<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1998
REGISTRATION NO. 333-56303
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
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
---------------
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(3)
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<S> <C> <C> <C> <C>
Asset Backed Notes............... $2,800,000,000 100% $2,800,000,000 $826,000
Asset Backed Certificates........ $ 200,000,000 100% $ 200,000,000 $ 59,000
Total............................ $3,000,000,000 100% $3,000,000,000 $885,000
</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 Deutsche Bank Securities
Inc., an affiliate of the Registrant, to the extent required.
(2) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
(3) $295.00 of which was previously paid in connection with original filing of
this Registration Statement.
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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)
-----------
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 (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 that shall
have secured a Receivable and that shall have been obtained by the applicable
Trust incidental to a foreclosure or repossession in the event of a payment
default, 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 or to make distributions to the Depositor with respect
thereto.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE [11] 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 .
<PAGE>
AVAILABLE INFORMATION
Deutsche Recreational Asset Funding Corporation 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 Deutsche Recreational Asset Funding Corporation (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 the 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
<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" beginning on page [ ].
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 ("DFS"
or 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.
[Notes will be available for purchase in
minimum denominations of $[1,000] and will be
available in book-entry form only.] 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 (with
respect to each class of Notes, the "Interest
Rate"). Each class of Notes may have a
different Interest
3
<PAGE>
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.
To the extent provided in the related
Prospectus Supplement, the Servicer will be
permitted at its option to purchase the
Receivables 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"). Such purchase price for the
Receivables will never be less than the
outstanding principal amount of the Securities
plus the accrued interest on the Securities.
See "Description of the Transfer and Servicing
Agreements--Termination".
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.
[Certificates will be available for purchase in
a minimum denomination of $[1,000] and will be
available in book-entry form only.]
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
4
<PAGE>
(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.
To the extent provided in the related
Prospectus Supplement, the Servicer will be
permitted at its option to purchase the
Receivables 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"). Such purchase price for the
Receivables will never be less than the
outstanding principal amount of the Securities
plus the accrued interest on the Securities.
See "Description of the Transfer and Servicing
Agreements--Termination".
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 (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
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<PAGE>
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
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 the Funding
Period, if any, will be specified in the
applicable Prospectus Supplement and in any
event will not exceed one year in length. 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.
The Receivables have been or will be originated
by the Transferor, and/or originated by
Dealers, and/or originated or acquired by DFS
and/or other entities (DFS and such other
entities being referred to herein as
6
<PAGE>
"Originators"), and (with respect to
Receivables which were not originated by the
Transferor) acquired by the Transferor from
such Dealers and/or Originators. 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 or other receivables secured by
boats and/or recreational vehicles. For a
description of the Transferor, see "The
Transferor." For a description of DFS, see "The
Servicer."
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. 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 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.
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
7
<PAGE>
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.
The [Depositor will be obligated to purchase
any Receivable from the Trust, and the]
Transferor will be obligated to purchase such
Receivable from the [Depositor] [Trust], 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.
To the extent 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.
To the extent provided 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
8
<PAGE>
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 such
a loan liable to the obligor thereon for any
violation by the lender which made such loan.
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.
Any lien or security interest in a Financed
Asset may be held by an agent or trustee for
the benefit of DFS and/or the Transferor. In
connection with the transfer of the related
Receivable to the related Trust, such lien
would then be held for the benefit of
applicable Trust.
Tax Status.................... If the Prospectus Supplement specifies that the
related Trust will be treated as an owner trust
upon the issuance of the related series of
Securities, Mayer, Brown & Platt ("Tax
Counsel") will deliver an opinion to the effect
that such Trust will not be classified as a
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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
will deliver an opinion that the Notes issued
by such Trust will be characterized as debt for
federal income tax purposes.
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 not be classified as an association
taxable as a corporation for federal tax
purposes and that such Trust will be classified
as a grantor trust for federal income tax
purposes.
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, 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.
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.
Rating........................ It will be a requirement for issuance of any
series that the Securities offered by this
Prospectus and the related Prospectus
Supplement be rated by at least one Rating
Agency in one of its four highest applicable
rating categories. The rating or ratings
applicable to Securities of each series offered
hereby and by the related Prospectus Supplement
will be as set forth in the related Prospectus
Supplement. A securities rating should be
evaluated independently of similar ratings on
different types of securities. A securities
rating is not a recommendation to buy, hold or
sell securities and does not address the effect
that the rate of prepayments on Receivables may
have on the yield to investors in the
Securities of such Series. See "Risk Factors"
herein.
Risk Factors.................. In considering an investment in any
Certificates and/or Notes, investors should
recognize that there are material risks
associated with such an investment. See "Risk
Factors" herein and in the related Prospectus
Supplement.
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RISK FACTORS
In addition to the other information contained in this Prospectus and in the
related Prospectus Supplement, prospective investors should carefully consider
the following risk factors before investing in any class or classes of
Securities. The risk factor disclosure here and in the related Prospectus
Supplement summarizes material risk factors relating to the Securities.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE TRUST TO
HAVE A PERFECTED SECURITY INTEREST IN CERTAIN FINANCED ASSETS. If a Trust does
not have a perfected security interest in a Financed Asset, 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 and delays and reductions in payments to Securityholders
could result.
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.
The [Depositor will be obligated to purchase from the related Trust and the]
Transferor will be obligated to [simultaneously] purchase from the
[Depositor][Trust] 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.]
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM CERTAIN LIENS HAVING
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. If such Trust does not have a first
perfected security interest in a Financed Asset, 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, and could
result in delays and reductions in payments to, the Securityholders. 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,
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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 Vehicles" and "--Security Interest in Boats" herein.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE TRUST TO
HAVE A PERFECTED SECURITY INTEREST IN THE RECEIVABLES. If a Trust does not
have a perfected security interest in the Receivables, its ability to realize
on such Receivable in the event of a default may be adversely affected. This
could adversely affect the amount available for distribution to, and could
result in delays and reductions in payments to, the Securityholders.
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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM LACK OF ENFORCEABILITY OF
RECEIVABLES. The inability of Trust to realize amounts owed in respect of a
Receivable could adversely affect the amount available for distribution to,
and could result in delays and reductions in payments to, the Securityholders.
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 Transferor will be obligated to purchase [or cause an
Originator to purchase] from the Trust any Receivable which fails to comply
with such requirements in the circumstances described in "Description of the
Transfer and Servicing Agreements--Transfer of Receivables." See also "Certain
Legal Aspects of the Receivables-- Consumer Protection Laws" herein.
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POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM THIRD PARTY LIABILITIES OF
TRUSTS. To the extent that a Dealer, Ganis or an Originator (including DFS)
violates consumer protection laws applicable to Receivables, a Trust could be
liable to the obligor, as an assignee of the affected Receivables. See
"Certain Legal Aspects of the Receivables--Consumer Protection Laws." The
related Receivables Transfer Agreement provides that the Transferor is
required to purchase [or to cause an Originator to purchase] from the Trust
Receivables that do not comply in all material respects with applicable law in
the circumstances described in "Description of the Transfer and Servicing
Agreements--Transfer of Receivables". However, if the Transferor [or an
Originator] fails for any reason to perform its purchase obligation,
Securityholders could experience delays or reductions in payments on their
Securities as a result of any such liabilities imposed on the applicable
Trust.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSOLVENCY OF A BANK
ORIGINATOR. The FDIC, if appointed as conservator or receiver for an insolvent
Bank Originator, may interfere with the timely transfer to the Transferor of
payments collected on the Receivables or interfere with the timely liquidation
of Receivables. Such interference could result in delays and reductions in
payments to the Securityholders. 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.
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<PAGE>
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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSOLVENCY OF A DEALER, A
NONBANK ORIGINATOR, THE TRANSFEROR OR THE DEPOSITOR. 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. References in this Prospectus or the related Prospectus
Supplement to a "conveyance" from the Transferor to the Depositor contemplate
either a "sale" or a "capital contribution" from the Transferor to the
Depositor. The applicable Receivables Transfer Agreement will set forth
whether such conveyance 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.
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.
POSSIBLE LOSSES RESULTING FROM 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
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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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM APPLICATION OF 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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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. If the assets of
the Depositor were consolidated into the bankruptcy estate of the Transferor
or any other entity, the assets would be subject to claims of certain
creditors, and delays and reductions in payments to the Securityholders could
result.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INABILITY TO COLLECT
PAYMENTS FROM OBLIGORS. 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.
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POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE DEPOSITOR,
TRANSFEROR OR SERVICER TO PERFORM UNDER THE AGREEMENTS. 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 purchase [or to cause an Originator to
purchase] from the [Depositor] [Trust] Receivables with respect to which such
representations and warranties have been breached. [The Depositor's obligation
to make such purchase is contingent upon the Transferor performing its
obligation to purchase 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. See "The
Servicer".
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON THE CERTIFICATES. 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. Investors in any subordinated
class or classes of Certificates should consider the risk that losses on the
Receivables will be borne by such investors if any Reserve Account (if any) or
any other credit enhancement, as described in the related Prospectus
Supplement, is exhausted and could result in delays and reductions in payments
to such investors.
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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. If
losses occur which are not covered by such credit enhancement or exceed the
amount covered by such credit enhancement, delays and reductions in payments
to Securityholders could result.
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POSSIBLE LOSSES RESULTING FROM PAYMENT PRIOR TO MATURITY. 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 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. As a result, the
actual maturity of any Class of Notes and/or Certificates could occur
significantly earlier than expected. Any such 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
"Possible Losses Resulting From 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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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 available for
distribution to the Securityholders and delays and reductions in payments to
Securityholders could result. 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.
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POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM 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 or may result in delays or reductions in
payments to Securityholders.
POSSIBLE LOSS OF YIELD RESULTING FROM 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.
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM CONTROL BY INDENTURE
TRUSTEE OR NOTEHOLDERS IN OWNER TRUSTS. In general, with respect to any Owner
Trust issuing Notes, until the Notes have been paid in full, the ability to
direct the related Owner 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. The risk that the Noteholders, not the Certificateholders,
control the Owner Trust pertains only to Certificateholders of Owner Trusts
because an Owner Trust is authorized to issue both Notes and Certificates
while a Grantor Trust may issue only Certificates.
For example, with respect to an Owner 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. The actions by the
Indenture Trustee or the Noteholders could result in delays or reductions in
payments to Certificateholders.
RISK OF BOOK-ENTRY REGISTRATION. As specified in the related Prospectus
Supplement, each class of Securities of a given series will be initially
represented by one or more certificates
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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".
RATINGS ARE NOT RECOMMENDATIONS; THERE IS NO ASSURANCE THAT A RATING WILL
REMAIN IN EFFECT. It will be a condition to the issuance of a series of
Securities that they be rated in one of the four highest rating categories by
a Rating Agency identified in the related Prospectus Supplement. Such rating
should not be deemed a recommendation to purchase, hold or sell Securities,
inasmuch as it does not address market price or suitability for a particular
investor. Such rating will not constitute an assessment of the likelihood that
principal prepayments on the related Receivables will be made, the degree to
which the rate of such prepayments might differ from that originally
anticipated or the likelihood of early optional termination of the Class of
Notes and/or Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an investor
purchasing a Note and/or Certificate at a significant premium might fail to
recoup its initial investment under certain scenarios.
There is no assurance that any such rating will remain in effect for any
given period of time or may not be lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the future so warrant. A reduction
or withdrawal of a rating could adversely affect a Securityholder's ability to
transfer its Securities.
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 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
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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
obtained by the applicable Trust incidental to a foreclosure or repossession
in the event of a payment default; 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.
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, certain factors, such as the
applicable Trust's not having perfected security interests in the
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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".
Each Trust may be a "business trust".
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 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
and chosen at random 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 was not
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more than 59 days past due (provided that, as of the Cutoff Date, the ratio of
the aggregate outstanding principal balance of the Receivables with any
payment in delinquency in excess of 30 days over the aggregate outstanding
principal balance of the Receivables does not equal or exceed 20%). 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 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."
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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 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.
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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.
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
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, (iii) to make the deposit of the
Pre-Funded Amount into the Pre-Funding Account, if any or (iv) for any other
purpose described 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].
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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 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 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
overall credit worthiness based upon the customer's willingness and ability to
repay and the adequacy of the underlying collateral. Credit applicants are
required to provide information pertaining to their income, employment
history, financial liabilities, personal status and a description of, or
invoice for, 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 credit
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 for which the loan is requested. Loans outside of an underwriter's
authority require approval by a more senior credit underwriting employee.
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DFS or Ganis, as the case may be, has and has had certain minimum
requirements, as described below. DFS or Ganis' management, as the case may
be, does not believe these minimum requirements are themselves generally
sufficient to warrant credit approval of a credit applicant. There were and
are no requirements which allow automatic approval or declination of the
applicant without review by a credit officer. Based on credit risk factors and
credit bureau score, each applicant is either approved, declined or, if
necessary, referred to the appropriate senior credit officer level for review.
DFS or Ganis, as the case may be, typically looks for stability of
employment and residence measured by a minimum of 2 years in the job or
industry and residence, a debt ratio (the ratio of total installment and
revolving debt and housing expenses to gross monthly income) of 40% or less, a
down payment of at least 10% of the purchase price of the asset for which the
loan is requested, and overall favorable credit profile. Approval of retail
applicants who do not meet the above referenced general guidelines is
considered on a case basis by appropriate senior level credit officers.
Approvals granted in such instances may be based on the applicant's job and
residential stability factors, ability to pay and past payment performance. On
an occasional basis, a cosigner or guarantor may be considered in determining
the credit decision being made.
[With respect to Receivables transferred to a Trust, the maximum amount DFS
or Ganis, as the case may be, will advance to borrowers is (i) in the case of
a new vehicle, up to 110% of the manufacturer's invoice price of the vehicle
[or boat] securing any such Receivable transferred to a Trust (on an exception
basis and approved at the appropriate senior credit officer level, a
discretionary credit approval may permit advances up to 120% of manufacturer's
invoice price) plus taxes, fees and insurance, and (ii) in the case of a used
vehicle, up to 105% of the wholesale value of the vehicle securing any such
Receivable transferred to a Trust as reported in the Kelly Blue Book or the
used recreational vehicle guidebooks of the National Automobile Dealers
Association ("NADA") Guide Book or, in the case of boats, up to 105% of the
average retail value reported in the NADA used boat guide or reported in the
"BUC" guide, or based on an appraisal of the boats (on an exception basis and
approved at the appropriate senior credit officer level, a discretionary
credit approval may permit advances up to 120% of the aforementioned value)
plus taxes, fees and insurance. Funding of the contact is authorized
subsequent to verifications of the stipulations of approval, confirmation of
the advance and satisfactory delivery of the related collateral. 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 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.]
THE SERVICER
GENERALLY
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
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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.
YEAR 2000 ISSUES
DFS is committed to taking the necessary steps to enable both new and
existing systems, applications and equipment to effectively process
transactions up to and beyond the Year 2000. To that end, DFS is well underway
with its Year 2000 readiness program, having spent approximately $5 million to
date. DFS estimates that the costs of its continuing Year 2000 readiness
efforts ultimately will exceed $10 million. Because of such ongoing readiness
efforts, Year 2000 processing issues and risks are not expected to have a
material adverse impact on the ability of DFS to continue its general business
operations, or on its ability to perform its responsibilities as Servicer.
Currently, DFS is actively engaged in completing the following Year 2000
program initiatives:
. Complete a comprehensive analysis of current functions which might be
impacted by Year 2000 issues, and document the results in a Year 2000
Assessment Report
. Develop and implement a detailed plan to address Year 2000 issues as
identified, particularly as they pertain to software and hardware
applications
. Establish a Year 2000 Program Management Office, staffed by dedicated
and experienced project managers
. Survey outside vendors to determine the degree of preparedness for the
Year 2000, to uncover potential issues arising from such business
counterparties
. Raise organizational awareness not only with top management, but also at
the staff level, and involve relevant business group leaders in reaching
solutions
. Implement an ongoing purchasing/procurement plan which is responsive to
Year 2000 concerns.
The risk of failures of computer applications, systems and networks due to
improper Year 2000 data processing are substantial, not only for users of
information technologies, but also for any entities and individuals which
interact with them. Moreover, when aggregated, multiple individual
malfunctions and failures relating to Year 2000 issues can potentially cause
broader, systemic disruptions across industries and economies. The risks
arising from Year 2000 issues which face many companies, including DFS,
include the potential diminished ability to respond to the needs and
expectations of customers in a timely manner, and the potential for inaccurate
processing of information. In recognition of this, DFS is focusing on mission
critical applications in order that programming changes are largely completed,
and that testing is underway, by December 31, 1998.
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In addition, DFS has begun developing contingency plans to complement the
Year 2000 readiness efforts already in progress, including backup and offsite
processing of certain information and functions. DFS anticipates that such
contingency plans will provide an additional level of security to its Year
2000 efforts already underway.
The foregoing discussion of Year 2000 issues is based on current estimates
of the management of DFS as to the amount of time and costs necessary to
remediate and test the computer systems of DFS. Such estimates are based on
the facts and circumstances existing at this time, and were derived utilizing
multiple assumptions of future events, including, but not limited to, the
continued availability of certain resources, third-party modification plans
and implementation success, and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual costs and results
could differ materially from the costs and results currently anticipated by
DFS. Specific factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer code, the
planning and modification success attained by the business counterparties of
DFS, and similar uncertainties.
SERVICING OPERATIONS; COLLECTION ACTIVITIES
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. This Prospectus and the related Prospectus
Supplement summarize material terms of the related Notes and the Indenture.
Such 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.
To the extent 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 Cede & Co. (together with any successor depository
selected by the Trust, the "Depository") except as set forth below. The Notes
will be available for purchase in minimum denominations of $[1,000] and
integral multiples thereof in book-entry form only. Accordingly, Cede & Co. is
expected to be the holder of record of the Notes of each class. Unless and
until Definitive Notes are issued
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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. To the extent 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.
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.
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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.
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.
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, "Events of Default" under the related Indenture will
consist of: (i) a default for five days 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 after notice thereof
is given to such Trust by the applicable Indenture Trustee or to such Trust
and such Indenture Trustee by the holders of at least 25% in principal amount
of such Notes then outstanding; (iv) any representation or warranty made by
such Trust in 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
after notice thereof is given to such Trust by the applicable Indenture
Trustee or
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to such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding; (v) certain events of
bankruptcy, insolvency, receivership or liquidation of the applicable Trust,
and (vi) any other event specified as an "Event of Default" in the related
Prospectus Supplement. However, the amount of principal required to be paid to
Noteholders of such series under the related Indenture will generally be
limited to amounts available to be deposited in the applicable Note
Distribution Account. Therefore, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default until
the final scheduled 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. Such declaration may, under
certain circumstances, be rescinded by the holders of Notes representing at
least 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. 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.
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
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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, subject to the next sentence.
Notwithstanding any other provision of the related Indenture, the right of any
Noteholder to receive payment of the principal of and interest on its Notes,
on or after the respective due dates expressed in the Indenture, or to
institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of
such Noteholder, except that the related Indenture may contain provisions
limiting or denying the right of any such Noteholder to institute any such
suit, if and to the extent that the institution or prosecution thereof or the
entry of judgment therein would, under applicable law, result in the
surrender, impairment, waiver or loss of the lien of such Indenture for any
property subject to such lien.
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.
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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.
This Prospectus and the related Prospectus Supplement summarize material terms
of the Certificates, the related Trust Agreement or the related Pooling and
Servicing Agreement. Such 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.
[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. 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
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DTC's nominee will be Cede.] Accordingly, such nominee is expected to be the
holder of record of the Certificates of any series that are not purchased by
the Depositor. If 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. To the extent 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
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 (or percentage) 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. See "Risk Factors" herein and in the related Prospectus
Supplement.
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. 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.
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
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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.
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.
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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.
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
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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 "Federal Income Tax Consequences" herein and "Global Clearance, Settlement
and Tax Documentation Procedures" in Annex I hereto. 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.
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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
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.
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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' 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 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;
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(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 Prospectus and the Prospectus Supplement summarize material terms
of the Transfer and Servicing Agreements. Such 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
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Receivables or review the Receivables files. 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.
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"). The purchase obligation
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 is contingent
upon the Transferor performing its corresponding obligation to purchase 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.
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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 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
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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 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.
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SERVICER ADVANCES
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
To the extent 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.
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
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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 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
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Supplement (the "Reserve Account"), which will be maintained with the related
Trustee or Indenture Trustee, as applicable. 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".
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,
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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.
SERVICER DEFAULT
"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,
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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; (iii) the occurrence of an Insolvency Event with respect
to the Servicer; and (iv) any other event described as a "Servicer Default" in
the related Prospectus Supplement. "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, 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, 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
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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
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. 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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To the extent provided in the related Prospectus Supplement, 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. Such price will never be less than the outstanding principal amount of
the Securities plus the accrued interest on the Securities.
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. Any
such successful bid must equal an amount which is not less than the
outstanding principal amount of the Securities plus accrued interest on the
Securities.
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.
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
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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.
Any lien or security interest in a Financed Asset may be held by an agent or
trustee for the benefit of DFS and/or the Transferor. In connection with the
transfer of the related Receivable to the related Trust, such lien would then
be held for the benefit of applicable Trust.
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.
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).
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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 purchase the
related Receivable from the Trust and of the Transferor to purchase the
related Receivable from the [Depositor] [Trust] unless the breach were cured.]
See "Description of the Transfer and Servicing Agreements--Transfer of
Receivables" and "Risk Factors--Possible Payment Delays and Losses Resulting
From Failure of the Trust to Have a Perfected Security Interest in Certain
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.
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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.
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.
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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, 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
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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.
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
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
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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 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)
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and (iii) of the [seventh] 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--Possible Payment Delays or Losses Resulting From Failure of the Trust
to Have a Perfected Security Interest 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
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exists or there are remaining funds, the UCC requires the creditor to remit
the surplus to the former owner of the vehicle or 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 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 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 [or to
cause an Originator 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
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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 [or to cause an Originator to purchase] the Receivable
unless the breach is cured. See "Risk Factors--Possible Payment Delays and
Losses Resulting From Lack of Enforceability of Receivables" and "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 should 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 federal tax discussion herein 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.
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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 Supplement 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.
Following is a brief summary of the tax opinions being rendered by Tax
Counsel. If the Prospectus Supplement specifies that the related Trust will be
treated as an owner trust, Tax Counsel will deliver an opinion, upon the
issuance of the related Securities, to the effect that such 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 will deliver an opinion that
the Notes issued by such Trust will be characterized as debt for federal
income tax purposes. If the Prospectus Supplement specifies that the related
Trust will be treated as a grantor trust, Tax Counsel will deliver an opinion,
upon the issuance of the related Certificates, to the effect that such Trust
will not be classified as an association taxable as a corporation for federal
tax purposes and that such Trust will be classified as a grantor trust for
federal income tax purposes.
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. 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. The discussion below assumes this characterization of the Notes is
correct.
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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 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 30 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.
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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 IRS Form W-8 generally will
continue to be required to file that form. However, the requirement that
foreign persons submit IRS 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 effectively connected with the conduct of a U.S. trade or
business (in lieu of IRS Form 4224) and to foreign persons wishing to rely on
a tax treaty to reduce the withholding tax rate (in lieu of IRS Form 1001).
The Withholding Tax Regulations generally are effective for payments of
interest due after December 31, 1998, but IRS 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
should 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.
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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 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
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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 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
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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 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,
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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 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
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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 should 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.
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. 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
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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 ($124,500 in 1998, 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 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.
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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 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.
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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.
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 should 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
71
<PAGE>
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 should 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 applicable Trust Agreement or Pooling
and Servicing Agreement will provide that the ability of any FASIT to add or
remove assets will be limited to the same extent as real estate mortgage
investment conduits ("REMICs") under applicable federal tax rules and
regulations.
STATE AND LOCAL TAX CONSEQUENCES
GENERAL MATTERS
The following is a general summary of certain State income tax consequences
to the Trust and the original Certificateholders and Noteholders under the
State income tax laws of Missouri, Illinois, California, and New York. The
summary, together with the discussion in the Prospectus Supplement under the
heading "State and Local Tax Consequences", represents the opinion of Bryan
Cave LLP ("Special State Tax Counsel") subject to the limitations and
qualifications set forth herein. No ruling of any State taxing authority has
been sought with respect to the matters discussed herein and in the Prospectus
Supplement, and the opinion of Special State Tax Counsel is not binding on any
State or local taxing authority. The summary is intended as a general
explanation only and does not furnish information in the level of detail or
with the attention to the holder's specific tax situation as would be provided
by a tax advisor to a Certificateholder or a Noteholder. In addition, the
summary relies upon the correctness of certain opinions of Tax Counsel with
respect to the federal income tax consequences to the Trust,
Certificateholders and Noteholders.
As a consequence of the foregoing, Noteholders and Certificateholders should
consult their own tax advisors in determining the specific federal, state,
local, foreign and any other tax consequences to them of the purchase,
ownership and disposition of the Notes and the Certificates.
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STATE TAX LAWS DISCUSSED
Because the Servicer has its principal office in the State of Missouri and
will conduct its activities relating to servicing the receivables owned by the
Trust from its offices located in the States of Illinois and California, and
the Trust will be organized under the common law of the State of New York,
these four States currently appear to have the strongest claim to tax any
income derived by a Trust, or realized by the holders of Notes and
Certificates by virtue of their ownership. It is possible, however, that other
states may assert jurisdiction to tax income derived by a Trust, or by the
holders of Notes and Certificates. In addition, future changes in the
operations of the Servicer, the Trust, or other factors may cause the Trust or
the income derived therefrom by Noteholders or Certificateholders to be
subject to taxation in other states or jurisdictions. Furthermore, because of
the factual nature of the issue, Special State Tax Counsel expresses no
opinion as to the tax consequences to Certificateholders attributable to the
activities of the Trust or the Servicer under the laws of any State. Finally
Special State Tax Counsel is rendering no opinions with respect to the local
tax consequences in any State, or the State tax consequences in any State
other than California, Illinois, Missouri and New York.
TAX STATUS OF A TRUST FOR CALIFORNIA, ILLINOIS, MISSOURI AND NEW YORK INCOME
TAX PURPOSES
Assuming that the Trust will not constitute an association taxable as a
corporation, or a publicly traded partnership for federal income tax purposes,
Special State Tax Counsel is of the opinion that a Trust will not constitute
an association taxable as a corporation, or publicly traded partnership, for
purposes of the income tax laws of the State of California, Illinois, Missouri
or New York. Accordingly, such a Trust will not be subject to corporate income
or franchise taxes imposed by the States of California, Illinois, Missouri and
New York. However, if the Trust were deemed to be doing business in Illinois,
the Trust could be subject to Illinois personal property replacement income
tax. Such taxes could result in reduced distributions to Certificateholders.
In addition, Certificateholders not otherwise subject to taxation in Illinois
could become subject to Illinois income tax as a result of their ownership of
Certificates.
TAX STATUS OF NOTEHOLDERS FOR CALIFORNIA, ILLINOIS, MISSOURI AND NEW YORK
INCOME TAX PURPOSES
Assuming that the Notes issued by a Trust are classified as debt for federal
income tax purposes, Special State Tax Counsel is further of the opinion that
such Notes will be classified as debt for purposes of the income tax laws of
California, Illinois, Missouri and New York. Accordingly, Special State Tax
Counsel is of the opinion that natural persons will not be subject to income
tax liability imposed by any of those States with respect to interest and
other income derived from the Notes, unless:
(a) they reside in one of those States (in which case they will be
subject to the tax imposed by the state of their residence), or
(b) the Notes constitute either
(i) property employed in a business, trade, profession or occupation
carried on in Missouri,
(ii) property employed in a regular trade or business conducted in
Illinois,
(iii) property which has acquired a business situs in California, or
(iv) property employed in a business, trade, profession or occupation
carried on in New York,
as the case may be.
THE FEDERAL AND STATE DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
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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.
TRUSTS THAT ISSUE NOTES OR CERTIFICATES
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
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
Benefit Plan.......................................................... 94
Boat Receivables...................................................... 27
capital asset......................................................... 93
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
Commission............................................................ 4
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
Eligible Deposit Account.............................................. 60
Eligible Institution.................................................. 60
Eligible Investments.................................................. 60
equity interest....................................................... 95
ERISA................................................................. 17
Euroclear............................................................. 53
Euroclear Operator.................................................... 53
Euroclear Participants................................................ 53
</TABLE>
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<TABLE>
<S> <C>
Events of Default..................................................... 39
Exchange Act.......................................................... 4
Exemption............................................................. 95
FASIT................................................................. 94
Final Scheduled Maturity Date......................................... 14
Financed Assets....................................................... 10
Financed Boats........................................................ 10
Financed Recreational Vehicles........................................ 10
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
Indirect Participants................................................. 51
Cutoff Date........................................................... 10
Initial Pool Balance.................................................. 69
Initial Receivables................................................... 10
Insolvency Event...................................................... 66
Interest Rate......................................................... 6
Investment Earnings................................................... 60
IRS................................................................... 80
Issuer................................................................ 5
market discount....................................................... 91
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
</TABLE>
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<TABLE>
<S> <C>
Purchase Amount....................................................... 59
Rating Agency......................................................... 96
Receivables........................................................... 2
Receivables Pool...................................................... 27
Receivables Transfer 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
Senior Certificates................................................... 95
Servicer.............................................................. 5
Servicer Advance...................................................... 13
Servicer Default...................................................... 66
Servicing Fee......................................................... 62
Servicing Fee Rate.................................................... 62
Simple Interest Receivables........................................... 30
Strip Certificates.................................................... 9
Strip Notes........................................................... 7
Subsequent Receivables................................................ 2
Subsequent Transfer Date.............................................. 58
Terms and Conditions.................................................. 53
Transfer and Servicing Agreement...................................... 10
Transferor ........................................................... 5
Trust................................................................. 1, 5
Trust Accounts........................................................ 60
Trust Agreement....................................................... 5
Trustee............................................................... 1, 5
U.S. Person........................................................... 93
UCC................................................................... 15, 59
</TABLE>
80
<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.
81
<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
82
<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.
83
<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.
84
<PAGE>
[ALTERNATE PAGE]
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by Deutsche Recreational Asset Funding Corporation (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 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 the 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].
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 )
$( )
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199-( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
-----------
Distribution Financial Services [RV/Boat] 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 Pool
Balance.
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.
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........................ Distribution Financial Services [RV/Boat] 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 Are Not
Recommendations" 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 Are
Not Recommendations" herein.
[Absence of Market............ The Securities will be a new issue of
securities with no established trading market.
The Issuer does not expect to apply for listing
of the Securities on any national securities
exchange or quote the Securities in the
automated quotation system of a registered
securities association. The Underwriter(s)
expects to make a secondary market in the
Securities, but has no obligation to do so. See
"Risk Factors" 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.
RISK THAT SECURITYHOLDER MAY BE UNABLE TO LIQUIDATE ITS INVESTMENT PRIOR TO
MATURITY. 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.
(POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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, which could result in delays and
reductions in payments to 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.)
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON 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. Investors in the Certificates
should consider the risk that losses on the Receivables will be borne by such
investors if the Reserve Account [or credit enhancement] is exhausted and
could result in delays and reductions in payments to such investors.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM VARIATION AMONG CLASSES
WITH RESPECT TO DISTRIBUTIONS OF PRINCIPAL OR INTEREST. As described under
"Description of the [Notes] [Certificates]", [each] class of [Notes]
[Certificates] has varying rights with respect to the amount, percentage and
timing of distributions of principal [and/or] interest. Investors in each
class which is entitled to distributions of principal [and/or] interest which
are smaller (in amount or percentage) than, or which are made later than,
distributions made to other classes should consider the risk that losses on
the Receivables will be borne by such investors if the Reserve Account [or
credit enhancement] is exhausted, and that such smaller or delayed
distributions could result in delays and reductions in payments to such
investors.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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
S-11
<PAGE>
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.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FLOATING
RATE SECURITIES AND FIXED RATE RECEIVABLES. The Securities bear interest at
floating rates as described under "Description of the Notes--Payments of
Interest" and "Description of the Certificates--Distributions of Interest."
However, the Receivables bear interest at fixed rates as described under "The
Receivables Pool." In the event that the floating rate of interest on the
Securities exceeds the fixed rates of interest borne by the Receivables, there
may be insufficient collections to make interest payments owing on the
Securities, and delays and reductions in payments to Securityholders could
result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FIXED
RATE SECURITIES AND FLOATING RATE RECEIVABLES. The Securities bear interest at
fixed rates as described under "Description of the Notes--Payments of
Interest" and "Description of the Certificates--Distribution of Interest."
However, the Receivables bear interest at floating rates as described under
"The Receivables Pool." In the event that the floating rate of interest on the
Receivables is less than the fixed rates of interest borne by the Securities,
there may be insufficient collections to make interest payments owing on the
Securities, and delays and reductions in payments to Securityholders could
result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM USE OF FINANCIAL
INSTRUMENTS SUCH AS SWAPS AND CAPS. [Name of counterparty] has agreed to
provide a [swap] [cap] to the Trust. Pursuant to the [swap/cap], [name of
counterparty] will make payments to the Trust in the event that the interest
rate on the [Receivables] [Securities] exceeds [ ]. [Describe any material
limitations in swap/cap agreement.] [Name of counterparty] currently is rated
[ ] by [ ]. No assurance can be given that [name of counterparty] will
continue to maintain such rating or that [name of counterparty] will be able
to fulfill its obligations under the [swap/cap]. [Describe legal
enforceability risk, if applicable.] If [name of counterparty] becomes
bankrupt or insolvent, delays and reductions in payments to Securityholders
could result.]
RATINGS ARE NOT RECOMMENDATIONS. 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-12
<PAGE>
THE TRUST
GENERAL
The Issuer, Distribution Financial Services [RV/Boat] 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.
(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-13
<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 $ ,
[(ii) had not more than remaining scheduled payments, (iii) had not
more than original scheduled payments, and (iv) had a [fixed] APR
of not less than % per annum.] 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.
The aggregate principal balance of the Receivables as of the Cutoff Date
will not vary more than 5% (measured by principal amount) on the Closing Date.
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.
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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>
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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-14
<PAGE>
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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 AND NET LOSSES
Set forth below is certain information concerning retail new and used marine
and recreational vehicle receivables originated or acquired by the Transferor
and DFS. See "The Transferor" and "Underwriting Procedures and Guidelines" in
the Prospectus and "Management's Discussion and Analysis" below. There can be
no assurance that the delinquency and net loss experience on the Receivables
will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
---------------------------------------- ----------------------------------------
1997 1996 1998 1997
-------------------- ------------------ -------------------- ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ---------- --------- -------- --------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 29,925 $1,052,856 25,116 $790,647 34,031 $1,263,808 25,638 $866,459
Period of Delinquency
30-59 Days............. 198 5,420 123 3,898 136 3,765 128 4,019
60-89 Days............. 53 1,370 37 1,203 34 1,181 29 914
90 Days or More........ 92 2,700 54 1,392 44 981 74 2,225
Total Delinquencies..... 343 $ 9,490 214 $ 6,493 216 $ 5,937 231 $ 7,159
Total Delinquencies as a
percent of the
Portfolio.............. 1.15% 0.90% 0.85% 0.82% 0.63% 0.47% 0.90% 0.81%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
-----------------------------------
NUMBER OF
CONTRACTS AMOUNT
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio.................................. 18,312 $559,123
Period of Delinquency
30-59 Days................................ 82 2,344
60-89 Days................................ 17 506
90 Days or More........................... 18 544
Total Delinquencies........................ 117 $ 3,394
Total Delinquencies as a percent of the
Portfolio................................. 0.64% .61%
</TABLE>
S-15
<PAGE>
MARINE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------------------------- --------------------------------------
1997 1996 1998 1997
------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 7,822 $500,523 6,143 $362,018 9,948 $624,864 7,186 $442,544
Period of Delinquency
30-59 Days............. 64 3,246 52 2,361 33 1,784 52 1,746
60-89 Days............. 8 246 4 153 9 344 7 426
90 Days or More........ 20 1,496 17 978 12 662 20 546
Total Delinquencies..... 92 $ 4,990 73 $ 3,512 54 $ 2,780 79 $ 2,718
Total Delinquencies as a
percent of the
Portfolio.............. 1.18% 1.00% 1.19% 0.97% 0.54% 0.45% 1.10% 0.61%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
-----------------------------------
NUMBER OF
CONTRACTS AMOUNT
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio.................................. 3,742 $198,130
Period of Delinquency
30-59 Days................................ 37 1,634
60-89 Days................................ 11 292
90 Days or More........................... 6 469
Total Delinquencies........................ 54 $ 2,395
Total Delinquencies as a percent of the
Portfolio................................. 1.44% 1.21%
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract. The information in the tables includes receivables
that were sold by the Transferor and that the Servicer continues to
service. The Servicer treats a receivable as delinquent if any part of a
scheduled payment is not received when due.
CREDIT LOSS EXPERIENCE(1)
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-------------------- ----------------------------
1998 1997 1997 1996 1995
---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period......... $1,158,332 $838,553 $921,752 $674,885 $279,562
Average Number of Contracts
Outstanding During the
Period.................... 31,978 25,377 27,521 21,714 9,156
Net Losses................. $ 3,555 $ 1,884 $ 3,082 $ 2,114 $ 491
Net Losses as a Percent of
Average Amount
Outstanding(2)(3)......... 0.31% 0.22% 0.33% 0.31% 0.16%
</TABLE>
MARINE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------ ---------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period............ $562,694 $402,281 $431,271 $260,074 $99,056
Average Number of Contracts
Outstanding During the
Period....................... 8,685 6,665 6,983 4,943 1,871
Net Losses.................... $ 696 $ 665 $ 755 $ 813 $ 239
Net Losses as a Percent of
Average Amount
Outstanding(2)(3)............ 0.12% 0.17% 0.18% 0.29% 0.24%
</TABLE>
- --------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract. The information in the
tables includes receivables that were sold by the Transferor and that the
Servicer continues to service.
S-16
<PAGE>
(2) The Dealer Agreements provide for recourse to Dealers with respect to
receivables acquired by the Transferor or DFS from Dealers. In the event
of (i) a breach of a warranty by the Dealer in the Dealer Agreement or
(ii) a rescission or attempted rescission by an obligor, the contract is
required to be repurchased by the Dealer for an amount generally equal to
all amounts due and unpaid thereunder. As a result, any losses under such
contract are incurred by the Dealer and are not indicated in the net loss
figures set forth above.
(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 and excluding any
proceeds of repurchases by Dealers.
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Trust was formed to (i) acquire, hold and manage the Receivables and the
other assets of the Trust and proceeds therefrom, (ii) issue the Notes and
Certificates, (iii) make payments on the Notes and the Certificates, and (iv)
engage in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith. As
of the date of this Prospectus Supplement, the Trust had no operating history.
CAPITAL RESOURCES AND LIQUIDITY
The Trust's primary sources of capital are expected to be the net proceeds
from the sale of the Certificates and the Notes. 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 will 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.
The Trust's primary sources of liquidity will be income on the Receivables
and other assets of the Trust, principal payments on the Receivables and
amounts on deposit in the Reserve Account.
RESULTS OF OPERATIONS
The Trust is newly formed and, accordingly, has no results of operations as
of the date of this Prospectus Supplement. The income generated from the
Receivables and other assets owned by the Trust, the interest costs of the
Notes and the related operating expenses will determine the Trust's results of
operations in the future. The principal operating expense of the Trust is
expected to be the Servicing Fee.
The ability of the Trust to realize proceeds on the Receivables in amounts
sufficient to pay interest and principal on the Notes and to make
distributions to Certificateholders will depend, in part, on the amount of
delinquencies and credit losses on the Receivables. For information on the
delinquency and loss experience of the Transferor pertaining to retail new and
used recreational vehicle and marine receivables, including those previously
sold which the Servicer continues to service, see "The Receivables Pool--
Delinquencies and Net Losses." Management's discussion of the delinquency and
loss experience of the Transferor and DFS with respect to consumer boat and
recreational vehicle loans originated or acquired by the Transferor and DFS
follows in the succeeding paragraphs.
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO. Total recreational vehicle
receivables at June 30, 1998 of $1.26 billion reflect substantially all
recreational vehicle receivables originated or
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acquired by the Transferor and DFS since February, 1995 which remained
outstanding at June 30, 1998. The tables titled "Delinquency Experience" and
"Credit Loss Experience" in "The Receivables Pool--Delinquencies and Net
Losses," reflect the delinquency and loss experience with respect to this
portfolio of receivables originated or acquired by the Transferor and DFS, a
portion of which has been previously securitized as discussed below.
It should be noted that over the time period covered by the tables,
BankBoston, N.A. ("BankBoston") performed some or all of the servicing
functions for the portfolios until the end of the first quarter of 1998. Since
1995, the Transferor performed some servicing duties related to the portfolios
originated by it such as management of late stage delinquent receivables and
repossessed collateral. Following the acquisition of the Transferor by DFS in
1997, the transfer of all servicing duties to DFS commenced, which process was
completed at the end of the first quarter of 1998. From April, 1998, the
Servicer has performed all servicing duties for the portfolio of receivables
originated or acquired by the Transferor and DFS including the portfolio of
receivables originated by the Transferor on behalf of BankBoston, a portion of
which has been securitized. For a description of the relationship between the
Transferor and BankBoston, see "The Transferor" in the Prospectus.
At June 30, 1998, 216 contracts totaling $5.94 million were 30 or more days
delinquent, representing 0.47% of the total dollar value of the portfolio.
Delinquencies were down from both June 30, 1997 and December 31, 1997 levels
of 0.81% and 0.90% respectively, due in part to normal seasonal trends. All
values are within normal ranges for the portfolio.
Net losses were $3.08 million in 1997 or 0.33% of average portfolio
outstandings. As a percentage of the portfolio, losses were virtually
unchanged from 1996 levels of 0.31%. Losses for the six-month period ended
June 30, 1998 were $3.56 million or 0.31% of average portfolio receivables
(not annualized), an increase from 0.22% (not annualized) in the prior year's
six-month period related primarily to receivables sold to BankBoston which are
impacted by its charge-off policies. While there can be no assurance of future
portfolio delinquency or loss experience, management of the Transferor and
Servicer are not aware of any trends in the recreational vehicle industry in
general, nor legal, social or economic trends in the states where the
receivables are billed, that could likely have a material adverse effect on
the Trust portfolio.
MARINE RECEIVABLES PORTFOLIO. Total marine receivables at June 30, 1998 of
$624.9 million reflect substantially all marine receivables originated or
acquired by the Transferor and DFS since February, 1995 which remained
outstanding at June 30, 1998. The tables titled "Delinquency Experience" and
"Credit Loss Experience" in "The Receivables Pool--Delinquencies and Net
Losses," reflect the delinquency and loss experience with respect to this
portfolio of receivables originated or acquired by the Transferor and DFS, a
portion of which has been previously securitized as discussed below.
It should be noted that over the time period covered by the tables,
BankBoston performed some or all of the servicing functions for the portfolios
until the end of the first quarter of 1998. Since 1995, the Transferor
performed some servicing duties related to the portfolios originated by it
such as management of late stage delinquent receivables and repossessed
collateral. Following the acquisition of the Transferor by DFS in 1997, the
transfer of all servicing duties to DFS commenced, which process was completed
at the end of the first quarter of 1998. From April, 1998, the Servicer has
performed all servicing duties for the portfolio of receivables originated or
acquired by the Transferor and DFS including the portfolio of receivables
originated by the Transferor on behalf of BankBoston, a portion of which has
been securitized.
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At June 30, 1998, 54 contracts totaling $2.79 million were 30 or more days
delinquent, representing 0.45% of the total dollar value of the portfolio.
Delinquencies were down from both June 30, 1997 and December 31, 1997 levels
of 0.61% and 1.00%, respectively, due in part to normal seasonal trends. All
values are within normal ranges for the portfolio.
Net losses were $755 thousand in 1997 or 0.18% of average portfolio
outstandings. As a percentage of the portfolio, losses decreased from 0.29% in
1996 and 0.24% in 1995. Losses for the six-month period ended June 30, 1998
were $696 thousand or 0.12% of average portfolio receivables (not annualized),
down from 0.17% (not annualized) in the prior year's six-month period in spite
of the higher year end 1997 delinquency noted above. While there can be no
assurance of future portfolio delinquency of loss experience, management of
the Transferor and Servicer are not aware of any trends in the marine industry
in general, nor legal, social or economic trends in the states where the
receivables are billed, that could likely have a material adverse effect on
the Trust portfolio.
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 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.
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.
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PAYMENTS OF INTEREST
The Notes will constitute [Fixed] [Floating] 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 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
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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 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] [Floating] 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
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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 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
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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.
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 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
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(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.
"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
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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 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
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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.
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 $ .
S-26
<PAGE>
(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.
"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.
S-27
<PAGE>
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.
STATE AND LOCAL TAX CONSEQUENCES
In the opinion of Bryan Cave LLP, special state tax counsel to the Trust,
which is based in part on the opinion of Mayer, Brown & Platt, counsel to the
Trust with respect to certain federal income tax matters, 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 for
California, Illinois, Missouri and New York income tax purposes. For
additional information regarding state and local tax consequences see "State
and Local 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
S-28
<PAGE>
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 initial concession not in excess of
% per Class ( ) Note and % per Class ( ) Note. The
S-29
<PAGE>
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-30
<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 state income tax matters relating to the Notes and
Certificates will be passed upon for the Depositor by Bryan Cave LLP, St.
Louis, Missouri.
S-31
<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-32
<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-33
<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-2
Summary of Terms........................................................... S-4
Risk Factors............................................................... S-11
The Trust.................................................................. S-13
Capitalization of the Trust................................................ S-13
The Owner Trustee.......................................................... S-13
The Receivables Pool....................................................... S-14
Delinquencies and Net Losses............................................... S-15
The Transferor............................................................. S-19
The Servicer............................................................... S-19
Weighted Average Life of the Securities.................................... S-19
Description of the Notes................................................... S-19
Description of the Certificates............................................ S-21
Description of the Transfer and Servicing Agreements....................... S-22
Federal Income Tax Consequences............................................ S-28
ERISA Considerations....................................................... S-28
Underwriting............................................................... S-29
Legal Opinions............................................................. S-31
Index of Terms S-32
Prospectus
[To Be Conformed]
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Summary of Terms........................................................... 3
Risk Factors............................................................... 11
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................................................... 27
Description of the Certificates............................................ 32
Certain Information Regarding the Securities............................... 33
Description of the Transfer and Servicing Agreements....................... 39
Certain Legal Aspects of the Receivables................................... 49
Federal Income Tax Consequences............................................ 58
ERISA Considerations....................................................... 70
Plan of Distribution....................................................... 73
Legal Opinions............................................................. 73
Index of Terms............................................................. 74
</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.
$( )
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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 )
$( )
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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
Pool Balance.
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.
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........................ Distribution Financial Services [RV/Boat] 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 and recreational
sport
S-3
<PAGE>
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
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 Are
Not Recommendations" 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 Are
Not Recommendations" herein.
[Absence of Market............
The Certificates will be a new issue of
securities with no established trading market.
The Issuer does not expect to apply for listing
of the Certificates on any national securities
exchange or quote the Certificates in the
automated quotation system of a registered
securities association. The Underwriter(s)
expects to make a secondary market in the
Certificates, but has no obligation to do so.
[See "Risk Factors" 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.
RISK THAT CERTIFICATEHOLDER MAY BE UNABLE TO LIQUIDATE ITS INVESTMENT PRIOR
TO MATURITY. 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.
(POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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 Certificateholders, which could result in delays and
reductions in payments 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.)
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON CERTIFICATES. 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. Investors in the Certificates should
consider the risk that losses on the Receivables will be borne by such
investors if the Reserve Account [or credit enhancement] is exhausted and
could result in delays and reductions in payments to such investors.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM VARIATION AMONG CLASSES
WITH RESPECT TO DISTRIBUTIONS OF PRINCIPAL OR INTEREST. As described under
"Description of the Certificates", each class of Certificates has varying
rights with respect to the amount, percentage and timing of distributions of
principal [and/or] interest. Investors in each class which is entitled to
distributions of principal [and/or] interest which are smaller (in amount or
percentage) than, or which are made later than, distributions made to other
classes should consider the risk that losses on the Receivables will be borne
by such investors if the Reserve Account [or credit enhancement] is exhausted,
and that such smaller or delayed distributions could result in delays and
reductions in payments to such investors.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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.
S-9
<PAGE>
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FLOATING
RATE CERTIFICATES AND FIXED RATE RECEIVABLES. The Certificates bear interest at
floating rates as described under "Description of the Certificates--
Distributions of Interest." However, the Receivables bear interest at fixed
rates as described under "The Receivables Pool." In the event that the floating
rate of interest on the Certificates exceeds the fixed rates of interest borne
by the Receivables, there may be insufficient collections to make interest
payments owing on the Certificates, and delays and reductions in payments to
Certificateholders could result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FIXED RATE
CERTIFICATES AND FLOATING RATE RECEIVABLES. The Certificates bear interest at
fixed rates as described under "Description of the Certificates--Distribution
of Interest." However, the Receivables bear interest at floating rates as
described under "The Receivables Pool." In the event that the floating rate of
interest on the Receivables is less than the fixed rates of interest borne by
the Certificates, there may be insufficient collections to make interest
payments owing on the Certificates, and delays and reductions in payments to
Certificateholders could result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM USE OF FINANCIAL
INSTRUMENTS SUCH AS SWAPS AND CAPS. [Name of counterparty] has agreed to
provide a [swap] [cap] to the Trust. Pursuant to the [swap/cap], [name of
counterparty] will make payments to the Trust in the event that the interest
rate on the [Receivables] [Certificates] exceeds [ ]. Describe any material
limitations in swap/cap agreement.] [Name of counterparty] currently is rated
[ ] by[ ]. No assurance can be given that [name of counterparty]
will continue to maintain such rating or that [name of counterparty] will be
able to fulfill its obligations under the [swap/cap]. [Describe legal
enforceability risk, if applicable.] If [name of counterparty] becomes bankrupt
or insolvent, delays and reductions in payments to Certificateholders could
result.]
RATINGS ARE NOT RECOMMENDATIONS. 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-10
<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-11
<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 $ , [(ii) had not more than remaining scheduled payments,
(iii) had not more than original scheduled payments, and (iv) had a
[fixed] APR of not less than % per annum.] 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.
The aggregate principal balance of the Receivables as of the Cutoff Date
will not vary more than 5% (measured by principal amount) on the Closing Date.
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.
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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-12
<PAGE>
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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.
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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-13
<PAGE>
DELINQUENCIES AND NET LOSSES
Set forth below is certain information concerning retail new and used marine
and recreational vehicle receivables originated or acquired by the Transferor
and DFS. See "The Transferor" and "Underwriting Procedures and Guidelines" in
the Prospectus and "Management's Discussion and Analysis" below. There can be
no assurance that the delinquency and net loss experience on the Receivables
will be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
---------------------------------------- ----------------------------------------
1997 1996 1998 1997
-------------------- ------------------ -------------------- ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ---------- --------- -------- --------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 29,925 $1,052,856 25,116 $790,647 34,031 $1,263,808 25,638 $866,459
Period of Delinquency
30-59 Days............. 198 5,420 123 3,898 136 3,765 128 4,019
60-89 Days............. 53 1,370 37 1,203 34 1,181 29 914
90 Days or More........ 92 2,700 54 1,392 44 981 74 2,225
Total Delinquencies.... 343 $ 9,490 214 $ 6,493 216 $ 5,937 231 $ 7,159
Total Delinquencies as a
percent of the
Portfolio.............. 1.15% 0.90% 0.85% 0.82% 0.63% 0.47% 0.90% 0.81%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------
1995
------------------
NUMBER OF
CONTRACTS AMOUNT
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio.................................. 18,312 $559,123
Period of Delinquency
30-59 Days................................ 82 2,344
60-89 Days................................ 17 506
90 Days or More........................... 18 544
Total Delinquencies........................ 117 $ 3,394
Total Delinquencies as a percent of the
Portfolio................................. 0.64% 0.61%
</TABLE>
S-14
<PAGE>
MARINE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------------------------- --------------------------------------
1997 1996 1998 1997
------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 7,822 $500,523 6,143 $362,018 9,948 $624,864 7,186 $442,544
Period of Delinquency
30-59 Days............. 64 3,246 52 2,361 33 1,784 52 1,746
60-89 Days............. 8 246 4 153 9 344 7 426
90 Days or More........ 20 1,496 17 978 12 662 20 546
Total Delinquencies..... 92 $ 4,990 73 $ 3,512 54 $ 2,780 79 $ 2,718
Total Delinquencies as a
percent of the
Portfolio.............. 1.18% 1.00% 1.19% 0.97% 0.54% 0.45% 1.10% 0.61%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
-----------------------------------
NUMBER OF
CONTRACTS AMOUNT
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio.................................. 3,742 $198,130
Period of Delinquency
30-59 Days................................ 37 1,634
60-89 Days................................ 11 292
90 Days or More........................... 6 469
Total Delinquencies........................ 54 $ 2,395
Total Delinquencies as a percent of the
Portfolio................................. 1.44% 1.21%
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract. The information in the tables includes receivables
that were sold by the Transferor and that the Servicer continues to
service. The Servicer treats a receivable as delinquent if any part of a
scheduled payment is not received when due.
CREDIT LOSS EXPERIENCE (1)
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-------------------- ----------------------------
1998 1997 1997 1996 1995
---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period......... $1,158,332 $838,553 $921,752 $674,885 $279,562
Average Number of Contracts
Outstanding During the
Period.................... 31,978 25,377 27,521 21,714 9,156
Net Losses................. $ 3,555 $ 1,884 $ 3,082 $ 2,114 $ 491
Net Losses as a Percent of
Average Amount
Outstanding(2)(3)......... 0.31% 0.22% 0.33% 0.31% 0.16%
</TABLE>
S-15
<PAGE>
MARINES RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ---------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period............ $562,694 $402,281 $431,271 $260,074 $99,056
Average Number of Contracts
Outstanding During the
Period....................... 8,685 6,665 6,983 4,943 1,871
Net Losses.................... $ 696 $ 665 $ 756 $ 813 $ 239
Net Losses as a Percent of
Average Amount Outstanding
(2)(3)....................... 0.12% 0.17% 0.18% 0.29% 0.24%
</TABLE>
- --------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract. The information in the
tables includes receivables that were sold by the Transferor and that the
Servicer continues to service.
(2) The Dealer Agreements provide for recourse to Dealers with respect to
receivables acquired by the Transferor or DFS from Dealers. In the event
of (i) a breach of a warranty by the Dealer in the Dealer Agreement or
(ii) a rescission or attempted rescission by an obligor, the contract is
required to be repurchased by the Dealer for an amount generally equal to
all amounts due and unpaid thereunder. As a result, any losses under such
contract are incurrred by the Dealer and are not indicated in the net loss
figures set forth above.
(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 and excluding any
proceeds of repurchases by Dealers.
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Trust was formed to (i) acquire, hold and manage the Receivables and the
other assets of the Trust and proceeds therefrom, (ii) issue the Certificates,
(iii) make payments on the Certificates, and (iv) engage in other activities
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith. As of the date of this Prospectus
Supplement, the Trust had no operating history.
CAPITAL RESOURCES AND LIQUIDITY
The Trust's primary source of capital is expected to be the net proceeds
from the sale of the Certificates. 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 will 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.
S-16
<PAGE>
The Trust's primary sources of liquidity will be income on the Receivables
and other assets of the Trust, principal payments on the Receivables and
amounts on deposit in the Reserve Account.
RESULTS OF OPERATIONS
The Trust is newly formed and, accordingly, has no results of operations as
of the date of this Prospectus Supplement. The income generated from the
Receivables and other assets owned by the Trust, and the related operating
expenses will determine the Trust's results of operations in the future. The
principal operating expense of the Trust is expected to be the Servicing Fee.
The ability of the Trust to realize proceeds on the Receivables in amounts
sufficient to make distributions to Certificateholders will depend, in part,
on the amount of delinquencies and credit losses on the Receivables. For
information on the delinquency and loss experience of the Transferor
pertaining to retail new and used recreational vehicle and marine receivables,
including those previously sold which the Servicer continues to service, see
"The Receivables Pool--Delinquencies and Net Losses." Management's discussion
of the delinquency and loss experience of the Transferor and DFS with respect
to consumer boat and recreational vehicle loans originated or acquired by the
Transferor and DFS follows in the succeeding paragraphs.
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO. Total recreational vehicle
receivables at June 30, 1998 of $1.26 billion reflect substantially all
recreational vehicle receivables originated or acquired by the Transferor and
DFS since February, 1995 which remained outstanding at June 30, 1998. The
tables titled "Delinquency Experience" and "Credit Loss Experience" in "The
Receivables Pool--Delinquencies and Net Losses," reflect the delinquency and
loss experience with respect to this portfolio of receivables originated or
acquired by the Transferor and DFS, a portion of which has been previously
securitized as discussed below.
It should be noted that over the time period covered by the tables,
BankBoston, N.A. ("BankBoston") performed some or all of the servicing
functions for the portfolios until the end of the first quarter of 1998. Since
1995, the Transferor performed some servicing duties related to the portfolios
originated by it such as management of late stage delinquent receivables and
repossessed collateral. Following the acquisition of the Transferor by DFS in
1997, the transfer of all servicing duties to DFS commenced, which process was
completed at the end of the first quarter of 1998. From April, 1998, the
Servicer has performed all servicing duties for the portfolio of receivables
originated or acquired by the Transferor and DFS including the portfolio of
receivables originated by the Transferor on behalf of BankBoston, a portion of
which has been securitized. For a description of the relationship between the
Transferor and BankBoston, see "The Transferor" in the Prospectus.
At June 30, 1998, 216 contracts totaling $5.94 million were 30 or more days
delinquent, representing 0.47% of the total dollar value of the portfolio.
Delinquencies were down from both June 30, 1997 and December 31, 1997 levels
of 0.81% and 0.90%, respectively, due in part to normal seasonal trends. All
values are within normal ranges for the portfolio.
Net losses were $3.08 million in 1997 or 0.33% of average portfolio
outstandings. As a percentage of the portfolio, losses were virtually
unchanged from 1996 levels of 0.31%. Losses for the six-month period ended
June 30, 1998 were $3.56 million or 0.31% of average portfolio receivables
(not annualized), an increase from 0.22% (not annualized) in the prior year's
six-month period related primarily to receivables sold to BankBoston which are
impacted by its charge-off policies. While there can be no assurance of future
portfolio delinquency or loss
S-17
<PAGE>
experience, management of the Transferor and Servicer are not aware of any
trends in the recreational vehicle industry in general, nor legal, social or
economic trends in the states where the receivables are billed, that could
likely have a material adverse effect on the Trust portfolio.
MARINE RECEIVABLES PORTFOLIO. Total marine receivables at June 30, 1998 of
$624.9 million reflect substantially all marine receivables originated or
acquired by the Transferor and DFS since February, 1995 which remained
outstanding at June 30, 1998. The tables titled "Delinquency Experience" and
"Credit Loss Experience" in "The Receivables Pool--Delinquencies and Net
Losses," reflect the delinquency and loss experience with respect to this
portfolio of receivables originated or acquired by the Transferor and DFS, a
portion of which has been previously securitized as discussed below.
It should be noted that over the time period covered by the tables,
BankBoston performed some or all of the servicing functions for the portfolios
until the end of the first quarter of 1998. Since 1995, the Transferor
performed some servicing duties related to the portfolios originated by it
such as management of late stage delinquent receivables and repossessed
collateral. Following the acquisition of the Transferor by DFS in 1997, the
transfer of all servicing duties to DFS commenced, which process was completed
at the end of the first quarter of 1998. From April, 1998, the Servicer has
performed all servicing duties for the portfolio of receivables originated or
acquired by the Transferor and DFS including the portfolio of receivables
originated by the Transferor on behalf of BankBoston, a portion of which has
been securitized.
At June 30, 1998, 54 contracts totaling $2.79 million were 30 or more days
delinquent, representing 0.45% of the total dollar value of the portfolio.
Delinquencies were down from both June 30, 1997 and December 31, 1997 levels
of 0.61% and 1.00%, respectively, due in part to normal seasonal trends. All
values are within normal ranges for the portfolio.
Net losses were $755 thousand in 1997 or 0.18% of average portfolio
outstandings. As a percentage of the portfolio, losses decreased from 0.29% in
1996 and 0.24% in 1995. Losses for the six-month period ended June 30, 1998
were $696 thousand or 0.12% of average portfolio receivables (not annualized),
down from 0.17% (not annualized) in the prior year's six-month period in spite
of the higher year end experience 1997 delinquency noted above. While there
can be no assurance of future portfolio delinquency of loss experience,
management of the Transferor and Servicer are not aware of any trends in the
marine industry in general, nor legal, social or economic trends in the states
where the receivables are billed, that could likely have a material adverse
effect on the Trust portfolio.
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
S-18
<PAGE>
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 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".
S-19
<PAGE>
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 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;
S-20
<PAGE>
(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 (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
S-21
<PAGE>
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 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.
S-22
<PAGE>
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 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
S-23
<PAGE>
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.
STATE AND LOCAL TAX CONSEQUENCES
In the opinion of Bryan Cave LLP, special state tax counsel to the Trust,
which is based in part on the opinion of Mayer, Brown & Platt, counsel to the
Trust with respect to certain federal income tax matters, for California,
Illinois and Missouri income tax purposes the Trust will be treated as a
Grantor Trust and will not be subject to tax. For additional information
regarding the State and local tax consequences see "State and Local 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.
S-24
<PAGE>
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.
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.
S-25
<PAGE>
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 state income tax matters will be passed upon
for the Depositor by Bryan Cave LLP, St. Louis, Missouri.
S-26
<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-27
<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-28
<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-2
Summary of Terms........................................................... S-4
Risk Factors............................................................... S-9
The Trust.................................................................. S-11
The Receivables Pool....................................................... S-12
Delinquencies and Net Losses............................................... S-14
The Transferor............................................................. S-18
The Servicer............................................................... S-18
Weighted Average Life of the Certificates.................................. S-18
Description of the Certificates............................................ S-19
Federal Income Tax Consequences............................................ S-24
ERISA Consideration........................................................ S-24
Underwriting............................................................... S-25
Legal Opinions............................................................. S-26
Index of Terms............................................................. S-27
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.
$( )
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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 that shall have secured a Receivable and that shall have been obtained
by the applicable Trust incidental to a foreclosure or repossession in the
event of a payment default, 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 or to make distributions to the
Depositor with respect thereto.
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.
<PAGE>
----------------
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 Deutsche Recreational Asset Funding Corporation (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 the 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" beginning on page [ ].
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 ("DFS" or
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.
[Notes will be available for purchase in minimum
denominations of $[1,000] and will be available
in book-entry form only.] 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
4
<PAGE>
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.
To the extent provided in the related Prospectus
Supplement, the Servicer will be permitted at its
option to purchase the Receivables 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"). Such purchase price for
the Receivables will never be less than the
outstanding principal amount of the Securities
plus the accrued interest on the Securities. See
"Description of the Transfer and Servicing
Agreements--Termination".
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.
Certificates will be available for purchase in a
minimum denomination of $[1,000] and will be
available in book-entry form only.
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
5
<PAGE>
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.
To the extent provided in the related Prospectus
Supplement, the Servicer will be permitted at its
option to purchase the Receivables 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"). Such purchase price for
the Receivables will never be less than the
outstanding principal amount of the Securities
plus the accrued interest on the Securities. See
"Description of the Transfer and Servicing
Agreements--Termination".
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
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"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 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 the Funding Period, if any, will be
specified in the applicable Prospectus Supplement
and in any event will not exceed one year in
length. 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.
The Receivables have been or will be originated
by the Transferor, and/or originated by Dealers,
and/or
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originated or acquired by 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. 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 or other receivables secured by
recreational vehicles. For a description of the
Transferor, see "The Transferor." For a
description of DFS, see "The Servicer."
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. 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 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.
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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.
The [Depositor will be obligated to purchase any
Receivable from the Trust, and the] Transferor
will be obligated to purchase such Receivable
from the [Depositor] [Trust], 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.
To the extent 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.
To the extent provided 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 financed in states where
security interests in recreational vehicles are
subject to certificate of title statutes will not
be amended to reflect any such
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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. 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.
Any lien or security interest in a Financed Asset
may be held by an agent or trustee for the
benefit of DFS and/or the Transferor. In
connection with the transfer of the related
Receivable to the related Trust, such lien would
then be held for the benefit of the applicable
Trust.
TAX STATUS.................. If the Prospectus Supplement specifies that the
related Trust will be treated as an owner trust
upon the issuance of the related series of
Securities, Mayer, Brown & Platt ("Tax Counsel")
will deliver an opinion to the effect that such
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 will deliver an opinion that
the Notes issued by such Trust will be
characterized as debt for federal income tax
purposes.
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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 not be classified as an association taxable
as a corporation for federal tax purposes and
that such Trust will be classified as a grantor
trust for federal income tax purposes.
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, 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.
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.
RATING...................... It will be a requirement for issuance of any
series that the Securities offered by this
Prospectus and the related Prospectus Supplement
be rated by at least one Rating Agency in one of
its four highest applicable rating categories.
The rating or ratings applicable to Securities of
each series offered hereby and by the related
Prospectus Supplement will be as set forth in the
related Prospectus Supplement. A securities
rating should be evaluated independently of
similar ratings on different types of securities.
A securities rating is not a recommendation to
buy, hold or sell securities and does not address
the effect that the rate of prepayments on
Receivables may have on the yield to investors in
the Securities of such Series. See "Risk Factors"
herein.
RISK FACTORS................ In considering an investment in any Certificates
and/or Notes, investors should recognize that
there are material risks associated with such an
investment. See "Risk Factors" herein and in the
related Prospectus Supplement.
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RISK FACTORS
In addition to the other information contained in this Prospectus and in the
related Prospectus Supplement, prospective investors should carefully consider
the following risk factors before investing in any class or classes of
Securities. The risk factor disclosure here and in the related Prospectus
Supplement summarizes material risk factors relating to the Securities.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE TRUST TO
HAVE A PERFECTED SECURITY INTEREST IN CERTAIN FINANCED ASSETS. If a Trust does
not have a perfected security interest in a Financed Asset, 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 and delays and reductions in payments to Securityholders
could result.
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.
The [Depositor will be obligated to purchase from the related Trust and the]
Transferor will be obligated to [simultaneously] purchase from the
[Depositor][Trust] 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.]
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM CERTAIN LIENS HAVING
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. If such Trust does not have a first
perfected security interest in a Financed Asset, 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, and could
result in delays and reductions in payments to, the Securityholders. 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
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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 Vehicles" and
"--Security Interest in Boats" herein.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE TRUST TO HAVE
A PERFECTED SECURITY INTEREST IN THE RECEIVABLES. If a Trust does not have a
perfected security interest in the Receivables, its ability to realize on such
Receivable in the event of a default may be adversely affected. This could
adversely affect the amount available for distribution to, and could result in
delays and reductions in payments to, the Securityholders.
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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM LACK OF ENFORCEABILITY OF
RECEIVABLES. The inability of Trust to realize amounts owed in respect of a
Receivable could adversely affect the amount available for distribution to, and
could result in delays and reductions in payments to, the Securityholders.
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 Transferor will be obligated to purchase [or cause an
Originator to purchase] from the Trust any Receivable which fails to comply
with such requirements in the circumstances described in "Description of the
Transfer and Servicing Agreements--Transfer of Receivables." See also "Certain
Legal Aspects of the Receivables-- Consumer Protection Laws" herein.
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POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM THIRD PARTY LIABILITIES OF
TRUSTS. To the extent that a Dealer, Ganis or an Originator (including DFS)
violates consumer protection laws applicable to Receivables, a Trust could be
liable to the obligor, as an assignee of the affected Receivables. See "Certain
Legal Aspects of the Receivables--Consumer Protection Laws." The related
Receivables Transfer Agreement provides that the Transferor is required to
purchase [or to cause an Originator to purchase] from the Trust Receivables
that do not comply in all material respects with applicable law in the
circumstances described in "Description of the Transfer and Servicing
Agreements--Transfer of Receivables." However, if the Transferor [or an
Originator] fails for any reason to perform its purchase obligation,
Securityholders could experience delays or reductions in payments on their
Securities as a result of any such liabilities imposed on the applicable Trust.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSOLVENCY OF A BANK
ORIGINATOR. The FDIC, if appointed as conservator or receiver for an insolvent
Bank Originator, may interfere with the timely transfer to the Transferor of
payments collected on the Receivables or interfere with the timely liquidation
of Receivables. Such interference could result in delays and reductions in
payments to the Securityholders. 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.
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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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSOLVENCY OF A DEALER, A
NONBANK ORIGINATOR, THE TRANSFEROR OR THE DEPOSITOR. 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. References in this Prospectus or the related Prospectus
Supplement to a "conveyance" from the Transferor to the Depositor contemplate
either a "sale" or a "capital contribution" from the Transferor to the
Depositor. The applicable Receivables Transfer Agreement will set forth
whether such conveyance 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.
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.
POSSIBLE LOSSES RESULTING FROM 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
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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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM APPLICATION OF 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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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. If the assets of
the Depositor were consolidated into the bankruptcy estate of the Transferor
or any other entity, the assets would be subject to claims of certain
creditors, and delays and reductions in payments to the Securityholders could
result.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INABILITY TO COLLECT
PAYMENTS FROM OBLIGORS. 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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE DEPOSITOR,
TRANSFEROR OR SERVICER TO PERFORM UNDER THE AGREEMENTS. None of the
Transferor, the Servicer, the Depositor
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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 purchase
[or to cause an Originator to purchase] from the [Depositor] [Trust]
Receivables with respect to which such representations and warranties have
been breached. [The Depositor's obligation to make such purchase is contingent
upon the Transferor performing its obligation to purchase 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. See "The
Servicer".
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON THE CERTIFICATES. 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. Investors in any subordinated
class or classes of Certificates should consider the risk that losses on the
Receivables will be borne by such investors if any Reserve Account (if any) or
any other credit enhancement, as described in the related Prospectus
Supplement, is exhausted and could result in delays and reductions in payments
to such investors.
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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. If
losses occur which are not covered by such credit enhancement or exceed the
amount covered by such credit enhancement, delays and reductions in payments
to Securityholders could result.
POSSIBLE LOSSES RESULTING FROM PAYMENT PRIOR TO MATURITY. All the
Receivables are prepayable at any time. (For this purpose the term
"prepayments" includes prepayments in full,
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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 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. As a result, the actual maturity
of any Class of Notes and/or Certificates could occur significantly earlier
than expected. Any such 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 "Possible Losses
Resulting From 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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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 available for
distribution to the Securityholders and delays and reductions in payments to
Securityholders could result. 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.
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM CHANGES IN CHARACTERISTICS
OF RECEIVABLES POOL DUE TO SUBSEQUENT RECEIVABLES. Amounts on deposit in any
Pre-Funding
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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 or may result in delays or reductions in payments
to Securityholders.
POSSIBLE LOSS OF YIELD RESULTING FROM 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.
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM CONTROL BY INDENTURE
TRUSTEE OR NOTEHOLDERS IN OWNER TRUSTS. In general, with respect to any Owner
Trust issuing Notes, until the Notes have been paid in full, the ability to
direct the related Owner 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. The risk that the Noteholders, not the Certificateholders,
control the Owner Trust pertains only to Certificateholders of Owner Trusts
because an Owner Trust is authorized to issue both Notes and Certificates
while a Grantor Trust may issue only Certificates.
For example, with respect to an Owner 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. The actions by the
Indenture Trustee or the Noteholders could result in delays or reductions in
payments to Certificateholders.
RISK OF BOOK-ENTRY REGISTRATION. As 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,
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"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".
RATINGS ARE NOT RECOMMENDATIONS; THERE IS NO ASSURANCE THAT A RATING WILL
REMAIN IN EFFECT. It will be a condition to the issuance of a series of
Securities that they be rated in one of the four highest rating categories by
a Rating Agency identified in the related Prospectus Supplement. Such rating
should not be deemed a recommendation to purchase, hold or sell Securities,
inasmuch as it does not address market price or suitability for a particular
investor. Such rating will not constitute an assessment of the likelihood that
principal prepayments on the related Receivables will be made, the degree to
which the rate of such prepayments might differ from that originally
anticipated or the likelihood of early optional termination of the Class of
Notes and/or Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an investor
purchasing a Note and/or Certificate at a significant premium might fail to
recoup its initial investment under certain scenarios.
There is no assurance that any such rating will remain in effect for any
given period of time or may not be lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the future so warrant. A reduction
or withdrawal of a rating could adversely affect a Securityholder's ability to
transfer its Securities.
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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 obtained by the applicable Trust incidental to a foreclosure or
repossession in the event of a payment default; 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.
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
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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".
Each Trust may be a "business trust".
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
and chosen at random 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 was not more
than 59 days past due (provided that, as of the Cutoff Date, the ratio of the
aggregate outstanding principal balance of the Receivables with any payment in
delinquency in excess of 30 days over the aggregate outstanding principal
balance of the Receivables does not equal or exceed 20%). 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].
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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 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
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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.
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
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
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distribution to the Depositor, (ii) to make the initial deposit into the
Reserve Account, if any, (iii) to make the deposit of the Pre-Funded Amount
into the Pre-Funding Account, if any or (iv) for any other purpose described
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 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 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
overall creditworthiness based upon the customer's willingness and ability to
repay and the adequacy of the underlying collateral. Credit applicants are
required to provide information pertaining to their income, employment
history, financial liabilities, personal status and a description of, or
invoice for, 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 credit
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 for which the loan is requested. Loans outside of an underwriter's
authority require approval by a more senior credit underwriting employee.
DFS or Ganis, as the case may be, has and has had certain minimum
requirements, as described below. DFS or Ganis' management, as the case may
be, does not believe these minimum requirements are themselves generally
sufficient to warrant credit approval of a credit applicant. There were and
are no requirements which allow automatic approval or declination of the
applicant without review by a credit officer. Based on credit risk factors and
credit bureau score, each applicant is either approved, declined or, if
necessary, referred to the appropriate senior credit officer level for review.
DFS or Ganis, as the case may be, typically looks for stability of
employment and residence measured by a minimum of 2 years in the job or
industry and residence, a debt ratio (the ratio of total installment and
revolving debt and housing expenses to gross monthly income) of 40% or less, a
down payment of at least 10% of the purchase price of the asset for which the
loan is requested, and overall favorable credit profile. Approval of retail
applicants who do not meet the above referenced general guidelines is
considered on a case basis by appropriate senior level credit officers.
Approvals granted in such instances may be based on the applicant's job and
residential stability factors, ability to pay and past payment performance. On
an occasional basis, a cosigner or guarantor may be considered in determining
the credit decision being made.
[With respect to Receivables transferred to a Trust, the maximum amount DFS
or Ganis, as the case may be, will advance to borrowers is (i) in the case of
a new vehicle, up to 110% to the manufacturer's invoice price of the vehicle
securing any such Receivable transferred to a Trust
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(on an exception basis and approved at the appropriate senior credit officer
level, a discretionary credit approval may permit advances up to 120% of
manufacturer's invoice price) plus taxes, fees and insurance, and (ii) in the
case of a used vehicle, up to 105% of the wholesale value of the vehicle
securing any such Receivable transferred to a Trust as reported in the Kelly
Blue Book or the used recreational vehicle guidebooks of the National
Automobile Dealers Association ("NADA") Guide Book (on an exception basis and
approved at the appropriate senior credit officer level, a discretionary
credit approval may permit advances up to 120% of the aforementioned value)
plus taxes, fees and insurance. Funding of the contract is authorized
subsequent to verifications of the stipulations of approval, confirmation of
the advance and satisfactory delivery of the related collateral. 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 SERVICER
GENERALLY
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.
YEAR 2000 ISSUES
DFS is committed to taking the necessary steps to enable both new and
existing systems, applications and equipment to effectively process
transactions up to and beyond the Year 2000. To that end, DFS is well underway
with its Year 2000 readiness program, having spent approximately $5 million to
date. DFS estimates that the costs of its continuing Year 2000 readiness
efforts ultimately will exceed $10 million. Because of such ongoing readiness
efforts, Year 2000 processing issues and risks are not expected to have a
material adverse impact on the ability of DFS to continue its general business
operations, or on its ability to perform its responsibilities as Servicer.
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Currently, DFS is actively engaged in completing the following Year 2000
program initiatives:
. Complete a comprehensive analysis of current functions which might be
impacted by Year 2000 issues, and document the results in a Year 2000
Assessment Report
. Develop and implement a detailed plan to address Year 2000 issues as
identified, particularly as they pertain to software and hardware
applications
. Establish a Year 2000 Program Management Office, staffed by dedicated and
experienced project managers
. Survey outside vendors to determine the degree of preparedness for the
Year 2000, to uncover potential issues arising from such business
counterparties
. Raise organizational awareness not only with top management, but also at
the staff level, and involve relevant business group leaders in reaching
solutions
. Implement an ongoing purchasing/procurement plan which is responsive to
Year 2000 concerns.
The risk of failures of computer applications, systems and networks due to
improper Year 2000 data processing are substantial, not only for users of
information technologies, but also for any entities and individuals which
interact with them. Moreover, when aggregated, multiple individual
malfunctions and failures relating to Year 2000 issues can potentially cause
broader, systemic disruptions across industries and economies. The risks
arising from Year 2000 issues which face many companies, including DFS,
include the potential diminished ability to respond to the needs and
expectations of customers in a timely manner, and the potential for inaccurate
processing of information. In recognition of this, DFS is focusing on mission
critical applications in order that programming changes are largely completed,
and that testing is underway, by December 31, 1998.
In addition, DFS has begun developing contingency plans to complement the
Year 2000 readiness efforts already in progress, including backup and offsite
processing of certain information and functions. DFS anticipates that such
contingency plans will provide an additional level of security to its Year
2000 efforts already underway.
The foregoing discussion of Year 2000 issues is based on current estimates
of the management of DFS as to the amount of time and costs necessary to
remediate and test the computer systems of DFS. Such estimates are based on
the facts and circumstances existing at this time, and were derived utilizing
multiple assumptions of future events, including, but not limited to, the
continued availability of certain resources, third-party modification plans
and implementation success, and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual costs and results
could differ materially from the costs and results currently anticipated by
DFS. Specific factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer code, the
planning and modification success attained by the business counterparties of
DFS, and similar uncertainties.
SERVICING OPERATIONS; COLLECTION ACTIVITIES
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
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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. This Prospectus and the related Prospectus
Supplement summarize material terms of the related Notes and the Indenture.
Such 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.
[To the extent 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 Cede & Co. of DTC (together with any successor
depository selected by the Trust, the "Depository") except as set forth below.
The Notes will be available for purchase in denominations of $[1,000] and
integral multiples thereof in book-entry form only.] Accordingly, Cede & Co.
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. To the extent 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
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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.
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.
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
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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.
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, "Events of Default" under the related Indenture will
consist of: (i) a default for five days 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 after notice thereof
is given to such Trust by the applicable Indenture Trustee or to such Trust
and such Indenture Trustee by the holders of at least 25% in principal amount
of such Notes then outstanding; (iv) any representation or warranty made by
such Trust in 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
after notice thereof is given to such Trust by the applicable Indenture
Trustee or to such Trust and such Indenture Trustee by the holders of at least
25% in principal amount of such Notes then outstanding; or (v) certain events
of bankruptcy, insolvency, receivership or liquidation of the applicable
Trust; and (vi) any other event specified as an "Event of Default" in the
related Prospectus Supplement. However, the amount of principal required to be
paid to Noteholders of such series under the related Indenture will generally
be limited to amounts available to be deposited in the applicable Note
Distribution Account. Therefore, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default until
the final scheduled 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. Such declaration may, under
certain circumstances, be rescinded by the holders of Notes representing at
least 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. 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
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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.
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, subject to the next sentence. Notwithstanding any other provision of the
related Indenture, the right of any Noteholder to receive payment of the
principal of and interest on its Notes, on or after the respective due dates
expressed in the Indenture, or to institute suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Noteholder, except that the related
Indenture may contain provisions limiting or denying the right of any such
Noteholder to institute any such suit, if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would,
under applicable law, result in the surrender, impairment, waiver or loss of
the lien of such Indenture for any property subject to such lien.
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.
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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.
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.
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THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee for any series may resign at any
time, in which event the 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.
This Prospectus and the related Prospectus Supplement summarize material terms
of the Certificates, the related Trust Agreement or the related Pooling and
Servicing Agreement. Such 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.
[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. 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.] Accordingly, such nominee is
expected to be the holder of record of the Certificates of any series that are
not purchased by the Depositor. If 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
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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. To the extent 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
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 (or percentage) 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. See "Risk Factors" herein and in the related Prospectus
Supplement.
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
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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.
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.
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
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to take action to effect final settlement on its behalf by delivering or
receiving securities in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly
to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or Euroclear
as a result of a transaction with a Participant will be made during the
subsequent securities settlement processing, dated the business day following
the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedel Participant or Euroclear Participant on such business day. Cash received
in Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant Cedel or
Euroclear cash account only as of the business day following settlement in DTC.
Securityholders 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 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.
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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"). 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
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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" herein and "Global Clearance, Settlement and Tax Documentation
Procedures" in Annex I hereto. 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.
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
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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
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.
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;
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(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 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.
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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 Prospectus
and the Prospectus Supplement summarize material terms of the Transfer and
Servicing Agreements. Such 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. 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.
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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"). The purchase obligation
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 is contingent
upon the Transferor performing its corresponding obligation to purchase 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
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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 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.
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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
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
To the extent 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.
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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 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
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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. 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.
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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 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
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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
"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; (iii) the occurrence of
an Insolvency Event with respect to the Servicer, and (iv) any other event
described as a "Servicer Default" in the related Prospectus Supplement.
"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, 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,
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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, 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
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. 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.
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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.
To the extent provided in the related Prospectus Supplement, 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. Such price will never be less than the outstanding principal amount of
the Securities plus the accrued interest on the Securities.
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. Any
such successful bid must equal an amount which is not less than the outstanding
principal amount of the Securities plus accrued interest on the Securities.
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
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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. 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.
Any lien or security interest in a Financed Asset may be held by an agent or
trustee for the benefit of DFS and/or the Transferor. In connection with the
transfer of the related Receivable to the related Trust, such lien would then
be held for the benefit of applicable Trust.
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.
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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 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
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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
purchase the related Receivable from the [Depositor] [Trust] unless the breach
were cured.] See "Description of the Transfer and Servicing Agreements--
Transfer of Receivables" and "Risk Factors--Possible Payment Delays and Losses
Resulting From Failure of the Trust to Have a Perfected Security Interest in
Certain 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
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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 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
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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 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 [or to cause an Originator 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
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create an obligation of the Transferor to purchase [or to cause an Originator
to purchase] the Receivable unless the breach is cured. See "Risk Factors--
Possible Payment Delays and Losses Resulting From Lack of Enforceability of
Receivables" and "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 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 should 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 federal tax discussion herein 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.
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 Supplement 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
Following is a brief summary of the tax opinions being rendered by Tax
Counsel. If the Prospectus Supplement specifies that the related Trust will be
treated as an owner trust, Tax Counsel will deliver an opinion, upon the
issuance of the related Securities, to the effect that such 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 will deliver an opinion that
the Notes issued by such Trust will be characterized as debt for federal
income tax purposes. If the Prospectus Supplement specifies that the related
Trust will be treated as a grantor trust, Tax Counsel will deliver an opinion,
upon the issuance of the related Certificates, to the effect that such Trust
will not be classified as an association taxable as a corporation for federal
tax purposes and that such Trust will be classified as a grantor trust for
federal income tax purposes.
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. 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. 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
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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 30 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 IRS Form W-8 generally will
continue to be required to file that form. However, the requirement that
foreign persons submit IRS 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 effectively connected with the conduct of a U.S. trade or
business (in lieu of IRS Form 4224) and to foreign
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persons wishing to rely on a tax treaty to reduce the withholding tax rate (in
lieu of IRS Form 1001). The Withholding Tax Regulations generally are effective
for payments of interest due after December 31, 1998, but IRS 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 should 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, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate
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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.
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The Withholding Tax Regulations alter, in certain respects, the foregoing
certification rules and generally are effective for periods after December 31,
1998. Prospective investors should 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.
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. 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 Section 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 ($124,500 in 1998, 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
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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 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
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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 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
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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.
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 should 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 should 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
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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
applicable Trust Agreement or Pooling and Servicing Agreement will provide that
the ability of any FASIT to add or remove assets will be limited to the same
extent as real estate mortgage investment conduits ("REMICs") under applicable
federal tax rules and regulations.
STATE AND LOCAL TAX CONSEQUENCES
GENERAL MATTERS
The following is a general summary of certain State income tax consequences
to the Trust and the original Certificateholders and Noteholders under the
State income tax laws of Missouri, Illinois, California, and New York. The
summary, together with the discussion in the Prospectus Supplement under the
heading "State and Local Tax Consequences", represents the opinion of Bryan
Cave LLP ("Special State Tax Counsel") subject to the limitations and
qualifications set forth herein. No ruling of any State taxing authority has
been sought with respect to the matters discussed herein and in the Prospectus
Supplement, and the opinion of Special State Tax Counsel is not binding on any
State or local taxing authority. The summary is intended as a general
explanation only and does not furnish information in the level of detail or
with the attention to the holder's specific tax situation as would be provided
by a tax advisor to a Certificateholder or a Noteholder. In addition, the
summary relies upon the correctness of certain opinions of Tax Counsel with
respect to the federal income tax consequences to the Trust, Certificateholders
and Noteholders.
As a consequence of the foregoing, Noteholders and Certificateholders should
consult their own tax advisors in determining the specific federal, state,
local, foreign and any other tax consequences to them of the purchase,
ownership and disposition of the Notes and the Certificates.
STATE TAX LAWS DISCUSSED
Because the Servicer has its principal office in the State of Missouri and
will conduct its activities relating to servicing the receivables owned by the
Trust from its offices located in the States of Illinois and California, [and
the Trust will be organized under the common law of the State of New York,]
these [four] States currently appear to have the strongest claim to tax any
income derived by a Trust, or realized by the holders of Notes and Certificates
by virtue of their ownership. It is possible, however, that other states may
assert jurisdiction to tax income derived by a Trust, or by the holders of
Notes and Certificates. In addition, future changes in the operations of the
Servicer, the Trust, or other factors may cause the Trust or the income derived
therefrom by Noteholders or Certificateholders to be subject to taxation in
other states or jurisdictions. Furthermore, because of the factual nature of
the issue, Special State Tax Counsel expresses no opinion as to the tax
consequences to Certificateholders attributable to the activities of the Trust
or the Servicer under the laws of any State. Finally Special State Tax Counsel
is rendering no opinions with respect to the local tax consequences in any
State, or the State tax consequences in any State other than California,
Illinois, Missouri and New York.
TAX STATUS OF A TRUST FOR CALIFORNIA, ILLINOIS, MISSOURI AND NEW YORK INCOME
TAX PURPOSES
Assuming that the Trust will not constitute an association taxable as a
corporation, or a publicly traded partnership for federal income tax purposes,
Special State Tax Counsel is of the opinion that a Trust will not constitute an
association taxable as a corporation, or publicly
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traded partnership, for purposes of the income tax laws of the States of
California, Illinois, Missouri or New York. Accordingly, such a Trust will not
be subject to corporate income or franchise taxes imposed by the States of
California, Illinois, Missouri and New York. However, if the Trust were deemed
to be doing business in Illinois, the Trust could be subject to Illinois
personal property replacement income tax. Such taxes could result in reduced
distributions to Certificateholders. In addition, Certificateholders not
otherwise subject to taxation in Illinois could become subject to Illinois
income tax as a result of their ownership of Certificates.
TAX STATUS OF NOTEHOLDERS FOR CALIFORNIA, ILLINOIS, MISSOURI AND NEW YORK
INCOME TAX PURPOSES
Assuming that the Notes issued by a Trust are classified as debt for federal
income tax purposes, Special State Tax Counsel is further of the opinion that
such Notes will be classified as debt for purposes of the income tax laws of
California, Illinois, Missouri and New York. Accordingly, Special State Tax
Counsel is of the opinion that natural persons will not be subject to income
tax liability imposed by any of those States with respect to interest and
other income derived from the Notes, unless:
(a) they reside in one of those States (in which case they will be
subject to the tax imposed by the state of their residence), or
(b) the Notes constitute either
(i) property employed in a business, trade, profession or occupation
carried on in Missouri,
(ii) property employed in a regular trade or business conducted in
Illinois,
(iii) property which has acquired a business situs in California, or
(iv) property employed in a business, trade, profession or occupation
carried on in New York,
as the case may be.
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.
TRUSTS THAT ISSUE NOTES OR CERTIFICATES
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
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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
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");
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(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.
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
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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.
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
Benefit Plan............................................................. 94
capital asset............................................................ 93
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
Commission............................................................... 4
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
Eligible Deposit Account................................................. 60
Eligible Institution..................................................... 60
Eligible Investments..................................................... 60
equity interest.......................................................... 95
ERISA.................................................................... 17
Euroclear................................................................ 53
Euroclear Operator....................................................... 53
Euroclear Participants................................................... 53
</TABLE>
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<TABLE>
<S> <C>
Events of Default..................................................... 39
Exchange Act.......................................................... 4
Exemption............................................................. 95
FASIT................................................................. 94
Final Scheduled Maturity Date......................................... 14
Financed Assets....................................................... 10
Financed Recreational Vehicles........................................ 10
foreign person........................................................ 82
FTC Rule.............................................................. 78
Ganis................................................................. 5
Grantor Trust Certificateholders...................................... 89
Grantor Trust Certificates............................................ 89
Holder-in-Due-Course.................................................. 78
Indenture............................................................. 6
Indenture Trustee..................................................... 1
Indirect Participants................................................. 51
Initial Pool Balance.................................................. 69
Initial Receivables................................................... 10
Insolvency Event...................................................... 66
Interest Rate......................................................... 6
Investment Earnings................................................... 60
IRS................................................................... 80
Issuer................................................................ 5
market discount....................................................... 91
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
</TABLE>
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<TABLE>
<S> <C>
Rating Agency......................................................... 96
Receivables........................................................... 2
Receivables Pool...................................................... 27
Receivables Transfer 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
Senior Certificates................................................... 95
Servicer.............................................................. 5
Servicer Advance...................................................... 13
Servicer Default...................................................... 66
Servicing Fee......................................................... 62
Servicing Fee Rate.................................................... 62
Simple Interest Receivables........................................... 30
Strip Certificates.................................................... 9
Strip Notes........................................................... 7
Subsequent Receivables................................................ 2
Subsequent Transfer Date.............................................. 58
Terms and Conditions.................................................. 53
Transfer and Servicing Agreement...................................... 10
Transferor............................................................ 5
Trust................................................................. 1, 5
Trust Accounts........................................................ 60
Trust Agreement....................................................... 5
Trustee............................................................... 1, 5
U.S. Person........................................................... 93
UCC................................................................... 15, 59
</TABLE>
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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.
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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
79
<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.
80
<PAGE>
[ALTERNATE PAGE]
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by Deutsche Recreational Asset Funding Corporation (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 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 the 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].
81
<PAGE>
Subject to completion, dated [ ], 1998 Version #2A
[Recreational Vehicles]
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED , 199 )
$( )
DISTRIBUTION FINANCIAL SERVICES RV TRUST 199 -( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
Distribution Financial Services RV 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 Pool
Balance.
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.
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......................
Distribution Financial Services RV 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 Collection
S-6
<PAGE>
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 Certificate Balance generally to
the extent of funds
S-7
<PAGE>
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 will apply collections in the
Collection Account to pay to the Servicer the
Servicing Fee for such Collection Period
S-8
<PAGE>
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.
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
S-9
<PAGE>
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 Are Not Recommendations"
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 Are Not
Recommendations" herein.
[ABSENCE OF MARKET..........
The Securities will be a new issue of securities
with no established trading market. The Issuer
does not expect to apply for listing of the
Securities on any national securities exchange or
quote the Securities in the automated quotation
system of a registered securities association.
The underwriter(s) expects to make a secondary
market in the Securities, but has no obligation
to do so. [See "Risk Factors" 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.
RISK THAT SECURITYHOLDER MAY BE UNABLE TO LIQUIDATE ITS INVESTMENT PRIOR TO
MATURITY. 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.
(POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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 effect on prepayments and/or defaults in respect of the
Receivables and thus potentially adversely affect the amount available for
distribution to the Securityholders, which could result in delays and
reductions in payments to 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.)
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON 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. Investors in the Certificates
should consider the risk that losses on the Receivables will be borne by such
investors if the Reserve Account [or credit enhancement] is exhausted and
could result in delays and reductions in payments to such investors.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM VARIATION AMONG CLASSES
WITH RESPECT TO DISTRIBUTIONS OF PRINCIPAL OR INTEREST. As described under
"Description of the [Notes] [Certificates]", [each] class of [Notes]
[Certificates] has varying rights with respect to the amount, percentage and
timing of distributions of principal [and/or] interest. Investors in each
class which is entitled to distributions of principal [and/or] interest which
are smaller (in amount or percentage) than, or which are made later than,
distributions made to other classes should consider the risk that losses on
the Receivables will be borne by such investors if the Reserve Account [or
credit enhancement] is exhausted, and that such smaller or delayed
distributions could result in delays and reductions in payments to such
investors.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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
S-11
<PAGE>
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.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FLOATING
RATE SECURITIES AND FIXED RATE RECEIVABLES. The Securities bear interest at
floating rates as described under "Description of the Notes--Payments of
Interest" and "Description of the Certificates--Distributions of Interest."
However, the Receivables bear interest at fixed rates as described under "The
Receivables Pool." In the event that the floating rate of interest on the
Securities exceeds the fixed rates of interest borne by the Receivables, there
may be insufficient collections to make interest payments owing on the
Securities, and delays and reductions in payments to Securityholders could
result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FIXED
RATE SECURITIES AND FLOATING RATE RECEIVABLES. The Securities bear interest at
fixed rates as described under "Description of the Notes--Payments of
Interest" and "Description of the Certificates--Distribution of Interest."
However, the Receivables bear interest at floating rates as described under
"The Receivables Pool." In the event that the floating rate of interest on the
Receivables is less than the fixed rates of interest borne by the Securities,
there may be insufficient collections to make interest payments owing on the
Securities, and delays and reductions in payments to Securityholders could
result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM USE OF FINANCIAL
INSTRUMENTS SUCH AS SWAPS AND CAPS. [Name of counterparty] has agreed to
provide a [swap] [cap] to the Trust. Pursuant to the [swap/cap], [name of
counterparty] will make payments to the Trust in the event that the interest
rate on the [Receivables] [Securities] exceeds [ ]. [Describe any
material limitations in swap/cap agreement.] [Name of counterparty] currently
is rated [ ] by [ ]. No assurance can be given that [name of
counterparty] will continue to maintain such rating or that [name of
counterparty] will be able to fulfill its obligations under the [swap/cap].
[Describe legal enforceability risk, if applicable.] If [name of counterparty]
becomes bankrupt or insolvent, delays and reductions in payments to
Securityholders could result.]
RATINGS ARE NOT RECOMMENDATIONS. 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-12
<PAGE>
THE TRUST
GENERAL
The Issuer, Distribution Financial Services RV 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-13
<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 $ ,
[(ii) had not more than remaining scheduled payments, (iii) had not more
than original scheduled payments, and (iv) had a [fixed] APR of not less
than % per annum.] 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.
The aggregate principal balance of the Receivables as of the Cutoff Date
will not vary more than 5% (measured by principal amount) on the Closing Date.
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.
DISTRIBUTION FINANCIAL SERVICES RV 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>
DISTRIBUTION FINANCIAL SERVICES RV 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-14
<PAGE>
DISTRIBUTION FINANCIAL SERVICES RV 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 AND NET LOSSES
Set forth below is certain information concerning the experience of the
Transferor pertaining to retail new and used recreational vehicle receivables
originated or acquired by the Transferor and DFS. See "The Transferor" and
"Underwriting Procedures and Guidelines" in the Prospectus and "Management's
Discussion and Analysis" below. There can be no assurance that the delinquency
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)
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
--------------------------------------- ---------------------------------------
1997 1996 1998 1997
-------------------- ------------------ -------------------- ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ---------- --------- -------- --------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 29,925 $1,052,856 25,116 $790,647 34,031 $1,263,808 25,638 $866,459
Period of Delinquency
30-59 Days............. 198 5,420 123 3,898 136 3,765 128 4,019
60-89 Days............. 53 1,370 37 1,203 34 1,181 29 914
90 Days or More........ 92 2,700 54 1,392 44 981 74 2,225
Total Delinquencies..... 343 $ 9,490 214 $ 6,493 216 $ 5,937 231 $ 7,159
Total Delinquencies as a
percent of the
Portfolio.............. 1.15% 0.90% 0.85% 0.82% 0.63% 0.47% 0.90% 0.81%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
1995
------------------
NUMBER OF
CONTRACTS AMOUNT
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Portfolio.................................................... 18,312 $559,123
Period of Delinquency
30-59 Days.................................................. 82 2,344
60-89 Days.................................................. 17 506
90 Days or More............................................. 18 544
Total Delinquencies.......................................... 117 $ 3,394
Total Delinquencies as a percent of the Portfolio............ 0.64% 0.61%
</TABLE>
S-15
<PAGE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract. The information in the tables includes receivables
that were sold by the Transferor and that the Servicer continues to
service. The Servicer treats a receivable as delinquent if any part of a
scheduled payment is not received when due.
CREDIT LOSS EXPERIENCE(1)
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- --------------------------
1998 1997 1997 1996 1995
---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period.............. $1,158,332 $838,553 $921,752 $674,885 $279,562
Average Number of Contracts
Outstanding During the Period.. 31,978 25,377 27,521 21,714 9,156
Net Losses...................... $ 3,555 $ 1,884 $ 3,082 $ 2,114 $ 491
Net Losses as a Percent of
Average Amount
Outstanding(2)(3).............. 0.31% 0.22% 0.33% 0.31% 0.16%
</TABLE>
- --------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract. The information in the
tables includes receivables that were sold by the Transferor and that the
Servicer continues to service.
(2) The Dealer Agreements provide for recourse to Dealers with respect to
receivables acquired by the Transferor or DFS from Dealers. In the event
of (i) a breach of a warranty by the Dealer in the Dealer Agreement or
(ii) a rescission or attempted rescission by an obligor, the contract is
required to be repurchased by the Dealer for an amount generally equal to
all amounts due and unpaid thereunder. As a result, any losses under such
contract are incurred by the Dealer and are not indicated in the net loss
figures set forth above.
(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 and excluding any
proceeds of repurchases by Dealers.
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Trust was formed to (i) acquire, hold and manage the Receivables and the
other assets of the Trust and proceeds therefrom, (ii) issue the Notes and
Certificates, (iii) make payments on the Notes and the Certificates, and (iv)
engage in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith. As
of the date of this Prospectus Supplement, the Trust had no operating history.
CAPITAL RESOURCES AND LIQUIDITY
The Trust's primary sources of capital are expected to be the net proceeds
from the sale of the Certificates and the Notes. 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 will 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.
The Trust's primary sources of liquidity will be income on the Receivables
and other assets of the Trust, principal payments on the Receivables and
amounts on deposit in the Reserve Account.
S-16
<PAGE>
RESULTS OF OPERATIONS
The Trust is newly formed and, accordingly, has no results of operations as
of the date of this Prospectus Supplement. The income generated from the
Receivables and other assets owned by the Trust, the interest costs of the
Notes and the related operating expenses will determine the Trust's results of
operations in the future. The principal operating expense of the Trust is
expected to be the Servicing Fee.
The ability of the Trust to realize proceeds on the Receivables in amounts
sufficient to pay interest and principal on the Notes and to make
distributions to Certificateholders will depend, in part, on the amount of
delinquencies and credit losses on the Receivables. For information on the
delinquency and loss experience of the Transferor pertaining to retail new and
used recreational vehicle receivables, including those previously sold which
the Servicer continues to service, refer to "The Receivables Pool--
Delinquencies and Net Losses." Management's discussion of the delinquency and
loss experience of the Transferor and DFS with respect to recreational vehicle
loans originated or acquired by the Transferor and DFS follows in the
succeeding paragraphs.
Total recreational vehicle receivables at June 30, 1998 of $1.26 billion
reflect substantially all recreational vehicle receivables originated or
acquired by the Transferor and DFS since February, 1995 which remained
outstanding at June 30, 1998. The tables titled "Delinquency Experience" and
"Credit Loss Experience" in "The Receivables Pool--Delinquencies and Net
Losses," reflect the delinquency and loss experience with respect to this
portfolio of receivables originated or acquired by the Transferor and DFS, a
portion of which has been previously securitized as discussed below.
It should be noted that over the time period covered by the tables,
BankBoston, N.A. ("BankBoston") performed some or all of the servicing
functions for the portfolios until the end of the first quarter of 1998. Since
1995, the Transferor performed some servicing duties related to the portfolios
originated by it such as management of late stage delinquent receivables and
repossessed collateral. Following the acquisition of the Transferor by DFS in
1997, the transfer of all servicing duties to DFS commenced, which process was
completed at the end of the first quarter of 1998. From April, 1998, the
Servicer has performed all servicing duties for the portfolio of receivables
originated or acquired by the Transferor and DFS including the portfolio of
receivables originated by the Transferor on behalf of BankBoston, a portion of
which has been securitized. For a description of the relationship between the
Transferor and BankBoston, see "The Transferor" in the Prospectus.
At June 30, 1998, 216 contracts totaling $5.94 million were 30 or more days
delinquent, representing 0.47% of the total dollar value of the portfolio.
Delinquencies were down from both June 30, 1997 and December 31, 1997 levels
of 0.81% and 0.90%, respectively, due in part to normal seasonal trends. All
values are within normal ranges for the portfolio.
Net losses were $3.08 million in 1997 or 0.33% of average portfolio
outstandings. As a percentage of the portfolio, losses were virtually
unchanged from 1996 levels of 0.31%. Losses for the six-month period ended
June 30, 1998 were $3.56 million or 0.31% of average portfolio receivables
(not annualized), an increase from 0.22% (not annualized) in the prior year's
six-month period related primarily to receivables sold to BankBoston which are
impacted by its charge-off policies. While there can be no assurance of future
portfolio delinquency or loss experience, management of the Transferor and
Servicer are not aware of any trends in the recreational vehicle industry in
general, nor legal, social or economic trends in the states where the
receivables are billed, that could likely have a material adverse effect on
the Trust portfolio.
S-17
<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 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.
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] [Floating] 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 [ ]
S-18
<PAGE>
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 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.
S-19
<PAGE>
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.
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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] [Floating] Rate
Securities, as such term is defined under "Certain Information Regarding the
Securities--[Fixed] [Floating] 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.
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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].
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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.
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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.
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"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;
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(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.
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"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.
STATE AND LOCAL TAX CONSEQUENCES
In the opinion of Bryan Cave LLP, special state tax counsel to the Trust,
which is based in part on the opinion of Mayer, Brown & Platt, counsel to the
Trust with respect to certain federal income tax matters, 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 for
California, Illinois and Missouri income tax purposes. For additional
information regarding the State and local tax consequences see "State and
Local Tax Consequences" in the Prospectus.
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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.
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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
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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 state income tax matters relating to the Notes and
Certificates will be passed upon for the Depositor by Bryan Cave LLP, St.
Louis, Missouri.
S-30
<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-31
<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-32
<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-3
SUMMARY OF TERMS........................................................... S-4
RISK FACTORS............................................................... S-11
THE TRUST.................................................................. S-13
CAPITALIZATION OF THE TRUST................................................ S-13
THE OWNER TRUSTEE.......................................................... S-13
THE RECEIVABLES POOL....................................................... S-14
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES................................ S-15
THE TRANSFEROR............................................................. S-18
THE SERVICER............................................................... S-18
WEIGHTED AVERAGE LIFE OF THE SECURITIES.................................... S-18
DESCRIPTION OF THE NOTES................................................... S-18
DESCRIPTION OF THE CERTIFICATES............................................ S-21
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................... S-22
FEDERAL INCOME TAX CONSEQUENCES............................................ S-27
ERISA CONSIDERATIONS....................................................... S-28
UNDERWRITING............................................................... S-29
LEGAL OPINIONS............................................................. S-30
INDEX OF TERMS............................................................. S-31
PROSPECTUS
[TO BE CONFORMED]
AVAILABLE INFORMATION...................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 3
SUMMARY OF TERMS........................................................... 4
RISK FACTORS............................................................... 12
THE TRUSTS................................................................. 20
THE RECEIVABLES POOLS...................................................... 22
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES.................................. 23
POOL FACTORS AND TRADING INFORMATION....................................... 24
USE OF PROCEEDS............................................................ 25
THE DEPOSITOR.............................................................. 25
DESCRIPTION OF THE NOTES................................................... 28
DESCRIPTION OF THE CERTIFICATES............................................ 33
CERTAIN INFORMATION REGARDING THE SECURITIES............................... 35
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................... 41
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES................................... 51
FEDERAL INCOME TAX CONSEQUENCES............................................ 56
ERISA CONSIDERATIONS....................................................... 68
PLAN OF DISTRIBUTION....................................................... 70
LEGAL OPINIONS............................................................. 71
INDEX OF TERMS............................................................. 72
</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.
$( )
DISTRIBUTION FINANCIAL SERVICES RV 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 )
$( )
DISTRIBUTION FINANCIAL SERVICES RV 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
Pool Balance.
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.
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........................ Distribution Financial Services RV 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 Are
Not Recommendations" 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 Are
Not Recommendations" herein.
Absence of Market........ The Certificates will be a new issue of
securities with no established trading market.
The Issuer does not expect to apply for listing
of the Certificates on any national securities
exchange or quote the Certificates in the
automated quotation system of a registered
securities association. The underwriter(s)
expects to make a secondary market in the
Certificates, but has no obligation to do so.
[See "Risk Factors" 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.
RISK THAT CERTIFICATEHOLDER MAY BE UNABLE TO LIQUIDATE ITS INVESTMENT PRIOR
TO MATURITY. 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.
(POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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 effect on prepayments and/or defaults in respect of the
Receivables and thus potentially adversely affect the amount available for
distribution to the Certificateholders, which could result in delays and
reductions in payments 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.)
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON CERTIFICATES. 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. Investors in the Certificates should
consider the risk that losses on the Receivables will be borne by such
investors if the Reserve Account [or credit enhancement] is exhausted and
could result in delays and reductions in payments to such investors.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM VARIATION AMONG CLASSES
WITH RESPECT TO DISTRIBUTIONS OF PRINCIPAL OR INTEREST. As described under
"Description of the Certificates", each class of Certificates has varying
rights with respect to the amount, percentage and timing of distributions of
principal [and/or] interest. Investors in each class which is entitled to
distributions of principal [and/or] interest which are smaller (in amount or
percentage) than, or which are made later than, distributions made to other
classes should consider the risk that losses on the Receivables will be borne
by such investors if the Reserve Account [or credit enhancement] is exhausted,
and that such smaller or delayed distributions could result in delays and
reductions in payments to such investors.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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.
S-9
<PAGE>
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FLOATING
RATE CERTIFICATES AND FIXED RATE RECEIVABLES. The Certificates bear interest
at floating rates as described under "Description of the Certificates--
Distributions of Interest." However, the Receivables bear interest at fixed
rates as described under "The Receivables Pool." In the event that the
floating rate of interest on the Certificates exceeds the fixed rates of
interest borne by the Receivables, there may be insufficient collections to
make interest payments owing on the Certificates, and delays and reductions in
payments to Certificateholders could result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FIXED
RATE CERTIFICATES AND FLOATING RATE RECEIVABLES. The Certificates bear
interest at fixed rates as described under "Description of the Certificates--
Distributions of Interest." However, the Receivables bear interest at floating
rates as described under "The Receivables Pool." In the event that the
floating rate of interest on the Receivables is less than the fixed rates of
interest borne by the Certificate, there may be insufficient collections to
make interest payments owing on the Certificates, and delays and reductions in
payments to Certificateholders could result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM USE OF FINANCIAL
INSTRUMENTS SUCH AS SWAPS AND CAPS. [Name of counterparty] has agreed to
provide a [swap] [cap] to the Trust. Pursuant to the [swap/cap], [name of
counterparty] will make payments to the Trust in the event that the interest
rate on the [Receivables] [Certificates] exceeds [ ]. [Describe any material
limitations in swap/cap agreement.] [Name of counterparty] currently is rated
[ ] by [ ]. No assurance can be given that [name of counterparty] will
continue to maintain such rating or that [name of counterparty] will be able
to fulfill its obligations under the [swap/cap]. [Describe legal
enforceability risk, if applicable.] If [name of counterparty], becomes
bankrupt or insolvent, delays and reductions in payments to Certificateholders
could result.]
RATINGS ARE NOT RECOMMENDATIONS. 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.
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
S-10
<PAGE>
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 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 $ , [(ii) had not more than remaining scheduled payments, (iii)
had not more than original scheduled payments, and (iv) had a [fixed] APR
of not less than % per annum.] 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.
The aggregate principal balance of the Receivables as of the Cutoff Date
will not vary more than 5% (measured by the principal amount) on the Closing
Date.
S-11
<PAGE>
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.
DISTRIBUTION FINANCIAL SERVICES RV 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>
DISTRIBUTION FINANCIAL SERVICES RV 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-12
<PAGE>
DISTRIBUTION FINANCIAL SERVICES RV 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 AND NET LOSSES
Set forth below is certain information concerning retail new and used
recreational vehicle receivables originated or acquired by the Transferor and
DFS. See "The Transferor" and "Underwriting Procedures and Guidelines" in the
Prospectus, and "Management's Discussion and Analysis" below. There can be no
assurance that the delinquency and net loss experience on the Receivables will
be comparable to that set forth below.
DELINQUENCY EXPERIENCE(1)
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
---------------------------------------- ----------------------------------------
1997 1996 1998 1997
-------------------- ------------------ -------------------- ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- ---------- --------- -------- --------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 29,925 $1,052,856 25,116 $790,647 34,031 $1,263,808 25,638 $866,459
Period of Delinquency
30-59 Days............. 198 5,420 123 3,898 136 3,765 128 4,019
60-89 Days............. 53 1,370 37 1,203 34 1,181 29 914
90 Days or More........ 92 2,700 54 1,392 44 981 74 2,225
Total Delinquencies..... 343 $ 9,490 214 $ 6,493 216 $ 5,937 231 $ 7,159
Total Delinquencies as a
percent of the
Portfolio.............. 1.15% 0.90% 0.85% 0.82% 0.63% 0.47% 0.90% 0.81%
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
1995
------------------
NUMBER OF
CONTRACTS AMOUNT
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Portfolio................................................... 18,312 $559,123
Period of Delinquency
30-59 Days................................................. 82 2,344
60-89 Days................................................. 17 506
90 Days or More............................................ 18 544
Total Delinquencies......................................... 117 $ 3,394
Total Delinquencies as a percent of the Portfolio........... 0.64% 0.61%
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract. The information in the tables includes receivables
that were sold by the Transferor and that the Servicer continues to
service. The Servicer treats a receivable as delinquent if any part of a
scheduled payment is not received when due.
CREDIT LOSS EXPERIENCE (1)
RECREATIONAL VEHICLE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------
1998 1997 1997 1996 1995
---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period......... $1,158,332 $838,553 $921,752 $674,885 $279,562
Average Number of Contracts
Outstanding During the
Period.................... 31,978 25,377 27,521 21,714 9,156
Net Losses................. $ 3,555 $ 1,884 $ 3,082 $ 2,114 $ 491
Net Losses as a Percent of
Average Amount
Outstanding (2)(3)........ 0.31% 0.22% 0.33% 0.31% 0.16%
</TABLE>
- --------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract. The information in the
tables includes receivables that were sold by the Transferor and that the
Servicer continues to service.
(2) The Dealer Agreements provide for recourse to Dealers with respect to
receivables acquired by the Transferor or DFS from Dealers. In the event
of (i) a breach of a warranty by the Dealer in the Dealer Agreement or
(ii) a rescission or attempted rescission by an obligor, the contract is
required to be repurchased by the Dealer for an amount generally equal to
all amounts due and unpaid thereunder. As a result, any losses under such
contract are incurred by the Dealer and are not indicated in the net loss
figures set forth above.
(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 and excluding any
proceeds of repurchases by Dealers.
S-14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Trust was formed to (i) acquire, hold and manage the Receivables and the
other assets of the Trust and proceeds therefrom, (ii) issue the Certificates,
(iii) make payments on the Certificates, and (iv) engage in other activities
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith. As of the date of this Prospectus
Supplement, the Trust had no operating history.
CAPITAL RESOURCES AND LIQUIDITY
The Trust's primary source of capital is expected to be the net proceeds
from the sale of the Certificates. 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 will 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.
The Trust's primary sources of liquidity will be income on the Receivables
and other assets of the Trust, principal payments on the Receivables and
amounts on deposit in the Reserve Account.
RESULTS OF OPERATIONS
The Trust is newly formed and, accordingly, has no results of operations as
of the date of this Prospectus Supplement. The income generated from the
Receivables and other assets owned by the Trust and the related operating
expenses will determine the Trust's results of operations in the future. The
principle operating expense of the Trust is expected to be the Servicing Fee.
The ability of the Trust to realize proceeds on the Receivables in amounts
sufficient to make distributions to Certificateholders will depend, in part,
on the amount of delinquencies and credit losses on the Receivables. For
information on the delinquency and loss experience of the Transferor
pertaining to retail new and used recreational vehicle receivables, including
those previously sold which the Servicer continues to service, refer to The
Receivables Pool--Delinquencies and Net Losses. Management's discussion of the
delinquency and loss experience of the Transferor and DFS with respect to
recreational vehicle loans originated or acquired by the Transferor and DFS
follows in the succeeding paragraphs.
Total recreational vehicle receivables at June 30, 1998 of $1.26 billion
reflect substantially all recreational vehicle receivables originated or
acquired by the Transferor and DFS since February, 1995 which remained
outstanding at June 30, 1998. The tables titled "Delinquency Experience" and
"Credit Loss Experience" in "The Receivables Pool--Delinquencies and Net
Losses," reflect the delinquency and loss experience with respect to this
portfolio of receivables originated or acquired by the Transferor and DFS, a
portion of which has been previously securitized as discussed below.
It should be noted that over the time period covered by the tables,
BankBoston, N.A. ("BankBoston") performed some or all of the servicing
functions for the portfolios until the end of the first quarter of 1998. Since
1995, the Transferor performed some servicing duties related to the portfolios
originated by it such as management of late stage delinquent receivables and
repossessed collateral. Following the acquisition of the Transferor by DFS in
1997, the transfer of all servicing duties to DFS commenced, which process was
completed at the end of the first quarter of 1998. From April, 1998, the
Servicer has performed all servicing duties for the portfolio of receivables
originated or acquired by the Transferor and DFS including the portfolio
S-15
<PAGE>
of receivables originated by the Transferor on behalf of BankBoston, a portion
of which has been securitized. For a description of the relationship between
the Transferor and BankBoston, see "The Transferor" in the Prospectus.
At June 30, 1998, 216 contracts totaling $5.94 million were 30 or more days
delinquent, representing 0.47% of the total dollar value of the portfolio.
Delinquencies were down from both June 30, 1997 and December 31, 1997 levels
of 0.81% and 0.81% and 0.90%, respectively, due in part to normal seasonal
trends. All values are within normal ranges for the portfolio.
Net losses were $3.08 million in 1997 or 0.33% of average portfolio
outstandings. As a percentage of the portfolio, losses were virtually
unchanged from 1996 levels of 0.31%. Losses for the six-month period ended
June 30, 1998 were $3.56 million or 0.31% of average portfolio receivables
(not annualized), an increase from 0.22% (not annualized) in the prior year's
six-month period related primarily to receivables sold to BankBoston which are
impacted by its charge-off policies. While there can be no assurance of future
portfolio delinquency or loss experience, management of the Transferor and
Servicer are not aware of any trends in the recreational vehicle industry in
general, nor legal, social or economic trends in the states where the
receivables are billed, that could likely have a material adverse effect on
the Trust portfolio.
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.
S-16
<PAGE>
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 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.
S-17
<PAGE>
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
(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
S-18
<PAGE>
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 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
S-19
<PAGE>
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
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
S-20
<PAGE>
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.
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
S-21
<PAGE>
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.
STATE AND LOCAL TAX CONSEQUENCES
In the opinion of Bryan Cave LLP, special state tax counsel to the Trust,
which is based in part on the opinion of Mayer, Brown & Platt, counsel to the
Trust with respect to certain federal income tax matters, for California,
Illinois and Missouri income tax purposes the Trust will be treated as a
Grantor Trust and will not be subject to tax. For additional information
regarding the State and local tax consequences see "State and Local 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.
S-22
<PAGE>
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.
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
S-23
<PAGE>
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 state income tax matters will be passed upon
for the Depositor by Bryan Cave LLP, St. Louis, Missouri.
S-24
<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-25
<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-26
<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
[TO BE CONFORMED]
<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-11
Delinquencies, Repossessions and Net Losses................................ S-13
Management's Discussion and Analysis....................................... S-15
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-22
ERISA Consideration........................................................ S-22
Underwriting............................................................... S-23
Legal Opinions............................................................. S-24
Index of Terms............................................................. S-25
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.
$( )
DISTRIBUTION FINANCIAL SERVICES RV 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 that shall have secured a Receivable and that shall
have been obtained by the applicable Trust incidental to a foreclosure or
repossession in the event of a payment default, 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 or to make
distributions to the Depositor with respect thereto.
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,
<PAGE>
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 Deutsche Recreational Asset Funding Corporation (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 the 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" beginning on page [ ].
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 ("DFS"
or 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.
[Notes will be available for purchase in mini-
mum denominations of [$1,000] and will be
available in book-entry form only.] 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.
To the extent provided in the related
Prospectus Supplement, the Servicer will be
permitted at its option to purchase the
Receivables 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"). Such purchase price for the
Receivables will never be less than the
outstanding principal amount of the Securities
plus the accrued interest on the Securities.
See "Description of the Transfer and Servicing
Agreements--Termination".
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.
[Certificates will be available for purchase in
a minimum denomination of [$1,000] and will be
available in book-entry form only.]
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
5
<PAGE>
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.
To the extent provided in the related
Prospectus Supplement, the Servicer will be
permitted at its option to purchase the
Receivables 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"). Such purchase price for the
Receivables will never be less than the
outstanding principal amount of the Securities
plus the accrued interest on the Securities.
See "Description of the Transfer and Servicing
Agreements--Termination".
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
6
<PAGE>
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
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 the Funding
Period, if any, will be specified in the
applicable Prospectus Supplement and in any
event will not exceed one year in length. 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.
The Receivables have been or will be originated
by the Transferor, and/or originated by
Dealers, and/or originated or acquired by DFS
and/or other entities (DFS
7
<PAGE>
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. 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 or other receivables secured by
boats and/or recreational vehicles. For a
description of the Transferor, see "The
Transferor." For a description of DFS, see "The
Servicer."
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. 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 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.
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
8
<PAGE>
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.
The [Depositor will be obligated to purchase
any Receivable from the Trust, and the]
Transferor will be obligated to purchase such
Receivable from the [Depositor] [Trust], 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.
To the extent 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.
To the extent provided 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 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
9
<PAGE>
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.
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.
Any lien or security interest in a Financed
Asset may be held by an agent or trustee for
the benefit of DFS and/or the Transferor. In
connection with the transfer of the related
Receivable to the related Trust, such lien
would then be held for the benefit of
applicable Trust.
Tax Status.................... If the Prospectus Supplement specifies that the
related Trust will be treated as an owner trust
upon the issuance of the related series of
Securities, Mayer, Brown & Platt ("Tax
Counsel") will deliver an opinion to the effect
that such 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
will deliver an opinion that the Notes issued
by
10
<PAGE>
such Trust will be characterized as debt for
federal income tax purposes.
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 not be classified as an association
taxable as a corporation for federal tax
purposes and that such Trust will be classified
as a grantor trust for federal income tax
purposes.
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 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.
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.
Rating........................ It will be a requirement for issuance of any
series that the Securities offered by this
Prospectus and the related Prospectus
Supplement be rated by at least one Rating
Agency in one of its four highest applicable
rating categories. The rating or ratings
applicable to Securities of each series offered
hereby and by the related Prospectus Supplement
will be as set forth in the related Prospectus
Supplement. A securities rating should be
evaluated independently of similar ratings on
different types of securities. A securities
rating is not a recommendation to buy, hold or
sell securities and does not address the effect
that the rate of prepayments on Receivables may
have on the yield to investors in the
Securities of such Series. See "Risk Factors"
herein.
Risk Factors.................. In considering an investment in any
Certificates and/or Notes, investors should
recognize that there are material risks
associated with such an investment. See "Risk
Factors" herein and in the related Prospectus
Supplement.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus and in the
related Prospectus Supplement, prospective investors should carefully consider
the following risk factors before investing in any class or classes of
Securities. The risk factor disclosure here and in the related Prospectus
Supplement summarizes material risk factors relating to the Securities.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE TRUST TO
HAVE A PERFECTED SECURITY INTEREST IN CERTAIN FINANCED ASSETS. If a Trust does
not have a perfected security interest in a Financed Asset, 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 and delays and reductions in payments to Securityholders
could result.
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.
The [Depositor will be obligated to purchase from the related Trust and the]
Transferor will be obligated to [simultaneously] purchase from the
[Depositor][Trust] 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.]
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM CERTAIN LIENS HAVING
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. If such Trust does not have a first
perfected security interest in a Financed Asset, 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, and could
result in delays and reductions in payments to, the Securityholders. 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
12
<PAGE>
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
Vehicles" and "--Security Interest in Boats" herein.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE TRUST TO
HAVE A PERFECTED SECURITY INTEREST IN THE RECEIVABLES. If a Trust does not
have a perfected security interest in the Receivables, its ability to realize
on such Receivable in the event of a default may be adversely affected. This
could adversely affect the amount available for distribution to, and could
result in delays and reductions in payments to, the Securityholders.
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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM LACK OF ENFORCEABILITY OF
RECEIVABLES. The inability of Trust to realize amounts owed in respect of a
Receivable could adversely affect the amount available for distribution to,
and could result in delays and reductions in payments to, the Securityholders.
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 Transferor will be obligated to purchase [or cause an
Originator to purchase] from the Trust any Receivable which fails to comply
with such requirements in the circumstances described in "Description of the
Transfer and Servicing Agreements--Transfer of Receivables." See also "Certain
Legal Aspects of the Receivables-- Consumer Protection Laws" herein.
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POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM THIRD PARTY LIABILITIES OF
TRUSTS. To the extent that a Dealer, Ganis or an Originator (including DFS)
violates consumer protection laws applicable to Receivables, a Trust could be
liable to the obligor, as an assignee of the affected Receivables. See
"Certain Legal Aspects of the Receivables--Consumer Protection Laws." The
related Receivables Transfer Agreement provides that the Transferor is
required to purchase [or to cause an Originator to purchase] from the Trust
Receivables that do not comply in all material respects with applicable law in
the circumstances described in "Description of the Transfer and Servicing
Agreements--Transfer of Receivables". However, if the Transferor [or an
Originator] fails for any reason to perform its purchase obligation,
Securityholders could experience delays or reductions in payments on their
Securities as a result of any such liabilities imposed on the applicable
Trust.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSOLVENCY OF A BANK
ORIGINATOR. The FDIC, if appointed as conservator or receiver for an insolvent
Bank Originator, may interfere with the timely transfer to the Transferor of
payments collected on the Receivables or interfere with the timely liquidation
of Receivables. Such interference could result in delays and reductions in
payments to the Securityholders. 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.
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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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSOLVENCY OF A DEALER, A
NONBANK ORIGINATOR, THE TRANSFEROR OR THE DEPOSITOR. 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. References in this Prospectus or the related Prospectus
Supplement to a "conveyance" from the Transferor to the Depositor contemplate
either a "sale" or a "capital contribution" from the Transferor to the
Depositor. The applicable Receivables Transfer Agreement will set forth
whether such conveyance 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.
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.
POSSIBLE LOSSES RESULTING FROM 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
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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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM APPLICATION OF 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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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. If the assets of
the Depositor were consolidated into the bankruptcy estate of the Transferor
or any other entity, the assets would be subject to claims of certain
creditors, and delays and reductions in payments to the Securityholders could
result.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INABILITY TO COLLECT
PAYMENTS FROM OBLIGORS. 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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM FAILURE OF THE DEPOSITOR,
TRANSFEROR OR SERVICER TO PERFORM UNDER THE AGREEMENTS. None of the
Transferor, the Servicer, the Depositor or any of their respective affiliates
will generally be obligated to make any payments in respect
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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 purchase [or to cause an
Originator to purchase] from the [Depositor] [Trust] Receivables with respect
to which such representations and warranties have been breached. [The
Depositor's obligation to make such purchase is contingent upon the Transferor
performing its obligation to purchase 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. See "The
Servicer".
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON THE CERTIFICATES. 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. Investors in any subordinated
class or classes of Certificates should consider the risk that losses on the
Receivables will be borne by such investors if any Reserve Account (if any) or
any other credit enhancement, as described in the related Prospectus
Supplement, is exhausted and could result in delays and reductions in payments
to such investors.
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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. If
losses occur which are not covered by such credit enhancement or exceed the
amount covered by such credit enhancement, delays and reductions in payments
to Securityholders could result.
POSSIBLE LOSSES RESULTING FROM PAYMENT PRIOR TO MATURITY. 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
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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 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. As a result, the actual maturity of any Class of Notes
and/or Certificates could occur significantly earlier than expected. Any such
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 "Possible Losses Resulting From 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.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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 available for
distribution to the Securityholders and delays and reductions in payments to
Securityholders could result. 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.
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM 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
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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 or may result in delays or reductions in payments to
Securityholders.
POSSIBLE LOSS OF YIELD RESULTING FROM 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.
POSSIBLE PAYMENT DELAYS AND LOSSES RESULTING FROM CONTROL BY INDENTURE
TRUSTEE OR NOTEHOLDERS IN OWNER TRUSTS. In general, with respect to any Owner
Trust issuing Notes, until the Notes have been paid in full, the ability to
direct the related Owner 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. The risk that the Noteholders, not the Certificateholders,
control the Owner Trust pertains only to Certificateholders of Owner Trusts
because an Owner Trust is authorized to issue both Notes and Certificates
while a Grantor Trust may issue only Certificates.
For example, with respect to an Owner 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. The actions by the
Indenture Trustee or the Noteholders could result in delays or reductions in
payments to Certificateholders.
RISK OF BOOK-ENTRY REGISTRATION. As 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
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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".
RATINGS ARE NOT RECOMMENDATIONS; THERE IS NO ASSURANCE THAT A RATING WILL
REMAIN IN EFFECT. It will be a condition to the issuance of a series of
Securities that they be rated in one of the four highest rating categories by
a Rating Agency identified in the related Prospectus Supplement. Such rating
should not be deemed a recommendation to purchase, hold or sell Securities,
inasmuch as it does not address market price or suitability for a particular
investor. Such rating will not constitute an assessment of the likelihood that
principal prepayments on the related Receivables will be made, the degree to
which the rate of such prepayments might differ from that originally
anticipated or the likelihood of early optional termination of the Class of
Notes and/or Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an investor
purchasing a Note and/or Certificate at a significant premium might fail to
recoup its initial investment under certain scenarios.
There is no assurance that any such rating will remain in effect for any
given period of time or may not be lowered or withdrawn entirely by a Rating
Agency if in its judgment circumstances in the future so warrant. A reduction
or withdrawal of a rating could adversely affect a Securityholder's ability to
transfer its Securities.
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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 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 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
obtained by the applicable Trust incidental to a foreclosure or repossession
in the event of a payment default; 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.
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
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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, 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".
Each Trust may be a "business trust".
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.
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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
and chosen at random 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 was not more than 59 days past
due (provided that, as of the Cutoff Date, the ratio of the aggregate
outstanding principal balance of the Receivables with any payment in
delinquency in excess of 30 days over the aggregate outstanding principal
balance of the Receivables does not equal or exceed 20%). 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
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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 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 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
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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.
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
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, (iii) to make the deposit of the
Pre-Funded Amount into the Pre-Funding Account, if any or (iv) for any other
purpose described 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.
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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 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 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
overall credit worthiness based upon the customer's willingness and ability to
repay and the adequacy of the underlying collateral. Credit applicants are
required to provide information pertaining to their income, employment
history, financial liabilities, personal status and a description of, or
invoice for, the asset for which the loan is requested. In
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addition, DFS or Ganis, as the case may be, requires one or more credit
reports on each credit 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 for which the loan is requested. Loans outside
of an underwriter's authority require approval by a more senior credit
underwriting employee.
DFS or Ganis, as the case may be, has and has had certain minimum
requirements, as described below. DFS or Ganis' management, as the case may
be, does not believe these minimum requirements are themselves generally
sufficient to warrant credit approval of a credit applicant. There were and
are no requirements which allow automatic approval or declination of the
applicant without review by a credit officer. Based on credit risk factors and
credit bureau score, each applicant is either approved, declined or, if
necessary, referred to the appropriate senior credit officer level for review.
DFS or Ganis, as the case may be, typically looks for stability of
employment and residence measured by a minimum of 2 years in the job or
industry and residence, a debt ratio (the ratio of total installment and
revolving debt and housing expenses to gross monthly income) of 40% or less, a
down payment of at least 10% of the purchase price of the asset for which the
loan is requested, and overall favorable credit profile. Approval of retail
applicants who do not meet the above referenced general guidelines is
considered on a case basis by appropriate senior level credit officers.
Approvals granted in such instances may be based on the applicant's job and
residential stability factors, ability to pay and past payment performance. On
an occasional basis, a cosigner or guarantor may be considered in determining
the credit decision being made.
[With respect to Receivables transferred to a Trust, the maximum amount DFS
or Ganis, as the case may be, will advance to borrowers is (i) in the case of
a new boat, up to 110% to the manufacturer's invoice price of the boat
securing any such Receivable transferred to a Trust (on an exception basis and
approved at the appropriate senior credit officer level, a discretionary
credit approval may permit advances up to 120% of the manufacturer's invoice
price) plus taxes, fees and insurance, and (ii) in the case of a used boat, up
to 105% of the wholesale value of the boat securing any such Receivable
transferred to a Trust as reported in the used boat guidebooks of the National
Automobile Dealers Association ("NADA") Guide Book or reported in the "BUC"
guide, or based on an appraisal of the boat (on an exception basis and
approved at the appropriate senior credit officer level, a discretionary
credit approval may permit advances up to 120% of the aforementioned wholesale
value) plus taxes, fees and insurance. Funding of the contact is authorized
subsequent to verifications of the stipulations of approval, confirmation of
the advance and satisfactory deliver of the related collateral. 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.]
THE SERVICER
GENERALLY
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
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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.
YEAR 2000 ISSUES
DFS is committed to taking the necessary steps to enable both new and
existing systems, applications and equipment to effectively process
transactions up to and beyond the Year 2000. To that end, DFS is well underway
with its Year 2000 readiness program, having spent approximately $5 million to
date. DFS estimates that the costs of its continuing Year 2000 readiness
efforts ultimately will exceed $10 million. Because of such ongoing readiness
efforts, Year 2000 processing issues and risks are not expected to have a
material adverse impact on the ability of DFS to continue its general business
operations, or on its ability to perform its responsibilities as Servicer.
Currently, DFS is actively engaged in completing the following Year 2000
program initiatives:
. Complete a comprehensive analysis of current functions which might be
impacted by Year 2000 issues, and document the results in a Year 2000
Assessment Report
. Develop and implement a detailed plan to address Year 2000 issues as
identified, particularly as they pertain to software and hardware
applications
. Establish a Year 2000 Program Management Office, staffed by dedicated
and experienced project managers
. Survey outside vendors to determine the degree of preparedness for the
Year 2000, to uncover potential issues arising from such business
counterparties
. Raise organizational awareness not only with top management, but also at
the staff level, and involve relevant business group leaders in reaching
solutions
. Implement an ongoing purchasing/procurement plan which is responsive to
Year 2000 concerns.
The risk of failures of computer applications, systems and networks due to
improper Year 2000 data processing are substantial, not only for users of
information technologies, but also for any entities and individuals which
interact with them. Moreover, when aggregated, multiple individual
malfunctions and failures relating to Year 2000 issues can potentially cause
broader, systemic disruptions across industries and economies. The risks
arising from Year 2000 issues which face many companies, including DFS,
include the potential diminished ability to respond to the needs and
expectations of customers in a timely manner, and the potential for inaccurate
processing of information. In recognition of this, DFS is focusing on mission
critical applications in order that programming changes are largely completed,
and that testing is underway, by December 31, 1998.
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In addition, DFS has begun developing contingency plans to complement the
Year 2000 readiness efforts already in progress, including backup and offsite
processing of certain information and functions. DFS anticipates that such
contingency plans will provide an additional level of security to its Year
2000 efforts already underway.
The foregoing discussion of Year 2000 issues is based on current estimates
of the management of DFS as to the amount of time and costs necessary to
remediate and test the computer systems of DFS. Such estimates are based on
the facts and circumstances existing at this time, and were derived utilizing
multiple assumptions of future events, including, but not limited to, the
continued availability of certain resources, third-party modification plans
and implementation success, and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual costs and results
could differ materially from the costs and results currently anticipated by
DFS. Specific factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer code, the
planning and modification success attained by the business counterparties of
DFS, and similar uncertainties.
SERVICING OPERATIONS; COLLECTION ACTIVITIES
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. This Prospectus and the related Prospectus
Supplement summarize material terms of the related Notes and the Indenture.
Such 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.
[To the extent 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 Cede & Co. (together with any successor depository
selected by the Trust, the "Depository") except as set forth below. The Notes
will be available for purchase in minimum denominations of $[1,000] and
integral multiples thereof in book-entry form only. Accordingly, Cede & Co. 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
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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. To the extent 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.
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.
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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.
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.
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, "Events of Default" under the related Indenture will
consist of: (i) a default for five days 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 after notice thereof
is given to such Trust by the applicable Indenture Trustee or to such Trust
and such Indenture Trustee by the holders of at least 25% in principal amount
of such Notes then outstanding; (iv) any representation or warranty made by
such Trust in 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
after notice thereof is given to such Trust by the applicable Indenture
Trustee or
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to such Trust and such Indenture Trustee by the holders of at least 25% in
principal amount of such Notes then outstanding; (v) certain events of
bankruptcy, insolvency, receivership or liquidation of the applicable Trust,
and (vi) any other event specified as an "Event of Default" in the related
Prospectus Supplement. However, the amount of principal required to be paid to
Noteholders of such series under the related Indenture will generally be
limited to amounts available to be deposited in the applicable Note
Distribution Account. Therefore, the failure to pay principal on a class of
Notes generally will not result in the occurrence of an Event of Default until
the final scheduled 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. Such declaration may, under
certain circumstances, be rescinded by the holders of Notes representing at
least 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. 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.
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
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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, subject to the next sentence. Notwithstanding any other
provision of the related Indenture, the right of any Noteholder to receive
payment of the principal of and interest on its Notes, on or after the
respective due dates expressed in the Indenture, or to institute suit for the
enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Noteholder, except that
the related Indenture may contain provisions limiting or denying the right of
any such Noteholder to institute any such suit, if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would,
under applicable law, result in the surrender, impairment, waiver or loss of
the lien of such Indenture for any property subject to such lien.
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.
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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.
This Prospectus and the related Prospectus Supplement summarize material terms
of the Certificates, the related Trust Agreement or the related Pooling and
Servicing Agreement. Such 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.
[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. 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.] Accordingly, such nominee is
expected to be the holder of record
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of the Certificates of any series that are not purchased by the Depositor. If
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. To the extent 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
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
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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 (or percentage) 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. See
"Risk Factors" herein and in the related Prospectus Supplement.
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. 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.
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.
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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.
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.
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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.
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
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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" herein and "Global Clearance,
Settlement and Tax Documentation Procedures" in Annex I hereto. 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
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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
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.
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.
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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' 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 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.
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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 Prospectus and the Prospectus Supplement summarize material terms
of the Transfer and Servicing Agreements. Such 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. 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
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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.
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 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 is contingent upon the Transferor performing
its corresponding obligation to purchase 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
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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 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
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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 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
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.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
To the extent 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.
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 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.
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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. 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
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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 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
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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
"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; (iii) the occurrence
of an Insolvency Event with respect to the Servicer; and (iv) any other event
described as a "Servicer Default" in the related Prospectus Supplement.
"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, 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
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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, 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
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. 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
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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.
To the extent 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. Such price will never be less
than the outstanding principal amount of the Securities plus the accrued
interest on the Securities.
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. Any
such successful bid must equal an amount which is not less than the
outstanding principal amount of the Securities plus accrued interest on the
Securities.
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
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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.
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.
Any lien or security interest in a Financed Asset may be held by an agent or
trustee for the benefit of DFS and/or the Transferor. In connection with the
transfer of the related Receivable to the related Trust, such lien would then
be held for the benefit of applicable Trust.
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,
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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, 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.
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
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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.
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 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
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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 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
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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 seventh 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--Possible Payment Delays or Losses Resulting From Failure of
the Trust to Have a Perfected Security Interest 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 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
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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 Financed Boat (and the 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 [or to cause an Originator to purchase] the Receivable unless the
breach is cured. See "Description of the Transfer and Servicing Agreements--
Transfer of Receivables" herein.
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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 [or to cause an Originator to purchase] the Receivable
unless the breach is cured. See "Risk Factors--Possible Payment Delays and
Losses Resulting from Lack of Enforceability of Receivables" and "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 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
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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 should 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 federal tax discussion herein 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.
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 Supplement 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.
Following is a brief summary of the tax opinions being rendered by Tax
Counsel. If the Prospectus Supplement specifies that the related Trust will be
treated as an owner trust, Tax Counsel will deliver an opinion, upon the
issuance of the related Securities, to the effect that such 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 will deliver an opinion that
the Notes issued by such Trust will be characterized as debt for federal
income tax purposes. If the Prospectus Supplement specifies that the related
Trust will be treated as a grantor trust, Tax Counsel will deliver an opinion,
upon the issuance of the related Certificates, to the effect that such Trust
will not be classified as an association taxable as a corporation for federal
tax purposes and that such Trust will be classified as a grantor trust for
federal income tax purposes.
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.
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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. 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
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
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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 30 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 IRS Form W-8 generally will
continue to be required to file that form. However, the requirement that
foreign persons submit IRS 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 effectively connected with the conduct of a U.S. trade or business
(in lieu of IRS Form 4224) and to foreign persons wishing to rely on a tax
treaty to reduce the withholding tax rate (in lieu of IRS Form 1001). The
Withholding Tax Regulations generally are effective for payments of interest
due after December 31, 1998, but IRS 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
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(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 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.
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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 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.
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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 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
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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 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
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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 should 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.
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. 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
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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 ($124,500 in 1998, 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 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,
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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 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.
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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.
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 should 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
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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 should 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 applicable Trust Agreement or Pooling and Servicing Agreement
will provide that the ability of any FASIT to add or remove assets will be
limited to the same extent as real estate mortgage investment conduits
("REMICs") under applicable federal tax rules and regulations.
STATE AND LOCAL TAX CONSEQUENCES
GENERAL MATTERS
The following is a general summary of certain State income tax consequences
to the Trust and the original Certificateholders and Noteholders under the
State income tax laws of Missouri, Illinois, California, and New York. The
summary, together with the discussion in the Prospectus Supplement under the
heading "State and Local Tax Consequences", represents the opinion of Bryan
Cave LLP ("Special State Tax Counsel") subject to the limitations and
qualifications set forth herein. No ruling of any State taxing authority has
been sought with respect to the matters discussed herein and in the Prospectus
Supplement, and the opinion of Special State Tax Counsel is not binding on any
State or local taxing authority. The summary is intended as a general
explanation only and does not furnish information in the level of detail or
with the attention to the holder's specific tax situation as would be provided
by a tax advisor to a Certificateholder or a Noteholder. In addition, the
summary relies upon the correctness of certain opinions of Tax Counsel with
respect to the federal income tax consequences to the Trust, Certificateholders
and Noteholders.
As a consequence of the foregoing, Noteholders and Certificateholders should
consult their own tax advisors in determining the specific federal, state,
local, foreign and any other tax consequences to them of the purchase,
ownership and disposition of the Notes and the Certificates.
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STATE TAX LAWS DISCUSSED
Because the Servicer has its principal office in the State of Missouri and
will conduct its activities relating to servicing the receivables owned by the
Trust from its offices located in the States of Illinois and California, and
the Trust will be organized under the common law of the State of New York,
these four States currently appear to have the strongest claim to tax any
income derived by a Trust, or realized by the holders of Notes and
Certificates by virtue of their ownership. It is possible, however, that other
states may assert jurisdiction to tax income derived by a Trust, or by the
holders of Notes and Certificates. In addition, future changes in the
operations of the Servicer, the Trust, or other factors may cause the Trust or
the income derived therefrom by Noteholders or Certificateholders to be
subject to taxation in other states or jurisdictions. Furthermore, because of
the factual nature of the issue, Special State Tax Counsel expresses no
opinion as to the tax consequences to Certificateholders attributable to the
activities of the Trust or the Servicer under the laws of any State. Finally
Special State Tax Counsel is rendering no opinions with respect to the local
tax consequences in any State, or the State tax consequences in any State
other than California, Illinois, Missouri and New York.
TAX STATUS OF A TRUST FOR CALIFORNIA, ILLINOIS, MISSOURI AND NEW YORK INCOME
TAX PURPOSES
Assuming that the Trust will not constitute an association taxable as a
corporation, or a publicly traded partnership for federal income tax purposes,
Special State Tax Counsel is of the opinion that a Trust will not constitute
an association taxable as a corporation, or publicly traded partnership, for
purposes of the income tax laws of the State of California, Illinois, Missouri
or New York. Accordingly, such a Trust will not be subject to corporate income
or franchise taxes imposed by the States of California, Illinois, Missouri and
New York. However, if the Trust were deemed to be doing business in Illinois,
the Trust could be subject to Illinois personal property replacement income
tax. Such taxes could result in reduced distributions to Certificateholders.
In addition, Certificateholders not otherwise subject to taxation in Illinois
could become subject to Illinois income tax as a result of their ownership of
Certificates.
TAX STATUS OF NOTEHOLDERS FOR CALIFORNIA, ILLINOIS, MISSOURI AND NEW YORK
INCOME TAX PURPOSES
Assuming that the Notes issued by a Trust are classified as debt for federal
income tax purposes, Special State Tax Counsel is further of the opinion that
such Notes will be classified as debt for purposes of the income tax laws of
California, Illinois, Missouri and New York. Accordingly, Special State Tax
Counsel is of the opinion that natural persons will not be subject to income
tax liability imposed by any of those States with respect to interest and
other income derived from the Notes, unless:
(a) they reside in one of those States (in which case they will be
subject to the tax imposed by the state of their residence), or
(b) the Notes constitute either
(i) property employed in a business, trade, profession or occupation
carried on in Missouri,
(ii)property employed in a regular trade or business conducted in
Illinois,
(iii) property which has acquired a business situs in California, or
(iv) property employed in a business, trade, profession or occupation
carried on in New York,
as the case may be.
THE FEDERAL AND STATE DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
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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.
TRUSTS THAT ISSUE NOTES OR CERTIFICATES
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
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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<PAGE>
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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<PAGE>
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.
75
<PAGE>
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
Benefit Plan............................................................. 94
Boat Receivables......................................................... 27
capital asset............................................................ 93
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
Commission............................................................... 4
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
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
</TABLE>
76
<PAGE>
<TABLE>
<S> <C>
Exemption................................................................ 95
FASIT.................................................................... 94
Final Scheduled Maturity Date............................................ 14
Financed Assets.......................................................... 10
Financed Boats........................................................... 10
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
Indirect Participants.................................................... 51
Cutoff Date.............................................................. 10
Initial Pool Balance..................................................... 69
Initial Receivables...................................................... 10
Insolvency Event......................................................... 66
Investment Earnings...................................................... 60
IRS...................................................................... 80
Issuer................................................................... 5
market discount.......................................................... 91
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
</TABLE>
77
<PAGE>
<TABLE>
<S> <C>
Receivables Transfer 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
Senior Certificates...................................................... 95
Servicer................................................................. 5
Servicer Advance......................................................... 13
Servicer Default......................................................... 66
Servicing Fee............................................................ 62
Servicing Fee Rate....................................................... 62
Simple Interest Receivables.............................................. 30
Strip Certificates....................................................... 9
Strip Notes.............................................................. 7
Subsequent Receivables................................................... 2
Subsequent Transfer Date................................................. 58
Terms and Conditions..................................................... 53
Transfer and Servicing Agreement......................................... 10
Transferor............................................................... 5
Trust.................................................................... 1, 5
Trust Accounts........................................................... 60
Trust Agreement.......................................................... 5
Trustee.................................................................. 1, 5
U.S. Person.............................................................. 93
UCC...................................................................... 15, 59
</TABLE>
78
<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.
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<PAGE>
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market trading
between CEDEL Participants or Euroclear Participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear, 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
Participant the following
80
<PAGE>
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.
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<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.
82
<PAGE>
[Alternate Page]
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by Deutsche Recreational Asset Funding Corporation (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 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 the 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, the telephone number (314) [523-3000].
83
<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 )
$( )
DISTRIBUTION FINANCIAL SERVICES BOAT TRUST 199-( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED NOTES, CLASS ( )
( %) ASSET BACKED CERTIFICATES
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, DEPOSITOR
DEUTSCHE FINANCIAL SERVICES CORPORATION, SERVICER
------------
Distribution Financial Services Boat 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 Pool
Balance.
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.
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........................ Distribution Financial Services Boat 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 Are Not
Recommendations" 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 Are
Not Recommendations" herein.
Absence of Market........ The Securities will be a new issue of
securities with no established trading market.
The Issuer does not expect to apply for listing
of the Securities on any national securities
exchange or quote the Securities in the
automated quotation system of a registered
securities association. The underwriter(s)
expects to make a secondary market in the
Securities, but has no obligation to do so.
[See "Risk Factors" 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.
RISK THAT SECURITYHOLDER MAY BE UNABLE TO LIQUIDATE ITS INVESTMENT PRIOR TO
MATURITY. 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.
(POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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, which could result in delays and
reductions in payments to 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.)
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON 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. Investors in the Certificates
should consider the risk that losses on the Receivables will be borne by such
investors if the Reserve Account [or credit enhancement] is exhausted and
could result in delays and reductions in payments to such investors.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM VARIATION AMONG CLASSES
WITH RESPECT TO DISTRIBUTIONS OF PRINCIPAL OR INTEREST. As described under
"Description of the [Notes][Certificates]", [each] class of
[Notes][Certificates] has varying rights with respect to the amount,
percentage and timing of distributions of principal [and/or] interest.
Investors in each class which is entitled to distributions of principal
[and/or] interest which are smaller (in amount or percentage) than, or which
are made later than, distributions made to other classes should consider the
risk that losses on the Receivables will be borne by such investors if the
Reserve Account [or credit enhancement] is exhausted, and that such smaller or
delayed distributions could result in delays and reductions in payments to
such investors.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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
S-11
<PAGE>
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.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FLOATING
RATE SECURITIES AND FIXED RATE RECEIVABLES. The Securities bear interest at
floating rates as described under "Description of the Notes--Payments of
Interest" and "Description of the Certificates--Distributions of Interest."
However, the Receivables bear interest at fixed rates as described under "The
Receivables Pool." In the event that the floating rate of interest on the
Securities exceeds the fixed rates of interest borne by the Receivables, there
may be insufficient collections to make interest payments owing on the
Securities, and delays and reductions in payments to Securityholders could
result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FIXED
RATE SECURITIES AND FLOATING RATE RECEIVABLES. The Securities bear interest at
fixed rates as described under "Description of the Notes--Payments of
Interest" and "Description of the Certificates--Distribution of Interest."
However, the Receivables bear interest at floating rates as described under
"The Receivables Pool." In the event that the floating rate of interest on the
Receivables is less than the fixed rates of interest borne by the Securities,
there may be insufficient collections to make interest payments owing on the
Securities, and delays and reductions in payments to Securityholders could
result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM USE OF FINANCIAL
INSTRUMENTS SUCH AS SWAPS AND CAPS. [Name of counterparty] has agreed to
provide a [swap] [cap] to the Trust. Pursuant to the [swap/cap], [name of
counterparty] will make payments to the Trust in the event that the interest
rate on the [Receivables] [Securities] exceeds [ ]. [Describe any material
limitations in swap/cap agreement.] [Name of counterparty] currently is rated
[ ] by [ ]. No assurance can be given that [name of counterparty] will
continue to maintain such rating or that [name of counterparty] will be able
to fulfill its obligations under the [swap/cap]. [Describe legal
enforceability risk, if applicable.] If [name of counterparty], becomes
bankrupt or insolvent, delays and reductions in payments to Securityholders
could result.]
RATINGS ARE NOT RECOMMENDATIONS. 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-12
<PAGE>
THE TRUST
GENERAL
The Issuer, Distribution Financial Services Boat 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-13
<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
$ , [(ii) had not more than remaining scheduled payments, (iii) had
not more than original scheduled payments, and (iv) had a [fixed] APR of
not less than % per annum. 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.
The aggregate principal balance of the Receivables as of the Cutoff Date
will not vary more than 5% (measured by the principal amount) on the Closing
Date.
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.
DISTRIBUTION FINANCIAL SERVICES BOAT 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>
DISTRIBUTION FINANCIAL SERVICES BOAT 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-14
<PAGE>
DISTRIBUTION FINANCIAL SERVICES BOAT 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 AND NET LOSSES
Set forth below is certain information concerning retail new and used marine
receivables originated or acquired by the Transferor and DFS. See "The
Transferor" and "Underwriting Procedures and Guidelines" in the Prospectus and
"Management's Discussion and Analysis" below. There can be no assurance that
the delinquency and net loss experience on the Receivables will be comparable
to that set forth below.
DELINQUENCY EXPERIENCE(1)
MARINE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------------------------- --------------------------------------
1997 1996 1998 1997
------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 7,822 $500,523 6,143 $362,018 9,948 $624,864 7,186 $442,544
Period of Delinquency
30-59 Days............. 64 3,246 52 2,361 33 1,784 52 1,746
60-89 Days............. 8 246 4 153 9 344 7 426
90 Days or More........ 20 1,496 17 978 12 662 20 546
Total Delinquencies..... 92 $ 4,990 73 $ 3,512 54 $ 2,780 79 $ 2,718
Total Delinquencies as a
percent of the
Portfolio.............. 1.18% 1.00% 1.19% 0.97% 0.54% 0.45% 1.10% 0.61%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
-----------------------------------
NUMBER OF
CONTRACTS AMOUNT
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio.................................. 3,742 $198,130
Period of Delinquency
30-59 Days................................ 37 1,634
60-89 Days................................ 11 292
90 Days or More........................... 6 469
Total Delinquencies........................ 54 $ 2,396
Total Delinquencies as a percent of the
Portfolio................................. 1.44% 1.21%
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract. The information in the tables includes receivables
that were sold by the Transferor and that the Servicer continues to
service. The Servicer treats a receivable as delinquent if any part of a
scheduled payment is not received when due.
S-15
<PAGE>
CREDIT LOSS EXPERIENCE(1)
MARINE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ---------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period............ $562,694 $402,281 $431,271 $260,074 $99,056
Average Number of Contracts
Outstanding During the
Period....................... 8,685 6,665 6,983 4,943 1,871
Net Losses.................... $ 696 $ 665 $ 755 $ 813 $ 239
Net Losses as a Percent of
Average Amount
Outstanding(2)(3)............ 0.12% 0.17% 0.18% 0.29% 0.24%
</TABLE>
- --------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract. The information in the
tables includes receivables that were sold by the Transferor and that the
Servicer continues to service.
(2) The Dealer Agreements provide for recourse to Dealers with respect to
receivables acquired by the Transferor or DFS from Dealers. In the event
of (i) a breach of a warranty by the Dealer in the Dealer Agreement or
(ii) a rescission or attempted rescission by an obligor, the contract is
required to be repurchased by the Dealer for an amount generally equal to
all amounts due and unpaid thereunder. As a result, any losses under such
contract are incurred by the Dealer and are not indicated in the net loss
figures set forth above.
(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 and excluding any
proceeds of repurchases by Dealers.
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Trust was formed to (i) acquire, hold and manage the Receivables and the
other assets of the Trust and proceeds therefrom, (ii) issue the Notes and
Certificates, (iii) make payments on the Notes and the Certificates, and (iv)
engage in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith. As
of the date of this Prospectus Supplement, the Trust had no operating history.
CAPITAL RESOURCES AND LIQUIDITY
The Trust's primary sources of capital are expected to be the net proceeds
from the sale of the Certificates and the Notes. 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 will 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.
The Trust's primary sources of liquidity will be income on the Receivables
and other assets of the Trust, principal payments on the Receivables and
amounts on deposit in the Reserve Account.
RESULTS OF OPERATIONS
The Trust is newly formed and, accordingly, has no results of operations as
of the date of this Prospectus Supplement. The income generated from the
Receivables and other assets owned by the Trust, the interest costs of the
Notes and the related operating expenses will determine the Trust's results of
operations in the future. The principal operating expense of the Trust is
expected to be the Servicing Fee.
S-16
<PAGE>
The ability of the Trust to realize proceeds on the Receivables in amounts
sufficient to pay interest and principal on the Notes and to make
distributions to Certificateholders will depend, in part, on the amount of
delinquencies and credit losses on the Receivables. For information on the
delinquency and loss experience of the Transferor pertaining to retail new and
used boat receivables, including those previously sold which the Servicer
continues to service, refer to "The Receivables Pool--Delinquencies and Net
Losses." Management's discussion of the delinquency and loss experience of the
Transferor and DFS with respect to consumer boat loans originated or acquired
by the Transferor and DFS follows in the succeeding paragraphs.
Total marine receivables at June 30, 1998 of $624.9 million reflect
substantially all marine receivables originated or acquired by the Transferor
and DFS since February, 1995 which remained outstanding at June 30, 1998. The
tables titled "Delinquency Experience" and "Credit Loss Experience" in "The
Receivables Pool--Delinquencies and Net Losses," reflect the delinquency and
loss experience with respect to this portfolio of receivables originated or
acquired by the Transferor and DFS, a portion of which has been previously
securitized as discussed below.
It should be noted that over the time period covered by the tables,
BankBoston, N.A. ("BankBoston") performed some or all of the servicing
functions for the portfolios until the end of the first quarter of 1998. Since
1995, the Transferor performed some servicing duties related to the portfolios
originated by it such as management of late stage delinquent receivables and
repossessed collateral. Following the acquisition of the Transferor by DFS in
1997, the transfer of all servicing duties to DFS commenced, which process was
completed at the end of the first quarter of 1998. From April, 1998, the
Servicer has performed all servicing duties for the portfolio of receivables
originated or acquired by the Transferor and DFS including the portfolio of
receivables originated by the Transferor on behalf of BankBoston, a portion of
which has been securitized. For a description of the relationship between the
Transferor and BankBoston, see "The Transferor" in the Prospectus.
At June 30, 1998, 54 contracts totaling $2.79 million were 30 or more days
delinquent, representing 0.45% of the total dollar value of the portfolio.
Delinquencies were down from both June 30, 1997 and December 31, 1997 levels
of 0.61% and 1.00%, respectively, due in part to normal seasonal trends. All
values are within normal ranges for the portfolio.
Net losses were $755 thousand in 1997 or 0.18% of average portfolio
outstandings. As a percentage of the portfolio, losses decreased from 0.29% in
1996 and 0.24% in 1995. Losses for the six-month period ended June 30, 1998
were $696 thousand or 0.12% of average portfolio receivables (not annualized),
down from 0.17% (not annualized) in the prior year's six-month period in spite
of the higher year end experience 1997 delinquency noted above. While there
can be no assurance of future portfolio delinquency of loss experience,
management of the Transferor and Servicer are not aware of any trends in the
marine industry in general, nor legal, social or economic trends in the states
where the receivables are billed, that could likely have a material adverse
effect on the Trust portfolio.
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.
S-17
<PAGE>
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.
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] [Floating] 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-18
<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-19
<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] [Floating] Rate
Securities, as such term is defined under "Certain Information Regarding the
Securities--[Fixed] [Floating] 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
S-20
<PAGE>
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. 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-21
<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;
S-22
<PAGE>
(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
S-23
<PAGE>
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.
S-24
<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'
S-25
<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
S-26
<PAGE>
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.
STATE AND LOCAL TAX CONSEQUENCES
In the opinion of Bryan Cave LLP, special state tax counsel to the Trust,
which is based in part on the opinion of Mayer, Brown and Platt, counsel to
the Trust with respect to certain federal income tax matters, 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 for
California, Illinois and Missouri income tax purposes. For additional
information regarding the State and local tax consequences see "State and
Local 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
S-27
<PAGE>
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 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.
S-28
<PAGE>
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.
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 state income tax matters relating to the Notes and
Certificates will be passed upon for the Depositor by Bryan Cave LLP, St.
Louis, Missouri.
S-29
<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
</TABLE>
S-30
<PAGE>
<TABLE>
<S> <C>
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-31
<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-2
Summary of Terms........................................................... S-4
Risk Factors............................................................... S-11
The Trust.................................................................. S-13
Capitalization of the Trust................................................ S-13
The Owner Trustee.......................................................... S-13
The Receivables Pool....................................................... S-14
Delinquencies, Repossessions and Net Losses................................ S-15
The Transferor............................................................. S-17
The Servicer............................................................... S-17
Weighted Average Life of the Securities.................................... S-18
Description of the Notes................................................... S-18
Description of the Certificates............................................ S-20
Description of the Transfer and Servicing Agreements....................... S-21
Federal Income Tax Consequences............................................ S-26
ERISA Considerations....................................................... S-27
Underwriting............................................................... S-28
Legal Opinions............................................................. S-29
Index of Terms............................................................. S-30
PROSPECTUS
[TO BE CONFORMED]
Available Information...................................................... 3
Incorporation of Certain Documents by Reference............................ 3
Summary of Terms........................................................... 4
Risk Factors............................................................... 12
The Trusts................................................................. 20
The Receivables Pools...................................................... 21
Weighted Average Life of the Certificates.................................. 23
Pool Factors and Trading Information....................................... 24
Use of Proceeds............................................................ 24
The Depositor.............................................................. 24
Description of the Notes................................................... 27
Description of the Certificates............................................ 32
Certain Information Regarding the Securities............................... 33
Description of the Transfer and Servicing Agreements....................... 39
Certain Legal Aspects of the Receivables................................... 50
Federal Income Tax Consequences............................................ 56
ERISA Considerations....................................................... 68
Plan of Distribution....................................................... 70
Legal Opinions............................................................. 71
Index of Terms............................................................. 72
</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.
$ ( )
DISTRIBUTION FINANCIAL SERVICES BOAT 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]
$( )
DISTRIBUTION FINANCIAL SERVICES BOAT 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
Pool Balance.
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.
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........................ Distribution Financial Services Boat 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-- 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 Are
Not Recommendations" 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 Are
Not Recommendations" herein.
The Certificates will be a new issue of
Absence of Market........ securities with no established trading market.
The Issuer does not expect to apply for listing
of the Certificates on any national securities
exchange or quote the Certificates in
S-8
<PAGE>
the automated quotation system of a registered
securities association. The underwriter(s)
expects to make a secondary market in the
Securities, but has no obligation to do so.
[See "Risk Factors" herein.]
S-9
<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.
RISK THAT CERTIFICATEHOLDER MAY BE UNABLE TO LIQUIDATE ITS INVESTMENT PRIOR
TO MATURITY. 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.
(POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM 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 effect on prepayments and/or defaults in respect of the
Receivables and thus potentially adversely affect the amount available for
distribution to the Certificateholders, which could result in delays and
reductions in payments 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.)
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM SUBORDINATION OF PAYMENTS
ON CERTIFICATES. 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. Investors in the Certificates should
consider the risk that losses on the Receivables will be borne by such
investors if the Reserve Account [or credit enhancement] is exhausted and
could result in delays and reductions in payments to such investors.
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM VARIATION AMONG CLASSES
WITH RESPECT TO DISTRIBUTIONS OF PRINCIPAL OR INTEREST. As described under
"Description of the Certificates", each class of Certificates has varying
rights with respect to the amount, percentage and timing of distributions of
principal [and/or] interest. Investors in each class which is entitled to
distributions of principal [and/or] interest which are smaller (in amount or
percentage) than, or which are made later than, distributions made to other
classes should consider the risk that losses on the Receivables will be borne
by such investors if the Reserve Account [or credit enhancement] is exhausted,
and that such smaller or delayed distributions could result in delays and
reductions in payments to such investors.
POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM INSUFFICIENT PAYMENTS ON
THE RECEIVABLES. 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.
S-10
<PAGE>
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FLOATING
RATE CERTIFICATES AND FIXED RATE RECEIVABLES. The Certificates bear interest
at floating rates as described under "Description of the Certificates--
Distributions of Interest." However, the Receivables bear interest at fixed
rates as described under "The Receivables Pool." In the event that the
floating rate of interest on the Certificates exceeds the fixed rates of
interest borne by the Receivables, there may be insufficient collections to
make interest payments owing on the Certificates, and delays and reductions in
payments to Certificateholders could result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM MISMATCH BETWEEN FIXED
RATE CERTIFICATES AND FLOATING RATE RECEIVABLES. The Certificates bear
interest at fixed rates as described under "Description of the Certificates--
Distribution of Interest." However, the Receivables bear interest at floating
rates as described under "The Receivables Pool." In the event that the
floating rate of interest on the Receivables is less than the fixed rates of
interest borne by the Certificates, there may be insufficient collections to
make interest payments owing on the Certificates, and delays and reductions in
payments to Certificateholders could result.]
[POSSIBLE PAYMENT DELAYS OR LOSSES RESULTING FROM USE OF FINANCIAL
INSTRUMENTS SUCH AS SWAPS AND CAPS. [Name of counterparty] has agreed to
provide a [swap] [cap] to the Trust. Pursuant to the [swap/cap], [name of
counterparty] will make payments to the Trust in the event that the interest
rate on the [Receivables] [Certificates] exceeds [ ]. [Describe any
material limitations in swap/cap agreement.] [Name of counterparty] currently
is rated [ ] by [ ]. No assurance can be given that [name of
counterparty] will continue to maintain such rating or that [name of
counterparty] will be able to fulfill its obligations under the [swap/cap].
[Describe legal enforceability risk, if applicable.] If [name of
counterparty], becomes bankrupt or insolvent, delays and reductions in
payments to Securityholders could result.]
RATINGS ARE NOT RECOMMENDATIONS. 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-11
<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-12
<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 $ , [(ii) had not more than remaining scheduled payments, (iii)
had not more than original scheduled payments, and (iv) had a [fixed] APR
of not less than % per annum. 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.
The aggregate principal balance of the Receivables as of the Cutoff Date
will not vary more than 5% (measured by principal amount) on the Closing Date.
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.
DISTRIBUTION FINANCIAL SERVICES BOAT 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-13
<PAGE>
DISTRIBUTION FINANCIAL SERVICES BOAT 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-14
<PAGE>
DISTRIBUTION FINANCIAL SERVICES BOAT 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-15
<PAGE>
DELINQUENCIES AND NET LOSSES
Set forth below is certain information concerning retail new and used marine
receivables originated or acquired by the Transferor and DFS. See "The
Transferor" and "Underwriting Procedures and Guidelines" in the Prospectus and
"Management's Discussion and Analysis" below. There can be no assurance that
the delinquency and net loss experience on the Receivables will be comparable
to that set forth below.
DELINQUENCY EXPERIENCE(1)
MARINE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------------------------- --------------------------------------
1997 1996 1998 1997
------------------ ------------------ ------------------ ------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- -------- --------- -------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio............... 7,786 $500,209 6,558 $375,523 9,948 $625,142 7,375 $446,569
Period of Delinquency
30-59 Days............. 62 3,174 57 2,461 33 1,784 75 2,484
60-89 Days............. 8 245 6 488 9 344 10 526
90 Days or More........ 11 1,080 19 1,049 12 382 22 744
----- -------- ----- -------- ----- -------- ----- --------
Total Delinquencies..... 81 $4,499 82 $3,998 54 $2,510 107 $3,754
Total Delinquencies
as a Percent of the
Portfolio.............. 1.04% 0.90% 1.25% 1.06% 0.54% 0.40% 1.45% 0.84%
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------
1995
------------------
NUMBER OF
CONTRACTS AMOUNT
--------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Portfolio.................................. 4,220 $211,611
Period of Delinquency
30-59 Days................................ 41 1,781
60-89 Days................................ 13 362
90 Days or More........................... 6 469
----- --------
Total Delinquencies........................ 60 $2,612
Total Delinquencies as a
Percent of the Portfolio.................. 1.42% 1.23%
</TABLE>
- --------
(1) All amounts and percentages are based on the gross amount scheduled to be
paid on each contract. The information in the tables includes receivables
that were sold by the Transferor and the Servicer continues to service.
The Servicer treats a receivable as delinquent if any part of a scheduled
payment is not received when due.
S-16
<PAGE>
CREDIT LOSS(1)
MARINE RECEIVABLES PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ----------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period........... $565,288 $416,640 $407,521 $308,049 $149,506
Average Number of Contracts
Outstanding During the
Period......................
Net Losses................... $ 695 $ 805 $ 592 $ 813 $ 239
Net Losses as a Percent of
Average Amount
Outstanding(2)(3)........... 0.24% 0.38% 0.15% 0.26% 0.16%
</TABLE>
- --------
(1) Except as indicated, all amounts and percentages are based on the gross
amount scheduled to be paid on each contract. The information in the
tables includes receivables that were sold by the Transferor and that the
Servicer continues to service.
(2) The Dealer Agreements provide for recourse to Dealers with respect to
receivables acquired by the Transferor and DFS from Dealers. In the event
of (i) a breach of a warranty by the Dealer in the Dealer Agreement or
(ii) a rescission or attempted rescission by an obligor, the contract is
required to be repurchased by the Dealer for an amount generally equal to
all amounts due and unpaid thereunder. As a result, any losses under such
contract are incurred by the Dealer and are not indicated in the net loss
figures set forth above.
(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 and excluding any
proceeds of repurchases by Dealers.
S-17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Trust was formed to (i) acquire, hold and manage the Receivables and the
other assets of the Trust and proceeds therefrom, (ii) issue the Certificates,
(iii) make payments on the Certificates, and (iv) engage in other activities
that are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith. As of the date of this prospectus,
the Trust had no operating history.
CAPITAL RESOURCES AND LIQUIDITY
The Trust's primary source of capital is expected to be the net proceeds
from the sale of the Certificates. 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 will 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.
The Trust's primary sources of liquidity will be income on the Receivables
and other assets of the Trust, principal payments on the Receivables and
amounts on deposit in the Reserve Account.
RESULTS OF OPERATIONS
The Trust is newly formed and, accordingly, has no results of operations as
of the date of this Prospectus Supplement. The income generated from the
Receivables and other assets owned by the Trust and the related operating
expenses will determine the Trust's results of operations in the future. The
principle operating expense of the Trust is expected to be the Servicing Fee.
The ability of the Trust to realize proceeds on the Receivables in amounts
sufficient to make distributions to Certificateholders will depend, in part,
on the amount of delinquencies and credit losses on the Receivables. For
information on the delinquency and loss experience of the Transferor
pertaining to retail new and used boat receivables, including those previously
sold which the Servicer continues to service, see "The Receivables Pool--
Delinquencies and Net Losses." Management's discussion of the delinquency and
loss experience of the Transferor and DFS with respect to consumer boat loans
originated or acquired by the Transferor and DFS follows in the succeeding
paragraphs.
Total marine receivables at June 30, 1998 of $624.9 million reflect
substantially all marine receivables originated or acquired by the Transferor
and DFS since February, 1995 which remained outstanding at June 30, 1998. The
tables titled "Delinquency Experience" and "Credit Loss Experience" in "The
Receivables Pool--Delinquencies and Net Losses," reflect the delinquency and
loss experience with respect to this portfolio of receivables originated or
acquired by the Transferor and DFS, a portion of which has been previously
securitized as discussed below.
It should be noted that over the time period covered by the tables,
BankBoston, N.A. ("BankBoston") performed some or all of the servicing
functions for the portfolios until the end of the first quarter of 1998. Since
1995, the Transferor performed some servicing duties related to the portfolios
originated by it such as management of late stage delinquent receivables and
repossessed collateral. Following the acquisition of the Transferor by DFS in
1997, the transfer of all servicing duties to DFS commenced, which process was
completed at the end of the first quarter of 1998. From April, 1998, the
Servicer has performed all servicing duties for the portfolio of receivables
originated or acquired by the Transferor and DFS including the portfolio
S-18
<PAGE>
of receivables originated by the Transferor on behalf of BankBoston, a portion
of which has been securitized. For a description of the relationship between
the Transferor and BankBoston, see "The Transferor" in the Prospectus.
At June 30, 1998, 54 contracts totaling $2.79 million were 30 or more days
delinquent, representing 0.45% of the total dollar value of the portfolio.
Delinquencies were down from both June 30, 1997 and December 31, 1997 levels
of 0.61% and 1.00%, respectively, due in part to normal seasonal trends. All
values are within normal ranges for the portfolio.
Net losses were $755 thousand in 1997 or 0.18% of average portfolio
outstandings. As a percentage of the portfolio, losses decreased from 0.29% in
1996 and 0.24% in 1995. Losses for the six-month period ended June 30, 1998
were $696 thousand or 0.12% of average portfolio receivables (not annualized),
down from 0.17% (not annualized) in the prior year's six-month period in spite
of the higher year end experience 1997 delinquency noted above. While there
can be no assurance of future portfolio delinquency of loss experience,
management of the Transferor and Servicer are not aware of any trends in the
marine industry in general, nor legal, social or economic trends in the states
where the receivables are billed, that could likely have a material adverse
effect on the Trust portfolio.
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.
S-19
<PAGE>
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 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.
S-20
<PAGE>
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
(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
S-21
<PAGE>
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 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.
S-22
<PAGE>
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
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.
S-23
<PAGE>
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.
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
S-24
<PAGE>
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.
STATE AND LOCAL TAX CONSEQUENCES
In the opinion of Bryan Cave LLP, special tax counsel to the Trust, which is
based in part on the opinion of Mayer, Brown & Platt, counsel to the Trust
with respect to certain federal income tax matters, for California, Illinois
and Missouri income tax purposes the Trust will be treated as a Grantor Trust
and will not be subject to tax. For additional information regarding the State
and local tax consequences see "State and Local 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-25
<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-26
<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 state income tax matters will be passed upon
for the Depositor by Bryan Cave LLP, St. Louis, Missouri.
S-27
<PAGE>
INDEX OF TERMS
[TO BE CONFORMED]
APR.........................................................................S-11
Cede.........................................................................S-3
Certificatehbolders......................................................... 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-28
<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-29
<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-10
The Trust.................................................................. S-12
The Receivables Pool....................................................... S-13
Delinquencies, Repossessions and Net Losses................................ S-16
Management's Discussion and Analysis....................................... S-18
The Transferor............................................................. S-19
The Servicer............................................................... S-19
Weighted Average Life of the Certificates.................................. S-19
Description of the Certificates............................................ S-19
Federal Income Tax Consequences............................................ S-25
ERISA Consideration........................................................ 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................................................................. 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.
$( )
DISTRIBUTION FINANCIAL SERVICES BOAT 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 )
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] 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" in the Prospectus.
, 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.
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.......................................... $ 885,000
Legal fees and expenses....................................... $ 300,000
Accounting fees and expenses.................................. $ 50,000
Blue sky fees and expenses.................................... $ 10,000
Rating agency fees............................................ $ 230,000
Trustee's fees and expenses................................... $ 40,000
Printing...................................................... $ 50,000
Miscellaneous................................................. $ 20,000
----------
Total..................................................... $1,585,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article NINTH of the articles of incorporation of Deutsche Recreational
Asset Funding Corporation (referred to therein as the "Corporation") provides
that:
The Corporation shall indemnify any person who is or was a director or
officer of the Corporation, with respect to actions taken or omitted by
such person in any capacity in which such person serves the Corporation, to
the full extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who
has ceased to be a director or officer, as the case may be, and shall
insure to the benefit of such person's heirs, executors and personal legal
representatives; PROVIDED, HOWEVER, that, except for proceedings to enforce
rights to indemnification, the Corporation shall not be obligated to
indemnify any person in connection with a proceeding (or part thereof)
initiated by such person unless such proceeding (or part thereof) was
authorized in advance, or unanimously consented to, by the Board of
Directors of the Corporation. Directors and officers of the Corporation
shall have the right to be paid by the Corporation expenses incurred in
defending or otherwise participating in any proceeding in advance of its
final disposition. The Corporation may, to the extent authorized from time
to time by the Board of Directors, provide rights to indemnification and to
the advancement of expenses to employees and agents of the Corporation. The
rights to indemnification and to the advancement of expenses conferred in
this Section shall not be exclusive of any other right that any person may
have or hereafter acquire under these Articles of Incorporation, the By-
Laws, any statute, agreement, vote of stockholders or disinterested
directors, or otherwise. Any repeal or modification of this Section by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to advancement of expenses that any person may have at
the time of such repeal or modification with respect to any acts or
omissions occurring prior to such repeal or modification.
II-1
<PAGE>
Section 4 of the by-laws of Deutsche Recreational Asset Funding Corporation
(referred to therein as the "Corporation") provides as follows:
4. INDEMNIFICATION.
(a) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interest of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification shall have been made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) or (b), or in
defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered by
a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the Director,
officer, employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in subsections (a) and
(b). Such determination shall be made (1) by the Board by a majority vote
of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
II-2
<PAGE>
(e) Expenses incurred by a Director or officer in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of any undertaking by or on behalf of such Director or officer to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this
Section. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any By-law, agreement,
vote of stockholders or disinterested Directors or otherwise, both as to
action in his official capacity and as to action in another capacity
holding such office.
(g) The Corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability
under the provisions of this Section.
(h) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 78.7502 of the Nevada Revised Statutes provides that a corporation
shall have the power (and that in certain circumstances a corporation is
required) to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director, officer, employee or agent
of the corporation, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement incurred in connection with the action,
suit or proceeding. Section 78.752 of the Nevada Revised Statutes provides that
a corporation may purchase and maintain insurance or make other financial
arrangements on behalf of any person who is or was a director, officer,
employee or agent of the corporation, for any liability asserted against such
person and liability and expenses incurred by such person in such person's
capacity as a director, officer, employee or agent, whether or not the
corporation has the authority to indemnify such person against such liability
and expense.
Deutsche Bank AG maintains a directors and officers liability insurance
policy with respect to certain direct and indirect subsidiaries, including
Deutsche Recreational Asset Funding Corporation. In general, the policy insures
the officers and directors of Deutsche Recreational Asset Funding Corporation
(the "Registrant") against loss arising from wrongful acts or omissions,
subject to the terms and conditions contained in the policy.
II-3
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <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 federal tax matters
* 8.2 Opinion of Bryan Cave LLP as to certain state tax matters
*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 Amendment No. 1 to this Registration
Statement)
</TABLE>
- --------
*Filed herewith.
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
II-4
<PAGE>
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 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-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 (AND THAT THE SECURITY RATING
REQUIREMENT WILL BE MET BY THE TIME OF SALE) AND HAS DULY CAUSED THIS AMENDMENT
NO. 2 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 SEPTEMBER 25, 1998.
Deutsche Recreational Asset Funding
Corporation
/s/ Richard Goldman
By: ____________________________
Name:Richard Goldman
Title:VICE PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 2 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED BELOW.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President (Principal September 25, 1998
____________________________________ Executive Officer)
Roger Kirwan
* Vice President and Treasurer September 25, 1998
____________________________________ (Principal Financial
Richard Schumacher Officer)
* Vice President and September 25, 1998
____________________________________ Controller (Principal
Steven Gentry Accounting Officer)
* Director September 25, 1998
____________________________________
Monte Miller
/s/ Richard Goldman Director September 25, 1998
____________________________________
Richard Goldman
* Director September 25, 1998
____________________________________
Phil Stout
</TABLE>
*IN WITNESS WHEREOF, RICHARD GOLDMAN HAS SIGNED THIS AMENDMENT NO. 2 ON
SEPTEMBER 25, 1998 ON BEHALF OF THE OFFICERS AND DIRECTORS NAMED ABOVE AS THEIR
ATTORNEY-IN-FACT UNDER A POWER OF ATTORNEY.
/s/ Richard Goldman
-------------------------------------
Richard Goldman
II-6
<PAGE>
EXHIBIT 1.1
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199_-_
$__________ (____%) Asset Backed Notes, Class A
$__________ (____%) Asset Backed Notes, Class B
$____________ (____%) Asset Backed Certificates
UNDERWRITING AGREEMENT
----------------------
___________ ___, 199_
DEUTSCHE BANK SECURITIES INC.
as Representative of the several Underwriters
31 West 52nd Street, 12th Floor
New York, New York 10019
Ladies and Gentlemen:
Section 1. Introductory. Deutsche Recreational Asset Funding Corporation,
a Nevada corporation (the "Depositor"), proposes to sell $_____________ (___%)
Asset Backed Notes, Class A and $_______ (____%) Asset Backed Notes, Class B
(the "Offered Notes") and $_________ (___%) Asset Backed Certificates (the
"Offered Certificates") (the Offered Certificates and the Offered Notes are
referred to herein collectively as the "Securities") issued by Distribution
Financial Services [RV/BOAT] Trust 199_-_ (the "Trust"). The Offered Notes will
be secured by the assets of the Trust. Each Offered Certificate will represent
a fractional undivided interest in the Trust. The assets of the Trust will
include, among other things, Receivables [transferred by Deutsche Financial
Services Corporation, a Nevada corporation ("DFS") to Ganis Credit Corporation,
a Delaware corporation ("Ganis"; the Depositor, DFS and Ganis may be referred to
herein individually as a "Participating Entity" and collectively as the
"Participating Entities") pursuant to the DFS/Ganis Transfer Agreement dated as
of _______, 199_ between DFS and Ganis (as amended, amended and restated or
otherwise modified from time to time, the "DFS/Ganis Transfer Agreement"),
Receivables transferred by Ganis to the Depositor pursuant to the
Ganis/Depositor Transfer Agreement dated as of _____, 199_ (as amended, amended
and restated or otherwise modified from time to time, the "Ganis/Depositor
Transfer Agreement"), and Receivables transferred by the Depositor to the Trust
pursuant to the Transfer and Servicing Agreement (as amended, amended and
restated or otherwise modified from time to time, the "Transfer and Servicing
Agreement") dated as of ________________, 199_ among
<PAGE>
the Trust, DFS, and the Depositor. The Offered Notes will be issued pursuant to
the Indenture dated as of ___________, 199_ (as amended, amended and restated or
otherwise modified from time to time, the "Indenture"), between the Trust and
_______________________, as indenture trustee (the "Indenture Trustee"). The
Offered Certificates will be issued pursuant to the Trust Agreement dated as of
, 199_ (as amended, amended and restated or otherwise modified from time to
time, the "Trust Agreement") between the Depositor and _________________, as
owner trustee (the "Owner Trustee"). The Transfer and Servicing Agreement, the
DFS/Ganis Transfer Agreement, the Ganis/Depositor Transfer Agreement, the Trust
Agreement and the Indenture are collectively referred to herein as the
"Designated Agreements".
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-56303), including a
related prospectus, for the registration under the Securities Act of 1933, as
amended (the "Act"), of the Securities, in the form heretofore delivered to the
Underwriters. The registration statement (including each prospectus constituting
a part thereof and the information, if any, deemed to be part thereof pursuant
to the rules and regulations of the Commission under the Act (the "1933 Act
Regulations")) as amended at the time it became effective, or, if any post-
effective amendment has been filed with respect thereto, as amended by the most
recent post-effective amendment at the time of its effectiveness, including the
exhibits thereto, is referred to herein as the "Registration Statement". The
form of base prospectus included in the Registration Statement as most recently
filed with the Commission is referred to as the "Base Prospectus" and the form
of the prospectus which includes the Base Prospectus and a prospectus supplement
describing the Securities and the offering thereof which prospectus is first
filed on or after the date of this Agreement in accordance with Rule 424(b) of
the 1933 Act Regulations, is referred to in this Agreement as the "Prospectus",
except that if any revised prospectus or prospectus supplement shall be provided
to you by the Depositor for use in connection with the offering of the
Securities which differs from such Prospectus (whether or not such revised
prospectus or prospectus supplement is required to be filed by the Depositor
pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus"
shall refer to such revised prospectus and prospectus supplement, as the case
may be, from and after the time it is first provided to you for such use.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given them in the Transfer and Servicing Agreement.
Section 2. Representations, Warranties and Covenants Participating
Entities. Each Participating Entity, severally but not jointly, represents and
warrants to, and agrees with, Deutsche Bank Securities Inc. ("Deutsche Bank
Securities") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Deutsche
Bank Securities is acting as representative (in such capacity, Deutsche Bank
Securities shall hereinafter be referred to as the "Representative"), as of the
date hereof that:
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<PAGE>
(i) The Registration Statement, including amendments thereto as may have
been required on or prior to the date hereof, has been filed with the
Commission and has become effective. The conditions to the use by the
Depositor of a Registration Statement on Form S-3 under the Act, as set
forth in the General Instructions to Form S-3, have been satisfied with
respect to the Registration Statement and the Prospectus.
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or, to the knowledge of any Participating Entity, threatened by
the Commission, and (i) on the Effective Date, the Registration Statement
conformed in all material respects to the requirements of the Act and the
1933 Act Regulations, and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (ii) on the date
of this Agreement, the Prospectus conforms in all material respects to the
requirements of the Act and the 1933 Act Regulations, and does not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein, or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
and (iii) at the time of filing of the Prospectus pursuant to Rule 424(b)
of the 1933 Act Regulations and on the Closing Date the Registration
Statement and the Prospectus will conform in all material respects to the
requirements of the Act and the 1933 Act Regulations, and neither the
Registration Statement nor the Prospectus will include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein, or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that these representations and warranties shall not apply to any
statement or omission made in reliance upon and in conformity with
information furnished in writing to the Depositor by the Representative
expressly for use in the Registration Statement or the Prospectus and set
forth in [(x) the chart immediately following the first paragraph set forth
under the heading "Underwriting" and (y) the third textual paragraph set
forth under the heading "Underwriting."] "Effective Date" means the latest
of the dates that the Registration Statement or the most recent post-
effective amendment thereto became effective.
(iii) Such Participating Entity is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly qualified to transact business and is in good
standing in each jurisdiction in the United States of America in which the
conduct of its business or the ownership of its property requires such
qualification, with corporate power to own, lease and operate its property
and conduct its business as it is currently conducted.
(iv) Such Participating Entity has the requisite power to execute and
deliver each Designated Agreement to which it is a party and this Agreement
and to perform its obligations under the Designated Agreements and
hereunder.
-3-
<PAGE>
(v) Each of the Designated Agreements to which it is a party and this
Agreement has been duly and validly authorized, executed and delivered by
such Participating Entity, and each of the Designated Agreements to which
it is a party and this Agreement constitutes the valid, legal and binding
obligation of such Participating Entity, enforceable against such
Participating Entity in accordance with its terms.
(vi) The direction by the Depositor to the Owner Trustee to
authenticate and deliver the Offered Certificates has been duly authorized
by the Depositor, and as of the Closing Date, the Offered Certificates will
be duly and validly authorized, and, when duly and validly executed by the
Trust and authenticated by the Owner Trustee and delivered to the Depositor
in accordance with the Trust Agreement, and following delivery to and
payment therefor by the Underwriters as provided herein, will be validly
issued and outstanding and entitled to the benefits of the Trust Agreement.
(vii) The direction by the Depositor to the Indenture Trustee to
authenticate and deliver the Offered Notes has been duly authorized by the
Depositor, and as of the Closing Date, the Offered Notes will be duly and
validly authorized, and, when duly and validly executed by the Trust and
authenticated by the Indenture Trustee and delivered to the Depositor in
accordance with the Indenture, and following delivery to and payment
therefor by the Underwriters as provided herein, will be validly issued and
outstanding and entitled to the benefits of the Indenture.
(viii) The Offered Certificates will have been duly and validly
executed and authenticated by the Owner Trustee in accordance with the
Trust Agreement on or before the Closing Date. The Offered Notes will have
been duly and validly executed and authenticated by the Indenture Trustee
in accordance with the Indenture on or before the Closing Date.
(ix) Neither the execution and delivery by such Participating Entity
of any Designated Agreement to which it is a party or of this Agreement nor
the consummation by such Participating Entity of the transactions
contemplated in the Designated Agreements or herein, nor the issuance of
the Securities by the Trust or the public offering thereof as contemplated
in the Prospectus, will conflict in any material respect with or result in
a material breach of, or constitute a material default (with notice or
passage of time or both) under, or result in the imposition of any lien,
pledge, charge, encumbrance, adverse claim or other security interest of
any other person (collectively, "Liens") upon any of the property or assets
of such Participating Entity (except as required or permitted pursuant
thereto or hereto), pursuant to any material mortgage, indenture, loan
agreement, contract or other instrument to which such Participating Entity
is party or by which such Participating Entity is bound, nor will such
action result in any violation of any provisions of any applicable law,
administrative regulation or administrative or court decree, the
certificate of incorporation or by-laws of such Participating Entity. Such
Participating Entity is not in violation of its certificate of
incorporation or in default in any material respect in the performance or
observance of
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<PAGE>
any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease, pooling and
servicing agreement or other instrument to which it is a party or by which
it may be bound, or to which any material portion of its property or assets
is subject.
(x) No legal or governmental proceedings are pending to which such
Participating Entity is a party or of which any property of such
Participating Entity is the subject, which if determined adversely to such
Participating Entity would, individually or in the aggregate, have a
material adverse effect on the financial position, shareholders' equity or
results of operations of such Participating Entity; and to the best
knowledge of such Participating Entity, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
(xi) No consent, approval, authorization or order of, or registration,
filing or declaration with, any court or governmental agency or body is
required in connection with (i) the execution and delivery by such
Participating Entity of any Designated Agreement to which it is a party or
this Agreement or the performance by such Participating Entity of any
Designated Agreement to which it is a party or this Agreement or (ii) the
offer, sale or delivery of the Securities, except such as shall have been
obtained or made, as the case may be, or will be obtained or made, as the
case may be, prior to the Closing Date, or will not materially adversely
affect the ability of such Participating Entity to perform its obligations
under any Designated Agreement to which it is a party or this Agreement.
(xii) Such Participating Entity possesses all material licenses,
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct the
business now conducted by it and as described in the Prospectus, except to
the extent that the failure to have such licenses, certificates,
authorities or permits does not have a material adverse effect on the
Securities or the financial condition of such Participating Entity, and
such Participating Entity has not received any notice of proceedings
relating to the revocation or modification of any such license,
certificate, authority or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the conduct of its business, operations or financial
condition.
(xiii) On the Closing Date, the Depositor (i) will have good and
marketable title to the Receivables being transferred by it to the Trust
pursuant to the Transfer and Servicing Agreement, free and clear of any
Lien, except to the extent permitted in the Transfer and Servicing
Agreement, (ii) will not have assigned to any Person (other than the Trust)
any of its right, title or interest in such Receivables or in the Transfer
and Servicing Agreement and (iii) will have the power and authority to
contribute the Receivables to the Trust, and upon execution and delivery of
the Transfer and Servicing Agreement by the Trust, the Trust will have good
and marketable title thereto, in each case free of Liens other than any
Lien created by an Underwriter.
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<PAGE>
(xiv) The properties and businesses of such Participating Entity
conform, in all material respects, to the descriptions thereof contained in
the Prospectus.
Section 3. Purchase, Sale and Delivery of Securities. (a) On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Depositor agrees to sell to each
Underwriter, severally and not jointly, and each Underwriter, severally and not
jointly, agrees to purchase from the Depositor, on __________, 199_, or on such
other date no later than seven Business Days thereafter as shall be mutually
agreed upon by the Depositor and the Representative (the "Closing Date") the
principal amount of the Securities set forth in Schedule A hereto opposite the
name of such Underwriter. The Class A Notes are to be purchased at a purchase
price equal to [ ]% of the aggregate principal amount thereof, the Class B Notes
are to be purchased at a purchase price equal to [ ]% of the aggregate amount
thereof and the Offered Certificates are to be purchased at a purchase price
equal to [ ]% of the aggregate amount thereof.
(b) Against payment of the purchase price in same day funds drawn to the
order of the Depositor, the Depositor will deliver the Securities to the
Underwriters at the offices of Mayer, Brown & Platt, 190 South LaSalle Street,
Chicago, Illinois 60603 on the Closing Date. The Securities to be so delivered
(other than the Offered Certificate registered in the name of the Depositor,
which shall be a definitive certificate) will be initially represented by one or
more Securities registered in the name of Cede & Co., the nominee of The
Depository Trust Company ("DTC"). The interests of beneficial owners of the
Securities (other than the Offered Certificate registered in the name of the
Depositor, which shall be a definitive certificate) will be represented by book
entries on the records of DTC and participating members thereof.
Section 4. Public Offering of the Securities. It is understood by the
parties hereto that, after the Registration Statement becomes effective, the
Underwriters propose to offer the Securities for sale to the public (which may
include selected dealers), as set forth in the Prospectus.
Section 5. Covenants of Each Participating Entity. Each Participating
Entity covenants and agrees severally and not jointly, with each Underwriter:
(a) If required, to file the Prospectus with the Commission pursuant
to and in accordance with Rule 424(b) of the 1933 Act Regulations not later
than the time specified therein. DFS and/or the Depositor will advise the
Underwriters promptly of any such filing pursuant to Rule 424(b).
(b) To make no amendment or any supplement to the Registration
Statement or the Prospectus as amended or supplemented, without furnishing
the Representative with a copy of the proposed form thereof and providing
the Representative with a reasonable opportunity to review the same and not
to file any such amendment or supplement to which the Representative shall
reasonably object; and to advise the Representative, promptly after it
receives notice thereof, of the time when any
-6-
<PAGE>
amendment to the Registration Statement has been filed or becomes effective
or any supplement to the Prospectus as amended or supplemented or any
amended Prospectus has been filed or mailed for filing, of the issuance of
any stop order by the Commission, of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, of the initiation
or threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or the Prospectus as amended or supplemented or for additional
information; and, in the event of the issuance of any such stop order or of
any order preventing or suspending the use of any Prospectus relating to
the Securities or suspending any such qualification, promptly to use its
best efforts to obtain its withdrawal.
(c) Promptly from time to time to take such action as the
Representative may reasonably request in order to qualify the Securities
for offering and sale under the securities laws of such states as the
Representative may request and to continue such qualifications in effect so
long as necessary under such laws for the distribution of such Securities;
provided, that in connection therewith no Participating Entity shall be
required to qualify as a foreign corporation to do business or to file a
general consent to service of process in any jurisdiction.
(d) To furnish the Representative with copies of the Registration
Statement (including exhibits) and copies of the Prospectus as amended or
supplemented in such quantities as the Representative may from time to time
reasonably request; and if the delivery of a Prospectus shall be at the
time required by law in connection with sales of any Securities, either (i)
any event shall have occurred as a result of which the Prospectus would
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
(ii) for any other reason it shall be necessary during such same period to
amend or supplement the Prospectus as amended or supplemented, to notify
the Representative and to prepare and furnish to the Representative as the
Representative may from time to time reasonably request an amendment or a
supplement to the Prospectus which will correct such statement or omission
or effect such compliance.
(e) To make generally available to Noteholders and Certificateholders
as soon as practicable after the effective date of the Registration
Statement (as such date is defined in Rule 158(c) under the Act), an
earnings statement of the Depositor complying with Rule 158 under the Act
and covering a period of at least twelve consecutive months beginning after
such effective date.
(f) To furnish to each Underwriter copies of the Registration
Statement (one of which will be signed and will include all exhibits), each
related preliminary prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as such Underwriter reasonably requests.
-7-
<PAGE>
(g) So long as any of the Securities are outstanding, to furnish each
Underwriter copies of all reports or other communications (financial or
other) furnished to Noteholders or Certificateholders, and to deliver to
the Underwriters during such same period (i) as soon as they are available,
copies of any reports and financial statements furnished to or filed with
the Commission and (ii) such additional information concerning the business
and financial condition of the Depositor and the Trust as such Underwriter
may from time to time reasonably request.
(h) To pay all expenses incident to the performance of the obligations
under this Agreement, including:
(i) the word processing, printing and filing of the Registration
Statement as originally filed and of each amendment thereto;
(ii) the reproduction of this Agreement;
(iii) the preparation, printing, issuance and delivery of the
Securities to the Underwriters;
(iv) the fees and disbursements of counsel and accountants for
such Participating Entity;
(v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 5(c) hereof, including
filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the
preparation of a blue sky survey;
(vi) if requested by the Representative, the determination of the
eligibility of the Securities for investment and the reasonable fees
and disbursements of counsel for the Underwriters in connection
therewith and in connection with the preparation of a legal investment
memorandum;
(vii) the printing and delivery to the Underwriters of copies of
the Registration Statement as originally filed and of each amendment
thereto, of the preliminary prospectuses, and of the Prospectus and
any amendments or supplements thereto;
(viii) the printing and delivery to the Underwriters of copies of
a blue sky survey and, if requested by the Representative, a legal
investment memorandum, if any;
(ix) the fees of [Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services] for rating the Securities; and
-8-
<PAGE>
(x) the fees and expenses of the Owner Trustee, the Indenture
Trustee and their respective counsel.
If the sale of the Securities is not consummated by reason of any failure,
refusal or inability on the part of any Participating Entity to perform any
agreement on its part to be performed, or because any condition of the
Underwriters' obligations hereunder required to be fulfilled shall not have
been fulfilled (other than as a result of any breach or default by the
Underwriters), each Participating Entity shall jointly and severally be
obligated to reimburse the Underwriters for all out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the
Underwriters. For purposes of the preceding sentence, the conditions in
clauses (ii) and (iii) of Section 6(d) shall not be conditions required to
be fulfilled by any Participating Entity.
(i) For a period from the date of this Agreement until the retirement
of the Securities, or until such time as each Underwriter shall cease to
maintain a secondary market in the Securities, whichever occurs first, to
deliver to each Underwriter the annual statements of compliance, the
Officer's Certificate and the annual independent certified public
accountants' servicing reports furnished pursuant to the Transfer and
Servicing Agreement and the monthly Servicer's Certificate pursuant to the
Transfer and Servicing Agreement as soon as such statements and reports are
furnished to the Indenture Trustee.
(j) From and after the Closing Date, not to take any action
inconsistent with the Trust's ownership of the Receivables other than as
permitted by the Transfer and Servicing Agreement.
(k) To the extent, if any, that the rating provided with respect to
the Securities by the rating agency or agencies that initially rate the
Securities is conditional upon the furnishing of documents or the taking of
any other actions by such Participating Entity, to furnish such documents
and take any such other actions.
Section 6. Conditions Precedent to the Obligations of the Underwriters. The
obligation of the Underwriters to purchase and pay for the Securities is subject
to the accuracy of the representations and warranties on the part of each
Participating Entity herein, to the accuracy of the statements of officers of
each Participating Entity made pursuant to the provisions hereof, to the
performance by each Participating Entity of its obligations hereunder and to the
following additional conditions precedent:
(a) The Registration Statement shall have become effective; and prior
to the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of any
Participating Entity, shall be contemplated by the Commission. If the
Depositor has elected to rely upon Rule 430A of the 1933 Act Regulations,
the price of the Securities and any price-related information previously
omitted from the effective Registration Statement pursuant to such Rule
430A shall have been transmitted
-9-
<PAGE>
to the Commission for filing pursuant to Rule 424(b) of the 1933 Act
Regulations within the prescribed time period, and prior to the Closing
Date the Depositor shall have provided evidence satisfactory to the
Representative of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A of the 1933 Act
Regulations.
(b) Each Participating Entity shall have delivered to the
Representative a certificate, dated the Closing Date, signed by its
president, a senior vice president or a vice president to the effect that
the signer of such certificate has carefully examined the Registration
Statement, the Prospectus, each Designated Agreement and this Agreement and
that:
(i) the representations and warranties of such Participating
Entity in each Designated Agreement and this Agreement are true and
correct in all material respects at and as of the Closing Date with
the same effect as if made on the Closing Date;
(ii) such Participating Entity has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been initiated or, to knowledge of such Participating
Entity, threatened as of the Closing Date; and
(iv) nothing has come to such Person's attention that would lead
such person to believe that the Prospectus contains any untrue
statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) Since the respective dates as of which information is given in
the Prospectus as amended or supplemented, there shall not have occurred
any material adverse change or any development involving a prospective
material adverse change, in or affecting particularly the business or
assets of the Trust or any Participating Entity or any material adverse
change in the financial position or results or operations of the Trust or
any Participating Entity otherwise than as set forth or contemplated in the
Prospectus which in any such case makes it impracticable to inadvisable in
the Representative's reasonable judgment to proceed with the public
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus as amended or supplemented.
-10-
<PAGE>
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business, financial
condition or properties of any Participating Entity or the Trust which, in
the Representative's judgment, materially impairs the investment quality of
the Securities, (ii) any material adverse change in the financial markets
in the United States or any outbreak of hostilities or other calamity or
crisis, the effect of which is such as to make it, in the judgment of the
Representative, impracticable or inadvisable to market the Securities or to
enforce contracts for the sale of the Securities, (iii) the suspension of
trading generally by either the American Stock Exchange or the New York
Stock Exchange, or the establishment of minimum or maximum prices or ranges
of prices, by either of such exchanges or by order of the Commission or any
other governmental authority, or any banking moratorium declared by
Federal, Missouri, California or New York authorities or (iv) any event
that would constitute a default under this Agreement or default in the
performance of the obligations of any Participating Entity under any
Designated Agreement to which it is a party or which, with the passage of
time or the giving of notice or both, would constitute such default.
(e) The Representative shall have received from counsel (who may be
an employee of a Participating Entity) to the Participating Entities, one
or more opinions, dated the Closing Date and addressed to the Underwriters
and satisfactory in form and substance to the Representative and to counsel
to the Representative.
(f) The Representative shall have received from special counsel for
the Participating Entities an opinion, dated the Closing Date and
satisfactory in form and substance to the Representative and to counsel to
the Underwriters.
(g) The Representative shall have received from special counsel to
the Depositor, an opinion, dated the Closing Date, addressed to the
Underwriters and satisfactory in form and substance to the Representative
and to counsel to the Underwriters, relating to certain bankruptcy matters
and federal income tax matters.
(h) The Representative shall have received from counsel for the Owner
Trustee, an opinion, dated the Closing Date and addressed to the
Underwriters and each Participating Entity and satisfactory in form and
substance to the Representative and to counsel to the Underwriters.
[(i) The Representative shall have received an officer's certificate
dated the Closing Date of the chairman of the board, the president, an
executive vice president or the treasurer of the Owner Trustee in which
such officer shall state that, to the best of his/her knowledge after
reasonable investigation, the representations and warranties of the Owner
Trustee contained in the Trust Agreement are true and correct in all
material respects, and that the Owner Trustee has complied in all material
respects with all
-11-
<PAGE>
agreements and satisfied all conditions on its part to be performed or
satisfied under the Trust Agreement at or prior to the Closing Date.]
(j) The Representative shall have received from counsel for the
Indenture Trustee, an opinion, dated the Closing Date and addressed to the
Underwriters, each Participating Entity and satisfactory in form and
substance to the Representative and to counsel to the Underwriters.
[(k) The Representative shall have received an officer's certificate
dated the Closing Date of the chairman of the board, the president, an
executive vice president or the treasurer of the Indenture Trustee in which
such officer shall state that, to the best of his/her knowledge after
reasonable investigation, the representations and warranties of the
Indenture Trustee contained in the Indenture are true and correct in all
material respects, and that the Indenture Trustee has complied in all
material respects with all agreements and satisfied all conditions on its
part to be performed or satisfied under the Indenture at or prior to the
Closing Date.]
(l) The Representatives shall have received a copy of a ratings
letter confirming that the Offered Notes have been rated in the highest
rating category by at least one of [Moody's Investors Service, Inc. and
Standard & Poor's Ratings Services], and such ratings shall not have been
reduced or withdrawn and that the Offered Certificates have been rated in
[one of the four highest rating categories] by at least one of [Moody's
Investors Service, Inc. and Standard & Poor's Ratings Service], and such
ratings shall not have been reduced or withdrawn.
(m) The Owner Trustee shall have furnished to the Representative a
certificate of the Owner Trustee, signed by one or more duly authorized
officers of the Owner Trustee, dated the Closing Date, as to the due
acceptance of the Trust Agreement by the Owner Trustee and the due
execution and delivery of the Offered Certificates by the Owner Trustee
thereunder and such other matters as the Representative shall reasonably
request.
(n) The Indenture Trustee shall have furnished to the Representative
a certificate of the Indenture Trustee, signed by one or more duly
authorized officers of the Indenture Trustee, dated the Closing Date, as to
the due acceptance of the Indenture by the Indenture Trustee and the due
execution and delivery of the Offered Notes by the Indenture Trustee
thereunder and such other matters as the Representative shall reasonably
request.
(o) Counsel to each Participating Entity shall have furnished to the
Representative any opinions supplied to the rating agencies relating to
certain matters with respect to the Securities, which opinions shall also
be addressed to the Underwriters. Drafts of such opinions shall have been
furnished to the Representative no later than five Business Days prior to
the Closing Date.
-12-
<PAGE>
(p) The Representative shall have received a letter, dated the
Closing Date and addressed to the Underwriters, from KPMG Peat Marwick LLP
certified public accountants, substantially in the form heretofore approved
by the Representative and counsel to the Underwriters.
(q) The Representative shall have received a copy of [(i) a file-
stamped acknowledgment copy of the UCC-1 financing statement on Form UCC-1
filed with the Secretary of State of the State of Missouri with respect to
the transfer of Receivables (and related items) by DFS to Ganis pursuant to
the DFS/Ganis Transfer Agreement, naming DFS as debtor/transferor and Ganis
as the secured party/transferee,] (ii) a file-stamped acknowledgment copy
of the UCC-1 financing statement on Form UCC-1 filed with the Secretary of
State of the State of California with respect to the transfer of
Receivables (and related items) by Ganis to the Depositor pursuant to the
Ganis/Depositor Transfer Agreement, naming Ganis as debtor/transferor and
the Depositor as the secured party/transferee, (iii) a file-stamped
acknowledgment copy of the UCC-1 financing statement on Form UCC-1 filed
with the Secretary of State of the State of Missouri with respect to the
transfer of Receivables (and related items) by the Depositor to the Trust
pursuant to the Transfer and Servicing Agreement, naming the Depositor as
debtor/transferor and the Trust as secured party/transferee, and (iv) a
file-stamped acknowledgment copy of the UCC-1 financing statement on Form
UCC-1 filed with the Secretary of State of the State of [ ]
with respect to the pledge of Receivables (and related items) by the
Trust to the Indenture Trustee pursuant to the Indenture, naming the Trust
as debtor and the Indenture Trustee as secured party.
(r) All documents incident to the Designated Agreements and this
Agreement shall be reasonably satisfactory in form and substance to the
Underwriters and counsel to the Underwriters; and all actions taken by the
Depositor to authorize the offering and sale of the Securities shall be
reasonably satisfactory in form and substance to the Underwriters and
counsel to the Underwriters; and each Participating Entity shall furnish
the Underwriters and counsel to the Underwriters with such other opinions,
certificates, letters and documents as the Underwriters or counsel to the
Underwriters shall reasonably request.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Representative by notice to the Depositor at any time on or prior to Closing
Date, and such termination shall be without liability of any party to any other
party except as provided in Section 5 hereof.
Section 7. Indemnification. (a) Each Participating Entity shall, jointly
and severally, indemnify and hold harmless each Underwriter and each person who
controls any Underwriter within the meaning of Section 15 of the Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material
-13-
<PAGE>
fact contained in the Registration Statement (or any amendment thereto), or
the omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus (or any amendment
or supplement thereto) or any preliminary prospectus, or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of such Participating Entity; and
(iii) against any and all expense whatsoever (including, subject to
Section 7(c) hereof, the fees and disbursements of counsel chosen by you)
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, to the extent that any such expense is
not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Depositor by
the Representative expressly for use in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) and set forth in [(x) the chart immediately
following the first paragraph set forth under the heading "Underwriting" and (y)
the third textual paragraph set forth under the heading "Underwriting."]
(b) Each Underwriter severally agrees to indemnify and hold harmless
each Participating Entity, each of their respective directors, each of their
respective officers who signed the Registration Statement, and each person, if
any, who controls each Participating Entity, respectively, within the meaning of
Section 15 of the Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section
7, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto, or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Depositor by such Underwriter through the
Representative expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
-14-
<PAGE>
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it with respect to which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve it from any liability which
it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action. In no event shall the indemnifying parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances.
Section 8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 7 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, each Participating Entity,
jointly and severally, on the one hand, and the Underwriters, on the other,
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred by any
such Participating Entity and one or more Underwriters, as incurred, in such
proportions that the Underwriters are responsible for that portion represented
by the percentage that the underwriting discount bears to the initial public
offering price, and each Participating Entity shall be jointly and severally
responsible for the balance; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the other provisions of this
Section 8, an Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section 8, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the Act
shall have the same rights to contribution as such Underwriter and each director
of the Depositor, each officer of the Depositor who signed the Registration
Statement, and each person, if any, who controls any Participating Entity within
the meaning of Section 15 of the Act shall have the same rights to contribution
as each Participating Entity.
Section 9. Survival of Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
each Participating Entity or its officers and of the Underwriters set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation or statement as to the results thereof, made by
or on behalf of any Underwriter, any Participating Entity or any of their
respective representatives, officers or directors of any controlling person, and
will survive delivery of and payment for the Securities.
Section 10. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail on the Closing Date to purchase the Securities which
it or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-
-15-
<PAGE>
defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representative shall not
have completed such arrangements within such 24-hour period, then:
(a) if the principal amount of Defaulted Securities does not exceed
10% of the principal amount of the Securities, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-
defaulting Underwriters, or
(b) if the principal amount of Defaulted Securities exceeds 10% of
the principal amount of the Securities, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representative or the Depositor shall have the right
to postpone Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
Section 11. Notices. All communications hereunder will be in writing and:
(i) if sent to the Underwriters, will be mailed, delivered or
sent by facsimile transmission and confirmed to the Representative at:
Deutsche Bank Securities Inc.
31 West 52nd Street, 12th Floor
New York, New York 10019
Attention: Victor Mahoney
Telephone: 212/469-7187
Facsimile: 212/469-7185;
(ii) if sent to the Depositor, will be mailed, delivered or sent
by facsimile transmission, and confirmed to it at:
Deutsche Recreational Asset Funding Corporation
655 Maryville Centre Drive
St. Louis, Missouri 63141
Attention: President
Telephone:
Facsimile:
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<PAGE>
[(iii) if sent to DFS, will be mailed, delivered or sent by
facsimile transmission, and confirmed to it at:
Deutsche Financial Services Corporation
655 Maryville Centre Drive
St. Louis, Missouri 63141
Attention: Senior Vice President
Telephone: 314/523-3950
Facsimile: 314/523-3993]
(iv) if sent to Ganis, will be mailed, delivered or sent by
facsimile transmission, and confirmed to it at:
Ganis Credit Corporation
660 Newport Center Drive
Newport Beach, California 92660
Attention: Executive Vice President
Telephone:
Facsimile:
or to such other address as any Participating Entity or the Representative may
designate in writing to the other parties hereto.
Section 12. Successors. This Agreement will inure to the benefit of and
be binding upon the Underwriters, each Participating Entity and their respective
successors and the officers and directors and controlling persons referred to in
Section 7 hereof, and no other Person will have any right or obligations
hereunder.
Section 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 14. Counterparts. This Agreement may be executed by each of the
parties hereto in any number of counterparts, and by each of the parties hereto
on separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us a counterpart hereof, whereupon this letter and your acceptance
hereof shall constitute a binding agreement among the Underwriters and each
Participating Entity.
Very truly yours,
DEUTSCHE RECREATIONAL ASSET
FUNDING CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
[DEUTSCHE FINANCIAL SERVICES CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title: ]
-18-
<PAGE>
GANIS CREDIT CORPORATION
By:
--------------------------------
Name:
Title:
Accepted in New York, New York,
as of the date first above written:
DEUTSCHE BANK SECURITIES INC.
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
For itself and as Representative
of the other Underwriters named in
Schedule A hereto.
-19-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Principal Principal
Amount of Amount of Amount of
Name of Underwriter Class A Notes Class B Notes Certificates
<S> <C> <C> <C>
Deutsche Bank Securities Inc................ $ $ $
________________________.................... $ $ $
________________________.................... $ $ $
________________________.................... $ $ $
________________________.................... $ $ $
- --------------------------------------------------------------------------------------------------
Total $ $ $
==================================================================================================
</TABLE>
A-1
<PAGE>
EXHIBIT 1.2
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199_-_
$__________ (____%) Asset Backed Certificates, Class A
$__________ (____%) Asset Backed Certificates, Class B
UNDERWRITING AGREEMENT
----------------------
___________ ___, 199_
DEUTSCHE BANK SECURITIES INC.
as Representative of the several Underwriters
31 West 52nd Street, 12th Floor
New York, New York 10019
Ladies and Gentlemen:
Section 1. Introductory. Deutsche Recreational Asset Funding Corporation, a
Nevada corporation (the "Depositor"), proposes to sell $_____________ (___%)
Asset Backed Certificates, Class A and $_______ (____%) Asset Backed
Certificates, Class B (the "Offered Certificates") or the "Securities") issued
by Distribution Financial Services [RV/BOAT] Trust 199_-_ (the "Trust"). Each
Offered Certificate will represent a fractional undivided interest in the Trust.
The assets of the Trust will include, among other things, Receivables
[transferred by Deutsche Financial Services Corporation, a Nevada corporation
("DFS") to Ganis Credit Corporation, a Delaware corporation ("Ganis"; the
Depositor, DFS and Ganis may be referred to herein individually as a
"Participating Entity" and collectively as the "Participating Entities")
pursuant to the DFS/Ganis Transfer Agreement dated as of _______, 199_ between
DFS and Ganis (as amended, amended and restated or otherwise modified from time
to time, the "DFS/Ganis Transfer Agreement"), Receivables transferred by Ganis
to the Depositor pursuant to the Receivables Transfer Agreement dated as of
_____, 199_ (as amended, amended and restated or otherwise modified from time to
time, the "Receivables Transfer Agreement"), and Receivables transferred by the
Depositor to the Trust pursuant to the Pooling and Servicing Agreement (as
amended, amended and restated or otherwise modified from time to time, the
"Pooling and Servicing Agreement") dated as of ________________, 199_ among the
DFS, the Depositor and _________, as trustee (the "Trustee"). The Offered
Certificates will be issued pursuant to the Pooling and Servicing Agreement. The
DFS/Ganis Transfer Agreement, the Receivables
<PAGE>
Transfer Agreement, and the Pooling and Servicing Agreement are collectively
referred to herein as the "Designated Agreements".
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-56303), including a
related prospectus, for the registration under the Securities Act of 1933, as
amended (the "Act"), of the Securities, in the form heretofore delivered to the
Underwriters. The registration statement (including each prospectus constituting
a part thereof and the information, if any, deemed to be part thereof pursuant
to the rules and regulations of the Commission under the Act (the "1933 Act
Regulations")) as amended at the time it became effective, or, if any post-
effective amendment has been filed with respect thereto, as amended by the most
recent post-effective amendment at the time of its effectiveness, including the
exhibits thereto, is referred to herein as the "Registration Statement". The
form of base prospectus included in the Registration Statement as most recently
filed with the Commission is referred to as the "Base Prospectus" and the form
of the prospectus which includes the Base Prospectus and a prospectus supplement
describing the Securities and the offering thereof which prospectus is first
filed on or after the date of this Agreement in accordance with Rule 424(b) of
the 1933 Act Regulations, is referred to in this Agreement as the "Prospectus",
except that if any revised prospectus or prospectus supplement shall be provided
to you by the Depositor for use in connection with the offering of the
Securities which differs from such Prospectus (whether or not such revised
prospectus or prospectus supplement is required to be filed by the Depositor
pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus"
shall refer to such revised prospectus and prospectus supplement, as the case
may be, from and after the time it is first provided to you for such use.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given them in the Pooling and Servicing Agreement.
Section 2. Representations, Warranties and Covenants Participating
Entities. Each Participating Entity, severally but not jointly, represents and
warrants to, and agrees with, Deutsche Bank Securities Inc. ("Deutsche Bank
Securities") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Deutsche
Bank Securities is acting as representative (in such capacity, Deutsche Bank
Securities shall hereinafter be referred to as the "Representative"), as of the
date hereof that:
(i) The Registration Statement, including amendments thereto as may
have been required on or prior to the date hereof, has been filed with the
Commission and has become effective. The conditions to the use by the
Depositor of a Registration Statement on Form S-3 under the Act, as set
forth in the General Instructions to Form S-3, have been satisfied with
respect to the Registration Statement and the Prospectus.
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or, to the
-2-
<PAGE>
knowledge of any Participating Entity, threatened by the Commission, and
(i) on the Effective Date, the Registration Statement conformed in all
material respects to the requirements of the Act and the 1933 Act
Regulations, and did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein, or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, (ii) on the date of this Agreement, the
Prospectus conforms in all material respects to the requirements of the Act
and the 1933 Act Regulations, and does not include any untrue statement of
a material fact or omit to state any material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (iii) at the
time of filing of the Prospectus pursuant to Rule 424(b) of the 1933 Act
Regulations and on the Closing Date the Registration Statement and the
Prospectus will conform in all material respects to the requirements of the
Act and the 1933 Act Regulations, and neither the Registration Statement
nor the Prospectus will include an untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that these
representations and warranties shall not apply to any statement or omission
made in reliance upon and in conformity with information furnished in
writing to the Depositor by the Representative expressly for use in the
Registration Statement or the Prospectus and set forth in [(x) the chart
immediately following the first paragraph set forth under the heading
"Underwriting" and (y) the third textual paragraph set forth under the
heading "Underwriting."] "Effective Date" means the latest of the dates
that the Registration Statement or the most recent post-effective amendment
thereto became effective.
(iii) Such Participating Entity is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly qualified to transact business and is in good
standing in each jurisdiction in the United States of America in which the
conduct of its business or the ownership of its property requires such
qualification, with corporate power to own, lease and operate its property
and conduct its business as it is currently conducted.
(iv) Such Participating Entity has the requisite power to execute and
deliver each Designated Agreement to which it is a party and this Agreement
and to perform its obligations under the Designated Agreements and
hereunder.
(v) Each of the Designated Agreements to which it is a party and this
Agreement has been duly and validly authorized, executed and delivered by
such Participating Entity, and each of the Designated Agreements to which
it is a party and this Agreement constitutes the valid, legal and binding
obligation of such Participating Entity, enforceable against such
Participating Entity in accordance with its terms.
(vi) The direction by the Depositor to the Trustee to authenticate and
deliver the Offered Certificates has been duly authorized by the Depositor,
and as of the Closing
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Date, the Offered Certificates will be duly and validly authorized, and,
when duly and validly executed by the Trust and authenticated by the
Trustee and delivered to the Depositor in accordance with the Pooling and
Servicing Agreement, and following delivery to and payment therefor by the
Underwriters as provided herein, will be validly issued and outstanding and
entitled to the benefits of the Pooling and Servicing Agreement.
(vii) The Offered Certificates will have been duly and validly
executed and authenticated by the Trustee in accordance with the Pooling
and Servicing Agreement on or before the Closing Date.
(viii) Neither the execution and delivery by such Participating
Entity of any Designated Agreement to which it is a party or of this
Agreement nor the consummation by such Participating Entity of the
transactions contemplated in the Designated Agreements or herein, nor the
issuance of the Securities by the Trust or the public offering thereof as
contemplated in the Prospectus, will conflict in any material respect with
or result in a material breach of, or constitute a material default (with
notice or passage of time or both) under, or result in the imposition of
any lien, pledge, charge, encumbrance, adverse claim or other security
interest of any other person (collectively, "Liens") upon any of the
property or assets of such Participating Entity (except as required or
permitted pursuant thereto or hereto), pursuant to any material mortgage,
indenture, loan agreement, contract or other instrument to which such
Participating Entity is party or by which such Participating Entity is
bound, nor will such action result in any violation of any provisions of
any applicable law, administrative regulation or administrative or court
decree, the certificate of incorporation or by-laws of such Participating
Entity. Such Participating Entity is not in violation of its certificate of
incorporation or in default in any material respect in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease, pooling and servicing agreement or other instrument to which it is a
party or by which it may be bound, or to which any material portion of its
property or assets is subject.
(ix) No legal or governmental proceedings are pending to which such
Participating Entity is a party or of which any property of such
Participating Entity is the subject, which if determined adversely to such
Participating Entity would, individually or in the aggregate, have a
material adverse effect on the financial position, shareholders' equity or
results of operations of such Participating Entity; and to the best
knowledge of such Participating Entity, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
(x) No consent, approval, authorization or order of, or registration,
filing or declaration with, any court or governmental agency or body is
required in connection with (i) the execution and delivery by such
Participating Entity of any Designated Agreement to which it is a party or
this Agreement or the performance by such
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Participating Entity of any Designated Agreement to which it is a party or
this Agreement or (ii) the offer, sale or delivery of the Securities,
except such as shall have been obtained or made, as the case may be, or
will be obtained or made, as the case may be, prior to the Closing Date, or
will not materially adversely affect the ability of such Participating
Entity to perform its obligations under any Designated Agreement to which
it is a party or this Agreement.
(xi) Such Participating Entity possesses all material licenses,
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct the
business now conducted by it and as described in the Prospectus, except to
the extent that the failure to have such licenses, certificates,
authorities or permits does not have a material adverse effect on the
Securities or the financial condition of such Participating Entity, and
such Participating Entity has not received any notice of proceedings
relating to the revocation or modification of any such license,
certificate, authority or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the conduct of its business, operations or financial
condition.
(xii) On the Closing Date, the Depositor (i) will have good and
marketable title to the Receivables being transferred by it to the Trust
pursuant to the Pooling and Servicing Agreement, free and clear of any
Lien, except to the extent permitted in the Pooling and Servicing
Agreement, (ii) will not have assigned to any Person (other than the Trust)
any of its right, title or interest in such Receivables or in the Pooling
and Servicing Agreement and (iii) will have the power and authority to
contribute the Receivables to the Trust, and upon execution and delivery of
the Pooling and Servicing Agreement by the Trustee, the Trust will have
good and marketable title thereto, in each case free of Liens other than
any Lien created by an Underwriter.
(xiii) The properties and businesses of such Participating Entity
conform, in all material respects, to the descriptions thereof contained in
the Prospectus.
Section 3. Purchase, Sale and Delivery of Securities. (a) On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Depositor agrees to sell to each
Underwriter, severally and not jointly, and each Underwriter, severally and not
jointly, agrees to purchase from the Depositor, on __________, 199^, or on such
other date no later than seven Business Days thereafter as shall be mutually
agreed upon by the Depositor and the Representative (the "Closing Date") the
principal amount of the Securities set forth in Schedule A hereto opposite the
name of such Underwriter. The Class A Certificates are to be purchased at a
purchase price equal to [ ]% of the aggregate principal amount thereof, the
Class B Certificates are to be purchased at a purchase price equal to [ ]% of
the aggregate amount thereof.
(b) Against payment of the purchase price in same day funds drawn to the
order of the Depositor, the Depositor will deliver the Securities to the
Underwriters at the offices of
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Mayer, Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603 on the
Closing Date. The Securities to be so delivered (other than the Offered
Certificate registered in the name of the Depositor, which shall be a definitive
certificate) will be initially represented by one or more Securities registered
in the name of Cede & Co., the nominee of The Depository Trust Company ("DTC").
The interests of beneficial owners of the Securities (other than the Offered
Certificate registered in the name of the Depositor, which shall be a definitive
certificate) will be represented by book entries on the records of DTC and
participating members thereof.
Section 4. Public Offering of the Securities. It is understood by the
parties hereto that, after the Registration Statement becomes effective, the
Underwriters propose to offer the Securities for sale to the public (which may
include selected dealers), as set forth in the Prospectus.
Section 5. Covenants of Each Participating Entity. Each Participating
Entity covenants and agrees severally and not jointly, with each Underwriter:
(a) If required, to file the Prospectus with the Commission pursuant
to and in accordance with Rule 424(b) of the 1933 Act Regulations not later
than the time specified therein. DFS and/or the Depositor will advise the
Underwriters promptly of any such filing pursuant to Rule 424(b).
(b) To make no amendment or any supplement to the Registration
Statement or the Prospectus as amended or supplemented, without furnishing
the Representative with a copy of the proposed form thereof and providing
the Representative with a reasonable opportunity to review the same and not
to file any such amendment or supplement to which the Representative shall
reasonably object; and to advise the Representative, promptly after it
receives notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus as amended or supplemented or any amended Prospectus has been
filed or mailed for filing, of the issuance of any stop order by the
Commission, of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus as amended or supplemented or for additional information; and,
in the event of the issuance of any such stop order or of any order
preventing or suspending the use of any Prospectus relating to the
Securities or suspending any such qualification, promptly to use its best
efforts to obtain its withdrawal.
(c) Promptly from time to time to take such action as the
Representative may reasonably request in order to qualify the Securities
for offering and sale under the securities laws of such states as the
Representative may request and to continue such qualifications in effect so
long as necessary under such laws for the distribution of such Securities;
provided, that in connection therewith no Participating Entity shall be
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required to qualify as a foreign corporation to do business or to file a
general consent to service of process in any jurisdiction.
(d) To furnish the Representative with copies of the Registration
Statement (including exhibits) and copies of the Prospectus as amended or
supplemented in such quantities as the Representative may from time to time
reasonably request; and if the delivery of a Prospectus shall be at the
time required by law in connection with sales of any Securities, either (i)
any event shall have occurred as a result of which the Prospectus would
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
(ii) for any other reason it shall be necessary during such same period to
amend or supplement the Prospectus as amended or supplemented, to notify
the Representative and to prepare and furnish to the Representative as the
Representative may from time to time reasonably request an amendment or a
supplement to the Prospectus which will correct such statement or omission
or effect such compliance.
(e) To make generally available to Certificateholders as soon as
practicable after the effective date of the Registration Statement (as such
date is defined in Rule 158(c) under the Act), an earnings statement of the
Depositor complying with Rule 158 under the Act and covering a period of at
least twelve consecutive months beginning after such effective date.
(f) To furnish to each Underwriter copies of the Registration
Statement (one of which will be signed and will include all exhibits), each
related preliminary prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as such Underwriter reasonably requests.
(g) So long as any of the Securities are outstanding, to furnish each
Underwriter copies of all reports or other communications (financial or
other) furnished to Certificateholders, and to deliver to the Underwriters
during such same period (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the Commission
and (ii) such additional information concerning the business and financial
condition of the Depositor and the Trust as such Underwriter may from time
to time reasonably request.
(h) To pay all expenses incident to the performance of the
obligations under this Agreement, including:
(i) the word processing, printing and filing of the Registration
Statement as originally filed and of each amendment thereto;
(ii) the reproduction of this Agreement;
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(iii) the preparation, printing, issuance and delivery of the
Securities to the Underwriters;
(iv) the fees and disbursements of counsel and accountants for
such Participating Entity;
(v) the qualification of the Securities under securities laws
in accordance with the provisions of Section 5(c) hereof, including
filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the
preparation of a blue sky survey;
(vi) if requested by the Representative, the determination of
the eligibility of the Securities for investment and the reasonable
fees and disbursements of counsel for the Underwriters in connection
therewith and in connection with the preparation of a legal investment
memorandum;
(vii) the printing and delivery to the Underwriters of copies of
the Registration Statement as originally filed and of each amendment
thereto, of the preliminary prospectuses, and of the Prospectus and
any amendments or supplements thereto;
(viii) the printing and delivery to the Underwriters of copies of
a blue sky survey and, if requested by the Representative, a legal
investment memorandum, if any;
(ix) the fees of [Moody's Investors Service, Inc. and Standard
& Poor's Ratings Services] for rating the Securities; and
(x) the fees and expenses of the Trustee and its counsel.
If the sale of the Securities is not consummated by reason of any failure,
refusal or inability on the part of any Participating Entity to perform any
agreement on its part to be performed, or because any condition of the
Underwriters' obligations hereunder required to be fulfilled shall not have
been fulfilled (other than as a result of any breach or default by the
Underwriters), each Participating Entity shall jointly and severally be
obligated to reimburse the Underwriters for all out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the
Underwriters. For purposes of the preceding sentence, the conditions in
clauses (ii) and (iii) of Section 6(d) shall not be conditions required to
be fulfilled by any Participating Entity.
(i) For a period from the date of this Agreement until the retirement
of the Securities, or until such time as each Underwriter shall cease to
maintain a secondary market in the Securities, whichever occurs first, to
deliver to each Underwriter the annual statements of compliance, the
Officer's Certificate and the annual independent certified
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public accountants' servicing reports furnished pursuant to the Pooling and
Servicing Agreement and the monthly Servicer's Certificate pursuant to the
Pooling and Servicing Agreement as soon as such statements and reports are
furnished to the Trustee.
(j) From and after the Closing Date, not to take any action
inconsistent with the Trust's ownership of the Receivables other than as
permitted by the Pooling and Servicing Agreement.
(k) To the extent, if any, that the rating provided with respect to
the Securities by the rating agency or agencies that initially rate the
Securities is conditional upon the furnishing of documents or the taking of
any other actions by such Participating Entity, to furnish such documents
and take any such other actions.
Section 6. Conditions Precedent to the Obligations of the Underwriters. The
obligation of the Underwriters to purchase and pay for the Securities is subject
to the accuracy of the representations and warranties on the part of each
Participating Entity herein, to the accuracy of the statements of officers of
each Participating Entity made pursuant to the provisions hereof, to the
performance by each Participating Entity of its obligations hereunder and to the
following additional conditions precedent:
(a) The Registration Statement shall have become effective; and prior
to the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of any
Participating Entity, shall be contemplated by the Commission. If the
Depositor has elected to rely upon Rule 430A of the 1933 Act Regulations,
the price of the Securities and any price-related information previously
omitted from the effective Registration Statement pursuant to such Rule
430A shall have been transmitted to the Commission for filing pursuant to
Rule 424(b) of the 1933 Act Regulations within the prescribed time period,
and prior to the Closing Date the Depositor shall have provided evidence
satisfactory to the Representative of such timely filing, or a post-
effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule
430A of the 1933 Act Regulations.
(b) Each Participating Entity shall have delivered to the
Representative a certificate, dated the Closing Date, signed by its
president, a senior vice president or a vice president to the effect that
the signer of such certificate has carefully examined the Registration
Statement, the Prospectus, each Designated Agreement and this Agreement and
that:
(i) the representations and warranties of such Participating
Entity in each Designated Agreement and this Agreement are true and
correct in all material respects at and as of the Closing Date with
the same effect as if made on the Closing Date;
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(ii) such Participating Entity has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been initiated or, to knowledge of such Participating
Entity, threatened as of the Closing Date; and
(iv) nothing has come to such Person's attention that would lead
such person to believe that the Prospectus contains any untrue
statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) Since the respective dates as of which information is given in
the Prospectus as amended or supplemented, there shall not have occurred
any material adverse change or any development involving a prospective
material adverse change, in or affecting particularly the business or
assets of the Trust or any Participating Entity or any material adverse
change in the financial position or results or operations of the Trust or
any Participating Entity otherwise than as set forth or contemplated in the
Prospectus which in any such case makes it impracticable to inadvisable in
the Representative's reasonable judgment to proceed with the public
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus as amended or supplemented.
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business, financial
condition or properties of any Participating Entity or the Trust which, in
the Representative's judgment, materially impairs the investment quality of
the Securities, (ii) any material adverse change in the financial markets
in the United States or any outbreak of hostilities or other calamity or
crisis, the effect of which is such as to make it, in the judgment of the
Representative, impracticable or inadvisable to market the Securities or to
enforce contracts for the sale of the Securities, (iii) the suspension of
trading generally by either the American Stock Exchange or the New York
Stock Exchange, or the establishment of minimum or maximum prices or ranges
of prices, by either of such exchanges or by order of the Commission or any
other governmental authority, or any banking moratorium declared by
Federal, Missouri, California or New York authorities or (iv) any event
that would constitute a default under this Agreement or default in the
performance of the obligations of any Participating Entity under any
Designated Agreement to which it is a party or which, with the passage of
time or the giving of notice or both, would constitute such default.
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(e) The Representative shall have received from counsel (who may be
an employee of a Participating Entity) to the Participating Entities, one
or more opinions, dated the Closing Date and addressed to the Underwriters
and satisfactory in form and substance to the Representative and to counsel
to the Representative.
(f) The Representative shall have received from special counsel for
the Participating Entities an opinion, dated the Closing Date and
satisfactory in form and substance to the Representative and to counsel to
the Underwriters.
(g) The Representative shall have received from special counsel to
the Depositor, an opinion, dated the Closing Date, addressed to the
Underwriters and satisfactory in form and substance to the Representative
and to counsel to the Underwriters, relating to certain bankruptcy matters
and federal income tax matters.
(h) The Representative shall have received from counsel for the
Trustee, an opinion, dated the Closing Date and addressed to the
Underwriters and each Participating Entity and satisfactory in form and
substance to the Representative and to counsel to the Underwriters.
[(i) The Representative shall have received an officer's certificate
dated the Closing Date of the chairman of the board, the president, an
executive vice president or the treasurer of the Trustee in which such
officer shall state that, to the best of his/her knowledge after reasonable
investigation, the representations and warranties of the Trustee contained
in the Pooling and Servicing Agreement are true and correct in all material
respects, and that the Trustee has complied in all material respects with
all agreements and satisfied all conditions on its part to be performed or
satisfied under the Pooling and Servicing Agreement at or prior to the
Closing Date.]
(j) The Representatives shall have received a copy of a ratings
letter confirming that the Offered Certificates have been rated in the
highest rating category by at least one of [Moody's Investors Service, Inc.
and Standard & Poor's Ratings Services], and such ratings shall not have
been reduced or withdrawn.
(k) The Trustee shall have furnished to the Representative a
certificate of the Trustee, signed by one or more duly authorized officers
of the Trustee, dated the Closing Date, as to the due acceptance of the
Pooling and Servicing Agreement by the Trustee and the due execution and
delivery of the Offered Certificates by the Trustee thereunder and such
other matters as the Representative shall reasonably request.
(l) Counsel to each Participating Entity shall have furnished to the
Representative any opinions supplied to the rating agencies relating to
certain matters with respect to the Securities, which opinions shall also
be addressed to the Underwriters. Drafts of such opinions shall have been
furnished to the Representative no later than five Business Days prior to
the Closing Date.
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(m) The Representative shall have received a letter, dated the
Closing Date and addressed to the Underwriters, from KPMG Peat Marwick LLP
certified public accountants, substantially in the form heretofore approved
by the Representative and counsel to the Underwriters.
(n) The Representative shall have received a copy of [(i) a file-
stamped acknowledgment copy of the UCC-1 financing statement on Form UCC-1
filed with the Secretary of State of the State of Missouri with respect to
the transfer of Receivables (and related items) by DFS to Ganis pursuant to
the DFS/Ganis Transfer Agreement, naming DFS as debtor/transferor and Ganis
as the secured party/transferee,] (ii) a file-stamped acknowledgment copy
of the UCC-1 financing statement on Form UCC-1 filed with the Secretary of
State of the State of California with respect to the transfer of
Receivables (and related items) by Ganis to the Depositor pursuant to the
Receivables Transfer Agreement, naming Ganis as debtor/transferor and the
Depositor as the secured party/transferee, and (iii) a file-stamped
acknowledgment copy of the UCC-1 financing statement on Form UCC-1 filed
with the Secretary of State of the State of Missouri with respect to the
transfer of Receivables (and related items) by the Depositor to the Trust
pursuant to the Pooling and Servicing Agreement, naming the Depositor as
debtor/transferor and the Trust as secured party/transferee.
(o) All documents incident to the Designated Agreements and this
Agreement shall be reasonably satisfactory in form and substance to the
Underwriters and counsel to the Underwriters; and all actions taken by the
Depositor to authorize the offering and sale of the Securities shall be
reasonably satisfactory in form and substance to the Underwriters and
counsel to the Underwriters; and each Participating Entity shall furnish
the Underwriters and counsel to the Underwriters with such other opinions,
certificates, letters and documents as the Underwriters or counsel to the
Underwriters shall reasonably request.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Representative by notice to the Depositor at any time on or prior to Closing
Date, and such termination shall be without liability of any party to any other
party except as provided in Section 5 hereof.
Section 7. Indemnification. (a) Each Participating Entity shall, jointly
and severally, indemnify and hold harmless each Underwriter and each person who
controls any Underwriter within the meaning of Section 15 of the Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue statement
or alleged untrue statement of a material fact contained in the Prospectus
(or any
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amendment or supplement thereto) or any preliminary prospectus, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of such Participating Entity; and
(iii) against any and all expense whatsoever (including, subject to
Section 7(c) hereof, the fees and disbursements of counsel chosen by you)
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, to the extent that any such expense is
not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Depositor by
the Representative expressly for use in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) and set forth in [(x) the chart immediately
following the first paragraph set forth under the heading "Underwriting" and (y)
the third textual paragraph set forth under the heading "Underwriting."]
(b) Each Underwriter severally agrees to indemnify and hold harmless
each Participating Entity, each of their respective directors, each of their
respective officers who signed the Registration Statement, and each person, if
any, who controls each Participating Entity, respectively, within the meaning of
Section 15 of the Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section
7, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto, or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Depositor by such Underwriter through the
Representative expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it with respect to which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve it from any liability which
it may have otherwise than on account of this indemnity
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agreement. An indemnifying party may participate at its own expense in the
defense of any such action. In no event shall the indemnifying parties be liable
for the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Section 8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 7 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, each Participating Entity,
jointly and severally, on the one hand, and the Underwriters, on the other,
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by said indemnity agreement incurred by any
such Participating Entity and one or more Underwriters, as incurred, in such
proportions that the Underwriters are responsible for that portion represented
by the percentage that the underwriting discount bears to the initial public
offering price, and each Participating Entity shall be jointly and severally
responsible for the balance; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the other provisions of this
Section 8, an Underwriter shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay in respect of such losses, liabilities,
claims, damages and expenses. For purposes of this Section 8, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the Act
shall have the same rights to contribution as such Underwriter and each director
of the Depositor, each officer of the Depositor who signed the Registration
Statement, and each person, if any, who controls any Participating Entity within
the meaning of Section 15 of the Act shall have the same rights to contribution
as each Participating Entity.
Section 9. Survival of Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
each Participating Entity or its officers and of the Underwriters set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation or statement as to the results thereof, made by
or on behalf of any Underwriter, any Participating Entity or any of their
respective representatives, officers or directors of any controlling person, and
will survive delivery of and payment for the Securities.
Section 10. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail on the Closing Date to purchase the Securities which
it or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representative shall not have completed
such arrangements within such 24-hour period, then:
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(a) if the principal amount of Defaulted Securities does not exceed
10% of the principal amount of the Securities, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-
defaulting Underwriters, or
(b) if the principal amount of Defaulted Securities exceeds 10% of
the principal amount of the Securities, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representative or the Depositor shall have the right
to postpone Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
Section 11. Notices. All communications hereunder will be in writing and:
(i) if sent to the Underwriters, will be mailed, delivered or
sent by facsimile transmission and confirmed to the Representative at:
Deutsche Bank Securities Inc.
31 West 52nd Street, 12th Floor
New York, New York 10019
Attention: Victor Mahoney
Telephone: 212/469-7187
Facsimile: 212/469-7185;
(ii) if sent to the Depositor, will be mailed, delivered or sent
by facsimile transmission, and confirmed to it at:
Deutsche Recreational Asset Funding Corporation
655 Maryville Centre Drive
St. Louis, Missouri 63141
Attention: President
Telephone:
Facsimile:
-15-
<PAGE>
[(iii) if sent to DFS, will be mailed, delivered or sent by
facsimile transmission, and confirmed to it at:
Deutsche Financial Services Corporation
655 Maryville Centre Drive
St. Louis, Missouri 63141
Attention: Senior Vice President
Telephone: 314/523-3950
Facsimile: 314/523-3993]
(iv) if sent to Ganis, will be mailed, delivered or sent by
facsimile transmission, and confirmed to it at:
Ganis Credit Corporation
660 Newport Center Drive
Newport Beach, California 92660
Attention: Executive Vice President
Telephone:
Facsimile:
or to such other address as any Participating Entity or the Representative may
designate in writing to the other parties hereto.
Section 12. Successors. This Agreement will inure to the benefit of and be
binding upon the Underwriters, each Participating Entity and their respective
successors and the officers and directors and controlling persons referred to in
Section 7 hereof, and no other Person will have any right or obligations
hereunder.
Section 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 14. Counterparts. This Agreement may be executed by each of the
parties hereto in any number of counterparts, and by each of the parties hereto
on separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
-16-
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us a counterpart hereof, whereupon this letter and your acceptance
hereof shall constitute a binding agreement among the Underwriters and each
Participating Entity.
Very truly yours,
DEUTSCHE RECREATIONAL ASSET
FUNDING CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
[DEUTSCHE FINANCIAL SERVICES CORPORATION
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title: ]
-17-
<PAGE>
GANIS CREDIT CORPORATION
By:
------------------------------------
Name:
Title:
Accepted in New York, New York,
as of the date first above written:
DEUTSCHE BANK SECURITIES INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
For itself and as Representative
of the other Underwriters named in
Schedule A hereto.
-18-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount of
Name of Underwriter Class A Certificates Class B Certificates
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Deutsche Bank Securities Inc............ $ $
________________________................ $ $
________________________................ $ $
________________________................ $ $
________________________................ $ $
- ---------------------------------------------------------------------------------------
Total $ $
=======================================================================================
</TABLE>
A-1
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
RV MARINE RECEIVABLES CORPORATION, a corporation organized under the laws
of the State of Nevada, by its Vice President and Controller and Assistant
Secretary does hereby certify:
1. That the board of directors, by unanimous written consent without a
meeting, duly adopted the following change and amendment in the articles of
incorporation.
RESOLVED, that Article I of the corporation's Articles of Incorporation be
amended to read: "The name of the corporation is DEUTSCHE RECREATIONAL ASSET
FUNDING CORPORATION."
2. That the number of shares of the corporation outstanding and entitled to
vote on an amendment to the articles of incorporation is 1,000; that the said
change and amendment has been consented to and authorized by the unanimous
written consent of stockholders.
IN WITNESS WHEREOF, the said RV MARINE RECEIVABLES CORPORATION has caused
this certificate to be signed by its Vice President and Controller and its
Assistant Secretary, and its corporate seal, to be hereto affixed this 22nd day
of May, 1998.
RV MARINE RECEIVABLES CORPORATION
By: /S/ STEPHEN J. GENTRY
----------------------------------
Name: Stephen J. Gentry
Title: Vice President and Controller
By: /S/ KENNETH P. BERGER
----------------------------------
Name: Kenneth P. Berger
Title: Assistant Secretary
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 22 1998
No. C10046-98
---------
/S/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE
[SEAL]
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
-----------------------------
STATE OF MISSOURI )
) ss
COUNTY OF ST. LOUIS)
On this 22nd day of May in the year 1998, before me, Patricia E. O'Malley, a
Notary Public, in and for said state, personally appeared Stephen J. Gentry and
Kenneth P. Berger, the Vice President and Controller and Assistant Secretary,
respectively of RV Marine Receivables Corporation, known to me to be the persons
who executed the within Certificate of Amendment of Certificate of
Incorporation, in behalf of said corporation and acknowledged to me that they
executed the same for the purposes therein state.
WITNESS my hand and official seal.
Seal: PATRICIA E. O'MALLEY
-----------------------------------
Patricia E. O'Malley, Notary Public
- --------------------------------
PATRICIA E. O'MALLEY
NOTARY PUBLIC--NOTARY SEAL
STATE OF MISSOURI
FRANKLIN COUNTY
MY COMMISSION EXP. JULY 16, 1999
- --------------------------------
<PAGE>
ARTICLES OF INCORPORATION
OF
RV MARINE RECEIVABLES CORPORATION
FIRST: The name of the corporation is
RV MARINE RECEIVABLES CORPORATION
SECOND: Its registered office in the State of Nevada is located at One East
First Street, Reno, Nevada 89501. The name of its resident agent at that address
is The Corporation Trust Company of Nevada.
THIRD: The total number of shares of stock which the Corporation shall have
authority to issue is one thousand (1,000) shares and the par value of each
such share is Ten Dollars ($10.00). All such shares are of one class and are
common stock ("Common Stock"). The Common Stock shall have voting rights for the
election of directors and for all other purposes, each holder of Common Stock
being entitled to one vote for each share thereof held by such holder, except as
otherwise required by law.
Meetings of stockholders and directors may be held within or without the
State of Nevada as the By-Laws may provide. The books and records of the
Corporation may be kept (subject to any provision contained in the General
Corporation Law of the State of Nevada (the "GCL") outside the State of Nevada.
FOURTH: The governing board of this corporation shall be known as directors, and
the number of directors may from time to time be increased or decreased in such
manner as shall be provided by the By-Laws of this corporation.
The names and addressed of the first board of directors, which shall be
three (3) in number, is as follows:
1
<PAGE>
<TABLE>
<CAPTION>
NAMES ADDRESSES
----- ---------
<S> <C>
Richard C. Goldman 655 Maryville Centre Drive
St. Louis, MO 63141
C. Don Brown P.O. Box 50401
Henderson, NV 89016
Phil Stout P.O. Box 50401
Henderson, NV 89016
</TABLE>
FIFTH: The name and address of the incorporator signing these Articles of
Incorporation is as follows:
<TABLE>
NAMES ADDRESSES
----- ---------
<S> <C>
Richard C. Goldman 655 Maryville Centre Drive
St. Louis, MO 63141
</TABLE>
SIXTH: The corporation is to have perpetual existence.
SEVENTH: (a) The nature of the business or purposes to be conducted and promoted
by the Corporation is to engage solely in the following activities:
(i) To acquire, own, hold, sell, transfer, pledge or otherwise
dispose of receivables ("Receivables"), including, without
limitation, retail installment sales contracts, installment
loans, purchase money orders or other notes, together with any
related insurance contracts and agreements with dealers or
borrowers or purchasers relating to the Receivables;
(ii) to act as settlor or depositor of trusts formed under a trust
agreement, pooling and servicing agreement or other agreement
("Agreements") to issue series (any of which series may be
issued in one or more classes) of trust certificates
("Certificates") representing undivided interests in
Receivables, Interests (defined below) and/or Residual
Interests (defined below) and/or to issue series (any of which
series may be issued in one or more classes) of bonds, notes or
other evidences of indebtedness ("Debt
2
<PAGE>
Obligations") collateralized by Receivables, Subordinated
Interests and/or Residual Interests and to enter into any
other agreement in connection with the authorization,
issuance, sale and delivery of such Certificates or Debt
Obligations;
(iii) to use proceeds from the Certificates as provided in the
Agreements;
(iv) to hold, pledge, transfer, otherwise deal with
Certificates or Debt Obligations representing a
subordinated undivided interest in Receivables.
("Subordinated Interests") or a residual interest in
Receivables ("Residual Interest");
(v) to loan or invest or otherwise apply proceeds from
Receivables, funds received in respect of Certificates,
Debt Obligations, Subordinated Interests or Residual
Interests and any other income, as determined by the
Corporation's Board of Directors;
(vi) to purchase, hold, and reissue any of the shares of its
capital stock;
(vii) to be the general partner of one or more limited
partnerships engaged in the activities described in this
Article; and
(viii) to exercise all powers enumerated in the GCL necessary or
convenient to the conduct, promotion or attainment of the
business or purposes set forth herein.
(b) Notwithstanding any other provision of these Articles of
Incorporation any provision of law that otherwise so empowers the
Corporation, the Corporation shall not, without the written consent of
each nationally recognized rating agency which has been requested by the
Corporation to rate any issue of Certificates or Debt Obligations and
which is then rating such Certificates or Debt Obligations, incur any
indebtedness, or assume or guaranty any indebtedness of any other
entity, other than (i) any indebtedness incurred in connection with any
Certificates or Debt Obligations pursuant to agreements or instruments
in effect at the time any such rating was originally issued and (ii) any
indebtedness to any affiliate of the Corporation incurred in connection
with the acquisition of Receivables, which indebtedness shall be
subordinated to any other obligations of the Corporation.
3
<PAGE>
EIGHTH: (a) The number of directors of the Corporation shall initially
be the three (3) and thereafter shall be as from time to time fixed by, or in
the manner provided in, the By-Laws of the Corporation. Election of directors
need not be by written ballot unless the By-Laws so provide.
(b) In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is expressly
authorized;
(i) To make, alter, amend or repeal the By-Laws, except as
otherwise expressly provided in any By-Laws enacted by the
holders of the Common Stock of the Corporation entitled to
vote thereon. Any by-law may be altered, amended or
repealed by the stockholders of the Corporation entitled to
vote thereon at any annual meeting or at any special
meeting called for that purpose.
(ii) To determine the use and disposition of any surplus and net
profits of the Corporation, including the determination of
the amount of working capital required, to set apart out of
any of the funds of the Corporation, whether or not
available for dividends, a reserve or reserves for any
proper purpose and to abolish any such reserve (in the
manner in which it was created).
(iii) To designate, by resolution passed by a majority of the
whole Board of Directors, one or more committees, each
committee to consist of two or more directors of the
Corporation, which, to the extent provided in the
resolution designating the committee or in the By-Laws of
the Corporation, shall, subject to the limitations
prescribed by law, have and may exercise all the powers and
authority of the Board of Directors in the management of
the business and affairs of the Corporation and may
authorize the seal of the Corporation to be affixed to all
papers that may require it. Such committee or committees
shall have such name or names as may be provided in the By-
Laws of the Corporation or as may be determined from time
to time by resolution adopted by the Board of Directors.
4
<PAGE>
(iv) To exercise, in addition to the powers and authorities
hereinbefore or by law conferred upon it, any such powers
and authorities and to all such acts and things as may be
exercised or done by the Corporation, subject,
nevertheless, to the provisions of the laws of the State of
Nevada and of these Articles of Incorporation and of the
By-Laws of the Corporation.
NINTH: (a) No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary duty as
a director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law (iii) pursuant to Section 78.300 of the GCL or (iv) for any transaction from
which the director derived an improper personal benefit. If the GCL is hereafter
amended to authorize corporate action further limiting or eliminating the
personal liability of the directors, then the liability of each director of the
Corporation shall be limited to or eliminated to the full extent permitted by
the GCL, as so amended from time to time.
(b) Neither the amendment nor repeal of this Article NINTH, nor
the adoption of any provision of these Articles of Incorporation inconsistent
with this Article NINTH, shall eliminate or reduce the effect of this Article
NINTH, in respect of any matter occurring, or any cause of action, suit or claim
that, but for this Article NINTH, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
(c) A director of the Corporation shall not in the absence of
fraud be disqualified by his office from dealing or contracting with the
Corporation either as a vendor, purchaser or otherwise, nor in the absence of
fraud shall a director of the Corporation be liable to account to the
Corporation for any profit realized by him from or through any transaction or
contract of the Corporation by reason of the fact that he, or any firm of which
he is a member, or any corporation of which he is an officer, director or
stockholder, was interested in such transaction or contract has been authorized,
approved or ratified in the manner provided in the GCL for authorization,
approval or ratification of transactions or contracts between the
5
<PAGE>
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest.
(d) The Corporation shall indemnify any person who is or was a
director or officer of the Corporation, with respect to actions taken or omitted
by such person in any capacity in which such person serves the Corporation, to
the full extent authorized or permitted by law, as now or hereafter in effect,
and such right to indemnification shall continue as to a person who has ceased
to be a director or officer, as the case may be, and shall inure to the benefit
of such person's heirs, executors and personal legal representatives; provided,
however, that, except for proceedings to enforce rights to indemnification, the
Corporation shall not be obligated to indemnify any person in connection with a
proceeding (or part thereof) initiated by such person unless such proceeding (or
part thereof) was authorized in advance, or unanimously consented to, by the
Board of Directors of the Corporation.
(e) Directors and officers of the Corporation shall have the
right to be paid by the Corporation expenses incurred in defending or otherwise
participating in any proceeding in advance of its final disposition.
(f) The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation.
(g) The rights to indemnification and to the advancement of
expenses conferred in this Section shall not be exclusive of any other right
that any person may have or hereafter acquire under these Articles of
Incorporation, the By-Laws, any statute, agreement, vote of stockholders or
disinterested directors, or otherwise.
(h) Any repeal or modification of this Section by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to advancement of
6
<PAGE>
expenses that any person may have at the time of such repeal or modification
with respect to any acts or omissions occurring prior to such repeal or
modification.
TENTH: Except as provided in Article TWELFTH, whenever a compromise or
arrangement is proposed between the Corporation and its creditors or any class
of them and/or between the Corporation and its stockholders, any court of
equitable jurisdiction within the State of Nevada may, on the application (in a
summary way) of the Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for the Corporation under
the provisions of Section 78.600 of the GCL order a meeting of the creditors or
class creditors, and/or of the stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. Except as provided
in Article TWELFTH, if a majority in number representing three-fourths in value
of the creditors or class of creditors, and/or of the stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and or on all the
stockholders of the Corporation, as the case may be, and also on the
Corporation.
ELEVENTH: For so long as the Certificates or Debt Obligations are
outstanding, in order to preserve and ensure its separate and distinct corporate
identity, in addition to the other provisions set forth in these Articles of
Incorporation, the Corporation shall conduct its affairs in accordance with the
following provisions:
It shall establish and maintain an office through which its business
shall be conducted separate and apart from those of its parent.
It shall maintain separate corporate records and books of account
from those of its parent and any affiliate thereof.
The Corporation's funds and other assets will not be commingled with
those of any of its stockholders or any direct or indirect parent of the
Corporation or of any affiliate of any such parent.
7
<PAGE>
If at any time the Corporation has two or more directors, at
least one director of the Corporation shall not be a director, officer,
or employee of its parent or any affiliate thereof (an "Independent
Director"). In the event of the death, incapacity, resignation, or
removal of the Independent Director, the Board of Directors shall
promptly appoint an Independent Director to replace the Independent
Director whose death, incapacity, resignation or removal caused the
related vacancy on the Board of Directors; provided, however, that the
Board of Directors shall not vote on or consent to any matter referred
to, in clause (b) of Article TWELFTH of these Articles of Incorporation
unless an Independent Director has been duly appointed to serve on the
Board.
Its Board of Directors shall hold appropriate meetings (or act
by unanimous consent) to authorize all appropriate corporate actions.
For purposes of this Article ELEVENTH, the following terms
shall have the following meanings:
"affiliate" means any person controlling or controlled by or
under common control with the parent, but shall not include the
Corporation. For purposes of this definition, "control," when used with
respect to any specified person, means the power to direct the management
and policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"parent" means, with respect to the Corporation, any other
corporation owning or controlling, directly or indirectly, fifty percent
(50%) or more of the voting stock of the Corporation.
"person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization, or government or any
agency or political subdivision.
TWELFTH: (a) The Corporation shall not, without the unanimous affirmative
vote of the members of the Board of Directors, consolidate or merge with
or into any other entity or sell, lease or otherwise transfer (except as
contemplated by Article SEVENTH hereof) all or
8
<PAGE>
substantially all of its assets to, or acquire all or substantially all
of the assets or capital stock or other ownership interest of, any other
corporation, company or entity.
(b) For so long as the Certificates or Debt Obligations are
outstanding, the Corporation will not, without the unanimous consent of
the Board of Directors (A) commence any case, proceeding or other action
relating to bankruptcy, insolvency, reorganization or relief of debtors,
or seek to have an order for relief entered with respect to it, or seek
to adjudicate it a bankrupt or insolvent, or seek reorganization,
arrangement, adjustment, winding up, liquidation, dissolution,
composition, or other relief with respect to it or its debts or make a
general assignment for the benefit of creditors without the unanimous
vote of the entire Board of Directors or (B) dissolve or liquidate, in
whole or in part
(c) The Corporation shall not without the consent of both of its
Independent Directors, institute against, or join in any institution
against, any entity in which the Corporation holds an ownership interest
in any bankruptcy, insolvency, liquidation, reorganization or arrangement
proceeding or other proceedings under any United States Federal or State
Bankruptcy or similar law.
THIRTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provisions contained in these Articles of Incorporation in
the manner now or hereafter prescribed by law, and all the provisions of
these Articles of Incorporation and all rights and powers conferred in
these Articles of Incorporation on stockholders, directors and officers
are subject to this reserved power, provided, that no such amendment of
the Articles SEVENTH, EIGHTH, TWELFTH or THIRTEENTH, pertaining to (i)
corporate purposes, (ii) power of the Board of Directors, (iii) mergers,
consolidation or bankruptcy and (iv) right to amend Articles of
Incorporation, respectively (the "Restricted Articles" shall be effective
without the unanimous affirmative vote of the members of the Board of
Directors and, provided, further, that the Corporation shall not amend or
change any Article so as to be inconsistent with the Restricted Articles
without the unanimous affirmative vote of the members of the Board of
Directors.
9
<PAGE>
Corporation shall not amend or change any Article so as to be
inconsistent with the Restricted Articles without the unanimous
affirmative vote of the members of the Board of Directors.
WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore named, for the purpose of forming a corporation pursuant to
the General Corporation Law of the State of Nevada, do make and file
these Articles of Incorporation, hereby declaring and certifying that the
facts herein stated are true, and accordingly have hereunto set our hands
this 29th day of April, 1998.
/s/ Richard C. Goldman
--------------------------------
Richard C. Goldman, Incorporator
10
<PAGE>
BY-LAWS
OF
RV MARINE RECEIVABLES CORPORATION
1. STOCKHOLDERS.
1.1 Place of Stockholders' Meetings. All meetings of the stockholders of
the Corporation shall be held at such place or places, within or outside the
State of Nevada, as may be fixed by the Board of Directors from time to time or
as shall be specified in the respective notices thereof.
1.2 Day and Time of Annual Meetings of Stockholders. An annual meeting of
stockholders shall be held each year on such day and at such time as shall be
determined by resolution of the Board of Directors.
1.3 Purpose of Annual Meetings. At each annual meeting, the stockholders
shall elect the members of the Board of Directors for the succeeding year. At
any such annual meeting any other business properly brought before the meeting
may be transacted.
1.4 Special Meeting of Stockholders. Special meetings of the stockholders
or of any class or series thereof entitled to vote may be called by the Chairman
of the Board or by the Board of Directors.
1.5 Chairman and Secretary of Meetings. The Chairman of the Board, or, in
his absence the President or any Vice President, shall preside at meetings of
the stockholders. The Secretary shall act as secretary of the meeting, or in his
absence an Assistant Secretary shall act, or if neither is present, then the
presiding officer may appoint a person to act as secretary of the meeting.
1.6 Voting by Stockholders. Except as may be otherwise provided by these
By-laws, at every meeting of the stockholders each stockholder shall, unless
otherwise provided, be entitled to one vote for each share of stock standing in
his name on the books of the Corporation on the record date for the meeting. All
elections and questions shall be decided by the vote of a majority in interest
of the stockholders present in person or represented by proxy and entitled to
vote at the meeting, except as otherwise permitted or required by the laws of
Nevada, the Certificate of Incorporation or these By-laws.
1
<PAGE>
2. DIRECTORS.
2.1 Powers of Directors. The business and affairs of the Corporation shall
be managed by or under the direction of its Board of Directors, which may
exercise all the powers of the Corporation except such as are by the laws of
Nevada or the Certificate of Incorporation or these By-laws required to be
exercised or performed by the stockholders.
2.2 Number and Term of Office. The number of Directors which shall
constitute the whole Board of Directors shall be (3) three. Each Director shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
2.3 Vacancies on Board of Directors. (a) Any Director may resign his
office at any time by delivering his resignation in writing to the Chairman of
the Board or the Secretary. It will take effect at the time specified therein,
or, if no time is specified, it will be effective at the time of its receipt by
the Corporation. The acceptance of a resignation shall not be necessary to make
it effective unless expressly so provided in the resignation.
(b) Any vacancy and newly created Directorship resulting from any
increase in the authorized number of Directors may be filled by vote of a
majority of the Directors then in office, though less than a quorum, and any
Director so chosen shall hold office until his successor is duly elected and
qualified or until his earlier resignation or removal.
2.4 Meetings of the Board of Directors. (a) The Board of Directors may
hold its meeting, both regular and special, either within or outside the State
of Nevada.
(b) Regular meetings of the Board of Directors may be held at such time
and place as shall from time to time be determined by resolution of the Board of
Directors.
(c) The first meeting of each newly elected Board of Directors shall be
held as soon as practical after the annual meeting of the stockholders for the
election of officers and the transaction of such other business as may come
before it.
(d) Special meetings of the Board of Directors shall be held whenever
called by direction of the Chairman of the Board or at the request of Directors
constituting one-third of the number of Directors then in office.
(e) Members of the Board of Directors or any committee of the Board may
participate in a meeting of the Board of Directors or committee, as the case may
be, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
such participation shall constitute presence in person at such meeting.
2
<PAGE>
(f) The Secretary shall give notice to each Director of any meeting of the
Board of Directors by mailing the same at least two days before the meeting, or
by telegraphing, telexing, telecopying or delivering the same not later than the
day before the meeting. Such notice need not include a statement of the business
to be transacted at, or the purpose of, any such meeting. Any and all business
may be transacted at any meeting of the Board of Directors. No notice of any
adjourned meeting need be given. No notice to or waiver by any Director shall be
required with respect to any meeting at which the Director is present.
2.5 Quorum and Action. One-third of the entire Board of Directors shall
constitute a quorum for the transaction of business, but if there shall be less
than a quorum at any meeting of the Board, a majority of those present may
adjourn the meeting from time to time. Unless otherwise provided by the laws of
Nevada, the Certificate of Incorporation or these By-laws, the act of a majority
of the Directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors.
2.6 Presiding Officer and Secretary of Meeting. The Chairman of the
Board, or in his absence, a member of the Board of Directors selected by the
members present, shall preside at meetings of the Board. The Secretary shall act
as secretary of the meeting, or in his absence an Assistant Secretary shall act,
or if neither is present, then the presiding officer may appoint a secretary of
the meeting.
2.7 Action by Consent without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing and the writing or writings are filed
with the records of the Board or committee.
2.8 Committees. The Board of Directors, by the vote of a majority of the
whole Board, may appoint from the Directors such committees as the Board may
deem judicious, and to such extent as is provided by resolution may delegate to
such committees, severally, all or any of the powers of the Board of Directors
which may be lawfully delegated, and such committees thereupon shall have and
may exercise all or any of the powers so delegated to them, respectively.
3. OFFICERS.
3.1 Officers, Titles, Elections, Terms. (a) The Board of Directors may
from time to time elect a Chairman of the Board, a President, one or more Vice
Presidents, a Controller, a Treasurer, a Secretary, one or more Assistant
Controllers, one or more Associate or Assistant Treasurers, and one or more
Assistant Secretaries, to serve at the pleasure of the Board or otherwise as
shall be specified by the Board at the time of such election and until their
successors are elected and qualify or until their earlier resignation or
removal.
3
<PAGE>
(b) The Board of Directors may elect or appoint at any time such other
officers or agents with such duties as it may deem necessary or desirable. Such
other officers or agents shall serve at the pleasure of the Board or otherwise
as shall be specified by the Board at the time of such election or appointment
and, in the case of such other officers, until their successors are elected and
qualify or until their earlier resignation or removal.
(c) Any vacancy in any office may be filled for the unexpired portion of
the term by the Board.
(d) Any officer or agent elected or appointed by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the entire
Board.
(e) Any officer may resign his office at any time. Such resignation shall
be made in writing and shall take effect at the time specified therein, or, if
no time be specified, at the time of its receipt by the Corporation. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
3.2 General Powers of Officers. Except as otherwise required by the laws
of Nevada, the Certificate of Incorporation or these By-laws, the Chairman of
the Board, the President, any Vice President, the Controller, the Treasurer and
the Secretary, or any of them, may execute and deliver in the name of the
Corporation any agreement, contract, instrument, power of attorney or other
document pertaining to the business or affairs of the Corporation, including
without limitation, commercial agreements or contracts and agreements or
contracts with any government or governmental departments, agency or
instrumentality.
3.3 Powers and Duties of the Chairman of the Board. The Chairman of the
Board shall be the chief executive of the Corporation and shall report directly
to the Board of Directors. Except in such instances as the Board may confer
powers in particular transactions upon any other officer, and subject to the
control and direction of the Board, the Chairman of the Board shall manage and
direct the business and affairs of the Corporation and shall communicate to the
Board of Directors and any committee thereof reports, proposals and
recommendations for their respective consideration or action. He may do and
perform all acts on behalf of the Corporation and shall preside at meetings of
the Board and the stockholders.
3.4 Powers and Duties of the President. The President shall have such
powers and perform such duties as the Board of Directors or the Chairman of the
Board may from time to time prescribe or as may be prescribed in these By-laws.
3.5 Powers and Duties of the Vice Presidents. The Vice Presidents shall
have such powers and perform such duties as the Board of Directors or the
President may from time to time prescribe or as may be prescribed in these By-
laws.
4
<PAGE>
3.6 Powers and Duties of the Controller and Assistant Controllers. (a) The
Controller shall be responsible for the maintenance of adequate accounting
records of all assets, liabilities, capital and transactions of the Corporation.
The Controller shall prepare and render such balance sheets, income statements,
budgets and other financial statements and reports as the Board of Directors or
the Chairman of the Board may require, and he shall perform such other duties as
may be prescribed in these By-laws or assigned to him and all other acts
incident to the position of Controller.
(b) Each Assistant Controller shall perform such duties as from time to
time may be assigned to him by the Controller or by the Board of Directors. In
the event of the absence of the Controller or his incapacity or inability to
act, then any Assistant Controller may perform any of the duties and may
exercise any of the powers of the Controller.
3.7 Powers and Duties of the Treasurer and Associate and Assistant
Treasurers. (a) The Treasurer shall have the care and custody of all the funds
and securities of the Corporation except as may be otherwise ordered by the
Board of Directors and shall cause such funds to be deposited to the credit of
the Corporation in such banks or depositories as may be designated by the Board,
the Chairman of the Board or the Treasurer.
(b) The Treasurer, any Associate Treasurer, any Assistant Treasurer or
such other person or persons as may be designated for such purpose by the Board
of Directors, the Chairman of the Board or the Treasurer, may endorse in the
name and on behalf of the Corporation all instruments for the payment of money,
bills of lading, warehouse receipts, insurance policies and other commercial
documents requiring such endorsement.
(c) The Treasurer, any Associate Treasurer, any Assistant Treasurer or
such other person or persons as may be designated for such purpose by the Board
of Directors, the Chairman of the Board or the Treasurer, may sign all receipts
and vouchers for payments made to the Corporation; he shall render a statement
of the cash account of the Corporation to the Board as often as it shall require
the same; he shall enter regularly in books to be kept by him for that purpose,
full and accurate account of all moneys received and paid by him on account of
the Corporation, and of all securities received and delivered by the
Corporation.
(d) The Treasurer shall perform such other duties as may be prescribed in
these By-laws or assigned to him and all other acts incident to the position of
Treasurer. Each Associate Treasurer and each Assistant Treasurer shall perform
such duties as may from time to time be assigned to him by the Treasurer or by
the Board of Directors. In the event of the absence of the Treasurer or his
incapacity or inability to act, then any Associate Treasurer, if any, or any
Assistant Treasurer may perform any of the duties and may exercise any of the
powers of the Treasurer.
5
<PAGE>
3.8 Powers and Duties of the Secretary and Assistant Secretaries. (a) The
Secretary shall keep the minutes of all proceedings of the stockholders, the
Board of Directors and the committees of the Board. The Secretary shall attend
to the giving and serving of all notices of the Corporation in accordance with
the provisions of these By-laws and as required by the laws of Nevada. The
Secretary shall maintain at the office of the Corporation in the State of
Nevada, a copy of a stock ledger containing the names and addresses of all
stockholders and the number of shares held by each. The Secretary shall have
custody of all stock books and of all unissued stock certificates. The Secretary
shall be the custodian of the seal of the Corporation. The Secretary shall affix
or cause to be affixed the seal of the Corporation to such contracts,
instruments and other documents requiring the seal of the Corporation, and when
so affixed may attest the same. He shall perform such other duties as may be
prescribed in these By-laws or assigned to him and all other acts incident to
the position of Secretary.
(b) Each Assistant Secretary shall perform such duties as may from time to
time be assigned to him by the Secretary or by the Board of Directors. In the
event of the absence of the Secretary or his incapacity or inability to act,
then any Assistant Secretary may perform any of the duties and may exercise any
of the powers of the Secretary.
4. INDEMNIFICATION.
(a) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit, or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
6
<PAGE>
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) or (b), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under subsections (a) and (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the Director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in subsections (a) and (b). Such determination shall be
made (1) by the Board by a majority vote of a quorum consisting of Directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by a Director or officer in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the Corporation as authorized in this Section. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any Bylaw, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity holding such office.
(g) The Corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was
7
<PAGE>
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Section.
(h) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
5. CAPITAL STOCK.
5.1 Stock Certificates. (a) Every holder of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of, the Corporation
by the Chairman of the Board, the President or a Vice President, and by
Treasurer or an Associate Treasurer or Assistant Treasurer, or the Secretary or
an Assistant Secretary, certifying the number of shares owned by him.
(b) Certificates of stock shall be issued in such form not inconsistent
with the Certificate of Incorporation as shall be approved by the Board of
Directors. They shall be numbered and registered in the order in which they are
issued.
(c) All certificates surrendered to the Corporation shall be canceled with
the date of cancellation, and shall be retained by the Secretary, together with
the powers of attorney to transfer and the assignments of the shares
represented by such certificates, for such period of time as shall be prescribed
from time to time by resolution of the Board of Directors.
6. SECURITIES HELD BY THE CORPORATION.
6.1 Voting. Unless the Board of Directors shall otherwise order, the
Chairman of the Board, the President, any Vice President or the Treasurer shall
have full power and authority, on behalf of the Corporation, to attend, act and
vote at any meeting of the stockholders of any corporation in which the
Corporation may hold stock and at such meeting to exercise any or all rights and
powers incident to the ownership of such stock, and to execute on behalf of the
Corporation a proxy or proxies empowering another or others to act as aforesaid.
The Board of Directors from time to time may confer like powers upon any other
person or persons.
6.2 General Authorization to Transfer Securities Held by the Corporation.
(a) Any of the following officers, to wit: the Chairman of the Board, the
President, any Vice President, the Treasurer, the Controller, any Associate
Treasurer or Assistant Treasurer or Assistant
8
<PAGE>
Controller of the Corporation are authorized and empowered to transfer, convert,
endorse, sell, assign, set over and deliver any and all shares of stock, bonds,
debentures, notes, subscription warrants, stock purchase warrants, evidences of
indebtedness, or other securities now or hereafter standing in the name of or
owned by the Corporation, and to make, execute and deliver, under the seal of
the Corporation, any and all written instruments of assignment and transfer
necessary or proper to effectuate the authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of assignment and
transfer executed pursuant to and in accordance with the foregoing paragraph
(a), a certificate of the Secretary or an Assistant Secretary of the Corporation
in office at the date of such certificate setting forth the provisions hereof
and stating that they are in full force and effect and setting forth the names
of persons who are then officers of the Corporation, then all persons to whom
such instrument and annexed certificate shall thereafter come, shall be
entitled, without further inquiry or investigation and regardless of the date
of such certificate, to assume and to act in reliance upon the assumption that
the shares of stock or other securities named in such instrument were
theretofore duly and properly transferred, endorsed, sold, assigned, set over
and delivered by the Corporation, and that with respect to such securities the
authority of these provisions of the By-laws and of such officers is still in
full force and effect.
7. SEAL.
The seal of the Corporation shall be in circular form and shall bear the
name of the Corporation and words and figures showing that it was incorporated
in the State of Nevada in the year 1998.
8. FISCAL YEAR.
The fiscal year of the Corporation shall end on December 31 in each
year.
9. WAIVER OF OR DISPENSING WITH NOTICE.
(a) Whenever any notice of the time, place or purpose of any meeting of
the stockholders, the Board of Directors or a committee of the Board is required
to be given under the laws of Nevada, the Certificate of Incorporation or these
By-laws, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the holding thereof, or actual
attendance at the meeting in person or, in the case of stockholders, by his
attorney-in-fact, shall be deemed equivalent to the giving of such notice to
such persons.
(b) No notice need be given to any person with whom communication is made
unlawful by any law of the United States or any rule, regulation, proclamation
or executive order issued under any such law.
9
<PAGE>
10. AMENDMENT OF BY-LAWS.
These By-laws, or any of them, may from time to time be supplemented,
amended or repealed by the Board of Directors, or by the vote of a majority in
interest of the stockholders represented and entitled to vote at any meeting at
which a quorum is present.
10
<PAGE>
EXHIBIT 4.1
DRAFT 7/7/98
------------
TRUST AGREEMENT
between
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION,
as Depositor,
and
[NAME OF OWNER TRUSTEE],
as Owner Trustee
Dated as of [ ], 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms................................................1
SECTION 1.02. Other Definitional Provisions....................................1
ARTICLE II
Organization
SECTION 2.01. Name.............................................................2
SECTION 2.02. Office...........................................................2
SECTION 2.03. Purposes and Powers..............................................2
SECTION 2.04. Appointment of Owner Trustee.....................................3
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate...............3
SECTION 2.06. Declaration of Trust.............................................3
SECTION 2.07. Liability of Owners..............................................3
SECTION 2.08. Title to Trust Property..........................................4
SECTION 2.09. Situs of Trust...................................................4
SECTION 2.10. Representations and Warranties of the Depositor..................4
SECTION 2.11. Maintenance of the Demand Note...................................5
SECTION 2.12. Federal Income Tax Allocations...................................5
SECTION 2.13. Administrative Duties............................................6
SECTION 2.14. Elimination of Certain Tax Provisions............................7
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership................................................7
SECTION 3.02. The Trust Certificates...........................................7
SECTION 3.03. Authentication of Trust Certificates.............................8
SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates;
Limitations on Transfer..........................................8
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates..........9
SECTION 3.06. Persons Deemed Certificateholders................................9
SECTION 3.07. Access to List of Certificateholders' Names and Addresses........9
SECTION 3.08. Maintenance of Office or Agency..................................9
SECTION 3.09. RESERVED........................................................10
SECTION 3.10. Ownership by Company of Trust Certificates......................10
SECTION 3.11. Book-Entry Certificates.........................................10
SECTION 3.12. Notices to Clearing Agency......................................11
</TABLE>
i
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<TABLE>
<S> <C>
SECTION 3.13. Definitive Trust Certificates...................................11
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Certificateholders with Respect
to Certain Matters..............................................12
SECTION 4.02. Action by Certificateholders with Respect to Certain Matters....12
SECTION 4.03. Action by Certificateholders with Respect to Bankruptcy.........12
SECTION 4.04. Restrictions on Certificateholders' Power.......................13
SECTION 4.05. Majority Control................................................13
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account..................................13
SECTION 5.02. Application of Trust Funds......................................13
SECTION 5.03. Method of Payment...............................................14
SECTION 5.04. No Segregation of Moneys; No Interest...........................14
SECTION 5.05. Accounting and Reports to Certificateholders, Internal
Revenue Service and Others......................................14
SECTION 5.06. Signature on Returns; Tax Matters Partner.......................15
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority...............................................15
SECTION 6.02. General Duties..................................................15
SECTION 6.03. Action upon Instruction.........................................15
SECTION 6.04. No Duties Except as Specified in this Agreement or
in Instructions.................................................16
SECTION 6.05. No Action Except Under Specified Documents or Instructions......17
SECTION 6.06. Restrictions....................................................17
ARTICLE VII
Concerning Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties.................................17
SECTION 7.02. Furnishing of Documents.........................................18
SECTION 7.03. Representations and Warranties..................................18
SECTION 7.04. Reliance; Advice of Counsel.....................................19
SECTION 7.05. Not Acting in Individual Capacity...............................19
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or Receivables..20
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes..............20
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses...............................20
SECTION 8.02. Indemnification.................................................20
SECTION 8.03. Payments to Owner Trustee.......................................21
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement..................................21
SECTION 9.02. Dissolution upon Bankruptcy of the Depositor....................22
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee.....................23
SECTION 10.02. Resignation or Removal of Owner Trustee........................23
SECTION 10.03. Successor Owner Trustee........................................24
SECTION 10.04. Merger or Consolidation of Owner Trustee.......................24
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee..................24
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments.....................................26
SECTION 11.02. No Legal Title to Owner Trust Estate in Certificateholders.....27
SECTION 11.03. Limitations on Rights of Others................................27
SECTION 11.04. Notices........................................................27
SECTION 11.05. Severability...................................................28
SECTION 11.06. Separate Counterparts..........................................28
SECTION 11.07. Successors and Assigns.........................................28
SECTION 11.08. Covenants of the Depositor.....................................28
SECTION 11.09. No Petition....................................................28
SECTION 11.10. No Recourse....................................................29
SECTION 11.11. Headings.......................................................29
SECTION 11.12. GOVERNING LAW..................................................29
SECTION 11.13. Trust Certificate Transfer Restrictions........................29
</TABLE>
EXHIBIT A - Form of Trust Certificate
EXHIBIT B - Form of Certificate of Trust of Distribution Financial Services
RV Trust 1998-1
iii
<PAGE>
EXHIBIT C - Form of Certificate Depository Agreement
iv
<PAGE>
TRUST AGREEMENT dated as of [ ], 1998 (this "Agreement"), between
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, a Nevada corporation, as
depositor (the "Depositor"), and [NAME OF OWNER TRUSTEE], a [Delaware banking
corporation], as owner trustee (the "Owner Trustee").
ARTICLE I
Definitions
-----------
SECTION 1.01. Capitalized Terms. For all purposes of this Agreement,
capitalized terms used herein shall have the meanings set forth in Appendix A to
the Transfer and Servicing Agreement dated as of [ ], 1998, among
Distribution Financial Services [RV/Boat] Trust 199 -[ ] (the "Trust"), the
Depositor, Ganis Credit Corporation, and Deutsche Financial Services
Corporation, individually and as Servicer.
SECTION 1.02. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
(including the Transfer and Servicing Agreement referred to above) or in any
instrument or certificate delivered in connection herewith means such agreement,
instrument or statute as from time to time
<PAGE>
amended, amended and restated, modified or supplemented and includes (in the
case of agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
ARTICLE II
Organization
------------
SECTION 2.01. Name. The Trust created hereby shall be known as
"Distribution Financial Services [RV/Boat] Trust 199 -[ ] ," in which name the
Owner Trustee may conduct the business of the Trust, make and execute contracts
and other instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Certificateholders
and the Depositor.
SECTION 2.03. Purposes and Powers.
(a) The purpose of the Trust is to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the Trust
Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to pay the organizational, start-up and transactional
expenses of the Trust [and to pay the balance to the Depositor pursuant to
the Transfer and Servicing Agreement];
(ii) to Grant the Trust Estate pursuant to the Indenture and to hold,
manage and distribute to the Certificateholders pursuant to the terms of
the Transfer and Servicing Agreement any portion of the Trust Estate
released from the Lien of, and remitted to the Trust pursuant to, the
Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into agreements,
that are necessary, suitable or convenient to accomplish the foregoing or
are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation of
the Owner Trust Estate and the making of distributions to the
Certificateholders and the Noteholders.
2
<PAGE>
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the other
Basic Documents.
SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby assigns, transfers, conveys and sets over to the Owner Trustee,
as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges
receipt in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate and shall be
deposited in the Certificate Distribution Account. The Depositor shall pay
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a business trust under
the Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. It is the intention of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall be treated
as a partnership, with the assets of the partnership being the Receivables and
other assets held by the Trust, the partners of the partnership being the
Certificateholders, and the Notes being debt of the partnership. The parties
agree that, unless otherwise required by appropriate tax authorities, the Trust
will file or cause to be filed annual or other necessary returns, reports and
other forms consistent with the characterization of the Trust as a partnership
for such tax purposes. Effective as of the date hereof, the Owner Trustee shall
have all rights, powers and duties set forth herein and in the Business Trust
Statute with respect to accomplishing the purposes of the Trust. The Owner
Trustee shall file the Certificate of Trust with the Secretary of State of the
State of Delaware pursuant to Section 3801 of the Business Trust Statute on or
before the Closing Date.
SECTION 2.07. Liability of Owners.
(a) The Depositor shall be liable directly to and will indemnify any
injured party for all losses, claims, damages, liabilities and expenses of the
Trust (including Expenses, to the extent not paid out of the Owner Trust Estate)
to the extent that the Depositor would be liable if the Trust were a partnership
under the Delaware Revised Uniform Limited Partnership Act in which the
Depositor were a general partner; provided, however, that the Depositor shall
not be liable for any losses incurred by a Certificateholder in the capacity of
an investor in the Trust Certificates, or by a Noteholder in the capacity of an
investor in the Notes. In addition, any third party creditors of the Trust
(other than in connection with the obligations described in the
3
<PAGE>
preceding sentence for which the Depositor shall not be liable) shall be deemed
third party beneficiaries of this paragraph. The obligations of the Depositor
under this paragraph shall be evidenced by the Trust Certificates described in
Section 3.10(a), which for purposes of the Business Trust Statute shall be
deemed to be a separate class of Trust Certificates from all other Trust
Certificates issued by the Trust; provided that the rights and obligations
evidenced by all Trust Certificates, regardless of class, shall, except as
provided in this Section and in Section 3.10(a), be identical.
(b) No Certificateholder, other than to the extent set forth in paragraph
(a), shall have any personal liability for any liability or obligation of the
Trust.
SECTION 2.08. Title to Trust Property. Legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co- trustee
and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York. The Trust shall not have any employees in any state other than
Delaware; provided, however, that nothing herein shall restrict or prohibit the
Owner Trustee from having employees within or without the State of Delaware.
Payments will be received by the Trust only in Delaware or New York, and
payments will be made by the Trust only from Delaware or New York. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Nevada, with
power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is presently
conducted.
(ii) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such qualifications.
(ii) The Depositor has the power and authority to execute and deliver
this Agreement and to carry out its terms; the Depositor has full power and
authority to transfer and assign the property to be transferred and
assigned to and deposited with the Trust and the Depositor has duly
authorized such transfer and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance
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of this Agreement have been duly authorized by the Depositor by all
necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Depositor, or any indenture, agreement or
other instrument to which the Depositor is a party or by which it is bound;
nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any
law or, to the best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its properties.
(v) To the Depositor's best knowledge, there are no proceedings or
investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
[SECTION 2.11. Maintenance of the Demand Note. To the fullest
extent permitted by applicable law, the Depositor agrees that it shall not sell,
convey, pledge, transfer or otherwise dispose of the Demand Note.]
SECTION 2.12. Federal Income Tax Allocations. Net income of the Trust
for any month as determined for federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof) shall be
allocated to the Certificateholders as of the first day following the end of
such month, in proportion to their ownership of principal amount of Trust
Certificates on such date, to the extent of any net income of the Trust
(including any amounts to be distributed to the Certificateholders pursuant to
the Transfer and Servicing Agreement).
Net losses of the Trust, if any, for any month as determined for federal income
tax purposes (and each item of income, gain, loss and deduction entering into
the computation thereof) shall be allocated to the Depositor to the extent the
Depositor is reasonably expected to bear the economic burden of such net losses,
and any remaining net losses shall be allocated among the Certificateholders as
of the first Record Date following the end of such month in proportion to their
ownership of principal amount of Trust Certificates on such Record Date. The
Depositor is authorized to modify the allocations in this paragraph if necessary
or appropriate, in its sole discretion, for the allocations to fairly reflect
the economic income, gain or loss to the Depositor or to the Certificateholders,
or as otherwise required by the Code.
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SECTION 2.13. Administrative Duties.
(a) Duties with Respect to the Specified Agreements. The Depositor shall
perform the duties of the Trust under the Indenture, the Note Depository
Agreement and the Certificate Depository Agreement (collectively the "Specified
Agreements"). In addition, the Depositor shall consult with the Owner Trustee
as the Depositor deems appropriate regarding the duties of the Trust under the
Specified Agreements. The Depositor shall monitor the performance of the
Trust's duties and shall advise the Owner Trustee when action is necessary to
comply with the Trust's duties under the Specified Agreements. The Depositor
shall prepare for execution by the Owner Trustee or shall cause the preparation
by other appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the Trust to
prepare, file or deliver pursuant to the Specified Agreements. In furtherance
of the foregoing, the Depositor shall take all necessary action that is the duty
of the Trust to take pursuant to Sections 3.04, 3.05, 3.06, 3.09, 3.14, 3.19 and
7.03 of the Indenture.
(b) Duties with Respect to the Trust.
(i) In addition to the duties of the Depositor set forth in the Basic
Documents, the Depositor shall perform such calculations and shall prepare
for execution by the Trust or the Owner Trustee or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of
the Trust or the Owner Trustee to prepare, file or deliver pursuant to
state and federal tax and securities laws and shall take all other
appropriate action that it is the duty of the Trust or the Owner Trustee to
take pursuant to the Basic Documents relating to the preparation and filing
of tax returns, the transfers of Certificates, the furnishing of documents
and with respect to supplements and amendments of the Specified Agreements.
In accordance with the request of the Owner Trustee, the Depositor shall
administer, perform or supervise the performance of such other activities
in connection with the Basic Documents as are not covered by any of the
foregoing provisions and as are expressly requested by the Owner Trustee
and are reasonably within the capability of the Depositor.
(ii) Notwithstanding anything in this Agreement or any of the other
Basic Documents to the contrary, the Depositor shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax
is imposed on the Trust's payments (or allocations of income) to a
Certificateholder. Any such notice shall be in writing and specify the
amount of any withholding tax required to be withheld by the Owner Trustee.
(c) Records. The Depositor shall maintain appropriate books of account,
including capital accounts, and records relating to the Trust, which books of
account and records shall be accessible for inspection by the Owner Trustee and
the Certificateholders at any time during normal business hours.
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(d) Additional Information to be Furnished to the Trust. The Depositor
shall furnish to the Owner Trustee from time to time such additional information
regarding the Trust or the Basic Documents as the Owner Trustee shall reasonably
request.
[SECTION 2.1 Elimination of Certain Tax Provisions. In the event that the
Depositor provides the Owner Trustee with an opinion of counsel acceptable to
the Owner Trustee (the cost of which opinion shall not be an expense of the
Owner Trustee or the Trust) that, based on a change in California law since the
Closing Date, for the Trust to be treated as a partnership for California state
income and franchise tax purposes it is no longer necessary for: [(i) the
Depositor to continue to maintain the Demand Note pursuant to Section 2.11 of
this Agreement;] (ii) an Insolvency Event of the Depositor to cause the
dissolution of the Trust pursuant to Section 9.02 of this Agreement; and (iii)
the Depositor's Trust Certificate to be nontransferable pursuant to Section
3.10(a) of this Agreement, this Agreement will be deemed to have been amended
(subject to any conditions set forth in such opinion of counsel and effective
only after the later of the date of such opinion or the effective date set forth
in such opinion) without the consent of Noteholders or Certificateholders and
without the requirement of any further action by the Owner Trustee or the
Depositor in that Section 2.11, Section 9.02, and Section 3.10(a) will be deemed
to have been eliminated from this Agreement and shall be of no further force or
effect.]
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01 Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the issuance of
the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
SECTION 3.02 The Trust Certificates. The Trust Certificates shall be issued
in definitive, certificated form in minimum denominations of $[1,000] and in
integral multiples of $1 in excess thereof; provided, however, that the Trust
Certificates issued to the Depositor pursuant to Section 3.10 may be issued in
such denomination as required to include any residual amount. The Trust
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee. Trust Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures shall have been affixed, authorized to sign on behalf of
the Trust, shall be validly issued and entitled to the benefit of this
Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the authentication and delivery of such
Trust Certificates or did not hold such offices at the date of authentication
and delivery of such Trust Certificates. The Trust Certificates shall evidence
fractional undivided interests in the Trust.
A transferee of a Trust Certificate shall become a Certificateholder in
accordance with Section 3.04.
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SECTION 3.03. Authentication of Trust Certificates. On the Closing Date,
the Owner Trustee shall cause the Trust Certificates in an aggregate principal
amount equal to the Initial Certificate Balance to be executed on behalf of the
Trust, authenticated and delivered to or upon the written order of the
Depositor, signed by its chairman of the board, its president, any vice
president, secretary or any assistant treasurer, without further corporate
action by the Depositor, in authorized denominations. No Trust Certificate shall
entitle its Holder to any benefit under this Agreement or be valid for any
purpose unless there shall appear on such Trust Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee by manual signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust Certificates;
Limitations on Transfer. The Certificate Registrar shall keep or cause to be
kept, at the office or agency maintained pursuant to Section 3.08, a Certificate
Register in which, subject to such reasonable regulations as it may prescribe,
the Owner Trustee shall provide for the registration of Trust Certificates and
of transfers and exchanges of Trust Certificates as herein provided. [Name of
Owner Trustee] shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.08, the Owner Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Trust Certificates in authorized denominations of a
like aggregate amount dated the date of authentication by the Owner Trustee. At
the option of a Holder, Trust Certificates may be exchanged for other Trust
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Trust Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be canceled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner Trustee
shall not make, and the Certificate Registrar shall not register transfers or
exchanges of, Trust Certificates for a period of 15 days preceding the due date
for any payment with respect to the Trust Certificates.
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SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates. If
(a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate, and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate has been acquired by a
bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and
the Owner Trustee shall authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Trust Certificate, a new Trust
Certificate of like tenor and denomination. In connection with the issuance of
any new Trust Certificate under this Section, the Owner Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Trust Certificate issued pursuant to this Section shall constitute
conclusive evidence of ownership in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Trust Certificate shall be found at any
time.
SECTION 3.06. Persons Deemed Certificateholders. Prior to due presentation
of a Trust Certificate for registration of transfer, the Owner Trustee or the
Certificate Registrar may treat the Person in whose name any Trust Certificate
is registered in the Certificate Register as the owner of such Trust Certificate
for the purpose of receiving distributions pursuant to Section 5.02 and for all
other purposes whatsoever, and none of the Owner Trustee or the Certificate
Registrar shall be bound by any notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall maintain a list of the names and addresses of the
Certificateholders, and shall furnish or cause to be furnished to the Servicer
and the Depositor, within 15 days after receipt by the Owner Trustee of a
written request therefor from the Servicer or the Depositor, a list, in such
form as the Servicer or the Depositor may reasonably require, of the names and
addresses of the Certificateholders as of the most recent Record Date. If a
Certificateholder applies in writing to the Owner Trustee, and such application
states that the applicant desires to communicate with other Certificateholders
with respect to their rights under this Agreement or under the Trust
Certificates and such application is accompanied by a copy of the communication
that such applicant proposes to transmit, then the Owner Trustee shall, within
five Business Days after the receipt of such application, afford such applicant
access during normal business hours to the current list of Certificateholders.
Each Holder, by receiving and holding a Trust Certificate, shall be deemed to
have agreed not to hold any of the Depositor, the Certificate Registrar or the
Owner Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates the Corporate Trust
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Office in New York as its office for such purposes. The Owner Trustee shall give
prompt written notice to the Depositor and to the Certificateholders of any
change in the location of the Certificate Register or any such office or agency.
SECTION 3.09. RESERVED.
SECTION 3.10. Ownership by Company of Trust Certificates.
(a) On the Closing Date, the Depositor shall retain one or more Trust
Certificates representing at least 1% of the Initial Certificate Balance and
shall thereafter retain beneficial and record ownership of Trust Certificates
representing at least 1% of the Certificate Balance. Any attempted transfer of
the Depositor's Trust Certificate that would reduce such interest of the
Depositor below 1% of the Certificate Balance shall be void. The Owner Trustee
shall cause any Trust Certificate issued to the Depositor to contain a legend
stating "THIS CERTIFICATE IS NON-TRANSFERABLE".
(b) The Trust Certificate issued to the Depositor as described in Section
3.10(a) shall contain such additional language providing that all amounts to be
distributed pursuant 5.06(b) of the Transfer and Servicing Agreement shall be
distributed to the Holder of such Certificate.
SECTION 3.11. Book-Entry Certificates. The Trust Certificates, upon
original issuance, will be issued in the form of a typewritten Trust Certificate
or Trust Certificates representing Book-Entry Certificates, to be delivered to
The Depository Trust Company, the initial Clearing Agency, by, or on behalf of,
the Trust; provided, however, that one Definitive Trust Certificate may be
issued to the Depositor pursuant to Section 3.10. Such Trust Certificate or
Trust Certificates shall initially be registered on the Certificate Register in
the name of Cede & Co., the nominee of the initial Clearing Agency, and no
Certificate Owner will receive a definitive Trust Certificate representing such
Certificate Owner's interest in such Trust Certificate, except as provided in
Section 3.13. Unless and until definitive, fully registered Trust Certificates
(the "Definitive Trust Certificates") have been issued to Certificate Owners
pursuant to Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Agreement (including the
payment of principal of and interest on the Trust Certificates and the giving of
instructions or directions hereunder) as the sole Holder of the Trust
Certificates and shall have no obligation to the Certificate Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Certificate
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Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Certificate Depository Agreement, unless and until Definitive Trust
Certificates are issued pursuant to Section 3.13, the initial Clearing Agency
will make book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and interest on the Trust
Certificates to such Clearing Agency Participants; and
(e) Whenever this Agreement requires or permits actions to be taken based
upon instructions or directions of Holders of Trust Certificates evidencing a
specified percentage of the Certificate Balance, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Certificate Owners and/or Clearing Agency
Participants owning or representing, respectively, such required percentage of
the beneficial interest in the Trust Certificates and has delivered such
instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Trust Certificates shall have been issued to Certificate
Owners pursuant to Section 3.13, the Owner Trustee shall give all such notices
and communications specified herein to be given to Certificateholders to the
Clearing Agency, and shall have no obligations to the Certificate Owners.
SECTION 3.13. Definitive Trust Certificates. If (i) the Depositor advises
the Owner Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Trust
Certificates and the Depositor is unable to locate a qualified successor, (ii)
the Depositor at its option advises the Owner Trustee in writing that it elects
to terminate the book-entry system through the Clearing Agency or (iii) after
the occurrence of an Event of Default or a Servicer Default, Certificate Owners
representing beneficial interests aggregating at least a majority of the
Certificate Balance advise the Clearing Agency in writing that the continuation
of a book-entry system through the Clearing Agency is no longer in the best
interest of the Certificate Owners, then the Clearing Agency shall notify all
Certificate Owners and the Owner Trustee of the occurrence of any such event and
of the availability of the Definitive Trust Certificates to Certificate Owners
requesting the same. Upon surrender to the Owner Trustee of the typewritten
Trust Certificate or Trust Certificates representing the Book-Entry Certificates
by the Clearing Agency, accompanied by registration instructions, the Owner
Trustee shall execute and authenticate the Definitive Trust Certificates in
accordance with the instructions of the Clearing Agency. Neither the Certificate
Registrar nor the Owner Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Trust
Certificates, the Owner Trustee shall recognize the Holders of the Definitive
Trust Certificates as Certificateholders. The Definitive Trust Certificates
shall be printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the Owner Trustee, as evidenced by its
execution thereof.
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ARTICLE IV
Actions by Owner Trustee
------------------------
SECTION 4.01. Prior Notice to Certificateholders with Respect to Certain
Matters. With respect to the following matters, the Owner Trustee shall not take
action unless, at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims or
lawsuits brought in connection with collection of the Receivables) and the
compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits brought in
connection with collection of the Receivables);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interests of the Certificateholders;
or
(e) the appointment pursuant to the Indenture of a successor Note
Registrar or Indenture Trustee or pursuant to this Agreement of a successor
Certificate Registrar, or the consent to the assignment by the Note Registrar or
Indenture Trustee or Certificate Registrar of its obligations under the
Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Certificateholders with Respect to Certain Matters.
The Owner Trustee shall not have the power [, except upon the direction of the
Certificateholders, to remove the Servicer under the Transfer and Servicing
Agreement pursuant to Section 8.01 thereof or], except as expressly provided in
the Basic Documents, to sell the Receivables after the termination of the
Indenture. The Owner Trustee shall take the actions referred to in the preceding
sentence only upon written instructions signed by the Certificateholders.
SECTION 4.03. Action by Certificateholders with Respect to Bankruptcy. The
Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent. [Compare Section 10.11 of the
Transfer and Servicing Agreement.]
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SECTION 4.04. Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or to refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the other Basic
Documents or would be contrary to Section 2.03, nor shall the Owner Trustee be
obligated to follow any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the Holders of Trust Certificates evidencing not less than a majority
of the Certificate Balance. Except as expressly provided herein, any written
notice of the Certificateholders delivered pursuant to this Agreement shall be
effective if signed by Holders of Trust Certificates evidencing not less than a
majority of the Certificate Balance at the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for the
benefit of the Certificateholders, shall establish and maintain in the name of
the Trust an Eligible Deposit Account (the "Certificate Distribution Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof. Except as otherwise expressly provided herein, the Certificate
Distribution Account shall be under the sole dominion and control of the Owner
Trustee for the benefit of the Certificateholders. If, at any time, the
Certificate Distribution Account ceases to be an Eligible Deposit Account, the
Owner Trustee (or the Depositor on behalf of the Owner Trustee, if the
Certificate Distribution Account is not then held by the Owner Trustee or an
Affiliate thereof) shall within 10 Business Days (or such longer period, not to
exceed 30 calendar days, as to which each Rating Agency may consent) establish a
new Certificate Distribution Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Certificate Distribution
Account.
SECTION 5.02. Application of Trust Funds.
(a) On each Monthly Payment Date, the Owner Trustee will distribute to
Certificateholders, on a pro rata basis, amounts deposited in the Certificate
Distribution Account pursuant to Section 5.06(a)(ii) of the Transfer and
Servicing Agreement with respect to such Monthly Payment Date. In addition, on
each Monthly Payment Date the Owner Trustee will distribute to the Depositor,
amounts, if any received from the Indenture Trustee for distribution to the
Depositor pursuant to Section 5.06(b) or Section 5.07(a) of the Transfer and
Servicing Agreement with respect to such Monthly Payment Date.
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(b) On each Monthly Payment Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee by
the Servicer pursuant to Section 5.08 of the Transfer and Servicing Agreement
with respect to such Monthly Payment Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance with
this Section. The Owner Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Certificateholders sufficient funds for
the payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Owner Trustee from contesting any such tax in appropriate
proceedings and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to a Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Trust and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax is
payable with respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Owner Trustee may in its sole discretion withhold such
amounts in accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c), distributions
required to be made to Certificateholders on any Monthly Payment Date shall be
made to each Certificateholder of record on the preceding Record Date either by
wire transfer, in immediately available funds, to the account of such Holder at
a bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Monthly Payment
Date or, if not, by check mailed to such Certificateholder at the address of
such Holder appearing in the Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Moneys received by the
Owner Trustee hereunder need not be segregated in any manner except to the
extent required by law or the Transfer and Servicing Agreement and may be
deposited under such general conditions as may be prescribed by law, and the
Owner Trustee shall not be liable for any interest thereon.
SECTION 5.05. Accounting and Reports to Certificateholders, Internal
Revenue Service and Others. The Depositor shall (a) maintain (or cause to be
maintained) the books of the Trust on a calendar year basis and the accrual
method of accounting, (b) deliver to each Certificateholder, as may be required
by the Code and applicable Treasury Regulations, such information as may be
required (including Schedule K-1) to enable each Certificateholder to prepare
its federal and state income tax returns, (c) file such tax returns relating to
the Trust (including a partnership information return, IRS Form 1065) and make
such elections as from time to time may be required or appropriate under any
applicable state or federal statute or any rule or regulation thereunder so as
to maintain the Trust's characterization as a partnership for federal income tax
purposes, (d) cause such tax returns to be signed in the manner required by
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law and (e) collect or cause to be collected any withholding tax as described in
and in accordance with Section 5.02(c) with respect to income or distributions
to Certificateholders. The Owner Trustee shall elect under Section 1278 of the
Code to include in income currently any market discount that accrues with
respect to the Receivables. The Owner Trustee shall not make the election
provided under Section 754 of the Code.
SECTION 5.06. Signature on Returns; Tax Matters Partner.
(a) Owner Trustee shall sign on behalf of the Trust the tax returns of the
Trust, unless applicable law requires a Certificateholder to sign such
documents, in which case such documents shall be signed by the Depositor.
(b) The Depositor shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE VI
Authority and Duties of Owner Trustee
-------------------------------------
SECTION 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and, in
each case, in such form as the Depositor shall approve, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Depositor recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the other Basic Documents to which the Trust is
a party and to administer the Trust in the interest of the Certificateholders,
subject to the Basic Documents and in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, the Owner Trustee will be deemed to
have discharged it duties under the Basic Documents to the extent the Depositor
has agreed to perform them pursuant to Section 2.13 of this Agreement.
SECTION 6.03. Action upon Instruction.
(a) Subject to Article IV and in accordance with the terms of the Basic
Documents, the Certificateholders may by written instruction direct the Owner
Trustee in the management of the Trust. Such direction may be exercised at any
time by written instruction of the Certificateholders pursuant to Article IV.
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(b) The Owner Trustee shall not be required to take any action hereunder
or under any other Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any other Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any other Basic Document, the Owner Trustee shall promptly give notice (in such
form as shall be appropriate under the circumstances) to the Certificateholders
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of [all of] the Certificateholders, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within 10 days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action not inconsistent with this Agreement or
the other Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any other Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction from [all] of the Certificateholders, the Owner Trustee shall not be
liable, on account of such action or inaction, to any Person. If the Owner
Trustee shall not have received appropriate instruction within 10 days of such
notice (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action not inconsistent with
this Agreement or the other Basic Documents, as it shall deem to be in the best
interests of the Certificateholders, and shall have no liability to any Person
for such action or inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement, any other Basic Document to which the Trust is a party or in
any written instruction received by the Owner Trustee as contemplated by Section
6.03; and no implied duties or obligations shall be read into this Agreement or
any other Basic Document against the Owner Trustee. The Owner Trustee shall
have no responsibility for filing any
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financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any other Basic
Document. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense, promptly take all action as may be necessary to discharge any Liens
on any part of the Owner Trust Estate that result from actions by, or claims
against, the Owner Trustee that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any instruction delivered to the Owner Trustee as contemplated
by Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section
2.03 or (b) that, to the actual knowledge of the Owner Trustee, would result in
the Trust's becoming taxable as a corporation for federal income tax purposes.
The Certificateholders shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.
ARTICLE VII
Concerning Owner Trustee
------------------------
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts, but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder
or under any other Basic Document under any circumstances, except (i) for its
own willful misconduct or negligence or (ii) in the case of the inaccuracy of
any representation or warranty contained in Section 7.03 expressly made by the
Owner Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment made
by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the instructions of [any]
Certificateholder;
(c) No provision of this Agreement or any other Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any other Basic Document if the
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Owner Trustee shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate, or for or in respect of the validity
or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty or obligation to any Noteholder or to
any Certificateholder, other than as expressly provided for herein or expressly
agreed to in the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct of
the Depositor the Indenture Trustee or the Servicer under any of the Basic
Documents or otherwise, and the Owner Trustee shall have no obligation or
liability to perform the obligations of the Trust under this Agreement or the
other Basic Documents that are required to be performed by the Indenture Trustee
under the Indenture or the Servicer or the Depositor under the Transfer and
Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any other Basic Document, at the request, order or direction of any
of the Certificateholders, unless such Certificateholders have offered to the
Owner Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by the Owner Trustee therein or
thereby. The right of the Owner Trustee to perform any discretionary act
enumerated in this Agreement or in any other Basic Document shall not be
construed as a duty, and the Owner Trustee shall not be answerable for other
than its negligence or willful misconduct in the performance of any such act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Certificateholders, promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor, for the benefit of the
Certificateholders, that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
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(b) It has taken all corporate action necessary to authorize the execution
and delivery by it of this Agreement, and this Agreement has been executed and
delivered by one of its officers who is duly authorized to execute and deliver
this Agreement on its behalf.
(c) Neither the execution or the delivery by it of this Agreement, nor the
consummation by it of the transactions contemplated hereby, nor compliance by it
with any of the terms or provisions hereof, will contravene any federal or
Delaware law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the other
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled Persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such Persons and not contrary to this Agreement or
any other Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created [Name of Owner Trustee]
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any other Basic Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
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SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
Receivables. The recitals contained herein and in the Trust Certificates (other
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any other Basic Document or of the Trust Certificates (other than the signature
and countersignature of the Owner Trustee on the Trust Certificates) or the
Notes, or of any Receivable or related documents. The Owner Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Receivable or the perfection and priority of
any security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments to
be distributed to Certificateholders under this Agreement or the Noteholders
under the Indenture, including, without limitation: the existence, condition and
ownership of any Financed Vehicle; the existence and enforceability of any
insurance thereon; the existence and contents of any Receivable on any computer
or other record thereof; the validity of the transfer of any Receivable to the
Trust or of any intervening transfer; the completeness of any Receivable; the
performance or enforcement of any Receivable; the compliance by the Depositor or
the Servicer with any warranty or representation made under any other Basic
Document or in any related document or the accuracy of any such warranty or
representation, or any action of the Indenture Trustee or the Servicer or any
subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Indenture Trustee and the Servicer in banking transactions with the same rights
as it would have if it were not Owner Trustee.
ARTICLE VII
Compensation of Owner Trustee
-----------------------------
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Depositor and the
Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Depositor for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder.
SECTION 8.02. Indemnification. The Depositor shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
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(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the other Basic Documents, the Owner Trust
Estate, the administration of the Owner Trust Estate or the action or inaction
of the Owner Trustee hereunder, except only that the Depositor shall not be
liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 7.01. The indemnities contained in this Section shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's choice of
legal counsel shall be subject to the approval of the Depositor, which approval
shall not be unreasonably withheld.
SECTION 8.03. Payments to Owner Trustee. Any amounts paid to the Owner
Trustee pursuant to this Article VIII shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01. Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust shall terminate
and be of no further force or effect (i) upon the final distribution by the
Owner Trustee of all moneys or other property or proceeds of the Owner Trust
Estate in accordance with the terms of the Indenture, the Transfer and Servicing
Agreement and Article V or (ii) [at the time provided in Section 9.02]. The
bankruptcy, liquidation, dissolution, death or incapacity of any
Certificateholder, [other than the Depositor as described in Section 9.02,]
shall not (x) operate to terminate this Agreement or the Trust or (y) entitle
such Certificateholder's legal representatives or heirs to claim an accounting
or to take any action or proceeding in any court for a partition or winding up
of all or any part of the Trust or Owner Trust Estate or (z) otherwise affect
the rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), none of the Depositor or any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Monthly Payment
Date upon which Certificateholders shall surrender their Trust Certificates for
payment of the final distribution and cancellation, shall be given by the Owner
Trustee by letter to Certificateholders mailed within five Business Days of
receipt of notice of such termination from the Servicer given pursuant to
Section 9.01(c) of the Transfer and Servicing Agreement, stating (i) the Monthly
Payment Date upon or with respect to which final payment of the Trust
Certificates shall be made upon presentation and surrender of the Trust
Certificates at the office of the Owner Trustee, (ii) the amount of any such
final payment and (iii) that the Record Date otherwise
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applicable to such Monthly Payment Date is not applicable, payments being made
only upon presentation and surrender of the Trust Certificates at the office of
the Owner Trustee. The Owner Trustee shall give such notice to the Certificate
Registrar (if other than the Owner Trustee) at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust Certificates,
the Owner Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Monthly Payment Date pursuant to Section 5.02.
In the event that all of the Certificateholders shall not surrender their
Trust Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their Trust
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Trust Certificates
shall not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Subject to applicable
escheat laws, any funds remaining in the Trust after exhaustion of such remedies
shall be distributed by the Owner Trustee to the Depositor.
(d) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
SECTION 9.02. [Dissolution upon Bankruptcy of the Depositor. In the event
that an Insolvency Event shall occur with respect to the Depositor, this
Agreement shall be terminated in accordance with Section 9.01 90 days after the
date of such Insolvency Event, unless, before the end of such 90-day period, the
Owner Trustee shall have received written instructions from (a) Holders of
Certificates (other than the Depositor) representing more than 50% of the
Certificate Balance (not including the Certificate Balance of the Trust
Certificates held by the Depositor) or (b) the (i) Holders of Notes representing
more than 50% of the Outstanding Amount of the Notes, and (ii) Holders of Trust
Certificates representing more than 50% of the Certificate Balance, to the
effect that such Holders disapprove of the liquidation of the Receivables and
termination of the Trust. Promptly after the occurrence of any Insolvency Event
with respect to the Depositor, (A) the Depositor shall give the Indenture
Trustee and the Owner Trustee written notice of such Insolvency Event, (B) the
Owner Trustee shall, upon the receipt of such written notice from the Depositor,
give prompt written notice to the Certificateholders, and the Indenture Trustee,
of the occurrence of such event and (C) the Indenture Trustee shall, upon
receipt of written notice of such Insolvency Event from the Owner Trustee or the
Depositor, give prompt written notice to the Noteholders of the occurrence of
such event; provided, however, that any failure to give a notice required by
this sentence shall not prevent or delay, in any manner, a termination of the
Trust pursuant to the first sentence of this Section 9.02. Upon a termination
pursuant to this Section, the Owner Trustee shall direct the Indenture Trustee
promptly to sell the assets of the Trust (other than the Trust Accounts and the
Certificate Distribution Account) in a
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commercially reasonable manner and on commercially reasonable terms. The
proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Transfer and Servicing Agreement.]
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
SECTION 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) time deposits that are rated at least A-1
by Standard & Poor's and P-1 by Moody's. If such corporation shall publish
reports of condition at least annually pursuant to law or to the requirements of
the aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Owner Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Owner Trustee
shall resign immediately in the manner and with the effect specified in Section
10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Depositor. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor Owner Trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Owner Trustee and one copy to the successor Owner
Trustee. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.01 and shall fail to resign after written
request therefor by the Depositor, or if at any time the Owner Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver
of the Owner Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Owner Trustee. If the Depositor shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Depositor
shall promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the outgoing Owner
Trustee so removed and one copy to the successor Owner Trustee, and shall pay
all fees owed to the outgoing Owner Trustee.
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Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Depositor shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Depositor and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee shall become effective, and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents and statements and monies held by it
under this Agreement; and the Depositor and the predecessor Owner Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Depositor shall mail notice thereof to all Certificateholders,
the Indenture Trustee, the Noteholders and the Rating Agencies. If the Depositor
shall fail to mail such notice within 10 days after acceptance of such
appointment by the successor Owner Trustee, the successor Owner Trustee shall
cause such notice to be mailed at the expense of the Depositor.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such corporation shall be eligible pursuant to Section 10.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Depositor and the Owner Trustee acting jointly shall
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have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Depositor and Owner Trustee to act as co-trustee,
jointly with the Owner Trustee, or as separate trustee or separate trustees, of
all or any part of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust or any part thereof and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Depositor and the Owner Trustee may consider necessary or desirable. If
the Depositor shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, the Owner Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed upon
the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Owner Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by reason
of any act or omission of any other trustee under this Agreement; and
(c) The Depositor and the Owner Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Owner Trustee. Each such instrument shall be filed with the Owner Trustee.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any
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lawful act under or in respect of this Agreement on its behalf and in its name.
If any separate trustee or co-trustee shall die, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Owner Trustee, to the extent
permitted by law, without the appointment of a new or successor co-trustee or
separate trustee.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments. This Agreement may be amended by
the Depositor and the Owner Trustee, with prior written notice to the Rating
Agencies, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the interests
of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor and
the Owner Trustee, with prior written notice to the Rating Agencies, with the
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes and the consent of the Holders of Certificates
evidencing not less than a majority of the Certificate Balance, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; provided, however, that no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Receivables or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes or the Certificate Balance required to consent to any such
amendment, without the consent of the Holders of all the outstanding Notes and
Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Indenture Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of the Certificateholders or the
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Certificateholders provided for in this Agreement or in any
other Basic Document) and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable requirements
as the Owner Trustee may prescribe.
26
<PAGE>
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment that affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
In connection with the execution of any amendment to this Trust Agreement
or any amendment of any other agreement to which the Issuer is a party, the
Owner Trustee shall be entitled to receive and conclusively rely upon an Opinion
of Counsel to the effect that such amendment is authorized or permitted by the
Basic Documents and that all conditions precedent in the Basic Documents for the
execution and delivery thereof by the Issuer or the Owner Trustee, as the case
may be, have been satisfied.
[In effecting the amendment described in Section 2.14 of this Agreement,
the parties hereto need not comply with this Section 11.01 so long as the
provisions of Section 2.14 have been complied with.]
SECTION 11.02. No Legal Title to Owner Trust Estate in Certificateholders.
The Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title or interest of the Certificateholders to and in their ownership interest
in the Owner Trust Estate shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of legal title to any part of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Certificateholders and, to the extent expressly
provided herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement (other than Section 2.07 hereof), whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 11.04. Notices.
(a) Unless otherwise expressly specified or permitted by the terms hereof,
all notices shall be in writing and shall be deemed given upon receipt by the
intended recipient or three Business Days after mailing if mailed by certified
mail, postage prepaid (except that notice to the Owner Trustee shall be deemed
given only upon actual receipt by the Owner Trustee), if to the Owner Trustee,
addressed to [Name of Owner Trustee], [Address], Attention: [ ]; if to
27
<PAGE>
the Depositor, addressed to Deutsche Recreational Asset Funding Corporation, 655
Maryville Centre Drive, St. Louis, MO 63141, Attention: President; or, as to
each party, at such other address as shall be designated by such party in a
written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor and its permitted assigns, the Owner Trustee and its successors and
each Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by a Certificateholder shall bind the successors and assigns of such
Certificateholder.
SECTION 11.08. Covenants of the Depositor. [In the event that (a) the
Certificate Balance shall be reduced by Realized Losses and) (b) any litigation
with claims in excess of $1,000,000 to which the Depositor is a party which
shall be reasonably likely to result in a material judgment against the
Depositor that the Depositor will not be able to satisfy shall be commenced by a
Certificateholder, during the period beginning nine months following the
commencement of such litigation and continuing until such litigation is
dismissed or otherwise terminated (and, if such litigation has resulted in a
final judgment against the Depositor, such judgment has been satisfied), the
Depositor shall not declare any dividend or make any other distribution on or in
respect of its shares to any of its equity holders, or repay the principal
amount of any indebtedness of the Depositor held by any Affiliate of the
Depositor, unless (i) after giving effect to such distribution or repayment, the
Depositor's liquid assets shall not be less than the amount of actual damages
claimed in such litigation or (ii) the Rating Agency Condition shall have been
satisfied with respect to any such distribution or repayment.]
SECTION 11.09. No Petition. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Trust Certificate, and the
Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they
28
<PAGE>
will not at any time institute against the Depositor or the Trust, or join in
any institution against the Depositor or the Trust of, any bankruptcy
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Trust Certificates, the
Notes, this Agreement or any of the Basic Documents. [Compare Section 10.11 of
the Transfer and Servicing Agreement]
SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Depositor, the Servicer, the Owner Trustee, the
Indenture Trustee or any Affiliate thereof and no recourse may be had against
such Persons or their assets, except as may be expressly set forth or
contemplated in this Agreement, the Trust Certificates or the Basic Documents.
SECTION 11.11. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Trust Certificate Transfer Restrictions. The Trust
Certificates may not be acquired by or for the account of (i) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Code or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding a Trust Certificate, the Holder thereof shall be deemed to
have represented and warranted that it is not a Benefit Plan.
[SIGNATURES FOLLOW]
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
DEUTSCHE RECREATIONAL ASSET FUNDING
CORPORATION,
as Depositor
By: /
---------------------------------------------
Name:
Title:
[NAME OF OWNER TRUSTEE], not in its
individual capacity but solely as Owner Trustee
By: /
---------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Form of Trust Certificate
-------------------------
(UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.)
A-1
<PAGE>
(THIS CERTIFICATE IS NON-TRANSFERABLE.)
NUMBER $___________
R-___ CUSIP NO. ___________
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199-[ ]
______% ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below.
(This Trust Certificate does not represent an interest in or obligation of the
Depositor or any of its affiliates, except to the extent described below.)
THIS CERTIFIES THAT _________________ is the registered owner of
_____________ DOLLARS nonassessable, fully-paid, fractional undivided interest
in Distribution Financial Services [RV/Boat] Trust 199-[ ] (the "Trust"),
formed by Deutsche Recreational Asset Funding Corporation, a Nevada corporation
(the "Depositor").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned Trust
Agreement.
[NAME OF OWNER TRUSTEE], as Owner Trustee
By:_____________________________
Authorized Signatory
By:_____________________________
Authorized Signatory
The Trust was created pursuant to a Trust Agreement dated as of [ ], 1998
(as may be amended, amended and restated or otherwise modified from time to
time, the "Trust Agreement"), between the Depositor and [Name of Owner Trustee],
as owner trustee (the "Owner Trustee"), a summary of certain of the pertinent
provisions of which is set forth below. In the event of any conflict or
inconsistency between this Certificate and the Trust Agreement, the Trust
Agreement shall govern in all respects. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them in
Appendix A to the Transfer and Servicing Agreement referred to in the Trust
Agreement.
A-2
<PAGE>
This Certificate is one of the duly authorized Certificates designated as
"[ ]% Asset Backed Certificates" (herein called the "Trust Certificates"). This
Trust Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Trust Certificate by virtue of its acceptance hereof assents and by which such
Holder is bound.
The Holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Transfer and
Servicing Agreement and the Indenture.
It is the intent of the Depositor, the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local income
and single business tax and any other income taxes, the Trust will be treated as
a partnership and the Certificateholders (including the Depositor) will be
treated as partners in that partnership. The Depositor and the other
Certificateholders, by acceptance of a Trust Certificate, agree to treat, and to
take no action inconsistent with the treatment of, the Trust Certificates for
such tax purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a Trust
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Trust Certificate, covenants and agrees that such Certificateholder or
Certificate Owner, as the case may be, will not at any time institute against
the Depositor, or join in any institution against the Depositor of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Trust
Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the Holder hereof to any benefit under the Trust
Agreement or the Transfer and Servicing Agreement or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-3
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT]
TRUST 199-[ ]
By: [NAME OF OWNER TRUSTEE], not in its individual
capacity but solely as Owner Trustee on behalf
of the Trust
Dated: By:___________________________________________
Authorized Signatory
A-4
<PAGE>
(REVERSE OF TRUST CERTIFICATE)
The Trust Certificates do not represent an obligation of, or an interest in
the Depositor, the Servicer, the Owner Trustee or any Affiliates of any of them
and no recourse may be had against such parties or their assets, except as
expressly set forth or contemplated herein or in the Trust Agreement or the
Basic Documents. In addition, this Trust Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment to
certain collections and recoveries with respect to the Receivables (and certain
other amounts), all as more specifically set forth herein and in the Transfer
and Servicing Agreement. A copy of each of the Transfer and Servicing Agreement
and the Trust Agreement may be examined by any Certificateholder upon written
request during normal business hours at the principal office of the Depositor
and at such other places, if any, designated by the Depositor.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the Holders
of the Trust Certificates and the Notes, each voting as a class, evidencing not
less than a majority of the Certificate Balance and the outstanding principal
balance of the Notes of each such class. Any such consent by the Holder of this
Trust Certificate shall be conclusive and binding on such Holder and on all
future Holders of this Trust Certificate and of any Trust Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof, whether or not
notation of such consent is made upon this Trust Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the Holders of any of the Trust Certificates.
The transfer and exchange of this Trust Certificate are subject to the
terms of the Trust Agreement.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement and the
Transfer and Servicing Agreement and the disposition of all property held as
part of the Owner Trust Estate. The Servicer of the Receivables may at its
option purchase the Owner Trust Estate at a price specified in the Transfer and
Servicing Agreement, and such purchase of the Receivables and other property of
the Trust will effect early retirement of the Trust Certificates; provided,
however, such right of purchase is exercisable only as of the last day of any
Collection Period as of which the Pool Balance is less than 10% of the Original
Pool Balance.
A-5
<PAGE>
The Trust Certificates may not be acquired by a "foreign person" as defined
in the Code or by (a) an employee benefit plan (as defined in Section 3(3) of
ERISA) that is subject to the provisions of Title I of ERISA, (b) a plan
described in Section 4975(e)(1) of the Code or (c) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity or
which uses plan assets to acquire Trust Certificates (each, a "Benefit Plan").
By accepting and holding this Trust Certificate, the Holder hereof shall be
deemed to have represented and warranted that it is not a "foreign person" or a
Benefit Plan.
A-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
the within Trust Certificate, and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________________, attorney, to transfer
said Trust Certificate on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:
___________________________________________*/
Signature Guaranteed:
____________________________*/
____________________________
*/ NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Trust Certificate in
every particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Certificate Registrar, which requirements include membership
or participation in STAMP or such other "signature guarantee program" as may be
determined by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
A-7
<PAGE>
EXHIBIT B
Form of Certificate of Trust of Distribution Financial Services [RV/Boat] Trust
- -------------------------------------------------------------------------------
199 -[ ]
---------
THIS Certificate of Trust of Distribution Financial Services [RV/Boat]
Trust 1998-1 (the "Trust"), dated [ ], 1998, is being
duly executed and filed by [Name of Owner Trustee], a Delaware banking
corporation, as trustee, to form a business trust under the Delaware Business
Trust Act (12 Del. Code, Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is DISTRIBUTION
FINANCIAL SERVICES [RV/BOAT] TRUST 199 -[ ] .
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware is [Name of Owner Trustee], [Address], Attention:
[ ].
3. Effective Date. This Certificate of Trust shall be effective upon its
filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first above written.
[NAME OF OWNER TRUSTEE], not in its individual
capacity but solely as owner trustee under the Trust
Agreement dated [ ], 1998
By:_________________________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
Form of Certificate Depository Agreement
-----------------------------------------
Letter of Representations
C-1
<PAGE>
(To be Completed by Issuer and Trustee)
_________________________________
(Name of Issuer)
___________________________________
(Name of Trustee)
_________________________________
(Date)
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: _________________________________________________
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trustee will act as
trustee with respect to the Securities pursuant to a trust agreement dated as of
[ ], 1998 (the "Document").
_____________________________________________________ (the "Underwriter")
is distributing the Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trustee make the following representations to DTC:
1. Prior to closing on the Securities on [ ], 1998, there shall be
deposited with DTC one Security certificate registered in the name of DTC's
nominee, Cede & Co., for each stated maturity of the Securities in the face
amounts set forth on Schedule A hereto, the total of which represents 100% of
the principal amount of such Securities. If, however, the aggregate principal
amount of any maturity exceeds $200 million, one certificate will be issued with
respect to each $200 million of principal amount and an additional certificate
will be issued with respect to any remaining principal amount. Each Security
certificate shall bear the following legend:
C-2
<PAGE>
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its
agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
2. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer or Trustee shall establish a record date for such
purposes (with no provision for revocation of consents or votes by subsequent
holders) and shall, to the extent possible, send notice of such record date to
DTC not less than 15 calendar days in advance of such record date. Notices to
DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization
Department at (212) 709-6896 or (212) 709-6897, and receipt of such notices
shall be confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to
this Paragraph by mail or by any other means shall be sent to DTC's
Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption, Issuer or Trustee shall
send a notice to DTC specifying: (a) the amount of the redemption or refunding;
(b) in the case of a refunding, the maturity date(s) established under the
refunding; and (c) the date such notice is to be mailed to Security holders or
published (the "Publication Date"). Such notice shall be sent to DTC by a secure
means (e.g., legible telecopy, registered or certified mail, overnight delivery)
in a timely manner designed to assure that such notice is in DTC's possession no
later than the close of business on the business day before or, if possible, two
business days before the Publication Date. Issuer or Trustee shall forward such
notice either in a separate secure transmission for each CUSIP number or in a
secure transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 30 days nor more than 60 days prior to the redemption date or, in the case
of an advance refunding, the date that the proceeds are deposited in escrow.
Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's
Call Notification Department at (516) 227-4039 or (516) 227-4190. If the party
sending the notice does not receive a telecopy receipt from DTC confirming that
the notice has been received, such party shall telephone (516) 227-4070. Notices
to DTC pursuant to this Paragraph by mail or by any other means shall be sent
to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
C-3
<PAGE>
4. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trustee
to Security holders specifying the terms of the tender and the Publication Date
of such notice shall be sent to DTC by a secure means in the manner set forth in
the preceding Paragraph. Notices to DTC pursuant to this Paragraph and notices
of other corporate actions by telecopy shall be sent to DTC's Reorganization
Department at (212) 709-1093 or (212) 709-1094, and receipt of such notices
shall be confirmed by telephoning (212) 709-6884. Notices to DTC pursuant to the
above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
5. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
6. Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized denomination
if less than $1,000 face value) payable on each payment date allocated as to the
interest and principal portions thereof preferably 5, but not less than 2,
business days prior to such Monthly Payment Date. Such notices, which shall also
contain the current pool factor, and special adjustments to principal/interest
rates (e.g., adjustments due to deferred interest or shortfall), and Trustee
contact's name and telephone number, shall be sent by telecopy to DTC's Dividend
Department at (212) 709-1723, or if by mail or by any other means to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695
7. (NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT THE
OTHER:) (The interest accrual period is record date to record date.) (The
interest accrual period is payment date to payment date.)
8. Trustee must provide DTC, no later than noon (Eastern Time) on the
payment date, CUSIP numbers for each issue for which payment is being sent, as
well as the dollar amount of the payment for each issue. Notification of payment
details should be sent using automated communications.
9. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds, no later than 2:30 p.m.
(Eastern Time) on each payment date (in accordance with existing
C-4
<PAGE>
arrangements between Issuer or Trustee and DTC). Absent any other arrangements
between Issuer or Trustee and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank
ABA 021000021
For credit to A/C The Depository Trust Company
Dividend Deposit Account 066-026776
Issuer or Trustee shall provide interest payment information to a standard
announcement service subscribed to by DTC. In the unlikely event that no such
service exists, Issuer or Trustee shall provide interest payment information
directly to DTC in advance of the interest payment date as soon as the
information is available. This information should be conveyed directly to DTC
electronically. If electronic transmission is not available, absent any other
arrangements between Trustee and DTC, such information should be sent by
telecopy to DTC's Dividend Department at (212) 709-1723 or (212) 709-1686, and
receipt of such notices shall be confirmed by telephoning (212) 709-1270.
Notices to DTC pursuant to the above by mail or by any other means shall be sent
to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
10. DTC shall receive maturity and redemption payments allocated with
respect to each CUSIP number on the payable date in same-day funds by 2:30 p.m.
(Eastern Time). Absent any other arrangements between Trustee and DTC, such
payments shall be wired as follows:
The Chase Manhattan Bank
ABA 021000021
For credit to A/C The Depository Trust Company
Redemption Account 066-027306
in accordance with existing SDFS payment procedures in the manner set forth in
DTC's SDFS Paying Agent Operating Procedures, a copy of which has previously
been furnished to Trustee.
11. DTC shall receive all reorganization payments and CUSIP-level detail
resulting from corporate actions (such as tender offers, remarketings, or
mergers) on the first payable date in same-day funds by 2:30 p.m. (Eastern
Time). Absent any other arrangements between Trustee and DTC, such payments
shall be wired as follows:
C-5
<PAGE>
The Chase Manhattan Bank
ABA 021000021
For credit to A/C The Depository Trust Company
Reorganization Account 066-027608
12. DTC may direct Issuer or Trustee to use any other number or address as
the number or address to which notices or payments of interest or principal may
be sent.
13. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Trustee to issue
and authenticate a new Security certificate; or (b) may make an appropriate
notation on the Security certificate indicating the date and amount of such
reduction in principal except in the case of final maturity, in which case the
certificate will be presented to Issuer or Trustee prior to payment, if
required.
14. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trustee
shall notify DTC of the availability of certificates. In such event, Issuer or
Trustee shall issue, transfer, and exchange certificates in appropriate amounts,
as required by DTC and others.
15. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trustee (at which time DTC will confirm with Issuer or Trustee the aggregate
principal amount of Securities outstanding). Under such circumstances, at DTC's
request Issuer and Trustee shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Securities
to any DTC Participant having Securities credited to its DTC accounts.
16. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
C-6
<PAGE>
17. Nothing herein shall be deemed to require Trustee to advance funds on
behalf of Issuer.
Notes: Very truly yours,
- -----
A. If there is a Trustee (as defined ----------------------------------------
in this Letter of Representations), (Issuer)
Trustee as well (Issuer) as Issuer
must sign this Letter. If there is
no Trustee, in signing By: this By:_____________________________________
Letter Issuer itself undertakes to (Authorized Officer's Signature)
perform all of the (Authorized
Officer's Signature) obligations set
forth herein.
----------------------------------------
(Trustee)
B. Schedule B contains statements
that DTC believes accurately
(Trustee) describe DTC, the method By:_____________________________________
of effecting book-entry transfers (Authorized Officer's Signature)
of By: securities distributed
through DTC, and certain related
matters.
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:________________________________
cc: Underwriter
Underwriter's Counsel
C-7
<PAGE>
SCHEDULE A
----------
________________________________________________________________________________
________________________________________________________________________________
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
- ----- --------- ------ ------------- -------------
<PAGE>
SCHEDULE B
----------
SAMPLE OFFICIAL STATEMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
------------------------------------
<PAGE>
(PREPARED BY DTC--BRACKETED MATERIAL MAY BE APPLICABLE ONLY TO CERTAIN
ISSUES)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities will
be issued as fully-registered securities registered pin the name of Cede & Co.
(DTC's partnership nominee). One fully-registered Security certificate will be
issued for (each issue of the Securities, (each) in the aggregate principal
amount of such issue, and will be deposited with DTC. (If, however, the
aggregate principal amount of (any) issue exceeds $200 million, one certificate
will be issued with respect to each $200 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.)
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership.
<PAGE>
DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
(6. Redemption notices shall be sent to Cede & Co. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.)
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer
as soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, Trustee, or Issuer, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and interest to DTC is the responsibility of the
Issuer or Trustee, disbursement of such payments to Direct Participants shall be
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
(9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to Trustee (or
Tender/Remarketing Agent), and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the
Securities, on DTC's records, to Trustee (or Tender/Remarketing Agent). The
requirement for physical delivery of Securities in connection with an optional
tender or a mandatory purchase will be deemed satisfied when the ownership
rights in the Securities are transferred by Direct Participants on DTC's records
and followed by a book-entry credit of tendered Securities to Trustee (or
Tender/Remarketing Agent's) DTC account.)
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Agent. Under such circumstances,
<PAGE>
in the event that a successor securities depository is not obtained, Security
certificates are required to be printed and delivered.
11. The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.
<PAGE>
EXHIBIT 4.2
Form of Pooling and Servicing Agreement
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION
as Depositor
__________________________
as Trustee
and
DEUTSCHE FINANCIAL SERVICES CORPORATION
as Servicer
Dated as of __________________________
__________________ TRUST 199__-__
___% Asset Backed Certificates, Class A
___% Asset Backed Certificates, Class B
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
<S> <C>
Definitions
SECTION 1.01. Definitions......................................................... 1
SECTION 1.02. Other Definitional Provisions....................................... 14
ARTICLE II
Establishment of Trust
SECTION 2.01. Creation of Trust................................................... 14
SECTION 2.02. Acceptance by Trustee............................................... 15
SECTION 2.03. Conveyance of Receivables........................................... 15
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties of the Transferor.................... 15
SECTION 3.02. Representations and Warranties of the Depositor..................... 16
SECTION 3.03. Purchase Upon Breach................................................ 16
SECTION 3.04. Custody of Receivable Files......................................... 17
SECTION 3.05. Duties of Servicer as Custodian..................................... 17
SECTION 3.06. Instructions; Authority to Act...................................... 18
SECTION 3.07. Custodian's Indemnification......................................... 18
SECTION 3.08. Effective Period and Termination.................................... 18
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer.................................................. 19
SECTION 4.02. Collection and Allocation of Receivable Payments.................... 19
SECTION 4.03. Realization Upon Receivables........................................ 20
SECTION 4.04. Physical Damage Insurance........................................... 20
SECTION 4.05. Maintenance of Security Interests in Financed Assets................ 20
SECTION 4.06. Covenants of Servicer............................................... 20
SECTION 4.07. Purchase of Receivables Upon Breach................................. 20
SECTION 4.08. Servicing Fee....................................................... 21
SECTION 4.09. Servicer's Certificate.............................................. 21
SECTION 4.10. Annual Statement as to Compliance; Notice of Default................ 21
SECTION 4.11. Annual Independent Certified Public Accountant's Report............. 22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables........................................................ 22
SECTION 4.13. Servicer Expenses.................................................. 22
SECTION 4.14. Appointment of Subservicer......................................... 22
ARTICLE V
Distributions; Reserve Account; Statements to Certificateholders
SECTION 5.01. Establishment of Trust Accounts.................................... 23
SECTION 5.02. Collections........................................................ 24
SECTION 5.03. Application of Collections......................................... 24
SECTION 5.04. Advances........................................................... 24
SECTION 5.05. Additional Deposits................................................ 25
SECTION 5.06. Distributions...................................................... 25
SECTION 5.07. Reserve Account.................................................... 27
SECTION 5.08. Statements to Certificateholders................................... 30
SECTION 5.09. Tax Returns........................................................ 32
SECTION 5.10. Net Deposits....................................................... 32
ARTICLE VI
The Certificates
SECTION 6.01. The Certificates................................................... 32
SECTION 6.02. Authentication of Certificates..................................... 32
SECTION 6.03. Registration of Transfer and Exchange of Certificates.............. 33
SECTION 6.04. Mutilated, Destroyed, Lost or Stolen Certificates.................. 33
SECTION 6.05. Persons Deemed Owners.............................................. 34
SECTION 6.06. Access to List of Certificateholders' Names and Addresses.......... 34
SECTION 6.07. Maintenance of Office or Agency.................................... 34
SECTION 6.08. Book-Entry Certificates............................................ 34
SECTION 6.09. Notices to Clearing Agency......................................... 35
SECTION 6.10. Definitive Certificates............................................ 35
ARTICLE VII
The Depositor
SECTION 7.01. Representations of Depositor....................................... 36
SECTION 7.02. Corporate Existence................................................ 37
SECTION 7.03. Liabilities of Depositor; Indemnities.............................. 37
SECTION 7.04. Merger or Consolidation of, or Assumption of the Obligations of,
Depositor.......................................................... 38
SECTION 7.05. Limitation on Liability of Depositor and Others.................... 39
SECTION 7.06. Depositor May Own Certificates..................................... 39
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SECTION 7.07. No Transfer of Excess Amounts...................................... 39
ARTICLE VIII
The Servicer
SECTION 8.01. Representations of Servicer........................................ 39
SECTION 8.02. Indemnities of Servicer............................................ 40
SECTION 8.03. Merger or Consolidation of, or Assumption of the Obligations of,
Servicer........................................................... 41
SECTION 8.04. Limitation on Liability of Servicer and Others..................... 42
ARTICLE IX
Default
SECTION 9.01. Events of Default................................................. 42
SECTION 9.02. Appointment of Successor.......................................... 43
SECTION 9.03. Repayment of Advances............................................. 44
SECTION 9.04. Notification to Certificateholders................................ 44
SECTION 9.05. Waiver of Past Defaults........................................... 44
ARTICLE X
The Trustee
SECTION 10.01. Duties of Trustee................................................. 44
SECTION 10.02. Certain Matters Affecting Trustee................................. 45
SECTION 10.03. Trustee Not Liable for Certificates or Receivables................ 46
SECTION 10.04. Trustee May Own Certificates...................................... 47
SECTION 10.05. Trustee's Fees and Expenses....................................... 47
SECTION 10.06. Eligibility Requirements for Trustee.............................. 47
SECTION 10.07. Resignation or Removal of Trustee................................. 47
SECTION 10.08. Successor Trustee................................................. 48
SECTION 10.09. Merger or Consolidation of Trustee................................ 48
SECTION 10.10. Appointment of Co-Trustee or Separate Trustee..................... 49
SECTION 10.11. Representations and Warranties of Trustee......................... 50
SECTION 10.12. No Bankruptcy Petition............................................ 50
SECTION 10.13. Trustee's Certificate............................................. 50
SECTION 10.14. Trustee's Assignment of Purchased Receivables..................... 51
ARTICLE XI
Termination
SECTION 11.01. Termination of the Trust.......................................... 51
SECTION 11.02. Optional Purchase of All Receivables.............................. 52
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ARTICLE XII
<S> <C>
Miscellaneous Provisions
SECTION 12.01. Amendment........................................................ 52
SECTION 12.02. Protection of Title to Trust..................................... 53
SECTION 12.03. Separate Counterparts............................................ 54
SECTION 12.04. Limitation on Rights of Certificateholders....................... 54
SECTION 12.05. Governing Law.................................................... 55
SECTION 12.06. Notices.......................................................... 55
SECTION 12.07. Severability of Provisions....................................... 56
SECTION 12.08. Assignment....................................................... 56
SECTION 12.09. Certificates Nonassessable and Fully Paid........................ 56
SECTION 12.10. Limitations on Rights of Others.................................. 56
SECTION 12.11. Headings......................................................... 56
SECTION 12.12. Nonpetition Covenants............................................ 56
</TABLE>
Exhibit A Form of Class A Certificate
Exhibit B Form of Class B Certificate
Exhibit C Form of Depository Agreement
Exhibit D Form of Servicer's Certificate
SCHEDULE A Schedule of Receivables
SCHEDULE B Location of Receivable Files
iv
<PAGE>
POOLING AND SERVICING AGREEMENT dated as of __________, among DEUTSCHE
RECREATIONAL ASSET FUNDING CORPORATION., a Nevada corporation, as depositor (the
"Depositor"),______________, DEUTSCHE FINANCIAL SERVICES CORPORATION, as
servicer (the "Servicer"), and ____________________, a ______________________
banking corporation, as trustee (the "Trustee").
WHEREAS, the Depositor ________________________ has acquired a portfolio of
receivables arising in connection with a pool of (boat) (recreational vehicle)
retail installment sale contracts or installment loans (the "Contracts"); and
WHEREAS, the Depositor, the Servicer and the Trustee wish to set forth the
terms and conditions pursuant to which the Trust (as hereinafter defined) will
acquire the Contracts from the Depositor, and the Servicer will service the
Contracts on behalf of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the Depositor, the Servicer and the Trustee agree as
follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Advance" means the amount of interest, as of the close of business on the
last day of a Collection Period, which the Servicer is required to advance on
the Receivables pursuant to Section 5.04(b).
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" means this Pooling and Servicing Agreement.
"Amount Financed" means with respect to a Receivable, the amount advanced
under such Receivable toward the purchase price of the Financed Asset and any
related costs, exclusive of any amount allocable to the premium of force-placed
physical damage insurance covering the Financed Asset.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate of
finance charges stated in the related Contract.
<PAGE>
"Book-Entry Certificates" means, unless otherwise specified in this
Agreement, a beneficial interest in the Class A or Class B Certificates,
ownership and transfers of which shall be registered through book entries by a
Clearing Agency as described in Section 6.08.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in [ ] or the
city in which the Corporate Trust Office is located, are authorized or obligated
by law, regulation or executive order to be closed.
"Certificate Balance" means, as of any date, the aggregate outstanding
principal amount of the Certificates at such date.
"Certificate Owner" means, with respect to a Book-Entry Certificate, the
Person who is the beneficial owner of such Book-Entry Certificate, as reflected
on the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Certificate Register" and "Certificate Registrar" mean the register
maintained and the registrar appointed pursuant to Section 6.03.
"Certificateholder" or "Holder" means a Person in whose name a Certificate
is registered in the Certificate Register.
"Certificates" means the Class A Certificates and the Class B Certificates.
"Class A Certificate" means a ___% Asset Backed Certificate, Class A,
evidencing a beneficial interest in the Trust, substantially in the form of
Exhibit A hereto.
"Class A Certificate Balance" means, as of any date of determination, the
Initial Class A Certificate Balance reduced by all amounts previously
distributed to Holders of Class A Certificates and allocable to principal.
"Class A Certificateholder" means the Holder of a Class A Certificate.
"Class A Distributable Amount" means, with respect to any Distribution
Date, the sum of the Class A Principal Distributable Amount and the Class A
Interest Distributable Amount for such date.
"Class A Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the sum of the Class A Interest Distributable
Amount for the preceding Distribution Date and any outstanding Class A Interest
Carryover Shortfall on such preceding Distribution Date, over the amount in
respect of interest that Holders of the Class A Certificates actually received
on such preceding Distribution Date, plus 30 days' interest on such excess, to
the extent permitted by law, at the Class A Pass-Through Rate.
2
<PAGE>
"Class A Interest Distributable Amount" means, with respect to any
Distribution Date, 30 days of interest at the Class A Pass-Through Rate on the
Class A Certificate Balance on the last day of the preceding Collection Period.
"Class A Pass-Through Rate" means _____% per annum.
"Class A Percentage" means _____%.
"Class A Pool Factor" means, as of the close of business on the last day of
any Collection Period, a seven-digit decimal figure equal to the Class A
Certificate Balance as of such Record Date divided by the Initial Class A
Balance.
"Class A Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class A Principal Distributable Amount and
any outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date, over the amount in respect of principal that is actually
distributed to Holders of the Class A Certificates on such current Distribution
Date.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date, the Class A Percentage of the Principal Distribution Amount.
In addition, on the Final Scheduled Distribution Date, the principal required to
be included in the Class A Principal Distributable Amount will include the
lesser of (a) the Class A Percentage of any principal due and remaining unpaid
on each Receivable, in each case, in the Trust as of the Final Scheduled
Maturity Date or (b) the amount that is necessary (after giving effect to the
other amounts to be deposited in the Distribution Account on such Distribution
Date and allocable to principal) to reduce the Class A Certificate Balance to
zero.
"Class B Certificate" means a ___% Asset Backed Certificate, Class B,
evidencing a beneficial interest in the Trust, substantially in the form of
Exhibit B hereto.
"Class B Certificate Balance" means, as of any date of determination, the
Initial Class B Certificate Balance reduced by all amounts previously
distributed to Holders of Class B Certificates (or deposited in the Reserve
Account, exclusive of the Reserve Account Initial Deposit) and allocable to
principal and by Realized Losses to the extent of the amount of such Realized
Losses paid from the Class B Percentage of the Principal Distribution Amount.
"Class B Certificateholder" means the Holder of a Class B Certificate.
"Class B Distributable Amount" means, with respect to any Distribution
Date, the sum of the Class B Principal Distributable Amount and the Class B
Interest Distributable Amount.
"Class B Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the sum of the Class B Interest Distributable
Amount for the preceding Distribution Date and any outstanding Class B Interest
Carryover Shortfall on such preceding Distribution
3
<PAGE>
Date, over the amount in respect of interest that Holders of the Class B
Certificates actually received on such preceding Distribution Date, plus 30
days' interest on such excess, to the extent permitted by law, at the Class B
Pass-Through Rate.
"Class B Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class B Interest Distributable Amount for such
Distribution Date and the Class B Interest Carryover Shortfall for such
Distribution Date. Unless otherwise specified in this Agreement, interest with
respect to the Class B Certificates shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
"Class B Interest Distributable Amount" means, with respect to any
Distribution Date, 30 days of interest at the Class B Pass-Through Rate on the
Class B Certificate Balance on the last day of the preceding Collection Period.
"Class B Pass-Through Rate" means ___% per annum.
"Class B Percentage" means ___%.
"Class B Pool Factor" means, as of the close of business on the last day of
any Collection Period, a seven-digit decimal figure equal to the Class B
Certificate Balance as of such Record Date divided by the Initial Class B
Balance.
"Class B Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class B Principal Distributable Amount and
any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date, over the amount in respect of principal that is actually
distributed to Holders of the Class B Certificates on such current Distribution
Date.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date, the Class B Percentage of the Principal Distribution Amount.
In addition, on the Final Scheduled Distribution Date, the principal required to
be included in the Class B Principal Distributable Amount will include the
lesser of (a) the Class B Percentage of any principal due and remaining unpaid
on each Receivable, in each case, in the Trust as of the Final Scheduled
Maturity Date or (b) the amount that is necessary (after giving effect to the
other amounts to be deposited in the Distribution Account on such Distribution
Date and allocable to principal) to reduce the Class B Certificate Balance to
zero.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
4
<PAGE>
"Closing Date" means ______________________.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.01(a)(i).
"Collection Period" means a calendar month (or in the case of the first
Distribution Date, the period from and including the Cutoff Date to and
including the last day of the calendar month in which the Closing Date occurs).
Any amount stated as of the last day of a Collection Period or as of the first
day of a Collection Period shall give effect to the following calculations as
determined as of the close of business on such last day: (1) all applications of
collections, (2) all Advances and reductions of Advances and (3) all
distributions to be made on the following Distribution Date.
"Contract" means a (boat) (recreational vehicle) retail installment sale
contract or installment loan.
"Corporate Trust Office" means the principal corporate trust office of the
Trustee, which at the time of execution of this agreement is
______________________, Attention: ____________.
"Cutoff Date" means[, with respect to any Receivable, the date as of which
collections on such Receivable will be included in the Trust or the related
Trust Account pursuant to this Agreement].
"Dealer" means the dealer who sold a Financed Asset to an Obligor.
"Definitive Certificates" shall have the meaning specified in Section 6.10.
"Delivery" means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Trustee or its nominee or custodian
by physical delivery to the Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Trustee or its nominee or custodian or endorsed
in blank, and, with respect to a certificated security (as defined in Section 8-
102 of the UCC) transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined in
Section 8-313 of the UCC) and the making by such financial intermediary of
entries on its books and records identifying such certificated securities as
belonging to the Trustee or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of such certificated
security by the Trustee or its
5
<PAGE>
nominee or custodian, or (ii) by delivery thereof to a "clearing corporation"
(as defined in Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the appropriate securities
account of a financial intermediary by the amount of such certificated security,
the identification by the clearing corporation of the certificated securities
for the sole and exclusive account of the financial intermediary, the
maintenance of such certificated securities by such clearing corporation or a
"custodian bank" (as defined in Section 8-102(4) of the UCC) or the nominee of
either, subject to the clearing corporation's exclusive control, the sending of
a confirmation by the financial intermediary of the purchase by the Trustee or
its nominee or custodian of such securities and the making by such financial
intermediary of entries on its books and records identifying such certificated
securities as belonging to the Trustee or its nominee or custodian (all of the
foregoing, "Physical Property"), and, in any event, any such Physical Property
in registered form shall be in the name of the Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such [Trust
Account Property] to the Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, the Federal
Home Loan Mortgage Corporation or by the Federal National Mortgage Association
that is a book-entry securities held through the Federal Reserve System pursuant
to federal book-entry regulations, the following procedures, all in accordance
with applicable law, including applicable federal regulations and Articles 8 and
9 of the UCC: book-entry registration of such Trust Account Property to an
appropriate book-entry account maintained with a Federal Reserve Bank by a
financial intermediary that is also a "depository" pursuant to applicable
federal regulations and issuance by such financial intermediary of a deposit
advice or other written confirmation of such book-entry registration to the
Trustee or its nominee or custodian of the purchase by the Trustee or its
nominee or custodian of such book-entry securities; the identification by the
Federal Reserve Bank of such book-entry securities on its record being credited
to the financial intermediary's participant's securities account; the making by
such financial intermediary of entries in its books and records identifying such
book-entry security held through the Federal Reserve System pursuant to federal
book-entry regulations as being credited to the Trustee's securities account or
custodian's securities account and indicating that such custodian holds such
Trust Account Property solely as agent for the Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust Account
Property to the Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Trustee or its nominee or
custodian of such uncertificated security, the making by such financial
intermediary of entries on
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its books and records identifying such uncertificated certificates as belonging
to the Trustee or its nominee or custodian.
"Depositor" means Deutsche Recreational Asset Funding Corporation, a Nevada
corporation, and its successors in interest to the extent permitted hereunder.
"Depository Agreement" means the agreement dated _____________, among the
Trustee and The Depository Trust Company, as the initial Clearing Agency,
substantially in the form attached as Exhibit C hereto.
"Determination Date" means, unless otherwise specified in this Agreement,
the ______ Business Day of each calendar month.
"DFS" means Deutsche Financial Services Corporation, a Delaware
corporation, and its successors.
"Distribution Account" means the account designated as such, established
and maintained pursuant to Section 5.01(a)(ii).
"Distribution Date" means, with respect to each Collection Period, the
_______ day of the following calendar month or, if such day is not a Business
Day, the immediately following Business Day, commencing on _________________.
"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 Colombia
(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 shall have a credit rating from each
Rating Agency in one of its generic rating categories that signifies investment
grade.
"Eligible Institution" means (a) the corporate trust department of the
Trustee or any other entity specified in this Agreement 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), which (i) has either (A) a long-term unsecured debt rating of AAA
or better by Standard & Poor's and A1 or better by Moody's or (B) a certificate
of deposit rating of A-1+ by Standard & Poor's and P-1 or better by Moody's or
any other long-term, short-term or certificate of deposit rating acceptable to
the Rating Agencies and (ii) whose deposits are insured by the FDIC. If so
qualified, the Trustee or any such other entity specified in this Agreement may
be considered an Eligible Institution for the purposes of clause (b) of this
definition.
"Eligible Investments" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
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(a) direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (of any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) thereof shall have a credit rating
from each of the Rating Agencies in the highest applicable rating category
granted thereby;
(c) commercial paper, variable amount notes or other short term debt
obligations, having, at the time of the investment or contractual commitment to
invest therein, a rating from each of the Rating Agencies in the highest
applicable rating category granted thereby;
(d) investments in money market or common trust funds having a rating from
each of the Rating Agencies in the highest applicable rating category granted
thereby (including funds for which the Trustee or any of its Affiliates is
investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed by, the United States of America or any
agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal)
described in clause (b);
(g) any other investment with respect to which the Trustee or the Servicer
has received written notification from the Rating Agencies that the acquisition
of such investment as an Eligible Investment will not result in a withdrawal or
downgrading of the ratings of the Certificates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means an event specified in Section 9.01.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Distribution Date" means ______________________.
"Final Scheduled Maturity Date" means ______________________.
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"Financed Asset" means a (recreational vehicle), (boat, boat motor, and
accompanying trailers) together with all accessions thereto, securing an
Obligor's indebtedness under the respective Receivable.
"Funding Period" means [ ].
"Ganis" means Ganis Credit Corporation, a Delaware corporation, and its
successors.
"Initial Certificate Balance" means $______________________.
"Initial Class A Balance" means $______________________.
"Initial Class B Balance" means $______________________.
"Initial Collection Period" means the period beginning on, and including,
_______________ to and including ______________________.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation or such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by, a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Interest Distribution Amount" means, with respect to any Distribution
Date, the sum of the following amounts in respect of the Receivables and the
preceding Collection Period: (i) that portion of all collections on Receivables
allocable to interest, (ii) Liquidation Proceeds with respect to the Receivables
to the extent allocable to interest due thereon in accordance with the
Servicer's customary servicing procedures; (iii) all Advances made by the
Servicer of interest due on Receivables, (iv) the Purchase Amount of each
Receivable that became a Purchased Receivable during the related Collection
Period to the extent attributable to accrued interest on such Receivable and (v)
Recoveries for such Collection Period; provided, however, that in calculating
the Interest Distribution Amount the following will be excluded: (i) all
payments and proceeds (including Liquidation Proceeds) of any Purchased
Receivables the Purchase Amount of which has been included in the Interest
Distribution Amount in a prior Collection Period; (ii)
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the sum for all Receivables of collections on each such Receivable received
during the preceding Collection Period in excess of the amount of interest that
would be due on the aggregate Principal Balance of the Receivables during such
Collection Period at their respective APRs if a payment were received on each
Receivable during such Collection Period on the date payment is due under the
terms of the related Contract; (iii) Liquidation Proceeds with respect to a
Receivable attributable to accrued and unpaid interest thereon (but not
including interest for the then current Collection Period) but only to the
extent of any unreimbursed Advances; and (iv) amounts released from the Pre-
Funding Account.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited to the Distribution Account on
such Distribution Date pursuant to Section 5.01(b).
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable or Financed Asset, as applicable, by
operation of law as a result of any act or omission by the related Obligor.
"Liquidated Receivable" means any Receivable liquidated by the Servicer
through sale of a Financed Asset or otherwise.
"Liquidation Proceeds" means, with respect to a Liquidated Receivable, the
monies collected in respect thereof, from whatever source, during the Collection
Period in which such Receivable became a Liquidated Receivable, net of the sum
of any amounts expended by the Servicer in connection with such liquidation,
plus any amounts required by law to be remitted to the Obligor.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Asset and any other Person who owes payments under the Receivable.
"Officers' Certificate" means a certificate signed by the (a) chairman of
the board, the president, any executive vice president or any vice president and
(b) any treasurer, assistant treasurer, secretary or assistant secretary of the
Depositor or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel, who may
be an employee of or counsel to the Depositor or the Servicer, which counsel
shall be acceptable to the Trustee or Rating Agencies, as applicable.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Originator" means [DFS and/or Ganis and/or ___________].
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"Outstanding Advances" on the Receivables means the sum, as of the close of
business on the last day of a Collection Period, of all Advances, reduced as
provided in Section 5.04(b).
"Person" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Pool Balance" means, as of the close of business on the last day of a
Collection Period, the aggregate Principal Balance of the Receivables as of such
date (excluding Purchased Receivables and Liquidated Receivables).
"Pre-Funded Amount" means [ ].
"Pre-Funding Account" means [ ].
"Principal Balance" means the Amount Financed minus the sum, as of the
close of business on the last day of a Collection Period, of (i) the portion of
all payments made by or on behalf of the related Obligor on or prior to such day
and allocable to principal using the Simple Interest Method and (ii) any payment
of the Purchase Amount allocable to principal.
"Principal Distribution Amount" means, for any Distribution Date, the sum
of the following amounts with respect to the preceding Collection Period: (i)
that portion of all collections on Receivables allocable to principal; (ii) all
Liquidation Proceeds attributable to the principal amount of Receivables that
became Liquidated Receivables during the 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 that became a Purchased Receivable 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; and provided,
however, that in calculating the Principal Distribution Amount the following
will be excluded: (x) all payments and proceeds (including Liquidation
Proceeds) of any Purchased Receivables the Purchase Amount of which has been
included in the Principal Distribution Amount in a prior Collection Period, and
(y) Recoveries.
"Purchase Amount" means the amount, as of the close of business on the last
day of a Collection Period, required to prepay in full a Receivable under the
terms thereof including interest to the end of the month of purchase.
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"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 by the Depositor pursuant to Section 3.02 or by the Transferor
pursuant to Section 3.01.
"Rating Agency" means Moody's and Standard & Poor's. If no such
organization or successor is any longer in existence, "Rating Agency" shall mean
any nationally recognized statistical rating organization or other comparable
Person designated by the Depositor, notice of which designation shall be given
to the Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Depositor, the Servicer and the Trustee
in writing that such action will not result in a reduction or withdrawal of the
then current rating of the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract transferred to the Trust on the Closing
Date that is listed on Schedule A to this Agreement (which schedule may be in
the form of microfiche).
"Receivable Files" means the documents specified in Section 3.04.
"Receivables Transfer Agreement" means the receivables transfer agreement
dated as of ________________ between the Transferor and the Depositor.
"Record Date" with respect to each Distribution Date means the first day of
the calendar month in which such Distribution Date occurs, unless otherwise
specified in this Agreement.
"Recoveries" means, with respect to any Receivable that becomes a
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts required
by law to be remitted to the Obligor.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.07.
"Reserve Account Initial Deposit" means, with respect to the Closing Date
and taking into account any transfer of Subsequent Receivables on such date, an
amount equal to the Specified Reserve Account Balance on the Closing Date (which
is equal to $________________) and, with respect to each Subsequent Transfer
Date after the Closing Date,
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an amount equal to ___% of the Principal Balance of the Subsequent Receivables
transferred to the Trust on such Subsequent Transfer Date.
"Reserve Account Property" has the meaning assigned thereto in Section
5.07(b).
"Servicer" means DFS, as the servicer of the Receivables, and each
successor Servicer pursuant to Section 8.03 or 9.02.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Exhibit D.
"Servicing Fee" means the fee payable to the Servicer for services rendered
during each Collection Period, determined pursuant to Section 4.08.
"Servicing Rate" means ___% per annum.
"Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made and the remainder
of such payment is allocable to principal.
"Specified Reserve Account Balance" means (STATE FORMULA).
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. or its successor.
"Subsequent Receivables" means [ ].
"Subsequent Transfer Date" means [ ].
"Total Distribution Amount" means, for each Distribution Date, the sum of
the Interest Distribution Amount and the Principal Distribution Amount (other
than the portion thereof attributable to Realized Losses).
"Transferor" means Ganis.
"Trust" shall have the meaning set forth in Section 2.01.
"Trust Account" means __________________.
"Trustee" means ______________________, a ___________________ banking
corporation, its successors in interest and any successor Trustee hereunder.
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"Trustee Officer" means the chairman or vice-chairman of the board of
directors, the chairman or vice-chairman of the executive committee of the board
of directors, the president, any vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller and any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
SECTION 1.02. Other Definitional Provisions. (a) All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto or thereto unless otherwise defined
therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined herein or in any such
certificate or other document, and accounting terms partly defined herein or in
any such certificate or other document to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms herein or in
any such certificate or other document are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained herein, or in any such certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and word of similar import
when used herein shall refer to this Agreement as a whole and not to any
particular provision of this Agreement; Article, Section, Schedule and Exhibit
references contained in this Agreement are references to Articles, Sections,
Schedules and Exhibits in or to this Agreement, respectively; and the term
"including" and its variations shall mean "including without limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
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ARTICLE II
Establishment of Trust
----------------------
SECTION 2.01. Creation of Trust. Upon the execution of this Agreement by
the parties hereto, there is hereby created a separate trust, which shall be
known as (_______________) Trust 199__-__ (the "Trust"). The Trust shall be
administered pursuant to the provisions of this Agreement for the benefit of the
Certificateholders.
SECTION 2.02. Acceptance by Trustee. The Trustee hereby accepts all
consideration conveyed by the Depositor pursuant to Section 2.03 and declares
that it will hold such consideration upon the trusts set forth herein for the
benefit of the Certificateholders, subject to the terms and provisions of this
Agreement.
SECTION 2.03. Conveyance of Receivables. In consideration of the
Trustee's delivery on the Closing Date to or upon the order of the Depositor of
Class A Certificates in an initial aggregate principal amount equal to the
Initial Class A Balance and Class B Certificates in an initial aggregate
principal amount equal to the Initial Class B Balance, the Depositor does hereby
transfer, assign, set over and otherwise convey to the Trustee for the benefit
of the Certificateholders, without recourse (subject to the obligations set
forth herein), all right, title and interest of the Depositor in and to:
(1) the Receivables, and all moneys received thereon on and after
__________;
(2) the security interests in the Financed Assets granted by Obligors
pursuant to the Receivables and any other interest of the Transferor or the
Depositor in such Financed Assets;
(3) any proceeds with respect to the Receivables from claims on any
physical damage, credit life or disability insurance policies covering
Financed Assets or Obligors;
(4) any Financed Asset that shall have secured any such Receivable and
shall have been acquired by or on behalf of the Transferor, the Depositor,
the Servicer or the Trust;
(5) all right, title and interest of the Depositor under the
Receivables Transfer Agreement, including, without limitation, the right of
the Depositor to cause the Transferor to purchase Receivables under certain
circumstances; and.
(6) the proceeds of any and all of the foregoing.
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ARTICLE III
The Receivables
---------------
SECTION 3.01. Representations and Warranties of the Transferor. (a) The
Transferor has consented to the assignment by the Depositor to the Trust of the
Depositor's rights with respect to the representations and warranties of the
Transferor set forth in the Receivables Transfer Agreement. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date, but shall survive the transfer and
assignment of the Receivables to the Trust. Pursuant to Section 2.03 of this
Agreement, the Depositor has assigned, transferred and conveyed to the Trust, as
part of the assets of the Trust, its rights under the Receivables Transfer
Agreement, including the representations and warranties of the Transferor
therein, upon which the Trustee relies in accepting the Receivables and
delivering the Certificates, together with all rights of the Depositor with
respect to any breach thereof, including the right to require the Transferor to
purchase Receivables in accordance with the Receivables Transfer Agreement. It
is understood and agreed that the representations and warranties referred to in
this Section shall survive the delivery of the Receivable Files to the Trustee
or any custodian.
(b) The Transferor hereby agrees that the Trustee shall have the right, on
behalf of the Trust and the Certificateholders, to enforce any and all rights
under the Receivables Transfer Agreement assigned to the Trust herein, including
the right to cause the Transferor to purchase any Receivable with respect to
which it is in breach of any of its representations and warranties set forth in
the Receivables Transfer Agreement, directly against the Transferor as though
the Trustee, as trustee of the Trust, were a party to the Receivables Transfer
Agreement, and the Trustee shall not be obligated to exercise any such rights
indirectly through the Depositor.
SECTION 3.02. Representations and Warranties of the Depositor. The
Depositor makes the following representations and warranties as to the
Receivables on which the Trustee relies in accepting the Receivables and
delivering the Certificates. Such representations and warranties speak as of
the execution and delivery of this Agreement and as of the Closing Date, but
shall survive the transfer and assignment of the Receivables by the Depositor to
the Trust.
(a) Title. It is the intention of the Depositor that (i) the transfer and
assignment herein contemplated constitute an absolute conveyance of the
Receivables from the Depositor to the Trust, conveying good title thereto, free
and clear of any Liens or rights of other Persons and (ii) the beneficial
interest in and title to the Receivables not be part of the debtor's estate in
the event of the filing of a bankruptcy petition by or against the Depositor
under any bankruptcy law. No Receivable has been sold, transferred, assigned
or pledged by the Depositor to any Person other than the Trust. Immediately
prior to the transfer and assignment herein contemplated, the Depositor had good
and marketable title to each Receivable, free and clear of all Liens and rights
of others and, immediately upon the transfer thereof, the Trust shall have good
and marketable title to each such Receivable, free and clear of all Liens and
rights of others; and the transfer has been perfected under the UCC.
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(b) All Filings Made. All filings (including UCC filings) necessary in any
jurisdiction to give the Trust a first perfected ownership interest in the
Receivables shall have been made.
SECTION 3.03. Purchase Upon Breach. The Depositor, the Servicer or the
Trustee, as the case may be, shall inform the other parties to this Agreement
promptly, in writing, upon the discovery of any breach of the Depositor's
representations and warranties made pursuant to Section 3.01 of this Agreement
or Section ___ of the Receivable Transfer Agreement or of the Depositor's
representations and warranties made pursuant to Section 3.02 above. Unless any
such breach shall have been cured by the last day of the second Collection
Period following the discovery thereof by the Trustee or receipt by the Trustee
of notice from the Depositor or the Servicer of such breach, the Depositor shall
be obligated to purchase any Receivable materially and adversely affected by any
such breach as of such last day (or, at the Depositor's option, the last day of
the first Collection Period following such discovery or notice). In
consideration of such purchase of any Receivable, the Depositor shall remit the
Purchase Amount, in the manner specified in Section 5.05 provided, however, that
the obligation of the Depositor to purchase any Receivable arising solely as a
result of a breach of the Transferor's representations and warranties under
Section 3.02 of the Receivables Transfer Agreement is subject to the receipt by
the Depositor of the Purchase Amount from the Transferor. Subject to the
provisions of Section 7.03, the sole remedy of the Trustee, the Trust or the
Certificateholders with respect to a breach of representations and warranties
pursuant to Section 3.01 and 3.02 and the agreement contained in this Section
shall be to require the Depositor to purchase Receivables pursuant to this
Section, subject to the conditions contained herein or to enforce the
Transferor's obligation to the Depositor to purchase such Receivables pursuant
to the Receivables Transfer Agreement.
SECTION 3.04. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Trustee, upon
the execution and delivery of this Agreement, hereby revocably appoints the
Servicer, and the Servicer hereby accepts such appointment, to act as the agent
of the Trustee as custodian of the following documents or instruments which are
hereby constructively delivered to the Trustee as of the Cutoff Date with
respect to each Receivable:
(i) the original of the Receivable;
(ii) the original credit application fully executed by the Obligor;
(iii) the original certificate of title or such documents that the
Servicer or the Depositor shall keep on file, in accordance with its
customary procedures, evidencing the security interest of the Depositor in
the Financed Asset; and
(iv) any and all other documents that the Servicer or the Depositor
shall keep on file, in accordance with its customary procedures, relating
to a Receivable, an Obligor or a Financed Asset.
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SECTION 3.05. Duties of Servicer as Custodian. (a) Safekeeping. The
Servicer shall hold the Receivable Files as custodian on behalf of the Trustee
for the benefit of all present and future Certificateholders, and shall maintain
such accurate and complete accounts, records and computer systems pertaining to
each Receivable File as shall enable the Trustee to comply with this Agreement.
In performing its duties as custodian the Servicer shall act with reasonable
care, using that degree of skill and attention that the Servicer exercises with
respect to the receivable files relating to all comparable (boat) (recreational
vehicle) receivables that the Servicer services for itself or others. The
Servicer shall conduct, or cause to be conducted, periodic audits of the
Receivable Files held by it under this Agreement, and of the related accounts,
records and computer systems, in such a manner as shall enable the Trustee to
verify the accuracy of the Servicer's record keeping. The Servicer shall
promptly report to the Trustee any failure on its part to hold the Receivable
Files and maintain its accounts, records and computer systems as herein provided
and shall promptly take appropriate action to remedy any such failure. Nothing
herein shall be deemed to require an initial review or any periodic review by
the Trustee of the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall maintain each
Receivable File at one of its offices specified in Schedule B to this Agreement
or at such other office as shall be specified to the Trustee by written notice
not later than 30 days after any change in location. The Servicer shall make
available to the Trustee or its duly authorized representatives, attorneys or
auditors a list of locations of the Receivable Files and the related accounts,
records and computer systems maintained by the Servicer at such times during
normal business hours as the Trustee shall instruct.
(c) Release of Documents. Upon instruction from the Trustee, the Servicer
shall release any Receivable File to the Trustee, the Trustee's agent or the
Trustee's designee, as the case may be, at such place or places as the Trustee
may designate, as soon as practicable.
SECTION 3.06. Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Trustee Officer.
SECTION 3.07. Custodian's Indemnification. The Servicer as custodian
shall indemnify the Trustee and each of its officers, directors, employees and
agents for any and all liabilities, obligations, losses, compensatory damages,
payments, costs, or expenses of any kind whatsoever that may be imposed on,
incurred by or asserted against the Trustee or any of its officers, directors,
employees or agents as the result of any improper act or omission in any way
relating to the maintenance and custody by the Servicer as custodian of the
Receivable Files; provided, however, that the Servicer shall not be liable to
the Trustee or any such officers, director, employee or agent of the Trustee for
any portion of any such amount resulting from the willful misfeasance, bad faith
or negligence of the Trustee or any such officer, director, employee or agent of
the Trustee.
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SECTION 3.08. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section. If
a Servicer shall resign as Servicer in accordance with the provisions hereof, or
if all of the rights and obligations of any Servicer shall have been terminated
under Section 9.01, the appointment of such Servicer as custodian shall be
terminated by the Trustee or by Holders of the Class A Certificates evidencing
not less than 25% of the Class A Certificate Balance, in the same manner as the
Trustee or such Holders may terminate the rights and obligations of the Servicer
under Section 9.01. The Trustee may terminate the Servicer's appointment as
custodian, with cause, at any time upon written notification to the Servicer,
and without cause upon 30 days' prior written notification. As soon as
practicable after any termination of such appointment, the Servicer shall
deliver the Receivable Files to the Trustee or the Trustee's agent at such place
or places as the Trustee may reasonably designate.
ARTICLE IV
Administration and Servicing of Receivables
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SECTION 4.01. Duties of Servicer. The Servicer, as agent for the Trustee
(to the extent provided herein), shall manage, service, administer and make
collections on the Receivables (other than Purchased Receivables) with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable receivables that it services for itself
or others. The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of Obligors on such Receivables, investigating
delinquencies, sending payment coupons to Obligors, reporting tax information to
Obligors, accounting for collections, furnishing monthly and annual statements
to the Trustee with respect to distributions, and making Advances pursuant to
Section 5.04. Subject to the provisions of Section 4.02, the Servicer shall
follow its customary standards, policies and procedures in performing its duties
as Servicer. Without limiting the generality of the foregoing, the Servicer is
authorized and empowered by the Trustee to execute and deliver, on behalf of
itself, the Trust, the Certificateholders, the Trustee, or any of them, any and
all instruments of satisfaction or cancellation, or partial or full release or
discharge, and all other comparable instruments, with respect to such
Receivables or to the Financed Assets securing such Receivables. If the
Servicer shall commence a legal proceeding to enforce a Receivable, the Trustee
(in the case of any Receivable other than a Purchased Receivable) shall
thereupon be deemed to have automatically assigned, solely for the purpose of
collection, such Receivable to the Servicer. If in any enforcement suit or
legal proceeding it shall be held that the Servicer may not enforce a Receivable
on the ground that it shall not be a real party in interest or a holder entitled
to enforce such Receivable, the Trustee shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Certificateholders. The Trustee shall, upon written
request of the Servicer, furnish the Servicer with any powers of attorney and
other documents reasonably necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder.
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SECTION 4.02. Collection and Allocation of Receivable Payments. The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Receivables as and when the same shall become
due and shall follow such collection procedures as it follows with respect to
all comparable (boat) (recreational vehicle) receivables that it services for
itself or others. The Servicer shall allocate collections between principal and
interest in accordance with the customary servicing procedures it follows with
respect to all comparable (boat) (recreational vehicle) receivables that it
services for itself or others. The Servicer may grant extensions, rebates or
adjustments on a Receivable, which shall not, for the purposes of this
Agreement, modify the original due dates [or amounts of the originally scheduled
payments of interest on] Receivables; provided, however, that if the Servicer
extends the date for final payment by the Obligor of any Receivable beyond the
Final Scheduled Maturity Date, it shall promptly purchase such Receivable from
the Trust in accordance with the terms of Section 4.07. The Servicer may in its
discretion waive any late payment charge or any other fees that may be collected
in the ordinary course of servicing a Receivable. The Servicer shall not agree
to any alteration of [the interest rate] or the originally scheduled payments on
any Receivable.
SECTION 4.03. Realization Upon Receivables. On behalf of the Trust, the
Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of the Financed
Asset securing any Receivable as to which the Servicer shall have determined
eventual payment in full is unlikely. The Servicer shall follow such customary
and usual practices and procedures as it shall deem necessary or advisable in
its servicing of such Receivables, which shall include reasonable efforts to
realize upon any recourse, if any, to Dealers and transferring the Financed
Asset at public or private sale. The foregoing shall be subject to the provision
that, in any case in which the Financed Asset shall have suffered damage, the
Servicer shall not expend funds in connection with the repair or the
repossession of such Financed Asset unless it shall determine in its discretion
that such repair and/or repossession will increase the Liquidation Proceeds by
an amount greater than the amount of such expenses.
SECTION 4.04. Physical Damage Insurance. [The Servicer, in accordance with
its customary servicing procedures, shall require that each Obligor shall have
obtained physical damage insurance covering the Financed Asset as of the
execution of the Receivable.]
SECTION 4.05. Maintenance of Security Interests in Financed Assets. The
Servicer shall, in accordance with its customary servicing procedures, take such
steps as are necessary to maintain perfection of the security interest created
by each Receivable in the related Financed Asset. The Trustee hereby authorizes
the Servicer to take such steps as are necessary to re-perfect such security
interest on behalf of the Trust in the event of the relocation of a Financed
Asset or for any other reason.
SECTION 4.06. Covenants of Servicer. The Servicer shall not release the
Financed Asset securing any Receivable from the security interest granted by
such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or repossession, nor shall
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the Servicer impair the rights of the Trust or the Certificateholders in such
Receivables, nor shall the Servicer increase the number of scheduled payments
due under a Receivable.
SECTION 4.07. Purchase of Receivables Upon Breach. The Servicer or the
Trustee shall inform the other party and the Depositor promptly, in writing,
upon the discovery of any breach of Section 4.02, 4.05 or 4.06. Unless the
breach shall have been cured by the last day of the second Collection Period
following such discovery (or, at the Servicer's election, the last day of the
first following Collection Period), the Servicer shall purchase any Receivable
materially and adversely affected by such breach as of such last day. If the
Servicer takes any action in any Collection Period pursuant to Section 4.02 that
impairs the right of the Trustee, the Trust or the Certificateholders in any
Receivable or as otherwise provided in Section 4.02, the Servicer shall purchase
such Receivable as of the last day of such Collection Period. In consideration
of the purchase of any such Receivable pursuant to either of the two preceding
sentences, the Servicer shall remit the Purchase Amount in the manner specified
in Section 5.05. For purposes of this Section, the Purchase Amount shall consist
in part of a release by the Servicer of all rights of reimbursement with respect
to Outstanding Advances on the Receivable. Subject to Section 8.02, the sole
remedy of the Trustee, the Trust or the Certificateholders with respect to a
breach pursuant to Section 4.02, 4.05 or 4.06 shall be to require the Servicer
to purchase Receivables pursuant to this Section. The Trustee shall have no duty
to conduct any affirmative investigation as to the occurrence of any condition
requiring the purchase of any Receivable pursuant to this Section.
SECTION 4.08. Servicing Fee. The Servicing Fee for a Distribution Date
shall equal the product of (a) one twelfth, (b) the Servicing Rate and (c) the
Pool Balance as of the first day of the preceding Collection Period. The
Servicer shall also be entitled to all late fees, prepayment charges and other
administrative fees or similar charges allowed by applicable law with respect to
the Receivables, collected (from whatever source) on the Receivables, plus any
reimbursement pursuant to Section 8.02.
SECTION 4.09. Servicer's Certificate. Not later than (11:00 a.m. (New York
time)) on each Determination Date, the Servicer shall deliver to the Trustee,
the Rating Agencies and the Depositor, a Servicer's Certificate containing all
information necessary to make the distributions on the related Distribution Date
pursuant to Section 5.06 (including, if required, withdrawals from any Reserve
Account and Advances by the Servicer pursuant to Section 5.04) for the related
Collection Period. Receivables to be purchased by the Servicer or to be
purchased by the Depositor or the Transferor shall be identified by the Servicer
by account number with respect to such Receivable (as specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to the Trustee, on or before ___________ of each year, an
Officers' Certificate, dated as of _____________ of the preceding year, stating
that (A) a review of the activities of the Servicer during the preceding 12-
month period (or such shorter period as shall have elapsed since the Closing
Date) and of its performance hereunder and under this Agreement has been made
under such officers' supervision and (B) to the best of such officers'
knowledge,
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based on such review, the Servicer has fulfilled all its obligations under this
Agreement throughout such year or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officers and the nature and status thereof. The Trustee shall send a copy of
such certificate and the report referred to in Section 4.11 to the Rating
Agencies. A copy of such certificate and the report referred to in Section 4.11
may be obtained by any Certificateholder by a request in writing to the Trustee
addressed to the Corporate Trust Office.
(b) The Servicer shall deliver to the Trustee and to the Rating Agencies,
promptly after having obtained knowledge thereof, but in no event later than 5
Business Days thereafter, written notice in an Officers' Certificate of any
event which with the giving of notice or lapse of time, or both, would become an
Event of Default under Section 9.01, clause (a) or (b).
SECTION 4.11. Annual Independent Certified Public Accountant's Report. [The
Servicer shall cause a firm of independent certified public accountants, which
may also render other services to the Servicer, the Depositor or their
Affiliates, to deliver to the Trustee on or before __________ of each year
beginning ________ , 199__, a report addressed to the Board of Directors of the
Servicer, to the effect that such firm has examined the financial statements of
the Servicer and issued its report thereon and that such examination (1) was
made in accordance with generally accepted auditing standards and accordingly
included such tests of the accounting records and such other auditing procedures
as such firm considered necessary in the circumstances; (2) included tests
relating to (boat) (recreational vehicle) loans serviced for others in
accordance with the requirements of the Uniform Single Attestation Program for
Mortgage Bankers (the "Program"), to the extent the procedures in such Program
are applicable to the servicing obligations set forth in this Agreement; and (3)
except as described in the report, disclosed no exceptions or errors in the
records relating to (boat) (recreational vehicle) loans serviced for others
that, in the firm's opinion, paragraph four of such Program requires such firm
to report.
Such report will also indicate that the firm is independent of the Servicer
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.]
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to the Certificateholders access to the
Receivable Files in such cases where the Certificateholder shall be required by
applicable statutes or regulations to review such documentation. Access shall be
afforded without charge, but only upon reasonable request and during the normal
business hours at the offices of the Servicer. Nothing in this Section shall
affect the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access to information as a result of such obligation shall
not constitute a breach of this Section.
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SECTION 4.13. Servicer Expenses. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder, including
fees and disbursements of independent accountants, taxes imposed on the Servicer
and expenses incurred in connection with distributions and reports to
Certificateholders.
SECTION 4.14. Appointment of Subservicer. The Servicer may at any time
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided that the Rating Agency Condition shall have been
satisfied in connection therewith; and, provided, further, that the Servicer
shall remain obligated and shall be liable to the Trustee and the
Certificateholders for the servicing and administering of the Receivables in
accordance with the provisions hereof without diminution of such obligation and
liability by virtue of the appointment of such subservicer and to the same
extent and under the same terms and conditions as if the Servicer alone were
servicing and administering the Receivables. The fees and expenses of the
subservicer shall be as agreed between the Servicer and its subservicer from
time to time, and none of the Trust, the Trustee or the Certificateholders shall
have any responsibility therefor.
ARTICLE V
Distributions; Reserve Account;
Statements to Certificateholders
--------------------------------
SECTION 5.01. Establishment of Trust Accounts.
(a) (i) The Servicer, for the benefit of the Certificateholders, shall
establish and maintain in the name of the Trustee an Eligible Deposit
Account (the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Certificateholders. Investment earnings on funds in the Collection Account
shall be paid to the Servicer as additional servicing compensation.
(ii) The Servicer, for the benefit of the Certificateholders, shall
establish and maintain in the name of the Trustee a non-interest bearing
account (the "Distribution Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Certificateholders.
(b) Funds on deposit in the Collection Account shall be invested by the
Trustee in Eligible Investments selected in writing by the Servicer or an
investment manager selected by the Servicer, which investment manager shall have
agreed to comply with the terms of this Agreement as they relate to investing
such funds; provided, however, that it is understood and agreed that the Trustee
shall not be liable for any loss arising from such investment in Eligible
Investments. All such Eligible Investments shall be held by the Trustee for the
benefit of the Servicer, and on each Distribution Date all interest and other
investment income (net of losses and investment expenses) on funds on deposit
therein shall be paid to the Servicer. Other than as permitted by the Rating
Agencies, funds on deposit in the Collection Account shall be invested
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in Eligible Investments that will mature (A) not later than the Business Day
immediately preceding the next Distribution Date or (B) on such next
Distribution Date if either (x) such investment is held in the corporate trust
department of the institution with which the Collection Account is then
maintained and is invested in a time deposit of (the Trustee) rated at least A-1
by Standard & Poor's and P-1 by Moody's (such account being maintained within
the corporate trust department of the Trustee) or (y) the Trustee (so long as
the short-term unsecured debt obligations of the Trustee are either (1) rated at
least P-1 by Moody's and A-1 by Standard & Poor's on the date such investment is
made or (2) guaranteed by an entity whose short-term unsecured debt obligations
are rated at least P-1 by Moody's and A-1 by Standard & Poor's on the date such
investment is made) has agreed to advance funds on such Distribution Date to the
Distribution Account in the amount payable on such investment on such
Distribution Date pending receipt thereof to the extent necessary to make
distributions on such Distribution Date. The guarantee referred to in clause (y)
of the preceding sentence shall be subject to the Rating Agency Condition. For
the purpose of the foregoing, unless the Trustee affirmatively agrees in writing
to make such advance with respect to such investment prior to the time an
investment is made, it shall not be deemed to have agreed to make such advance.
Funds deposited in the Collection Account upon the maturity of any Eligible
Investments on the day immediately preceding a Distribution Date are not
required to be invested overnight. If, at any time, the Collection Account
ceases to be an Eligible Deposit Account, the Trustee (or the Servicer on its
behalf) shall within 10 Business Days (or such longer period, not to exceed 30
calendar days, as to which each Rating Agency may consent) establish a new
Collection Account as an Eligible Deposit Account and shall transfer any cash
and/or any investments to such new account.
SECTION 5.02. Collections. The Servicer shall remit within two Business
Days of receipt thereof to the Collection Account all payments by or on behalf
of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds, both as collected during the
Collection Period. Notwithstanding the foregoing, for so long as (i) DFS remains
the Servicer, (ii) no Event of Default shall have occurred and be continuing and
(iii) prior to ceasing daily remittances, the Rating Agency Condition shall have
been satisfied (and any conditions or limitations imposed by the Rating Agencies
in connection therewith are complied with), the Servicer shall remit such
collections with respect to the preceding calendar month to the Collection
Account on the Determination Date immediately preceding the related Distribution
Date. For purposes of this Article V the phrase "payments by or on behalf of
Obligors" shall mean payments made with respect to the Receivables by Persons
other than the Servicer or the Depositor.
SECTION 5.03. Application of Collections. All collections for the
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied first to reduce
Outstanding Advances to the extent described in Section 5.04(b). Next, any
excess shall be applied to interest and principal in accordance with the
Simple Interest Method.
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SECTION 5.04. Advances.
As of the close of business on the last day of each Collection Period, the
Servicer shall advance an amount equal to the amount of interest due on the
Receivables at their respective APRs for the related Collection Period (assuming
the Receivables pay on their respective due dates) minus the amount of interest
actually received on the Receivables during the related Collection Period (such
amount, an "Advance"). With respect to each Receivable, the Advance shall
increase Outstanding Advances. If such calculation results in a negative number,
an amount equal to the absolute value of such negative number shall be paid to
the Servicer and the amount of Outstanding Advances shall be reduced by such
amount. In addition, in the event that a Receivable becomes a Liquidated
Receivable, Liquidation Proceeds with respect to such Receivable attributable to
accrued and unpaid interest thereon (but not including interest for the then
current Collection Period) shall be paid to the Servicer to reduce Outstanding
Advances, but only to the extent of any Outstanding Advances. The Servicer shall
not make any advance with respect to principal of Receivables.
SECTION 5.05. Additional Deposits. The Servicer shall deposit in the
Collection Account the aggregate Advances pursuant to Section 5.04. To the
extent that the Servicer fails to make an Advance pursuant to Section 5.04(b) on
the date required, the Trustee shall withdraw such amount (or, if determinable,
such portion of such amount as does not represent advances for delinquent
interest) from the Reserve Account and deposit such amount in the Collection
Account. The Servicer and the Depositor shall deposit or cause to be deposited
in the Collection Account the aggregate Purchase Amount with respect to
Purchased Receivables, and the Servicer shall deposit therein all amounts to be
paid under Section 11.02. The Servicer shall deposit the aggregate Purchase
Amount with respect to Purchased Receivables when such obligations are due,
unless the Servicer shall not be required to make daily deposits pursuant to
Section 5.02.
SECTION 5.06. Distributions. (a) On each Distribution Date, the Trustee
shall cause to be transferred from the Collection Account to the Distribution
Account, in immediately available funds, the entire amount then on deposit in
the Collection Account; provided, however, that in the event that the Servicer
is required to make deposits to the Collection Account on a daily basis pursuant
to Section 5.02, the amount of the funds transferred from the Collection Account
to the Distribution Account will include only those funds that were deposited in
the Collection Account for the Collection Period related to such Distribution
Date.
(b) On or prior to each Determination Date, the Servicer shall calculate
the Total Distribution Amount, the Interest Distribution Amount, the Principal
Distribution Amount, the Class A Distributable Amount, and the Class B
Distributable Amount, and, based on the Total Distribution Amount and the other
amounts to be distributed on the related Distribution Date, determine the amount
distributable to Holders of each class of Certificates.
(c) On each Distribution Date, the Trustee (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date pursuant to Section 5.09) shall
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distribute amounts on deposit in the Distribution Account and, if applicable,
the Reserve Account, in the manner and priority set forth below:
(i) to the Servicer, from the Interest Distribution Amount, the
Servicing Fee and all unpaid Servicing Fees from prior Collection Periods;
(ii) to the Class A Certificateholders:
(A) from the Class A Percentage of the Interest Distribution
Amount (as such Interest Distribution Amount has been reduced by
Servicing Fee payments), the sum of the Class A Interest Distributable
Amount and the Class A Interest Carryover Shortfall as of the close of
the preceding Distribution Date;
(B) from the Class A Percentage of the Principal Distribution
Amount (other than the portion thereof attributable to Realized
Losses), the sum of the Class A Principal Distributable Amount and the
Class A Principal Carryover Shortfall as of the close of the preceding
Distribution Date;
(iii) to the Class B Certificateholders:
(A) from the Class B Percentage of the Interest Distribution
Amount (as such Interest Distribution Amount has been reduced by
Servicing Fee payments), the sum of the Class B Interest Distributable
Amount and the Class B Interest Carryover Shortfall as of the close of
the preceding Distribution Date; and
(B) from the Class B Percentage of the Principal Distribution
Amount, the sum of the Class B Principal Distributable Amount and the
Class B Principal Carryover Shortfall as of the close of the preceding
Distribution Date.
(d) The rights of the Class B Certificateholders to receive distributions
in respect of the Class B Certificates shall be and hereby are subordinated to
the rights of the Class A Certificateholders to receive distributions in respect
of the Class A Certificates and the rights of the Servicer to receive the
Servicing Fee (and any accrued and unpaid Servicing Fees from prior Collection
Periods) in the event of delinquency or defaults on the Receivables. In
addition, the Class A Certificateholders and the Class B Certificateholders
shall have the respective rights to receive funds from the Reserve Account in
the order of priority set forth below. Such subordination and withdrawals from
the Reserve Account shall be effected as follows, and all payments shall be
effected by applying funds in the following order:
(i) If the Class A Percentage of the Interest Distribution Amount
(as such Interest Distribution Amount has been reduced by Servicing Fee
payments) is less than the sum of the Class A Interest Distributable Amount
and any Class A Interest Carryover Shortfall from the preceding
Distribution Date, the Class A Certificateholders shall be entitled to
receive distributions in respect of such deficiency first, from the Class B
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Percentage of the Interest Distribution Amount; second, if such amounts are
insufficient, from amounts on deposit 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).
(ii) If the Class A Percentage of the Principal Distribution Amount
(other than the portion thereof attributable to Realized Losses) is less
than the sum of the Class A Principal Distributable Amount and the Class A
Principal Carryover Shortfall from the preceding Distribution Date, the
Class A Certificateholders shall be entitled to receive distributions in
respect of such deficiency 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
on deposit in the Reserve Account; and third, if such amounts are
insufficient, from the Class B Percentage of the Interest Distribution
Amount.
(iii) If the Class B Percentage of the Interest Distribution Amount,
less the portion thereof, if any, distributed to the Class A
Certificateholders pursuant to clause (i) above, is less than the Class B
Interest Distributable Amount, the Class B Certificateholders shall be
entitled to receive such deficiency from amounts on deposit in the Reserve
Account (after giving effect to any withdrawals therefrom pursuant to
clauses (i) and (ii) above).
(iv) If the Class B Percentage of the Principal Distribution Amount
(other than the portion thereof attributable to Realized Losses), less the
portion thereof, if any, distributed to the Class A Certificateholders
pursuant to clause (ii) above, is less than the Class B Principal
Distributable Amount, the Class B Certificateholders shall be entitled to
receive such deficiency from amounts on deposit in the Reserve Account
(after giving effect to any withdrawals therefrom pursuant to clauses (i),
(ii) and (iii) above).
(e) On each Distribution Date, the Trustee shall distribute any amounts
remaining in the Distribution Account after making the distributions described
in Sections 5.06(c) and (d) above in the following amounts and in the following
order of priority: (i) into the Reserve Account until the amount on deposit
therein equals the Specified Reserve Account Balance and (ii) to the Depositor.
(f) Subject to Section 11.01 respecting the final payment upon retirement
of each Certificate, the Servicer shall on each Distribution Date instruct the
Trustee to distribute to each Certificateholder of record on the preceding
Record Date either by wire transfer in immediately available funds to the
account of such Holder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder shall have provided to the Servicer
appropriate instructions prior to such Distribution Date and such Holder's
Certificates of either Class in the aggregate evidence a denomination of not
less than $1,000,000, or, if not, by check mailed to such Certificateholder at
the address of such Holder appearing in the Certificate Register, the amounts to
be distributed to such Certificateholder pursuant to such Holder's Certificates.
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SECTION 5.07. Reserve Account. (a) In order to effectuate the subordination
provided for herein and to assure that sufficient amounts to make required
distributions to Certificateholders will be available, the Servicer shall
establish and maintain an Eligible Deposit Account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Certificateholders. The Reserve Account
will include the money and other property deposited and held therein pursuant to
Section 5.06(e), 5.08(a) and this Section.
On or prior to the Closing Date, the Depositor shall deposit an amount
equal to the Reserve Account Initial Deposit into the Reserve Account. The
Reserve Account and the Reserve Account Property shall not be part of the Trust,
but instead will be held by the Trustee, as collateral agent, for the benefit of
the Holders of the Certificates. The Depositor hereby acknowledges that the
Reserve Account Initial Deposit (and any investment earnings thereon) is owned
directly by it, and the Depositor hereby agrees to treat the same as its assets
(and earnings) for federal income tax and all other purposes.
(b) In order to give effect to the subordination provided for herein and
to assure the availability of the amounts maintained in the Reserve Account, the
Depositor hereby conveys and transfers to the Trustee, as collateral agent, and
its successors and assigns, the Reserve Account Initial Deposit and all proceeds
thereof and hereby pledges to the Trustee as collateral agent, and its
successors and assigns, all other amounts deposited in or credited to the
Reserve Account from time to time under this Agreement, all Eligible Investments
made with amounts on deposit therein, all earnings and distributions thereon and
proceeds thereof (other than proceeds constituting net investment earnings
attributable to the Reserve Account Property) subject, however, to the
limitations set forth below, and solely for the purpose of securing and
providing for payment of the Class A Distributable Amount and the Class B
Distributable Amount in accordance with Section 5.06 and this Section (all the
foregoing, subject to the limitations set forth below, the "Reserve Account
Property"), to have and to hold all the aforesaid property, rights and
privileges unto the Trustee, its successors and assigns, in trust for the uses
and purposes, and subject to the terms and provisions, set forth in this
Section. The Trustee hereby acknowledges such transfer and accepts the trusts
hereunder and shall hold and distribute the Reserve Account Property in
accordance with the terms and provisions of this Section.
(c) Consistent with the limited purposes for which such trust is granted,
the amounts on deposit in the Reserve Account on each Distribution Date shall be
available for distribution as provided in Section 5.06, in accordance with and
subject to the following: if the amount on deposit in the Reserve Account (after
giving effect to all deposits thereto and withdrawals therefrom on such
Distribution Date) is greater than the Specified Reserve Account Balance, the
Trustee shall release and distribute all such amounts to the Depositor. Upon any
such distribution to the Depositor, the Certificateholders will have no further
rights in, or claims to, such amounts.
(d) Funds on deposit in the Reserve Account shall be invested by the
Trustee, as collateral agent, in Eligible Investments selected in writing by the
Depositor or an investment
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manager selected by the Servicer, which investment manager shall have agreed to
comply with the terms of this Agreement as they relate to investing such funds;
provided, however, that it is understood and agreed that the Trustee shall not
be liable for any loss arising from such investment in Eligible Investments.
Other than as permitted by the Rating Agencies, funds on deposit in the Reserve
Account shall be invested in Eligible Investments that will mature (A) not later
than the Business Day immediately preceding the next Distribution Date or (B) on
such next Distribution Date if either (x) such investment is held in the
corporate trust department of the institution with which the Reserve Account is
then maintained and is invested in a time deposit of (the Trustee) rated at
least A-1 by Standard & Poor's and P-1 by Moody's (such account being maintained
within the corporate trust department of the Trustee) or (y) the Trustee (so
long as the short-term unsecured debt obligations of the Trustee are either (1)
rated at least P-1 by Moody's and A-1 by Standard & Poor's on the date such
investment is made or (2) guaranteed by an entity whose short-term unsecured
debt obligations are rated at least P-1 by Moody's and A-1 by Standard & Poor's
on the date such investment is made) has agreed to advance funds on such
Distribution Date to the Distribution Account in the amount payable on such
investment on such Distribution Date pending receipt thereof to the extent
necessary to make distributions on such Distribution Date. The guarantee
referred to in clause (y) of the preceding sentence shall be subject to the
Rating Agency Condition. For the purpose of the foregoing, unless the Trustee
affirmatively agrees in writing to make such advance with respect to such
investment prior to the time an investment is made, it shall not be deemed to
have agreed to make such advance. Funds deposited in the Reserve Account upon
the maturity of any Eligible Investments on the day immediately preceding a
Distribution Date are not required to be invested overnight. If, at any time,
the Reserve Account ceases to be an Eligible Deposit Account, the Trustee as
collateral agent (or the Servicer on its behalf) shall within 10 Business Days
(or such longer period, not to exceed 30 calendar days, as to which each Rating
Agency may consent) establish a new Reserve Account as an Eligible Deposit
Account and shall transfer any cash and/or any investments to such new account.
Investment earnings attributable to the Reserve Account Property shall not
be available to satisfy the subordination provisions of this Agreement and shall
not otherwise be subject to any claims or rights of the Certificateholders or
the Servicer. All such investments shall be made in the name of the Trustee or
its nominee, as collateral agent, and all net income and gain realized thereon
shall be solely for the benefit of the Depositor and shall be payable by the
Trustee to the Depositor on each Distribution Date. Realized losses, if any, on
investments of the Reserve Account Property shall be charged first against
undistributed investment earnings attributable to the Reserve Account Property
and then against the Reserve Account Property.
(e) With respect to the Reserve Account Property, the Depositor, on behalf
of itself, its successors and assigns, and the Trustee agree that:
(i) Any Reserve Account Property that is held in deposit accounts
shall be held solely in the name of the Trustee, as collateral agent, at an
Eligible Institution. Each such deposit account shall be subject to the
exclusive custody and control of the Trustee, and the Trustee shall have
sole signature authority with respect thereto.
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(ii) Any Reserve Account Property that constitutes Physical Property
shall be delivered to the Trustee, as collateral agent, in accordance with
paragraph (a) of the definition of "Delivery" and shall be held, pending
maturity or disposition, solely by the Trustee, as collateral agent, or a
financial intermediary (as such term is defined in Section 8- 313(4) of the
UCC) acting solely for the Trustee, as collateral agent.
(iii) Any Reserve Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trustee, as
collateral agent, pending maturity or disposition, through continued book-
entry registration of such Reserve Account Property as described in such
paragraph.
(iv) Any Reserve Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by clause (C)
above shall be delivered to the Trustee, as collateral agent, in accordance
with paragraph (c) of the definition of "Delivery" and shall be maintained
by the Trustee, as collateral agent, pending maturity or disposition,
through continued registration of the Trustee's (or its custodian's or it
nominee's) ownership of such security, in its capacity as collateral agent.
Effective upon Delivery of any Reserve Account Property in the form of
Physical Property, book-entry securities or uncertificated securities, the
Trustee shall be deemed to have acquired such Reserve Account Property for
value, in good faith and without notice of any adverse claim thereto.
(f) Each of the Depositor and the Servicer agrees to take or cause to be
taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments (including
any UCC financing statements or this Agreement) as may be determined to be
necessary in an Opinion of Counsel to the Depositor delivered to the Trustee in
order to perfect the interests created by this Section and otherwise fully to
effectuate the purposes, terms and conditions of this Section. The Depositor
shall:
(i) promptly execute, deliver and file any financing statements,
amendments, continuation statements, assignments, certificates, and other
documents with respect to such interests and perform all such other acts as
may be necessary in order to perfect or to maintain the perfection of the
Trustee's security interest; and
(ii) file the necessary financing statements or amendments thereto
within five days, and promptly notify the Trustee of any such filing, after
the occurrence of any of the following: (1) any change in its corporate
name or any trade name; (2) any change in the location of its chief
executive office or principal place of business; and (3) any merger or
consolidation or other change in its identity or corporate structure and
promptly notify the Trustee of any such filings.
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(g) The Trustee shall not enter into any subordination or intercreditor
agreement with respect to the Reserve Account Property.
(h) Following the payment in full of the Certificate Balance and of all
other amounts owing or to be distributed under this Agreement to
Certificateholders and the termination of the Trust, any amount remaining on
deposit in the Reserve Account shall be distributed to the Depositor.
SECTION 5.08. Statements to Certificateholders. On each Distribution
Date, the Servicer shall provide to the Trustee for the Trustee to forward to
each Certificateholder of record as of the most recent Record Date, a statement
substantially in the form of Exhibit D setting forth at least the following
information as to each Class of Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal of each
class of Certificates;
(ii) the amount of such distribution allocable to interest of each
class of Certificates;
(iii) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(iv) the Class A Certificate Balance and Class B Certificate Balance
and the Class A Pool Factor and Class B Pool Factor 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 amount of the Class A Principal Carryover Shortfall and
Class A Interest Carryover Shortfall and Class B Principal Carryover
Shortfall and Class B Interest Carryover Shortfall, as applicable, if any,
on such Distribution Date and the change in the Class A Principal Carryover
Shortfall and Class A Interest Carryover Shortfall and Class B Principal
Carryover Shortfall and Class B Interest Carryover Shortfall, as
applicable, from the preceding Distribution Date;
(vii) the amount of aggregate Realized Losses, if any, for the second
preceding Collection Period;
(viii) the aggregate Purchase Amounts for Receivables, if any, that
were purchased in such period;
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(ix) the amount otherwise distributable to the Class B
Certificateholders that is distributed to Class A Certificateholders on
such Distribution Date;
(x) the balance of the Reserve Account on such Distribution Date,
after giving effect to deposits and withdrawals made on such Distribution
Date;
(xi) for Distribution Dates during the Funding Period (if any), the
remaining Pre-Funded Amount; and
(xii) for the first Distribution Date that is on or immediately
following the end of the Funding Period (if any), the amount of any
remaining Pre-Funded Amount that has not been [used to fund the purchase of
Subsequent Receivables] [to make distributions to the Transferor] and is
passed through as payments of principal of the Certificates.
Each amount set forth pursuant to subclauses (i), (ii), (v) or (vi) above shall
be expressed as a dollar amount per $1,000 of original principal balance of a
Class A or Class B Certificate, as applicable.
SECTION 5.09. Tax Returns. The Trustee shall deliver to each Holder of a
Certificate, as may be required by the Code and applicable Treasury Regulations,
such information as may be required to enable each Holder to prepare its federal
and state income tax returns.
SECTION 5.10. Net Deposits. As an administrative convenience, unless the
Servicer is required to remit collections daily, the Servicer will be permitted
to make the deposit of collections on the Receivables, aggregate Advances and
Purchase Amounts for or with respect to each Collection Period net of
distributions to be made to the Servicer with respect to such Collection Period.
The Servicer, however, will account to the Trustee and to the Certificateholders
as if all deposits, distributions and transfers were made individually.
ARTICLE VI
The Certificates
----------------
SECTION 6.01. The Certificates. Unless otherwise specified in this
Agreement, the Certificates shall be issued in fully registered form in minimum
denominations of $1,000. The Certificates shall be executed on behalf of the
Trust by manual or facsimile signature of an authorized officer of the Trustee.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued and entitled to the benefit of this
Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of authentication and
delivery of such Certificates.
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A transferee of a Certificate shall become a Certificateholder and shall be
entitled to the rights and subject to the obligations of a Certificateholder
hereunder upon such transferee's acceptance of a Certificate duly registered in
such transferee's name pursuant to Section 6.03.
SECTION 6.02. Authentication of Certificates. The Trustee shall cause
the Certificates to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Depositor, signed by its chairman
of the board, its president, any vice president, secretary, or assistant
treasurer, without further corporate action by the Depositor, in authorized
denominations, pursuant to this Agreement. No Certificate shall entitle its
Holder to any benefit under this Agreement or shall be valid for any purpose
unless there shall appear on such Certificate a certificate of authentication
substantially in the form set forth in Exhibit A or Exhibit B, as appropriate,
executed by the Trustee by manual signature. Such authentication shall
constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
SECTION 6.03. Registration of Transfer and Exchange of Certificates. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 6.08, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Trustee shall provide
for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. Unless otherwise specified in this Agreement,
the Trustee shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office, the Trustee shall execute, authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Certificates in authorized denominations of a like aggregate amount dated the
date of authentication by the Trustee. At the option of a Holder, Certificates
may be exchanged for other Certificates of authorized denominations of a like
aggregate amount upon surrender at the Corporate Trust Office of the
Certificates to be exchanged.
Every Certificate presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by the
Holder or such Holder's attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer and exchange shall be cancelled and
subsequently disposed of by the Trustee.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
SECTION 6.04. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there
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shall be delivered to the Certificate Registrar and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Certificate has been acquired by a bona fide
purchaser, the Trustee on behalf of the Trust shall execute, and the Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section, the Trustee and the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
SECTION 6.05. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 5.06 and for all other purposes whatsoever, and neither the
Trustee nor the Certificate Registrar shall be bound by any notice to the
contrary.
SECTION 6.06. Access to List of Certificateholders' Names and Addresses.
The Trustee shall furnish or cause to be furnished to the Servicer, within 15
days after receipt by the Trustee of a request therefor from the Servicer in
writing, a list, in such form as the Servicer may reasonably require, of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Certificateholders, or one or more Holders of Class A
Certificates evidencing not less than 25% of the Class A Certificate Balance
apply in writing to the Trustee, and such application states that the applicants
desire to communicate with other Certificateholders with respect to their rights
under this Agreement or under the Certificates and such application shall be
accompanied by a copy of the communication that such applicants propose to
transmit, then the Trustee shall, within five Business Days after the receipt
for such application, afford such applicants access during normal business hours
to the current list of Certificateholders. Each Holder, by receiving and
holding a Certificate, shall be deemed to have agreed to hold neither the
Servicer nor the Trustee accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 6.07. Maintenance of Office or Agency. The Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates and this Agreement may be served. The Trustee
initially designates the Corporate Trust Office as specified in this Agreement
as its office for such purposes. The Trustee shall give prompt written notice
to the Servicer and to Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 6.08. Book-Entry Certificates. The Class A Certificates and[, if
so specified in this Agreement,] the Class B Certificates may be issued in the
form of one or more
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typewritten Certificates representing Book-Entry Certificates, to be delivered
by, or on behalf of, the Depositor to the initial Clearing Agency, which, unless
otherwise specified in this Agreement, shall be The Depository Trust Company.
In such case, the Certificates delivered to the Depository Trust Company shall
initially be registered on the Certificate Register in the name of Cede & Co.,
the nominee of the initial Clearing Agency, and no Certificate Owner will
receive a definitive certificate representing such Certificate Owner's interest
in the Certificates, except as provided in Section 6.10. Unless and until
definitive, fully registered Certificates (the "Definitive Certificates") have
been issued to such Certificate Owners pursuant to Section 6.10:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Depositor, the Servicer, the Certificate Registrar and the
Trustee may deal with the Clearing Agency for all purposes (including the
making of distributions on such Certificates) as the sole Holder of such
Certificates and shall have no obligation to the related Certificate
Owners;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section
shall control;
(iv) the rights of such Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law and agreements between such Certificate Owners and the Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the Depository
Agreement, unless and until Definitive Certificates are issued pursuant to
Section 6.10, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on such Certificates to such
Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Certificates evidencing
a specified percentage of the Certificate Balance, the Clearing Agency
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in such Certificates and has
delivered such instructions to the Trustee.
SECTION 6.09. Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Certificate Owners
pursuant to Section 6.10, the Trustee and the Servicer shall give all such
notices and communications specified herein to be given to Certificate Owners to
the Clearing Agency.
SECTION 6.10. Definitive Certificates. If (i) the Servicer advises the
Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities
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under the Depository Agreement and the Trustee or the Depositor is unable to
locate a qualified successor, (ii) the Depositor at its option advises the
Trustee in writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default,
Certificate Owners representing beneficial interests aggregating not less than a
majority of the aggregate outstanding principal amount of the Book-Entry
Certificates advise the Trustee and the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Certificate Owners, then the Clearing Agency shall
notify all Certificate Owners and the Trustee of the occurrence of such event
and of the availability of Definitive Certificates to Certificate Owners
requesting the same. Upon surrender to the Trustee of the typewritten
Certificates representing the Book-Entry Certificates by the Clearing Agency,
accompanied by registration instructions, the Trustee shall execute and
authenticate the Definitive Certificates in accordance with the instructions of
the Clearing Agency. None of the Depositor, the Certificate Registrar or the
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder. The
Definitive Certificates shall be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Trustee, as
evidenced by its execution thereof.
ARTICLE VII
The Depositor
-------------
SECTION 7.01. Representations of Depositor. The Depositor makes the
following representations on which the Trustee shall be deemed to have relied in
accepting the Receivables in trust and executing and authenticating the
Certificates. The representations speak as of the execution and delivery of
this Agreement and as of the Closing Date, in the case of Initial Receivables
and as of the applicable Subsequent Transfer Date, in the case of Subsequent
Receivables, if any, and shall survive the transfer of the Receivables to the
Trustee.
(i) Organization and Good Standing. The Depositor is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Nevada, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is presently
conducted, and had at all relevant times, and has, the corporate power,
authority and legal right to acquire and own the Receivables.
(ii) Due Qualification. The Depositor is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualifications.
(iii) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its respective
terms; the Depositor has full power and authority to transfer and assign the
property to be transferred and assigned to and
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deposited with the Trustee as part of the Trust, and the Depositor shall have
duly authorized such transfer and assignment to the Trustee, as applicable, by
all necessary corporate action; and the execution, delivery and performance of
this Agreement and of each Subsequent Transfer Assignment or Eligible Investment
Transfer Assignment, as applicable, shall have been duly authorized by the
Depositor by all necessary corporate action.
(iv) Binding Obligation. This Agreement, each Subsequent Transfer
Assignment and Eligible Investment Transfer Assignment, when executed and
delivered by the Depositor, shall constitute legal, valid and binding
obligations of the Depositor enforceable in accordance with their respective
terms.
(v) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof and thereof do not
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or bylaws of the Depositor, or any indenture,
agreement or other instrument to which the Depositor is a party or by which it
is bound; or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to this Agreement); or violate any law or, to
the best of the Depositor's knowledge, any order, rule or regulation applicable
to the Depositor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Depositor or its properties.
(vi) No Proceedings. To the Depositor's best knowledge, there are no
proceedings or investigations pending, or threatened, before any court,
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Depositor or its properties: (i) asserting the
invalidity of this Agreement or the Certificates; (ii) seeking to prevent the
issuance of the Certificates or the consummation of any of the transactions
contemplated by this Agreement; (iii) seeking any determination or ruling that
might materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this Agreement or the
Certificates, or (iv) that might adversely affect the federal income tax
attributes of the Certificates.
SECTION 7.02. Corporate Existence. During the term of this Agreement,
the Depositor will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby and thereby.
SECTION 7.03. Liabilities of Depositor; Indemnities. The Depositor shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement.
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(i) The Depositor shall indemnify, defend and hold harmless the
Trustee and the Trust from and against any taxes that may at any time be
asserted against the Trustee or the Trust with respect to the transactions
contemplated in this Agreement, including any sales, gross receipts,
general corporation, tangible personal property, privilege, or license
taxes (but, in the case of the Trust, not including any taxes asserted with
respect to, and as the date of, the transfer of the Receivables to the
Trust or the issuance and original sale of the Certificates, or asserted
with respect to ownership of the Receivables, or federal or other income
taxes arising out of the distributions on the Certificates) and costs and
expenses in defending against the same.
(ii) The Depositor shall indemnify, defend and hold harmless the
Trustee and the Certificateholders from and against any loss, liability or
expense incurred by reason of (a) the Depositor's willful misfeasance, bad
faith or negligence in the performance of its duties under this Agreement,
or by reason of reckless disregard of its obligations and duties under this
Agreement, and (b) the Depositor's or Trust's violation of federal or state
securities laws in connection with the offering and sale of the
Certificates.
(iii) The Depositor shall indemnify, defend and hold harmless the
Trustee and its officers, directors, employees and agents from and against
all costs, expenses, losses, claims, damages and liabilities arising out of
or incurred in connection with the acceptance or performance of the trusts
and duties in this Agreement contained, except to the extent that such
cost, expense, loss, claim, damage or liabilities shall be due to the
willful misfeasance, bad faith or negligence (except for errors in
judgment) of the Trustee.
Indemnification under this Section shall survive the resignation or removal
of the Trustee and the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Depositor shall have made any indemnity payments to the Trustee pursuant to this
Section and the Trustee thereafter shall collect any of such amounts from
others, the Trustee shall promptly repay such amounts to the Depositor, without
interest.
SECTION 7.04. Merger or Consolidation of, or Assumption of the Obligations
of, Depositor. Any Person (a) into which the Depositor may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Depositor shall be a party or (c) which may succeed to the properties and assets
of the Depositor substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Depositor under this Agreement, shall be the successor to the Depositor
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 3.01 shall have been breached and no Event of Default, and
no event which, after notice or lapse of time, or both, would become an Event of
Default shall have happened and be continuing, (ii) the Depositor shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this
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Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, (iii) the Rating
Agency Condition shall have been satisfied with respect to such transaction and
(iv) the Depositor shall have delivered to the Trustee an Opinion of Counsel
stating that, in the opinion of such Counsel, either (A) all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Trustee in the Receivables and reciting the details of such filings or (B) no
such action shall be necessary to preserve and protect such interest.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (i), (ii), (iii) and (iv)
above shall be conditions to the consummation of the transactions referred to in
clauses (a), (b) or (c) above.
SECTION 7.05. Limitation on Liability of Depositor and Others. The
Depositor and any director, officer, employee or agent of the Depositor may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 7.06. Depositor May Own Certificates. The Depositor and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates with the same rights as it would have if it were not
the Depositor or an Affiliate thereof, except as otherwise provided herein.
SECTION 7.07. No Transfer of Excess Amounts. The Depositor hereby covenants
that, except as otherwise provided in this Agreement, it will not transfer,
pledge or assign to any Person any part of its right to receive any amounts in
excess of the Specified Reserve Account Balance pursuant to Section 5.07(c) and
(h) unless it has first delivered to the Trustee and each Rating Agency an
Opinion of Counsel in form and substance satisfactory to the Trustee stating
that such transfer will not (i) adversely affect the status of the Trust as a
grantor trust pursuant to subpart E, part I of subchapter J of the Code or (ii)
cause the Reserve Account to be taxable as a corporation under the Code. The
Depositor shall give written notice to each Rating Agency of any proposed
transfer, pledge or assignment to any Person of all or any part of its right to
receive such excess amounts.
SECTION 7.08. Non-Consolidation. [Covenants to follow.]
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ARTICLE VIII
The Servicer
------------
SECTION 8.01. Representations of Servicer. The Servicer makes the following
representations on which the Trustee shall be deemed to have relied in accepting
the Receivables in trust and executing and authenticating the Certificates. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date, in the case of the initial Receivables and as of the
applicable Subsequent Transfer Date, in the case of the Subsequent Receivables,
if any, and shall survive the transfer of the Receivables to the Trustee.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the state
of its incorporation, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire, own, transfer and service the
Receivables and to hold the Receivable Files as custodian.
(b) Due Qualification. The Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business (including the servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and to carry out the terms of this Agreement;
and the execution, delivery and performance of this Agreement has been duly
authorized by the Servicer by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes the legal, valid and
binding obligations of the Servicer enforceable in accordance with their
respective terms.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof shall not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement or other
instrument to which the Servicer is a party or by which it is bound; or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than this
Agreement); or violate any law or, to the best of the Servicer's knowledge, any
order, rule or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
(f) No Proceedings. To the Servicer's best knowledge, there are no
proceedings or investigations pending, or threatened, before any court,
regulatory body, administrative agency
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or other governmental instrumentality having jurisdiction over the Servicer or
its properties: (i) asserting the invalidity of this Agreement or the
Certificates, (ii) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement, (iii)
seeking any determination or ruling that might materially and adversely affect
the performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or the Certificates, or (iv) relating to the
Servicer and which might adversely affect the federal income tax attributes of
the Certificates.
(g) No Insolvent Obligors. As of the related Cutoff Date, no Obligor on a
Receivable shall be shown on the Receivable Files as the subject of a bankruptcy
proceeding.
SECTION 8.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement.
(a) The Servicer shall defend, indemnify and hold harmless the Trustee,
the Trust, the Certificateholders and the Depositor from and against any and all
costs, expenses, losses, damages, claims, and liabilities, arising out of or
resulting from the use, ownership or operation by the Servicer or any Affiliate
thereof of a Financed Asset.
(b) The Servicer shall indemnify, defend and hold harmless the Trustee,
the Depositor, the Trust and the Certificateholders from and against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage, or liability arose out of, or was
imposed upon any such Person through, the negligence, willful misfeasance or bad
faith of the Servicer in the performance of its duties under this Agreement or
by reason of reckless disregard of its obligations and duties under this
Agreement.
For purposes of this Section, in the event of the termination of the
rights and obligations of DFS (or any successor thereto pursuant to Section
8.03) as Servicer pursuant to Section 9.01, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer (other than the Trustee) pursuant to
Section 9.02.
Indemnification under this Section shall survive the resignation or removal
of the Trustee or the termination of this Agreement and shall include reasonable
fees and expenses of counsel and expenses of litigation. If the Servicer shall
have made any indemnity payments pursuant to this Section and the recipient
thereafter collects any of such amounts from others, such Person shall promptly
repay such amounts to the Servicer, without interest.
SECTION 8.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party, (c) which may succeed to the properties and assets of
the Servicer substantially as a whole or (d) with respect to the Servicer's
obligations hereunder, which is a corporation 50% or more of the voting stock of
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which is owned, directly or indirectly, by DFS shall be the successor to the
Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided, however, that (i) immediately after giving
effect to such transaction, no Event of Default and no event which, after notice
or lapse of time, or both, would become an Event of Default shall have happened
and be continuing, (ii) the Servicer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction, (iv) the
Servicer shall have delivered to the Trustee an Opinion of Counsel stating that,
in the opinion of such counsel, either (A) all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Trustee in the
Receivables and reciting the details of such filings or (B) no such action shall
be necessary to preserve and protect such and (v) such Person shall have
executed an agreement of assumption to perform every obligation of the Servicer
hereunder. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii), (iv) and (v) above shall be conditions to the
consummation of the transactions referred to in clauses (a), (b), (c) or (d)
above.
SECTION 8.04. Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of the directors, officers, employees or agents of the Servicer
shall be under any liability to the Trust or the Certificateholders, except as
provided under this Agreement, for any action taken or for refraining from the
taking of any action pursuant to this Agreement or for errors in judgment;
provided, however, that this provision shall not protect the Servicer or any
such Person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its duties to service the Receivables in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the rights and
duties of the parties to this Agreement and the interests of the
Certificateholders under this Agreement.
ARTICLE IX
Default
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SECTION 9.01. Events of Default. If any one of the following events
("Events of Default") shall occur and be continuing:
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(a) Any failure by the Servicer to deliver to the Trustee for deposit to
the Collection Account or the Distribution Account any proceeds or payment
required to be so delivered under the terms of the Certificates and this
Agreement that shall continue unremedied for a period of three Business Days
after written notice of such failure is received by the Servicer from the
Trustee or after discovery of such failure by an officer of the Servicer; or
(b) Failure by the Servicer or the Depositor, as the case may be, duly to
observe or to perform in any material respect any other covenants or agreements
of the Servicer or the Depositor (as the case may be) set forth in the
Certificates or in this Agreement, which failure shall (a) materially and
adversely affect the rights of Certificateholders and (b) continue unremedied
for a period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given (1) to the Servicer or
the Depositor (as the case may be) by the Trustee or (2) to the Servicer or the
Depositor (as the case may be) and to the Trustee by the Holders of Class A
Certificates evidencing not less than 25% of the Class A Certificate Balance; or
(c) The occurrence of an Insolvency Event with respect to the Servicer or
the Depositor;
then, and in each and every case, so long as the Event of Default shall not have
been remedied, either the Trustee or the Holders of Class A Certificates
evidencing not less than 25% of the Class A Certificate Balance, by notice then
given in writing to the Servicer (and to the Trustee if given by
Certificateholders) may terminate all of the rights and obligations (other than
the obligations set forth in Section 8.02) of the Servicer under this Agreement.
On or after the receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Certificates or the Receivables or otherwise, shall, without further action,
pass to and be vested in the Trustee or such successor Servicer as may be
appointed under Section 9.02; and, without limitation, the Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the predecessor
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Receivables and related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer and the Trustee in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including the
transfer to the successor Servicer for administration by it of all cash amounts
that shall at the time be held by the predecessor Servicer for deposit, or shall
thereafter be received with respect to any Receivable. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Receivable Files to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section shall be paid by
the predecessor Servicer upon presentation of reasonable documentation of such
costs and expenses. Upon receipt of notice of the occurrence of an Event of
Default, the Trustee shall give notice thereof to the Rating Agencies.
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SECTION 9.02. Appointment of Successor. (a) Upon the Servicer's receipt of
notice of termination pursuant to Section 9.01 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the later of (x) the date 45 days
from the delivery to the Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the Servicer's termination
hereunder, the Trustee shall appoint a successor Servicer, and the successor
Servicer shall accept its appointment by a written assumption in form acceptable
to the Trustee. In the event that a successor Servicer has not been appointed at
the time when the predecessor Servicer has ceased to act as Servicer in
accordance with this Section, the Trustee without further action shall
automatically be appointed the successor Servicer and shall be entitled to the
Servicing Fee. Notwithstanding the above, the Trustee shall, if it shall be
legally unable so to act, appoint, or petition a court of competent jurisdiction
to appoint, any established institution having a net worth of not less than
$100,000,000 and whose regular business shall include the servicing of (boat)
(recreational vehicle) receivables as the successor to the Servicer under this
Agreement.
(b) Upon appointment, the successor Servicer (including the Trustee acting
as successor Servicer) shall be the successor in all respects to the predecessor
Servicer and shall be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the predecessor
Servicer and shall be entitled to the Servicing Fee and all of the rights
granted to the predecessor Servicer by the terms and provisions of this
Agreement.
(c) The Servicer may not resign unless it is prohibited from serving as
such by law.
SECTION 9.03. Repayment of Advances. If the Servicer shall change, the
predecessor Servicer shall be entitled to receive reimbursement for Outstanding
Advances pursuant to Sections 5.03 and 5.04 with respect to all Advances made by
the predecessor Servicer.
SECTION 9.04. Notification to Certificateholders. Upon any termination of,
or appointment of a successor to, the Servicer pursuant to this Article IX, the
Trustee shall give prompt written notice thereof to Certificateholders and to
the Rating Agencies.
SECTION 9.05. Waiver of Past Defaults. The Holders of Class A Certificates
evidencing not less than a majority of the Class A Certificate Balance may, on
behalf of all Holders of Certificates, waive any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits to or payments from the Trust Accounts in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
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ARTICLE X
The Trustee
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SECTION 10.01. Duties of Trustee. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Agreement and use the same degree of care and skill in their exercise as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs; provided, however, that if the Trustee shall assume
the duties of the Servicer pursuant to Section 9.02, the Trustee in performing
such duties shall use the degree of skill and attention customarily exercised by
a servicer with respect to [(boat) (recreational vehicles)] receivables that it
services for itself or others.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement; provided,
however, that the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Agreement.
(c) The Trustee shall take and maintain custody of the Schedule of
Receivables included as Schedule A to this Agreement and shall retain all
Servicer's Certificates identifying Receivables that become Purchased
Receivables and Liquidated Receivables.
(d) The Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken in good faith in accordance with this Agreement
or at the direction of the Holders of Class A Certificates evidencing not less
than 25% of the Class A Certificate Balance relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee under this Agreement;
(e) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of clause (d) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Trustee Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to this Agreement.
(f) No provision of this Agreement shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 10.02. Certain Matters Affecting Trustee. Except as otherwise
provided in Section 10.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in any such document.
(b) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters or relating to this Agreement or
the Certificates shall be full and complete authorization and protection
from liability in respect of any action taken, suffered or omitted by it
under this Agreement in good faith and in accordance with such advice or
opinion of such counsel.
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement at the request, order or
direction of any of the Certificateholders pursuant to the provisions of
this Agreement, unless such Certificateholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby.
(d) The Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith which it believes to be authorized or within
its rights or powers conferred upon it by this Agreement; provided, that
such conduct does not constitute willful misconduct, bad faith or
negligence on the part of the Trustee.
(e) The Trustee may execute any of the trusts or powers or perform
any duties hereunder either directly or by or through agents or attorneys
or a custodian, and the Trustee shall not be responsible for any misconduct
or negligence of any such agent, attorney or custodian appointed with due
care by it hereunder.
SECTION 10.03. Trustee Not Liable for Certificates or Receivables. The
recitals contained herein and in the Certificates (other than the certificate of
authentication on the Certificates) shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Trustee assumes no
responsibility for the correctness thereof. The Trustee shall make no
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representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the Certificates),
or of any Receivable or related document. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable, or the perfection and priority of any security
interest created by any Receivable in any Financed Asset or the maintenance of
any such perfection and priority, or for or with respect to the efficacy of the
Trust or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation: the
existence, condition and ownership of any Financed Asset; the existence and
enforceability of any insurance thereon; the existence and contents of any
Receivable or any computer or other record thereof; the validity of the
assignment of any Receivable to the Trust or of any intervening assignment; the
completeness of any Receivable; the performance or enforcement of any
Receivable; the compliance by the Depositor or the Servicer with any warranty or
representation made under this Agreement or in any related document and the
accuracy of any such warranty or representation or any action of the Servicer
taken in the name of the Trustee.
SECTION 10.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates and may
deal with the Depositor and the Servicer in banking transactions with the same
rights as it would have if it were not Trustee.
SECTION 10.05. Trustee's Fees and Expenses. The Servicer shall pay to the
Trustee, and the Trustee shall be entitled to receive, reasonable compensation
as shall have been separately agreed upon before the date of this Agreement
between the Depositor and the Trustee (which shall not be limited by any
provision of law regarding the compensation of a trustee of an express trust)
for all services rendered by it in the execution of the trusts created by this
Agreement and in the exercise and performance of any of the Trustee's powers and
duties under this Agreement. The Trustee shall be entitled to be reimbursed by
the Depositor for its reasonable expenses under this Agreement, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Trustee may employ in connection
with the exercise and performance of its rights and duties under this Agreement.
SECTION 10.06. Eligibility Requirements for Trustee. The Trustee shall at
all times be a corporation having an office in the same state as the location of
the Corporate Trust Office; organized and doing business under the laws of such
state or the United States of America; authorized under such laws to exercise
corporate trust powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authorities; and having (or having a parent that has) a rating of at least Baa3
by Moody's and [___] by Standard & Poor's. If such corporation shall publish
reports of condition at least annually pursuant to law or to the requirements of
the aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in
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accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect specified in Section 10.07.
SECTION 10.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Servicer. Upon receiving such notice of resignation, the
Servicer shall promptly appoint a successor Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 10.06 and shall fail to resign after written request
therefor by the Servicer, or if at any time the Trustee shall be legally unable
to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee
or of its property shall be appointed, or any public officer shall take charge
or control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Servicer may remove the
Trustee. If the Servicer shall remove the Trustee under the authority of the
immediately preceding sentence, the Servicer shall promptly appoint a successor
Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the outgoing Trustee so removed and one copy to the successor
Trustee, and shall pay all fees owed to the outgoing Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor Trustee pursuant to
Section 10.08 and payment of all fees and expenses owed to the outgoing Trustee.
The Servicer shall provide notice of such resignation or removal of the Trustee
to each of the Rating Agencies.
SECTION 10.08. Successor Trustee. Any successor Trustee appointed pursuant
to Section 10.07 shall execute, acknowledge and deliver to the Servicer and to
its predecessor Trustee an instrument accepting such appointment under this
Agreement, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as Trustee. The predecessor Trustee shall upon payment of its
fees and expenses deliver to the successor Trustee all documents and statements
and monies held by it under this Agreement; and the Servicer and the predecessor
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor Trustee shall be eligible
pursuant to Section 10.06.
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Upon acceptance of appointment by a successor Trustee pursuant to this
Section, the Servicer shall mail notice thereof to all Certificateholders and to
the Rating Agencies. If the Servicer shall fail to mail such notice within 10
days after acceptance of appointment by the successor Trustee, the successor
Trustee shall cause such notice to be mailed at the expense of the Servicer.
SECTION 10.09. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible pursuant to Section 10.06, without the execution
or filing of any instrument or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding. The Trustee shall mail
notice of any such merger or consolidation to the Rating Agencies
SECTION 10.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Financed Asset may at the time be located, the Servicer and
the Trustee acting jointly shall have the power and shall execute and deliver
all instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust, and to vest in such Person, in such capacity
and for the benefit of the Certificateholders, such title to the Trust or any
part thereof and, subject to the other provisions of this Section, such powers,
duties, obligations, rights, and trusts as the Servicer and the Trustee may
consider necessary or desirable. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor Trustee pursuant to Section 10.06 and no notice of
the appointment of any co-trustee or separate trustee shall be required pursuant
to Section 10.08.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or imposed
upon any such separate trustee or co- trustee shall be conferred upon and
exercised or performed by the Trustee and such separate trustee or co-
trustee jointly (it being understood that such separate trustee or co-
trustee is not authorized to act separately without the Trustee joining in
such act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed, the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to
the Trust or any portion thereof in any such
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jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) The Servicer and the Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Each
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
Any separate trustee or co-trustee may at any time appoint the Trustee its
agent or attorney-in-fact with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement on
its behalf and in its name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor co-trustee or separate trustee.
SECTION 10.11. Representations and Warranties of Trustee. The Trustee shall
make the following representations and warranties on which the Depositor and
Certificateholders shall be deemed to rely:
(i) The Trustee is a banking corporation duly organized, validly
existing and in good standing under the laws of its place of incorporation.
(ii) The Trustee has full corporate power, authority and legal right
to execute and deliver, and to perform its obligations under, this
Agreement, and shall have taken all necessary action to authorize the
execution and delivery of, and the performance of its obligations under,
this Agreement.
(iii) This Agreement shall have been duly executed and delivered by
the Trustee.
SECTION 10.12. No Bankruptcy Petition. The Trustee, by entering into this
Agreement, and each Certificateholder, by accepting a Certificate, hereby
covenant and agree
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that they will not at any time institute against, or join any other Person in
instituting against, the Depositor or the Trust any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other similar proceedings
under any federal or state bankruptcy or similar law in connection with the
Certificates or this Agreement.
SECTION 10.13. Trustee's Certificate. On or as soon as practicable after
each Record Date as of which Receivables shall be assigned to the Depositor or
the Servicer pursuant to Section 10.14, the Trustee shall execute a certificate
(in form and substance reasonably satisfactory to the Depositor or the Servicer,
as the case may be), based on the information contained in the Servicer's
Certificate for the related Collection Period, amounts deposited to the
Collection Account and notices received pursuant to this Agreement, identifying
the Receivables purchased by the Depositor pursuant to Section 3.02 or purchased
by the Servicer pursuant to Section 4.07 or Section 11.02 during such Collection
Period, and shall deliver such certificate, accompanied by a copy of the
Servicer's Certificate for such Collection Period, to the Depositor or the
Servicer, as applicable. Such certificate submitted with respect to such
Distribution Date shall operate, as of such Distribution Date, as an assignment,
without recourse, representation or warranty, to the Depositor or the Servicer,
as applicable, of all the Trustee's right, title and interest in and to any such
purchased Receivable and to the other property conveyed to the Trust with
respect thereto, and all security and documents relating thereto, such
assignment being an assignment outright and not for security.
SECTION 10.14. Trustee's Assignment of Purchased Receivables. With respect
to all Receivables purchased by the Depositor pursuant to Section 3.02 or
purchased by the Servicer pursuant to Section 4.07 or Section 11.02, the Trustee
shall by a certificate (in form and substance reasonably satisfactory to the
Depositor or the Servicer, as the case may be) assign, without recourse,
representation or warranty, to the Depositor or the Servicer, as applicable, all
the Trustee's right, title and interest in and to any such Receivable and the
other property conveyed to the Trust with respect thereto, and all security and
documents relating thereto, such assignment being an assignment outright and not
for security.
ARTICLE XI
Termination
-----------
SECTION 11.01. Termination of the Trust. (a) The respective obligations and
responsibilities of the Depositor, the Servicer and the Trustee created hereby
and the Trust created by this Agreement shall terminate (i) upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to this
Agreement and the disposition of all property held as part of the Trust and (ii)
at the time provided in Section 11.02; provided, however, that in no event shall
the trust created by this Agreement continue beyond the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy, the
late ambassador of the United States to the Court of St. James's, living on the
date of this Agreement. The Servicer shall promptly notify the Trustee of any
prospective termination pursuant to this Section.
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(b) Except as provided in Section 11.01(a), neither the Depositor nor any
Certificateholder or Certificate Owner shall be entitled to revoke or terminate
the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Certificates to the
Trustee for payment of the final distribution and cancellation of the
Certificates, shall be given by the Trustee by letter to Certificateholders
mailed not earlier than the 15th day and not later than the 25th day of the
month next preceding the specified Distribution Date stating (A) the
Distribution Date upon which final payment of the Certificates shall be made
upon presentation and surrender of the Certificates at the office of the Trustee
therein designated, (B) the amount of such final payment and (C) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Certificates at the
office of the Trustee therein specified. The Trustee shall give such notice to
the Certificate Registrar (if other than the Trustee) at the time such notice is
given to Certificateholders. Upon presentation and surrender of the
Certificates, the Trustee shall cause to be distributed to Certificateholders
amounts distributable on such Distribution Date pursuant to Section 5.06.
In the event that all of the Certificateholders shall not surrender their
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after such second notice all of the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Trustee to the Depositor.
SECTION 11.02. Optional Purchase of All Receivables. On the last day of any
Collection Period as of which the Pool Balance shall be less than 10% of the
Original Pool Balance, the Servicer shall have the option to purchase the corpus
of the Trust. To exercise such option, the Servicer shall deposit an amount into
the Collection Account pursuant to Section 5.05 equal to the aggregate Purchase
Amount for the Receivables (including defaulted Receivables), plus the appraised
value of any other property held by the Trust, such value to be determined by an
appraiser mutually agreed upon by the Servicer and the Trustee; provided,
however that such amount so deposited must equal at least the outstanding
Certificate Balance plus accrued and unpaid interest thereon. The Servicer
thereafter shall succeed to all interests in and to the Trust.
ARTICLE XII
Miscellaneous Provisions
------------------------
52
<PAGE>
SECTION 12.01. Amendment. This Agreement may be amended by the Depositor,
the Servicer and the Trustee, without the consent of the Certificateholders, to
cure any ambiguity, to correct or supplement any provisions in this Agreement or
for the purpose of adding any provisions to or changing in any manner or
eliminating any provision in this Agreement or of modifying in any manner the
rights of the Certificateholders; provided, however, that such action shall not,
as evidenced by an Opinion of Counsel delivered to the Trustee, adversely affect
in any material respect the interests of any Certificateholder.
This Agreement may also be amended from time to time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Class A Certificates
and Class B Certificates (which consent shall be conclusive and binding on such
Holders and on all future Holders of such Certificates and of any Certificates
issued upon the transfer therefor or in exchange thereof or in lieu thereof,
whether or not notation of such consent is made upon the Certificates), each
voting as a class, evidencing not less than a majority of the Class A
Certificate Balance and Class B Certificate Balance, respectively, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Certificateholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that shall be
required to be made on any Certificate or (b) reduce the aforesaid percentage of
the Class A Certificate Balance and Class B Certificate Balance required to
consent to any such amendment without the consent of the Holders of all
Certificates then outstanding.
Promptly after the execution of any such amendment or consent, the Trustee
shall furnish written notification of the substance of such amendment or consent
to each Certificateholder and the Rating Agencies.
It shall not be necessary for the consent of Certificateholders pursuant to
this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Certificateholders provided for in this Agreement) and of evidencing the
authorization of any action by Certificateholders shall be subject to such
reasonable requirements as the Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement and
the Opinion of Counsel referred to in Section (12.02(i)(1)). The Trustee may,
but shall not be obligated to, enter into any such amendment that affects the
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 12.02. Protection of Title to Trust. (a) The Depositor shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect
53
<PAGE>
the interest of the Certificateholders and the Trustee in the Receivables and in
the proceeds thereof. The Depositor shall deliver (or cause to be delivered) to
the Trustee file-stamped copies of, or filing receipts for, any document filed
as provided above, as soon as available following such filing.
(b) Neither the Depositor nor the Servicer shall change its name, identity
or corporate structure in any manner that would, could or might make any
financing statement or continuation statement filed in accordance with paragraph
(a) above seriously misleading within the meaning of Section 9-402(7) of the
UCC, unless it shall have given the Trustee at least five days' prior written
notice thereof and shall have promptly filed appropriate amendments to all
previously filed financing statements or continuation statements.
(c) Each of the Depositor and the Servicer shall have an obligation to
give the Trustee at least 60 days' prior written notice of any relocation of its
principal executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement, and shall promptly file any such amendment or new financing
statement. The Servicer shall at all times maintain its principal executive
office and each office from which it shall service Receivables within the United
States of America.
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Distribution Account in respect of such
Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of transfer under this Agreement of the Receivables to the
Trustee, the Servicer's master computer records (including any back-up archives)
that refer to a Receivable shall indicate clearly the interest of the Trust, in
such Receivable, and that such Receivable is owned by the Trustee. Indication of
the Trustee's ownership of a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, such Receivable shall have been
paid in full or shall have become a Purchased Receivable.
(f) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in (boat)
(recreational vehicle) receivables to, any prospective purchaser, lender or
other transferee, the Servicer shall give to such prospective purchaser, lender
or other transferee computer tapes, records or print-outs (including any
restored from back-up archives) that, if they shall refer in any manner
whatsoever to any Receivable, shall indicate clearly that such Receivable has
been transferred to and is owned by the Trustee.
54
<PAGE>
(g) The Servicer shall permit the Trustee and its agents at any time
during normal business hours to inspect, audit and make copies of and abstracts
from the Servicer's records regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Trustee, within five
Business Days, a list of all Receivables (by contract number and name of
Obligor) then held as part of the Trust, together with a reconciliation of such
list to the Schedule of Receivables attached as Schedule A hereto and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
SECTION 12.03. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 12.04. Limitation on Rights of Certificateholders. (a) The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them
(b) No Certificateholder shall have any right to vote (except as provided
in Section 12.01 or 9.05) or in any manner otherwise control the operation and
management of the Trust or the obligations of the parties to this Agreement; nor
shall any provision in this Agreement or contained in the Certificates be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken pursuant to any
provision of this Agreement.
(c) No Certificateholder shall have any right to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless: (i) such Holder previously shall have given to the Trustee
written notice of a continuing Event of Default; (ii) the Holders of
Certificates evidencing not less than 25% of the Certificate Balance shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee under this Agreement and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby; (iii) the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity shall have neglected or refused to institute any such action, suit or
proceeding; and (iv) during such 60-day period no request or waiver inconsistent
with such written request shall have been given to the Trustee by Holders
representing a majority of the Certificate Balance. It is understood and
intended that no one or more Holders of Certificates shall have any right in any
manner whatever by virtue of, or by availing of, any provisions of this
Agreement to affect, disturb or prejudice the rights of any other Holders of
Certificates, or to obtain or seek to obtain
55
<PAGE>
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner provided in this Agreement.
SECTION 12.05. Governing Law. This Agreement SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER This Agreement SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 12.06. Notices. All demands, notices and communications upon or to
the Depositor, the Servicer, the Trustee or the Rating Agencies under this
Agreement shall be in writing, personally delivered or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the Depositor, Deutsche Recreational Asset Funding
Corporation, 655 Maryville Centre Drive, St. Louis, Missouri, 63141, Attention:
President, ((314) - ); (b) in the case of the Servicer, to Deutsche Financial
Services Corporation, 655 Maryville Centre Drive, St. Louis, Missouri, 63141,
Attention: _______________ ((314 ) - ); (c) in the case of the Trustee, at the
Corporate Trust Office; (d) in the case of Moody's, to Moody's Investors
Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New York
10007; and (e) in the case of Standard & Poor's, to Standard & Poor's Ratings
Services, 25 Broadway -- 15th Floor, New York, New York 10004, Attention: Asset
Backed Surveillance Department. Any notice required or permitted to be mailed to
a Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder shall
receive such notice.
SECTION 12.07. Severability of Provisions. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 12.08. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.04 and 8.03 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Depositor or the Servicer without the
prior written consent of the Trustee and the Holders of Certificates evidencing
not less than 66% of the Certificate Balance.
SECTION 12.09. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever.
SECTION 12.10. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Depositor, the Servicer, the Trustee
and the Certificateholders, and
56
<PAGE>
nothing in this Agreement, whether express or implied, shall be construed to
give any other Person any legal or equitable right, remedy or claim in respect
of the Trust or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 12.11. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 12.12. Nonpetition Covenants. (a) Notwithstanding any prior
termination of this Agreement, the Servicer and the Depositor shall not, prior
to the date that is one year and one day after the termination of this Agreement
with respect to the Trust, acquiesce to, petition or otherwise invoke or cause
the Trust to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Trust under any federal
or state bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator, or other similar
official of the Trust or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Trust.
(b) Notwithstanding any prior termination of this Agreement, the Servicer
shall not, prior to the date that is one year and one day after the termination
of this Agreement with respect to the Depositor, acquiesce to, petition or
otherwise invoke or cause the Depositor to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Depositor under any federal or state bankruptcy, insolvency or similar law,
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator,
or other similar official of the Depositor or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Depositor.
* * *
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
(_________________) TRUST 199_-_
By:__________________________________
Name:________________________________
Title:_______________________________
DEUTSCHE RECREATIONAL ASSET
FUNDING CORPORATION,
as Depositor
By:__________________________________
Name:________________________________
Title:_______________________________
DEUTSCHE FINANCIAL SERVICES
CORPORATION, as Servicer
By:__________________________________
Name:________________________________
Title:_______________________________
58
<PAGE>
EXHIBIT A
FORM OF CLASS A CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CLASS A CERTIFICATE
WILL BE MADE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL AMOUNT OF THIS CLASS B CERTIFICATE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
NUMBER $
R- CUSIP NO.
(______________) TRUST 199_-_
____% ASSET BACKED CERTIFICATE, CLASS A evidencing a fractional undivided
interest in the Trust, as defined below, the property of which includes a pool
of (boat) (recreational vehicle) retail installment sale contracts or
installment loans secured by new and used (boats, boat motors and accompanying
trailers) (recreational vehicles).
(This Class A Certificate does not represent an interest in or obligation
of Deutsche Recreational Asset Funding Corporation, except to the extent
described below.)
THIS CERTIFIES THAT _______________________________________ is the
registered owner of ______________________________________ DOLLARS
nonassessable, fully-paid, fractional undivided interest in
(___________________) Trust 199_-_ (the "Trust") formed pursuant to the Pooling
and Servicing Agreement (the "Agreement") dated as of _________________, among
Deutsche Recreational Asset Funding Corporation, a Nevada corporation, as
depositor (the "Depositor"), Deutsche Financial Services Corporation, as
servicer (the "Servicer") and ______________________, a
________________________________ banking association, as trustee (the
"Trustee"), a summary of certain of the pertinent provisions
A-1
<PAGE>
of which is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the
Agreement.
This Certificate is one of a duly authorized series of Certificates,
designated as the _____% Asset Backed Certificates, Class A (herein called the
"Class A Certificates"), all issued under the Agreement, to which Agreement
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Depositor, the Servicer, the Trustee and Holders
of the Certificates. The Class A Certificates are subject to all terms of the
Agreement. In the event of any conflict or inconsistency between this
Certificate and the Agreements, the Agreement shall control.
The property of the Trust includes a pool of retail installment sale
contracts and installment loans for new and used (boats, boat motors and
accompanying trailers) (recreational vehicles) (the "Receivables"), all monies
received on or after the related Cutoff Date security interests in the assets
financed thereby, certain bank accounts and the proceeds thereof, proceeds from
claims on certain insurance policies and all proceeds of the foregoing.
It is the intent of the Depositor, the Servicer, the Trustee and the
Certificateholders that, for purposes of federal income, state and local income
and single business tax and any other income taxes, the Trust will be treated as
a grantor trust and the Certificates will be treated as interests in a grantor
trust. The Depositor, the Servicer, the Trustee and the Certificateholders, by
acceptance of a Certificate or of a beneficial interest in a Certificate, as the
case may be, agree to treat, and to take no action inconsistent with the
treatment of, the Certificates for such tax purposes as interests in a grantor
trust.
Reference is hereby made to the further provisions of this Class A
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Trustee, by manual signature, this Class A
Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-2
<PAGE>
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust and not in its
individual capacity, has caused this Class A Certificate to be duly executed.
Date: (_________________) TRUST 199 __-__
By:__________________________________________,
not its individual capacity but solely as
Trustee
By:___________________________________________
Authorized Signatory
A-3
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the within-mentioned
Agreement.
Date: ____________________________________
as Trustee
By__________________________________
Authorized Signatory
A-4
<PAGE>
(REVERSE OF CLASS A CERTIFICATE)
The Class A Certificates do not represent an obligation of, or an interest
in, the Depositor, the Servicer, the Trustee or any affiliates of any of them,
and no recourse may be had against such parties or their assets except as
expressly set forth or contemplated herein or in the Agreement. In addition,
this Class A Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Receivables (and certain other amounts), all as
more specifically set forth herein and in the Agreement. A copy of the Agreement
may be examined by any Certificateholder upon written request during normal
business hours at the principal office of the Depositor and at such other
places, if any, designated by the Depositor.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer and the Trustee and the rights of the Certificateholders
at any time by the Depositor, the Servicer and the Trustee with the consent of
the Holders of Certificates evidencing not less than a majority of the
Certificate Balance. Any such consent by the Holder of this Class A Certificate
shall be conclusive and binding on such Holder and on all future Holders of this
Certificate and of any Class A Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such consent is
made upon this Class A Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations therein set
forth, the transfer of this Class A Certificate is registerable in the
Certificate Register upon surrender of this Class A Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Trustee in the Borough of Manhattan, The City of New York, accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Class A
Certificates of authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Agreement is
________________________________.
The Trustee, the Certificate Registrar and any agent of the Trustee or the
Certificate Registrar may treat the Person in whose name this Class A
Certificate is registered as the owner hereof for all purposes, and none of the
Trustee, the Certificate Registrar or any such agent shall be affected by any
notice to the contrary.
A-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Class A Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing _________________________ to transfer said Class A
Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated: _________________________________________
Signature Guaranteed:
_____________________________________/*//
A-6
<PAGE>
EXHIBIT B
FORM OF CLASS B CERTIFICATE
THIS CLASS B CERTIFICATE IS SUBORDINATE TO THE PRIOR RIGHTS OF THE CLASS A
CERTIFICATES IN ACCORDANCE WITH THE POOLING AND SERVICING AGREEMENT REFERRED TO
BELOW.
THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT
IS AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1074, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1086, AS AMENDED (THE "CODE"), OR
ANY GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY
FEDERAL, STATE OR LOCAL LAW THAT IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN") OR ANY PERSON
INVESTING THE ASSETS OF A PLAN EXCEPT AS PROVIDED IN THE AGREEMENT REFERRED TO
HEREIN.
DISTRIBUTIONS IN REDUCTION OF THE PRINCIPAL BALANCE OF THIS CLASS B
CERTIFICATE WILL BE MADE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS B CERTIFICATE AT ANY TIME MAY BE LESS
THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
NUMBER $
R- CUSIP NO.
(______________) TRUST 199_-_
____% ASSET BACKED CERTIFICATE, CLASS B evidencing a fractional
undivided interest in the Trust, as defined below, the property of which
includes a pool of (boat) (recreational vehicle) retail installment sale
contracts secured by new and used (boats, boat motors and accompanying trailers)
(recreational vehicles).
(This Class B Certificate does not represent an interest in or
obligation of Deutsche Recreational Asset Funding Corporation, except to the
extent described below.)
THIS CERTIFIES THAT ____________________________________ is the
registered owner of ____________________________ DOLLARS nonassessable, fully-
paid, fractional undivided interest in (___________) Trust 199_-_ (the "Trust")
formed pursuant to a Pooling and Servicing Agreement (the "Agreement") dated as
of _________________, among Deutsche Recreational Asset Funding Corporation, a
Nevada corporation, as depositor (the "Depositor"), Deutsche Financial Services
Corporation, as servicer (the "Servicer") and _____________, a
B-1
<PAGE>
_______________ banking association, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Agreement.
This Certificate is one of a duly authorized series of Certificates,
designated as the ____% Asset Backed Certificates, Class B (herein called the
"Class B Certificates") all, issued under the Agreement, to which Agreement
reference is hereby made for a statement of the respective rights and
obligations thereunder of the Depositor, the Servicer, the Trustee and holders
of the Certificates. The Class B Certificates are subject to all terms of the
Agreement. In the event of any conflict or inconsistency between this
Certificate and the Agreement, the Agreement shall control.
The property of the Trust includes a pool of (boat) (recreational
vehicle) retail installment sale contracts for new and used (automobiles and
light duty trucks) (boats, boat motors and accompanying trailers) (the
"Receivables"), all monies received on or after __________________, security
interests in the vehicles financed thereby, certain bank accounts and the
proceeds thereof, proceeds from claims on certain insurance policies and all
proceeds of the foregoing.
It is the intent of the Depositor, the Servicer, the Trustee and the
Certificateholders that, for purposes of federal income, state and local income
and single business tax and any other income taxes, the Trust will be treated as
a grantor trust and the Certificates will be treated as interests in a grantor
trust. The Depositor, the Servicer, the Trustee and the Certificateholders, by
acceptance of a Certificate or of a beneficial interest in a Certificate, as the
case may be, agree to treat, and to take no action inconsistent with the
treatment of, the Certificates for such tax purposes as interests in a grantor
trust.
Reference is hereby made to the further provisions of this Class B
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Class B Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
B-2
<PAGE>
IN WITNESS WHEREOF, the Trustee, on behalf of the Trust and not in its
individual capacity, has caused this Class B Certificate to be duly executed.
(__________________) TRUST 199_-_
By: ____________________________________________ ,
not in its individual capacity but solely as
Trustee
By: ______________________________________________
Authorized Signatory
B-3
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates referred to in the within-mentioned
Agreement.
Date: __________________________________________________
as Trustee
By _______________________________________________
Authorized Signatory
B-4
<PAGE>
(REVERSE OF CLASS B CERTIFICATE)
The Class B Certificates do not represent an obligation of, or an interest
in, the Depositor, the Servicer, the Trustee or any affiliates of any of them,
and no recourse may be had against such parties or their assets except as
expressly set forth or contemplated herein or in the Agreement. In addition,
this Class B Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Receivables (and certain other amounts), all as
more specifically set forth herein and in the Agreement. A copy of the Agreement
may be examined by any Certificateholder upon written request during normal
business hours at the principal office of the Depositor and at such other
places, if any, designated by the Depositor.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer and the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates evidencing not less than a
majority of the Certificate Balance. Any such consent by the Holder of this
Class B Certificate shall be conclusive and binding on such Holder and on all
future Holders of this Class B Certificate and of any Class B Certificate issued
upon the transfer hereof or in exchange herefor or in lieu hereof, whether or
not notation of such consent is made upon this Class B Certificate. The
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the Holders of any of the Certificates.
The Trustee, the Certificate Registrar and any agent of the Trustee or the
Certificate Registrar may treat the Person in whose name this Class B
Certificate is registered as the owner hereof for all purposes, and none of the
Trustee, the Certificate Registrar or any such agent shall be affected by any
notice to the contrary.
B-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Class A Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing _________________________ to transfer said Class A
Certificate on the books of the Certificate Registrar, with full power of
substitution in the premises.
Dated:
_______________________________________
Signature Guaranteed:
_______________________________________/*//
B-6
<PAGE>
EXHIBIT C
FORM OF DEPOSITORY AGREEMENT
Letter of Representations
(To be Completed by Issuer and Trustee)
_____________________________
(Name of Issuer)
_____________________________
(Name of Trustee)
_____________________________
(Date)
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: ___________________________________
___________________________________
___________________________________
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trustee will act as
trustee with respect to the Securities pursuant to a pooling and servicing
agreement dated as of __, 199_ (the "Document"). ___________________________
(the "Underwriter") is distributing the Securities through The Depository Trust
Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trustee make the following representations to DTC:
I. Prior to closing on the Securities on ________________, 199_, there
shall be deposited with DTC one Security certificate registered in the name of
DTC's nominee, Cede & Co., for each stated maturity of the Securities in the
face amounts set forth on Schedule A hereto, the total of which represents 100%
of the principal amount of such Securities. If, however, the aggregate principal
amount of any maturity exceeds $150 million, one certificate will be issued
C-1
<PAGE>
with respect to each $150 million of principal amount and an additional
certificate will be issued with respect to any remaining principal amount. Each
$150 million certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
II. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer or Trustee shall establish a record date for such
purposes (with no provision for revocation of consents or votes by subsequent
holders) and shall, to the extent possible, send notice of such record date to
DTC not less than 15 calendar days in advance of such record date. Notices to
DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization
Department at (212) 709-6896 or (212) 709-6897, and receipt of such notices
shall be confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to
this Paragraph by mail or by any other means shall be sent to DTC's
Reorganization Department as indicated in Paragraph 4.
III. In the event of a full or partial redemption, Issuer or Trustee shall
send a notice to DTC specifying: (a) the amount of the redemption or refunding;
(b) in the case of a refunding, the maturity date(s) established under the
refunding; and (c) the date such notice is to be mailed to Security holders or
published (the "Publication Date"). Such notice shall be sent to DTC by a secure
means (e.g., legible telecopy, registered or certified mail, overnight delivery)
in a timely manner designed to assure that such notice is in DTC's possession no
later than the close of business on the business day before or, if possible, two
business days before the Publication Date. Issuer or Trustee shall forward such
notice either in a separate secure transmission for each CUSIP number or in a
secure transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 30 days nor more than 60 days prior to the redemption date or, in the case
of an advance refunding, the date that the proceeds are deposited in escrow.
Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's
Call Notification Department at (516) 227-4039 or (516) 227-4190. If the party
sending the notice does not receive a telecopy receipt from DTC confirming that
the notice has been received, such party shall telephone (516) 227-4070. Notices
to DTC pursuant to this Paragraph by mail or by any other means shall be sent
to:
C-2
<PAGE>
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
IV. In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions (including mandatory tenders,
exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
V. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
VI. Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized denomination
if less than $1,000 face value) payable on each payment date allocated as to the
interest and principal portions thereof preferably 5, but not less than 2,
business days prior to such payment date. Such notices, which shall also contain
the current pool factor and Trustee contact's name and telephone number, shall
be sent by telecopy to DTC's Dividend Department at (212) 709-1723, or if by
mail or by any other means to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
VII. (NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT THE
OTHER:) (The interest accrual period is record date to record date.) (The
interest accrual period is payment date to payment date.)
VIII. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with
C-3
<PAGE>
existing arrangements between Issuer or Trustee and DTC). Such payments shall be
made payable to the order of Cede & Co. Absent any other existing arrangements,
such payments shall be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
IX (NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT THE
OTHER:)
Securities Eligible for DTC's Same-Day Funds Settlement ("SDFS") System.
Other principal payments (redemption payments) shall be made in same-day funds
by Trustee in the manner set forth in the SDFS Paying Agent Operating
Procedures, a copy of which previously has been furnished to Trustee.
Securities Eligible for DTC's Next-Day Funds Settlement ("NDFS") System.
Other principal payments (redemption payments) shall be made in next-day funds
by Trustee to Cede & Co., as nominee of DTC, or its registered assigns, on each
payment date. Such payments shall be made payable to the order of Cede & Co.,
and shall be addressed as follows:
NDFS Redemptions Manager
Reorganization/Redemptions Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
X. DTC may direct Issuer or Trustee to use any other number or address as
the number or address to which notices or payments of interest or principal may
be sent.
XI. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Trustee to issue
and authenticate a new Security certificate; or (b) may make an appropriate
notation on the Security certificate indicating the date and amount of such
reduction in principal except in the case of final maturity, in which case the
certificate will be presented to Issuer or Trustee prior to payment, if
required.
XII. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trustee
shall notify DTC of the availability of
C-4
<PAGE>
certificates. In such event, Issuer or Trustee shall issue, transfer, and
exchange certificates in appropriate amounts, as required by DTC and others.
XIII. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trustee (at which time DTC will confirm with Issuer or Trustee the aggregate
principal amount of Securities outstanding). Under such circumstances, at DTC's
request Issuer and Trustee shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Securities
to any DTC Participant having Securities credited to its DTC accounts.
XIV. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
XV. Nothing herein shall be deemed to require Trustee to advance funds
on behalf of Issuer.
Very truly yours,
(Authorized Officer's Signature)
Notes:
A. If there is a Trustee (as defined in this Letter of Representations),
Trustee as well as Issuer must sign this Letter. If there is no Trustee, in
signing this Letter Issuer itself undertakes to perform all of the
obligations set forth herein.
________________________________________
(Issuer)
By:______________________________________
(Authorized Officer's Signature)
B. Schedule B contains statements that DTC believes accurately describe
DTC, the method of effecting book-entry transfers of securities distributed
through DTC, and certain related matters.
________________________________________
(Trustee)
C-5
<PAGE>
By:_____________________________________
(Authorized Officer's Signature)
________________________________________
(Administrator)
By:_____________________________________
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:_____________________________________
cc: Underwriter
Underwriter's Counsel
C-6
<PAGE>
SCHEDULE A
(Describe Issue)
CUSIP Principal Amount Maturity Date Interest Rate
- ----- ---------------- ------------- -------------
C-7
<PAGE>
EXHIBIT D
FORM OF SERVICER'S CERTIFICATE
(___________________) TRUST 199__-__
___% Asset Backed Certificates, Class A
___% Asset Backed Certificates, Class B
Distribution Date:
Collection Period:
Under the Pooling and Servicing Agreement dated as of _____________ by and
among Deutsche Recreational Asset Funding Corporation, as Depositor, Deutsche
Financial Services Corporation, as Servicer, and __________________________, as
Trustee, the Servicer is required to prepare certain information each month
regarding current distributions to Certificateholders and the performance of the
Trust during the previous month. The information that is required to be prepared
with respect to the Distribution Date and Collection Period listed above is set
forth below. Certain of the information is presented on the basis of an original
principal amount of $1,000 per Class A Certificate or Class B Certificate, as
appropriate, and certain other information is presented based upon the aggregate
amounts for the Trust as a whole.
A. Information Regarding the Current Monthly Distribution.
<TABLE>
<CAPTION>
1. Class A Certificates.
<S> <C> <C>
(a) The aggregate amount of the distribution to Class A
Certificateholders........................................... $_________
(b) The amount of the distribution set forth in paragraph A.1.(a)
above in respect of interest................................. $_________
(c) The amount of the distribution set forth in paragraph A.1.(a)
above in respect of principal................................ $_________
(d) The amount of the distribution set forth in paragraph A.1.(a)
above per $1,000 interest.................................... $_________
(e) The amount of the distribution set forth in paragraph A.1.(b)
above per $1,000 interest.................................... $_________
(f) The amount of the distribution set forth in paragraph A.1.(c)
above per $1,000 interest.................................... $_________
</TABLE>
D-1
<PAGE>
2. Class B Certificates.
(a) The aggregate amount of the distribution to Class B
Certificateholders..................................... $_________
(b) The amount of the distribution set forth in paragraph
A.2(a) above in respect of interest.................... $_________
(c) The amount of the distribution set forth in paragraph
A.2(a) above in respect of principal................... $_________
(d) The amount of the distribution set forth in paragraph
A.2(a) above per $1,000 interest....................... $_________
(e) The amount of the distribution set forth in paragraph
A.2(b) above per $1,000 interest....................... $_________
(f) The amount of the distribution set forth in paragraph
A.2(c) above per $1,000 interest....................... $_________
B. Information Regarding the Performance of the Trust.
1. Pool Balance and Certificate Balances.
(a) The Pool Balance close of business on the last day of
the preceding Collection Period........................ $_________
(b) The Class A Certificate Balance as of the close of
business on the last day of the preceding Collection
Period, after giving effect to payments allocated to
principal set forth in Paragraph A.1(c) above.......... $_________
(c) The Class B Certificate Balance as of the close of
business of the last day of the preceding Collection
Period, after giving effect to payments allocated to
principal set forth in paragraph A.2(c) above.......... $_________
(d) The Class A Pool Factor and the Class B Pool Factor as
of the close of business on the last day of the
preceding Collection Period............................ $_________
D-2
<PAGE>
2. Servicing Fee and Advances.
(a) The aggregate amount of the Servicing Fee paid to the
Servicer with respect to the preceding Collection
Period................................................. $_________
(b) The amount of such Servicing Fee per $1,000
interest............................................... $_________
(c) The amount of any unpaid Servicing Fee................. $_________
(d) The change in the amount of any unpaid Servicing Fee
from the previous Distribution Date.................... $_________
(e) Aggregate Advances on such Distribution Date........... $_________
3. Payment Shortfalls.
(a) The amount of the Class A Interest Carryover Shortfall
after giving effect to the payments set forth in
paragraph A.1(b) above................................. $_________
(b) The amount of the Class A Principal Carryover Shortfall
after giving effect to the payment set forth in
paragraph A.1(c) above................................. $_________
(c) The amount of the Class B Interest Carryover Shortfall
after giving effect to the payments set forth in
paragraph A.2(b) above................................. $_________
(d) The amount of the Class B Principal Carryover Shortfall
after giving effect to the payments set forth in
paragraph A.2(c) above................................. $_________
(e) The amount otherwise distributable to Class B
Certificateholders that is distributed to Class A
Certificateholders..................................... $_________
4. Reserve Account.
(a) The Reserve Account balance after giving effect to
distributions made on such Distribution Date........... $_________
(b) The change in the Reserve Account on such
D-3
<PAGE>
Distribution Date ................................. $_________
D-4
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
<PAGE>
SCHEDULE B
LOCATION OF RECEIVABLE FILES
<PAGE>
DRAFT 9/2/98
------------
INDENTURE
between
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199__-1,
as Issuer
and
THE CHASE MANHATTAN BANK
as Indenture Trustee
Dated as of [ ], 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01 Definitions............................................ 2
SECTION 1.02 Incorporation by Reference of Trust Indenture Act...... 2
SECTION 1.03 Rules of Construction.................................. 2
ARTICLE II
The Notes
SECTION 2.01 Form................................................... 3
SECTION 2.02 Execution, Authentication and Delivery................. 3
SECTION 2.03 Temporary Notes........................................ 4
SECTION 2.04 Registration; Registration of Transfer and Exchange.... 4
SECTION 2.05 Mutilated, Destroyed, Lost or Stolen Notes............. 6
SECTION 2.06 Persons Deemed Owner................................... 6
SECTION 2.07 Payment of Principal and Interest; Defaulted Interest.. 7
SECTION 2.08 Cancellation........................................... 8
SECTION 2.09 Reserved............................................... 8
SECTION 2.10 Book-Entry Notes....................................... 8
SECTION 2.11 Notices to Clearing Agency............................. 9
SECTION 2.12 Definitive Notes....................................... 9
SECTION 2.13 Tax Treatment.......................................... 10
ARTICLE III
Covenants
SECTION 3.01 Payment of Principal and Interest..................... 10
SECTION 3.02 Maintenance of Office or Agency....................... 10
SECTION 3.03 Money for Payments To Be Held in Trust................ 11
SECTION 3.04 Existence............................................. 12
SECTION 3.05 Protection of Trust Estate............................ 12
SECTION 3.06 Opinions as to Trust Estate........................... 13
SECTION 3.07 Performance of Obligations; Servicing of Receivables.. 13
SECTION 3.08 Negative Covenants.................................... 15
SECTION 3.09 Annual Statement as to Compliance..................... 16
SECTION 3.10 Issuer May Consolidate, etc., Only on Certain Terms... 16
SECTION 3.11 Successor or Transferee............................... 18
SECTION 3.12 No Other Business..................................... 18
SECTION 3.13 No Borrowing.......................................... 18
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
SECTION 3.14 Servicer's Obligations.................................... 18
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities......... 18
SECTION 3.16 Capital Expenditures...................................... 19
SECTION 3.17 (Reserved)................................................ 19
SECTION 3.18 Restricted Payments....................................... 19
SECTION 3.19 Notice of Events of Default............................... 19
SECTION 3.20 Further Instruments and Acts............................... 19
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01 Satisfaction and Discharge of Indenture................... 19
SECTION 4.02 Application of Trust Money................................ 21
SECTION 4.03 Repayment of Moneys Held by Paying Agent.................. 21
ARTICLE V
Remedies
SECTION 5.01 Events of Default......................................... 21
SECTION 5.02 Acceleration of Maturity; Rescission and Annulment........ 22
SECTION 5.03 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.......................................... 23
SECTION 5.04 Remedies; Priorities...................................... 25
SECTION 5.05 Optional Preservation of the Receivables.................. 26
SECTION 5.06 Limitation of Suits....................................... 27
SECTION 5.07 Unconditional Rights of Noteholders To Receive Principal
and Interest.............................................. 27
SECTION 5.08 Restoration of Rights and Remedies........................ 28
SECTION 5.09 Rights and Remedies Cumulative............................ 28
SECTION 5.10 Delay or Omission Not a Waiver............................ 28
SECTION 5.11 Control by Noteholders.................................... 28
SECTION 5.12 Waiver of Past Defaults................................... 29
SECTION 5.13 Undertaking for Costs..................................... 29
SECTION 5.14 Waiver of Stay or Extension Laws.......................... 29
SECTION 5.15 Action on Notes........................................... 30
SECTION 5.16 Performance and Enforcement of Certain Obligations........ 30
ARTICLE VI
The Indenture Trustee
SECTION 6.01 Duties of Indenture Trustee............................... 30
SECTION 6.02 Rights of Indenture Trustee............................... 32
SECTION 6.03 Individual Rights of Indenture Trustee.................... 33
SECTION 6.04 Indenture Trustee's Disclaimer............................ 33
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 6.05 Notice of Defaults........................................ 33
SECTION 6.06 Reports by Indenture Trustee to Holders................... 33
SECTION 6.07 Compensation and Indemnity................................ 33
SECTION 6.08 Replacement of Indenture Trustee.......................... 34
SECTION 6.09 Successor Indenture Trustee by Merger..................... 35
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate
Indenture Trustee......................................... 35
SECTION 6.11 Eligibility; Disqualification............................. 37
SECTION 6.12 Preferential Collection of Claims Against Issuer.......... 37
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01 Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders............................................... 37
SECTION 7.02 Preservation of Information;
Communications to Noteholders............................. 37
SECTION 7.03 Reports by Issuer......................................... 38
SECTION 7.04 Reports by Indenture Trustee.............................. 38
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01 Collection of Money....................................... 38
SECTION 8.02 Trust Accounts............................................ 39
SECTION 8.03 General Provisions Regarding Accounts..................... 41
SECTION 8.04 Release of Trust Estate................................... 42
SECTION 8.05 Opinion of Counsel........................................ 43
ARTICLE IX
Supplemental Indentures
SECTION 9.01 Supplemental Indentures Without Consent of Noteholders.... 43
SECTION 9.02 Supplemental Indentures with Consent of Noteholders....... 44
SECTION 9.03 Execution of Supplemental Indentures...................... 46
SECTION 9.04 Effect of Supplemental Indenture.......................... 46
SECTION 9.05 Conformity with Trust Indenture Act....................... 46
SECTION 9.06 Reference in Notes to Supplemental Indentures............. 46
ARTICLE X
Redemption of Notes
SECTION 10.01 Redemption................................................ 47
SECTION 10.02 Form of Redemption Notice................................. 47
SECTION 10.03 Notes Payable on Redemption Date.......................... 48
</TABLE>
-iii-
<PAGE>
ARTICLE XI
Miscellaneous
SCHEDULE A - Schedule of Receivables
EXHIBIT A - Form of Class A Note (Section 2.01)
EXHIBIT B - Form of Note Depository Agreement
-iv-
<PAGE>
CROSS REFERENCE TABLE/1/
<TABLE>
<CAPTION>
TIA Indenture
Section Section
<S> <C>
310 (a) (1).................................................... 6.11
(a) (2).................................................... 6.11
(a) (3).................................................... 6.10
(a) (4)................................................... N.A/2/
(a) (5).................................................... 6.11
(b) ............................................... 6.08; 6.11
(c)......................................................... N.A.
311 (a)......................................................... 6.12
(b)......................................................... 6.12
(c)......................................................... N.A.
312 (a)......................................................... 7.01
(b)......................................................... 7.02
(c)......................................................... 7.02
(d)......................................................... 7.04
313 (a)......................................................... 7.04
(b) (1)..................................................... 7.04
(b) (2)................................................ 7.04; 11.5
(c)......................................................... 7.04
(d)......................................................... 7.03
314 (a)......................................................... 11.01
(b).......... .............................................. 11.15
(c) (1)..................................................... 11.01
(c) (2)..................................................... 11.01
(c) (3)..................................................... 11.01
(d)......................................................... 11.01
(e)......................................................... 11.01
(f)......................................................... 11.01
315 (a)......................................................... 6.01
(b)....................................................6.05; 11.05
(c)......................................................... 6.01
(d)......................................................... 6.01
(e)......................................................... 5.13
316 (a) (last sentence)......................................... 2.07
(a) (1) (A)................................................. 5.11
</TABLE>
___________________
/1/ Note: This Cross Reference Table shall not, for any purpose, be deemed
to be part of this Indenture.
/2/ N.A means Not Applicable.
-v-
<PAGE>
<TABLE>
<S> <C>
(a) (1) (B)................................................. 5.12
(a) (2)..................................................... N.A.
(b)......................................................... 5.07
(c)......................................................... N.A.
317 (a) (1)..................................................... 5.03
(a) (2)..................................................... 5.03
(b)......................................................... 3.03
318 (a)......................................................... 11.07
</TABLE>
-v-
<PAGE>
INDENTURE dated as of [ ], 199__, between DISTRIBUTION FINANCIAL SERCISES
[RV/BOAT] TRUST 199__-1, a New York trust (the "Issuer"), and The Chase
Manhattan Bank, a New York banking corporation, as trustee and not in its
individual capacity (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's Class A-1 Asset Backed
Notes, Class A-2 Asset Backed Notes, Class A-3 Asset Backed Notes, Class A-4
Asset Backed Notes, Class A-5 Asset Backed Notes, Class A-6 Asset Backed Notes,
Class A-7 Asset Backed Notes, Class A-8 Asset Backed Notes, Class A-9 Asset
Backed Notes and Class A-10 Asset Backed Notes (together, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as
Indenture Trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in, to and under: (a) the Receivables and
all moneys received thereon on and after the Closing Date; (b) the security
interests in the Financed Vehicles created pursuant to the Receivables and any
other interest of the Issuer in such Financed Vehicles; (c) any proceeds with
respect to the Receivables under any Insurance Policies; (d) any proceeds from
recourse to Dealers; (e) any Financed Vehicle acquired in repossession; (f) the
contents of the Receivable Files and all rights, benefits and proceeds arising
therefrom or in connection therewith; (g) all funds on deposit from time to time
in Trust Accounts, and all investments and proceeds thereof (including all
income thereon except for Investment Earnings in the Collection Account); (h)
the Transfer and Servicing Agreement; and (i) all present and future claims,
demands, causes of action and choses in action in respect of any or all of the
foregoing and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing, including all proceeds of
the conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction (subject to Section
8.02), and to secure compliance with the provisions of this Indenture, all as
provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders of the
Notes, acknowledges such Grant and accepts the trusts under this Indenture in
accordance with the provisions of this Indenture.
<PAGE>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.01 Definitions. Except as otherwise specified herein or as the
-----------
context may otherwise require, capitalized terms used herein have the respective
meanings set forth in Appendix A to the Transfer and Servicing Agreement dated
as of [ ], 1998, among Distribution Financial Services RV Trust 1998-1 (the
"Issuer"), Distribution Recreational Asset Funding Corporation (the
"Depositor"), Ganis Credit Corporation, and Deutsche Financial Services
Corporation, individually and as the Servicer.
SECTION 1.02 Incorporation by Reference of Trust Indenture Act. Whenever
-------------------------------------------------
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any other obligor
on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.03 Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iii) "or" is not exclusive;
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<PAGE>
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
amended and restated, modified or supplemented and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
ARTICLE II
THE NOTES
---------
SECTION 2.01 Form. The Notes, together with the Indenture Trustee's
----
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note.
The definitive Notes shall be typewritten, printed, lithographed or engraved
or produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit A are part of the terms of this Indenture.
SECTION 2.02 Execution, Authentication and Delivery. The Notes shall be
--------------------------------------
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Order authenticate and deliver Class
A-1 Notes for original issue in an aggregate principal amount of $[ ], and Class
A-2 Notes for original issue in an aggregate principal amount of $[ ], Class A-3
Notes for original issue in an aggregate
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<PAGE>
Principle amount of $[ ], Class A-4 Notes for original issue in an aggregate
princpal amount of $[ ], Class A-5 Notes for oringinal issue in an aggregate
principal amount of $[ ], Class A-6 Notes for original issue in an aggrgate
principal amount of $[ ], Class A-7 Notes for original issue in an aggregate
amount of $[ ], Class A-8 Notes for original issue in an aggregate amount of
$[ ], Class A-9 Notes for original issue in an aggregate amount of $[ ], Class
A-10 Notes for original issue in an aggregate amount of $[ ]. The Aggregate
principal amount of Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes, Class A-6 Notes, Class A-7 Notes, Class A-8 Notes, Class
A-9 Notes, Class A-10 Notes outstanding at any time may not exceed such
respective amounts except as provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $1.00 and in
integral multiples thereof.
No Note shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose, unless there appears on such Note a certificate of
authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized officers, and
such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
SECTION 2.03 Temporary Notes. Pending the preparation of definitive
---------------
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes that are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer shall cause definitive Notes to be
prepared without unreasonable delay. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute, and
the Indenture Trustee shall authenticate and deliver in exchange therefor, a
like principal amount of definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
SECTION 2.04 Registration; Registration of Transfer and Exchange. The
---------------------------------------------------
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee initially shall be the "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
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<PAGE>
If a Person other than the Indenture Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Indenture Trustee prompt written notice
of the appointment of such Note Registrar and of the location, and any change in
the location, of the Note Register, and the Indenture Trustee shall have the
right to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Executive Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of the
same Class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Issuer shall
execute, and the Indenture Trustee shall authenticate and the Noteholder shall
obtain from the Indenture Trustee, the Notes which the Noteholder making the
exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or exchange
shall be duly endorsed by, or be accompanied by a written instrument of transfer
in form satisfactory to the Indenture Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements may include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of transfer
or exchange of Notes, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Notes, other than exchanges
pursuant to Section 2.03 or 9.06 not involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer shall
not be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
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<PAGE>
SECTION 2.05 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
------------------------------------------
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
the Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer may
require the payment by the Holder of such Note of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.06 Persons Deemed Owner. Prior to due presentment for
--------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination except as provided in
Section 2.07) as the owner of such Note for the purpose of receiving payments of
principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be
affected by notice to the contrary.
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<PAGE>
SECTION 2.07 Payment of Principal and Interest; Defaulted Interest.
-----------------------------------------------------
(a) The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes, the Class A-5 Notes, the Class A-6 Notes, the Class A-7 Notes,
the Class A-8 Notes, the Class A-9 Notes and the Class A-10 Notes shall accrue
interest at the Class A-1 Interest Rate, the Class A-2 Interest Rate, the Class
A-3 Interest Rate, the Class A-4 Interest Rate, the Class A-5 Interest Rate, the
Class A-6 Interest Rate, the Class A-7 Interest Rate, the Class A-8 Interest
Rate, the Class A-9 Interest Rate and the Class A-10 Interest Rate,
respectively, and such interest shall be due and payable on each Monthly Payment
Date (or in the case of the Class A-9 Notes on each Quarterly Payment Date),
subject to Section 3.01. Any installment of interest or principal payable on a
Note that is punctually paid or duly provided for by the Issuer on the
applicable Monthly Payment Date (or, in the case of the Class A-9 Notes, on each
Quarterly Payment Date) shall be paid to the Person in whose name such Note (or
one or more Predecessor Notes) is registered on the Record Date by check mailed
first-class postage prepaid to such Person's address as it appears on the Note
Register on such Record Date, except that, unless Definitive Notes have been
issued pursuant to Section 2.12, with respect to Notes registered on the Record
Date in the name of the nominee of the Clearing Agency (initially, such nominee
shall be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee, except for the final
installment of principal payable with respect to such Note on a Monthly Payment
Date (or, in the case of the Class A-9 Notes, on each Quarterly Payment Date) or
on the applicable class Stated Maturity Date (and except for the Redemption
Price for any Note called for redemption pursuant to Section 10.01) which shall
be payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Monthly Payment Date (or in the case of the Class A-9 Notes on each Quarterly
Payment Date); provided, however, that the entire unpaid principal amount of
each Note shall be due and payable on the applicable class Stated Maturity Date.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable, if not previously paid, if an Event of Default shall
have occurred and be continuing and if the Indenture Trustee or Holders of the
Notes representing not less than a majority of the Outstanding Amount of the
Notes have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02. All principal payments on each Class of Notes shall be
made pro rata to the Noteholders of such Class entitled thereto. The Indenture
Trustee shall notify the Person in whose name a Note is registered at the close
of business on the Record Date preceding the Monthly Payment Date on which the
Issuer expects that the final installment of principal of and interest on such
Note will be paid if the Issuer or the Servicer has notified the Indenture
Trustee of such expectation at least five Business Days prior to such Record
Date. Such notice shall be mailed or transmitted by facsimile prior to such
final Monthly Payment Date and shall specify that such final installment will be
payable to the Holder of record as of the applicable Record Date only upon
presentation and surrender of such Note and shall specify the place where such
Note may be presented and surrendered for payment of such installment. Notices
in connection with redemptions of Notes shall be mailed to Noteholders as
provided in Section 10.02.
-7-
<PAGE>
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to each Noteholder and the Indenture
Trustee a notice that states the special record date, the payment date and the
amount of defaulted interest to be paid.
SECTION 2.08 Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange
for any Notes cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided, that such Issuer Order
is timely and the Notes have not been previously disposed of by the Indenture
Trustee.
SECTION 2.09 Reserved.
--------
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance, will
----------------
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to The Depository Trust Company, the initial Clearing Agency, by,
or on behalf of, the Issuer. The Book-Entry Notes shall be registered initially
on the Note Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Note Owner thereof will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and
the giving of instructions or directions hereunder) as the sole
holder of the Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict with any
other provisions of this Indenture, the provisions of this Section
shall control;
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<PAGE>
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or
the Clearing Agency Participants pursuant to the Note Depository
Agreement. Unless and until Definitive Notes are issued pursuant to
Section 2.12, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken based
upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the
Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from Note
Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Notes and has delivered such instructions to the Indenture
Trustee.
SECTION 2.11 Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Depositor advises the
----------------
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Depositor is unable to locate a qualified successor within 90 days
of the giving of such advice, (ii) the Depositor at its option advises the
Indenture Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency or (iii) after the occurrence of an Event of Default
or a Servicer Default, Note Owners of the Book-Entry Notes representing
beneficial interests aggregating at least a majority of the Outstanding Amount
of such Notes advise the Clearing Agency in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the best interests
of such Note Owners, then the Clearing Agency shall notify all Note Owners and
the Indenture Trustee of the occurrence of any such event and of the
availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
SECTION 2.13 Tax Treatment. The Issuer has entered into this Indenture,
-------------
and the Notes will be issued, with the intention that, for all purposes
including federal, state and local income, single business and franchise tax
purposes, the Notes will qualify as indebtedness of the Issuer secured by
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<PAGE>
the Trust Estate. The Issuer, by entering into this Indenture, and each
Noteholder, by its acceptance of a Note (and each Note Owner by its acceptance
of an interest in the applicable Book-Entry Note), agree to treat the Notes for
all purposes including federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
ARTICLE III
Covenants
SECTION 3.01 Payment of Principal and Interest. The Issuer will duly
---------------------------------
and punctually pay the principal of and interest, if any, on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, subject to Section 8.02(c), the Issuer will cause to be distributed
all amounts on deposit in the Note Distribution Account on a Monthly Payment
Date deposited therein pursuant to the Transfer and Servicing Agreement (i) for
the benefit of the Class A-1 Notes, to the Class A-1 Noteholders, (ii) for the
benefit of the Class A-2 Notes, to the Class A-2 Noteholders, (iii) for the
benefit of the Class A-3 Notes, to the Class A-3 Noteholders, (iv) for the
benefit of the Class A-4 Notes, to the Class A-4 Noteholders, (v) for the
benefit of the Class A-5 Notes, to the Class A-5 Noteholders, (vi) for the
benefit of the Class A-6 Notes, to the Class A-6 Noteholders, (vii) for the
benefit of the Class A-7 Notes, to the Class A-7 Noteholders, (viii) for the
benefit of the Class A-8 Notes, to the Class A-8 Noteholders, (ix) for the
benefit of the Class A-9 Notes, to the Class A-9 Noteholders (or on any
Nonquarterly Payment Date, to the Class A-9 Interest Account or the Class A-9
Principal Account, as applicable) and (x) for the benefit of the Class A-10
Notes, to the Class A-10 Noteholders. Amounts properly withheld under the Code
by any Person from a payment to any Noteholder of interest and/or principal
shall be considered as having been paid by the Issuer to such Noteholder for all
purposes of this Indenture.
SECTION 3.02 Maintenance of Office or Agency. The Issuer will maintain
-------------------------------
in the Borough of Manhattan, The City of New York, an office or agency where
Notes may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.03 Money for Payments To Be Held in Trust. All payments of
--------------------------------------
amounts due and payable with respect to any Notes that are to be made from
amounts withdrawn from the Collection Account, the Class A-9 Interest Account,
the Class A-9 Principal Account and the Note Distribution Account pursuant to
Section 8.02 shall be made on behalf of the Issuer by the Indenture Trustee or
by another Paying Agent, and no amounts so withdrawn from the Collection
Account, the Class A-9 Interest Account, the Class A-9 Principal Account and the
Note Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section.
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<PAGE>
On each Monthly Payment Date and Redemption Date, the Issuer shall deposit
or cause to be deposited in the Note Distribution Account an aggregate sum
sufficient to pay the amounts then becoming due under the Notes (or with respect
to the Class A-9 Notes on any Nonquarterly Payment Date, the amount required to
be deposited into the Class A-9 Interest Account and the Class A-9 Principal
Account), such sum to be held in trust for the benefit of the Persons entitled
thereto, and (unless the Paying Agent is the Indenture Trustee) shall promptly
notify the Indenture Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) old all sums held by it for the payment of amounts due with
espect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and pay such sums
to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by the Issuer
(or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with
respect to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to
the Indenture Trustee all sums so held in trust by such Paying
Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment
of Notes if at any time it ceases to meet the standards
required hereby to be met by a Paying Agent at the time of its
appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect
to any applicable reporting requirements in connection
therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Indenture Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts
as those upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
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Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for two years after
such amount has become due and payable shall be discharged from such trust and
be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The
Indenture Trustee shall also adopt and employ, at the expense and direction of
the Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying Agent,
at the last address of record for each such Holder).
SECTION 3.04 Existence. The Issuer will keep in full effect its
---------
existence, rights and franchises as a trust under the laws of the State of New
York (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Estate.
SECTION 3.05 Protection of Trust Estate. The Issuer will from time to
--------------------------
time execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Noteholders in such Trust
Estate against the claims of all persons and parties.
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The Issuer hereby designates the Indenture Trustee its agent and attorney-in-
fact to execute any financing statement, continuation statement or other
instrument prepared by the Issuer required to be executed pursuant to this
Section 3.05.
SECTION 3.06 Opinions as to Trust Estate. (a) On the Closing Date,
---------------------------
the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the lien and security interest of
this Indenture and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to make such lien and
security interest effective.
(b) On or before September 15, in each calendar year, beginning in 1999, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of this Indenture,
any indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action, or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until September 15 in the following calendar year.
SECTION 3.07 Performance of Obligations; Servicing of Receivables.
----------------------------------------------------
(a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Transfer and Servicing Agreement or
such other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Servicer to assist the Issuer in performing its duties under
this Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the other Basic Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to filing or causing to be filed all UCC
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financing statements and continuation statements required to be filed by the
terms of this Indenture and the Transfer and Servicing Agreement in accordance
with and within the time periods provided for herein and therein. Except as
otherwise expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document or any provision thereof without the
consent of the Indenture Trustee or the Holders of at least a majority of the
Outstanding Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Transfer and Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee and the Rating Agencies thereof, and shall specify
in such notice the action, if any, the Issuer is taking with respect to such
default. If a Servicer Default shall arise from the failure of the Servicer to
perform any of its duties or obligations under the Transfer and Servicing
Agreement with respect to the Receivables, the Issuer shall take all reasonable
steps available to it to remedy such failure.
(e) As promptly as possible after notice of termination of the Servicer's
rights and powers has been given to the Servicer pursuant to Section 8.01 of the
Transfer and Servicing Agreement, the Indenture Trustee shall appoint a
successor servicer (the "Successor Servicer"), and such Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to the
Indenture Trustee. Any Successor Servicer other than the Indenture Trustee
shall (i) be an established financial institution having a net worth of not less
than $100,000,000 and whose regular business includes the servicing of Contracts
and (ii) enter into a servicing agreement with the Issuer having substantially
the same provisions as the provisions of the Transfer and Servicing Agreement
applicable to the Servicer which is being replaced by such Successor Servicer.
If the Indenture Trustee shall succeed to the Servicer's duties as servicer of
the Receivables as provided herein and in the Transfer and Servicing Agreement,
it shall do so in its individual capacity and not in its capacity as Indenture
Trustee and, accordingly, the provisions of Article VI hereof shall be
inapplicable to the Indenture Trustee in its duties as the successor to the
Servicer and in connection with the Indenture Trustee's servicing of the
Receivables. In case the Indenture Trustee shall become successor to the
Servicer under the Transfer and Servicing Agreement, the Indenture Trustee shall
be entitled to appoint as Servicer any one of its Affiliates, provided that it
shall be fully liable for the actions and omissions of such Affiliate in such
capacity as Successor Servicer.
(f) (Reserved.)
--------
(g) Without derogating from the absolute nature of the assignment granted
to the Indenture Trustee under this Indenture or the rights of the Indenture
Trustee hereunder, the Issuer agrees (i) that it will not, without the prior
written consent of the Indenture Trustee or the Holders of at least a majority
in Outstanding Amount of the Notes, amend, modify, waive, supplement, terminate
or surrender, or agree to any amendment, modification, supplement, termination,
waiver or surrender of, the terms of any Collateral (except to the extent
otherwise provided in the Transfer and Servicing Agreement) or the Basic
Documents, or waive timely performance or observance by the Servicer, DFS, the
Transferor or the Depositor under the Transfer and Servicing Agreement; and (ii)
that any such amendment, modification, waiver, supplement, termination or
surrender shall not (A) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, distributions that are required to be made
for the benefit of the Noteholders or (B) reduce the
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aforesaid percentage of the Notes that is required to consent to any such
amendment, without the consent of the Holders of all the Outstanding Notes. If
any such amendment, modification, waiver, supplement, termination or surrender
shall be so consented to by the Indenture Trustee or such Holders, the Issuer
agrees, promptly following a request by the Indenture Trustee to do so, to
execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate in the circumstances.
SECTION 3.08 Negative Covenants. So long as any Notes are Outstanding,
------------------
the Issuer shall not:
(i) except as expressly permitted by this Indenture or any other
Basic Document, sell, transfer, exchange or otherwise dispose
of any of the properties or assets of the Issuer, including
those included in the Trust Estate, unless directed to do so by
the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the principal
or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or
assert any claim against any present or former Noteholder by
reason of the payment of the taxes levied or assessed upon any
part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or
obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any
lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be
created on or extend to or otherwise arise upon or burden the
Trust Estate or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens and
other liens that arise by operation of law, in each case on any
of the Financed Vehicles and arising solely as a result of an
action or omission of the related Obligor) or (C) permit the
lien of this Indenture not to constitute a valid first priority
(other than with respect to any such tax, mechanics' or other
lien) security interest in the Trust Estate.
SECTION 3.09 Annual Statement as to Compliance. The Issuer will deliver
---------------------------------
to the Indenture Trustee, on or before March 31 of each year beginning in 1999,
an Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year and
of its performance under this Indenture has been made under
such Authorized Officer's supervision; and
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(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year or, if
there has been a default in its compliance with any such
condition or covenant, specifying each such default known to
such Authorized Officer and the nature and status thereof.
SECTION 3.10 Issuer May Consolidate, etc., Only on Certain Terms.
---------------------------------------------------
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any
State and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Indenture Trustee, in
form satisfactory to the Indenture Trustee, the due and
punctual payment of the principal of and interest on all Notes
and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee)
to the effect that such transaction will not have any material
adverse tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental
indenture comply with this Article III and that all conditions
precedent herein provided for relating to such transaction have
been complied with (including any filing required by the
Exchange Act).
(b) Except as otherwise expressly contemplated by the Transfer and
Servicing Agreement, the Issuer shall not convey or transfer any of its
properties or assets, including those included in the Trust Estate, to any
Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer
of which is hereby restricted (A) shall be
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a United States citizen or a Person organized and existing
under the laws of the United States of America or any State,
(B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form
satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of
this Indenture on the part of the Issuer to be performed or
observed, all as provided herein, (C) expressly agrees by means
of such supplemental indenture that all right, title and
interest so conveyed or transferred shall be subject and
subordinate to the rights of Holders of the Notes, (D) unless
otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer
against and from any loss, liability or expense arising under
or related to this Indenture and the Notes and (E) expressly
agrees by means of such supplemental indenture that such Person
(or if a group of Persons, then one specified Person) shall
make all filings with the Commission (and any other appropriate
Person) required by the Exchange Act in connection with the
Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee)
to the effect that such transaction will not have any material
adverse tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(iv) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental
indenture comply with this Article III and that all conditions
precedent herein provided for relating to such transaction have
been complied with (including any filing required by the
Exchange Act).
SECTION 3.11 Successor or Transferee. (a) Upon any consolidation or
-----------------------
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of the assets and properties of the Issuer
including the Trust Estate pursuant to Section 3.10(b), (i) the Person acquiring
such assets and properties shall
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succeed to, and be substituted for, and may exercise every right and power of,
the Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein and (ii) Distribution Financial Services RV Trust
1998-1 will be released from every covenant and agreement of this Indenture to
be observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Indenture Trustee stating
that Distribution Financial Services RV Trust 1998-1 is to be so released.
SECTION 3.12 No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the other Basic
Documents and activities incidental thereto.
SECTION 3.13 No Borrowing. The Issuer shall not issue, incur, assume,
------------
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness other than as contemplated by this Indenture.
SECTION 3.14 Servicer's Obligations. The Issuer shall cause the
----------------------
Servicer to comply with Sections 4.09, 4.10, 4.11 and Article IX of the Transfer
and Servicing Agreement.
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities. Except
-------------------------------------------------
as contemplated by the Transfer and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance of credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.16 Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17 (Reserved).
--------
SECTION 3.18 Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
as contemplated by, and to the extent funds are available for such purpose
under, the Transfer and Servicing Agreement or the Trust Agreement. The Issuer
will not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Indenture and the other Basic
Documents.
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SECTION 3.19 Notice of Events of Default. In addition to its
---------------------------
obligations under the last paragraph of Section 5.01, the Issuer shall give the
Indenture Trustee and the Rating Agencies written notice of each Event of
Default hereunder and each default on the part of the Servicer, DFS, the
Transferor or the Depositor of its obligations under the Transfer and Servicing
Agreement, in each case promptly after becoming aware of such Event of Default
or default.
SECTION 3.20 Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01 Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08,
3.10, 3.12 and 3.13, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.05 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation; or
(2) all such Notes not theretofore delivered to the Indenture Trustee
for cancellation
a. have become due and payable, ]
b. will become due and payable at the applicable Stated Maturity
Date within one year, or
c. are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
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and the Issuer, in the case of a., b, or c, above, has irrevocably deposited
or caused to be irrevocably deposited with the Indenture Trustee cash or
direct obligations of or obligations guaranteed by the United States of
America (which will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to the Indenture
Trustee for cancellation when due to the applicable final scheduled Monthly
Payment Date (or in the case of the Class A-9 Notes the Quarterly Payment
Date) or Redemption Date (if Notes shall have been called for redemption
pursuant to Section 10.01(a)), as the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the
Indenture Trustee) an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of Section
11.01(a) and, subject to Section 11.02, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
SECTION 4.02 Application of Trust Money. All moneys deposited with the
--------------------------
Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption of which such moneys have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest; but such moneys need not be segregated from other funds except to the
extent required herein or in the Transfer and Servicing Agreement or required by
law.
SECTION 4.03 Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
ARTICLE V
Remedies
SECTION 5.01 Events of Default. "Event of Default", wherever used
-----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
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(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue
for a period of five days; or
(ii) default in the payment of the principal of or any installment
of the principal of any Note when the same becomes due and
payable; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or
performance of which is elsewhere in this Section specifically
dealt with), or any representation or warranty of the Issuer
made in this Indenture or in any certificate or other writing
delivered pursuant hereto or in connection herewith proving to
have been incorrect in any material respect as of the time when
the same shall have been made, and such default shall continue
or not be cured, or the circumstance or condition in respect of
which such misrepresentation or warranty was incorrect shall
not have been eliminated or otherwise cured, for a period of 30
days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee (or to
the Issuer and the Indenture Trustee by the Holders of Notes
representing at least 25% of the Outstanding Amount of the
Notes) a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and
stating that such notice is a notice of Default hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case
under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any
substantial part of the Trust Estate, or ordering the winding-
up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(v) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the
Issuer to the entry of an order for relief in an involuntary
case under any such law, or the consent by the Issuer to the
appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of the Trust Estate,
or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to
pay its debts as such debts become due, or the taking of any
action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Indenture Trustee, within five days after
the occurrence thereof, written notice in the form of an Officer's Certificate
of any event which with the giving of notice and
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the lapse of time would become an Event of Default under clause (iii), its
status and what action the Issuer is taking or proposes to take with respect
thereto.
SECTION 5.02 Acceleration of Maturity; Rescission and Annulment. If an
--------------------------------------------------
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee or the Holders of Notes representing not less than a majority
of the Outstanding Amount of the Notes may declare all of the Notes to be
immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has been made
and before a judgment or decree for payment of the money due has been obtained
by the Indenture Trustee as hereinafter in this Article V provided, the Holders
of Notes representing at least a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
(A) all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section
5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03 Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee.
- -----------------
(a) The Issuer covenants that if (i) default is made in the payment of any
interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, the Issuer will, upon demand of the Indenture Trustee,
pay to it, for the benefit of the Holders of the Notes, the whole amount then
due and payable on such Notes for principal and interest, with interest on the
overdue principal and, to the extent payment at such rate of interest shall be
legally enforceable, on overdue installments of interest at the rate borne by
the Notes and, in addition thereto, such further amount as shall be sufficient
to
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cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.
(c) If an Event of Default occurs and is continuing, the Indenture Trustee
may, as more particularly provided in Section 5.04, in its discretion, proceed
to protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver or trustee in bankruptcy or reorganization, or liquidator,
sequestrator or similar official, shall have been appointed for or taken
possession of the Issuer or its property or such other obligor or Person, or in
case of any other comparable judicial Proceedings relative to the Issuer or
other obligor upon the Notes or to the creditors or property of the Issuer or
such other obligor, the Indenture Trustee, irrespective of whether the principal
of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes
and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Indenture
Trustee (including any claim for reasonable compensation to the
Indenture Trustee and each predecessor Indenture Trustee, and
their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor
Indenture Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any
such Proceedings;
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(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of
the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of
the Indenture Trustee or the Holders of Notes allowed in any
Proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, sequestrator or similar official in any
such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except as contemplated by clause (d)(ii)
above.
(f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
liabilities, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
SECTION 5.04 Remedies; Priorities. (a) If an Event of Default shall have
--------------------
occurred and be continuing, the Indenture Trustee may do one or more of the
following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on
the Notes or under this Indenture with respect thereto, whether
by declaration or otherwise, enforce any judgment obtained and
collect from the Issuer and any other obligor upon such Notes
moneys adjudged due;
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(ii) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and take any
other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee and the Holders of the Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or interest
therein, at one or more public or private sales called and conducted
in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than an Event of
Default described in Section 5.01(i) or (ii), unless (A) the Holders of 100% of
the Outstanding Amount of the Notes consent thereto, (B) the proceeds of such
sale or liquidation distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for principal and
interest or (C) the Indenture Trustee determines that the Trust Estate will not
continue to provide sufficient funds for the payment of principal of and
interest on the Notes as they would have become due if the Notes had not been
declared due and payable, and the Indenture Trustee obtains the consent of
Holders of Notes representing at least 66 2/3% of the Outstanding Amount of the
Notes. In determining such sufficiency or insufficiency with respect to clause
(B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section 6.07;
SECOND: to the Servicer for due and unpaid Servicing Fees or any other
amounts due to it by the Issuer pursuant to the Transfer and Servicing
Agreement;
THIRD: to Noteholders for amounts due and unpaid on the Notes for interest
(including any premium), ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest (including
any premium);
FOURTH: to Holders of the Notes for amounts due and unpaid on the Notes for
principal, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, until the Outstanding Amount
of each Class of the Notes is reduced to zero; and
FIFTH: to the Issuer for amounts required to be distributed pursuant to the
Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuer shall mail to each
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Noteholder and the Indenture Trustee a notice that states the record date, the
payment date and the amount to be paid.
SECTION 5.05 Optional Preservation of the Receivables. If the Notes have
----------------------------------------
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to maintain possession
of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Indenture Trustee shall take such desire into
account when determining whether or not to maintain possession of the Trust
Estate. In determining whether to maintain possession of the Trust Estate, the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
SECTION 5.06 Limitation of Suits. No Holder of any Note shall have any
-------------------
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of Notes representing not less than 25% of the
Outstanding Amount of the Notes have made written request to
the Indenture Trustee to institute such Proceeding in respect
of such Event of Default in its own name as Indenture Trustee
hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
such Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the
Holders of Notes representing at least a majority of the
Outstanding Amount of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of
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the Outstanding Amount of the Notes, the Indenture Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provisions of this Indenture.
SECTION 5.07 Unconditional Rights of Noteholders To Receive Principal and
------------------------------------------------------------
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
- --------
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.08 Restoration of Rights and Remedies. If the Indenture Trustee
----------------------------------
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.09 Rights and Remedies Cumulative. No right or remedy herein
------------------------------
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10 Delay or Omission Not a Waiver. No delay or omission of the
------------------------------
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.11 Control by Noteholders. Subject to Section 5.16(b), the
----------------------
Holders of Notes representing at least a majority of the Outstanding Amount of
the Notes shall have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Indenture Trustee with
respect to the Notes or exercising any trust or power conferred on the Indenture
Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
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(ii) subject to the express terms of Section 5.04, any direction to the
Indenture Trustee to sell or liquidate the Trust Estate shall be by
Holders of Notes representing not less than 100% of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied and
the Indenture Trustee elects to retain the Trust Estate pursuant to
such Section, then any direction to the Indenture Trustee by Holders
of Notes representing less than 100% of the Outstanding Amount of
the Notes to sell or liquidate the Trust Estate shall be of no force
and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by the
Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in personal liability or might materially adversely affect the
rights of any Noteholders not consenting to such action.
SECTION 5.12 Waiver of Past Defaults. Prior to the declaration of the
-----------------------
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes representing not less than a majority of the Outstanding Amount
of the Notes may waive any past Default or Event of Default and its consequences
except a Default (a) in payment of principal of or interest on any of the Notes
or (b) in respect of a covenant or provision hereof which cannot be modified or
amended without the consent of the Holder of each Note. In the case of any such
waiver, the Issuer, the Indenture Trustee and the Holders of the Notes shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.13 Undertaking for Costs. All parties to this Indenture agree,
---------------------
and each Holder of a Note by such Holder's acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate Notes representing more than
10% of the Outstanding Amount of the Notes or (c) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on any
Note on or after the respective due
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dates expressed in such Note and in this Indenture (or, in the case of
redemption, on or after the Redemption Date).
SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer covenants (to
--------------------------------
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 5.15 Action on Notes. The Indenture Trustee's right to seek and
---------------
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Trust Estate
or upon any of the assets of the Issuer. Any money or property collected by the
Indenture Trustee shall be applied in accordance with Section 5.04(b).
SECTION 5.16 Performance and Enforcement of Certain Obligations. (a) If
--------------------------------------------------
an Event of Default has occurred and is continuing, promptly following a request
from the Indenture Trustee to do so, the Issuer shall take all such lawful
action as the Indenture Trustee may request to compel or secure the performance
and observance by any party to the Transfer and Servicing Agreement, of each of
such party's obligations to the Issuer under or in connection with the Transfer
and Servicing Agreement, and to exercise any and all rights, remedies, powers
and privileges lawfully available to the Issuer under or in connection with the
Transfer and Servicing Agreement to the extent and in the manner directed by the
Indenture Trustee, including the transmission of notices of default on the part
of any party to the Transfer and Servicing Agreement and the institution of
legal or administrative actions or proceedings to compel or secure performance
by any party to the Transfer and Servicing Agreement of such party's obligations
under the Transfer and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture
Trustee may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Holders of Notes
representing at least 66 2/3% of the Outstanding Amount of the Notes shall,
subject to the proviso and last sentence of Section 5.11, exercise all rights,
remedies, powers, privileges and claims of the Issuer against any party to the
Transfer and Servicing Agreement under or in connection with the Transfer and
Servicing Agreement, including the right or power to take any action to compel
or secure performance or observance by any party to the Transfer and Servicing
Agreement of such party's obligations to the Issuer thereunder and to give any
consent, request, notice, direction, approval, extension or waiver under the
Transfer and Servicing Agreement, and any right of the Issuer to take such
action shall be suspended.
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ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.01 Duties of Indenture Trustee.
---------------------------
(a) If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and
the Transfer and Servicing Agreement and no implied covenants or
obligations shall be read into this Indenture or the Transfer and
Servicing Agreement against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Indenture Trustee and conforming to
the requirements of this Indenture or the Transfer and Servicing
Agreement; however, the Indenture Trustee shall examine the
certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining
the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 5.11 or Section
5.16(b).
(d) Every provision of this Indenture and the Transfer and Servicing
Agreement that in any way relates to the Indenture Trustee is subject to
paragraphs (a), (b), (c) and (g) of this Section.
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(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Transfer and Servicing Agreement.
(g) No provision of this Indenture or the Transfer and Servicing Agreement
shall require the Indenture Trustee to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties hereunder or
thereunder or in the exercise of any of its rights or powers, if it shall have
reasonable grounds to believe that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(h) Every provision of this Indenture or the Transfer and Servicing
Agreement relating to the conduct or affecting the liability of or affording
protection to the Indenture Trustee shall be subject to the provisions of this
Section and to the provisions of the TIA.
SECTION 6.02 Rights of Indenture Trustee.
---------------------------
(a) The Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, that the Indenture Trustee's conduct does not
constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) The Indenture Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Noteholders pursuant to this Indenture, unless such Noteholders
shall have offered to the Indenture Trustee reasonable
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security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(g) The Indenture Trustee shall not be charged with knowledge of any
Default, Event of Default or Servicer Default unless (i) a Responsible Officer
of the Indenture Trustee assigned to its Corporate Trust Office shall have
actual knowledge thereof or (ii) written notice thereof shall have been given to
the Indenture Trustee by the Issuer, the Depositor, the Servicer or any
Noteholder.
SECTION 6.03 Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer, the Depositor, the Servicer or
their respective Affiliates with the same rights it would have if it were not
Indenture Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying
agent may do the same with like rights. However, the Indenture Trustee must
comply with Sections 6.11 and 6.12.
SECTION 6.04 Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, the Collateral or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuer in this Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Trustee's certificate of authentication. The Indenture
Trustee shall have no responsibility for reviewing the contents of the
Receivable Files or for maintaining custody of or protecting same, for
monitoring the servicing of the Receivables by the Servicer or for perfecting or
continuing the perfection of the Indenture Trustee's security interest in the
Collateral, including the filing, re-filing, recording or re-recording of any
notice, instrument or document in any public office at any time or times. The
Indenture Trustee shall have no duty to conduct any affirmative investigation as
to the occurrence of any condition requiring the purchase of any Receivable
pursuant to the Transfer and Servicing Agreement.
SECTION 6.05 Notice of Defaults. If a Default occurs and is continuing
------------------
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment of principal
of or interest on any Note (including payments pursuant to the [mandatory]
redemption provisions of such Note), the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION 6.06 Reports by Indenture Trustee to Holders. The Indenture
---------------------------------------
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns,
provided, that, such information shall consist only of Form 1099s or any
successor forms required to be given by Paying Agents to Noteholders pursuant to
the Code.
SECTION 6.07 Compensation and Indemnity. The Issuer shall pay to the
--------------------------
Indenture Trustee from time to time reasonable compensation for its services.
The Indenture Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer shall
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reimburse the Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Indenture Trustee's
agents, counsel, accountants and experts. The Issuer shall indemnify the
Indenture Trustee against any and all loss, liability or expense (including
attorneys' fees) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder. The Indenture Trustee shall
notify the Issuer promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Issuer shall not relieve the Issuer of
its obligations hereunder. The Issuer shall defend any such claim, and the
Indenture Trustee may have separate counsel and the Issuer shall pay the fees
and expenses of such counsel. The Issuer need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to this
Section shall survive the discharge of this Indenture. Without prejudice to any
other rights available to the Indenture Trustee under applicable law, when the
Indenture Trustee incurs expenses after the occurrence of a Default specified in
Section 5.01(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.08 Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture
Trustee may resign at any time by so notifying the Issuer. The Holders of Notes
representing at least a majority of the Outstanding Amount of the Notes may
remove the Indenture Trustee by so notifying the Indenture Trustee and may
appoint a successor Indenture Trustee. The Issuer shall remove the Indenture
Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed by the Issuer or by the Holders
of Notes representing at least a majority of Outstanding Amount of the Notes
(and such Holders shall not have appointed a successor Indenture Trustee and
such successor Indenture Trustee shall not have accepted its appointment as set
forth below within 30 days after the Indenture Trustee shall have been removed
by such Holders), or if a vacancy exists in the office of Indenture Trustee for
any reason (the Indenture Trustee in the event of any such resignation, removal
or vacancy being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee.
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A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly, upon payment of its charges, transfer all property held
by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of Notes representing at least a majority in
Outstanding Amount of the Notes may petition any court of competent jurisdiction
for the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Indenture Trustee.
SECTION 6.09 Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction. Such notice shall be
deemed given if a description of such transaction is published in a newspaper of
general circulation in The City of New York.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
---------------------------------------------------------
Trustee.
- -------
(a) Notwithstanding any other provisions of this Indenture, at any time,
for the purpose of meeting any legal requirement of any jurisdiction in which
any part of the Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee
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or separate trustees, of all or any part of the Trust Estate, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust Estate, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act
separately without the Indenture Trustee joining in such act),
except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed the
Indenture Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate
or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-
trustee, but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Indenture on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates,
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properties, rights, remedies and trusts shall vest in and be exercised by the
Indenture Trustee, to the extent permitted by law, without the appointment of a
new or successor trustee.
SECTION 6.11 Eligibility; Disqualification. The Indenture Trustee shall
-----------------------------
at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition, and the time
deposits of the Indenture Trustee shall be rated at least A-1 by Standard &
Poor's and P-1 by Moody's. The Indenture Trustee shall comply with TIA Section
310(b), subject to the penultimate paragraph thereof; provided, however, that
there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
SECTION 6.12 Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01 Issuer To Furnish Indenture Trustee Names and Addresses of
----------------------------------------------------------
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
- -----------
Trustee (a) not more than five days after each Record Date, a list, in such form
as the Indenture Trustee may reasonably require, of the names and addresses of
the Holders of Notes as of such Record Date, and (b) at such other times as the
Indenture Trustee may request in writing, within 30 days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
SECTION 7.02 Preservation of Information; Communications to Noteholders.
-----------------------------------------------------------
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
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SECTION 6.03 Reports by Issuer. (a) The Issuer shall:
-----------------
(i) file with the Indenture Trustee, within 15 days after the Issuer
is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) that the Issuer may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time
by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA Section
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this Section 7.03(a) as may be required by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
SECTION 7.04 Reports by Indenture Trustee. If required by TIA Section
----------------------------
313(a), within 60 days after each July 15 beginning with July 15, 1999, the
Indenture Trustee shall mail to each Noteholder as required by TIA Section
313(c) a brief report dated as of such date that complies with TIA Section
313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.01 Collection of Money. Except as otherwise expressly provided
-------------------
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise
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expressly provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of the
Trust Estate, the Indenture Trustee may take such action as may be appropriate
to enforce such payment or performance, including the institution and
prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
Notwithstanding the foregoing provisions of this Section 8.01, the Indenture
Trustee shall not be empowered to demand payment of or to enforce payment or
performance of any Receivable, except during the continuance of an Event of
Default, and, during the pendency of such an Event of Default, shall be
protected in refraining from making any such demand or instituting any
proceeding to enforce such payment or performance as long as the Servicer shall
be servicing the Receivables.
SECTION 8.02 Trust Accounts.
--------------
(a) On or prior to the Closing Date, the Issuer shall cause the Servicer or
the Indenture Trustee, as applicable, to establish and maintain, in the name of
the Indenture Trustee, for the benefit of the applicable Noteholders and
Certificateholders, the Trust Accounts as provided in Section 5.01 of the
Transfer and Servicing Agreement.
(b) Collections with respect to the Receivables and other amounts with
respect to each Collection Period will be deposited in the Collection Account as
provided in Sections 5.02 and 5.05 of the Transfer and Servicing Agreement. On
each Monthly Payment Date, all amounts required to be deposited in the Note
Distribution Account with respect to the preceding Collection Period pursuant to
Sections 5.06 and 5.07 of the Transfer and Servicing Agreement will be
transferred from the applicable Trust Account to the Note Distribution Account.
(c) On each Monthly Payment Date and Redemption Date, the Indenture Trustee
shall distribute all amounts on deposit in the Note Distribution Account to
Noteholders in respect of the Notes (or in the case of the Class A-9 Notes on
each Nonquarterly Payment Date shall make the deposits provided for below) to
the extent of amounts due and unpaid on the Notes for principal and interest
(including any premium) in the following amounts and in the following order of
priority (except as otherwise provided in Section 5.04(b)):
(i) the Noteholders' Interest Distributable Amount to be distributed
as follows:
for each Nonquarterly Payment Date (other than any Redemption Date), (1)
for each Class of Notes, other than the Class A-9 Notes, accrued and
unpaid interest on each such Class of Notes shall be distributed to the
Holders of Notes of such Class and (2) for the Class A-9 Notes, one-
third of the total amount of accrued and unpaid interest that will be
due on the Class A-9 Notes on the next Quarterly Payment Date will be
deposited into the Class A-9 Interest Account, with any shortfall in
such amounts to be allocated among each Class pro rata based on the
ratio for each Class of (x) the amount of interest due to be distributed
on (or deposited with respect to) each such Class to (y) the total of
such amounts; and
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for each Quarterly Payment Date and each Redemption Date, for each Class
of Notes accrued and unpaid interest on each such Class of Notes shall
be distributed to the Holders of such Class, but for the Class A-9 Notes
such amount as distributed from the Note Distribution Account shall be
reduced by the amount to be distributed to the Class A-9 Noteholders on
such Quarterly Payment Date or Redemption Date from the Class A-9
Interest Account, and with any shortfall in such amounts to be allocated
among each Class pro rata based on the ratio for each Class of (x) the
amount of interest due to be distributed on each such Class (but in the
case of the Class A-9 Notes only the amount to be distributed from the
Note Distribution Account on such Quarterly Payment Date) to (y) the
total of such amounts;
(ii) the Noteholders' Principal Distributable Amount, to be distributed
in the following order of priority in each case to the extent of
the remaining amounts on deposit in the Note Distribution Account
after giving effect to all withdrawals of a higher priority:
(1) to the Holders of the Class A-1 Notes on account of principal
until the Outstanding Amount of the Class A-1 Notes is reduced to
zero;
(2) in the case of this clause (2), only for the Monthly Payment Dates
occurring on or after [ ], to the Holders of the Class A-10
Notes on account of principal until the Outstanding Amount of the
Class A-10 Notes is reduced to $[ ];
(3) in the case of this clause (3), only for the Monthly Payment
Dates occurring on or after [ ], to the Holders of the
Class A-10 Notes on account of principal until the Outstanding
Amount of the Class A-10 Notes is reduced to zero;
(4) to the Holders of the Class A-2 Notes on account of principal
until the Outstanding Amount of the Class A-2 Notes is reduced to
zero;
(5) to the Holders of the Class A-3 Notes on account of principal
until the Outstanding Amount of the Class A-3 Notes is reduced to
zero;
(6) to the Holders of the Class A-4 Notes on account of principal
until the Outstanding Amount of the Class A-4 Notes is reduced to
zero;
(7) to the Holders of the Class A-5 Notes on account of principal
until the Outstanding Amount of the Class A-5 Notes is reduced to
zero;
(8) to the Holders of the Class A-6 Notes on account of principal
until the Outstanding Amount of the Class A-6 Notes is reduced to
zero;
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(9) to the Holders of the Class A-7 Notes on account of principal
until the Outstanding Amount of the Class A-7 Notes is reduced to
zero;
(10) to the Holders of the Class A-8 Notes on account of principal
until the Outstanding Amount of the Class A-8 Notes is reduced to
zero;
(11) to the Holders of the Class A-9 Notes on account of principal (but
in the case of a Nonquarterly Payment Date, by depositing such
amount into the Class A-9 Principal Account) until the Outstanding
Amount of the Class A-9 Notes is reduced to zero, such Outstanding
Amount to be determined solely for purposes of this clause (11) by
assuming that the Outstanding Amount of the Class A-9 Notes has
been reduced by any deposits to the Class A-9 Principal Account
since the preceding Quarterly Payment Date); and
(12) in the case of this clause (12), only for Monthly Payment Dates
occurring prior to [ ], or, if the Outstanding Amount
of the Class A-10 Notes has been reduced to $[ ] or less,
occurring prior to [ ], to the Holders of the Class
A-10 Notes on account of principal until the Outstanding Amount of
the Class A-10 Notes is reduced to zero;
(d) On each Quarterly Payment Date and any Redemption Date, (i) the
Indenture Trustee will withdraw the aggregate amount on deposit in the Class A-9
Interest Account ([other than any investment income thereon that is payable to
the Servicer pursuant to Section 5.01(b) of the Transfer and Servicing
Agreement]) and will distribute such amount as interest to the Class A-9
Noteholders and (ii) the Indenture Trustee will withdraw the aggregate amount on
deposit in the Class A-9 Principal Account and will distribute such amount, as a
distribution on account of principal, to the Class A-9 Noteholders.
SECTION 8.03 General Provisions Regarding Accounts.
-------------------------------------
(a) So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the funds in the Trust Accounts shall be
invested or reinvested in Eligible Investments pursuant to Section 5.01(b) of
the Transfer and Servicing Agreement by the Indenture Trustee. The Servicer
will not direct the Indenture Trustee to make any investment of any funds or to
sell any investment held in any of the Trust Accounts unless the security
interest Granted and perfected in such account will continue to be perfected in
such investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Indenture
Trustee to make any such investment or sale, if requested by the Indenture
Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of
Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.01(c), the Indenture Trustee shall not in any way
be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible
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Investment included therein except for losses attributable to the Indenture
Trustee's failure to make payments on such Eligible Investments issued by the
Indenture Trustee, in its commercial capacity as principal obligor and not as
trustee, in accordance with their terms.
(c) If (i) the Servicer (pursuant to Section 5.01(b) of the Transfer and
Servicing Agreement) shall have failed to give investment directions for any
funds on deposit in the Trust Accounts to the Indenture Trustee by 11:00 a.m.
Eastern Time (or such other time as may be agreed by the Servicer and Indenture
Trustee) on any Business Day or (ii) a Default or Event of Default shall have
occurred and be continuing with respect to the Notes but the Notes shall not
have been declared due and payable pursuant to Section 5.02 or (iii) if such
Notes shall have been declared due and payable following an Event of Default but
amounts collected or receivable from the Trust Estate are being applied in
accordance with Section 5.05 as if there had not been such a declaration, then
the Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts (other than the Note Distribution Account)
in money market funds having a rating from each of the Rating Agencies in the
highest investment category granted thereby (including funds for which the
Indenture Trustee or the Owner Trustee or any of their respective Affiliates is
investment manager or advisor).
(d) Nothing in the Section 8.03 shall require the investment of any funds
on deposit in the Note Distribution Account.
SECTION 8.04 Release of Trust Estate. (a) Subject to the payment of
-----------------------
its fees, expenses and indemnities pursuant to Section 6.07, the Indenture
Trustee shall, when required by Section 8.04(b), execute instruments (prepared
by the Issuer) to release (without recourse or warranty) property from the lien
of this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.07 have
been paid, release any remaining portion of the Trust Estate that secured the
Notes from the lien of this Indenture and release to the Issuer or any other
Person entitled thereto any funds then on deposit in the Trust Accounts. The
Indenture Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.04(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.01.
SECTION 8.05 Opinion of Counsel. The Indenture Trustee shall receive at
------------------
least seven days notice when requested by the Issuer to take any action pursuant
to Section 8.04(a), accompanied by copies of any instruments involved, and the
Indenture Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form satisfactory to the Indenture Trustee, stating the legal
effect of any such action, outlining the steps required to complete the same,
and concluding that all conditions precedent to the taking of such action have
been complied with and such action will not
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materially and adversely impair the security for the Notes or the rights of the
Noteholders in contravention of the provisions of this Indenture; provided,
however, that such Opinion of Counsel shall not be required to express an
opinion as to the fair value of the Trust Estate. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01 Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with prior notice
to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by
an Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to
subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer
herein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent
with any other provision herein or in any supplemental indenture
or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided, that such action shall not adversely affect
in any material respect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to
add to or change any of the provisions of this Indenture as shall
be necessary to facilitate the administration
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of the trusts hereunder by more than one trustee, pursuant to the
requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect the qualification of
this Indenture under the TIA or under any similar federal statute
hereafter enacted and to add to this Indenture such other
provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.02 Supplemental Indentures with Consent of Noteholders. The
---------------------------------------------------
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the consent of the Holders of
Notes representing not less than a majority of the Outstanding Amount of the
Notes, by Act of such Holders delivered to the Issuer and the Indenture Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect
thereto, change the provisions of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the
Trust Estate to payment of principal of or interest on the Notes,
or change any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable, or impair the
right to institute suit for the enforcement of the provisions of
this Indenture requiring the application of funds available
therefor, as provided in Article V, to the payment of any such
amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption
Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such
supplemental indenture, or the
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consent of the Holders of which is required for any waiver of
certain defaults hereunder and their consequences provided for in
this Indenture;
(iii) modify or alter the provisions of the proviso to the definition of
the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee pursuant to Sections 5.11
or 5.16(b) or to direct the Indenture Trustee to sell or liquidate
the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Note affected
thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest
or principal due on any Note on any Monthly Payment Date (or in
the case of the Class A-9 Notes any Quarterly Payment Date)
(including the calculation of any of the individual components of
such calculation) or to affect the rights of the Holders of Notes
to the benefit of any provisions for the [mandatory] redemption of
the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at
any time subject hereto or deprive the Holder of any Note of the
security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
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SECTION9.03 Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.04 Effect of Supplemental Indenture. Upon the execution of
--------------------------------
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.05 Conformity with Trust Indenture Act. Every amendment of
-----------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.06 Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01 Redemption. (a) The Notes are subject to redemption in
----------
whole, but not in part, at the direction of the Servicer pursuant to Section
9.01(a) of the Transfer and Servicing Agreement, on any Monthly Payment Date on
which the Servicer exercises its option to purchase the Trust Estate pursuant to
said Section 9.01(a), for a purchase price equal to the Redemption Price. The
Servicer or the Issuer shall furnish the Rating Agencies notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a),
the Servicer or the Issuer shall furnish notice of such election to the
Indenture Trustee not later than 50 days prior to the Redemption Date and the
Issuer shall deposit or cause to be deposited by 10:00 A.M. New York City time
on the Redemption Date with the Indenture Trustee in the Note Distribution
Account the Redemption Price of each
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Class of Notes whereupon all such Notes shall be due and payable on the
Redemption Date upon the furnishing of a notice complying with Section 10.02 to
each Holder of the Notes.
(b) In the event that the assets of the Trust are sold pursuant to Section
9.02 of the Trust Agreement, all amounts on deposit in the Note Distribution
Account and in the Class A-9 Interest Account and the Class A-9 Principal
Account shall be paid to the Noteholders up to the Outstanding Amount of the
Notes and all accrued and unpaid interest thereon. If amounts are to be paid to
Noteholders pursuant to this Section 10.01(b), the Servicer or the Issuer shall,
to the extent practicable, furnish notice of such event to the Indenture Trustee
not later than 40 days prior to the Redemption Date, whereupon all such amounts
shall be payable on the Redemption Date.
SECTION 10.02 Form of Redemption Notice. (a) Notice of redemption under
-------------------------
Section 10.01(a) shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by facsimile mailed or transmitted, not later than 30 days
prior to the applicable Redemption Date to each Holder of Notes, as of the close
of business on the Record Date preceding the giving of such notice, at such
Holder's address or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the
Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.01(b) is not required to
be given to Noteholders.
SECTION 10.03 Notes Payable on Redemption Date. The Notes shall,
--------------------------------
following notice of redemption as required by Section 10.02 (in the case of
redemption pursuant to Section 10.01(a)), on the Redemption Date become due and
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Price.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Compliance Certificates and Opinions, etc.
-----------------------------------------
(a) Upon any application or request by the Issuer to the Indenture Trustee
to take any action under any provision of this Indenture, the Issuer shall
furnish to the Indenture Trustee (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or
condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as
is necessary to enable such signatory to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied
with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the
basis for the release of any property or securities subject to
the lien of this Indenture, the Issuer shall, in addition to any
obligation imposed in Section 11.01(a) or elsewhere in this
Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person
signing such certificate as to the fair value (within 90 days of
such deposit) to the Issuer of the Collateral or other property
or securities to be so deposited.
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(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in
clause (i) above, the Issuer shall also deliver to the Indenture
Trustee an Independent Certificate as to the same matters, if
the fair value to the Issuer of the property or securities to be
so deposited and of all other such property or securities made
the basis of any such release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to clause (i) above and this
clause (ii), is 10% or more of the Outstanding Amount of the
Notes, but such a certificate need not be furnished with respect
to any property or securities so deposited, if the fair value
thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the
Outstanding Amount of the Notes.
(iii) Whenever any property or securities are to be released from the
lien of this Indenture, the Issuer shall also furnish to the
Indenture Trustee an Officer's Certificate certifying or stating
the opinion of each person signing such certificate as to the
fair value (within 90 days of such release) of the property or
securities proposed to be released and stating that in the
opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in
clause (iii) above, the Issuer shall also furnish to the
Indenture Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and of
all other property, other than property as contemplated by
clause (v) below or securities released from the lien of this
Indenture since the commencement of the then-current calendar
year, as set forth in the certificates required by clause (iii)
above and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not
be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related
Officer's Certificate is less than $25,000 or less than one
percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the Issuer
may, without compliance with the requirements of the other
provisions of this Section, (A) collect, liquidate, sell or
otherwise dispose of Receivables or Financed Vehicles as and to
the extent permitted or required by the Basic Documents and (B)
make cash payments out of the Trust Accounts as and to the
extent permitted or required by the Basic Documents, so long as
the Issuer shall deliver to the Indenture Trustee every six
months, commencing on the day which is six months after the
Closing Date (or, if such day is not a Business Day, on the next
Business Day), an Officer's Certificate of the Issuer stating
that all the dispositions of Collateral described in clauses (A)
or (B) above that occurred
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during the preceding six calendar months were in the ordinary
course of the Issuer's business and that the proceeds thereof
were applied in accordance with the Basic Documents.
SECTION 11.02 Form of Documents Delivered to Indenture Trustee. In any
------------------------------------------------
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of any
party to the Transfer and Servicing Agreement, stating that the information with
respect to such factual matters is in the possession of such party to the
Transfer and Servicing Agreement, unless the person signing such certificate of
an Authorized Officer or such Opinion of Counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.03 Acts of Noteholders.
-------------------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Noteholders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by agents duly appointed
in writing; and except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are delivered to the
Indenture Trustee
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and, where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.04 Notices, etc., to Indenture Trustee, Issuer and Rating
------------------------------------------------------
Agencies. Any request, demand, authorization, direction, notice, consent,
- --------
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made,
given, furnished or filed in writing to or with the
Indenture Trustee at its Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in
writing and mailed first-class, postage prepaid to the
Issuer addressed to: Distribution Financial Services RV
Trust 1998-1, in care of the Owner Trustee at its Corporate
Trust Office, or at any other address previously furnished
in writing to the Indenture Trustee by the Issuer. The
Issuer shall promptly transmit any notice received by it
from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
Moody's, at the following address: Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007 or (ii) in the
case of Standard & Poor's, at the following address: Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc., 25 Broadway (15th
Floor), New York, New York 10004, Attention of Asset Backed Surveillance
Department; or as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.
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SECTION 11.05 Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Holder's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.06 Alternate Payment and Notice Provisions. Notwithstanding
---------------------------------------
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee will cause payments to be made and
notices to be given in accordance with such agreement if it is administratively
acceptable to it.
SECTION 11.07 Conflict with Trust Indenture Act. If any provision hereof
---------------------------------
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.08 Effect of Headings and Table of Contents. The Article and
----------------------------------------
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
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SECTION 11.09 Successors and Assigns. All covenants and agreements in
----------------------
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.
SECTION 11.10 Separability. In case any provision in this Indenture or
------------
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 11.12 Legal Holidays. In any case where the date on which any
--------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 Counterparts. This Indenture may be executed in any number
------------
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is subject to
----------------------
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense and the Issuer shall deliver to the
Indenture Trustee an Opinion of Counsel to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16 Trust Obligation. No recourse may be taken, directly or
----------------
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any
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holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Indenture Trustee and the Owner
Trustee have no such obligations in their individual capacity) and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity. For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Article VI, VII and
VIII of the Trust Agreement.
SECTION 11.17 No Petition. The Indenture Trustee, by entering into this
-----------
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Issuer, or join in any
institution against the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the other Basic
Documents.
SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall, and shall cause its representatives to, hold in confidence all
such information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
[SIGNATURES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT]
TRUST 199__-1,
By: THE BANKERS TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee,
By:____________________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, not in its individual
capacity but solely as Indenture Trustee,
By:____________________________________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared _________________, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of DISTRIBUTION
FINANCIAL SERVICES [RV/BOAT] TRUST 1998 - 1, a New York trust, and that (s)he
executed the same as the act of said business trust for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of ___________, 1998.
_______________________________________________
Notary Public in and for the State of New York.
My commission expires:
_______________________________
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said county
and state, on this day personally appeared _____________, known to me to be the
person and officer whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of THE CHASE MANHATTAN BANK, a New
York banking corporation, and that (s)he executed the same as the act of said
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________, 199__.
_______________________________________________
Notary Public in and for the State of New York.
My commission expires:
______________________________
<PAGE>
SCHEDULE A
Provided to the Owner Trustee at Closing
<PAGE>
EXHIBIT A
(FORM OF CLASS A NOTE)
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $____________
Class A-[ ] Interest Rate: __%
No. R-__ CUSIP NO. ____________
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199__-1
CLASS A-__ ASSET BACKED NOTES
Distribution Financial Services [RV/Boat] Trust1998 - 1, a trust organized
and existing under the laws of the State of New York (herein referred to as the
"Issuer"), for value received, hereby promises to pay to _________, or
registered assigns, the principal sum of ___________ DOLLARS payable on each
(Monthly)(Quarterly) Payment Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $____________ and the
denominator of which is $_________________________ by (ii) the aggregate amount,
if any, payable from the Note Distribution Account (and the Class A-9 Principal
Account) in respect of principal on the Class A-__ Notes pursuant to Section
3.01 of the Indenture dated as of [ ], 1998 (the "Indenture"), between the
Issuer and The Chase Manhattan Bank, a New York banking corporation, as
Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
the ______________ ______ (Monthly)(Quarterly) Payment Date (the "Class A-__
Stated Maturity") and the Redemption Date, if any, pursuant to
<PAGE>
Section 10.01 of the Indenture. Capitalized terms used but not defined herein
are as defined in the Indenture, which also contains rules as to construction
that shall be applicable herein.
The Issuer will pay interest on this Note at the rate per annum shown above
on each (Monthly)(Quarterly) Payment Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding (Monthly)(Quarterly) Payment Date (after giving
effect to all payments of principal made on the preceding (Monthly)(Quarterly)
Payment Date), subject to certain limitations contained in the last sentence of
Section 3.01 of the Indenture. Interest on this Note will accrue for each
(Monthly)(Quarterly) Payment Date from the Closing Date (in the case of the
first (Monthly)(Quarterly) Payment Date) (or from the most recent Monthly
Payment Date on which interest has been paid to but excluding such Monthly
Payment Date) (or from the first day of the (third) calendar month preceding the
month of the applicable (Monthly)(Quarterly) Payment Date to and including the
last day of (such) (the) calendar month (preceding the month of such Quarterly
Payment Date)). (Interest will be computed on the basis of a 360-day year of
twelve 30-day months.) (Interest will be computed on the basis of the actual
number of days in each accrual period divided by 360.) Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Note shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
Date:
DISTRIBUTION FINANCIAL SERVICES
[RV/BOAT] TRUST 199__-1,
By: BANKERS TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement,
By:___________________________________________
Authorized Signatory
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the within-
mentioned Indenture.
Date:___________ THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as Indenture
Trustee,
By:___________________________________________
Authorized Officer
<PAGE>
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-__ Asset Backed Notes (herein called the "Class A-__
Notes"), all issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Holders of the Notes. The Class A-__ Notes are subject to all terms of the
Indenture. In the event of any conflict or inconsistency between this Note and
the Indenture, the Indenture shall govern in all respects.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4
Notes, the Class A-5 Notes, the Class A-6 Notes, the Class A-7 Notes, the Class
A-8 Notes, the Class A-9 Notes and the Class A-10 Notes (together, the "Notes"),
are and will be equally and ratably secured, subject to the Indenture, by the
collateral pledged as security therefor as provided in the Indenture.
Principal of this Class A-__ Note will be payable in installments on each
(Monthly)(Quarterly) Payment Date in an aggregate amount described on the face
hereof, provided, that payments of principal of the Class A-__Notes will be
subject to the provisions that are set forth in the Indenture relating to the
allocations of distributions of principal as among the other Classes of Notes.
"(Monthly)(Quarterly) Payment Date" means the ____ day of each (month)
(November, February, May, August), or, if any such date is not a Business Day,
the next succeeding Business Day, commencing ______________ __, 199__.
As described above, the entire unpaid principal amount of this Note shall be
due and payable on the earlier of the Class A-__ Stated Maturity Date and the
Redemption Date, if any, pursuant to Section 10.01 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which an Event of Default shall have
occurred and be continuing and the Indenture Trustee or the Holders of Notes
representing not less than a majority of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. All principal payments on the Class A-__
Notes shall be made pro rata to the Class A-__ Noteholders entitled thereto.
Payments of interest on this Note due and payable on each
(Monthly)(Quarterly) Payment Date, together with the installment of principal,
if any, to the extent not in full payment of this Note, shall be made by check
mailed to the Person whose name appears as the Registered Holder of this Note
(or one or more Predecessor Notes) on the Note Register as of the close of
business on each Record Date. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any
(Monthly)(Quarterly) Payment Date shall be binding upon all future Holders of
this Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a (Monthly)
(Quarterly) Payment Date, then the Indenture Trustee, in the name of and on
behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such (Monthly)(Quarterly) Payment Date by
notice mailed or transmitted by facsimile prior to such
<PAGE>
(Monthly)(Quarterly) Payment Date, and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Trustee's principal Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-__ Interest Rate to the extent lawful.
The transfer and exchange of this Note are subject to the terms of the
Indenture.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees by accepting
the benefits of the Indenture that such Noteholder or Note Owner will not at any
time institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Note is issued with the
intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Note Owner by acceptance of a beneficial interest in a Note), agrees to treat
the Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
<PAGE>
Reference is hereby made to the Indenture with respect to provisions
governing amendments, consents and waivers relating thereto.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Issuer, which is absolute
and unconditional, to pay the principal of and interest on this Note at the
times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of The Chase Manhattan Bank in its
individual capacity, Bankers Trust Company in its individual capacity, any owner
of a beneficial interest in the Issuer, or any of their respective partners,
beneficiaries, agents, officers, directors, employees or successors or assigns
shall be personally liable for, nor shall recourse be had to any of them for,
the payment of principal of or interest on this Note or performance of, or
failure to perform, any of the covenants, obligations or indemnifications
contained in the Indenture. The Holder of this Note by its acceptance hereof
agrees that, except as expressly provided in the Basic Documents, in the case of
an Event of Default under the Indenture, the Holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided,
however, that nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
________________________________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________ attorney, to transfer said Note on __________ the
books kept for registration thereof, with full power of substitution in the
premises.
Dated: */
___________ ______________________________________
Signature Guaranteed:
*/
_____________________________________
_____________________________________
*/ NOTICE: The signature to this assignment must correspond with the name - of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT B
(Form of Note Depository Agreement)
Letter of Representations
(To be Completed by Issuer and Trustee)
__________________________________
(Name of Issuer)
_________________________________
(Name of Trustee)
_________________________________
(Date)
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street; 49th Floor
New York, NY 10041-0099
Re: _____________________________________________________
_____________________________________________________
_____________________________________________________
(Issue Description)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trustee will act as
trustee with respect to the Securities pursuant to an indenture dated as of
_____________, 1998 (the "Document"). ______________ (the "Underwriter") is
distributing the Securities through The Depository Trust Company ("DTC").
<PAGE>
To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trustee make the following representations to DTC:
1. Prior to closing on the Securities on _____________________, 199__,
there shall be deposited with DTC one Security certificate registered in the
name of DTC's nominee, Cede & Co., for each stated maturity of the Securities in
the face amounts set forth on Schedule A hereto, the total of which represents
100% of the principal amount of such Securities. If, however, the aggregate
principal amount of any maturity exceeds $200 million, one certificate will be
issued with respect to each $200 million of principal amount and an additional
certificate will be issued with respect to any remaining principal amount. Each
Security certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
2. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer or Trustee shall establish a record date for such
purposes (with no provision for revocation of consents or votes by subsequent
holders) and shall, to the extent possible, send notice of such record date to
DTC not less than 15 calendar days in advance of such record date. Notices to
DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization
Department at (212) 709-6896 or (212) 709-6897, and receipt of such notices
shall be confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to
this Paragraph by mail or by any other means shall be sent to DTC's
Reorganization Department as indicated in Paragraph 4.
3. In the event of a full or partial redemption, Issuer or Trustee shall
send a notice to DTC specifying: (a) the amount of the redemption or refunding;
(b) in the case of a refunding, the maturity date(s) established under the
refunding; and (c) the date such notice is to be mailed to Security holders or
published (the "Publication Date"). Such notice shall be sent to DTC by a
secure means (e.g., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before the
Publication Date. Issuer or Trustee shall forward such notice either in a
separate secure transmission for each CUSIP number or in a secure transmission
for multiple CUSIP numbers (if applicable) which includes a manifest or list of
each CUSIP number submitted in that transmission. (The party sending such
notice shall have a method to verify subsequently the use of such means and the
timeliness of such notice.) The Publication Date shall be not less than 30 days
nor more than 60 days prior to the redemption date or, in the case of an advance
refunding, the date that the proceeds are deposited in escrow. Notices to DTC
pursuant to this Paragraph by telecopy shall be sent to DTC's Call Notification
Department at (516) 227-4039 or (516) 227-4190. If the party sending the notice
does not receive a telecopy receipt from DTC confirming that the notice has
<PAGE>
been received, such party shall telephone (516) 227-4070. Notices to DTC
pursuant to this Paragraph by mail or by any other means shall be sent to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trustee
to Security holders specifying the terms of the tender and the Publication Date
of such notice shall be sent to DTC by a secure means in the manner set forth in
the preceding Paragraph. Notices to DTC pursuant to this Paragraph and notices
of other corporate actions by telecopy shall be sent to DTC's Reorganization
Department at (212) 709-1093 or (212) 709-1094, and receipt of such notices
shall be confirmed by telephoning (212) 709-6884. Notices to DTC pursuant to the
above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
5. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
6. Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized denomination
if less than $1,000 face value) payable on each payment date allocated as to the
interest and principal portions thereof preferably 5, but not less than 2,
business days prior to such payment date. Such notices, which shall also contain
the current pool factor, and special adjustments to principal/interest rates
(e.g., adjustments due to deferred interest or shortfall), and Trustee contact's
name and telephone number, shall be sent by telecopy to DTC's Dividend
Department at (212) 709-1723, or if by mail or by any other means to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695
7. (NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT THE
OTHER:) (The interest accrual period is record date to record date.) (The
interest accrual period is payment date to payment date.)
<PAGE>
8. Trustee must provide DTC, no later than noon (Eastern Time) on the
payment date, CUSIP numbers for each issue for which payment is being sent, as
well as the dollar amount of the payment for each issue. Notification of
payment details should be sent using automated communications.
9. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds, no later than 2:30 p.m.
(Eastern Time) on each payment date (in accordance with existing arrangements
between Issuer or Trustee and DTC). Absent any other arrangements between
Issuer or Trustee and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank
ABA 021000021
For credit to A/C The Depository Trust Company
Dividend Deposit Account 066-026776
Issuer or Trustee shall provide interest payment information to a standard
announcement service subscribed to by DTC. In the unlikely event that no such
service exists, Issuer or Trustee shall provide interest payment information
directly to DTC in advance of the interest payment date as soon as the
information is available. This information should be conveyed directly to DTC
electronically. If electronic transmission is not available, absent any other
arrangements between Trustee and DTC, such information should be sent by
telecopy to DTC's Dividend Department at (212) 709-1723 or (212) 709-1686, and
receipt of such notices shall be confirmed by telephoning (212) 709-1270.
Notices to DTC pursuant to the above by mail or by any other means shall be sent
to:
Manager, Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
10. DTC shall receive maturity and redemption payments allocated with
respect to each CUSIP number on the payable date in same-day funds by 2:30 p.m.
(Eastern Time). Absent any other arrangements between Trustee and DTC, such
payments shall be wired as follows:
The Chase Manhattan Bank
ABA 021000021
For credit to A/C The Depository Trust Company
Redemption Account 066-027306
in accordance with existing SDFS payment procedures in the manner set forth in
DTC's SDFS Paying Agent Operating Procedures, a copy of which has previously
been furnished to Trustee.
<PAGE>
11. DTC shall receive all reorganization payments and CUSIP-level detail
resulting from corporate actions (such as tender offers, remarketings, or
mergers) on the first payable date in same-day funds by 2:30 p.m. (Eastern
Time). Absent any other arrangements between Trustee and DTC, such payments
shall be wired as follows:
The Chase Manhattan Bank
ABA 021000021
For credit to A/C The Depository Trust Company
Reorganization Account 066-027608
12. DTC may direct Issuer or Trustee to use any other number or address as
the number or address to which notices or payments of interest or principal may
be sent.
13. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Trustee's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the
Securities outstanding, DTC, in its discretion: (a) may request Issuer or
Trustee to issue and authenticate a new Security certificate; or (b) may make an
appropriate notation on the Security certificate indicating the date and amount
of such reduction in principal except in the case of final maturity, in which
case the certificate will be presented to Issuer or Trustee prior to payment, if
required.
14. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trustee
shall notify DTC of the availability of certificates. In such event, Issuer or
Trustee shall issue, transfer, and exchange certificates in appropriate amounts,
as required by DTC and others.
15. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trustee (at which time DTC will confirm with Issuer or Trustee the aggregate
principal amount of Securities outstanding). Under such circumstances, at DTC's
request Issuer and Trustee shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Securities
to any DTC Participant having Securities credited to its DTC accounts.
16. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
17. Nothing herein shall be deemed to require Trustee to advance funds on
behalf of Issuer.
<PAGE>
Notes: Very truly yours,
A. If there is a Trustee (as
defined in this Letter of
Representations), Trustee as well (Issuer)
as Issuer must sign this Letter.
If there is no Trustee, in signing By:_________________________________
this Letter Issuer itself (Authorized Officer's Signature)
undertakes to perform all of the
obligations set forth herein.
(Trustee)
B. Schedule B contains statements
that DTC believes accurately By:_________________________________
describe DTC, the method of (Authorized Officer's Signature)
(Authorized Officer's Signature)
effecting book-entry transfers of
securities distributed through
DTC, and certain related matters.
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:___________________________________
cc: Underwriter
Underwriter's Counsel
<PAGE>
SCHEDULE A
(Describe Issue)
<PAGE>
CUSIP Principal Amount Maturity Date Interest Rate
SCHEDULE B
SAMPLE OFFICIAL STATEMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
PREPARED BY DTC--BRACKETED MATERIAL MAY BE APPLICABLE ONLY TO CERTAIN
ISSUES)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee). One fully-registered Security certificate
will be issued for (each issue of the Securities, (each) in the aggregate
principal amount of such issue, and will be deposited with DTC. (If, however,
the aggregate principal amount of (any) issue exceeds $200 million, one
certificate will be issued with respect to each $200 million of principal amount
and an additional certificate will be issued with respect to any remaining
principal amount of such issue.)
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of
<PAGE>
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
(6. Redemption notices shall be sent to Cede & Co. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.)
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, Trustee, or Issuer, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and interest to DTC is the responsibility of the
Issuer or Trustee, disbursement of such payments to Direct Participants shall be
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
(9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to Trustee (or
Tender/Remarketing Agent), and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the
Securities, on DTC's records, to Trustee (or Tender/Remarketing Agent). The
requirement for physical delivery of Securities in connection with an optional
tender or a mandatory purchase will be deemed satisfied when the ownership
rights in the Securities are transferred by Direct Participants
<PAGE>
on DTC's records and followed by a book-entry credit of tendered Securities to
Trustee (or Tender/Remarketing Agent's) DTC account.)
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and
delivered.
11. The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.
<PAGE>
RIDER AMENDING DTC LETTER OF REPRESENTATIONS -- BEO COLLATERALIZED MORTGAGE
---------------------------------------------------------------------------
OBLIGATION (CMO) WITHOUT OWNER OPTION TO REDEEM/OTHER ASSET-BACKED SECURITIES/
- ------------------------------------------------------------------------------
AND PASS-THROUGH CERTIFICATES
-----------------------------
As of March 9, 1998, DTC's Reorganization Department relocated and prior to
that, DTC's Dividend Department relocated to the 55 Water Street location.
Following are the new addresses and related telephone and facsimile numbers
referenced in the Letter of Representations.
THE FOLLOWING CHANGES RELATE TO PARAGRAPH 3 OF THE LETTER OF REPRESENTATIONS:
Old Telecopier Numbers Current Telecopier Numbers
(212) 709-6896 and (212) 709-6897 (212) 855-5181 and (212) 855-5182
The confirmation number (212) 709-6870 is now (212) 855-5202.
THE FOLLOWING CHANGES RELATE TO PARAGRAPH 5 OF THE LETTER OF REPRESENTATIONS:
Old Telecopier Numbers Current Telecopier Numbers
(212) 709-1093 and (212) 709-1094 (212) 855-5278
The confirmation number (212) 709-6884 is now (212) 855-5280.
The new address is Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
55 Water Street 50th Floor
New York, NY 10041-0099
THE FOLLOWING CHANGES RELATE TO PARAGRAPH 7 OF THE LETTER OF REPRESENTATIONS:
Old Telecopier Numbers Current Telecopier Numbers
(212) 709-1723 (212) 855-4555
The new address is Manager; Announcements
Dividend Department
The Depository Trust Company
55 Water Street 25th Floor
New York, NY 10041-0099
THE FOLLOWING CHANGES RELATE TO PARAGRAPH 9 OF THE LETTER OF REPRESENTATIONS:
Old Telecopier Numbers Current Telecopier Numbers
(212) 709-1723 and (212) 709-1686 (212) 855-4555 and (212) 855-4556
The confirmation number (212) 709-1270 is now (212) 855-4550.
<PAGE>
The new address for this Paragraph 9 is the same as that listed above,
referenced in Paragraph 7.
THE FOLLOWING CHANGES RELATE TO PARAGRAPH 10 OF THE LETTER OF REPRESENTATIONS:
Such information shall be conveyed by automated notification. If the
circumstance prevent the funds paid to Cede & Co., as nominee of DTC, by 2:30
p.m. ET from equaling the dollar amount associated with detail payments by 12:00
noon ET Issuer or Agent must provide CUSIP-level reconciliation to DTC no later
than 2:30 p.m. ET. Reconciliation can be provided by automated means or written
format.
THE FOLLOWING CHANGES RELATE TO PARAGRAPH 11 OF THE LETTER OF REPRESENTATIONS:
To facilitate the payment standards, Issuer is required to remit free funds to
Agent by 1:00 p.m. ET on each payment date, or at such earlier time as required
by Agent to guarantee timely credit to the Dividend Deposit Account of Cede &
Co.
THE FOLLOWING CHANGES RELATE TO PARAGRAPH 12 OF THE LETTER OF REPRESENTATIONS:
To facilitate the payment standards, Issuer is required to remit free funds to
Agent by 1:00 p.m. ET on each payment date, or at such earlier time as required
by Agent to guarantee timely credit to the Redemption Deposit Account of Cede &
Co. Issuer or Agent shall deliver Cusip-level detail regarding such payments to
DTC no later than 2:30 p.m. ET on each payment date.
THE FOLLOWING CHANGES RELATE TO PARAGRAPH 13 OF THE LETTER OF REPRESENTATIONS:
To facilitate the payment standards, Issuer is required to remit free funds to
Agent by 1:00 p.m. ET on each payment date, or at such earlier time as required
by Agent to guarantee timely credit to the Reorganization Deposit Account of
Cede & Co. Issuer or Agent shall deliver Cusip-level detail regarding such
payments to DTC no later than 2:30 p.m. ET on each payment date.
<PAGE>
[Letterhead of Mayer, Brown & Platt]
Exhibit 5.1
September 25, 1998
Deutsche Recreational Asset Funding Corporation
655 Maryville Centre Drive
St. Louis, Missouri 63141
Re: Deutsche Recreational Asset Funding Corporation
Registration Statement on Form S-3 (No. 333-56303)
Ladies and Gentlemen:
We have acted as special counsel for Deutsche Recreational Asset Funding
Corporation, a Nevada corporation (the "Company"), in connection with the
preparation of the Registration Statement on Form S-3, File No. 333-56303
(together with the exhibits and amendments thereto, the "Registration
Statement") filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), for the registration under the
Act of certain series (of Asset Backed Notes (the "Notes") and/or Asset Backed
Certificates ( the "Certificates" and, together with the Notes, the
"Securities").
We are familiar with the proceedings to date in connection with the
proposed issuance and sale of the Notes and Certificates, and in order to
express our opinion hereinafter stated we have examined and relied upon the
Registration Statement and, in each case as filed with the Registration
Statement, the forms of Pooling and Servicing Agreement, Trust Agreement,
Transfer and Servicing Agreement, Indenture, Receivables Transfer Agreement,
Administration Agreement, Notes and Certificates (the "Operative Documents").
Terms used herein without definition have the meanings given to such terms in
the Registration Statement. We have also examined such statutes, corporate
records and other instruments as we have deemed necessary for the purposes of
this opinion.
<PAGE>
Based on and subject to the foregoing, we are of the opinion that, with
respect to the Certificates and/or Notes of any series, when: (a) the
Registration Statement becomes effective pursuant to the provisions of the Act,
(b) the amount, price, interest rate and other principal terms of such
Securities have been fixed by or pursuant to authorization of the Board of
Directors of the Company, (c) the Operative Documents relating to such series
have each been duly completed, authorized, executed and delivered by the parties
thereto substantially in the form filed as an exhibit to the Registration
Statement reflecting the terms established as described above, (d) if such Trust
is a Delaware business trust, the Certificate of Trust for such Trust has been
duly executed by the related trustee and timely filed with the Secretary of
State of Delaware, (e) the related Indenture has been duly qualified under the
Trust Indenture Act of 1939, as amended, (f) such Securities have been duly
executed and issued by the related Trust and authenticated by each applicable
trustee, and sold by the Company or by the Trust, at the direction of the
Company as applicable, and (g) payment of the agreed consideration for such
Securities shall have been received by the Trust, all in accordance with the
terms and conditions of the related Operative Documents and a definitive
purchase, underwriting or similar agreement with respect to such Securities and
in the manner described in the Registration Statement: (i) such Certificates
will have been duly authorized by all necessary action of the Trust and will be
legally issued, fully paid and nonassessable and (ii) such Notes will have been
duly authorized by all necessary action of the Trust and will be legally issued
and binding obligations of the Trust and entitled to the benefits afforded by
the related Indenture.
Our opinions expressed herein are limited to the federal laws of the United
States and the laws of the State of Illinois.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the use
of our name therein.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
-2-
<PAGE>
Exhibit 8.1
[Letterhead of Mayer, Brown & Platt]
September 25, 1998
Deutsche Recreational Asset Funding Corporation
645 Marysville Centre Drive
St. Louis, Missouri 63141
Re: Deutsche Recreational Asset Funding
Corporation (Depositor);
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special tax counsel for Deutsche Recreational Asset
Funding Corporation, a Nevada corporation (the "Depositor"), in connection with
the preparation of the Registration Statement on Form S-3, File No. 333-56303
(as amended, the "Registration Statement") filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
for the registration under the Act of certain series (each, a "Series") of Asset
Backed Notes (the "Notes") and/or Asset Backed Certificates (the "Certificates"
and, together with the Notes, the "Securities"), each such Series representing
an undivided interest in a trust (the "Trust") to be formed pursuant to either
(i) a Trust Agreement between the Depositor and the Trustee specified in the
related Prospectus Supplement or (ii) a Pooling and Servicing Agreement among
the Trustee, the Depositor and Deutsche Financial Services Corporation, as
Servicer. Capitalized terms used herein without definitions have the meanings
ascribed to them in the Registration Statement.
We hereby confirm that the statements set forth in the prospectus relating
to the Securities (the "Prospectus") forming a part of the Registration
Statement under the headings "Summary of Terms -- Tax Status" and "Federal
Income Tax Consequences," and the statements set forth in the form of prospectus
supplement relating to the Securities (the "Prospectus Supplement") forming a
part of the Registration Statement under the headings "Summary of Terms -- Tax
Status" and "Federal Income Tax Consequences," which statements have been
prepared by us, to the extent that they constitute matters of law or legal
conclusions with respect thereto relating to federal tax matters, are correct in
all material respects, and we hereby confirm the opinions set forth therein.
There can be no assurance, however, that the tax conclusions presented therein
will not be successfully challenged by the IRS, or significantly altered by new
legislation, changes in IRS positions or judicial decisions, any of which
challenges or alterations may be applied retroactively with respect to completed
transactions.
<PAGE>
Deutsche Recreational Asset Funding Corporation
September 25, 1998
Page 2
We note that the Prospectus and form of Prospectus Supplement do not relate
to a specific transaction. Accordingly, the above-referenced description of
federal income tax consequences and opinions may, under certain circumstances,
require modification in the context of an actual transaction. We hereby
undertake, for so long as we continue to be employed as special tax counsel to
the Depositor, to include any such modifications in a subsequently filed tax
opinion.
The opinion set forth in this letter is based upon the applicable
provisions of the Internal Revenue Code of 1986, as amended, Treasury
regulations promulgated and proposed thereunder, current positions of the
Internal Revenue Service (the "IRS") contained in published Revenue Rulings and
Revenue Procedures, current administrative positions of the IRS and existing
judicial decisions. No tax rulings will be sought from the IRS with respect to
any of the matters discussed herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are
"experts" within the meaning of the term used in the Act or the rules and
regulations of the Securities and Exchange Commission issued thereunder, with
respect to any part of the Registration Statement, including this opinion as an
exhibit or otherwise.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
<PAGE>
Exhibit 8.2
August ___, 1998
To the Parties Listed on Schedule A
Re: Deutsche Recreational Asset Funding Corporation
Registration Statement on Form S-3
Registration No. 333-56303; as Amended by
Amendment Nos. 1 and 2
Gentlemen:
We have acted as Special State Tax Counsel to Deutsche Recreational
Asset Funding Corporation (the "Company") in connection with the Company's
Registration Statement filed on Form S-3 (Registration No. 333-56303) and dated
June 8, 1998, as amended by Amendment No. 1 dated August 12, 1998, and Amendment
No. __ dated August ___, 1998 (collectively the "Registration Statement"). You
have asked our opinion with respect to certain State and local tax matters
contained in various Prospectuses and various Prospectus Supplements which are
included as exhibits to the Registration Statement (each such Prospectus and
Prospectus Supplement being hereinafter referred to as the "Prospectus"). We
understand that Amendment No. 2 to the Registration Statement will be filed with
the Securities and Exchange Commission on ____________ ___, 1998.
In our opinion, the description of the California, Illinois and
Missouri income tax aspects of the offering contained in the Prospectus under
the heading "State and Local Tax Consequences" is an accurate description of
certain California, Illinois and Missouri tax consequences of the Trust and the
holders of the Certificates and Notes, described therein.
Our opinion is based on the Statutes of California, Illinois and
Missouri, rules and regulations promulgated thereunder, and interpretations
thereof existing on this date. Our opinion represents judgments concerning
complex issues and is not binding upon any taxing authority. No assurance can be
given that the California, Illinois or Missouri tax treatment described in the
Prospectus will not be challenged, or that any such challenge would not be
successful.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to Bryan Cave LLP in the Prospectus
under the heading "State and Local Tax Consequences."
Very truly yours,
BRYAN CAVE LLP
<PAGE>
Schedule A
Deutsche Bank Securities Inc.
31 West 52nd Street
New York, NY 10019
Deutsche Financial Services Corporation
655 Maryville Centre Drive
St. Louis, MO 63141
Ganis Credit Corporation
660 Newport Center Drive
Newport Beach, CA 92660
Deutsche Recreational Asset Funding Corporation
665 Maryville Centre Drive
St. Louis, MO 63141
<PAGE>
EXHIBIT 10.1
TRANSFER AND SERVICING AGREEMENT
among
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199_ -_,
as Issuer,
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION,
as Depositor
and
DEUTSCHE FINANCIAL SERVICES CORPORATION,
as Servicer
Dated as of __________, 199_
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
<TABLE>
<S> <C> <C>
SECTION 1.01. Definitions..................................................... 1
SECTION 1.02. Other Definitional Provisions................................... 1
ARTICLE II
Contribution of Receivables
SECTION 2.01. Contribution.................................................... 2
SECTION 2.02. Intent of the Parties........................................... 2
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties with Respect to the Receivables.. 3
SECTION 3.02. Custody of Receivable Files..................................... 5
SECTION 3.03. Duties of Servicer as Custodian................................. 5
SECTION 3.04. Instructions; Authority To Act.................................. 6
SECTION 3.05. Custodian's Indemnification..................................... 6
SECTION 3.06. Effective Period and Termination................................ 6
ARTICLE IV
Administration and Servicing of Receivables
SECTION 4.01. Duties of Servicer.............................................. 7
SECTION 4.02. Collection and Allocation of Receivable Payments................ 8
SECTION 4.03. Realization upon Receivables.................................... 8
SECTION 4.04. Physical Damage Insurance....................................... 8
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.......... 9
SECTION 4.06. Covenants of Servicer........................................... 9
SECTION 4.07. Purchase of Receivables upon Breach............................. 9
SECTION 4.08. Servicing Fee................................................... 9
SECTION 4.09. Servicer's Certificate..........................................10
SECTION 4.10. Annual Statement as to Compliance; Notice of Default............10
SECTION 4.11. Annual Independent Certified Public Accountants' Report.........10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.12. Access to Certain Documentation and Information
Regarding Receivables.......................................... 11
SECTION 4.13. Servicer Expenses.............................................. 11
SECTION 4.14. Appointment of Subservicer..................................... 11
SECTION 4.15. Fidelity Bond; Errors and Omissions Insurance.................. 12
ARTICLE V
Distributions; Statements to Noteholders and Certificateholders
SECTION 5.01. Establishment of Trust Accounts................................ 12
SECTION 5.02. Collections.................................................... 15
SECTION 5.03. Application of Collections..................................... 15
SECTION 5.04. Advances....................................................... 16
SECTION 5.05. Additional Deposits............................................ 16
SECTION 5.06. Distributions.................................................. 16
SECTION 5.07. Reserve Account................................................ 18
SECTION 5.08. Statements to Noteholders and Certificateholders............... 18
ARTICLE VI
The Depositor
SECTION 6.01. Representations of Depositor................................... 19
SECTION 6.02. Corporate Existence............................................ 20
SECTION 6.03. Liability of the Depositor..................................... 21
SECTION 6.04. Indemnification................................................ 21
SECTION 6.05. Merger or Consolidation of, or Assumption of the
Obligations of, Depositor...................................... 22
SECTION 6.06. Limitation on Liability of Depositor and Others................ 22
SECTION 6.07. Depositor May Own Notes and Certificates....................... 23
SECTION 6.08. Pennsylvania Motor Vehicle Sales Finance Act License........... 23
ARTICLE VII
The Servicer
SECTION 7.01. Representations and Warranties of the Servicer................. 23
SECTION 7.02. Indemnities, etc. of Servicer.................................. 24
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer....................................... 25
SECTION 7.04. Limitation on Liability of Servicer and Others................. 26
SECTION 7.05. DFS Not To Resign as Servicer.................................. 26
</TABLE>
ii
<PAGE>
<TABLE>
ARTICLE VIII
Servicer Default
<S> <C> <C>
SECTION 8.01. Servicer Default..................................................27
SECTION 8.02. Appointment of Successor..........................................28
SECTION 8.03. Repayment of Advances.............................................29
SECTION 8.04. Notification to Noteholders.......................................29
SECTION 8.05. Waiver of Past Defaults...........................................29
ARTICLE IX
Termination
SECTION 9.01. Optional Purchase of All Receivables..............................29
ARTICLE X
Miscellaneous
SECTION 10.01. Amendment.........................................................31
SECTION 10.02. Protection of Title to Trust; Change of Name, Identity,
Corporate Structure or Location of the Depositor, Etc.............32
SECTION 10.03. Notices...........................................................34
SECTION 10.04. Assignment........................................................34
SECTION 10.05. Limitations on Rights of Others...................................34
SECTION 10.06. Severability......................................................34
SECTION 10.07. Separate Counterparts.............................................34
SECTION 10.08. Headings..........................................................35
SECTION 10.09. Governing Law; Submission to Jurisdiction.........................35
SECTION 10.10. Nonpetition Covenants.............................................35
SECTION 10.11. Limitation of Liability of Owner Trustee and Indenture Trustee....35
SECTION 10.12. Waiver............................................................36
SECTION 10.13. Separate Corporate Existence......................................36
APPENDIX A Definitions (Section 1.01)
SCHEDULE A Schedule of Receivables (Sections 3.01(viii), 3.02(a)(viii))
SCHEDULE B Location of the Receivable Files (Section 3.03(b))
EXHIBIT A-1 Form of Distribution Statement to Noteholders (Section 5.08)
EXHIBIT A-2 Form of Distribution Statement to Certificateholders
(Section 5.08)
EXHIBIT B Form of Servicer's Certificate (Section 4.09)
EXHIBIT C Final Certification of Custodian (Section 3.02)
EXHIBIT D DFS/Ganis Transfer Agreement
</TABLE>
iii
<PAGE>
EXHIBIT E Ganis/Depositor Transfer Agreement
||
iv
<PAGE>
TRANSFER AND SERVICING AGREEMENT dated as of ___________], 199_ (this
"Agreement") among DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199_-_, a
[ ] trust (the "Issuer"), DEUTSCHE RECREATIONAL ASSET FUNDING
CORPORATION, a Nevada corporation, as Depositor (the "Depositor"), and DEUTSCHE
FINANCIAL SERVICES CORPORATION, a Nevada corporation ("DFS"), as Servicer.
WHEREAS, the Issuer desires to acquire a portfolio of receivables from the
Depositor arising in connection with recreational vehicle retail installment
sale contracts and loan contracts;
WHEREAS, the Depositor is willing to contribute such receivables to the
Issuer, and
WHEREAS, the Depositor acquired such receivables from the Transferor
pursuant to the Ganis/Depositor Transfer Agreement, and the Transferor acquired
certain of such receivables from DFS pursuant to the DFS/Ganis Transfer
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Except as otherwise specified herein or as the
context may otherwise require, capitalized terms used herein have the respective
meanings assigned thereto in Appendix A for all purposes of this Agreement.
SECTION 1.02. Other Definitional Provisions.
(a) All terms defined in Appendix A attached hereto shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
<PAGE>
(c) The words "hereof", "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, amended and
restated or otherwise modified and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments incorporated
therein; references to a Person are also to its permitted successors and
assigns.
(f) Each reference to the "close of business" on a particular day shall
mean 5:00 p.m. Pacific Time on such day.
ARTICLE II
Contribution of Receivables
---------------------------
SECTION 2.01. Contribution. The Depositor does hereby transfer, assign, set
over and otherwise convey to the Issuer, as a capital contribution, without
recourse (subject to the obligations of the Depositor set forth herein), all
right, title and interest of the Depositor in, to and under (but none of the
obligations of the Depositor under):
(a) the Receivables, the DFS/Ganis Transfer Agreement and the other
Transferor Conveyed Property;
(b) the Ganis/Depositor Transfer Agreement; and
(c) the proceeds of any and all of the foregoing.
The Receivables and other items covered by clauses (a)-(c) of this Section
2.01 shall be referred to collectively as the "Depositor Conveyed Property".
SECTION 2.02. Intent of the Parties.
(a) The Depositor and the Issuer intend that the conveyance by the
Depositor to the Issuer of the right, title and interest of the Depositor in, to
and under the Receivables and the other Depositor Conveyed Property pursuant to
this Agreement shall constitute a capital
2
<PAGE>
contribution and not a loan. However, in the event that, notwithstanding the
intent of the parties, such conveyance is deemed to be a transfer for security
and not a capital contribution, then (i) the Depositor shall be deemed to have
granted, and in such event does hereby grant, to the Issuer a first priority
security interest in all of its right, title and interest in, to and under the
Depositor Conveyed Property, and (ii) this Agreement shall constitute a security
agreement under applicable law with respect to such conveyance. If such
conveyance is deemed to be a transfer for security and not a capital
contribution, the Depositor consents to the Issuer hypothecating and
transferring such security interest in favor of any assignee or assignees and
transferring the obligations secured thereby to such assignee or assignees.
(b) No party hereto shall take any action that is inconsistent with the
ownership of the Depositor Conveyed Property by the Issuer, and each party
hereto shall inform any Person inquiring about the Receivables that the Issuer
owns the Depositor Conveyed Property. Without limiting the generality of the
foregoing, for accounting, tax and other purposes the Depositor and the Issuer
shall treat the transfer of the Depositor Conveyed Property by the Depositor to
the Issuer as a capital contribution by the Depositor to the Issuer.
Notwithstanding any other provision of this Agreement, no party hereto shall
have any recourse to DFS, the Transferor, the Depositor or the Servicer on
account of the financial inability of any Obligor to make payments in respect of
a Receivable.
ARTICLE III
The Receivables
---------------
SECTION 3.01 Representations and Warranties with Respect to the
Receivables. DFS has made the representations and warranties set forth in
Section 3.01 of the DFS/Ganis Transfer Agreement, and has consented to the
assignment by the Transferor to the Depositor and by the Depositor to the Issuer
of the Transferor's rights with respect thereto. The Transferor has made the
representations and warranties set forth in Section 3.01 of the Ganis/Depositor
Transfer Agreement, and has consented to the assignment by the Depositor to the
Issuer of the Depositor's rights with respect thereto. Pursuant to Section 2.01
of this Agreement, the Depositor has transferred to the Issuer all of the
Depositor's right, title and interest in, to and under the DFS/Ganis Transfer
Agreement and the Ganis/Depositor Transfer Agreement, which shall be understood
to include the representations and warranties of DFS and the Transferor therein,
upon which the Issuer relies in accepting the Receivables, together with all
rights of the Depositor with respect to any breach thereof, including the right
to require DFS or the Transferor, as the case may be, to purchase Receivables in
accordance with the DFS/Ganis Transfer Agreement or the Ganis/Depositor
Transferor Agreement, as the case may be.
The Depositor makes the following representations and warranties as to the
Receivables on which the Issuer is deemed to have relied in acquiring the
Receivables. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date, but shall survive the
transfer and assignment of the Receivables to the Issuer and the pledge thereof
to the Indenture Trustee pursuant to the Indenture.
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(a) Title. No Receivable has been sold, transferred, assigned or pledged
by the Depositor to any Person other than the Issuer. Immediately prior to the
transfer and assignment by the Depositor to the Issuer, the Depositor had good
and marketable title to each Receivable, free and clear of all Liens and rights
of others and, immediately upon the transfer thereof, the Issuer shall have good
and marketable title to each Receivable, free and clear of all Liens and rights
of others; and such transfer has been perfected under the UCC.
(b) All Filings Made. All filings (including UCC filings) necessary in any
jurisdiction to give (i) the Issuer a first perfected ownership interest in the
Receivables and (ii) the Indenture Trustee a first perfected security interest
in the Receivables have been made.
Upon discovery by any party hereto of a breach of any of the
representations and warranties of the Depositor set forth in this Section, of
the Transferor set forth in Section 3.01 of the Ganis/Depositor Transfer
Agreement or of DFS set forth in Section 3.01 of the DFS/Ganis Transfer
Agreement, in each case which materially and adversely affects the value of the
Receivables or the interest therein of the Issuer or the Indenture Trustee (or
which materially and adversely affects the interest of the Issuer or the
Indenture Trustee in the related Receivable in the case of a representation and
warranty relating to a particular Receivable), the party discovering such breach
shall give prompt written notice to the other parties hereto. On the last day of
the Collection Period following the Collection Period during which the Depositor
discovers or receives notice of any such breach of any such representation or
warranty, if such breach shall not have been cured in all material respects by
such last day, then the Depositor shall purchase (and, if applicable, the
Depositor shall enforce the obligation of DFS, under the DFS/Ganis Transfer
Agreement, or Ganis, under the Ganis/Depositor Transfer Agreement, to purchase)
such Receivable from the Issuer as of such last day at a price equal to the
Purchase Amount of such Receivable, which price the Depositor shall remit in the
manner specified in Section 5.05; provided, however, that the obligation of the
Depositor to purchase any Receivable that arises solely as a result of a breach
of the representations and warranties of DFS or the Transferor under the
DFS/Ganis Transfer Agreement or the Ganis/Depositor Agreement, as the case may
be, is subject to the payment of the Purchase Amount by DFS or the Transferor in
accordance with the DFS/Ganis Transfer Agreement or the Ganis/Depositor Transfer
Agreement, as the case may be. Subject to the indemnification provisions
contained in the last paragraph of this Section, the sole remedy of the Issuer,
the Owner Trustee or the Indenture Trustee with respect to a breach of
representations and warranties of the Depositor set forth in this Section shall
be to require the Depositor to purchase Receivables pursuant to this Section,
subject to the conditions contained herein; provided that this Section shall not
limit the right of any party hereto to enforce (or to cause the Depositor to
enforce) the obligation of DFS or the Transferor to purchase Receivables
pursuant to the DFS/Ganis Transfer Agreement or the Ganis/Depositor Transfer
Agreement, as the case may be.
The Depositor shall indemnify the Issuer, the Owner Trustee and the
Indenture Trustee and hold each harmless against any loss, damages, penalties,
fines, forfeitures, legal fees and related costs, judgments, and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach of the Depositor's
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representations and warranties contained in this Agreement; provided that the
Depositor shall not be liable for any indirect damages or for any loss, damage,
penalty, fine, forfeiture, legal fees and related costs, judgments and other
costs and expenses caused by the wilful misconduct of the Issuer, the Owner
Trustee or the Indenture Trustee.
SECTION 3.02. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Issuer hereby
revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act for the benefit of the Issuer and the Indenture Trustee as
custodian of the following documents or instruments which are hereby or shall
hereby be constructively delivered to the Indenture Trustee, as pledgee of the
Issuer, as of the Closing Date with respect to each Receivable:
(a) the fully executed original Receivable;
(b) a fully executed assignment of the Receivable in blank or from the
related Dealer to DFS or the Transferor, as the case may be, if such Receivable
was acquired by DFS or the Transferor, as the case may be, from a Dealer.
(c) a certificate of physical damage insurance, application form for such
insurance signed by the Obligor or a signed representation letter from the
Obligor named in the Receivable pursuant to which the Obligor has agreed to
obtain physical damage insurance for the Financed Vehicle, or copies thereof;
(d) the Lien Certificate or application therefor or a certification from
the Servicer that it has received confirmation from an authorized official of
the appropriate governmental office of the existence of the first lien of DFS or
the Transferor with respect to the related Financed Vehicle; and
(e) a credit application signed by the Obligor, or a copy thereof.
Within 120 days after the Closing Date, the Servicer, as custodian, shall
ascertain whether all of the Receivable Files are in its possession, and shall
deliver to the Indenture Trustee a certification ("Final Certification")
substantially in the form attached hereto as Exhibit C hereto. During the term
of this Agreement, in the event the Servicer, as custodian, discovers any defect
with respect to the Receivable File, the Servicer, as custodian, shall give
written specification of such defect to the Indenture Trustee.
SECTION 3.03. Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer shall hold the Receivable Files as custodian
for the benefit of the Issuer and the Indenture Trustee and maintain such
accurate and complete accounts, records and computer systems pertaining to each
Receivable File as shall enable the Issuer to comply with this Agreement. In
performing its duties as custodian the Servicer shall act with reasonable care,
using that degree of skill and attention that the Servicer exercises with
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respect to the receivable files relating to all comparable recreational vehicle
receivables that the Servicer services for itself or others. The Servicer shall
promptly report to the Issuer and the Indenture Trustee any failure on its part
to hold the Receivable Files and maintain its accounts, records and computer
systems as herein provided and shall promptly take appropriate action to remedy
any such failure.
(b) Maintenance of and Access to Records. The Servicer shall maintain each
Receivable File at one of its offices specified in Schedule B or at such other
office as shall be specified to the Issuer and the Indenture Trustee by written
notice not later than 90 days after any change in location. The Servicer shall
make available to the Issuer and the Indenture Trustee or their respective duly
authorized representatives, attorneys or auditors a list of locations of the
Receivable Files, and access to such Receivable Files and the related accounts,
records and computer systems maintained by the Servicer at such times during
normal business hours as the Issuer or the Indenture Trustee shall instruct.
Access to Receivable Files by Noteholders, Note Owners, Certificateholders and
Certificate Owners is covered by Section 4.12. Nothing in this Section shall
affect the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors and the failure of the Servicer
to provide access to information as a result of such obligation shall not
constitute a breach of this Section.
(c) Release of Documents. Upon written instruction from the Indenture
Trustee, the Servicer shall release any Receivable File to the Indenture
Trustee, the Indenture Trustee's agent or the Indenture Trustee's designee, as
the case may be, at such place or places as the Indenture Trustee may designate,
as soon as practicable following the Servicer's receipt of such written
instruction.
SECTION 3.04 Instructions; Authority To Act. The Servicer shall be deemed
to have received proper instructions with respect to the Receivable Files upon
its receipt of written instructions signed by a Trust Officer of the Indenture
Trustee.
SECTION 3.05 Custodian's Indemnification. The Servicer as custodian shall
indemnify the Trust, the Owner Trustee and the Indenture Trustee and each of
their respective officers, directors, employees and agents for any and all
liabilities, obligations, losses, compensatory damages, payments, costs or
expenses of any kind whatsoever that may be imposed on, incurred by or asserted
against the Trust, the Owner Trustee or the Indenture Trustee or any of their
respective officers, directors, employees and agents as the result of any
improper act or omission in any way relating to the maintenance and custody of
the Receivable Files by the Servicer as custodian thereof; provided, however,
that the Servicer shall not be liable to the Owner Trustee for any portion of
any such amount resulting from the willful misfeasance, bad faith or negligence
of the Owner Trustee, and the Servicer shall not be liable to the Indenture
Trustee for any portion of any such amount resulting from the willful
misfeasance, bad faith or negligence of the Indenture Trustee.
SECTION 3.06 Effective Period and Termination. The Servicer's appointment
as custodian shall become effective as of the Cutoff Date and shall continue in
full force and effect
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until terminated pursuant to this Section. If DFS shall resign as Servicer in
accordance with Article VII of this Agreement or if all of the rights and
obligations of any Servicer shall have been terminated pursuant to Section 8.01,
the appointment of such Servicer as custodian shall be terminated by the
Indenture Trustee or by the Holders of Notes evidencing not less than 25% of the
Outstanding Amount of the Notes or, if Notes have been paid in full, by the
Owner Trustee or by Holders of Certificates evidencing not less than 25% of the
Certificate Balance, in the same manner as the Indenture Trustee or such Holders
may terminate the rights and obligations of the Servicer under Section 8.01. The
Indenture Trustee or, with the consent of the Indenture Trustee, the Owner
Trustee may terminate the Servicer's appointment as custodian, with cause, at
any time upon written notification to the Servicer and, without cause, upon 30
days' prior written notification to the Servicer. As soon as practicable after
any termination of such appointment, the Servicer shall deliver the Receivable
Files to the Indenture Trustee or the Indenture Trustee's agent at such place or
places as the Indenture Trustee may reasonably designate.
ARTICLE IV
Administration and Servicing of Receivables
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SECTION 4.01 Duties of Servicer. The Servicer, for the benefit of the
Issuer (to the extent provided herein), shall manage, service, administer and
make collections on the Receivables (other than Purchased Receivables) with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable recreational vehicle receivables that
it services for itself or others. The Servicer's duties shall include collection
and posting of all payments, responding to inquiries of Obligors on such
Receivables, investigating delinquencies, sending payment notifications to
Obligors, reporting tax information to Obligors, accounting for collections,
furnishing monthly and annual statements to the Owner Trustee and the Indenture
Trustee with respect to distributions and making Advances pursuant to Section
5.04. Subject to the provisions of Section 4.02, the Servicer shall follow its
customary standards, policies and procedures in performing its duties as
Servicer. Without limiting the generality of the foregoing, the Servicer is
authorized and empowered to execute and deliver, on behalf of itself, the
Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to such Receivables or to the Financed Vehicles
securing such Receivables. If the Servicer shall commence a legal proceeding to
enforce a Receivable, the Issuer (in the case of a Receivable other than a
Purchased Receivable) shall thereupon be deemed to have automatically assigned,
solely for the purpose of collection, such Receivable to the Servicer. If in any
enforcement suit or legal proceeding it shall be held that the Servicer may not
enforce a Receivable on the grounds that it shall not be a real party in
interest or a holder entitled to enforce such Receivable, the Owner Trustee
shall, at the Servicer's expense and direction, take steps to enforce such
Receivable, including bringing suit in its name or the name of the Owner
Trustee, the Indenture Trustee, the Certificateholders or the Noteholders. The
Owner Trustee shall upon the written
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request of the Servicer furnish the Servicer with any powers of attorney and
other documents reasonably necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder.
SECTION 4.02 Collection and Allocation of Receivable Payments. The Servicer
shall make reasonable efforts to collect all payments called for under the terms
and provisions of the Receivables as and when the same shall become due and
shall follow such collection procedures as it follows with respect to all
comparable recreational vehicle receivables that it services for itself or
others. The Servicer may allocate collections between principal and interest in
accordance with the customary servicing procedures it follows with respect to
all comparable recreational vehicle receivables that it services for itself or
others. The Servicer may grant extensions, rebates or adjustments on a
Receivable, which shall not, for the purposes of this Agreement, modify the
original due dates (except that DFS as Servicer may, for administrative
purposes, modify the due date of a Receivable to a different date in the same
month, which date shall be reflected in its servicing records) or amounts of the
originally scheduled payments of interest on Receivables; provided, however,
that if the Servicer extends the date for final payment by the Obligor of any
Receivable beyond the Final Scheduled Maturity Date, it shall promptly purchase
the Receivable from the Issuer in accordance with the terms of Section 4.07. The
Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing a Receivable. The
Servicer shall not agree to any alteration of the originally scheduled payments
on any Receivable.
SECTION 4.03 Realization upon Receivables. On behalf of the Issuer, the
Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of the Financed
Vehicles securing any Receivable as to which the Servicer shall have determined
eventual payment in full is unlikely. The Servicer shall follow such customary
and usual practices and procedures as it shall deem necessary or advisable in
its servicing of the Receivables, which may include reasonable efforts to
realize upon any recourse to Dealers and selling the Financed Vehicle at public
or private sale. The Servicer shall be entitled to reimbursement out of
recoveries on such Defaulted Receivable for its reasonable, out-of-pocket costs
and expenses incurred in realizing upon any Financed Vehicle securing any
Receivable that becomes a Defaulted Receivable or in attempting to repossess any
Financed Vehicle and in prosecuting legal action against any Obligor in respect
of any Receivable. The foregoing shall be subject to the provision that, in any
case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with the repair or the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession shall increase the Liquidation Proceeds by an amount greater
than the amount of its expenses in connection with such repair and/or
repossession.
SECTION 4.04 Physical Damage Insurance. The Servicer shall, in accordance
with its customary servicing procedures, require that each Obligor shall have
obtained physical damage insurance covering the Financed Vehicle as of the
execution of the Receivable.
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SECTION 4.05 Maintenance of Security Interests in Financed Vehicles. The
Servicer shall, in accordance with its customary servicing procedures, take such
steps as are necessary to maintain perfection of the security interest created
by each Receivable in the related Financed Vehicle. The Servicer is hereby
authorized to take such steps as are necessary to re-perfect such security
interest on behalf of the Issuer and the Indenture Trustee in the event of the
relocation of a Financed Vehicle or for any other reason.
SECTION 4.06 Covenants of Servicer. The Servicer shall not release the
Financed Vehicle securing any Receivable from the security interest granted by
such Receivable in whole or in part (except in the event of payment in full by
the Obligor thereunder or repossession, or except as ordered by a court of
competent jurisdiction), nor shall the Servicer impair the rights of the Issuer,
the Indenture Trustee, the Certificateholders or the Noteholders in such
Receivable, nor shall the Servicer increase the number of scheduled payments due
under a Receivable.
SECTION 4.07 Purchase of Receivables upon Breach. The Servicer or the Owner
Trustee shall inform the other party and the Indenture Trustee and the Depositor
promptly, in writing, upon the discovery of any breach of the Servicer's
obligations under Section 4.02, 4.05 or 4.06. Unless the breach shall have been
cured by the last day of the second Collection Period following such discovery
(or, at the Servicer's election, the last day of the first following Collection
Period), the Servicer shall purchase any Receivable materially and adversely
affected by such breach as of such last day. If the Servicer takes any action
during any Collection Period pursuant to Section 4.02 that impairs the rights of
the Issuer, the Indenture Trustee, the Noteholders or the Certificateholders in
any Receivable or as otherwise provided in Section 4.02 [subject to exception
for reductions in interest rates], the Servicer shall purchase such Receivable
as of the close of business on the last day of such Collection Period. In
consideration of the purchase of any such Receivable pursuant to either of the
two preceding sentences, the Servicer shall remit the Purchase Amount in the
manner specified in Section 5.05. Subject to Section 7.02, the sole remedy of
the Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders or the
Certificateholders with respect to a breach pursuant to Section 4.02, 4.05 or
4.06 shall be to require the Servicer to purchase Receivables pursuant to this
Section. The Owner Trustee and the Indenture Trustee shall have no duty to
conduct any affirmative investigation as to the occurrence of any condition
requiring the purchase of any Receivable pursuant to this Section.
SECTION 4.08 Servicing Fee. The Servicing Fee for each Monthly Payment Date
shall equal the product of (a) one-twelfth, (b) the Servicing Fee Rate and (c)
the Pool Balance as of the first day of the preceding Collection Period. The
Servicer shall also be entitled to keep all late fees, prepayment charges and
other administrative fees or similar charges provided for under the Receivables
or allowed by applicable law, in each case, to the extent not prohibited by
applicable law, collected (from whatever source) on the Receivables, plus any
reimbursement pursuant to the last paragraph of Section 7.02 and plus investment
earnings on amounts on deposit in the Collection Account to the extent specified
in Section 5.01(b). [To follow: reference to additional compensation from
Servicing Suspense Account.]
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SECTION 4.09 Servicer's Certificate. At least two Business Days prior to
each Determination Date the Servicer shall provide to the Indenture Trustee
sufficient information relating to the Receivables for the applicable Collection
Period to enable the Indenture Trustee to prepare Section VII of the Servicer's
Certificate. Not later than 11:00 A.M. (New York time) on each Determination
Date, the Servicer shall deliver to the Owner Trustee, each Paying Agent, the
Indenture Trustee and the Depositor, with a copy to the Rating Agencies, a
Servicer's Certificate containing all information necessary to make the
distributions to be made on the related Monthly Payment Date pursuant to
Sections 5.05 and 5.06 for the related Collection Period. Receivables to be
purchased by the Servicer, the Depositor, DFS or the Transferor shall be
identified by the Servicer by account number with respect to such Receivable (as
specified in Schedule A).
SECTION 4.10 Annual Statement as to Compliance; Notice of Default.
(a) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee, on or before March 31 of each year beginning in 199_, an Officer's
Certificate, dated as of December 31 of the preceding year, stating that (i) a
review of the activities of the Servicer during the preceding 12- month period
(or such shorter period as shall have elapsed since the Closing Date) and of its
performance under this Agreement has been made under the supervision of the
officers of the Servicer signing such Officer's Certificate and (ii) to the best
of such officers' knowledge, based on such review, the Servicer has fulfilled
all its obligations under this Agreement throughout such year or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officers and the nature and status thereof. The Indenture
Trustee shall send a copy of such certificate and the report referred to in
Section 4.11 to the Rating Agencies. A copy of such certificate and the report
referred to in Section 4.11 may be obtained by any Noteholder, Note Owner,
Certificateholder or Certificate Owner by a request in writing to the Owner
Trustee addressed to the Corporate Trust Office. Upon the telephone request of
the Owner Trustee, the Indenture Trustee shall promptly furnish the Owner
Trustee a list of Noteholders as of the date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee
and the Rating Agencies, promptly after having obtained knowledge thereof, but
in no event later than five (5) Business Days thereafter, written notice in an
Officer's Certificate of any event which with the giving of notice or lapse of
time, or both, would become a Servicer Default under Section 8.01(a) or (b).
SECTION 4.11 Annual Independent Certified Public Accountants' Report. The
Servicer shall cause a firm of nationally recognized "independent certified
public accountants" (within the meaning of the Code of Professional Ethics of
the American Institute of Certified Public Accountants), which may also render
other services to the Servicer, the Depositor or their Affiliates, to deliver to
the Owner Trustee and the Indenture Trustee on or before March 31 of each year
beginning in 199_, a report addressed to the Board of Directors of the Servicer,
to the effect that such firm has examined certain documents and records of the
Servicer relating to the servicing of Receivables under this Agreement and that
such examination (a) was made in
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accordance with generally accepted auditing standards and accordingly included
such tests and auditing procedures as such firm considered necessary in the
circumstances; (b) included tests relating to recreational vehicle loans
serviced for others in compliance with the minimum servicing standards
identified in the Mortgage Bankers Association of America's Uniform Single
Attestation Program for Mortgage Bankers (the "Program"), to the extent the
procedures in such Program are applicable to the servicing obligations set forth
in this Agreement; and (c) except as described in the report, disclosed no
exceptions or errors in such documents and records relating to recreational
vehicle loans serviced for others that, in such firm's opinion, paragraph four
of such Program requires such firm to report.
SECTION 4.12 Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to the Noteholders, Note Owners,
Certificateholders and Certificate Owners access to the Receivable Files in such
cases where the Noteholders, Note Owners, Certificateholders, or Certificate
Owners, as applicable, shall be required by applicable statutes or regulations
to review such documentation. Access shall be afforded without charge, but only
upon reasonable request and during the normal business hours at the offices of
the Servicer. Nothing in this Section shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors and the failure of the Servicer to provide access to
information as a result of such obligation shall not constitute a breach of this
Section.
The Servicer shall provide to the Noteholders, Note Owners,
Certificateholders and Certificate Owners and any supervisory agents or
examiners which may relate to the Noteholders, Note Owners, Certificateholders
or Certificate Owners, including the Office of Thrift Supervision, the Office of
the Comptroller of the Currency or the FDIC and other similar entities, access
to any documentation regarding the Receivables which may be required by any
applicable regulations. Such access shall be afforded without charge, upon
reasonable request, during normal business hours and at the offices of the
Servicer, all in accordance with federal government, the FDIC, the Office of
Thrift Supervision, the Office of the Comptroller of the Currency or any other
similar regulations.
SECTION 4.13 Servicer Expenses. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder, including
fees and disbursements of independent accountants, taxes imposed on the Servicer
and expenses incurred by the Servicer in connection with distributions and
reports to Noteholders.
SECTION 4.14 Appointment of Subservicer. The Servicer may at any time
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder including but not limited to its obligations as custodian as
set forth in Article III hereof. Prior to the appointment of any subservicer
other than the Transferor, the Servicer shall cause the Rating Agency Condition
to have been satisfied in connection therewith. Notwithstanding the appointment
of any subservicer (including but not limited to the Transferor), the Servicer
shall remain obligated and be liable to the Issuer, the Owner Trustee, the
Indenture Trustee, the Noteholders and Certificateholders for the servicing,
administering and custodianship of the
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Receivables in accordance with the provisions hereof without diminution of such
obligation and liability by virtue of the appointment of such subservicer and to
the same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering and acting as custodian of the Receivables. The
fees and expenses of the subservicer shall be as agreed between the Servicer and
its subservicer from time to time, and none of the Issuer, the Owner Trustee,
the Indenture Trustee, the Noteholders or Certificateholders shall have any
responsibility therefor.
SECTION 4.15 Fidelity Bond; Errors and Omissions Insurance. The Servicer
shall maintain, at its own expense, a blanket fidelity bond and an errors and
omissions insurance policy, with broad coverage with responsible companies on
all officers, employees or other persons acting in any capacity with regard to
the Receivables to handle funds, money, documents and papers relating to the
Receivables. Any such fidelity bond and errors and omissions insurance shall
protect and insure the Servicer against losses, including forgery, theft,
embezzlement, fraud, errors and omissions and negligent acts of such persons.
Such fidelity bond shall also protect and insure the Servicer against losses in
connection with any failure to maintain insurance policies required pursuant to
this Agreement and the release or satisfaction of a Receivable without having
obtained payment in full of the indebtedness secured thereby. No provision of
this Section 4.15 requiring such fidelity bond and errors and omissions
insurance shall diminish or relieve the Servicer from its duties and obligations
as set forth in this Agreement. The coverage under any such bond and insurance
policy shall be in such amounts as are customary for the business of servicing
recreational vehicle receivables.
ARTICLE V
Distributions; Statements to Noteholders and Certificateholders
---------------------------------------------------------------
SECTION 5.01 Establishment of Trust Accounts.
(a)(i) The Servicer, for the benefit of the Noteholders and
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Collection Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Noteholders and Certificateholders.
(ii) The Indenture Trustee, for the benefit of the Noteholders,
shall establish and maintain in the name of the Indenture Trustee an
Eligible Deposit Account (the "Note Distribution Account"), bearing a
designation clearly indicating that the funds deposited therein are held
for the benefit of the Noteholders.
(iii) The Servicer, for the benefit of the Noteholders and
Certificateholders, shall establish and maintain in the name of the
Indenture Trustee an Eligible Deposit Account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Noteholders and Certificateholders. [To
follow: reference to Servicing Suspense Account.]
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[(iv) The Indenture Trustee, for the benefit of the Class [ ]
Noteholders, shall establish and maintain in the name of the Indenture
Trustee an Eligible Deposit Account (the "Class [ ] Interest Account"),
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Class [ ] Noteholders.]
[(v) The Indenture Trustee, for the benefit of the Class [ ]
Noteholders, shall establish and maintain in the name of the Indenture
Trustee an Eligible Deposit Account (the "Class [ ] Principal
Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Class [ ]
Noteholders.]
(b) Subject to Section 8.03 of the Indenture, funds on deposit in the
Collection Account, the Class [ ] Interest Account, the Class [ ] Principal
Account and the Reserve Account (the Collection Account, the Class A-9 Interest
Account, the Class A-9 Principal Account and the Reserve Account being referred
to collectively, with the Note Distribution Account, as the "Trust Accounts")
shall be invested by the Indenture Trustee in Eligible Investments selected in
writing by the Servicer, in each case pursuant to a direction of the Servicer
which shall contain a certification that the requested investment constitutes an
Eligible Investment and is permitted to be made hereby by the Indenture Trustee.
It is understood and agreed that the Indenture Trustee shall not be liable for
any loss arising from an investment in Eligible Investments made in accordance
with this Section 5.01(b). All such Eligible Investments shall be held by the
Indenture Trustee for the benefit of the Noteholders and Certificateholders (or
for such of such holders for whose benefit the applicable account is
maintained); provided, that on each date on which amounts on deposit in such
accounts mature as provided below in this Section 5.01(b), all realized interest
and other investment income (net of losses and investment expenses) on funds on
deposit in the Collection Account shall be paid to the Servicer as additional
servicing compensation. Investment Earnings on amounts on deposit in the Reserve
Account, the Class [ ] Principal Account and the Class [ ] Interest Account
shall be added to the balance of the respective account as realized. Other than
as permitted by the Rating Agencies, funds on deposit in the Collection Account,
the Class [ ] Interest Account, the Class [ ] Principal Account and the
Reserve Account shall be invested in Eligible Investments that shall mature (A)
not later than the Business Day immediately preceding the next Monthly Payment
Date or (B) on such next Monthly Payment Date if either (x) such investment is
held in the trust department of the institution with which the Collection
Account, the Class [ ] Interest Account, the Class [ ] Principal Account
and the Reserve Account is then maintained and is invested in a time deposit of
such institution that is rated at least [ ] by Standard & Poor's and P-1 by
Moody's or (y) DFS (so long as the short-term unsecured debt obligations of DFS
are either (i) rated at least P-1 by Moody's and [ ] by Standard & Poor's on
the date such investment is made or (ii) guaranteed by an entity whose short-
term unsecured debt obligations are rated at least P-1 by Moody's and A-1 by
Standard & Poor's on the date such investment is made) has agreed to advance
funds on such Monthly Payment Date to the Note Distribution Account in the
amount payable on such investment on such Monthly Payment Date pending receipt
thereof to the extent necessary to make distributions on such Monthly Payment
Date. The guarantee referred to in clause (y) of the preceding sentence shall be
subject to the Rating Agency Condition. For the purpose of the foregoing, unless
DFS affirmatively agrees in writing
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with the Indenture Trustee to make such advance with respect to such investment
prior to the time an investment is made, it shall not be deemed to have agreed
to make such advance. Funds deposited in a Trust Account on a day which
immediately precedes a Monthly Payment Date upon the maturity of any Eligible
Investments are not required to be invested overnight. Funds on deposit in the
Note Distribution Account shall not be invested. The Indenture Trustee shall
possess all right, title and interest in all funds on deposit from time to time
in the Trust Accounts and in all proceeds thereof (including all income thereon)
and all such funds, investments, proceeds and income shall be part of the Trust
Estate. The Trust Accounts shall be under the sole dominion and control of the
Indenture Trustee for the benefit of the Noteholders and Certificateholders (or
for such of such holders for whose benefit the applicable account is
maintained). If, at any time, any of the Trust Accounts ceases to be an Eligible
Deposit Account, the Indenture Trustee (or the Servicer on its behalf) shall
within 10 Business Days (or such longer period, not to exceed 30 calendar days,
as to which each Rating Agency may consent) establish a new Trust Account as an
Eligible Deposit Account and shall transfer any cash and/or any investments to
such new Trust Account.
[(ii) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(A) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Deposit Accounts, subject to the
last sentence of Section 5.01(b)(i); and each such Eligible Deposit
Account shall be subject to the exclusive custody and control of the
Indenture Trustee, and the Indenture Trustee shall have sole signature
authority with respect thereto;
(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance
with paragraph (1) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Indenture Trustee or a
financial intermediary (as such term is defined in Section 8-313(4)
of the UCC) acting solely for the Indenture Trustee;
(C) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal book-
entry regulations shall be delivered in accordance with paragraph (2)
of the definition of "Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described
in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (C) above shall be delivered to the Indenture Trustee in
accordance with paragraph (3) of the definition of "Delivery" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture Trustee's
(or its nominee's) ownership of such security.]
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(iii) The Servicer shall have the power, revocable by the Indenture
Trustee or by the Owner Trustee with the consent of the Indenture Trustee,
to make withdrawals and payments from the Trust Accounts (other than the
Note Distribution Account, the Class [ ] Principal Account and the Class
[ ] Interest Account) for the purpose of permitting the Servicer or the
Owner Trustee to carry out its respective duties hereunder or permitting
the Indenture Trustee to carry out its duties under the Indenture.
SECTION 5.02. Collections. (a) The Servicer shall remit within two
Business Days of receipt thereof to the Collection Account all payments by or on
behalf of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds, both as collected during each
Collection Period. For purposes of this Article V the phrase "payments by or on
behalf of Obligors" shall mean payments made with respect to the Receivables or
the Financed Vehicles by Persons other than the Servicer, DFS, the Transferor or
the Depositor.
(b) Notwithstanding anything in this Agreement to the contrary (i) for
so long as DFS is the Servicer, (ii) no Servicer Default has occurred and
is continuing and (iii) (x) DFS arranges for and maintains a letter of
credit or other form of credit enhancement in respect of the Servicer's
obligations to make deposits of payments and Liquidation Proceeds in the
Collection Account that is acceptable in form and substance to each Rating
Agency or (y) DFS otherwise obtains the Rating Agency confirmations
described below, then, subject to any limitations in the confirmations
described below, the Servicer need not make the daily deposits of payments
and Liquidation Proceeds into the Collection Account as provided in Section
5.02(a), but may make a single deposit into the Collection Account in same-
day funds not later than 12:00 noon, New York City time, on the Business
Day immediately preceding each Monthly Payment Date in a net amount equal
to the amount which would have been on deposit with respect to the
immediately preceding Collection Period in the Collection Account;
provided, however, that prior to ceasing daily deposits as described in
Section 5.02(a) the Servicer shall have delivered to the Indenture Trustee
written confirmation from each of the Rating Agencies that the failure by
DFS to make daily deposits shall not result in a reduction or withdrawal of
the rating of any outstanding Securities.
(c) If (i) the Servicer makes a deposit into the Collection Account in
respect of a payment of a Receivable and such payment was received by the
Servicer in the form of a check which is not honored for any reason or (ii)
the Servicer makes a mistake with respect to the amount of any payment and
deposits an amount that is less than or more than the actual amount of such
payment, the Servicer shall appropriately adjust the amount subsequently
deposited into the Collection Account to reflect such dishonored check or
mistake. Any Receivable in respect of which a dishonored check is received
shall be deemed not to have been paid.
SECTION 5.03. Application of Collections. All payments by or on behalf of
Obligors for any Collection Period shall be applied by the Servicer as follows:
(a) first, payments by or on
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behalf of the Obligors (other than with respect to Purchased Receivables) shall
be applied to reduce Outstanding Advances to the extent described in Section
5.04; and (b) second, any excess shall be applied to interest and principal on
the Receivables in accordance with the Simple Interest Method.
SECTION 5.04. Advances. As of the close of business on the last day of
each Collection Period, subject to the last sentence of this Section, the
Servicer shall advance an amount equal to the amount of interest due on the
Receivables at their respective APRs for the related Collection Period (assuming
the Receivables pay on their respective due dates) minus the amount of interest
actually received by the Servicer on the Receivables during the related
Collection Period (such amount, an "Advance"). With respect to each Receivable,
the Advance shall increase Outstanding Advances. If such calculation (i.e., the
subtraction of the amount of interest due on the Receivables at their respective
APRs for the related Collection Period (assuming the Receivables pay on their
respective due dates) from the amount of interest actually received on the
Receivables during the related Collection Period) results in a negative number,
an amount equal to the absolute value of such negative number shall be paid to
the Servicer and the amount of Outstanding Advances shall be reduced by such
amount, in each case in accordance with Section 5.03. In addition, in the event
that a Receivable becomes a Defaulted Receivable, Liquidation Proceeds with
respect to such Receivable attributable to accrued and unpaid interest thereon
(but not including interest for the then current Collection Period) shall be
paid to the Servicer to reduce Outstanding Advances.
Notwithstanding the foregoing, the Servicer shall not make any Advance: (i)
unless the Servicer, in its sole discretion, believes that the Servicer shall be
reimbursed for such Advance as contemplated by this Section; (ii) in respect of
principal of the Receivables; or (iii) in respect of a Defaulted Receivable or a
Purchased Receivable.
SECTION 5.05. Additional Deposits. The Servicer shall deposit in the
Collection Account on the Determination Date for the related Collection Period
the related Advance pursuant to Section 5.04. The Servicer and the Depositor
shall deposit or cause to be deposited in the Collection Account the aggregate
Purchase Amount with respect to Purchased Receivables and the Servicer shall
deposit therein all amounts to be paid under Section 9.01, in each case on or
prior to the Determination Date following the Collection Period as of which such
purchase is made by the Servicer, DFS, the Transferor or the Depositor, as the
case may be. In addition, any other deposits required to be made by the
Depositor or the Servicer to the Collection Account and which are not otherwise
provided for by Section 5.02 or by the other provisions of this Section 5.05
shall be made on or prior to the Determination Date for the related Collection
Period.
SECTION 5.06. Distributions.
(a)(i) On each Determination Date, the Servicer shall calculate all
amounts required to be deposited in the Note Distribution Account and the
Certificate Distribution Account.
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(ii) On each Monthly Payment Date, the Servicer shall instruct the
Indenture Trustee (based on the information contained in the Servicer's
Certificate delivered on the related Determination Date pursuant to Section
4.09) to make the following deposits and distributions for receipt by the
Servicer or deposit in the applicable account by 11:00 A.M. (New York
time), to the extent of the Total Distribution Amount, in the following
order of priority:
(A) to the Servicer, from the Note Distribution Amount, the
Servicing Fee (and all unpaid Servicing Fees from prior Collection
Periods);
(B) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clause (A),
the Noteholders' Interest Distributable Amount;
(C) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clause (A) and
(B), the Certificateholders' Interest Distributable Amount;
(D) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (A)
through (C), the Noteholders' Regular Principal Distributable Amount;
(E) to the Certificate Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (A)
through (D), the Certificateholders' Regular Principal Distributable
Amount;
(F) to the Reserve Account, from the Total Distribution Amount
remaining after the application of clauses (A) through (E), the
amount, if any, by which the Specified Reserve Account Balance for
such Monthly Payment Date, exceeds the amount then on deposit in the
Reserve Account; and
(G) to the Note Distribution Account, from the Total
Distribution Amount remaining after the application of clauses (A)
through (F), the Noteholders' Excess Distributable Amount, if any,
and after the Notes have been paid in full, after the application of
clauses (A), (D), (E) and (F), to the Certificate Distribution
Account, the Certificateholders' Excess Distributable Amount until
the Certificate Balance has been reduced to zero.
(b) On each Monthly Payment Date, the portion of the Total Distribution
Amount, if any, remaining after making in full each of the allocations set forth
in Section 5.06(a)(ii), shall be distributed to the Owner Trustee for
distribution by the Owner Trustee to the Depositor pursuant to Section 5.02(a)
of the Trust Agreement.
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SECTION 5.07. Reserve Account.
(a) On the Closing Date the Depositor shall deposit an amount equal to the
Reserve Account Initial Deposit into the Reserve Account. If the amount on
deposit in the Reserve Account on any Monthly Payment Date (after giving effect
to all deposits thereto or withdrawals therefrom on such Monthly Payment Date)
is greater than the Specified Reserve Account Balance for such Monthly Payment
Date and the Overcollateralization Amount for such Monthly Payment Date is not
less than the Targeted Overcollateralization Amount, the Servicer shall instruct
the Indenture Trustee to distribute the amount of such excess to the Owner
Trustee for distribution by the Owner Trustee to the Depositor.
(b)(i) In the event that the Noteholders' Interest Distributable
Amount plus the Noteholders' Regular Principal Distributable Amount for a
Monthly Payment Date exceeds the sum of the amounts deposited into the Note
Distribution Account pursuant to Section 5.06(a)(ii) on such Monthly
Payment Date, the Servicer shall instruct the Indenture Trustee to withdraw
from the Reserve Account on such Monthly Payment Date an amount equal to
such excess, to the extent of funds available therein, and deposit such
amount into the Note Distribution Account.
(ii) In the event that the Certificateholders' Interest Distributable
Amount and the Certificateholders' Regular Distributable Amount for a
Monthly Payment Date exceeds the sum of the amounts deposited into the
Certificate Distribution Account pursuant to Section 5.06(a)(ii) on such
Monthly Payment Date, the Servicer shall instruct the Indenture Trustee to
withdraw from the Reserve Account on such Monthly Payment Date an amount
equal to such excess, to the extent of funds available therein after giving
effect to paragraph (b)(i) above, and deposit such amount into the
Certificate Distribution Account.
SECTION 5.08. Statements to Noteholders and Certificateholders. At least
three Business Days prior to each Monthly Payment Date, the Servicer shall
provide to the Indenture Trustee and the Owner Trustee (with a copy to each
Paying Agent) information relating to the Receivables for the applicable
Collection Period in order that the Indenture Trustee may perform the requisite
calculations and forward to each Noteholder and Certificateholder of record as
of the most recent Record Date a statement substantially in the forms of Exhibit
A-1 and Exhibit A-2 setting forth at least the following information as to the
Notes and the Certificates to the extent applicable:
(i) the amount of distributions to be made on such Monthly Payment
Date allocable to principal allocable to each Class of Notes and to the
Certificates;
(ii) the amount of such distributions to be made on such Monthly
Payment Date allocable to interest allocable to each Class of Notes and to
the Certificates;
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(iii) the outstanding principal balance of each Class of Notes, the
Note Pool Factor for each such Class, the Certificate Balance and the
Certificate Pool Factor as of the close of business on the last day of the
preceding Collection Period, after giving effect to payments allocated to
principal reported under clause (i) above;
(iv) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period;
(v) the amount of Realized Losses, if any, with respect to the related
Collection Period;
(vi) the balance of the Reserve Account on such Monthly Payment Date
after giving effect to deposits and withdrawals to be made on such Monthly
Payment Date, if any; and
(vii) the Pool Balance as of the close of business on the last day of
the related Collection Period, after giving effect to payments allocated to
principal reported under clause (i) above.
Each amount set forth on the Monthly Payment Date statement under
clauses (i), (ii) or (iv) above shall be expressed as a dollar amount per
$1,000 of original principal balance of a Note or Certificate, as
applicable.
ARTICLE VI
The Depositor
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SECTION 6.01. Representations of Depositor. The Depositor makes the
following representations on which the Issuer is deemed to have relied in
acquiring the Receivables. The representations speak as of the execution and
delivery of this Agreement and as of the Closing Date, in the case of the
Receivables, and shall survive the transfer of the Receivables to the Issuer and
the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Depositor is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Nevada, with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Depositor is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualifications.
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(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its respective
terms; the Depositor has full power and authority to transfer and assign the
property to be transferred and assigned to and deposited with the Issuer, and
the Depositor shall have duly authorized such transfer and assignment to the
Issuer by all necessary corporate action; and the execution, delivery and
performance of this Agreement by the Depositor has been duly authorized by the
Depositor by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Depositor enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement by the Depositor and the fulfillment of the terms hereof by the
Depositor do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a party or by
which it is bound; or result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); or violate any
law or, to the best of the Depositor's knowledge, any order, rule or regulation
applicable to the Depositor of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(f) No Proceedings. To the Depositor's best knowledge, there are no
proceedings or investigations pending or threatened before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (i) asserting the invalidity
of this Agreement, the Indenture or any of the other Basic Documents, the Notes
or the Certificates, (ii) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, any of the other Basic
Documents, the Notes or the Certificates or (iv) which might adversely affect
the federal or state income tax attributes of the Notes or the Certificates.
(g) Chief Executive Office. The chief executive office of the Depositor is
located at 655 Maryville Centre Drive, St. Louis, Missouri 63141.
SECTION 6.02. Corporate Existence. During the term of this Agreement, the
Depositor shall keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and shall obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or
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agreement necessary or appropriate to the proper administration of this
Agreement and the transactions contemplated hereby. In addition, all
transactions and dealings between the Depositor and its Affiliates shall be
conducted on an arm's-length basis.
SECTION 6.03. Liability of the Depositor. The Depositor shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Depositor under this Agreement.
SECTION 6.04. Indemnification. (a) The Depositor shall indemnify, defend
and hold harmless the Issuer, the Owner Trustee, the Indenture Trustee and any
of the officers, directors, employees and agents of the Issuer, the Owner
Trustee and the Indenture Trustee from and against any taxes that may at any
time be asserted against any such Person with respect to the transactions
contemplated herein and in the other Basic Documents (except any income taxes
arising out of fees paid to the Owner Trustee and the Indenture Trustee),
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to, and as of the date of, the
transfer of the Receivables to the Issuer or the issuance and original sale of
the Notes and the Certificates, or asserted with respect to ownership of the
Receivables, or federal or other income taxes arising out of distributions on
the Notes and the Certificates) and costs and expenses in defending against the
same.
(b) The Depositor shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders and Certificateholders and
any of the officers, directors, employees and agents of the Issuer, the Owner
Trustee and the Indenture Trustee from and against any loss, liability or
expense incurred by reason of (i) the Depositor's willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement, or by
reason of reckless disregard of its obligations and duties under this Agreement
and (ii) the Depositor's or the Issuer's violation of federal or state
securities laws in connection with the offering and sale of the Notes or the
Certificates.
(c) The Depositor shall indemnify, defend and hold harmless the Owner
Trustee and the Indenture Trustee and their respective officers, directors,
employees and agents from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties herein and in the Trust
Agreement contained, in the case of the Owner Trustee, and herein and in the
Indenture contained, in the case of the Indenture Trustee, except to the extent
that such cost, expense, loss, claim, damage or liability: (i) in the case of
the Owner Trustee, shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Owner Trustee or, in the case
of the Indenture Trustee, shall be due to the willful misfeasance, bad faith or
negligence (except for errors in judgment) of the Indenture Trustee; or (ii) in
the case of the Owner Trustee, shall arise from the breach by the Owner Trustee
of any of its representations or warranties set forth in Section 7.03 of the
Trust Agreement.
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(d) The Depositor shall pay any and all taxes levied or assessed upon all
or any part of the Owner Trust Estate (other than any taxes expressly excluded
from the Depositor's responsibilities pursuant to this Section 6.04).
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee or the Indenture Trustee and the termination of this
Agreement and the other Basic Documents shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Depositor shall have made
any indemnity payments pursuant to this Section and the Person to or on behalf
of whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to the Depositor, without
interest.
SECTION 6.05. Merger or Consolidation of, or Assumption of the Obligations
of, Depositor. Any Person (a) into which the Depositor may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Depositor shall be a party or (c) which may succeed to the properties and assets
of the Depositor substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Depositor under this Agreement, shall be the successor to the Depositor
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made by
the Depositor pursuant to Section 3.01 shall have been breached (unless the
applicable breach shall have been cured, or the applicable Receivable shall have
been purchased in accordance with therewith), (ii) the Depositor shall have
delivered to the Owner Trustee and the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, (iii) the Rating Agency
Condition shall have been satisfied with respect to such transaction and (iv)
the Depositor shall have delivered to the Owner Trustee and the Indenture
Trustee an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of the Owner Trustee and Indenture Trustee, respectively,
in the Receivables and reciting the details of such filings, or (B) stating
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interests. Notwithstanding anything herein to the
contrary, the execution of the foregoing agreement of assumption and compliance
with clauses (i), (ii), (iii) and (iv) above shall be conditions to the
consummation of the transactions referred to in clauses (a), (b) or (c) above.
SECTION 6.06. Limitation on Liability of Depositor and Others. The
Depositor and any director, officer, employee or agent of the Depositor may rely
in good faith on the advice of counsel or on any document of any kind, prima
facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
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SECTION 6.07. Depositor May Own Notes and Certificates. The Depositor and
any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Notes and Certificates with the same rights as it would have
if it were not the Depositor or an Affiliate thereof, except as expressly
provided herein or in any other Basic Document.
SECTION 6.08. Pennsylvania Motor Vehicle Sales Finance Act License. The
Depositor shall use its best efforts to maintain, and shall cause the Trust to
use its best efforts to maintain, the effectiveness of all licenses required
under the Pennsylvania Motor Vehicle Sales Finance Act in connection with this
Agreement and the other Basic Documents and the transactions contemplated hereby
and thereby until such time as the Trust shall terminate in accordance with the
Trust Agreement.
ARTICLE VII
The Servicer
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SECTION 7.01. Representations and Warranties of the Servicer. DFS makes
the following representations and warranties on which each of the Transferor,
the Depositor and the Issuer is deemed to have relied in acquiring the
Receivables. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date but shall survive (1) the
transfer and assignment of the Receivables to the Issuer and the pledge thereof
to the Indenture Trustee pursuant to the Indenture and (2) the removal of DFS as
Servicer.
(i) DFS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada with the full power and
authority to own and conduct its business as it is presently conducted by
DFS. DFS is or shall be in compliance with the laws of any state to the
extent necessary to insure the enforceability of each Receivable and the
servicing of the Receivables in accordance with the terms of this
Agreement.
(ii) DFS has the full power and authority to consummate all
transactions contemplated by this Agreement. DFS has duly authorized the
execution, delivery and performance of this Agreement, has duly executed
and delivered this Agreement and this Agreement constitutes a legal, valid
and binding obligation of DFS, enforceable against it in accordance with
its terms.
(iii) Neither the execution and delivery of this Agreement by DFS, the
acquisition or origination of the Receivables by DFS, the consummation by
DFS of the transactions contemplated hereby, nor the fulfillment of or
compliance by DFS with the terms and conditions of this Agreement shall
conflict with or result in a breach of any of the terms of DFS's charter or
by-laws or any legal restriction or any agreement or instrument to which
DFS is now a party or by which it is bound, or constitute a default or
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result in an acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree to which
DFS or its property is subject.
(iv) DFS does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant of DFS contained in
this Agreement.
(v) There is no litigation pending or, to DFS's knowledge, threatened,
which if determined adversely to DFS would adversely affect the execution,
delivery or enforceability of this Agreement, or the ability of DFS to
service the Receivables hereunder in accordance with the terms hereof or
which would have a material adverse effect on the financial condition of
DFS.
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by DFS of or compliance by DFS with this Agreement or the
consummation by DFS of the transactions contemplated by this Agreement.
(vii) The collection practices used by DFS with respect to each
Receivable have been in all respects legal, proper, prudent and customary
in the origination and servicing of receivables similar to the Receivables.
(viii) The chief executive office of DFS is located in St. Louis,
Missouri.
(ix) Neither the representations and warranties of DFS set forth in
this Agreement nor any statement, report or other document furnished or to
be furnished by DFS in connection with or pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any untrue
statement of fact or omits to state a fact necessary to make the statements
contained therein not misleading;
SECTION 7.02. Indemnities, etc. of Servicer. The Servicer shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement:
(a) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders, the Certificateholders
and the Depositor and any of the officers, directors, employees and agents of
the Issuer, the Owner Trustee and the Indenture Trustee from and against any and
all costs, expenses, losses, damages, claims and liabilities arising out of or
resulting from the use, ownership or operation by the Servicer or any Affiliate
thereof of a Financed Vehicle.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Depositor, the Noteholders, the
Certificateholders and any of the officers, directors, employees and agents of
the Issuer, the Owner Trustee and the Indenture Trustee from and against any and
all costs, expenses, losses, claims, damages and liabilities to
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the extent that such cost, expense, loss, claim, damage or liability arose out
of, or was imposed upon any such Person through, the negligence, willful
misfeasance or bad faith of the Servicer in the performance of its duties under
this Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement.
(c) The Servicer agrees to pay when due the compensation and any other
amounts due to the Indenture Trustee and the Owner Trustee pursuant to Section
6.07 of the Indenture and Section 8.02 of the Trust Agreement (in the event the
Issuer or the Depositor, as applicable, cannot fully indemnify the Indenture
Trustee or the Owner Trustee), as applicable.
For purposes of this Section, in the event of the termination of the rights
and obligations of DFS (or any successor thereto pursuant to Section 7.03) as
Servicer pursuant to Section 8.01, or a resignation by such Servicer pursuant to
this Agreement, such Servicer shall be deemed to be the Servicer pending
appointment of a successor Servicer (other than the Indenture Trustee) pursuant
to Section 8.02.
Indemnification and other payments under this Section shall survive the
resignation or removal of the Owner Trustee or the Indenture Trustee or the
termination of this Agreement and the Indenture and shall include reasonable
fees and expenses of counsel and expenses of litigation. If the Servicer shall
have made any indemnity payments pursuant to this Section and the Person to or
on behalf of whom such payments are made thereafter collects any of such amounts
from others, such Person shall promptly repay such amounts to the Servicer,
without interest.
SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party, (c) which may succeed to the properties and assets of
the Servicer substantially as a whole or (d) with respect to the Servicer's
obligations hereunder, which is a corporation 50% or more of the voting stock of
which is owned, directly or indirectly, by DFS, which Person executed an
agreement of assumption to perform every obligation of the Servicer hereunder,
shall be the successor to the Servicer under this Agreement without further act
on the part of any of the parties to this Agreement; provided, however, that (i)
immediately after giving effect to such transaction, no Servicer Default and no
event which, after notice or lapse of time, or both, would become a Servicer
Default shall have occurred and be continuing, (ii) the Servicer shall have
delivered to the Owner Trustee and the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent provided for in this Agreement relating to
such transaction have been complied with, (iii) the Rating Agency Condition
shall have been satisfied with respect to such transaction and (iv) the Servicer
shall have delivered to the Owner Trustee and the Indenture Trustee an Opinion
of Counsel stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Indenture Trustee, respectively, in the
Receivables and reciting the
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details of such filings or (B) no such action shall be necessary to preserve and
protect such interests. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
(i), (ii), (iii) and (iv) above shall be conditions to the consummation of the
transactions referred to in clause (a), (b), (c) or (d) above.
SECTION 7.04. Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of the directors, officers, employees or agents of the Servicer
shall be under any liability to the Issuer, the Noteholders or
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this Agreement
or for errors in judgment; provided, however, that this provision shall not
protect the Servicer or any such Person against any liability that would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties under this Agreement. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of any
kind prima facie properly executed and submitted by any Person respecting any
matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its duties to service the Receivables in accordance with this
Agreement and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that it
may deem necessary or desirable in respect of this Agreement and the other Basic
Documents and the rights and duties of the parties to this Agreement and the
other Basic Documents and the interests of the Noteholders under the Indenture
and of the Certificateholders under the Trust Agreement.
SECTION 7.05. DFS Not To Resign as Servicer. Subject to the provisions of
Section 7.03, DFS shall not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon a determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any such determination permitting
the resignation of DFS shall be communicated to the Owner Trustee and the
Indenture Trustee at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination shall be evidenced by an Opinion of Counsel to
such effect delivered to the Owner Trustee and the Indenture Trustee
concurrently with or promptly after such notice. No such resignation shall
become effective until the Indenture Trustee or a successor Servicer shall have
assumed the responsibilities and obligations of DFS in accordance with Section
8.02. In addition, in effecting such resignation, DFS shall cooperate with the
successor Servicer, the Indenture Trustee and the Owner Trustee in effecting the
termination of its responsibilities and rights as Servicer under this Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that shall at the time be held by it for deposit, or shall
thereafter be received by it with respect to any Receivable. DFS shall also give
the successor Servicer access to its records, software, systems, facilities and
employees in order to facilitate the servicing transfer. All reasonable costs
and expenses (including attorneys' fees) incurred in connection with
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transferring the Receivable Files and the Servicer's duties to the successor
Servicer and amending this Agreement to reflect such succession as Servicer
shall be paid by DFS upon presentation of reasonable documentation of such costs
and expenses. Upon receipt of notice of the occurrence of any such resignation,
the Owner Trustee shall give notice thereof to the Rating Agencies.
ARTICLE VII
Servicer Default
----------------
SECTION 8.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver to the Indenture Trustee for
deposit in any of the Trust Accounts or the Certificate Distribution Account any
required payment or to direct the Indenture Trustee to make any required
distributions therefrom, which failure continues unremedied for a period of
three Business Days after written notice of such failure is received by the
Servicer from the Owner Trustee or the Indenture Trustee (with a copy to the
Indenture Trustee, if given by the Owner Trustee) or after discovery of such
failure by an officer of the Servicer; or
(b) failure by the Servicer duly to observe or to perform in any material
respect any other covenants or agreements of the Servicer set forth in this
Agreement or any other Basic Document, which failure shall (i) materially and
adversely affect the rights of Noteholders and (ii) continue unremedied for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given (A) to the Servicer by
the Owner Trustee or the Indenture Trustee (with a copy to the Indenture
Trustee, if given by the Owner Trustee) or (B) to the Servicer, and to the Owner
Trustee and the Indenture Trustee, by the Holders of Notes or Certificates
evidencing not less than 25% of the Outstanding Amount of the Notes or 25% of
the Certificate Balance, respectively; or
(c) the occurrence of an Insolvency Event with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not
have been remedied, either the Indenture Trustee or the Holders of Notes
evidencing not less than 25% of the Outstanding Amount of the Notes, by notice
then given in writing to the Servicer (and to the Indenture Trustee and the
Owner Trustee if given by the Noteholders) may terminate all the rights and
obligations (other than the obligations set forth in Section 7.02 hereof) of the
Servicer under this Agreement. On or after the latest of receipt by the Servicer
of such written notice or the date of termination specified in such notice or
deemed specified pursuant to Section 8.02(d), all authority and power of the
Servicer under this Agreement, whether with respect to the Notes or the
Receivables or otherwise, shall, without further action, pass to and be vested
in the Indenture Trustee or such successor Servicer as may be appointed under
Section 8.02; and,
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without limitation, the Indenture Trustee and the Owner Trustee are hereby
authorized and empowered to execute and deliver, for the benefit of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Receivables and related
documents, or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer, the Indenture Trustee and the Owner Trustee in effecting the
termination of the responsibilities and rights of the predecessor Servicer under
this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
predecessor Servicer for deposit, or shall thereafter be received by it with
respect to any Receivable. The predecessor Servicer shall also give the
successor Servicer access to its records, software, systems, facilities and
employees in order to facilitate the servicing transfer. All reasonable costs
and expenses (including attorneys' fees) incurred in connection with
transferring the Receivable Files and the Servicer's duties to the successor
Servicer and amending this Agreement to reflect such succession as Servicer
pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses. Upon
receipt of notice of the occurrence of a Servicer Default, the Owner Trustee
shall give notice thereof to the Rating Agencies.
SECTION 8.02. Appointment of Successor.
(a) Upon the Servicer's receipt of notice of termination pursuant to
Section 8.01 or the Servicer's resignation in accordance with the terms of this
Agreement, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the date
specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice (subject in each case to
Section 8.02(d)) and, in the case of resignation, until the later of (i) the
date 45 days from the delivery to the Owner Trustee and the Indenture Trustee of
written notice of such resignation (or written confirmation of such notice) in
accordance with the terms of this Agreement and (ii) the date upon which the
predecessor Servicer shall become unable to act as Servicer, as specified in the
notice of resignation and accompanying Opinion of Counsel. In the event of the
Servicer's termination hereunder, the Indenture Trustee shall appoint a
successor Servicer, and the successor Servicer shall accept its appointment by a
written assumption in form acceptable to the Owner Trustee and the Indenture
Trustee. In the event that a successor Servicer has not been appointed at the
time when the predecessor Servicer has ceased to act as Servicer in accordance
with this Section, the Indenture Trustee without further action shall
automatically be appointed the successor Servicer and the Indenture Trustee
shall be entitled to the Servicing Fee. Notwithstanding the above, the Indenture
Trustee shall, if it shall be legally unable so to act, appoint or petition a
court of competent jurisdiction to appoint any established institution, having a
net worth of not less than $100,000,000 and whose regular business shall include
the servicing of recreational vehicle receivables, as the successor to the
Servicer under this Agreement.
(b) Upon appointment, the successor Servicer (including the Indenture
Trustee acting as successor Servicer) shall be the successor in all respects to
the predecessor Servicer and shall
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be subject to all the responsibilities, duties and liabilities arising
thereafter relating thereto placed on the predecessor Servicer and shall be
entitled to the Servicing Fee and all the rights granted to the predecessor
Servicer by the terms and provisions of this Agreement.
(c) The Servicer may not resign except as contemplated by Section 7.05.
(d) Notwithstanding anything herein to the contrary, any notice of
termination delivered by Noteholders pursuant to Section 8.01 that (i) does not
contain therein a date as of which such termination shall take effect or (ii)
contains such a date of termination, shall be deemed, in the case of clauses (i)
and (ii) to contain a date of termination which is no sooner than the date,
established by the Indenture Trustee by notice to the Servicer, which shall be
the earliest date practicable by which the Indenture Trustee is capable of
assuming the functions of Servicer hereunder.
SECTION 8.03. Repayment of Advances. If the Servicer shall change, the
predecessor Servicer shall be entitled to receive reimbursement for Outstanding
Advances pursuant to Section 5.04 with respect to all Advances made by the
predecessor Servicer.
SECTION 8.04. Notification to Noteholders. Upon any termination of, or
appointment of a successor to, the Servicer pursuant to this Article VIII, the
Indenture Trustee shall give prompt written notice thereof to Noteholders and
the Rating Agencies.
SECTION 8.05. Waiver of Past Defaults. The Holders of Notes evidencing
not less than a majority of the Outstanding Amount of the Notes may, on behalf
of all Noteholders, waive in writing any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits to or payments from any of the Trust Accounts in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
ARTICLE IX
Termination
-----------
SECTION 9.01. Optional Purchase of All Receivables.
(a) As of the last day of any Collection Period immediately preceding a
Monthly Payment Date as of which the then outstanding Pool Balance is less than
ten percent (10%) of the Initial Pool Balance, the Servicer shall have the
option to purchase the Owner Trust Estate, other than the Trust Accounts, as of
such last day. To exercise such option, the Servicer shall deposit pursuant to
Section 5.05 in the Collection Account an amount equal to the aggregate Purchase
Amount for the Receivables (including Defaulted Receivables), plus the appraised
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value of any such other property held by the Trust other than the Trust
Accounts, such value to be determined by an appraiser mutually agreed upon by
the Servicer, the Owner Trustee and the Indenture Trustee, and shall succeed to
all interests in and to the Trust. Notwithstanding the foregoing, the Servicer
shall not be permitted to exercise such option unless the resulting distribution
to the Noteholders and Certificateholders on the applicable Monthly Payment Date
would be sufficient to pay the sum of the outstanding principal balance of the
Notes and the Certificate Balance and all accrued but unpaid interest thereon.
[ (b) Upon any sale of the assets of the Trust pursuant to Section 9.02
of the Trust Agreement, the Servicer shall instruct the Indenture Trustee to
deposit the proceeds from such sale after all payments and reserves therefrom
have been made (the "Insolvency Proceeds") in the Collection Account. On the
Monthly Payment Date on which the Insolvency Proceeds are deposited in the
Collection Account (or, if such proceeds are not so deposited on a Monthly
Payment Date, on the Monthly Payment Date immediately following such deposit),
the Servicer shall instruct the Indenture Trustee to make the following deposits
(after the application on such Monthly Payment Date of the Total Distribution
Amount) from the Insolvency Proceeds and any funds remaining in the Reserve
Account, the Class [ ] Interest Account and the Class [ ] Principal Account
(including the proceeds of any sale of investments therein as described in the
following sentence):
(i) to the Note Distribution Account, any portion of the Noteholders'
Interest Distributable Amount not otherwise deposited into the Note
Distribution Account on such Monthly Payment Date;
(ii) to the Note Distribution Account, the outstanding principal
balance of the Notes (after giving effect to the reduction in the
outstanding principal balance of the Notes to result from the deposits made
in the Note Distribution Account on such Monthly Payment Date and on prior
Monthly Payment Dates);
(iii) to the Certificate Distribution Account, any portion of the
Certificateholders' Interest Distributable Amount not otherwise deposited
into the Certificate Distribution Account on such Monthly Payment Date;
(iv) to the Certificate Distribution Account, the outstanding
principal balance of the Certificates (after giving effect to the reduction
in the outstanding principal balance of the Certificates to result from the
deposits made in the Certificate Distribution Account on such Monthly
Payment Date and on prior Monthly Payment Dates); and
(v) any remaining amount to the Owner Trustee for distribution to the
Depositor.
Any investments on deposit in the Trust Accounts, which shall not
mature on or before such Monthly Payment Date, shall be sold by the
Indenture Trustee at such time as
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shall result in the Indenture Trustee receiving the proceeds from such sale
not later than the Determination Date preceding such Monthly Payment Date.]
(c) Notice of any termination of the Trust shall be given by the Servicer
to the Owner Trustee and the Indenture Trustee as soon as practicable after the
Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders shall succeed to the rights of the Noteholders hereunder and
the Owner Trustee shall succeed to the rights of, and assume the obligations of,
the Indenture Trustee pursuant to this Agreement.
ARTICLE X
Miscellaneous
-------------
SECTION 10.01. Amendment. This Agreement may be amended by the parties
hereto, with the consent of the Indenture Trustee, but without the consent of
any other Person, to cure any ambiguity, to correct or supplement any provisions
in this Agreement or for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions in this Agreement or of
modifying in any manner the rights of the Noteholders or Certificateholders;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Owner Trustee and the Indenture Trustee, adversely
affect in any material respect the interests of any Noteholder or
Certificateholder.
This Agreement may also be amended from time to time by the parties hereto,
with the consent of the Indenture Trustee and the consent of the Holders of
Notes evidencing not less than a majority of the Outstanding Amount of the Notes
and the consent of the Holders of outstanding Certificates evidencing not less
than a majority of the outstanding Certificate Balance, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or Certificateholders; provided, however, that no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Receivables or distributions that
shall be required to be made for the benefit of the Noteholders or
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes and the Certificate Balance, the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all of the outstanding Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to the Indenture Trustee and each of the Rating Agencies.
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It shall not be necessary for the consent of Noteholders or
Certificateholders pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof.
Prior to the execution of or the consent to any amendment to this
Agreement, the Owner Trustee and the Indenture Trustee shall be entitled to
receive and rely upon (i) an Opinion of Counsel stating that the execution of
such amendment is authorized or permitted by this Agreement and (ii) the Opinion
of Counsel referred to in Section 10.02(i). The Owner Trustee and the Indenture
Trustee may, but shall not be obligated to, enter into or consent to any such
amendment which affects the Owner Trustee's or the Indenture Trustee's, as
applicable, own rights, duties or immunities under this Agreement or otherwise.
SECTION 10.02. Protection of Title to Trust; Change of Name, Identity,
Corporate Structure or Location of the Depositor, Etc.
(a) The Depositor shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of the Issuer and of the Indenture Trustee in the
Receivables and in the proceeds thereof. The Depositor shall deliver (or cause
to be delivered) to the Owner Trustee and the Indenture Trustee file-stamped
copies of, or filing receipts for, any document filed as provided above, as soon
as available following such filing.
(b) The Depositor shall not change its name, identity or corporate
structure in any manner that would, could or might make any financing statement
or continuation statement filed in accordance with paragraph (a) above seriously
misleading within the meaning of Section 9-402(7) of the UCC, unless it shall
have given the Owner Trustee and the Indenture Trustee at least five days' prior
written notice thereof and shall have promptly filed appropriate amendments to
all previously filed financing statements or continuation statements.
(c) The Depositor shall give the Owner Trustee and the Indenture Trustee at
least 60 days' prior written notice of any relocation of its chief executive
office if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment or new financing statement. The Servicer shall at all times
maintain each office from which it shall service Receivables, and its principal
executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account in respect of such
Receivable.
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(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables, the Servicer's
master computer records (including any backup archives) that refer to a
Receivable shall indicate clearly the interest of the Issuer and the Indenture
Trustee in such Receivable and that such Receivable is owned by the Issuer and
has been pledged to the Indenture Trustee. Indication of the Issuer's and the
Indenture Trustee's interest in a Receivable shall be deleted from or modified
on the Servicer's computer systems when, and only when, the related Receivable
shall have been paid in full or shall have become a Purchased Receivable.
(f) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in recreational
vehicle receivables to any prospective purchaser, lender or other transferee,
the Servicer shall give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been transferred to
and is owned by the Issuer and has been pledged to the Indenture Trustee.
(g) The Servicer shall permit the Indenture Trustee and its agents at any
time during normal business hours to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Owner Trustee or to the
Indenture Trustee, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Trust, together
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Indenture
Trustee, promptly after the execution and delivery of this Agreement, and of
each amendment hereto and on each Monthly Payment Date occurring in September,
an Opinion of Counsel (which may be an employee of the Servicer) stating that,
in the opinion of such counsel, either (A) all financing statements and
continuation statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the Indenture Trustee
in the Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no such action
shall be necessary to preserve and protect such interest. Each such Opinion of
Counsel shall specify any action necessary (as of the date of such opinion) to
be taken in the following year to preserve and protect such interest.
(j) The Depositor shall, to the extent required by applicable law, cause
the Notes and Certificates to be registered with the Commission pursuant to
Section 12(b) or Section 12(g) of the Exchange Act within the time periods
specified in such sections.
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SECTION 10.03. Notices. All demands, notices, directions, communications
and instructions upon, to, or by the Depositor, the Servicer, the Owner Trustee,
the Indenture Trustee or the Rating Agencies under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case the Servicer (so long as DFS is the Servicer), to Deutsche Financial
Services Corporation, 645 Maryville Centre Drive, St. Louis, Missouri 63141,
Attention: Chief Legal Officer, (b) in the case of the Depositor, to Deutsche
Recreational Asset Funding Corporation, 655 Maryville Centre Drive, St. Louis,
Missouri 63141, Attention: President, (c) in the case of the Issuer or the Owner
Trustee, at the Corporate Trust Office (as defined in the Trust Agreement), (d)
in the case of the Indenture Trustee, at the Corporate Trust Office, (e) in the
case of Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department,
99 Church Street, New York, New York 10007, and (f) in the case of Standard &
Poor's, to Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., 25 Broadway (15th Floor), New York, New York 10004, Attention
of Asset Backed Surveillance Department; or, as to each of the foregoing, at
such other address as shall be designated by written notice to the other Persons
listed in this Section.
SECTION 10.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in this Section, in Sections 6.05 and 7.03
of this Agreement and as provided in the provisions of this Agreement concerning
the resignation of the Servicer, this Agreement may not be assigned by the
Depositor or the Servicer. The parties hereto hereby acknowledge and consent to
any mortgage, pledge, assignment and grant of a security interest by the Issuer
to the Indenture Trustee pursuant to the Indenture for the benefit of the
Noteholders of all right, title and interest of the Issuer in, to and under the
Depositor Conveyed Property and/or the assignment of any or all of the Issuer's
rights under this Agreement to the Indenture Trustee.
SECTION 10.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Depositor, the Servicer, the Issuer,
the Owner Trustee, the Indenture Trustee and the Noteholders, and, except as
expressly provided in this Agreement, nothing in this Agreement shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 10.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.07. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
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SECTION 10.08. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 10.09. Governing Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE PERFECTION
(AND THE EFFECT OF PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF ANY PERSON
IN CONVEYED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW YORK OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE BASIC DOCUMENTS, AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE OR FEDERAL COURT, IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION 10.10. Nonpetition Covenants. Notwithstanding any prior
termination of this Agreement, the Servicer and the Depositor shall not, prior
to the date which is one year and one day after the termination of the Trust
Agreement, acquiesce, petition or otherwise invoke or cause the Issuer to invoke
the process of any court or government authority for the purpose of commencing
or sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Issuer. Notwithstanding any prior termination of this
Agreement, the Servicer and the Issuer shall not, prior to the date which is one
year and one day after the termination of the Trust Agreement, acquiesce,
petition or otherwise invoke or cause the Depositor to invoke the process of any
court or government authority for the purpose of commencing or sustaining a case
against the Depositor under any federal or state bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Depositor or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Depositor.
SECTION 10.11. Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by [ ] not
in its individual capacity but solely in its capacity as Owner Trustee of the
Issuer and in no event shall [ ] in its
individual capacity or, except as expressly provided in the Trust Agreement, as
beneficial owner
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of the Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder or in any of the
certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer. For all purposes
of this Agreement, in the performance of its duties or obligations hereunder or
in the performance of any duties or obligations of the Issuer hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the terms
and provisions of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by [ ], not in its
individual capacity but solely as Indenture Trustee and in no event shall
[ ] have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
SECTION 10.12. Waiver. Each of DFS, the Depositor, the Trust, the Owner
Trustee and the Indenture Trustee hereby (i) acknowledges that Mayer, Brown &
Platt represents DFS, the Transferor, the Depositor and Affiliates of the
Transferor, DFS and the Depositor in connection with the transactions
contemplated by the Basic Documents, and represents the institutions which are
the Indenture Trustee and the Owner Trustee (or Affiliates of such institutions)
in other transactions, and (ii) waives any conflict of interest relating
thereto. Notwithstanding any other provision of this Agreement, Mayer, Brown &
Platt is entitled to rely on this Section.
SECTION 10.13. Separate Corporate Existence. The Depositor hereby
acknowledges that the Trust is entering into the transactions contemplated by
the Basic Documents in reliance upon the Depositor's identity as a legal entity
separate from DFS and the Transferor. Therefore, until the first day following
the termination of the Trust Agreement on which all of the Securities have been
paid in full, the Depositor shall take all reasonable steps to make it apparent
to third Persons that each of DFS and the Transferor is an entity with assets
and liabilities distinct from those of the Depositor and any other Affiliate and
that the Depositor is not a division of DFS or the Transferor or any other
Person.
[SIGNATURES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Transfer and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT]
TRUST 199_-_
By: [ ], not in its individual
capacity but solely as Owner Trustee on behalf
of the Trust
By: ____________________________________________________
Name: __________________________________________________
Title: _________________________________________________
DEUTSCHE RECREATIONAL ASSET FUNDING
CORPORATION, as Depositor
By: ____________________________________________________
Name: __________________________________________________
Title: _________________________________________________
DEUTSCHE FINANCIAL SERVICES CORPORATION,
as Servicer
By: ____________________________________________________
Name: __________________________________________________
Title: _________________________________________________
Acknowledged, accepted and agreed to
as of the day and year first above written:
[ ],
not in its individual capacity but
solely as Indenture Trustee
By: __________________________________
Name: ________________________________
Title: _______________________________
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APPENDIX A
DEFINITIONS
"Accelerated Principal Distribution Amount" means, with respect to any
Monthly Payment Date, 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 interest due on the Notes (including deposits to the Class [ ]
Interest Account), (c) the Regular Principal Distribution Amount, (d) the amount
of interest due on the Certificates and (e) the amount, if any, required to be
deposited into the Reserve Account.
"Act" has the meaning specified in Section 11.03(a) of the Indenture.
"Advance" means the amount of interest, as of the close of business on the
last day of a Collection Period, which the Servicer advances on the Receivables
pursuant to Section 5.04 of the Transfer and Servicing Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Amount Financed" means with respect to a Receivable, the amount advanced
toward the purchase price of the Financed Vehicles and any related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate of
finance charges stated in the related Contract.
"Authorized Officer" means, with respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter).
"Basic Documents" means the Transfer and Servicing Agreement, the DFS/Ganis
Transfer Agreement, the Ganis/Depositor Transfer Agreement, the Indenture, the
Trust Agreement, the Note Depository Agreement and the Certificate Depository
Agreement and the other documents and certificates delivered in connection
therewith.
"Benefit Plan" has the meaning assigned to such term in Section 11.13 of
the Trust Agreement.
<PAGE>
"Book-Entry Certificates" means a beneficial interest in the Certificates,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 3.11 of the Trust Agreement.
"Book-Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10 of the Indenture.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in the State of New York are
authorized or obligated by law, regulation or executive order to remain closed.
["Business Trust Statute" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as the same may be amended from time to
time.]
"Certificate" means a Trust Certificate.
"Certificate Balance" equals, initially, the Initial Certificate Balance
and, thereafter, equals the Initial Certificate Balance reduced by all amounts
allocable to principal previously distributed to Certificateholders.
"Certificate Depository Agreement" means the agreement dated the Closing
Date among the Trust, the Owner Trustee, and The Depository Trust Company, as
the initial Clearing Agency, relating to the Certificates, as the same may be
amended, amended and restated or otherwise modified from time to time.
"Certificate Distribution Account" has the meaning specified in Section
5.01 of the Trust Agreement.
"Certificate Owner" means, with respect to a Book-Entry Certificate, the
Person who is the beneficial owner of such Book-Entry Certificate, as reflected
on the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Certificate Register" and "Certificate Registrar" means the register
mentioned in and the registrar appointed pursuant to Section 3.04 of the Trust
Agreement.
["Certificate of Trust" means the Certificate of Trust in the form of
Exhibit B to the Trust Agreement filed for the Trust pursuant to Section 3810(a)
of the Business Trust Statute.]
"Certificate Pool Factor" means, as of the close of business on the last
day of a Collection Period, a seven-digit decimal figure equal to the
Certificate Balance (after giving effect to any reductions therein to be made on
the immediately following Monthly Payment
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Date) divided by the Initial Certificate Balance. The Certificate Pool Factor
shall be 1.0000000 as of the Closing Date; thereafter, the Certificate Pool
Factor shall decline to reflect reductions in the Certificate Balance.
"Certificateholder" means the Holder of a Certificate.
"Certificateholders' Distributable Amount" means, with respect to any
Monthly Payment Date, the sum of the Certificateholders' Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount for such date.
"Certificateholders' Excess Distributable Amount" means, with respect to
each Monthly Payment Date, the lesser of (i) the Accelerated Principal
Distribution Amount and (ii) the amount, if any, necessary after application of
the Certificateholders' Regular Principal Distribution Amount for such Monthly
Payment Date, to reduce the aggregate principal amount of the Certificates so
that the Overcollateralization Amount shall equal the Targeted
Overcollateralization amount after application of principal payments for such
Monthly Payment Date.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Monthly Payment Date, the excess of the sum of the Certificateholders'
Monthly Interest Distributable Amount for the preceding Monthly Payment Date and
any outstanding Certificateholders' Interest Carryover Shortfall on such
preceding Monthly Payment Date, over the amount in respect of interest that is
actually deposited in the Certificate Distribution Account on such preceding
Monthly Payment Date, plus 30 days' interest on such excess, to the extent
permitted by law, at the Pass-Through Rate.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Monthly Payment Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Monthly Payment Date and the Certificateholders'
Interest Carryover Shortfall for such Monthly Payment Date. Interest with
respect to the Certificates shall be computed on the basis of a 360-day year
consisting of twelve 30-day months for all purposes of the Transfer and
Servicing Agreement and the other Basic Documents.
"Certificateholders' Monthly Interest Distributable Amount" means, with
respect to any Monthly Payment Date, 30 days of interest (or, in the case of the
first Monthly Payment Date, interest accrued from and including the Closing
Date) at the Pass-Through Rate on the Certificate Balance on the last day of the
preceding Collection Period (or, in the case of the first Monthly Payment Date,
on the Closing Date).
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Monthly Payment Date prior to the Monthly Payment Date on which
the Notes are paid in full, zero; and with respect to any Monthly Payment Date
on or after the Monthly Payment Date on which the Notes are paid in full, the
lesser of (i) the sum of the Regular Principal Distribution Amount plus the
Accelerated Principal Distribution Amount for such Monthly Payment Date and
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(ii) the amount, if any, necessary to reduce the aggregate principal amount of
the Certificates so that the Overcollateralization Amount shall equal the
Targeted Overcollateralization Amount after application of principal payments
for such Monthly Payment Date (less, on the Monthly Payment Date on which the
Notes are paid in full, the portion thereof payable as the Noteholders' Monthly
Principal Distributable Amount on the Notes).
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any Monthly Payment Date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding Monthly Payment Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account on such current Monthly Payment Date.
"Certificateholders' Principal Distributable Amount" means, with respect to
any Monthly Payment Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Monthly Payment Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Monthly Payment
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the Final
Scheduled Payment Date, the principal required to be included in the
Certificateholders' Principal Distributable Amount shall include the lesser of
(a) any principal due and remaining unpaid on each Receivable, in each case, in
the Trust as of the Final Stated Maturity Date or (b) the amount that is
necessary (after giving effect to the other amounts to be deposited in the
Certificate Distribution Account on such Monthly Payment Date and allocable to
principal) to reduce the Certificate Balance to zero.
"Certificateholders' Regular Principal Distributable Amount" means, with
respect to each Monthly Payment Date, the lesser of (i) the Regular Principal
Distribution Amount and (ii) the amount, if any, necessary to reduce the
aggregate principal amount of the Certificates so that the Overcollateralization
Amount shall equal the Targeted Overcollateralization Amount after application
of principal payments for such Monthly Payment Date.
"Certificates" means [ ]% Asset Backed Certificates issued pursuant to
the Trust Agreement.
"Class" means any one of the classes of Notes.
"Class [ ] Interest Account" means the account designated as such,
established and maintained pursuant to Section 5.01(a)(iv) of the Transfer and
Servicing Agreement.
"Class [ ] Interest Rate" means [ ]% per annum (computed on the
basis of the actual number of days in each Interest Accrual Period divided by
360).
"Class [ ] Interest Rate" means [ ]% per annum (computed on the
basis of a 360-day year consisting of twelve 30-day months).
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<PAGE>
"Class [ ] Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class [ ] Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class [ ] Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class [ ] Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class [ ] Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class [ ] Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class [ ] Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class [ ] Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year consisting of twelve 30-day months).
"Class [ ] Noteholder" means the Person in whose name a Class [ ] Note
is registered in the Note Register.
"Class [ ] Noteholder" means the Person in whose name a Class [ ] Note
is registered in the Note Register.
"Class [ ] Noteholder" means the Person in whose name a Class [ ] Note
is registered in the Note Register.
"Class [ ] Noteholder" means the Person in whose name a Class [ ] Note
is registered in the Note Register.
"Class [ ] Noteholder" means the Person in whose name a Class [ ] Note
is registered in the Note Register.
"Class [ ] Noteholder" means the Person in whose name a Class [ ] Note
is registered in the Note Register.
"Class [ ] Noteholder" means the Person in whose name a Class [ ] Note
is registered in the Note Register.
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<PAGE>
"Class [ ] Noteholder" means the Person in whose name a Class [ ]
Note is registered in the Note Register.
"Class [ ] Noteholder" means the Person in whose name a Class [ ]
Note is registered in the Note Register.
"Class [ ] Noteholder" means the Person in whose name a Class [ ]
Note is registered in the Note Register.
"Class A Notes" means the Class [ ] Notes, Class [ ] Notes, Class
[ ] Notes, Class [ ] Notes, Class [ ] Notes, Class [ ] Notes, Class
[ ] Notes, Class [ ] Notes, Class [ ] Notes and Class [ ] Notes.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
"Class [ ] Notes" means the [ ]% Asset Backed Notes, Class [ ],
substantially in the form of Exhibit A to the Indenture.
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"Class [ ] Principal Account" means the account designated as such,
established and maintained pursuant to Section 5.01(a)(v) of the Transfer and
Servicing Agreement.
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Class [ ] Stated Maturity Date" means [ ].
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means [ ], 199_.
"Code" means the Internal Revenue Code of 1986, as amended, and Treasury
Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of the
Indenture.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.01(a)(i) of the Transfer and Servicing
Agreement.
"Collection Period" means a calendar month. Any amount stated as of the
last day of a Collection Period or as of the first day of a Collection Period
shall give effect to the following calculations as determined as of the close of
business on such last day: (1) all applications of
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collections, (2) all Advances and reductions of Outstanding Advances and (3) all
distributions to be made on the following Monthly Payment Date.
"Commission" has the meaning specified in Section 1.02 of the Indenture.
"Computer Tape" means the computer tape containing information on the
[entire portfolio of recreational vehicle receivables of DFS and the Transferor]
delivered by DFS to the Issuer.
"Contract" means a retail installment sale contract or installment loan
contract relating to a recreational vehicle.
"Conveyed Property" has the meaning specified in Section 2.02 of the
Transfer and Servicing Agreement.
"Corporate Trust Office" or "Corporate Trust Administration Department"
means (i) the office of the Indenture Trustee at which at any particular time
its corporate trust business shall be principally administered, which office at
the date of the execution of the Indenture is located at [ ];
or at such other address as the Indenture Trustee may designate from time to
time by notice to the Noteholders and the Depositor, or the principal corporate
trust office of any successor Indenture Trustee (of which address such successor
Indenture Trustee shall notify the Noteholders and the Depositor) and (ii) with
respect to the Owner Trustee, the principal corporate trust office of the Owner
Trustee located at [ ] or at such other address as the
Owner Trustee may designate by notice to the Certificate Owners, the Indenture
Trustee, the Noteholders, the Certificateholders and the Depositor, or the
principal corporate trust office of any successor Owner Trustee (of which
address such successor Owner Trustee shall notify the Certificateholders, the
Indenture Trustee and the Depositor).
"Cutoff Date" means [ ], 199_.
"Dealer" means the dealer which sold a Financed Vehicle to an Obligor and,
if applicable, which originated and assigned the related Receivable to DFS or
the Transferor, as the case may be.
"Dealer Agreement": An agreement between a Dealer and DFS or the
Transferor, as the case may be, pursuant to which DFS or the Transferor, as the
case may be, purchased one or more Receivables.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Defaulted Receivable" means a Receivable as to which (a) all or any part
of a scheduled payment is 120 days past due and the Servicer has not repossessed
the related Financed Vehicle
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<PAGE>
or (b) the Servicer has repossessed and liquidated the related Financed Vehicle,
whichever occurs first.
"Definitive Notes" has the meaning specified in Section 2.10 of the
Indenture.
"Definitive Trust Certificates" shall have the meaning specified in Section
3.11 of the Trust Agreement.
"Delivery" when used with respect to Trust Account Property means:
(1) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Indenture Trustee or its nominee or
custodian by physical delivery to the Indenture Trustee or its nominee or
custodian endorsed to, or registered in the name of, the Indenture Trustee or
its nominee or custodian or endorsed in blank, and, with respect to a
certificated security (as defined in Section 8-102 of the UCC) transfer thereof
(i) by delivery of such certificated security endorsed to, or registered in the
name of, the Indenture Trustee or its nominee or custodian or endorsed in blank
to a financial intermediary (as defined in Section 8-313 of the UCC) and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Indenture Trustee
or its nominee or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Indenture
Trustee or its nominee or custodian, or (ii) by delivery thereof to a "clearing
corporation" (as defined in Section 8-102(3) of the UCC) and the making by such
clearing corporation of appropriate entries on its books reducing the
appropriate securities account of the transferor and increasing the appropriate
securities account of a financial intermediary by the amount of such
certificated security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such clearing
corporation or a "custodian bank" (as defined in Section 8-102(4) of the UCC) or
the nominee of either subject to the clearing corporation's exclusive control,
the sending of a confirmation by the financial intermediary of the purchase by
the Indenture Trustee or its nominee or custodian of such securities and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Indenture Trustee
or its nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the name of
the Indenture Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account Property (as defined
herein) to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof;
(2) with respect to any securities issued by the U.S. Treasury, the Federal
Home Loan Mortgage Corporation or by the Federal National Mortgage Association
that is a book-entry security held through the Federal Reserve System pursuant
to Federal book-entry regulations, the
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following procedures, all in accordance with applicable law, including
applicable Federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a financial intermediary which is also
a "depository" pursuant to applicable Federal regulations and issuance by such
financial intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Indenture Trustee or its nominee or custodian of
the purchase by the Indenture Trustee or its nominee or custodian of such book-
entry securities; the making by such financial intermediary of entries in its
books and records identifying such book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations as belonging to the
Indenture Trustee or its nominee or custodian and indicating that such custodian
holds such Trust Account Property solely as agent for the Indenture Trustee or
its nominee or custodian; and such additional or alternative procedures as may
hereafter become appropriate to effect complete transfer of ownership of any
such Trust Account Property to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof; and
(3) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such uncertificated security and the making by such financial
intermediary of entries on its books and records identifying such
uncertificated certificates as belonging to the Indenture Trustee or its nominee
or custodian.
"Depositor" means Deutsche Recreational Asset Funding Corporation, in its
capacity as depositor under the Transfer and Servicing Agreement, and its
successor in interest.
"Determination Date" means, with respect to any Monthly Payment Date, the
Business Day immediately preceding such Monthly Payment Date.
"DFS" means Deutsche Financial Services Corporation, a Nevada corporation,
or its successors in interest.
"DFS Contributed Property" has the meaning specified in Section 2.01 of the
DFS/Ganis Transfer Agreement.
"DFS Receivables" has the meaning specified in Section 2.01 of the
DFS/Ganis Transfer Agreement.
"DFS/Ganis Transfer Agreement" means the DFS/Ganis Transfer Agreement
between DFS and Ganis, substantially in the form of Exhibit D to the Transfer
and Servicing Agreement, as amended, amended and restated or otherwise modified
from time to time.
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"Eligible Deposit Account" means either (1) a segregated account with an
Eligible Institution or (2) 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 shall have a credit rating from each
Rating Agency in one of its generic rating categories that signifies investment
grade.
"Eligible Institution" means (1) the corporate trust department of the
Indenture Trustee or the Owner Trustee, or (2) 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 of AAA or
better by Standard & Poor's and A1 or better by Moody's or (B) a certificate of
deposit rating of A-1+ by Standard & Poor's and P-1 or better by Moody's, or any
other long-term, short-term or certificate of deposit rating acceptable to the
Rating Agencies and (ii) whose deposits are insured by the FDIC. If so
qualified, the Indenture Trustee or the Owner Trustee may be considered an
Eligible Institution for the purposes of clause (2) of this definition.
"Eligible Investments" means book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(1) direct obligations of, and obligations fully guaranteed as to the full
and timely payment by, the United States of America;
(2) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) thereof shall have a credit rating
from each of the Rating Agencies in the highest investment category granted
thereby;
(3) commercial paper having, at the time of the investment or contractual
commitment to invest therein, a rating from each of the Rating Agencies in the
highest investment category granted thereby;
(4) investments in money market funds having a rating from each of the
Rating Agencies in the highest investment category granted thereby (including
funds for which the Indenture Trustee or the Owner Trustee or any of their
respective Affiliates is investment manager or advisor);
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(5) bankers' acceptances issued by any depository institution or trust
company referred to in clause (2) above;
(6) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed by, the United States of America or any
agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal)
described in clause (2);
(7) repurchase obligations with respect to any security or whole loan,
entered into with (i) a depository institution or trust company (acting as
principal) described in clause (2) above (except that the rating referred to in
the proviso in such clause (b) shall be A-1 or higher in the case of Standard &
Poor's) (such depository institution or trust company being referred to in this
definition as a "financial institution"), (ii) a broker/dealer (acting as
principal) registered as a broker or dealer under Section 15 of the Exchange Act
(a "broker/dealer") the unsecured short-term debt obligations of which are rated
P-1 by Moody's and at least A-1 by Standard & Poor's at the time of entering
into such repurchase obligation (a "rated broker/dealer"), (iii) an unrated
broker/dealer (an "unrated broker/dealer"), acting as principal, that is a
wholly-owned subsidiary of a non-bank holding company the unsecured short-term
debt obligations of which are rated P-1 by Moody's and at least A-1 by Standard
& Poor's at the time of entering into such repurchase obligation (a "Rated
Holding Company") or (iv) an unrated subsidiary (a "Guaranteed Counterparty"),
acting as principal, that is a wholly-owned subsidiary of a direct or indirect
parent Rated Holding Company, which guarantees such subsidiary's obligations
under such repurchase agreement; provided that the following conditions are
satisfied:
(A) the aggregate amount of funds invested in repurchase obligations
of a financial institution, a rated broker/dealer, an unrated broker/dealer
or Guaranteed Counterparty in respect of which the Standard & Poor's
unsecured short-term ratings are A-1 (in the case of an unrated
broker/dealer or Guaranteed Counterparty, such rating being that of the
related Rated Holding Company) shall not exceed 20% of the sum of the then
outstanding principal balance of the Notes and the Certificate Balance
(there being no limit on the amount of funds that may be invested in
repurchase obligations in respect of which such Standard & Poor's rating is
A-1+ (in the case of an unrated broker/dealer or Guaranteed Counterparty,
such rating being that of the related Rated Holding Company));
(B) in the case of the Reserve Account, the rating from Standard &
Poor's in respect of the unsecured short-term debt obligations of the
financial institution, rated broker/dealer, unrated broker/dealer or
Guaranteed Counterparty (in the case of an unrated broker/dealer or
Guaranteed Counterparty, such rating being that of the related Rated
Holding Company) shall be A-1+;
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(C) the repurchase obligation must mature within 30 days of the date
on which the Indenture Trustee or the Issuer, as applicable, enters into
such repurchase obligation;
(D) the repurchase obligation shall not be subordinated to any other
obligation of the related financial institution, rated broker/dealer,
unrated broker/dealer or Guaranteed Counterparty;
(E) the collateral subject to the repurchase obligation is held, in
the appropriate form, by a custodial bank on behalf of the Indenture
Trustee or the Issuer, as applicable;
(F) the repurchase obligation shall require that the collateral
subject thereto shall be marked to market daily;
(G) in the case of a repurchase obligation of a Guaranteed
Counterparty, the following conditions shall also be satisfied:
(i) the Indenture Trustee or the Issuer, as applicable, shall
have received an opinion of counsel (which may be in- house counsel)
to the effect that the guarantee of the related Rated Holding Company
is a legal, valid and binding agreement of the Rated Holding Company,
enforceable in accordance with its terms, subject as to enforceability
to bankruptcy, insolvency, reorganization and moratorium or other
similar laws affecting creditors' rights generally and to general
equitable principles;
(ii) the Indenture Trustee or the Issuer, as applicable, shall
have received (x) an incumbency certificate for the signer of such
guarantee, certified by an officer of such Rated Holding Company and
(y) a resolution, certified by an officer of the Rated Holding
Company, of the board of directors (or applicable committee thereof)
of the Rated Holding Company authorizing the execution, delivery and
performance of such guarantee by the Rated Holding Company;
(iii) the only conditions to the obligation of such Rated
Holding Company to pay on behalf of the Guaranteed Counterparty shall
be that the Guaranteed Counterparty shall not have paid under such
repurchase obligation when required (it being understood that no
notice to, demand on or other action in respect of the Guaranteed
Counterparty is necessary) and that the Indenture Trustee or the
Issuer shall make a demand on the Rated Holding Company to make the
payment due under such guarantee;
(iv) the guarantee of the Rated Holding Company shall be
irrevocable with respect to such repurchase obligation and shall not
be subordinated to any other obligation of the Rated Holding Company;
and
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(v) each of Standard & Poor's and Moody's has confirmed in
writing to the Indenture Trustee or Issuer, as applicable, that it has
reviewed the form of the guarantee of the Rated Holding Company and
has determined that the issuance of such guarantee shall not result in
the downgrade or withdrawal of the ratings assigned to the Notes.
(H) the repurchase obligation shall require that the repurchase
obligation be overcollateralized and shall provide that, upon any failure
to maintain such overcollateralization, the repurchase obligation shall
become due and payable, and unless the repurchase obligation is satisfied
immediately, the collateral subject to the repurchase agreement shall be
liquidated and the proceeds applied to satisfy the unsatisfied portion of
the repurchase obligation;
(8) any other investment with respect to which the Issuer or the Servicer
has received written notification from the Rating Agencies that the acquisition
of such investment as an Eligible Investment shall not result in a withdrawal or
downgrading of the ratings on the Notes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning specified in Section 5.01 of the
Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Expenses" has the meaning specified in Section 8.02 of the Trust
Agreement.
"FDIC" means the Federal Deposit Insurance Corporation or any successor
organization.
"Fidelity Bond" means a fidelity bond to be maintained by the Servicer
pursuant to Section 4.15 of the Transfer and Servicing Agreement.
"Final Certification" has the meaning specified in Section 3.04 of the
Transfer and Servicing Agreement.
"Final Scheduled Maturity Date" means the Monthly Payment Date immediately
following the scheduled maturity date of the Receivables.
"Final Scheduled Payment Date" means [____________].
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"Financed Vehicle" means a new or used recreational vehicle, together with
all accessions thereto, securing an Obligor's indebtedness under the respective
Receivable.
"Ganis" means Ganis Credit Corporation, a Delaware corporation, or its
successors in interest.
"Ganis/Depositor Transfer Agreement" means the Ganis/Depositor Transfer
Agreement, substantially in the form of Exhibit E to the Transfer and Servicing
Agreement, as the same may be amended, amended and restated or otherwise
modified from time to time.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and a right of set-off against pursuant to the Indenture. A Grant of
the Collateral or of any other agreement or instrument shall include all rights,
powers and options (but none of the obligations) of the granting party
thereunder, including the immediate and continuing right to claim for, collect,
receive and give receipt for principal and interest payments in respect of the
Collateral and all other moneys payable thereunder, to give and receive notices
and other communications, to make waivers or other agreements, to exercise all
rights and options, to bring Proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party is
or may be entitled to do or receive thereunder or with respect thereto.
"Holder" means the Person in whose name a Note or Certificate is registered
on the Note Register or Certificate Register, as applicable.
"Indemnified Parties" shall have the meaning specified in Section 8.02 of
the Trust Agreement.
"Indenture" means the Indenture dated as of the Closing Date between the
Issuer and the Indenture Trustee, as the same may be amended, amended and
restated, supplemented or otherwise modified from time to time.
"Indenture Trustee" means [_______________], a New York corporation, as
Indenture Trustee under the Indenture, or any successor Indenture Trustee under
the Indenture.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor on the
Notes, the Depositor and any Affiliate of any of the foregoing Persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Depositor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Depositor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable
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requirements of Section 11.01 of the Indenture, made by an Independent appraiser
or other expert appointed by an Issuer Order, and such opinion or certificate
shall state that the signer has read the definition of "Independent" in the
Indenture and that the signer is Independent within the meaning thereof.
"Independent Director" has the meaning specified in the articles of
incorporation of the Depositor.
"Initial Certificate Balance" means $[__________].
"Initial Pool Balance" means $[__________].
"Insolvency Event" means, with respect to a specified Person, (1) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (2)
the commencement by such Person of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Insurance Policy" means, with respect to a Receivable, any insurance
policy benefiting the holder of the Receivable providing loss or physical
damage, credit life, credit disability, theft, mechanical breakdown or similar
coverage with respect to the Financed Vehicle or the Obligor.
"Interest Accrual Period" means the calendar month preceding each Monthly
Payment Date (or in the case of the first Monthly Payment Date, the period from
the Closing Date until [_____], 199_) and with respect to the Class [__] Notes,
the period from (and including) the immediately preceding Monthly Payment Date
(or in the case of the first Monthly Payment Date, from and including the
Closing Date) to and including the day preceding the applicable Monthly Payment
Date.
"Interest Rate" means the interest rate for any one or more of the Classes
of Notes, or collectively for all Classes of Notes, in each case as the context
requires.
"Investment Earnings" means, with respect to any Monthly Payment Date, the
realized investment earnings (net of losses and investment expenses) on amounts
on deposit in the Trust
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Accounts to be distributed on such Monthly Payment Date pursuant to Section
5.01(b) of the Transfer and Servicing Agreement.
"Issuer" means Distribution Financial Services [RV/Boat] Trust 199_-_, a
Delaware business trust, until a successor replaces it and, thereafter, means
the successor and, for purposes of any provision contained herein and required
by the TIA, each other obligor on the Notes.
"Issuer Order" or "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to a Receivable by operation of law as a result of any act or
omission by the related Obligor.
"Lien Certificate": With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable State to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" means only a certificate or notification issued to a secured party
by such Registrar of Titles.
"Liquidation Proceeds" means, with respect to any Defaulted Receivable, the
monies collected in respect thereof, from whatever source, on a Defaulted
Receivable [during the Collection Period in which such Receivable became a
Defaulted Receivable], net of the sum of any amounts 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 Defaulted Receivable.
"Monthly Payment Date" means, with respect to each Collection Period, the
15th day of the following month or, if such day is not a Business Day, the
immediately following Business Day, commencing on [__], 199_.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Nonquarterly Payment Date" means a Monthly Payment Date that is not a
Quarterly Payment Date.
"Note" means any Class A Note.
"Note Depository Agreement" means the agreement dated the Closing Date
among the Trust, the Indenture Trustee, and The Depository Trust Company, as the
initial Clearing Agency, relating to the Notes, as the same may be amended,
amended and restated or otherwise modified from time to time.
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"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.01 of the Transfer and
Servicing Agreement.
"Note Owner" means, with respect to a Book-Entry Note, the Person who is
the beneficial owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency).
"Note Pool Factor" means, with respect to each Class of Notes as of the
close of business on the last day of a Collection Period, a seven-digit decimal
figure equal to the outstanding principal balance of such Class of Notes (after
giving effect to any reductions thereof to be made on the immediately following
Monthly Payment Date) divided by the original outstanding principal balance of
such Class of Notes. The Note Pool Factor shall be 1.0000000 as of the Closing
Date; thereafter, the Note Pool Factor shall decline to reflect reductions in
the outstanding principal balance of such Class of Notes.
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.04 of the Indenture.
"Noteholder" means the Person in whose name a Note is registered on the
Note Register.
"Noteholders' Distributable Amount" means, with respect to any Monthly
Payment Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount for such Monthly Payment Date.
"Noteholders' Excess Distributable Amount" means, with respect to each
Monthly Payment Date, the lesser of (i) the Accelerated Principal Distribution
Amount and (ii) the amount, if any, necessary after application of the
Noteholders' Regular Principal Distribution amount for such Monthly Payment
Date, to reduce the aggregate principal amount of the Notes so that the
Overcollateralization Amount shall equal the Targeted Overcollateralization
Amount after application of principal payments for such Monthly Payment Date.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Monthly Payment Date, the excess of the sum of the Noteholders' Monthly Interest
Distributable Amount for the preceding Monthly Payment Date and any outstanding
Noteholders' Interest Carryover Shortfall on such preceding Monthly Payment
Date, over the amount in respect of interest that is actually deposited in the
Note Distribution Account on such preceding Monthly Payment Date, plus interest
on the amount of interest due but not paid to Noteholders on the preceding
Monthly Payment 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' Interest Distributable Amount" means, with respect to any
Monthly Payment Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such
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Monthly Payment Date and the Noteholders' Interest Carryover Shortfall for such
Monthly Payment Date. For all purposes of the Transfer and Servicing Agreement
and the other Basic Documents, interest with respect to the Notes shall be
computed on the basis of twelve 30-day months in a 360-day year except for the
Class [___] Notes which shall be calculated on the basis of the actual number
days in a year divided by 360.
"Noteholders' Monthly Interest Distributable Amount" means, with respect to
any Monthly Payment 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 Monthly Payment Date (or, in the case of the first Monthly Payment
Date, the Closing Date), after giving effect to all distributions of principal
to the Noteholders of such Class on or prior to such Monthly Payment Date.
"Noteholders' Monthly Principal Distributable Amount" means, with respect
to any Monthly Payment Date, the lesser of (i) the sum of the Regular Principal
Distribution Amount plus the Accelerated Principal Distribution Amount for such
Monthly Payment Date and (ii) the amount, if any, necessary to reduce the
aggregate principal amount of the Notes so that the Overcollateralization Amount
shall equal the Targeted Overcollateralization Amount after application of
principal payments for such Monthly Payment Date.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Monthly Payment Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Monthly Payment Date, over the amount in respect of
principal that is actually deposited in the Note Distribution Account on such
current Monthly Payment Date.
"Noteholders' Principal Distributable Amount" means, with respect to any
Monthly Payment Date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such Monthly Payment Date and the Noteholders'
Principal Carryover Shortfall as of the close of the preceding Monthly Payment
Date; provided, however, that the Noteholders' Principal Distributable Amount
shall not exceed the outstanding principal balance of the Notes. In addition,
(a) on the Class [___] Stated Maturity Date, the principal required to be
deposited in the Note Distribution Account shall include the amount necessary
(after giving effect to the other amounts to be deposited in the Note
Distribution Account on such Monthly Payment Date and allocable to principal) to
reduce the Outstanding Amount of the Class [___] Notes to zero; (b) on the Class
[___] Stated Maturity Date, the principal required to be deposited in the Note
Distribution Account shall include the amount necessary (after giving effect to
the other amounts to be deposited in the Note Distribution Account on such
Monthly Payment Date and allocable to principal) to reduce the Outstanding
Amount of the Class [___] Notes to zero; (c) on the Class [___] Stated Maturity
Date, the principal required to be deposited in the Note Distribution Account
shall include the amount necessary (after giving effect to the other amounts to
be deposited in the Note Distribution Account on such Monthly Payment Date and
allocable to principal) to reduce the Outstanding Amount of the Class [___]
Notes to zero; (d) on the Class [___] Stated Maturity Date, the principal
required to be deposited in the Note Distribution Account
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shall include the amount necessary (after giving effect to the other amounts to
be deposited in the Note Distribution Account on such Monthly Payment Date and
allocable to principal) to reduce the Outstanding Amount of the Class [_____]
Notes to zero; (e) on the Class [_____] Stated Maturity Date, the principal
required to be deposited in the Note Distribution Account shall include the
amount necessary (after giving effect to the other amounts to be deposited in
the Note Distribution Account on such Monthly Payment Date and allocable to
principal) to reduce the Outstanding Amount of the Class [_____] Notes to zero;
(f) on the Class [_____] Stated Maturity Date, the principal required to be
deposited in the Note Distribution Account shall include the amount necessary
(after giving effect to the other amounts to be deposited in the Note
Distribution Account on such Monthly Payment Date and allocable to principal) to
reduce the Outstanding Amount of the Class [_____] Notes to zero; (g) on the
Class [_____] Stated Date, the principal required to be deposited in the Note
Distribution Account shall include the amount necessary (after giving effect to
the other amounts to be deposited in the Note Distribution Account on such
Monthly Payment Date and allocable to principal) to reduce the Outstanding
Amount of the Class [ ] Notes to zero; (h) on the Class [_____] Stated Maturity
Date, the principal required to be deposited in the Note Distribution Account
shall include the amount necessary (after giving effect to the other amounts to
be deposited in the Distribution Account on such Monthly Payment Date and
allocable to principal) to reduce the Outstanding Amount of the Class [_____]
Notes to zero; (i) on the Class [_____] Stated Maturity Date, the principal
required to be deposited in the Note Distribution Account shall include the
amount necessary (after giving effect to the other amounts to be deposited in
the Note Distribution Account on such Monthly Payment Date and allocable to
principal and all amounts available in the Class [_____] Principal Account) to
reduce the Outstanding Amount of the Class [_____] Notes to zero; and (j) on the
Class [ ] Stated Maturity Date, the principal required to be deposited in the
Note Distribution Account shall include the amount necessary (after giving
effect to the other amounts to be deposited in the Note Distribution Account on
such Monthly Payment Date and allocable to principal) to reduce the Outstanding
Amount of the Class [_____] Notes to zero.
"Noteholders' Regular Principal Distributable Amount" means, with respect
to each Monthly Payment Date, the lesser of (i) the Regular Principal
Distribution Amount and (ii) the amount, if any, necessary to reduce the
aggregate principal amount of the Notes so that the Overcollateralization Amount
shall equal the Targeted Overcollateralization Amount after application of
principal payments for such Monthly Payment Date.
"Notes" means the Class A Notes.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01 of the Indenture,
and delivered to the Indenture Trustee and, with respect to any other Basic
Document, means a certificate signed by (i) any vice president and (ii) the
president, treasurer, assistant treasurer, secretary or assistant secretary of
the Servicer (or any
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other party specified in any such Basic Document as delivering an Officer's
Certificate). Unless otherwise specified, any reference in the Indenture to an
Officer's Certificate shall be to an Officer's Certificate signed by any
Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in the Indenture, be an employee of or
counsel to the Issuer, the Servicer or the Depositor and who shall be
satisfactory to the Indenture Trustee, and which opinion or opinions shall be
addressed to the Indenture Trustee as Indenture Trustee, shall comply with any
applicable requirements of Section 11.01 of the Indenture and shall be in form
satisfactory to the Indenture Trustee.
"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under the Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to the Indenture or provision for such notice
has been made, satisfactory to the Indenture Trustee); and
(iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, that in determining whether the Holders of the requisite
Outstanding Amount of the Notes have given any request, demand,
authorization, direction, notice, consent or waiver under any Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes, the
Depositor or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Notes that the Indenture Trustee knows to be so owned shall be so
disregarded. Notes so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of
the Indenture Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Depositor or any Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes, or
Class of Notes, as applicable, Outstanding at the date of determination.
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"Outstanding Advances" on the Receivables means the sum, as of the close of
business on the last day of a Collection Period, of all Advances as reduced as
provided in Section 5.04 of the Transfer and Servicing Agreement.
"Overcollateralization Amount" means the amount which shall equal zero as
of the Closing Date and for any Monthly Payment Date shall equal the amount, if
any, by which the Pool Balance as of the end of the related Collection Period
exceeds the sum of the (i) aggregate principal amount of the Notes, (ii) the
aggregate amount on deposit in the Class [___] Principal Account and (iii) the
Certificate Balance, after giving effect to all distributions made in respect of
principal on such Monthly Payment Date.
"Owner Trust Estate" means all right, title and interest of the Trust in
and to the property and rights assigned to the Trust pursuant to Article II of
the Transfer and Servicing Agreement, all funds on deposit from time to time in
the Trust Accounts and all other property of the Trust from time to time,
including any rights of the Owner Trustee and the Trust pursuant to the Transfer
and Servicing Agreement.
"Owner Trustee" means [__________], a Delaware banking corporation, not in
its individual capacity but solely as owner trustee under the Trust Agreement,
and any successor Owner Trustee thereunder.
"Pass-Through Rate" means [_____]%.
"Paying Agent" means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee specified in Section 6.11 of
the Indenture and is authorized by the Issuer to make payments to and
distributions from the Collection Account, the Note Distribution Account, the
Class [___] Interest Account and the Class [___] Principal Account, including
payments of principal of or interest on the Notes on behalf of the Issuer.
"Percentage Interest" means, as to any Certificate, the percentage
interest, specified on the face thereof, in the distributions on the
Certificates pursuant to the Trust Agreement.
"Person" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Pool Balance" means, as of the close of business on the last day of a
Collection Period, the aggregate Principal Balance of the Receivables as of such
day (excluding Purchased Receivables and Defaulted Receivables).
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"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 of the Indenture in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"Principal Balance" means, as of the close of business on the last day of a
Collection Period, the Amount Financed minus the sum of (i) the portion of all
payments made by or on behalf of the related Obligor on or prior to such date
and allocable to principal using the Simple Interest Method and (ii) any payment
of the Purchase Amount for such Receivable allocable to principal.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase Amount" means the amount, as of the close of business on the last
day of a Collection Period, required to prepay in full a Receivable under the
terms thereof including interest to the end of such Collection Period.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.07 of the Transfer and Servicing Agreement, by DFS pursuant to Section
3.01 of the DFS/Ganis Transfer Agreement, by the Transferor pursuant to Section
3.01 of the Ganis/Depositor Transfer Agreement, or by the Depositor pursuant to
Section 3.01 of the Transfer and Servicing Agreement.
["Quarterly Payment Date" means each Monthly Payment Date occurring in
November, February, May and August, commencing [_________], 199_].
"Rating Agency" means Moody's and Standard & Poor's or, if no such
organization or successor is any longer in existence, a nationally recognized
statistical rating organization or other comparable Person designated by the
Depositor, notice of which designation shall be given to the Indenture Trustee,
the Owner Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 Business Days (or such shorter period as
is acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Depositor, the Servicer and the Issuer
in writing that such action shall not result in a reduction or withdrawal of the
then current rating of the Notes and the Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Defaulted Receivable during any Collection Period, the excess of the Principal
Balance of such Defaulted Receivable over all Liquidation Proceeds or other
amounts [received by the Servicer with respect to such Receivable] to the extent
allocable to principal during such Collection Period.
23
<PAGE>
"Receivable" means any Contract listed on Schedule A to the Transfer and
Servicing Agreement (which Schedule may be in the form of microfiche).
"Receivable Files" means the documents specified in Section 3.04 of the
Transfer and Servicing Agreement.
"Record Date" means, with respect to any Monthly Payment Date or Redemption
Date, the close of business on the day immediately preceding such Monthly
Payment Date or, if Definitive Certificates are issued pursuant to Section 3.13
of the Trust Agreement, the last day of the month preceding such Monthly Payment
Date and if Definitive Notes have been issued pursuant to Section 2.12 of the
Indenture, the last day of the month preceding such Monthly Payment Date.
"Recoveries" means, with respect to any Receivable that becomes a Defaulted
Receivable, monies collected in respect thereof, from whatever source, during
any Collection Period following the Collection Period in which such Receivable
became a Defaulted Receivable, net of the sum of (i) any amounts expended by the
Servicer for the account of the Obligor and (ii) any amounts required by law to
be remitted to the Obligor.
"Redemption Date" means, in the case of a redemption of the Notes pursuant
to Section 10.01(a) of the Indenture or a payment to Noteholders pursuant to
Section 10.01(b) of the Indenture, a Monthly Payment Date specified by the
Servicer or the Issuer pursuant to Section 10.01(a) or (b), as applicable.
"Redemption Price" means (a) in the case of a redemption of the Notes
pursuant to Section 10.01(a) of the Indenture, an amount equal to the unpaid
principal amount of the Notes redeemed plus accrued and unpaid interest thereon
at the respective Interest Rates for each Class of Notes being so redeemed
through the end of the Interest Accrual Period relating to the applicable
Monthly Payment Date, or (b) in the case of a payment made to Noteholders
pursuant to Section 10.01(b) of the Indenture, the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (a)
above.
"Registered Holder" means the Person in whose name a Note is registered on
the Note Register on the applicable Record Date.
"Registrar of Titles" means, with respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
"Regular Principal Distribution Amount" means, with respect to any Monthly
Payment Date, the sum of the following amounts, without duplication, with
respect to the Receivables in respect of the Collection Period preceding such
Monthly Payment Date: (i) that portion of all collections on Receivables
allocable to principal, (ii) all Liquidation Proceeds or other collections
attributable to the principal amount of Receivables that became Defaulted
24
<PAGE>
Receivables during such Collection Period, plus the amount of Realized Losses
with respect to the Defaulted Receivables, (iii) to the extent attributable to
principal, the Purchase Amount of each Receivables that became a Purchased
Receivable during such Collection Period and (iv) partial payments 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 Obligors thereon as of the date of the original
contract and only to the extent not included under clause (i) above.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.01(a)(iii) of the Transfer and Servicing
Agreement.
"Reserve Account Initial Deposit" means an amount equal to $[ ].
"Responsible Officer" means, with respect to the Indenture Trustee, any
Trust Officer thereof.
"Schedule of Receivables" means the list of the Receivables set forth in
Schedule A to the Transfer and Servicing Agreement (which Schedule may be in the
form of microfiche).
"Secretary of State" means the Secretary of State of the State of Delaware.
"Securities" means the Notes and the Certificates.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer" means DFS, as the servicer of the Receivables, and each
successor to DFS (in the same capacity).
"Servicer Default" has the meaning specified in Section 8.01 of the
Transfer and Servicing Agreement.
"Servicer's Certificate" means a certificate of the Servicer delivered
pursuant to Section 4.09 of the Transfer and Servicing Agreement, substantially
in the form of Exhibit B thereto.
"Servicing Fee" means the fee payable to the Servicer for services rendered
during each Collection Period, determined pursuant to Section 4.08 of the
Transfer and Servicing Agreement.
"Servicing Fee Rate" means [ ] basis points (___) per annum.
"Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the period of
time elapsed since the preceding payment of interest was made and the remainder
of such payment is allocable to principal.
25
<PAGE>
"Specified Agreement" has the meaning set forth in Section 2.13(a) of the
Trust Agreement.
"Specified Reserve Account Balance" means, with respect to any Monthly
Payment Date, the lesser of (i) [ ]% of the Initial Pool Balance and (ii) the
outstanding principal balance of the Securities.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., or its successor.
"State" means any one of the 50 States of the United States of America or
the District of Columbia.
"Stated Maturity Date" means, with respect to any class of Notes, the
Monthly Payment Date set forth below opposite such class of Notes on which, to
the extent not previously paid, the outstanding principal amount of such Class
of Notes shall be payable.
<TABLE>
<CAPTION>
CLASS OF NOTES STATED MATURITY DATE
<S> <C>
Class [ ] [ ]
Class [ ] [ ]
Class [ ] [ ]
Class [ ] [ ]
Class [ ] [ ]
Class [ ] [ ]
Class [ ] [ ]
Class [ ] [ ]
Class [ ] [ ]
Class [ ] [ ]
</TABLE>
"Successor Servicer" has the meaning specified in Section 3.07(e) of the
Indenture.
"Targeted Overcollateralization Amount" means, for any Monthly Payment
Date, shall be an Overcollateralization Amount equal to [ ]% of the Pool
Balance as of the end of the related Collection Period after giving effect to
all distributions in respect of principal to be made on such Monthly Payment
Date.
"Total Distribution Amount" means, with respect to any Monthly Payment
Date, the sum of the following amounts, without duplication, with respect to the
Receivables in respect of the Collection Period preceding such Monthly Payment
Date: (1) all collections on Receivables allocable to interest and principal,
(2) all Liquidation Proceeds or other collections attributable to accrued
interest on or the principal amount of Receivables that became Defaulted
Receivables during such Collection Period, plus the amount of Realized Losses
with respect to the Defaulted Receivables, (3) all Advances made by the
Servicer, (4) the Purchase Amount of each
26
<PAGE>
Receivable that became a Purchased Receivable during such Collection Period, (5)
all Recoveries and (6) partial payments 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 Obligors thereon as of the date of the original contract and only to
the extent not included under clause (1) above; provided, however, that in
calculating the Total Distribution Amount the following shall be excluded: (i)
all payments and proceeds (including Liquidation Proceeds) of any Purchased
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 the Receivables (which amounts shall be determined based
on the Simple Interest Method) during such preceding Collection Period in excess
of the amount of interest that would be due on the aggregate Principal Balance
of the Receivables during such Collection Period at their respective APRs if a
payment were received on each Receivable during such Collection Period on the
date payment is due under the terms of such Receivable; and (iii) Liquidation
Proceeds with respect to a Receivable attributable to accrued and unpaid
interest thereon (but not including interest for the then current Collection
Period) but only to the extent of any unreimbursed Advances.
"Transfer and Servicing Agreement" means the Transfer and Servicing
Agreement dated as of the Closing Date among the Issuer, the Depositor, and DFS,
as Servicer, as the same may be amended, amended and restated or otherwise
modified from time to time.
"Transferor" means Ganis Credit Corporation, a Delaware corporation, or its
successor in interest.
"Transferor Conveyed Property" has the meaning specified in Section 3.01 of
the Ganis/Depositor Transfer Agreement.
"Transferor Receivables" has the meaning specified in Section 2.01 of the
Ganis/Depositor Transfer Agreement.
"Treasury Regulations" means regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning specified in Section 5.01 in the Transfer
and Servicing Agreement.
27
<PAGE>
"Trust Agreement" means the Trust Agreement dated as of the Closing Date
between the Depositor and the Owner Trustee, as the same may be amended, amended
and restated or otherwise modified from time to time.
"Trust Certificate" means a [__]% Asset Backed Certificate issued pursuant
to the Trust Agreement.
"Trust Estate" means all money, instruments, rights and other property that
are subject or intended to be subject to the lien and security interest of the
Indenture for the benefit of the Noteholders (including, without limitation, all
property and interests Granted to the Indenture Trustee), including all proceeds
thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force on the Closing Date, unless otherwise specifically provided.
"Trust Officer" means (i) in the case of the Indenture Trustee, any officer
within the Corporate Trust Office of the Indenture Trustee, including any Vice
President, Assistant Vice President, Senior Trust Officer, Trust Officer,
Secretary, Assistant Secretary or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject, and (ii) in the case of the Owner
Trustee, any officer in the Corporate Trust Administration Department of the
Owner Trustee with direct responsibility for the administration of the Trust
Agreement and the other Basic Documents on behalf of the Owner Trustee.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
28
<PAGE>
SCHEDULE A
Schedule of Receivables
Delivered to the Owner Trustee at Closing
<PAGE>
SCHEDULE B
Location of Receivable Files
<PAGE>
EXHIBIT A-1
Form of Distribution Statement to Noteholders
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199_-_
MONTHLY PAYMENT DATE STATEMENT TO NOTEHOLDERS
Pool Balance
Distribution Allocable to Principal on Notes
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Distribution Allocable to Interest on Notes
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Class [ ] Notes: ($ per $1,000 original principal amount)
Note Balance After Giving Effect to Principal Distributions on Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
A-1-1
<PAGE>
Class [ ] Notes
Note Pool Factor
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Certificate Balance After Giving Effect to Principal Distributions on
Certificates
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 Note
Realized Losses
Reserve Account Balance
A-1-2
<PAGE>
EXHIBIT A-2
Form of Distribution Statement to Certificateholders
----------------------------------------------------
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199_-_
MONTHLY PAYMENT DATE STATEMENT TO CERTIFICATEHOLDERS
Pool Balance
Distribution Allocable to Principal on Certificates
Principal Per $1000 Certificate
Distribution Allocable to Interest on Certificates
Interest Per $1,000 Certificate
Note Balance After Giving Effect to Principal Distributions on Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Note Pool Factor
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
Class [ ] Notes
A-2-1
<PAGE>
Certificate Balance After Giving Effect to Principal Distributions on
Certificates
Certificate Pool Factor
Servicing Fee
Servicing Fee Per $1,000 Certificate
Realized Losses
Reserve Account Balance
A-2-2
<PAGE>
EXHIBIT B
Form of Servicer's Certificate
------------------------------
SERVICER'S MONTHLY CERTIFICATE
DISTRIBUTION FINANCIAL SERVICES [RV/BOAT] TRUST 199_-_
Accounting Date:
Determination Date:
Monthly Payment Date:
Collection Period Ending:
I. Collection Account Summary
Total Available Funds:
Principal and Interest Payments Received (including Prepayments):
Net Liquidation Proceeds (including Rebates/Insurance Amounts):
Current Monthly Interest Advance:
Amount of Withdrawal, if any, from Reserve Account:
Purchase Amounts for Purchased Receivables:
Total Distribution Amount Sent to Trustee:
II. Excess or Shortfalls
Amount of Interest Payments Due During the Collection Period for
Receivables:
Amount of Interest Payments Received During the Collection Period for
Receivables:
Amount of Current Month Excess/Shortfall:
III. Calculation of Reserve Account Deposit/Withdrawals
Specified Reserve Account Balance (lesser of [ ]% of the Initial Pool
Balance and the outstanding Principal Balance of the Notes and
Certificates):
B-1
<PAGE>
Deposits to Reserve Account (only if Reserve Account less than the
specified Reserve Account Balance):
Withdrawals from Reserve Account (to the extent there are shortfalls on
payments of Interest or Principal):
Amount in Reserve Account as of Determination Date (excluding amount to
be paid on next Payment Date):
IV. Collections on Receivables
(a) Interest and Principal Payments Received:
Interest Payments Received:
Scheduled Principal Payments Received:
Principal Prepayments Received:
Total Interest and Principal Payments Received:
(b) Liquidation Proceeds:
Gross Proceeds of Defaulted Receivables (including Rebates/Insurance):
minus: Reasonable Expenses:
Net Liquidation Proceeds:
Allocation of Liquidation Proceeds:
Amount Allocable to Interest Payments:
Amount Allocable to Principal Payments:
(c) Purchase Amount--Receivables purchased from Trust:/1/
Amount Allocable to Interest:
Amount Allocable to Principal:
Total Collected Funds:
V. Calculation of Servicing and Trustee Fees:
Pool Balance of Receivables as of First Day of Collection Period:
multiplied by Servicer Fee Rate:
divided by Months per Year:
Servicing Fee Amount:
Pool Balance of Receivables as of First Day of Collection Period:
multiplied by Trustee Fee Rate:
divided by Months per Year:
Trustee Fee Amount:
- --------------
/1/Identify pursuant to Section 4.09 of the Transfer and Servicing Agreement.
B-2
<PAGE>
VI. Pool Balance and Portfolio Performance
(a) Pool Balance:
Initial Pool Balance:
Pool Balance as of Preceding Accounting Date:
Pool Balance as of Current Accounting Date
Age of Pool in Months:
(b) Default and Delinquency Performance (Includes Repossessions and
Bankruptcies):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Current Month Number of Loans Principal Balance Percentage
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
30 - 59 Days Delinquent
- --------------------------------------------------------------------------------
60 - 89 Days Delinquent
- --------------------------------------------------------------------------------
90+ Days Delinquent
- --------------------------------------------------------------------------------
Defaults
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Defaults
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Schedule of Liquidated Receivables
Description of Vehicle
Account Number
Original Principal Balance of the Liquidated Receivables
Outstanding Principal Balance of the Liquidated Receivables
Gross Recovery
Net of Expenses
Realized Loss
Chargeoff Date
Repossession Date
Liquidation Date
Current Period Defaulted Receivables:
Description of Vehicle
Account Number
Original Principal Balance of the Defaulted Receivables
Outstanding Principal Balance of the Defaulted Receivables
Recovery Net of Expenses
Realized Loss
Chargeoff Date
Schedule of Repossession Inventory
Description of Vehicle
B-3
<PAGE>
Account Number
Original Principal Balance of the Defaulted Receivables
Outstanding Principal Balance of the Defaulted Loan
Recovery Net of Expenses
Realized Loss
Chargeoff Date
Repossession Date
Current Period Realized Losses
Current Month's Realized Losses as Percentage of Initial Pool Balance
(Annualized):
Preceding Realized Month's Losses as Percentage of Initial Pool Balance
(Annualized):
Second Preceding Month's Realized Losses as Percentage of Initial Pool Balance
(Annualized):
VII. Distributions of the Total Distributable Amount
Total Pool Factor:
Note Pool Factor:
Certificate Pool Factor:
Class [ ] Interest and Principal Account:
A. Monthly Servicing Fee and any unpaid servicing fees from prior
Monthly Payment Dates:
Servicer Reimbursements for Mistaken Deposits or Postings of Checks
Returned for Insufficient Funds (not Otherwise Reimbursed to Servicer):
B. Noteholders' Interest Distributable Amount:
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Noteholders' Principal Distributable Amount:
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
Class [ ]
B-4
<PAGE>
Class [ ]
Class [ ]
Class [ ]
C. Certificateholders' Interest Distributable Amount:
Certificateholders' Principal Distributable Amount:
B-5
<PAGE>
EXHIBIT C
FINAL CERTIFICATION OF CUSTODIAN
(date)
(to be addressed to the
Indenture Trustee)
Re: Transfer and Servicing Agreement dated as of ___________, 199_
among Distribution Financial Services [RV/Boat] Trust 199_-_, Deutsche
Recreational Asset Funding Corporation, Ganis Credit Corporation, and
Deutsche Financial Services Corporation, individually and as Servicer
(the "Agreement")
Gentlemen:
In accordance with the provisions of Section 3.02 of the above-referenced
Agreement, the undersigned, as custodian, hereby certifies that as to each
Receivable listed in the Schedule of Receivables, it has reviewed the related
Receivable File and has determined that (i) all documents required to be
delivered to it pursuant to the Agreement are in its possession, (ii) such
documents have been reviewed by it and appear regular on their face and relate
to such Receivable (for each of the Receivables listed on the attachment hereto
a certified confirmation of the lien is included in the Receivables File in lieu
of a fully executed original Lien Certificate or application therefor), and
(iii) based on its examination and only as to the foregoing documents, the
information set forth in the Schedule of Receivables respecting such Receivable
is correct. Capitalized terms used but not defined herein shall have the
meanings provided by the Agreement.
DEUTSCHE FINANCIAL SERVICES
CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE>
EXHIBIT D
DFS/GANIS TRANSFER AGREEMENT
between
DEUTSCHE FINANCIAL SERVICES CORPORATION
and
GANIS CREDIT CORPORATION
Dated as of ____________, 199_
<PAGE>
TABLE OF CONTENTS
<TABLE>
ARTICLE I
Definitions
<S> <C> <C>
SECTION 1.01. Definitions................................................ 1
SECTION 1.02. Other Definitional Provisions.............................. 1
ARTICLE II
[Contribution] [Sale] of Receivables
SECTION 2.01. [Contribution] [Sale]...................................... 2
SECTION 2.02. Intent of the Parties...................................... 3
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties as to Receivables........... 3
ARTICLE IV
DFS
SECTION 4.02. Corporate Existence........................................11
SECTION 4.03. Liability of DFS...........................................11
SECTION 4.04. Indemnification............................................11
SECTION 4.05. Merger or Consolidation of, or Assumption of the
Obligations of, DFS........................................12
SECTION 4.06. Limitation on Liability of DFS and Others..................12
SECTION 4.07. DFS May Own Notes and Certificates.........................12
ARTICLE V
Miscellaneous
SECTION 5.01. Amendment..................................................13
SECTION 5.02. Protection of Title; Change of Name, Identity, Corporate
Structure or Location, Etc.................................13
SECTION 5.03. Notices....................................................14
SECTION 5.04. Assignment.................................................14
</TABLE>
D-i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 5.05. Limitations on Rights of Others...........................14
SECTION 5.06. Severability..............................................15
SECTION 5.07. Separate Counterparts.....................................15
SECTION 5.08. Headings..................................................15
SECTION 5.09. Governing Law; Submission to Jurisdiction.................15
SECTION 5.10. Nonpetition Covenants.....................................15
SECTION 5.11. Waiver....................................................16
SECTION 5.12. Separate Corporate Existence..............................16
</TABLE>
||
D-ii
<PAGE>
DFS/GANIS TRANSFER AGREEMENT dated as of _____________, 199_ (this
"Agreement") between DEUTSCHE FINANCIAL SERVICES CORPORATION, a Nevada
corporation ("DFS") and GANIS CREDIT CORPORATION, a Delaware corporation
("Ganis").
WHEREAS, Ganis desires to acquire receivables from DFS arising in
connection with recreational vehicle retail installment sale contracts and loan
contracts; and
WHEREAS, DFS is willing to [contribute] such receivables to Ganis.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Except as otherwise specified herein or as the
context may otherwise require, capitalized terms used herein have the respective
meanings assigned thereto in Appendix A to the Transfer and Servicing Agreement
for all purposes of this Agreement. "Transfer and Servicing Agreement" means the
Transfer and Servicing Agreement, dated the same date as this Agreement, among
Distribution Financial Services [RV/Boat] Trust 199_-_, Deutsche Recreational
Asset Funding Corporation and DFS, as the same may be amended, amended and
restated or otherwise modified from time to time.
SECTION 1.02. Other Definitional Provisions.
(a) All terms defined in Appendix A to the Transfer and Servicing Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(c) The words "hereof", "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this
<PAGE>
Agreement are references to Articles, Sections, Schedules and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, amended and
restated or otherwise modified and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments incorporated
therein; references to a Person are also to its permitted successors and
assigns.
(f) Each reference to the "close of business" on a particular day shall
mean 5:00 p.m. Pacific Time on such day.
ARTICLE II
[Contribution] [Sale] of Receivables
------------------------------------
SECTION 2.01. [Contribution] [Sale]. DFS does hereby transfer, assign, set
over and otherwise convey to Ganis, as a [capital contribution] [sale], without
recourse (subject to the obligations of DFS set forth herein), all right, title
and interest of DFS in, to and under (but none of the obligations of DFS under):
(a) all of the Receivables originated by DFS or acquired by DFS from
Dealers (all of such Receivables being referred to collectively as the "DFS
Receivables" and individually as a "DFS Receivable") and all moneys received
thereon on and after the Cutoff Date;
(b) the security interests in the Financed Vehicles created pursuant to the
DFS Receivables and any other interest of DFS in the Financed Vehicles;
(c) any proceeds with respect to the DFS Receivables under any Insurance
Policies;
(d) any proceeds from recourse to Dealers with respect to DFS Receivables;
(e) any Financed Vehicle, relating to a DFS Receivable, acquired in
repossession;
(f) the contents of the Receivable Files with respect to DFS Receivables
and all rights, benefits and proceeds arising therefrom or in connection
therewith;
(g) all funds on deposit from time to time in the Trust Accounts, and all
investments and proceeds thereof (including all income thereon); and
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(h) the proceeds of any and all of the foregoing.
The Receivables and other items covered by clauses (a)-(h) of this Section
2.01 shall be referred to collectively as the "DFS Conveyed Property".
SECTION 2.02. Intent of the Parties. (a) DFS and Ganis intend that the
conveyance by DFS to Ganis of the right, title and interest of DFS in, to and
under the Receivables and the other DFS Conveyed Property pursuant to this
Agreement shall constitute a [capital contribution] [sale] and not a loan.
However, in the event that, notwithstanding the intent of the parties, such
conveyance is deemed to be a transfer for security and not a [capital
contribution] [sale], then (i) DFS shall be deemed to have granted, and in such
event does hereby grant, to Ganis a first priority security interest in all of
its right, title and interest in, to and under DFS Conveyed Property, and (ii)
this Agreement shall constitute a security agreement under applicable law with
respect to such conveyance.
(b) No party hereto shall take any action that is inconsistent with the
ownership of the DFS Conveyed Property by Ganis, it being understood that this
sentence shall not prevent the transfer of the DFS Conveyed Property by Ganis to
the Depositor in accordance with the Ganis/Depositor Transfer Agreement and the
transfer of the DFS Conveyed Property by the Depositor to the Issuer in
accordance with the Transfer and Servicing Agreement. Each party hereto shall
inform any Person inquiring about the Receivables that the DFS Conveyed Property
has been transferred by DFS to Ganis, by Ganis to the Depositor and by Ganis to
the Issuer. Without limiting the generality of the foregoing, for accounting,
tax and other purposes each party hereto shall treat the transfer of DFS
Conveyed Property by DFS to Ganis as a [capital contribution] [sale] by DFS to
Ganis. Notwithstanding any other provision of this Agreement, no party hereto
shall have any recourse to DFS, Ganis or the Servicer on account of the
financial inability of any Obligor to make payments in respect of a Receivable.
ARTICLE III
The Receivables
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SECTION 3.01. Representations and Warranties as to Receivables.
DFS makes the following representations and warranties as to the
Receivables, on which representations and warranties each of Ganis, the
Depositor and the Issuer is deemed to have relied in acquiring the Receivables.
Such representations and warranties speak as of the execution and delivery of
this Agreement and as of the Closing Date but shall survive the transfer and
assignment of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
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(i) Characteristics of Receivables. All of the Receivables (other
than the Transferor Receivables) were originated by DFS or acquired by DFS
from Dealers. Each DFS Receivable (A) was fully and properly executed by
the parties thereto, (B) contains customary and enforceable provisions such
as to render the rights and remedies of the holder thereof adequate for
realization against the collateral security, (C) is fully amortizing and
provides for level periodic payments which, if made when due, shall fully
amortize the Amount Financed over the original term and (D) provides for,
in the event that such DFS Receivable is prepaid in full, payment of an
amount that fully pays the Principal Balance and includes accrued but
unpaid interest at least through the date of prepayment calculated at a
rate at least equal to its Annual Percentage Rate. Each DFS Receivable
provides that payments thereon are to be applied in accordance with the
Simple Interest Method. If such DFS Receivable was originated by a Dealer,
such Receivable, to the knowledge of DFS, (A) was originated by the Dealer
for the retail sale of a Financed Vehicle in the ordinary course of such
Dealer's business, (B) was purchased by DFS from such Dealer for new value
under a Dealer Agreement and (C) was validly assigned by the Dealer to DFS.
To the knowledge of DFS, such Dealer had all necessary licenses and permits
to originate DFS Receivables in the state where such Dealer was located. If
such DFS Receivable was originated by DFS, such DFS Receivable was
originated for value by DFS in the ordinary course of its business to
finance the purchase of, or refinance, the related Financed Vehicle by the
related Obligor. DFS had all necessary licenses and permits to originate or
purchase such DFS Receivable.
(ii) No Fraud or Misrepresentation. To the knowledge of DFS, each
DFS Receivable originated by a Dealer was originated by the Dealer and sold
by the Dealer to DFS without any fraud or misrepresentation on the part of
such Dealer.
(iii) Compliance with Law. To the knowledge of DFS, all requirements
of applicable federal, state and local laws, and regulations thereunder
(including, without limitation, usury laws, the Federal Truth-in- Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission 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 motor vehicle retail installment sales acts and
lending acts and state adaptations of the National Consumer Act and of the
Uniform Consumer Credit Code and other consumer credit laws and equal
credit opportunity and disclosure laws) in respect of all of the DFS
Receivables and each and every sale of Financed Vehicles relating thereto,
have been complied with in all material respects, and each DFS Receivable
and the sale of the Financed Vehicle evidenced by each DFS Receivable
complied at the time it was originated or made and now complies in all
material respects with all applicable legal requirements.
(iv) Origination. Each DFS Receivable was originated in the United
States.
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(v) Binding Obligation. Each DFS Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally and
by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law; and all parties to each DFS Receivable had full legal
capacity to execute and deliver such DFS Receivable and all other documents
related thereto and to grant the security interest purported to be granted
thereby.
(vi) No Government Obligor. No Obligor of a DFS Receivable is the
United States of America or any State or any agency, department,
subdivision or instrumentality thereof.
(vii) Obligor Bankruptcy. At the Cutoff Date, no Obligor had been
identified on the records of DFS as being the subject of a current
bankruptcy proceeding.
(viii) Schedule of Receivables. The information with respect to DFS
Receivables set forth in the Schedule of Receivables is true and correct in
all material respects as of the close of business on the Cutoff Date.
(ix) Marking Records. By the Closing Date, DFS shall have caused the
portions of its electronic ledger relating to the DFS Receivables to be
clearly and unambiguously marked to show that the DFS Receivables have been
transferred absolutely from DFS to Ganis, from Ganis to the Depositor and
from the Depositor to the Trust.
(x) Computer Tape. The Computer Tape was complete and accurate as
of the Cutoff Date and includes a description of the same DFS Receivables
that are described in the Schedule of Receivables.
(xi) Chattel Paper. The DFS Receivables constitute chattel paper
within the meaning of the UCC as in effect in the states in which the
Obligors reside.
(xii) One Original. There is only one original executed copy of each
DFS Receivable.
(xiii) Receivable Files Complete. There exists a Receivable File
pertaining to each DFS Receivable and, to the knowledge of DFS , such
Receivable File contains (a) a fully executed original of the DFS
Receivable, with a fully executed assignment thereof in blank or from the
related Dealer to DFS, as the case may be, if such DFS Receivable was
acquired by DFS from a Dealer, (b) a certificate of physical damage
insurance, application form for such insurance signed by the Obligor or a
signed representation letter from the Obligor named in the DFS Receivable
pursuant to which the Obligor has
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agreed to obtain physical damage insurance for the Financed Vehicle, or
copies thereof, (c) the Lien Certificate or a copy of the application
therefor or a certification from the Servicer that it has received
confirmation from an authorized official of the appropriate governmental
office of the existence of the first lien of DFS with respect to the
related Financed Vehicle and (d) a credit application signed by the
Obligor, or a copy thereof. Each of such documents which is required to be
signed by the Obligor has been signed by the Obligor in the appropriate
spaces. Each of the foregoing documents has been correctly prepared. The
complete file for each DFS Receivable currently is in the possession of the
Servicer.
(xiv) Receivables in Force. No DFS Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such DFS
Receivable has not been released from the lien of the related DFS
Receivable in whole or in part. No provisions of any DFS Receivable have
been waived, altered or modified (except that DFS as servicer may have, for
administrative purposes, modified the due date of a DFS Receivable to a
different date in the month, which modification is reflected in its
servicing records) in any respect since its origination, except by
instruments or documents identified in the Receivable File. No DFS
Receivable has been modified as a result of application of the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended.
(xv) Lawful Assignment. No DFS Receivable was originated in, or is
subject to the laws of, any jurisdiction the laws of which (a) would make
unlawful, void or voidable the transfer and assignment of such DFS
Receivable under this Agreement or the pledge of such DFS Receivable under
the Indenture or (b) would impair the validity or enforceability of any DFS
Receivable because of any such transfer, assignment or pledge.
(xvi) Good Title. No DFS Receivable has been sold, transferred,
assigned or pledged by DFS except pursuant to this Agreement; immediately
prior to the conveyance of the DFS Receivables by DFS to Ganis pursuant to
this Agreement, DFS had good and indefeasible title to the DFS Receivables,
free and clear of any Lien. No Dealer has a participation in, or other
right to receive, payments or proceeds in respect of any DFS Receivable.
DFS has not taken any action to convey any right to any Person that would
result in such Person having a right to payments received under the related
Insurance Policies or the related Dealer Agreements or to payments due
under such DFS Receivables.
(xvii) Security Interest in Financed Vehicle. Each DFS Receivable has
created a valid, binding and enforceable first priority security interest
in favor of DFS in the related Financed Vehicle, which is in full force and
effect. Each Lien Certificate contained in the Receivables Files shows DFS
named as the original secured party under each DFS Receivable and as the
holder of a first priority security interest in such Financed Vehicle. With
respect to each DFS Receivable for which the Lien Certificate is not
contained in the related Receivable File, the Servicer has either received
written
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evidence that such Lien Certificate showing DFS as first lienholder has
been applied for or has certified in writing in the related Receivable File
that it has received confirmation from the appropriate governmental office
of the existence of the first lien of DFS with respect to the related
Financed Vehicle. The security interest of DFS in each such Financed
Vehicle has been validly assigned by DFS to Ganis pursuant to this
Agreement. Each DFS Receivable is secured by an enforceable and perfected
first priority security interest in the Financed Vehicle in the name of DFS
as secured party, which security interest is prior to all other Liens upon
and security interests in such Financed Vehicle which now exist or may
hereafter arise or be created.
(xviii) All Filings Made; Valid Security Interest. All filings
(including, without limitation, UCC filings) required to be made by any
Person and actions required to be taken or performed by any Person in any
jurisdiction to give Ganis a first priority perfected ownership interest in
the DFS Receivables and the proceeds thereof have been made, taken or
performed, subject to the transfer thereof by Ganis to the Depositor. At
the Closing Date Ganis shall have a valid, subsisting and enforceable first
priority ownership interest in each Receivable and the proceeds thereof,
subject to the transfer thereof by Ganis to the Depositor.
(xix) No Impairment. DFS has not done and shall not do anything to
convey any right to any Person that would result in such Person having a
right to payments due under a Receivable or otherwise to impair the rights
of the Trust in any Receivable or the proceeds thereof.
(xx) No Release. No DFS Receivable is assumable by another Person in
a manner which would release the Obligor thereof from such Obligor's
obligations to DFS with respect to such DFS Receivable.
(xxi) No Defenses. No DFS Receivable is subject to any right of
rescission, setoff, counterclaim or defense and, to the knowledge of DFS,
no such right has been asserted or threatened with respect to any DFS
Receivable. The operation of the terms of any DFS Receivable or the
exercise of any right thereunder shall not render the DFS Receivable
unenforceable in whole or in part or subject to any right of rescission,
setoff, counterclaim or defense, and to the knowledge of DFS, no such right
of rescission, setoff, counterclaim or defense has been asserted with
respect thereto.
(xxii) No Default. To the knowledge of DFS, there has been no default,
breach, violation or event permitting acceleration under the terms of any
DFS Receivable (other than payment delinquencies of not more than 59 days),
and no condition exists or event has occurred and is continuing that with
notice, the lapse of time or both would constitute a default, breach,
violation or event permitting acceleration under the terms of any DFS
Receivable, and there has been no waiver of any of the foregoing. As of the
Cutoff Date, no Financed Vehicle relating to any DFS Receivable had been
repossessed.
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(xxiii) Insurance. Each DFS Receivable requires the Obligor to
maintain physical loss and damage insurance, naming DFS and its successors
and assigns as additional insured parties, and each DFS Receivable permits
the holder thereof to obtain physical loss and damage insurance at the
expense of the Obligor if the Obligor fails to do so. No Financed Vehicle
relating to any DFS Receivable was insured under a policy of force-placed
insurance on the Cutoff Date.
(xxiv) Past Due. At the Cutoff Date, no DFS Receivable was more than
59 days past due.
(xxv) No Liens. There are no Liens or claims which have been filed,
and, to the knowledge of DFS, none pending or threatened to be filed, for
work, labor, materials or unpaid state or federal taxes affecting the
Financed Vehicle securing any DFS Receivable which are or may become liens
prior or equal to the lien of the DFS Receivable.
(xxvi) Remaining Principal Balance. At the Cutoff Date, the Principal
Balance of each DFS Receivable set forth in the Schedule of Receivables is
true and accurate in all material respects.
(xxvii) Final Scheduled Maturity Date. No DFS Receivable has a final
maturity later than [ ].
(xxviii) Certain Characteristics. (A) Each DFS Receivable had a
remaining maturity, as of the Cutoff Date, of at least 1 month but not more
than [ ] months; (B) each DFS Receivable had an original maturity of at
least [ ] months but not more than [ ] months; (C) each DFS
Receivable had an original principal balance of at least $[ ] and not
more than $[ ]; (D) each DFS Receivable had a Principal Balance as of
the Cutoff Date of at least $[ ] and not more than $[ ]; (E) each DFS
Receivable has an Annual Percentage Rate of at least [ ]% and not more
than [ ]%; (F) [ ]% of the Receivables when originated were secured
by new Financed Vehicles; (G) no funds have been advanced by DFS, any
Dealer, or any Person acting on behalf of any of them in order to cause any
DFS Receivable to qualify under paragraph (xxv) above; (H) no DFS
Receivable has a Final Scheduled Maturity Date on or before [ ] or later
than [ ]; (I) as of the Cutoff Date, other than California ([ ]%),
Florida ([ ]%), Oregon ([ ]%) and Texas ([ ]%), no State
represented more than 5% by outstanding Pool Balance with respect to the
location of the Financed Vehicles; and (J) the Principal Balance of each
DFS Receivable set forth in Schedule of Receivables is true and accurate in
all material respects as of the Cutoff Date.
For purposes of determining whether DFS is obligated to purchase a DFS
Receivable on account of a breach of a representation and warranty pursuant
to this Section 3.01 or indemnify in respect of such breach pursuant to the
last paragraph of this Section 3.01, the determination as to whether a
representation or warranty that is made to
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the knowledge of DFS has been breached shall be made without regard to such
knowledge of DFS as if such representation and warranty were not qualified
by the knowledge of DFS.
Upon discovery by any party hereto of a breach of any of the
representations and warranties of DFS set forth in this Section, which
materially and adversely affects the value of the Receivables or the
interest therein of the Issuer or the Indenture Trustee (or which
materially and adversely affects the interest of the Issuer or the
Indenture Trustee in the related Receivable in the case of a representation
and warranty relating to a particular Receivable), the party discovering
such breach shall give prompt written notice to the other parties hereto.
On the last day of the Collection Period following the Collection Period
during which DFS discovers or receives notice of any such breach of any
such representation or warranty, if such breach shall not have been cured
in all material respects by such last day, then DFS shall purchase such
Receivable from the Issuer (or from the Depositor, if the Depositor is
required to purchase such Receivable pursuant to Section 3.01 of the
Transfer and Servicing Agreement) as of such last day at a price equal to
the Purchase Amount of such Receivable, which price DFS shall remit in the
manner specified in Section 5.05 of the Transfer and Servicing Agreement[;
provided, that, with respect to the representation set forth in paragraph
(xiii) above, such purchase shall be required with respect to a Receivable
only if any resulting breach is not cured (it being understood that if the
related Lien Certificate has been duly applied for from the applicable
governmental offices as evidenced by a copy of the application therefor,
the receipt of such Lien Certificate shall not be required to cure a breach
of the applicable representation and warranty) within 90 days after
completion of the review and examination of the Receivable File for such
Receivable pursuant to Section 3.02 of the Transfer and Servicing
Agreement]. Subject to the indemnification provisions contained in the last
paragraph of this Section, the sole remedy of Ganis, the Depositor, the
Issuer, the Owner Trustee or the Indenture Trustee with respect to a breach
of representations and warranties of DFS set forth in this Section shall be
to require DFS to purchase Receivables pursuant to this Section, subject to
the conditions contained herein.
DFS shall indemnify Ganis, the Depositor, the Issuer, the Owner
Trustee and the Indenture Trustee and hold each harmless against any loss,
damages, penalties, fines, forfeitures, legal fees and related costs,
judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach
of the representations and warranties of DFS contained in this Agreement;
provided that DFS shall not be liable for any indirect damages or for any
loss, damage, penalty, fine, forfeiture, legal fees and related costs,
judgments and other costs and expenses caused by the wilful misconduct of
Ganis, the Depositor, the Issuer, the Owner Trustee or the Indenture
Trustee.
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ARTICLE IV
DFS
---
SECTION 4.01. Representations of DFS. DFS makes the following
representations on which each of Ganis, the Depositor and the Issuer is deemed
to have relied in acquiring the Receivables. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date, in the case
of the Receivables, and shall survive the transfer of the Receivables to the
Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
(a) Organization and Good Standing. DFS is duly organized and validly
existing as a corporation in good standing under the laws of the State of
Nevada, with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. DFS is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease of property or
the conduct of its business shall require such qualifications.
(c) Power and Authority. DFS has the corporate power and authority to
execute and deliver this Agreement and to carry out its respective terms; DFS
has full power and authority to transfer and assign the property to be
transferred and assigned to Ganis, and DFS shall have duly authorized such
transfer and assignment by all necessary corporate action; and the execution,
delivery and performance of this Agreement by DFS has been duly authorized by
DFS by all necessary corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of DFS enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement by DFS and the fulfillment of the terms hereof by DFS do not conflict
with, result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of DFS, or any indenture, agreement or other instrument
to which DFS is a party or by which it is bound; or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument (other than pursuant to the Basic
Documents); or violate any law or, to the best of DFS's knowledge, any order,
rule or regulation applicable to DFS of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over DFS or its properties.
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(f) No Proceedings. To DFS's best knowledge, there are no proceedings or
investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over DFS or its properties: (i) asserting the invalidity of this Agreement, the
Indenture or any of the other Basic Documents, the Notes or the Certificates,
(ii) seeking to prevent the issuance of the Notes or the Certificates or the
consummation of any of the transactions contemplated by this Agreement, the
Indenture or any of the other Basic Documents, (iii) seeking any determination
or ruling that might materially and adversely affect the performance by DFS of
its obligations under, or the validity or enforceability of, this Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates or
(iv) which might adversely affect the federal or state income tax attributes of
the Notes or the Certificates.
(g) Chief Executive Office. The chief executive office of DFS is located at
655 Maryville Centre Drive, St. Louis, Missouri 63141.
SECTION 4.02. Corporate Existence. During the term of this Agreement, DFS
shall keep in full force and effect its existence, rights and franchises as a
corporation under the laws of the jurisdiction of its incorporation and shall
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Basic Documents and each other instrument
or agreement necessary or appropriate to the proper administration of this
Agreement and the transactions contemplated hereby. In addition, all
transactions and dealings between the Depositor and DFS, and between DFS and
Ganis, shall be conducted on an arm's-length basis.
SECTION 4.03. Liability of DFS. DFS shall be liable in accordance herewith
only to the extent of the obligations specifically undertaken by DFS under this
Agreement.
SECTION 4.04. Indemnification. (a) DFS shall indemnify, defend and hold
harmless Ganis against any taxes that may at any time be asserted against Ganis
with respect to the transactions contemplated herein and in the other Basic
Documents including any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes (but not including any taxes
asserted with respect to, and as of the date of, the transfer of the Receivables
to Ganis or the issuance and original sale of the Notes and the Certificates, or
asserted with respect to ownership of the Receivables, or federal or other
income taxes arising out of distributions on the Notes and the Certificates) and
costs and expenses in defending against the same.
(b) DFS shall indemnify, defend and hold harmless Ganis and any of the
officers, directors, employees and agents of Ganis from and against any loss,
liability or expense incurred by reason of DFS's willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement, or by
reason of reckless disregard of its obligations and duties under this Agreement.
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Indemnification under this Section shall survive termination of this
Agreement and the other Basic Documents and shall include reasonable fees and
expenses of counsel and expenses of litigation. If DFS shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to DFS, without interest.
SECTION 4.05. Merger or Consolidation of, or Assumption of the Obligations
of, DFS. Any Person (a) into which DFS may be merged or consolidated, (b) which
may result from any merger or consolidation to which DFS shall be a party or (c)
which may succeed to the properties and assets of DFS substantially as a whole,
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of DFS under this Agreement, shall be the successor
to DFS hereunder without the execution or filing of any document or any further
act by any of the parties to this Agreement; provided, however, that (i)
immediately after giving effect to such transaction, no representation or
warranty made by DFS in Section 3.01 shall have been breached (unless the
applicable breach shall have been cured in all material respects, or the
applicable Receivable shall have been purchased in accordance therewith), (ii)
DFS shall have delivered to Ganis, the Owner Trustee and the Indenture Trustee
an Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, (iii) DFS shall
have delivered to the Owner Trustee and the Indenture Trustee an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and Indenture Trustee, respectively, in the DFS Receivables and
reciting the details of such filings, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interests. Notwithstanding anything herein to the contrary, the execution of the
foregoing agreement of assumption and compliance with clauses (i), (ii), and
(iii) above shall be conditions to the consummation of the transactions referred
to in clauses (a), (b) or (c) above.
SECTION 4.06. Limitation on Liability of DFS and Others. DFS and any
director, officer, employee or agent of DFS may rely in good faith on the advice
of counsel or on any document of any kind, prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. DFS shall not
be under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its obligations under this Agreement, and that in its
opinion may involve it in any expense or liability.
SECTION 4.07. DFS May Own Notes and Certificates. DFS and any Affiliate
thereof may in its individual or any other capacity become the owner or pledgee
of Notes and Certificates with the same rights as it would have if it were not
DFS or an Affiliate thereof, except as expressly provided herein or in any other
Basic Document.
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ARTICLE V
Miscellaneous
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SECTION 5.01. Amendment. This Agreement may be amended by the parties
hereto, with the consent of the Indenture Trustee, but without the consent of
any other Person; provided, however, that, unless the Rating Agency Condition
shall have been satisfied with respect thereto, such action shall not (as
evidenced by an Opinion of Counsel delivered to the Owner Trustee and the
Indenture Trustee) adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
Promptly after the execution of any such amendment or consent, Ganis shall
furnish written notification of the substance of such amendment or consent to
the Indenture Trustee and each of the Rating Agencies.
Prior to the execution of or the consent to any amendment to this
Agreement, the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Indenture Trustee may, but shall not be
obligated to, enter into or consent to any such amendment which affects the
Indenture Trustee's own rights, duties or immunities under this Agreement or
otherwise.
SECTION 5.02. Protection of Title; Change of Name, Identity, Corporate
Structure or Location, Etc.
(a) DFS shall execute and file such financing statements and cause to be
executed and filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
interest of Ganis, the Issuer and of the Indenture Trustee in the Receivables
and in the proceeds thereof. DFS shall deliver (or cause to be delivered) to the
Owner Trustee and the Indenture Trustee file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) DFS shall not change its name, identity or corporate structure in any
manner that would, could or might make any financing statement or continuation
statement filed in accordance with paragraph (a) above seriously misleading
within the meaning of Section 9-402(7) of the UCC, unless it shall have given
Ganis, the Owner Trustee and the Indenture Trustee at least five days' prior
written notice thereof and shall have promptly filed appropriate amendments to
all previously filed financing statements or continuation statements.
(c) DFS shall give Ganis, the Owner Trustee and the Indenture Trustee at
least 60 days' prior written notice of any relocation of its chief executive
office if, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment or new financing statement.
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(d) If at any time DFS shall propose to sell, grant a security interest
in, or otherwise transfer any interest in recreational vehicle receivables to
any prospective purchaser, lender or other transferee, DFS shall give (or shall
cause the Servicer to give) to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any DFS
Receivable, shall indicate clearly that such DFS Receivable has been transferred
by DFS to Ganis and by Ganis to the Issuer and is owned by the Issuer and has
been pledged to the Indenture Trustee.
SECTION 5.03. Notices. All demands, notices, directions, communications
and instructions upon, to, or by DFS, Ganis, the Servicer, the Owner Trustee,
the Indenture Trustee or the Rating Agencies under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of DFS, to Deutsche Financial Services Corporation, 645 Maryville Centre
Drive, St. Louis, Missouri 63141, Attention: Chief Legal Officer, (b) in the
case of Ganis, to Ganis Credit Corporation, 660 Newport Center Drive, Newport
Beach, California 92660, Attention: Executive Vice President, (c) in the case of
the Depositor, to Deutsche Recreational Asset Funding Corporation, 655 Maryville
Centre Drive, St. Louis, Missouri 63141, Attention: President, (d) in the case
of the Issuer or the Owner Trustee, at the Corporate Trust Office (as defined in
the Trust Agreement), (e) in the case of the Indenture Trustee, at the Corporate
Trust Office, (f) in the case of Moody's, to Moody's Investors Service, Inc.,
ABS Monitoring Department, 99 Church Street, New York, New York 10007, and (g)
in the case of Standard & Poor's, to Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., 25 Broadway (15th Floor), New York,
New York 10004, Attention of Asset Backed Surveillance Department; or, as to
each of the foregoing, at such other address as shall be designated by written
notice to the other Persons listed in this Section.
SECTION 5.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 4.05 of this Agreement, this
Agreement may not be assigned by DFS. DFS hereby acknowledges and consents to
(i) the transfer by Ganis to the Depositor pursuant to the Ganis/Depositor
Transfer Agreement of all right, title and interest of Ganis in, to and under
(but none of the obligations of Ganis under) the DFS Conveyed Property and this
Agreement, (ii) the transfer by Ganis to the Issuer pursuant to the Transfer and
Servicing Agreement of all right, title and interest of Ganis in, to and under
(but none of the obligations of the Depositor under) the DFS Conveyed Property
and this Agreement, including the representations and warranties of DFS in this
Agreement, together with all rights of Ganis with respect to any breach thereof,
including the right to require DFS to purchase Receivables in accordance with
this Agreement, and (iii) the other terms of and transactions contemplated by
the Transfer and Servicing Agreement and the other Basic Documents.
SECTION 5.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of DFS, Ganis, the Depositor, the Servicer,
the Issuer, the Owner Trustee, the Indenture Trustee and the Noteholders, and,
except as expressly provided in this Agreement, nothing in this Agreement shall
be construed to give to any other Person any legal or equitable
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right, remedy or claim under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 5.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 5.07. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 5.08. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 5.09. Governing Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE PERFECTION
(AND THE EFFECT OF PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF ANY PERSON
IN CONVEYED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW YORK OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE BASIC DOCUMENTS, AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE OR FEDERAL COURT, IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION 5.10. Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement, DFS shall not, prior to the date which is one year and one
day after the termination of the Trust Agreement, acquiesce, petition or
otherwise invoke or cause the Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Issuer under any federal or state bankruptcy, insolvency or similar law, or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer.
Notwithstanding any prior termination of this Agreement, DFS shall not, prior to
the date which is one year and one day after the termination of the Trust
Agreement, acquiesce, petition or otherwise invoke or cause the Depositor to
invoke the process of any court
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or government authority for the purpose of commencing or sustaining a case
against the Depositor under any federal or state bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Depositor or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Depositor.
SECTION 5.11. Waiver. Each party hereto hereby (i) acknowledges that
Mayer, Brown & Platt represents DFS, the Transferor, the Depositor and
Affiliates of the Transferor, DFS and the Depositor in connection with the
transactions contemplated by the Basic Documents, and represents the
institutions which are the Indenture Trustee and the Owner Trustee (or
Affiliates of such institutions) in other transactions, and (ii) waives any
conflict of interest relating thereto. Notwithstanding any other provision of
this Agreement, Mayer, Brown & Platt is entitled to rely on this Section.
SECTION 5.12. Separate Corporate Existence. Each party hereto hereby
acknowledges that the Trust is entering into the transactions contemplated by
the Basic Documents in reliance upon (i) DFS's identity as a legal identity
separate from the Depositor and (ii) Ganis's identity as a legal entity separate
from the Depositor. Therefore, until the first day following the termination of
the Trust Agreement on which all of the Securities have been paid in full, each
party hereto shall take all reasonable steps to make it apparent to third
Persons that each of DFS and Ganis is an entity with assets and liabilities
distinct from those of the Depositor and that the Depositor is not a division of
DFS, Ganis or any other Person. Without limiting the foregoing, each party
hereto shall operate and conduct its respective businesses and otherwise act in
a manner which is consistent with Section 10.13 of the Transfer and Servicing
Agreement.
[SIGNATURES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this DFS/Ganis Transfer
Agreement to be duly executed by their respective officers as of the day and
year first above written.
DEUTSCHE FINANCIAL SERVICES CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
GANIS CREDIT CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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<PAGE>
EXHIBIT E
GANIS/DEPOSITOR TRANSFER AGREEMENT
between
GANIS CREDIT CORPORATION,
as Transferor,
and
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION,
as Depositor
Dated as of ____________, 199__
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
SECTION 1.01. Definitions............................................. 1
SECTION 1.02. Other Definitional Provisions........................... 1
ARTICLE II
[Contribution] [Sale] of Receivables
SECTION 2.01. [Contribution] [Sale]................................... 2
SECTION 2.02. Intent of the Parties................................... 3
ARTICLE III
The Receivables
SECTION 3.01. Representations and Warranties as to Receivables........ 4
ARTICLE IV
The Transferor
SECTION 4.01. Representations of Transferor........................... 11
SECTION 4.02. Corporate Existence..................................... 12
SECTION 4.03. Liability of the Transferor............................. 12
SECTION 4.04. Indemnification......................................... 12
SECTION 4.05. Merger or Consolidation of, or Assumption of the
Obligations of, Transferor.............................. 13
SECTION 4.06. Limitation on Liability of Transferor and Others........ 13
SECTION 4.07. The Transferor May Own Notes and Certificates........... 13
ARTICLE V
Miscellaneous
SECTION 5.01. Amendment............................................... 14
SECTION 5.02. Protection of Title; Change of Name, Identity,
Corporate Structure or Location, Etc.................... 14
SECTION 5.03. Notices................................................. 15
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SECTION 5.04. Assignment.............................................. 15
SECTION 5.05. Limitations on Rights of Others......................... 16
SECTION 5.06. Severability............................................ 16
SECTION 5.07. Separate Counterparts................................... 16
SECTION 5.08. Headings................................................ 16
SECTION 5.09. Governing Law; Submission to Jurisdiction............... 16
SECTION 5.10. Nonpetition Covenants................................... 16
SECTION 5.11. Waiver.................................................. 17
SECTION 5.12. Separate Corporate Existence............................ 17
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<PAGE>
GANIS/DEPOSITOR TRANSFER AGREEMENT dated as of _____________, 199_ (this
"Agreement") between DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, a Nevada
corporation (the "Depositor") and GANIS CREDIT CORPORATION, a Delaware
corporation ("Ganis" or the "Transferor").
WHEREAS, the Depositor desires to acquire receivables from the Transferor
arising in connection with recreational vehicle retail installment sale
contracts and loan contracts;
WHEREAS, the Transferor is willing to [contribute] [sell] such receivables
to the Depositor; and
WHEREAS, the Transferor acquired certain of such receivables from DFS
pursuant to the DFS/Ganis Transfer Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Except as otherwise specified herein or as the
context may otherwise require, capitalized terms used herein have the respective
meanings assigned thereto in Appendix A to the Transfer and Servicing Agreement
for all purposes of this Agreement. "Transfer and Servicing Agreement" means the
Transfer and Servicing Agreement, dated the same date as this Agreement, among
Distribution Financial Services [RV/Boat] Trust 199_-_, the Depositor, and
Deutsche Financial Services Corporation, as the same may be amended, amended and
restated or otherwise modified from time to time.
SECTION 1.02. Other Definitional Provisions.
(a) All terms defined in Appendix A to the Transfer and Servicing Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles,
<PAGE>
the definitions contained in this Agreement or in any such certificate or other
document shall control.
(c) The words "hereof", "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term "including" shall mean "including without limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, amended and
restated or otherwise modified and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments incorporated
therein; references to a Person are also to its permitted successors and
assigns.
(f) Each reference to the "close of business" on a particular day shall
mean 5:00 p.m. Pacific Time on such day.
ARTICLE II
[Contribution] [Sale] of Receivables
SECTION 2.01. [Contribution] [Sale]. The Transferor does hereby transfer,
assign, set over and otherwise convey to the Depositor, as a [capital
contribution] [sale], without recourse (subject to the obligations of the
Transferor set forth herein), all right, title and interest of the Transferor
in, to and under (but none of the obligations of the Transferor under):
(a) all of the Receivables originated by the Transferor or acquired by the
Transferor from Dealers (all of such Receivables being referred to collectively
as the "Transferor Receivables" and individually as a "Transferor Receivable")
and all moneys received thereon on and after the Cutoff Date;
(b) the security interests in the Financed Vehicles created pursuant to the
Transferor Receivables and any other interest of the Transferor in the Financed
Vehicles;
(c) any proceeds with respect to the Transferor Receivables under any
Insurance Policies;
(d) any proceeds from recourse to Dealers with respect to Transferor
Receivables;
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(e) any Financed Vehicle, relating to a Transferor Receivable, acquired in
repossession;
(f) the contents of the Receivable Files with respect to Transferor
Receivables and all rights, benefits and proceeds arising therefrom or in
connection therewith;
(g) all funds on deposit from time to time in the Trust Accounts, and all
investments and proceeds thereof (including all income thereon);
(h) the DFS/Ganis Transfer Agreement;
(i) the DFS Conveyed Property; and
(j) the proceeds of any and all of the foregoing.
The Receivables and other items covered by clauses (a)-(j) of this Section
2.01 shall be referred to collectively as the "Transferor Conveyed Property".
SECTION 2.02. Intent of the Parties. (a) The Transferor and the Depositor
intend that the conveyance by the Transferor to the Depositor of the right,
title and interest of the Transferor in, to and under the Receivables and the
other Transferor Conveyed Property pursuant to this Agreement shall constitute a
[capital contribution] [sale] and not a loan. However, in the event that,
notwithstanding the intent of the parties, such conveyance is deemed to be a
transfer for security and not a [capital contribution] [sale], then (i) the
Transferor shall be deemed to have granted, and in such event does hereby grant,
to the Depositor a first priority security interest in all of its right, title
and interest in, to and under the Transferor Conveyed Property, and (ii) this
Agreement shall constitute a security agreement under applicable law with
respect to such conveyance.
(b) No party hereto shall take any action that is inconsistent with the
ownership of the Transferor Conveyed Property by the Depositor, it being
understood that this sentence shall not prevent the transfer of the Transferor
Conveyed Property by the Depositor to the Issuer in accordance with the Transfer
and Servicing Agreement. Each party hereto shall inform any Person inquiring
about the Receivables that the Transferor Conveyed Property has been transferred
by the Transferor to the Depositor and by the Depositor to the Issuer. Without
limiting the generality of the foregoing, for accounting, tax and other purposes
each party hereto shall treat the transfer of Transferor Conveyed Property by
the Transferor to the Depositor as a [capital contribution] [sale] by the
Transferor to the Depositor. Notwithstanding any other provision of this
Agreement, no party hereto shall have any recourse to DFS, the Transferor, the
Depositor or the Servicer on account of the financial inability of any Obligor
to make payments in respect of a Receivable.
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<PAGE>
ARTICLE III
The Receivables
---------------
SECTION 3.0 Representations and Warranties as to Receivables. DFS has made
representations and warranties set forth in Section 3.01 of the DFS/Ganis
Transfer Agreement, and has consented to the assignment by the Transferor to the
Depositor and by the Depositor to the Issuer of the Transferor's rights with
respect thereto. Pursuant to Section 2.01 of this Agreement, the Transferor has
transferred to the Depositor all of the Transferor's right, title and interest
in, to and under the DFS/Ganis Transfer Agreement, which shall be understood to
include the representations and warranties of DFS therein, upon which the
Depositor relies in accepting the Receivables, together with all rights of the
Transferor with respect to any breach thereof, including the right to require
DFS to purchase Receivables in accordance with the DFS/Ganis Transfer Agreement.
The Transferor makes the following representations and warranties as to the
Receivables, on which representations and warranties each of the Depositor and
the Issuer is deemed to have relied in acquiring the Receivables. Such
representations and warranties speak as of the execution and delivery of this
Agreement and as of the Closing Date but shall survive the transfer and
assignment of the Receivables to the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(i) Characteristics of Receivables. All of the Receivables (other than
the DFS Receivables) were originated by the Transferor or acquired by the
Transferor from Dealers. Each Transferor Receivable (A) was fully and
properly executed by the parties thereto, (B) contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for realization against the collateral security,
(C) is fully amortizing and provides for level periodic payments which, if
made when due, shall fully amortize the Amount Financed over the original
term and (D) provides for, in the event that such Transferor Receivable is
prepaid in full, payment of an amount that fully pays the Principal Balance
and includes accrued but unpaid interest at least through the date of
prepayment calculated at a rate at least equal to its Annual Percentage
Rate. Each Transferor Receivable provides that payments thereon are to be
applied in accordance with the Simple Interest Method. If such Transferor
Receivable was originated by a Dealer, such Receivable, to the knowledge of
the Transferor, (A) was originated by the Dealer for the retail sale of a
Financed Vehicle in the ordinary course of such Dealer's business, (B) was
purchased by the Transferor from such Dealer for new value under a Dealer
Agreement and (C) was validly assigned by the Dealer to the Transferor. To
the knowledge of the Transferor, such Dealer had all necessary licenses and
permits to originate Transferor Receivables in the state where such Dealer
was located. If such Transferor Receivable was originated by the
Transferor, such Transferor Receivable was originated for value by the
Transferor in the ordinary course of its business to finance the purchase
of, or refinance, the related Financed Vehicle by the
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<PAGE>
related Obligor. The Transferor had all necessary licenses and permits to
originate or purchase such Transferor Receivable.
(ii) No Fraud or Misrepresentation. To the knowledge of the
Transferor, each Transferor Receivable originated by a Dealer was
originated by the Dealer and sold by the Dealer to the Transferor without
any fraud or misrepresentation on the part of such Dealer.
(iii) Compliance with Law. To the knowledge of the Transferor, all
requirements of applicable federal, state and local laws, and regulations
thereunder (including, without limitation, usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Federal Trade Commission 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 motor vehicle retail installment
sales acts and lending acts and state adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code and other consumer credit laws
and equal credit opportunity and disclosure laws) in respect of all of the
Transferor Receivables and each and every sale of Financed Vehicles
relating thereto, have been complied with in all material respects, and
each Transferor Receivable and the sale of the Financed Vehicle evidenced
by each Transferor Receivable complied at the time it was originated or
made and now complies in all material respects with all applicable legal
requirements.
(iv) Origination. Each Transferor Receivable was originated in the
United States.
(v) Binding Obligation. Each Transferor Receivable represents the
genuine, legal, valid and binding payment obligation of the Obligor
thereon, enforceable by the holder thereof in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors'
rights generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is considered
in a proceeding in equity or at law; and all parties to each Transferor
Receivable had full legal capacity to execute and deliver such Transferor
Receivable and all other documents related thereto and to grant the
security interest purported to be granted thereby.
(vi) No Government Obligor. No Obligor of a Transferor Receivable is
the United States of America or any State or any agency, department,
subdivision or instrumentality thereof.
(vii) Obligor Bankruptcy. At the Cutoff Date, no Obligor had been
identified on the records of the Transferor as being the subject of a
current bankruptcy proceeding.
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(viii) Schedule of Receivables. The information with respect to
Transferor Receivables set forth in the Schedule of Receivables is true and
correct in all material respects as of the close of business on the Cutoff
Date.
(ix) Marking Records. By the Closing Date, the Transferor shall have
caused the portions of its electronic ledger relating to the Receivables to
be clearly and unambiguously marked to show that the Receivables have been
transferred absolutely from DFS to the Transferor (in the case of the DFS
Receivables), from the Transferor to the Depositor and from the Depositor
to the Trust.
(x) Computer Tape. The Computer Tape was complete and accurate as of
the Cutoff Date and includes a description of the same Receivables that are
described in the Schedule of Receivables.
(xi) Chattel Paper. The Transferor Receivables constitute chattel
paper within the meaning of the UCC as in effect in the states in which the
Obligors reside.
(xii) One Original. There is only one original executed copy of each
Transferor Receivable.
(xiii) Receivable Files Complete. There exists a Receivable File
pertaining to each Transferor Receivable and, to the knowledge of the
Transferor, such Receivable File contains (a) a fully executed original of
the Transferor Receivable, with a fully executed assignment thereof in
blank or from the related Dealer to the Transferor, as the case may be, if
such Transferor Receivable was acquired by the Transferor from a Dealer,
(b) a certificate of physical damage insurance, application form for such
insurance signed by the Obligor or a signed representation letter from the
Obligor named in the Transferor Receivable pursuant to which the Obligor
has agreed to obtain physical damage insurance for the Financed Vehicle, or
copies thereof, (c) the Lien Certificate or a copy of the application
therefor or a certification from the Servicer that it has received
confirmation from an authorized official of the appropriate governmental
office of the existence of the first lien of the Transferor with respect to
the related Financed Vehicle and (d) a credit application signed by the
Obligor, or a copy thereof. Each of such documents which is required to be
signed by the Obligor has been signed by the Obligor in the appropriate
spaces. Each of the foregoing documents has been correctly prepared. The
complete file for each Transferor Receivable currently is in the possession
of the Servicer.
(xiv) Receivables in Force. No Transferor Receivable has been
satisfied, subordinated or rescinded, and the Financed Vehicle securing
each such Transferor Receivable has not been released from the lien of the
related Transferor Receivable in whole or in part. No provisions of any
Transferor Receivable have been waived, altered or modified (except that
DFS as servicer may have, for administrative purposes, modified the due
date of a Transferor Receivable to a different date in the month, which
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modification is reflected in its servicing records) in any respect since
its origination, except by instruments or documents identified in the
Receivable File. No Transferor Receivable has been modified as a result of
application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
(xv) Lawful Assignment. No Transferor Receivable was originated in,
or is subject to the laws of, any jurisdiction the laws of which (a) would
make unlawful, void or voidable the transfer and assignment of such
Transferor Receivable under this Agreement or the pledge of such Transferor
Receivable under the Indenture or (b) would impair the validity or
enforceability of any Transferor Receivable because of any such transfer,
assignment or pledge.
(xvi) Good Title. No Transferor Receivable has been sold,
transferred, assigned or pledged by the Transferor except pursuant to this
Agreement; immediately prior to the conveyance of the Receivables by the
Transferor to the Depositor pursuant to this Agreement, the Transferor had
good and indefeasible title to the Receivables, free and clear of any Lien.
No Dealer has a participation in, or other right to receive, payments or
proceeds in respect of any Transferor Receivable. The Transferor has not
taken any action to convey any right to any Person that would result in
such Person having a right to payments received under the related Insurance
Policies or the related Dealer Agreements or to payments due under such
Transferor Receivables.
(xvii) Security Interest in Financed Vehicle. Each Transferor
Receivable has created a valid, binding and enforceable first priority
security interest in favor of the Transferor in the related Financed
Vehicle, which is in full force and effect. Each Lien Certificate contained
in the Receivables Files shows the Transferor named as the original secured
party under each Transferor Receivable and as the holder of a first
priority security interest in such Financed Vehicle. With respect to each
Transferor Receivable for which the Lien Certificate is not contained in
the related Receivable File, the Servicer has either received written
evidence that such Lien Certificate showing the Transferor as first
lienholder has been applied for or has certified in writing in the related
Receivable File that it has received confirmation from the appropriate
governmental office of the existence of the first lien of the Transferor
with respect to the related Financed Vehicle. The security interest of the
Transferor in each such Financed Vehicle has been validly assigned by the
Transferor to the Depositor pursuant to this Agreement. Each Transferor
Receivable is secured by an enforceable and perfected first priority
security interest in the Financed Vehicle in the name of the Transferor as
secured party, which security interest is prior to all other Liens upon and
security interests in such Financed Vehicle which now exist or may
hereafter arise or be created.
(xviii) Filings Made; Valid Security Interest. All filings
(including, without limitation, UCC filings) required to be made by any
Person and actions required to be taken or performed by any Person in any
jurisdiction to give the Depositor a first priority perfected ownership
interest in the Receivables and the proceeds thereof have been made,
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taken or performed, subject to the transfer thereof by the Depositor to the
Issuer. At the Closing Date the Depositor shall have a valid, subsisting
and enforceable first priority ownership interest in each Receivable and
the proceeds thereof, subject to the transfer thereof by the Depositor to
the Issuer.
(xix) No Impairment. The Transferor has not done and shall not do
anything to convey any right to any Person that would result in such Person
having a right to payments due under a Receivable or otherwise to impair
the rights of the Trust in any Receivable or the proceeds thereof.
(xx) No Release. No Transferor Receivable is assumable by another
Person in a manner which would release the Obligor thereof from such
Obligor's obligations to the Transferor with respect to such Transferor
Receivable.
(xxi) No Defenses. No Transferor Receivable is subject to any right
of rescission, setoff, counterclaim or defense and, to the knowledge of the
Transferor, no such right has been asserted or threatened with respect to
any Transferor Receivable. The operation of the terms of any Transferor
Receivable or the exercise of any right thereunder shall not render the
Transferor Receivable unenforceable in whole or in part or subject to any
right of rescission, setoff, counterclaim or defense, and to the knowledge
of the Transferor, no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
(xxii) No Default. To the knowledge of the Transferor, there has been
no default, breach, violation or event permitting acceleration under the
terms of any Transferor Receivable (other than payment delinquencies of not
more than 59 days), and no condition exists or event has occurred and is
continuing that with notice, the lapse of time or both would constitute a
default, breach, violation or event permitting acceleration under the terms
of any Transferor Receivable, and there has been no waiver of any of the
foregoing. As of the Cutoff Date, no Financed Vehicle relating to any
Transferor Receivable had been repossessed.
(xxiii) Insurance. Each Transferor Receivable requires the Obligor to
maintain physical loss and damage insurance, naming the Transferor and its
successors and assigns as additional insured parties, and each Transferor
Receivable permits the holder thereof to obtain physical loss and damage
insurance at the expense of the Obligor if the Obligor fails to do so. No
Financed Vehicle relating to any Transferor Receivable was insured under a
policy of force-placed insurance on the Cutoff Date.
(xxiv) Past Due. At the Cutoff Date, no Transferor Receivable was
more than 59 days past due.
(xxv) No Liens. There are no Liens or claims which have been filed,
and, to the knowledge of the Transferor, none pending or threatened to be
filed, for work, labor,
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materials or unpaid state or federal taxes affecting the Financed Vehicle
securing any Transferor Receivable which are or may become liens prior or
equal to the lien of the Transferor Receivable.
(xxvi) Remaining Principal Balance. At the Cutoff Date, the
Principal Balance of each Transferor Receivable set forth in the Schedule
of Receivables is true and accurate in all material respects.
(xxvii) Final Scheduled Maturity Date. No Transferor Receivable has
a final maturity later than [ ].
(xxviii) Certain Characteristics. (A) Each Transferor Receivable had
a remaining maturity, as of the Cutoff Date, of at least 1 month but not
more than [ ] months; (B) each Transferor Receivable had an original
maturity of at least [ ] months but not more than [ ] months; (C) each
Transferor Receivable had an original principal balance of at least $[ ]
and not more than $[ ]; (D) each Transferor Receivable had a Principal
Balance as of the Cutoff Date of at least $[ ] and not more than $[ ];
(E) each Transferor Receivable has an Annual Percentage Rate of at least
[ ]% and not more than [ ]%; (F) [ ]% of the Receivables when
originated were secured by new Financed Vehicles; (G) no funds have been
advanced by the Transferor, any Dealer, or any Person acting on behalf of
any of them in order to cause any Transferor Receivable to qualify under
paragraph (xxv) above; (H) no Transferor Receivable has a Final Scheduled
Maturity Date on or before [ ] or later than [ ]; (I) as of the
Cutoff Date, other than California ([ ]%), Florida ([ ]%), Oregon ([ ]%)
and Texas ([ ]%), no State represented more than 5% by outstanding Pool
Balance with respect to the location of the Financed Vehicles; and (J) the
Principal Balance of each Transferor Receivable set forth in Schedule of
Receivables is true and accurate in all material respects as of the Cutoff
Date.
For purposes of determining whether the Transferor is obligated to
purchase a Transferor Receivable on account of a breach of representation
and warranty pursuant to this Section 3.01 or indemnify in respect of such
breach pursuant to the last paragraph of this Section 3.01, the
determination as to whether a representation or warranty that is made to
the knowledge of the Transferor has been breached shall be made without
regard to such knowledge of the Transferor as if such representation and
warranty were not qualified by the knowledge of the Transferor.
Upon discovery by any party hereto of a breach of any of the
representations and warranties of the Transferor set forth in this Section
or of DFS set forth in Section 3.01 of the DFS/Ganis Transfer Agreement, in
each case which materially and adversely affects the value of the
Receivables or the interest therein of the Issuer or the Indenture Trustee
(or which materially and adversely affects the interest of the Issuer or
the Indenture Trustee in the related Receivable in the case of a
representation and warranty relating to a particular Receivable), the party
discovering such breach shall give prompt written notice
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to the other parties hereto. On the last day of the Collection Period
following the Collection Period during which the Transferor discovers or
receives notice of any such breach of any such representation or warranty,
if such breach shall not have been cured in all material respects by such
last day, then the Transferor shall purchase (and, if applicable, the
Transferor shall enforce the obligation of DFS, under the DFS/Ganis
Transfer Agreement, to purchase) such Receivable from the Issuer (or from
the Depositor, if the Depositor is required to purchase such Receivable
pursuant to Section 3.01 of the Transfer and Servicing Agreement) as of
such last day at a price equal to the Purchase Amount of such Receivable,
which price the Transferor shall remit in the manner specified in Section
5.05 of the Transfer and Servicing Agreement[; provided, that, with respect
to the representation set forth in paragraph (xiii) above, such purchase
shall be required with respect to a Receivable only if any resulting breach
is not cured (it being understood that if the related Lien Certificate has
been duly applied for from the applicable governmental offices as evidenced
by a copy of the application therefor, the receipt of such Lien Certificate
shall not be required to cure a breach of the applicable representation and
warranty) within 90 days after completion of the review and examination of
the Receivable File for such Receivable pursuant to Section 3.02 of the
Transfer and Servicing Agreement]. Subject to the indemnification
provisions contained in the last paragraph of this Section, the sole remedy
of the Depositor, the Issuer, the Owner Trustee or the Indenture Trustee
with respect to a breach of representations and warranties of the
Transferor set forth in this Section shall be to require the Transferor to
purchase Receivables pursuant to this Section, subject to the conditions
contained herein; it being understood that this sentence shall not limit
the right of the parties to the Transfer and Servicing Agreement to enforce
(or to cause the Transferor to enforce) the obligation of DFS to purchase
Receivables pursuant to the DFS/Ganis Transfer Agreement.
The Transferor shall indemnify the Depositor, the Issuer, the Owner
Trustee and the Indenture Trustee and hold each harmless against any loss,
damages, penalties, fines, forfeitures, legal fees and related costs,
judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach
of the representations and warranties of the Transferor contained in this
Agreement; provided that the Transferor shall not be liable for any
indirect damages or for any loss, damage, penalty, fine, forfeiture, legal
fees and related costs, judgments and other costs and expenses caused by
the wilful misconduct of the Depositor, the Issuer, the Owner Trustee or
the Indenture Trustee.
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ARTICLE IV
The Transferor
--------------
SECTION 4.01. Representations of Transferor. The Transferor makes the
following representations on which each of the Depositor and the Issuer is
deemed to have relied in acquiring the Receivables. The representations speak as
of the execution and delivery of this Agreement and as of the Closing Date, in
the case of the Receivables, and shall survive the transfer of the Receivables
to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
(a) Organization and Good Standing. The Transferor is duly organized and
validly existing as a corporation in good standing under the laws of the State
of Delaware, with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Transferor is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Transferor has the corporate power and
authority to execute and deliver this Agreement and to carry out its respective
terms; the Transferor has full power and authority to transfer and assign the
property to be transferred and assigned to the Depositor, and the Transferor
shall have duly authorized such transfer and assignment by all necessary
corporate action; and the execution, delivery and performance of this Agreement
by the Transferor has been duly authorized by the Transferor by all necessary
corporate action.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Transferor enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions contemplated by this
Agreement by the Transferor and the fulfillment of the terms hereof by the
Transferor do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Transferor, or any
indenture, agreement or other instrument to which the Transferor is a party or
by which it is bound; or result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); or violate any
law or, to the best of the Transferor's knowledge, any order, rule or regulation
applicable to the Transferor of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Transferor or its properties.
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(f) No Proceedings. To the Transferor's best knowledge, there are no
proceedings or investigations pending or threatened before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Transferor or its properties: (i) asserting the invalidity
of this Agreement, the Indenture or any of the other Basic Documents, the Notes
or the Certificates, (ii) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Indenture or any of the other Basic Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Transferor of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, any of the other Basic
Documents, the Notes or the Certificates or (iv) which might adversely affect
the federal or state income tax attributes of the Notes or the Certificates.
(g) Chief Executive Office. The chief executive office of the Transferor is
located at 660 Newport Center Drive, Newport Beach, California 92660.
SECTION 4.02. Corporate Existence. During the term of this Agreement, the
Transferor shall keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and shall obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby. In
addition, all transactions and dealings between the Transferor and DFS, and
between the Transferor and the Depositor, shall be conducted on an arm's-length
basis.
SECTION 4.03. Liability of the Transferor. The Transferor shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Transferor under this Agreement.
SECTION 4.04. Indemnification. (a) The Transferor shall indemnify, defend
and hold harmless the Depositor against any taxes that may at any time be
asserted against the Depositor with respect to the transactions contemplated
herein and in the other Basic Documents including any sales, gross receipts,
general corporation, tangible personal property, privilege or license taxes (but
not including any taxes asserted with respect to, and as of the date of, the
transfer of the Receivables to the Depositor or the issuance and original sale
of the Notes and the Certificates, or asserted with respect to ownership of the
Receivables, or federal or other income taxes arising out of distributions on
the Notes and the Certificates) and costs and expenses in defending against the
same.
(b) The Transferor shall indemnify, defend and hold harmless the Depositor
and any of the officers, directors, employees and agents of the Depositor from
and against any loss, liability or expense incurred by reason of the
Transferor's willful misfeasance, bad faith or negligence in the performance of
its duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement.
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Indemnification under this Section shall survive termination of this
Agreement and the other Basic Documents and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Transferor shall have
made any indemnity payments pursuant to this Section and the Person to or on
behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall promptly repay such amounts to the
Transferor, without interest.
SECTION 4.05. Merger or Consolidation of, or Assumption of the Obligations
of, Transferor. Any Person (a) into which the Transferor may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Transferor shall be a party or (c) which may succeed to the properties and
assets of the Transferor substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Transferor under this Agreement, shall be the successor to the Transferor
hereunder without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that (i) immediately
after giving effect to such transaction, no representation or warranty made by
the Transferor in Section 3.01 shall have been breached (unless the applicable
breach shall have been cured in all material respects, or the applicable
Receivable shall have been purchased in accordance therewith), (ii) the
Transferor shall have delivered to the Depositor, the Owner Trustee and the
Indenture Trustee an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with, (iii) the Transferor shall have delivered to the Owner Trustee and the
Indenture Trustee an Opinion of Counsel either (A) stating that, in the opinion
of such counsel, all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and Indenture Trustee,
respectively, in the Receivables and reciting the details of such filings, or
(B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests. Notwithstanding anything
herein to the contrary, the execution of the foregoing agreement of assumption
and compliance with clauses (i), (ii), and (iii) above shall be conditions to
the consummation of the transactions referred to in clauses (a), (b) or (c)
above.
SECTION 4.06. Limitation on Liability of Transferor and Others. The
Transferor and any director, officer, employee or agent of the Transferor may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Transferor shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 4.07. The Transferor May Own Notes and Certificates. The Transferor
and any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of
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Notes and Certificates with the same rights as it would have if it were not the
Transferor or an Affiliate thereof, except as expressly provided herein or in
any other Basic Document.
ARTICLE V
Miscellaneous
-------------
SECTION 5.01. Amendment. This Agreement may be amended by the parties
hereto, with the consent of the Indenture Trustee, but without the consent of
any other Person; provided, however, that, unless the Rating Agency Condition
shall have been satisfied with respect thereto, such action shall not (as
evidenced by an Opinion of Counsel delivered to the Owner Trustee and the
Indenture Trustee) adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
Promptly after the execution of any such amendment or consent, the
Depositor shall furnish written notification of the substance of such amendment
or consent to the Indenture Trustee and each of the Rating Agencies.
Prior to the execution of or the consent to any amendment to this
Agreement, the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Indenture Trustee may, but shall not be
obligated to, enter into or consent to any such amendment which affects the
Indenture Trustee's own rights, duties or immunities under this Agreement or
otherwise.
SECTION 5.02. Protection of Title; Change of Name, Identity, Corporate
Structure or Location, Etc.
(a) The Transferor shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of the Depositor, the Issuer and of the Indenture Trustee
in the Receivables and in the proceeds thereof. The Transferor shall deliver (or
cause to be delivered) to the Owner Trustee and the Indenture Trustee file-
stamped copies of, or filing receipts for, any document filed as provided above,
as soon as available following such filing.
(b) The Transferor shall not change its name, identity or corporate
structure in any manner that would, could or might make any financing statement
or continuation statement filed in accordance with paragraph (a) above seriously
misleading within the meaning of Section 9-402(7) of the UCC, unless it shall
have given the Depositor, the Owner Trustee and the Indenture Trustee at least
five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
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(c) The Transferor shall give the Depositor, the Owner Trustee and the
Indenture Trustee at least 60 days' prior written notice of any relocation of
its chief executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment or new financing statement.
(d) If at any time the Transferor shall propose to sell, grant a security
interest in, or otherwise transfer any interest in recreational vehicle
receivables to any prospective purchaser, lender or other transferee, the
Transferor shall give (or shall cause the Servicer to give) to such prospective
purchaser, lender or other transferee computer tapes, records or printouts
(including any restored from backup archives) that, if they shall refer in any
manner whatsoever to any Receivable, shall indicate clearly that such Receivable
has been transferred by the Transferor to the Depositor and by the Depositor to
the Issuer and is owned by the Issuer and has been pledged to the Indenture
Trustee.
SECTION 5.03. Notices. All demands, notices, directions, communications and
instructions upon, to, or by the Depositor, the Servicer, the Owner Trustee, the
Indenture Trustee or the Rating Agencies under this Agreement shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Servicer (so long as DFS is the Servicer), to Deutsche Financial
Services Corporation, 645 Maryville Centre Drive, St. Louis, Missouri 63141,
Attention: Chief Legal Officer, (b) in the case of the Transferor, to Ganis
Credit Corporation, 660 Newport Center Drive, Newport Beach, California 92660,
Attention: Executive Vice President, (c) in the case of the Depositor, to
Deutsche Recreational Asset Funding Corporation, 655 Maryville Centre Drive, St.
Louis, Missouri 63141, Attention: President, (d) in the case of the Issuer or
the Owner Trustee, at the Corporate Trust Office (as defined in the Trust
Agreement), (e) in the case of the Indenture Trustee, at the Corporate Trust
Office, (f) in the case of Moody's, to Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007, and (g) in
the case of Standard & Poor's, to Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc., 25 Broadway (15th Floor), New York, New York
10004, Attention of Asset Backed Surveillance Department; or, as to each of the
foregoing, at such other address as shall be designated by written notice to the
other Persons listed in this Section.
SECTION 5.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 4.05 of this Agreement, this
Agreement may not be assigned by the Transferor. The Transferor hereby
acknowledges and consents to (i) the transfer by the Depositor to the Issuer
pursuant to the Transfer and Servicing Agreement of all right, title and
interest of the Depositor in, to and under (but none of the obligations of the
Depositor under) the Transferor Conveyed Property and this Agreement, including
the representations and warranties of DFS in the DFS/Ganis Transfer Agreement
and of the Transferor in this Agreement, together with all rights of the
Depositor with respect to any breach thereof, including the right to require DFS
to purchase Receivables in accordance with the DFS/Ganis Transfer Agreement and
to require the Transferor to purchase Receivables in accordance with this
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Agreement, and (ii) the other terms of and transactions contemplated by the
Transfer and Servicing Agreement and the other Basic Documents.
SECTION 5.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of DFS, the Transferor, the Depositor, the
Servicer, the Issuer, the Owner Trustee, the Indenture Trustee and the
Noteholders, and, except as expressly provided in this Agreement, nothing in
this Agreement shall be construed to give to any other Person any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 5.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 5.07. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 5.08. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 5.09. Governing Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE PERFECTION
(AND THE EFFECT OF PERFECTION OR NON-PERFECTION) OF THE INTERESTS OF ANY PERSON
IN CONVEYED PROPERTY ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW YORK OVER ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE BASIC DOCUMENTS, AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE OR FEDERAL COURT, IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING.
SECTION 5.10. Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement, the Transferor shall not, prior to the date which is one year
and one day after the termination of the Trust Agreement, acquiesce, petition or
otherwise invoke or cause the Issuer
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to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer. Notwithstanding any prior termination
of this Agreement, the Transferor shall not, prior to the date which is one year
and one day after the termination of the Trust Agreement, acquiesce, petition or
otherwise invoke or cause the Depositor to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Depositor under any federal or state bankruptcy, insolvency or similar law,
or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Depositor or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Depositor.
SECTION 5.11. Waiver. Each party hereto hereby (i) acknowledges that
Mayer, Brown & Platt represents DFS, the Transferor, the Depositor and
Affiliates of the Transferor, DFS and the Depositor in connection with the
transactions contemplated by the Basic Documents, and represents the
institutions which are the Indenture Trustee and the Owner Trustee (or
Affiliates of such institutions) in other transactions, and (ii) waives any
conflict of interest relating thereto. Notwithstanding any other provision of
this Agreement, Mayer, Brown & Platt is entitled to rely on this Section.
SECTION 5.12. Separate Corporate Existence. Each party hereto hereby
acknowledges that the Trust is entering into the transactions contemplated by
the Basic Documents in reliance upon (i) the Transferor's identity as a legal
identity separate from DFS and the Depositor and (ii) the Depositor's identity
as a legal entity separate from DFS and the Transferor. Therefore, until the
first day following the termination of the Trust Agreement on which all of the
Securities have been paid in full, each of DFS, the Transferor and the Depositor
shall take all reasonable steps to make it apparent to third Persons that each
of DFS and the Transferor is an entity with assets and liabilities distinct from
those of the Depositor and that the Depositor is not a division of DFS, the
Transferor or any other Person. Without limiting the foregoing, each party
hereto shall operate and conduct its respective businesses and otherwise act in
a manner which is consistent with Section 10.13 of the Transfer and Servicing
Agreement.
[SIGNATURES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Ganis/Depositor
Transfer Agreement to be duly executed by their respective officers as of the
day and year first above written.
GANIS CREDIT CORPORATION, as Transferor
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION, as
Depositor
By:
------------------------------------
Name:
----------------------------------
Title
----------------------------------
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EXHIBIT 10.2
Form of Administration Agreement
This ADMINISTRATION AGREEMENT dated as of _______________, 199_, among
(______________) TRUST 199_, a Delaware business trust (the "Issuer"),
________________________, a _________ corporation, as administrator (the
"Administrator"), and ________________, a __________ banking corporation, not in
its individual capacity but solely as Indenture Trustee (the "Indenture
Trustee").
W I T N E S S E T H :
WHEREAS, the Issuer is issuing the Class (A-1) Asset Backed Notes and Class
(A-2) Asset Backed Notes, (together, the "Notes") pursuant to the Indenture
dated as of ___________, 199_ (as amended and supplemented from time to time,
the "Indenture"), between the Issuer and the Indenture Trustee (capitalized
terms used and not otherwise defined herein shall have the meanings assigned to
such terms in the Indenture);
WHEREAS, the Issuer has entered into certain agreements in connection with
the issuance of the Notes and of certain beneficial ownership interests in the
Issuer, including (i) a Transfer and Servicing Agreement dated as of
___________, 199_ (as amended and supplemented from time to time, the "Transfer
and Servicing Agreement"), among [the Issuer, Deutsche Recreational Asset
Funding Corporation, as depositor (the "Depositor"), and Deutsche Financial
Services Corporation, as servicer (the "Servicer")], (ii) a Letter of
Representations dated ____________, 199_ (as amended and supplemented from time
to time, the "Note Depository Agreement"), among the Issuer, the Indenture
Trustee, the Administrator and The Depository Trust Company ("DTC") relating to
the Notes, (iii) a Letter of Representations dated ______________, 199 (as
amended and supplemented from time to time, the "Certificate Depository
Agreement", and together with the Note Depository Agreement, the "Depository
Agreements"), among the Issuer, the Administrator, the Owner Trustee and DTC
relating to the Certificates and (iv) the Indenture (the Transfer and Servicing
Agreement, the Depository Agreements and the Indenture being referred to
hereinafter collectively as the "Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and the Owner
Trustee are required to perform certain duties in connection with (a) the Notes
and the collateral therefor pledged pursuant to the Indenture (the "Collateral")
and (b) the beneficial ownership interests in the Issuer (the registered holders
of such interests being referred to herein as the "Owners");
WHEREAS, the Issuer and the Owner Trustee desire to have the Administrator
perform certain of the duties of the Issuer and the Owner Trustee referred to in
the preceding clause and to provide such additional services consistent with the
terms of this Agreement and the Related Agreements as the Issuer and the Owner
Trustee may from time to time request; and
<PAGE>
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
1. Duties of the Administrator. (a) Duties with Respect to the Depository
Agreements and the Indenture. (i) The Administrator agrees to perform all its
duties as Administrator and the duties of the Issuer and the Owner Trustee under
the Depository Agreements. In addition, the Administrator shall consult with the
Owner Trustee regarding the duties of the Issuer or the Owner Trustee under the
Indenture and the Depository Agreements. The Administrator shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's or the Owner Trustee's duties under the
Indenture and the Depository Agreements. The Administrator shall prepare for
execution by the Issuer, or shall cause the preparation by other appropriate
persons of, all such documents, reports, filings, instruments, certificates and
opinions that it shall be the duty of the Issuer or the Owner Trustee to
prepare, file or deliver pursuant to the Indenture and the Depository
Agreements. In furtherance of the foregoing, the Administrator shall take all
appropriate action that is the duty of the Issuer or the Owner Trustee to take
pursuant to the Indenture including, without limitation, such of the foregoing
as are required with respect to the following matters under the Indenture
(references are to sections of the Indenture):
(A) the duty to cause the Note Register to be kept and to give the
Indenture Trustee notice of any appointment of a new Note Registrar and the
location, or change in location, of the Note Register (Section 2.04);
(B) the notification of Noteholders of the final principal payment on
their Notes (Section 2.07(b));
(C) the fixing or causing to be fixed of any specified record date and
the notification of the Indenture Trustee and Noteholders with respect to
special payment dates, if any (Section 2.07(c));
(D) the preparation of or obtaining of the documents and instruments
required for authentication of the Notes and delivery of the same to the
Indenture Trustee (Section 2.02);
(E) the preparation, obtaining or filing of the instruments, opinions
and certificates and other documents required for the release of collateral
(Section 2.09);
(F) the maintenance of an office in the Borough of Manhattan, City of
New York, for registration of transfer or exchange of Notes (Section 3.02);
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<PAGE>
(G) the duty to cause newly appointed Paying Agents, if any, to
deliver to the Indenture Trustee the instrument specified in the Indenture
regarding funds held in trust (Section 3.03);
(H) the direction to the Indenture Trustee to deposit moneys with
Paying Agents, if any, other than the Indenture Trustee (Section 3.03);
(I) the obtaining and preservation of the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Collateral and each other instrument and agreement included in
the Trust Estate (Section 3.04);
(J) the preparation of all supplements and amendments to the Indenture
and all financing statements, continuation statements, instruments of
further assurance and other instruments and the taking of such other action
as is necessary or advisable to protect the Trust Estate (Section 3.05);
(K) the delivery of the Opinion of Counsel on the Closing Date and the
annual delivery of Opinions of Counsel as to the Trust Estate, and the
annual delivery of the Officer's Certificate and certain other statements
as to compliance with the Indenture (Sections 3.06 and 3.09);
(L) the identification to the Indenture Trustee in an Officer's
Certificate of a Person with whom the Issuer has contracted to perform its
duties under the Indenture (Section 3.07(b));
(M) the notification of the Indenture Trustee and the Rating Agencies
of a Servicer Default under the Transfer and Servicing Agreement and, if
such Servicer Default arises from the failure of the Servicer to perform
any of its duties under the Transfer and Servicing Agreement with respect
to the Receivables, the taking of all reasonable steps available to remedy
such failure (Section 3.07(d));
(N) the duty to cause the Servicer to comply with Sections 4.09, 4.10,
4.11 and 5.09 and Article XI of the Transfer and Servicing Agreement
(Section 3.14);
(O) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10(b));
(P) the delivery of written notice to the Indenture Trustee and the
Rating Agencies of each Event of Default under the Indenture and each
default by the Servicer or the Depositor under the Transfer and Servicing
Agreement (Section 3.19);
(Q) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officer's
Certificate and the
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<PAGE>
obtaining of the Opinion of Counsel and the Independent Certificate
relating thereto (Section 4.01);
(R) the compliance with any written directive of the Indenture Trustee
with respect to the sale of the Trust Estate in a commercially reasonable
manner if an Event of Default shall have occurred and be continuing
(Section 5.04);
(S) the preparation and delivery of notice to Noteholders of the
removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee (Section 6.08);
(T) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or removal
of any co-trustee or separate trustee (Sections 6.08 and 6.10);
(U) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee is
not the Note Registrar (Section 7.01);
(V) the preparation and, after execution by the Issuer, the filing
with the Commission, any applicable state agencies and the Indenture
Trustee of documents required to be filed on a periodic basis with, and
summaries thereof as may be required by rules and regulations prescribed
by, the Commission and any applicable state agencies and the transmission
of such summaries, as necessary, to the Noteholders (Section 7.03);
(W) the opening of one or more accounts in the Issuer's name, the
preparation and delivery of Issuer Orders, Officer's Certificates and
Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections 8.02
and 8.03);
(X) the preparation of an Issuer Request and Officer's Certificate and
the obtaining of an Opinion of Counsel and Independent Certificates, if
necessary, for the release of the Trust Estate (Sections 8.04 and 8.05);
(Y) the preparation of Issuer Orders and the obtaining of Opinions of
Counsel with respect to the execution of supplemental indentures and the
mailing to the Noteholders of notices with respect to such supplemental
indentures (Sections 9.01, 9.02 and 9.03);
(Z) the execution and delivery of new Notes conforming to any
supplemental indenture (Section 9.06);
(AA) the duty to notify Noteholders of redemption of the Notes or to
cause the Indenture Trustee to provide such notification (Section 10.02);
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(BB) the preparation and delivery of all Officer's Certificates,
Opinions of Counsel and Independent Certificates with respect to any
requests by the Issuer to the Indenture Trustee to take any action under
the Indenture (Section 11.01(a));
(CC) the preparation and delivery of Officer's Certificates and the
obtaining of Independent Certificates, if necessary, for the release of
property from the lien of the Indenture (Section 11.01(b));
(DD) the notification of the Rating Agencies, upon the failure of the
Indenture Trustee to give such notification, of the information required
pursuant to Section 11.04 of the Indenture (Section 11.04);
(EE) the preparation and delivery to Noteholders and the Indenture
Trustee of any agreements with respect to alternate payment and notice
provisions (Section 11.06);
(FF) the recording of the Indenture, if applicable (Section 11.15);
(GG) the preparation of Definitive Notes in accordance with the
instructions of the Clearing Agency (Section 2.12); and
(HH) the appointment of any successor Calculation Agent (Section
2.15).
(ii) The Administrator will:
(A) pay the Indenture Trustee (and any separate trustee or co-trustee
appointed pursuant to Section 6.10 of the Indenture (a "Separate Trustee"))
from time to time reasonable compensation for all services rendered by the
Indenture Trustee or Separate Trustee, as the case may be, under the
Indenture (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);
(B) except as otherwise expressly provided in the Indenture, reimburse
the Indenture Trustee or any Separate Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee or Separate Trustee, as the case may be, in accordance
with any provision of the Indenture (including the reasonable compensation,
expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence
or bad faith;
(C) indemnify the Indenture Trustee and any Separate Trustee and their
respective agents for, and hold them harmless against, any losses,
liability or expense incurred without negligence or bad faith on their
part, arising out of or in connection with the acceptance or administration
of the transactions contemplated by the Indenture, including the reasonable
costs and expenses of defending themselves against any claim or
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<PAGE>
liability in connection with the exercise or performance of any of their
powers or duties under the Indenture; and
(D) indemnify the Owner Trustee and its agents for, and hold them
harmless against, any losses, liability or expense incurred without
negligence or bad faith on their part, arising out of or in connection with
the acceptance or administration of the transactions contemplated by the
Trust Agreement, including the reasonable costs and expenses of defending
themselves against any claim or liability in connection with the exercise
or performance of any of their powers or duties under the Trust Agreement.
(b) Additional Duties. (i) In addition to the duties of the Administrator
set forth above, the Administrator shall perform such calculations and shall
prepare or shall cause the preparation by other appropriate persons of, and
shall execute on behalf of the Issuer or the Owner Trustee, all such documents,
reports, filings, instruments, certificates and opinions that it shall be the
duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to
the Related Agreements or Section 5.05(a), (b), (c) or (d) of the Trust
Agreement, and at the request of the Owner Trustee shall take all appropriate
action that it is the duty of the Issuer or the Owner Trustee to take pursuant
to the Related Agreements. In furtherance thereof, the Owner Trustee shall, on
behalf of itself and of the Issuer, execute and deliver to the Administrator and
to each successor Administrator appointed pursuant to the terms hereof, one or
more powers of attorney substantially in the form of Exhibit A hereto,
appointing the Administrator the attorney-in-fact of the Owner Trustee and the
Issuer for the purpose of executing on behalf of the Owner Trustee and the
Issuer all such documents, reports, filings, instruments, certificates and
opinions. Subject to Section 5 of this Agreement, and in accordance with the
directions of the Owner Trustee, the Administrator shall administer, perform or
supervise the performance of such other activities in connection with the
Collateral (including the Related Agreements) as are not covered by any of the
foregoing provisions and as are expressly requested by the Owner Trustee and are
reasonably within the capability of the Administrator. Such responsibilities
shall include obtaining and maintaining any licenses required to be obtained or
maintained by the Trust under the Pennsylvania Motor Vehicle Sales Finance Act.
In addition, the Administrator shall promptly notify the Indenture Trustee and
the Owner Trustee in writing of any amendment to the Pennsylvania Motor Vehicle
Sales Finance Act that would affect the duties or obligations of the Indenture
Trustee or the Owner Trustee under any Basic Document and shall assist the
Indenture Trustee or the Owner Trustee in its obtainment and maintenance of any
licenses required to be obtained or maintained by the Indenture Trustee or the
Owner Trustee thereunder. In connection therewith, the Administrator shall cause
the Depositor to pay all fees and expenses under such Act.
(ii) Notwithstanding anything in this Agreement or the Related Agreements
to the contrary, the Administrator shall be responsible for promptly notifying
the Owner Trustee in the event that any withholding tax is imposed on the
Trust's payments (or allocations of income) to an Owner as contemplated in
Section 5.02(c) of the Trust Agreement. Any such notice shall specify the amount
of any withholding tax required to be withheld by the Owner Trustee pursuant to
such provision.
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(iii) Notwithstanding anything in this Agreement or the Related Agreements
to the contrary, the Administrator shall be responsible for performance of the
duties of the Owner Trustee set forth in Section 5.05(a), (b), (c) and (d), the
penultimate sentence of Section 5.05 and Section 5.06(a) of the Trust Agreement
with respect to, among other things, accounting and reports to Owners; provided,
however, that the Owner Trustee shall retain responsibility for the distribution
of the Schedule K-1s necessary to enable each Owner to prepare its federal and
state income tax returns.
(iv) The Administrator shall satisfy its obligations with respect to
clauses (ii) and (iii) above by retaining, at the expense of the Trust payable
by the Administrator, a firm of independent public accountants (the
"Accountants") acceptable to the Owner Trustee, which shall perform the
obligations of the Administrator thereunder. In connection with paragraph (ii)
above, the Accountants will provide prior to ________________, a letter in form
and substance satisfactory to the Owner Trustee as to whether any tax
withholding is then required and, if required, the procedures to be followed
with respect thereto to comply with the requirements of the Code. The
Accountants shall be required to update the letter in each instance that any
additional tax withholding is subsequently required or any previously required
tax withholding shall no longer be required.
(v) The Administrator shall perform the duties of the Administrator
specified in Section 10.02 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Administrator under the Trust
Agreement.
(vi) In carrying out the foregoing duties or any of its other obligations
under this Agreement, the Administrator may enter into transactions or otherwise
deal with any of its affiliates; provided, however, that the terms of any such
transactions or dealings shall be in accordance with any directions received
from the Issuer and shall be, in the Administrator's opinion, no less favorable
to the Issuer than would be available from unaffiliated parties.
(c) Non-Ministerial Matters. (i) With respect to matters that in the
reasonable judgment of the Administrator are non-ministerial, the Administrator
shall not take any action unless within a reasonable time before the taking of
such action, the Administrator shall have notified the Owner Trustee of the
proposed action and the Owner Trustee shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Receivables or
Eligible Investments);
(C) the amendment, change or modification of the Related Agreements;
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<PAGE>
(D) the appointment of successor Note Registrars, successor Paying
Agents and successor Indenture Trustees pursuant to the Indenture or the
appointment of successor Administrators or Successor Servicers, or the
consent to the assignment by the Note Registrar, Paying Agent or Indenture
Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this Agreement, the
Administrator shall not be obligated to, and shall not, (x) make any payments to
the Noteholders under the Related Agreements, (y) sell the Trust Estate pursuant
to Section 5.04 of the Indenture or (z) take any other action that the Issuer
directs the Administrator not to take on its behalf.
2. Records. The Administrator shall maintain appropriate books of account
and records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by the Issuer and the Company at any
time during normal business hours.
3. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to $_______ per
month which shall be solely an obligation of the Depositor.
4. Additional Information To Be Furnished to Issuer. The Administrator
shall furnish to the Issuer from time to time such additional information
regarding the Collateral as the Issuer shall reasonably request.
5. Independence of Administrator. For all purposes of this Agreement, the
Administrator shall be an independent contractor and shall not be subject to the
supervision of the Issuer or the Owner Trustee with respect to the manner in
which it accomplishes the performance of its obligations hereunder. Unless
expressly authorized by the Issuer, the Administrator shall have no authority to
act for or represent the Issuer or the Owner Trustee in any way and shall not
otherwise be deemed an agent of the Issuer or the Owner Trustee.
6. No Joint Venture. Nothing contained in this Agreement (i) shall
constitute the Administrator and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
7. Other Activities of Administrator. Nothing herein shall prevent the
Administrator or its Affiliates from engaging in other businesses or, in its
sole discretion, from acting in a similar capacity as an administrator for any
other person or entity even though such person or
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entity may engage in business activities similar to those of the Issuer, the
Owner Trustee or the Indenture Trustee.
8. Term of Agreement; Resignation and Removal of Administrator. (a) This
Agreement shall continue in force until the dissolution of the Issuer, upon
which event this Agreement shall automatically terminate.
(b) Subject to Section 8(e), the Administrator may resign its duties
hereunder by providing the Issuer with at least 60 days' prior written notice.
(c) Subject to Section 8(e), the Issuer may remove the Administrator
without cause by providing the Administrator with at least 60 days' prior
written notice.
(d) Subject to Section 8(e), at the sole option of the Issuer, the
Administrator may be removed immediately upon written notice of termination from
the Issuer to the Administrator if any of the following events shall occur:
(i) the Administrator shall default in the performance of any of its duties
under this Agreement and, after notice of such default, shall not cure such
default within ten days (or, if such default cannot be cured in such time, shall
not give within ten days such assurance of cure as shall be reasonably
satisfactory to the Issuer);
(ii) a court having jurisdiction in the premises shall enter a decree or
order for relief, and such decree or order shall not have been vacated within 60
days, in respect of the Administrator in any involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect or appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Administrator or any substantial part
of its property or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, shall consent to the appointment of a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official for the
Administrator or any substantial part of its property, shall consent to the
taking of possession by any such official of any substantial part of its
property, shall make any general assignment for the benefit of creditors or
shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in clauses
(ii) or (iii) of this Section shall occur, it shall give written notice thereof
to the Issuer and the Indenture Trustee within seven days after the happening of
such event.
(e) No resignation or removal of the Administrator pursuant to this Section
shall be effective until (i) a successor Administrator shall have been appointed
by the Issuer and (ii) such
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successor Administrator shall have agreed in writing to be bound by the terms of
this Agreement in the same manner as the Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective only
after satisfaction of the Rating Agency Condition with respect to the proposed
appointment.
(g) Subject to Section 8(e) and 8(f), the Administrator acknowledges that
upon the appointment of a Successor Servicer pursuant to the Transfer and
Servicing Agreement, the Administrator shall immediately resign and such
Successor Servicer shall automatically become the Administrator under this
Agreement.
9. Action upon Termination, Resignation or Removal. Promptly upon the
effective date of termination of this Agreement pursuant to Section 8(a) or the
resignation or removal of the Administrator pursuant to Section 8(b) or (c),
respectively, the Administrator shall be entitled to be paid all fees and
reimbursable expenses accruing to it to the date of such termination,
resignation or removal. The Administrator shall forthwith upon such termination
pursuant to Section 8(a) deliver to the Issuer all property and documents of or
relating to the Collateral then in the custody of the Administrator. In the
event of the resignation or removal of the Administrator pursuant to Section
8(b) or (c), respectively, the Administrator shall cooperate with the Issuer and
take all reasonable steps requested to assist the Issuer in making an orderly
transfer of the duties of the Administrator.
10. Notices. Any notice, report or other communication given hereunder
shall be in writing and addressed as follows:
(a) if to the Issuer or the Owner Trustee, to:
(___________________) Trust 199_-_
c/o _____________________
_________________________
_________________________
Attention: ________________________
(b) if to the Administrator, to:
_____________________
_____________________
_____________________
Attention: _______________
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(c) if to the Indenture Trustee, to:
_______________________
_______________________
_______________________
Attention: _______________________
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above.
11. Amendments. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Owner Trustee,
without the consent of the Noteholders and the Certificateholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Noteholders or Certificateholders; provided that such amendment will not, in
the Opinion of Counsel satisfactory to the Indenture Trustee, materially and
adversely affect the interest of any Noteholder or Certificateholder. This
Agreement may also be amended by the Issuer, the Administrator and the Indenture
Trustee with the written consent of the Owner Trustee and the holders of Notes
evidencing at least a majority of the Outstanding Amount of the Notes and the
holders of Certificates evidencing at least a majority of the Certificate
Balance for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of Noteholders or the Certificateholders; provided, however,
that no such amendment may (i) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on Receivables or
distributions that are required to be made for the benefit of the Noteholders or
Certificateholders or (ii) reduce the aforesaid percentage of the holders of
Notes and Certificates which are required to consent to any such amendment,
without the consent of the holders of all the outstanding Notes and
Certificates. Notwithstanding the foregoing, the Administrator may not amend
this Agreement without the permission of the Depositor, which permission shall
not be unreasonably withheld.
12. Successors and Assigns. This Agreement may not be assigned by the
Administrator unless such assignment is previously consented to in writing by
the Issuer and the Owner Trustee and subject to the satisfaction of the Rating
Agency Condition in respect thereof. An assignment with such consent and
satisfaction, if accepted by the assignee, shall bind the assignee hereunder in
the same manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Issuer or the Owner Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided that such successor organization executes
and delivers to the Issuer, the Owner Trustee and the Indenture Trustee an
agreement in which such corporation or other organization agrees to be bound
hereunder by the terms of said assignment in the same manner as the
Administrator is
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bound hereunder. Subject to the foregoing, this Agreement shall bind any
successors or assigns of the parties hereto.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
14. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
15. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed shall be an original, but all of which together shall
constitute but one and the same agreement.
16. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
17. Not Applicable to the Administrator in Other Capacities. Nothing in
this Agreement shall affect any obligation ________________ may have in any
other capacity.
18. Limitation of Liability of Owner Trustee and Indenture Trustee. (a)
Notwithstanding anything contained herein to the contrary, this instrument has
been countersigned by ___________________ not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
_____________________ in its individual capacity or any beneficial owner of the
Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by __________________ not in its individual
capacity but solely as Indenture Trustee and in no event shall
______________________ have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
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(c) Third-Party Beneficiary. The Owner Trustee is a third-party beneficiary
to this Agreement and is entitled to the rights and benefits hereunder and may
enforce the provisions hereof as if it were a party hereto.
* * * * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
(_________________) TRUST 199 _-_
By:__________________________________,
not in its individual capacity but solely as
Owner Trustee on behalf of the Trust
By:__________________________________,
Name:
Title:
(_______________________________), not in its individual
capacity but solely as Indenture Trustee
By:__________________________________,
Name:
Title:
(___________________________)
as Administrator
By:__________________________________,
Name:
Title:
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EXHIBIT A
POWER OF ATTORNEY
STATE OF __________
COUNTY OF _________
KNOW ALL MEN BY THESE PRESENTS, that
___________________________________, a ______________ banking corporation, not
in its individual capacity but solely as owner trustee (the "Owner Trustee") for
(_____________) Trust 199_-_ (the "Trust"), does hereby make, constitute and
appoint ____________________, as administrator under the Administration
Agreement dated ______________ (the "Administration Agreement"), among the
Trust, the Administrator and _________________________________, as Indenture
Trustee, as the same may be amended from time to time, and its agents and
attorneys, as Attorneys-in-Fact to execute on behalf of the Owner Trustee or the
Trust all such documents, reports, filings, instruments, certificates and
opinions as it should be the duty of the Owner Trustee or the Trust to prepare,
file or deliver pursuant to the Basic Documents, or pursuant to Section 5.05(a),
(b), (c) or (d) of the Trust Agreement, including, without limitation, to appear
for and represent the Owner Trustee and the Trust in connection with the
preparation, filing and audit of federal, state and local tax returns pertaining
to the Trust, and with full power to perform any and all acts associated with
such returns and audits that the Owner Trustee could perform, including without
limitation, the right to distribute and receive confidential information, defend
and assert positions in response to audits, initiate and defend litigation, and
to execute waivers of restrictions on assessments of deficiencies, consents to
the extension of any statutory or regulatory time limit, and settlements.
All powers of attorney for this purpose heretofore filed or executed by the
Owner Trustee are hereby revoked.
Capitalized terms that are used and not otherwise defined herein shall have
the meanings ascribed thereto in the Administration Agreement.
EXECUTED this ___ of _____________, 199_.
(________________________________),
not in its individual capacity but solely as
Owner Trustee
By:
--------------------------------------
Name:
Title:
15
<PAGE>
STATE OF __________)
)
COUNTY OF _________)
Before me, the undersigned authority, on this day personally appeared,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he/she signed the same for the purposes
and considerations therein expressed.
Sworn to before me this ___
day of _______, 199__.
- ----------------------------
Notary Public - State of______________________
16
<PAGE>
EXHIBIT 10.3
FORM OF RECEIVABLES TRANSFER AGREEMENT
between
GANIS CREDIT CORPORATION
as Transferor,
and
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION
as Depositor
Dated as of __________, 199_
<PAGE>
ARTICLE I
Certain Definitions
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables....................................... 2
SECTION 2.02. The Closing..................................................... 3
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Depositor................. 3
SECTION 3.02. Representations and Warranties of Transferor.................... 4
ARTICLE IV
Conditions
SECTION 4.01. Conditions to Obligation of the Depositor....................... 9
SECTION 4.02. Conditions to Obligation of the Transferor......................10
ARTICLE V
Covenants of the Transferor
SECTION 5.01. Protection of Right, Title and Interest.........................10
SECTION 5.02. Other Liens or Interests........................................11
SECTION 5.03. Costs and Expenses..............................................11
SECTION 5.04. Indemnification.................................................11
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Obligations of Transferor.......................................11
SECTION 6.02. Purchase Events.................................................11
SECTION 6.03. Depositor Assignment of Purchased Receivables...................12
(SECTION 6.04. Transfer to the Issuer.........................................12
(SECTION 6.04. Transfer to the Trust..........................................12
SECTION 6.05. Amendment.......................................................12
SECTION 6.06. Waivers.........................................................13
SECTION 6.07. Notices.........................................................13
<PAGE>
<TABLE>
<S> <C>
SECTION 6.08. Costs and Expenses..................................... 13
SECTION 6.09. Representations of the Transferor and the Depositor.... 13
SECTION 6.10. Confidential Information............................... 13
SECTION 6.11. Headings and Cross-References.......................... 13
SECTION 6.12. Governing Law.......................................... 14
SECTION 6.13. Counterparts........................................... 14
EXHIBIT A............................................................ A-1
SCHEDULE I........................................................... I-1
SCHEDULE II..........................................................II-1
</TABLE>
<PAGE>
RECEIVABLES TRANSFER AGREEMENT dated as of ______________, 199_, between
GANIS CREDIT CORPORATION, a Delaware corporation, as Transferor and DEUTSCHE
RECREATIONAL ASSET FUNDING CORPORATION, a Nevada corporation, as Depositor.
RECITALS
WHEREAS in the regular course of its business, the Transferor has acquired
certain (boat) (recreational vehicle) retail installment sale contracts secured
by new and used (boats, boat motors and accompanying trailers) (recreational
vehicles);
WHEREAS the Transferor and the Depositor wish to set forth the terms
pursuant to which such contracts are to be transferred by the Transferor to the
Depositor; and
WHEREAS the Depositor intends, concurrently with its transfers from time to
time hereunder, to convey all of its right, title and interest in and to
$______________ of such contracts to Distribution Financial Services [RV/Boat]
Trust 199_-_ (the"Issuer") pursuant to a (Transfer and Servicing Agreement dated
as of _____________, 199 (the "Transfer and Servicing Agreement"), by and among
(_________________) Trust 199_, as Issuer, Deutsche Recreational Asset Funding
Corporation, as Depositor, Deutsche Financial Services Corporation, as Servicer
and _______________, as Indenture Trustee) (Pooling and Servicing Agreement
dated as of ___________,199 (the "Pooling and Servicing Agreement") by and among
Deutsche Recreational Asset Funding Corporation, as Depositor, Deutsche
Financial Services Corporation, as Servicer, and ___________________________, as
Trustee).
NOW, THEREFORE, in consideration of the foregoing, other good and valuable
consideration and the mutual terms and covenants contained herein, the parties
hereto agree as follows:
ARTICLE I
Certain Definitions
Terms not defined in this Agreement shall have the meanings assigned
thereto in the (Transfer and Servicing Agreement) (Pooling and Servicing
Agreement). As used in this Agreement, the following terms shall, unless the
context otherwise requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms of the terms defined):
"Agreement" shall mean this Receivables Transfer Agreement, as the same may
be amended, amended and restated, or otherwise modified from time to time.
<PAGE>
"Assignment" shall mean the document of assignment substantially in the
form attached to this Agreement as Exhibit A.
"Conveyance Date" shall mean the Cutoff Date.
"Depositor" shall mean Deutsche Recreational Asset Funding Corporation, a
Nevada corporation, and its successors and assigns.
("Pooling and Servicing Agreement" shall have the meaning set forth in the
recitals.)
"Purchase Event" shall have the meaning specified in Section 6.02.
"Receivables" shall mean any Contract listed on Schedule I hereto (which
Schedule may be in the form of microfiche).
"Schedule of Receivables" shall mean the list of Receivables annexed hereto
as Schedule I.
("Transfer and Servicing Agreement" shall have the meaning set forth in the
recitals.)
"Transfer Date" shall mean the Closing Date.
"Transferor" shall mean Ganis Credit Corporation, a Delaware corporation,
and its successors and assigns.
ARTICLE II
Conveyance of Receivables
SECTION 2.01. Conveyance of Receivables. (a) In consideration of the
Depositor's delivery to or upon the order of the Transferor on the Closing
Date of $______________, the Transferor does hereby, transfer, assign, set over
and otherwise convey to the Depositor, without recourse (subject to the
obligations herein) all right, title, and interest of the Transferor in and to:
(i) the Receivables and all moneys received thereon on or
after________________, 199_;
(ii) the security interests in the Financed Assets and any
accessions thereto granted by Obligors pursuant to the Receivables and any
other interest of the Transferor in such Financed Assets;
(iii) any Liquidation Proceeds and any other proceeds with respect to
the Receivables claims on any physical damage, credit life or disability
insurance policies covering
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<PAGE>
Financed Assets or Obligors, including any vendor's single interest or other
collateral protection insurance policy;
(iv) any property that shall have secured a Receivable and that
shall have been acquired by or on behalf of the Transferor;
(v) all documents and other items contained in the Receivable
Files; and
(vi) the proceeds of any and all of the foregoing.
(b) The Transferor and the Depositor intend that the transfer of assets by
the Transferor to the Depositor pursuant to this Agreement be an absolute
conveyance of the ownership interest in such assets to the Depositor, rather
than the mere granting of a security interest to secure a borrowing. In the
event, however, that such transfer is deemed not to be a sale but to be of a
mere security interest to secure a borrowing, the Transferor shall be deemed to
have hereby granted to the Depositor a perfected first priority security
interest in all such assets, and this Agreement shall constitute a security
agreement under applicable law. Pursuant to the (Transfer and Servicing
Agreement)(Pooling and Servicing Agreement) and Section 6.04 hereof, the
Depositor may transfer and assign to the Issuer (i) all or any portion of the
assets assigned to the Depositor hereunder, (ii) all or any portion of the
Depositor's rights against the Transferor under this Agreement and (iii) all
proceeds thereof. Such assignment may be made by the Depositor with or without
assignment by the Depositor of its rights under this Agreement, and without
further notice to or acknowledgment from the Transferor. The Transferor waives,
to the extent permitted under applicable law, all claims, causes of action and
remedies, whether legal or equitable (including any right of setoff), against
the Depositor or any assignee of the Depositor relating to such action by the
Depositor in connection with the transactions contemplated by the (Transfer and
Servicing Agreement) (Pooling and Servicing Agreement).
SECTION 2.02. The Closing. The transfer of the Receivables shall take place
at a closing at the offices of ___________,____________________________ on the
Closing Date, simultaneously with the closing under ((a) the Transfer and
Servicing Agreement and (b) the Indenture)(the Pooling and Servicing Agreement).
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants as follows to the Transferor as of the
date hereof and the Transfer Date:
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<PAGE>
(a) Organization and Good Standing. The Depositor has been duly under the
laws of the State of Nevada, with the power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is presently conducted.
(b) Due Qualification. The Depositor is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of property
or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Depositor has the power and authority to
execute and deliver this Agreement and to carry out its terms; the Depositor had
at all relevant times, and has, the power, authority and legal right to acquire
and own the Receivables; and the execution, delivery and performance of this
Agreement have been duly authorized by the Depositor by all necessary corporate
action.
(d) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time or both) a default under, the articles of
incorporation or bylaws of the Depositor, or any indenture, agreement or other
instrument to which the Depositor is a party or by which it is bound, or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents), or violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable to the Depositor
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Depositor or
its properties.
(e) No Proceedings. There are no proceedings or investigations pending or,
to the Depositor's knowledge, threatened against the Depositor before any court,
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Depositor or its properties (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement.
SECTION 3.02. Representations and Warranties of Transferor. (a) The
Transferor hereby represents and warrants as follows to the Depositor as of the
date hereof and as of the Transfer Date:
(1) Organization and Good Standing. The Transferor has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of Delaware, with the power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted.
4
<PAGE>
(2) Due Qualification. The Transferor is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(3) Power and Authority. The Transferor has the power and authority
to execute and deliver this Agreement and the other Basic Documents to which it
is a party and to carry out their respective terms; the Transferor had at all
relevant times, and has, full power, authority and legal right to transfer and
assign the property transferred, transferred and assigned to the purchaser
hereby and has duly authorized such sale, transfer and assignment to the
Depositor by all necessary corporate action; and the execution, delivery and
performance of this Agreement and the other Basic Documents to which the
Transferor is a party have been duly authorized by the Transferor by all
necessary corporate action.
(4) No Violation. Upon giving effect to the consent described in
Section 3.02(b)(14), the consummation of the transactions contemplated by this
Agreement and the other Basic Documents to which the Transferor is a party and
the fulfillment of their respective terms do not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, the articles of incorporation
or bylaws of the Transferor, or any indenture, agreement or other instrument to
which the Transferor is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than this
Agreement), or violate any law or, to the best of the Transferor's knowledge,
any order, rule or regulation applicable to the Transferor of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Transferor or its
properties.
(5) No Proceedings. There are no proceedings or investigations
pending or, to the Transferor's knowledge, threatened against the Transferor
before any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Transferor or its properties
(i)asserting the invalidity of this Agreement or any other Basic Document to
which the Transferor is a party, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement or any other Basic Document
to which the Transferor is a party or (iii) seeking any determination or ruling
that might materially and adversely affect the performance by the Transferor of
its obligations under, or the validity or enforceability of, this Agreement or
any other Basic Document to which the Transferor is a party.
(6) Valid Transfer, Binding Obligations. This Agreement and the other
Basic Documents to which the Transferor is a party, when duly executed and
delivered by the other parties hereto and thereto, shall constitute legal, valid
and binding obligations of the Transferor, enforceable against the Transferor in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization
5
<PAGE>
and similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and to general principles of equity (whether applied in a
proceeding at law or in equity).
(7) Chief Executive Office. The chief executive office of the
Transferor is located at 660 Newport Center Drive, Newport Beach, California
92660.
(8) No Consents. The Transferor is not required to obtain the consent
of any other party or any consent, license, approval, registration,
authorization, or declaration of or with any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity, or
enforceability of this Agreement or any other Basic Document to which it is a
party that has not already been obtained.
(b) The Transferor makes the following representations and warranties with
respect to the Receivables, on which the Depositor relies in accepting the
Receivables and in transferring the Receivables to the (Issuer under the
Transfer and Servicing Agreement, and on which the Issuer relies in pledging the
same to the Indenture Trustee) (Trustee under the Pooling and Servicing
Agreement). Such representations and warranties speak as of the execution and
delivery of this Agreement as of the Closing Date.
(1) Characteristics of Receivables. Each Receivable (A) was
originated in the United States by a Dealer for the retail sale of a Financed
Asset in the ordinary course of such Dealer's business in accordance with the
Transferor's credit policies, was fully and properly executed by the parties
thereto, was purchased by the Transferor from such Dealer under an existing
Dealer Agreement and was validly assigned by such Dealer to the Transferor,
(B)has created or shall create a valid, subsisting and enforceable first
priority security interest in favor of the Transferor in the Financed Asset,
which security interest is assignable by the Transferor to the Depositor, and by
the Depositor to the Issuer, (C) contains customary and enforceable provisions
such that the rights and remedies of the holder thereof are adequate for
realization against the collateral of the benefits of the security and (D)
provides for level periodic payments (provided that the payment in the last
month of the term of the Receivable may be different from the level payments)
that fully amortize the Amount Financed by maturity and yield interest at the
APR.
(2) Compliance with Law. Each Receivable and the sale of the related
Financed Asset complied at the time it was originated or made, and at the time
of execution of this Agreement complies, in all material respects with all
requirements of applicable federal, state and local laws and regulations
thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act,
the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z", the Soldiers' and Sailors' Civil Relief Act of 1940, and state adaptations
of the National Consumer Act and of the Uniform Consumer Credit Code, and other
consumer credit laws and equal credit opportunity and disclosure laws.
6
<PAGE>
(3) Binding Obligation. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon, enforceable
by the holder thereof in accordance with its terms, except (A) as enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law and (B) as such
Receivable may be modified by the application after the Transfer Date of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
(4) No Government Obligor. No Receivable is due from the United
States of America or any State or any agency, department, subdivision or
instrumentality thereof.
(5) Obligor Bankruptcy. No Obligor had been identified on the
records of the Transferor as being the subject of a current bankruptcy
proceeding.
(6) Schedule of Receivables . The information set forth in Schedule
I to this Agreement is true and correct in all material respects as of the close
of business on the Cutoff Date.
(7) Marking Records. By the Transfer Date, the Transferor will have
caused its records relating to each Receivable, including any computer records,
to be clearly and unambiguously marked to show that the Receivables have been
transferred to the Depositor by the Transferor and transferred and assigned by
the Depositor to the Issuer in accordance with the terms of the (Transfer and
Servicing Agreement and pledged by the Issuer to the Indenture Trustee in
accordance with the terms of the Indenture) (Pooling and Servicing Agreement).
(8) Computer Tape. The computer tape regarding the Receivables made
available by the Transferor to the Depositor is complete and accurate in all
respects as of the Conveyance Date.
(9) No Adverse Selection. No selection procedures believed by the
Transferor to be adverse to the (Noteholders) (or Certificateholders) were
utilized in selecting the Receivables.
(10) Chattel Paper. The Receivables constitute chattel paper within
the meaning of the UCC as in effect in the State of ______________.
(11) One Original. There is only one original executed copy of each
Receivable.
(12) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Asset been released from the
lien of the related Receivable in whole or in part. None of the terms of any
Receivable has been waived, altered or modified in
7
<PAGE>
any respect since its origination, except by instruments or documents identified
in the related Receivable File. No Receivable has been modified as a result of
the application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
(13) Lawful Assignment. No Receivable has been originated in, or is
subject to the laws of, any jurisdiction the laws of which would make unlawful,
void or voidable the transfer and assignment of such Receivable under this
Agreement or (the Transfer and Servicing Agreement or the pledge of such
Receivable under the Indenture) (the Pooling and Servicing Agreement).
(14) Title. It is the intention of the Transferor that the transfers
and assignments herein contemplated constitute transfers of the Receivables from
the Transferor to the Depositor and that the beneficial interest in and title to
the Receivables not be part of the debtor's estate in the event of the filing of
a bankruptcy petition by or against the Transferor under any bankruptcy law. No
Receivable has been transferred, assigned or pledged by the Transferor to any
Person other than to the Depositor or pursuant to this Agreement ((or by the
Depositor to the Issuer pursuant to the Transfer and Servicing Agreement))((or
by the Depositor to the Trustee pursuant to the Pooling and Servicing
Agreement)). Immediately prior to the transfers and assignments herein
contemplated, the Transferor has good and marketable title to each Receivable
free and clear of all Liens and, immediately upon the transfer thereof, the
Depositor shall have good and marketable title to each Receivable, free and
clear of all Liens.
(15) Security Interest in Financed Asset. Immediately prior to its
assignment and transfer to the Depositor pursuant to this Agreement, each
Receivable shall be secured by a validly perfected first priority security
interest in the related Financed Asset in favor of the Transferor as secured
party, or all necessary and appropriate actions have been commenced that will
result in the valid perfection of a first priority security interest in such
Financed Asset in favor of the Transferor as secured party.
(16) All Filings Made. All filings (including UCC filings) required
to be made in any jurisdiction to give the Depositor a first perfected ownership
interest in the Receivables have been made.
(17) No Defenses. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense, and no such right has been asserted
or threatened with respect to any Receivable.
(18) No Default. There has been no default, breach, violation or
event permitting acceleration under the terms of any Receivable (other than
payment delinquencies of not more than __ days), and no condition exists or
event has occurred and is continuing that with notice, the lapse of time or both
would constitute a default, breach, violation or event permitting acceleration
under the terms of any Receivable, and there has been no waiver of any of the
foregoing. As of the Cutoff Date, no Financed Asset has been repossessed.
8
<PAGE>
(19) Insurance. The Transferor, in accordance with its customary
procedures, has determined that the Obligor has obtained physical damage
insurance covering each Financed Asset and, under the terms of the related
contract, the Obligor is required to maintain such insurance.
(20) Final Scheduled Maturity Date. No Receivable has a final
scheduled payment date after ___________________.
(21) Certain Characteristics of the Receivables. As of the Conveyance
Date, (A) each Receivable had an original maturity of not more than __ months;
(B) no Receivable was more than __ days past due; and (C) no funds have been
advanced by the Transferor, any Dealer or anyone acting on behalf of either of
them in order to cause any Receivable to qualify under clause(B) above.
ARTICLE IV
Conditions
SECTION 4.01. Conditions to Obligation of the Depositor. The obligation of
the Depositor to purchase the Receivables is subject to the satisfaction of the
following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Transferor hereunder shall be true and correct on the Transfer
Date with the same effect as if then made, and the Transferor shall have
performed all obligations to be performed by it hereunder on or prior to the
Transfer Date.
(b) Computer Files Marked. The Transferor shall, at its own expense, on or
prior to the Transfer Date, indicate in its computer files that the Receivables
have been transferred to the Depositor pursuant to this Agreement and deliver to
the Depositor the Schedule of Receivables, certified by the Transferor's
President, a Vice President or the Treasurer to be true, correct and complete.
(c) Documents To Be Delivered by the Transferor on the Transfer Date.
(1) The Assignment. On the Transfer Date, the Transferor will execute
and deliver an Assignment with respect to the Receivables, substantially in the
form of Exhibit A hereto.
(2) Evidence of UCC Filing. On or prior to the Transfer Date, the
Transferor shall record and file, at its own expense, a UCC-1 financing
statement in each jurisdiction in which required by applicable law, executed by
the Transferor, in favor of the Depositor, describing the Receivables and the
other assets assigned to the Depositor pursuant to Section 2.01 hereof, meeting
the requirements of the laws of each such jurisdiction and in such manner as is
necessary to perfect the transfer, assignment and conveyance of the Receivables
9
<PAGE>
and such other assets to the Depositor. The Transferor shall deliver to the
Depositor a file-stamped copy or other evidence satisfactory to the Depositor of
such filing on or prior to the Transfer Date.
(3) Other Documents. Such other documents as the Depositor may
reasonably request.
(d) Other Transactions. The transactions contemplated by the (Transfer and
Servicing Agreement, the Indenture and the Trust Agreement( (Pooling and
Servicing Agreement) to be consummated on the Transfer Date shall be consummated
on such date.
SECTION 4.02. Conditions to Obligation of the Transferor. The obligation of
the Transferor to transfer the Receivables to the Depositor is subject to the
satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Depositor hereunder shall be true and correct on the Transfer
Date with the same effect as if then made, and the Transferor shall have
performed all obligations to be performed by it hereunder on or prior to the
Transfer Date.
[(b) Receivables Transfer Price. On the Transfer Date, the Depositor shall
have delivered to the Transferor the purchase price specified in Section 2.01.]
ARTICLE V
Covenants of the Transferor
The Transferor agrees with the Depositor as follows:
SECTION 5.01. Protection of Right, Title and Interest. (a) Filings. The
Transferor shall cause all financing statements and continuation statements and
any other necessary documents covering the right, title and interest of the
Transferor and the Depositor, respectively, in and to the Receivables and the
other property included in the Owner Trust Estate to be promptly filed and atoll
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the right, title
and interest of the Depositor hereunder in and to the Receivables and the other
property included in the Owner Trust Estate. The Transferor shall deliver to the
Depositor file stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recordation, registration or filing. The Depositor shall cooperate fully with
the Transferor in connection with the obligations set forth above and will
execute any and all documents reasonably required to fulfill the intent of this
paragraph.
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(b) Name Change. If the Transferor makes any change in its name, identity
or corporate structure that would make any financing statement or continuation
statement filed in accordance with paragraph (a) above seriously misleading
within the applicable provisions of the UCC or any title statute, the Transferor
shall give the Depositor, the Indenture Trustee and the Owner Trustee written
notice thereof at least 5 days prior to such change and shall promptly file such
financing statements or amendments as may be necessary to continue the
perfection of the Depositor's interest in the property included in the Owner
Trust Estate.
SECTION 5.02. Other Liens or Interests. Except for the conveyances
hereunder and pursuant to the Basic Documents, the Transferor shall not sell,
pledge, assign or transfer to any Person, or grant, create, incur, assume, or
suffer to exist any Lien on, or any interest in, to or under the Receivables,
and the Transferor shall defend the right, title and interest of the Depositor
in, to and under the Receivables against all claims of third parties claiming
through or under the Transferor; provided, however, that the Transferor's
obligations under this Section shall terminate upon the termination of the
Issuer pursuant to the Trust Agreement.
SECTION 5.03. Costs and Expenses. The Transferor agrees to pay all
reasonable costs and disbursements in connection with the perfection, as against
all third parties, of the Depositor's and the Issuer's right, title and interest
in and to the Receivables.
SECTION 5.04. Indemnification. The Transferor shall indemnify the Depositor
and the Issuer for any liability resulting from the failure of a Receivable to
be originated in compliance with all requirements of law and for any breach of
any of its representations and warranties contained herein. These indemnity
obligations shall be in addition to any obligation that the Transferor may
otherwise have.
ARTICLE VI
Miscellaneous Provisions
SECTION 6.01. Obligations of Transferor. The obligations of the Transferor
shall not be affected by the invalidity, illegality or irregularity of any
Receivable.
SECTION 6.02. Purchase Events. The Transferor hereby covenants and agrees
with the Depositor for the benefit of the Depositor, the (Indenture Trustee, the
Owner Trustee, (the Certificateholders) and the Noteholders)(the Trustee and the
Certificateholders) that the occurrence of a breach of any of the Transferor's
representations and warranties contained in Section 3.02(b) shall constitute an
event obligating the Transferor to purchase the Receivables to which the breach
is applicable ("Purchase Events"), at the Purchase Amount, from the Depositor or
from the Issuer, as applicable, unless any such breach shall have been cured by
the last day of the first Collection Period following the discovery or notice
thereof by or to the Transferor or the Servicer. The purchase obligation of the
Transferor shall constitute the sole
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remedy available to the Depositor, (the Indenture Trustee, the Owner Trustee,
the Issuer and the Noteholders (or the Certificateholders) (the Trustee or the
Certificateholders) against the Transferor with respect to any Purchase Event.
SECTION 6.03. Depositor Assignment of Purchased Receivables. With respect
to all Receivables repurchased by the Transferor pursuant to this Agreement, the
Depositor shall assign, without recourse, representation or warranty, to the
Transferor all of the Depositor's right, title and interest in and to such
Receivables and all security and documents relating thereto.
(SECTION 6.04. Transfer to the Issuer. The Transferor acknowledges and
agrees that (a) the Depositor will, pursuant to the Transfer and Servicing
Agreement, transfer and assign the Receivables and assign its rights under this
Agreement with respect thereto to the Issuer and the Issuer will pledge the
Receivables to the Indenture Trustee and (b) the representations and warranties
contained in this Agreement and the rights of the Depositor under this
Agreement, including under Section 6.02, are intended to benefit the Issuer, the
Noteholders (and the Certificateholders). The Transferor hereby consents to such
transfers and assignments.)
(SECTION 6.04. Transfer to the Trust. The Transferor acknowledges and
agrees that (a) the Depositor will, pursuant to the Pooling and Servicing
Agreement transfer and assign the Receivables and assign its rights under this
Agreement with respect thereto to the Trustee and (b) the representations and
warranties contained in this Agreement and the rights of the Depositor under
this Agreement, including under Section 6.02, are intended to benefit the
Certificateholders. The Transferor hereby consents to such transfers and
assignments.)
SECTION 6.05. Amendment. This Agreement may be amended from time to time,
with prior written notice to the Rating Agencies and by a written amendment duly
executed and delivered by the Transferor and the Depositor, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of
(Noteholders) (or Certificateholders); provided that such amendment shall not,
as evidenced by an Opinion of Counsel, materially and adversely affect the
interest of any (Noteholder) (or Certificateholder). This Agreement may also be
amended by the Transferor and the Depositor, with prior written notice to the
Rating Agencies and the prior written consent of (Holders of Notes evidencing at
least a majority of the Outstanding Amount of the Notes) and (Holders of
Certificates) evidencing at least a majority of the Certificate Balance
(excluding, for purposes of this Section 6.05, Certificates held by the
Transferor or any of its affiliates) for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the (Noteholders) (or
Certificateholders); provided, 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 Receivables or distributions that are required to be
made for the benefit of (Noteholders)(or Certificateholders) or (ii) reduce the
aforesaid
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percentage of the(Notes) or the (Certificates) that is required to
consent to any such amendment, without the consent of the Holders of all the
outstanding (Notes)and (Certificates).
SECTION 6.06. Waivers. No failure or delay on the part of the Depositor
in exercising any power, right or remedy under this Agreement or the
Assignment shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other or further
exercise thereof or the exercise of any other power, right or remedy.
SECTION 6.07. Notices. All demands, notices and communications under this
Agreement shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, to: (a) in the case of the
Transferor, Ganis Credit Corporation, 660 Newport Center Drive, Newport Beach,
California 92660, Attention: Executive Vice President; (b) in the case of the
Depositor, Deutsche Recreational Asset Funding Corporation, 655 Maryville Centre
Drive, St. Louis, Missouri 63141, Attention: President; (c) in the case of
Moody's, Moody's Investors Service, Inc.,ABS Monitoring Department, 99 Church
Street, New York, New York 10007; (d) in the case of Standard & Poor's, Standard
& Poor's Ratings Service, 26 Broadway (20th Floor), New York, New York 10004,
Attention: Asset Backed Surveillance Department; or as to each of the foregoing,
at such other address as shall be designated by written notice to the other
parties.
SECTION 6.08. Costs and Expenses. The Transferor shall pay all expenses
incident to the performance of its obligations under this Agreement and the
Transferor agrees to pay all reasonable out-of-pocket costs and expenses of
the purchaser, excluding fees and expenses of counsel, in connection with
the perfection as against third parties of the Depositor's right, title
and interest in and to the Receivables and the enforcement of any obligation
of the Transferor hereunder.
SECTION 6.09. Representations of the Transferor and the Depositor. The
respective agreements, representations, warranties and other statements by the
Transferor and the Depositor set forth in or made pursuant to this Agreement
shall remain in full force and effect and will survive the closing under
Section 2.02 and the transfers and assignments referred to in Section 6.04.
SECTION 6.10. Confidential Information. The Depositor agrees that it will
neither use nor disclose to any Person the names and addresses of the
Obligors, except in connection with the enforcement of the Depositor's rights
hereunder, under the Receivables, under the (Transfer and Servicing
Agreement) (Pooling and Servicing Agreement) or another Basic Document, or as
required by any of the foregoing or by law.
SECTION 6.11. Headings and Cross-References. The various headings in this
Agreement are included for convenience only and shall not affect the meaning
or interpretation of any provision of this Agreement. References in this
Agreement to section names or numbers are to such Sections of this
Agreement.
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SECTION 6.12. Governing Law. This Agreement and the Assignment shall be
construed in accordance with the laws of the State of New York, without
reference to its conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder or thereunder shall be determined in
accordance with such laws.
SECTION 6.13. Counterparts. This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date and year
first above written.
GANIS CREDIT CORPORATION
By:
----------------------------
Name:
Title:
DEUTSCHE RECREATIONAL ASSET FUNDING
CORPORATION
By:
----------------------------
Name:
Title:
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EXHIBIT A
Form of Assignment
ASSIGNMENT
For value received, in accordance with the Receivables Transfer Agreement
dated as of ____________, 199 (the "Receivables Transfer Agreement"), between
Ganis Credit Corporation (the "Transferor") and Deutsche Recreational Asset
Funding Corporation (the "Depositor"), the Transferor does hereby assign,
transfer and otherwise convey unto the Depositor, without recourse, all right,
title and interest of the Transferor in and to (i) the Receivables and all
moneys received thereon on or after ______________, 199 ; (ii) the security
interests in the Financed Assets and any accessions thereto granted by Obligors
pursuant to the Receivables and any other interest of the Transferor in such
Financed Assets; (iii) any Liquidation Proceeds and any other proceeds with
respect to the Receivables from claims on any physical damage, credit life or
disability insurance policies covering Financed Assets or Obligors, including
any vendor's single interest or other collateral protection insurance policy;
(iv) any property that shall have secured a Receivable and that shall have been
acquired by or on behalf of the Transferor; (v) all documents and other items
contained in the Receivable Files; and (vi)proceeds of any and all of the
foregoing. The foregoing transfer does not constitute and is not intended to
result in any assumption by the Depositor of any obligation of the Transferor to
the Obligors, insurers or any other person in connection with the Receivables,
the Receivable Files, any insurance policies or any agreement or instrument
relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the Transferor contained in the
Receivables Transfer Agreement and is to be governed by the Receivables Transfer
Agreement.
Capitalized terms used and not otherwise defined herein shall have the
meaning assigned to them in the Receivables Transfer Agreement.
IN WITNESS WHEREOF, the Transferor has caused this Assignment to be duly
executed as of ________________, 199 . (______________________________),
GANIS CREDIT CORPORATION
By:
---------------------------
Name:
Title:
A-1
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SCHEDULE I
Schedule of Receivables
I-1
<PAGE>
SCHEDULE II
Location of Receivable Files
II-1
