to any excess of the principal
amount of the Certificates over their initial issue price, (ii) prepayment
premium, if any, payable to the Certificateholders for such month and (iii)
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
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining items of taxable income, gain, loss
and deduction of the Trust, if any, will be allocated to the Depositor.
Based on the economic arrangement of the parties, this approach for
allocating Trust income arguably 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
would, in effect, be required to report income from the Certificates on the
accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes.
In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable
income that is greater or less than the amount reported to them by the Trust.
All of the guaranteed payments and taxable income allocated to a
Certificateholder that is a pension, profit sharing or employee benefit plan
or other tax-exempt entity (including an individual retirement account) will
constitute "unrelated business taxable income" generally taxable to such a
holder under the Code.
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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. It is not clear whether these rules would be applicable to
a Certificateholder accruing guaranteed payments.
The Trust intends to 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 Receivable, 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 Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, upon
transfer of the Receivables to the Trust, the value of the Receivables may be
greater or less than the remaining principal balance of the Receivables at the
time of transfer. If so, the Receivables may 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
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it
accrues over the life of the Receivables or to offset any such premium against
interest income on the Receivables. As indicated above, a portion of such
market discount income or premium deduction may be allocated to
Certificateholders.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. If such a termination occurs, under current Treasury regulations
the Trust (the "old partnership") will be considered to contribute its assets
to a new partnership (the "new partnership") in exchange for interest in the
new partnership. Such interests would be deemed distributed to the partners of
the old partnership in liquidation thereof, which would not constitute a sale
or exchange. The Trust will not comply with certain technical requirements
that might apply when such a constructive termination occurs. As a result, the
Trust may be subject to certain tax penalties and may incur additional
expenses if it is required to comply with those requirements. Furthermore, the
Trust might not be able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Subject to the discussion in the immediately
following paragraph, 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 seller'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 (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the
amount realized on a sale of a Certificate would include the holder's share of
the Notes and other liabilities of the Trust. A holder acquiring Certificates
at different prices may be required to maintain a single aggregate adjusted
tax basis in such Certificates, and, upon sale or other disposition of some of
the Certificates, allocate a portion of such aggregate tax basis to the
Certificates sold (rather than maintaining a separate tax basis in each
Certificate for purposes of computing gain or loss on a sale of that
Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to
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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 purchase.
The use of such a monthly convention may not be permitted by existing
Treasury 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
Depositor is 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 Trust 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 (x) the name, address and identification number of such
person, (y) whether such person is a United States person, a tax-exempt entity
or a foreign government, an international organization, or any wholly-owned
agency or instrumentality of either of the foregoing, and (z) certain
information on Certificates that were held, bought or sold
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on behalf of such person throughout the year. In addition, brokers and
financial institutions that hold Certificates through a nominee are required
to furnish directly to the Trust information as to themselves and their
ownership of Certificates. A clearing agency registered under Section 17A of
the Exchange Act is not required to furnish any such information statement to
the Trust. The information referred to above for any calendar year must be
furnished to the Trust on or before the following January 31. Nominees,
brokers and financial institutions that fail to provide the Trust with the
information described above may be subject to penalties.
The Depositor will be designated as the tax matters partner in the related
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.
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. Although it is not
expected that the Trust would be engaged in a trade or business in the United
States for such purposes, 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
Certificateholder's withholding status, the Trust may 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 Certificateholder might be required to file a U.S. individual
or corporate income tax return and pay U.S. income tax on the amount computed
therein (including, in the case of a corporation, the branch profits tax) on
its share of accruals of guaranteed payments and the Trust's income. Each
foreign Certificateholder 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 Certificateholder
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. However,
the IRS may assert additional taxes are due, and no assurance can be given as
to the appropriate amount of tax liability.
The Withholding Tax Regulations alter, in certain respects, the foregoing
certification rules and generally are effective for periods after December 31,
1998. Prospective investors are urged to consult their tax advisors with
respect to the effect of the Withholding Tax Regulations.
BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds from
the sale of the Certificates will be subject to a "backup" withholding tax of
31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an
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exempt recipient under applicable provisions of the Code. Certificateholders
should consult with their tax advisors as to their eligibility for exemption
to backup withholding, the procedure for obtaining the exemption, and the
potential impact of the Withholding Tax Regulations.
TRUSTS TREATED AS GRANTOR TRUSTS
TAX CLASSIFICATION OF THE TRUST AS A GRANTOR TRUST. Tax Counsel is of the
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part 1 of subchapter J of the Code. A copy of such opinion of Tax
Counsel will be filed with the Commission as an exhibit to a Form 8-K prior to
the issuance of the Certificates by the Trust. Owners of Certificates
(referred to herein as "Grantor Trust Certificateholders") will be treated for
federal income tax purposes as owners of a portion of the Trust's assets as
described below. The Certificates issued by the Trust are referred to herein
as "Grantor Trust Certificates."
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will
be considered the equitable owner of a pro rata undivided interest in each of
the Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable
because of a default or delinquency in payment will be treated for federal
income tax purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire
income from the Receivables in the Trust represented by the Grantor Trust
Certificates, including interest, OID, if any, market discount, if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Servicer. Under Sections 162 or 212 of
the Code each Grantor Trust Certificateholder will be entitled to deduct its
pro rata share of servicing fees, prepayment fees, assumption fees, any loss
recognized upon an assumption and late payment charges retained by the
Servicer, provided that such amounts are reasonable compensation for services
rendered to the Trust. Grantor Trust Certificateholders that are individuals,
estates or trusts will be entitled to deduct their share of expenses only to
the extent such expenses plus all other miscellaneous itemized deductions
exceed two percent of its adjusted gross income. In addition, the Code
provides that the amount of itemized deductions otherwise allowable for the
taxable year for an individual whose adjusted gross income exceeds a threshold
amount specified in the Code adjusted for inflation ($117,950 in 1996, in the
case of a joint return) will be reduced by the lesser of (i) 3% of the excess
of adjusted gross income over the specified threshold amount or (ii) 80% of
the amount of itemized deductions otherwise allowable for such taxable year. A
Grantor Trust Certificateholder using the cash method of accounting must take
into account its pro rata share of income and deductions as and when collected
by or paid to the Servicer. A Grantor Trust Certificateholder using an accrual
method of accounting must take into account its pro rata share of income and
deductions as they become due or are paid to the Servicer, whichever is
earlier. If the servicing fees paid to the Servicer are deemed to exceed
reasonable servicing compensation ("excess servicing"), the amount of such
excess could be considered as an ownership interest retained by the Servicer
(or any person to whom the Servicer assigned for value all or a portion of the
servicing fees) in a portion of the interest payments on the Receivables. The
Receivables would then be subject to the "coupon stripping" rules of the Code
discussed below.
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<PAGE>
STRIPPED BONDS AND STRIPPED COUPONS. To the extent a transaction is
determined to involve "excess servicing" (as described above), or that the
classes of Certificates represent stripped interests in the underlying
Receivables, the Grantor Trust Certificates will represent interests in
stripped bonds for federal income tax purposes. Although the tax treatment of
stripped bonds is not entirely clear, based on recent guidance by the IRS,
each purchaser of a Grantor Trust Certificate will be treated as the purchaser
of a stripped bond which generally should be treated as a single debt
instrument issued on the day it is purchased for purposes of calculating any
OID. Generally, under Treasury regulations (the "Section 1286 Treasury
Regulations"), if the discount on a stripped bond is larger than a DE MINIMIS
amount (as calculated for purposes of the OID rules of the Code) such stripped
bond will be considered to have been issued with OID. If OID rules were to
apply, all of the taxable income to be recognized with respect to the
Certificates would be includible in income as OID but would not be includible
again when the interest is actually received. Regulations do not adequately
address the circumstances in which payment of interest on Certificates such as
the Grantor Trust Certificates would be considered unconditionally payable,
and thus, Tax Counsel is unable to opine as to the extent to which interest
payments on the Certificates would be treated as qualified stated interest.
MARKET DISCOUNT. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules
of Sections 1276 through 1278 of the Code to the extent an undivided interest
in a Receivable is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Receivable allocable to such holder's
undivided interest over such holder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than
0.25% of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Sections 1276 through 1278 of the Code.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history likely will apply. Under those rules, the holder
of a market discount bond may elect to accrue market discount on the basis of
a constant yield method.
A holder who acquired a Grantor Trust Certificate at a market discount may
be required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry
such Grantor Trust Certificate purchased with market discount. For these
purposes, the DE MINIMIS rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the
year in which such market discount is includible in income. If such holder
elects to include market discount in income currently as it
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<PAGE>
accrues on all market discount instruments acquired by such holder in that
taxable year or thereafter, the interest deferral rule described above will
not apply.
PREMIUM. The price paid for a Grantor Trust Certificate by a holder will be
allocated to such holder's undivided interest in each Receivable based on each
Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant yield method. Amortizable bond
premium will be treated as an offset to interest income on such Grantor Trust
Certificate. The basis for such Grantor Trust Certificate will be reduced to
the extent that amortizable premium is applied to offset interest payments. It
is not clear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code. A
Grantor Trust Certificateholder that makes this election for a Grantor Trust
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Grantor Trust Certificateholder held at the
beginning of the year of the election or acquired thereafter. Absent such an
election, the premium will be deductible as an ordinary loss only upon
disposition of the Certificate or pro rata as principal is paid on the
Receivables.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the
difference between the portion of the prepaid principal amount of such
Receivable that is allocable to the Grantor Trust Certificate and the portion
of the adjusted basis of the Grantor Trust Certificate that is allocable to
such Receivable. If a reasonable prepayment assumption is used to amortize
such premium, it appears that such a loss would be available, if at all, only
if prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
ELECTION TO TREAT ALL INTEREST AS OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including
DE MINIMIS market or OID) and premium in income as interest, based on a
constant yield method. If such an election were to be made with respect to a
Grantor Trust Certificate with market discount, the Certificateholder would be
deemed to have made an election to include in income currently market discount
with respect to all other debt instruments having market discount that such
Grantor Trust Certificateholder acquires during the year of the election or
thereafter. Similarly, a Grantor Trust Certificateholder that makes this
election for a Grantor Trust Certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that such Grantor Trust
Certificateholder held at the beginning of the year of the election or
acquired thereafter. See "Premium." The election to accrue interest, discount
and premium on a constant yield method with respect to a Grantor Trust
Certificate is generally irrevocable.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221 of the Code,
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and will be long-term or short-term depending on whether the Grantor Trust
Certificate has been owned for the long-term capital gain holding period
(currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from
the sale of a Grantor Trust Certificate by a bank or a thrift institution to
which such section applies will be treated as ordinary income or loss.
NON-U.S. PERSONS. Generally, interest or OID paid by the person required to
withhold tax under Section 1441 or 1442 of the Code to (i) an owner that is
not a U.S. Person (as defined below) or (ii) a Grantor Trust Certificateholder
holding on behalf of an owner that is not a U.S. Person would not be subject
to withholding if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that
such Grantor Trust Certificateholder is not a U.S. Person and providing the
name and address of such Grantor Trust Certificateholder).
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership 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 includible in gross income for federal income tax purposes
regardless of its source.
The Withholding Tax Regulations alter, in certain respects, the foregoing
certification rules and generally are effective for periods after December 31,
1998. Prospective investors are urged to consult their tax advisors with
respect to the effect of the Withholding Tax Regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year,
to each person who was a Grantor Trust Certificateholder at any time during
such year, such information as may be deemed necessary or desirable to assist
Grantor Trust Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold Grantor Trust Certificates as
nominees on behalf of beneficial owners. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income
tax return, 31% backup withholding may be required with respect to any
payments. Any amounts deducted and withheld from a distribution to a recipient
would be allowed as a credit against such recipient's federal income tax
liability. Prospective investors are urged to consult their tax advisors
concerning the potential impact of the Withholding Tax Regulations.
FASIT LEGISLATION. The "Small Business Job Protection Act of 1996" (the
"Act") created a new type of entity for federal income tax purposes called a
"financed asset securitization investment trust" or "FASIT." The Act generally
enables certain arrangements similar to a trust that is treated as a
partnership to elect to be treated as a FASIT. Under 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 provided in
the related Prospectus Supplement, the Trust Agreement and Indenture will set
forth certain conditions which, if satisfied, will permit the Depositor to
amend such Trust Agreement and Indenture in order to enable all or a portion
of the Trust to qualify as a FASIT and to permit a FASIT election to be made
with respect thereto, and to make such modifications to such Trust Agreement
and Indenture as may be permitted by reason of the making of such an election.
However, there can be no assurance that the Depositor will or will
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not cause any permissible FASIT election to be made with respect to a Trust or
amend the related Trust Agreement and Indenture in connection with any
election. Furthermore, any such election will be made only if an opinion of
Tax Counsel is rendered that such election will not have material adverse
consequences to any holder of a Note or Certificate.
THE FEDERAL AND STATE DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S OR
CERTIFICATEHOLDER'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 certain types of Keogh Plans (each a "Benefit 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 Benefit 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. ERISA also imposes certain duties and certain
prohibitions on persons who are fiduciaries of plans subject to ERISA.
Generally, any person who exercises any authority or control with respect to
the management or disposition of the assets of a plan subject to ERISA is
considered to be a fiduciary of such plan.
If the assets of a Trust were deemed to constitute plan assets of a Benefit
Plan, the Benefit Plan's investment in Notes or Certificates might be deemed
to constitute delegation under ERISA of the duty to manage plan assets by the
fiduciaries making the decision on behalf of the Benefit Plan to make the
investment, and transactions involving the Trust might be deemed as
transactions with the Benefit Plan for the purpose of ERISA's fiduciary and
prohibited transaction rules. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a Trust
would be treated as plan assets of a Benefit Plan for the purposes of ERISA
and the Code only if the Benefit 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. The likely
treatment in this context of Notes and Certificates of a given series will be
discussed in the related Prospectus Supplement.
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. Accordingly, assets of such
plans may be invested in Notes or Certificates without regard to the ERISA
considerations discussed herein, subject to the provisions of other applicable
federal, state, and local law.
A plan fiduciary considering the purchase of Securities of a given series
should consult its tax and/or legal advisors regarding the applicability of
the fiduciary responsibility provisions of ERISA to such investment, 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.
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SENIOR CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
Unless otherwise specified in the related Prospectus Supplement, the
following discussion applies only to nonsubordinated Certificates (referred to
herein as "Senior Certificates") issued by a Trust that does not issue Notes.
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 Benefit 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 receivables covered by the Exemption
include installment sales contracts such as the Receivables. In general, the
Exemption will apply to the acquisition, holding and resale of the Senior
Certificates by a Benefit Plan, provided that specific conditions (certain of
which are described below) are met. However, it is not clear whether the
Exemption applies to those Benefit Plans which are participant directed plans
as described in Section 404(c) of ERISA or plans that are subject to Section
4975 of the Code but that are not subject to Title I of ERISA, such as certain
Keogh plans and certain individual retirement accounts.
Among the conditions which must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The acquisition of the Senior Certificates by a Benefit Plan is on terms
(including the price for the Senior Certificates) that are at least as
favorable to the Benefit Plan as they would be in an arm's length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates acquired by
the Benefit Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Benefit Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's Structured Rating
Group, Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. or
Fitch Investors Service, L.P. (each a "Rating Agency");
(4) The Trustee is not an affiliate of any other member of the Restricted
Group (as defined in the Exemption);
(5) The sum of all payments made to the Underwriters in connection with the
distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates; the sum
of all payments made to and retained by the Transferor pursuant to the
transfer of the Contracts to the Trust represents not more than the fair
market value of such Contracts; and the sum of all payments made to and
retained by the Servicer represents not more than reasonable compensation
for the Servicer's services under the Agreement and reimbursement of the
Servicer's reasonable expenses in connection therewith;
(6) The Benefit Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501 (a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933; and
(7) The Trust satisfies the following requirements:
(a) the corpus of the Trust consists solely of assets of the type which
have been included in other investment pools,
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(b) certificates in such other investment pools have been rated in one of
the three highest generic rating categories of a Rating Agency for at
least one year prior to the Benefit Plan's acquisition of the Senior
Certificates, and
(c) certificates evidencing interests in such other investment pools have
been purchased by investors other than Benefit Plans for at least one
year prior to any Benefit Plan's acquisition of Senior Certificates.
Furthermore, if the related Prospectus Supplement provides that the property
of the Trust will include a Pre-Funding Account, certain additional conditions
must be met in order for the Exemption to apply to the acquisition, holding
and resale of the Senior Certificates by a Benefit Plan.
The Exemption does not provide an exemption from ERISA Sections
406(a)(1)(E), 406(a)(2) or 407 for the purchase or holding of Senior
Certificates by fiduciaries investing assets of Benefit Plans sponsored by any
member of the Restricted Group or any affiliate of such person.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of interest or prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the
Senior Certificates are acquired by persons independent of the Restricted
Group and at least 50% of the aggregate interest in the Trust is acquired by
persons independent of the Restricted Group, (ii) the Benefit Plan's
investment in Senior Certificates does not exceed twenty-five (25) percent of
all of the Senior Certificates outstanding at the time of the acquisition, and
(iii) immediately after the acquisition, no more than twenty-five (25) percent
of the assets of the Benefit Plan are invested in certificates representing an
interest in one or more trusts containing assets sold or serviced by the same
entity. The Exemption does not apply to Plans sponsored by the Depositor, the
Transferor, any Underwriter, the Trustee, the Servicer, any obligor with
respect to Contracts included in the Trust constituting more than five percent
of the aggregate unamortized principal balance of the assets in the Trust, or
any affiliate of such parties (the "Restricted Group").
The Depositor believes that the Exemption will apply to the acquisition and
holding by Benefit 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 have been met.
In addition, as of the date hereof, no obligor with respect to Contracts
included in the Trust constitutes more than five percent of the aggregate
unamortized principal balance of the assets of the Trust.
Any Benefit Plan fiduciary considering the purchase of Senior Certificates
should consult with its counsel with respect to the applicability of the
Exemption and other issues and determine on its own whether all conditions
have been satisfied and whether the Senior Certificates are an appropriate
investment for a Benefit Plan under ERISA and the Code. Each purchaser that
purchases Senior Certificates with the assets of one or more Benefit Plans
shall be deemed to represent that each such Plan qualifies as an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D under the Securities
Act.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Securities of a given series the ("Underwriting Agreement"),
the Depositor will agree to cause the related Trust to sell to the
underwriters named therein and in the related Prospectus
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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 therein and in the related Prospectus
Supplement.
In the Underwriting Agreement 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 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 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 Depositor.
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 OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust and the Depositor by Mayer, Brown & Platt,
Chicago, Illinois and for the Underwriter for such series by Mayer, Brown &
Platt. Certain federal income tax matters will be passed upon for each Trust
by Mayer, Brown & Platt.
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INDEX OF TERMS
[TO BE CONFORMED]
<TABLE>
<S> <C>
accounts.............................................................. 21
accredited investor................................................... 96
Act................................................................... 94
Administration Agreement.............................................. 69
Administration Fee.................................................... 70
Administrator......................................................... 69
Applicable Trustee.................................................... 51
APR................................................................... 14
Base Rate............................................................. 45
Benefit Plan.......................................................... 94
Calculation Agent..................................................... 45
Calculation Date...................................................... 46-48, 50
capital asset......................................................... 93
CD Rate............................................................... 46
CD Rate Determination Date............................................ 46
CD Rate Security...................................................... 45
Cede.................................................................. 27
Cedel................................................................. 52
Cedel Participants.................................................... 52
Certificate Balance................................................... 8
Certificate Distribution Account...................................... 59
Certificate Pool Factor............................................... 33
Certificateholder..................................................... 51
Certificateholders.................................................... 27
Certificates.......................................................... 1
chattel paper......................................................... 19
clearing corporation.................................................. 50
Closing Date.......................................................... 57
Code.................................................................. 80
Collection Account.................................................... 59
Collection Period..................................................... 61
Commercial Paper Rate................................................. 46
Commercial Paper Rate Determination Date.............................. 46
Commercial Paper Rate Security........................................ 45
Commission............................................................ 4
Composite Quotations.................................................. 45
Cooperative........................................................... 53
Cutoff Date........................................................... 27
Dealer Agreements..................................................... 27
Dealers............................................................... 11, 27
Definitive Certificates............................................... 54
Definitive Notes...................................................... 54
Definitive Securities................................................. 54
Depositaries.......................................................... 50
Depositor............................................................. 4, 34
Depository............................................................ 37
Distribution Date..................................................... 43
DTC................................................................... 27
</TABLE>
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<TABLE>
<S> <C>
DTC's Nominee......................................................... 27
Eligible Deposit Account.............................................. 60
Eligible Institution.................................................. 60
Eligible Investments.................................................. 60
equity interest....................................................... 95
ERISA................................................................. 17
Euroclear............................................................. 53
Euroclear Operator.................................................... 53
Euroclear Participants................................................ 53
Events of Default..................................................... 39
Exchange Act.......................................................... 4
Exemption............................................................. 95
FASIT................................................................. 94
Federal Funds Rate.................................................... 47
Federal Funds Rate Determination Date................................. 48
Federal Funds Rate Security........................................... 45
Final Scheduled Maturity Date......................................... 14
Financed Assets....................................................... 10
Financed Recreational Vehicles........................................ 10
Fixed Rate Securities................................................. 44
Floating Rate Securities.............................................. 44
foreign person........................................................ 82
FTC Rule.............................................................. 78
Funding Period........................................................ 7
Ganis................................................................. 5
Grantor Trust Certificateholders...................................... 89
Grantor Trust Certificates............................................ 89
H.15(519)............................................................. 45
Holder-in-Due-Course.................................................. 78
Indenture............................................................. 6
Indenture Trustee..................................................... 1
Index Maturity........................................................ 45
Indirect Participants................................................. 51
Cutoff Date........................................................... 10
Initial Pool Balance.................................................. 69
Initial Receivables................................................... 10
Insolvency Event...................................................... 66
Interest Rate......................................................... 6
Interest Reset Date................................................... 45
Interest Reset Period................................................. 45
Investment Earnings................................................... 60
IRS................................................................... 80
Issuer................................................................ 5
LIBOR................................................................. 48, 49
LIBOR Determination Date.............................................. 48
LIBOR Security........................................................ 45
LIBOR Telerate........................................................ 48
London Banking Day.................................................... 48
market discount....................................................... 91
Money Market Yield.................................................... 47
new partnership....................................................... 86
Note Distribution Account............................................. 59
</TABLE>
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<TABLE>
<S> <C>
Note Pool Factor...................................................... 32
Noteholder............................................................ 51
Noteholders........................................................... 27
Notes................................................................. 1
Obligors.............................................................. 27
OID................................................................... 81
OID regulations....................................................... 81
old partnership....................................................... 86
Participants.......................................................... 51
parties in interest................................................... 94
Pass Through Rate..................................................... 8
Payment Date.......................................................... 38
Plan Assets Regulation................................................ 95
Pool Balance.......................................................... 33
Pooling and Servicing Agreement....................................... 5
Portfolio interest.................................................... 82
Pre-Funded Amount..................................................... 11
Pre-Funding Account................................................... 2
Preferred Mortgages................................................... 15
prepayments........................................................... 24, 32
prohibited transaction................................................ 94
Prospectus Supplement................................................. 1
Purchase Amount....................................................... 59
Rating Agency......................................................... 96
Receivables........................................................... 2
Receivables Pool...................................................... 27
Receivables Purchase Agreement........................................ 58
Recreational Vehicle Receivables...................................... 27
Registration Statement................................................ 4
Related Documents..................................................... 41
Reserve Account....................................................... 64
Restricted Group...................................................... 97
Rules................................................................. 52
Schedule of Receivables............................................... 58
Section 1286 Treasury Regulations..................................... 90
Securities............................................................ 1
Securities Act........................................................ 4
Securityholder........................................................ 51
Securityholders....................................................... 27
Seller................................................................ 5
Senior Certificates................................................... 95
Servicer.............................................................. 5
Servicer Advance...................................................... 13
Servicer Default...................................................... 66
Servicing Fee......................................................... 62
Servicing Fee Rate.................................................... 62
Simple Interest Receivables........................................... 30
Spread................................................................ 45
Spread Multiplier..................................................... 45
Strip Certificates.................................................... 9
Strip Notes........................................................... 7
Subsequent Receivables................................................ 2
</TABLE>
78
<PAGE>
<TABLE>
<S> <C>
Subsequent Transfer Date.............................................. 58
Telerate Page 3750.................................................... 48
Terms and Conditions.................................................. 53
Transfer and Servicing Agreement...................................... 10
Treasury bills........................................................ 49
Treasury Rate......................................................... 49
Treasury Rate Determination Date...................................... 50
Treasury Rate Security................................................ 45
Trust................................................................. 1, 5
Trust Accounts........................................................ 60
Trust Agreement....................................................... 5
Trustee............................................................... 1, 5
U.S. Person........................................................... 93
UCC................................................................... 15, 59
</TABLE>
79
<PAGE>
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities 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
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear, as applicable, will instruct its Depositary to receive the Global
Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by such Depositary to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
applicable clearing system and by the clearing system, in accordance with its
usual procedures, to the CEDEL Participant's or Euroclear Participant's
account. The Global Securities credit will appear the next day (European time)
and the cash debit will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debit
will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each CEDEL Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
80
<PAGE>
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing systems, through
their respective Depositaries, 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 their respective Depositaries, as
appropriate, to deliver the bonds to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities from
and including the last coupon payment date to and excluding the settlement
date. The payment will then be reflected in the account of the CEDEL
Participant or Euroclear Participant the following day, and receipt of the
cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would be back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the CEDEL Participant or Euroclear
Participant have a line of credit with its clearing system and elect to be in
debit in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft charges incurred over that one-
day period. If settlement is not completed on the intended value date (i.e.,
the trade fails), receipt of the cash proceeds in the CEDEL Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use CEDEL or Euroclear and that
purchase Global Securities from DTC Participants for delivery to CEDEL
Participants or Euroclear Participants should note that these trades would
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase side
of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so that
the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue 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 OF NON-U.S. PERSONS (FORM W-8). Beneficial owners of Notes that
are non-U.S. Persons generally 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. PERSON WITH 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
81
<PAGE>
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 beneficial owners of Notes
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 beneficial owner of Notes or such owner's 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 PROCEDURE. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person
through whom it holds the security (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 a citizen or resident of the United States,
a corporation or a partnership organized in or under the laws of the United
States or any political subdivision thereof or an estate, the income of
which from sources outside the United States is includible in gross income
for federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States or a trust if a
court within the United States is able to exercise primary supervision of
the administration of the trust and one or more United States fiduciaries
have the authority to control all substantial decisions of the trust.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax
advice concerning their holding and disposing of the Global Securities.
82
<PAGE>
Subject to completion, dated [ ], 1998 Version #2A
[Recreational Vehicles]
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED , 199 )
$( )
( ) TRUST 199 -( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
( ) Trust 199 ( ) (the "Trust") will be governed pursuant to
a Trust Agreement to be dated as of , 199 , between Deutsche Recreational
Asset Funding Corporation (the "Depositor") and ( ), as (Owner) Trustee. The
Trust will issue $ aggregate principal amount of ( %) Asset Backed Notes,
Class ( ) (the "Class ( ) Notes") and $ aggregate principal amount of
( %) Asset Backed Notes, Class ( ) (the "Class ( ) Notes" and, together
with the Class ( ) Notes, the "Notes") pursuant to an Indenture to be dated as
of , 199 , between the Trust and , as Indenture Trustee. (No principal
payments will be made in the Class ( ) Notes until the Class ( ) Notes have
been paid in full, and to that extent, the rights of the holders of the Class
( ) Notes to receive distributions with respect to the Receivables are
subordinated to the rights of the holders of the Class ( ) Notes, as more
fully described herein.)
(Cover continued on following page)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [S-10] HEREIN AND ON PAGE [19] IN THE ACCOMPANYING PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS
IN DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, THE TRANSFEROR, THE
SERVICER OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES, THE
CERTIFICATES OR THE RECEIVABLES ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
ORIGINAL
PRINCIPAL PRICE TO UNDERWRITING PROCEEDS TO THE
AMOUNT PUBLIC(1) DISCOUNT DEPOSITOR(1)(2)
--------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Class ( ) Notes............... $ % % %
Class ( ) Notes............... % % %
Certificates................... % % %
Total........................ $ $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
The Notes and the Certificates are offered by Deutsche Bank Securities Inc.
(the "Underwriter") subject to prior sale, when, as and if issued and accepted
by the Underwriter and subject to the Underwriter's right to reject any order
in whole or in part and to approval of certain legal matters by its counsel. It
is expected that the Notes and the Certificates will be delivered in book-entry
form only through the facilities of The Depository Trust Company and, in the
case of the Notes, Cedel Bank, societe anonyme, and the Euroclear System, in
each case against payment therefor, in immediately available funds on or about
, 199 .
DEUTSCHE BANK SECURITIES INC.
, 199 .
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
The Trust will also issue $ aggregate principal amount of ( %) Asset
Backed Certificates (the "Certificates" and, together with the Notes, the
"Securities"). The assets of the Trust will include a pool of retail
installment sale contracts and/or retail installment loans (the
"Receivables"), secured by security interests in new or used recreational
vehicles (the "Financed Assets" or "Financed Recreational Vehicles"),
collections and other payments with respect to the Receivables received after
the Cutoff Date described herein and monies on deposit in certain trust
accounts. The Notes will be secured by the assets of the Trust pursuant to the
Indenture.
Interest on each class of Notes will be payable on the day of each
month or, if any such day is not a Business Day, on the next succeeding
Business Day (each, a "Distribution Date"), commencing , 199 . Principal
of the Notes will be payable on each Distribution Date to the extent described
herein; however, no principal payments will be made on the Class ( ) Notes
until the Class ( ) Notes have been paid in full.
The Certificates will represent fractional undivided interests in the Trust.
Interest, to the extent of the Pass Through Rate specified above, will be
distributed to the Certificateholders on each Distribution Date. Distributions
of interest on the Certificates will be subordinated in priority of payment to
interest due on the Notes as and to the extent described herein. In addition,
no distributions of principal on the Certificates will be made until all the
Notes have been paid in full. See "Risk Factors--Subordination of the
Certificates to the Notes" herein.
Each class of the Notes and the Certificates will be payable in full on the
applicable final scheduled Distribution Date as set forth herein. However,
payment in full of a class of Notes or of the Certificates could occur earlier
than such dates as described herein. In addition, the Class ( ) Notes will be
subject to redemption in whole, but not in part, and the Certificates will be
subject to prepayment in whole, but not in part, on any Distribution Date on
which the Servicer exercises its option to purchase the Receivables. The
Servicer may purchase the Receivables when the aggregate principal balance of
the Receivables shall have declined to less than 10% of the initial aggregate
principal balance of the Receivables acquired by the Trust.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS
CONTAINED IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR
THE CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN
THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE
STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF SECURITIES TO
COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" HEREIN.
S-2
<PAGE>
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are issued,
monthly and annual unaudited reports containing information concerning the
Receivables will be prepared by the Servicer and sent on behalf of the Trust
only to Cede & Co. ("Cede"), as nominee of The Depository Trust Company
("DTC") and registered holder of the Notes and the Certificates. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--Reports
to Securityholders" in the accompanying Prospectus (the "Prospectus"). Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. The Depositor, as originator of the
Trust, will file with the Securities and Exchange Commission (the
"Commission") such periodic reports as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Delinquencies,
Repossessions and Net Losses" and "Weighted Average Life of the Securities"
herein may constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and as such may involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Receivables to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
S-3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
ISSUER...................... ( ) Trust 199 -( ) (the
"Trust" or the "Issuer"), a ( ) a
business trust to be governed pursuant to a Trust
Agreement dated as of , 199 (as
amended and supplemented from time to time, the
"Trust Agreement"), between the Depositor and the
Owner Trustee.
TRANSFEROR.................. Ganis Credit Corporation
DEPOSITOR................... Deutsche Recreational Asset Funding Corporation
(the "Depositor").
SERVICER.................... Deutsche Financial Services Corporation (the
"Servicer").
INDENTURE TRUSTEE........... , as trustee under the Indenture (the
"Indenture Trustee").
OWNER TRUSTEE............... , as trustee under the Trust Agreement
(the "Owner Trustee").
CLOSING DATE................ On or about , 199 .
CUTOFF DATE................. , 199 .
THE NOTES................... The Trust will issue Asset Backed Notes pursuant
to an Indenture to be dated as of , 199 (as
amended and supplemented from time to time, the
"Indenture"), between the Trust and the Indenture
Trustee, as follows: (i) ( %) Asset Backed
Notes, Class ( ) (the "Class ( ) Notes") in the
aggregate initial principal amount of $ ; and
(ii) ( %) Asset Backed Notes, Class ( ) (the
"Class ( ) Notes") in the aggregate initial
principal amount of $ . The Class ( ) Notes
and the Class ( ) Notes are collectively
referred to herein as the "Notes".
The Notes will be secured by the assets of the
Trust pursuant to the Indenture.
THE CERTIFICATES............ The Trust will issue ( %) Asset Backed
Certificates (the "Certificates" and, together
with the Notes, the "Securities") with an
aggregate initial Certificate Balance of $ .
The Certificates will represent fractional
undivided interests in the Trust and will be
issued pursuant to the Trust Agreement.
THE RECEIVABLES............. The Receivables will have an aggregate principal
balance of approximately $ (the "Initial Pool
Balance") as
S-4
<PAGE>
of the Cutoff Date. The Receivables will consist
of retail installment sale contracts and/or
retail installment loans between Obligors and
Dealers, between Originators and Dealers and/or
between the Transferor and Obligors, secured by
new or used recreational vehicles (the "Financed
Assets" or "Financed Recreational Vehicles"). The
Receivables were originated by the Transferor
[and/or] were acquired by the Transferor from
Dealers [or Originators]. The Receivables will be
transferred by the Transferor to the Depositor on
or prior to the Closing Date, and will be
transferred by the Depositor to the Trust on the
Closing Date. As of the Cutoff Date, the weighted
average annual percentage rate of the Receivables
was approximately %, the weighted average
remaining maturity of the Receivables was
approximately months, and the weighted average
original maturity of the Receivables was
approximately months. No Receivable has a
scheduled maturity later than , 20 (the
"Final Scheduled Maturity Date"). See "The
Receivables Pool" herein.
The "Pool Balance" at any time will represent the
aggregate principal balance of the Receivables at
the end of the preceding Collection Period, after
giving effect to all payments received from
Obligors, Servicer Advances and Purchase Amounts
to be remitted by the Servicer or the Depositor,
as the case may be, all for such Collection
Period, and all losses realized on Receivables
liquidated during such Collection Period.
TERMS OF THE NOTES
A. DISTRIBUTION DATES..... Payments of interest and principal on the Notes
will be made on the day of each month or, if any
such day is not a Business Day, on the next
succeeding Business Day (each, a "Distribution
Date"), commencing , 199 . Each reference to a
"Payment Date" in the Prospectus shall refer to a
Distribution Date herein. Payments will be made
to holders of record of the Notes (the
"Noteholders") as of the day immediately
preceding such Distribution Date or, if
Definitive Notes are issued, as of the [ ] day
of the preceding month (a "Record Date"). A
"Business Day" is a day other than a Saturday, a
Sunday or a day on which banking institutions or
trust companies in the States of ( ) are
authorized by law, regulation or executive order
to be closed.
B. INTEREST RATES......... The Class ( ) Notes will bear interest at a per
annum rate of % (the "Class ( ) Rate") and the
Class ( ) Notes will bear interest at a per
annum rate of % (the "Class ( ) Rate").
S-5
<PAGE>
The interest rates for the various classes of
Notes are referred to herein collectively as
"Interest Rates" and for each class of Notes as
the "Interest Rate" for such class.
C.INTEREST................ Interest on the outstanding principal amount of
the Notes will accrue at the applicable Interest
Rate from the Closing Date (in the case of the
first Distribution Date) or from the day of
the month preceding the month of a Distribution
Date to and including the day of the month of
such Distribution Date (each an "Interest Accrual
Period"). Interest on the Notes will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. See
"Description of the Notes--Payments of Interest"
herein.
D.PRINCIPAL............... Principal of the Notes will be payable on each
Distribution Date in an amount equal to the
Noteholders' Principal Distributable Amount for
the calendar month (the "Collection Period")
preceding such Distribution Date (or in the case
of the first Distribution Date, the period from
and including the Cutoff Date to and including
, 199 ) to the extent of funds available
therefor. The "Noteholders' Principal
Distributable Amount" will equal the sum of (i)
the Regular Principal Distribution Amount plus
(ii) the Accelerated Principal Distribution
Amount. The "Regular Principal Distribution
Amount" with respect to any Distribution Date
will equal the amount of principal paid [or, in
certain circumstances, scheduled to be paid] with
respect to the Receivables plus, in certain
circumstances, the principal balance of
[defaulted] Receivables, as calculated by the
Servicer as described under "Description of the
Transfer and Servicing Agreements--Distributions"
herein. The "Accelerated Principal Distribution
Amount" with respect to a Distribution Date will
equal the portion, if any, of the Total
Distribution Amount for the related Collection
Period that remains after payment of (a) the
Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior
Distribution Dates), (b) the interest due on the
Notes, (c) the Regular Principal Distribution
Amount, (d) the interest due on the Certificates,
and (e) the amount, if any, required to be
deposited in the Reserve Account on such
Distribution Date.
On the Business Day immediately preceding each
Distribution Date (a "Determination Date"), the
Indenture Trustee shall determine the amount in
the Collection Account available for distribution
on the related Distribution Date. Payments to
Securityholders will be made on each Distribution
Date in accordance with such determination. The
Servicing Fee in respect of a
S-6
<PAGE>
Collection Period (together with any portion of
the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid at the beginning
of such Collection Period out of collections for
such Collection Period.
No principal payments will be made on the Class
( ) Notes until the Class ( ) Notes have been
paid in full.
The outstanding principal amount of the Class
( ) Notes, to the extent not previously paid,
will be payable on the (199 )(20 )
Distribution Date (the "Class ( ) Final
Scheduled Distribution Date"); and the
outstanding principal amount of the Class ( )
Notes, to the extent not previously paid, will be
payable on the (199 )(20 ) Distribution Date
(the "Class ( ) Final Scheduled Distribution
Date").
E.OPTIONAL REDEMPTION..... The Notes will be redeemed in whole, but not in
part, on any Distribution Date on which the
Servicer exercises its option to purchase the
Receivables. The Servicer will have the option to
purchase all of the Receivables on any
Distribution Date on or after the Distribution
Date on which the Pool Balance has declined to
less than 10% of the Initial Pool Balance. The
price at which the Servicer will be required to
purchase the Receivables in order to exercise
such option will be equal to the aggregate of the
Purchase Amounts of the Receivables as of the end
of the related Collection Period. The Servicer
will be required to give not less than ( ) days
notice to the Trustee of its intention to
exercise such option. In addition, the Servicer
will not be permitted to exercise such option
unless the resulting distribution would be
sufficient to retire the Notes at a redemption
price equal to the unpaid principal amount of the
Class ( ) Notes plus accrued and unpaid interest
thereon. See "Description of the Notes--Optional
Redemption" herein.
TERMS OF THE CERTIFICATES
A.DISTRIBUTION DATES...... Distributions with respect to the Certificates
will be made on each Distribution Date,
commencing , 199 . Distributions will be made
to holders of record of the Certificates (the
"Certificateholders" and, together with the
Noteholders, the "Securityholders") as of the
related Record Date (which will be the [ ] day
of the preceding month if Definitive Certificates
are issued).
B. PASS THROUGH RATE...... ( )% per annum (the "Pass Through Rate").
C.INTEREST................ On each Distribution Date, the Owner Trustee will
distribute pro rata to Certificateholders 30 days
of accrued interest at the Pass Through Rate on
the outstanding
S-7
<PAGE>
Certificate Balance generally to the extent of
funds available following payment of the
Servicing Fee and distributions in respect of the
Notes from the Total Distribution Amount and the
Reserve Account. Interest will be calculated on
the basis of a 360-day year consisting of twelve
30-day months. Interest in respect of a
Distribution Date will accrue from the Closing
Date (in the case of the first Distribution Date)
or from the [ ] day of the month preceding the
month of the Distribution Date to and including
the [ ] day of the month of such Distribution
Date.
D.PRINCIPAL............... No distributions of principal on the Certificates
will be made until all of the Notes have been
paid in full. On each Distribution Date
commencing on the Distribution Date on which the
Class ( ) Notes are paid in full, principal of
the Certificates will be payable in an amount
generally equal to the Certificateholders'
Principal Distributable Amount for the Collection
Period preceding such Distribution Date, to the
extent of funds available therefor following
payment of the Servicing Fee, payments of
interest and principal, if any, due in respect of
the Notes and the distribution of interest in
respect of the Certificates. The
"Certificateholders' Principal Distributable
Amount" will be the Regular Principal
Distribution Amount (less, on the Distribution
Date on which the Notes are paid in full, the
portion thereof payable on the Notes), and will
be calculated by the Servicer in the manner
described under "Description of the Transfer and
Servicing Agreements--Distributions" herein.
E.OPTIONAL PREPAYMENT..... If the Servicer exercises its option to purchase
the Receivables, the terms of which option are
summarized under "Terms of the Notes--E. Optional
Redemption" above, the Certificates will be
retired. The Servicer will not be permitted to
exercise such option unless the resulting
distribution to Certificateholders would be equal
to the outstanding Certificate Balance together
with accrued interest at the Pass Through Rate.
See "Description of the Certificates--Optional
Prepayment" herein.
RESERVE ACCOUNT............. (DESCRIBE RESERVE ACCOUNT FORMULA)
COLLECTION ACCOUNT;
PRIORITY OF PAYMENTS.......
Except under certain conditions described herein
or as otherwise acceptable to each Rating Agency,
the Servicer will be required to remit
collections received with respect to the
Receivables within [ ] Business Days of receipt
thereof to one or more accounts in the name of
the Indenture Trustee (the "Collection Account").
At the beginning of each Collection Period the
Indenture Trustee
S-8
<PAGE>
will apply collections in the Collection Account
to pay to the Servicer the Servicing Fee for such
Collection Period and any overdue Servicing Fees.
Pursuant to the Transfer and Servicing Agreement,
the Servicer will have the revocable power to
instruct the Indenture Trustee to withdraw funds
on deposit in the Collection Account and to apply
such funds on each Distribution Date to the
following (in the priority indicated): (i) the
Servicing Fee, together with any unpaid Servicing
Fees from prior Distribution Dates (if for any
reason such amount was not paid at the beginning
of the Collection Period as described above), to
the Servicer, (ii) the Noteholders' Interest
Distributable Amount and the Noteholders'
Principal Distributable Amount into the Note
Distribution Account, (iii) the
Certificateholders' Interest Distributable Amount
and, after the Notes have been paid in full, the
Certificateholders' Principal Distributable
Amount into the Certificate Distribution Account
and (iv) the remaining balance, if any, to the
Reserve Account.
TAX STATUS.................. In the opinion of Mayer, Brown & Platt, counsel
to the Trust ("Tax Counsel"), 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 and state income tax
purposes. Alternative characterizations of the
Trust and the Certificates are possible, but
would not result in materially adverse tax
consequences to Certificateholders. See "Federal
Income Tax Consequences" herein and "Federal
Income Tax Consequences" in the Prospectus for
additional information concerning the application
of federal income and state tax laws to the Trust
and the Securities.
ERISA CONSIDERATIONS........ Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes are eligible for purchase
by employee benefit plans. Except as provided
herein under "ERISA Considerations," the
Certificates may not be acquired by any employee
benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), or
by an individual retirement account. See "ERISA
Considerations" herein and in the Prospectus.
S-9
<PAGE>
RATING OF THE NOTES......... It is a condition to the issuance of the Notes
that they be rated " " by at least one Rating
Agency. The rating of the Notes by a Rating
Agency reflects such Rating Agency's assessment
of the likelihood that the Noteholders will
receive payments and interest, however, the
rating on the Notes does not address the timing
of distributions of principal of the Notes prior
to the Final Scheduled Distribution Date. A
rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or
withdrawal at any time by the assigning Rating
Agency. Each rating should be evaluated
independently of any other rating. See "Risk
Factors--Ratings of the Securities" herein.
RATING OF THE CERTIFICATES.. It is a condition to the issuance of the
Certificates that they be rated at least in the
" " category or its equivalent by at least one
Rating Agency. The rating of the Certificates by
a Rating Agency reflects such Rating Agency's
assessment of the likelihood that the
Certificateholders will receive payments of
principal and interest, however, the rating on
the Certificates does not address the timing of
the distributions of principal in respect of the
Certificates prior to the Final Scheduled
Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Each
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Securities" herein.
S-10
<PAGE>
RISK FACTORS
Investors should consider, among other things, the matters discussed under
"Risk Factors" in the Prospectus and the following risk factors in connection
with purchases of the Notes and/or Certificates.
LIMITED LIQUIDITY; ABSENCE OF A SECONDARY MARKET. There is currently no
secondary market for the Securities. Each Underwriter currently intends to
make a market in the Securities, but it is under no obligation to do so. There
can be no assurance that a secondary market will develop or, if a secondary
market does develop, that it will provide the Securityholders with liquidity
of investment or that it will continue for the life of the Securities offered
hereby.
(GEOGRAPHIC CONCENTRATION. Economic conditions in states where Obligors
reside may affect the delinquency, loan loss and repossession experience of
the Trust with respect to the Receivables. Obligors on Receivables
representing approximately % by principal balance of the Receivables were
located in ( ) at the Cutoff Date. As a result, economic
conditions in such states may have a disproportionate affect on prepayments
and/or defaults in respect of the Receivables and thus potentially adversely
affect the amount available for distribution to the Securityholders. In
particular, an economic downturn in one or more of such states could adversely
affect the performance of the Trust as a whole (even if national economic
conditions remain unchanged or improve) as Obligors in such state or states
experience the effects of such a downturn and face greater difficulty in
making payments on their Financed Assets. See "The Receivables Pool" herein.)
SUBORDINATION OF THE CERTIFICATES TO THE NOTES. Distributions of interest
and principal on the Certificates will be subordinated in priority of payment
to interest and principal due on the Notes. Consequently, the
Certificateholders will not receive any distributions with respect to a
Collection Period until the full amount of interest on and principal of the
Notes due on such Distribution Date has been deposited in the Note
Distribution Account. The Certificateholders will not receive any
distributions of principal until the Distribution Date on which all of the
Notes have been paid in full.
LIMITED ASSETS OF THE TRUST. The Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and the Reserve Account. Holders of the Notes and the Certificates
must rely for repayment upon payments on the Receivables and, if and to the
extent available, amounts on deposit in the Reserve Account. Although funds in
the Reserve Account will be available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Notes and the
Certificates, amounts to be deposited in the Reserve Account are limited in
amount. If the Reserve Account is exhausted, the Trust will depend solely on
current distributions on the Receivables to make payments on the Notes and the
Certificates.
RATINGS OF THE SECURITIES. It is a condition to the issuance of the
Securities that each class of the Notes be rated in the highest investment
rating category, and that the Certificates be rated at least in the " "
category or its equivalent, by at least one nationally recognized rating
agency (the "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. The ratings of the Securities
address the likelihood of the payment of principal and interest on the
Securities pursuant to their terms. There can be no assurance that a rating
will remain for any 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.
S-11
<PAGE>
THE TRUST
GENERAL
The Issuer, ( ) Trust 199 -( ), is a
business trust formed under the laws of the State of ( ) pursuant to
the Trust Agreement for the transactions described in this Prospectus
Supplement. After its formation, the Trust will not engage in any activity
other than (i) acquiring, holding and managing the Receivables 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 or are incidental thereto or connected therewith.
The Trust will initially be capitalized with equity equal to the Certificate
Balance of $ , excluding amounts deposited in the Reserve Account. The equity
of the Trust, together with the net proceeds from the sale of the Notes, may
be used by the Trust to acquire the Receivables from the Depositor pursuant to
the Transfer and Servicing Agreement or otherwise will be distributed to the
Depositor.
If the protection provided to the investment of the Securityholders by the
Reserve Account is insufficient, the Trust will look only to the Obligors on
the Receivables and the proceeds from the repossession and sale of Financed
Assets which secure defaulted Receivables. In such event, certain factors,
such as the Trust's not having first priority perfected security interests in
some of the Financed Assets, may affect the Trust's ability to realize on the
collateral securing the Receivables, and thus may reduce the proceeds to be
distributed to Securityholders with respect to the Securities. See
"Description of the Transfer and Servicing Agreements--Distributions" and "--
Subordination; Reserve Account" herein and "Certain Legal Aspects of the
Receivables" in the Prospectus.
The Trust's principal offices are in , , in care of ( ),
as Owner Trustee, at the address listed below under "--The Owner Trustee".
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes and the Certificates
had taken place on such date:
<TABLE>
<S> <C>
Class ( ) Notes......................................................
Class ( ) Notes......................................................
Certificates..........................................................
------
Total............................................................... $
======
</TABLE>
THE OWNER TRUSTEE
is the Owner Trustee under the Trust Agreement. is
a (state) banking corporation and its principal offices are located
at , , . The Depositor and its affiliates may maintain normal
commercial banking relations with the Owner Trustee and its affiliates.
S-12
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables transferred to the Trust on the Closing Date. The Receivables
(will be)(have been) acquired by the Depositor from the Transferor. The
Transferor originated the Receivables or acquired the Receivables from Dealers
[or Originators] in the ordinary course of business. The Receivables were
selected from the Transferor's portfolio for transfer to the Depositor, and
were selected from the Depositor's portfolio for inclusion in the Receivables
Pool, by several criteria, some of which are set forth in the Prospectus under
"The Receivables Pools", as well as the requirement that, as of the Cutoff
Date, each Receivable (i) had an outstanding gross balance of at least $
and (ii) was not more than 59 days past due (a Receivable is not considered
past due if the amount past due is less than % of the scheduled monthly
payment). As of the Cutoff Date, no Obligor on any Receivable was noted in the
related records of the Servicer as being the subject of a bankruptcy
proceeding. No selection procedures believed by the Depositor to be adverse to
Securityholders were used in selecting the Receivables.
Set forth in the following tables is information concerning the composition,
distribution by annual percentage rate ("APR") and the geographic distribution
of the Receivables Pool as of the Cutoff Date.
( ) TRUST 199 -( )
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE APR AGGREGATE AVERAGE WEIGHTED AVERAGE
OF PRINCIPAL NUMBER OF REMAINING AVERAGE PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TERM ORIGINAL TERM BALANCE
- ----------- ------------ ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
( ) TRUST 199 -( )
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE RECEIVABLES BALANCE BALANCE(1)
- --------- ----------- --------- ----------
<S> <C> <C> <C>
0.00%-- 5.00%................................. $ %
5.01%-- 6.00%.................................
6.01%-- 7.00%.................................
7.01%-- 8.00%.................................
8.01%-- 9.00%.................................
9.01%--10.00%.................................
10.01%--11.00%.................................
11.01%--12.00%.................................
12.01%--13.00%.................................
13.01%--14.00%.................................
14.01%--15.00%.................................
15.01%--16.00%.................................
16.01%--17.00%.................................
17.01%--18.00%.................................
Greater than 18.00%............................
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
S-13
<PAGE>
( ) TRUST 199 -( )
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENTAGE
AGGREGATE
PRINCIPAL
STATE(2) BALANCE(1)
-------- ----------
<S> <C>
-------
%
=======
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
(2) Based on billing addresses of the Obligors, as reflected in the Servicer's
records as of the Cutoff Date.
Approximately % of the aggregate principal balance of the Receivables,
constituting % of the number of the Receivables, represent previously titled
vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of the
Transferor pertaining to retail new and used recreational receivables [,
including those previously sold which the Servicer continues to service].
There can be no assurance that the delinquency, repossession and net loss
experience on the Receivables will be comparable to that set forth below. [To
follow: reference to repurchases by Dealers for (i) breaches of
representations and warranties by Dealers or (ii) rescissions and attempted
rescissions by customers.]
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT ,
----------------------------------- ---------------------------------
199 199 199 199
----------------- ----------------- ---------------- ----------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $ $
Period of Delinquency
31-60 Days.............
61 Days or More........
Total Delinquencies..... $ $ $ $
Total...................
Delinquencies as a Per-
cent of the Portfolio.. % % % % % % % %
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------
199 199 199
----------------- ----------------- ----------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio................. $ $ $
Period of Delinquency
31-60 Days............... $ $ $
61 Days or More.......... $ $ $
Total Delinquencies.......
Total Delinquencies as a
Percent of the Portfolio. % % % % % %
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract.
S-14
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE (1)
<TABLE>
<CAPTION>
ENDED [ ] YEAR ENDED DECEMBER 31,
-------------------- ---------------------------
199 199 199 199 199 199 199
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period............ $ $ $ $ $ $ $
Average Number of Contracts
Outstanding During the Peri-
od...........................
Repossessions as a Percent of
Average Number of Contacts
Outstanding.................. % % % % % % %
Net Losses as a Percent of
Liquidations(3)(4)........... % % % % % % %
Net Losses as a Percent of Av-
erage Amount Outstand-
ing(2)(3).................... % % % % % % %
</TABLE>
- --------
(1) (Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract.)
(2) Percentages have been annualized for the [ ] months ended [ ], 199 and
199 and are not necessarily indicative of the experience for the year.
(3) (Net losses are equal to the aggregate of the balances of all contracts
which are determined to be uncollectible in the period, less any
recoveries on contracts charged off in the period or any prior periods,
including any losses resulting from disposition expenses.)
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
THE TRANSFEROR
For a description of the Transferor and its underwriting standards, see "The
Transferor" in the Prospectus.
THE SERVICER
For a description of the Servicer and its servicing standards, see "The
Servicer" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations with
respect to the Securities is set forth under "Weighted Average Life of the
Securities" in the Prospectus. No principal payments will be made on the Class
( ) Notes until all Class ( ) Notes have been paid in full. In addition, no
principal payments on the Certificates will be made until all of the Notes
have been paid in full. See "Description of the Notes--Payments of Principal"
and "Description of the Certificates--Distributions of Principal" herein. As
the rate of payment of principal of each class of Notes and the Certificates
depends primarily on the rate of payment (including prepayments) of the
principal balance of the Receivables, final payment of any class of the Notes
and the final distribution in respect of the Certificates could occur
significantly earlier than their respective final scheduled Distribution
Dates. In addition, the rate of payment of principal of each class of Notes
will be affected by the Accelerated Principal Distribution Amounts applied to
the payment of the principal of the Notes. Securityholders will bear the risk
of being able to reinvest principal payments on the Securities at yields at
least equal to the yields on their respective Securities.
S-15
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of
the Indenture will be filed with the Commission following the issuance of the
Securities. The following summary describes certain terms of the Notes and the
Indenture. The summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the Notes
and the Indenture. The following summary supplements, and to the extent
inconsistent therewith, replaces the description of the general terms and
provisions of the Notes of any given series and the related Indenture set
forth in the Prospectus, to which description reference is hereby made.
, a , will be the Indenture Trustee under the Indenture.
PAYMENTS OF INTEREST
The Notes will constitute Fixed Rate Securities, as such term is defined
under "Certain Information Regarding the Securities--Fixed Rate Securities" in
the Prospectus. Interest on the principal balances of the classes of the Notes
will accrue at their respective per annum Interest Rates and will be payable
to the Noteholders monthly on each Distribution Date, commencing , 199 .
Interest on the outstanding principal amount of the Notes will accrue at the
applicable Interest Rate from the Closing Date (in the case of the first
Distribution Date) or from the day of the month preceding the month of a
Distribution Date to and including the [ ] day of the month of the
Distribution Date (each an "Interest Accrual Period"). Interest on the Notes
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. Interest payments on the Notes will generally be derived from the
Total Distribution Amount remaining after the payment of the Servicing Fee and
from the Reserve Account. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Subordination; Reserve Account" herein.
Interest payments to all classes of Noteholders will have the same priority.
Under certain circumstances, the amount available for interest payments could
be less than the amount of interest payable on the Notes on any Distribution
Date, in which case each class of Noteholders will receive their ratable share
(based upon the aggregate amount of interest due to such class of Noteholders)
of the aggregate amount available to be distributed in respect of interest on
the Notes.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution Date
in an amount generally equal to the sum of (i) the Regular Principal
Distribution Amount plus (ii) the Accelerated Principal Distribution Amount.
The "Regular Principal Distribution Amount" with respect to any Distribution
Date will equal the sum of principal payments received with respect to the
Receivables during the preceding Collection Period or, in certain cases,
scheduled to be paid during such Collection Period plus the principal balances
of [defaulted] Receivables written off in respect of such Collection Period,
subject to certain limitations. The "Accelerated Principal Distribution
Amount" with respect to any Distribution Date will equal the portion, if any,
of the Total Distribution Amount for the related Collection Period that
remains after payment of (a) the Servicing Fee, (b) the Noteholders' Interest
Distributable Amount, (c) the Regular Principal Distribution Amount, (d) the
Certificateholders' Interest Distributable Amount, and (e) the amount, if any,
required to be deposited in the Reserve Account on such Distribution Date.
Principal payments on the Notes will generally be derived from the Total
Distribution Amount and the amount, if any, in the Reserve Account up to the
Available Amount remaining after the payment of the Servicing Fee and the
Noteholders' Interest Distributable Amount and, in the case of any Accelerated
Principal Distribution Amount, the Certificateholders' Interest
S-16
<PAGE>
Distributable Amount and the amount, if any, required to be deposited into the
Reserve Account. See "Description of the Transfer and Servicing Agreements--
Distributions" and "--Subordination; Reserve Account" herein.
On the Business Day immediately preceding each Distribution Date (a
"Determination Date"), the Indenture Trustee shall determine the amount in the
Collection Account for the related Collection Period allocable to interest and
the amount allocable to principal on an actual basis, and payments to
Securityholders on the following Distribution Date will be based on such
allocation.
On each Distribution Date, principal payments on the Notes will be applied
in the following order of priority: (i) to the principal balance of the Class
( ) Notes until the principal balance of the Class ( ) Notes is reduced to
zero; and (ii) to the principal balance of the Class ( ) Notes until the
principal balance of the Class ( ) Notes is reduced to zero. The principal
balance of the Class ( ) Notes, to the extent not previously paid, will be
due on the Class ( ) Final Scheduled Distribution Date; and the principal
balance of the Class ( ) Notes, to the extent not previously paid, will be
due on the Class ( ) Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of any class of Notes is paid
may be earlier than the respective Final Scheduled Distribution Dates set
forth above based on a variety of factors, including those described under
"Weighted Average Life of the Securities" herein and in the Prospectus.
OPTIONAL REDEMPTION
The Class ( ) Notes will be redeemed in whole, but not in part, on any
Distribution Date after all the other classes of Notes have been paid in full
on which the Servicer exercises its option to purchase the Receivables. The
Servicer will have the option to purchase all, but not less than all, of the
Receivables on any Distribution Date on or after the Distribution Date on
which the Pool Balance has declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will be required to purchase the
Receivables in order to exercise such option will be equal to the aggregate of
the Purchase Amounts of the Receivables as of the end of the related
Collection Period. The Servicer will be required to give not less than ( )
days notice to the Trustee of its intention to exercise such option. In
addition, the Servicer will not be permitted to exercise such option unless
the resulting distribution would be sufficient to retire the Notes at a
redemption price equal to the unpaid principal amount of such Notes plus
accrued and unpaid interest thereon (the "Redemption Price"). See "Description
of the Transfer and Servicing Agreements--Termination" in the Prospectus.
S-17
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Trust Agreement will be filed with the Commission
following the issuance of the Securities. The following summary describes
certain terms of the Certificates and the Trust Agreement. The summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Certificates and the Trust Agreement.
The following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
DISTRIBUTIONS OF INTEREST
On each Distribution Date, commencing , (199 )(20 ) , the
Certificateholders will be entitled to distributions in an amount equal to the
amount of interest that would accrue on the Certificate Balance at the Pass
Through Rate. The Certificates will constitute Fixed Rate Securities, as such
term is defined under "Certain Information Regarding the Securities--Fixed
Rate Securities" in the Prospectus. Interest in respect of a Distribution Date
will accrue from the Closing Date (in the case of the first Distribution Date)
or from the day of the month preceding the month of the Distribution Date to
and including the day of the month of such Distribution Date. Interest in
respect of the Certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest distributions due for any
Distribution Date but not distributed on such Distribution Date will be due on
the next Distribution Date increased by an amount equal to interest on such
amount at the Pass Through Rate (to the extent lawful). Interest distributions
with respect to the Certificates will generally be funded from the portion of
the Total Distribution Amount and the funds in the Reserve Account remaining
after the distribution of the Servicing Fee and the Noteholders' Distributable
Amount. See "Description of the Transfer and Servicing Agreements--
Distributions" and "--Subordination; Reserve Account" herein.
DISTRIBUTIONS OF PRINCIPAL
Certificateholders will be entitled to distributions of principal on each
Distribution Date, commencing with the Distribution Date on which the Notes
are paid in full, in an amount generally equal to the Regular Principal
Distribution Amount (less, on the Distribution Date on which the Notes are
paid in full, the portion thereof payable on the Notes). Distributions with
respect to principal payments will generally be funded from the portion of the
Total Distribution Amount and funds in the Reserve Account remaining after the
distribution of the Servicing Fee, the Noteholders' Distributable Amount (on
the Distribution Date on which the Notes are paid in full) and the
Certificateholders' Interest Distributable Amount. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Subordination;
Reserve Account" herein.
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables, the terms
of which option are described under "Description of the Notes--Optional
Redemption" herein, the Certificates will be retired. The Servicer will not be
permitted to exercise such option unless the resulting distribution to the
Certificateholders would be equal to the outstanding Certificate Balance
together with accrued interest at the Pass Through Rate. See "Description of
the Transfer and Servicing Agreements--Termination" in the Prospectus.
S-18
<PAGE>
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Transfer and Servicing
Agreement, the Administration Agreement and the Trust Agreement (collectively,
the "Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement. A copy
of the Transfer and Servicing Agreement will be filed with the Commission
following the issuance of the Securities. The summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
the provisions of the Transfer and Servicing Agreements. The following summary
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Transfer and Servicing
Agreements set forth in the Prospectus, to which description reference is
hereby made.
TRANSFER OF RECEIVABLES
Certain information regarding the transfer of the Receivables by the
Depositor to the Trust on the Closing Date pursuant to the Transfer and
Servicing Agreement is set forth in the Prospectus under "Description of the
Transfer and Servicing Agreements--Transfer of Receivables".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be % per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection Period
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid at the beginning of such Collection Period
out of collections for such Collection Period. [To follow: description of
Supplemental Servicing Fee and Servicing Suspense Account.] See "Description
of the Transfer and Servicing Agreements--Servicing Compensation and Payment
of Expenses" in the Prospectus.
DISTRIBUTIONS
DEPOSITS TO COLLECTION ACCOUNT. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for a Distribution Date shall be the sum of the Interest
Distribution Amount and the Regular Principal Distribution Amount (other than
the portion thereof attributable to Realized Losses). "Realized Losses" means
the excess of the principal balance of any Liquidated Receivable over
Liquidation Proceeds to the extent allocable to principal [received in the
Collection Period in which the Receivable became a Liquidated Receivable].
The "Interest Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of [defaulted] Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Liquidated Receivables ("Liquidation
Proceeds"), to the extent attributable to interest due thereon in accordance
with the Servicer's customary servicing procedures, and all recoveries in
respect of Liquidated Receivables which were written off in prior Collection
Periods; (iii) all Servicer Advances made by the Servicer; (iv) the Purchase
Amount of each Receivable that was purchased by the Depositor or purchased by
the Servicer under an obligation which arose during the related Collection
Period, to the extent attributable to accrued interest thereon; and (v)
Investment Earnings for such Distribution Date. The Interest Distribution
Amount shall be determined on the related Determination Date [on an actual
basis].
S-19
<PAGE>
The "Regular Principal Distribution Amount" on any Distribution Date will
generally be the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
allocable to principal; (ii) all Liquidation Proceeds attributable to the
principal amount of Receivables which became Liquidated Receivables during
such Collection Period in accordance with the Servicer's customary servicing
procedures, plus the amount of Realized Losses with respect to such Liquidated
Receivables; (iii) to the extent attributable to principal, the Purchase
Amount received with respect to each Receivable purchased by the Transferor or
purchased by the Servicer under an obligation which arose during the related
Collection Period; and (iv) partial prepayments relating to refunds of
extended warranty protection plan costs or of physical damage, credit life or
disability insurance policy premiums, but only if such costs or premiums were
financed by the respective Obligor as of the date of the original contract.
The Regular Principal Distribution Amount shall be determined on the related
Determination Date [on an actual basis].
The Interest Distribution Amount and the Regular Principal Distribution
Amount on any Distribution Date shall exclude the following:
(i) all payments and proceeds (including Liquidation Proceeds) of any
Receivables, the Purchase Amount of which has been included in the Total
Distribution Amount in a prior Collection Period;
(ii) amounts received in respect of interest on Receivables during the
preceding Collection Period in excess of the amount of interest that would
have been due during the Collection Period on the Receivables at their
respective APRs (assuming that a payment is received on each Receivable on
the due date thereof); and
(iii) Liquidation Proceeds attributable to accrued and unpaid interest on
the Receivables (but not including interest for the then current Collection
Period) but only to the extent of any unreimbursed Servicer Advances.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS. At the beginning of each Collection
Period, the Indenture Trustee will apply funds available in the Collection
Account to pay to the Servicer the Servicing Fee for such Collection Period
and any overdue Servicing Fees. On each Distribution Date, the Servicer will
instruct the Indenture Trustee to make the following deposits and
distributions, to the extent of the amount then on deposit in the Collection
Account, in the following order of priority:
(i) to the Servicer, from the Interest Distribution Amount (as so
allocated) the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods, to the extent, if any, such amounts are not paid at the
beginning of the related Collection Period;
(ii) to the Note Distribution Account, from the Total Distribution Amount
remaining after the payment of the Servicing Fee for such Collection Period
and all unpaid Servicing Fees from prior Collection Periods, the
Noteholders' Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) and (ii), the
Noteholders' Principal Distributable Amount;
(iv) to the Certificate Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (iii), the
Certificateholders' Interest Distributable Amount;
(v) after all of the Notes have been paid in full, to the Certificate
Distribution Account, from the Total Distribution Amount remaining after
the application of clauses (i) through (iv), the Certificateholders'
Principal Distributable Amount; and
(vi) the remaining balance, if any, to the Reserve Account.
S-20
<PAGE>
For purposes hereof, the following terms shall have the following meanings:
"Noteholders' Distributable Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, interest accrued for the related Interest Accrual
Period on each class of Notes at the respective Interest Rate for such class
on the outstanding principal balance of the Notes of such class on the
immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all payments
of principal to the Noteholders of such class on or prior to such Distribution
Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Noteholders' Interest Carryover Shortfall on such preceding Distribution Date,
over the amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus interest on the
amount of interest due but not paid to Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the respective Interest
Rates borne by each class of the Notes for the related Interest Accrual
Period.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date; provided,
however, that the Noteholders' Principal Distributable Amount shall not exceed
the outstanding principal balance of the Notes; and provided, further, that
(i) the Noteholders' Principal Distributable Amount on the Class ( ) Final
Scheduled 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 balance of the Class ( ) Notes to zero; and
(ii) the Noteholders' Principal Distributable Amount on the Class ( ) Final
Scheduled 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 balance of the Class ( ) Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means, with respect to
each Distribution Date, the sum of (i) the Regular Principal Distribution
Amount and (ii) the Accelerated Principal Distribution Amount.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount.
S-21
<PAGE>
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' 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, calculated on the basis of a 360-day
year consisting of twelve 30-day months) at the Pass Through Rate on the
Certificate Balance on the immediately preceding Distribution Date, after
giving effect to all payments allocable to the reduction of the Certificate
Balance made on or prior to such Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date).
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus interest on such excess, to the extent permitted by
law, at the Pass Through Rate for the related Interest Accrual Period.
"Certificateholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the
Distribution Date immediately following the Final Scheduled Maturity Date (the
"Final Scheduled Distribution Date"), the principal required to be deposited
into the Certificate Distribution Account will include the lesser of (a) any
principal due and remaining unpaid on each Receivable in the Trust as of the
Final Scheduled Distribution Date and (b) the amount that is necessary (after
giving effect to the other amounts to be deposited in the Certificate
Distribution Account on the Final Scheduled Distribution Date and allocable to
principal) to reduce the Certificate Balance to zero.
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date prior to the Distribution Date on which the
Notes are paid in full, zero; and with respect to any Distribution Date
commencing on the Distribution Date on which the Notes are paid in full, the
Regular Principal Distribution Amount (less, on the Distribution Date on which
the Notes are paid in full, the portion thereof payable on the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders'
Principal Carryover Shortfall from the preceding Distribution Date, over the
amount in respect of principal that is actually deposited in the Certificate
Distribution Account.
"Certificate Balance" equals, initially, $ and, thereafter, equals the
initial Certificate Balance, reduced by all amounts allocable to principal
previously distributed to Certificateholders.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account (other than Investment Earnings) will be generally paid in the
following order of priority:
(i) to the applicable Noteholders, accrued and unpaid interest on the
outstanding principal balance of the applicable class of Notes at the
applicable Interest Rate;
S-22
<PAGE>
(ii) the Noteholders' Principal Distributable Amount in the following
order of priority:
(a) to the Class ( ) Noteholders in reduction of principal until the
principal balance of the Class ( ) Notes has been reduced to zero; and
(b) to the Class ( ) Noteholders in reduction of principal until the
principal balance of the Class ( ) Notes has been reduced to zero.
On each Distribution Date, all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certificateholders.
SUBORDINATION; RESERVE ACCOUNT
The rights of the Certificateholders to receive distributions with respect
to the Receivables generally will be subordinated to the rights of the
Noteholders in the event of defaults and delinquencies on the Receivables as
provided in the Transfer and Servicing Agreement. The protection afforded to
the Noteholders through subordination will be effected both by the
preferential right of the Noteholders to receive current distributions with
respect to the Receivables and by the establishment of the Reserve Account.
The Reserve Account will be created with an initial deposit by the Depositor
on the Closing Date of cash or Eligible Investments in the amount of $ .
(DESCRIBE RESERVE ACCOUNT FORMULA)
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits therein or other withdrawals therefrom on
such Distribution Date) is greater than the Specified Reserve Account Balance
for such Distribution Date, except as described below and subject to certain
limitations, the Servicer shall instruct the Indenture Trustee to distribute
such excess to the Depositor. Upon any distribution to the Depositor of
amounts from the Reserve Account, neither the Noteholders nor the
Certificateholders will have any rights in, or claims to, such amounts.
Subsequent to any reduction or withdrawal by any Rating Agency of its rating
of any class of Notes, unless such rating has been restored, any such excess
released from the Reserve Account on a Distribution Date will be deposited in
the Note Distribution Account for payment to Noteholders as an accelerated
payment of principal on such Distribution Date.
Amounts held from time to time in the Reserve Account will continue to be
held for the benefit of Noteholders and Certificateholders. On each
Distribution Date, funds will be withdrawn from the Reserve Account up to the
Available Amount to the extent that the Total Distribution Amount (after the
payment of the Servicing Fee) with respect to any Collection Period is less
than the Noteholders' Distributable Amount and will be deposited in the Note
Distribution Account. In addition, after giving effect to such withdrawal,
funds will be withdrawn from the Reserve Account up to the Available Amount
(as reduced by any withdrawal pursuant to the preceding sentence) to the
extent that the portion of the Total Distribution Amount remaining after the
payment of the Servicing Fee and the deposit of the Noteholders' Distributable
Amount in the Note Distribution Account is less than the Certificateholders'
Distributable Amount and will be deposited in the Certificate Distribution
Account. If funds applied in accordance with the preceding sentence are
insufficient to distribute interest due on the Certificates, subject to
certain limitations, funds will be withdrawn from the Reserve Account and
applied to distribute interest due on the Certificates to the extent of the
Certificate Interest Reserve Amount. On each Distribution Date, the Reserve
Account will be reinstated up to the Specified Reserve Account Balance to the
extent of the portion, if any, of the Total Distribution Amount remaining
after payment of the Servicing Fee, the deposit of the Noteholders'
Distributable Amount into the Note Distribution Account and the deposit of the
Certificateholders' Distributable Amount into the Certificate Distribution
Account.
S-23
<PAGE>
"Available Amount" means, with respect to any Distribution Date, the amount
of funds on deposit in the Reserve Account on such Distribution Date (other
than Investment Earnings) less the Certificate Interest Reserve Amount with
respect to such Distribution Date, in each case, before giving effect to any
reduction thereto on such Distribution Date.
"Certificate Interest Reserve Amount" means the lesser of (i) $ less the
amount of any application of the Certificate Interest Reserve Amount to pay
interest on the Certificates on any prior Distribution Date and (ii) % of
the Certificate Balance on such Distribution Date (before giving effect to any
reduction thereof on such Distribution Date); provided, however, that the
Certificate Interest Reserve Amount shall be zero subsequent to any reduction
by any Rating Agency to less than " " or its equivalent, or withdrawal by
any Rating Agency, of its rating of any class of Notes, unless such rating has
been restored.
If on any Distribution Date the entire Noteholders' Distributable Amount for
such Distribution Date (after giving effect to any amounts withdrawn from the
Reserve Account) is not deposited in the Note Distribution Account, the
Certificateholders generally will not receive any distributions other than
those, if any, in respect of interest made from the Certificate Interest
Reserve Amount.
After the payment in full, or the provision for such payment, of (i) all
accrued and unpaid interest on the Securities and (ii) the outstanding
principal balance of the Securities, any funds remaining on deposit in the
Reserve Account, subject to certain limitations, will be paid to the
Depositor.
The subordination of the Certificates and the Reserve Account are intended
to enhance the likelihood of receipt by Noteholders of the full amount of
principal and interest due them and to decrease the likelihood that the
Noteholders will experience losses. In addition, the Reserve Account is
intended to enhance the likelihood of receipt by Certificateholders of the
full amount of principal and interest due them and to decrease the likelihood
that the Certificateholders will experience losses. However, in certain
circumstances, the Reserve Account could be depleted. If the amount required
to be withdrawn from the Reserve Account to cover shortfalls in collections on
the Receivables exceeds the amount of available cash in the Reserve Account,
Noteholders or Certificateholders could incur losses or a temporary shortfall
in the amounts distributed to the Noteholders or the Certificateholders could
result, which could, in turn, increase the average life of the Notes or the
Certificates.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Mayer, Brown & Platt, counsel for the Trust, 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. The Notes, including the Class ( ) Notes, will not
be issued with original issue discount ("OID"). For additional information
regarding federal income tax consequences, see "Federal Income Tax
Consequences" in the Prospectus.
S-24
<PAGE>
ERISA CONSIDERATIONS
THE NOTES
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Trust were
deemed to be assets of an employee benefit plan or an individual retirement
account (each a "Benefit Plan") subject to ERISA or Section 4975 of the Code.
Under a regulation issued by the United States Department of Labor (the "Plan
Asset Regulations"), the assets of the Trust would be treated as assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquires an "equity interest" in the Trust and none of the exceptions
contained in the Plan Asset Regulations is applicable. An equity interest is
defined under the Plan Asset Regulations as an interest other than an
instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. Although there is little guidance on
the subject, assuming that the Notes would be treated as debt under applicable
local law, the Depositor believes that the Notes should be treated as
indebtedness without substantial equity features for purposes of the Plan
Asset Regulations. This determination is based in part upon the traditional
debt features of the Notes, including the reasonable expectation of purchasers
of Notes that the Notes will be repaid when due, as well as the absence of
conversion rights, warrants and other typical equity features. The debt
treatment of the Notes for ERISA purposes could change if the Trust incurred
losses. However, without regard to whether the Notes are treated as an equity
interest for such purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Trust, the Owner Trustee or the Indenture Trustee, the
Servicer, the owner of collateral, or any of their respective affiliates is or
becomes a party in interest or a disqualified person with respect to such
Benefit Plan. In such case, certain exemptions from the prohibited transaction
rules could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to purchase a Note. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 95-
60, regarding investments by insurance company general accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 96-23,
regarding transactions by in-house asset managers; and PTCE 84-14, regarding
transactions by "qualified professional asset managers." Each investor using
the assets of a Benefit Plan which acquires the Notes, or to whom the Notes
are transferred by its acceptance and holding of any Notes or an interest
therein, will be deemed to represent and warrant that its acquisition and
continued holding of the Notes will not, throughout the term of the holding,
result in a non-exempt prohibited transaction under Section 406(a) of ERISA or
Section 4975 of the Code. A fiduciary of a Benefit Plan must determine that
the purchase of a Note is consistent with its fiduciary duties under ERISA and
does not result in a nonexempt prohibited transaction as defined in Section
406 of ERISA or Section 4975 of the Code. For additional information regarding
treatment of the Notes under ERISA, see "ERISA Considerations" in the
Prospectus.
THE CERTIFICATES
No sale, pledge or transfer of a Certificate or any interest therein may be
made to any Benefit Plan or any person who is directly or indirectly
purchasing such Certificate or interest therein on behalf of, as named
fiduciary of, as trustee of, or with assets of a Benefit Plan, unless the
purchase and holding of such Certificate is exempt under Section III of
Prohibited Transaction Class Exemption 95-60 (applicable to certain insurance
company general accounts). Each person who acquires any Class B Certificate or
interest therein shall be deemed to have certified that the foregoing
conditions have been satisfied.
S-25
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Depositor has agreed to cause the Trust to
sell to the Underwriter, and the Underwriter has agreed to purchase, the
entire principal amount of the Notes and the Certificates. [UNDERWRITING
SYNDICATE LANGUAGE AND TABLE TO BE ADDED IF APPLICABLE]
The Depositor has been advised by the Underwriter that it proposes initially
to offer the Notes to the public at the prices set forth herein, and to
certain dealers at such prices less the initial concession not in excess of
% per Class ( ) Note and % per Class ( ) Note. The Underwriter may
allow and such dealers may reallow a concession not in excess of % per
Class ( ) Note and % per Class ( ) Note to certain other dealers. After
the initial public offering of the Notes, the public offering price and such
concessions may be changed.
The Depositor has been advised by the Underwriter that it proposes initially
to offer the Certificates to the public at the price set forth herein and to
certain dealers at such price less the initial concession not in excess of
% per Certificate. The Underwriter may allow and such dealers may reallow a
concession not in excess of % per Certificate to certain other dealers.
After the initial public offering of the Certificates, the public offering
price and such concessions may be changed.
Until the distribution of the Notes and Certificates is completed, rules of
the Commission may limit the ability of the Underwriter and certain selling
group members to bid for and purchase the Notes and Certificates. As an
exception to these rules, the Underwriter is 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 Certificates.
If the Underwriter creates 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
Underwriter may reduce that short position by purchasing Notes and
Certificates in the open market.
In general, the purchase of a security for the purpose of stabilization or
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 Depositor nor [any] Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Notes and
Certificates. In addition, neither the Depositor nor any Underwriter makes any
representation that the Underwriter will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell, any Notes to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of
the Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the Notes in,
from or otherwise involving the United Kingdom and (c) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document in
connection
S-26
<PAGE>
with the issue of the Notes 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 the document may otherwise
lawfully be issued or passed on.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the 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 Transferor
or the Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
Deutsche Bank Securities Inc., the Transferor, the Servicer and the
Depositor are each indirect, wholly-owned subsidiaries of Deutsche Bank AG.
Any obligations of Deutsche Bank Securities Inc. are the sole responsibility
of Deutsche Bank Securities Inc. and do not create any obligation on the part
of any affiliate of Deutsche Bank Securities Inc.
LEGAL OPINIONS
Certain legal matters relating to the Notes and the Certificates, certain
federal income tax matters will be passed upon for the Depositor by Mayer,
Brown & Platt, Chicago, Illinois. (Certain legal matters relating to the Notes
and the Certificates will be passed upon for the Underwriter by Mayer, Brown &
Platt.). Certain California [and Illinois] income tax matters relating to the
Notes and Certificates will be passed upon for the Depositor by Bryan Cave
LLP, St. Louis, Missouri.
S-27
<PAGE>
INDEX OF TERMS
[TO BE CONFORMED]
<TABLE>
<S> <C>
"APR".................................................................. S-12
"Available Amount"..................................................... S-22
"Business Day"......................................................... S-5
"Cede"................................................................. S-3
"Certificate Balance".................................................. S-21
"Certificate Interest Reserve Amount".................................. S-22
"Certificateholders"................................................... S-7
"Certificateholders' Distributable Amount"............................. S-20
"Certificateholders' Interest Carryover Shortfall"..................... S-21
"Certificateholders' Interest Distributable Amount".................... S-20
"Certificateholders' Monthly Interest Distributable Amount"............ S-20
"Certificateholders' Monthly Principal Distributable Amount"........... S-21
"Certificateholders' Principal Carryover Shortfall".................... S-21
"Certificateholders' Principal Distributable Amount"................... S-21
"Certificates"......................................................... S-4
"Class ( ) Final Scheduled Distribution Date"......................... S-6
"Class ( ) Notes"..................................................... S-1
"Closing Date"......................................................... S-5
"Code"................................................................. S-8
"Collection Account"................................................... S-7
"Collection Period".................................................... S-5
"Commission"........................................................... S-3
"Depositor"............................................................ S-1
"Determination Date"................................................... S-6
"Distribution Date".................................................... S-2
"DTC".................................................................. S-3
"ERISA"................................................................ S-8
"Exchange Act"......................................................... S-3
"Final Scheduled Distribution Date".................................... S-19
"Final Scheduled Maturity Date"........................................ S-5
"Financed Assets"...................................................... S-2
"Financed Recreational Vehicles"....................................... S-4
"Indenture Trustee".................................................... S-4
"Indenture"............................................................ S-4
"Initial Pool Balance"................................................. S-4
"Interest Accrual Period".............................................. S-5
"Interest Distribution Amount"......................................... S-18
"Interest Rates"....................................................... S-5
"Issuer"............................................................... S-4
"Liquidated Receivables"............................................... S-18
"Liquidation Proceeds"................................................. S-18
"Noteholders".......................................................... S-5
"Noteholders' Distributable Amount".................................... S-20
"Noteholders' Interest Carryover Shortfall"............................ S-20
"Noteholders' Interest Distributable Amount"........................... S-20
"Noteholders' Monthly Interest Distributable Amount"................... S-20
"Noteholders' Monthly Principal Distributable Amount".................. S-20
"Noteholders' Principal Carryover Shortfall"........................... S-20
</TABLE>
S-28
<PAGE>
<TABLE>
<S> <C>
"Noteholders' Principal Distributable Amount".......................... S-6,S-20
"Notes"................................................................ S-1
"OID".................................................................. S-23
"Owner Trustee"........................................................ S-4
"Pass Through Rate".................................................... S-7
"Payment Date"......................................................... S-5
"Pool Balance"......................................................... S-5
"Prospectus"........................................................... S-3
"Rating Agency"........................................................ S-10
"Realized Losses"...................................................... S-18
"Receivables Pool"..................................................... S-11
"Receivables".......................................................... S-2
"Record Date".......................................................... S-5
"Redemption Price"..................................................... S-17
"Regular Principal Distribution Amount"................................ S-18
"Securities"........................................................... S-2
"Securityholders"...................................................... S-7
"Servicer"............................................................. S-4
"Tax Counsel".......................................................... S-8
"Total Distribution Amount"............................................ S-18
"Transfer and Servicing Agreements".................................... S-18
"Trust Agreement"...................................................... S-4
"Trust"................................................................ S-1
"Underwriter".......................................................... S-2
"Underwriting Agreement"............................................... S-24
</TABLE>
S-29
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BACK COVER OF PROSPECTUS SUPPLEMENT}
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE DEPOSITOR OR BY THE UNDERWRITER(S). THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANYONE IN
ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
[TO BE CONFORMED]
REPORTS TO SECURITYHOLDERS................................................. S-
SUMMARY OF TERMS........................................................... S-
RISK FACTORS............................................................... S-
THE TRUST.................................................................. S-
CAPITALIZATION OF THE TRUST................................................ S-
THE OWNER TRUSTEE.......................................................... S-
THE RECEIVABLES POOL....................................................... S-
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES................................ S-
THE TRANSFEROR............................................................. S-
THE SERVICER............................................................... S-
WEIGHTED AVERAGE LIFE OF THE SECURITIES.................................... S-
DESCRIPTION OF THE NOTES................................................... S-
DESCRIPTION OF THE CERTIFICATES............................................ S-
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................... S-
FEDERAL INCOME TAX CONSEQUENCES............................................ S-
ERISA CONSIDERATIONS....................................................... S-
UNDERWRITING............................................................... S-
LEGAL OPINIONS............................................................. S-
INDEX OF TERMS............................................................. S-
PROSPECTUS
[TO BE CONFORMED]
AVAILABLE INFORMATION......................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................
SUMMARY OF TERMS...........................................................
RISK FACTORS...............................................................
THE TRUSTS.................................................................
THE RECEIVABLES POOLS......................................................
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES..................................
POOL FACTORS AND TRADING INFORMATION.......................................
USE OF PROCEEDS............................................................
THE DEPOSITOR..............................................................
DESCRIPTION OF THE NOTES...................................................
DESCRIPTION OF THE CERTIFICATES............................................
CERTAIN INFORMATION REGARDING THE SECURITIES...............................
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS.......................
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES...................................
FEDERAL INCOME TAX CONSEQUENCES............................................
ERISA CONSIDERATIONS.......................................................
PLAN OF DISTRIBUTION.......................................................
LEGAL OPINIONS.............................................................
INDEX OF TERMS.............................................................
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS EF-
FECTING 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 OB-
LIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
WHEN ACTING AS UNDERWRITER(S) AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$( )
( ) TRUST
199 -( )
$
[ ] %
ASSET BACKED NOTES, CLASS ( )
$
[ ] %
ASSET BACKED NOTES, CLASS ( )
$
[ ] %
ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION,
DEPOSITOR
---------------
PROSPECTUS SUPPLEMENT
---------------
DEUTSCHE BANK SECURITIES INC.
---------------
, 199
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT +
+RELATES SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER +
+TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH +
+SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED [ ], 1998
VERSION #2B
[RECREATIONAL VEHICLES]
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED , 199 )
$( )
TRUST 199-( )
( %) ASSET BACKED CERTIFICATES, CLASS A
( %) ASSET BACKED CERTIFICATES, CLASS B
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
-----------
The Asset Backed Certificates, Series 199 - (the "Certificates") will consist
of two Classes of Certificates, the Class A Certificates and the Class B
Certificates. The Class A Certificates will evidence in the aggregate an
undivided ownership interest of approximately % in a trust (the" Trust") to
be formed pursuant to a Pooling and Servicing Agreement to be entered into
among Deutsche Recreational Asset Funding Corporation, as Depositor (the
"Depositor"), Deutsche Financial Services Corporation, as Servicer (the
"Servicer"), and , as Trustee (the "Trustee"). The Class B
Certificates will evidence in the aggregate an undivided ownership interest of
approximately % in the Trust. The rights of the Class B Certificateholders
to receive distributions with respect to the Receivables are subordinated to
the rights of the Class A Certificateholders, to the extent described herein.
The Trust property will include a pool of retail installment sale contracts
[and/or] retail installment loans (the "Receivables") secured by new or used
recreational vehicles (the "Financed Assets" or "Financed Recreational
Vehicles"), collections and other payments with respect to the Receivables
received after the Cutoff Date described herein and monies on deposit in
certain trust accounts.
Principal, and interest to the extent of the Pass Through Rate of % per
annum, will be distributed on the th day of each month (or the next following
business day) beginning , 199 (the "Distribution Date"). The Final
Scheduled Distribution Date on the Certificates will be .
(Cover continued on following page)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [S-9] HEREIN AND ON PAGE [19] IN THE ACCOMPANYING PROSPECTUS.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN DEUTSCHE RECREATIONAL ASSET FUNDING
CORPORATION, THE TRANSFEROR, THE SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES. NONE OF THE CERTIFICATES OR THE RECEIVABLES ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
ORIGINAL
PRINCIPAL PRICE TO UNDERWRITING PROCEEDS TO THE
AMOUNT PUBLIC (1) DISCOUNT DEPOSITOR (1) (2)
<S> <C> <C> <C> <C>
Class A Certificates........ $ % % %
Class B Certificates........ % % %
Total....................... $ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
The Certificates are offered by Deutsche Bank Securities Inc. (the
"Underwriter") subject to prior sale and subject to the Underwriter's right to
reject any order in whole or in part and to approval of certain legal matters
by its counsel. It is expected that when, as and if issued and accepted by the
Underwriter the Certificates will be delivered in book-entry form only through
the facilities of The Depository Trust Company, Cedel Bank, societe anonyme,
and the Euroclear System, in each case against payment therefor in immediately
available funds on or about , 199 .
DEUTSCHE BANK SECURITIES INC.
, 199 .
<PAGE>
(Continued from previous page)
The Servicer may purchase the Receivables when the aggregate principal
balance of the Receivables shall have declined to less than 10% of the initial
aggregate principal balance of the Receivables acquired by the Trust.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT
CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF CERTIFICATES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" HEREIN.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the Certificates. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "Reports to Securityholders" in the
accompanying Prospectus (the "Prospectus"). Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Depositor, as originator of the Trust, will file with the
Securities and Exchange Commission (the "Commission") such periodic reports as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act", and the rules and regulations of the Commission thereunder.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Delinquencies,
Repossessions and Net Losses" and "Weighted Average Life of the Certificates"
herein may constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and as such may involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Receivables to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer........................ Trust 199 -( ) (the "Trust" or
the "Issuer"), to be formed pursuant to a
Pooling and Servicing Agreement to be dated as
of , 199 among the Depositor, the
Servicer and the Trustee (the "Pooling and
Servicing Agreement")
Transferor.................... Ganis Credit Corporation.
Depositor..................... Deutsche Recreational Asset Funding Corporation
(the "Depositor").
Servicer...................... Deutsche Financial Services Corporation (the
"Servicer").
Trustee....................... , as trustee under the
Pooling and Servicing Agreement (the
"Trustee").
Closing Date.................. On or about , 199 .
Cutoff Date................... , 199 .
The Certificates.............. The Certificates will consist of two classes,
entitled % Asset Backed Certificates, Class
A (the "Class A Certificates") and % Asset
Backed Certificates, Class B (the "Class B
Certificates"). Each Certificate will represent
a fractional undivided ownership interest in
the Trust.
The Class A Certificates will evidence in the
aggregate an undivided ownership interest (the
"Class A Percentage") of approximately % of
the Trust (initially representing $ )
and the Class B Certificates will evidence in
the aggregate an undivided ownership interest
(the "Class B Percentage") of approximately
% of the Trust (initially representing
$ ). The Class B Certificates are
subordinated to the Class A Certificates, to
the extent described herein.
The Receivables............... The Receivables will have an aggregate
principal balance of approximately $
(the "Initial Pool Balance") as of ,
199 (the "Cutoff Date"). The Receivables will
consist of retail installment sale contracts
and/or installment loans between the Transferor
and Obligors, between Originators and Obligors,
or between Obligors and Dealers, secured by new
or used recreational vehicles (the "Financed
S-3
<PAGE>
Assets" or "Financed Recreational Vehicles").
The Receivables were originated by the
Transferor or were acquired by the Transferor
from Dealers [or Originators]. The Receivables
will be transferred by the Transferor to the
Depositor on or prior to the Closing Date, and
will be transferred by the Depositor to the
Trust on the Closing Date. As of the Cutoff
Date, the weighted average annual percentage
rate of the Receivables was approximately
%, the weighted average remaining maturity
of the Receivables was approximately months,
and the weighted average original maturity of
the Receivables was approximately months.
No Receivable has a scheduled maturity later
than , 20 (the "Final Scheduled
Maturity Date"). See "The Receivables Pool"
herein.
The "Pool Balance" at any time will represent
the aggregate principal balance of the
Receivables at the end of the preceding
Collection Period, after giving effect to all
payments received from Obligors, Servicer
Advances and Purchase Amounts to be remitted by
the Servicer or the Depositor, as the case may
be, all for such Collection Period, and all
losses realized on Receivables liquidated
during such Collection Period.
Distribution Dates............ Distributions with respect to the Certificates
will be made on the day of each month or,
if any such day is not a Business Day, on the
next succeeding Business Day (each, a
"Distribution Date") commencing ,
199. The Servicer shall determine the amount to
be distributed on the Distribution Date on or
before the Business Day preceding such
Distribution Date (the "Determination Date").
Distributions will be made to holders of the
Certificates (the "Certificateholders") of
record as of the day immediately preceding such
Distribution Date or, if Definitive
Certificates are issued, as of the day of the
preceding month (a "Record Date").
Class A Pass Through Rate..... % per annum.
Class B Pass Through Rate..... % per annum.
Interest...................... On each Distribution Date, the Trustee will
distribute to the Class A Certificateholders 30
days of interest at the Class A Pass-Through
Rate on the Class A Certificate Balance as of
the last day of the preceding calendar month
(before giving effect to distributions of
principal on the related Distribution Date)
generally to the extent of funds available from
(i) the Class A Percentage of the Interest
Distribution Amount; (ii) the Reserve Account
and (iii) the Class B Percentage of the Total
Distribution
S-4
<PAGE>
Amount. The "Class A Certificate Balance" shall
equal, initially, the Class A Percentage of the
Pool Balance as of the Cutoff Date and
thereafter shall equal the initial Class A
Certificate Balance, reduced by all principal
distributions on the Class A Certificates.
Interest on the Certificates will be calculated
on the basis of a 360-day year consisting of
twelve 30-day months.
Class A Principal............. On each Distribution Date, the Trustee will
distribute to Class A Certificateholders an
amount equal to the Class A Percentage of the
Principal Distribution Amount for the
Collection Period preceding such Distribution
Date to the extent of funds available therefor.
The "Principal Distribution Amount" is the
amount of principal paid or, in certain
circumstances, the principal balance of
defaulted Receivables, as calculated by the
Servicer as described under "Description of the
Certificates--Distributions." The Class A
Percentage of the Principal Distribution Amount
will be passed through on each Distribution
Date to the Class A Certificateholders to the
extent of funds available from (i) the Class A
Percentage of the Principal Distribution Amount
(exclusive of the portion thereof attributable
to Realized Losses), (ii) the Reserve Account
and (iii) the Class B Percentage of the Total
Distribution Amount. "Realized Losses" means
the excess of the principal balance of any
Liquidated Receivable over Liquidation Proceeds
to the extent allocable to principal received
in the Collection Period in which the
Receivable became a Liquidated Receivable. A
"Collection Period" with respect to a
Distribution Date will be the calendar month
preceding the month in which such Distribution
Date occurs.
Class B Interest.............. On each Distribution Date, the Trustee will
distribute to the Class B Certificateholders 30
days of interest at the Class B Pass Through
Rate on the Class B Certificate Balance as of
the last day of the preceding calendar month
(before giving effect to distributions of
principal on such Distribution Date) generally
to the extent of funds available, after giving
effect to the prior rights of the Class A
Certificateholders to receive the distribution
of principal and interest due them as described
above, from (i) the Class B Percentage of the
Interest Distribution Amount and (ii) the
Reserve Account. The "Class B Certificate
Balance" will equal, initially, $ and,
thereafter, will equal the initial Class B
Certificate Balance reduced by all amounts
previously distributed to Class B
Certificateholders (or deposited in the Reserve
Account, exclusive of the Reserve Account
Initial Deposit) and allocable to principal and
by Realized Losses.
S-5
<PAGE>
Class B Principal............. On each Distribution Date, the Trustee will
distribute the Class B Percentage of the
Principal Distribution Amount to the Class B
Certificateholders to the extent of funds
available (after giving effect to the
distribution of the interest and principal due
to the Class A Certificateholders and the
interest due to the Class B Certificateholders)
from (i) the Class B Percentage of the
Principal Distribution Amount (exclusive of the
portion thereof attributable to Realized
Losses) and (ii) the Reserve Account.
Optional Prepayment........... The Servicer will have the option to purchase
all, but not less than all, of the Receivables
on any Distribution Date on or after the
Distribution Date on which the Pool Balance has
declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will
be required to purchase the Receivables in
order to exercise such option will be equal to
the aggregate of the Purchase Amounts of the
Receivables as of the end of the related
Collection Period. The Servicer will be
required to give not less than ( ) days notice
to the Trustee of its intention to exercise
such option. In addition, the Servicer will not
be permitted to exercise such option unless the
resulting distribution would be sufficient to
distribute to the Class A Certificateholders an
amount equal to the Class A Certificate Balance
together with accrued interest at the Class A
Pass Through Rate, and to the Class B
Certificateholders an amount equal to the Class
B Certificate Balance together with accrued
interest at the Class B Pass Through Rate. Upon
such a distribution the Certificates will be
retired.
Reserve Account............... On the Closing Date, the Depositor will deposit
in the Reserve Account cash or Eligible
Investments having a value of at least
$ .
Certain amounts in the Reserve Account on any
Distribution Date (after giving effect to all
distributions to be made on such Distribution
Date) in excess of the Specified Reserve
Account Balance for such Distribution Date will
be released to the Depositor.
The "Specified Reserve Account Balance" with
respect to any Distribution Date generally will
be equal to (state formula). The amount in the
Reserve Account will be increased by the
deposit thereto on each Distribution Date of
the amount, if any, of the Total Distribution
Amount remaining after the payment of the
Servicing Fee and any prior unpaid Servicing
Fee, the Class A Distributable Amount and the
Class B Distributable Amount until the amount
in the Reserve Account equals the Specified
Reserve Account Balance. Amounts in the
S-6
<PAGE>
Reserve Account on any Distribution Date (after
giving effect to all distributions made on such
Distribution Date) in excess of the Specified
Reserve Account Balance for such Distribution
Date generally will be released to the
Depositor and will no longer be available to
the Certificateholders. The Reserve Account
will be maintained with the Trustee as a
segregated trust account, but will not be part
of the Trust.
Collection Account............ Except under certain conditions described
herein, the Servicer will be required to remit
collections received with respect to the
Receivables within two Business Days of receipt
thereof to one or more accounts in the name of
the Trustee (the "Collection Account").
Pursuant to the Pooling and Servicing
Agreement, the Servicer will have the revocable
power to instruct the Trustee to withdraw funds
on deposit in the Collection Account and to
apply such funds on each Distribution Date to
the following (in the priority indicated):
(i) the Servicing Fee for the prior
Collection Period and any overdue Servicing
Fees to the Servicer,
(ii) the Class A Distributable Amount to the
Class A Certificateholders,
(iii) the Class B Distributable Amount to
the Class B Certificateholders, and
(iv) the remaining balance, if any, to the
Reserve Account.
Tax Status.................... In the opinion of Mayer, Brown & Platt, counsel
to the Trust ("Tax Counsel") the Trust will be
treated as a grantor trust for federal income
tax purposes and will not be subject to federal
income tax. Certificate Owners will report
their pro rata share of all income earned on
the Receivables (other than amounts, if any,
treated as "stripped coupons") and, subject to
certain limitations in the case of Certificate
Owners who are individuals, trusts, or estates,
may deduct their pro rata share of reasonable
servicing and other fees. See "Federal Income
Tax Consequences" in the Prospectus for
additional information concerning the
application of federal income tax laws to the
Trust and the Certificates.
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Class A Certificates are
eligible for purchase by employee benefit
plans.
The Class B Certificates may not be acquired by
any employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended
S-7
<PAGE>
("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"),
or by an individual retirement account. See
"ERISA Considerations" herein and in the
Prospectus.
Ratings of the Class A It is a condition to the issuance of the Class
Certificates.................. A Certificates that they be rated " " by at
least one Rating Agency. The rating of the
Class A Certificates by a Rating Agency
reflects such Rating Agency's assessment of the
likelihood that the holders of the Class A
Certificates will receive payments of principal
and interest, however, the rating on the Class
A Certificates does not address the timing of
distributions of principal in respect of the
Class A Certificates prior to the Final
Scheduled Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Each
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Certificates" herein.
Ratings of the Class B It is a condition to the issuance of the Class
Certificates.................. B Certificates that they be rated at least in
the " " category or its equivalent by at least
one Rating Agency. The rating of the Class B
Certificates by a Rating Agency reflects such
Rating Agency's assessment of the likelihood
that the holders of the Class B Certificates
will receive payments of principal and
interest, however, the rating on the Class B
Certificates does not address the timing of
distributions of principal in respect of the
Certificates prior to the Final Scheduled
Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Such
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Certificates" herein.
S-8
<PAGE>
RISK FACTORS
Investors should consider, among other things, the matters discussed under
"Risk Factors" in the Prospectus and the following risk factors in connection
with purchases of the Certificates.
LIMITED LIQUIDITY; ABSENCE OF A SECONDARY MARKET. There is currently no
secondary market for the Certificates. Each Underwriter currently intends to
make a market in the Certificates, but it is under no obligation to do so.
There can be no assurance that a secondary market will develop or, if a
secondary market does develop, that it will provide the Certificateholders
with liquidity of investment or that it will continue for the life of the
Certificates offered hereby.
(GEOGRAPHIC CONCENTRATION. Economic conditions in states where Obligors
reside may affect the delinquency, loan loss and repossession experience of
the Trust with respect to the Receivables. Obligors on Receivables
representing approximately % by principal balance of the Receivables were
located in ( ) as of the Cutoff Date. As a result, economic conditions in
such states may have a disproportionate effect on prepayments and/or defaults
in respect of the Receivables and thus potentially adversely affect the amount
available for distribution to Certificateholders. In particular, an economic
downturn in one or more of such states could adversely affect the performance
of the Trust as a whole (even if national economic conditions remain unchanged
or improve) as Obligors in such state or states experience the effects of such
a downturn and face greater difficulty in making payments on their Financed
Assets. See "The Receivables Pool" herein.)
SUBORDINATION. Distributions of interest and principal on the Class B
Certificates will be subordinated in priority of payment to interest and
principal due on the Class A Certificates. Consequently, the Class B
Certificateholders will not receive any distributions with respect to a
Collection Period until the full amount of interest on and principal of the
Class A Certificates due on such Distribution Date has been deposited in the
Certificate Distribution Account.
LIMITED ASSETS OF THE TRUST. The Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and the Reserve Account. Holders of the Certificates must rely for
repayment upon payments on the Receivables and, if and to the extent
available, amounts on deposit in the Reserve Account. Although funds in the
Reserve Account will be available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Certificates,
amounts to be deposited in the Reserve Account are limited in amount. If the
Reserve Account is exhausted, the Trust will depend solely on current
distributions on the Receivables to make payments on the Certificates.
PAYMENT DELAY. The effective yield on the Certificates will be reduced below
the yield otherwise produced because interest accrued through the end of each
calendar month will not be distributed until the Distribution Date in the
following month, and the amount distributable on such Distribution Date will
not bear interest during such delay. As a result, the market value of the
Certificates will be lower than would be the case if there was no such delay.
RATINGS OF THE CERTIFICATES. It is a condition to the issuance of the
Certificates that the Class A Certificates be rated in the highest investment
rating category, and that the Class B Certificates be rated at least in the
" " category or its equivalent, by at least one nationally recognized rating
agency (the "Rating Agency"). A rating is not a recommendation to purchase,
hold or sell Certificates, inasmuch as such rating does not comment as to
market price or suitability for a particular investor. The ratings of the
Certificates address the likelihood of the payment of principal and interest
on the Certificates pursuant to their terms. There can be no assurance that a
rating will remain for any 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.
S-9
<PAGE>
THE TRUST
GENERAL
The Depositor will establish the Trust by transferring the Trust property,
as described below, to the Trustee in exchange for the Certificates. The
Servicer will service the Receivables pursuant to the Pooling and Servicing
Agreement and will be compensated for acting as the Servicer. See "Description
of the Certificates--Servicing Compensation and Payment of Expenses" herein.
To facilitate servicing and to minimize administrative burden and expense, the
Servicer will be appointed custodian for the Receivables by the Trustee, but
will not stamp the Receivables to reflect the transfer of the Receivables to
the Trust. In addition, due to administrative burden and expense, (i) the
certificates of title to those Financed Recreational Vehicles financed in
states where security interests in recreational vehicles are subject to
certificate of title statutes will not be amended to reflect such transfers,
and (ii) UCC financing statements in respect of those Financed Recreational
Vehicles financed in states where security interests in recreational vehicles
are perfected by filing a UCC-1 financing statement will not be amended to
reflect such assignments. In the absence of such procedures, such Trust may
not have a perfected security interest in the Financed Assets in some states.
See "Certain Legal Aspects of the Receivables" in the Prospectus.
If the protection provided to the Certificateholders by the Reserve Account
and, in the case of the Class A Certificateholders, the subordination of the
Class B Certificates is insufficient, the Trust will look only to the Obligors
on the Receivables and the proceeds from the repossession and sale of Financed
Assets which secure defaulted Receivables. In such event, certain factors,
such as the Trust's not having first priority perfected security interests in
some of the Financed Assets, may affect the Trust's ability to realize on the
Financed Assets securing the Receivables, and thus may reduce the proceeds to
be distributed to Certificateholders with respect to the Certificates. See
"Description of the Certificates--Distributions"and "--Subordination of the
Class B Certificates; Reserve Account" herein and "Certain Legal Aspects of
the Receivables" in the Prospectus.
Each Certificate represents a fractional undivided ownership interest in the
Trust. The Trust property includes retail installment sale contracts between
Dealers and Obligors, and all payments received thereunder on or after the
Cutoff Date. The Trust property also includes (i) such amounts as from time to
time may be held in one or more trust accounts established and maintained by
the Servicer pursuant to the Pooling and Servicing Agreement, as described in
the Prospectus under "Description of the Transfer and Servicing Agreements--
Accounts"; (ii) the Depositor's rights with respect to security interests in
the Financed Assets; (iii) the Depositor's rights with respect to proceeds
from claims on certain physical damage, credit life and disability insurance
policies covering the Financed Assets or the Obligors, as the case may be;
(iv) the Depositor's rights in any proceeds with respect to the Receivables
from recourse, if any, to Dealers on Receivables or Financed Assets with
respect to which the Servicer has determined that eventual repayment in full
is unlikely; (v) any property that shall have secured a Receivable and that
shall have been acquired by the Trustee; and (vi) any and all proceeds of the
foregoing. The Reserve Account will be maintained by the Trustee for the
benefit of the Certificateholders, but will not be part of the Trust.
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables acquired by the Trust on the Closing Date. The Receivables (will
be) (have been) acquired by the Depositor from the Transferor, which
originated the Receivables or acquired the Receivables
S-10
<PAGE>
from Dealers [or Originators] in the ordinary course of business or in
acquisitions. The Receivables were selected from the Depositor's portfolio for
inclusion in the Receivables Pool by several criteria, some of which are set
forth in the Prospectus under "The Receivables Pools", as well as the
requirement that, as of the Cutoff Date, each Receivable (i) had an
outstanding gross balance of at least $ and (ii) was not more than [59 days
past due (an account is not considered past due if the amount past due is less
than % of the scheduled monthly payment)]. As of the Cutoff Date, no Obligor
on any Receivable was noted in the related records of the Servicer as being
the subject of a bankruptcy proceeding. No selection procedures believed by
the Depositor to be adverse to Certificateholders were used in selecting the
Receivables.
Set forth in the following tables is information concerning the composition,
distribution by annual percentage rate ("APR") and the geographic distribution
of the Receivables Pool as of the Cutoff Date.
TRUST 199 -( )
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AGGREGATE AVERAGE AVERAGE AVERAGE
APR OF PRINCIPAL NUMBER OF REMAINING ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TERM TERM BALANCE
- ----------- ---------- ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
TRUST 199-( )
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
APR RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- --------- ----------- ----------------- ----------
<S> <C> <C> <C>
0.00%-5.00%........................... $ %
5.01%-6.00%...........................
6.01%-7.00%...........................
7.01%-8.00%...........................
8.01%-9.00%...........................
9.01%-10.00%..........................
10.01%-11.00%..........................
11.01%-12.00%..........................
12.01%-13.00%..........................
13.01%-14.00%..........................
14.01%-15.00%..........................
15.01%-16.00%..........................
16.01%-17.00%..........................
17.01%-18.00%..........................
Greater than 18.00%....................
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
S-11
<PAGE>
TRUST 199-( )
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF AGGREGATE
STATE(2) PRINCIPAL BALANCE(1)
- -------- --------------------
<S> <C>
........................................................... %
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
...........................................................
----
%
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
(2) Based on billing addresses of the Obligors, as reflected in the Servicer's
records as of the Cutoff Date.
Approximately % of the aggregate principal balance of the Receivables,
constituting % of the number of the Receivables, represent previously
titled vehicles.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of the
Transferor pertaining to retail new and used recreational vehicle
receivables[, including those previously sold which the Servicer continues to
service]. There can be no assurance that the delinquency, repossession and net
loss experience on the Receivables will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT , AT DECEMBER 31,
------------------------------------ ------------------------------------
199 199 199 199
----------------- ----------------- ----------------- -----------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $ $
Period of Delinquency...
31-60 Days.............
61 Days or More........
------- ------- ------- ------- ------- ------- ------- -------
Total Delinquencies ... $ $ $ $
Total Delinquencies as a
Percent of the
Portfolio.............. % % % % % % % %
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------
199 199 199
----------------- ----------------- -----------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------- --------- ------- --------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $
Period of Delinquency...
31-60 Days.............
61 Days or More........
------ ------- ------ ------- ------ -------
Total Delinquencies...
Total Delinquencies as a
Percent of the
Portfolio.............. % % % % % %
</TABLE>
- --------
1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract.
CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
ENDED , YEAR ENDED DECEMBER 31,
---------------------- -------------------------------------------
199 199 199 199 199 199 199
---------- ---------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Amount
Outstanding During the
Period................. $ $ $ $ $ $ $
Average Number of
Contracts Outstanding
During the Period......
Percent of Contracts
Acquired During the
Period with Recourse to
the Dealer............. % % % % % % %
Repossessions as a
Percent of Average
Number of Contracts
Outstanding............ % % % % % % %
Net Losses as a Percent
of Liquidations (3)(4). % % % % % % %
Net Losses as a Percent
of Average Amount
Outstanding (2)(3)..... % % % % % % %
</TABLE>
- --------
(1) (Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract.)
(2) Percentages have been annualized for the months ended ,
199 and 199 and are not necessarily indicative of the experience for the
year.
(3) (Net losses are equal to the aggregate of the balances of all contracts
which are determined to be uncollectible in the period, less any
recoveries on contracts charged off in the period or any prior periods,
including any losses resulting from disposition expenses.)
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
S-13
<PAGE>
THE TRANSFEROR
For a description of the Transferor and its underwriting standards, see "The
Transferor" in the Prospectus.
THE SERVICER
For a description of the Servicer and its servicing standards, see "The
Servicer" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Information regarding certain maturity and prepayment considerations with
respect to the Certificates is set forth under "Weighted Average Life of the
Securities" in the Prospectus. As the rate of payment of principal of the
Certificates depends primarily on the rate of payment (including prepayments
on liquidations due to default) of the principal balance of the Receivables,
the final distribution in respect of the Certificates could occur
significantly earlier than their final scheduled Distribution Date.
Certificateholders will bear the risk of being able to reinvest principal
payments on the Certificates at yields at least equal to the yields on their
respective Certificates.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Pooling and
Servicing Agreement, a form of which has been filed as an exhibit to the
Registration Statement. A copy of the Pooling and Servicing Agreement will be
filed with the Commission following the issuance of the Certificates. The
following summary describes certain terms of the Certificates and the Pooling
and Servicing Agreement. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of the Certificates and the Pooling and Servicing Agreement. The following
summary supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Certificates of any
given series and the related Pooling and Servicing Agreement set forth in the
Prospectus, to which description reference is hereby made.
In general, it is intended that Class A Certificateholders receive, on each
Distribution Date, the Class A Percentage of the Principal Distribution Amount
plus interest at the Class A Pass Through Rate on the Class A Certificate
Balance. Subject to the prior rights of the Class A Certificateholders, it is
intended that the Class B Certificateholders receive, on each Distribution
Date, the Class B Percentage of the Principal Distribution Amount plus
interest at the Class B Pass Through Rate on the Class B Certificate Balance.
The Certificates will evidence interests in the Trust created pursuant to
the Pooling and Servicing Agreement. The Class A Certificates will evidence in
the aggregate an undivided ownership interest (the "Class A Percentage") of
approximately % of the Trust and the Class B Certificates will evidence in
the aggregate an undivided ownership interest (the "Class B Percentage") of
approximately % of the Trust.
S-14
<PAGE>
OPTIONAL PREPAYMENT
The Servicer will have the option to purchase all, but not less than all, of
the Receivables on any Distribution Date on or after the Distribution Date on
which the Pool Balance has declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will be required to purchase the
Receivables in order to exercise such option will be equal to the aggregate of
the Purchase Amounts of the Receivables as of the end of the related
Collection Period. The Servicer will be required to give not less than ( )
days notice to the Trustee of its intention to exercise such option. In
addition, the Servicer will not be permitted to exercise such option unless
the resulting distribution would be sufficient to distribute to the Class A
Certificateholders an amount equal to the Class A Certificate Balance together
with accrued interest at the Class A Pass Through Rate, and to the Class B
Certificateholders an amount equal to the Class B Certificate Balance together
with accrued interest at the Class B Pass Through Rate. Upon such a
distribution, the Certificates will be retired.
TRANSFER OF RECEIVABLES
Certain information regarding the transfer of the Receivables by the
Depositor to the Trust on the Closing Date pursuant to the Pooling and
Servicing Agreement is set forth in the Prospectus under "Description of the
Transfer and Servicing Agreements--Transfer of Receivables".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be % per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection Period
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid at the beginning of such Collection Period
out of collections for such Collection Period. See "Description of the
Transfer and Servicing Agreements--Servicing Compensation and Payment of
Expenses" in the Prospectus. [To follow: description of Supplemental Servicing
Fee and Servicing Suspense Account.]
DISTRIBUTIONS
DEPOSITS TO COLLECTION ACCOUNT. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for a Distribution Date shall be the sum of the Interest
Distribution Amount and the Principal Distribution Amount (other than the
portion thereof attributable to Realized Losses). "Realized Losses" means the
excess of the principal balance of any Liquidated Receivable over Liquidation
Proceeds to the extent allocable to principal received in the Collection
Period in which the Receivable became a Liquidated Receivable.
The "Interest Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of [defaulted] Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Liquidated Receivables ("Liquidation
Proceeds"), to the extent attributable to interest due thereon in accordance
with the Servicer's customary servicing procedures, and all recoveries in
respect of Liquidated Receivables which were written off in prior Collection
Periods; (iii) all Servicer Advances made by the Servicer of interest due on
the Receivables; (iv) the Purchase Amount of each Receivable that was
purchased by the Transferor or purchased by the Servicer under an obligation
which arose during the related Collection Period, to the extent attributable
to accrued interest thereon; and (v) Investment Earnings for such Distribution
Date. The Interest Distribution Amount shall be determined on the related
Determination Date.
S-15
<PAGE>
The "Principal Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
principal; (ii) all Liquidation Proceeds attributable to the principal amount
of Receivables which became Liquidated Receivables during such Collection
Period in accordance with the Servicer's customary servicing procedures, plus
the amount of Realized Losses with respect to such Liquidated Receivables;
(iii) to the extent attributable to principal, the Purchase Amount received
with respect to each Receivable purchased by the Transferor or purchased by
the Servicer under an obligation which arose during the related Collection
Period; and (iv) partial prepayments relating to refunds of extended warranty
protection plan costs or of physical damage, credit life or disability
insurance policy premiums, but only if such costs or premiums were financed by
the respective Obligor as of the date of the original contract. The Regular
Principal Distribution Amount shall be determined on the related Determination
Date.
The Interest Distribution Amount and the Regular Principal Distribution
Amount on any Distribution Date shall exclude the following:
(i) all payments and proceeds (including Liquidation Proceeds) of any
Receivables, the Purchase Amount of which has been included in the Total
Distribution Amount in a prior Collection Period;
(ii) amounts received in respect of interest on Receivables during the
preceding Collection Period in excess of the amount of interest that would
have been due during the Collection Period on the Receivables at their
respective APRs (assuming that a payment is received on each Receivable on
the due date thereof); and
(iii) Liquidation Proceeds attributable to accrued and unpaid interest on
the Receivables (but not including interest for the then current Collection
Period) but only to the extent of any unreimbursed Servicer Advances.
CALCULATION OF DISTRIBUTABLE AMOUNTS. The "Class A Distributable Amount"
with respect to a Distribution Date will be an amount equal to the sum of (i)
the "Class A Principal Distributable Amount", consisting of the Class A
Percentage of the Principal Distribution Amount, plus (ii) the "Class A
Interest Distributable Amount", consisting of thirty (30) days' interest at
the Class A Pass Through Rate on the Class A Certificate Balance as of the
close of business on the last day of the preceding Collection Period. In
addition, on the Distribution Date immediately following the Final Scheduled
Maturity Date (the "Final Scheduled Distribution Date"), the Class A Principal
Distributable Amount will include the lesser of (A) the Class A Percentage of
any payments of principal due and remaining unpaid on each Receivable in the
Trust as of the last day of the preceding Collection Period and (B) the
portion of such amount necessary (after giving effect to the other amounts
described above to be distributed to the Class A Certificateholders on such
Distribution Date and allocable to principal) to reduce the Class A
Certificate Balance to zero.
The "Class A Certificate Balance" will equal, initially, $ and,
thereafter, shall equal the initial Class A Certificate Balance reduced by all
amounts previously distributed to Class A Certificateholders and allocable to
principal.
The "Class B Distributable Amount" with respect to a Distribution Date shall
be an amount equal to the sum of (i) the "Class B Principal Distributable
Amount", consisting of the Class B Percentage of the Principal Distribution
Amount plus (ii) the "Class B Interest Distributable Amount", consisting of
thirty (30) days' interest at the Class B Pass Through Rate to the Class B
S-16
<PAGE>
Certificate Balance as of the close of business on the last day of the
preceding Collection Period. In addition, on the Final Scheduled Distribution
Date, the principal required to be distributed on the Class B
Certificateholders will include the lesser of (i) the Class B Percentage of
any payments of principal due and remaining unpaid with respect to the
Receivables in the Trust as of the last day of the preceding Collection Period
and (ii) the portion of the amount in clause (i) above that is necessary
(after giving effect to all other amounts distributed to Class A and Class B
Certificateholders on such Distribution Date and allocable to principal) to
reduce the Class B Certificate Balance to zero.
The "Class B Certificate Balance" shall equal, initially, $ and,
thereafter, shall equal the initial Class B Certificate Balance, reduced by
all amounts previously distributed to Class B Certificateholders [(or
deposited in the Reserve Account, but not including the Reserve Account
Initial Deposit)] and allocable to principal and by Realized Losses.
CALCULATION OF AMOUNTS TO BE DISTRIBUTED. Prior to each Distribution Date,
the Servicer will calculate the Total Distribution Amount, the Class A
Distributable Amount and the Class B Distributable Amount.
The holders of the Class A Certificates will receive on any Distribution
Date, to the extent of available funds, the Class A Distributable Amount and
any outstanding Class A Interest Carryover Shortfall and Class A Principal
Carryover Shortfall as of the close of the preceding Distribution Date. On
each Distribution Date on which the sum of the Class A Interest Distributable
Amount and any outstanding Class A Interest Carryover Shortfall from the
preceding Distribution Date (plus interest on such Class A Interest Carryover
Shortfall at the Class A Pass Through Rate from such preceding Distribution
Date to the current Distribution Date, to the extent permitted by law) exceeds
the Class A Percentage of the Interest Distribution Amount (after payment of
the Servicing Fee) on such Distribution Date, the Class A Certificateholders
shall be entitled generally to receive such amounts, first, from the Class B
Percentage of the Interest Distribution Amount; second, if such amounts are
insufficient, from the amounts available in the Reserve Account; and third, if
such amounts are insufficient, from the Class B Percentage of the Principal
Distribution Amount (other than the portion thereof attributable to Realized
Losses). The "Class A Interest Carryover Shortfall" as of the close of any
Distribution Date means the excess of the Class A Interest Distributable
Amount for such Distribution Date, plus any outstanding Class A Interest
Carryover Shortfall from the preceding Distribution Date, plus interest on
such outstanding Class A Interest Carryover Shortfall, to the extent permitted
by law, at the Class A Pass Through Rate from such preceding Distribution Date
through the current Distribution Date, over the amount of interest that the
holders of the Class A Certificates actually received on such current
Distribution Date.
On each Distribution Date on which the sum of the Class A Principal
Distributable Amount and any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class A Percentage of the
Principal Distribution Amount (exclusive of the portion thereof attributable
to Realized Losses) on such Distribution Date, the Class A Certificateholders
shall be entitled to receive such amounts, first, from the Class B Percentage
of the Principal Distribution Amount (other than the portion thereof
attributable to Realized Losses); second, if such amounts are insufficient,
from amounts available in the Reserve Account; and third, if such amounts are
insufficient, from the Class B Percentage of the Interest Distribution Amount.
The "Class A Principal Carryover Shortfall" as of the close of any
Distribution Date means the excess of the Class A Principal Distributable
Amount plus any outstanding Class A Principal Carryover Shortfall from the
preceding Distribution Date over the amount of principal that the holders of
the Class A Certificates actually received on such current Distribution Date.
S-17
<PAGE>
The holders of the Class B Certificates will receive on any Distribution
Date, to the extent of available funds, the Class B Distributable Amount and
any outstanding Class B Interest Carryover Shortfall and Class B Principal
Carryover Shortfall as of the close of the preceding Distribution Date. On
each Distribution Date on which the sum of the Class B Interest Distributable
Amount and any outstanding Class B Interest Carryover Shortfall from the
preceding Distribution Date (plus interest on such Class B Interest Carryover
Shortfall at the Class B Pass Through Rate from such preceding Distribution
Date to the current Distribution Date, to the extent permitted by law) exceeds
the Class B Percentage of the Interest Distribution Amount (after payment of
the Servicing Fee) on such Distribution Date less any portion thereof required
to be distributed to the Class A Certificateholders pursuant to their prior
rights as described above, the Class B Certificateholders shall be entitled
generally to receive such amounts, first, from the Class A Percentage of the
Interest Distribution Amount that is not otherwise required to be distributed
to the Class A Certificateholders as described above and, second, from the
amount, if any, available in the Reserve Account (after giving effect to any
withdrawals therefrom for distribution to the Class A Certificateholders on
such Distribution Date). The "Class B Interest Carryover Shortfall" as of the
close of any Distribution Date means the excess of the Class B Interest
Distributable Amount for such Distribution Date, plus any outstanding Class B
Interest Carryover Shortfall from the preceding Distribution Date, plus
interest on such outstanding Class B Interest Carryover Shortfall, to the
extent permitted by law, at the Class B Pass Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class B Certificates actually received on
such current Distribution Date.
On each Distribution Date on which the sum of the Class B Principal
Distributable Amount and any outstanding Class B Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class B Percentage of the
Principal Distribution Amount (exclusive of the portion thereof attributable
to Realized Losses) on such Distribution Date less any portion thereof
required to be distributed to the Class A Certificateholders pursuant to their
prior rights as described above, the Class B Certificateholders shall be
entitled to receive such amounts, first, from the Interest Distribution Amount
that is not otherwise required to be distributed to the Class A or Class B
Certificateholders as described above and, second, from amounts available in
the Reserve Account (after giving effect to any withdrawals therefrom on such
Distribution Date for distribution to the Class A Certificateholders and for
distribution of interest to the Class B Certificateholders). The "Class B
Principal Carryover Shortfall" as of the close of any Distribution Date means
the excess of the Class B Principal Distributable Amount plus any outstanding
Class B Principal Carryover Shortfall from the preceding Distribution Date
over the amount of principal that the holders of Class B Certificates actually
received on such current Distribution Date.
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE ACCOUNT
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables generally will be subordinated to the rights of the
Class A Certificateholders in the event of defaults and delinquencies on the
Receivables as described herein and provided in the Pooling and Servicing
Agreement. The protection afforded to the Class A Certificateholders through
subordination will be effected both by the preferential right of the Class A
Certificateholders to receive current distributions with respect to the
Receivables and by the establishment of the Reserve Account. The Reserve
Account will be created with an initial deposit by the Depositor of the
Reserve Account Initial Deposit and will be augmented by deposit therein on
each Distribution Date of the amount, if any, remaining from the Total
Distribution Amount after the distributions due to the Certificateholders have
been made until the amount in the Reserve Account reaches the Specified
Reserve Account Balance for such Distribution Date.
S-18
<PAGE>
The Reserve Account will not be part of or otherwise includible in the Trust
and will be a segregated trust account held by the Trustee. On each
Distribution Date, (i) if the amounts on deposit in the Reserve Account are
less than the Specified Reserve Account Balance for such Distribution Date,
the Trustee will, after payment of any amounts required to be distributed to
Certificateholders and the payment of the Servicing Fee due with respect to
the related Collection Period (including any unpaid Servicing Fees with
respect to prior Collection Periods), withdraw from the Collection Account and
deposit in the Reserve Account the amount, if any, remaining in the Collection
Account that would otherwise be distributed to the Depositor, or such lesser
portion thereof as is sufficient to restore the amount in the Reserve Account
to such Specified Reserve Account Balance for such Distribution Date, and (ii)
if the amount on deposit in the Reserve Account on such Distribution Date
(after giving effect to all deposits or withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Account Balance for
such Distribution Date, the Trustee will release and distribute any such
excess to the Depositor. Upon any such distribution to the Depositor, the
Certificateholders will have no rights in, or claims to, such amounts.
Amounts held from time to time in the Reserve Account will continue to be
held for the benefit of holders of the Class A Certificates and holders of the
Class B Certificates. Funds in the Reserve Account shall be invested as
provided in the Pooling and Servicing Agreement in Eligible Investments. The
Depositor will be entitled to receive all investment earnings on amounts in
the Reserve Account. Investment income on amounts in the Reserve Account will
not be available for distribution to the Certificateholders or otherwise
subject to any claims or rights of the Certificateholders.
The time necessary for the Reserve Account to reach and maintain the
Specified Reserve Account Balance at any time after the Closing Date will be
affected by the delinquency, credit loss, repossession and prepayment
experience of the Receivables and, therefore, cannot be accurately predicted.
The subordination of the Class B Certificates and the Reserve Account
described above are intended to enhance the likelihood of receipt by Class A
Certificateholders of the full amount of principal and interest on the Class A
Certificates due them and to decrease the likelihood that the Class A
Certificateholders will experience losses. However, in certain circumstances,
the Reserve Account could be depleted and shortfalls could result.
If on any Distribution Date the holders of the Class A Certificates do not
receive the sum of the Class A Distributable Amount, the Class A Interest
Carryover Shortfall and the Class A Principal Carryover Shortfall for such
Distribution Date (after giving effect to any amounts withdrawn from the
Reserve Account and the Class B Percentage of the Total Distribution Amount
and applied to such deficiency, as described above), the holders of the Class
B Certificates generally will not receive any portion of the Total
Distribution Amount. While the Class B Certificateholders are entitled to
receive amounts from the Reserve Account as described above, such entitlement
is subordinated to the rights of the Class A Certificateholders to receive
amounts from the Reserve Account as described above. If the Reserve Account
becomes depleted, the Class B Certificateholders may experience shortfalls in
the distributions due them and incur a loss on their investment.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Tax Counsel, the Trust will be treated as a grantor trust
for federal income tax purposes and will not be subject to federal income tax.
For additional information regarding federal income tax consequences, see
"Federal Income Tax Consequences" in the Prospectus.
S-19
<PAGE>
ERISA CONSIDERATIONS
THE CLASS A CERTIFICATES
Subject to the considerations set forth under "ERISA Considerations--Senior
Certificates Issued by Trusts That Do Not Issue Notes" in the Prospectus, the
Class A Certificates may be purchased by an employee benefit plan or an
individual retirement account (a "Benefit Plan") subject to ERISA or Section
4975 of the Code. A fiduciary of a Benefit Plan must determine that the
purchase of a Class A Certificate is consistent with its fiduciary duties
under ERISA and does not result in a nonexempt prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the Code. For additional
information regarding treatment of the Class A Certificates under ERISA, see
"ERISA Considerations" in the Prospectus.
No sale pledge, or transfer of a Class A Certificate or any interest therein
shall be made (i) to any Benefit Plan, or (ii) to any person who is directly
or indirectly purchasing such Certificate or interest therein on behalf of, as
named fiduciary of, as trustee of, or with assets of a Benefit Plan, unless
(1) such Benefit Plan qualifies as an accredited investor within the meaning
of the Exemption described in the Prospectus, and (2) at the time of such
sale, pledge or transfer, the Class A Certificates continue to be rated in one
of the top three rating categories by at least one Rating Agency, as defined
in the Prospectus, or (3) the purchase and holding of the Class A Certificates
is exempt under Section III of Prohibited Transaction Class Exemption 95-60
(applicable to certain insurance company general accounts). Each person who
acquires any Class A Certificates or interest therein shall be deemed to have
certified that the foregoing conditions will be satisfied.
THE CLASS B CERTIFICATES
No sale, pledge, or transfer of a Class B Certificate or any interest
therein shall be made to any Benefit Plan or any person who is directly or
indirectly purchasing such Certificate or interest therein on behalf of, as
named fiduciary of, as trustee of, or with assets of a Benefit Plan, unless
the purchase and holding of such Certificate is exempt under Section III of
Prohibited Transaction Class Exemption 95-60 (applicable to certain insurance
company general accounts). Each person who acquires any Class B Certificate or
interest therein shall be deemed to have certified that the foregoing
conditions will be satisfied.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Depositor has agreed to cause the Trust to
sell to the Underwriter, and the Underwriter has agreed to purchase, the
entire principal amount of the Certificates. [UNDERWRITING SYNDICATE LANGUAGE
AND TABLE TO BE ADDED IF APPLICABLE]
The Depositor has been advised by the Underwriter that it proposes initially
to offer the 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
% per Class A Certificate and % per Class B Certificate. The Underwriter
may allow and such dealers may reallow a concession not in excess of % per
Class A Certificate and % per Class B Certificate to certain other dealers.
After the initial public offering of the Certificates, the public offering
prices and such concessions may be changed.
Until the distribution of the Certificates is completed, rules of the
Commission may limit the ability of the Underwriter and certain selling group
members to bid for and purchase the Certificates. As an exception to these
rules, the Underwriter is permitted to engage in certain transactions that
stabilize the price of the Certificates. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Certificates.
S-20
<PAGE>
If the Underwriter creates a short position in the Certificates in
connection with the offering, i.e., if it sells more Certificates than are set
forth on the cover page of this Prospectus Supplement, the Underwriter may
reduce that short position by purchasing Certificates in the open market.
In general, the purchase of a security for the purpose of stabilization or
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 Depositor nor [any] Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Certificates. In
addition, neither the Depositor nor [any] Underwriter makes any representation
that the Underwriter will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
The Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell, any Certificates to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of
the Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document in connection with the issue of the Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom the
document may otherwise lawfully be issued or passed on.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the 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 Transferor
or the Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
Deutsche Bank Securities Inc., the Transferor, the Servicer and the
Depositor are each indirect, wholly-owned subsidiaries of Deutsche Bank AG.
Any obligations of Deutsche Bank Securities Inc. are the sole responsibility
of Deutsche Bank Securities Inc. and do not create any obligation on the part
of any affiliate of Deutsche Bank Securities Inc.
LEGAL OPINIONS
Certain legal matters relating to the Certificates, certain federal income
tax matters and certain Illinois income tax matters will be passed upon for
the Depositor by Mayer, Brown & Platt, Chicago, Illinois. (Certain legal
matters relating to the Certificates will be passed upon for the Underwriter
by Mayer, Brown & Platt.) Certain California income tax matters will be passed
upon for the Depositor by Bryan Cave LLP, St. Louis, Missouri.
S-21
<PAGE>
INDEX OF TERMS
[TO BE CONFORMED]
<TABLE>
<S> <C>
APR................................................................... S-11
Cede.................................................................. S-3
Certificateholders.................................................... S-5
Certificates.......................................................... S-1
Class A Certificate Balance........................................... S-5, S-18
Class A Certificates.................................................. S-4
Class A Distributable Amount.......................................... S-18
Class A Interest Carryover Shortfall.................................. S-18
Class A Interest Distributable Amount................................. S-18
Class A Percentage.................................................... S-4, S-16
Class A Principal Carryover Shortfall................................. S-19
Class A Principal Distributable Amount................................ S-18
Class B Certificate Balance........................................... S-6, S-18
Class B Certificates.................................................. S-4
Class B Distributable Amount.......................................... S-18
Class B Interest Carryover Shortfall.................................. S-19
Class B Interest Distributable Amount................................. S-18
Class B Percentage.................................................... S-4, S-16
Class B Principal Carryover Shortfall................................. S-19
Class B Principal Distributable Amount................................ S-18
Code.................................................................. S-8
Collection Account.................................................... S-7
Collection Period..................................................... S-5
Commission............................................................ S-3
Cutoff Date........................................................... S-4
Depositor............................................................. S-1, S-4
Determination Date.................................................... S-5
Distribution Date..................................................... S-1, S-5
DTC................................................................... S-3
ERISA................................................................. S-8
Exchange Act.......................................................... S-3
Final Scheduled Distribution Date..................................... S-17
Final Scheduled Maturity Date......................................... S-5
Financed Assets....................................................... S-1, S-4
Financed Recreational Vehicles........................................ S-1, S-5
Initial Pool Balance.................................................. S-4
Interest Distribution Amount.......................................... S-17
Issuer................................................................ S-4
Liquidated Receivables................................................ S-17
Liquidation Proceeds.................................................. S-17
Plan.................................................................. S-21
Pool Balance.......................................................... S-5
Pooling and Servicing Agreement....................................... S-4
Principal Distribution Amount......................................... S-5, S-17
Prospectus............................................................ S-3
Rating Agency......................................................... S-9
Realized Losses....................................................... S-6, S-17
Receivables........................................................... S-1
</TABLE>
S-22
<PAGE>
<TABLE>
<S> <C>
Receivables Pool....................................................... S-10
Record Date............................................................ S-5
Servicer............................................................... S-1
Specified Reserve Account Balance...................................... S-7
stripped coupons....................................................... S-7
Tax Counsel............................................................ S-7
Total Distribution Amount.............................................. S-17
Transferor............................................................. S-4
Trust.................................................................. S-1, S-4
Trustee................................................................ S-1, S-4
Underwriter............................................................ S-3
Underwriting Agreement................................................. S-21
</TABLE>
S-23
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE DEPOSITOR OR BY THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, THE CERTIFICATES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Reports to Certificateholders.............................................. S-2
Summary of Terms........................................................... S-3
Risk Factors............................................................... S-9
The Trust.................................................................. S-10
The Receivables Pool....................................................... S-10
Delinquencies, Repossessions and Net Losses................................ S-12
The Transferor............................................................. S-14
The Servicer............................................................... S-14
Weighted Average Life of the Certificates.................................. S-14
Description of the Certificates............................................ S-14
Federal Income Tax Consequences............................................ S-19
ERISA Consideration........................................................ S-20
Underwriting............................................................... S-20
Legal Opinions............................................................. S-21
Index of Terms............................................................. S-22
PROSPECTUS
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Summary of Terms........................................................... 4
Risk Factors............................................................... 12
The Trusts................................................................. 17
The Receivables Pools...................................................... 18
Weighted Average Life of the Certificates.................................. 20
Pool Factors and Trading Information....................................... 21
Use of Proceeds............................................................ 21
The Depositor.............................................................. 21
Description of the Notes................................................... 22
Description of the Certificates............................................ 25
Certain Information Regarding the Securities............................... 27
Description of the Transfer and Servicing Agreements....................... 35
Certain Legal Aspects of the Receivables................................... 44
Federal Income Tax Consequences............................................ 50
ERISA Considerations....................................................... 60
Plan of Distribution....................................................... 61
Legal Opinions............................................................. 62
Index of Terms............................................................. 63
</TABLE>
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE CERTIFICATES 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 UNDERWRITER(S) AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
$( )
TRUST
199 -( )
$
% ASSET BACKED CERTIFICATES, CLASS A
$
% ASSET BACKED CERTIFICATES, CLASS B
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE BANK SECURITIES INC.
PROSPECTUS SUPPLEMENT
, 199
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS +
+SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO +
+REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
VERSION #3
[BOATS]
SUBJECT TO COMPLETION, DATED [ ], 1998
PROSPECTUS
ASSET BACKED NOTES
ASSET BACKED CERTIFICATES
(EACH ISSUABLE IN SERIES)
------------
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION
DEPOSITOR
------------
The Asset Backed Notes (the "Notes") and the Asset 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 may include one or more classes of Notes and/or one or more
classes of Certificates, will be issued by a trust 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 Deutsche Recreational Asset
Funding Corporation (the "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 Depositor and Deutsche
Financial Services Corporation, as servicer (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. The related Prospectus Supplement
will specify which class or classes of Notes, if any, and which class or
classes of Certificates, if any, of the related series are being offered
thereby. The property of each Trust will include a pool of retail installment
sale contracts, installment loans, or notes (the "Receivables") secured by new
or used recreational sport and power boats (including any boat motors and
accompanying trailers) and yachts (both power and sail), certain monies due or
received thereunder on and after the applicable Cutoff Date set forth in the
related Prospectus Supplement, security interests in the items financed thereby
and certain other property, all as described herein and in the related
Prospectus Supplement. 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") to be established with the Indenture
Trustee, which may be used to acquire additional Receivables (the "Subsequent
Receivables") from the Depositor from time to time during the Funding Period
specified in the related Prospectus Supplement.
Each class of Securities of any series will represent the right to receive a
specified amount of payments on the related Receivables, at the rates, on the
dates and in the manner described herein and in the related Prospectus
Supplement. If a series includes multiple classes of Securities, the rights of
one or more classes of Securities to receive payments may be senior or
subordinate to the rights of one or more of the other classes of such series.
Distributions on Certificates of a series may be subordinated in priority to
payments due on any related Notes 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 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
<PAGE>
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 distributions in respect of the Certificate Balance 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 Receivables) on the related Receivables. 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 REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [19] HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
ANY NOTES OF A SERIES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES OF A
SERIES REPRESENT BENEFICIAL INTERESTS IN, THE RELATED TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN, AND ARE NOT GUARANTEED OR INSURED
BY, DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEUTSCHE FINANCIAL
SERVICES CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES,
THE CERTIFICATES OR THE RECEIVABLES ARE GUARANTEED OR INSURED BY ANY
GOVERNMENT AGENCY OR INSTRUMENTALITY.
----------------
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.
----------------
, 199 .
2
<PAGE>
AVAILABLE INFORMATION
Deutsche Recreational Asset Funding Corporation (the "Depositor") has filed
with the Securities and Exchange Commission (the "Commission") a Registration
Statement (together with all amendments and exhibits thereto, referred to
herein as the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Notes and the Certificates
offered pursuant to this Prospectus. For further information, reference is
made to the Registration Statement which may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; and at the Commission's regional offices 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 the Registration Statement may be obtained from the Public Reference
Section of the Commission at 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, including Deutsche Recreational Asset Funding
Corporation, that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor as originator of the Trust referred to
in the accompanying Prospectus Supplement, pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), subsequent to the date of this Prospectus and prior to the termination
of the offering of the Securities offered by such Trust shall be deemed to be
incorporated by reference in this Prospectus. 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 any subsequently filed
document which 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 Depositor will provide without charge to each person, including any
beneficial owner of Securities, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any or
all of the documents incorporated herein or in any related Prospectus
Supplement by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to Secretary, Deutsche
Recreational Asset Funding Corporation, 655 Maryville Centre Drive, St. Louis,
Missouri 63141, telephone number (314) [523-3000].
----------------
3
<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".
Issuer........................ With respect to each series of Securities, the
trust (referred to herein as the "Trust" or the
"Issuer") to be formed pursuant to either a
Trust Agreement (as amended and supplemented
from time to time, a "Trust Agreement") between
the Depositor and the trustee specified in the
related Prospectus Supplement (the "Trustee")
or a Pooling and Servicing Agreement (as
amended and supplemented from time to time, the
"Pooling and Servicing Agreement") among the
Trustee, the Depositor and the Servicer.
Depositor..................... Deutsche Recreational Asset Funding
Corporation.
Transferor.................... Ganis Credit Corporation ("Ganis").
Servicer...................... Deutsche Financial Services Corporation (the
"Servicer").
Trustee....................... With respect to each series of Securities, the
Trustee will be specified in the related
Prospectus Supplement.
Indenture Trustee............. With respect to any applicable series of
Securities, the Indenture Trustee will be
specified in the related Prospectus Supplement.
The Notes..................... A series of Securities may include one or more
classes of Notes, which will be issued pursuant
to an Indenture between the Trust and the
Indenture Trustee (as amended and supplemented
from time to time, an "Indenture"). The related
Prospectus Supplement will specify which class
or classes, if any, of Notes of the related
series are being offered thereby.
Unless otherwise specified in the related
Prospectus Supplement, Notes will be available
for purchase in minimum denominations of $1,000
and will be available in book-entry form only.
Unless otherwise specified in the related
Prospectus Supplement, Noteholders will be able
to receive Definitive Notes only in the limited
circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the Securities--
Definitive Securities".
Except in the case of any Strip Notes, as
described below, each class of Notes will have
a stated principal amount and will bear
interest at a specified rate or rates
4
<PAGE>
(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 the Interest Rate.
With respect to a series that includes two or
more classes of Notes, each class may differ as
to the timing and priority of payments,
seniority, allocations of losses, Interest Rate
or amount of payments of principal or interest,
or 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 Receivables Pool. 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.
If the Servicer exercises its option to
purchase the Receivables of a Trust (or, if not
and, if and to the extent provided in the
related Prospectus Supplement, satisfactory
bids for the purchase of such Receivables are
received), in the manner and on the respective
terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination", 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 a Pre-Funding
Account (as such term is defined in the related
Prospectus Supplement, the "Pre-Funding
Account"), one or more classes of the
outstanding Notes may be subject to partial
redemption on or immediately following the end
of the Funding Period (as such term is defined
in the related Prospectus Supplement, the
"Funding Period") in an amount and manner
specified in the related 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.............. A series may include one or more classes of
Certificates and may or may not include any
Notes. The related Prospectus Supplement will
specify which class or classes, if any, of the
Certificates are being offered thereby.
5
<PAGE>
Unless otherwise specified in the related
Prospectus Supplement, Certificates will be
available for purchase in a minimum
denomination of $1,000 and will be available in
book-entry form only. Unless otherwise
specified in the related Prospectus Supplement,
Certificateholders will be able to receive
Definitive Certificates only in the limited
circumstances described herein or in the
related Prospectus Supplement. See "Certain
Information Regarding the Securities--
Definitive Securities".
Except in the case of any Strip Certificates,
as described below, each class of Certificates
will have a stated Certificate Balance
specified in the related Prospectus Supplement
(the "Certificate Balance") and will accrue
interest on such Certificate Balance at a
specified rate (with respect to each class of
Certificates, the "Pass Through Rate"). Each
class of Certificates may have a different Pass
Through Rate, which may be a fixed, variable or
adjustable Pass Through Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the Pass
Through Rate for each class of Certificates or
the method for determining the Pass Through
Rate.
With respect to a series that includes two or
more classes of Certificates, each class may
differ as to 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 Receivables Pool.
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 in respect of the
Certificates may be subordinated in priority of
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
If the Servicer exercises its option to
purchase the Receivables of a Trust (or, if
not, and if and to the extent provided in the
related Prospectus Supplement, satisfactory
bids for the purchase of such Receivables
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are received), in the manner and on the
respective terms and conditions described under
"Description of the Transfer and Servicing
Agreements--Termination", Certificateholders
will receive as a prepayment an amount in
respect of the Certificates as specified in the
related Prospectus Supplement. In addition, if
the related Prospectus Supplement provides that
the property of a Trust will include a Pre-
Funding Account, Certificateholders may receive
a partial prepayment of principal on or
immediately following the end of the Funding
Period in an amount and manner specified in the
related 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.
Trust Property................ The property of each Trust will include a pool
of retail installment sale contracts,
installment loans, or notes (the "Receivables")
secured by new or used recreational sport and
power boats (including any boat motors and
accompanying trailers) and yachts (both power
and sail) (the "Financed Boats" or "Financed
Assets"), collections and other payments with
respect to the Receivables received after the
date specified in the related Prospectus
Supplement (the "Cutoff Date") and monies on
deposit in certain trust accounts. On or prior
to the Closing Date specified in the related
Prospectus Supplement with respect to a Trust,
the Transferor will transfer Receivables (the
"Initial Receivables") having an aggregate
principal balance specified in the related
Prospectus Supplement as of the Cutoff Date to
the Depositor, which will transfer the Initial
Receivables to such Trust on or prior to the
Closing Date pursuant to either a Transfer and
Servicing Agreement among the Depositor, the
Servicer and the Trustee (as amended and
supplemented from time to time, a "Transfer and
Servicing Agreement") or, if the Trust is to be
treated as a grantor trust for federal income
tax purposes, the related Pooling and Servicing
Agreement among the Depositor, the Servicer and
the Trustee. The property of each Trust will
also include amounts on deposit in certain
trust accounts, including the related
Collection Account, any Pre-Funding Account,
and any other account identified in the
applicable Prospectus Supplement.
To the extent provided in the related
Prospectus Supplement, the Transferor will be
obligated (subject only to the availability
thereof) to transfer to the Depositor which
will be obligated to acquire and transfer to
the related Trust, and such Trust will then be
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obligated to acquire (subject to the
satisfaction of certain conditions described in
the applicable Transfer and Servicing Agreement
or Pooling and Servicing Agreement), additional
Receivables (the "Subsequent Receivables") from
time to time (as frequently as daily) during
the Funding Period specified in the related
Prospectus Supplement having an aggregate
principal balance approximately equal to the
amount on deposit in the Pre-Funding Account
(the "Pre-Funded Amount") on such Closing Date.
With respect to any Trust that is to be treated
as a grantor trust for federal income tax
purposes, the Funding Period, if any, will not
exceed 90 days in length from the Closing Date,
and with respect to any other Trust will not
exceed one year in length from the Closing Date
unless otherwise specified in the applicable
Prospectus Supplement. With respect to each
Trust, the Pre-Funded Amount on the Closing
Date will not exceed 25% of the aggregate
initial principal balance of the Securities
unless otherwise specified in the applicable
Prospectus Supplement.
Credit and Cash Flow If and to the extent specified in the related
Enhancement................... Prospectus Supplement, credit and cash flow
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, a
Reserve Account, 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 or
accounts, other agreements with respect to
third party payments or other support, cash
deposits or other arrangements. Unless
otherwise specified in the related Prospectus
Supplement, any form of credit or cash flow
enhancement will have certain limitations and
exclusions from coverage thereunder, which will
be described in the related Prospectus
Supplement.
Transfer and Servicing With respect to each Trust, the Transferor will
Agreements.................... transfer the related Receivables to the
Depositor, which, in turn, will transfer the
related Receivables to such Trust pursuant to a
Transfer and Servicing Agreement or a Pooling
and Servicing Agreement. The rights and
benefits of any Trust under a Transfer and
Servicing Agreement will be transferred to the
Indenture Trustee as collateral for the Notes
of the related series. If so specified in the
related Prospectus Supplement, the person
specified therein as Administrator will
undertake certain administrative duties under
an Administration Agreement with respect to any
Trust that has issued
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Notes, which duties would in the absence of an
Administrator be performed for the related
Trust primarily by the related Indenture
Trustee or by the Depositor.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will
advance any interest shortfall with respect to
a Receivable to the extent that the Servicer,
in its sole discretion, expects to recoup the
advance from subsequent payments on or with
respect to the Receivables (a "Servicer
Advance"). The Servicer shall be entitled to
reimbursement of Servicer Advances from
subsequent payments on or with respect to the
Receivables to the extent described herein and
in the related Prospectus Supplement.
Unless otherwise provided in the related
Prospectus Supplement, the Depositor will be
obligated to purchase any Receivable from the
Trust, and the Transferor will be obligated to
simultaneously purchase such Receivable from
the Depositor, if the interest of the
applicable Trust in such Receivable is
materially adversely affected by a breach of
any representation or warranty made by the
Transferor with respect to the Receivable, if
the breach has not been cured following the
discovery by or notice to the Transferor and
the Depositor of the breach. If so specified in
the related Prospectus Supplement, the
Transferor or the Depositor will be permitted,
in a circumstance where it would otherwise be
required to purchase a Receivable as described
in the preceding sentence, to instead
substitute a comparable Receivable for the
Receivable otherwise requiring purchase,
subject to certain conditions and eligibility
criteria for the substitution to be summarized
in such Prospectus Supplement.
Unless otherwise provided in the related
Prospectus Supplement, the Servicer will be
obligated to purchase a Receivable if, among
other things, it extends the date for final
payment by the Obligor of such Receivable
beyond the applicable Final Scheduled Maturity
Date (as defined in the related Prospectus
Supplement, the "Final Scheduled Maturity
Date"), changes the annual percentage rate
("APR") or amount of a scheduled payment of
such Receivable or fails to maintain a
perfected security interest in the related
Financed Asset.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will be
entitled to receive a fee for servicing the
Receivables of each Trust plus certain late
fees, prepayment charges and other
administrative fees or similar charges. See
"Description
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of the Transfer and Servicing Agreements--
Servicing Compensation and Payment of Expenses"
herein and in the related Prospectus
Supplement.
Certain Legal Aspects of the
Receivables...................
In connection with the transfer of Receivables
to a Trust, security interests in the Financed
Assets securing such Receivables will be
transferred by the Transferor to the Depositor
(or by the related Dealer or an Originator to
the Transferor and by the Transferor to the
Depositor) and by the Depositor to such Trust.
Due to administrative burden and expense, the
certificates of title to those Financed Boats
financed in states where security interests in
boats are subject to certificate of title
statutes will not be amended to reflect any
such transfers, the Uniform Commercial Code
("UCC") financing statements in respect of
those Financed Boats financed in states where
security interests in boats are perfected by
filing a UCC-1 financing statement will not be
amended to reflect such transfers, and the
transfer of liens perfected pursuant to federal
law ("Preferred Mortgages") in respect of
Financed Boats documented under federal law
will not be filed as required under federal law
to reflect such transfers. In the absence of
such procedures, such Trust may not have a
perfected security interest in the Financed
Boats in some states and will not have a
perfected security interest in Financed Boats
documented under federal law. If such Trust
does not have a perfected security interest in
a Financed Asset, its ability to realize on
such Financed Asset may be adversely affected.
To the extent the security interest is
perfected, such Trust will have a prior claim
over subsequent purchasers of such Financed
Asset and holders of subsequently perfected
security interests. However, as against liens
for repairs of Financed Assets or for taxes
unpaid by an Obligor under a Receivable, or
because of fraud or negligence, such Trust
could lose the priority of its security
interest or its security interest in Financed
Assets.
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 a transferee of such
a loan liable to the obligor thereon for any
violation by the lender which made such loan.
Unless otherwise specified in the related
Prospectus Supplement, the Depositor will be
obligated to purchase from the Trust and the
Transferor will be obligated to simultaneously
purchase from the Depositor any Receivable
which fails to comply with
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such requirements if such failure materially
and adversely affects the interest of the Trust
or the Indenture Trustee in such Receivable.
The Depositor's obligation to make such
purchase is contingent upon the Transferor
performing its obligation to purchase such
Receivable from the Depositor on account of
such failure.
Tax Status.................... Unless the Prospectus Supplement specifies that
the related Trust will be treated as a grantor
trust, upon the issuance of the related series
of Securities Tax Counsel to such Trust will
deliver an opinion to the effect that, for
federal income tax purposes: (i) all or certain
specified classes of Notes of such series will
be characterized as debt and (ii) such Trust
will not be characterized as an association (or
a publicly traded partnership) taxable as a
corporation.
If the Prospectus Supplement specifies that the
related Trust will be treated as a grantor
trust, upon the issuance of the related series
of Certificates, Tax Counsel to such Trust will
deliver an opinion to the effect that such
Trust will be treated as a grantor trust for
federal income tax purposes and will not be
subject to federal income tax.
See "Federal Income Tax Consequences" herein
for additional information concerning the
application of federal and state tax laws.
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
related Prospectus Supplement, and unless
otherwise specified therein, any Notes of a
series and any Certificates that are issued by
a Trust that is a grantor trust and are not
subordinated to any other class of Certificates
are eligible for purchase by employee benefit
plans.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates of any
series that are subordinated to any other
Security of that series may not be acquired by
any employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or by any
individual retirement account. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
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RISK FACTORS
CERTAIN LEGAL ASPECTS--SECURITY INTERESTS IN FINANCED ASSETS. Trusts May Not
Have A Perfected Security Interest in Certain Financed Assets. In connection
with the transfer of Receivables to a Trust, security interests in the
Financed Assets securing such Receivables will be, or will have been,
transferred by the Transferor to the Depositor and by the Depositor to such
Trust simultaneously with the transfer of such Receivables to such Trust. Due
to administrative burden and expense, (i) the certificates of title to those
Financed Boats financed in states where security interests in recreational
boats, as applicable, are subject to certificate of title statutes will not be
amended to reflect such transfers, (ii) UCC financing statements in respect of
those Financed Boats financed in states where security interests in boats are
perfected by filing a UCC-1 financing statement will not be amended to reflect
such transfers and (iii) the transfer of liens created pursuant to Preferred
Mortgages in respect of Financed Boats documented under federal law will not
be filed as required by federal law to reflect such transfers. In the absence
of such procedures, such Trust may not have a perfected security interest in
the Financed Assets in some states and will not have a perfected security
interest in the Financed Boats documented under federal law.
Unless otherwise provided in the related Prospectus Supplement, the
Depositor will be obligated to purchase from the related Trust and the
Transferor will be obligated to simultaneously purchase from the Depositor any
Receivable transferred to such Trust as to which a perfected security interest
in the name of the Transferor in the Financed Asset securing such Receivable
shall not exist as of the date such Receivable is transferred to such Trust,
if such failure shall materially adversely affect the interest of such Trust
in such Receivable and if such failure shall not have been cured by the last
day of the second month following the discovery by or notice to the Transferor
of such breach. The Depositor's obligation to make such purchase is contingent
upon the Transferor performing its obligation to purchase such Receivable from
the Depositor on account of such failure. Moreover, such purchase obligations
will not address or remedy the circumstance where a perfected security
interest in the name of the Transferor in the Financed Asset securing a
Receivable has not been perfected in the related Trust as a result of the
absence of the procedures described in the preceding paragraph or for any
other reason. If such Trust does not have a perfected security interest in a
Financed Boat, its ability to realize on such Financed Asset in the event of a
default may be adversely affected. This could adversely affect the amount
available for distribution to the Securityholders.
Certain Liens Will Have Priority Over a Perfected Security Interest. To the
extent the security interest is perfected, such Trust will have a prior claim
over subsequent purchasers of such Financed Asset and holders of subsequently
perfected security interests. However, as against liens for repairs of a
Financed Asset or for taxes unpaid by an Obligor under a Receivable, or
through fraud or negligence, such Trust could lose the priority of its
security interest or its security interest in a Financed Asset. In addition,
in the case of a Financed Boat, certain additional liens, including a lien for
damages arising out of a maritime tort, for wages of a stevedore when employed
directly by the owner, operator, master, ship's husband, or agent of the
vessel, for wages of the crew of a vessel, for general average, or a lien for
salvage may, as a matter of law, have priority over perfected first priority
liens. The above described risk for crew wages exists in the case of the
Financed Boats because, although not typical, there exists the possibility
that recreational boat owners will utilize crew members and because liens for
wages owed to such crew members could, as described above, have priority over
the Trust's lien in such asset. None of the Transferor, the Servicer or the
Depositor will have any obligation to purchase a Receivable as to which any of
the aforementioned occurrences result in such Trust's losing the priority of
its security interest or its security interest in such Financed Asset after
the date such security interest was conveyed to such Trust. See "Certain Legal
Aspects of the Receivables--Security Interest in Boats" herein.
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CERTAIN LEGAL ASPECTS--SECURITY INTEREST IN THE RECEIVABLES. The Receivables
will be treated by each Trust as "chattel paper" as defined in the UCC.
Pursuant to the UCC, the transfer of chattel paper is treated in a manner
similar to a security interest in chattel paper. Perfection of a security
interest in chattel paper may generally be made by filing UCC-1 financing
statements in respect thereof or by possession of the chattel paper. In order
to protect each Trust's ownership or security interest in its Receivables, the
Depositor will file UCC-1 financing statements with the appropriate
authorities in any state deemed advisable by the Depositor to give notice of
such Trust's ownership interest (and any related Indenture Trustee's security
interest) in the Receivables and proceeds thereof. Under each Transfer and
Servicing Agreement and Pooling and Servicing Agreement, the Servicer will be
appointed custodian of the Receivables by the Trustee and the Servicer will
otherwise be obligated to maintain the perfection of each Trust's and any
related Indenture Trustee's interest in the Receivables. The filing of UCC-1
financing statements as described above and possession of the chattel paper by
the Servicer will reduce but not eliminate the risks involved in perfection. A
Trust could lose priority of its security interest in the Receivables to
certain liens arising by operation of law or in certain cases by fraud or
negligence. Moreover, if the Servicer should lose or inadvertently give up
possession of the chattel paper, a good faith purchaser of the chattel paper
without knowledge who gives new value and takes possession of it in the
ordinary course of such purchaser's business has priority over a security
interest (including an ownership interest) in the chattel paper that is
perfected by filing UCC-1 financing statements. In addition, the Receivables
will not be stamped to reflect the transfer of the Receivables to the Trust.
Therefore, any good faith purchaser of the chattel paper described above would
not be deemed to have knowledge of a security interest (including an ownership
interest) therein because such purchaser would not learn of the transfer of or
security interest in the Receivables from a review of the chattel paper.
CERTAIN LEGAL ASPECTS--CONSUMER PROTECTION LAWS. 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 a transferee of such a loan (such as such Trust) liable to
the obligor thereon for any violation by the lender. The application of such
laws could render a Receivable unenforceable or otherwise uncollectible. The
inability of Trust to realize amounts owed in respect of such Receivable could
adversely affect the amount available for distribution to the Securityholders.
Unless otherwise specified in the related Prospectus Supplement, the Depositor
will be obligated to purchase from the Trust and the Transferor will be
obligated to simultaneously purchase from the Depositor any Receivable which
fails to comply with such requirements. The Depositor's obligation to make
such purchase is contingent upon the Transferor performing its obligation to
purchase such Receivable from the Depositor on account of such failure. See
"Certain Legal Aspects of the Receivables--Consumer Protection Laws" herein.
CERTAIN LEGAL ASPECTS--INSOLVENCY CONSIDERATIONS. The Transferor will
represent and warrant that, immediately prior to transferring Receivables to
the Depositor, the Transferor owns such Receivables and that the transfer of
the Receivables by it to the Depositor will constitute a conveyance of such
Receivables. The applicable Receivables Transfer Agreement will set forth
whether such transfer is intended to be a "sale" or a "capital contribution"
of such Receivable by the Transferor to the Depositor. The Depositor intends
that the transfer of Receivables by it to a Trust will constitute either a
conveyance of such Receivables or a pledge of such Receivables.
Considerations Relating to the Insolvency, Conservatorship or Receivership
of a Bank Originator. In the case of an Originator (a "Bank Originator") that
is a depository institution, if such Bank Originator becomes insolvent or is
in an unsound condition, or under certain other
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circumstances, the applicable banking regulators may appoint a conservator or
receiver for such Bank Originator. In most instances, the conservator or
receiver would be the Federal Deposit Insurance Corporation (the "FDIC").
In the event that the FDIC were to assert that the transfer of Receivables
by a Bank Originator that is subject to the Federal Deposit Insurance Act, as
amended (the "FDIA"), constituted a grant of a security interest rather than a
sale, the FDIA sets forth certain powers that the FDIC, in its capacity as
conservator or receiver for a Bank Originator, could exercise. Positions taken
by the FDIC do not suggest that the FDIC, if appointed as conservator or
receiver for a Bank Originator, would interfere with the timely transfer to
the Transferor of payments collected on the Receivables or interfere with the
timely liquidation of Receivables, provided that certain conditions, as
described below, had been satisfied. To the extent that such Bank Originator
has granted a security interest in the Receivables to the Transferor and that
interest was validly perfected before the appointment of the FDIC as
conservator or receiver and before such Bank Originator's insolvency, was not
taken in contemplation of the insolvency of such Bank Originator, and was not
taken with the intent to hinder, delay or defraud such Bank Originator or the
creditors of such Bank Originator, such security interest should not be
subject to avoidance if the Originator Agreement and related documents are
approved by such Bank Originator and are continuously maintained records of
such Bank Originator (as required by the FDIA) and the transactions represent
bona fide and arm's length transactions undertaken for adequate consideration
in the ordinary course of business and the secured party is neither an insider
nor an affiliate of such Bank Originator. If the foregoing conditions are
satisfied and transfers of the Receivables constitute neither voidable
preferences nor fraudulent conveyances, payments to the Transferor with
respect to the Receivables should not be subject to recovery by the FDIC, as
conservator or receiver of such Bank Originator. The foregoing conclusion is
based upon policy statements of the FDIC and opinions of a former general
counsel of the FDIC. No assurance can be given, however, that all such
conditions have been satisfied with respect to any Bank Originator and the
Receivables transferred by such Bank Originator. If such conditions were not
satisfied or the FDIC, as conservator or receiver for a Bank Originator, were
to assert a position contrary to the policy statements, or were to require the
Transferor, the Depositor, the Trustee or the Indenture Trustee to establish
its right to those payments by submitting to and completing the administrative
claims procedure established under the FDIA, or the conservator or receiver
were to request a stay of proceedings with respect to such Bank Originator as
provided under the FDIA, delays in payments on the related Securities and
possible reductions in the amount of those payments could occur.
Notwithstanding the foregoing, the FDIA provides that the FDIC may repudiate
contracts determined by it to be burdensome. If the FDIC were to repudiate an
Originator Agreement, the claims (and any security interest securing such
claims) of the affected party thereof would be limited to actual, direct
compensatory damages and any security securing such claims would be
enforceable only to the extent of such damages. The FDIA does not define the
term "actual direct compensatory damages", but requires such damages to be
determined as of the date of the appointment of the conservator or receiver.
The FDIC, as conservator or receiver, would also have the rights and powers
conferred under applicable state or Federal law (including laws regarding bank
insolvencies and applicable laws regarding preferences or fraudulent
conveyances). In addition, the appointment of a receiver or conservator could
result in administrative expenses of the receiver or conservator having
priority over the interest of the Trustee or the Indenture Trustee in the
Receivables. In addition, if the FDIC were appointed as conservator or
receiver of a Bank Originator, certain administrative expenses of the
conservator, receiver or banking authorities may have priority over the
Transferor's, the Depositor's, the Trustee's or the Indenture Trustee's
interest in the Receivables.
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Considerations Relating to the Insolvency of a Dealer, a Nonbank Originator,
the Transferor or the Depositor. If a Dealer, the Transferor, an Originator
other than a Bank Originator (a "Nonbank Originator") or the Depositor were to
become a debtor in a bankruptcy case (or if the parent of a Dealer, the
Transferor, a Nonbank Originator or the Depositor were to become a debtor in a
bankruptcy case and the assets of such Dealer, the Transferor, such Nonbank
Originator or the Depositor, as applicable, were consolidated with those of
its parent) and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to take the position that the transfer of Receivables by
such Dealer, such Nonbank Originator, or the Depositor, as the case may be,
should be treated as a pledge of such Receivables to secure a borrowing of
such debtor, then delays in payments of collections of Receivables to the
related Securityholders could occur or (should the court rule in favor of any
such trustee, debtor or creditor) reductions in the amounts of such payments
could result. If the transfer of Receivables by a Dealer, an Originator, the
Transferor or the Depositor is treated as a pledge instead of a conveyance, a
tax or government lien on the property of the Dealer, the Originator, the
Transferor or the Depositor, as applicable, arising before such Receivables
transfer may have priority over the interest of the Transferor, the Depositor
or the Trust in such Receivables. If all of the transactions contemplated
herein are treated as conveyances, the Receivables would not be part of the
bankruptcy estate of a Nonbank Originator, the Transferor or the Depositor and
would not be available to their respective creditors.
Considerations Relating to an Insolvency Event of the Depositor Related to
Certain Trusts. With respect to each Trust that is not a grantor trust, if the
related Prospectus Supplement so provides, upon the occurrence of an
Insolvency Event of the Depositor, the Indenture Trustee or Trustee for such
Trust will promptly sell, dispose of or otherwise liquidate the related
Receivables in a commercially reasonable manner on commercially reasonable
terms, except under certain limited circumstances. The proceeds from any such
sale, disposition or liquidation of Receivables will be treated as collections
on the Receivables and deposited in the Collection Account of such Trust. If
the proceeds from the liquidation of the Receivables and any amounts on
deposit in the Reserve Account, if any, the Note Distribution Account, if any,
and the Certificate Distribution Account with respect to any such Trust and
any amounts available from any credit enhancement are not sufficient to pay
any Notes and the Certificates of the related series in full, the amount of
principal returned to any Noteholders or the Certificateholders will be
reduced and such Noteholders and Certificateholders will incur a loss.
Octagon Gas Case. In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th
Cir. 1993), the U.S. Court of Appeals for the 10th Circuit determined that
"accounts," a defined term under the Uniform Commercial Code, would be
included in the bankruptcy estate of a transferor regardless of whether the
transfer is treated as a transfer or a secured loan. Although the Receivables
are likely to be viewed as "chattel paper," as defined under the Uniform
Commercial Code, rather than as accounts, the Octagon holding is equally
applicable to chattel paper. The circumstances under which the Octagon ruling
would apply are not fully known and the extent to which the Octagon decision
will be followed in other courts or outside of the Tenth Circuit is not
certain. If the holding in the Octagon case were applied in a bankruptcy of a
Dealer, an Originator, the Transferor or the Depositor, however, even if the
transfers of Receivables by the Dealer, by the Originator, by the Transferor
and by the Depositor were treated as conveyances, the Receivables would be
part of the bankruptcy estate of the Dealer, the Originator, the Transferor or
the Depositor (as applicable) and would be subject to claims of certain
creditors, and delays and reductions in payments to the Securityholders could
result.
Risk of Substantive Consolidation. The Transferor has taken steps in
structuring the transactions described herein that are intended to ensure that
the voluntary or involuntary application for the relief by the Transferor
under the United States Bankruptcy Code or similar
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state insolvency laws (collectively, "Insolvency Laws") will not result in
consolidation of the assets and liabilities of the Transferor with those of
the Depositor. These steps include the creation of the Depositor as a
separate, bankruptcy-remote, special-purpose corporation under a certificate
of incorporation containing certain limitations (including restrictions on the
nature of its business and a restriction on its ability to commence a
voluntary case or proceeding under any Insolvency Law without the consent of
an independent director). However, there can be no assurance that the
activities of the Depositor would not result in a court's concluding that the
assets and liabilities of the Depositor should be consolidated with those of
the Transferor in a proceeding under any Insolvency Law.
Obligor Insolvency-Related Risks. Numerous statutory provisions, including
Insolvency Laws, may interfere with or affect the ability of a creditor to
collect payments due under a contract or to enforce a deficiency judgment
against an Obligor. For example, a bankruptcy court may reduce the monthly
payments of an Obligor due under a Receivable or change the rate of interest
applicable to such Receivable. Such actions could result in delays in payments
on the Securities and possible reductions in the amount of those payments.
RELIANCE ON REPRESENTATIONS AND WARRANTIES BY THE DEPOSITOR, THE TRANSFEROR
AND THE SERVICER. None of the Transferor, the Servicer, the Depositor or any
of their respective affiliates will generally be obligated to make any
payments in respect of any Notes, the Certificates or the Receivables of a
Trust. However, in connection with the transfer of Receivables by the
Transferor to the Depositor and the Depositor to a Trust, the Transferor will
make representations and warranties with respect to the characteristics of
such Receivables and, in certain circumstances, the Depositor may be required
to purchase from the Trust and the Transferor would be required to
simultaneously purchase from the Depositor Receivables with respect to which
such representations and warranties have been breached. Alternatively, if so
specified in the related Prospectus Supplement, the Transferor or the
Depositor will be permitted, in a circumstance where it would otherwise be
required to purchase a Receivable as described in the preceding sentence, to
instead substitute a comparable Receivable for the Receivable otherwise
requiring purchase, subject to certain conditions and eligibility criteria for
the substitute Receivable to be summarized in the related Prospectus
Supplement. The Depositor's obligation to make such purchase or substitution
is contingent upon the Transferor performing its obligation to purchase or
substitute for such Receivable from the Depositor. See "Description of the
Transfer and Servicing Agreements--Transfer of Receivables". In addition,
under certain circumstances, the Servicer may be required to purchase
Receivables. See "Description of the Transfer and Servicing Agreements--
Servicing Procedures". If collections on any Receivable were reduced as a
result of any matter giving rise to a purchase obligation on the part of the
Depositor, the Transferor and/or the Servicer, as the case may be, and the
Depositor, the Transferor and/or the Servicer failed for any reason to perform
in accordance with that obligation, then delays in payments on the Securities
and possible reductions in the amount of those payments could occur.
Moreover, if the Servicer were to cease acting as Servicer, the performance
of the Receivables could be adversely affected. In addition, delays in
processing payments on the Receivables and information in respect thereof
could occur and result in delays in payments to the Securityholders.
SUBORDINATION. To the extent specified in the related Prospectus Supplement,
distributions of interest and principal on one or more classes of Certificates
of a series may be subordinated in priority of payment to interest and
principal due on the Notes, if any, of such series or one or more other
classes of Certificates of such series.
LIMITED ASSETS. Moreover, each Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and, to the extent provided in the related Prospectus Supplement,
a Pre-Funding Account, a Reserve Account and any other
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credit enhancement. 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 any of the Transferor, the Depositor, the Servicer,
any Trustee, any Indenture Trustee or any other person or entity.
Consequently, holders of the Securities of any series must rely for repayment
upon payments on the related Receivables and, if and to the extent available,
amounts on deposit in the Pre-Funding Account (if any), the Reserve Account
(if any) and any other credit enhancement, all as specified in the related
Prospectus Supplement. If such amounts and credit enhancement are exhausted
(and not replenished), the related Trust will depend solely on payments on the
Receivables to make distributions on the Securities, and the Securities will
bear the risk of delinquency, loan loss and repossessions with respect to the
Receivables.
MATURITY AND PREPAYMENT CONSIDERATIONS. All the Receivables are prepayable
at any time. (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) and liquidations due to
default, as well as receipts of proceeds from physical damage, credit life and
disability insurance policies and certain other Receivables repurchased for
administrative reasons). The rate of prepayments on the Receivables may be
influenced by a variety of economic, social and other factors, including the
fact that an Obligor generally may not sell or transfer the Financed Asset
securing a Receivable without causing the related loan to become due and
payable. The rate of prepayment on the Receivables may also be influenced by
the structure of the loan evidencing the Receivable. In addition, under
certain circumstances, the Depositor will be obligated to purchase from the
Trust, and the Transferor will be obligated to simultaneously purchase from
the Depositor (or in either case, if so specified in the related Prospectus
Supplement and subject to the conditions summarized therein, substitute for)
Receivables pursuant to a Transfer and Servicing Agreement or Pooling and
Servicing Agreement as a result of certain breaches of representations and
warranties and, under certain circumstances, the Servicer will be obligated to
purchase Receivables pursuant to such Transfer and Servicing Agreement or
Pooling and Servicing Agreement as a result of breaches of certain covenants.
See "Description of the Transfer and Servicing Agreements--Transfer of
Receivables" herein. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables held by a given Trust will be borne
entirely by the Securityholders of the related series of Securities. See also
"Description of the Transfer and Servicing Agreements--Termination" herein
regarding the Servicer's option to purchase the Receivables of a given
Receivables Pool. In addition, as described above under "Considerations
Relating to an Insolvency Event of the Depositor Related to Certain Trusts",
in the case of a Trust that is not a grantor trust if so specified in the
related Prospectus Supplement, as described in such supplement, the sale of
the Receivables owned by such Trust will be required if an Insolvency Event
with respect to the Depositor occurs.
RISK OF COMMINGLING. With respect to each Trust, the Servicer will deposit
all payments on the related Receivables (from whatever source) and all
proceeds of such Receivables collected during each Collection Period into the
Collection Account of such Trust within two business days of receipt thereof.
However, in the event that the Servicer satisfies certain requirements for
monthly or less frequent remittances and the Rating Agencies (as such term is
defined in the related Prospectus Supplement, the "Rating Agencies") affirm
their ratings of the related Securities at the initial level, then for so long
as the servicer specified in the related Prospectus Supplement is the Servicer
and provided that (i) there exists no Servicer Default and (ii) each other
condition to making such monthly or less frequent deposits as may be specified
by the Rating Agencies and described in the related 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 or Payment Date. The Servicer will
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deposit the aggregate Purchase Amount of Receivables purchased by the Servicer
into the applicable Collection Account on or before the business day preceding
each Distribution Date or Payment 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, such funds will not be available for
distribution to the applicable Securityholders and such 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 Receivables and
payment of the aggregate Purchase Amount with respect to Receivables purchased
by the Servicer.
RISK ASSOCIATED WITH SUBSEQUENT RECEIVABLES AND THE PRE-FUNDING ACCOUNT. If
so specified in the related Prospectus Supplement, the Transferor will be
obligated to transfer, and the Depositor will be obligated to acquire and then
transfer to the related Trust which Trust will then be obligated to acquire,
Subsequent Receivables from time to time during the Funding Period specified
in the related Prospectus Supplement. With respect to any Trust that is to be
treated as a grantor trust for federal income tax purposes, the Funding
Period, if any, will not exceed 90 days in length from the Closing Date, and
with respect to any other Trust will not exceed one year in length from the
Closing Date unless otherwise specified in the related Prospectus Supplement.
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement the Pre-Funded Amount on the Closing Date will not
exceed 25% of the aggregate initial principal balance of the Securities.
Changes in Characteristics of Receivables Pool Due to Subsequent
Receivables. Amounts on deposit in any Pre-Funding Account may be invested
only in Eligible Investments. Subsequent Receivables may be originated by the
Dealers, by Originators or by the Transferor at a later date using credit
criteria different from those which were applied to any Initial Receivables
and may be of a different credit quality and seasoning. In addition, following
the transfer of Subsequent Receivables to the applicable Trust, the
characteristics of the entire pool of Receivables included in such Trust may
vary from those of the Initial Receivables transferred to such Trust. As a
result, it is possible that the credit quality of the Receivables in a Trust,
as a whole, may decline as a result of the inclusion of Subsequent Receivables
and may result in a higher rate of payment to the applicable Securityholders
as a result of an increased level of defaults on such Receivables.
Use of Balance in Pre-Funding Account to Prepay Securities. To the extent
that amounts on deposit in the Pre-Funding Account have not been distributed
to the Transferor by the end of the Funding Period and such amount exceeds the
applicable amount described in the related Prospectus Supplement, the holders
of Securities issued by the related Trust will receive, on the Distribution
Date or Payment Date on or immediately following the last day of the
applicable Funding Period, a prepayment of principal in an amount equal to the
amount remaining in the Pre-Funding Account. It is anticipated that the
principal balance of Subsequent Receivables transferred to a Trust will not be
exactly equal to the amount on deposit in the Pre-Funding Account, and that
therefore there will be at least a nominal amount of principal prepaid to the
holders of the Securities issued by such Trust. Securityholders will bear all
reinvestment risk associated with distribution to Securityholders of amounts
on deposit in the Pre-Funding Account after termination of the applicable
Funding Period. Any such distribution will have the effect of a prepayment on
the related Receivables and may result in a reduction in the yield to maturity
of any class of Securities to which such amounts are distributed.
RIGHTS OF THE NOTEHOLDERS TO DIRECT CERTAIN MATTERS AFFECTING THE
CERTIFICATEHOLDERS. In general, with respect to any Trust issuing Notes, until
the Notes have been paid in full, the
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ability to direct the related Trust with respect to certain actions permitted
to be taken under the related Transfer and Servicing Agreements rests with the
related Indenture Trustee and the Noteholders instead of the
Certificateholders.
For example, unless otherwise provided in the related Prospectus Supplement
with respect to a Trust issuing Notes, in the event a Servicer Default occurs,
the Indenture Trustee or the Noteholders with respect to such series, as
described under "Description of the Transfer and Servicing Agreements--Rights
upon Servicer Default" herein, may remove the Servicer without the consent of
the Trustee or any of the Certificateholders with respect to such series. The
Trustee or the Certificateholders with respect to such series will not have
the ability to remove the Servicer if a Servicer Default occurs. In addition,
the Noteholders of such series have the ability, with certain specified
exceptions, to waive defaults by the Servicer, including defaults that could
materially adversely affect the Certificateholders of such series. See
"Description of the Transfer and Servicing Agreements--Waiver of Past
Defaults" herein.
BOOK-ENTRY REGISTRATION. Unless otherwise specified in the related
Prospectus Supplement, 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 the related 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 for such series are issued, holders of
such Securities will not be recognized by the Trustee or any applicable
Indenture Trustee as "Certificateholders", "Noteholders" or "Securityholders",
as the case may be (as such terms are used herein or in the related Pooling
and Servicing Agreement or related Indenture and Trust Agreement, as
applicable). Hence, until Definitive Securities are issued, holders of such
Securities will only be able to exercise the rights of Securityholders
indirectly through DTC and its participating organizations. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--
Definitive Securities" herein. The Noteholders and the Certificateholders are
referred to collectively as the "Securityholders".
THE TRUSTS
With respect to each series of Securities, the 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 (a "Receivables Pool") of retail installment sales contracts,
installment loans or notes (i) between dealers (the "Dealers") and Obligors,
(ii) between Originators and Obligors and/or (iii) between the Transferor and
Obligors, and all payments received thereunder on and after the applicable
closing date (as such term is defined in the related Prospectus Supplement, a
"Closing Date"). "Obligors" are purchasers of new and used recreational sport
and power boats (including any boat motors and accompanying trailers) and
yachts (both power and sail) ("Financed Boats," and the Receivables with
respect thereto, "Boat Receivables"). The Receivables of each Receivables Pool
were or will be originated by the Transferor, Originators and/or Dealers,
acquired by the Transferor, pursuant to agreements between the Transferor and
Dealers ("Dealer Agreements"), or pursuant to agreements between the
Transferor and one or more Originators, and transferred to the Depositor. Such
Receivables will be serviced by the Servicer. On or prior to the applicable
Closing Date, the Transferor will transfer the Receivables to the Depositor.
On or prior to the applicable Closing Date, the Depositor will transfer the
Initial Receivables of the applicable Receivables Pool to the Trust. To the
extent so provided in the related Prospectus Supplement, Subsequent
Receivables will be transferred to the Trust as frequently as daily during the
Funding Period. Any Subsequent Receivables so transferred will also be assets
of the applicable Trust, subject to the
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prior rights of the related Indenture Trustee and the Noteholders, if any,
therein. 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 Transfer and Servicing Agreement or Pooling and
Servicing Agreement and the proceeds of such accounts, as described herein and
in the related Prospectus Supplement; (ii) the Depositor's rights with respect
to security interests in the Financed Assets; (iii) the Depositor's rights
with respect to proceeds from claims on certain physical damage, credit life
and disability insurance policies covering the Financed Assets or the
Obligors, as the case may be; (iv) any property that shall have secured a
Receivable and that shall have been acquired by the applicable Trust; and (v)
any and all proceeds of the foregoing. To the extent specified in the related
Prospectus Supplement, a Pre-Funding Account, a Reserve Account or other form
of credit enhancement 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.
Although the property of each Trust will include any interest of the
Depositor in proceeds from claims on physical damage insurance policies
covering the Financed Assets, the Servicer typically allows Obligors (unless
the Financed Asset is a total loss) to use such proceeds to repair or replace
Financed Assets instead of making corresponding prepayments of the applicable
Receivables. The applicable Trust Agreement or Pooling and Servicing Agreement
will permit the Servicer, subject to the servicing standards referred to
therein, to allow Obligors to use proceeds from such claims to repair or
replace Financed Assets rather than making prepayments of Receivables in the
related Trust.
With respect to each series of Securities, if so specified in the related
Prospectus Supplement, prior to its transfer of Receivables to the Trust, the
Depositor may hold such assets in the form of one or more participation
certificates, issued by the Transferor, evidencing the entire undivided
ownership interest in each related Receivable (each, a "Participation"). In
such event, immediately upon the transfer of the Receivables to the related
Trust, the Participation will be terminated and dissolved by mutual agreement
of the Transferor, the Trust and the Depositor and the Trust will then own the
Receivables directly.
The Servicer will continue to service the Receivables held by each Trust and
will receive fees for such services. See "Description of the Transfer and
Servicing Agreements--Servicing Compensation and Payment of Expenses" herein
and in the related Prospectus Supplement. To facilitate the servicing of the
Receivables, each Trustee will authorize the Servicer to retain physical
possession of the Receivables 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 or UCC financing statements, as applicable,
to the Financed Assets will not be amended to reflect the transfer of the
security interest in the Financed Assets to each Trust, and transfers to the
Trust of the Preferred Mortgages in respect of federally documented Financed
Boats will not be filed. In the absence of such an amendment or filing, a
Trust may not have a perfected security interest in the Financed Assets in all
states and will not have a perfected security interest in federally documented
Financed Boats. See "Risk Factors--Certain Legal Aspects--Security Interest in
Financed Assets," "Certain Legal Aspects of the Receivables" and "Description
of the Transfer and Servicing Agreements--Transfer of Receivables".
If the protection provided to any Noteholders of a series by the
subordination of the related Certificates and by the Reserve Account, if any,
or other credit enhancement for such series or the protection provided to
Certificateholders by any such Reserve Account or other credit enhancement is
insufficient, such Noteholders or Certificateholders, as the case may be,
would have to look principally to payments on the related Receivables, the
proceeds from the repossession and sale of Financed Assets which secure
[defaulted] Receivables and the proceeds from any recourse against Dealers
with respect to such Receivables. In such event,
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certain factors, such as the applicable Trust's not having perfected security
interests in the Financed Assets in all states or, if applicable, under
federal law, may affect the Servicer's ability to repossess and sell the
collateral securing the Receivables, and thus may reduce the proceeds to be
distributed to the holders of the Securities of such series. See "Description
of the Transfer and Servicing Agreements--Distributions", "--Credit and Cash
Flow Enhancement" and "Certain Legal Aspects of the Receivables".
The principal offices of each Trust and the related Trustee will be
specified in the applicable Prospectus Supplement.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale
of the related Securities is limited solely to the express obligations of such
Trustee set forth in the related Trust Agreement and the Transfer and
Servicing Agreement or the related Pooling and Servicing Agreement, as
applicable. A Trustee may resign at any time, in which event the Servicer, or
its successor, will be obligated to appoint a successor trustee. The
Administrator, if any, of a Trust that is not a grantor trust and the Servicer
in respect of a Trust that is a grantor trust may also remove the Trustee if
the Trustee ceases to be eligible to continue as Trustee under the related
Trust Agreement or Pooling and Servicing Agreement, as applicable, or if the
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 and appointment of a successor trustee
will not become effective until acceptance of the appointment by the successor
trustee.
THE RECEIVABLES POOLS
GENERAL
The Receivables in each Receivables Pool are and will be retail installment
sales contracts, installment loans, or notes that have been or will be
originated by the Transferor, and/or originated by Dealers, and/or originated
or acquired by Deutsche Financial Services Corporation ("DFS") and/or other
entities (DFS and such other entities being referred to herein as
"Originators"), and (with respect to Receivables which were not originated by
the Transferor) acquired by the Transferor from such Dealers and/or
Originators, and will be Boat Receivables. Receivables held by any Originator
may have been acquired by such Originator from Dealers or from other
Originators. An Originator (such as DFS) may be an affiliate of the
Transferor. The Originators will be entities involved in the origination,
secondary market purchasing and/or servicing of retail installment sales
contracts, installment loans, loans and other receivables secured by boats. In
addition, to the extent described in any Prospectus Supplement, the related
Receivables Pool may include Receivables acquired by an Affiliate of the
Transferor through acquisitions. Receivables will be transferred by the
Transferor to the Depositor pursuant to a Receivables Transfer Agreement and
then will be transferred by the Depositor to the applicable Trust.
The Receivables to be held by each Trust will be acquired by the Depositor
from the portfolio of the Transferor for inclusion in a Receivables Pool in
accordance with several criteria, including that each Receivable (i) is
secured by a new or used boat, (ii) was originated in the United States, and
(iii) as of the Cutoff Date (a) had an outstanding principal balance of at
least the amount set forth in the related Prospectus Supplement, (b) was not
more than 59 days (or such other number of days specified in the related
Prospectus Supplement) past due, (c) had a
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remaining number of scheduled payments not more than the number set forth in
the related Prospectus Supplement, (d) had an original number of scheduled
payments not more than the number set forth in the related Prospectus
Supplement and (e) had an APR of not less than the rate per annum set forth in
the related Prospectus Supplement. No selection procedures believed by the
Depositor to be adverse to the Securityholders of any series were or will be
used in selecting the related Receivables.
All of the Receivables will be Simple Interest Receivables. "Simple Interest
Receivables" are receivables that provide for the amortization of the amount
financed under each receivable over a series of fixed level payments,
generally in monthly installments. Each such installment consists of an amount
of interest which is calculated on the basis of the outstanding principal
balance of the receivable multiplied by the stated APR and further multiplied
by the period elapsed (as a fraction of a calendar year) since the preceding
payment of interest was made. As payments are received under a Simple Interest
Receivable, the amount received is applied, first, to interest accrued to the
date of payment, second, to reduce the unpaid principal balance, and third, to
late fees and other fees and charges, if any. Accordingly, if an Obligor pays
a fixed monthly installment before its scheduled due date, the portion of the
payment allocable to interest for the period since the preceding payment was
made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, if an Obligor
pays a fixed monthly installment after its scheduled due date, the portion of
the payment allocable to interest for the period since the preceding payment
was made will be greater than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly less. In either case, the Obligor
pays a fixed monthly installment until the final scheduled payment date, at
which time the amount of the final installment is increased or decreased as
necessary to repay the then outstanding principal balance and unpaid accrued
interest. If a Simple Interest Receivable is prepaid, the Obligor is required
to pay interest only to the date of prepayment.
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
geographic distribution and distribution by APR [and the portion of such
Receivables Pool secured by new Financed Assets and by used Financed Assets].
SUBSEQUENT RECEIVABLES
Subsequent Receivables may be originated by Dealers, Originators or the
Transferor at a later date using credit criteria different from those which
were applied to any Initial Receivables and may be of a different credit
quality and seasoning. In addition, following the transfer of Subsequent
Receivables to the applicable Trust, the characteristics of the entire pool of
Receivables included in such Trust may vary significantly from those of the
Initial Receivables transferred to such Trust. Each Prospectus Supplement will
describe the effects that including such Subsequent Receivables may have on
the Receivables Pool included in the Trust Property of each Trust issuing
Securities.
UNDERWRITING
For a description of certain underwriting procedures and guidelines of the
Transferor and of DFS (in its capacity as an Originator), see "Underwriting
Procedures and Guidelines."
SERVICING AND COLLECTIONS
For a description of the Servicer's servicing procedures, see "The Servicer"
and "Description of the Transfer and Servicing Agreements--Servicing
Procedures."
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DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information concerning the Transferor's loss and delinquency
experience with respect to its portfolio of boat loans will be set forth in
each Prospectus Supplement. There can be no assurance that the delinquency,
repossession and net loss experience on any Receivables Pool 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, if
any, of any series will generally be influenced by the rate at which the
principal balances of the related Receivables 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, as well as receipts of
proceeds from physical damage, credit life and disability insurance policies
and certain other Receivables repurchased by the Depositor or the Servicer for
administrative reasons.) All of the Receivables are prepayable at any time
without penalty to the Obligor. The rate of prepayment of boat receivables is
influenced by a variety of economic, social and other factors, including the
fact that an Obligor generally may not sell or transfer the Financed Asset
securing a Receivable without the consent of the Servicer. The rate of
prepayment on the Receivables may also be influenced by the structure of the
loan. In addition, under certain circumstances, the Depositor will be
obligated to purchase from a Trust and the Transferor will be obligated to
simultaneously purchase from the Depositor (or in either case, if so specified
in the related Prospectus Supplement and subject to the conditions summarized
therein, substitute for) Receivables pursuant to the related Transfer and
Servicing Agreement or Pooling and Servicing Agreement as a result of breaches
of representations and warranties and the Servicer will be obligated to
purchase Receivables from such Trust pursuant to such Transfer and Servicing
Agreement or Pooling and Servicing Agreement as a result of breaches of
certain covenants. In the case of any Security purchased at a discount to its
principal amount, a slower than anticipated rate of principal payments is
likely to result in a lower than anticipated yield. In the case of a Security
purchased at a premium to its principal amount, a faster than anticipated rate
of principal payments is likely to result in a lower than anticipated yield.
See "Description of the Transfer and Servicing Agreements--Transfer of
Receivables" and "--Servicing Procedures". See also "Description of the
Transfer and Servicing Agreements--Termination" herein regarding the
Servicer's option to purchase the Receivables from a given Trust. No
prediction can be made as to the rate of prepayment that the Receivables will
experience.
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, if any, of a given series on each Payment Date or Distribution
Date, as applicable, since such amount will depend, in part, on the amount of
principal collected on the related Receivables Pool during the applicable
Collection Period. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Receivables 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 Receivables Pool 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
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the remaining outstanding principal balance of such class of Notes, as of the
applicable Payment Date (after giving effect to payments to be made on such
Payment 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 with respect
to a Trust, the Noteholders and the Certificateholders, as applicable, will
receive reports on or about each Payment Date concerning (i) with respect to
the Collection Period immediately preceding such Payment Date, payments
received on the Receivables, the Pool Balance (as such term is defined in the
related Prospectus Supplement, the "Pool Balance"), each Certificate Pool
Factor or Note Pool Factor, as applicable, and various other items of
information, and (ii) with respect to the Collection Period second preceding
such Payment Date, as applicable, amounts allocated or distributed on the
preceding Payment Date and any reconciliation of such amounts with information
provided by the Servicer prior to such current Payment Date. 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" herein.
USE OF PROCEEDS
Unless the related Prospectus Supplement provides for other applications,
the net proceeds from the sale of the Securities of a given series will be
applied by the applicable Trust (i) to acquire Receivables from the Depositor
or otherwise to make a distribution to the Depositor, (ii) to make the initial
deposit into the Reserve Account, if any, and (iii) to make the deposit of the
Pre-Funded Amount into the Pre-Funding Account, if any. Unless otherwise
specified in the related Prospectus Supplement, the Depositor will use that
portion of such net proceeds paid to it with respect to any such Trust to
acquire Receivables from the Transferor or otherwise to make a distribution to
the Transferor and for general corporate purposes.
THE DEPOSITOR
Deutsche Recreational Asset Funding Corporation (the "Depositor") was
incorporated in the State of Nevada on May 1, 1998 as a wholly-owned
subsidiary of the Transferor. The Depositor maintains its principal office at
655 Maryville Centre Drive, St. Louis, Missouri 63141. Its telephone number is
(314) [523-3000].
The only obligations, if any, of the Depositor with respect to a Series of
Certificates and/or Notes may be pursuant to certain limited representations
and warranties and limited undertakings to purchase (or, if so specified in
related Prospectus Supplement, substitute for)
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Receivables under certain circumstances, but only to the extent the Transferor
simultaneously performs its obligation to purchase such Receivables. The
Depositor will have no ongoing servicing obligations or responsibilities with
respect to any Financed Asset. The Depositor does not have, nor is required to
have, nor is expected in the future to have, any significant assets.
Neither the Depositor nor the Transferor nor any of their respective
affiliates will insure or guarantee the Receivables or the Certificates and/or
Notes of any series.
THE TRANSFEROR
Ganis Credit Corporation ("Ganis" or the "Transferor"), a Delaware
corporation headquartered in Newport Beach, California, is a wholly-owned
subsidiary of DFS. Ganis was founded in 1980 and provides financing to
recreational vehicle and boat consumers nationwide. In February 1995,
BankBoston, N.A. ("BankBoston") acquired Ganis and established it as a
division of BankBoston. Following such acquisition, Ganis originated loans
exclusively for the portfolio of BankBoston. In June 1997, BankBoston sold
Ganis to DFS. Certain of the Receivables were underwritten prior to the sale
of Ganis to DFS.
UNDERWRITING PROCEDURES AND GUIDELINES
DFS engages in indirect consumer lending through its headquarters in Newport
Beach, California and its regional offices in Tampa, Florida, Harrisburg,
Pennsylvania and Irving, Texas. Ganis engages in direct consumer lending
through its headquarters and its district offices. "Direct lending" refers to
financing provided directly to an Obligor. "Indirect lending" refers to
acquisitions of Receivables from Dealers and from Originators (which
Originators may be DFS or other affiliates of the Transferor).
Dealers who seek to enter into financing arrangements with DFS are required
to submit an application and provide, among other things, evidence of licenses
by the appropriate state agencies, financial information and resumes of key
personnel. DFS investigates the creditworthiness, licensing and general
business reputation of the Dealer prior to entering into a financing
arrangement with such Dealer. The regional offices of DFS maintain
relationships with the Dealers and coordinate the underwriting and settlement
process relating to Receivables originated by such Dealers.
Credit applications are initially reviewed by an underwriter located at the
consumer headquarters or in one of the regional offices of DFS or, if
applicable, located at the headquarters or in one of the district offices of
Ganis. Such review of an application is intended to determine the customer's
willingness and ability to repay and the adequacy of the underlying
collateral. Applicants are required to provide information pertaining to their
income, employment history, financial liabilities, personal status and a
description or invoice of the asset for which the loan is requested. In
addition, DFS or Ganis, as the case may be, requires one or more credit
reports on each applicant from a national reporting company. Once a loan
request passes a preliminary review the underwriter, where appropriate, seeks
verification of, among other things, income, employment, outstanding debt and
the value of the asset. Loans in excess of an underwriter's authority require
approval by a more senior credit underwriting employee.
The criteria considered by DFS or Ganis, as the case may be, in evaluating a
credit application include, among other things: (i) years of employment, (ii)
income, (iii) home ownership, (iv) credit history, (v) debt to gross income
analysis and (vi) loan-to-value ratios. DFS or Ganis, as the case may be, also
includes credit scores derived from one or more credit bureau reports in
assessing a borrower's creditworthiness. The "value" of a new boat to be
financed is determined based on the invoice price, and the "value" of a used
boat to be financed is determined based on the average retail value reported
in the National Automobile Dealers
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Association ("NADA") used boat guide or reported in the "BUC" guide, or based
on an appraisal of the boat. DFS or Ganis, as the case may be, generally will
not finance more than 110% of the "value" of the boat plus related amounts
financed in connection therewith, if any, such as equipment, title and
licensing fees, taxes and extended warranties.
In general, the underwriting standards of DFS or Ganis, as the case may be,
are not a fixed set of criteria which are required to be met by all loans.
Applications for loans which do not meet the customary guidelines of DFS or
Ganis, as the case may be, require review and approval by a more senior credit
underwriting employee than loans which conform to such guidelines.
THE SERVICER
Deutsche Financial Services Corporation ("DFS") was incorporated in Nevada
in 1969. It is an indirect, wholly-owned subsidiary of Deutsche Bank AG. DFS
was formerly known as ITT Commercial Finance Corp. The stock of ITT Commercial
Finance Corp. was acquired by Deutsche Financial Services Holding Corporation
in 1995. In January 1997, Deutsche Financial Services Holding Corporation
merged into DFS; DFS was the surviving corporation. DFS is a financial
services company which provides inventory financing, retail financing,
accounts receivable financing and asset based financing to dealers,
distributors and manufacturers of consumer and commercial durable goods.
Industries served by DFS include, but are not limited to: computers and
computer products, manufactured housing, recreational vehicles, boats and
motors, consumer electronics and appliances, keyboards and other musical
instruments, industrial and agricultural equipment, office automation
products, snowmobiles, and motorcycles. DFS also is in the business of
providing equipment loans and leases, franchisee loans, vendor finance
programs and private label retail finance programs.
DFS has offices in major metropolitan areas of the United States. Its
principal executive offices are located at 655 Maryville Centre Drive, St.
Louis, Missouri 63141-5832. The telephone number of such office is (314) 523-
3000.
The Servicer's servicing operations are conducted from its servicing centers
in Newport Beach, California and Bannockburn, Illinois.
The Servicer generally commences collections activities by phone or written
correspondence with respect to delinquent contracts when payment is more than
10 days past due. At 45 days past due, collection personnel issue notices of
intent to repossess unless a secured payment promise is obtained. The Servicer
continues to work the account until the account is 65 days past due, at which
time the repossession process is initiated for those accounts which remain
delinquent. The collateral is generally disposed of 40 to 45 days following
repossession. The benchmark for recovery values is 95% of the NADA [or "BUC"]
guidebook value for the collateral on a gross basis, with expenses ranging up
to 5% depending on the type of collateral. Delinquent contracts, including
those due to bankruptcies, are generally charged-off at 120 days delinquent.
For a discussion of collection procedures with respect to the Receivables, see
"Description of the Transfer and Servicing Agreements--Servicing Procedures"
herein.
DESCRIPTION OF THE NOTES
GENERAL
With respect to each Trust that issues Notes, one or more classes of Notes
of the related series will be issued pursuant to the terms of an Indenture, a
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The following
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summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Notes and the
Indenture.
Unless otherwise specified in the related Prospectus Supplement, 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.
Unless otherwise specified in the related Prospectus Supplement, the Notes
will be available for purchase in denominations of $1,000 and integral
multiples thereof in book-entry form only. The Depositor 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 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" herein.
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. To the extent
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" herein. 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 at the end of the Funding Period (if any) or
as a result of the Servicer's exercising its option to purchase the related
Receivables Pool.
To the extent specified in any Prospectus Supplement, one or more classes of
Notes of a series may have fixed principal payment schedules. Noteholders of
such Notes would be entitled to receive as payments of principal on any
Payment 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.
Unless otherwise specified in the related Prospectus Supplement, payments to
Noteholders 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
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interest payable on the Notes on any of the dates specified for payments in
the related Prospectus Supplement (each, a "Payment Date"), in which case each
class of Noteholders will receive its ratable share (based upon the aggregate
amount of interest due to such class of Noteholders) of the aggregate amount
available to be distributed in respect of interest on the Notes of such
series. See "Description of the Transfer and Servicing Agreements--
Distributions" and "--Credit and Cash Flow Enhancement" herein.
In the case of a series of Notes 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 and interest of any
class of Notes will be made on a pro rata basis among all the Noteholders of
such class.
THE INDENTURE
MODIFICATION OF INDENTURE. With respect to each Trust that has issued Notes
pursuant to an Indenture, the Trust and the Indenture Trustee may, with the
consent of the holders of a majority of the outstanding Notes of the related
series, execute a supplemental indenture to add provisions to, change in any
manner or eliminate any provisions of, the related Indenture, or modify
(except as provided below) in any manner the rights of the related
Noteholders.
Unless otherwise specified in the related Prospectus Supplement with respect
to a series of Notes, in the absence of the consent of the holder of each such
outstanding Note affected thereby, no supplemental indenture will: (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 the related Indenture or
of certain defaults thereunder and their consequences as provided for in such
Indenture; (iv) modify or alter the provisions of the related Indenture
regarding the voting of Notes held by the applicable Trust, any other obligor
on such Notes, the Depositor, the Transferor 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 Receivables 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) decrease the percentage
of the aggregate principal amount of such Notes required to amend the sections
of the related Indenture which specify the applicable percentage of aggregate
principal amount of the Notes of such series 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 related 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, the 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.
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EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to the Notes
of a given series, unless otherwise specified in the related Prospectus
Supplement, "Events of Default" under the related Indenture will consist of:
(i) a default for five days (or such longer period specified in the related
Prospectus Supplement) in the payment of any interest on any such Note; (ii) a
default in the payment of the principal of 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 the related Indenture and the continuation of any such default for a
period of 30 days (or such other period specified in the related Prospectus
Supplement) 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% (or such other percentage specified in the related Prospectus
Supplement) in principal amount of such Notes then outstanding; (iv) any
representation or warranty made by such Trust in the related Indenture or in
any certificate delivered pursuant thereto or in connection therewith having
been incorrect in a material respect as of the time made, and such breach not
having been cured within 30 days (or such other period specified in the
related Prospectus Supplement) 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% (or such other percentage specified in the
related Prospectus Supplement) 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, unless otherwise specified in the
related Prospectus Supplement, 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 Payment 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 a majority in
principal amount of such Notes then outstanding may declare the principal of
such Notes to be immediately due and payable. Unless otherwise specified in
the related Prospectus Supplement, such declaration may, under certain
circumstances, be rescinded by the holders of a majority in principal amount
of such Notes then outstanding.
If the Notes of any series are 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 Receivables or elect to have the applicable
Trust maintain possession of such Receivables and continue to apply
collections on such Receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the related Prospectus Supplement,
however, such Indenture Trustee is prohibited from selling the related
Receivables 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 Receivables 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 66 2/3% 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
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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 such Indenture that cannot be modified
without the waiver or consent of all the holders of such outstanding Notes.
Unless otherwise specified in the related Prospectus Supplement, no holder
of a Note of any series will have the right to institute any proceeding with
respect to the related Indenture, unless (i) such holder previously has given
to the applicable Indenture Trustee written notice of a continuing Event of
Default, (ii) the holders of not less than 25% in principal amount of the
outstanding Notes of such series have made written request to such Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee,
(iii) such holder or holders have offered such Indenture Trustee reasonable
indemnity, (iv) such Indenture Trustee has for 60 days failed to institute
such proceeding and (v) no direction inconsistent with such written request
has been given to such Indenture Trustee during such 60-day period by the
holders of a majority in principal amount of such outstanding Notes.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the 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 (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 the performance or
observance of 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 or 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 and (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.
Each Trust will not, among other things, (i) except as expressly permitted
by the applicable Indenture, the applicable Transfer and Servicing Agreements
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 withheld under the Code or applicable state law) or
assert any claim
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against any present or former holder of such Notes because of the payment of
taxes levied or assessed upon such Trust, (iii) dissolve or liquidate in whole
or in part, (iv) permit the validity or effectiveness of the related 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 (v) 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.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust". 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 Servicer Advances made to it by the Servicer or otherwise in accordance
with the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust 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 Trust 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
such 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 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.
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 Depositor will be obligated to appoint a successor
trustee for such series. The Depositor 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, the Depositor will be obligated to appoint a successor
trustee for the applicable series of Notes. Any resignation or removal of the
Indenture Trustee and appointment of a successor trustee for any series of
Notes does not become effective until acceptance of the appointment by the
successor trustee for such series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of the
related series will be issued pursuant to the terms of a Trust Agreement or a
Pooling and Servicing Agreement, a form of each of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
The following summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the
Certificates and the Trust Agreement or Pooling and Servicing Agreement, as
applicable.
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Unless otherwise specified in the related Prospectus Supplement and except
for the Certificates, if any, of a given series purchased by the 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. Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a given series purchased by the
Depositor, the Certificates will be available for purchase in minimum
denominations of $1,000 in book-entry form only. The Depositor 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 Depositor. Unless and until Definitive Certificates are
issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificateholder (other than the 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" herein. Any
Certificates of a given series owned by the Depositor 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 have given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents.
PRINCIPAL AND INTEREST ON THE CERTIFICATES
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 and interest of each class of Certificates will be
described in the related Prospectus Supplement. Distributions of interest on
such Certificates will be made on the dates specified in the related
Prospectus Supplement (each, a "Distribution Date") and will be made prior to
distributions with respect to principal of such Certificates. With respect to
any Trust that issues both Notes and Certificates, the Distribution Date for
the Certificates may coincide with the Payment Date for the Notes, in which
case such date will be referred to in the related Prospectus Supplement as a
Payment Date with respect to both the Notes and 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" herein. Unless otherwise provided in the related Prospectus
Supplement, distributions in respect of the Certificates of a given series
that includes Notes may be subordinate to payments in respect of the Notes of
such series as more fully described 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
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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.
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--Principal and Interest on the
Certificates" herein.
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, the
"Interest Reset Period") 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 the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of one percent) 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.
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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. Unless otherwise specified in
the applicable Prospectus Supplement, all percentages resulting from any
calculation of the rate of interest on a Floating Rate Security will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
CD RATE SECURITIES. Each CD Rate Security will bear interest for each
Interest Reset Period at the interest rate calculated with reference to the CD
Rate and the Spread or Spread Multiplier, if any, specified in such Security
and in the applicable Prospectus Supplement.
Unless otherwise specified 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 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 and the Spread or Spread
Multiplier, if any, specified in such Security and in the applicable
Prospectus Supplement.
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Unless otherwise specified 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 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" with respect to finance companies. In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date pertaining to such Commercial Paper Rate Determination Date,
then the "Commercial Paper Rate" for such Interest Reset Period shall be the
Money Market Yield on such Commercial Paper Rate Determination Date of the
rate for commercial paper of the specified Index Maturity as published in
Composite Quotations under the heading "Commercial Paper". If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for
such Interest Reset Period shall be the Money Market Yield of the arithmetic
mean of the offered rates, as of 11:00 a.m., New York City time, on such
Commercial Paper Rate Determination Date of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
such Commercial Paper Rate Security for commercial paper of the specified
Index Maturity placed for an industrial issuer whose bonds are rated "AA" or
the equivalent by a nationally recognized rating agency; provided, however,
that if the dealers selected as aforesaid by such Calculation Agent are not
quoting offered rates as mentioned in this sentence, the "Commercial Paper
Rate" for such Interest Reset Period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = X 100
360-(D X M)
where "D" refers to the applicable per annum rate for commercial paper
quoted on a bank discount basis and expressed as a decimal, and "M" refers to
the actual number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such
Commercial Paper Rate Determination Date or, if such day is not a business
day, the next succeeding business day or (b) the second business day preceding
the date any payment is required to be made for any period following the
applicable Interest Reset Date.
FEDERAL FUNDS RATE SECURITIES. Each Federal Funds Rate Security will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds Rate and the Spread or Spread Multiplier, if
any, specified in such Security and in the applicable Prospectus Supplement.
Unless otherwise specified 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
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
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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 and the
Spread or Spread Multiplier, if any, specified in such Security and in the
applicable Prospectus Supplement.
Unless otherwise specified 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 determined by the Calculation
Agent for any LIBOR Security as follows:
(i) On the second London Banking Day prior to the Interest Reset Date for
such Interest Reset Period (a "LIBOR Determination Date"), the Calculation
Agent for such LIBOR Security will determine the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period of the Index
Maturity specified in the applicable Prospectus Supplement, commencing on
such Interest Reset Date, which appear on the Telerate Page 3750 ("LIBOR
Telerate") at approximately 11:00 a.m., London time, on such LIBOR
Determination Date. For purposes of calculating LIBOR, "London Banking Day"
means any business day on which dealings in deposits in United States
dollars are transacted in the London interbank market; and "Telerate Page
3750" means the display designated as page "3750" on the Telerate Service
(or such other page as may replace the 3750 page on that service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits).
(ii) If no rate appears on the Telerate Page 3750, as applicable, on such
LIBOR Determination Date, the Calculation Agent for such LIBOR Security
will request the principal London offices of each of four major banks in
the London interbank market selected by such Calculation Agent to provide
such Calculation Agent with its offered quotations for deposits in U.S.
dollars for the period of the specified Index Maturity, commencing on such
Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on such LIBOR Determination Date and
in a principal amount equal to an amount of not less than $1,000,000 that,
in the Calculation Agent's judgment, is representative of a single
transaction in such market at such time. If at least two such quotations
are provided, "LIBOR" for such Interest Reset Period will be the arithmetic
mean of such quotations. If fewer than two such quotations are provided,
"LIBOR" for such Interest Reset Period will be the arithmetic mean of rates
quoted by three major banks in The City of New York selected by the
Calculation Agent for such LIBOR Security at approximately 11:00 a.m., New
York City time, on such LIBOR Determination Date for loans in U.S. dollars
to leading European banks, for the period of the specified Index Maturity,
commencing on such Interest Reset Date, and in a principal amount equal to
an amount of
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not less than $1,000,000 that, in the Calculation Agent's judgment, is
representative of a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by such
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for the
immediately preceding Interest Reset Period.
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 and the Spread or Spread Multiplier, if any, specified in
such Security and in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the
auction held on the Treasury Rate Determination Date 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 pertaining to such Treasury Rate Determination Date, 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.
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BOOK-ENTRY REGISTRATION
Holders of the Certificates or the Notes may hold through DTC (in the United
States) or, solely in the case of the Notes, Cedel or Euroclear (in Europe) if
they are participants of such systems, or indirectly through organizations
that are participants in such systems. The Certificates may not be held,
directly or indirectly, through Cedel or Euroclear. Cede, as nominee for DTC,
will hold the Securities. Cedel and Euroclear will hold omnibus positions in
the Notes on behalf of the Cedel Participants and the Euroclear Participants,
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 UCC and a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-
entries, thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust companies
and clearing corporations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Transfers between DTC's participating organizations (the "Participants")
will occur in accordance with DTC rules. Transfers between Cedel Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant Cedel Participant or Euroclear Participant on such business day. Cash
received in Cedel or Euroclear as a result of sales of securities by or
through a Cedel Participant or a Euroclear Participant to a Participant will
be received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
Unless otherwise specified in the related Prospectus Supplement,
Securityholders that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
Securities may do so only through Participants and Indirect
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Participants. In addition, Securityholders will receive all distributions of
principal and interest from the related Indenture Trustee or the related
Trustee, as applicable (the "Applicable Trustee"), through Participants. Under
a book-entry format, Securityholders 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 forward such payments to its Participants,
which thereafter will forward them to Indirect Participants or
Securityholders. Except to the extent the Depositor holds Certificates with
respect to any series of Securities, it is anticipated that the only
"Securityholder", "Noteholder" and "Certificateholder" will be DTC's nominee.
Noteholders will not be recognized by each Indenture Trustee as Noteholders,
as such term is used in each Indenture, and Noteholders will be permitted to
exercise the rights of Noteholders only indirectly through DTC and its
Participants. Similarly, Certificateholders will not be recognized by each
Trustee as Certificateholders as such term is used in each Trust Agreement or
Pooling and Servicing Agreement, and Certificateholders will be permitted to
exercise the rights of Certificateholders only indirectly through DTC and its
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Securities 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
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments
on behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to the lack of a physical certificate for such
Securities.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Noteholder under the related Indenture or a Certificateholder under
the related Trust Agreement or Pooling and Servicing Agreement only at the
direction of one or more Participants to whose accounts with DTC the
applicable Notes or Certificates 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.
Cedel Bank, societe anonyme ("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,
thereby eliminating the need for physical movement of certificates.
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
depository, Cedel is subject to regulation by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the Underwriter(s) for the related Notes. Indirect access to Cedel is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
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The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in Euroclear 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. 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
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriter(s). 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 State 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 certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding through
Euroclear Participants.
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 Income Tax Consequences" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures" in Annex I to this
Prospectus Supplement. 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 Notes among participants of DTC, Cedel and
Euroclear, they are under no obligation to perform or continue to perform such
procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Administrator, if any, or the Applicable Trustee would seek an
alternative depository (if
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available) or cause the issuance of Definitive Securities to the owners
thereof or their nominees in the manner described in the Prospectus under
"Certain Information Regarding the Securities--Definitive Securities".
Except as required by law, neither the Administrator, if any, nor 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
the 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
If so specified in the related Prospectus Supplement, the Notes, if any, and
the Certificates of a 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 Applicable Trustee, determines that DTC is no
longer willing or able to discharge properly its responsibilities as
depository with respect to such Securities and such Applicable Trustee is
unable to locate a qualified successor, (ii) the Applicable Trustee, 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, holders 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
holders of such Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders 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 Securityholders.
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.
LIST OF SECURITYHOLDERS
Unless otherwise specified in the related Prospectus Supplement with respect
to the Notes of any series, three or more holders of the Notes of such series
or one or more holders of such
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Notes evidencing not less than 25% of the aggregate outstanding principal
balance of such Notes 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.
Unless otherwise specified in the related Prospectus Supplement 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.
REPORTS TO SECURITYHOLDERS
With respect to each series of Securities that includes Notes, on or prior
to each Payment Date, the Servicer will prepare and provide to the related
Indenture Trustee a statement to be delivered to the related Noteholders on
such Payment Date. With respect to each series of Securities, 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 Payment Date or the period
since the previous Payment 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 the related
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 Collection 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 after
giving effect to all payments reported under clause (i) above on such date;
(v) the amount of the Servicing Fee paid to the Servicer with respect to
the related Collection Period or Collection Periods, as the case may be;
(vi) the Interest Rate or Pass Through Rate for the next period for any
class of Notes or Certificates of such series with variable or adjustable
rates;
(vii) the amount of the aggregate realized losses, if any, for the
related Collection Period;
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(viii) the Noteholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, the Certificateholders' Interest Carryover
Shortfall and the Certificateholders' Principal Carryover Shortfall (each
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 Receivables, if any, that were
repurchased or substituted for in such Collection Period;
(x) the balance of the Reserve Account (if any) on such date, after
giving effect to changes therein on such date;
(xi) for each such date during the Funding Period (if any), the remaining
Pre-Funded Amount; and
(xii) for the first such date that is on or immediately following the end
of the Funding Period (if any), the amount of any remaining Pre-Funded
Amount that has not been distributed to the Transferor and is being passed
through as payments of principal on the Securities of such series.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (viii) with
respect to the Notes or the Certificates of any series will be expressed as a
dollar amount per $1,000 of the initial principal balance of such Notes or the
initial Certificate Balance of such Certificates, as applicable.
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 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 "Certain
Federal Income Tax Consequences" herein.
In addition, the filing with the Commission of periodic reports with respect
to each Trust will cease following completion of the reporting period required
by Rule 15d-1 of Regulation 15D under the Exchange Act.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of each Transfer and Servicing
Agreement or Pooling and Servicing Agreement pursuant to which a Trust will
acquire Receivables from the Depositor and the Servicer will agree to service
such Receivables, each Trust Agreement (in the case of a grantor trust, the
Pooling and Servicing Agreement) pursuant to which a Trust will be created and
Certificates will be issued and each Administration Agreement pursuant to
which the Servicer (or such other person named in the related Prospectus
Supplement) will undertake certain administrative duties with respect to a
Trust that issues Notes (collectively, the "Transfer and Servicing
Agreements"). Forms of the Transfer and Servicing Agreements have been filed
as exhibits to the Registration Statement of which this Prospectus forms a
part. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements.
TRANSFER OF RECEIVABLES
On or prior to the closing date (the "Closing Date") specified in the
Prospectus Supplement for a Trust, the Transferor will transfer, without
recourse, to the Depositor its entire interest in the related Initial
Receivables and its security interests in the related Financed Assets pursuant
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to a receivables transfer agreement (a "Receivables Transfer Agreement"). On
or prior to such Closing Date, the Depositor will transfer to the Applicable
Trustee, without recourse, pursuant to a Transfer and Servicing Agreement or a
Pooling and Servicing Agreement, as applicable, its entire interest in such
Initial Receivables, including its security interests in the related Financed
Assets. Each such Receivable will be identified in a schedule appearing as an
exhibit to such Pooling and Servicing Agreement or Transfer and Servicing
Agreement (a "Schedule of Receivables"). The Applicable Trustee will,
concurrently with such transfer, execute and deliver the related Notes and/or
Certificates. The Applicable Trustee will not verify the existence of the
Receivables or review the Receivables files. 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
acquisition of the related Receivables from the Transferor (or otherwise
distributed to the Transferor) and, to the extent specified in the related
Prospectus Supplement, to the deposit of the Pre-Funded Amount into the Pre-
Funding Account or to the deposit of a specified amount into the Reserve
Account. The related Prospectus Supplement for a given Trust will specify
whether, and the terms, conditions and manner under which, Subsequent
Receivables will be transferred by the Transferor to the Depositor and by the
Depositor to the applicable Trust from time to time during any Funding Period
on each date specified as a transfer date in the related Prospectus Supplement
(each, a "Subsequent Transfer Date").
In each Receivables Transfer Agreement the Transferor will represent and
warrant to the Depositor and, in each Transfer and Servicing Agreement or
Pooling and Servicing Agreement, the Depositor will represent and warrant to
the applicable Trust, among other things, that: (i) the information provided
in the related Schedule of Receivables is correct in all material respects;
(ii) the Obligor on each related Receivable is required to maintain physical
damage insurance covering the Financed Asset in accordance with the
Transferor'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 Receivables 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 Receivables is or will be
secured by a first perfected security interest in favor of the Transferor in
the Financed Asset; (v) each related Receivable, 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 (vi) any other
representations and warranties that may be set forth in the related Prospectus
Supplement.
Unless otherwise provided in the related Prospectus Supplement, as of the
last day of the second (or, if the Transferor elects, the first) month
following the discovery by or notice to the Transferor of a breach of any
representation or warranty of the Transferor that materially and adversely
affects the interests of the related Trust in any Receivable, the Depositor,
unless the breach is cured, will purchase such Receivable from such Trust and
the Transferor will be obligated to simultaneously purchase such Receivable
from the Depositor at a price equal to the unpaid principal balance owed by
the Obligor thereon plus interest thereon at the respective APR to the last
day of the month of purchase (the "Purchase Amount"). Alternatively, if so
specified in the related Prospectus Supplement, the Transferor or the
Depositor will be permitted, in a circumstance where it would otherwise be
required to purchase a Receivable as described in the preceding sentence, to
instead substitute a comparable Receivable for the Receivable otherwise
requiring purchase, subject to certain conditions and eligibility criteria for
the substitute Receivable to be summarized in the related Prospectus
Supplement. The purchase obligation (or, if applicable, the substitution
alternative with respect thereto)
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constitutes the sole remedy available to the Certificateholders or the Trustee
and any Noteholders or Indenture Trustee in respect of such Trust for any such
uncured breach. The Depositor's obligation to make such purchase or
substitution is contingent upon the Transferor performing its corresponding
obligation to purchase (or, if applicable, substitute for) such Receivable
from the Depositor.
Pursuant to each Transfer and Servicing Agreement or Pooling and Servicing
Agreement, to assure uniform quality in servicing the Receivables and to
reduce administrative costs, each Trust will designate the Servicer as
custodian to maintain possession, as such Trust's agent, of the related retail
installment sale or loan contracts, and any other documents relating to the
Receivables. The Depositor's and the Transferor's accounting records and
computer systems will reflect the transfer of the related Receivables to the
applicable Trust, and Uniform Commercial Code ("UCC") financing statements
reflecting such transfers will be filed. The Receivables will not be
segregated, stamped or otherwise marked to indicate that they have been
transferred to the related Trust. If through inadvertence or otherwise,
another party purchases (or takes a security interest in) the Receivables for
new value in the ordinary course of business and takes possession of the
Receivables without actual knowledge of the related Trust's interest, the
purchaser (or secured party) will acquire an interest in the Receivables
superior to the interest of the related Trust.
ACCOUNTS
With respect to each Trust that issues 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 Receivables 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,
Reserve Account 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"). The Servicer will establish and
maintain with the related Trustee an account, in the name of such Trustee on
behalf of such Certificateholders, into which amounts released from the
Collection Account and any Pre-Funding Account, Reserve Account 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
Trust that does not issue Notes, the Servicer will also establish and maintain
the Collection Account and any other Trust Account in the name of the related
Trustee on behalf of the related Certificateholders.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account or any Reserve Account, will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account and any Pre-Funding Account, Reserve Account and other
accounts identified as such in the related Prospectus Supplement
(collectively, the "Trust Accounts") will be invested as provided in the
related Transfer and Servicing Agreement or Pooling and Servicing Agreement in
Eligible Investments. "Eligible Investments" are generally limited to
investments acceptable to the Rating Agencies rating such Securities as being
consistent with the rating of such Securities and may include boat retail sale
contracts or installment loans. 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 Account may be invested in securities
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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 Account at any time may be less than
the balance of the Reserve Account. If the amount required to be withdrawn
from any Reserve Account to cover shortfalls in collections on the related
Receivables (as provided in the related Prospectus Supplement) exceeds the
amount of cash in the Reserve Account, 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. Investment earnings on funds deposited in the
Trust Accounts, net of losses and investment expenses (collectively,
"Investment Earnings"), shall be allocated in the manner described in the
related Prospectus Supplement.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as
any of the securities of such depository institution have a credit rating from
each Rating Agency in one of its generic rating categories which signifies
investment grade. "Eligible Institution" means, with respect to a Trust, (a)
the corporate trust department of the related Indenture Trustee or the related
Trustee, as applicable, or (b) a depository institution organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank), (i) which has
either (A) a long-term unsecured debt rating acceptable to the Rating Agencies
or (B) a short-term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies and (ii) whose deposits are insured by the
FDIC.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables held by any Trust and will, consistent with the
related Transfer and Servicing Agreement or Pooling and Servicing Agreement,
follow such collection procedures as it follows with respect to boat retail
installment sale contracts, installment loans, or notes that it services for
itself or others and that are comparable to such Receivables. Consistent with
its normal procedures, the Servicer may, in its discretion, arrange with the
Obligor on a Receivable to extend or modify the payment schedule, but no such
arrangement will, for purposes of any Transfer 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 Receivable
beyond the Final Scheduled Maturity Date (as such term is defined with respect
to any Receivables Pool in the related Prospectus Supplement). Some of such
arrangements may result in the Servicer purchasing the Receivable for the
Purchase Amount. The Servicer may sell the Financed Asset securing the
respective Receivable at public or private sale, or take any other action
permitted by applicable law. See "Certain Legal Aspects of the Receivables"
herein.
The Servicer may from time to time perform any portion of its servicing
obligations under the applicable Transfer and Servicing Agreement or Pooling
and Servicing Agreement through subservicing agreements with third-party
servicers approved by the Rating Agencies. Each applicable Transfer and
Servicing Agreement and Pooling and Servicing Agreement will provide that,
notwithstanding the use of subservicers, the Servicer will remain liable for
its servicing duties and obligations as if the Servicer were servicing the
Receivable directly.
COLLECTIONS
With respect to each Trust, the Servicer will deposit all payments on the
related Receivables (from whatever source) and all proceeds of such
Receivables collected during each collection period specified in the related
Prospectus Supplement (each, a "Collection Period") into the
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related Collection Account within two business days after receipt thereof.
However, at any time that and for so long as (i) the Servicer (or its
successor) is the Servicer, (ii) there exists no Servicer Default and (iii)
each other condition to making deposits less frequently than daily as may be
specified by the Rating Agencies or set forth in the related Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account until on or before the applicable
Distribution Date or Payment Date. Pending deposit into the Collection
Account, collections may be invested by the Servicer at its own risk and for
its own benefit and will not be segregated from its own funds. If the Servicer
were unable to remit such funds, 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 Receivables and payment of the
aggregate Purchase Amount with respect to Receivables purchased by the
Servicer.
SERVICER ADVANCES
Unless otherwise provided in the related Prospectus Supplement, on or before
the business day prior to each applicable Distribution Date or Payment Date,
the Servicer shall deposit into the related Collection Account as a Servicer
Advance (but only to the extent that the Servicer, in its sole discretion,
expects to recoup such Servicer Advance from subsequent payments on or with
respect to the Receivables) an amount equal to the amount of interest due on
the related Receivables at their respective APRs for the related Collection
Period (assuming that such Receivables are paid on their respective due dates)
minus the amount of interest actually received on such Receivables during the
related Collection Period. If such calculation results in a negative number,
an amount equal to such amount shall be paid to the Servicer in reimbursement
of outstanding Servicer Advances. In addition, in the event that a Receivable
becomes a Liquidated Receivable (as such term is defined in the related
Prospectus Supplement), the amount of accrued and unpaid interest thereon (but
not including interest for the then current Collection Period) shall be
withdrawn from the Collection Account and paid to the Servicer in
reimbursement of outstanding Servicer Advances. No advances of principal will
be made with respect to Receivables.
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
Collection Period in an amount equal to a 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 Collection Period (the
"Servicing Fee"). The Servicing Fee (together with any portion of the
Servicing Fee that remains unpaid from prior Distribution Dates or Payment
Dates) will be paid out of available funds for the related Collection Period
prior to the distributions on the related Distribution Date or Payment Date to
the Noteholders or the Certificateholders of the given series. [To follow:
description of Servicing Suspense Account and Supplemental Servicing Fee.]
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 Receivables 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 boat receivables as an agent for their beneficial
owner, including collecting and posting all payments, responding to inquiries
of Obligors on the Receivables, investigating
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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 administering the particular Receivables Pool, including accounting for
collections and furnishing monthly and annual statements to the related
Trustee and Indenture Trustee with respect to distributions and generating
federal income tax information for such Trust and for the related Noteholders
and Certificateholders. The Servicing Fee also will reimburse the Servicer for
certain taxes, the fees of the related Trustee and Indenture Trustee, if any,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering the applicable Receivables Pool.
DISTRIBUTIONS
With respect to each series of Securities, beginning on the Payment Date or
Distribution Date, as applicable, 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, priorities of and requirements for all payments to each class of
Noteholders and all distributions to each class of Certificateholders of such
series will be set forth in the related Prospectus Supplement.
With respect to each Trust, on each Payment Date and Distribution Date, as
applicable, collections on the related Receivables 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 Account, 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 subordinate 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 subordinate to payments in respect of
Notes, if any, of such series or other classes of Certificates of such series.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit and cash flow enhancement arrangements and
the provider thereof, if applicable, with respect to each class of Securities
of a given series, if any, 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 Accounts, over-
collateralization, 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 the
related 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 Account 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
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and to decrease the likelihood that such Securityholders will experience
losses. The credit enhancement for a class or series of Securities may not
provide protection against all risks of loss and may not guarantee repayment
of the entire principal balance and interest thereon; any such limitations
will be described in the related Prospectus Supplement. 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 ACCOUNT. If so provided in the related Prospectus Supplement,
pursuant to the related Transfer and Servicing Agreement or Pooling and
Servicing Agreement, the Depositor will establish for a series or class of
Securities an account, as specified in the related Prospectus Supplement (the
"Reserve Account"), which will be maintained with the related Trustee or
Indenture Trustee, as applicable. Unless otherwise provided in the related
Prospectus Supplement, the Reserve Account will be funded by an initial
deposit by the Depositor or such other person specified in the related
Prospectus Supplement on the Closing Date in the amount set forth in the
related Prospectus Supplement and, if the related series has a Funding Period,
will also be funded on each Subsequent Transfer Date to the extent described
in the related Prospectus Supplement. As further described in the related
Prospectus Supplement, the amount on deposit in the Reserve Account will be
increased on each Distribution Date or Payment Date thereafter up to the
Specified Reserve Account Balance (as defined in the related Prospectus
Supplement) by the deposit therein of the amount of collections on the related
Receivables remaining on each such Distribution Date or Payment Date after the
payment of all other required payments and distributions on such date. The
related Prospectus Supplement will describe the circumstances and manner under
which distributions may be made out of the Reserve Account, either to holders
of the Securities covered thereby, to the Depositor, to the Servicer or such
other person specified in the related Prospectus Supplement.
NET DEPOSITS
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 Servicer Advances and Purchase
Amounts for any Trust for or with respect to the related Collection Period net
of distributions to be made to the Servicer for such Trust with respect to
such Collection Period. The Servicer, however, will account to the Trustee,
any Indenture 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 Payment Dates do not coincide with
Distribution Dates, all distributions, deposits or other remittances made on a
Payment Date will be treated as having been distributed, deposited or remitted
on the Distribution Date for the applicable Collection Period for purposes of
determining other amounts required to be distributed, deposited or otherwise
remitted on such Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date or Payment Date with respect to each series
of Securities, the Servicer will provide to each Applicable Trustee as of the
close of business on the last day of the preceding Collection 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".
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EVIDENCE AS TO COMPLIANCE
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance by the Servicer during the preceding twelve months
(or, in the case of the first such certificate, from the applicable Closing
Date) with certain standards relating to the servicing of the applicable
Receivables, the Servicer's accounting records and computer files with respect
thereto and certain other matters.
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will also provide for delivery to the related Trust and Indenture Trustee or
Trustee, as applicable, 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 Transfer 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 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 Indenture Trustee and
each Trustee notice of certain Servicer Defaults under the related Transfer
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 Transfer and Servicing Agreement and Pooling and Servicing Agreement
will provide that the Servicer may not resign from its obligations and duties
as Servicer thereunder, except upon determination that the Servicer's
performance of such duties is no longer permissible under applicable law. No
such resignation will become effective until the related Indenture Trustee or
Trustee, as applicable, or a successor servicer has assumed the Servicer's
servicing obligations and duties under such Transfer and Servicing Agreement
or Pooling and Servicing Agreement.
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will further provide that neither the Servicer nor any of its directors,
officers, employees and agents will be under any liability to the related
Trust or the related Noteholders or Certificateholders for taking any action
or for refraining from taking any action pursuant to such Transfer and
Servicing Agreement or Pooling and Servicing Agreement or for errors in
judgment; except that neither the Servicer nor any such person will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of the
Servicer's duties thereunder or by reason of reckless disregard of its
obligations and duties thereunder. In addition, each Transfer and Servicing
Agreement and Pooling and Servicing Agreement will provide that the Servicer
is under no obligation to appear in, prosecute or defend any legal action that
is not incidental to the Servicer's servicing responsibilities under such
Transfer 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 Transfer 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, 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 Transfer and Servicing Agreement or Pooling and
Servicing Agreement.
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SERVICER DEFAULT
Except as otherwise provided in the related Prospectus Supplement, "Servicer
Default" under each Transfer and Servicing Agreement and Pooling and Servicing
Agreement will consist of (i) any failure by the Servicer to deliver to the
Applicable Trustee for deposit in any of the Trust Accounts or the Certificate
Distribution Account any required payment or to direct the Applicable Trustee
to make any required distributions therefrom, which failure continues
unremedied for three business days after written notice from the Applicable
Trustee is received by the Servicer or after discovery of such failure by the
Servicer; (ii) any failure by the Servicer duly to observe or perform in any
material respect any other covenant or agreement in such Transfer and
Servicing Agreement or Pooling and Servicing Agreement, which failure
materially and adversely affects the rights of the Noteholders or the
Certificateholders of the related series and which continues unremedied for 60
days after the giving of written notice of such failure (A) to the Servicer or
the Depositor, as the case may be, by the Applicable Trustee or (B) to the
Servicer and to the Applicable Trustee by holders of Notes or Certificates of
such series, as applicable, evidencing not less than 25% in principal amount
of such outstanding Notes or of such Certificate Balance; 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 any Trust that has issued Notes, unless otherwise provided in
the related Prospectus Supplement, as long as a Servicer Default under a
Transfer and Servicing Agreement remains unremedied, the related Indenture
Trustee or holders of Notes of the related series evidencing not less than 25%
of the principal amount of such Notes then outstanding may terminate all the
rights and obligations of the Servicer under such Transfer 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 Transfer and Servicing Agreement and
will be entitled to similar compensation arrangements. In the case of any
Trust that has not issued 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 such Indenture Trustee, such Noteholders, such Trustee or
such Certificateholders from effecting a transfer of servicing. In the event
that such Indenture Trustee or Trustee is unwilling or unable to so act, it
may appoint, or petition a court of competent jurisdiction for the appointment
of, a successor with a net worth of at least $100,000,000 and whose regular
business includes the servicing of the type of receivables included in the
Trust. 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 Transfer and Servicing Agreement or
Pooling and Servicing Agreement.
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WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, the holders of Notes evidencing at least
a majority in principal amount of the then outstanding Notes of the related
series (or the holders of the Certificates of such series evidencing not less
than a majority of the outstanding Certificate Balance, in the case of any
Servicer Default which does not adversely affect the related Indenture Trustee
or such Noteholders) may, on behalf of all such Noteholders and
Certificateholders, waive any default by the Servicer in the performance of
its obligations under the related Transfer and Servicing Agreement and its
consequences, except a Servicer Default in making any required deposits to or
payments from any of the Trust Accounts or to the Certificate Distribution
Account in accordance with such Transfer and Servicing Agreement. With respect
to each Trust that has not issued Notes, holders of Certificates of such
series evidencing not less than a majority of the principal amount of such
Certificates then outstanding may, on behalf of all such Certificateholders,
waive any default by the Servicer in the performance of its obligations under
the related Pooling and Servicing Agreement, except a Servicer Default in
making any required deposits to or payments from the Certificate Distribution
Account or the related Trust Accounts in accordance with such Pooling and
Servicing Agreement. No such waiver will impair such Noteholders' or
Certificateholders' rights with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each of the
Transfer and Servicing Agreements 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 Transfer and Servicing Agreements 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.
Unless otherwise specified in the related Prospectus Supplement, the Transfer
and Servicing Agreements may also be amended by the 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 Transfer 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
Receivables 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 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 Depositor) of such Trust and the delivery to such Trustee by
each such Certificateholder (including the 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
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Indenture Trustee, and the Certificateholders of such series will succeed to
all the rights of the Noteholders of such series, under the related Transfer
and Servicing Agreement, except as otherwise provided therein.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Depositor,
the related Trustee and the related Indenture Trustee, if any, pursuant to the
Transfer and Servicing Agreements will terminate upon the earlier of (i) the
maturity or other liquidation of the last related Receivable and the
disposition of any amounts received upon liquidation of any such remaining
Receivables, (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 Transfer and Servicing Agreements and (iii) the occurrence of either event
described below.
Unless otherwise provided in the related Prospectus Supplement, in order to
avoid excessive administrative expense, the Servicer will be permitted at its
option to purchase from each Trust, as of the end of any applicable Collection
Period, if the then outstanding Pool Balance with respect to the Receivables
held by such Trust is less than 10% of the Initial Pool Balance (as defined in
the related Prospectus Supplement, the "Initial Pool Balance"), all remaining
related Receivables at a price equal to the aggregate of the Purchase Amounts
thereof as of the end of such Collection Period.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Applicable Trustee will, within ten days following a
Distribution Date or Payment Date as of which the Pool Balance is equal to or
less than the percentage of the Initial Pool Balance specified in the related
Prospectus Supplement, solicit bids for the purchase of the Receivables
remaining in such Trust, in the manner and subject to the terms and conditions
set forth in such Prospectus Supplement. If the Applicable Trustee receives
satisfactory bids as described in such Prospectus Supplement, then the
Receivables remaining in such Trust will be sold to the highest bidder.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above, and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
ADMINISTRATION AGREEMENT
If so specified in the related Prospectus Supplement, the person named as
such in the related Prospectus Supplement (the "Administrator"), will enter
into an agreement (as amended and supplemented from time to time, an
"Administration Agreement") with each 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.
Unless otherwise specified in the related Prospectus Supplement with respect
to any such Trust, 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 in such amount as may be set forth in the related
Prospectus Supplement (the "Administration Fee").
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Receivables will be treated by each Trust as "chattel paper" as defined
in the UCC. Pursuant to the UCC, the transfer of chattel paper is treated in a
manner similar to a security
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interest in chattel paper. In order to protect each Trust's ownership or
security interest in its Receivables, the Depositor will file UCC-1 financing
statements with the appropriate authorities in any state deemed advisable by
the Depositor to give notice of such Trust's and any related Indenture
Trustee's ownership of and security interest in the Receivables and their
proceeds. Under each Transfer and Servicing Agreement and Pooling and
Servicing Agreement, the Servicer will be obligated to maintain the perfection
of each Trust's and any related Indenture Trustee's interest in the
Receivables. It should be noted, however, that a purchaser of chattel paper
who gives new value and takes possession of it in the ordinary course of such
purchaser's business has priority over a security interest, including an
ownership interest, in the chattel paper that is perfected by filing UCC-1
financing statements, and not by possession of such chattel paper by the
original secured party, if such purchaser acts in good faith without knowledge
that the related chattel paper is subject to a security interest, including an
ownership interest. Any such purchaser would not be deemed to have such
knowledge because there are UCC filings and would not learn of the transfer of
or security interest in the Receivables from a review of the Receivables since
they would not be marked to show such transfer.
SECURITY INTERESTS IN BOATS
Generally, security interests in boats may be perfected in one of three
ways: (a) in "title" states, a security interest is perfected by notation of
the secured party's lien on the certificate of title issued by an applicable
state motor vehicle department or other appropriate state agency; (b) in other
states, a security interest may be perfected by filing a UCC-1 financing
statement, however, in some jurisdictions a purchase money lien in consumer
goods may be perfected without any filing requirement; and (c) if a boat
qualifies for documentation under Federal law, a preferred mortgage (a
"Preferred Mortgage") may be obtained under the federal ship mortgage statutes
by filing the Preferred Mortgage with the Secretary of Transportation of the
United States, who conducts such function through the United States Coast
Guard (the "Coast Guard").
To qualify for documentation under Federal law, a boat must measure at least
five net tons, which is a measure not of weight but of units of 100 cubic feet
of enclosed, internal volume after certain deductions of space, as measured
under Federal law. If a boat with a security interest perfected under state
law is later documented under Federal law (or an application for documentation
is duly filed), the exclusive method of perfecting a security interest in it
is to have the boat owner sign a Preferred Mortgage and for the Preferred
Mortgage to be filed with the Coast Guard. When a boat becomes documented
under Federal law (or an application therefor is duly filed) the state law
security interest becomes unperfected unless it is continued by the filing of
a Preferred Mortgage under Federal law.
The Transferor will represent that it has taken such measures necessary to
perfect its security interest in each related Financed Boat under the
applicable state or Federal law. Typically arrangements are made so that the
necessary documents to grant and perfect the desired security interest or
mortgage are signed by the consumer and are filed by the Dealer or the
Transferor (or the applicable Originator, if the Transferor acquired the
applicable Receivable from an Originator). In the event of clerical error or
otherwise, the necessary actions will not have been taken in a timely fashion.
In such event, the Transferor may not have a perfected security interest in
the Financed Boat or the security interest may be subordinate to the interests
of subsequent purchasers of the Financed Boat, other lienholders, or
bankruptcy trustees or receivers of the owner of the Financed Boat. The
Transferor's security interest or Preferred Mortgage may also be subordinate
to such third parties in the event of fraud or forgery by the Obligor or
administrative error by state or federal recording and filing officials. In
addition,
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under certain state certificate of title statutes the Transferor must
separately perfect its security interest in boat motors, unless the Financed
Boat is properly documented under Federal law and, as a matter of Federal law,
the particular boat motor is considered to be an appurtenance of the Financed
Boat.
If the security interest in the boat is perfected under a title statute and
the related Obligor moves to a state other than the state in which the boat is
registered, under the laws of most title states the perfection of the security
interest in the boat would continue for a brief period of time after such
relocation. Some states issuing certificates of title on boats require
surrender of a certificate of title to reregister a boat. In those states that
also provide for possession of the certificate of title by the secured party,
the Transferor must surrender possession of the certificate of title in such
circumstance for any related Financed Boat to be reregistered. Some states do
not give the secured party possession of the certificate of title, but
indicate the secured party on the certificate of title and provide notice to
such secured party of surrender of the certificate of title by another person.
If either the Servicer is in possession of a certificate of title that must be
surrendered to reregister the Financed Boat or the Servicer receives notice of
any surrender of the certificate of title by another person, the Servicer
would then have the opportunity to continue the perfection of the security
interest in the Financed Boat in the state of registration. If the Obligor
moves to a state which does not require surrender of a certificate of title
for reregistration of a boat, re-registration could defeat perfection. In the
ordinary course of servicing its portfolio of boat contracts, the Servicer
generally takes steps to effect such perfection upon receipt of notice of
surrender or information from the Obligor as to relocation in those states
that require any action to be taken. Similarly, when an Obligor sells a boat,
under the laws of many states, the purchaser cannot reregister the boat unless
the related lienholder of record (which in the case of the Financed Boats
covered by such laws would be the Transferor or, if the Transferor acquired
the Receivables from an Originator, would be such Originator or other entity,
if applicable, which acquired such Receivable from the related Dealer)
surrenders possession of the certificate of title and accordingly the
Servicer, in such circumstance, would have an opportunity to require
satisfaction of the related Receivable before release of the lien.
If the Transferor has perfected its security interest by the filing of a
UCC-1 financing statement, or the Obligor moves from a title state to a non-
title state, the Servicer will be required to file a UCC-1 financing statement
in the new state of the Obligor as soon as possible after receiving notice of
the Obligor's change of residence. If the Servicer does not learn of the
change or act in time, the perfection of the security interest could lapse.
UCC-1 financing statements expire after five years. When the term of a loan
exceeds five years, the filing must be continued in order to maintain the
Transferor's perfected security interest. The Servicer will be required to
take steps to effect such continuation. In the event that an Obligor moves to
a state other than the state in which the UCC-1 financing statement is filed
or in certain states to a different county in such state, under the laws of
most states the perfection of the security interest in the Financed Boat would
continue for four months after such relocation, unless the perfection in the
original jurisdiction would have expired earlier. A new financing statement
must be filed in the state of relocation or, if such state is a title state, a
notation on the certificate of title must be made in order to continue the
Transferor's security interest.
Unless otherwise specified in the related Prospectus Supplement, due to the
administrative burden and expense of (i) endorsing the certificate of title of
each Financed Boat to reflect a Trust's interest therein and delivering each
such certificate of title to the Trustee for filing (and the payment of
related filing fees), in the case of Financed Boats licensed in states where
security interests in boats are subject to certificate of title statutes; (ii)
filing amendments to or assignments of record of UCC-1 financing statements
relating to each Financed Boat (and the
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payment of related filing fees) to reflect the Trust's interest therein, in
the case of Financed Boats licensed in states where security interests in
boats are perfected by filing a UCC-1 financing statement; and (iii) filing
each transfer of the Preferred Mortgages (and the payment of related filing
fees) as required under Federal law to perfect the Trust's interest therein,
in the case of Financed Boats which are documented under Federal law, none of
such certificates of title will be endorsed, delivered and filed, UCC-1
financing statements amended or assigned of record, or transfers of Preferred
Mortgages filed. In the absence of such procedures, neither the Depositor nor
the Trust may have a perfected security interest in the Financed Boats
licensed in certificate of title or UCC states, and will not have a perfected
security interest in Financed Boats documented under Federal law, but the
failure to make such endorsements, filings or recordations will not affect the
validity of the original security interest as against the Obligor under a
Receivable in UCC states.
In the case of "title" states, in the absence of the step described in
clause (i) above, the Transferor (or, if the Transferor acquired the related
Receivable from an Originator, such Originator) will continue to be named as
the secured party on the certificates of title relating to the Financed Boats
registered in such states. In most such states, a transfer of such Receivable
would be an effective conveyance of such a security interest and the new
secured party would succeed to the rights of the Transferor (or, if the
Transferor acquired the related Receivable from an Originator, the rights of
such Originator) as the secured party. In the absence of fraud or forgery by
the Obligor or administrative error by Federal, state or local recording
officials, the notation of the lien of the Transferor (or, if the Transferor
acquired the related Receivable from an Originator, the lien of such
Originator) on the certificate of title will be sufficient to protect the
Trust against the rights of subsequent purchasers of a Financed Boat covered
by the laws of such state or subsequent lenders who take a security interest
in the Financed Boat. There exists a risk, however, in not identifying the
Trust as the new secured party on the certificate of title, that the Trust may
in some states be subordinate to claims of creditors or the receiver of the
Transferor or an Originator, as the case may be, in the event of the
insolvency of the Transferor or such Originator, as the case may be, and that,
through fraud or negligence, the security interest of such Trust could be
released by the Transferor or such Originator, as the case may be, as security
holder of record.
Similarly, neither the Transferor nor an Originator will, as the case may
be, cause the documentation for Financed Boats which are subject to a
Preferred Mortgage to be endorsed to reflect the Trust's interest therein nor
will the transfer be filed with the Secretary of Transportation, and under
Federal law no transfer of a Preferred Mortgage is valid against a third party
without notice until the transfer is recorded. While the interpretation of
this provision by a court might depend upon the factual circumstances, under
the terms of the Federal statute, a Trust's security interest in federally
documented Financed Boats is subordinate to creditors and the receiver or
trustee of the Transferor, an Originator or any other holder of the related
Receivable, as the case may be, in the event of the insolvency of the
Transferor (and, if the Transferor acquired the related Receivable from an
Originator, in the event of an insolvency of such Originator or any other
holder of the related Receivable), as the case may be, and to the rights of
subsequent purchasers of such a Financed Boat, subsequent lenders who take a
security interest in the Financed Boat and the bankruptcy trustee of the
Obligor. This provision does not affect the validity of the original security
interest as against the Obligor. As a general rule a Preferred Mortgage on a
Financed Boat is subordinate to the costs incurred by the court and the
custodian of the Financed Boat incurred during foreclosure proceedings; liens
for crew wages, salvage, general average, and tort claims, whenever they
arise; Preferred Mortgages granted and perfected prior in time to the mortgage
in question; liens under Federal law for "necessaries" (which are generally
goods and services rendered or delivered to the Financed
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Boat) furnished before the Preferred Mortgage in question is perfected; and
certain stevedoring charges (which are a type of "necessaries" claims)
whenever they arise.
A security interest perfected under state law is subordinate to the same
costs and liens, and is also subordinate to liens for necessaries (including
stevedoring charges) whenever they arise; previously perfected state law
security interests; and certain other liens, including liens for storage,
repairs and taxes.
The priority of all security interests, mortgages, and liens is subject to
the application of principles of equitable subordination and other changes due
to the exercise by courts of their equitable discretion in appropriate cases.
Certain state laws and Federal law permit the confiscation of boats by
governmental authorities under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected
security interest in the confiscated boat. Federal law protects a Preferred
Mortgage from this result for violation of Federal laws if the mortgagor did
not authorize, consent or conspire with respect to the unlawful act.
The enforceability and priority of security interests in boats that journey
outside the United States are subject to the laws of each country where such
boats go, which laws vary from place to place.
The holder of a preferred maritime lien who arrests a boat under Federal law
to enforce that lien is required to give notice of the suit to all lienholders
of record. However, if the holder of a Preferred Mortgage does not receive
notice of the suit (e.g., because a transfer of the Preferred Mortgage was not
recorded and the current holder did not receive notice of the arrest) and
consequently does not intervene in the arrest action, or otherwise fails to so
intervene, the boat can be sold free and clear of the Preferred Mortgage. If
the holder of the Preferred Mortgage does not arrest the boat and foreclose
the mortgage under Federal law in Federal court, but rather repossesses and
resells the boat under state law, any preferred maritime liens on the boat are
not terminated by such sale and may impair the Preferred Mortgage holder's
ability to transfer clear title to the Boat.
The Transferor will warrant in the related Receivables Transfer Agreement
that there shall exist a valid, subsisting and enforceable first priority
security interest in each Financed Boat in favor of the Transferor as of the
Closing Date, and that such security interest will be transferred to the
related Trust albeit unaccompanied by any of the procedures described in
clauses (i), (ii) and (iii) of the [third] preceding paragraph above. In the
event of a material adverse breach of such warranty, the only recourse of the
Trust would be to require the Transferor to purchase the related Receivables.
See "Risk Factors--Certain Legal Aspects--Security Interests in the
Receivables" herein. However, liens that take priority over a perfected
security interest in a Financed Boat could arise, or the confiscation of a
Financed Boat could occur, at any time during the term of a Receivable. No
notice will be given to the Trustee, any Indenture Trustee, any Noteholders or
the Certificateholders in respect of a given Trust if such a lien arises or
confiscation occurs and any such lien or confiscation arising after the
applicable Closing Date would not give rise to the Transferor's purchase
obligation under the applicable Receivables Transfer Agreement.
REPOSSESSION
In the event of default by boat purchasers, the holder of the boat 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
or federal laws. Among the UCC remedies, the secured party has the right to
perform self-help repossession unless such act would constitute a breach
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of the peace. Self-help is the method employed by the Servicer in most cases
and is accomplished simply by retaking possession of the financed boat. 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 may cure
the default prior to repossession. Generally, the right of reinstatement 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, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court, and the boat must then be repossessed in accordance
with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws generally require the secured party to provide
the obligor with reasonable notice of the date, time and place of any public
sale and/or the date after which any private sale of the collateral may be
held. The obligor 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, or, in some states, by payment of
delinquent installments or the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Financed Assets 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. However, the deficiency
judgment would be a personal judgment against the obligor for the shortfall,
and a defaulting obligor can be expected to have very little capital or
sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount.
Occasionally, after resale of a boat and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the boat
or if no such lienholder exists or there are remaining funds, the UCC requires
the creditor to remit the surplus to the former owner of the boat.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of
the National Consumer Act and of the Uniform Consumer Credit Code, and retail
installment sales acts, lending acts and other similar laws. Also, state laws
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply with their provisions. In some cases, this liability could
affect a transferee's ability to enforce consumer finance contracts such as
the Receivables.
The Fair Debt Collection Practices Act contains provisions that restrict
where a legal action against a consumer may be filed. In the case of personal
property, this is where the consumer
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resides or where the applicable contract was signed. When the consumer keeps
the personal property collateral outside the court jurisdiction where the
consumer resides or where the applicable contract was signed, the statute
could require that the Trustee enforce the security interest or Preferred
Mortgage in the Financed Boat by means of private repossession and sale, which
is not always available in each case, depending upon the circumstances.
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, other statutes or the common law, has the effect
of subjecting a seller in a consumer credit transaction (and certain related
creditors and their assignees) to all claims and defenses which the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract
and the holder of the contract may also be unable to collect any balance
remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC Rule.
Accordingly, each Trust, as holder of the related Receivables, will be subject
to any claims or defenses that the purchaser of the applicable Financed Boat
may assert against the seller of the Financed Boat. Such claims are limited to
a maximum liability equal to the amounts paid by the Obligor on the
Receivable. If an Obligor were successful in asserting any such claim or
defense, such claim or defense would constitute a breach of the Transferor's
warranties under the related Transfer and Servicing Agreement or Pooling and
Servicing Agreement and would create an obligation of the Transferor to
purchase the Receivable unless the breach is cured. See "Description of the
Transfer and Servicing Agreements--Transfer of Receivables" herein.
Courts have applied general equitable principles to secured parties pursuing
repossession and 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 certain cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to 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 borrowers.
Under each Receivables Transfer Agreement, the Transferor will warrant to
the Depositor (which will in turn transfer its rights under such warranty to
the applicable Trust under the related Transfer and Servicing Agreement or
Pooling and Servicing Agreement) that each Receivable complies with all
requirements of law in all material respects. Accordingly, if an Obligor has a
claim against such Trust for violation of any law and such claim materially
and adversely affects such Trust's interest in a Receivable, such violation
would constitute a breach of the warranties of the Transferor under such
Receivables Transfer Agreement and would create an obligation of the
Transferor to purchase the Receivable unless the breach is cured. See
"Description of the Transfer and Servicing Agreements--Transfer of
Receivables" herein.
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 to enforce a deficiency
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judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy
law, a court may prevent a creditor from repossessing a boat, and, as part of
the rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the boat at the time of bankruptcy (as determined by the
court), leaving the creditor 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
The following is a general summary of material federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. The following summary represents the opinion of Tax Counsel
subject to the qualifications set forth herein. An opinion of Tax Counsel,
however, is not binding on the Internal Revenue Service ("IRS") or the courts.
No ruling on any of the issues discussed below will be sought from the IRS.
The following summary is intended as an explanatory discussion of the possible
effects of certain federal income tax consequences to holders generally, but
does not purport to furnish information in the level of detail or with the
attention to a holder's specific tax circumstances that would be provided by a
holder's own tax advisor. For example, it does not discuss the tax treatment
of Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. In addition, the discussion
regarding the Notes is limited to the federal income tax consequences of the
initial Noteholders and not a purchaser in the secondary market. Moreover,
there are no cases or IRS rulings on similar transactions involving both debt
and equity interests issued by a trust with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or a
part of the discussion below. Prospective investors are urged to consult their
own tax advisors in determining the federal, state, local, foreign and any
other tax consequences to them of the purchase, ownership and disposition of
the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive.
SCOPE OF THE TAX OPINIONS
In the opinion of Tax Counsel, the Trust will not be classified as a
separate entity that is an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. Further, with
respect to the Notes, Tax Counsel is of the opinion that the Notes will be
characterized as debt for federal income tax purposes.
In addition, Tax Counsel has prepared or reviewed the statements under the
heading "Summary of Terms--Tax Status" as they relate to federal income tax
matters and under the heading "Federal Income Tax Consequences" herein and in
the Prospectus and is of the opinion that such statements are correct in all
material respects. Such statements are intended as an explanatory discussion
of the possible effects of the classification of the Trust as a partnership
for federal income tax purposes on investors generally and of related tax
matters affecting investors generally, but do not purport to furnish
information in the level of detail or with the attention to the investor's
specific tax circumstances that would be provided by an investor's own tax
adviser. Accordingly, each investor is advised to consult its own tax advisers
with regard to the tax consequences to it of investing in the Notes and the
Certificates.
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TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CLASSIFICATION OF THE TRUST AS A PARTNERSHIP
Tax Counsel is of the opinion that the Trust (which the Trust Agreement
specifies is intended to be treated as a partnership) will not be classified
as a separate entity that is an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes. A copy of such
opinion of Tax Counsel will be filed with the Commission as an exhibit to a
Form 8-K prior to an issuance of Securities by the Trust. This opinion is
based on the assumption that the terms of the Trust Agreement and related
documents will be complied with, and on Tax Counsel's conclusion that the
nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
If the Trust were taxable as a corporation for federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables,
reduced by its interest expense on the Notes provided the Notes are respected
as debt for federal income tax purposes (see discussion in the following
paragraph). 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.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
TREATMENT OF THE NOTES AS INDEBTEDNESS. The Transferor will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal, state and local income and franchise tax purposes. In the opinion
of Tax Counsel, the Notes will be characterized as debt for federal income tax
purposes. A copy of such opinion of Tax Counsel will be filed with the
Commission with a Form 8-K following the issuance of the Notes. The discussion
below assumes this characterization of the Notes is correct.
The discussion below assumes that all payments on the Notes are denominated
in U.S. dollars, and that the Notes are not Strip Notes. Moreover, the
discussion assumes that the interest formula for the Notes meets the
requirements for "qualified stated interest" under Treasury regulations (the
"OID regulations") relating to original issue discount ("OID"), and that any
OID on the Notes (I.E., any excess of the principal amount of the Notes over
their issue price) does not exceed a DE MINIMIS amount (I.E., 1/4% of their
principal amount multiplied by the number of full years included in their
term), all within the meaning of the OID regulations.
INTEREST INCOME ON THE NOTES. Based on the above assumptions, except as
discussed in the following paragraph, the Notes will not be considered 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. It is
believed that any prepayment premium paid as a result of a mandatory
redemption will be taxable as contingent interest when it becomes fixed and
unconditionally payable. 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.
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 for the Note, increased by any market discount, OID and gain
previously
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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 by a corporate taxpayer only to offset capital gains,
and by an individual taxpayer only to the extent of capital gains plus $3,000
of other income.
FOREIGN HOLDERS. Interest payments made (or accrued) to a Noteholder who is
a nonresident alien, foreign corporation or other non-United States 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 or the Depositor (including a holder of 10% of the
outstanding Certificates) or a "controlled foreign corporation" with respect
to which the Trust or the Depositor is a "related person" within the meaning
of the Code and (ii) provides the Trustee or other person who is otherwise
required to withhold U.S. tax with respect to the Notes with an appropriate
statement (on IRS Form W-8 or a similar form), 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 withholding tax at a rate of 31 percent,
unless that rate is reduced or eliminated pursuant to an applicable tax treaty
and the foreign person provides the trustee or other payor of the interest
with a copy of IRS Form 1001, or if the interest is effectively connected with
the conduct of a U.S. trade or business and the foreign person provides a copy
of IRS Form 4224.
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.
On October 6, 1997, final Treasury regulations (the "Withholding Tax
Regulations") were issued that modify certain of the filing requirements with
which foreign persons must comply in order to be entitled to an exemption from
U.S. withholding tax or a reduction to the applicable U.S. withholding tax
rate. Those persons currently required to file Form W-8 generally will
continue to be required to file that form. However, the requirement that
foreign persons submit Form W-8 is extended to most foreign persons who wish
to seek an exemption from withholding tax on the basis that income from the
Notes is not effectively connected with the conduct of a U.S. trade or
business (in lieu of Form 4224) and to foreign persons wishing to rely on a
tax treaty to reduce the withholding tax rate (in lieu of Form 1001). The
Withholding Tax Regulations generally are effective for payments of interest
due after December 31, 1998, but Forms 4224 and 1001 filed prior to that date
will continue to be effective until the earlier of December 31, 1999 or the
current expiration date of those forms. Prospective investors are urged to
consult their tax advisors with respect to the effect of the Withholding Tax
Regulations.
BACKUP WITHHOLDING. Each holder of a Note (other than an exempt holder such
as a corporation, tax exempt organization, qualified pension and profit
sharing trust, individual
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retirement account or nonresident alien who provides certification as to
status as a nonresident) will be required to provide, under penalties 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 backup withholding. Should a nonexempt Noteholder fail to provide the
required certification, the Trust will be required to withhold 31 percent 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.
Noteholders should consult with their tax advisors as to their eligibility for
exemption from backup withholding and the procedure for obtaining the
exemption, and the potential impact of the Withholding Tax Regulations.
POSSIBLE ALTERNATIVE TREATMENTS OF THE NOTES. If, contrary to the opinion of
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 taxable
corporation would not be able to reduce its taxable income by deductions for
interest expense on Notes recharacterized as equity). Alternatively, and most
likely in the view of Tax Counsel, the Trust might be treated as a publicly
traded partnership that would not be taxable as a corporation because it would
meet certain qualifying income tests. Nonetheless, treatment of the Notes as
equity interests in such a publicly traded partnership could have adverse tax
consequences to certain holders. For example, income to certain tax-exempt
entities (including pension funds) would be "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, and individual holders
might be subject to certain limitations on their ability to deduct their share
of Trust expenses. Furthermore, such a characterization could subject holders
to state and local taxation in jurisdictions in which they are not currently
subject to tax.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
TREATMENT OF THE TRUST AS A PARTNERSHIP. The Depositor, the Servicer and the
Trustee, and the Certificateholders by their purchase of Certificates, will
agree 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 Depositor,
and the Servicer is not clear because there is no authority on transactions
closely comparable to that contemplated herein.
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 Depositor or the Trust. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the intended 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.
The following discussion assumes that all payments on the Certificates are
denominated in U.S. dollars, none of the Certificates are Strip Certificates,
and that a series of Securities includes a single class of Certificates.
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 accruals of guaranteed payments
from the Trust and its allocated share of other income, gains, losses,
deductions and credits of the Trust. The Trust's income will consist primarily
of interest and finance charges earned on the Receivables (including
appropriate adjustments for market
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discount, OID and bond premium) and any gain upon collection or disposition of
Receivables. The Trust's deductions will consist primarily of interest
accruing with respect to the Notes, guaranteed payments on the Certificates,
servicing and other fees, and losses or deductions upon collection or
disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). Under the Trust Agreement, interest
payments on the Certificates at the Pass Through Rate (including interest on
amounts previously due on the Certificates but not yet distributed) will be
treated as "guaranteed payments" under Section 707(c) of the Code. Guaranteed
payments are payments to partners for the use of their capital and, in the
present circumstances, are treated as deductible to the Trust and ordinary
income to the Certificateholders. The Trust will have a calendar year tax year
and will deduct the guaranteed payments under the accrual method of
accounting. Certificateholders with a calendar year tax year are required to
include the accruals of guaranteed payments in income in their taxable year
that corresponds to the year in which the Trust deducts the payments, and
Certificateholders with a different taxable year are required to include the
payments in income in their taxable year that includes the December 31 of the
Trust year in which the Trust deducts the payments. It is possible that
guaranteed payments will not be treated as interest for all purposes of the
Code.
In addition, the Trust Agreement will provide, in general, that the
Certificateholders will be allocated taxable income of the Trust for each
Collection Period equal to the sum of (i) any Trust income attributable to
discount on the Receivables that corresponds to any excess of the principal
amount of the Certificates over their initial issue price, (ii) prepayment
premium, if any, payable to the Certificateholders for such month and (iii)
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
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining items of taxable income, gain, loss
and deduction of the Trust, if any, will be allocated to the Depositor.
Based on the economic arrangement of the parties, this approach for
allocating Trust income arguably 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
would, in effect, be required to report income from the Certificates on the
accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes.
In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable
income that is greater or less than the amount reported to them by the Trust.
All of the guaranteed payments and taxable income allocated to a
Certificateholder that is a pension, profit sharing or employee benefit plan
or other tax-exempt entity (including an individual retirement account) will
constitute "unrelated business taxable income" generally taxable to such a
holder under the Code.
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
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an amount of income that exceeds the amount of cash actually distributed to
such holder over the life of the Trust. It is not clear whether these rules
would be applicable to a Certificateholder accruing guaranteed payments.
The Trust intends to 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 Receivable, 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 Receivables were not issued
with OID, and, therefore, the Trust should not have OID income. However, upon
transfer of the Receivables to the Trust, the value of the Receivables may be
greater or less than the remaining principal balance of the Receivables at the
time of transfer. If so, the Receivables may 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
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it
accrues over the life of the Receivables or to offset any such premium against
interest income on the Receivables. As indicated above, a portion of such
market discount income or premium deduction may be allocated to
Certificateholders.
SECTION 708 TERMINATION. Under Section 708 of the Code, the Trust will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a 12-
month period. If such a termination occurs, under current Treasury regulations
the Trust (the "old partnership") will be considered to contribute its assets
to a new partnership (the "new partnership") in exchange for interest in the
new partnership. Such interests would be deemed distributed to the partners of
the old partnership in liquidation thereof, which would not constitute a sale
or exchange. The Trust will not comply with certain technical requirements
that might apply when such a constructive termination occurs. As a result, the
Trust may be subject to certain tax penalties and may incur additional
expenses if it is required to comply with those requirements. Furthermore, the
Trust might not be able to comply due to lack of data.
DISPOSITION OF CERTIFICATES. Subject to the discussion in the immediately
following paragraph, 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 seller'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 (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the
amount realized on a sale of a Certificate would include the holder's share of
the Notes and other liabilities of the Trust. A holder acquiring Certificates
at different prices may be required to maintain a single aggregate adjusted
tax basis in such Certificates, and, upon sale or other disposition of some of
the Certificates, allocate a portion of such aggregate tax basis to the
Certificates sold (rather than maintaining a separate tax basis in each
Certificate for purposes of computing gain or loss on a sale of that
Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect
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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 purchase.
The use of such a monthly convention may not be permitted by existing
Treasury 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
Depositor is 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 Trust 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 (x) the name, address and identification number of such
person, (y) whether such person is a United States person, a tax-exempt entity
or a foreign government, an international organization, or any wholly-owned
agency or instrumentality of either of the foregoing, and (z) 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
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to themselves and their ownership of Certificates. A clearing agency
registered under Section 17A of the Exchange Act is not required to furnish
any such information statement to the Trust. The information referred to above
for any calendar year must be furnished to the Trust on or before the
following January 31. Nominees, brokers and financial institutions that fail
to provide the Trust with the information described above may be subject to
penalties.
The Depositor will be designated as the tax matters partner in the related
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.
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. Although it is not
expected that the Trust would be engaged in a trade or business in the United
States for such purposes, 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
Certificateholder's withholding status, the Trust may 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 Certificateholder might be required to file a U.S. individual
or corporate income tax return and pay U.S. income tax on the amount computed
therein (including, in the case of a corporation, the branch profits tax) on
its share of accruals of guaranteed payments and the Trust's income. Each
foreign Certificateholder 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 Certificateholder
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. However,
the IRS may assert additional taxes are due, and no assurance can be given as
to the appropriate amount of tax liability.
The Withholding Tax Regulations alter, in certain respects, the foregoing
certification rules and generally are effective for periods after December 31,
1998. Prospective investors are urged to consult their tax advisors with
respect to the effect of the Withholding Tax Regulations.
BACKUP WITHHOLDING. Distributions made on the Certificates and proceeds from
the sale of the Certificates will be subject to a "backup" 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. Certificateholders should consult with
their tax advisors as to their eligibility for exemption to backup
withholding, the procedure for obtaining the exemption, and the potential
impact of the Withholding Tax Regulations.
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TRUSTS TREATED AS GRANTOR TRUSTS
TAX CLASSIFICATION OF THE TRUST AS A GRANTOR TRUST. Tax Counsel is of the
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part 1 of subchapter J of the Code. A copy of such opinion of Tax
Counsel will be filed with the Commission as an exhibit to a Form 8-K prior to
the issuance of the Certificates by the Trust. Owners of Certificates
(referred to herein as "Grantor Trust Certificateholders") will be treated for
federal income tax purposes as owners of a portion of the Trust's assets as
described below. The Certificates issued by the Trust are referred to herein
as "Grantor Trust Certificates."
CHARACTERIZATION. Each Grantor Trust Certificateholder will be treated as
the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will
be considered the equitable owner of a pro rata undivided interest in each of
the Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable
because of a default or delinquency in payment will be treated for federal
income tax purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire
income from the Receivables in the Trust represented by the Grantor Trust
Certificates, including interest, OID, if any, market discount, if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the Servicer. Under Sections 162 or 212 of
the Code each Grantor Trust Certificateholder will be entitled to deduct its
pro rata share of servicing fees, prepayment fees, assumption fees, any loss
recognized upon an assumption and late payment charges retained by the
Servicer, provided that such amounts are reasonable compensation for services
rendered to the Trust. Grantor Trust Certificateholders that are individuals,
estates or trusts will be entitled to deduct their share of expenses only to
the extent such expenses plus all other miscellaneous itemized deductions
exceed two percent of its adjusted gross income. In addition, the Code
provides that the amount of itemized deductions otherwise allowable for the
taxable year for an individual whose adjusted gross income exceeds a threshold
amount specified in the Code adjusted for inflation ($117,950 in 1996, in the
case of a joint return) will be reduced by the lesser of (i) 3% of the excess
of adjusted gross income over the specified threshold amount or (ii) 80% of
the amount of itemized deductions otherwise allowable for such taxable year. A
Grantor Trust Certificateholder using the cash method of accounting must take
into account its pro rata share of income and deductions as and when collected
by or paid to the Servicer. A Grantor Trust Certificateholder using an accrual
method of accounting must take into account its pro rata share of income and
deductions as they become due or are paid to the Servicer, whichever is
earlier. If the servicing fees paid to the Servicer are deemed to exceed
reasonable servicing compensation ("excess servicing"), the amount of such
excess could be considered as an ownership interest retained by the Servicer
(or any person to whom the Servicer assigned for value all or a portion of the
servicing fees) in a portion of the interest payments on the Receivables. The
Receivables would then be subject to the "coupon stripping" rules of the Code
discussed below.
STRIPPED BONDS AND STRIPPED COUPONS. To the extent a transaction is
determined to involve "excess servicing" (as described above), or that the
classes of Certificates represent stripped interests in the underlying
Receivables, the Grantor Trust Certificates will represent interests in
stripped bonds for federal income tax purposes. Although the tax treatment of
stripped bonds is not entirely clear, based on recent guidance by the IRS,
each purchaser of a Grantor Trust Certificate will be treated as the purchaser
of a stripped bond which generally should be treated
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<PAGE>
as a single debt instrument issued on the day it is purchased for purposes of
calculating any OID. Generally, under Treasury regulations (the "Section 1286
Treasury Regulations"), if the discount on a stripped bond is larger than a DE
MINIMIS amount (as calculated for purposes of the OID rules of the Code) such
stripped bond will be considered to have been issued with OID. If OID rules
were to apply, all of the taxable income to be recognized with respect to the
Certificates would be includible in income as OID but would not be includible
again when the interest is actually received. Regulations do not adequately
address the circumstances in which payment of interest on Certificates such as
the Grantor Trust Certificates would be considered unconditionally payable,
and thus, Tax Counsel is unable to opine as to the extent to which interest
payments on the Certificates would be treated as qualified stated interest.
MARKET DISCOUNT. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules
of Sections 1276 through 1278 of the Code to the extent an undivided interest
in a Receivable is considered to have been purchased at a "market discount."
Generally, the amount of market discount is equal to the excess of the portion
of the principal amount of such Receivable allocable to such holder's
undivided interest over such holder's tax basis in such interest. Market
discount with respect to a Grantor Trust Certificate will be considered to be
zero if the amount allocable to the Grantor Trust Certificate is less than
0.25% of the Grantor Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Sections 1276 through 1278 of the Code.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain on disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history likely will apply. Under those rules, the holder
of a market discount bond may elect to accrue market discount on the basis of
a constant yield method.
A holder who acquired a Grantor Trust Certificate at a market discount may
be required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry
such Grantor Trust Certificate purchased with market discount. For these
purposes, the DE MINIMIS rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the
year in which such market discount is includible in income. If such holder
elects to include market discount in income currently as it accrues on all
market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
PREMIUM. The price paid for a Grantor Trust Certificate by a holder will be
allocated to such holder's undivided interest in each Receivable based on each
Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect
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<PAGE>
to amortize such premium under a constant yield method. Amortizable bond
premium will be treated as an offset to interest income on such Grantor Trust
Certificate. The basis for such Grantor Trust Certificate will be reduced to
the extent that amortizable premium is applied to offset interest payments. It
is not clear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code. A
Grantor Trust Certificateholder that makes this election for a Grantor Trust
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Grantor Trust Certificateholder held at the
beginning of the year of the election or acquired thereafter. Absent such an
election, the premium will be deductible as an ordinary loss only upon
disposition of the Certificate or pro rata as principal is paid on the
Receivables.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Receivable prepays in full, equal to the
difference between the portion of the prepaid principal amount of such
Receivable that is allocable to the Grantor Trust Certificate and the portion
of the adjusted basis of the Grantor Trust Certificate that is allocable to
such Receivable. If a reasonable prepayment assumption is used to amortize
such premium, it appears that such a loss would be available, if at all, only
if prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
ELECTION TO TREAT ALL INTEREST AS OID. The OID regulations permit a Grantor
Trust Certificateholder to elect to accrue all interest, discount (including
DE MINIMIS market or OID) and premium in income as interest, based on a
constant yield method. If such an election were to be made with respect to a
Grantor Trust Certificate with market discount, the Certificateholder would be
deemed to have made an election to include in income currently market discount
with respect to all other debt instruments having market discount that such
Grantor Trust Certificateholder acquires during the year of the election or
thereafter. Similarly, a Grantor Trust Certificateholder that makes this
election for a Grantor Trust Certificate that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that such Grantor Trust
Certificateholder held at the beginning of the year of the election or
acquired thereafter. See "Premium." The election to accrue interest, discount
and premium on a constant yield method with respect to a Grantor Trust
Certificate is generally irrevocable.
SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Section 1221 of the Code, and will be
long-term or short-term depending on whether the Grantor Trust Certificate has
been owned for the long-term capital gain holding period (currently more than
one year).
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from
the sale of a Grantor Trust Certificate by a bank or a thrift institution to
which such section applies will be treated as ordinary income or loss.
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NON-U.S. PERSONS. Generally, interest or OID paid by the person required to
withhold tax under Section 1441 or 1442 of the Code to (i) an owner that is
not a U.S. Person (as defined below) or (ii) a Grantor Trust Certificateholder
holding on behalf of an owner that is not a U.S. Person would not be subject
to withholding if such Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a statement, signed by the
Grantor Trust Certificateholder under penalties of perjury, certifying that
such Grantor Trust Certificateholder is not a U.S. Person and providing the
name and address of such Grantor Trust Certificateholder).
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership 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 includible in gross income for federal income tax purposes
regardless of its source.
The Withholding Tax Regulations alter, in certain respects, the foregoing
certification rules and generally are effective for periods after December 31,
1998. Prospective investors are urged to consult their tax advisors with
respect to the effect of the Withholding Tax Regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Servicer will furnish or
make available, within a reasonable time after the end of each calendar year,
to each person who was a Grantor Trust Certificateholder at any time during
such year, such information as may be deemed necessary or desirable to assist
Grantor Trust Certificateholders in preparing their federal income tax
returns, or to enable holders to make such information available to beneficial
owners or financial intermediaries that hold Grantor Trust Certificates as
nominees on behalf of beneficial owners. If a holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a
beneficial owner fails to supply a certified taxpayer identification number or
if the Secretary of the Treasury determines that such person has not reported
all interest and dividend income required to be shown on its federal income
tax return, 31% backup withholding may be required with respect to any
payments. Any amounts deducted and withheld from a distribution to a recipient
would be allowed as a credit against such recipient's federal income tax
liability. Prospective investors are urged to consult their tax advisors
concerning the potential impact of the Withholding Tax Regulations.
FASIT LEGISLATION. The "Small Business Job Protection Act of 1996" (the
"Act") created a new type of entity for federal income tax purposes called a
"financed asset securitization investment trust" or "FASIT." The Act generally
enables certain arrangements similar to a trust that is treated as a
partnership to elect to be treated as a FASIT. Under 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 provided in
the related Prospectus Supplement, the Trust Agreement and Indenture will set
forth certain conditions which, if satisfied, will permit the Depositor to
amend such Trust Agreement and Indenture in order to enable all or a portion
of the Trust to qualify as a FASIT and to permit a FASIT election to be made
with respect thereto, and to make such modifications to such Trust Agreement
and Indenture as may be permitted by reason of the making of such an election.
However, there can be no assurance that the Depositor will or will not cause
any permissible FASIT election to be made with respect to a Trust or amend the
related Trust Agreement and Indenture in connection with any election.
Furthermore, any such election will be made only if an opinion of Tax Counsel
is rendered that such election will not have material adverse consequences to
any holder of a Note or Certificate.
THE FEDERAL AND STATE DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S OR
CERTIFICATEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE
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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 certain types of Keogh Plans (each a "Benefit 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 Benefit 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. ERISA also imposes certain duties and certain
prohibitions on persons who are fiduciaries of plans subject to ERISA.
Generally, any person who exercises any authority or control with respect to
the management or disposition of the assets of a plan subject to ERISA is
considered to be a fiduciary of such plan.
If the assets of a Trust were deemed to constitute plan assets of a Benefit
Plan, the Benefit Plan's investment in Notes or Certificates might be deemed
to constitute delegation under ERISA of the duty to manage plan assets by the
fiduciaries making the decision on behalf of the Benefit Plan to make the
investment, and transactions involving the Trust might be deemed as
transactions with the Benefit Plan for the purpose of ERISA's fiduciary and
prohibited transaction rules. Under a regulation issued by the United States
Department of Labor (the "Plan Assets Regulation"), the assets of a Trust
would be treated as plan assets of a Benefit Plan for the purposes of ERISA
and the Code only if the Benefit 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. The likely
treatment in this context of Notes and Certificates of a given series will be
discussed in the related Prospectus Supplement.
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. Accordingly, assets of such
plans may be invested in Notes or Certificates without regard to the ERISA
considerations discussed herein, subject to the provisions of other applicable
federal, state, and local law.
A plan fiduciary considering the purchase of Securities of a given series
should consult its tax and/or legal advisors regarding the applicability of
the fiduciary responsibility provisions of ERISA to such investment, 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.
SENIOR CERTIFICATES ISSUED BY TRUSTS THAT DO NOT ISSUE NOTES
Unless otherwise specified in the related Prospectus Supplement, the
following discussion applies only to nonsubordinated Certificates (referred to
herein as "Senior Certificates") issued by a Trust that does not issue Notes.
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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 Benefit 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 receivables covered by the Exemption
include installment sales contracts such as the Receivables. In general, the
Exemption will apply to the acquisition, holding and resale of the Senior
Certificates by a Benefit Plan, provided that specific conditions (certain of
which are described below) are met. However, it is not clear whether the
Exemption applies to those Benefit Plans which are participant directed plans
as described in Section 404(c) of ERISA or plans that are subject to Section
4975 of the Code but that are not subject to Title I of ERISA, such as certain
Keogh plans and certain individual retirement accounts.
Among the conditions which must be satisfied for the Exemption to apply to
the Senior Certificates are the following:
(1) The acquisition of the Senior Certificates by a Benefit Plan is on
terms (including the price for the Senior Certificates) that are at least
as favorable to the Benefit Plan as they would be in an arm's length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Benefit Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from either Standard & Poor's Structured Rating
Group, Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. or
Fitch Investors Service, L.P. (each a "Rating Agency");
(4) The Trustee is not an affiliate of any other member of the Restricted
Group (as defined in the Exemption);
(5) The sum of all payments made to the Underwriters in connection with
the distribution of the Senior Certificates represents not more than
reasonable compensation for underwriting the Senior Certificates; the sum
of all payments made to and retained by the Transferor pursuant to the
transfer of the Contracts to the Trust represents not more than the fair
market value of such Contracts; and the sum of all payments made to and
retained by the Servicer represents not more than reasonable compensation
for the Servicer's services under the Agreement and reimbursement of the
Servicer's reasonable expenses in connection therewith;
(6) The Benefit Plan investing in the Senior Certificates is an
"accredited investor" as defined in Rule 501 (a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of 1933; and
(7) The Trust satisfies the following requirements:
(a) the corpus of the Trust consists solely of assets of the type
which have been included in other investment pools,
(b) certificates in such other investment pools have been rated in
one of the three highest generic rating categories of a Rating Agency
for at least one year prior to the Benefit Plan's acquisition of the
Senior Certificates, and
(c) certificates evidencing interests in such other investment pools
have been purchased by investors other than Benefit Plans for at least
one year prior to any Benefit Plan's acquisition of Senior
Certificates.
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Furthermore, if the related Prospectus Supplement provides that the property
of the Trust will include a Pre-Funding Account, certain additional conditions
must be met in order for the Exemption to apply to the acquisition, holding
and resale of the Senior Certificates by a Benefit Plan.
The Exemption does not provide an exemption from ERISA Sections
406(a)(1)(E), 406(a)(2) or 407 for the purchase or holding of Senior
Certificates by fiduciaries investing assets of Benefit Plans sponsored by any
member of the Restricted Group or any affiliate of such person.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of interest or prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Senior Certificates in
connection with the initial issuance, at least fifty (50) percent of the
Senior Certificates are acquired by persons independent of the Restricted
Group and at least 50% of the aggregate interest in the Trust is acquired by
persons independent of the Restricted Group, (ii) the Benefit Plan's
investment in Senior Certificates does not exceed twenty-five (25) percent of
all of the Senior Certificates outstanding at the time of the acquisition, and
(iii) immediately after the acquisition, no more than twenty-five (25) percent
of the assets of the Benefit Plan are invested in certificates representing an
interest in one or more trusts containing assets sold or serviced by the same
entity. The Exemption does not apply to Plans sponsored by the Depositor, the
Transferor, any Underwriter, the Trustee, the Servicer, any obligor with
respect to Contracts included in the Trust constituting more than five percent
of the aggregate unamortized principal balance of the assets in the Trust, or
any affiliate of such parties (the "Restricted Group").
The Depositor believes that the Exemption will apply to the acquisition and
holding by Benefit 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 have been met.
In addition, as of the date hereof, no obligor with respect to Contracts
included in the Trust constitutes more than five percent of the aggregate
unamortized principal balance of the assets of the Trust.
Any Benefit Plan fiduciary considering the purchase of Senior Certificates
should consult with its counsel with respect to the applicability of the
Exemption and other issues and determine on its own whether all conditions
have been satisfied and whether the Senior Certificates are an appropriate
investment for a Benefit Plan under ERISA and the Code. Each purchaser that
purchases Senior Certificates with the assets of one or more Benefit Plans
shall be deemed to represent that each such Plan qualifies as an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D under the Securities
Act.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to the Securities of a given series the ("Underwriting Agreement"),
the 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 therein and in the related Prospectus Supplement.
In the Underwriting Agreement 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.
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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 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 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 Depositor.
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 OPINIONS
Certain legal matters relating to the Securities of any series will be
passed upon for the related Trust and the Depositor by Mayer, Brown & Platt,
Chicago, Illinois and for the Underwriter for such series by Mayer, Brown &
Platt. Certain federal income tax matters will be passed upon for each Trust
by Mayer, Brown & Platt.
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INDEX OF TERMS
<TABLE>
<S> <C>
accounts.............................................................. 21
accredited investor................................................... 96
Act................................................................... 94
Administration Agreement.............................................. 69
Administration Fee.................................................... 70
Administrator......................................................... 69
Applicable Trustee.................................................... 51
APR................................................................... 14
Base Rate............................................................. 45
Benefit Plan.......................................................... 94
Boat Receivables...................................................... 27
Calculation Agent..................................................... 45
Calculation Date...................................................... 46-48, 50
capital asset......................................................... 93
CD Rate............................................................... 46
CD Rate Determination Date............................................ 46
CD Rate Security...................................................... 45
Cede.................................................................. 27
Cedel................................................................. 52
Cedel Participants.................................................... 52
Certificate Balance................................................... 8
Certificate Distribution Account...................................... 59
Certificate Pool Factor............................................... 33
Certificateholder..................................................... 51
Certificateholders.................................................... 27
Certificates.......................................................... 1
chattel paper......................................................... 19
clearing corporation.................................................. 50
Closing Date.......................................................... 57
Code.................................................................. 80
Collection Account.................................................... 59
Collection Period..................................................... 61
Commercial Paper Rate................................................. 46
Commercial Paper Rate Determination Date.............................. 46
Commercial Paper Rate Security........................................ 45
Commission............................................................ 4
Composite Quotations.................................................. 45
Cooperative........................................................... 53
Cutoff Date........................................................... 27
Dealer Agreements..................................................... 27
Dealers............................................................... 11, 27
Definitive Certificates............................................... 54
Definitive Notes...................................................... 54
Definitive Securities................................................. 54
Depositaries.......................................................... 50
Depositor............................................................. 4, 34
Depository............................................................ 37
Distribution Date..................................................... 43
DTC................................................................... 27
DTC's Nominee......................................................... 27
</TABLE>
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<TABLE>
<S> <C>
Eligible Deposit Account................................................. 60
Eligible Institution..................................................... 60
Eligible Investments..................................................... 60
equity interest.......................................................... 95
ERISA.................................................................... 17
Euroclear................................................................ 53
Euroclear Operator....................................................... 53
Euroclear Participants................................................... 53
Events of Default........................................................ 39
Exchange Act............................................................. 4
Exemption................................................................ 95
FASIT.................................................................... 94
Federal Funds Rate....................................................... 47
Federal Funds Rate Determination Date.................................... 48
Federal Funds Rate Security.............................................. 45
Final Scheduled Maturity Date............................................ 14
Financed Assets.......................................................... 10
Financed Boats........................................................... 10
Fixed Rate Securities.................................................... 44
Floating Rate Securities................................................. 44
foreign person........................................................... 82
FTC Rule................................................................. 78
Funding Period........................................................... 7
Ganis.................................................................... 5
Grantor Trust Certificateholders......................................... 89
Grantor Trust Certificates............................................... 89
H.15(519)................................................................ 45
Holder-in-Due-Course..................................................... 78
Indenture................................................................ 6
Indenture Trustee........................................................ 1
Index Maturity........................................................... 45
Indirect Participants.................................................... 51
Cutoff Date.............................................................. 10
Initial Pool Balance..................................................... 69
Initial Receivables...................................................... 10
Insolvency Event......................................................... 66
Interest Rate............................................................ 6
Interest Reset Date...................................................... 45
Interest Reset Period.................................................... 45
Investment Earnings...................................................... 60
IRS...................................................................... 80
Issuer................................................................... 5
LIBOR.................................................................... 48, 49
LIBOR Determination Date................................................. 48
LIBOR Security........................................................... 45
LIBOR Telerate........................................................... 48
London Banking Day....................................................... 48
market discount.......................................................... 91
Money Market Yield....................................................... 47
new partnership.......................................................... 86
Note Distribution Account................................................ 59
Note Pool Factor......................................................... 32
</TABLE>
77
<PAGE>
<TABLE>
<S> <C>
Noteholder............................................................... 51
Noteholders.............................................................. 27
Notes.................................................................... 1
Obligors................................................................. 27
OID...................................................................... 81
OID regulations.......................................................... 81
old partnership.......................................................... 86
Participants............................................................. 51
parties in interest...................................................... 94
Pass Through Rate........................................................ 8
Payment Date............................................................. 38
Plan Assets Regulation................................................... 95
Pool Balance............................................................. 33
Pooling and Servicing Agreement.......................................... 5
Portfolio interest....................................................... 82
Pre-Funded Amount........................................................ 11
Pre-Funding Account...................................................... 2
Preferred Mortgages...................................................... 15
prepayments.............................................................. 24, 32
prohibited transaction................................................... 94
Prospectus Supplement.................................................... 1
Purchase Amount.......................................................... 59
Rating Agency............................................................ 96
Receivables.............................................................. 2
Receivables Pool......................................................... 27
Receivables Purchase Agreement........................................... 58
Registration Statement................................................... 4
Related Documents........................................................ 41
Reserve Account.......................................................... 64
Restricted Group......................................................... 97
Rules.................................................................... 52
Schedule of Receivables.................................................. 58
Section 1286 Treasury Regulations........................................ 90
Securities............................................................... 1
Securities Act........................................................... 4
Securityholder........................................................... 51
Securityholders.......................................................... 27
Seller................................................................... 5
Senior Certificates...................................................... 95
Servicer................................................................. 5
Servicer Advance......................................................... 13
Servicer Default......................................................... 66
Servicing Fee............................................................ 62
Servicing Fee Rate....................................................... 62
Simple Interest Receivables.............................................. 30
Spread................................................................... 45
Spread Multiplier........................................................ 45
Strip Certificates....................................................... 9
Strip Notes.............................................................. 7
Subsequent Receivables................................................... 2
Subsequent Transfer Date................................................. 58
Telerate Page 3750....................................................... 48
</TABLE>
78
<PAGE>
<TABLE>
<S> <C>
Terms and Conditions..................................................... 53
Transfer and Servicing Agreement......................................... 10
Treasury bills........................................................... 49
Treasury Rate............................................................ 49
Treasury Rate Determination Date......................................... 50
Treasury Rate Security................................................... 45
Trust.................................................................... 1, 5
Trust Accounts........................................................... 60
Trust Agreement.......................................................... 5
Trustee.................................................................. 1, 5
U.S. Person.............................................................. 93
UCC...................................................................... 15, 59
</TABLE>
79
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Securities
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, CEDEL and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior debt issues. Investors'
securities custody accounts will be credited with their holdings against
payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payments in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
80
<PAGE>
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear, as applicable, will instruct its Depositary to receive the Global
Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by such Depositary to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
applicable clearing system and by the clearing system, in accordance with its
usual procedures, to the CEDEL Participant's or Euroclear Participant's
account. The Global Securities credit will appear the next day (European time)
and the cash debit will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debit
will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each CEDEL Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing systems, through
their respective Depositaries, 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 their respective Depositaries, as
appropriate, to deliver the bonds to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities from
and including the last coupon payment date to and excluding the settlement
date. The payment will
81
<PAGE>
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 clearing system and elect to be in debit in anticipation of
receipt of the sale proceeds in its account, the back-valuation will
extinguish any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade
fails), receipt of the cash proceeds in the CEDEL Participant's or Euroclear
Participant's account would instead be valued as of the actual settlement
date. Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue 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 OF NON-U.S. PERSONS (FORM W-8). Beneficial owners of Notes that
are non-U.S. Persons generally 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. PERSON WITH 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 beneficial owners of Notes
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 beneficial owner of Notes or such owner's agent.
82
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT +
+RELATES SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER +
+TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH +
+SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED [ ], 1998
VERSION #3A
[BOATS]
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED , 199 )
$( )
( ) TRUST 199-( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
------------
( ) Trust 199( ) (the "Trust") will be governed pursuant to a
Trust Agreement to be dated as of , 199 , between Deutsche Recreational
Asset Funding Corporation (the "Depositor") and ( ), as (Owner) Trustee.
The Trust will issue $ aggregate principal amount of ( %) Asset Backed
Notes, Class ( ) (the "Class ( ) Notes") and $ aggregate principal
amount of ( %) Asset Backed Notes, Class ( ) (the "Class ( ) Notes" and,
together with the Class ( ) Notes, the "Notes") pursuant to an Indenture to be
dated as of , 199 , between the Trust and , as Indenture Trustee.
(No principal payments will be made in the Class ( ) Notes until the Class
( ) Notes have been paid in full, and to that extent, the rights of the
holders of the Class ( ) Notes to receive distributions with respect to the
Receivables are subordinated to the rights of the holders of the Class ( )
Notes, as more fully described herein.)
(Cover continued on following page)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [S-10] HEREIN AND ON PAGE [19] IN THE ACCOMPANYING PROSPECTUS.
THE NOTES REPRESENT OBLIGATIONS OF, AND THE CERTIFICATES REPRESENT BENEFICIAL
INTERESTS IN, THE TRUST ONLY AND DO NOT REPRESENT OBLIGATIONS OF OR INTERESTS
IN DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, THE TRANSFEROR, THE
SERVICER OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE NOTES, THE
CERTIFICATES OR THE RECEIVABLES ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
ORIGINAL PROCEEDS TO
PRINCIPAL PRICE TO UNDERWRITING THE DEPOSITOR
AMOUNT PUBLIC(1) DISCOUNT (1)(2)
<S> <C> <C> <C> <C>
Class ( ) Notes................. $ % % %
Class ( ) Notes................. % % %
Certificates..................... % % %
Total........................ $ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 199 .
(2) Before deducting expenses, estimated to be $ .
The Notes and the Certificates are offered by Deutsche Bank Securities Inc.
(the "Underwriter") subject to prior sale, when, as and if issued and accepted
by the Underwriter and subject to the Underwriter's right to reject any order
in whole or in part and to approval of certain legal matters by its counsel. It
is expected that the Notes and the Certificates will be delivered in book-entry
form only through the facilities of The Depository Trust Company and, in the
case of the Notes, Cedel Bank, societe anonyme, and the Euroclear System, in
each case against payment therefor, in immediately available funds on or about
, 199 .
DEUTSCHE BANK SECURITIES INC.
, 199 .
<PAGE>
The Trust will also issue $ aggregate principal amount of ( %) Asset
Backed Certificates (the "Certificates" and, together with the Notes, the
"Securities"). The assets of the Trust will include a pool of retail
installment sale contracts and/or retail installment loans (the
"Receivables"), secured by security interests in new or used recreational
sport and power boats (including any boat motors and accompanying trailers)
and yachts (both power and sail) (the "Financed Assets" or "Financed Boats"),
collections and other payments with respect to the Receivables received after
the Cutoff Date described herein and monies on deposit in certain trust
accounts. The Notes will be secured by the assets of the Trust pursuant to the
Indenture.
Interest on each class of Notes will be payable on the day of each month
or, if any such day is not a Business Day, on the next succeeding Business Day
(each, a "Distribution Date"), commencing , 199 . Principal of the Notes
will be payable on each Distribution Date to the extent described herein;
however, no principal payments will be made on the Class ( ) Notes until the
Class ( ) Notes have been paid in full.
The Certificates will represent fractional undivided interests in the Trust.
Interest, to the extent of the Pass Through Rate specified above, will be
distributed to the Certificateholders on each Distribution Date. Distributions
of interest on the Certificates will be subordinated in priority of payment to
interest due on the Notes as and to the extent described herein. In addition,
no distributions of principal on the Certificates will be made until all the
Notes have been paid in full. See "Risk Factors--Subordination of the
Certificates to the Notes" herein.
Each class of the Notes and the Certificates will be payable in full on the
applicable final scheduled Distribution Date as set forth herein. However,
payment in full of a class of Notes or of the Certificates could occur earlier
than such dates as described herein. In addition, the Class ( ) Notes will be
subject to redemption in whole, but not in part, and the Certificates will be
subject to prepayment in whole, but not in part, on any Distribution Date on
which the Servicer exercises its option to purchase the Receivables. The
Servicer may purchase the Receivables when the aggregate principal balance of
the Receivables shall have declined to less than 10% of the initial aggregate
principal balance of the Receivables acquired by the Trust.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE NOTES AND THE CERTIFICATES. ADDITIONAL INFORMATION IS
CONTAINED IN THE PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE NOTES OR
THE CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN
THIS PROSPECTUS SUPPLEMENT CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE
STATEMENTS IN THIS PROSPECTUS SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF SECURITIES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" HEREIN.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Notes or Definitive Certificates are issued,
monthly and annual unaudited reports containing information concerning the
Receivables will be prepared by the Servicer and sent on behalf of the Trust
only to Cede & Co. ("Cede"), as nominee of The Depository Trust Company
("DTC") and registered holder of the Notes and the Certificates. See
S-2
<PAGE>
"Certain Information Regarding the Securities--Book-Entry Registration" and
"--Reports to Securityholders" in the accompanying Prospectus (the
"Prospectus"). Such reports will not constitute financial statements prepared
in accordance with generally accepted accounting principles. The Depositor, as
originator of the Trust, will file with the Securities and Exchange Commission
(the "Commission") such periodic reports as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Delinquencies,
Repossessions and Net Losses" and "Weighted Average Life of the Securities"
herein may constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and as such may involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Receivables to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
S-3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer........................ ( ) Trust 199-( ) (the
"Trust" or the "Issuer"), a ( ) a
business trust to be governed pursuant to a
Trust Agreement dated as of ,
199 (as amended and supplemented from time to
time, the "Trust Agreement"), between the
Depositor and the Owner Trustee.
Transferor.................... Ganis Credit Corporation
Depositor..................... Deutsche Recreational Asset Funding Corporation
(the "Depositor").
Servicer...................... Deutsche Financial Services Corporation (the
"Servicer").
Indenture Trustee............. , as trustee under the Indenture (the
"Indenture Trustee").
Owner Trustee................. , as trustee under the Trust Agreement
(the "Owner Trustee").
Closing Date.................. On or about , 199 .
Cutoff Date................... , 199 .
The Notes..................... The Trust will issue Asset Backed Notes
pursuant to an Indenture to be dated as of
, 199 (as amended and supplemented from
time to time, the "Indenture"), between the
Trust and the Indenture Trustee, as follows:
(i) ( %) Asset Backed Notes, Class ( ) (the
"Class ( ) Notes") in the aggregate initial
principal amount of $ ; and (ii) ( %)
Asset Backed Notes, Class ( ) (the "Class ( )
Notes") in the aggregate initial principal
amount of $ . The Class ( ) Notes and the
Class ( ) Notes are collectively referred to
herein as the "Notes".
The Notes will be secured by the assets of the
Trust pursuant to the Indenture.
The Certificates.............. The Trust will issue ( %) Asset Backed
Certificates (the "Certificates" and, together
with the Notes, the "Securities") with an
aggregate initial Certificate Balance of
$ . The Certificates will represent
fractional undivided interests in the Trust and
will be issued pursuant to the Trust Agreement.
The Receivables............... The Receivables will have an aggregate
principal balance of approximately $ (the
"Initial Pool
S-4
<PAGE>
Balance") as of the Cutoff Date. The
Receivables will consist of retail installment
sale contracts and/or retail installment loans
between Obligors and Dealers, between
Originators and Dealers and/or between the
Transferor and Obligors, secured by new or used
recreational sport and power boats (including
any boat motors and accompanying trailers) and
yachts (both power and sail) (the "Financed
Assets" or "Financed Boats"). The Receivables
were originated by the Transferor [and/or] were
acquired by the Transferor from Dealers [or
Originators]. The Receivables will be
transferred by the Transferor to the Depositor
on or prior to the Closing Date, and will be
transferred by the Depositor to the Trust on
the Closing Date. As of the Cutoff Date, the
weighted average annual percentage rate of the
Receivables was approximately %, the weighted
average remaining maturity of the Receivables
was approximately months, and the weighted
average original maturity of the Receivables
was approximately months. No Receivable has
a scheduled maturity later than , 20
(the "Final Scheduled Maturity Date"). See "The
Receivables Pool" herein.
The "Pool Balance" at any time will represent
the aggregate principal balance of the
Receivables at the end of the preceding
Collection Period, after giving effect to all
payments received from Obligors, Servicer
Advances and Purchase Amounts to be remitted by
the Servicer or the Depositor, as the case may
be, all for such Collection Period, and all
losses realized on Receivables liquidated
during such Collection Period.
Terms of the Notes
A. Distribution Dates....... Payments of interest and principal on the Notes
will be made on the day of each month or,
if any such day is not a Business Day, on the
next succeeding Business Day (each, a
"Distribution Date"), commencing , 199 .
Each reference to a "Payment Date" in the
Prospectus shall refer to a Distribution Date
herein. Payments will be made to holders of
record of the Notes (the "Noteholders") as of
the day immediately preceding such Distribution
Date or, if Definitive Notes are issued, as of
the [ ] day of the preceding month (a "Record
Date"). A "Business Day" is a day other than a
Saturday, a Sunday or a day on which banking
institutions or trust companies in the States
of ( ) are authorized by law,
regulation or executive order to be closed.
S-5
<PAGE>
B. Interest Rates........... The Class ( ) Notes will bear interest at a
per annum rate of % (the "Class ( ) Rate")
and the Class ( ) Notes will bear interest at
a per annum rate of % (the "Class ( )
Rate").
The interest rates for the various classes of
Notes are referred to herein collectively as
"Interest Rates" and for each class of Notes as
the "Interest Rate" for such class.
C. Interest................. Interest on the outstanding principal amount of
the Notes will accrue at the applicable
Interest Rate from the Closing Date (in the
case of the first Distribution Date) or from
the day of the month preceding the month of
a Distribution Date to and including the
day of the month of such Distribution Date
(each an "Interest Accrual Period"). Interest
on the Notes will be calculated on the basis of
a 360-day year consisting of twelve 30-day
months. See "Description of the Notes--Payments
of Interest" herein.
D. Principal................ Principal of the Notes will be payable on each
Distribution Date in an amount equal to the
Noteholders' Principal Distributable Amount for
the calendar month (the "Collection Period")
preceding such Distribution Date (or in the
case of the first Distribution Date, the period
from and including the Cutoff Date to and
including , 199 ) to the extent of funds
available therefor. The "Noteholders' Principal
Distributable Amount" will equal the sum of (i)
the Regular Principal Distribution Amount plus
(ii) the Accelerated Principal Distribution
Amount. The "Regular Principal Distribution
Amount" with respect to any Distribution Date
will equal the amount of principal paid [or, in
certain circumstances, scheduled to be paid]
with respect to the Receivables plus, in
certain circumstances, the principal balance of
[defaulted] Receivables, as calculated by the
Servicer as described under "Description of the
Transfer and Servicing Agreements--
Distributions" herein. The "Accelerated
Principal Distribution Amount" with respect to
a Distribution Date will equal the portion, if
any, of the Total Distribution Amount for the
related Collection Period that remains after
payment of (a) the Servicing Fee (together with
any portion of the Servicing Fee that remains
unpaid from prior Distribution Dates), (b) the
interest due on the Notes, (c) the Regular
Principal Distribution Amount, (d) the interest
due on the Certificates, and (e) the amount, if
any, required to be deposited in the Reserve
Account on such Distribution Date.
S-6
<PAGE>
On the Business Day immediately preceding each
Distribution Date (a "Determination Date"), the
Indenture Trustee shall determine the amount in
the Collection Account available for
distribution on the related Distribution Date.
Payments to Securityholders will be made on
each Distribution Date in accordance with such
determination. The Servicing Fee in respect of
a Collection Period (together with any portion
of the Servicing Fee that remains unpaid from
prior Distribution Dates) will be paid at the
beginning of such Collection Period out of
collections for such Collection Period.
No principal payments will be made on the Class
( ) Notes until the Class ( ) Notes have been
paid in full.
The outstanding principal amount of the Class
( ) Notes, to the extent not previously paid,
will be payable on the (199 )(20 )
Distribution Date (the "Class ( ) Final
Scheduled Distribution Date"); and the
outstanding principal amount of the Class ( )
Notes, to the extent not previously paid, will
be payable on the (199 )(20 ) Distribution
Date (the "Class ( ) Final Scheduled
Distribution Date").
E. Optional Redemption...... The Notes will be redeemed in whole, but not in
part, on any Distribution Date on which the
Servicer exercises its option to purchase the
Receivables. The Servicer will have the option
to purchase all of the Receivables on any
Distribution Date on or after the Distribution
Date on which the Pool Balance has declined to
less than 10% of the Initial Pool Balance. The
price at which the Servicer will be required to
purchase the Receivables in order to exercise
such option will be equal to the aggregate of
the Purchase Amounts of the Receivables as of
the end of the related Collection Period. The
Servicer will be required to give not less than
( ) days notice to the Trustee of its
intention to exercise such option. In addition,
the Servicer will not be permitted to exercise
such option unless the resulting distribution
would be sufficient to retire the Notes at a
redemption price equal to the unpaid principal
amount of the Class ( ) Notes plus accrued and
unpaid interest thereon. See "Description of
the Notes--Optional Redemption" herein.
Terms of the Certificates
A. Distribution Dates....... Distributions with respect to the Certificates
will be made on each Distribution Date,
commencing , 199 . Distributions will be
made to holders of record of the Certificates
(the "Certificateholders"
S-7
<PAGE>
and, together with the Noteholders, the
"Securityholders") as of the related Record
Date (which will be the [ ] day of the
preceding month if Definitive Certificates are
issued).
B. Pass Through Rate........ ( )% per annum (the "Pass Through Rate").
C. Interest................. On each Distribution Date, the Owner Trustee
will distribute pro rata to Certificateholders
30 days of accrued interest at the Pass Through
Rate on the outstanding Certificate Balance
generally to the extent of funds available
following payment of the Servicing Fee and
distributions in respect of the Notes from the
Total Distribution Amount and the Reserve
Account. Interest will be calculated on the
basis of a 360-day year consisting of twelve
30-day months. Interest in respect of a
Distribution Date will accrue from the Closing
Date (in the case of the first Distribution
Date) or from the [ ] day of the month
preceding the month of the Distribution Date to
and including the [ ] day of the month of such
Distribution Date.
D. Principal................ No distributions of principal on the
Certificates will be made until all of the
Notes have been paid in full. On each
Distribution Date commencing on the
Distribution Date on which the Class ( ) Notes
are paid in full, principal of the Certificates
will be payable in an amount generally equal to
the Certificateholders' Principal Distributable
Amount for the Collection Period preceding such
Distribution Date, to the extent of funds
available therefor following payment of the
Servicing Fee, payments of interest and
principal, if any, due in respect of the Notes
and the distribution of interest in respect of
the Certificates. The "Certificateholders'
Principal Distributable Amount" will be the
Regular Principal Distribution Amount (less, on
the Distribution Date on which the Notes are
paid in full, the portion thereof payable on
the Notes), and will be calculated by the
Servicer in the manner described under
"Description of the Transfer and Servicing
Agreements--Distributions" herein.
E. Optional Prepayment...... If the Servicer exercises its option to
purchase the Receivables, the terms of which
option are summarized under "Terms of the
Notes--E. Optional Redemption" above, the
Certificates will be retired. The Servicer will
not be permitted to exercise such option unless
the resulting distribution to
Certificateholders would be equal to the
outstanding Certificate Balance together with
accrued interest at the Pass Through Rate. See
"Description of the Certificates--Optional
Prepayment" herein.
S-8
<PAGE>
Reserve Account............... (DESCRIBE RESERVE ACCOUNT FORMULA)
Collection Account; Priority
of Payments...................
Except under certain conditions described
herein or as otherwise acceptable to each
Rating Agency, the Servicer will be required to
remit collections received with respect to the
Receivables within [ ] Business Days of
receipt thereof to one or more accounts in the
name of the Indenture Trustee (the "Collection
Account"). At the beginning of each Collection
Period the Indenture Trustee will apply
collections in the Collection Account to pay to
the Servicer the Servicing Fee for such
Collection Period and any overdue Servicing
Fees. Pursuant to the Transfer and Servicing
Agreement, the Servicer will have the revocable
power to instruct the Indenture Trustee to
withdraw funds on deposit in the Collection
Account and to apply such funds on each
Distribution Date to the following (in the
priority indicated): (i) the Servicing Fee,
together with any unpaid Servicing Fees from
prior Distribution Dates (if for any reason
such amount was not paid at the beginning of
the Collection Period as described above), to
the Servicer, (ii) the Noteholders' Interest
Distributable Amount and the Noteholders'
Principal Distributable Amount into the Note
Distribution Account, (iii) the
Certificateholders' Interest Distributable
Amount and, after the Notes have been paid in
full, the Certificateholders' Principal
Distributable Amount into the Certificate
Distribution Account and (iv) the remaining
balance, if any, to the Reserve Account.
Tax Status.................... In the opinion of Mayer, Brown & Platt, counsel
to the Trust ("Tax Counsel"), 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 and state income tax purposes.
Alternative characterizations of the Trust and
the Certificates are possible, but would not
result in materially adverse tax consequences
to Certificateholders. See "Federal Income Tax
Consequences" herein and "Federal Income Tax
Consequences" in the Prospectus for additional
information concerning the application of
federal income and state tax laws to the Trust
and the Securities.
S-9
<PAGE>
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes are eligible for purchase
by employee benefit plans. Except as provided
herein under "ERISA Considerations," the
Certificates may not be acquired by any
employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the
"Code"), or by an individual retirement
account. See "ERISA Considerations" herein and
in the Prospectus.
Rating of the Notes........... It is a condition to the issuance of the Notes
that they be rated " " by at least one Rating
Agency. The rating of the Notes by a Rating
Agency reflects such Rating Agency's assessment
of the likelihood that the Noteholders will
receive payments and interest, however, the
rating on the Notes does not address the timing
of distributions of principal of the Notes
prior to the Final Scheduled Distribution Date.
A rating is not a recommendation to buy, sell
or hold securities and may be subject to
revision or withdrawal at any time by the
assigning Rating Agency. Each rating should be
evaluated independently of any other rating.
See "Risk Factors--Ratings of the Securities"
herein.
Rating of the Certificates.... It is a condition to the issuance of the
Certificates that they be rated at least in the
" " category or its equivalent by at least one
Rating Agency. The rating of the Certificates
by a Rating Agency reflects such Rating
Agency's assessment of the likelihood that the
Certificateholders will receive payments of
principal and interest, however, the rating on
the Certificates does not address the timing of
the distributions of principal in respect of
the Certificates prior to the Final Scheduled
Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Each
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Securities" herein.
S-10
<PAGE>
RISK FACTORS
Investors should consider, among other things, the matters discussed under
"Risk Factors" in the Prospectus and the following risk factors in connection
with purchases of the Notes and/or Certificates.
LIMITED LIQUIDITY; ABSENCE OF A SECONDARY MARKET. There is currently no
secondary market for the Securities. Each Underwriter currently intends to
make a market in the Securities, but it is under no obligation to do so. There
can be no assurance that a secondary market will develop or, if a secondary
market does develop, that it will provide the Securityholders with liquidity
of investment or that it will continue for the life of the Securities offered
hereby.
(GEOGRAPHIC CONCENTRATION. Economic conditions in states where Obligors
reside may affect the delinquency, loan loss and repossession experience of
the Trust with respect to the Receivables. Obligors on Receivables
representing approximately % by principal balance of the Receivables were
located in ( ) at the Cutoff Date. As a result, economic
conditions in such states may have a disproportionate affect on prepayments
and/or defaults in respect of the Receivables and thus potentially adversely
affect the amount available for distribution to the Securityholders. In
particular, an economic downturn in one or more of such states could adversely
affect the performance of the Trust as a whole (even if national economic
conditions remain unchanged or improve) as Obligors in such state or states
experience the effects of such a downturn and face greater difficulty in
making payments on their Financed Assets. See "The Receivables Pool" herein.)
SUBORDINATION OF THE CERTIFICATES TO THE NOTES. Distributions of interest
and principal on the Certificates will be subordinated in priority of payment
to interest and principal due on the Notes. Consequently, the
Certificateholders will not receive any distributions with respect to a
Collection Period until the full amount of interest on and principal of the
Notes due on such Distribution Date has been deposited in the Note
Distribution Account. The Certificateholders will not receive any
distributions of principal until the Distribution Date on which all of the
Notes have been paid in full.
LIMITED ASSETS OF THE TRUST. The Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and the Reserve Account. Holders of the Notes and the Certificates
must rely for repayment upon payments on the Receivables and, if and to the
extent available, amounts on deposit in the Reserve Account. Although funds in
the Reserve Account will be available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Notes and the
Certificates, amounts to be deposited in the Reserve Account are limited in
amount. If the Reserve Account is exhausted, the Trust will depend solely on
current distributions on the Receivables to make payments on the Notes and the
Certificates.
RATINGS OF THE SECURITIES. It is a condition to the issuance of the
Securities that each class of the Notes be rated in the highest investment
rating category, and that the Certificates be rated at least in the " "
category or its equivalent, by at least one nationally recognized rating
agency (the "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. The ratings of the Securities
address the likelihood of the payment of principal and interest on the
Securities pursuant to their terms. There can be no assurance that a rating
will remain for any 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.
S-11
<PAGE>
THE TRUST
GENERAL
The Issuer, ( ) Trust 199 -( ), is a
business trust formed under the laws of the State of ( ) pursuant to
the Trust Agreement for the transactions described in this Prospectus
Supplement. After its formation, the Trust will not engage in any activity
other than (i) acquiring, holding and managing the Receivables 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 or are incidental thereto or connected therewith.
The Trust will initially be capitalized with equity equal to the Certificate
Balance of $ , excluding amounts deposited in the Reserve Account. The
equity of the Trust, together with the net proceeds from the sale of the
Notes, may be used by the Trust to acquire the Receivables from the Depositor
pursuant to the Transfer and Servicing Agreement or otherwise will be
distributed to the Depositor.
If the protection provided to the investment of the Securityholders by the
Reserve Account is insufficient, the Trust will look only to the Obligors on
the Receivables and the proceeds from the repossession and sale of Financed
Assets which secure defaulted Receivables. In such event, certain factors,
such as the Trust's not having first priority perfected security interests in
some of the Financed Assets, may affect the Trust's ability to realize on the
collateral securing the Receivables, and thus may reduce the proceeds to be
distributed to Securityholders with respect to the Securities. See
"Description of the Transfer and Servicing Agreements--Distributions" and "--
Subordination; Reserve Account" herein and "Certain Legal Aspects of the
Receivables" in the Prospectus.
The Trust's principal offices are in , , in care of ( ),
as Owner Trustee, at the address listed below under "--The Owner Trustee".
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Closing Date, as if the issuance and sale of the Notes and the Certificates
had taken place on such date:
<TABLE>
<S> <C>
Class ( ) Notes...............................................
Class ( ) Notes...............................................
Certificates...................................................
----------
Total........................................................ $
==========
</TABLE>
THE OWNER TRUSTEE
is the Owner Trustee under the Trust Agreement.
is a (state) banking corporation and its principal offices
are located at , , . The Depositor and its affiliates may maintain
normal commercial banking relations with the Owner Trustee and its affiliates.
S-12
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables transferred to the Trust on the Closing Date. The Receivables
(will be)(have been) acquired by the Depositor from the Transferor. The
Transferor originated the Receivables or acquired the Receivables from Dealers
[or Originators] in the ordinary course of business. The Receivables were
selected from the Transferor's portfolio for transfer to the Depositor, and
were selected from the Depositor's portfolio for inclusion in the Receivables
Pool, by several criteria, some of which are set forth in the Prospectus under
"The Receivables Pools", as well as the requirement that, as of the Cutoff
Date, each Receivable (i) had an outstanding gross balance of at least $ and
(ii) was not more than 59 days past due (a Receivable is not considered past
due if the amount past due is less than % of the scheduled monthly payment).
As of the Cutoff Date, no Obligor on any Receivable was noted in the related
records of the Servicer as being the subject of a bankruptcy proceeding. No
selection procedures believed by the Depositor to be adverse to
Securityholders were used in selecting the Receivables.
Set forth in the following tables is information concerning the composition,
distribution by annual percentage rate ("APR") and the geographic distribution
of the Receivables Pool as of the Cutoff Date.
( ) TRUST 199-( )
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE APR AGGREGATE AVERAGE AVERAGE AVERAGE
OF PRINCIPAL NUMBER OF REMAINING ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TERM TERM BALANCE
- ----------- ---------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
( ) TRUST 199-( )
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENT OF AGGREGATE
APR RANGE RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE(1)
- --------- ----------- ----------------- --------------------
<S> <C> <C> <C>
0.00%- 5.00%................ $ %
5.01%- 6.00%................
6.01%- 7.00%................
7.01%- 8.00%................
8.01%- 9.00%................
9.01%-10.00%................
10.01%-11.00%................
11.01%-12.00%................
12.01%-13.00%................
13.01%-14.00%................
14.01%-15.00%................
15.01%-16.00%................
16.01%-17.00%................
17.01%-18.00%................
Greater than 18.00%..........
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
S-13
<PAGE>
( ) TRUST 199-( )
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENTAGE AGGREGATE
STATE PRINCIPAL BALANCE
(2) (1)
- ----- --------------------
<S> <C>
----
%
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
(2) Based on billing addresses of the Obligors, as reflected in the Servicer's
records as of the Cutoff Date.
Approximately % of the aggregate principal balance of the Receivables,
constituting % of the number of the Receivables, represent previously titled
boats.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experience of the
Transferor pertaining to retail new and used boat and recreational receivables
[, including those previously sold which the Servicer continues to service].
There can be no assurance that the delinquency, repossession and net loss
experience on the Receivables will be comparable to that set forth below. [To
follow: reference to repurchases by Dealers for (i) breaches of
representations and warranties by Dealers or (ii) rescissions and attempted
rescissions by customers.]
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT ,
------------------------------------------- ------------------------------------------
199 199 199 199
--------------------- -------------------- -------------------- --------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ----------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $ $
Period of Delinquency
31-60 Days.............
61 Days or More........
Total Delinquencies.... $ $ $ $
Total Delinquencies as a
Percent of the
Portfolio.............. % % % % % % % %
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------
199 199 199
-------------------- -------------------- --------------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ---------- --------- ---------- --------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $
Period of Delinquency
31-60 Days.............
61 Days or More........
Total Delinquencies... $ $ $
Total Delinquencies as a
percent of the
Portfolio.............. % % % % % %
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract.
S-14
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE (1)
<TABLE>
<CAPTION>
ENDED
[ ] YEAR ENDED DECEMBER 31,
---------------------------- --------------------------------------
199 199 199 199 199 199 199
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Amount
Outstanding During the
Period................. $ $ $ $ $ $ $
Average Number of
Contracts Outstanding
During the Period......
Repossessions as a
Percent of Average
Number of Contracts
Outstanding............ % % % % % % %
Net Losses as a Percent
of Liquidations (3)(4). % % % % % % %
Net Losses as a Percent
of Average Amount Out-
standing (2) (3)....... % % % % % % %
</TABLE>
- --------
(1) (Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract.)
(2) Percentages have been annualized for the [ ] months ended [ ], 199 and
199 and are not necessarily indicative of the experience for the year.
(3) (Net losses are equal to the aggregate of the balances of all contracts
which are determined to be uncollectible in the period, less any
recoveries on contracts charged off in the period or any prior periods,
including any losses resulting from disposition expenses.)
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
THE TRANSFEROR
For a description of the Transferor and its underwriting standards, see "The
Transferor" in the Prospectus.
THE SERVICER
For a description of the Servicer and its servicing standards, see "The
Servicer" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations with
respect to the Securities is set forth under "Weighted Average Life of the
Securities" in the Prospectus. No
S-15
<PAGE>
principal payments will be made on the Class ( ) Notes until all Class ( )
Notes have been paid in full. In addition, no principal payments on the
Certificates will be made until all of the Notes have been paid in full. See
"Description of the Notes--Payments of Principal" and "Description of the
Certificates--Distributions of Principal" herein. As the rate of payment of
principal of each class of Notes and the Certificates depends primarily on the
rate of payment (including prepayments) of the principal balance of the
Receivables, final payment of any class of the Notes and the final
distribution in respect of the Certificates could occur significantly earlier
than their respective final scheduled Distribution Dates. In addition, the
rate of payment of principal of each class of Notes will be affected by the
Accelerated Principal Distribution Amounts applied to the payment of the
principal of the Notes. Securityholders will bear the risk of being able to
reinvest principal payments on the Securities at yields at least equal to the
yields on their respective Securities.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of
the Indenture will be filed with the Commission following the issuance of the
Securities. The following summary describes certain terms of the Notes and the
Indenture. The summary does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, all the provisions of the Notes
and the Indenture. The following summary supplements, and to the extent
inconsistent therewith, replaces the description of the general terms and
provisions of the Notes of any given series and the related Indenture set
forth in the Prospectus, to which description reference is hereby made.
, a , will be the Indenture
Trustee under the Indenture.
PAYMENTS OF INTEREST
The Notes will constitute Fixed Rate Securities, as such term is defined
under "Certain Information Regarding the Securities--Fixed Rate Securities" in
the Prospectus. Interest on the principal balances of the classes of the Notes
will accrue at their respective per annum Interest Rates and will be payable
to the Noteholders monthly on each Distribution Date, commencing , 199 .
Interest on the outstanding principal amount of the Notes will accrue at the
applicable Interest Rate from the Closing Date (in the case of the first
Distribution Date) or from the day of the month preceding the month of a
Distribution Date to and including the [ ] day of the month of the
Distribution Date (each an "Interest Accrual Period"). Interest on the Notes
will be calculated on the basis of a 360-day year consisting of twelve 30-day
months. Interest payments on the Notes will generally be derived from the
Total Distribution Amount remaining after the payment of the Servicing Fee and
from the Reserve Account. See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Subordination; Reserve Account" herein.
Interest payments to all classes of Noteholders will have the same priority.
Under certain circumstances, the amount available for interest payments could
be less than the amount of interest payable on the Notes on any Distribution
Date, in which case each class of Noteholders will receive their ratable share
(based upon the aggregate amount of interest due to such class of Noteholders)
of the aggregate amount available to be distributed in respect of interest on
the Notes.
S-16
<PAGE>
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Distribution Date
in an amount generally equal to the sum of (i) the Regular Principal
Distribution Amount plus (ii) the Accelerated Principal Distribution Amount.
The "Regular Principal Distribution Amount" with respect to any Distribution
Date will equal the sum of principal payments received with respect to the
Receivables during the preceding Collection Period or, in certain cases,
scheduled to be paid during such Collection Period plus the principal balances
of [defaulted] Receivables written off in respect of such Collection Period,
subject to certain limitations. The "Accelerated Principal Distribution
Amount" with respect to any Distribution Date will equal the portion, if any,
of the Total Distribution Amount for the related Collection Period that
remains after payment of (a) the Servicing Fee, (b) the Noteholders' Interest
Distributable Amount, (c) the Regular Principal Distribution Amount, (d) the
Certificateholders' Interest Distributable Amount, and (e) the amount, if any,
required to be deposited in the Reserve Account on such Distribution Date.
Principal payments on the Notes will generally be derived from the Total
Distribution Amount and the amount, if any, in the Reserve Account up to the
Available Amount remaining after the payment of the Servicing Fee and the
Noteholders' Interest Distributable Amount and, in the case of any Accelerated
Principal Distribution Amount, the Certificateholders' Interest Distributable
Amount and the amount, if any, required to be deposited into the Reserve
Account. See "Description of the Transfer and Servicing Agreements--
Distributions" and "--Subordination; Reserve Account" herein.
On the Business Day immediately preceding each Distribution Date (a
"Determination Date"), the Indenture Trustee shall determine the amount in the
Collection Account for the related Collection Period allocable to interest and
the amount allocable to principal on an actual basis, and payments to
Securityholders on the following Distribution Date will be based on such
allocation.
On each Distribution Date, principal payments on the Notes will be applied
in the following order of priority: (i) to the principal balance of the Class
( ) Notes until the principal balance of the Class ( ) Notes is reduced to
zero; and (ii) to the principal balance of the Class ( ) Notes until the
principal balance of the Class ( ) Notes is reduced to zero. The principal
balance of the Class ( ) Notes, to the extent not previously paid, will be
due on the Class ( ) Final Scheduled Distribution Date; and the principal
balance of the Class ( ) Notes, to the extent not previously paid, will be
due on the Class ( ) Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of any class of Notes is paid
may be earlier than the respective Final Scheduled Distribution Dates set
forth above based on a variety of factors, including those described under
"Weighted Average Life of the Securities" herein and in the Prospectus.
OPTIONAL REDEMPTION
The Class ( ) Notes will be redeemed in whole, but not in part, on any
Distribution Date after all the other classes of Notes have been paid in full
on which the Servicer exercises its option to purchase the Receivables. The
Servicer will have the option to purchase all, but not less than all, of the
Receivables on any Distribution Date on or after the Distribution Date on
which the Pool Balance has declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will be required to purchase the
Receivables in order to exercise such option will be equal to the aggregate of
the Purchase Amounts of the Receivables as of the end of the related
Collection Period. The Servicer will be required to give not less than ( )
days notice to the Trustee of its intention to exercise such option. In
addition, the Servicer will not be permitted to exercise such option unless
the resulting distribution would be sufficient to retire
S-17
<PAGE>
the Notes at a redemption price equal to the unpaid principal amount of such
Notes plus accrued and unpaid interest thereon (the "Redemption Price"). See
"Description of the Transfer and Servicing Agreements--Termination" in the
Prospectus.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement. A copy of the Trust Agreement will be filed with the Commission
following the issuance of the Securities. The following summary describes
certain terms of the Certificates and the Trust Agreement. The summary does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Certificates and the Trust Agreement.
The following summary supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
DISTRIBUTIONS OF INTEREST
On each Distribution Date, commencing , (199 )(20 ), the
Certificateholders will be entitled to distributions in an amount equal to the
amount of interest that would accrue on the Certificate Balance at the Pass
Through Rate. The Certificates will constitute Fixed Rate Securities, as such
term is defined under "Certain Information Regarding the Securities--Fixed
Rate Securities" in the Prospectus. Interest in respect of a Distribution Date
will accrue from the Closing Date (in the case of the first Distribution Date)
or from the day of the month preceding the month of the Distribution Date to
and including the day of the month of such Distribution Date. Interest in
respect of the Certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest distributions due for any
Distribution Date but not distributed on such Distribution Date will be due on
the next Distribution Date increased by an amount equal to interest on such
amount at the Pass Through Rate (to the extent lawful). Interest distributions
with respect to the Certificates will generally be funded from the portion of
the Total Distribution Amount and the funds in the Reserve Account remaining
after the distribution of the Servicing Fee and the Noteholders' Distributable
Amount. See "Description of the Transfer and Servicing Agreements--
Distributions" and "--Subordination; Reserve Account" herein.
DISTRIBUTIONS OF PRINCIPAL
Certificateholders will be entitled to distributions of principal on each
Distribution Date, commencing with the Distribution Date on which the Notes
are paid in full, in an amount generally equal to the Regular Principal
Distribution Amount (less, on the Distribution Date on which the Notes are
paid in full, the portion thereof payable on the Notes). Distributions with
respect to principal payments will generally be funded from the portion of the
Total Distribution Amount and funds in the Reserve Account remaining after the
distribution of the Servicing Fee, the Noteholders' Distributable Amount (on
the Distribution Date on which the Notes are paid in full) and the
Certificateholders' Interest Distributable Amount. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Subordination;
Reserve Account" herein.
OPTIONAL PREPAYMENT
If the Servicer exercises its option to purchase the Receivables, the terms
of which option are described under "Description of the Notes--Optional
Redemption" herein, the Certificates
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will be retired. The Servicer will not be permitted to exercise such option
unless the resulting distribution to the Certificateholders would be equal to
the outstanding Certificate Balance together with accrued interest at the Pass
Through Rate. See "Description of the Transfer and Servicing Agreements--
Termination" in the Prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Transfer and Servicing
Agreement, the Administration Agreement and the Trust Agreement (collectively,
the "Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement. A copy
of the Transfer and Servicing Agreement will be filed with the Commission
following the issuance of the Securities. The summary does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
the provisions of the Transfer and Servicing Agreements. The following summary
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Transfer and Servicing
Agreements set forth in the Prospectus, to which description reference is
hereby made.
TRANSFER OF RECEIVABLES
Certain information regarding the transfer of the Receivables by the
Depositor to the Trust on the Closing Date pursuant to the Transfer and
Servicing Agreement is set forth in the Prospectus under "Description of the
Transfer and Servicing Agreements--Transfer of Receivables".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be % per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection Period
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid at the beginning of such Collection Period
out of collections for such Collection Period. [To follow: description of
Supplemental Servicing Fee and Supplemental Suspense Account.] See
"Description of the Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses" in the Prospectus.
DISTRIBUTIONS
DEPOSITS TO COLLECTION ACCOUNT. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for a Distribution Date shall be the sum of the Interest
Distribution Amount and the Regular Principal Distribution Amount (other than
the portion thereof attributable to Realized Losses). "Realized Losses" means
the excess of the principal balance of any Liquidated Receivable over
Liquidation Proceeds to the extent allocable to principal [received in the
Collection Period in which the Receivable became a Liquidated Receivable].
The "Interest Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of [defaulted] Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Liquidated Receivables ("Liquidation
Proceeds"), to the extent attributable to interest
S-19
<PAGE>
due thereon in accordance with the Servicer's customary servicing procedures,
and all recoveries in respect of Liquidated Receivables which were written off
in prior Collection Periods; (iii) all Servicer Advances made by the Servicer;
(iv) the Purchase Amount of each Receivable that was purchased by the
Depositor or purchased by the Servicer under an obligation which arose during
the related Collection Period, to the extent attributable to accrued interest
thereon; and (v) Investment Earnings for such Distribution Date. The Interest
Distribution Amount shall be determined on the related Determination Date [on
an actual basis].
The "Regular Principal Distribution Amount" on any Distribution Date will
generally be the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the Receivables
allocable to principal; (ii) all Liquidation Proceeds attributable to the
principal amount of Receivables which became Liquidated Receivables during
such Collection Period in accordance with the Servicer's customary servicing
procedures, plus the amount of Realized Losses with respect to such Liquidated
Receivables; (iii) to the extent attributable to principal, the Purchase
Amount received with respect to each Receivable purchased by the Transferor or
purchased by the Servicer under an obligation which arose during the related
Collection Period; and (iv) partial prepayments relating to refunds of
extended warranty protection plan costs or of physical damage, credit life or
disability insurance policy premiums, but only if such costs or premiums were
financed by the respective Obligor as of the date of the original contract.
The Regular Principal Distribution Amount shall be determined on the related
Determination Date [on an actual basis].
The Interest Distribution Amount and the Regular Principal Distribution
Amount on any Distribution Date shall exclude the following:
(i) all payments and proceeds (including Liquidation Proceeds) of any
Receivables, the Purchase Amount of which has been included in the Total
Distribution Amount in a prior Collection Period;
(ii) amounts received in respect of interest on Receivables during the
preceding Collection Period in excess of the amount of interest that would
have been due during the Collection Period on the Receivables at their
respective APRs (assuming that a payment is received on each Receivable on
the due date thereof); and
(iii) Liquidation Proceeds attributable to accrued and unpaid interest on
the Receivables (but not including interest for the then current Collection
Period) but only to the extent of any unreimbursed Servicer Advances.
DEPOSITS TO THE DISTRIBUTION ACCOUNTS. At the beginning of each Collection
Period, the Indenture Trustee will apply funds available in the Collection
Account to pay to the Servicer the Servicing Fee for such Collection Period
and any overdue Servicing Fees. On each Distribution Date, the Servicer will
instruct the Indenture Trustee to make the following deposits and
distributions, to the extent of the amount then on deposit in the Collection
Account, in the following order of priority:
(i) to the Servicer, from the Interest Distribution Amount (as so
allocated) the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods, to the extent, if any, such amounts are not paid at the
beginning of the related Collection Period;
(ii) to the Note Distribution Account, from the Total Distribution Amount
remaining after the payment of the Servicing Fee for such Collection Period
and all unpaid Servicing Fees from prior Collection Periods, the
Noteholders' Interest Distributable Amount;
(iii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) and (ii), the
Noteholders' Principal Distributable Amount;
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(iv) to the Certificate Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (iii), the
Certificateholders' Interest Distributable Amount;
(v) after all of the Notes have been paid in full, to the Certificate
Distribution Account, from the Total Distribution Amount remaining after
the application of clauses (i) through (iv), the Certificateholders'
Principal Distributable Amount; and
(vi) the remaining balance, if any, to the Reserve Account.
For purposes hereof, the following terms shall have the following meanings:
"Noteholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Principal Distributable
Amount and the Noteholders' Interest Distributable Amount.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such Distribution Date and the Noteholders'
Interest Carryover Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with respect
to any Distribution Date, interest accrued for the related Interest Accrual
Period on each class of Notes at the respective Interest Rate for such
class on the outstanding principal balance of the Notes of such class on
the immediately preceding Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date), after giving effect to all
payments of principal to the Noteholders of such class on or prior to such
Distribution Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any
outstanding Noteholders' Interest Carryover Shortfall on such preceding
Distribution Date, over the amount in respect of interest that is actually
deposited in the Note Distribution Account on such preceding Distribution
Date, plus interest on the amount of interest due but not paid to
Noteholders on the preceding Distribution Date, to the extent permitted by
law, at the respective Interest Rates borne by each class of the Notes for
the related Interest Accrual Period.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such Distribution Date and the Noteholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Noteholders' Principal Distributable
Amount shall not exceed the outstanding principal balance of the Notes; and
provided, further, that (i) the Noteholders' Principal Distributable Amount
on the Class ( ) Final Scheduled 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 balance of the
Class ( ) Notes to zero; and (ii) the Noteholders' Principal Distributable
Amount on the Class ( ) Final Scheduled 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 balance of the
Class ( ) Notes to zero.
"Noteholders' Monthly Principal Distributable Amount" means, with respect
to each Distribution Date, the sum of (i) the Regular Principal
Distribution Amount and (ii) the Accelerated Principal Distribution Amount.
"Noteholders' Principal Carryover Shortfall" means, as of the close of
any Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any
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outstanding Noteholders' Principal Carryover Shortfall from the preceding
Distribution Date over the amount in respect of principal that is actually
deposited in the Note Distribution Account.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Principal
Distributable Amount and the Certificateholders' Interest Distributable
Amount.
"Certificateholders' Interest Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Monthly
Interest Distributable Amount for such Distribution Date and the
Certificateholders' Interest Carryover Shortfall for such Distribution
Date.
"Certificateholders' 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, calculated on the
basis of a 360-day year consisting of twelve 30-day months) at the Pass
Through Rate on the Certificate Balance on the immediately preceding
Distribution Date, after giving effect to all payments allocable to the
reduction of the Certificate Balance made on or prior to such Distribution
Date (or, in the case of the first Distribution Date, on the Closing Date).
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Monthly
Interest Distributable Amount for the preceding Distribution Date and any
outstanding Certificateholders' Interest Carryover Shortfall on such
preceding Distribution Date, over the amount in respect of interest that is
actually deposited in the Certificate Distribution Account on such
preceding Distribution Date, plus interest on such excess, to the extent
permitted by law, at the Pass Through Rate for the related Interest Accrual
Period.
"Certificateholders' Principal Distributable Amount" means, with respect
to any Distribution Date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such Distribution Date and the
Certificateholders' Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that the
Certificateholders' Principal Distributable Amount shall not exceed the
Certificate Balance. In addition, on the Distribution Date immediately
following the Final Scheduled Maturity Date (the "Final Scheduled
Distribution Date"), the principal required to be deposited into the
Certificate Distribution Account will include the lesser of (a) any
principal due and remaining unpaid on each Receivable in the Trust as of
the Final Scheduled Distribution Date and (b) the amount that is necessary
(after giving effect to the other amounts to be deposited in the
Certificate Distribution Account on the Final Scheduled Distribution Date
and allocable to principal) to reduce the Certificate Balance to zero.
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date prior to the Distribution Date on which
the Notes are paid in full, zero; and with respect to any Distribution Date
commencing on the Distribution Date on which the Notes are paid in full,
the Regular Principal Distribution Amount (less, on the Distribution Date
on which the Notes are paid in full, the portion thereof payable on the
Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the
close of any Distribution Date, the excess of the Certificateholders'
Monthly Principal Distributable Amount and any outstanding
Certificateholders' Principal Carryover Shortfall from the preceding
Distribution Date, over the amount in respect of principal that is actually
deposited in the Certificate Distribution Account.
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<PAGE>
"Certificate Balance" equals, initially, $ and, thereafter, equals
the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
On each Distribution Date, all amounts on deposit in the Note Distribution
Account (other than Investment Earnings) will be generally paid in the
following order of priority:
(i) to the applicable Noteholders, accrued and unpaid interest on the
outstanding principal balance of the applicable class of Notes at the
applicable Interest Rate;
(ii) the Noteholders' Principal Distributable Amount in the following
order of priority:
(a) to the Class ( ) Noteholders in reduction of principal until the
principal balance of the Class ( ) Notes has been reduced to zero; and
(b) to the Class ( ) Noteholders in reduction of principal until the
principal balance of the Class ( ) Notes has been reduced to zero.
On each Distribution Date, all amounts on deposit in the Certificate
Distribution Account will be distributed to the Certificateholders.
SUBORDINATION; RESERVE ACCOUNT
The rights of the Certificateholders to receive distributions with respect
to the Receivables generally will be subordinated to the rights of the
Noteholders in the event of defaults and delinquencies on the Receivables as
provided in the Transfer and Servicing Agreement. The protection afforded to
the Noteholders through subordination will be effected both by the
preferential right of the Noteholders to receive current distributions with
respect to the Receivables and by the establishment of the Reserve Account.
The Reserve Account will be created with an initial deposit by the Depositor
on the Closing Date of cash or Eligible Investments in the amount of $ .
(DESCRIBE RESERVE ACCOUNT FORMULA)
If the amount on deposit in the Reserve Account on any Distribution Date
(after giving effect to all deposits therein or other withdrawals therefrom on
such Distribution Date) is greater than the Specified Reserve Account Balance
for such Distribution Date, except as described below and subject to certain
limitations, the Servicer shall instruct the Indenture Trustee to distribute
such excess to the Depositor. Upon any distribution to the Depositor of
amounts from the Reserve Account, neither the Noteholders nor the
Certificateholders will have any rights in, or claims to, such amounts.
Subsequent to any reduction or withdrawal by any Rating Agency of its rating
of any class of Notes, unless such rating has been restored, any such excess
released from the Reserve Account on a Distribution Date will be deposited in
the Note Distribution Account for payment to Noteholders as an accelerated
payment of principal on such Distribution Date.
Amounts held from time to time in the Reserve Account will continue to be
held for the benefit of Noteholders and Certificateholders. On each
Distribution Date, funds will be withdrawn from the Reserve Account up to the
Available Amount to the extent that the Total Distribution Amount (after the
payment of the Servicing Fee) with respect to any Collection Period is less
than the Noteholders' Distributable Amount and will be deposited in the Note
Distribution Account. In addition, after giving effect to such withdrawal,
funds will be withdrawn from the Reserve Account up to the Available Amount
(as reduced by any withdrawal pursuant to the preceding sentence) to the
extent that the portion of the Total Distribution Amount remaining after the
payment of the Servicing Fee and the deposit of the Noteholders'
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<PAGE>
Distributable Amount in the Note Distribution Account is less than the
Certificateholders' Distributable Amount and will be deposited in the
Certificate Distribution Account. If funds applied in accordance with the
preceding sentence are insufficient to distribute interest due on the
Certificates, subject to certain limitations, funds will be withdrawn from the
Reserve Account and applied to distribute interest due on the Certificates to
the extent of the Certificate Interest Reserve Amount. On each Distribution
Date, the Reserve Account will be reinstated up to the Specified Reserve
Account Balance to the extent of the portion, if any, of the Total
Distribution Amount remaining after payment of the Servicing Fee, the deposit
of the Noteholders' Distributable Amount into the Note Distribution Account
and the deposit of the Certificateholders' Distributable Amount into the
Certificate Distribution Account.
"Available Amount" means, with respect to any Distribution Date, the amount
of funds on deposit in the Reserve Account on such Distribution Date (other
than Investment Earnings) less the Certificate Interest Reserve Amount with
respect to such Distribution Date, in each case, before giving effect to any
reduction thereto on such Distribution Date.
"Certificate Interest Reserve Amount" means the lesser of (i) $ less
the amount of any application of the Certificate Interest Reserve Amount to
pay interest on the Certificates on any prior Distribution Date and (ii) % of
the Certificate Balance on such Distribution Date (before giving effect to any
reduction thereof on such Distribution Date); provided, however, that the
Certificate Interest Reserve Amount shall be zero subsequent to any reduction
by any Rating Agency to less than " " or its equivalent, or withdrawal by
any Rating Agency, of its rating of any class of Notes, unless such rating has
been restored.
If on any Distribution Date the entire Noteholders' Distributable Amount for
such Distribution Date (after giving effect to any amounts withdrawn from the
Reserve Account) is not deposited in the Note Distribution Account, the
Certificateholders generally will not receive any distributions other than
those, if any, in respect of interest made from the Certificate Interest
Reserve Amount.
After the payment in full, or the provision for such payment, of (i) all
accrued and unpaid interest on the Securities and (ii) the outstanding
principal balance of the Securities, any funds remaining on deposit in the
Reserve Account, subject to certain limitations, will be paid to the
Depositor.
The subordination of the Certificates and the Reserve Account are intended
to enhance the likelihood of receipt by Noteholders of the full amount of
principal and interest due them and to decrease the likelihood that the
Noteholders will experience losses. In addition, the Reserve Account is
intended to enhance the likelihood of receipt by Certificateholders of the
full amount of principal and interest due them and to decrease the likelihood
that the Certificateholders will experience losses. However, in certain
circumstances, the Reserve Account could be depleted. If the amount required
to be withdrawn from the Reserve Account to cover shortfalls in collections on
the Receivables exceeds the amount of available cash in the Reserve Account,
Noteholders or Certificateholders could incur losses or a temporary shortfall
in the amounts distributed to the Noteholders or the Certificateholders could
result, which could, in turn, increase the average life of the Notes or the
Certificates.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Mayer, Brown & Platt, counsel for the Trust, 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. The Notes, including the
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Class ( ) Notes, will not be issued with original issue discount ("OID"). For
additional information regarding federal income tax consequences, see "Federal
Income Tax Consequences" in the Prospectus.
ERISA CONSIDERATIONS
THE NOTES
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the Trust were
deemed to be assets of an employee benefit plan or an individual retirement
account (each a "Benefit Plan") subject to ERISA or Section 4975 of the Code.
Under a regulation issued by the United States Department of Labor (the "Plan
Asset Regulations"), the assets of the Trust would be treated as assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquires an "equity interest" in the Trust and none of the exceptions
contained in the Plan Asset Regulations is applicable. An equity interest is
defined under the Plan Asset Regulations as an interest other than an
instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. Although there is little guidance on
the subject, assuming that the Notes would be treated as debt under applicable
local law, the Depositor believes that the Notes should be treated as
indebtedness without substantial equity features for purposes of the Plan
Asset Regulations. This determination is based in part upon the traditional
debt features of the Notes, including the reasonable expectation of purchasers
of Notes that the Notes will be repaid when due, as well as the absence of
conversion rights, warrants and other typical equity features. The debt
treatment of the Notes for ERISA purposes could change if the Trust incurred
losses. However, without regard to whether the Notes are treated as an equity
interest for such purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Trust, the Owner Trustee or the Indenture Trustee, the
Servicer, the owner of collateral, or any of their respective affiliates is or
becomes a party in interest or a disqualified person with respect to such
Benefit Plan. In such case, certain exemptions from the prohibited transaction
rules could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to purchase a Note. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 95-
60, regarding investments by insurance company general accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 96-23,
regarding transactions by in-house asset managers; and PTCE 84-14, regarding
transactions by "qualified professional asset managers." Each investor using
the assets of a Benefit Plan which acquires the Notes, or to whom the Notes
are transferred by its acceptance and holding of any Notes or an interest
therein, will be deemed to represent and warrant that its acquisition and
continued holding of the Notes will not, throughout the term of the holding,
result in a non-exempt prohibited transaction under Section 406(a) of ERISA or
Section 4975 of the Code. A fiduciary of a Benefit Plan must determine that
the purchase of a Note is consistent with its fiduciary duties under ERISA and
does not result in a nonexempt prohibited transaction as defined in Section
406 of ERISA or Section 4975 of the Code. For additional information regarding
treatment of the Notes under ERISA, see "ERISA Considerations" in the
Prospectus.
THE CERTIFICATES
No sale, pledge or transfer of a Certificate or any interest therein may be
made to any Benefit Plan or any person who is directly or indirectly
purchasing such Certificate or interest therein on behalf of, as named
fiduciary of, as trustee of, or with assets of a Benefit Plan, unless the
purchase and holding of such Certificate is exempt under Section III of
Prohibited
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Transaction Class Exemption 95-60 (applicable to certain insurance company
general accounts). Each person who acquires any Class B Certificate or
interest therein shall be deemed to have certified that the foregoing
conditions have been satisfied.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Depositor has agreed to cause the Trust to
sell to the Underwriter, and the Underwriter has agreed to purchase, the
entire principal amount of the Notes and the Certificates. [UNDERWRITING
SYNDICATE LANGUAGE AND TABLE TO BE ADDED IF APPLICABLE]
The Depositor has been advised by the Underwriter that it proposes initially
to offer the Notes to the public at the prices set forth herein, and to
certain dealers at such prices less the initial concession not in excess of %
per Class ( ) Note and % per Class ( ) Note. The Underwriter may allow and
such dealers may reallow a concession not in excess of % per Class ( )
Note and % per Class ( ) Note to certain other dealers. After the initial
public offering of the Notes, the public offering price and such concessions
may be changed.
The Depositor has been advised by the Underwriter that it proposes initially
to offer the Certificates to the public at the price set forth herein and to
certain dealers at such price less the initial concession not in excess of %
per Certificate. The Underwriter may allow and such dealers may reallow a
concession not in excess of % per Certificate to certain other dealers.
After the initial public offering of the Certificates, the public offering
price and such concessions may be changed.
Until the distribution of the Notes and Certificates is completed, rules of
the Commission may limit the ability of the Underwriter and certain selling
group members to bid for and purchase the Notes and Certificates. As an
exception to these rules, the Underwriter is 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 Certificates.
If the Underwriter creates 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
Underwriter may reduce that short position by purchasing Notes and
Certificates in the open market.
In general, the purchase of a security for the purpose of stabilization or
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 Depositor nor [any] Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Notes and
Certificates. In addition, neither the Depositor nor any Underwriter makes any
representation that the Underwriter will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell, any Notes to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances that do not
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constitute an offer to the public in the United Kingdom for the purposes of
the Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the Notes in,
from or otherwise involving the United Kingdom and (c) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document in
connection with the issue of the Notes 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 the document
may otherwise lawfully be issued or passed on.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the 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 Transferor
or the Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
Deutsche Bank Securities Inc., the Transferor, the Servicer and the
Depositor are each indirect, wholly-owned subsidiaries of Deutsche Bank AG.
Any obligations of Deutsche Bank Securities Inc. are the sole responsibility
of Deutsche Bank Securities Inc. and do not create any obligation on the part
of any affiliate of Deutsche Bank Securities Inc..
LEGAL OPINIONS
Certain legal matters relating to the Notes and the Certificates, certain
federal income tax matters will be passed upon for the Depositor by Mayer,
Brown & Platt, Chicago, Illinois. (Certain legal matters relating to the Notes
and the Certificates will be passed upon for the Underwriter by Mayer, Brown &
Platt.). Certain California [and Illinois] income tax matters relating to the
Notes and Certificates will be passed upon for the Depositor by Bryan Cave
LLP, St. Louis, Missouri.
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INDEX OF TERMS
<TABLE>
<S> <C>
"APR"................................................................. S-12
"Available Amount".................................................... S-22
"Business Day"........................................................ S-5
"Cede"................................................................ S-3
"Certificate Balance"................................................. S-21
"Certificate Interest Reserve Amount"................................. S-22
"Certificateholders".................................................. S-7
"Certificateholders' Distributable Amount"............................ S-20
"Certificateholders' Interest Carryover Shortfall".................... S-21
"Certificateholders' Interest Distributable Amount"................... S-20
"Certificateholders' Monthly Interest Distributable Amount"........... S-20
"Certificateholders' Monthly Principal Distributable Amount".......... S-21
"Certificateholders' Principal Carryover Shortfall"................... S-21
"Certificateholders' Principal Distributable Amount".................. S-21
"Certificates"........................................................ S-4
"Class ( ) Final Scheduled Distribution Date"........................ S-6
"Class ( ) Notes".................................................... S-1
"Closing Date"........................................................ S-5
"Code"................................................................ S-8
"Collection Account".................................................. S-7
"Collection Period"................................................... S-5
"Commission".......................................................... S-3
"Depositor"........................................................... S-1
"Determination Date".................................................. S-6
"Distribution Date"................................................... S-2
"DTC"................................................................. S-3
"ERISA"............................................................... S-8
"Exchange Act"........................................................ S-3
"Final Scheduled Distribution Date"................................... S-19
"Final Scheduled Maturity Date"....................................... S-5
"Financed Assets"..................................................... S-2
"Indenture Trustee"................................................... S-4
"Indenture"........................................................... S-4
"Initial Pool Balance"................................................ S-4
"Interest Accrual Period"............................................. S-5
"Interest Distribution Amount"........................................ S-18
"Interest Rates"...................................................... S-5
"Issuer".............................................................. S-4
"Liquidated Receivables".............................................. S-18
"Liquidation Proceeds"................................................ S-18
"Noteholders"......................................................... S-5
"Noteholders' Distributable Amount"................................... S-20
"Noteholders' Interest Carryover Shortfall"........................... S-20
"Noteholders' Interest Distributable Amount".......................... S-20
"Noteholders' Monthly Interest Distributable Amount".................. S-20
"Noteholders' Monthly Principal Distributable Amount"................. S-20
"Noteholders' Principal Carryover Shortfall".......................... S-20
"Noteholders' Principal Distributable Amount"......................... S-6, S-20
"Notes"............................................................... S-1
"OID"................................................................. S-23
</TABLE>
S-28
<PAGE>
<TABLE>
<S> <C>
"Owner Trustee"............................................................ S-4
"Pass Through Rate"........................................................ S-7
"Payment Date"............................................................. S-5
"Pool Balance"............................................................. S-5
"Prospectus"............................................................... S-3
"Rating Agency"............................................................ S-10
"Realized Losses".......................................................... S-18
"Receivables Pool"......................................................... S-11
"Receivables".............................................................. S-2
"Record Date".............................................................. S-5
"Redemption Price"......................................................... S-17
"Regular Principal Distribution Amount".................................... S-18
"Securities"............................................................... S-2
"Securityholders".......................................................... S-7
"Servicer"................................................................. S-4
"Tax Counsel".............................................................. S-8
"Total Distribution Amount"................................................ S-18
"Transfer and Servicing Agreements"........................................ S-18
"Trust Agreement".......................................................... S-4
"Trust".................................................................... S-1
"Underwriter".............................................................. S-2
"Underwriting Agreement"................................................... S-24
</TABLE>
S-29
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DE-
POSITOR OR BY THE UNDERWRITER(S). THIS PROSPECTUS SUPPLEMENT AND THE PROSPEC-
TUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PER-
SON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMA-
TION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Reports to Securityholders................................................. S-2
Summary of Terms........................................................... S-4
Risk Factors............................................................... S-11
The Trust.................................................................. S-12
Capitalization of the Trust................................................ S-12
The Owner Trustee.......................................................... S-12
The Receivables Pool....................................................... S-13
Delinquencies, Repossessions and Net Losses................................ S-14
The Transferor............................................................. S-15
The Servicer............................................................... S-15
Weighted Average Life of the Securities.................................... S-15
Description of the Notes................................................... S-16
Description of the Certificates............................................ S-18
Description of the Transfer and Servicing Agreements....................... S-19
Federal Income Tax Consequences............................................ S-24
ERISA Considerations....................................................... S-25
Underwriting............................................................... S-26
Legal Opinions............................................................. S-27
Index of Terms............................................................. S-28
PROSPECTUS
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Summary of Terms........................................................... 4
Risk Factors............................................................... 12
The Trusts................................................................. 19
The Receivables Pools...................................................... 21
Weighted Average Life of the Certificates.................................. 23
Pool Factors and Trading Information....................................... 23
Use of Proceeds............................................................ 24
The Depositor.............................................................. 24
Description of the Notes................................................... 26
Description of the Certificates............................................ 31
Certain Information Regarding the Securities............................... 33
Description of the Transfer and Servicing Agreements....................... 43
Certain Legal Aspects of the Receivables................................... 53
Federal Income Tax Consequences............................................ 60
ERISA Considerations....................................................... 72
Plan of Distribution....................................................... 74
Legal Opinions............................................................. 75
Index of Terms............................................................. 76
</TABLE>
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS EF-
FECTING 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 OB-
LIGATION OF DEALERS TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
WHEN ACTING AS UNDERWRITER(S) AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$ ( )
( ) TRUST
199-( )
$
[ ] %
ASSET BACKED NOTES, CLASS ( )
$
[ ] %
ASSET BACKED NOTES, CLASS ( )
$
[ ] %
ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE BANK SECURITIES INC.
PROSPECTUS SUPPLEMENT
, 199
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT +
+RELATES SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER +
+TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH +
+SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998 VERSION #3B
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED , 199 ) [BOATS]
$( )
TRUST 199 -( )
( %) ASSET BACKED CERTIFICATES, CLASS A
( %) ASSET BACKED CERTIFICATES, CLASS B
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
----------
The Asset Backed Certificates, Series 199 - (the "Certificates") will consist
of two Classes of Certificates, the Class A Certificates and the Class B
Certificates. The Class A Certificates will evidence in the aggregate an
undivided ownership interest of approximately % in a trust (the "Trust") to
be formed pursuant to a Pooling and Servicing Agreement to be entered into
among Deutsche Recreational Asset Funding Corporation, as Depositor (the
"Depositor"), Deutsche Financial Services Corporation, as Servicer (the
"Servicer"), and , as Trustee (the "Trustee"). The Class B
Certificates will evidence in the aggregate an undivided ownership interest of
approximately % in the Trust. The rights of the Class B Certificateholders
to receive distributions with respect to the Receivables are subordinated to
the rights of the Class A Certificateholders, to the extent described herein.
The Trust property
(Cover continued on following page)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [S-9] HEREIN AND ON PAGE [19] IN THE ACCOMPANYING PROSPECTUS.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN DEUTSCHE RECREATIONAL ASSET FUNDING
CORPORATION, THE TRANSFEROR, THE SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES. NONE OF THE CERTIFICATES OR THE RECEIVABLES ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
ORIGINAL PRICE TO UNDERWRITING PROCEEDS TO THE
PRINCIPAL AMOUNT PUBLIC(1) DISCOUNT DEPOSITOR(1)(2)
<S> <C> <C> <C> <C>
Class A Certificates $ % % %
Class B Certificates $ % % %
Total $ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 199 .
(2)Before deducting expenses, estimated to be $ .
The Certificates are offered by Deutsche Bank Securities Inc. (the
"Underwriter") subject to prior sale and subject to the Underwriter's right to
reject any order in whole or in part and to approval of certain legal matters
by its counsel. It is expected that when, as and if issued and accepted by the
Underwriter the Certificates will be delivered in book-entry form only through
the facilities of The Depository Trust Company, Cedel Bank, societe anonyme,
and the Euroclear System, in each case against payment therefor in immediately
available funds on or about , 199 .
DEUTSCHE BANK SECURITIES INC.
, 199 .
<PAGE>
(Continued from previous page)
will include a pool of retail installment sale contracts [and/or] retail
installment loans (the "Receivables") secured by new or used recreational
sport and power boats (including any boat motors and accompanying trailers)
and yachts (both power and sail) (the "Financed Assets" or "Financed Boats"),
collections and other payments with respect to the Receivables received after
the Cutoff Date described herein and monies on deposit in certain trust
accounts.
Principal, and interest to the extent of the Pass Through Rate of % per
annum, will be distributed on the th day of each month (or the next
following business day) beginning , 199 (the "Distribution Date").
The Final Scheduled Distribution Date on the Certificates will be .
The Servicer may purchase the Receivables when the aggregate principal
balance of the Receivables shall have declined to less than 10% of the initial
aggregate principal balance of the Receivables acquired by the Trust.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE
PROSPECTUS, AND PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. TO THE EXTENT ANY STATEMENTS IN THIS PROSPECTUS SUPPLEMENT
CONFLICT WITH STATEMENTS IN THE PROSPECTUS, THE STATEMENTS IN THIS PROSPECTUS
SUPPLEMENT SHALL CONTROL.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF CERTIFICATES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" HEREIN.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Receivables will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the Certificates. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Reports to Securityholders" in the
accompanying Prospectus (the "Prospectus"). Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Depositor, as originator of the Trust, will file with the
Securities and Exchange Commission (the "Commission") such periodic reports as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Delinquencies,
Repossessions and Net Losses" and "Weighted Average Life of the Certificates"
herein may constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and as such may involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Receivables to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.
S-2
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus. Certain
capitalized terms used herein are defined elsewhere in this Prospectus
Supplement on the pages indicated in the "Index of Terms" or, to the extent not
defined herein, have the meanings assigned to such terms in the Prospectus.
Issuer........................ Trust 199 -( ) (the "Trust" or the
"Issuer"), to be formed pursuant to a Pooling
and Servicing Agreement to be dated as of
, 199 among the Depositor, the
Servicer and the Trustee (the "Pooling and
Servicing Agreement")
Transferor.................... Ganis Credit Corporation.
Depositor..................... Deutsche Recreational Asset Funding Corporation
(the "Depositor").
Servicer...................... Deutsche Financial Services Corporation (the
"Servicer").
Trustee....................... , as trustee under the Pooling and
Servicing Agreement (the "Trustee").
Closing Date.................. On or about , 199 .
Cutoff Date................... , 199 .
The Certificates.............. The Certificates will consist of two classes,
entitled % Asset Backed Certificates, Class
A (the "Class A Certificates") and % Asset
Backed Certificates, Class B (the "Class B
Certificates"). Each Certificate will represent
a fractional undivided ownership interest in
the Trust.
The Class A Certificates will evidence in the
aggregate an undivided ownership interest (the
"Class A Percentage") of approximately % of
the Trust (initially representing $ )
and the Class B Certificates will evidence in
the aggregate an undivided ownership interest
(the "Class B Percentage") of approximately
% of the Trust (initially representing
$ ). The Class B Certificates are
subordinated to the Class A Certificates, to
the extent described herein.
The Receivables............... The Receivables The Receivables will have an
aggregate principal balance of approximately
$ (the "Initial Pool Balance") as of ,
199 (the "Cutoff Date"). The Receivables will
consist of retail installment sale contracts
and/or installment loans between the Transferor
and Obligors, between Originators and Obligors,
or between Obligors and
S-3
<PAGE>
Dealers, secured by new or used recreational
sport and power boats (including any boat
motors and accompanying trailers) and yachts
(both power and sail) (the "Financed Assets" or
"Financed Boats"). The Receivables were
originated by the Transferor or were acquired
by the Transferor from Dealers [or
Originators]. The Receivables will be
transferred by the Transferor to the Depositor
on or prior to the Closing Date, and will be
transferred by the Depositor to the Trust on
the Closing Date. As of the Cutoff Date, the
weighted average annual percentage rate of the
Receivables was approximately %, the weighted
average remaining maturity of the Receivables
was approximately months, and the weighted
average original maturity of the Receivables
was approximately months. No Receivable has
a scheduled maturity later than , 20
(the "Final Scheduled Maturity Date"). See "The
Receivables Pool" herein.
The "Pool Balance" at any time will represent
the aggregate principal balance of the
Receivables at the end of the preceding
Collection Period, after giving effect to all
payments received from Obligors, Servicer
Advances and Purchase Amounts to be remitted by
the Servicer or the Depositor, as the case may
be, all for such Collection Period, and all
losses realized on Receivables liquidated
during such Collection Period.
Distribution Dates............ Distributions with respect to the Certificates
will be made on the day of each month or,
if any such day is not a Business Day, on the
next succeeding Business Day (each, a
"Distribution Date") commencing , 199 .
The Servicer shall determine the amount to be
distributed on the Distribution Date on or
before the Business Day preceding such
Distribution Date (the "Determination Date").
Distributions will be made to holders of the
Certificates (the "Certificateholders") of
record as of the day immediately preceding such
Distribution Date or, if Definitive
Certificates are issued, as of the day of the
preceding month (a "Record Date").
Class A Pass Through Rate..... % per annum.
Class B Pass Through Rate..... % per annum.
Interest...................... On each Distribution Date, the Trustee will
distribute to the Class A Certificateholders 30
days of interest at the Class A Pass-Through
Rate on the Class A Certificate Balance as of
the last day of the preceding calendar month
(before giving effect to distributions of
principal on the related Distribution Date)
generally to the extent
S-4
<PAGE>
of funds available from (i) the Class A
Percentage of the Interest Distribution Amount;
(ii) the Reserve Account and (iii) the Class B
Percentage of the Total Distribution Amount.
The "Class A Certificate Balance" shall equal,
initially, the Class A Percentage of the Pool
Balance as of the Cutoff Date and thereafter
shall equal the initial Class A Certificate
Balance, reduced by all principal distributions
on the Class A Certificates. Interest on the
Certificates will be calculated on the basis of
a 360-day year consisting of twelve 30-day
months.
Class A Principal............. On each Distribution Date, the Trustee will
distribute to Class A Certificateholders an
amount equal to the Class A Percentage of the
Principal Distribution Amount for the
Collection Period preceding such Distribution
Date to the extent of funds available therefor.
The "Principal Distribution Amount" is the
amount of principal paid or, in certain
circumstances, the principal balance of
defaulted Receivables, as calculated by the
Servicer as described under "Description of the
Certificates C Distributions." The Class A
Percentage of the Principal Distribution Amount
will be passed through on each Distribution
Date to the Class A Certificateholders to the
extent of funds available from (i) the Class A
Percentage of the Principal Distribution Amount
(exclusive of the portion thereof attributable
to Realized Losses), (ii) the Reserve Account
and (iii) the Class B Percentage of the Total
Distribution Amount. "Realized Losses" means
the excess of the principal balance of any
Liquidated Receivable over Liquidation Proceeds
to the extent allocable to principal received
in the Collection Period in which the
Receivable became a Liquidated Receivable. A
"Collection Period" with respect to a
Distribution Date will be the calendar month
preceding the month in which such Distribution
Date occurs.
Class B Interest.............. On each Distribution Date, the Trustee will
distribute to the Class B Certificateholders 30
days of interest at the Class B Pass Through
Rate on the Class B Certificate Balance as of
the last day of the preceding calendar month
(before giving effect to distributions of
principal on such Distribution Date) generally
to the extent of funds available, after giving
effect to the prior rights of the Class A
Certificateholders to receive the distribution
of principal and interest due them as described
above, from (i) the Class B Percentage of the
Interest Distribution Amount and (ii) the
Reserve Account. The "Class B Certificate
Balance" will equal, initially, $ and,
thereafter, will equal the initial Class B
Certificate Balance reduced by all amounts
previously distributed
S-5
<PAGE>
to Class B Certificateholders (or deposited in
the Reserve Account, exclusive of the Reserve
Account Initial Deposit) and allocable to
principal and by Realized Losses.
Class B Principal............. On each Distribution Date, the Trustee will
distribute the Class B Percentage of the
Principal Distribution Amount to the Class B
Certificateholders to the extent of funds
available (after giving effect to the
distribution of the interest and principal due
to the Class A Certificateholders and the
interest due to the Class B Certificateholders)
from (i) the Class B Percentage of
the Principal Distribution Amount (exclusive of
the portion thereof attributable to Realized
Losses) and (ii) the Reserve Account.
Optional Prepayment........... The Servicer will have the option to purchase
all, but not less than all, of the Receivables
on any Distribution Date on or after the
Distribution Date on which the Pool Balance has
declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will
be required to purchase the Receivables in
order to exercise such option will be equal to
the aggregate of the Purchase Amounts of the
Receivables as of the end of the related
Collection Period. The Servicer will be
required to give not less than ( ) days notice
to the Trustee of its intention to exercise
such option. In addition, the Servicer will not
be permitted to exercise such option unless the
resulting distribution would be sufficient to
distribute to the Class A Certificateholders an
amount equal to the Class A Certificate Balance
together with accrued interest at the Class A
Pass Through Rate, and to the Class B
Certificateholders an amount equal to the Class
B Certificate Balance together with accrued
interest at the Class B Pass Through Rate. Upon
such a distribution the Certificates will be
retired.
Reserve Account............... On the Closing Date, the Depositor will deposit
in the Reserve Account cash or Eligible
Investments having a value of at least $ .
Certain amounts in the Reserve Account on any
Distribution Date (after giving effect to all
distributions to be made on such Distribution
Date) in excess of the Specified Reserve
Account Balance for such Distribution Date will
be released to the Depositor.
The "Specified Reserve Account Balance" with
respect to any Distribution Date generally will
be equal to (state formula). The amount in the
Reserve Account will be increased by the
deposit thereto on each Distribution Date of
the amount, if any, of the Total Distribution
Amount remaining after the payment of the
Servicing
S-6
<PAGE>
Fee and any prior unpaid Servicing Fee, the
Class A Distributable Amount and the Class B
Distributable Amount until the amount in the
Reserve Account equals the Specified Reserve
Account Balance. Amounts in the Reserve Account
on any Distribution Date (after giving effect
to all distributions made on such Distribution
Date) in excess of the Specified Reserve
Account Balance for such Distribution Date
generally will be released to the Depositor and
will no longer be available to the
Certificateholders. The Reserve Account will be
maintained with the Trustee as a segregated
trust account, but will not be part of the
Trust.
Collection Account............ Except under certain conditions described
herein, the Servicer will be required to remit
collections received with respect to the
Receivables within two Business Days of receipt
thereof to one or more accounts in the name of
the Trustee (the "Collection Account").
Pursuant to the Pooling and Servicing
Agreement, the Servicer will have the revocable
power to instruct the Trustee to withdraw funds
on deposit in the Collection Account and to
apply such funds on each Distribution Date to
the following (in the priority indicated):
(i) the Servicing Fee for the prior Collection
Period and any overdue Servicing Fees to
the Servicer,
(ii) the Class A Distributable Amount to the
Class A Certificateholders,
(iii) the Class B Distributable Amount to the
Class B Certificateholders, and
(iv) the remaining balance, if any, to the
Reserve Account.
Tax Status.................... In the opinion of Mayer, Brown & Platt, counsel
to the Trust ("Tax Counsel") the Trust will be
treated as a grantor trust for federal income
tax purposes and will not be subject to federal
income tax. Certificate Owners will report
their pro rata share of all income earned on
the Receivables (other than amounts, if any,
treated as "stripped coupons") and, subject to
certain limitations in the case of Certificate
Owners who are individuals, trusts, or estates,
may deduct their pro rata share of reasonable
servicing and other fees. See "Federal Income
Tax Consequences" in the Prospectus for
additional information concerning the
application of federal income tax laws to the
Trust and the Certificates.
S-7
<PAGE>
ERISA Considerations.......... Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Class A Certificates are
eligible for purchase by employee benefit
plans.
The Class B Certificates may not be acquired by
any employee benefit plan subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended
(the "Code"), or by an individual retirement
account. See "ERISA Considerations" herein and
in the Prospectus.
Ratings of the Class A It is a condition to the issuance of the Class
Certificates.................. A Certificates that they be rated " " by at
least one Rating Agency. The rating of the
Class A Certificates by a Rating Agency
reflects such Rating Agency's assessment of the
likelihood that the holders of the Class A
Certificates will receive payments of principal
and interest, however, the rating on the Class
A Certificates does not address the timing of
distributions of principal in respect of the
Class A Certificates prior to the Final
Scheduled Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Each
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Certificates" herein.
Ratings of the Class B It is a condition to the issuance of the Class
Certificates.................. B Certificates that they be rated at least in
the " " category or its equivalent by at
least one Rating Agency. The rating of the
Class B Certificates by a Rating Agency
reflects such Rating Agency's assessment of the
likelihood that the holders of the Class B
Certificates will receive payments of principal
and interest, however, the rating on the Class
B Certificates does not address the timing of
distributions of principal in respect of the
Certificates prior to the Final Scheduled
Distribution Date. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the assigning Rating Agency. Such
rating should be evaluated independently of any
other rating. See "Risk Factors--Ratings of the
Certificates" herein.
S-8
<PAGE>
RISK FACTORS
Investors should consider, among other things, the matters discussed under
"Risk Factors" in the Prospectus and the following risk factors in connection
with purchases of the Certificates.
Limited Liquidity; Absence of a Secondary Market. There is currently no
secondary market for the Certificates. Each Underwriter currently intends to
make a market in the Certificates, but it is under no obligation to do so.
There can be no assurance that a secondary market will develop or, if a
secondary market does develop, that it will provide the Certificateholders
with liquidity of investment or that it will continue for the life of the
Certificates offered hereby.
(Geographic Concentration. Economic conditions in states where Obligors
reside may affect the delinquency, loan loss and repossession experience of
the Trust with respect to the Receivables. Obligors on Receivables
representing approximately % by principal balance of the Receivables were
located in ( ) as of the Cutoff Date. As a result, economic conditions in
such states may have a disproportionate effect on prepayments and/or defaults
in respect of the Receivables and thus potentially adversely affect the amount
available for distribution to Certificateholders. In particular, an economic
downturn in one or more of such states could adversely affect the performance
of the Trust as a whole (even if national economic conditions remain unchanged
or improve) as Obligors in such state or states experience the effects of such
a downturn and face greater difficulty in making payments on their Financed
Assets. See "The Receivables Pool" herein.)
Subordination. Distributions of interest and principal on the Class B
Certificates will be subordinated in priority of payment to interest and
principal due on the Class A Certificates. Consequently, the Class B
Certificateholders will not receive any distributions with respect to a
Collection Period until the full amount of interest on and principal of the
Class A Certificates due on such Distribution Date has been deposited in the
Certificate Distribution Account.
Limited Assets of the Trust. The Trust will not have, nor is it permitted or
expected to have, any significant assets or sources of funds other than the
Receivables and the Reserve Account. Holders of the Certificates must rely for
repayment upon payments on the Receivables and, if and to the extent
available, amounts on deposit in the Reserve Account. Although funds in the
Reserve Account will be available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Certificates,
amounts to be deposited in the Reserve Account are limited in amount. If the
Reserve Account is exhausted, the Trust will depend solely on current
distributions on the Receivables to make payments on the Certificates.
Payment Delay. The effective yield on the Certificates will be reduced below
the yield otherwise produced because interest accrued through the end of each
calendar month will not be distributed until the Distribution Date in the
following month, and the amount distributable on such Distribution Date will
not bear interest during such delay. As a result, the market value of the
Certificates will be lower than would be the case if there was no such delay.
Ratings of the Certificates. It is a condition to the issuance of the
Certificates that the Class A Certificates be rated in the highest investment
rating category, and that the Class B Certificates be rated at least in the
" " category or its equivalent, by at least one nationally recognized
rating agency (the "Rating Agency"). A rating is not a recommendation to
purchase, hold or sell Certificates, inasmuch as such rating does not comment
as to market price or suitability for a particular investor. The ratings of
the Certificates address the likelihood of the payment of principal and
interest on the Certificates pursuant to their terms. There can be no
assurance that a rating will remain for any 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.
S-9
<PAGE>
THE TRUST
GENERAL
The Depositor will establish the Trust by transferring the Trust property,
as described below, to the Trustee in exchange for the Certificates. The
Servicer will service the Receivables pursuant to the Pooling and Servicing
Agreement and will be compensated for acting as the Servicer. See "Description
of the Certificates--Servicing Compensation and Payment of Expenses" herein.
To facilitate servicing and to minimize administrative burden and expense, the
Servicer will be appointed custodian for the Receivables by the Trustee, but
will not stamp the Receivables to reflect the transfer of the Receivables to
the Trust. In addition, due to administrative burden and expense, (i) the
certificates of title to those Financed Boats financed in states where
security interests in boats are subject to certificate of title statutes will
not be amended to reflect such transfers, (ii) UCC financing statements in
respect of those Financed Boats financed in states where security interests in
boats are perfected by filing a UCC-1 financing statement will not be amended
to reflect such assignments and (iii) and the transfer of liens created
pursuant to Preferred Mortgages in respect of Financed Boats documented under
federal law will not be filed as required by federal law to reflect such
assignments. In the absence of such procedures, such Trust may not have a
perfected security interest in the Financed Assets in some states and will not
have a perfected security interest in the Financed Boats documented under
Federal law. See "Certain Legal Aspects of the Receivables" in the Prospectus.
If the protection provided to the Certificateholders by the Reserve Account
and, in the case of the Class A Certificateholders, the subordination of the
Class B Certificates is insufficient, the Trust will look only to the Obligors
on the Receivables and the proceeds from the repossession and sale of Financed
Assets which secure defaulted Receivables. In such event, certain factors,
such as the Trust's not having first priority perfected security interests in
some of the Financed Assets, may affect the Trust's ability to realize on the
Financed Assets securing the Receivables, and thus may reduce the proceeds to
be distributed to Certificateholders with respect to the Certificates. See
"Description of the Certificates--Distributions" and "--Subordination of the
Class B Certificates; Reserve Account" herein and "Certain Legal Aspects of
the Receivables" in the Prospectus.
Each Certificate represents a fractional undivided ownership interest in the
Trust. The Trust property includes retail installment sale contracts between
Dealers and Obligors, and all payments received thereunder on or after the
Cutoff Date. The Trust property also includes (i) such amounts as from time to
time may be held in one or more trust accounts established and maintained by
the Servicer pursuant to the Pooling and Servicing Agreement, as described in
the Prospectus under "Description of the Transfer and Servicing Agreements--
Accounts"; (ii) the Depositor's rights with respect to security interests in
the Financed Assets; (iii) the Depositor's rights with respect to proceeds
from claims on certain physical damage, credit life and disability insurance
policies covering the Financed Assets or the Obligors, as the case may be;
(iv) the Depositor's rights in any proceeds with respect to the Receivables
from recourse, if any, to Dealers on Receivables or Financed Assets with
respect to which the Servicer has determined that eventual repayment in full
is unlikely; (v) any property that shall have secured a Receivable and that
shall have been acquired by the Trustee; and (vi) any and all proceeds of the
foregoing. The Reserve Account will be maintained by the Trustee for the
benefit of the Certificateholders, but will not be part of the Trust.
S-10
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables (the "Receivables Pool") will include only the
Receivables acquired by the Trust on the Closing Date. The Receivables (will
be) (have been) acquired by the Depositor from the Transferor, which
originated the Receivables or acquired the Receivables from Dealers [or
Originators] in the ordinary course of business or in acquisitions. The
Receivables were selected from the Depositor's portfolio for inclusion in the
Receivables Pool by several criteria, some of which are set forth in the
Prospectus under "The Receivables Pools", as well as the requirement that, as
of the Cutoff Date, each Receivable (i) had an outstanding gross balance of at
least $ and (ii) was not more than [59 days past due (an account is not
considered past due if the amount past due is less than % of the scheduled
monthly payment)]. As of the Cutoff Date, no Obligor on any Receivable was
noted in the related records of the Servicer as being the subject of a
bankruptcy proceeding. No selection procedures believed by the Depositor to be
adverse to Certificateholders were used in selecting the Receivables.
Set forth in the following tables is information concerning the composition,
distribution by annual percentage rate ("APR") and the geographic distribution
of the Receivables Pool as of the Cutoff Date.
TRUST 199 -( )
COMPOSITION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AGGREGATE AVERAGE AVERAGE AVERAGE
APR OF PRINCIPAL NUMBER OF REMAINING ORIGINAL PRINCIPAL
RECEIVABLES BALANCE RECEIVABLES TEAM TEAM BALANCE
----------- --------- ----------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
% $ months months $
</TABLE>
S-11
<PAGE>
TRUST 199 -( )
DISTRIBUTION BY APR OF THE
RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
APR RANGE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- --------- ----------- ----------------- ----------
<S> <C> <C> <C>
0.00% - 5.00%........................ $ %
5.01% - 6.00%........................
6.01% - 7.00%........................
7.01% - 8.00%........................
8.01% - 9.00%........................
9.01% - 10.00%........................
10.01% - 11.00%........................
11.01% - 12.00%........................
12.01% - 13.00%........................
13.01% - 14.00%........................
14.01% - 15.00%........................
15.01% - 16.00%........................
16.01% - 17.00%........................
17.01% - 18.00%........................
Greater than 18.01%....................
----- -----
</TABLE>
- --------
(1)Percentages may not add to 100.0% because of rounding.
S-12
<PAGE>
TRUST 199 -( )
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
PERCENT OF AGGREGATE
STATE(2) PRINCIPAL BALANCE(1)
- -------- --------------------
<S> <C>
........................................................ %
........................................................
........................................................
........................................................
........................................................
........................................................
----
%
</TABLE>
- --------
(1) Percentages may not add to 100.0% because of rounding.
(2) Based on billing address of the Obligers, as reflected in the Servicer's
records as of the Cutoff Date.
Approximately % of the aggregate principal balance of the Receivables,
constituting % of the number of the Receivables, represent previously titled
boats.
S-13
<PAGE>
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is certain information concerning the experiences of the
Transferor pertaining to retail new and used boat receivables[, including
those previously sold which the Servicer continues to service]. There can be
no assurance that the delinquency, repossession and net loss experience on the
Receivables will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT , AT DECEMBER 31,
---------------------------------- ----------------------------------
199 199 199 199
---------------- ---------------- ---------------- ----------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------ --------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... $ $ $ $
Period of Delinquency
31-60 Days.............
61 Days or More........
----- ----- ---- ----- ---- ----- ---- -----
Total Delinquencies..... $ $ $ $
Total Delinquencies
as a Percent of the
Portfolio.............. % % % % % % % %
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------
199 199 199
---------------- ---------------- ----------------
NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ------ --------- ------ --------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio................... $ $ $
Period of Delinquency
31-60 Days.................
61 Days or More............
----- ----- ---- ----- ---- -----
Total Delinquencies......... $ $ $
Total Delinquencies as a
Percent of the Portfolio... % % % % % %
</TABLE>
- --------
(1)All amounts and percentages are based on the gross amount scheduled to be
paid on each contract.
S-14
<PAGE>
CREDIT LOSS/REPOSSESSION EXPERIENCE(1)
<TABLE>
<CAPTION>
ENDED YEAR ENDED DECEMBER 31,
------------ ---------------------------------
199 199 199 199 199 199 199
----- ----- ----- ----- ----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period............ $ $ $ $ $ $ $
Average Number of Contracts
Outstanding During the
Period....................... % % % % % % %
Percent of Contracts Acquired
During the Period with
Recourse to the Dealer....... % % % % % % %
Repossessions as a Percent of
Average Number of Contracts
Outstanding.................. % % % % % % %
Net Losses as a Percent of
Liquidations(3)(4)........... % % % % % % %
Net Losses as a Percent of
Average Amount
Outstanding(2)(3)............ % % % % % % %
</TABLE>
- --------
(1) (Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract.)
(2) Percentages have been annualized for the months ended , 199 and
199 and are not necessarily indicative of the experience for the year.
(3) (Net losses are equal to the aggregate of the balances of all contracts
which are determined to be uncollectible in the period, less any
recoveries on contracts charged off in the period or any prior periods,
including any losses resulting from disposition expenses)
(4) Liquidations represent a reduction in the outstanding balances of the
contracts as a result of monthly cash payments and charge-offs.
S-15
<PAGE>
THE TRANSFEROR
For a description of the Transferor and its underwriting standards, see "The
Transferor" and "Underwriting Procedures and Guidelines" in the Prospectus.
THE SERVICER
For a description of the Servicer and its servicing standards, see "The
Servicer" in the Prospectus.
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
Information regarding certain maturity and prepayment considerations with
respect to the Certificates is set forth under "Weighted Average Life of the
Securities" in the Prospectus. As the rate of payment of principal of the
Certificates depends primarily on the rate of payment (including prepayments
on liquidations due to default) of the principal balance of the Receivables,
the final distribution in respect of the Certificates could occur
significantly earlier than their final scheduled Distribution Date.
Certificateholders will bear the risk of being able to reinvest principal
payments on the Certificates at yields at least equal to the yields on their
respective Certificates.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Pooling and
Servicing Agreement, a form of which has been filed as an exhibit to the
Registration Statement. A copy of the Pooling and Servicing Agreement will be
filed with the Commission following the issuance of the Certificates. The
following summary describes certain terms of the Certificates and the Pooling
and Servicing Agreement. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all the provisions
of the Certificates and the Pooling and Servicing Agreement. The following
summary supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Certificates of any
given series and the related Pooling and Servicing Agreement set forth in the
Prospectus, to which description reference is hereby made.
In general, it is intended that Class A Certificateholders receive, on each
Distribution Date, the Class A Percentage of the Principal Distribution Amount
plus interest at the Class A Pass Through Rate on the Class A Certificate
Balance. Subject to the prior rights of the Class A Certificateholders, it is
intended that the Class B Certificateholders receive, on each Distribution
Date, the Class B Percentage of the Principal Distribution Amount plus
interest at the Class B Pass Through Rate on the Class B Certificate Balance.
The Certificates will evidence interests in the Trust created pursuant to
the Pooling and Servicing Agreement. The Class A Certificates will evidence in
the aggregate an undivided ownership interest (the "Class A Percentage") of
approximately % of the Trust and the Class B Certificates will evidence in
the aggregate an undivided ownership interest (the "Class B Percentage") of
approximately % of the Trust.
OPTIONAL PREPAYMENT
The Servicer will have the option to purchase all, but not less than all, of
the Receivables on any Distribution Date on or after the Distribution Date on
which the Pool Balance has declined to less than 10% of the Initial Pool
Balance. The price at which the Servicer will be
S-16
<PAGE>
required to purchase the Receivables in order to exercise such option will be
equal to the aggregate of the Purchase Amounts of the Receivables as of the
end of the related Collection Period. The Servicer will be required to give
not less than ( ) days notice to the Trustee of its intention to exercise such
option. In addition, the Servicer will not be permitted to exercise such
option unless the resulting distribution would be sufficient to distribute to
the Class A Certificateholders an amount equal to the Class A Certificate
Balance together with accrued interest at the Class A Pass Through Rate, and
to the Class B Certificateholders an amount equal to the Class B Certificate
Balance together with accrued interest at the Class B Pass Through Rate. Upon
such a distribution, the Certificates will be retired.
TRANSFER OF RECEIVABLES
Certain information regarding the transfer of the Receivables by the
Depositor to the Trust on the Closing Date pursuant to the Pooling and
Servicing Agreement is set forth in the Prospectus under "Description of the
Transfer and Servicing Agreements--Transfer of Receivables".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicing Fee Rate with respect to the Servicing Fee for the Servicer
will be % per annum of the Pool Balance as of the first day of the related
Collection Period. The Servicing Fee in respect of a Collection Period
(together with any portion of the Servicing Fee that remains unpaid from prior
Distribution Dates) will be paid at the beginning of such Collection Period
out of collections for such Collection Period. See "Description of the
Transfer and Servicing Agreements--Servicing Compensation and Payment of
Expenses" in the Prospectus. [To follow: description of Supplemental Servicing
Fee and Servicing Suspense Account.]
DISTRIBUTIONS
Deposits to Collection Account. On or before each Distribution Date, the
Servicer will cause all collections and other amounts constituting the Total
Distribution Amount to be deposited into the Collection Account. The "Total
Distribution Amount" for a Distribution Date shall be the sum of the Interest
Distribution Amount and the Principal Distribution Amount (other than the
portion thereof attributable to Realized Losses). "Realized Losses" means the
excess of the principal balance of any Liquidated Receivable over Liquidation
Proceeds to the extent allocable to principal received in the Collection
Period in which the Receivable became a Liquidated Receivable.
The "Interest Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
interest; (ii) all proceeds of the liquidation of [defaulted] Receivables
("Liquidated Receivables"), net of expenses incurred by the Servicer in
connection with such liquidation and any amounts required by law to be
remitted to the Obligor on such Liquidated Receivables ("Liquidation
Proceeds"), to the extent attributable to interest due thereon in accordance
with the Servicer's customary servicing procedures, and all recoveries in
respect of Liquidated Receivables which were written off in prior Collection
Periods; (iii) all Servicer Advances made by the Servicer of interest due on
the Receivables; (iv) the Purchase Amount of each Receivable that was
purchased by the Transferor or purchased by the Servicer under an obligation
which arose during the related Collection Period, to the extent attributable
to accrued interest thereon; and (v) Investment Earnings for such Distribution
Date. The Interest Distribution Amount shall be determined on the related
Determination Date.
The "Principal Distribution Amount" on any Distribution Date will generally
be the sum of the following amounts with respect to the preceding Collection
Period: (i) that portion of all collections on the Receivables allocable to
principal; (ii) all Liquidation Proceeds attributable to
S-17
<PAGE>
the principal amount of Receivables which became Liquidated Receivables during
such Collection Period in accordance with the Servicer=s customary servicing
procedures, plus the amount of Realized Losses with respect to such Liquidated
Receivables; (iii) to the extent attributable to principal, the Purchase
Amount received with respect to each Receivable purchased by the Transferor or
purchased by the Servicer under an obligation which arose during the related
Collection Period; and (iv) partial prepayments relating to refunds of
extended warranty protection plan costs or of physical damage, credit life or
disability insurance policy premiums, but only if such costs or premiums were
financed by the respective Obligor as of the date of the original contract.
The Regular Principal Distribution Amount shall be determined on the related
Determination Date.
The Interest Distribution Amount and the Regular Principal Distribution
Amount on any Distribution Date shall exclude the following:
(i) all payments and proceeds (including Liquidation Proceeds) of any
Receivables, the Purchase Amount of which has been included in the Total
Distribution Amount in a prior Collection Period;
(ii) amounts received in respect of interest on Receivables during the
preceding Collection Period in excess of the amount of interest that would
have been due during the Collection Period on the Receivables at their
respective APRs (assuming that a payment is received on each Receivable on
the due date thereof); and
(iii) Liquidation Proceeds attributable to accrued and unpaid interest on
the Receivables (but not including interest for the then current Collection
Period) but only to the extent of any unreimbursed Servicer Advances.
Calculation of Distributable Amounts. The "Class A Distributable Amount"
with respect to a Distribution Date will be an amount equal to the sum of (i)
the "Class A Principal Distributable Amount", consisting of the Class A
Percentage of the Principal Distribution Amount, plus (ii) the "Class A
Interest Distributable Amount", consisting of thirty (30) days' interest at
the Class A Pass Through Rate on the Class A Certificate Balance as of the
close of business on the last day of the preceding Collection Period. In
addition, on the Distribution Date immediately following the Final Scheduled
Maturity Date (the "Final Scheduled Distribution Date"), the Class A Principal
Distributable Amount will include the lesser of (A) the Class A Percentage of
any payments of principal due and remaining unpaid on each Receivable in the
Trust as of the last day of the preceding Collection Period and (B) the
portion of such amount necessary (after giving effect to the other amounts
described above to be distributed to the Class A Certificateholders on such
Distribution Date and allocable to principal) to reduce the Class A
Certificate Balance to zero.
The "Class A Certificate Balance" will equal, initially, $ and,
thereafter, shall equal the initial Class A Certificate Balance reduced by all
amounts previously distributed to Class A Certificateholders and allocable to
principal.
The "Class B Distributable Amount" with respect to a Distribution Date shall
be an amount equal to the sum of (i) the "Class B Principal Distributable
Amount", consisting of the Class B Percentage of the Principal Distribution
Amount plus (ii) the "Class B Interest Distributable Amount", consisting of
thirty (30) days' interest at the Class B Pass Through Rate to the Class B
Certificate Balance as of the close of business on the last day of the
preceding Collection Period. In addition, on the Final Scheduled Distribution
Date, the principal required to be distributed on the Class B
Certificateholders will include the lesser of (i) the Class B Percentage of
any payments of principal due and remaining unpaid with respect to the
Receivables in the Trust as of the last day of the preceding Collection Period
and (ii) the portion of the amount in clause
S-18
<PAGE>
(i) above that is necessary (after giving effect to all other amounts
distributed to Class A and Class B Certificateholders on such Distribution
Date and allocable to principal) to reduce the Class B Certificate Balance to
zero.
The "Class B Certificate Balance" shall equal, initially, $ and,
thereafter, shall equal the initial Class B Certificate Balance, reduced by
all amounts previously distributed to Class B Certificateholders [(or
deposited in the Reserve Account, but not including the Reserve Account
Initial Deposit)] and allocable to principal and by Realized Losses.
Calculation of Amounts to be Distributed. Prior to each Distribution Date,
the Servicer will calculate the Total Distribution Amount, the Class A
Distributable Amount and the Class B Distributable Amount.
The holders of the Class A Certificates will receive on any Distribution
Date, to the extent of available funds, the Class A Distributable Amount and
any outstanding Class A Interest Carryover Shortfall and Class A Principal
Carryover Shortfall as of the close of the preceding Distribution Date. On
each Distribution Date on which the sum of the Class A Interest Distributable
Amount and any outstanding Class A Interest Carryover Shortfall from the
preceding Distribution Date (plus interest on such Class A Interest Carryover
Shortfall at the Class A Pass Through Rate from such preceding Distribution
Date to the current Distribution Date, to the extent permitted by law) exceeds
the Class A Percentage of the Interest Distribution Amount (after payment of
the Servicing Fee) on such Distribution Date, the Class A Certificateholders
shall be entitled generally to receive such amounts, first, from the Class B
Percentage of the Interest Distribution Amount; second, if such amounts are
insufficient, from the amounts available in the Reserve Account; and third, if
such amounts are insufficient, from the Class B Percentage of the Principal
Distribution Amount (other than the portion thereof attributable to Realized
Losses). The "Class A Interest Carryover Shortfall" as of the close of any
Distribution Date means the excess of the Class A Interest Distributable
Amount for such Distribution Date, plus any outstanding Class A Interest
Carryover Shortfall from the preceding Distribution Date, plus interest on
such outstanding Class A Interest Carryover Shortfall, to the extent permitted
by law, at the Class A Pass Through Rate from such preceding Distribution Date
through the current Distribution Date, over the amount of interest that the
holders of the Class A Certificates actually received on such current
Distribution Date.
On each Distribution Date on which the sum of the Class A Principal
Distributable Amount and any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class A Percentage of the
Principal Distribution Amount (exclusive of the portion thereof attributable
to Realized Losses) on such Distribution Date, the Class A Certificateholders
shall be entitled to receive such amounts, first, from the Class B Percentage
of the Principal Distribution Amount (other than the portion thereof
attributable to Realized Losses); second, if such amounts are insufficient,
from amounts available in the Reserve Account; and third, if such amounts are
insufficient, from the Class B Percentage of the Interest Distribution Amount.
The "Class A Principal Carryover Shortfall" as of the close of any
Distribution Date means the excess of the Class A Principal Distributable
Amount plus any outstanding Class A Principal Carryover Shortfall from the
preceding Distribution Date over the amount of principal that the holders of
the Class A Certificates actually received on such current Distribution Date.
The holders of the Class B Certificates will receive on any Distribution
Date, to the extent of available funds, the Class B Distributable Amount and
any outstanding Class B Interest Carryover Shortfall and Class B Principal
Carryover Shortfall as of the close of the preceding Distribution Date. On
each Distribution Date on which the sum of the Class B Interest Distributable
Amount and any outstanding Class B Interest Carryover Shortfall from the
preceding Distribution Date (plus interest on such Class B Interest Carryover
Shortfall at the
S-19
<PAGE>
Class B Pass Through Rate from such preceding Distribution Date to the current
Distribution Date, to the extent permitted by law) exceeds the Class B
Percentage of the Interest Distribution Amount (after payment of the Servicing
Fee) on such Distribution Date less any portion thereof required to be
distributed to the Class A Certificateholders pursuant to their prior rights
as described above, the Class B Certificateholders shall be entitled generally
to receive such amounts, first, from the Class A Percentage of the Interest
Distribution Amount that is not otherwise required to be distributed to the
Class A Certificateholders as described above and, second, from the amount, if
any, available in the Reserve Account (after giving effect to any withdrawals
therefrom for distribution to the Class A Certificateholders on such
Distribution Date). The "Class B Interest Carryover Shortfall" as of the close
of any Distribution Date means the excess of the Class B Interest
Distributable Amount for such Distribution Date, plus any outstanding Class B
Interest Carryover Shortfall from the preceding Distribution Date, plus
interest on such outstanding Class B Interest Carryover Shortfall, to the
extent permitted by law, at the Class B Pass Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class B Certificates actually received on
such current Distribution Date.
On each Distribution Date on which the sum of the Class B Principal
Distributable Amount and any outstanding Class B Principal Carryover Shortfall
from the preceding Distribution Date exceeds the Class B Percentage of the
Principal Distribution Amount (exclusive of the portion thereof attributable
to Realized Losses) on such Distribution Date less any portion thereof
required to be distributed to the Class A Certificateholders pursuant to their
prior rights as described above, the Class B Certificateholders shall be
entitled to receive such amounts, first, from the Interest Distribution Amount
that is not otherwise required to be distributed to the Class A or Class B
Certificateholders as described above and, second, from amounts available in
the Reserve Account (after giving effect to any withdrawals therefrom on such
Distribution Date for distribution to the Class A Certificateholders and for
distribution of interest to the Class B Certificateholders). The "Class B
Principal Carryover Shortfall" as of the close of any Distribution Date means
the excess of the Class B Principal Distributable Amount plus any outstanding
Class B Principal Carryover Shortfall from the preceding Distribution Date
over the amount of principal that the holders of Class B Certificates actually
received on such current Distribution Date.
SUBORDINATION OF THE CLASS B CERTIFICATES; RESERVE ACCOUNT
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables generally will be subordinated to the rights of the
Class A Certificateholders in the event of defaults and delinquencies on the
Receivables as described herein and provided in the Pooling and Servicing
Agreement. The protection afforded to the Class A Certificateholders through
subordination will be effected both by the preferential right of the Class A
Certificateholders to receive current distributions with respect to the
Receivables and by the establishment of the Reserve Account. The Reserve
Account will be created with an initial deposit by the Depositor of the
Reserve Account Initial Deposit and will be augmented by deposit therein on
each Distribution Date of the amount, if any, remaining from the Total
Distribution Amount after the distributions due to the Certificateholders have
been made until the amount in the Reserve Account reaches the Specified
Reserve Account Balance for such Distribution Date.
The Reserve Account will not be part of or otherwise includible in the Trust
and will be a segregated trust account held by the Trustee. On each
Distribution Date, (i) if the amounts on deposit in the Reserve Account are
less than the Specified Reserve Account Balance for such Distribution Date,
the Trustee will, after payment of any amounts required to be distributed to
Certificateholders and the payment of the Servicing Fee due with respect to
the related
S-20
<PAGE>
Collection Period (including any unpaid Servicing Fees with respect to prior
Collection Periods), withdraw from the Collection Account and deposit in the
Reserve Account the amount, if any, remaining in the Collection Account that
would otherwise be distributed to the Depositor, or such lesser portion
thereof as is sufficient to restore the amount in the Reserve Account to such
Specified Reserve Account Balance for such Distribution Date, and (ii) if the
amount on deposit in the Reserve Account on such Distribution Date (after
giving effect to all deposits or withdrawals therefrom on such Distribution
Date) is greater than the Specified Reserve Account Balance for such
Distribution Date, the Trustee will release and distribute any such excess to
the Depositor. Upon any such distribution to the Depositor, the
Certificateholders will have no rights in, or claims to, such amounts.
Amounts held from time to time in the Reserve Account will continue to be
held for the benefit of holders of the Class A Certificates and holders of the
Class B Certificates. Funds in the Reserve Account shall be invested as
provided in the Pooling and Servicing Agreement in Eligible Investments. The
Depositor will be entitled to receive all investment earnings on amounts in
the Reserve Account. Investment income on amounts in the Reserve Account will
not be available for distribution to the Certificateholders or otherwise
subject to any claims or rights of the Certificateholders.
The time necessary for the Reserve Account to reach and maintain the
Specified Reserve Account Balance at any time after the Closing Date will be
affected by the delinquency, credit loss, repossession and prepayment
experience of the Receivables and, therefore, cannot be accurately predicted.
The subordination of the Class B Certificates and the Reserve Account
described above are intended to enhance the likelihood of receipt by Class A
Certificateholders of the full amount of principal and interest on the Class A
Certificates due them and to decrease the likelihood that the Class A
Certificateholders will experience losses. However, in certain circumstances,
the Reserve Account could be depleted and shortfalls could result.
If on any Distribution Date the holders of the Class A Certificates do not
receive the sum of the Class A Distributable Amount, the Class A Interest
Carryover Shortfall and the Class A Principal Carryover Shortfall for such
Distribution Date (after giving effect to any amounts withdrawn from the
Reserve Account and the Class B Percentage of the Total Distribution Amount
and applied to such deficiency, as described above), the holders of the Class
B Certificates generally will not receive any portion of the Total
Distribution Amount. While the Class B Certificateholders are entitled to
receive amounts from the Reserve Account as described above, such entitlement
is subordinated to the rights of the Class A Certificateholders to receive
amounts from the Reserve Account as described above. If the Reserve Account
becomes depleted, the Class B Certificateholders may experience shortfalls in
the distributions due them and incur a loss on their investment.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Tax Counsel, the Trust will be treated as a grantor trust
for federal income tax purposes and will not be subject to federal income tax.
For additional information regarding federal income tax consequences, see
"Federal Income Tax Consequences" in the Prospectus.
S-21
<PAGE>
ERISA CONSIDERATIONS
THE CLASS A CERTIFICATES
Subject to the considerations set forth under "ERISA Considerations--Senior
Certificates Issued by Trusts That Do Not Issue Notes"in the Prospectus, the
Class A Certificates may be purchased by an employee benefit plan or an
individual retirement account (a "Benefit Plan") subject to ERISA or Section
4975 of the Code. A fiduciary of a Benefit Plan must determine that the
purchase of a Class A Certificate is consistent with its fiduciary duties
under ERISA and does not result in a nonexempt prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the Code. For additional
information regarding treatment of the Class A Certificates under ERISA, see
"ERISA Considerations" in the Prospectus.
No sale pledge, or transfer of a Class A Certificate or any interest therein
shall be made (i) to any Benefit Plan, or (ii) to any person who is directly
or indirectly purchasing such Certificate or interest therein on behalf of, as
named fiduciary of, as trustee of, or with assets of a Benefit Plan, unless
(1) such Benefit Plan qualifies as an accredited investor within the meaning
of the Exemption described in the Prospectus, and (2) at the time of such
sale, pledge or transfer, the Class A Certificates continue to be rated in one
of the top three rating categories by at least one Rating Agency, as defined
in the Prospectus, or (3) the purchase and holding of the Class A Certificates
is exempt under Section III of Prohibited Transaction Class Exemption 95-60
(applicable to certain insurance company general accounts). Each person who
acquires any Class A Certificates or interest therein shall be deemed to have
certified that the foregoing conditions will be satisfied.
THE CLASS B CERTIFICATES
No sale, pledge, or transfer of a Class B Certificate or any interest
therein shall be made to any Benefit Plan or any person who is directly or
indirectly purchasing such Certificate or interest therein on behalf of, as
named fiduciary of, as trustee of, or with assets of a Benefit Plan, unless
the purchase and holding of such Certificate is exempt under Section III of
Prohibited Transaction Class Exemption 95-60 (applicable to certain insurance
company general accounts). Each person who acquires any Class B Certificate or
interest therein shall be deemed to have certified that the foregoing
conditions will be satisfied.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Depositor has agreed to cause the Trust to
sell to the Underwriter, and the Underwriter has agreed to purchase, the
entire principal amount of the Certificates. [UNDERWRITING SYNDICATE LANGUAGE
AND TABLE TO BE ADDED IF APPLICABLE]
The Depositor has been advised by the Underwriter that it proposes initially
to offer the 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
% per Class A Certificate and % per Class B Certificate. The Underwriter
may allow and such dealers may reallow a concession not in excess of % per
Class A Certificate and % per Class B Certificate to certain other dealers.
After the initial public offering of the Certificates, the public offering
prices and such concessions may be changed.
Until the distribution of the Certificates is completed, rules of the
Commission may limit the ability of the Underwriter and certain selling group
members to bid for and purchase the Certificates. As an exception to these
rules, the Underwriter is permitted to engage in certain transactions that
stabilize the price of the Certificates. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Certificates.
S-22
<PAGE>
If the Underwriter creates a short position in the Certificates in
connection with the offering, i.e., if it sells more Certificates than are set
forth on the cover page of this Prospectus Supplement, the Underwriter may
reduce that short position by purchasing Certificates in the open market.
In general, the purchase of a security for the purpose of stabilization or
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 Depositor nor [any] Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Certificates. In
addition, neither the Depositor nor [any] Underwriter makes any representation
that the Underwriter will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
The Underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer or sell, any Certificates to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of
the Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document in connection with the issue of the Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1995 or is a person to whom the
document may otherwise lawfully be issued or passed on.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from the 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 Transferor
or the Underwriter will promptly deliver, or cause to be delivered, without
charge, a paper copy of the Prospectus Supplement and Prospectus.
Deutsche Bank Securities Inc., the Transferor, the Servicer and the
Depositor are each indirect, wholly-owned subsidiaries of Deutsche Bank AG.
Any obligations of Deutsche Bank Securities Inc. are the sole responsibility
of Deutsche Bank Securities Inc. and do not create any obligation on the part
of any affiliate of Deutsche Bank Securities Inc.
LEGAL OPINIONS
Certain legal matters relating to the Certificates, certain federal income
tax matters and certain Illinois income tax matters will be passed upon for
the Depositor by Mayer, Brown & Platt, Chicago, Illinois. (Certain legal
matters relating to the Certificates will be passed upon for the Underwriter
by Mayer, Brown & Platt.) Certain California income tax matters will be passed
upon for the Depositor by Bryan Cave LLP, St. Louis, Missouri.
S-23
<PAGE>
INDEX OF TERMS
[TO BE CONFORMED]
APR.........................................................................S-11
Cede.........................................................................S-3
Certifcatehbolders.......................................................... S-5
Certificates................................................................ S-1
Class A Certificate Balance........................................... S-5, S-18
Class A Certificates........................................................ S-4
Class A Distributable Amount............................................... S-18
Class A Interest Carryover Shortfall....................................... S-18
Class A Interest Distributable Amount...................................... S-18
Class A Percentage....................................................S-4,. S-16
Class A Principal Carryover Shortfall...................................... S-19
Class A Principal Distributable Amount..................................... S-18
Class B Certificate Balance........................................... S-6, S-18
Class B Certificates........................................................ S-4
Class B Distributable Amount............................................... S-18
Class B Interest Carryover Shortfall....................................... S-19
Class B Interest Distributable Amount...................................... S-18
Class B Percentage.................................................... S-4, S-16
Class B Principal Carryover Shortfall...................................... S-19
Class B Principal Distributable Amount..................................... S-18
Code........................................................................ S-8
Collection Account.......................................................... S-7
Collection Period........................................................... S-5
Commission.................................................................. S-3
Cutoff Date................................................................. S-4
Depositor.............................................................. S-1, S-4
Determination Date.......................................................... S-5
Distribution Date...................................................... S-1, S-5
DTC......................................................................... S-3
ERISA....................................................................... S-8
Exchange Act................................................................ S-7
Final Scheduled Distribution Date.......................................... S-17
Final Scheduled Maturity Date............................................... S-5
Financed Assets........................................................ S-1, S-4
Initial Pool Balance........................................................ S-4
Interest Distribution Amount............................................... S-17
Issuer...................................................................... S-4
Liquidated Receivables..................................................... S-17
Liquidation Proceeds....................................................... S-17
Plan....................................................................... S-21
Pool Balance................................................................ S-5
Pooling and Servicing Agreement............................................. S-4
Principal Distribution Amount......................................... S-5, S-17
Prospectus.................................................................. S-3
Rating Agency............................................................... S-9
Realized Losses....................................................... S-6, S-17
Receivables................................................................. S-1
Receivables Pool........................................................... S-10
S-24
<PAGE>
Record Date................................................................. S-5
Servicer.................................................................... S-1
Specified Reserve Account Balance........................................... S-7
stripped coupons............................................................ S-7
Tax Counsel................................................................. S-7
Total Distribution Amount.................................................. S-17
Transferor.................................................................. S-4
Trust.................................................................. S-1, S-4
Trustee................................................................ S-1, S-4
Underwriter................................................................. S-3
Underwriting Agreement..................................................... S-21
S-25
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus Supplement or the Prospectus, and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Depositor or by the Underwriter. This Prospectus Supplement
and the Prospectus do not constitute an offer to sell, or a solicitation of an
offer to buy, the certificates offered hereby to anyone in any jurisdiction in
which the person making such offer or solicitation is not qualified to do so
or to anyone to whom it is unlawful to make any such offer or solicitation.
Neither the delivery of this Prospectus Supplement and the Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
information herein or therein is correct as of any time subsequent to the date
of this Prospectus Supplement or Prospectus.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
<CAPTION>
PAGE
----
<S> <C>
Reports to Certificateholders.............................................. S-2
Summary of Terms........................................................... S-3
Risk Factors............................................................... S-9
The Trust.................................................................. S-10
The Receivables Pool....................................................... S-11
Delinquencies, Repossessions and Net Losses................................ S-14
The Transferor............................................................. S-16
The Servicer............................................................... S-16
Weighted Average Life of the Certificates.................................. S-16
Description of the Certificates............................................ S-16
Federal Income Tax Consequences............................................ S-21
ERISA Consideration........................................................ S-22
Underwriting............................................................... S-22
Legal Opinions............................................................. S-23
Index of Terms............................................................. S-24
PROSPECTUS
Available Information...................................................... 3
Incorporation of Certain Documents
by Reference.............................................................. 3
Summary of Terms........................................................... 4
Risk Factors............................................................... 12
The Trusts................................................................. 17
The Receivables............................................................ 18
Weighted Average Life of the Certificates.................................. 20
Pool Factors and Trading Information....................................... 21
Use of Proceeds............................................................ 21
The Depositor.............................................................. 21
Description of the Notes................................................... 22
Description of the Certificates............................................ 25
Certain Information Regarding the Securities............................... 27
Description of the Transfer and Servicing
Agreements................................................................ 35
Certain Legal Aspects of the Receivables................................... 44
Federal Income Tax Consequences............................................ 50
ERISA Considerations....................................................... 60
Plan of Distribution....................................................... 61
Legal Opinions............................................................. 62
Index of Terms............................................................. 63
</TABLE>
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Certificates 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 underwriter(s) and with respect to their unsold
allotments or subscriptions.
$( )
TRUST
199 -( )
$
% ASSET BACKED CERTIFICATES, CLASS A
$
% ASSET BACKED CERTIFICATES, CLASS B
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE BANK SECURITIES INC.
PROSPECTUS SUPPLEMENT
, 199
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT +
+RELATES SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER +
+TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH +
+SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED [ ], 1998
VERSION #4
[MARKETING MAKING FORM]
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS SUPPLEMENT DATED , 199 AND PROSPECTUS DATED , 199 )
( ) TRUST, SERIES 199
ASSET BACKED NOTES, CLASS ( )
ASSET BACKED CERTIFICATES, CLASS ( )
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
-----------
The Prospectus dated , 199 and the Prospectus Supplement dated
, 199 are hereby amended and supplemented as indicated below.
Terms used herein and not otherwise defined have the meanings given them in the
Prospectus and Prospectus Supplement.
This Supplement reflects the issuance on , 199 of in an
original principal amount of $ (and in an original principal amount of
$ ).
Because this Supplement is to be used in connection with offers and sales
related to market-making transactions in the (Notes) (Certificates)
(Securities), the following portions of the Prospectus Supplement and
Prospectus do not apply and are deemed deleted from such documents to the
extent they are used for market-making transactions:
(a)the sentence(s) on (the cover page) (page S-( ) of the Prospectus
Supplement stating that ("(t)here is currently no secondary market for the
Securities.") ("(t)here can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will continue or
provide Securityholders with a sufficient level of liquidity of
investment.")
This Supplement to the Prospectus and Prospectus Supplement is to be used by
Deutsche Bank Securities Inc. (the "Dealer") in connection with offers and
sales from time to time related to market-making transactions in the (Notes)
(Certificates) (Securities) in which the Dealer acts as principal. The Dealer
also may act as agent in such transactions. Sales will be made at negotiated
prices determined at the time of sale. Certain information with respect to the
Prospectus and Prospectus Supplement will be updated periodically by an
incorporation by reference of filings made by the Depositor on behalf of the
Trust pursuant to the Securities and Exchange Act of 1934, as amended. See
"Available Information" herein.
, 199 .
(b)(the pricing table and related footnotes on the cover page of the
Prospectus Supplement) (the sentence on the front cover page of the
Prospectus Supplement with respect to the purchase of the (Notes)
(Certificate) (Securities) by the Underwriters from the Depositor and the
offering thereof) and (the sentence on the front cover page of the
Prospectus Supplement with respect to the proceeds to the Depositor from the
sale of the (Notes) (Certificates) (Securities);
(c)the (paragraph) (sentences) with respect to delivery of the (Notes)
(Certificates) (Securities) on the cover page of the Prospectus Supplement;
(d)the paragraph with respect to stabilization activities of the Dealer on
page S-2 of the Prospectus Supplement;)
(e)the "Underwriting" section of the Prospectus Supplement; and
(f)the "Use of Proceeds" section of the Prospectus.
<PAGE>
PLAN OF DISTRIBUTION
The "Plan of Distribution" section of the Prospectus is replaced with the
following:
This Supplement is to be used by the Dealer in connection with offers and
sales from time to time related to market-making transactions in the
Securities in which the Dealer acts as principal. The Dealer also may act as
agent in such transactions. Sales will be made at negotiated prices determined
at the time of sale. The Dealer has no obligation to make a market in the
(Notes) (Certificates) (Securities) and may discontinue its market-making
activities at any time without notice, in its sole discretion. There is no
assurance that any secondary market will develop or, that if such market
develops, that it will continue.
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Securities and
Exchange Act of 1934, as amended, and, in accordance therewith, the Depositor,
on behalf of the Trust, files reports and other information with the
Securities and Exchange Commission. Such reports filed by the Depositor on
behalf of the Trust are available for inspection without charge at the public
reference facilities maintained by the Securities and Exchange Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 7 World Trade
Center, Suite 1300, New York, New York 10048; and the Midwest Regional Office,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material may be obtained from the Public Reference Section of the
Securities and Exchange Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. Such reports and other documents
may also be obtained from the web site that the Securities and Exchange
Commission maintains at http://www.sec.gov. Such reports and other information
are hereby incorporated by reference in this Supplement. The information
provided in the monthly reports to Securityholders will be included in such
reports, which will include, but are not limited to, information relating to
the principal and interest distributed to Securityholders on the most recent
Distribution Date, the outstanding principal balance of each class of the
related Series, the percentage of principal payments on the Receivables,
Loans, the amount of servicing compensation retained by Servicer, the
delinquency status of the Receivables, and certain interest rates. See
"Certain Information Regarding the Securities--Reports to Securityholders" in
the Prospectus.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted without the delivery of a final prospectus
supplement and prospectus. This prospectus and the accompanying prospectus
supplement shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
S-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
The following table sets forth the estimated expenses in connection with the
offering of the Securities being registered under this Registration Statement,
other than underwriting discounts and commissions:
<TABLE>
<S> <C>
SEC registration fee................................................. $ **
Legal fees and expenses.............................................. **
Accounting fees and expenses......................................... **
Blue sky fees and expenses........................................... **
Rating agency fees................................................... **
Trustee's fees and expenses.......................................... **
Printing............................................................. **
Miscellaneous........................................................ **
----
Total............................................................ $
====
</TABLE>
- --------
* All amounts except the SEC registration fee are estimates of expenses
incurred or to be incurred in connection with the issuance and distribution
of a series of Securities in an aggregate principal amount assumed for
these purposes to be equal to $[ ] of Securities registered hereby.
** To be filed by Amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The articles of incorporation of Deutsche Recreational Asset Funding
Corporation (the "Registrant") provide for indemnification, to the maximum
extent permitted by law as now or hereafter in effect, any currently acting or
former director or officer, of the Registrant with respect to actions taken or
omitted by such person in any capacity in which such person serves the
Registrant. In addition, the Registrant's bylaws provide for the Registrant to
indemnify currently acting or former directors, officers, employees and
agents.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S> <C>
* 1.1 Form of Underwriting Agreement for Owner Trusts
* 1.2 Form of Underwriting Agreement for Grantor Trusts
* 3.1 Articles of Incorporation of the Registrant
* 3.2 Bylaws of the Registrant
* 4.1 Form of Trust Agreement (including form of Certificates)
* 4.2 Form of Pooling and Servicing Agreement (including form of
Certificates)
* 4.3 Form of Indenture (including form of Notes)
* 5.1 Opinion of Mayer, Brown & Platt with respect to legality
* 8.1 Opinion of Mayer, Brown & Platt with respect to certain
tax matters
* 8.2 Opinion of Bryan Cave LLP as to certain California tax
matters
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S> <C>
*10.1 Form of Transfer and Servicing Agreement
*10.2 Form of Administration Agreement
*10.3 Form of Receivables Transfer Agreement
*23.1 Consent of Mayer, Brown & Platt (included in Exhibit 5.1)
*23.2 Consent of Mayer, Brown & Platt (included in Exhibit 8.1)
*23.3 Consent of Bryan Cave LLP (included in Exhibit 8.2)
24.1 Power of Attorney (included in this Part II)
*25.1 Statement of Eligibility and Qualification of Indenture
Trustee
</TABLE>
- --------
*To be filed by Amendment.
ITEM 17. UNDERTAKINGS.
(a) As to Rule 415:
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) As to documents subsequently filed that are incorporated by
reference:
The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration
II-2
<PAGE>
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) As to indemnification:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, as amended, the information omitted from
the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective
amendment that contains a form of prospectus shall be deemed to
be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(e) As to qualification of trust indentures:
The undersigned Registrant hereby undertakes to file an
application for the purpose of determining the eligibility of
the trustee to act under subsection (a) of Section 310 of the
Trust Indenture Act in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Act.
(f) The undersigned Registrant hereby undertakes to file in a
current report a Form 8-K or in a post-effective amendment an
opinion with respect to any Federal tax consequences material to an
investor with regard to a specific Series to be issued pursuant to
this Registration Statement where such tax consequences, have not
been addressed in the prospectus or the prospectus supplement
related to such Series.
II-3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this Form
S-3 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Louis, State of
Missouri, on June 8, 1998.
Deutsche Recreational Asset Funding
Corporation
/s/ Richard Schumacher
By: _________________________________
Name: Richard Schumacher
Title: VICE PRESIDENT AND TREASURER
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS EACH OF ROGER KIRWAN, RICHARD SCHUMACHER,
STEVEN GENTRY, RICHARD GOLDMAN, W. STEVEN CULP, NARAN BURCHINOW, KENNETH
BERGER AND ROBERT MAURER, OR ANY OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-
FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM
AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM,
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR
THEIR OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THEIR
CAPACITIES AS OFFICERS AND DIRECTORS OF DEUTSCHE RECREATIONAL ASSET FUNDING
CORPORATION IN THE CAPACITIES AND ON THE DATES INDICATED BELOW.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Roger Kirwan President (Principal June 8, 1998
____________________________________ Executive Officer)
Roger Kirwan
/s/ Richard Schumacher Vice President and Treasurer June 8, 1998
____________________________________ (Principal Financial
Richard Schumacher Officer)
/s/ Steven Gentry Vice President and June 8, 1998
____________________________________ Controller (Principal
Steven Gentry Accounting Officer)
/s/ Richard Goldman Director June 8, 1998
____________________________________
Richard Goldman
/s/ Don Brown Director June 8, 1998
____________________________________
Don Brown
/s/ Phil Stout Director June 8, 1998
____________________________________
Phil Stout
</TABLE>
II-5
