<PAGE>
Filed Pursuant To Rule 424(b)(5)
Registration No. 333-56303
Prospectus Supplement to Prospectus dated March 12, 1999
$1,000,000,000
Distribution Financial Services RV Trust 1999-1
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION
Depositor
DEUTSCHE FINANCIAL SERVICES CORPORATION
Servicer
The Trust will issue eight classes of Notes as listed below. Interest and
principal on the Notes will be payable monthly, on the 15th of the month or
the first business day after the 15th of the month, to the extent described
herein. The first interest payment will be made on April 15, 1999. The Notes
represent obligations of the Trust only and do not represent obligations of or
interests in, and are not guaranteed by, Deutsche Recreational Asset Funding
Corporation, Deutsche Financial Services Corporation, Ganis Credit
Corporation, Deutsche Bank AG or any other person or entity.
Investing in the Notes involves certain risks. You should consider the
discussion of "Risk Factors" beginning on page S-14 of this Prospectus
Supplement and page 11 of the accompanying Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus Supplement or the Prospectus. Any
representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Underwriting
Discounts
Principal Interest Stated Price to and Proceeds to
Amount(1) Rate Maturity Date Public Commissions Depositor(2)
-------------- -------- ----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Notes......... $ 112,743,000 4.97% March 15, 2000 100.000000% 0.100% 99.900000%
Class A-2 Notes......... $ 227,529,000 5.38% May 15, 2006 99.999484% 0.200% 99.799484%
Class A-3 Notes......... $ 197,998,000 5.70% February 16, 2009 99.985600% 0.250% 99.735600%
Class A-4 Notes......... $ 192,642,000 5.84% October 17, 2011 99.985422% 0.250% 99.735422%
Class A-5 Notes......... $ 159,722,000 5.97% August 15, 2013 99.985387% 0.270% 99.715387%
Class A-6 Notes......... $ 64,366,000 6.02% November 15, 2016 99.996257% 0.350% 99.646257%
Class B Notes........... $ 25,000,000 6.36% June 15, 2018 99.991902% 0.600% 99.391902%
Class C Notes........... $ 20,000,000 7.23% June 15, 2020 99.972946% 0.745% 99.227946%
-------------- ------------ ---------- ------------
Total................... $1,000,000,000 $999,909,046 $2,499,931 $997,409,115
</TABLE>
- --------
(1) Subject to a variance in each case of plus or minus five percent.
(2) Before deducting expenses estimated to be $700,000.
The Notes are offered subject to prior sale, when, as and if issued to and
accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that delivery of the Notes will be made in
book-entry form only through the facilities of The Depository Trust Company,
Cedelbank, and Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear system, on or about March 18, 1999.
Deutsche Bank Securities
Bear, Stearns & Co. Inc.
Morgan Stanley Dean Witter
The date of this Prospectus Supplement is March 12, 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the Notes in two separate documents that progressively
provide more detail: (a) the accompanying Prospectus, which provides general
information, some of which may not apply to the Notes; and (b) this Prospectus
Supplement, which describes the specific terms of the Notes.
If the terms of the Notes described in this Prospectus Supplement vary from
the Prospectus, you should rely on the information in this Prospectus
Supplement.
We include cross-references in this Prospectus Supplement and in the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents provides the
pages on which these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement are defined under the caption "Index of Terms" beginning
on page S-37 in this Prospectus Supplement and under the caption "Index of
Terms" beginning on page 75 in the accompanying Prospectus.
This document may be used only where it is legal to offer and sell these
securities. This Prospectus Supplement may be used to offer and sell the Notes
only if accompanied by the Prospectus. We do not claim the accuracy of the
information in this Prospectus Supplement or the accompanying Prospectus as of
any date other than the dates stated on their respective covers.
After the initial distribution of the Notes by the Underwriters, the
Prospectus and Prospectus Supplement may be used by Deutsche Bank Securities
Inc., an affiliate of the Transferor, the Servicer and the Depositor, in
connection with market making transactions in the Notes. Deutsche Bank
Securities Inc. may act as principal or agent in such transactions. Such
transactions will be at prices related to prevailing market prices at the time
of sale.
S-2
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C>
REPORTS TO NOTEHOLDERS..................................................... S-4
SUMMARY OF TERMS........................................................... S-5
RISK FACTORS............................................................... S-14
THE TRUST.................................................................. S-17
THE RECEIVABLES POOL....................................................... S-18
MANAGEMENT'S DISCUSSION AND ANALYSIS....................................... S-24
THE TRANSFEROR............................................................. S-25
THE SERVICER............................................................... S-25
WEIGHTED AVERAGE LIFE OF THE NOTES......................................... S-25
DESCRIPTION OF THE NOTES................................................... S-31
DESCRIPTION OF THE RESIDUAL INTEREST....................................... S-33
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................... S-34
FEDERAL INCOME TAX CONSEQUENCES............................................ S-38
STATE AND LOCAL TAX CONSEQUENCES........................................... S-39
ERISA CONSIDERATIONS....................................................... S-39
UNDERWRITING............................................................... S-40
LEGAL OPINIONS............................................................. S-41
INDEX OF TERMS............................................................. S-42
PROSPECTUS
AVAILABLE INFORMATION...................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 3
SUMMARY OF TERMS........................................................... 4
RISK FACTORS............................................................... 11
THE TRUSTS................................................................. 20
THE RECEIVABLES POOLS...................................................... 22
WEIGHTED AVERAGE LIVES OF THE SECURITIES................................... 23
POOL FACTORS AND TRADING INFORMATION....................................... 24
USE OF PROCEEDS............................................................ 24
THE DEPOSITOR.............................................................. 25
THE TRANSFEROR............................................................. 25
UNDERWRITING PROCEDURES AND GUIDELINES..................................... 26
THE SERVICER............................................................... 27
DESCRIPTION OF THE NOTES................................................... 29
DESCRIPTION OF THE CERTIFICATES............................................ 34
CERTAIN INFORMATION REGARDING THE SECURITIES............................... 35
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS....................... 42
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES................................... 53
FEDERAL INCOME TAX CONSEQUENCES............................................ 58
STATE AND LOCAL TAX CONSEQUENCES........................................... 70
ERISA CONSIDERATIONS....................................................... 72
PLAN OF DISTRIBUTION....................................................... 74
LEGAL OPINIONS............................................................. 75
INDEX OF TERMS............................................................. 76
</TABLE>
ANNEX I: GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
S-3
<PAGE>
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes 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. 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-4
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information from this document and does not
contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the Notes, you should
read carefully this entire Prospectus Supplement and the accompanying
Prospectus, including the information under "Risk Factors" in this Prospectus
Supplement and the accompanying Prospectus.
This summary provides an overview of certain cash flows and other information
to aid your understanding and is qualified by the full description of these
cash flows and other information in this Prospectus Supplement and the
accompanying Prospectus.
THE PARTIES
Trust....................... Distribution Financial Services RV Trust 1999-1.
Depositor................... Deutsche Recreational Asset Funding Corporation.
The principal executive office of the Depositor
is located at 655 Maryville Centre Drive, St.
Louis, Missouri 63141, telephone number (314)
523-3000.
Transferor.................. Ganis Credit Corporation.
Servicer.................... Deutsche Financial Services Corporation.
Indenture Trustee........... The Chase Manhattan Bank.
Owner Trustee............... Norwest Bank Minnesota, National Association.
THE SECURITIES THE NOTES
The Trust will issue the following notes (the
"Notes"):
.Class A Notes
. Class A-1 4.97% Asset Backed Notes in the
aggregate principal amount of $112,743,000;
. Class A-2 5.38% Asset Backed Notes in the
aggregate principal amount of $227,529,000;
. Class A-3 5.70% Asset Backed Notes in the
aggregate principal amount of $197,998,000;
. Class A-4 5.84% Asset Backed Notes in the
aggregate principal amount of $192,642,000;
. Class A-5 5.97% Asset Backed Notes in the
aggregate principal amount of $159,722,000;
. Class A-6 6.02% Asset Backed Notes in the
aggregate principal amount of $64,366,000;
and
.Class B 6.36% Asset Backed Notes in the
aggregate principal amount of $25,000,000.
.Class C 7.23% Asset Backed Notes in the
aggregate principal amount of $20,000,000.
If Receivables are removed from or added to the
Receivables Pool as described under "The
Receivables Pool" herein, the initial aggregate
principal amount of each Class of Notes will be
correspondingly decreased or increased.
S-5
<PAGE>
CLOSING DATE
The issuance of the Notes will take place on or
about March 18, 1999.
MONTHLY PAYMENT DATES
With respect to each calendar month (each, a
"Collection Period"), the "Monthly Payment Date"
will be the 15th day of the following month (or,
if such day is not a business day, the next
business day), commencing on April 15, 1999.
INTEREST PAYMENTS
. The "Interest Rate" for each Class of Notes is
the fixed rate as specified on the cover page
of this Prospectus Supplement.
. Interest on the outstanding principal balance
of each class of Notes will accrue at the
applicable Interest Rate from and including the
Closing Date (in the case of the first Monthly
Payment Date) or from and including the
immediately preceding Monthly Payment Date to
and including the day preceding the applicable
Monthly Payment Date (each an "Interest Accrual
Period").
. Interest on the Class A-1 Notes will be
calculated on the basis of the actual number of
days elapsed and a 360-day year. Interest on
the other Class A Notes, the Class B Notes and
the Class C Notes will be calculated on the
basis of a 360-day year of twelve 30-day
months.
. Interest on the Notes will be payable on each
Monthly Payment Date in the following order of
priority:
. first, to the Class A Noteholders, on a pro
rata basis without preference or priority
among the different classes of Class A Notes,
interest accrued for the related Interest
Accrual Period on the Class A Notes at the
applicable Interest Rate for each class of
the Class A Notes, plus interest due and
unpaid from prior Interest Accrual Periods
(plus interest on overdue interest at the
applicable Interest Rate to the extent
permitted by law);
. second, to the Class B Noteholders, on a pro
rata basis, interest accrued for the related
Interest Accrual Period on the Class B Notes
at the Interest Rate for the Class B Notes,
plus interest due and unpaid from prior
Interest Accrual Periods (plus interest on
overdue interest at the Interest Rate for the
Class B Notes to the extent permitted by
law); and
. third, to the Class C Noteholders, on a pro
rata basis, interest accrued for the related
Interest Accrual Period on the Class C Notes
at the Interest Rate for
S-6
<PAGE>
the Class C Notes, plus interest due and
unpaid from prior Interest Accrual Periods
(plus interest on overdue interest at the
Interest Rate for the Class C Notes to the
extent permitted by law).
See "Description of the Notes--Payments of
Interest" and "Description of the Transfer and
Servicing Agreements--Distributions" herein. See
also "Priority of Payments Following an Event of
Default under the Indenture" below.
PRINCIPAL PAYMENTS
. Principal on the Notes will be payable on each
Monthly Payment Date in the following order of
priority (subject to the allocations described
under "Priority of Payments Following an Event
of Default under the Indenture" below):
. first, 100% to the Class A Notes,
sequentially, so that no principal will be
paid on any class of Class A Notes until each
class of Class A Notes with a lower numerical
designation has been paid in full (e.g., no
principal will be paid on the Class A-2 Notes
until the Class A-1 Notes have been paid in
full and no principal will be paid on the
Class A-3 Notes until the Class A-1 Notes and
the Class A-2 Notes have been paid in full)
until all of the Class A Notes have been paid
in full;
. second, 100% to the Class B Notes until paid
in full; and
. third, 100% to the Class C Notes until paid
in full.
See "Description of the Notes--Payments of
Principal" and "Description of the Transfer and
Servicing Agreements--Distributions" herein.
STATED MATURITY DATES
The outstanding principal amount, if any, of each
class of Notes will be payable in full on the
applicable date set forth below (with respect to
each class of Notes, its "Stated Maturity Date").
<TABLE>
<CAPTION>
Stated Maturity
Notes Date
----- -----------------
<S> <C>
Class A-1...................... March 15, 2000
Class A-2...................... May 15, 2006
Class A-3...................... February 16, 2009
Class A-4...................... October 17, 2011
Class A-5...................... August 15, 2013
Class A-6...................... November 15, 2016
Class B........................ June 15, 2018
Class C........................ June 15, 2020
</TABLE>
S-7
<PAGE>
If any class of Notes is not repaid in full on or
prior to its Stated Maturity Date, an Event of
Default will occur.
See "Description of the Notes--The Indenture--
Events of Default; Rights Upon Event of Default"
in the Prospectus.
PRIORITY OF PAYMENTS FOLLOWING AN EVENT OF
DEFAULT UNDER THE INDENTURE
Following an Event of Default under the Indenture
and acceleration of the Notes, the Indenture
Trustee will distribute money or property
collected pursuant to the Indenture in the
following order of priority on each Monthly
Payment Date:
. first, to the Indenture Trustee, amounts due
as compensation and indemnities;
. second, to the Servicer (if DFS is no longer
the Servicer), due and unpaid Servicing Fees
(and any other amounts due to it by the
Trust);
. third, to the Class A Noteholders, on a pro
rata basis without preference or priority
among the different classes of Class A Notes,
amounts due in respect of interest;
. fourth, to the Class B Noteholders, on a pro
rata basis, amounts due in respect of
interest;
. fifth, to the Class C Noteholders, on a pro
rata basis, amounts due in respect of
interest;
. sixth, to the Class A Noteholders, on a pro
rata basis without preference or priority
among the different classes of Class A Notes,
amounts due for principal until the
Outstanding Amount of each class of Class A
Notes is reduced to zero;
. seventh, to the Class B Noteholders, on a pro
rata basis, amounts due for principal until
the Outstanding Amount of each class of Class
B Notes is reduced to zero;
. eighth, to the Class C Noteholders, on a pro
rata basis, amounts due for principal until
the Outstanding Amount of each class of Class
C Notes is reduced to zero; and
. ninth, if DFS is the Servicer, to DFS in its
capacity as Servicer, due and unpaid
Servicing Fees (and any other amounts due to
it by the Trust); and
. tenth, all remaining amounts to the Residual
Interestholder.
See "Description of the Notes--The Indenture--
Events of Default; Rights Upon Event of Default "
in the Prospectus.
REDEMPTION
The Notes will be redeemed in whole on any
Monthly Payment Date if the Servicer exercises
its option to
S-8
<PAGE>
purchase the Receivables from the Trust. The
Servicer may exercise this option only if:
. the outstanding Pool Balance is less than 10%
of the Initial Pool Balance; and
. the resulting distribution to the Noteholders
on the applicable Monthly Payment Date is
sufficient to pay the sum of the outstanding
principal balances of all Notes, plus accrued
and unpaid interest thereon.
See "Description of the Notes--Optional
Redemption" herein.
CREDIT ENHANCEMENT Credit enhancement with respect to the Notes will
be provided by (1) excess spread, (2)
overcollateralization, (3) the Reserve Account,
and (4) class subordination, each as described
below.
EXCESS SPREAD
The weighted average APR of the Receivables
generally is expected to be higher than the sum
of (a) the Servicing Fee and (b) the weighted
average Interest Rates of the Notes. The excess
interest generated by the Receivables in each
Collection Period is referred to herein as
"Excess Spread."
OVERCOLLATERALIZATION
Excess Spread (and other funds, as described
herein) will be applied, to the extent available,
to make payments of principal on the classes of
Notes then entitled to receive payments in
respect of the principal amounts of such Notes;
such application may cause the Notes to amortize
more rapidly than the Receivables, resulting in
overcollateralization. The application of Excess
Spread (and other funds, as described herein) to
create overcollateralization will occur only to
the extent set forth under "Description of the
Transfer and Servicing Agreement--Distributions"
herein.
RESERVE ACCOUNT
The Servicer will establish and maintain in the
name of the Indenture Trustee an account to be
known as the "Reserve Account." Funds on deposit
in the Reserve Account will be available on each
Monthly Payment Date to cover certain shortfalls
in distributions of interest and principal on the
Notes.
The Reserve Account will be funded as follows:
. On the Closing Date, the Depositor will deposit
(or cause to be deposited) $5,000,000 into the
Reserve Account from the proceeds of the
issuance of the Notes.
S-9
<PAGE>
. On each Monthly Payment Date, the Total
Distribution Amount remaining after providing
for specified payments to the Servicer and the
Note Distribution Account will be deposited in
the Reserve Account if the balance of the
Reserve Account is less than the Specified
Reserve Account Balance.
Investment earnings on amounts on deposit in the
Reserve Account will be added to the balance of
funds on deposit in the Reserve Account, subject
to application of funds on deposit in the Reserve
Account as described herein.
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 equal to or exceeds the Targeted
Overcollateralization Amount, then the amount of
such excess will be paid to the Servicer. On the
first Monthly Payment Date as of which the
aggregate Outstanding Amount of the Notes has
been reduced to zero, the amount (if any) on
deposit in the Reserve Account will be paid to
the Servicer.
The "Specified Reserve Account Balance" for any
Monthly Payment Date will equal 2.00% of the Pool
Balance as of the close of business on the last
day of the immediately preceding Collection
Period; provided, however, that the Specified
Reserve Account Balance will not be less than
0.75% of the Initial Pool Balance.
Notwithstanding the preceding sentence, the
Specified Reserve Account Balance will not exceed
the aggregate outstanding principal balance of
the Notes.
See "Description of the Transfer and Servicing
Agreements--Distributions" and "--Reserve
Account" herein.
CLASS SUBORDINATION
Except to the extent set forth under "Description
of the Notes--Priority of Payments Following an
Event of Default Under the Indenture" herein:
. principal payments on classes of Class A Notes
with higher numerical designations are
subordinated to principal payments on classes
of Class A Notes with lower numerical
designations;
. principal payments on the Class B Notes and the
Class C Notes are subordinated to principal
payments on the Class A Notes;
S-10
<PAGE>
. principal payments on the Class C Notes are
subordinated to principal payments on the Class
A Notes and the Class B Notes;
. interest payments on the Class B Notes and the
Class C Notes are subordinated to interest
payments on the Class A Notes; and
. interest payments on the Class C Notes are
subordinated to interest payments on the Class
A Notes and the Class B Notes.
See "Description of the Notes--Payments of
Interest" and "--Payments of Principal" herein.
TRUST PROPERTY The primary assets of the Trust will be the
Receivables, which are recreational vehicle
installment sales contracts or installment loans
originated by DFS or acquired by DFS from Dealers
("DFS Receivables") and recreational vehicle
installment sales contracts or installment loans
originated by the Transferor or acquired by the
Transferor from Dealers (the "Transferor
Receivables"). On the Closing Date, DFS will
transfer the DFS Receivables to the Transferor,
the Transferor will transfer the DFS Receivables
and the Transferor Receivables to the Depositor,
and the Depositor will transfer all of such
Receivables to the Trust.
The assets of the Trust will also include:
. all monies received under the Receivables on
and after March 1, 1999 (the "Cutoff Date");
. security interests in the Financed Recreational
Vehicles created pursuant to the Receivables;
. any proceeds from certain related insurance
policies;
. amounts on deposit in the Trust Accounts,
including the Reserve Account; and
. all rights of the Trust under the Transfer and
Servicing Agreement.
See "The Receivables Pool" herein and "The
Receivables Pools" and "Description of the
Transfer and Servicing Agreements" in the
Prospectus.
INITIAL POOL BALANCE The Receivables to be acquired by the Trust on
the Closing Date will have an aggregate Principal
Balance of $1,000,003,403 as of the Cutoff Date
(the "Initial Pool Balance").
COLLECTION ACCOUNT; Payments received on the Receivables will be
PRIORITY OF DISTRIBUTIONS deposited in the Collection Account by the
Servicer as described in "Description of the
Transfer and Servicing Agreements-- Collections"
in the Prospectus.
On each Monthly Payment Date, the Servicer will
instruct the Indenture Trustee to make the
following deposits and distributions from amounts
on deposit in the Collection Account, to the
extent of the Total Distribution Amount, in the
following order of priority:
S-11
<PAGE>
(i) to the Servicer (if DFS is no longer the
Servicer), the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods;
(ii) to the Note Distribution Account, from the
Total Distribution Amount remaining after
the application of clause (i), 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' Regular Principal
Distributable Amount;
(iv) if DFS is the Servicer, to DFS in its
capacity as the Servicer, from the Total
Distribution Amount remaining after the
application of clauses (i) through (iii),
the Servicing Fee and all unpaid Servicing
Fees from prior Collection Periods;
(v) to the Reserve Account, from the Total
Distribution Amount remaining after
application of clauses (i) through (iv), 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
(vi) to the Note Distribution Account, from the
Total Distribution Amount remaining after
application of clauses (i) through (v), the
Noteholders' Excess Distributable Amount, if
any.
On each Monthly Payment Date, the portion of the
Total Distribution Amount, if any, remaining
after the application of clauses (i) through (vi)
will be distributed to the Owner Trustee for
distribution to the Residual Interestholder. See
"Description of the Transfer and Servicing
Agreements--Distributions" herein.
SERVICING FEE The Servicer will be entitled to receive a
monthly Servicing Fee and other compensation as
described under "Description of the Transfer and
Servicing Agreement--Servicing Compensation and
Payment of Expenses" and "--Distributions"
herein.
SERVICER ADVANCES The Servicer will advance any interest shortfall
with respect to the Receivables 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 will be
entitled to reimbursement of Servicer Advances
from subsequent payments on or with respect to
the Receivables. Such reimbursements will be made
out of available funds prior to the deposit of
such funds in the Collection Account. See
"Description of the Transfer and Servicing
Agreements--Servicer Advances" in the Prospectus.
S-12
<PAGE>
TAX STATUS In the opinion of Mayer, Brown & Platt, special
counsel to the Depositor, for federal income tax
purposes, the Notes will be characterized as debt
and the Trust will not be characterized as a
separate entity that is 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. See "Federal Income Tax
Consequences" and "State and Local Tax
Consequences" herein and "Federal Income Tax
Consequences" and "State and Local Tax
Consequences" in the Prospectus.
ERISA CONSIDERATIONS Subject to the considerations discussed under
"ERISA Considerations" herein and in the
Prospectus, the Notes will be eligible for
purchase by employee benefit plans. See "ERISA
Considerations" herein and "ERISA Considerations"
in the Prospectus.
LEGAL INVESTMENT At the time of their issuance, the Class A-1
Notes will be eligible for purchase by money
market funds under Rule 2a-7 under the Investment
Company Act of 1940, as amended. Investors should
consult with their own counsel in determining the
extent to which the Notes constitute legal
investments for them.
RATINGS OF THE NOTES The Notes must receive at least the following
ratings from Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and Fitch
IBCA, Inc. ("Fitch" and each of S&P and Fitch, a
"Rating Agency") in order to be issued:
<TABLE>
<CAPTION>
Rating
----------
Class S&P Fitch
----- ---- -----
<S> <C> <C>
A-1............................................... A-1+ F1+
A-2............................................... AAA AAA
A-3............................................... AAA AAA
A-4............................................... AAA AAA
A-5............................................... AAA AAA
A-6............................................... AAA AAA
B ............................................... A A
C ............................................... BBB BBB
</TABLE>
See "Risk Factors--Ratings Are Not Recommenda-
tions" herein.
ABSENCE OF MARKET The Notes will be a new issue of securities with
no established trading market. The Trust does not
expect to apply for listing of the Notes on any
securities exchange or quote the Notes in the
automated quotation system of a registered
securities association. The Underwriters may
assist in resales of the Notes, but they are not
required to do so. See "Risk Factors--Noteholders
May Be Unable To Resell Notes" herein.
S-13
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus Supplement
and the Prospectus, you should consider the following risk factors and the
risk factors set forth in the Prospectus in deciding whether to purchase
Notes.
Noteholders May Be Unable To There is currently no secondary market for the
Resell Notes Notes. The Underwriters may assist in resales
of the Notes, but they are not required to do
so. If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to resell any
of your Notes.
Possible Payment Delays or Economic conditions in states where Obligors
Losses Resulting From reside may affect the delinquency, loan loss
Geographic Concentration and repossession experience of the Trust with
respect to the Receivables. As of the Cutoff
Date, the mailing addresses of Obligors of
Receivables representing, by Principal Balance,
19.74%, 11.06%, 9.20% and 6.93% of the Initial
Pool Balance were located in California, Texas,
Florida and Oregon. An economic downturn in one
or more of states where concentrations of
Obligors reside 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
the Receivables. Economic factors such as
unemployment, interest rates, the rate of
inflation and consumer perceptions may affect
the rate of prepayment and defaults on the
Receivables and could reduce or delay payments
to you. See "The Receivables Pool" herein.
Possible Payment Delays or Except as set forth under "Description of the
Losses as a result of Notes--Priority of Payments Following an Event
Priority Differences Among of Default Under the Indenture": (i) principal
the Classes payments on classes of Class A Notes with
higher numerical designations are subordinated
to principal payments on classes of Class A
Notes with lower numerical designations; (ii)
interest payments on the Class B Notes are
subordinated to interest payments on the Class
A Notes; (iii) interest payments on the Class C
Notes are subordinated to interest payments on
the Class A Notes and the Class B Notes; (iv)
principal payments on the Class B Notes are
subordinated to principal payments on the Class
A Notes; and (v) principal payments on the
Class C Notes are subordinated to principal
payments on the Class A Notes and the Class B
Notes. See "Description of the Notes--Payments
of Interest" and "--Payments of Principal"
herein. Because of this priority structure, if
you hold a class that is paid later than
another class, you bear more risk of loss than
holders of prior classes and you could
experience delays or reductions in payments.
S-14
<PAGE>
Ratings Are Not A rating of the Notes from a Rating Agency is
Recommendations not a recommendation to purchase, hold or sell
Notes, inasmuch as such rating does not comment
as to market price or suitability for a
particular investor. The ratings of the Notes
address the likelihood of the payment of
principal and interest on the Notes pursuant to
their terms; however, the rating on the Notes
does not address the timing of distributions of
principal of any class of the Notes prior to
the Stated Maturity Date of such class of
Notes. 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. Each
rating should be evaluated independently of any
other rating. See "Ratings are Not
Recommendations; There is No Assurance That a
Rating Will Remain in Effect" in the
Prospectus.
Risks Due to Potential Many existing computer applications and systems
Computer Problems Relating are dependent upon calendar dates, including
to the Year 2000 dates before, on and after January 1, 2000.
These applications and systems could fail or
could produce erroneous results during the
transition from the year 1999 to the year 2000
and afterwards.
If DFS, in its capacity as the Servicer, does
not have a computer system that is year 2000
compliant in a timely manner, the ability of
DFS to service the Receivables may be
materially and adversely affected. If the
Indenture Trustee does not have a computer
system that is year 2000 compliant in a timely
manner, the ability of the Indenture Trustee to
make distributions on the Notes may be
materially and adversely affected. For a
description of the efforts of DFS with respect
to year 2000 issues, see "The Servicer-Year
2000 Issues" in the Prospectus. Year 2000
issues may also affect the ability of DTC to
perform its services. See "Certain Information
Regarding The Securities--Book-Entry
Registration" in the Prospectus.
Possible Delays and The Trust will not have any significant assets
Reductions in Payments on or sources of funds other than the Receivables.
Notes Due to Limited Assets The Notes will be payable only from the assets
of the Trust of the Trust. You must rely for repayment upon
payments on the Receivables and, if and to the
extent available, amounts on deposit in the
Reserve Account. However, amounts to be
deposited in the Reserve Account are limited in
amount and the balance of the Reserve Account
will be reduced from time to time as described
herein. The Notes represent obligations of the
Trust only and do not represent an interest in
or an obligation of, and are not insured or
guaranteed by, the Transferor, the Depositor,
DFS, Ganis Credit Corporation, Deutsche Bank AG
or any other
S-15
<PAGE>
person or entity. You will have no recourse to
the Transferor, the Depositor, DFS, Ganis
Credit Corporation, Deutsche Bank AG or any
other person or entity in the event that
proceeds of the assets of the Trust are
insufficient or otherwise unavailable to make
payments on the Notes.
If losses or delinquencies occur with respect
to Receivables which are not covered by
payments on other Receivables or by the Reserve
Account, you may experience delays and
reductions in payments on your Notes.
Possible Delays and Credit enhancement of the Notes will be
Reductions In Payments on provided by Excess Spread, by
Notes Due to Limited Credit overcollateralization, by amounts in the
Enhancement Reserve Account, and by the subordination of
certain classes of Notes to other classes of
Notes. The amount of such credit enhancement is
limited and will be reduced from time to time
as described herein. If the amount available
under such credit enhancement is reduced to
zero, you will bear directly the credit and
other risks associated with your investment in
the Notes and will be more likely to experience
delays and reductions in payments on your
Notes. See "Description of the Transfer and
Servicing Agreement-- Distributions",
"Description of the Transfer and Servicing
Agreement--Reserve Account", "Description of
the Notes" and "Risk Factors--Possible Payment
Delays or Losses as a Result of Priority
Differences Among the Classes" herein.
Possible Losses Due to The actual maturity of any class of Notes could
Payment Prior to Maturity occur significantly earlier than the Stated
Maturity Date for such class of Notes. See
"Risk Factors--Possible Losses Resulting From
Payment Prior to Maturity" in the Prospectus,
and "Weighted Average Life of the Notes" and
"Description of the Notes--Optional Redemption"
herein. You will bear the risk of being able to
reinvest principal received on Notes at a yield
at least equal to the yield on such Notes. If
you acquire a Note at a premium, repayment of
principal at a rate that is faster than you
anticipated will result in a yield that is
lower than you anticipated. If you acquire a
Note at a discount, repayment of principal at a
rate that is slower than you anticipated will
result in a yield that is lower than you
anticipated.
S-16
<PAGE>
THE TRUST
GENERAL
The Trust, Distribution Financial Services RV Trust 1999-1, is a common law
trust formed under the laws of the State of New York. The purpose of the Trust
is generally to engage in the following activities: (i) to acquire the
Receivables pursuant to the Transfer and Servicing Agreement; (ii) to issue
the Notes pursuant to the Indenture and to sell the Notes; (iii) with the
proceeds of the sale of the Notes to pay certain expenses of the Trust and to
pay the balance to the Depositor; (iv) to grant a security interest in the
Receivables pursuant to the Indenture; (v) to enter into and perform its
obligations under the documents to which it is to be a party; (vi) 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 (vii) subject to compliance with the documents to
which it is a party, to engage in such other activities as may be required in
connection with conservation of the Receivables and other items and the making
of distributions to the Residual Interestholder and the Noteholders.
The net proceeds from the sale of the Notes will be distributed to the
Depositor.
If the protection provided to the investment of the Noteholders 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 Noteholders with respect to the Notes. See "Description of the
Transfer and Servicing Agreements--Distributions" and "--Reserve Account"
herein and "Risk Factors" and "Certain Legal Aspects of the Receivables" in
the Prospectus.
The Trust's principal offices are in Minneapolis, Minnesota, in care of
Norwest Bank Minnesota, National Association, 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 in the respective
amounts set forth herein had taken place on such date:
<TABLE>
<CAPTION>
Capitalization
of The Trust
--------------
<S> <C>
Class A-1 Notes.................................................. $ 112,743,000
Class A-2 Notes.................................................. $ 227,529,000
Class A-3 Notes.................................................. $ 197,998,000
Class A-4 Notes.................................................. $ 192,642,000
Class A-5 Notes.................................................. $ 159,722,000
Class A-6 Notes.................................................. $ 64,366,000
Class B Notes.................................................... $ 25,000,000
Class C Notes.................................................... $ 20,000,000
--------------
Total........................................................ $1,000,000,000
==============
</TABLE>
THE OWNER TRUSTEE
Norwest Bank Minnesota, National Association, is the Owner Trustee under the
Trust Agreement. Norwest Bank Minnesota, National Association, is a national
banking association and its principal offices are located at Sixth &
Marquette, Minneapolis, Minnesota 55479-0070. The Depositor and its affiliates
may maintain normal commercial banking relations with the Owner Trustee and
its affiliates.
S-17
<PAGE>
THE RECEIVABLES POOL
The pool of Receivables held by the Trust (the "Receivables Pool") will
include only the Receivables transferred by the Depositor to the Trust on the
Closing Date. Such Receivables will be acquired by the Depositor from the
Transferor on the Closing Date. The Transferor originated certain of such
Receivables, acquired certain of such Receivables from Dealers, and will
acquire the rest of such Receivables from DFS on the Closing Date. Such
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 a Principal Balance of at least
$153.62, (ii) had a remaining maturity of at least two months but not more
than 240 months, (iii) had an APR of at least 4.00% and not more than 18.50%
per annum, and (iv) was not more than 59 days past due. As of the Cutoff Date,
the ratio of (x) the aggregate principal balance of the Receivables that are
31 to and including 59 days delinquent to (y) the aggregate principal balance
of the Receivables was 0.17%. All of such Receivables have fixed rate APRs,
except that less than 1.0% of the aggregate principal balance of the
Receivables have APRs which will increase to a different fixed rate from time
to time during the terms of such Receivables. 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 Noteholders were used in selecting the
Receivables.
All of the Receivables are Simple Interest Receivables, as described under
"The Receivables Pools--General" in the Prospectus.
A maximum of 5% (relative to the aggregate principal balance) of the
Receivables, as they will be constituted at the time of the Closing Date, will
deviate from the Receivables as described in this Prospectus Supplement.
Set forth in the following tables is information concerning the composition,
distribution by annual percentage rate ("APR"), geographic distribution,
remaining term, loan age, year of origination and current balances of the
Receivables expected to be included in the Receivables Pool as of the Cutoff
Date. Prior to the issuance of the Notes, Receivables not exceeding five
percent of the aggregate principal balance set forth below may be removed from
or added to the Receivables Pool. The percentages in the following tables may
not add to 100% because of rounding. Dollar amounts in the following tables
may not add to the totals indicated because of rounding.
DISTRIBUTION FINANCIAL SERVICES RV TRUST 1999-1
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>
8.86% $1,000,003,403 21,366 165 months 174 months $46,803
</TABLE>
S-18
<PAGE>
DISTRIBUTION FINANCIAL SERVICES RV TRUST 1999-1
DISTRIBUTION BY APR OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
Number of Percentage of Aggregate Aggregate Principal
APR Range Receivables Principal Balance Balance
- --------- ----------- ----------------------- -------------------
<S> <C> <C> <C>
3.001-- 4.000......... 1 0.00% $ 8,737
5.001-- 6.000......... 1 0.00 44,720
6.001-- 7.000......... 19 0.18 1,794,412
7.001-- 8.000......... 691 9.83 98,268,100
8.001-- 9.000......... 10,424 65.50 654,961,123
9.001--10.000......... 6,093 18.04 180,404,898
10.001--11.000......... 2,392 4.52 45,202,689
11.001--12.000......... 998 1.27 12,703,993
12.001--13.000......... 448 0.43 4,286,047
13.001--14.000......... 173 0.15 1,459,612
14.001--15.000......... 68 0.04 439,600
15.001--16.000......... 31 0.02 174,347
16.001--17.000......... 22 0.02 214,185
17.001--18.000......... 3 0.00 28,495
18.001--19.000......... 2 0.00 12,445
------ ------ --------------
Total................ 21,366 100.00% $1,000,003,403
====== ====== ==============
</TABLE>
DISTRIBUTION FINANCIAL SERVICES RV TRUST 1999-1
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
Number of Percentage of Aggregate Aggregate Principal
State(1) Receivables Principal Balance Balance
- -------- ----------- ----------------------- -------------------
<S> <C> <C> <C>
Alabama................. 437 1.70% $ 16,984,674
Alaska.................. 136 0.92 9,214,669
Arizona................. 896 4.14 41,351,862
Arkansas................ 314 1.20 12,032,965
California.............. 4,377 19.74 197,440,267
Colorado................ 297 1.78 17,765,177
Connecticut............. 218 0.96 9,614,469
Delaware................ 38 0.19 1,864,982
Florida................. 1,814 9.20 91,963,927
Georgia................. 305 1.58 15,775,427
Hawaii.................. 6 0.04 428,929
Idaho................... 105 0.59 5,871,144
Illinois................ 436 2.34 23,431,856
Indiana................. 136 0.77 7,710,851
Iowa.................... 141 0.50 5,020,081
Kansas.................. 210 0.80 8,039,177
Kentucky................ 87 0.34 3,428,819
Louisiana............... 467 2.01 20,143,093
Maine................... 177 0.70 6,981,501
Maryland................ 162 0.69 6,947,024
Massachusetts........... 607 2.05 20,488,848
</TABLE>
S-19
<PAGE>
<TABLE>
<CAPTION>
Number of Percentage of Aggregate Aggregate Principal
State (1) Receivables Principal Balance Balance
- --------- ----------- ----------------------- -------------------
<S> <C> <C> <C>
Michigan............... 167 1.08% $ 10,755,361
Minnesota.............. 425 1.42 14,239,070
Mississippi............ 410 1.46 14,611,221
Missouri............... 310 1.23 12,288,328
Montana................ 101 0.65 6,535,121
Nebraska............... 68 0.21 2,101,574
Nevada................. 664 2.38 23,844,567
New Hampshire.......... 167 0.71 7,071,893
New Jersey............. 157 0.92 9,243,056
New Mexico............. 239 1.05 10,487,604
New York............... 509 2.10 21,018,079
North Carolina......... 381 1.56 15,609,693
North Dakota........... 17 0.14 1,372,278
Ohio................... 290 1.83 18,254,790
Oklahoma............... 309 1.42 14,208,411
Oregon................. 1,324 6.93 69,316,560
Pennsylvania........... 411 2.15 21,487,409
Rhode Island........... 90 0.23 2,330,359
South Carolina......... 191 0.71 7,116,036
South Dakota........... 81 0.32 3,172,951
Tennessee.............. 233 1.26 12,601,941
Texas.................. 2,012 11.06 110,610,883
Utah................... 124 0.62 6,221,848
Vermont................ 73 0.25 2,467,302
Virginia............... 228 1.21 12,051,028
Washington............. 723 3.45 34,513,117
West Virginia.......... 46 0.18 1,812,319
Wisconsin.............. 204 0.94 9,412,927
Wyoming................ 45 0.27 2,710,139
Other.................. 1 0.00 37,791
------ ------ --------------
Total................ 21,366 100.00% $1,000,003,403
====== ====== ==============
</TABLE>
- --------
(1) Based on billing addresses of the Obligors, as reflected in the Servicer's
records as of the Cutoff Date.
S-20
<PAGE>
DISTRIBUTION FINANCIAL SERVICES RV TRUST 1999-1
DISTRIBUTION BY REMAINING TERM OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
Remaining
Term Number of Percentage of Aggregate Aggregate Principal
in Months Receivables Principal Balance Balance
--------- ----------- ----------------------- -------------------
<S> <C> <C> <C>
1-12.................. 30 0.10% $ 1,015,286
13-24.................. 99 0.11 1,119,911
25-36.................. 235 0.18 1,817,479
37-48.................. 474 0.52 5,178,746
49-60.................. 765 0.99 9,873,229
61-72.................. 553 0.88 8,778,888
73-84.................. 880 1.44 14,407,510
85-96.................. 772 1.42 14,159,642
97-108................. 1,045 2.59 25,945,009
109-120................. 2,359 5.25 52,458,130
121-132................. 1,083 3.16 31,595,634
133-144................. 3,076 9.19 91,934,844
145-156................. 1,202 6.23 62,319,703
157-168................. 2,959 18.58 185,762,915
169-180................. 4,666 31.49 314,920,845
181-192................. 12 0.07 733,935
193-204................. 40 0.29 2,918,841
205-216................. 21 0.26 2,649,949
217-228................. 213 3.29 32,893,046
229-240................. 882 13.95 139,519,862
------ ------ --------------
Total................. 21,366 100.00% $1,000,003,403
====== ====== ==============
</TABLE>
DISTRIBUTION FINANCIAL SERVICES RV TRUST 1999-1
DISTRIBUTION BY AGE OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
Number of Percentage of Aggregate Aggregate Principal
Age in Months Receivables Principal Balance Balance
- -------------- ----------- ----------------------- -------------------
<S> <C> <C> <C>
Less than 1 month....... 1,311 6.31% $ 63,071,181
1-6.................... 7,279 35.71 357,147,342
7-12................... 7,576 34.73 347,277,672
13-18................... 3,970 18.69 186,945,574
19 and greater.......... 1,230 4.56 45,561,635
------ ------ --------------
Total................. 21,366 100.00% $1,000,003,403
====== ====== ==============
DISTRIBUTION FINANCIAL SERVICES RV TRUST 1999-1
DISTRIBUTION BY ORIGINATION YEAR OF THE RECEIVABLES POOL
<CAPTION>
Number of Percentage of Aggregate Aggregate Principal
Origination Year Receivables Principal Balance Balance
- ---------------- ----------- ----------------------- -------------------
<S> <C> <C> <C>
1997.................... 4,270 19.58% $ 195,818,356
1998.................... 14,726 69.02 690,153,498
1999.................... 2,370 11.40 114,031,550
------ ------ --------------
Total................. 21,366 100.00% $1,000,003,403
====== ====== ==============
</TABLE>
S-21
<PAGE>
DISTRIBUTION FINANCIAL SERVICES RV TRUST 1999-1
DISTRIBUTION BY CURRENT BALANCE OF THE RECEIVABLES POOL
<TABLE>
<CAPTION>
Percentage of
Number of Aggregate Aggregate Principal
Current Balance Receivables Principal Balance Balance
- --------------- ----------- ----------------- -------------------
<S> <C> <C> <C>
$ 0.01- 50,000.00........ 15,305 36.22% $ 362,220,803
50,000.01-100,000.00........ 3,896 26.31 263,057,361
100,000.01-150,000.00........ 1,211 14.78 147,796,279
150,000.01-200,000.00........ 500 8.68 86,793,025
200,000.01-250,000.00........ 196 4.34 43,420,805
250,000.01-300,000.00........ 86 2.36 23,550,384
300,000.01-350,000.00........ 55 1.80 17,989,757
350,000.01-400,000.00........ 34 1.27 12,679,332
400,000.01-450,000.00........ 28 1.19 11,881,933
450,000.01-500,000.00........ 18 0.86 8,578,869
500,000.01-550,000.00........ 9 0.47 4,736,657
550,000.01-600,000.00........ 18 1.03 10,340,571
600,000.01-650,000.00........ 3 0.19 1,860,319
650,000.01-700,000.00........ 4 0.27 2,738,312
700,000.01-750,000.00........ 1 0.07 710,594
750,000.01 and greater....... 2 0.16 1,648,403
------ ------ --------------
Total....................... 21,366 100.00% $1,000,003,403
====== ====== ==============
</TABLE>
Approximately 50.52% of the aggregate Principal Balance of the Receivables
in the Receivables Pool (measured as of the Cutoff Date), constituting 56.18%
of the number of such Receivables, were secured by used Financed Vehicles at
the time such Receivables were originated.
DELINQUENCIES AND NET LOSSES
Set forth below is certain information concerning the experience of the
Transferor and DFS pertaining to 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 in the Receivables Pool will be
comparable to that set forth below.
S-22
<PAGE>
DELINQUENCY EXPERIENCE OF DFS AND THE TRANSFEROR(1)
<TABLE>
<CAPTION>
At December 31,
------------------------------------------
1998 1997
-------------------- --------------------
Number of Number of
contracts Amount Contracts Amount
--------- ---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Portfolio.......................... 38,584 $1,468,233 29,925 $1,052,856
Period of Delinquency
30-59 Days....................... 201 4,827 198 5,420
60-89 Days....................... 38 1,411 53 1,370
90 Days or More.................. 47 1,907 92 2,700
Total Delinquencies................ 286 $ 8,145 343 $ 9,490
Total Delinquencies as a percent of
the Portfolio..................... 0.74% 0.55% 1.15% 0.90%
</TABLE>
<TABLE>
<CAPTION>
At December 31,
1996
------------------
Number of
Contracts Amount
--------- --------
<S> <C> <C>
Portfolio................................................... 25,116 $790,647
Period of Delinquency
30-59 Days................................................ 123 3,898
60-89 Days................................................ 37 1,203
90 Days or More........................................... 54 1,392
Total Delinquencies......................................... 214 $ 6,493
Total Delinquencies as a
percent of the Portfolio................................... 0.85% 0.82%
</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 OF DFS AND THE TRANSFEROR(1)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1998 1997 1996
---------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Average Amount Outstanding During the Period... $1,260,545 $921,752 $674,885
Average Number of Contracts Outstanding During
the Period.................................... 34,255 27,521 21,714
Net Losses..................................... $ 4,869 $ 3,082 $ 2,114
Net Losses as a Percent of Average Amount
Outstanding(2)(3)............................. 0.39% 0.33% 0.31%
</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-23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Trust was formed for the purposes described under "The Trust" herein. 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 Notes and amounts deposited in the Reserve Account. The
net proceeds from the sale of the Notes will be distributed to the Depositor.
The Trust's primary sources of liquidity will be 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, the interest costs of the Notes and 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 will depend, in part, on
the amount of delinquencies and credit losses on the Receivables. For
information on the delinquency and loss experience of DFS and 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 December 31, 1998 of $1.468
billion reflect substantially all recreational vehicle receivables originated
or acquired by the Transferor and DFS since February, 1995 which remained
outstanding at December 31, 1998. The tables titled "Delinquency Experience of
DFS and the Transferor" and "Credit Loss Experience of DFS and the Transferor"
in "The Receivables Pool--Delinquencies and Net Losses" herein 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 such 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 receivables
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 recreational vehicle
receivables originated or acquired by the Transferor and DFS including
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.
S-24
<PAGE>
At December 31, 1998, 286 contracts totaling $8.145 million were 30 or more
days delinquent, representing 0.55% of the total dollar value of the
portfolio. Delinquencies were down from both December 31, 1997 and December
31, 1996 levels of 0.90% and 0.82%, respectively, due in part to changed
servicing procedures. All values are within normal ranges for the portfolio.
Net losses were $4.869 million in 1998 or 0.39% of average portfolio
outstandings, as compared to $3.082 million in 1997 or 0.33% of average
portfolio outstandings. While there can be no assurance of future delinquency
or loss experience with respect to recreational vehicle receivables,
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 would 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 NOTES
Information regarding certain maturity and prepayment considerations with
respect to the Notes is set forth under "Weighted Average Life of the
Securities" in the Prospectus. Except to the extent discussed under
"Description of the Notes--Priority of Payments Following an Event of Default
Under the Indenture" herein: (i) no principal will be paid on any class of
Class A Notes until each class of Class A Notes with a lower numerical
designation has been paid in full (e.g., no principal will be paid on the
Class A-2 Notes until the Class A-1 Notes have been paid in full, and no
principal will be paid on the Class A-3 Notes until the Class A-1 Notes and
the Class A-2 Notes have been paid in full); (ii) no principal payments will
be made on the Class B Notes until all Class A Notes have been paid in full;
and (iii) no principal payments on the Class C Notes will be made until all of
the Class A Notes and Class B Notes have been paid in full. See "Description
of the Notes--Payments of Principal" herein. As the rate of payment of
principal of each class of Notes depends primarily on the rate of payment
(including prepayments) of the principal balance of the Receivables, the final
payment of any class of the Notes could occur significantly earlier than its
Stated Maturity Date. 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. Noteholders will
bear the risk of being able to reinvest principal payments on the Notes at
yields at least equal to the yields on their respective Notes. The final
payment on any class of Notes could also occur later than its Stated Maturity
Date.
Prepayments on recreational vehicle receivables may be measured by a
prepayment standard or model. The prepayment model used with respect to the
Receivables is expressed in terms of "ABS," which refers to a prepayment model
that assumes prepayment in full of a constant percentage of the original
number of receivables in a pool each month. The ABS model also assumes that
each receivable has the same principal balance as each other receivable in
S-25
<PAGE>
the applicable pool as of the Cutoff Date and at all times thereafter, that
each receivable in the applicable pool amortizes at the same rate, and that in
each month until maturity each receivable will either be paid as scheduled or
prepaid in full. For example, if the Receivables Pool includes 21,366
Receivables as of the Cutoff Date, an ABS percentage of 1.00% indicates that
it is assumed that 213.66 Receivables having the same assumed principal
balance are prepaid in full during each Collection Period. ABS does not
purport to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of receivables,
including the Receivables.
The following tables were prepared on the basis of the assumptions that (i)
scheduled interest and principal payments on the Receivables are received on
the applicable due dates, there are no delinquencies or losses on the
Receivables and prepayments in full are received at the applicable percentages
of ABS set forth in each table, (ii) each scheduled payment includes thirty
days of accrued interest, (iii) there are no prepayment interest shortfalls,
(iv) there are no substitutions or repurchases of Receivables, (v) there is no
optional redemption of the Notes (except with respect to the weighted average
life with optional redemption set forth below in each table), (vi) there are
no investment earnings on amounts in the Reserve Account, (vii) payments are
made on the Notes on the 15th day of each month, commencing April 15, 1999,
(viii) the Notes are issued on March 18, 1999 and (ix) there are five groups
of Receivables having the following weighted average characteristics:
<TABLE>
<CAPTION>
Months
Outstanding Gross Net Age to
Balance Coupon Coupon (months) Maturity
------------ ------ ------ -------- --------
<S> <C> <C> <C> <C>
$134,753,370 9.54% 9.04% 10 93
$233,714,534 8.67% 8.17% 3 168
$249,869,927 8.83% 8.33% 9 162
$202,947,144 9.00% 8.50% 16 157
$178,715,025 8.48% 7.98% 7 232
</TABLE>
Such assumptions are made solely for the purpose of the tables set forth
below. The actual characteristics and performance of the Receivables will
differ from such assumptions. In particular, it can be expected that there
will be delinquencies in payment and losses with respect to the Receivables,
and it is highly unlikely that prepayments of the Receivables will be received
at the constant rates indicated in the following tables, or at any constant
rate. The following tables are hypothetical in nature and are provided only to
give a general sense of how the principal cash flows might behave under
varying prepayment scenarios.
Subject to the foregoing assumptions and qualifications, the following
tables indicate the weighted average lives of the Notes and set forth the
percentage of the initial aggregate principal amount of each Class of Notes
that would be outstanding after each of the Monthly Payment Dates shown at
various percentages of ABS.
The weighted average life of a Class of Notes is determined by (i)
multiplying the net reduction, if any, of the applicable initial principal
amount by the number of years from the date of issuance of the Notes to the
related Monthly Payment Date, (ii) adding the results and (iii) dividing the
sum by the aggregate of the net reductions of initial principal amount
described in (i) above.
S-26
<PAGE>
PERCENTAGE OF INITIAL AGGREGATE PRINCIPAL AMOUNT OUTSTANDING
AT THE FOLLOWING PERCENTAGE OF ABS(1)
<TABLE>
<CAPTION>
Class A-1 Class A-2
----------------------------------------- -----------------------------------------
Payment Date 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage...... 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2000.............. 0 0 0 0 0 0 0 100 71 59 46 33 18 4
March 2001.............. 0 0 0 0 0 0 0 56 1 0 0 0 0 0
March 2002.............. 0 0 0 0 0 0 0 12 0 0 0 0 0 0
March 2003.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2004.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2005.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2006.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2007.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2008.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2009.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2010.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2011.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2012.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2013.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2014.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2015.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2016.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(Years)
Without Optional
Redemption............ 0.5 0.4 0.3 0.3 0.2 0.2 0.2 2.2 1.3 1.1 1.0 0.9 0.8 0.7
With Optional
Redemption............ 0.5 0.4 0.3 0.3 0.2 0.2 0.2 2.2 1.3 1.1 1.0 0.9 0.8 0.7
</TABLE>
- -------
(1) The percentages in this table have been rounded to the nearest whole
number.
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<PAGE>
PERCENTAGE OF INITIAL AGGREGATE PRINCIPAL AMOUNT OUTSTANDING AT THE FOLLOWING
PERCENTAGES OF ABS(1)
<TABLE>
<CAPTION>
Class A-3 Class A-4
----------------------------------------- -----------------------------------------
Payment Date 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage...... 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2000.............. 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2001.............. 100 100 74 46 17 0 0 100 100 100 100 100 86 52
March 2002.............. 100 26 0 0 0 0 0 100 100 87 46 4 0 0
March 2003.............. 66 0 0 0 0 0 0 100 55 6 0 0 0 0
March 2004.............. 19 0 0 0 0 0 0 100 0 0 0 0 0 0
March 2005.............. 0 0 0 0 0 0 0 74 0 0 0 0 0 0
March 2006.............. 0 0 0 0 0 0 0 31 0 0 0 0 0 0
March 2007.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2008.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2009.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2010.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2011.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2010.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2013.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2014.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2015.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2016.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(Years)
Without Optional
Redemption............ 4.4 2.7 2.3 2.0 1.8 1.6 1.4 6.6 4.1 3.5 3.0 2.6 2.3 2.1
With Optional
Redemption............ 4.4 2.7 2.3 2.0 1.8 1.6 1.4 6.6 4.1 3.5 3.0 2.6 2.3 2.1
</TABLE>
- -------
(1) The percentages in this table have been rounded to the nearest whole
number.
S-28
<PAGE>
PERCENTAGE OF INITIAL AGGREGATE PRINCIPAL AMOUNT OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF ABS(1)
<TABLE>
<CAPTION>
Class A-5 Class A-6
----------------------------------------- ------------------------------------------
Payment Date 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage...... 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2000.............. 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2001.............. 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2002.............. 100 100 100 100 100 50 0 100 100 100 100 100 100 100
March 2003.............. 100 100 100 46 0 0 0 100 100 100 100 63* 0 0
March 2004.............. 100 87 20 0 0 0 0 100 100 100 0 0 0 0
March 2005.............. 100 19 0 0 0 0 0 100 100 0 0 0 0 0
March 2006.............. 100 0 0 0 0 0 0 100 3* 0 0 0 0 0
March 2007.............. 91 0 0 0 0 0 0 100 0 0 0 0 0 0
March 2008.............. 54 0 0 0 0 0 0 100 0 0 0 0 0 0
March 2009.............. 21 0 0 0 0 0 0 100 0 0 0 0 0 0
March 2010.............. 0 0 0 0 0 0 0 79* 0 0 0 0 0 0
March 2011.............. 0 0 0 0 0 0 0 18* 0 0 0 0 0 0
March 2012.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2013.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2014.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2015.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
March 2016.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(Years)
Without Optional
Redemption............ 9.2 5.6 4.7 4.0 3.5 3.0 2.7 11.5 6.7 5.6 4.7 4.1 3.6 3.2
With Optional
Redemption............ 9.2 5.6 4.7 4.0 3.5 3.0 2.7 11.0 6.4 5.4 4.6 3.9 3.5 3.1
</TABLE>
- -------
(1) The percentages in this table have been rounded to the nearest whole
number.
* Based on the assumption that the Servicer does not exercise its option to
purchase the Receivables as described under "Description of the Notes--
Optional Redemption" herein.
S-29
<PAGE>
PERCENTAGE OF INITIAL AGGREGATE PRINCIPAL AMOUNT OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF ABS(1)
<TABLE>
<CAPTION>
Class B Class C
------------------------------------------ ------------------------------------------
Payment Date 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 0.50% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00%
- ------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage...... 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2000.............. 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2001.............. 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2002.............. 100 100 100 100 100 100 100 100 100 100 100 100 100 100
March 2003.............. 100 100 100 100 100* 0 0 100 100 100 100 100* 92* 0
March 2004.............. 100 100 100 85* 0 0 0 100 100 100 100* 0 0 0
March 2005.............. 100 100 46* 0 0 0 0 100 100 100* 0 0 0 0
March 2006.............. 100 100* 0 0 0 0 0 100 100* 0 0 0 0 0
March 2007.............. 100 0 0 0 0 0 0 100 7* 0 0 0 0 0
March 2008.............. 100 0 0 0 0 0 0 100 0 0 0 0 0 0
March 2009.............. 100 0 0 0 0 0 0 100 0 0 0 0 0 0
March 2010.............. 100* 0 0 0 0 0 0 100* 0 0 0 0 0 0
March 2011.............. 100* 0 0 0 0 0 0 100* 0 0 0 0 0 0
March 2012.............. 25* 0 0 0 0 0 0 100* 0 0 0 0 0 0
March 2013.............. 0 0 0 0 0 0 0 52* 0 0 0 0 0 0
March 2014.............. 0 0 0 0 0 0 0 23* 0 0 0 0 0 0
March 2015.............. 0 0 0 0 0 0 0 1* 0 0 0 0 0 0
March 2016.............. 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(Years)
Without Optional
Redemption............ 12.8 7.3 6.0 5.1 4.4 3.9 3.5 14.3 7.7 6.4 5.4 4.7 4.2 3.7
With Optional
Redemption............ 11.0 6.4 5.4 4.6 3.9 3.5 3.1 11.0 6.4 5.4 4.6 3.9 3.5 3.1
</TABLE>
- -------
(1) The percentages in this table have been rounded to the nearest whole
number.
* Based on the assumption that the Servicer does not exercise its option to
purchase the Receivables as described under "Description of the Notes--
Optional Redemption" herein.
S-30
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, a form of
which has been filed as an exhibit to the Registration Statement. A copy of
the Indenture will be filed with the Commission following the issuance of the
Notes. 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. The
Chase Manhattan Bank, a New York banking corporation, will be the Indenture
Trustee under the Indenture.
PAYMENTS OF INTEREST
The Notes will constitute Fixed Rate Securities, as such term is defined
under "Certain Information Regarding the Securities--Fixed Rate Securities" in
the Prospectus. Interest on the principal balances of the classes of the Notes
will accrue at their respective per annum Interest Rates and will be payable
to the Noteholders monthly on each Monthly Payment Date, commencing April 15,
1999. Interest on the Notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months except that interest on the Class A-1 Notes
will be calculated on the basis of the actual number of days in a year divided
by 360. See "Description of the Transfer and Servicing Agreements--
Distributions" herein.
Interest on the Notes will be payable on each Monthly Payment Date in the
following order of priority: first, to the Class A Noteholders, on a pro rata
basis without preference or priority among the different classes of Class A
Notes, interest accrued for the related Interest Accrual Period on the Class A
Notes at the applicable Interest Rate for each class of Class A Notes, plus
interest due and unpaid from prior Interest Accrual Periods (plus interest on
overdue interest at the applicable Interest Rate to the extent permitted by
law); second, to the Class B Noteholders, on a pro rata basis, interest
accrued for the related Interest Accrual Period on the Class B Notes at the
Interest Rate for the Class B Notes, plus interest due and unpaid from prior
Interest Accrual Periods (plus interest on overdue interest at the Interest
Rate for the Class B Notes to the extent permitted by law); and third, to the
Class C Noteholders, on a pro rata basis, interest accrued for the related
Interest Accrual Period on the Class C Notes at the Interest Rate for the
Class C Notes, plus interest due and unpaid from prior Interest Accrual
Periods (plus interest on overdue interest at the Interest Rate for the Class
C Notes to the extent permitted by law).
PAYMENTS OF PRINCIPAL
Principal payments will be made to the Noteholders on each Monthly Payment
Date in an amount equal to the Noteholders' Monthly Principal Distributable
Amount to the extent of the remaining amounts on deposit in the Note
Distribution Account after giving effect to distributions in respect of
interest on the Notes on such Monthly Payment Date; provided, however, that
the Noteholders' Monthly Principal Distributable Amount will not exceed the
outstanding principal balance of the Notes. See "Description of the Transfer
and Servicing Agreements--Distributions" herein.
S-31
<PAGE>
On each Monthly Payment Date (subject to the allocations described under
"Description of the Notes--Priority of Payments Following an Event of Default
under the Indenture" herein), the Noteholders' Monthly Principal Distributable
Amount will be applied in the following order of priority: (i) 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; (ii) 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; (iii) 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; (iv) 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; (v) 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; (vi) 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; (vii) to the Holders of the
Class B Notes on account of principal until the Outstanding Amount of the
Class B Notes is reduced to zero; and (viii) to the Holders of the Class C
Notes on account of principal until the Outstanding Amount of the Class C
Notes is reduced to zero. The actual date on which the principal amount of any
class of Notes is paid may be earlier than the respective Stated Maturity
Dates based on a variety of factors, including those described under "Weighted
Average Life of the Securities" herein and in the Prospectus.
RECORD DATE
Payments of principal and interest on any Note on a Monthly Payment Date
will be made to the holder in whose name such Note is registered as of the
close of business on the applicable Record Date. The registered holder of any
class of Notes will be referred to herein as a "Holder" or a "Noteholder."
Notwithstanding any reference herein to the Holders or Noteholders of a
particular class of Notes, it is anticipated that the only registered holder
of each class of Notes will be Cede as nominee for DTC. See "Risk Factors--
Risk of Book-Entry Registration" in the Prospectus.
The "Record Date" with respect to any Monthly Payment Date will be the close
of business on the day immediately preceding such Monthly Payment Date or, if
Definitive Notes have been issued pursuant to the Indenture, the last day of
the month immediately preceding such Monthly Payment Date.
PRIORITY OF PAYMENTS FOLLOWING AN EVENT OF DEFAULT UNDER THE INDENTURE
Following an Event of Default under the Indenture and acceleration of the
Notes, the Indenture Trustee will distribute money or property collected
pursuant to the Indenture in the following order of priority on each Monthly
Payment Date: first, to the Indenture Trustee, amounts due as compensation and
indemnities; second, to the Servicer (if DFS is no longer the Servicer), due
and unpaid Servicing Fees (and any other amounts due to it by the Trust);
third, to the Class A Noteholders, on a pro rata basis without preference or
priority among the different classes of Class A Notes, amounts due in respect
of interest; fourth, to the Class B Noteholders, on a pro rata basis, amounts
due in respect of interest; fifth, to the Class C Noteholders, on a pro rata
basis, amounts due in respect of interest; sixth, to the Class A Noteholders,
on a pro rata basis without preference or priority among the different classes
of Class A Notes, amounts due for principal until the Outstanding Amount of
each class of Class A Notes is reduced to zero; seventh, to the Class B
Noteholders, on a pro rata basis, amounts due for principal until the
Outstanding Amount of the Class B Notes is reduced to zero; eighth, to the
Class C Noteholders, on a pro rata basis, amounts due for principal until the
Outstanding Amount of the Class C Notes is reduced to zero; ninth, if DFS is
the Servicer, to DFS in its
S-32
<PAGE>
capacity as Servicer, due and unpaid Servicing Fees (and any other amounts due
to it by the Trust); and tenth, any remaining amounts to the Residual
Interestholder.
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 Trust
(and to the Indenture Trustee if given by Noteholders), and upon any such
declaration the unpaid principal amount of the Notes, together with accrued
and unpaid interest thereon through the date of acceleration, shall become
immediately due and payable. See "Description of the Notes--Events of Default;
Rights Upon Event of Default" in the Prospectus.
OPTIONAL REDEMPTION
The Notes are subject to redemption in whole, but not in part, on any
Monthly Payment Date 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 Monthly Payment Date occurring at any
time after the last day of a Collection Period as of 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 generally 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 50 days' notice to the
Indenture Trustee of its intention to exercise such option. 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. See also "Description of the Transfer and Servicing Agreements--
Termination" in the Prospectus.
DESCRIPTION OF THE RESIDUAL INTEREST
The Trust will not issue any class of Certificates. The undivided beneficial
ownership interest in the Trust (the "Residual Interest") will be retained by
the Depositor (in its capacity as the holder of the Residual Interest, the
"Residual Interestholder") 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 Notes. The description of the Residual Interest in this
Prospectus Supplement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Trust
Agreement. The description of the Residual Interest in this Prospectus
Supplement supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Certificates and the
related Trust Agreement set forth in the Prospectus, to which description
reference is hereby made.
The Residual Interestholder generally will have the rights of the
Certificateholders as set forth in the Prospectus, except that the Residual
Interest will not be certificated, will not have a principal balance and will
not bear interest. For a description of distributions to the Residual Interest
on any Monthly Payment Date, see "Description of the Transfer and Servicing
Agreements--Distributions" herein.
The Residual Interest is not being offered hereby.
S-33
<PAGE>
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Transfer and Servicing
Agreement and the Trust Agreement pertaining to the Trust (collectively, the
"Transfer and Servicing Agreements"). Forms of the Transfer and Servicing
Agreements have been filed as exhibits to the Registration Statement. Copies
of the Transfer and Servicing Agreements will be filed with the Commission
following the issuance of the Notes. 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 DFS to the
Transferor, by the Transferor to the Depositor and by the Depositor to the
Trust 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" for each Monthly Payment Date will equal the product of
(a) one-twelfth, (b) 0.50% and (c) the Pool Balance as of the first day of the
preceding Collection Period. The Servicer will 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 amounts distributed from the Reserve Account
to the Servicer as described under "--Reserve Account" herein. See also
"Description of the Transfer and Servicing Agreements--Servicing Compensation
and Payment of Expenses" in the Prospectus.
DISTRIBUTIONS
On each Monthly Payment Date, the Servicer will instruct the Indenture
Trustee to make the following deposits and distributions from amounts on
deposit in the Collection Account, to the extent of the Total Distribution
Amount, in the following order of priority:
(i) to the Servicer (if DFS is no longer the Servicer), the Servicing Fee
and all unpaid Servicing Fees from prior Collection Periods;
(ii) to the Note Distribution Account, from the Total Distribution Amount
remaining after the application of clause (i), 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' Regular Principal Distributable Amount;
(iv) if DFS is the Servicer, to DFS in its capacity as the Servicer, from
the Total Distribution Amount remaining after the application of clauses
(i) through (iii), the Servicing Fee and all unpaid Servicing Fees from
prior Collection Periods;
(v) to the Reserve Account, from the Total Distribution Amount remaining
after application of clauses (i) through (iv), 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
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<PAGE>
(vi) to the Note Distribution Account, from the Total Distribution Amount
remaining after application of clauses (i) through (v), the Noteholders'
Excess Distributable Amount, if any.
On each Monthly Payment Date, the portion of the Total Distribution Amount,
if any, remaining after the application of clauses (i) through (vi) will be
distributed to the Owner Trustee for distribution by the Owner Trustee to the
Residual Interestholder.
For purposes hereof, the following terms will have the following meanings:
"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 the application of clauses (i)
through (v) above.
"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 or (b) the Servicer has repossessed and liquidated
the related Financed Vehicle, whichever occurs first.
"Liquidation Proceeds" means, with respect to any Defaulted Receivable, the
monies collected in respect thereof, from whatever source, on such 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.
"Noteholders' Distributable Amount" means, with respect to any Monthly
Payment Date, the sum of the Noteholders' Monthly 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 will equal the Targeted Overcollateralization
Amount (after application of payments in reduction of the aggregate principal
amount of the Notes on such Monthly Payment Date).
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Monthly Payment Date, the result of (a) the excess of the Noteholders' Interest
Distributable Amount for the 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 (b) 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 Monthly Payment Date and the Noteholders'
Interest Carryover Shortfall for such Monthly Payment Date.
"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, which outstanding
principal balance will be calculated as of the immediately preceding Monthly
Payment Date (or, in the case of the first Monthly Payment Date, as of the
Closing Date), after giving effect to all payments of principal to the
Noteholders of such class on or prior to such preceding 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
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<PAGE>
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 will equal the Targeted
Overcollateralization Amount after application of payments for such Monthly
Payment Date in reduction of the aggregate principal amount of the Notes;
provided that on and after the Stated Maturity Date for any class or classes of
Notes, the Noteholders' Monthly Principal Distributable Amount will be
calculated as an amount which is not less than the amount required to reduce
the aggregate principal amount of the Notes of such class or classes 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 will equal the
Targeted Overcollateralization Amount after application of payments in
reduction of the aggregate principal amount of the Notes on such Monthly
Payment Date; provided that on and after the Stated Maturity Date for any class
or classes of Notes, the Noteholders' Regular Principal Distributable Amount
will be calulated as an amount which is not less than the amount required to
reduce the aggregate principal amount of the Notes of such class or classes to
zero.
"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 referred to in the
Indenture 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 referred to in the Indenture 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.
"Outstanding Amount" means the aggregate principal amount of all Notes, or
class of Notes, as applicable, Outstanding at the date of determination.
"Overcollateralization Amount" means, with respect to any Monthly Payment
Date, the amount, if any, by which the Pool Balance as of the end of the
related Collection Period exceeds the aggregate Outstanding Amount of the
Notes.
"Principal Balance" means, with respect to a Receivable, as of the close of
business on the last day of a Collection Period, the amount advanced toward the
purchase price of the related Financed Vehicle and any related costs 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.
"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 the
Transfer and Servicing Agreement, by DFS pursuant to the DFS/Ganis Transfer
Agreement, by the Transferor pursuant to the Ganis/Depositor Transfer
Agreement, or by the Depositor pursuant to the Transfer and Servicing
Agreement.
"Realized Loss" means, with respect to any Receivable that becomes a
Defaulted Receivable during any Collection Period, the excess of the Principal
Balance of such Defaulted
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<PAGE>
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.
"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.
"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
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 Receivable 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.
"Simple Interest Method" means the method of allocating a payment with
respect to a Receivable to principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to the product
of the stated APR multiplied by the unpaid principal balance of the Receivable
multiplied by the period of time elapsed (as a fraction of a calendar year)
since the preceding payment of interest was made and the remainder of such
payment is allocable to reduce the principal.
"Targeted Overcollateralization Amount" means, with respect to any Monthly
Payment Date, an amount equal to 1% of the Pool Balance as of the end of the
preceding Collection Period.
"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 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 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 Total Distribution Amount in a prior Collection
Period; (ii) amounts received in respect of interest on the Receivables (which
amounts will 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; (iii) late payments of interest to the extent applied
to reimbursement of Servicer Advances; and (iv) Liquidation Proceeds with
respect to a Receivable attributable to
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<PAGE>
accrued and unpaid interest thereon (but not including interest for the then
current Collection Period) but only to the extent of any unreimbursed Advances.
On each Monthly Payment Date (subject to the matters described under
"Description of the Notes--Priority of Payments Following an Event of Default
under the Indenture"), all amounts on deposit in the Note Distribution Account
will be generally paid in the following order of priority:
(i) the Noteholders' Interest Distributable Amount will be distributed to
Noteholders in the order of priority described under "Description of the
Notes--Payments of Interest" herein;
(ii) the Noteholders' Monthly Principal Distributable Amount will be
distributed to the applicable Noteholders in the order of priority
described under "Description of the Notes--Payments of Principal" herein.
RESERVE ACCOUNT
On the Closing Date the Depositor will deposit (or cause to be deposited)
cash in the amount of $5,000,000 into the Reserve Account from the proceeds of
the issuance of the Notes. Investment earnings on amounts on deposit in the
Reserve Account will be added to the balance of funds on deposit in the Reserve
Account, subject to application of funds on deposit in the Reserve Account as
described herein.
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 on
such Monthly Payment Date, the Servicer will 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.
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 equal to or exceeds the Targeted Overcollateralization Amount,
then the amount of such excess will be paid to the Servicer. On the first
Monthly Payment Date as of which the aggregate Outstanding Amount of the Notes
has been reduced to zero, the amount (if any) on deposit in the Reserve Account
will be paid to the Servicer.
The Reserve Account is 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. 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 could incur losses or a temporary shortfall in the
amounts distributed to the Noteholders could result, which could, in turn,
increase the average life of the Notes.
FEDERAL INCOME TAX CONSEQUENCES
The Trust will be structured as an owner trust. In the opinion of Mayer,
Brown & Platt, special counsel for the Depositor, for federal income tax
purposes, the Notes will be characterized as debt, and the Trust will not be
characterized as a separate entity that is an association (or a publicly traded
partnership) taxable as a corporation. The Notes will not be
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<PAGE>
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 Depositor,
which is based in part on the opinion of Mayer, Brown and Platt, special
counsel to the Depositor 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, New York and Missouri income tax purposes. For
additional information regarding state and local tax consequences, see "State
and Local Tax Consequences" in the Prospectus.
ERISA CONSIDERATIONS
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 certain other retirement
plans or accounts, such as 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; the risk of recharacterization is
enhanced for subordinate classes of Notes. 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." There
can be no assurance that any of these, or any other exemption, will be
available with respect to any particular transaction involving the Notes. 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 of
ERISA or Section 4975 of the Code. A fiduciary of a Benefit Plan
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<PAGE>
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.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
and related terms agreement (collectively, the "Underwriting Agreement"), the
Depositor has agreed to sell to each of the Underwriters named below
(collectively, the "Underwriters"), and each of the Underwriters, for whom
Deutsche Bank Securities Inc. is acting as representative, has severally
agreed to purchase from the Depositor, the principal amount of the Notes set
forth opposite its name below:
<TABLE>
<CAPTION>
Deutsche
Bank Bear, Morgan
Securities Stearns & Stanley & Co.
Inc. Co. Inc. Incorporated
----------- ----------- -------------
<S> <C> <C> <C>
Class A-1 Notes........................... $37,581,000 $37,581,000 $37,581,000
Class A-2 Notes........................... $75,843,000 $75,843,000 $75,843,000
Class A-3 Notes........................... $65,999,333 $65,999,333 $65,999,333
Class A-4 Notes........................... $64,214,000 $64,214,000 $64,214,000
Class A-5 Notes........................... $53,240,667 $53,240,667 $53,240,667
Class A-6 Notes........................... $21,455,333 $21,455,333 $21,455,333
Class B Notes............................. $ 8,333,333 $ 8,333,333 $ 8,333,333
Class C Notes............................. $ 6,666,667 $ 6,666,667 $ 6,666,667
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the Notes
offered hereby if any of the Notes are purchased. In the event of a default by
any Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The underwriting discounts and commissions of the Underwriters, the selling
concessions that the Underwriters may allow to certain dealers and the
discounts that certain dealers may reallow to certain other dealers, each
expressed as a percentage of the principal amount of the Notes, will be as
follows:
<TABLE>
<CAPTION>
Underwriting Selling
Discounts Concessions, Reallowance,
and Not to Not to
Commissions Exceed Exceed
------------ ------------ ------------
<S> <C> <C> <C>
Class A-1 Notes.......................... 0.100% 0.060% 0.042%
Class A-2 Notes.......................... 0.200% 0.120% 0.084%
Class A-3 Notes.......................... 0.250% 0.150% 0.105%
Class A-4 Notes.......................... 0.250% 0.150% 0.105%
Class A-5 Notes.......................... 0.270% 0.162% 0.113%
Class A-6 Notes.......................... 0.350% 0.210% 0.147%
Class B Notes............................ 0.600% 0.360% 0.252%
Class C Notes............................ 0.745% 0.447% 0.313%
</TABLE>
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the Notes. As an exception to these rules, the
Underwriters are permitted to engage in certain transactions that stabilize
the price of the Notes. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Notes.
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<PAGE>
If the Underwriters create a short position in the Notes in connection with
this offering (i.e., they sell more Notes than are set forth on the cover page
of this Prospectus Supplement), the Underwriters may reduce that short position
by purchasing Notes in the open market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase Notes in
the open market to reduce the Underwriters' short position or to stabilize the
price of the Notes, they may reclaim the amount of the selling concession from
any Underwriter or selling group member who sold those Notes as part of the
offering.
In general, purchases 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. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Depositor nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Depositor nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and commercial banking
transactions with the Servicer and its affiliates.
DFS and the Depositor have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.
Upon receipt of a request by an investor who has received an electronic
Prospectus Supplement and Prospectus from an Underwriter or a request by such
investor's representative within the period during which there is an obligation
to deliver a Prospectus Supplement and Prospectus, the Transferor or such
Underwriter will promptly deliver, or cause to be delivered, without charge, a
paper copy of the Prospectus Supplement and Prospectus.
After the initial distribution of the Notes by the Underwriters, the
Prospectus and this Prospectus Supplement may be used by Deutsche Bank
Securities Inc., an affiliate of the Transferor, the Servicer and the
Depositor, in connection with market making transactions in the Notes. Deutsche
Bank Securities Inc. may act as principal or agent in such transaction. Such
transactions will be at prices related to prevailing market prices at the time
of sale.
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 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 certain state income
tax matters will be passed upon for the Depositor by Bryan Cave LLP, St. Louis,
Missouri. Certain legal matters relating to the Notes will be passed upon for
the Underwriters by Brown & Wood LLP, Washington, D.C.
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<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
Accelerated Principal Distribution Amount................................ S-35
APR...................................................................... S-18
BankBoston............................................................... S-24
Benefit Plan............................................................. S-39
Cede..................................................................... S-4
Closing Date............................................................. S-6
Collection Period........................................................ S-6
Commission............................................................... S-4
Cutoff Date.............................................................. S-11
Defaulted Receivable..................................................... S-35
Depositor................................................................ S-5
DFS Receivables.......................................................... S-11
DTC...................................................................... S-4
Excess Spread............................................................ S-9
Exchange Act............................................................. S-4
Holder................................................................... S-32
Indenture Trustee........................................................ S-5
Initial Pool Balance..................................................... S-11
Interest Accrual Period.................................................. S-6
Interest Rate............................................................ S-6
Liquidation Proceeds..................................................... S-35
Monthly Payment Date..................................................... S-6
Noteholder............................................................... S-32
Noteholders' Distributable Amount........................................ S-35
Noteholders' Excess Distributable Amount................................. S-35
Noteholders' Interest Carryover Shortfall................................ S-35
Noteholders' Interest Distributable Amount............................... S-35
Noteholders' Monthly Interest Distributable Amount....................... S-35
Noteholders' Monthly Principal Distributable Amount...................... S-35
Noteholders' Regular Principal Distributable Amount...................... S-36
Notes.................................................................... S-5
Outstanding.............................................................. S-36
Outstanding Amount....................................................... S-36
Overcollateralization Amount............................................. S-36
Owner Trustee............................................................ S-5
Principal Balance........................................................ S-36
PTCE..................................................................... S-39
Purchased Receivable..................................................... S-36
Rating Agency............................................................ S-13
Realized Loss............................................................ S-36
Receivables Pool......................................................... S-18
Record Date.............................................................. S-32
Recoveries............................................................... S-37
Regular Principal Distribution Amount.................................... S-37
Reserve Account.......................................................... S-9
Residual Interest........................................................ S-33
Residual Interestholder.................................................. S-33
Servicer Advance......................................................... S-12
Servicing Fee............................................................ S-34
Simple Interest Method................................................... S-37
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Specified Reserve Account Balance......................................... S-10
Stated Maturity Date...................................................... S-7
Targeted Overcollateralization Amount..................................... S-37
Total Distribution Amount................................................. S-37
Transfer and Servicing Agreements......................................... S-34
Transferor Receivables.................................................... S-11
Trust..................................................................... S-5
Underwriters.............................................................. S-40
Underwriting Agreement.................................................... S-40
</TABLE>
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<PAGE>
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 "Owner 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. In the event
that the Depositor and/or affiliates of the Depositor are the sole holders of
undivided interests in a Trust, such undivided interests may not be
represented by a certificate. 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 or installment loan contracts (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 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, GANIS CREDIT CORPORATION,
DEUTSCHE FINANCIAL SERVICES CORPORATION, DEUTSCHE BANK AG 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.
----------------
March 12, 1999.
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<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.
----------------
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SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in this summary
are defined elsewhere in this Prospectus on the pages indicated in the "Index
of Terms" beginning on page 76.
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/Owner Trustee.. With respect to each series of Securities, the
Trustee or Owner 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 subject to the next
sentence. 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
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<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 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. In the
event that the Depositor and/or affiliates of the
Depositor are the sole holders of undivided
interests in a Trust, such undivided interests
may not be represented by a certificate.
Certificates will be available for purchase in a
minimum denomination of $1,000 and will be
available in book-entry form only subject to the
next sentence. 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".
5
<PAGE>
Except in the case of any Strip Certificates, as
described below, each class of Certificates will
have a stated Certificate Balance specified in
the related Prospectus Supplement (the
"Certificate Balance") and will accrue interest
on such Certificate Balance at a specified rate
(with respect to each class of Certificates, the
"Pass Through Rate"). Each class of Certificates
may have a different Pass Through Rate, which may
be a fixed, variable or adjustable Pass Through
Rate, or any combination of the foregoing. The
related Prospectus Supplement will specify the
Pass Through Rate for each class of Certificates
or the method for determining the Pass Through
Rate.
With respect to a series that includes two or
more classes of Certificates, each class may
differ as to timing and priority of
distributions, seniority, allocations of losses,
Pass Through Rate or amount of distributions in
respect of principal or interest, or
distributions in respect of principal or interest
in respect of any such class or classes may or
may not be made upon the occurrence of specified
events or on the basis of collections from
designated portions of the Receivables Pool.
In addition, a series may include one or more
classes of Certificates ("Strip Certificates")
entitled to (i) distributions in respect of
principal with disproportionate, nominal or no
interest distributions or (ii) interest
distributions with disproportionate, nominal or
no distributions in respect of principal.
If a series of Securities includes classes of
Notes, distributions in respect of the
Certificates may be subordinated in priority of
payment to payments on the Notes to the extent
specified in the related Prospectus Supplement.
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".
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<PAGE>
Trust Property..............
The property of each Trust will include a pool of
retail installment sale contracts or installment
loans (the "Receivables") secured by new or used
recreational vehicles (the "Financed Vehicles",
"Financed Recreational Vehicles" or "Financed
Assets"), collections and other payments with
respect to the Receivables received after the
date specified in the related Prospectus
Supplement (the "Cutoff Date") and monies on
deposit in certain trust accounts. On or prior to
the closing date specified in the related
Prospectus Supplement with respect to a Trust
(the "Closing Date"), 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 Owner 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,
if any, 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
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<PAGE>
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 "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
8
<PAGE>
Trust that has issued Notes, which duties would
in the absence of an Administrator be performed
for the related Trust primarily by the related
Indenture Trustee or by the Depositor.
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 as described under "Description of
the Transfer and Servicing Agreements--Servicer
Advances."
The Servicer will be entitled to receive
compensation for servicing the Receivables of
each Trust as described under "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 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. See "Risk Factors" and "Certain Legal
Aspects of the Receivables."
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")
is of the opinion 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
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<PAGE>
Notes, Tax Counsel is of the 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 is of the
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 at the time of initial sale 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 financed in states where security
interests in recreational vehicles are subject to certificate of title
statutes will not be amended to reflect such transfers and (ii) UCC financing
statements in respect of those Financed Recreational Vehicles financed in
states where security interests in recreational vehicles are perfected by
filing a UCC-1 financing statement will not be amended to reflect such
transfers. In the absence of such procedures, such Trust may not have a
perfected security interest in the Financed Assets in some states.
The Transferor will be obligated to purchase from the Trust any Transferor
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,
provided that such purchase obligation shall apply only in the circumstances
described under "Description of the Transfer and Servicing Agreements--
Transfer of Receivables." Such purchase obligation will not address or remedy
the situation where a perfected security interest in the name of a Trust in
the Financed Asset securing a Receivable has not been perfected as a result of
the absence of the procedures described in the preceding paragraph or for any
other reason. If such Trust does not have a perfected security interest in a
Financed 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.
Possible Payment Delays or Losses Resulting From Certain Liens Having
Priority Over a Perfected Security Interest. To the extent the security
interest of a Trust in a Financed Asset is perfected, such Trust generally
will have a prior claim over subsequent purchasers of such Financed Asset and
holders of subsequently perfected security interests. However, as against
liens for repairs of a Financed Asset or for taxes unpaid by an Obligor under
a Receivable, or through fraud or negligence, such Trust could lose the
priority of its security interest or its security interest in a Financed
Asset. In some jurisdictions, if an Obligor arranges for a dealer to sell a
Financed Recreational Vehicle on consignment and the dealer then sells the
Financed Recreational Vehicle to a third party which is a "buyer in the
ordinary course", the third party will take the Financed Recreational Vehicle
free of the security interest created by the Obligor (even though the security
interest is perfected). 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. None of the Transferor, the
Servicer or the Depositor will have any obligation to purchase a
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<PAGE>
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 "Possible Payment Delays or Losses Resulting From Failure of
the Trust to Have a Protected Security Interest in the Receivables" 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 a 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. 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.
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
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<PAGE>
applicable to Receivables, a Trust could be liable to the obligor, as assignee
of the affected Receivables. See "Certain Legal Aspects of the Receivables--
Consumer Protection Laws." The related Ganis/Depositor 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" or a "transfer" from the Transferor to the Depositor
contemplate either a "sale" or a "capital contribution" from the Transferor to
the Depositor. The Ganis/Depositor Transfer Agreement will set forth whether
such conveyance or transfer is intended to be a "sale" or a "capital
contribution" of such Receivable by the Transferor to the Depositor. The
Depositor intends that the transfer of Receivables by it to a Trust will
constitute either a conveyance of such Receivables or a pledge of such
Receivables.
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 or another affiliate 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 or
with those of such affiliate) 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, the Transferor, 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 transfer may have priority over the interest of
the Transferor, the Depositor or the Trust or the Indenture Trustee 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 Insolvency of the Depositor Related to Certain
Trusts. With respect to each Trust that is not a grantor trust, if the related
Prospectus Supplement so provides, upon the occurrence of an Insolvency Event
of the Depositor, the Indenture Trustee
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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 or with those of another entity 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 or the Transferor would be required to purchase or
to cause an Originator to purchase from the Depositor or the Trust Receivables
with respect to which such representations and warranties have been breached.
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 the Depositor, the Transferor
and/or the Servicer failed for any reason to perform in accordance with their
respective purchase obligations, 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 or Losses Resulting From Subordination of Payments.
To the extent specified in the related Prospectus Supplement, distributions of
interest and principal on one or more classes of Notes or 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 Notes
or Certificates of such series. Investors in any subordinated class or classes
of Notes or Certificates should consider the risk that losses on the
Receivables will be borne by such investors if the 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 or Losses Resulting From Insufficient Payments on
the Receivables. No Trust will have, and no Trust is 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 insurance
premiums) and liquidations due to default, as well as receipts of proceeds
from physical damage, credit life and disability insurance policies). The rate
of prepayments on the Receivables may be influenced by a variety of economic,
social and other factors, including the
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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 (or an Originator) will be obligated to purchase from
the Depositor or the Trust 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
"Weighted Average Life of the 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 Prospectus 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 DFS 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 is satisfied, the Servicer will not be
required to deposit such amounts into the Collection Account of such Trust
until 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 the applicable Distribution Date or Payment
Date. Pending deposit into such Collection Account, collections may be
invested by the Servicer at its own risk and for its own benefit and will not
be segregated from funds of the Servicer. If the Servicer were unable to remit
such funds, such funds will not be available for distribution to the
applicable Securityholders and delays and reductions in payments to
Securityholders could result. In order to satisfy the requirements described
above, the Servicer may (but is not required to) obtain a letter of credit or
other credit enhancement 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.
It is anticipated that the Servicer will satisfy the conditions to making
monthly or less frequent remittances and thus the Servicer will commingle
collections and will not be required to deposit such amounts in the Collection
Account until on or before each Distribution Date or Payment Date.
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 or lower 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. With respect to any Owner Trust
issuing Notes, until the Notes have been paid in full, the ability to cause
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 certain 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. Each class of Securities of a given series
will be initially represented by one or more certificates registered in the
name of Cede & Co. ("Cede"), or any other nominee for the Depository Trust
Company ("DTC") set forth in the related Prospectus Supplement (Cede, or such
other nominee, "DTC's Nominee"), and will not be registered in the names of
the holders of the Securities of such series or their nominees. Because of
this, unless and until Definitive Securities for such series are issued,
holders of such Securities will not be
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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 or
installment loan contracts (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
Cutoff Date. "Obligors" are purchasers or owners of new and used recreational
vehicles ("Financed Vehicles" or "Financed Recreational Vehicles," and the
Receivables with respect thereto, "Receivables" or "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 Transfer and Servicing 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 or other Notes 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 and the proceeds from the repossession and sale of Financed Assets
which secure defaulted Receivables. In such event, certain factors, such as
the applicable Trust's not having perfected security interests in the Financed
Assets in all jurisdictions 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" or common-law 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 under the related Trust Agreement or Pooling and
Servicing Agreement 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 Depositor
will be obligated to appoint a successor trustee. The Depositor 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 is adjudged insolvent. In such circumstances,
the Depositor, 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 or installment loans 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. The installment loans are typically
documented in a combined note and security agreement. 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, 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
the Ganis/Depositor 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 (x)
the aggregate outstanding principal balance of the Receivables that are 31 to
and including 59 days delinquent to (y) 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 periodic 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 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 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 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.
Additional information with respect to each Receivables Pool will be set
forth in the related Prospectus Supplement.
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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 the applicable Trust.
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."
LOSSES AND DELINQUENCIES
Certain information concerning the loss and delinquency experience of DFS
and the Trasnferor with respect to recreational vehicle receivables will be
set forth in each Prospectus Supplement. There can be no assurance that the
loss and delinquency 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.)
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 the Receivables generally provide 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 or the
Transferor (or an Originator, if applicable) will be obligated to purchase
Receivables from the Depositor or a Trust 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
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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 aggregate Principal Balance of the Receivables as of the
close of business on the last day of a given Collection Period (excluding
Purchased Receivables and Defaulted Receivables) (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, or (ii) 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. See "Description of the Transfer and Servicing Agreements--
Transfer of 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. 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 or refinancing 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-by-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. 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
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. 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, as of 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 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 75 to 90 days following
repossession. The benchmark for recovery values is 85% 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.
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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.
Each class of Notes will initially be represented by one or more Notes, in
each case registered in the name of the nominee of DTC (together with any
successor depository selected by the Trust, the "Depository") except as set
forth below. The Notes will be available for purchase in denominations of
$1,000, and integral multiples thereof, in book-entry form only. The Depositor
has been informed by DTC that DTC's nominee will be Cede & Co. ("Cede").
Accordingly, Cede 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 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
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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 not less than a majority in principal amount 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 date of payment 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 the 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 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 (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.
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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 adversely affect in any
material respect 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 time specified in the related
Indenture (which may be as long as 60 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 a period of time
specified in the related Indenture (which may be as long as 60 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; (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 not less than
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 Notes had not been declared due and payable, and such
Indenture Trustee obtains the consent of the holders of at least 66 2/3% of
the aggregate outstanding principal amount of such Notes.
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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 acquiesce,
petition or otherwise invoke or cause (or join with any other person in
acquiescing, petitioning or otherwise invoking or causing) the Depositor or the
related Trust to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Depositor or the
related 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 Depositor or the related Trust
or any substantial part of the property of the Depositor or the related Trust,
or ordering the winding up or liquidation of the affairs of the Depositor or
related Trust.
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) except as contemplated by
the related Indenture 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 titled "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. If required by the Trust Indenture Act of
1939, 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 of
all such Notes to the related Indenture Trustee for cancellation 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 may 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.
In the event that the Depositor and/or affiliates of the Depositor are the
sole holders of undivided interests in a Trust, such undivided interests may
not be represented by a certificate.
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. Unless and until Definitive Certificates are
issued under the limited circumstances described herein or in the related
Prospectus Supplement, no Certificateholder (other than the Depositor) will be
entitled to receive a physical certificate representing a Certificate. All
references herein and in the related Prospectus Supplement to actions by
Certificateholders refer to actions taken by DTC upon instructions from the
Participants and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to
Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the case may be, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities" herein. Any
Certificates of a given series owned by the Depositor will be entitled to
equal and proportionate benefits under the applicable Trust Agreement or
Pooling and Servicing Agreement, except that such Certificates will be deemed
not to be outstanding for the purpose of determining whether the requisite
percentage of Certificateholders have given any request, demand,
authorization, direction, notice, consent or have taken other action under the
Related Documents.
PRINCIPAL AND INTEREST ON THE CERTIFICATES
The timing and priority of distributions, seniority, any 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.
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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 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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Cedelbank ("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.
DTC management is aware that some computer applications, systems, and
processing data ("Systems") that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other members of the
financial community (the "Industry") that it has developed and is implementing
a program so that its Systems, as the same relate to the timely payment of
distributions (including principal and income payments) to securityholders,
book-entry deliveries, and settlement of trades within DTC, continue to
function appropriately. This program includes a technical assessment and a
remediation plan.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service
providers, among others. DTC has informed the Industry that it is contacting
(and will continue to contact) third party vendors from whom DTC acquires
services to: (i) impress upon them the importance of such services being Year
2000 compliant; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, DTC
is in the process of developing such contingency plans as it deems
appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended
to serve as a representation, warranty, or contract modification of any kind.
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DEFINITIVE SECURITIES
The Notes, if any, and the Certificates, if any, 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 Depositor, determines that
DTC is no longer willing or able to discharge properly its responsibilities as
the Depositor with respect to such Securities and such Applicable Trustee is
unable to locate a qualified successor, (ii) the Depositor, 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 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 typewritten Notes or
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 Trust or 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 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, a holder of a Certificate
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.
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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 transfer agreement (the "Ganis/Depositor 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").
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The Depositor will acquire Receivables from the Transferor pursuant to a
Ganis/Depositor Transfer Agreement, and the Transferor may acquire Receivables
from DFS pursuant to a transfer agreement (the "DFS/Ganis Transfer Agreement").
In each Ganis/Depositor Transfer Agreement the Transferor will represent and
warrant, among other things, that: (i) the information provided in the related
Schedule of Receivables with respect to Receivables originated by the
Transferor or acquired by the Transferor from Dealers ("Transferor
Receivables") is correct in all material respects; (ii) the Obligor on each
Transferor Receivable is required to maintain physical loss and damage
insurance covering the related Financed Asset; (iii) immediately prior to the
conveyance of the Receivables by the Transferor to the Depositor, the
Transferor had good and indefeasible title to the Receivables, free and clear
of all security interests, liens, charges and encumbrances (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) and, to the
knowledge of the Transferor, no offsets, defenses or counterclaims have been
asserted or threatened with respect to the Transferor Receivables; (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 related Financed Asset; and (v) to the
knowledge of the Transferor, each Transferor 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 DFS will make similar
representations and warranties in any DFS/Ganis Transfer Agreement, if
applicable, with respect to Receivables originated or acquired by DFS. In the
Transfer and Servicing Agreement, the Depositor will represent and warrant as
of the Closing Date that (i) no Receivable has been sold, transferred, assigned
or pledged by the Depositor other than to the related Trust; (ii) immediately
prior to the transfer and assignment by the Depositor to the related Trust, the
Depositor had good and marketable title to each Receivable, free and clear of
all liens (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) and, immediately upon the transfer thereof, the related Trust
will have good and marketable title to each Receivable, free and clear of all
such liens (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) and such transfer has been perfected under the UCC; and (iii)
all filings (including UCC filings) necessary in any jurisdiction to give the
related Trust a first perfected ownership interest in the Receivables and the
Indenture Trustee a first perfected security interest in the Receivables have
been made.
Upon discovery by the Depositor, the Servicer, the Trustee or the Indenture
Trustee of a breach of any of such representations and warranties of the
Depositor set forth in the Transfer and Servicing Agreement, of the Transferor
set forth in the Ganis/Depositor Transfer Agreement or of DFS set forth in the
DFS/Ganis Transfer Agreement, in each case which materially and adversely
affects the value of the Receivables or the interest therein of the related
Trust or the Indenture Trustee (or which materially and adversely affects the
interest of the related Trust or the Indenture Trustee in the related
Receivable in the case of a representation and warranty relating to a
particular Receivable), the person discovering such breach shall give prompt
written notice to the other parties thereto. On the last day of the Collection
Period following the Collection Period during which the Depositor discovers or
receives notice of such a breach, 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 related Trust as of such last
day at a price equal to the unpaid principal balance owed by the Obligor
thereon plus interest thereon at the respective APR to such last day (the
"Purchase Amount"). The purchase obligations described
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above constitute the sole remedy available to the Trust, DFS, Ganis, the
Depositor, the Certificateholders or the Trustee and any Noteholders or
Indenture Trustee for any such uncured breach. The obligation of the Depositor
to purchase any Receivable that arises 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 Transfer Agreement, as the case may
be, is subject to the payment of the Purchase Amount by DFS or the Transferor.
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 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 Indenture Trustee will establish and maintain 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 applicable
Trustee will establish and maintain an account, in the name of the related
Trustee on behalf of such Certificateholders, into which amounts released from
the Collection Account and any Pre-Funding Account, Reserve Account or other
credit or cash flow enhancement for distribution to such Certificateholders
will be deposited and from which all distributions to such Certificateholders
will be made (the "Certificate Distribution Account"). With respect to each
Trust that does not issue Notes, the Servicer will also establish and maintain
the Collection Account and any other Trust Account in the name of the related
Trustee on behalf of the related Certificateholders.
Any other accounts to be established with respect to a Trust, including any
Pre-Funding Account or any Reserve Account, will be described in the related
Prospectus Supplement.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account and any Pre-Funding Account, Reserve Account and other
accounts identified as such in the related Prospectus Supplement (collectively,
the "Trust Accounts") will be invested as provided in the related Transfer and
Servicing Agreement or Pooling and Servicing Agreement in Eligible Investments.
"Eligible Investments" are generally limited to investments acceptable to the
Rating Agencies rating such Securities as being consistent with the rating of
such Securities and may include recreational vehicle retail sale contracts or
installment loans. Except as described below or in the related Prospectus
Supplement, Eligible Investments are limited to obligations or securities that
mature on or before the date of the next distribution for such series. However,
to the extent permitted by the Rating Agencies, funds in any Reserve Account or
the Collection
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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
or the Collection Account at any time may be less than the balance of the
Reserve Account or the Collection Account. If the amount required to be
withdrawn from any Reserve Account or the Collection 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 or the Collection 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 receivables that it services for itself or others. 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 (except that DFS, as Servicer, may, for administrative
purposes, modify the due date of a Receivable to a different date in the same
month) or the amount of the scheduled payments. If the Servicer extends 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) or takes certain other actions, the Servicer may be
obligated to purchase the related 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 which (other than the Transferor) shall have been 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.
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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) DFS 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 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. In order to satisfy the requirements described above, the Servicer may
(but is not required to) 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 purchased by the Servicer.
SERVICER ADVANCES
On or before 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 pay 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 Defaulted Receivable (as such term is defined in the related
Prospectus Supplement), certain 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 withdrawn
from the Collection Account and paid to the Servicer in reimbursement of
outstanding Servicer Advances. No advances will be made by the Servicer in
respect of principal of the Receivables or in respect of Defaulted
Receivables. The reimbursement of Servicer Advances will be made out of
available funds prior to the deposit of funds in the Collection Account.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
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 be entitled to retain any late fees, prepayment
charges and other administrative fees or similar charges provided for under
the Receivables or 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 customary servicing procedures that it follows with respect to all
comparable recreational vehicle receivables that it services for itself or
others.
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The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of recreational vehicle receivables as an agent for
their beneficial owner, including collecting and posting all payments,
responding to inquiries of Obligors on the Receivables, investigating
delinquencies, sending payment coupons to Obligors and reporting tax
information to Obligors. 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.
The Servicer will be entitled to receive additional compensation from
amounts on deposit in a Reserve Account or other account relating to the
applicable Trust, or from other funds (including collections on the related
Receivables) relating to such Trust.
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 or before 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 or Notes of such series may be subordinate to payments
in respect of Notes, if any, of such series or other classes of Certificates
or Notes 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 li quidity facilities, surety
bonds, insurance policies, guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase obligations, yield supplement
agreements, other agreements with respect to third party payments or other
support, cash deposits or such other arrangements as may be described in the
related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, credit or
cash flow enhancement for a class of Securities may cover one or more other
classes of Securities of the same series, and credit or cash flow enhancement
for a series of Securities may cover one or more other series of Securities.
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The presence of a Reserve Account and other forms of credit enhancement for
the benefit of any class or series of Securities is intended to enhance the
likelihood of receipt by the Securityholders of such class or series of the
full amount of principal and interest due thereon and to decrease the
likelihood that such Securityholders will experience losses. The credit
enhancement for a class or series of Securities may not provide protection
against all risks of loss and may not guarantee repayment of the entire
principal balance and interest thereon. 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 Servicer 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 in the name of 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. If so provided 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
an amount specified in the related Prospectus Supplement by the deposit
therein of certain collections on the related Receivables. 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
payments daily (see "--Collections" above), the Servicer will be permitted to
make the deposit of collections, aggregate Servicer Advances and Purchase
Amounts for any Trust for or with respect to the related Collection Period net
of distributions to be made to the Servicer for such Trust with respect to
such Collection Period. The Servicer, however, will account to the Trustee,
any Indenture Trustee, the Noteholders, if any, and the Certificateholders
with respect to each Trust as if all deposits, distributions and transfers
were made individually. With respect to any Trust that issues both
Certificates and Notes, if the related Payment Dates do not coincide with
Distribution Dates, all distributions, deposits or other remittances made on a
Payment Date will be treated as having been distributed, deposited or remitted
on the Distribution Date for the applicable Collection Period for purposes of
determining other amounts required to be distributed, deposited or otherwise
remitted on such Distribution Date.
STATEMENTS TO TRUSTEES AND TRUST
Prior to each Distribution Date or Payment Date with respect to each series
of Securities, the Servicer will provide to each Applicable Trustee as of the
close of business on the last day of the preceding Collection Period a
statement setting forth substantially the same information as is required to
be provided in the periodic reports provided to Securityholders of such series
described under "Certain Information Regarding the Securities--Reports to
Securityholders".
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EVIDENCE AS TO COMPLIANCE
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will provide that a firm of independent public accountants will furnish to the
related Trust and Indenture Trustee or Trustee, as applicable, annually a
statement as to compliance by the Servicer during the preceding calendar year
(or, in the case of the first such certificate, from the applicable Closing
Date through the end of the preceding calendar year) with certain standards
relating to the servicing of the applicable Receivables.
Each Transfer and Servicing Agreement and Pooling and Servicing Agreement
will also provide for annual delivery to the related Indenture Trustee or
Trustee, as applicable, of a certificate signed by an officer of the Servicer
stating that to the best of such officer's knowledge the Servicer has fulfilled
its obligations under the Transfer and Servicing Agreement or Pooling and
Servicing Agreement, as applicable, throughout the preceding calendar year (or,
in the case of the first such certificate, from the Closing Date through the
end of the preceding calendar year) or, if there has been a default in the
fulfillment of any such obligation, describing each such default known to such
officer. 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
properties and assets of the Servicer substantially as a whole, which entity in
each of the foregoing cases assumes the obligations of the Servicer, will be
the successor of the Servicer under such Transfer and Servicing Agreement or
Pooling and Servicing Agreement.
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SERVICER DEFAULT
"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 or other
Basic Document, 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, 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 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.
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
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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.
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 the Noteholders of such Series) 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 default in making any required
deposits to or payments from any of the Trust Accounts 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 related
Trust, the Depositor and the Servicer, with the consent of the related
Indenture Trustee but, 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, adversely affect in any material respect 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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NON PETITION
The related Trust Agreement will provide that the Trustee and the
Certificateholders will not at any time acquiesce, petition or otherwise invoke
or cause (or join with any other person in acquiescing, petitioning or
otherwise invoking or causing) the Depositor or the Trust to invoke the process
of any court or government authority for the purpose of commencing or
sustaining a case against the Depositor or 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
Depositor or the Trust or any substantial part of the property of the Depositor
or the Trust, or ordering the winding up or liquidation of the affairs of the
Depositor or the Trust.
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. The Servicer will not be permitted to exercise such option unless the
resulting distribution to the Noteholders and Certificateholders would be
sufficient to pay the sum of the outstanding principal amount of the Securities
plus the accrued but unpaid 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.
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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 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 the 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
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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.
Because the Servicer will continue to service the Receivables, 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 the Ganis/Depositor Transfer Agreement, the Transferor will
transfer to the Depositor its interests in the Financed Recreational Vehicles
securing the Recreational Vehicle Receivables transferred by the 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 the Ganis/Depositor 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
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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 may create an obligation of the Depositor to purchase the
related Receivable from the Trust or of the Transferor to purchase the related
Receivable from the Depositor or the Trust in the circumstances described
under "Description of the Transfer and Servicing Agreements--Transfer of
Receivables." See also "Risk Factors--Possible Payment Delays and Losses
Resulting From Failure of the Trust to Have a Perfected Security Interest in
Certain Financed Assets." Notwithstanding the foregoing, in some
jurisdictions, if an Obligor arranges for a dealer to sell a Financed
Recreational Vehicle on consignment and the dealer then sells the Financed
Recreational Vehicle to a third party which is a "buyer in the ordinary
course", the third party will take the Financed Recreational Vehicle free of
the security interest created by the Obligor (even though the security
interest is perfected).
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 steps to maintain perfection of security
interests created by the Receivables in the Financed Recreational Vehicles and
is obligated to purchase the related Receivable if it fails to do so and such
uncured failure materially and adversely affects such Receivables.
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 the Ganis/Depositor 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, mechanic's liens, and other liens that arise by operation of law)
upon such Financed Recreational Vehicle. However, liens for repairs or
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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
Ganis/Depositor 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.
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CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z,
the Soldiers' and Sailors' Civil Relief Act of 1940, state adoptions of the
National Consumer Act and of the Uniform Consumer Credit Code, and retail
installment sales acts, lending acts and other similar laws. Also, state laws
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply with their provisions. In some cases, this liability could
affect a transferee's ability to enforce consumer finance contracts such as the
Receivables.
The Fair Debt Collection Practices Act contains provisions that restrict
where a legal action against a consumer may be filed. In the case of personal
property, this is where the consumer resides or where the applicable contract
was signed. When the consumer keeps the personal property collateral outside
the court jurisdiction where the consumer resides or where the applicable
contract was signed, the 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 Ganis/Depositor Transfer
Agreement and would create an obligation of the Transferor to purchase or to
cause an Originator to purchase the Receivable in the circumstances described
under "Description of the Transfer and Servicing Agreements--Transfer of
Receivables."
Courts have applied general equitable principles to secured parties pursuing
repossession and litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
In certain cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by
the creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
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Under the Ganis/Depositor Transfer Agreement, the Transferor will warrant
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 create an obligation of
the Transferor to purchase or (if applicable) to cause an Originator to
purchase the Receivable in the circumstances described under "Description of
the Transfer and Servicing Agreements--Transfer of Receivables." See also "Risk
Factors--Possible Payment Delays and Losses Resulting From Lack of
Enforceability of Receivables."
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
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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 is of the opinion 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 is of the 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 is of the opinion 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 THAT ARE STRUCTURED AS OWNER TRUSTS
Tax Classification of the Trust
If the Prospectus Supplement specifies that the related Trust will be
structured as an Owner Trust, Tax Counsel is of the opinion 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.
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 such 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.
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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.
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.
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In October, 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).
Under the Withholding Tax Regulations, a foreign person would generally be
required to submit Form W-8BEN in lieu of Form 1001 or IRS Form W-8ECI in lieu
of IRS Form 4224, although alternative documentation may be applicable in
certain situations. The Withholding Tax Regulations generally are effective
for payments of interest due after December 31, 1999, but IRS Forms 4224 and
1001 filed prior to that date will continue to be effective until the earlier
of December 31, 2000 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. The Depositor, the Servicer and the Trustee, and the
Certificateholders by their purchase of Certificates, will agree to treat the
Trust as either (i) a disregarded entity if there is only one
Certificateholder, or if there are no Certificates and the undivided interest
in the Trust is held by a single holder for purposes of federal and state
income tax, franchise tax and any other tax measured in whole or in part by
income, or (ii), if there is more than one Certificateholder, 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
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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 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.
The following discussion assumes that the Certificates represent equity
interests in a partnership.
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
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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 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.
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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, 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
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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 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
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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,
1999. 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. If the Prospectus
Supplement specifies that the related Trust will be treated as a grantor
trust, Tax Counsel is of the opinion that such 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 (such
Trust may be referred to herein as the "Grantor Trust"). Owners of
Certificates issued by such Grantor Trust (referred to herein as "Grantor
Trust Certificateholders") will be treated for federal income tax purposes as
owners of a portion of the Grantor Trust's assets as described below. The
Certificates issued by the Grantor 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 Grantor 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 Grantor 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 Grantor 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 Grantor 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
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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 Grantor
Trust 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.
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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.
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
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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,
1999. 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.
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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
"financial 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. 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 or local 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
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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 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.
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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.
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 but may be subject to state or
other laws that are substantially similar to ERISA or the Code.
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, the Code and other
applicable law 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
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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 IBCA, Inc. (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.
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.
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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.
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.
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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 Depositor by Mayer, Brown & Platt, Chicago, Illinois and
Bryan Cave LLP, St. Louis, Missouri. Certain federal income tax matters will
be passed upon for each Trust by Mayer, Brown & Platt. Certain legal matters
and certain state income tax matters will be passed upon for each Trust by
Bryan Cave LLP.
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INDEX OF TERMS
<TABLE>
<S> <C>
accounts.................................................................... 44
accredited investor......................................................... 73
Act......................................................................... 70
Administration Agreement.................................................... 53
Administration Fee.......................................................... 53
Administrator............................................................... 53
Applicable Trustee.......................................................... 37
Base Rate................................................................... 36
Benefit Plan................................................................ 72
capital asset............................................................... 69
Cede........................................................................ 18
Cedel....................................................................... 38
Cedel Participants.......................................................... 38
Certificate Balance......................................................... 6
Certificate Distribution Account............................................ 44
Certificate Pool Factor..................................................... 24
Certificateholder........................................................... 37
Certificateholders.......................................................... 19
Certificates................................................................ 1
chattel paper............................................................... 53
clearing corporation........................................................ 36
Closing Date................................................................ 7
Code........................................................................ 58
Collection Account.......................................................... 44
Collection Period........................................................... 46
Commission.................................................................. 3
Cooperative................................................................. 38
Cutoff Date................................................................. 7
Dealer Agreements........................................................... 20
Dealers..................................................................... 20
Definitive Certificates..................................................... 40
Definitive Notes............................................................ 40
Definitive Securities....................................................... 40
Depositaries................................................................ 36
Depositor................................................................... 1
Depository.................................................................. 29
Distribution Date........................................................... 35
DFS/Ganis Transfer Agreement................................................ 43
DTC......................................................................... 18
DTC's Nominee............................................................... 18
Eligible Deposit Account.................................................... 45
Eligible Institution........................................................ 45
Eligible Investments........................................................ 44
equity interest............................................................. 72
ERISA....................................................................... 10
Euroclear................................................................... 38
Euroclear Operator.......................................................... 38
Euroclear Participants...................................................... 38
Events of Default........................................................... 31
Exchange Act................................................................ 3
</TABLE>
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<TABLE>
<S> <C>
Exemption................................................................... 72
FASIT....................................................................... 70
Final Scheduled Maturity Date............................................... 7
Financed Assets............................................................. 7
Financed Recreational Vehicles.............................................. 7
Fixed Rate Securities....................................................... 35
Floating Rate Securities.................................................... 36
foreign person.............................................................. 60
FTC Rule.................................................................... 57
Ganis....................................................................... 4
Ganis/Depositor Transfer Agreement.......................................... 42
Grantor Trust............................................................... 66
Grantor Trust Certificateholders............................................ 66
Grantor Trust Certificates.................................................. 66
Holder-in-Due-Course........................................................ 57
Indenture................................................................... 4
Indenture Trustee........................................................... 1
Indirect Participants....................................................... 36
Initial Pool Balance........................................................ 6
Initial Receivables......................................................... 7
Insolvency Event............................................................ 50
Interest Rate............................................................... 5
Investment Earnings......................................................... 45
IRS......................................................................... 58
Issuer...................................................................... 4
market discount............................................................. 67
new partnership............................................................. 63
Note Distribution Account................................................... 44
Note Pool Factor............................................................ 24
Noteholder.................................................................. 37
Noteholders................................................................. 19
Notes....................................................................... 1
Obligors.................................................................... 20
OID......................................................................... 59
OID regulations............................................................. 59
old partnership............................................................. 63
Owner Trustee............................................................... 1
Participants................................................................ 36
parties in interest......................................................... 72
Pass Through Rate........................................................... 6
Payment Date................................................................ 30
Plan Assets Regulation...................................................... 72
Pool Balance................................................................ 24
Pooling and Servicing Agreement............................................. 4
portfolio interest.......................................................... 60
Pre-Funded Amount........................................................... 7
Pre-Funding Account......................................................... 1
prepayments................................................................. 23
prohibited transaction...................................................... 72
Prospectus Supplement....................................................... 1
Purchase Amount............................................................. 43
Rating Agency............................................................... 73
</TABLE>
77
<PAGE>
<TABLE>
<S> <C>
Receivables................................................................. 1
Receivables Pool............................................................ 20
Recreational Vehicle Receivables............................................ 20
Registration Statement...................................................... 3
Related Documents........................................................... 33
Restricted Group............................................................ 74
Rules....................................................................... 37
Schedule of Receivables..................................................... 42
Section 1286 Treasury Regulations........................................... 67
Securities.................................................................. 1
Securities Act.............................................................. 3
Securityholder.............................................................. 37
Securityholders............................................................. 19
Senior Certificates......................................................... 72
Servicer.................................................................... 1
Servicer Advance............................................................ 9
Servicer Default............................................................ 50
Servicing Fee............................................................... 46
Servicing Fee Rate.......................................................... 46
Simple Interest Receivables................................................. 22
Strip Certificates.......................................................... 6
Strip Notes................................................................. 5
Subsequent Receivables...................................................... 1
Subsequent Transfer Date.................................................... 42
Terms and Conditions........................................................ 38
Transfer and Servicing Agreement............................................ 7
Transferor.................................................................. 25
Trust....................................................................... 1
Trust Accounts.............................................................. 44
Trust Agreement............................................................. 4
Trustee..................................................................... 1
U.S. Person................................................................. 82
UCC......................................................................... 9
</TABLE>
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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.
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.
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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 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
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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.
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).
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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.
In particular, this summary does not deal with changes to the foregoing forms
relating to withholding tax regulations adopted in October, 1997. Those
regulations are effective generally for payments of interest due after
December 31, 1999, but forms filed prior to that date will generally continue
to be effective until the earlier of December 31, 2000 or the current
expiration date for those forms. Investors are advised to consult their own
tax advisors for specific tax advice concerning their holding and disposing of
the Global Securities and requirements under the new withholding tax
regulations.
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$1,000,000,000
Distribution Financial Services RV Trust 1999-1
DEUTSCHE RECREATIONAL ASSET FUNDING CORPORATION
Depositor
DEUTSCHE FINANCIAL SERVICES CORPORATION
Servicer
$112,743,000 4.97% Asset Backed Notes, Class A-1
$227,529,000 5.38% Asset Backed Notes, Class A-2
$197,998,000 5.70% Asset Backed Notes, Class A-3
$192,642,000 5.84% Asset Backed Notes, Class A-4
$159,722,000 5.97% Asset Backed Notes, Class A-5
$ 64,366,000 6.02% Asset Backed Notes, Class A-6
$ 25,000,000 6.36% Asset Backed Notes, Class B
$ 20,000,000 7.23% Asset Backed Notes, Class C
----------------
PROSPECTUS SUPPLEMENT
----------------
Deutsche Bank Securities
Bear, Stearns & Co. Inc.
Morgan Stanley Dean Witter
We are not offering the Notes in any state where the offer is not permitted.
Until June 10, 1999, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
