<PAGE>
As filed with the Securities and Exchange Commission on July 15, 1999
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
Bombardier Capital CF II Inc.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Delaware P.O. Box 200 59-3586233
(State or other jurisdiction 1600 Mountain View Drive (I.R.S. Employer
of incorporation or organization) Colchester, Vermont 05446 Identification Number)
(802) 655-2607
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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GEORGE W. CALVER
P.O. Box 200
1600 Mountain View Drive
Colchester, Vermont 05446
(802) 655-2607
(Name and address, including zip code, and telephone
number, including area code, of agent for service)
--------------------
Copies to:
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STEVEN J. MOLITOR, ESQ. SIEGFRIED KNOPF, ESQ.
Morgan, Lewis & Bockius LLP Brown & Wood LLP
101 Park Avenue One World Trade Center
New York, New York 10178 New York, New York 10048
212-309-6183 212-839-5334
</TABLE>
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
--------------------
CALCULATION OF REGISTRATION FEE
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====================================================================================================================================
Proposed Proposed
Title of Each Maximum Maximum Amount of
Class of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Share* Price* Fee
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Asset Backed Certificates..... $1,000,000 100% $1,000,000 $278
====================================================================================================================================
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(*) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act of 1933.
We hereby amend this Registration Statement on such date or dates as may be
necessary to delay its effective date until we shall file a further amendment
which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933,
as amended, or until this Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
Information contained in this prospectus supplement and the accompanying
prospectus is not complete and may be changed. A registration statement relating
to these securities has been filed with the SEC but has not yet been declared
effective by the SEC. We may not sell these securities until the final
prospectus supplement and prospectus are delivered. This prospectus supplement
and the accompanying prospectus do not constitute an offer to sell these
securities in any state where it is not permitted.
PRELIMINARY PROSPECTUS SUPPLEMENT DATED __________ __, 1999
SUBJECT TO COMPLETION
PROSPECTUS SUPPLEMENT [LOGO]
(To Prospectus dated ________ __, 199_)
$__________________
BCI CONSUMER RECEIVABLE TRUST 1999-__
$________________ ____% ASSET BACKED CERTIFICATES, CLASS A-1
$________________ FLOATING RATE ASSET BACKED CERTIFICATES, CLASS A-2
BOMBARDIER CAPITAL CF II INC.
DEPOSITOR
BOMBARDIER CAPITAL INC.
SELLER AND SERVICER
- ------------------------------------------
INVESTING IN THESE CERTIFICATES INVOLVES
RISKS. YOU SHOULD NOT PURCHASE THESE
CERTIFICATES UNLESS YOU FULLY UNDERSTAND
THEIR RISKS AND STRUCTURE. SEE "RISK
FACTORS" BEGINNING ON PAGE S-__ OF THIS
PROSPECTUS SUPPLEMENT.
The certificates will be obligations of
the Trust only. Neither the certificates
nor the assets of the Trust will be
obligations of Bombardier Capital CF Inc.,
Bombardier Capital Inc. or any of their
respective affiliates.
- ------------------------------------------
GENERAL:
Bombardier Consumer Receivable Trust 1999-___ will issue the above Class A
Certificates. The trust's main source of funds for making payments on the
Class A Certificates will be collections on the pool of receivables owned by
the trust and a bond insurance policy. The receivables consist of retail
installment sales contracts and promissory notes for the purchase of a variety
of consumer products and equipment.
Interest and principal will be payable on the __th of each month. The first
payment will be due ___________, 1999.
Principal will be paid on the Class A Certificates pro rata.
CREDIT ENHANCEMENT:
The Class A Certificates will be entitled to the benefit of an irrevocable
financial guaranty insurance policy to be issued by ____________ which will
unconditionally and irrevocably guarantee certain payments on the Class A
Certificates.
[Insurer Logo]
[A reserve account will be funded with an initial balance of $_________.]
[The Class A Certificates will be overcollateralized since the principal
balance on ________, 199_ of the receivables owned by the trust ($_____) will
exceed the initial principal balance of the Class A Certificates by
$________.]
OFFERING INFORMATION:
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PROCEEDS TO
PRICE TO UNDERWRITING THE DEPOSITOR
PUBLIC DISCOUNT BEFORE EXPENSES
------ -------- ---------------
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Per Class A-1 Certificate.......... ____________% ____________% ____________%
Per Class A-2 Certificate.......... ____________% ____________% ____________%
Total.......................... $ $ $
============ ============ ============
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The underwriters' offer of the certificates is subject to certain
conditions which are discussed in the "Underwriting" section of this prospectus
supplement. We expect that delivery of the Class A Certificates will be made in
book-entry form only through the facilities of The Depository Trust Company and
Cedel Bank, societe anonyme and the Euroclear System on or about _____________.
<PAGE>
Neither the SEC nor any state securities commission has approved or
disapproved the Class A Certificates or determined that this prospectus
supplement and prospectus are accurate or complete. Any representation to the
contrary is a criminal offense.
---------------------------
MERRILL LYNCH & CO.
---------------------------
The date of this Prospectus Supplement is ___________ ___, 199_.
S-2
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TABLE OF CONTENTS
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Caption Page
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IMPORTANT NOTICE..................................S-4
SUMMARY...........................................S-5
RISK FACTORS......................................S-8
The Servicer's Limited Delinquency, Loss and
Repossession Experience .......................S-8
Geographic Concentration of Receivables...........S-8
Limited Assets of the Trust.......................S-8
Maturity and Prepayment Considerations............S-8
The Class A Certificates May Lack Liquidity.......S-9
The Lack of Physical Class A Certificates May
Cause Delays in Payment and Difficulties
in Pledging....................................S-9
Ratings...........................................S-9
Certain Legal Aspects Relating to the Ownership
and Enforceability of Receivables .............S-9
Risks to Investors upon an Insolvency of
the Seller....................................S-10
Year 2000 Readiness Disclosure: You Could be
Adversely Affected in Absence of Year
2000 Compliance...............................S-10
The Trust........................................S-11
General..........................................S-11
Capitalization of the Trust......................S-12
The Trustee......................................S-12
The Trust Property...............................S-12
The Receivables Pool.............................S-13
General..........................................S-13
Certain Other Characteristics....................S-13
CHARACTERISTICS OF THE RECEIVABLES...............S-13
Bombardier Capital Inc...........................S-18
Delinquency, Loss and Repossession Information...S-18
Delinquency Experience...........................S-18
Weighted Average Life of the Certificates........S-20
Description of the Class A Certificates..........S-22
General..........................................S-22
Distributions....................................S-23
Interest.........................................S-23
Principal........................................S-24
Reserve Account..................................S-25
Optional Redemption..............................S-26
Description of the Trust Documents...............S-26
Accounts.........................................S-26
Distributions....................................S-26
Statements to Securityholders....................S-27
Administrator....................................S-28
The Bond Insurance Policy........................S-28
The Insurer......................................S-30
Rights of the Insurer............................S-32
CERTAIN FEDERAL AND STATE INCOME
TAX CONSEQUENCES..............................S-32
ERISA Considerations.............................S-33
Underwriting.....................................S-34
Legal Matters....................................S-35
INDEX OF DEFINED TERMS IN PROSPECTUS
SUPPLEMENT....................................S-36
</TABLE>
S-3
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered securities is contained in (a) the
accompanying prospectus, which provides general information, some of which may
not apply to the offered securities; and (b) this prospectus supplement, which
describes the specific terms of the offered securities. IF THE TERMS OF THE
OFFERED SECURITIES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
S-4
<PAGE>
SUMMARY
This summary contains only selected information about the Class A Certificates
and does not contain all information that you should consider in making your
investment decision. To fully understand the terms of the Class A Certificates,
you should read the remainder of this prospectus supplement and the accompanying
prospectus in their entirety.
OFFERED SECURITIES
We are forming a trust to be named "BCI Consumer Receivable Trust 1999__". The
trust will issue the following classes of certificates:
$________ ___% Asset Backed Certificates, Class A-1 and $________ Floating Rate
Asset Backed Certificates, Class A-2.
We are offering the certificates by means of this prospectus supplement and the
accompanying prospectus. The Class A-1 Certificates and Class A-2 certificates
will represent fractional undivided interests in the trust.
SECURITIES NOT OFFERED
The trust will also issue $__________ principal amount of Asset Backed
Certificates, Class B. The Class B Certificates will represent fractional
undivided interests in the trust. The Class B Certificates are not being offered
hereby and the description of them in this prospectus supplement is intended
only to provide you with a better understanding of the Class A Certificates.
Payments on the Class B Certificates are subordinated to the Class A
Certificates. The Class B Certificates will be held initially by the Depositor.
The "Certificates" consist of the Class A Certificates and Class B Certificates.
The certificates will be held initially by us.
TRUST ASSETS
The trust's main source of funds for making payments on the Class A Certificates
will be collections on its receivables and the bond insurance policy.
The receivables will consist of conventional retail installment sales contracts
and promissory notes for the purchase of a variety of consumer products and
equipment. The receivables have been either originated by Bombardier Capital
Inc. through dealers or purchased by it in the ordinary course of business. The
receivables are generally prepayable at any time without penalty.
The bond insurance policy will be issued by [_______________] for the benefit
of the certificateholders. See "The Bond Insurance Policy" in this prospectus
supplement.
SELECTED RECEIVABLE DATA AS OF _____________, 1999
Number of receivables _________
Aggregate unpaid principal balance $________
Range of unpaid principal balances
$_______ $________
Average unpaid principal balance _________
Range of financing rates _______%-_______%
Weighted average financing rate _______%
Range of remaining terms to maturity
____months ____months
Weighted average remaining term to maturity
____months
Weighted average contract or promissory note age
____months
[Range of original loan-to-value ratios
_______%-_______%]
[Weighted average original loan-to-value ratio
_______%]
The data relating to the remaining term to maturity above assumes that scheduled
payments on the receivables after __________ __, 1999 are received when due and
without prepayment.
The figure for "weighted average contract or promissory note age" is based on
the number of months from and including the first monthly payment to and
including _________ __, 1999.
PRINCIPAL PARTIES
TRUST - BCI Consumer Receivables Trust 1999-1, a Delaware business trust, will
issue the certificates.
DEPOSITOR - Bombardier Capital CF II Inc., a Delaware special purpose
corporation will form the trust and will deposit the receivables into the
trust.
SELLER - Bombardier Capital Inc. will sell the receivables to the depositor. See
"Bombardier Capital Inc." in the prospectus.
S-5
<PAGE>
SERVICER - Bombardier Capital Inc. will service the receivables on behalf of the
trust.
TRUSTEE - [_________________], a Delaware trust company, will act as trustee for
the trust.
INSURER - _________________ will provide an irrevocable financial guaranty
insurance policy which will unconditionally and irrevocably guaranty certain
payments on the Class A Certificates. See -- "The Bond Insurance Policy" in this
prospectus supplement for a description of this policy.
Closing Date
We expect that the Class A Certificates will be issued and purchased by the
underwriters on or about __________ __, 1999.
DISTRIBUTIONS ON THE CLASS A CERTIFICATES
General
You will receive payments of interest and principal on the Class A Certificates
monthly on each distribution date. Distribution dates will occur on the __th day
of each month, or the first business day after the __th beginning in ________
__, 1999.
INTEREST PAYMENTS
On each payment date, you will be entitled to interest accrued on your Class A
Certificates since the last distribution date. For the __________ __, 1999
distribution date, interest will accrue from the closing date.
PER ANNUM INTEREST RATES. The Class A-1 Certificates will accrue interest at
a fixed rate per annum of ___%:
The Class A-1 Certificates will accrue interest on the basis of a 360
day year of 30-day months. This means that on each distribution date,
30 days of interest will have accrued on the Class A-1 Certificates,
regardless of the actual number of days since the last distribution
date.
The Class A-2 Certificates will accrue interest on the basis of the
actual number of days in each year, divided by 360. This means that on
each distribution date, the number of days of interest that will have
accrued on the Class A-2 Certificates will be the actual number of days
since the last distribution date.
DETERMINATION OF LIBOR - LIBOR is the rate for deposits in U.S. dollars for a
one-month period which appears on the Dow Jones Telerate Page 3750 (or similar
replacement page) as of 11:00 a.m., London time, on the related LIBOR
determination date. See "Description of the Notes--Interest" in this prospectus
supplement for a discussion of the determination of LIBOR if that rate does not
appear on Dow Jones Telerate Page 3750 (or similar replacement page). The LIBOR
determination date is the second London business day prior to each distribution
date and the closing date. On each distribution date, the interest rate on the
Class A-2 certificates will adjust based on that determination.
PRINCIPAL PAYMENTS
AMOUNT OF PRINCIPAL PAYABLE ON EACH DISTRIBUTION DATE. The trust will make
payments of principal on the notes on each payment date in an amount generally
equal to the total amount collected as principal payments on the receivables,
plus, in certain circumstances the principal balance of defaulted receivables.
PAYMENT AMONG CLASSES. Principal payments will be made on the Certificates
pro rata.
STATED MATURITY DATE. The trust is required to pay the outstanding principal
amount of the certificates, to the extent not previous paid, by ________ __,
____,
OPTIONAL REDEMPTION. The trust may, but is not obligated to, redeem at par the
outstanding certificates in whole, but not in part, on any distribution date on
which the depositor exercises its option to purchase the receivables. The
depositor may purchase the receivables once the aggregate principal balance of
the receivables has declined to [15]% or less of their balance as of __________
__, 1999.
CREDIT ENHANCEMENT
Bond Insurance Policy
You will have the benefit of an irrevocable financial guaranty insurance policy
issued by [ ]. See-- "The Insurer" in this prospectus supplement.
S-6
<PAGE>
This bond insurance policy will permit claims to be made on it in circumstances
where collections on the receivables are insufficient to pay interest and in
certain cases principal due on the Class A Certificates. See -- "The Bond
Insurance Policy" for a description of procedures and conditions for claims on
the policy.
In all cases, amounts held in the reserve account, and available amounts from
collections on the receivables, must be exhausted before a claim can be made on
the bond insurance policy. In addition, the insurer will be entitled to direct
certain actions of the servicer and the trustee and shall control all
certificateholder consents, approvals and directions under the indenture.
Reserve Account
You will also have the benefit of funds held on reserve in the reserve account
by the trust. The initial amount in the reserve account will be ___% of the
principal balance of the Class A Certificates as of the closing date. The
trustee will apply funds in the reserve account to make payments due on the
Class A Certificates that are not covered by collections on the receivables. The
reserve account will be reinstated to its required amount if sufficient funds
are available after making payments due on the Class A Certificates.
Subordination of Class B Certificates;
Overcollateralization.
On each distribution date, the trustee will apply the trust's available funds
(as described in this document):
first, to pay interest on the Class A
Certificates;
second, to pay the principal due on the
certificates pro rata; and
third, if necessary, to restore the reserve
account to its required level.
In the event that the trust's available funds are insufficient to pay the
outstanding principal amount of the certificates, this shortfall will be met
first by the nonpayment of principal on the Class B Certificates and then by the
nonpayment of principal on the Class A-2 Certificates, as necessary.
The Class A Certificates will be overcollateralized since the principal balance
of the receivables on __________ __, 1999 will exceed the initial principal
balance of the Class A certificates by approximately $__________. This
overcollateralization will be represented by the Class B certificates. The
overcollateralization of the Class A Certificates is intended to decrease the
likelihood that the trust will default in making payments due on the Class A
Certificates.
RATINGS
Before the Class A certificate can be issued, we must obtain a rating on the
notes of "Aaa" by Moody's Investors Service, Inc. and "AAA" by Standard & Poor's
Ratings Services, a division of The McGraw Hill Companies, Inc. The ratings of
the Class A Certificates will depend primarily on an assessment by these rating
agencies of the claims-paying ability of the insurer. Any reduction in the
rating assigned to the claims-paying ability of the insurer would therefore be
likely to result in a reduction in the rating of the Class A Certificates. A
rating is not a recommendation to buy, sell or hold securities and may be
subject to revision or withdrawal at any time.
FEDERAL INCOME TAX MATTERS
In the opinion of Morgan, Lewis & Bockius LLP, for federal income tax purposes,
the Class A Certificates will be characterized as debt, and the trust will not
be characterized as an association or a publicly traded partnership taxable as a
corporation. See "Certain Federal and State Income Tax Consequences" in this
prospectus supplement and "Federal Income Tax Consequences" in the prospectus.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations" in this
prospectus supplement and the prospectus, the Class A Certificates are eligible
for purchase by employee benefit plans.
S-7
<PAGE>
RISK FACTORS
The Class A Certificates are not suitable investments for all
investors. In particular, you should not purchase any of the Class A
Certificates unless you understand and are able to bear the prepayment, credit,
liquidity and market risks associated with that class.
The Class A Certificates are complex securities and it is important
that you possess, either alone or together with an investment advisor, the
expertise necessary to evaluate the information contained in this prospectus
supplement and the accompanying prospectus in the context of your financial
situation.
THE SERVICER'S LIMITED DELINQUENCY, LOSS AND REPOSSESSION EXPERIENCE
You will be relying on Bombardier Capital Inc. both for its origination
and underwriting of the receivables securing the notes and for its ongoing
servicing of those receivables. Although Bombardier Capital Inc. has been in
business for over 23 years, Bombardier Capital Inc.'s Consumer Finance Division
began underwriting and servicing retail installment contracts for consumer
products and equipment in May 1997. Thus, with less than two years of operating
history, Bombardier Capital Inc.'s operations in this area may entail a higher
level of risk than that found in more established operations. These risks
include a potential increase in delinquencies and defaults on the receivables
associated with the development of new computer systems and the opening of
additional servicing facilities by Bombardier Capital Inc. or its affiliates.
There can be no assurance that the delinquency and loss experience on the
receivables will not exceed industry norms. Bombardier Capital Inc. does not
currently have extensive historical loss data on its consumer finance receivable
portfolio.
GEOGRAPHIC CONCENTRATION OF RECEIVABLES
Approximately __%, __%, __% and __% of the receivables (by aggregate principal
balance as of __________ 1, 1999) are expected to be located in the states of
___, ___, ___ and ___. Consequently, losses and prepayments on the receivables
and the resulting payments on the Class A Certificates may be affected
significantly by adverse economic conditions or other factors particularly
affecting these states. Measured by aggregate principal balance on
_______________ 1, 1999, no more than [5]% of the receivables will be located in
any other state.
LIMITED ASSETS OF THE TRUST
The trust will not have any significant assets or sources of funds to make
payments on the Class A Certificates other than the receivables, the reserve
account and the bond insurance policy. If for any reason the policy is
unavailable, you will be relying for repayment of your Class A Certificates
solely upon payments on the receivables and amounts, if any, in the reserve
account. Although funds in the reserve account may be available to cover
shortfalls in distributions of interest and principal on the Class A
Certificates, the amounts available in the reserve account are limited. If the
reserve account becomes depleted and the policy becomes unavailable, the trust
will depend solely on current collections on the receivables to make payments on
the Class A Certificates.
MATURITY AND PREPAYMENT CONSIDERATIONS
Each receivable generally may be prepaid at any time at the option of
the obligor on that receivable and must be prepaid if the obligor sells the
product securing the receivable. Prepayments may also occur as a result of
defaults, casualties to the related products, death of an obligor or other
reasons. Also, the depositor and the seller may be required to repurchase one or
more receivables from the trust in certain circumstances as a result of breaches
of representations and warranties, and the depositor will have the right to
purchase all remaining receivables from the trust when their balance has
declined to [15]% or less of the initial balance. See "Description of the Trust
Documents--Sale and Assignment of Receivables" and "--Termination" in the
prospectus and "Description of the Class A Certificates--Optional Redemption" in
this prospectus supplement. Each such prepayment, repurchase or
S-8
<PAGE>
purchase will shorten the average life of the Class A Certificates. Prepayment
rates may be influenced by a variety of factors and cannot be predicted with any
assurance.
You will bear all reinvestment risks resulting from a faster or slower rate of
prepayment on the receivables and from the rate of principal payments on the
Class A Certificates.
THE CLASS A CERTIFICATES MAY LACK LIQUIDITY
The underwriters intend to make a market for the purchase and sale of
the Class A Certificates after their initial issuance but have no obligation to
do so. There is no assurance that such a secondary market will develop or, if it
develops, that it will continue. Consequently, you may not be able to sell your
Class A Certificates readily or at desirable prices.
The secondary markets for asset-backed securities have experienced
periods of illiquidity and can be expected to do so in the future. Illiquidity
could have a severely adverse effect on the prices at which the Class A
Certificates can be sold.
THE LACK OF PHYSICAL CLASS A CERTIFICATES MAY CAUSE DELAYS IN PAYMENT AND
DIFFICULTIES IN PLEDGING
You may hold Class A Certificates only in book-entry form through The
Depository Trust Company, Euroclear or Cedel Bank. Your ability to pledge a
Class A Certificate to a person that does not participate in those systems may
be limited because of the lack of a physical certificate. In addition, Class A
Certificate payments will not be made directly to you. Instead, the trustee or
its paying agent will send all distributions to The Depository Trust Company,
which will then credit those distributions to the participating organizations.
Those organizations must in turn credit accounts you have either directly or
indirectly through indirect participants for you to receive your payments. This
may cause you to experience some delay in receiving payments on the Class A
Certificates.
RATINGS
The ratings of the Class A Certificates will depend primarily on an
assessment by the Moody's and S&P of the claims-paying ability of the insurer.
Any reduction in the rating assigned to the claims-paying ability of the insurer
would likely result in a corresponding reduction in the rating of the Class A
Certificates. The rating by the rating agencies of the Class A Certificates is
not a recommendation to you to purchase, hold or sell the Class A Certificates.
For example, the rating does not comment as to the price at which the Class A
Certificates are being offered to you, or suitability of the Class A
Certificates for a particular investor. There is no assurance that the ratings
will remain in place for any given period of time or that the ratings will not
be lowered or withdrawn by the rating agencies. In addition, ratings assess
credit risk and do not address likelihood of prepayments.
CERTAIN LEGAL ASPECTS RELATING TO THE OWNERSHIP AND ENFORCEABILITY
OF RECEIVABLES
Under the Pooling and Servicing Agreement, the depositor will grant a
security interest in the receivables to the trustee for your benefit. This
security interest will be perfected by the filing of Uniform Commercial Code
financing statements in Vermont, Nevada and Florida. To facilitate servicing and
save administrative costs, however, certain steps which could further protect
your rights under the Uniform Commercial Code will not be taken. First,
Bombardier Capital Inc., as servicer, and not the trustee will maintain custody
of the receivable files. Also, the receivables will not be stamped or otherwise
marked to indicate that they have been sold to the trust. If, in the absence of
these steps, through inadvertence or otherwise, any of the receivables are sold
or pledged to another party who takes physical possession of the contracts
evidencing those receivables, there is a risk that such party will acquire an
interest in the receivables superior to the interest of the trustee and the
certificateholders.
S-9
<PAGE>
Due to the administrative burden and expense, the documents reflecting
Bombardier Capital Inc.'s security interest in the products securing the
receivables will not be amended to reflect the assignment of the security
interests in the products by Bombardier Capital Inc. to the depositor or by the
depositor to the trustee. In the absence of such an amendment, the trustee may
not have a perfected security interest in the products securing the receivables.
In addition, in certain cases, Bombardier Capital Inc., as servicer, does not as
part of its standard procedures file Uniform Commercial Code financing
statements for certain classes of products. Thus the security interest in a
particular product that has been assigned to the trustee may not have been
perfected in the first instance. Moreover, statutory liens for repair or unpaid
taxes may have priority even over perfected security interests in the products.
See "Description of the Trust Documents--Sale and Assignment of the Receivables"
and "Certain Legal Aspects of the Receivables" in the prospectus. The lack of a
perfected security interest in a particular product could prevent the trust from
realizing on that product in the event of a receivable default.
RISKS TO INVESTORS UPON AN INSOLVENCY OF THE SELLER
The seller and the depositor intend that the transfer of receivables to
the depositor will constitute a sale, rather than a pledge of the receivables to
secure indebtedness of the seller. For accounting purposes, the seller and the
depositor intend that the transfer of receivables be treated as a financing. If
the seller were to become a debtor under the federal bankruptcy code or similar
applicable state laws, a creditor or trustee in bankruptcy of the seller or the
seller as debtor-in-possession might attempt to include the receivables in the
seller's bankruptcy estate. To do so it might argue that the transfer of
receivables by the seller was in fact a pledge of the receivables rather than a
an absolute transfer and assignment. Alternately or in addition, it might argue
that the assets of the depositor, including the receivables, should be
consolidated into the seller's bankruptcy estate. Either of these positions, if
presented to or accepted by a court, could cause the trust to experience a delay
in or reduction of collections on the receivables.
YEAR 2000 READINESS DISCLOSURE: YOU COULD BE ADVERSELY AFFECTED IN ABSENCE OF
YEAR 2000 COMPLIANCE
Bombardier Capital Inc. has made efforts to identify, modify or replace
computer systems which are not year 2000 compliant and to address other related
issues associated with the change of the millennium, although there is no
assurance these efforts will be fully successful. In the event that computer
problems arise out of a failure to identify, modify or replace appropriate
systems on time, or in the event that the computer systems of Bombardier Capital
Inc., the trustee or certain external suppliers are not fully year 2000
compliant, the resulting disruptions in the collection or distribution of
receipts on the receivables could materially and adversely affect the holders of
the certificates.
With respect to the year 2000 problem, The Depository Trust Company has
informed members of the financial community that it has developed and is
implementing a program so that its systems, as they relate to the timely payment
of distributions, including principal and interest payments, to certificate
holders, book-entry deliveries, and settlement of trades within The Depository
Trust Company, continue to function appropriately on and after January 1, 2000.
This program includes a technical assessment and a remediation plan, each of
which is complete. Additionally, The Depository Trust Company's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
Bombardier has not independently verified the information provided to it by The
Depository Trust Company.
However, The Depository Trust Company's ability to perform properly its
services is also dependent upon other parties, including but not limited to, its
participating organizations, through which you will hold your certificates, as
well as the computer systems of third party service providers. The Depository
Trust Company has informed the financial community that it is contacting and
will continue to contact third party vendors from whom The Depository Trust
Company acquires services to:
impress upon them the importance of their services being year 2000
compliant; and
S-10
<PAGE>
determine the extent of their efforts for year 2000 remediation, and,
as appropriate, testing, of their services.
In addition, The Depository Trust Company has stated that it is in the process
of developing these contingency plans as it deems appropriate.
If problems associated with the year 2000 problem were to occur with
respect to The Depository Trust Company and the services described above,
payments to you could be delayed or otherwise adversely affected.
THE TRUST
GENERAL
BCI Consumer Receivable Trust 1999-_ (the "Trust") is a business trust
formed under the laws of the State of Delaware pursuant to a Pooling and
Servicing Agreement dated as of __________ 1, 1999 (the "Pooling and Servicing
Agreement"), among the Depositor, the Servicer and the trustee under the Trust
Agreement (the "Trustee"). The Trust will be formed solely for the purpose of
engaging in the transactions described in this prospectus supplement. After its
formation, the Trust will not engage in any activity other than:
(1) acquiring, holding and managing a pool of retail
installment sales contracts and promissory notes (the "Receivables")
secured by various consumer products and equipment (the "Products") and
the other assets of the Trust and proceeds therefrom;
(2) issuing the Class A-1 and Class A-2 Certificates (the
"Class A Certificates") and the Class B Certificates (the "Class B
Certificates" and, together with the Class A Certificates, the
"Certificates");
(3) making payments on the Certificates; and
(4) engaging in other activities that are necessary, suitable
or convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
Not including the amounts allocated in the Reserve Account, the Trust
will initially be capitalized with equity equal to approximately $[ ], which
is the difference between the aggregate principal amount of the Receivables as
of __________ 1, 1999 (the "Cut-Off Date") and the initial aggregate principal
amount of the Class A Certificates (assuming that the aggregate principal amount
of the Receivables as of the Cut-off Date will be equal to $____________). The
equity in the Trust, including the right to receive distributions from the
Reserve Account, will be evidenced by the Certificates issued by the Trust to
the Depositor, which may thereafter hold such equity or sell or otherwise
transfer it. The net proceeds from the sale of the Class A Certificates will be
used by the Trust to purchase the Receivables from the Seller pursuant to the
Receivables Purchase Agreement (the "Receivables Purchase Agreement"), dated as
of __________ 1, 1999, among the Depositor, the Trust and Bombardier Capital
Inc. as servicer (in this capacity, the "Servicer"). Simultaneously, Bombardier
Capital Inc., in its capacity as seller under the Transfer Agreement (in this
capacity, the "Seller") will have [contributed] [sold] and absolutely assigned
the Receivables to the Depositor pursuant to a Transfer Agreement, dated as of
__________ 1, 1999 (the "Transfer Agreement") between the Seller and the
Depositor.
The Trust's principal offices are in Wilmington, Delaware, at the
address listed below under "--The Owner Trustee."
S-11
<PAGE>
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of
the Cut-off Date, as if the issuance and sale of the Certificates had taken
place on that date:
<TABLE>
<S> <C>
Class A-1 Certificates.................... $ ___,___,___
Class A-2 Certificates.................... ___,___,___
Class B Certificates...................... ___,___,___
Total............................ $ ___,___,___
=============
</TABLE>
THE TRUSTEE
[Trustee] is the Trustee under the Pooling and Servicing Agreement.
____________ is a __________ banking corporation and its principal offices are
located at ___________________________________________. The Trustee will perform
limited administrative functions under the Pooling and Servicing Agreement. The
Trustee's liability in connection with the issuance and sale of the Certificates
is limited solely to the express obligations of the Trustee as set forth in the
Pooling and Servicing Agreement.
THE TRUST PROPERTY
The Trust Property will include, among other things:
(1) the Receivables;
(2) all rights to receive payments due thereon on or after the
Cut-off Date, excluding certain insurance premiums, late fees and other
servicing charges;
(3) amounts held in the Collection Account, the Reserve
Account and certain other accounts established and maintained by the
Servicer pursuant to the Pooling and Servicing Agreement, as described
below, including all investments in the Collection Account and such
other accounts and all income from the investment of funds therein and
all proceeds thereof;
(4) an assignment of the security interests of the Seller in
the Products securing the related Receivables;
(5) an assignment of the right to receive proceeds from claims
on certain insurance policies covering the Products and the Obligors;
and
(6) certain other rights under the Trust Documents.
See "The Receivables" and "Description of the Trust Documents--Collections" in
the accompanying prospectus.
The Servicer, as custodian on behalf of the Trust, will hold each
original contract evidencing a Receivable, as well as copies of documents and
instruments relating to that Receivable and evidencing the security interest in
the Product securing that Receivable (the "Receivable Files"). In order to
protect the Trust's ownership interest in the Receivables, and the interests of
Certificateholders in the Receivables under the Pooling and Servicing Agreement,
the Depositor will file UCC-1 financing statements in Vermont, Florida and
Nevada to give notice of the Trust's ownership of the Receivables and the
related Trust Property, and the Trust will file UCC-1 financing statements in
Vermont, Florida and Nevada with respect to the Trust Property in favor of the
Trustee.
S-12
<PAGE>
THE RECEIVABLES POOL
GENERAL
The information presented in this prospectus supplement relates to the
Receivables as of the Cut-Off Date.
All of the Receivables will be purchased directly or indirectly by the
Seller from dealers, brokers and finance companies who regularly originate and
sell receivables to the Seller, or will be originated by the Seller directly.
CERTAIN OTHER CHARACTERISTICS
As of the Cut-off Date, the Receivables:
(1) had a remaining maturity of at least __ months, but not
more than ___ months,
(2) had an original maturity of at least __ months, but not
more than ___ months,
(3) had an original principal balance of at least $______ and
not more than $_________,
(4) had a remaining principal balance of at least $_______
and not more than $________ and
(5) had a contractual rate of interest ("Receivable Rate") of
at least ___% and not more than ___%.
[As of the Cut-off Date, __% of the Receivables were in an interest deferral
period and the average remaining deferral period was ___ months.] Neither the
Depositor nor the Servicer may substitute other Receivables for the Receivables
at any time during the term of the Receivables Purchase Agreement.
CHARACTERISTICS OF THE RECEIVABLES
Geographic Concentration of the Receivables
[TABLE]
S-13
<PAGE>
(1) Based on the billing address of the Obligor set forth in BCI's records.
* Indicates an amount greater than zero but less than .___% of the number
of Receivables or the Cut-off Date Principal Balance of the Initial
Receivables.
Types of Products
[TABLE]
S-14
<PAGE>
Distribution of Original Receivable Amounts of the Receivables
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL BALANCE % OF INITIAL RECEIVABLES BY
NUMBER OF RECEIVABLES AS OF OUTSTANDING AS OF CUT-OFF OUTSTANDING-PRINCIPAL
ORIGINAL RECEIVABLE AMOUNT CUT-OFF DATE DATE BALANCE AS OF CUT-OFF DATE
- ------------------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Less than $10,000.................... [TABLE]
Between $10,000 and $19,999..........
Between $20,000 and $29,999..........
Between $30,000 and $39,999..........
Between $40,000 and $49,999..........
Between $50,000 and $59,999..........
Between $60,000 and $69,999..........
Between $70,000 and $79,999..........
Between $80,000 and $89,999..........
Between $90,000 and $99,999..........
Between $100,000 and $109,999........
Between $110,000 and $119,999........
Between $120,000 and $129,999........
Between $130,000 and $139,999........
Between $140,000 and $149,999........
Between $150,000 and $159,999........
Between $160,000 and $169,999........
Between $170,000 and $179,999........
Between $180,000 and $189,999........
Between $190,000 and $199,999........
Between $200,000 and $249,999........
Between $250,000 and $299,999........
Between $400,000 and $449,999........
Between $450,000 and $499,999........
Between $500,000 and $549,999........
Between $550,000 and $599,999........
Between $600,000 and $649,999........
Between $650,000 and $699,999........
Between $700,000 and $749,999........
Between $750,000 and $799,999........
Between $800,000 and $849,999........
Between $850,000 and $899,999........
Between $900,000 and $949,999........
Between $950,000 and $999,999........
Over $999,999........................
--------------------------- --------------------------- ---------------------------
Total.......................
=========================== =========================== ===========================
</TABLE>
S-15
<PAGE>
Year of Origination of the Receivables
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PRINCIPAL BALANCE % OF INITIAL RECEIVABLES BY
RECEIVABLES AS OF OUTSTANDING AS OF CUT-OFF OUTSTANDING PRINCIPAL BALANCE
YEAR OF ORIGINATION CUT-OFF DATE DATE AS OF CUT-OFF DATE
- ----------------------------- ----------------- --------------------------- -----------------------------
<S> <C> <C> <C>
1996.........................
1997.........................
1998.........................
----------------- --------------------------- -----------------------------
1999.........................
----------------- --------------------------- -----------------------------
Total...............
================= =========================== =============================
</TABLE>
* Indicates an amount greater than zero but less than .___% of Statistical
Calculation Date Principal Balance.
Distribution of Original Loan-to-value Ratios of the Receivables
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL BALANCE % OF INITIAL RECEIVABLES BY
NUMBER OF RECEIVABLES AS OF OUTSTANDING AS OF CUT-OFF OUTSTANDING PRINCIPAL BALANCE
LOAN-TO-VALUE RATIO CUT-OFF DATE DATE AS OF CUT-OFF DATE
- ----------------------------- --------------------------- --------------------------- -----------------------------
<S> <C> <C> <C>
Less than 61%................
From 61 to 65%...............
From 66 to 70%...............
From 71 to 75%...............
From 76 to 80%...............
From 81 to 85%...............
From 86 to 90%...............
From 91 to 95%...............
Over 95%.....................
--------------------------- --------------------------- -----------------------------
Total...............
=========================== =========================== =============================
</TABLE>
S-16
<PAGE>
Receivable Rates
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL BALANCE % OF INITIAL RECEIVABLES BY
NUMBER OF RECEIVABLES AS OF OUTSTANDING AS OF CUT-OFF OUTSTANDING PRINCIPAL BALANCE
RECEIVABLE RATE CUT-OFF DATE DATE AS OF CUT-OFF DATE
- ----------------------------- --------------------------- --------------------------- -----------------------------
<S> <C> <C> <C>
Less than 7.001%.............
7.001% to 8.000%.............
8.001% to 9.000%.............
9.001% to 10.000%............
10.001% to 11.000%...........
11.001% to 12.000%...........
12.001% to 13.000%...........
13.001% to 14.000%...........
14.001% to 15.000%...........
15.001% to 16.000%...........
16.001% to 17.000%...........
Over 17.000%.................
--------------------------- --------------------------- -----------------------------
Total...............
--------------------------- --------------------------- -----------------------------
</TABLE>
Remaining Months to Maturity of the Receivables
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL BALANCE % OF INITIAL RECEIVABLES BY
REMAINING MONTHS TO NUMBER OF RECEIVABLES AS OF OUTSTANDING AS OF CUT-OFF OUTSTANDING PRINCIPAL BALANCE
MATURING CUT-OFF DATE DATE AS OF CUT-OFF DATE
- ----------------------------- --------------------------- --------------------------- -----------------------------
<S> <C> <C> <C>
Fewer than 31................
31 to 60.....................
61 to 90.....................
91 to 120....................
121 to 150...................
151 to 180...................
181 to 210...................
211 to 240...................
--------------------------- --------------------------- -----------------------------
Total...............
=========================== =========================== =============================
</TABLE>
S-17
<PAGE>
BOMBARDIER CAPITAL INC.
The following information supplements the information in the prospectus under
the heading "Bombardier Capital Inc."
DELINQUENCY, LOSS AND REPOSSESSION INFORMATION
The following tables set forth information relating to Bombardier
Capital Inc.'s ("BCI") delinquency, loss and repossession experience for each
period indicated with respect to all financing to retail customer and equipment
receivables it has purchased and continues to service, including such
receivables which do not meet the criteria for selection as a Receivable. BCI
began underwriting and servicing retail installment contracts for consumer
products and equipment in May of 1997. Thus contracts have not yet exhibited a
delinquency and loss experience that is likely to be representative of the
delinquencies that may be experienced over a longer period of time. In addition,
because of the rapid growth of BCI's portfolio of consumer product and equipment
receivables, the experience shown in more recent periods may not be indicative
of the experience to be expected from a more seasoned portfolio. No
representation is made as to the possible likelihood, amount, timing or severity
of delinquencies and losses which might occur with respect to the Receivables.
Delinquency Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter ended Quarter ended Quarter ended
Dec. 31, 1997 March 31, 1998 June 30, 1998
------------------------------- ------------------------------- -------------------------------
% of total % of total % of total
receivable receivable receivable
$ value balance $ value balance $ value balance
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding...........
Receivables
Delinquent............
30-59 Days..........
60-89 Days..........
90 Days or More.....
Total Receivables
Delinquent............
------------------------------- ------------------------------- -------------------------------
=============================== =============================== ===============================
</TABLE>
The figures for "Receivables Outstanding" in the immediately preceding table do
not take into account receivables already in repossession. The periods of
delinquency set out in the immediately preceding table are based on the number
of days payments are contractually past due, assuming 30-day months.
Consequently, a receivable due on the first day of a month is not 30 days
delinquent until the first day of the next month.
S-18
<PAGE>
<TABLE>
<CAPTION>
Quarter ended Quarter ended Quarter ended
Sept. 30, 1998 Dec. 31, 1998 Mar. 31, 1999
------------------------------- ------------------------------- -------------------------------
% of total % of total % of total
receivable receivable receivable
$ value balance $ value balance $ value balance
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding.............
Receivables
Delinquent..............
30-59 Days............
60-89 Days............
90 Days or More.......
Total Receivables
Delinquent............
------------------------------- ------------------------------- -------------------------------
=============================== =============================== ===============================
</TABLE>
The figures for "Receivables Outstanding" in the immediately preceding tables
do not take into account receivables already in repossession. The periods of
delinquency set out in the immediately preceding table are based on the number
of days payments are contractually past due, assuming 30-day months.
Consequently, a receivable due on the first day of a month is not 30 days
delinquent until the first day of the next month.
Loss/Repossession Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended
Dec. 31, 1997 March 31, 1998 June 30, 1998 Sept. 30, 1998 Dec. 31, 1998 Mar. 31, 1999
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
% of total % of total % of total % of total % of total % of total
$ receivable $ receivable $ receivable $ receivable $ receivable $ receivable
value balance value balance value balance value balance value balance value balance
----- ---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(1)....
Receivable
Liquidations(2):..
Net Losses (3):...
</TABLE>
The data in this table reflect circumstances as of the end of the
period indicated. Figures for "Receivables Outstanding" include receivables
already in repossession. The information on "Receivable Liquidations" reflects
this activity during each quarter, as a percentage of the total number of
receivables being serviced as of period end. The calculation of net loss
includes unpaid interest to the date of repossession and all expenses of
repossession and liquidation during such quarter.
There can be no assurance that the delinquency, loss or repossession
experience of the Trust with respect to the Receivables will be better than,
worse than or comparable to the experience set forth above. See "Risk
Factors--The Servicer's Limited Delinquency, Loss and Repossession Experience"
herein.
S-19
<PAGE>
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments on the Receivables on the weighted average life of the Certificates
under the stated assumptions and is not a prediction of the prepayment rate that
might actually be experienced by the Receivables.
Weighted average life refers to the average amount of time from the
date of issuance of a security until each dollar of principal of that security
will be repaid to the investor. The weighted average life of the Certificates
will be influenced by the rate at which principal on the Receivables is paid.
Principal payments on the Receivables may be in the form of scheduled
amortization or prepayments, including, for this purpose, liquidations due to
default. The rate of prepayments on the Receivables may be influenced by a
variety of social and other factors and cannot be predicted. In addition, the
Depositor has the option to purchase from the Trust all remaining Receivables,
and thereby effect early redemption of the Class A Certificates and early
retirement of the Class B Certificates, on any Distribution Date when the Pool
Scheduled Principal Balance is 15% or less of the Cut-off Date Pool Principal
Balance. See "Description of the Trust Documents--Termination" in the prospectus
and "Description of the Trust Documents--Termination" herein. Certificateholders
will bear all reinvestment risks resulting from the timing of principal payments
on the Certificates. See "Yield and Prepayment Considerations" in the
prospectus.
The Base Case prepayment model is an example of the prepayment rates
that may be experienced on the Receivables. Because BCI began originating and
servicing Receivables for many of the Products only recently, the model is based
in part on industry experience with similar Receivables rather than BCI's
experience. There can be no assurance that the Receivables will experience
prepayments at projected rates or in the manner assumed by the prepayment model
used for that type of Receivable, or that the Receivables in the aggregate will
experience prepayments similar to the overall prepayment rate or in the manner
assumed in the Base Case.
<TABLE>
<CAPTION>
PRODUCT BASE CASE PREPAYMENT RATE
<S> <C>
Horse Trailers and Trucks........................ ___% CPR
Power Sports Vehicles............................ ___% CPR
Keyboard Instruments............................. ___% CPR
Recreational Vehicles............................ ___% CPR
Marine........................................... ___% CPR
Motorcycles...................................... ___% CPR
Golf Carts....................................... ___% CPR
Lawn and Garden Equipment........................ ___% CPR
Neighborhood Vehicles............................ ___% CPR
</TABLE>
The model used in this prospectus supplement is the Constant Prepayment
Rate ("CPR"). The CPR represents an assumed constant rate of prepayment each
month, expressed as a per annum percentage of the outstanding principal balance
of the Receivables secured by the particular Product types listed above.
As used in the following tables, the columns headed __%, __%, ___%,
___% and ___% assume that prepayments on the Receivables are made at Base Case
Prepayment Rates of __%, __%, ___%, ___% and ___%, respectively. For example,
__% Base Case Prepayment Rate and ___% Base Case Prepayment Rate mean that
Receivables related to horse trailers, power sport vehicles, keyboard
instruments and recreational vehicles have been assumed to have a prepayment
rate equal to ___% CPR and ___% CPR, respectively. CPR DOES NOT PURPORT TO BE AN
HISTORICAL DESCRIPTION OF PREPAYMENT EXPERIENCE OR A PREDICTION OF THE
ANTICIPATED RATE OF PREPAYMENT OF ANY POOL OF RECEIVABLES, INCLUDING THE
RECEIVABLES.
The percentages and weighted average lives in the following tables were
determined assuming that:
S-20
<PAGE>
(1) scheduled interest and principal payments on the
Receivables are received in a timely manner and
prepayments are made at the percentages of the Base Case
prepayment model set forth in the table;
(2) the Servicer exercises its right of optional termination
described above;
(3) the aggregate principal balance of the Receivables as of
the Cut-off Date is $___,___,___.__ and the Receivables
have the characteristics described under "Assumed
Characteristics of the Receivables as of the Cut-Off
Date";
(4) no interest shortfalls will arise in connection with
prepayments in full of the Receivables; and
(5) distributions are made on the Certificates on the ___ day
of each month commencing in [Date]; and
(6) the Certificates are issued on [Date] (collectively, the
"Modeling Assumptions").
No representation is made that the Receivables will not experience
delinquencies or losses.
Assumed Characteristics of the
Receivables as of the Cut-Off Date
<TABLE>
<CAPTION>
Weighted Average Aggregate
Balance Principal Weighted Average Weighted Average
Outstanding Receivable Rate Original Term Remaining Term
<S> <C> <C> <C> <C>
Horse Trailers and
Trucks......................
Power Sports Vehicles.......
Keyboard Instruments........
Recreational Vehicles.......
Marine......................
Motorcycles.................
Golf Carts..................
Lawn and Garden
Equipment...................
Neighborhood
Vehicles....................
Total..............
</TABLE>
- --------
(1) Based on scheduled payments due after the Cut-off Date and assuming no
prepayments on the Receivables.
Based on the foregoing assumptions, the following tables indicate the
projected weighted average lives of each Class of the Class A Certificates and
set forth the percentages of the original Principal Balance of each Class that
would be outstanding after each of the dates shown, at the indicated percentages
of the Base Case Prepayment Rate. Investors are urged to make their investment
decisions on a basis that includes their determination as to anticipated
prepayment rates under a variety of the assumptions discussed herein.
Percentage of the Original Principal Balance of the Class A-1
S-21
<PAGE>
Certificates at the Respective Percentages of the
Base Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
DATE __% __% __% __% __%
- ---------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Initial Percentage................
[DATE]............................
Weighted Average Life
Years.............................
</TABLE>
The weighted average life of a Class A-1 Certificate set forth in the
immediately preceding table is determined by adding the products of the amount
of cash distributions in reduction of the principal balance of that Certificate
multiplied by the number of years from the date of issuance of the Class A-1
Certificate to the stated Distribution Date and dividing the sum by the initial
principal balance of the Class A-1 Certificate.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-2
CERTIFICATE AT THE RESPECTIVE PERCENTAGES OF THE
BASE CASE PREPAYMENT MODEL SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE __% __% __% __% __%
- ---------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Initial Percentage................
[DATE]............................
[DATE]............................
[DATE]............................
Weighted Average Life(1)
Years.............................
</TABLE>
The weighted average life of a Class A-2 Certificate set forth in the
immediately preceding table is determined by adding the products of the amount
of cash distributions in reduction of the principal balance of that Certificate
multiplied by the number of years from the date of issuance of the Class A-2
Certificate to the stated Distribution Date and dividing the sum by the initial
principal balance of the Class A-2 Certificate.
DESCRIPTION OF THE CLASS A CERTIFICATES
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying prospectus.
Prospective Certificateholders should consider, in addition to the information
below, the information in the accompanying prospectus under "The Certificates,"
"Certain Information Regarding the Securities," and "Description of the Trust
Documents."
GENERAL
The Class A Certificates will be issued pursuant to the terms of the
Pooling and Servicing Agreement, a form of which has been filed as an exhibit to
the Registration Statement. A copy of the Indenture, as executed, will be filed
with the Commission following the issuance of the Certificates. The following
summary describes certain
S-22
<PAGE>
terms of the Class A Certificates. 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 Class A Certificates and the Indenture. The following summary
supplements the description of the general terms and provisions of the
Certificates of any given series set forth in the accompanying prospectus, to
which description reference is hereby made.
DISTRIBUTIONS
Certificateholders will be entitled to receive distributions of
interest and principal on each Distribution Date commencing in ____ __, to the
extent that funds available are sufficient therefor. Distributions on the Class
A Certificates generally will be made from funds available first in respect on
interest on the Certificates, then in respect of principal on the Certificates,
in the manner and order of priority set forth below.
INTEREST
Interest on the Principal Balance of each Class of the Class A
Certificates will accrue from the Closing Date, or from the most recent
Distribution Date on which interest has been paid, to but excluding the
following Distribution Date, at the Interest Rate for that Class. The "Principal
Balance" of any Class of the Class A Certificates as of any Distribution Date
will be the original Principal Balance of such Class minus all amounts
previously distributed to the Certificateholders of that Class in respect of
principal.
Interest on the Class A-1 Certificates will be calculated on the basis
of a 360-day year of twelve 30-day months. Interest on the Class A-2
Certificates will be calculated on the basis of the actual number of days in
each period beginning on and including a Distribution Date and ending on but
excluding the next Distribution Date; provided that the first such period shall
begin on and include the Closing Date and shall end on but exclude the next
Distribution Date (each a "Floating Rate Interest Accrual Period").
Interest will be paid on the Certificates on each Distribution Date to
the extent of funds available on that date. In the event the funds available are
not sufficient to make a full payment of interest on the Certificates, the funds
available will be applied pro rata to each Class of Certificates based on the
amount payable to each Class and the amount of the shortfall will be carried
forward and added to the amount of interest payable on the next Distribution
Date. Any amount so carried forward will bear interest at the Interest Rate for
that Class, to the extent legally permissible.
Determination of LIBOR.
LIBOR, for the purposes of calculating the Class A-2 Rate, will be determined as
described in this paragraph. "LIBOR" with respect to any Interest Reset Period
will be established by the Calculation Agent and will equal the offered rate for
United States dollar deposits for one month that appears on Telerate Page 3750
as of 11:00 A.M., London time, on the second LIBOR Business Day prior to that
Interest Reset Period (a "LIBOR Determination Date"). The "Interest Reset
Period" for the calculation of LIBOR will be the Floating Rate Interest Accrual
Period. "Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service, or such other page as may replace that page on that
service, or such other service as may be nominated as the information vendor,
for the purpose of displaying London interbank offered rates of major banks. If
such rate appears on Telerate Page 3750, LIBOR will be such rate. "LIBOR
Business Day" as used herein means a day that is both a Business Day and a day
on which banking institutions in the City of London, England are not required or
authorized by law to be closed. If on any LIBOR Determination Date the offered
rate does not appear on Telerate Page 3750, the Calculation Agent will request
each of the reference banks to provide the Calculation Agent with its offered
quotation for United States dollar deposits for one month to prime banks in the
London interbank market as of 11:00 A.M., London time, on such date. If at lease
two reference banks provide the Calculation Agent with such offered quotations,
LIBOR on such date will be the arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a
percentage point rounded upward, of all such quotations.
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If on such date fewer than two of the reference banks provide the Calculation
Agent with such offered quotations, LIBOR on such date will be the arithmetic
mean, rounded upwards, if necessary, to the nearest 1/100,000 of 15 (.0000001),
with five one-millionths of a percentage point rounded upwards, of the offered
per annum rates that one or more leading banks in The City of New York selected
by the Calculation Agent are quoting as of 11:00 A.M., New York City time, on
such date to leading European banks for United States dollar deposits for one
month; provided, however, that if such banks are not quoting as described above,
LIBOR for such date will be LIBOR applicable to the Interest Reset Period
immediately preceding such Interest Reset Period. The "Calculation Agent" with
respect to the Class A-2 Certificates will be the Trustee; the reference banks
shall be major banks selected by the Calculation Agent that are engaged in
transactions in the London interbank market.
PRINCIPAL
[Certificateholders will be entitled to receive on each Distribution
Date as payment of principal, in the manner and order of priority set forth
below, an amount equal to its pro rata share of the Total Principal Distribution
Amount for such Distribution Date.]
To the extent not paid in full prior to such date, the outstanding
principal amount of each Class of Certificates will be payable on _________ __,
____ (the "Stated Maturity Date"). In the event that the Trust property shall be
insufficient to pay down the outstanding principal amount on all the Class A
Certificates, such deficiency shall be covered:
(1) by nonpayment of principal of the Class B Certificates;
(2) to the extent of any remaining deficiency after the
nonpayments in (1) above, by nonpayment of principal of the Class A-2
Certificates; and
(3) to the extent of any remaining deficiency after the
nonpayments in (1) and (2) above, by nonpayment of principal of the
Class A-1 Certificates.
The "Total Principal Distribution Amount" for any Distribution Date
will equal:
(1) the Formula Principal Distribution Amount for such
Distribution Date (described below), plus
(2) the aggregate of all Formula Principal Shortfalls, if
any, for prior Distribution Dates (described below).
The "Formula Principal Distribution Amount" with respect to any
Distribution Date will be an amount equal to the sum of the following amounts
with respect to the related Monthly Period (as defined below), in each case
computed in accordance with the method specified in each Receivable:
(1) all scheduled payments of principal due on each
outstanding Receivable during the related Monthly Period, after
adjustments for previous partial principal prepayments and after any
adjustments to a Receivable's amortization schedule as a result of
a bankruptcy or similar proceeding involving the related Obligor;
(2) the Scheduled Principal Balance (as defined below) of
each Receivable which, during the related Monthly Period, was purchased
by the Seller pursuant to the Sale and Servicing Agreement on account
of a breach of a representation or warranty;
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<PAGE>
(3) all partial principal prepayments applied and all
principal prepayments in full received on Receivables during the
related Monthly Period;
(4) the Scheduled Principal Balance of each Receivable that
became a Liquidated Receivable (as defined below) during the related
Monthly Period, plus the amount of any reduction in the outstanding
principal balance of a Receivable during such Monthly Period ordered
as a result of a bankruptcy or similar proceeding involving the
related Obligor; and
(5) all collections in respect of principal on the
Receivables received during the preceding Monthly Period.
A "Monthly Period" with respect to a Distribution Date is the calendar
month immediately preceding the month in which such Distribution Date occurs.
The "Scheduled Principal Balance" of a Receivable for any Monthly Period is its
principal balance as specified in its amortization schedule, after giving effect
to any previous partial principal prepayments and to the scheduled payment due
on its scheduled payment date (the "Due Date") in that month, and after giving
effect to any adjustments due to bankruptcy or similar proceedings. A
"Liquidated Receivable" means any Defaulted Receivable as to which the Servicer
has determined that all amounts which it expects to recover from or on account
of such Receivable through the date of disposition of the related Product have
been recovered or any defaulted Receivable in respect of which the related
Product has been realized upon and disposed of and the proceeds of such
disposition have been received.
A "Defaulted Receivable" is any Receivable as to which the Servicer has
commenced repossession procedures or assigned such Receivable to a third party
for repossession or other enforcement, but which has not become a Liquidated
Receivable.
In the event the remaining funds available for such Distribution Date
are not sufficient to make a full distribution of the Formula Principal
Distribution Amount, the amount of such deficiency (the "Formula Principal
Shortfall" for such Distribution Date) will be added to the Total Principal
Distribution Amount for the next Payment Date.
RESERVE ACCOUNT
The Reserve Account held by the Trust for the benefit of the Noteholder
(the "Reserve Account") will be created with an initial deposit by the Depositor
on the Closing Date of cash or Eligible Investments in the amount of $
(the "Required Reserve Amount"), which is ___% of the initial principal balance
of the Class A Certificates.
Amounts allocated from time to time to the Reserve Account will
continue to be held for the benefit of Certificateholders. On each Distribution
Date, funds will be withdrawn from the Reserve Account to the extent that the
Amount Available, after the payment of the Servicing Fee [if BCI is not the
Servicer], with respect to any Monthly Period is less than the sum of the
interest due on the Class A Certificates plus the Total Principal Distribution
Amount for such Distribution Date and will be paid to the Certificateholders. On
each Distribution Date, the Reserve Account will be reinstated up to the
Required Reserve Amount to the extent of the portion, if any, of the Amount
Available remaining after payment of the Servicing Fee [if BCI is not the
Servicer] and the payment on the Class A Certificates of interest due thereon
and the Total Principal Distribution Amount.
After giving effect to all deposits to or withdrawals from the Reserve
Account on any Distribution Date, if the amount allocated to the Reserve Account
is greater than the Required Reserve Amount for this Distribution Date, except
as described below, such excess amount will be distributed to the Depositor.
Upon any distribution to the Depositor of such amounts, the Certificateholders
will not have any rights in, or claims to, such amounts.
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<PAGE>
After the payment in full, or the provision for such payment, of all
accrued and unpaid interest on the Class A Certificates and the outstanding
principal balance of the Certificates, any funds allocated to the Reserve
Account will be paid to the Depositor.
The Reserve Account is intended to enhance the likelihood of receipt by
Certificateholders of the full amount of principal and interest due them and to
decrease the likelihood that the Certificateholders will experience losses.
However, in certain circumstances, the Reserve Account could be depleted. If the
Bond Insurance Policy were unavailable for any reason, and the amount required
to be withdrawn from the Reserve Account to cover shortfalls in collections on
the Receivables exceeds the amount then allocated to the Reserve Account,
Certificateholders could incur losses or a temporary shortfall in the amounts
distributed to the Certificateholders could result, which could, in turn,
increase the average life of the Class A Certificates.
OPTIONAL REDEMPTION
The Class A Certificates will be redeemed in whole, but not in part, on
any Distribution Date on which the Servicer exercises its option to purchase the
Receivables. The Depositor may purchase the Receivables when the Pool Scheduled
Principal Balance has declined to [15]% or less of the Cut-off Date Pool
Principal Balance, as described in the accompanying prospectus under
"Description of the Trust Documents--Termination." The "Pool Scheduled Principal
Balance" is the aggregate Scheduled Principal Balance of all outstanding
Receivables during a Monthly Period. Redemption would effect early retirement of
the Class A Certificates. The redemption price will be equal to the unpaid
principal amount of the Class A Certificates redeemed plus accrued and unpaid
interest thereon.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes certain terms of the Receivables
Purchase Agreement and the Pooling and Servicing Agreement (together, the "Trust
Documents"). Forms of the Trust Documents, as executed, have been filed as
exhibits to the Registration Statement. A copy of each of the Trust Documents
will be filed with the Commission following the issuance of the Certificates.
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 Trust Documents. The
following summary supplements, the description of the general terms and
provisions of the Trust Documents, as such term is used in the accompanying
prospectus, and as set forth in the accompanying prospectus, to which
description reference is hereby made.
ACCOUNTS
The Servicer will establish and maintain one or more accounts, in the
name of the Trustee on behalf of the Certificateholders, into which all payments
made on or with respect to the Receivables will be deposited (the "Collection
Account"). The Servicer will establish and maintain an account, in the name of
the Trustee on behalf of the Certificateholders, in which amounts released from
the Collection Account for distribution to Certificateholders will be deposited
and from which all distributions to Certificateholders will be made (the
"Certificateholders Distribution Account"). See "Description of the Trust
Documents---Collections" in the accompanying prospectus.
DISTRIBUTIONS
On each Distribution Date, the Servicer shall instruct the Trustee to
distribute from the Collection Account the Amount Available in the following
order of priority:
1. [If BCI or an affiliate is no longer the Servicer, then] to the
Servicer, the Monthly Servicing Fee for the related Monthly Period.
S-26
<PAGE>
2. To the Insurer, the premium due on the Bond Insurance Policy.
3. To the Servicer, reimbursement for advances made with respect to
delinquent payments that were recovered during the prior Monthly Period and with
respect to advances no longer deemed collectible by the Servicer out of proceeds
of the related Receivable.
4. To the Certificate Distribution Account, all accrued interest on the
Certificate.
5. To the Certificate Distribution Account, the Total Principal
Distribution Amount for such Distribution Date.
6. To the Reserve Account, the amount, if any, necessary to restore the
balance thereof to the Required Reserve Account.
7. To BCI, any remaining amount as the Monthly Servicing Fee.
On each Distribution Date, the Trustee or its paying agent will
distribute all amounts on deposit in the Certificate Distribution Account in
payment of interest and principal on the Certificates in the manner described
above.
"Amount Available" with respect to any Distribution Date, means
generally the sum of payments on the Receivables received during the preceding
month, any advances made by the Servicer, prepayments and other unscheduled
collections received during the preceding month, any amounts deposited in
respect of Purchased Receivables, any payments made under the Bond Insurance
Policy, all earnings from the investment of funds in the Collection Account.
"Purchased Receivable" means a Receivable:
that the Seller or Depositor has become obligated to
repurchase (or, under certain circumstances, has
elected to repurchase) as a result of an uncured
breach by the Seller or Depositor of a representation
or warranty made by it with respect to such
Receivable; or
that the Servicer has become obligated to repurchase
(or, under certain circumstances, has elected to
repurchase) as a result of an uncured breach of the
covenants made by it with respect to such Receivable.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and
provide to the Trustee a statement to be delivered to the Certificateholders.
Such statements will be based on the information in the related Servicer's
Certificate setting forth certain information required under the Trust
Documents. Each such statement to be delivered to Certificateholders will
include the following information as to the Class A Certificates, with respect
to such Distribution Date or the period since the previous Distribution Date, as
applicable:
(1) the amount of the distribution allocable to interest on or
with respect to each Class of Class A Certificates;
(2) the amount of the distribution allocable to principal on
or with respect to each Class of Class A Certificates;
S-27
<PAGE>
(3) the aggregate outstanding principal balance and the
Certificate Pool Factor for each Class of Class A Certificates after
giving effect to all payments reported under (2) above on such date;
(4) the Interest Shortfall for each Class of Class A
Certificates, if any, and the change in such amounts from the preceding
statement;
(5) the amount on deposit in the Reserve Account and the
Required Reserve Account;
(6) the amount of the Monthly Servicing paid to the Servicer;
(7) the number and aggregate principal balances of delinquent
Receivables, the number of Products repossessed and repossessed and
remaining in inventory and the number of Receivables that became
Liquidated Receivables with respect to the immediately preceding
Monthly Period; and
(8) the aggregate amount of advances made by the Servicer with
respect to such Distribution Date, and the aggregate amount paid to the
Servicer as reimbursement of advances made on prior Distribution Dates.
Each amount set forth pursuant to subclauses (1) through (6) with
respect to Class A Certificates will be expressed as a dollar amount per $______
of the initial principal amount of the Class A Certificates.
Unless and until Certificates are issued in registered form
("Definitive Certificates") to the Certificateholders or their nominees, rather
than to The Depository Trust Company, such reports will be sent on behalf of the
Trust to Cede & Co., as registered holder of the Class A Certificates and the
nominee of The Depositary Trust Company. Class A Certificate Owners may receive
copies of such reports upon written request, together with a certification that
they are Class A Certificate Owners, and payment of any expenses associated with
the distribution of such reports, from the Trustee. See "Reports to
Securityholders" herein and "Reports to Securityholders" and "Certain
Information Regarding the Securities" in the accompanying prospectus.
Within the required period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during such calendar
year was a Certificateholder, a statement as to the aggregate amounts of
interest and principal paid to such Certificateholder, information regarding the
amount of servicing compensation received by the Servicer and such other
information as the Depositor deems necessary to enable such Certificateholder to
prepare its tax returns. See "Certain Federal Income Tax Consequences" herein.
ADMINISTRATOR
BCI will provide the notices and perform other administrative
obligations required by the Trust Agreement (in such capacity, the
"Administrator"). The Administrator, will enter into an Administration Agreement
with the Trust relating to its duties and obligations as Administrator.
THE BOND INSURANCE POLICY
The following information and the information under "--The Insurer"
herein have been supplied by the Insurer for inclusion in this prospectus
supplement. No representation is made by the Underwriters, the Seller, the
Servicer, the Depositor or any of their affiliates as to the accuracy or
completeness of such information. Terms defined herein are exclusive to this
section and "--The Insurer" herein.
The Insurer, in consideration of the payment of the premium and subject
to the irrevocable financial guaranty insurance policy issued by the Insurer for
the benefit of the Class A Certificateholders (the "Bond Insurance Policy"),
thereby unconditionally and irrevocably guarantees to any Class A
Certificateholder that an
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<PAGE>
amount equal to each full and complete Insured Payment will be received by the
Trustee, or its successor, on behalf of the Class A Certificateholder from the
Insurer, for distribution by the Trustee to each Class A Certificateholder of
each Class A Certificateholder's proportionate share of the Insured Payment. The
Insurer's obligations under the Bond Insurance Policy with respect to a
particular Insured Payment shall be discharged to the extent funds equal to the
applicable Insured Payment are received by the Trustee, whether or not such
funds are properly applied by the Trustee. Insured Payments shall be made only
at the time set forth in the Bond Insurance Policy, and no accelerated Insured
Payments shall be made regardless of any acceleration of the Class A
Certificates, unless such acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the Bond Insurance Policy does
not cover shortfalls, if any, attributable to the liability of the Trust or the
Trustee for withholding taxes, if any, including interest and penalties in
respect of any such liability.
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of:
(1) a certified copy of the order requiring the return of a
preference payment;
(2) an opinion of counsel satisfactory to the Insurer that
such order is final and not subject to appeal;
(3) an assignment in such form as is reasonably required by
the Insurer, irrevocably assigning to the Insurer all rights and claims
of the Owner relating to or arising under the related Class A
Certificates against the debtor which made such preference payment or
otherwise with respect to such preference payment; and
(4) appropriate instruments to effect the appointment of the
Insurer as agent for such Owner in any legal proceeding related to such
preference payment, such instruments being in a form satisfactory to
the Insurer, provided that if such documents are received after 12:00
noon New York City time on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be
disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the
Certificateholder and not to any Certificateholder directly unless such
Certificateholder has returned principal or interest paid on the
related Certificates to such receiver or trustee in bankruptcy, in
which case such payment shall be disbursed to such Certificateholder.
The Insurer will pay any other amount payable under the Bond Insurance
Policy no later than 12:00 noon, New York City time, on the later of the
Distribution Date on which the related Deficiency Amount (as defined below) is
due or the second Business Day following receipt in New York, New York on a
Business Day by ________________________, as Fiscal Agent for the Insurer or any
successor fiscal agent appointed by the Insurer (the "Fiscal Agent") of a Notice
(as described below); provided that if such Notice is received after 12:00 noon,
New York City time, on such Business Day, it will be deemed to be received on
the following Business Day. If any such Notice received by the Fiscal Agent is
not in proper form or is otherwise insufficient for the purpose of making a
claim under the Insurance Policy it shall be deemed not to have been received by
the Fiscal Agent for Purposes of this paragraph, and the Insurer or the Fiscal
Agent, as the case may be, shall promptly so advise the Trustee and the Trustee
may submit an amended Notice.
Insured Payments due under the Policy, unless otherwise stated therein,
will be disbursed by the Fiscal Agent to the Trustee on behalf of the
Certificateholders by wire transfer of immediately available funds in the amount
of the Insured Payment less, in respect of Insured Payments related to
Preference Amounts, any amount held by the Trustee for payment of such Insured
Payment and legally available therefor.
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<PAGE>
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under the Bond Insurance Policy.
As used in the Bond Insurance Policy, the following terms shall have
the following meanings:
"Deficiency Amount" means, as of any Distribution Date, the excess of
interest and principle due on the Class A Certificates over amounts
available in the Certificate Distribution Account and Reserve Account
but for the payment of any Insured Payments by the Insurer.
"Insured Payment" means any Preference Amount and, as of any
Distribution Date, any Deficiency Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached
to the Bond Insurance Policy, the original of which is subsequently
delivered by registered or certified mail, from the Trustee specifying
the Insured Payment which shall be due and owing on the applicable
Distribution Date.
"Preference Amount" means any amount previously distributed to a
Certificateholder on the related Certificate that is recoverable and
sought to be recovered as a voidable preference by a trustee in
bankruptcy pursuant to the United States Bankruptcy Code (11 U.S.C.),
as amended from time to time in accordance with a final nonappealable
order of a Court having competent jurisdiction.
Capitalized terms used in the Bond Insurance Policy and not otherwise
defined in the Bond Insurance Policy shall have the respective meanings set
forth in the Pooling and Servicing Agreement as of the date of execution of the
Bond Insurance Policy, without giving effect to any subsequent amendment or
modification to the Indenture unless such amendment or modification has been
approved in writing by the Insurer.
Any notice under the Bond Insurance Policy or service of process on the
Fiscal Agent may be made at the address listed below for the Fiscal Agent or
such other address as the Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is ____________________________,
Attention: _____________________, or such other address as the Fiscal Agent
shall specify in writing to the Trustee.
The Bond Insurance Policy is being issued under and pursuant to and
shall be construed under, the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
The insurance provided by the Bond Insurance Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Bond Insurance Policy is not cancelable for any reason. The premium
on the Bond Insurance Policy is not refundable for any reason including payment,
or provision being made for payment, prior to maturity of the Certificates.
THE INSURER
The Insurer is ________________________________, a [ ] company.
The Insurer is domiciled in the State of New York and licensed to do business
in and is subject to regulations under the laws of all 50 states, the District
of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the Territory of
Guam. New York has laws prescribing minimum capital requirements, limited
classes and concentrations of investments and requiring the approval of
S-30
<PAGE>
policy rates and forms. State laws also regulate the amount of both the
aggregate and individual risks that may be insured, the payment of dividends by
the Insurer, changes in control and transactions among affiliates. Additionally,
the Insurer is required to maintain contingency reserves on its liabilities in
certain amounts and for certain periods of time.
The consolidated financial statements of the Insurer and its
subsidiaries as of December 31, 1998 and December 31, 1997 and for the three
years ended December 31, 1998, prepared in accordance with generally accepted
accounting principles, included in the Annual Report on Form 10-K of _______ for
the year ended December 31, 1998 (which was filed with the SEC on _________,
1999) and the consolidated financial statements of the Insurer and its
subsidiaries for the nine months ended September 30, 1999 and for the periods
ending September 30, 1999 and September 30, 1998 included in the Quarterly
Report on Form 10-Q of ________ for the period ending September 30, 1998 (which
was filed with the SEC on __________, 1998), are hereby incorporated by
reference into this prospectus supplement and shall be deemed to be a part
hereof. Any statement contained in a document incorporated by reference herein
shall be modified or superseded for purposes of this prospectus supplement to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus
supplement.
All financial statements of the Insurer and its subsidiaries included in
documents filed by _______ pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, subsequent to the date of this
prospectus supplement and prior to the termination of the offering of the Class
A Certificates shall be deemed to be incorporated by reference into this
prospectus supplement and to be a part hereof from the respective dates of
filing such documents.
The tables below present selected financial information of the Insurer
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities ("SAP") and generally accepted
accounting principles ("GAAP").
<TABLE>
<CAPTION>
SAP
-----------------------------------------------------
December 31, 1998 September 30, 1999
------------------------ --------------------------
(Audited) (Unaudited)
(In millions)
<S> <C> <C>
Admitted Assets..........
Liabilities..............
Capital and Surplus......
</TABLE>
<TABLE>
<CAPTION>
GAAP
-----------------------------------------------------
December 31, 1998 September 30, 1999
------------------------ --------------------------
(Audited) (Unaudited)
(In millions)
<S> <C> <C>
Assets...................
Liabilities..............
Shareholder's Equity.....
</TABLE>
Copies of the financial statements of the Insurer incorporated by
reference herein and copies of the Insurer's 199_ year-end audited financial
statements prepared in accordance with statutory accounting practices are
available, without charge, from the Insurer. The address of the Insurer is
_____________________________. The telephone number of the Insurer is
____________.
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<PAGE>
The Insurer does not accept any responsibility for the accuracy or
completeness of this prospectus supplement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy
of the information regarding the Bond Insurance Policy and the Insurer set forth
under the heading "Description of the Trust Documents and Indenture--The Bond
Insurance Policy" herein. Additionally, the Insurer makes no representation
regarding the Class A Certificates or the advisability of investing in the Class
A Certificates.
Moody's Investors Service, Inc. rates the claims paying ability of the
Insurer "Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., rates the claims paying ability of the Insurer "AAA."
[Fitch Investors Service, L.P. rates the claims paying ability of the
Insurer "AAA."]
Each rating of the Insurer should be evaluated independently. The
ratings reflect the respective rating agency's current assessment of the
creditworthiness of the Insurer and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above ratings
may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Class A Certificates, and such ratings may be subject to revision or withdrawal
at any time by the rating agencies. Any downward revision or withdrawal of any
of the above ratings may have an adverse effect on the market price of the Class
A Certificates. The Insurer does not guaranty the market price of the Class A
Certificates nor does it guaranty that the ratings on the Class A Certificates
will not be revised or withdrawn.
RIGHTS OF THE INSURER
The Pooling and Servicing Agreement provides that the Trustee is
permitted to distribute Insured Payments only for purposes of paying the Class A
Certificateholders any amount for which a claim was made to the Insurer.
In the event an Insured Payment is made, the Insurer, until all such
Insured Payments have been fully reimbursed, will be subrogated to the rights of
Class A Certificateholders to receive any payments on the Class A Certificates.
Provided no Insurer default has occurred and is continuing, the Insurer
shall have the right to direct certain actions of the Servicer and Trustee and
shall control all Class A Certificateholder consents, approvals and directions
under the Pooling and Servicing Agreement.
The Bond Insurance Policy does not guarantee to the Certificateholders
any specified rate of principal prepayments.
CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal and state
income tax consequences relating to the purchase, ownership, and disposition of
the Class A Certificates. The discussion is based upon the 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. For additional
information regarding federal and state income tax consequences, see "Certain
Federal Income Tax Consequences--Owner Trust Series" and "Certain State Income
Tax Consequences" in the prospectus.
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<PAGE>
Prospective investors should consult their own tax advisors to
determine the federal, state, local and other tax consequences of the purchase,
ownership and disposition of the Class A Certificates. Prospective investors
should note that no rulings have been or will be sought from the IRS with
respect to any of the federal income tax consequences discussed herein or in the
accompanying prospectus, and no assurance can be given that the IRS will not
take contrary positions. Moreover, there are no cases or IRS rulings on
transactions similar to those described herein with respect to the Trust,
involving both debt and equity interests issued by a trust with terms similar to
those of the Class A Certificates. Prospective investors are urged to consult
their own tax advisors in determining the federal, state, local, foreign and any
other tax consequences to them of the purchase, ownership and disposition of the
Certificates.
In the opinion of Morgan, Lewis & Bockius LLP, for federal income tax
purposes and in the opinion of ___________, for Delaware state income tax
purposes, the Certificates will be characterized as debt and the Trust will not
be characterized as an association or a publicly traded partnership taxable as a
corporation. Each Certificateholder, by the acceptance of a Class A Certificate,
agrees to treat the Certificates as debt for federal income tax purposes. The
Class A Certificates will not be issued with original issue discount ("OID").
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("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. Title
I of ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA
make investments that are prudent, diversified, except if prudent not to
diversify, and in accordance with governing plan documents.
Certain transactions involving the purchase, holding or transfer of the
Certificates might be deemed to constitute prohibited transactions under ERISA
and the Code if assets of the Trust were deemed to be assets of a Benefit Plan.
Under a regulation issued by the United States Department of Labor (the "Plan
Assets Regulation"), the assets of the Trust would be treated as plan 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 Assets Regulation is applicable. An equity interest is defined under
the Plan Assets Regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial
equity features. The Depositor believes that the Class A Certificates should be
treated as indebtedness without substantial equity features for purposes of the
Plan Assets Regulation. However, without regard to whether the Class A
Certificates are treated as an Equity Interest for such purposes, the
acquisition or holding of Class A Certificates by or on behalf of a Benefit Plan
could be considered to give rise to a prohibited transaction if the Trust, the
Trustee, the owner of certificates, 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 acquire a Class A Certificate. Included among
these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 91-38
regarding investments by bank collective investment funds; PTCE 95-60, regarding
investments by insurance company general accounts; PTCE 96-23 regarding
transactions effected by in-house asset managers; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers."
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. Such plans may, however, be
subject to the provisions of other applicable federal and state laws, including,
for any such
S-33
<PAGE>
governmental or church plan qualified under Section 401(a) of the Code and
exempt from taxation under Section 501(a) of the Code, the prohibited
transaction rules set forth in Section 503 of the Code.
A plan fiduciary considering the purchase of Class A Certificates
should consult its tax and/or legal advisors regarding whether the assets of the
Trust would be considered plan assets, the possibility of exemptive relief from
the prohibited transaction rules and other issues and their potential
consequences.
UNDERWRITING
Each of the underwriters named below severally agreed, subject to the
terms and conditions of the Underwriting Agreement (the "Underwriting
Agreement") among each of the underwriters, the Depositor and [BCI] to purchase
from the Depositor the respective principal amounts of Class A Certificates set
forth opposite its name below:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
CERTIFICATES CERTIFICATES
---------------- ----------------
<S> <C> <C>
$ $
Merrill Lynch, Pierce, Fenner & Smith Incorporated.....
[Underwriter]..........................................
Total..................................................
================ ================
</TABLE>
The Depositor has been advised by the underwriters that they propose
initially to offer the Class A Certificates to the public at the respective
offering prices set forth on the cover page of this prospectus supplement and to
certain dealers at such price less a concession not in excess of the respective
amounts set forth in the table below, expressed as a percentage of the Principal
Balance of the applicable Class. The underwriters may allow and such dealers may
reallow a discount not in excess of the respective amounts set forth in the
table below to certain other dealers.
<TABLE>
<CAPTION>
SELLING REALLOWANCE
CLASS CONCESSION DISCOUNT
- ----------------------------------- ---------------- -----------------
<S> <C> <C>
A-1................................ % %
A-2................................ % %
</TABLE>
Until the distribution of the Class A Certificates is completed, rules
of the Commission may limit the ability of the underwriters and certain selling
group members to bid for and purchase the Class A Certificates. As an exception
to these rules, the underwriters are permitted to engage in certain transactions
that stabilize the price of the Class A Certificates. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the price
of the Class A Certificates.
If the underwriters create a short position in the Class A Certificates
in connection with the offering, i.e., if they sell more Class A Certificates
than are set forth on the cover page of this prospectus supplement, the
underwriters may reduce that short position by purchasing Class A Certificates
in the open market.
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.
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 prices of the Class A
Certificates. In addition, neither the Depositor nor any of the underwriters
make any representation that the underwriters will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
S-34
<PAGE>
The Depositor does not intend to apply for listing of the Class A
Certificates on a national securities exchange, but has been advised by the
underwriters that the underwriters currently intend to make a market in the
Class A Certificates, as permitted by applicable laws and regulations. The
underwriters are not obligated, however, to make a market in the Class A
Certificates and any such market may be discontinued at any time at the sole
discretion of the underwriters. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Class A Certificates.
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 Depositor and the
underwriters will promptly deliver, or cause to be delivered, without charge, a
paper copy of the prospectus supplement and prospectus.
LEGAL MATTERS
Certain matters with respect to the legality of the Class A
Certificates and with respect to the federal and New York income tax matters
discussed under "Certain Federal and State Income Tax Consequences" will be
passed upon for the Seller by Morgan, Lewis & Bockius LLP, New York, New York.
The validity of the Class A Certificates will be passed upon for the
underwriters by Brown & Wood LLP, New York, New York.
S-35
<PAGE>
INDEX OF DEFINED TERMS IN PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Amount Available............................................................S-27
BCI.........................................................................S-18
Benefit Plan................................................................S-33
Bond Insurance Policy.......................................................S-28
Calculation Agent...........................................................S-24
Certificates................................................................S-11
Class A Certificates........................................................S-11
Class B Certificates........................................................S-11
Code........................................................................S-32
Collection Account..........................................................S-26
CPR.........................................................................S-20
Cut-Off Date................................................................S-11
Defaulted Receivable........................................................S-25
Deficiency Amount...........................................................S-30
Definitive Certificates.....................................................S-28
Due Date....................................................................S-25
ERISA.......................................................................S-33
Fiscal Agent................................................................S-29
Floating Rate Interest Accrual Period.......................................S-23
Formula Principal Distribution Amount.......................................S-24
Formula Principal Shortfall.................................................S-25
GAAP........................................................................S-31
Insured Payment.............................................................S-30
Insurer.....................................................................S-28
Interest Reset Period.......................................................S-23
LIBOR.......................................................................S-23
LIBOR Business Day..........................................................S-23
LIBOR Determination Date....................................................S-23
Liquidated Receivable.......................................................S-25
Modeling Assumptions........................................................S-21
Monthly Period..............................................................S-25
Notice......................................................................S-30
OID.........................................................................S-33
Plan Assets Regulation......................................................S-33
Pool Scheduled Principal Balance............................................S-26
Pooling and Servicing Agreement.............................................S-11
Preference Amount...........................................................S-30
Principal Balance...........................................................S-23
Products....................................................................S-11
PTCE........................................................................S-33
Purchased Receivable........................................................S-27
Receivable Files............................................................S-12
Receivable Rate.............................................................S-13
Receivables.................................................................S-11
Receivables Purchase Agreement..............................................S-11
Required Reserve Amount.....................................................S-25
Reserve Account.............................................................S-25
SAP.........................................................................S-31
Scheduled Principal Balance.................................................S-25
Seller......................................................................S-11
Servicer....................................................................S-11
Stated Maturity Date........................................................S-24
Telerate Page 3750..........................................................S-23
</TABLE>
S-36
<PAGE>
<TABLE>
<S> <C>
Total Principal Distribution Amount.........................................S-24
Transfer Agreement..........................................................S-11
Trust.......................................................................S-11
Trust Documents.............................................................S-26
Trustee.....................................................................S-11
Underwriting Agreement......................................................S-34
</TABLE>
S-37
<PAGE>
BCI CONSUMER RECEIVABLE TRUST 1999-____
ASSET-BACKED NOTES,
SERIES 1998-__
BOMBARDIER CAPITAL CF II INC.
DEPOSITOR
BOMBARDIER CAPITAL INC.
SELLER AND SERVICER
$___,___,___, ___% ASSET BACKED CERTIFICATES, CLASS A-1
$___, ___,___, FLOATING RATE ASSET BACK CERTIFICATES, CLASS A-2
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
MERRILL LYNCH & CO.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information.
We are not offering the Certificates in any state where the offer is
not permitted.
We do not claim the accuracy of the information in this prospectus
supplement and the accompanying prospectus as of any date other than the dates
stated on their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting
as underwriters of the offered certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the Certificates
will deliver a prospectus supplement and prospectus until , 1999.
<PAGE>
Information contained in this prospectus supplement and the accompanying
prospectus is not complete and may be changed. A registration statement relating
to these securities has been filed with the SEC but has not yet been declared
effective by the SEC. We may not sell these securities until the final
prospectus supplement and prospectus are delivered. This prospectus supplement
and the accompanying prospectus do not constitute an offer to sell these
securities in any state where it is not permitted.
PRELIMINARY PROSPECTUS SUPPLEMENT DATED __________ __, 1999
SUBJECT TO COMPLETION
PROSPECTUS SUPPLEMENT [LOGO]
(TO PROSPECTUS DATED ________ __, 199_)
$_________________
BCI CONSUMER RECEIVABLE TRUST 1999-_
$________________ ____% ASSET BACKED NOTES, CLASS A-1
$________________ FLOATING RATE ASSET BACKED NOTES, CLASS A-2
$________________ ____% ASSET BACKED NOTES, CLASS A-3
BOMBARDIER CAPITAL CF II INC.
DEPOSITOR
BOMBARDIER CAPITAL INC.
SELLER AND SERVICER
INVESTING IN THESE NOTES INVOLVES RISKS. YOU SHOULD NOT PURCHASE THESE NOTES
UNLESS YOU FULLY UNDERSTAND THEIR RISKS AND STRUCTURE. SEE "RISK FACTORS"
BEGINNING ON PAGE S-__ OF THIS PROSPECTUS SUPPLEMENT.
These notes will be obligations of the trust only. Neither these notes nor the
assets of the trust will be obligations of Bombardier Capital CF II Inc.,
Bombardier Capital Inc. or any of their respective affiliates.
GENERAL:
Bombardier Consumer Receivable Trust 1999-___ will issue the above
notes. The trust's main source of funds for making payments on the notes
will be collections on the pool of receivables owned by the trust and a
bond insurance policy. The receivables consist of retail installment sales
contracts and promissory notes for the purchase of a variety of consumer
products and equipment.
Interest and principal will be payable on the __th of each month. The
first payment will be due ___________, 1999.
Principal will be paid on the notes in sequence. All principal will be
paid on the Class A-1 Notes until they are fully paid, then on Class A-2
until fully paid, and then on Class A-3 until fully paid.
CREDIT ENHANCEMENT:
The notes will be entitled to the benefit of an irrevocable financial
guaranty insurance policy to be issued by ____________ which will
unconditionally and irrevocably guarantee [certain] payments on the notes.
[Insurer Logo]
[A reserve account will be funded with an initial balance of $_________.]
[The notes will be overcollateralized since the principal balance on
________, 199_ of the receivables owned by the trust ($_____)
will exceed the initial principal balance of the notes by $________.]
OFFERING INFORMATION:
<TABLE>
<CAPTION>
Proceeds to
Price to Underwriting the Depositor
Public Discount (Before Expenses)
-------- ------------ ---------------
<S> <C> <C> <C>
Per Class A-1 Note........... ________% ___________% ______________%
Per Class A-2 Note........... ________% ___________% ______________%
Per Class A-3 Note........... ________% ___________% ______________%
Total........................ $ $ $
========= ============ ===============
</TABLE>
---------------
<PAGE>
The underwriters' offer of the notes is subject to conditions which are
discussed in the "Underwriting" section of this prospectus supplement. We expect
that delivery of the notes will be made in book-entry form only through the
facilities of The Depository Trust Company and Cedelbank and the Euroclear
System on or about _____________.
Neither the SEC nor any state securities commission has approved or
disapproved the notes or determined that this prospectus supplement and
prospectus are accurate or complete. Any representation to the contrary is a
criminal offense.
---------------------------
MERRILL LYNCH & CO.
---------------------------
The date of this Prospectus Supplement is ___________ ___, 199_.
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Caption Page
------- ----
<S> <C>
IMPORTANT NOTICE . . . . . . . . . . . . . . . . . . . .S-4
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . .S-5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . .S-9
The Servicer's Limited Delinquency, Loss and
Repossession Experience. . . . . . . . . . . . . . . . .S-9
Geographic Concentration of Receivables. . . . . . . . .S-9
Limited Assets of the Trust. . . . . . . . . . . . . . .S-9
Maturity and Prepayment Considerations . . . . . . . . .S-9
The Notes May Lack Liquidity . . . . . . . . . . . . . .S-10
THE LACK OF PHYSICAL NOTES MAY CAUSE
DELAYS IN PAYMENT AND DIFFICULTIES
IN PLEDGING. . . . . . . . . . . . . . . . . . . . . . .S-10
Ratings. . . . . . . . . . . . . . . . . . . . . . . . .S-10
Certain Legal Aspects Relating to the
Ownership and Enforceability of
Receivables. . . . . . . . . . . . . . . . . . . . . . .S-11
Risks to Investors upon an Insolvency of the
Seller . . . . . . . . . . . . . . . . . . . . . . . . .S-11
The Trust. . . . . . . . . . . . . . . . . . . . . . . .S-12
General. . . . . . . . . . . . . . . . . . . . . . . . .S-12
Capitalization of the Trust. . . . . . . . . . . . . . .S-12
The Owner Trustee. . . . . . . . . . . . . . . . . . . .S-13
The Trust Property . . . . . . . . . . . . . . . . . . .S-13
The Receivables Pool . . . . . . . . . . . . . . . . . .S-14
General. . . . . . . . . . . . . . . . . . . . . . . . .S-14
Certain Other Characteristics. . . . . . . . . . . . . .S-14
Characteristics of the Receivables . . . . . . . . . . .S-14
Bombardier Capital Inc.. . . . . . . . . . . . . . . . .S-19
Delinquency, Loss and Repossession
Information. . . . . . . . . . . . . . . . . . . . . . .S-19
Delinquency Experience . . . . . . . . . . . . . . . . .S-19
WEIGHTED AVERAGE LIFE OF THE NOTES . . . . . . . . . . .S-20
Description of the Notes . . . . . . . . . . . . . . . .S-23
General. . . . . . . . . . . . . . . . . . . . . . . . .S-23
Distributions. . . . . . . . . . . . . . . . . . . . . .S-24
Interest . . . . . . . . . . . . . . . . . . . . . . . .S-24
Principal. . . . . . . . . . . . . . . . . . . . . . . .S-25
Reserve Account. . . . . . . . . . . . . . . . . . . . .S-26
Optional Redemption. . . . . . . . . . . . . . . . . . .S-27
Description of the Trust Documents and
Indenture. . . . . . . . . . . . . . . . . . . . . . . .S-27
Accounts . . . . . . . . . . . . . . . . . . . . . . . .S-27
Distributions. . . . . . . . . . . . . . . . . . . . . .S-27
Statements to Securityholders. . . . . . . . . . . . . .S-28
Administrator. . . . . . . . . . . . . . . . . . . . . .S-29
The Bond Insurance Policy. . . . . . . . . . . . . . . .S-29
The Insurer. . . . . . . . . . . . . . . . . . . . . . .S-31
Rights of the Insurer. . . . . . . . . . . . . . . . . .S-33
Certain Federal and State Income Tax
Consequences . . . . . . . . . . . . . . . . . . . . . .S-33
ERISA Considerations . . . . . . . . . . . . . . . . . .S-34
Underwriting . . . . . . . . . . . . . . . . . . . . . .S-34
Legal Matters. . . . . . . . . . . . . . . . . . . . . .S-36
INDEX OF DEFINED TERMS IN
PROSPECTUS SUPPLEMENT. . . . . . . . . . . . . . . . . .S-37
</TABLE>
S-3
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered securities is contained in (a) the
accompanying prospectus, which provides general information, some of which may
not apply to the offered securities; and (b) this prospectus supplement, which
describes the specific terms of the offered securities. IF THE TERMS OF THE
OFFERED SECURITIES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
S-4
<PAGE>
SUMMARY
This summary contains only selected information about the notes and does not
contain all information that you should consider in making your investment
decision. To fully understand the terms of the notes, you should read the
remainder of this prospectus supplement and the accompanying prospectus in their
entirety.
OFFERED SECURITIES
We are forming a trust to be named "BCI Consumer Receivable Trust 1999-__." The
trust will issue the following classes of notes:
$________ ___% Asset Backed Notes,
Class A-1,
$________ Floating Rate Asset Backed
Notes, Class A-2 and
$________ ___% Asset Backed Notes,
Class A-3.
We are offering the notes by means of this prospectus supplement and the
accompanying prospectus. The notes will represent obligations of the trust
secured by the assets of the trust.
SECURITIES NOT OFFERED
The trust will also issue $__________ principal amount of asset backed
certificates. The certificates will represent fractional undivided interests in
the trust. The certificates are not being offered hereby and the description of
them in this prospectus supplement is intended only to provide you with a better
understanding of the notes. Payments on the certificates are subordinated to
payments on the notes. The certificates will be held initially by us.
TRUST ASSETS
The trust's main source of funds for making payments on the notes will be
collections on its receivables and a bond insurance policy.
The receivables will consist of conventional retail installment sales contracts
and promissory notes for the purchase of a variety of consumer products and
equipment. The receivables have been either originated by Bombardier Capital
Inc. through dealers or purchased by it in the ordinary course of business. The
receivables are generally prepayable at any time without penalty.
The bond insurance policy will be issued by [_______________] for the benefit
of the noteholders. See "The Bond Insurance Policy" in this prospectus
supplement.
SELECTED RECEIVABLE DATA AS OF _____________, 1999
Number of receivables _________
Aggregate unpaid principal balances $________
Range of unpaid principal balances $_______-$_______
Average unpaid principal balance __________
Range of financing rates _______%-_______%
Weighted average financing rate _______%
Range of remaining terms to maturity(1) ___ months - ___ months
Weighted average remaining term to maturity(1) ___ months
Weighted average contract or promissory note age(2) ___ months
[Range of original loan-to-value ratios _______%-_______%]
[Weighted average original loan-to-value ratio _______%]
- ---------------------
(1) Assuming scheduled payments on the receivables after __________ 1, 1999
are received when due and without prepayment.
(2) Based on the number of months from and including the first monthly payment
to and including __________ 1, 1999.
PRINCIPAL PARTIES
TRUST - BCI Consumer Receivable Trust 1999-1, a Delaware business trust, will
issue the notes and certificates.
DEPOSITOR - Bombardier Capital CF II Inc., a Delaware special purpose
corporation, will form the trust and will deposit the receivables into the
trust.
SELLER - Bombardier Capital Inc. will sell the receivables to the depositor.
See "Bombardier Capital Inc." in the prospectus.
S-5
<PAGE>
SERVICER - Bombardier Capital Inc. or its wholly-owned subsidiary will service
the receivables on behalf of the trust.
INDENTURE TRUSTEE - [_______] will act as trustee under the indenture between
the trust and the indenture trustee. The notes will be issued pursuant to
the indenture. See "The Transfer Agreements -- Trustee" in this prospectus
supplement.
OWNER TRUSTEE - [______________], a Delaware trust company, will act as owner
trustee for the trust.
INSURER - _________________ will provide an irrevocable financial guaranty
insurance policy which will unconditionally and irrevocably guaranty certain
payments on the notes. See "The Bond Insurance Policy" in this prospectus
supplement for a description of this policy.
Closing Date
We expect that the notes will be issued and purchased by the underwriters on or
about ________, 1999.
DISTRIBUTIONS ON THE NOTES
General
You will receive payments of interest and principal on the notes monthly on each
payment date. Payment dates will occur on the _____th day of each month or the
first business day after the __th beginning in ________, 1999.
INTEREST PAYMENTS
On each payment date, you will be entitled to interest accrued on your notes
since the last payment date. For the ____, 1999 payment date interest will
accrue from the closing date.
PER ANNUM INTEREST RATES. The Class A-1 Notes and Class A-3 Notes will accrue
interest at a fixed rate per annum:
Class A-1 ___%
Class A-3 ___%
The Class A-1 and Class A-3 Notes will accrue interest on the basis of
a 360 day year of 30 day months. This means that on each payment date, 30
days of interest will have accrued on the Class A-1 and Class A-3 Notes,
regardless of the actual number of days since the last payment date.
The Class A-2 Notes will accrue interest at a variable rate per annum equal to
LIBOR plus ___%, subject to a maximum rate of ___%.
The Class A-2 Notes will accrue interest on the basis of the actual
number of days in each year, divided by 360. This means that on each
payment date, the number of days of interest that will have accrued on the
Class A-2 Notes will be the actual number of days since the last payment
date.
DETERMINATION OF LIBOR - For purposes of setting the interest rate on the Class
A-2 Notes, LIBOR is the rate for deposits in U.S. dollars for a one-month period
which appears on the Dow Jones Telerate Page 3750 or similar replacement page as
of 11:00 a.m., London time, on the related LIBOR determination date. See
"Description of the Notes -- Interest" in this prospectus supplement for a
discussion of the determination of LIBOR if that rate does not appear on Dow
Jones Telerate Page 3750 or similar replacement page. The LIBOR determination
date is the second London business day prior to each payment date and the
closing date. On each payment date, the interest rate on the Class A-2 Notes
will adjust based on that determination.
PRINCIPAL PAYMENTS
AMOUNT OF PRINCIPAL PAYABLE ON EACH PAYMENT DATE. The trust will make payments
of principal on the notes on each payment date in an amount generally equal to
the total amount collected as principal payments on the receivables, plus, in
certain circumstances the principal balance of defaulted receivables.
SEQUENTIAL PAYMENT AMONG CLASSES. No principal payments will be made on the
Class A-2 Notes until the Class A-1 Notes have been paid in full. No principal
payments will be made on the Class A-3 Notes until the Class A-2 Notes have been
paid in full.
STATED MATURITY DATES. The trust is required to pay the outstanding principal
amount of a class of notes, to the extent not previous paid, by the following
date:
Class Stated Maturity
- ----- ---------------
A-1
S-6
<PAGE>
A-2
A-3
OPTIONAL REDEMPTION. The trust may, but is not obligated to, redeem at par the
outstanding notes in whole, but not in part, on any payment date on which the
depositor exercises its option to purchase the receivables. The depositor may
purchase the receivables once the aggregate principal balance of the receivables
has declined to [15]% or less of their balance as of _____ 1, 1999.
CREDIT ENHANCEMENT
Bond Insurance Policy
You will have the benefit of an irrevocable financial guaranty insurance policy
issued by [____________]. See "The Insurer" in this prospectus supplement.
This bond insurance policy will permit claims to be made on it in circumstances
where collections on the receivables are insufficient to pay interest and in
certain cases principal due on the notes. See "The Bond Insurance Policy" for a
description of procedures and conditions for claims on the policy.
In all cases, amounts held in the reserve account, and available amounts from
collections on the receivables, must be exhausted before a claim can be made on
the bond insurance policy. In addition, the insurer will be entitled to direct
certain actions of the servicer and the indenture trustee and shall control all
noteholder consents, approvals and directions under the indenture.
Reserve Account
You will also have the benefit of funds held on reserve in the reserve account
by the trust. The initial amount in the reserve account will be ___% of the
principal balance of the notes as of the closing date. The indenture trustee
will apply funds in the reserve account to make payments due on the notes that
are not covered by collections on the receivables. The reserve account will be
reinstated to its required amount if sufficient funds are available after making
payments due on the notes.
Priority of Payments; Overcollateralization
On each payment date, the indenture trustee will apply the trust's available
funds as described in this document:
first, to pay the premium on the bond insurance policy and, if
Bombardier Capital Inc. is no longer the servicer, the servicing fee;
second, to reimburse the servicer for advances it has made;
third, to pay interest on the notes;
fourth, to pay principal due on the notes in the order described
herein;
fifth, if necessary, to restore the reserve account to its required
level; and
sixth, to pay amounts due to the holders of the certificates.
The notes will be overcollateralized since the principal balance of the
receivables on _____1, 1999 will exceed the initial principal balance of the
notes by approximately $__________. This overcollateralization will be
represented by the certificates. The overcollateralization of the notes is
intended to decrease the likelihood that the trust will default in making
payments due on the notes.
RATINGS
Before the notes can be issued, we must obtain a rating on the notes of "Aaa" by
Moody's Investors Service, Inc. and "AAA" by Standard & Poor's Ratings Services,
a division of The McGraw Hill Companies, Inc. The ratings of the notes will
depend primarily on an assessment by these rating agencies of the claims-paying
ability of the insurer. Any reduction in the rating assigned to the
claims-paying ability of the insurer would therefore be likely to result in a
reduction in the rating of the notes. A rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or withdrawal at any
time.
FEDERAL INCOME TAX MATTERS
In the opinion of Morgan, Lewis & Bockius LLP, for federal income tax purposes,
the notes will be characterized as debt, and the trust will not be characterized
as an association or a publicly traded partnership taxable as a corporation. See
"Certain Federal and State Income Tax Consequences" in this prospectus
supplement and "Federal Income Tax Consequences" in the prospectus.
S-7
<PAGE>
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations" in this
prospectus supplement and the prospectus, the notes are eligible for purchase by
employee benefit plans.
S-8
<PAGE>
RISK FACTORS
The notes are not suitable investments for all investors. In particular, you
should not purchase any class of notes unless you understand and are able to
bear the prepayment, credit, liquidity and market risks associated with that
class.
The notes are complex securities and it is important that you possess,
either alone or together with an investment advisor, the expertise necessary to
evaluate the information contained in this prospectus supplement and the
accompanying prospectus in the context of your financial situation.
THE SERVICER'S LIMITED DELINQUENCY, LOSS AND REPOSSESSION EXPERIENCE
You will be relying on Bombardier Capital Inc. both for its origination and
underwriting of the receivables securing the notes and for its ongoing servicing
of those receivables. Although Bombardier Capital Inc. has been in business for
over 23 years, Bombardier Capital Inc.'s Consumer Finance Division began
underwriting and servicing retail installment contracts for consumer products
and equipment in May 1997. Thus, with less than three years of operating
history, Bombardier Capital Inc.'s operations in this area may entail a higher
level of risk than that found in more established operations. These risks
include a potential increase in delinquencies and defaults on the receivables
associated with the development of new computer systems and the opening of
additional servicing facilities by Bombardier Capital Inc.'s or its affiliates.
There can be no assurance that the delinquency and loss experience on the
receivables will not exceed industry norms. Bombardier Capital Inc. does not
currently have extensive historical loss data on its consumer finance receivable
portfolio.
GEOGRAPHIC CONCENTRATION OF RECEIVABLES
Approximately __%, __%, __% and __% of the receivables by aggregate principal
balance as of ______ 1, 1999 are expected to be located in the states of ___,
___, ___ and ___. Consequently, losses and prepayments on the receivables and
the resulting payments on the notes may be affected significantly by adverse
economic conditions or other factors particularly affecting these states. No
more than [5]% of the receivables by aggregate principal balance as of ______ 1,
1999 will be located in any other state.
LIMITED ASSETS OF THE TRUST
The trust will not have any significant assets or sources of funds to make
payments on the notes other than the receivables, the bond insurance policy and
the reserve account. If for any reason the policy is unavailable, you will be
relying for repayment of your notes solely upon payments on the receivables and
amounts, if any, in the reserve account. Although funds in the reserve account
may be available to cover shortfalls in distributions of interest and principal
on the notes, the amounts available in the reserve account are limited. If the
reserve account becomes depleted and the policy becomes unavailable, the trust
will depend solely on current collections on the receivables to make payments on
the notes.
MATURITY AND PREPAYMENT CONSIDERATIONS
Each receivable generally may be prepaid at any time at the option of the
obligor and must be prepaid if the obligor sells the product securing the
receivable. Prepayments may also occur as a result of defaults, casualties to
the related products, death of an obligor or other reasons. Also, the depositor
and the seller may be required to repurchase one or more receivables from the
trust in as a result of breaches of representations and warranties, and the
depositor will have the right to purchase all remaining receivables from the
trust when their balance has declined to [15]% or less of the initial balance.
See "Description of the Trust Documents - Sale and Assignment of Receivables"
and "--Termination" in the prospectus and "Description of the Notes - Optional
Redemption" in this
S-9
<PAGE>
prospectus supplement. Each prepayment, repurchase or purchase will shorten the
average life of the notes. Prepayment rates may be influenced by a variety of
factors and cannot be predicted with any assurance.
You will bear all reinvestment risks resulting from a faster or slower rate of
prepayment on the receivables and from the rate of principal payments on the
notes.
THE NOTES MAY LACK LIQUIDITY
The underwriters intend to make a market for the purchase and sale of the notes
after their initial issuance but have no obligation to do so. There is no
assurance that a secondary market will develop or, if it develops, that it will
continue. Consequently, you may not be able to sell your notes readily or at
desirable prices.
The secondary markets for asset-backed securities have experienced periods of
illiquidity and can be expected to do so in the future. Illiquidity could have a
severely adverse effect on the prices at which the notes can be sold.
THE LACK OF PHYSICAL NOTES MAY CAUSE DELAYS IN PAYMENT AND DIFFICULTIES IN
PLEDGING
The notes will be issued only in book-entry form through The Depository Trust
Company, Euroclear or Cedelbank. Your ability to pledge a note to a person that
does not participate in those systems may be limited because of the lack of a
physical note. In addition, note payments will not be made directly to you.
Instead, the indenture trustee or its paying agent will send all distributions
to The Depository Trust Company, which will then credit those distributions to
the participating organizations. Those organizations must in turn credit
accounts you have either directly or indirectly through indirect participants
for you to receive your payments. This may cause you to experience some delay in
receiving payments on the notes.
RATINGS
The ratings of the notes will depend primarily on an assessment by Moody's and
S&P of the claims-paying ability of the insurer. Any reduction in the rating
assigned to the claims-paying ability of the insurer would likely result in a
corresponding reduction in the rating of the notes. The rating by the rating
agencies of the notes is not a recommendation to you to purchase, hold or sell
the notes. For example, the rating does not comment as to the price at which the
notes are being offered to you or the suitability of the notes for you. There is
no assurance that the ratings will remain in place for any given period of time
or that the ratings will not be lowered or withdrawn by the rating agencies. In
addition, ratings assess credit risk and do not address likelihood of
prepayments.
CERTAIN LEGAL ASPECTS RELATING TO THE OWNERSHIP AND ENFORCEABILITY OF
RECEIVABLES
Under the Indenture, the trust will grant a security interest in the receivables
to the indenture trustee for your benefit. This security interest will be
perfected by the filing of Uniform Commercial Code financing statements in
Vermont, Nevada and Florida. To facilitate servicing and save administrative
costs, however, steps which could further protect your rights under the Uniform
Commercial Code will not be taken. Bombardier Capital Inc., as servicer, and not
the indenture trustee, will maintain custody of the receivable files. Also, the
contracts evidencing the receivables will not be stamped or otherwise marked to
indicate that they have been sold to the trust and pledged to the indenture
trustee. If, in the absence of these steps, through inadvertence or otherwise,
any of the contracts evidencing the receivables are sold or pledged to another
party who takes physical possession of the contracts evidencing those
receivables, there is a risk that party will acquire an interest in the
receivables superior to the interest of the indenture trustee and the
noteholders.
Due to the administrative burden and expense, the documents reflecting
Bombardier Capital Inc.'s security interest in the products securing the
receivables will not be amended to reflect the assignment of the security
interests in the
S-10
<PAGE>
products by Bombardier Capital Inc. to the depositor or by the depositor to the
indenture trustee. In the absence of an amendment, in certain states the
indenture trustee may not have a perfected security interest in the products
securing the receivables. In addition, in certain cases Bombardier Capital Inc.,
as servicer, does not as part of its standard procedures file Uniform Commercial
Code financing statements for certain classes of products. Thus the security
interest in a particular product that has been assigned to the indenture trustee
may not have been perfected in the first instance. Moreover, statutory liens for
repair or unpaid taxes may have priority even over perfected security interests
in the products. See "Description of the Trust Documents - Sale and Assignment
of the Receivables" and "Certain Legal Aspects of the Receivables" in the
prospectus. The lack of a perfected security interest in a particular product
could prevent the trust from realizing on that product in the event of a
receivable default.
RISKS TO INVESTORS UPON AN INSOLVENCY OF THE SELLER
The seller and the depositor intend that the transfer of receivables to the
depositor will constitute an absolute transfer and assignment, rather than a
pledge of the receivables to secure indebtedness of the seller. For accounting
purposes, the seller and the depositor intend that the transfer of receivables
be treated as a financing. If the seller were to become a debtor under the
federal bankruptcy code or similar applicable state laws, a creditor or trustee
in bankruptcy of the seller or the seller as debtor-in-possession might attempt
to include the receivables in the seller's bankruptcy estate. To do so it might
argue that the transfer of receivables by the seller was in fact a pledge of the
receivables rather than an absolute transfer and assignment. Alternately or in
addition, it might argue that the assets of the depositor, including the
receivables, should be consolidated into the seller's bankruptcy estate. Either
of these positions, if presented to or accepted by a court, could cause the
trust to experience a delay in or reduction of collections on the receivables.
YEAR 2000 READINESS DISCLOSURE: YOU COULD BE ADVERSELY AFFECTED IN ABSENCE OF
YEAR 2000 COMPLIANCE
Bombardier Capital Inc. has made efforts to identify, modify or replace
computer systems which are not year 2000 compliant and to address other related
issues associated with the change of the millennium, although there is no
assurance these efforts will be fully successful. In the event that computer
problems arise out of a failure to identify, modify or replace appropriate
systems on time, or in the event that the computer systems of Bombardier Capital
Inc., the trustee or certain external suppliers are not fully year 2000
compliant, the resulting disruptions in the collection or distribution of
receipts on the receivables could materially and adversely affect the holders of
the notes
With respect to the year 2000 problem, The Depository Trust Company has
informed members of the financial community that it has developed and is
implementing a program so that its systems, as they relate to the timely payment
of distributions, including principal and interest payments, to certificate
holders, book-entry deliveries, and settlement of trades within The Depository
Trust Company, continue to function appropriately on and after January 1, 2000.
This program includes a technical assessment and a remediation plan, each of
which is complete. Additionally, The Depository Trust Company's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
Bombardier has not independently verified the information provided to it by The
Depository Trust Company.
However, The Depository Trust Company's ability to perform properly its
services is also dependent upon other parties, including but not limited to, its
participating organizations, through which you will hold your certificates, as
well as the computer systems of third party service providers. The Depository
Trust Company has informed the financial community that it is contacting and
will continue to contact third party vendors from whom The Depository Trust
Company acquires services to:
impress upon them the importance of their services being year 2000
compliant; and
S-11
<PAGE>
determine the extent of their efforts for year 2000 remediation, and, as
appropriate, testing, of their services.
In addition, The Depository Trust Company has stated that it is in the process
of developing these contingency plans as it deems appropriate.
If problems associated with the year 2000 problem were to occur with respect
to The Depository Trust Company and the services described above, payments to
you could be delayed or otherwise adversely affected.
THE TRUST
GENERAL
BCI Consumer Receivable Trust 1999-_ (the "Trust") is a business trust
formed under the laws of the State of Delaware pursuant to a Trust Agreement,
dated as of ____ 1, 1999 (the "Trust Agreement"), between the Depositor and
____________, as Owner Trustee under the Trust Agreement (the "Owner Trustee").
The Trust will be formed solely for the purpose of engaging in the transactions
described in this prospectus supplement. After its formation, the Trust will not
engage in any activity other than:
(1) acquiring, holding and managing a pool of retail installment
sales contracts and promissory notes (the "Receivables") secured by various
consumer products and equipment (the "Products") and the other assets of the
Trust and proceeds therefrom;
(2) issuing the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes (collectively, the "Notes") and the Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities");
(3) making payments on the Notes and the Certificates; and
(4) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
Not including amounts allocated in the Reserve Account, the Trust will
initially be capitalized with equity equal to approximately $[_____________],
which is the difference between the aggregate principal amount of the
Receivables as of ________ 1, 1999 (the "Cut-off Date") and the initial
aggregate principal amount of the Notes. The equity in the Trust, including the
right to receive distributions from the Reserve Account, will be evidenced by
the Certificates issued by the Trust to the Depositor, which may thereafter hold
the equity or sell or otherwise transfer it. The net proceeds from the sale of
the Notes will be used by the Trust to purchase the Receivables from the
Depositor pursuant to the Sale and Servicing Agreement, dated as of ____ 1, 1999
(the "Sale and Servicing Agreement"), among the Depositor, the Trust, Bombardier
Capital Inc., as Servicer (in that capacity, the "Servicer"), and the Indenture
Trustee. Simultaneously, Bombardier Capital Inc., in its capacity as Seller
under the Transfer Agreement (in this capacity, the "Seller") will have
[contributed] [sold] and absolutely assigned the Receivables to the Depositor
pursuant to a Transfer Agreement, dated as of ____ 1, 1999 (the "Transfer
Agreement"), between the Seller and the Depositor.
The Trust's principal offices are in Wilmington, Delaware, at the address
listed below under "- The Owner Trustee."
CAPITALIZATION OF THE TRUST
S-12
<PAGE>
The following table illustrates the capitalization of the Trust as of the
Cut-off Date, as if the issuance and sale of the Notes and Certificates had
taken place on that date:
<TABLE>
<CAPTION>
<S> <C>
Class A-1 Notes................... $ ___,___,___
Class A-2 Notes................... ___,___,___
Class A-3 Notes................... ___,___,___
Certificates...................... ___,___,___
Total......................... $ ___,___,___
=============
</TABLE>
THE OWNER TRUSTEE
[Owner Trustee] is the Owner Trustee under the Trust Agreement.
____________ is a Delaware banking corporation and its principal offices are
located at ___________________________________________. The Owner Trustee will
perform limited administrative functions under the Trust Agreement. The Owner
Trustee's liability in connection with the issuance and sale of the Certificates
and the Notes is limited solely to the express obligations of the Owner Trustee
as set forth in the Trust Agreement.
THE TRUST PROPERTY
The Trust Property will include, among other things:
(1) the Receivables;
(2) all rights to receive payments due thereon on or after the
Cut-off Date (excluding certain insurance premiums, late fees and other
servicing charges);
(3) amounts held in the Collection Account, the Reserve Account and
certain other accounts established and maintained by the Servicer pursuant
to the Sale and Servicing Agreement, as described below (including all
investments in the Collection Account and other accounts and all income from
the investment of funds therein and all proceeds thereof);
(4) an assignment of the security interests of the Seller in the
Products securing the related Receivables;
(5) an assignment of the right to receive proceeds from claims on
certain insurance policies covering the Products and the Obligors; and
(6) certain other rights under the Trust Documents.
See "The Receivables" and "Description of the Trust Documents - Collections" in
the accompanying Prospectus.
Pursuant to the Indenture, dated as of ________ 1, 1999 (the "Indenture"),
between the Trust and _________, as Indenture Trustee under the Indenture (the
"Indenture Trustee") the Trust will grant a security interest in the Trust
Property in favor of the Indenture Trustee on behalf of the Noteholders. In
addition, [ ] (the "Insurer") will issue its irrevocable financial guaranty
insurance policy (the "Bond Insurance Policy") to the Indenture Trustee for the
benefit of the Noteholders.
The Servicer, as custodian on behalf of the Trust, will hold each original
Contract evidencing a Receivable, as well as copies of documents and instruments
relating to that Receivable and evidencing the security interest in the
S-13
<PAGE>
Product securing that Receivable (the "Receivable Files"). In order to protect
the Trust's ownership interest in the Receivables, and the interests of
Noteholders in the Receivables under the Indenture, the Depositor will file
UCC-1 financing statements in Vermont, Florida and Nevada to give notice of the
Trust's ownership of the Receivables and the related Trust Property, and the
Trust will file UCC-1 financing statements in Vermont, Florida and Nevada with
respect to the Trust Property in favor of the Indenture Trustee.
THE RECEIVABLES POOL
GENERAL
The information presented in this prospectus supplement relates to the
Receivables as of the Cut-off Date. All of the Receivables will be purchased
directly or indirectly by the Seller from dealers, brokers and finance companies
who regularly originate and sell receivables to the Seller or an affiliate, or
will be originated by the Seller or an affiliate directly.
CERTAIN OTHER CHARACTERISTICS
As of the Cut-off Date, the Receivables:
(1) had a remaining maturity of at least __ months, but not more
than ___ months;
(2) had an original maturity of at least __ months, but not more
than ___ months;
(3) had an original principal balance of at least $______ and
not more than $_________;
(4) had a remaining principal balance of at least $_______ and not
more than $________; and
(5) had a contractual rate of interest ("Receivable Rate") of at
least ___% and not more than ___%.
[As of the Cut-off Date, __% of the Receivables were in an interest deferral
period and the average remaining deferral period remaining was _ months.]
Neither the Depositor nor the Servicer may substitute other Receivables for the
Receivables at any time during the term of the Sale and Servicing Agreement.
CHARACTERISTICS OF THE RECEIVABLES
Geographic Concentration of the Receivables
[TABLE]
S-14
<PAGE>
(1) Based on the billing address of the Obligor set forth in BCI's records.
* Indicates an amount greater than zero but less than .___% of the number
of Receivables or the Cut-off Date Principal Balance of the Initial
Receivables.
Types of Products
[TABLE]
S-15
<PAGE>
Distribution of Original Principal Balances of the Receivables
<TABLE>
<CAPTION>
% OF INITIAL RECEIVABLES BY
NUMBER OF RECEIVABLES AS AGGREGATE PRINCIPAL BALANCE OUTSTANDING PRINCIPAL
ORIGINAL PRINCIPAL BALANCE OF CUT-OFF DATE OUTSTANDING AS OF CUT-OFF DATE BALANCE AS OF CUT-OFF DATE
- -------------------------- ------------------------ ------------------------------ ----------------------------
<S> <C> <C> <C>
Less than $10,000................ [TABLE]
Between $10,000 and $19,999......
Between $20,000 and $29,999......
Between $30,000 and $39,999......
Between $40,000 and $49,999......
Between $50,000 and $59,999......
Between $60,000 and $69,999......
Between $70,000 and $79,999......
Between $80,000 and $89,999......
Between $90,000 and $99,999......
Between $100,000 and $109,999....
Between $110,000 and $119,999....
Between $120,000 and $129,999....
Between $130,000 and $139,999....
Between $140,000 and $149,999....
Between $150,000 and $159,999....
Between $160,000 and $169,999....
Between $170,000 and $179,999....
Between $180,000 and $189,999....
Between $190,000 and $199,999....
Between $200,000 and $249,999....
Between $250,000 and $299,999....
Between $400,000 and $449,999....
Between $450,000 and $499,999....
Between $500,000 and $549,999....
Between $550,000 and $599,999....
Between $600,000 and $649,999....
Between $650,000 and $699,999....
Between $700,000 and $749,999....
Between $750,000 and $799,999....
Between $800,000 and $849,999....
Between $850,000 and $899,999....
Between $900,000 and $949,999....
Between $950,000 and $999,999....
Over $999,999....................
------------------------ ------------------------------ ----------------------------
Total........................
======================== ============================== ============================
</TABLE>
S-16
<PAGE>
Year of Origination of the Receivables
<TABLE>
<CAPTION>
% OF INITIAL RECEIVABLES BY
NUMBER OF RECEIVABLES AS AGGREGATE PRINCIPAL BALANCE OUTSTANDING PRINCIPAL
YEAR OF ORIGINATION OF CUT-OFF DATE OUTSTANDING AS OF CUT-OFF DATE BALANCE AS OF CUT-OFF DATE
- -------------------------- ------------------------ ------------------------------ ----------------------------
<S> <C> <C> <C>
1997......................
1998......................
------------------------ ------------------------------ ----------------------------
Total
======================== ============================== ============================
</TABLE>
* Indicates an amount greater than zero but less than .___% of Statistical
Calculation Date Principal Balance.
Distribution of Original Loan-to-value Ratios of the Receivables
<TABLE>
<CAPTION>
% OF INITIAL RECEIVABLES BY
NUMBER OF RECEIVABLES AS AGGREGATE PRINCIPAL BALANCE OUTSTANDING PRINCIPAL
LOAN-TO-VALUE RATIO OF CUT-OFF DATE OUTSTANDING AS OF CUT-OFF DATE BALANCE AS OF CUT-OFF DATE
- -------------------------- ------------------------ ------------------------------ ----------------------------
<S> <C> <C> <C>
Less than 61%.............
From 61 to 65%............
From 66 to 70%............
From 71 to 75%............
From 76 to 80%............
From 81 to 85%............
From 86 to 90%............
From 91 to 95%............
Over 95%..................
------------------------ ------------------------------ ----------------------------
Total.................
======================== ============================== ============================
</TABLE>
S-17
<PAGE>
Receivable Rates
<TABLE>
<CAPTION>
% OF INITIAL RECEIVABLES BY
NUMBER OF RECEIVABLES AS AGGREGATE PRINCIPAL BALANCE OUTSTANDING PRINCIPAL
RECEIVABLE RATE OF CUT-OFF DATE OUTSTANDING AS OF CUT-OFF DATE BALANCE AS OF CUT-OFF DATE
- -------------------------- ------------------------ ------------------------------ ----------------------------
<S> <C> <C> <C>
Less than 7.001%..........
7.001% to 8.000%..........
8.001% to 9.000%..........
9.001% to 10.000%.........
10.001% to 11.000%........
11.001% to 12.000%........
12.001% to 13.000%........
13.001% to 14.000%........
14.001% to 15.000%........
15.001% to 16.000%........
16.001% to 17.000%........
Over 17.000%..............
------------------------ ------------------------------ ----------------------------
Total.................
======================== ============================== ============================
</TABLE>
Remaining Months to Maturity of the Receivables
<TABLE>
<CAPTION>
% OF INITIAL RECEIVABLES BY
REMAINING MONTHS TO NUMBER OF RECEIVABLES AS AGGREGATE PRINCIPAL BALANCE OUTSTANDING PRINCIPAL
MATURING OF CUT-OFF DATE OUTSTANDING AS OF CUT-OFF DATE BALANCE AS OF CUT-OFF DATE
- -------------------------- ------------------------ ------------------------------ ----------------------------
<S> <C> <C> <C>
Fewer than 31.............
31 to 60..................
61 to 90..................
91 to 120.................
121 to 150................
151 to 180................
181 to 210................
211 to 240................
------------------------ ------------------------------ ----------------------------
Total.................
======================== ============================== ============================
</TABLE>
S-18
<PAGE>
Bombardier Capital Inc.
The following information supplements the information in the prospectus
under the heading "Bombardier Capital Inc."
DELINQUENCY, LOSS AND REPOSSESSION INFORMATION
The following tables set forth information relating to Bombardier Capital
Inc.'s ("BCI") delinquency, loss and repossession experience for each period
indicated with respect to all financing to retail customer and equipment
receivables it has purchased and continues to service, including receivables
which do not meet the criteria for selection as a Receivable. BCI began
underwriting and servicing retail installment contracts for consumer products
and equipment in May of 1997. Thus, contracts have not yet exhibited a
delinquency and loss experience that is likely to be representative of the
delinquencies that may be experienced over a longer period of time. In addition,
because of the rapid growth of BCI's portfolio of consumer product and equipment
receivables, the experience shown in more recent periods may not be indicative
of the experience to be expected from a more seasoned portfolio. No
representation is made as to the possible likelihood, amount, timing or severity
of delinquencies and losses which might occur with respect to the Receivables.
Delinquency Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended
Dec. 31, 1997 March 31, 1998 June 30, 1998 Sept. 30, 1998 Dec. 31, 1998 March 31, 1999
------------------ ------------------ ------------------ ---------------- ----------------- -----------------
% of total % of total % of total % of total % of total % of total
receivable receivable receivable % receivable receivable receivable
$ value balance $ value balance $ value balance value balance $ value balance $ value balance
-------- ------- -------- ------- ------- -------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding.......
Receivables
Delinquent
30-59 Days......
60-89 Days......
90 Days or More.
Total Receivables
Delinquent........
------------------ ------------------ ------------------ ---------------- -----------------
================== ================== ================== ================ =================
</TABLE>
Loss/Repossession Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended Quarter ended
Dec. 31, 1997 March 31, 1998 June 30, 1998 Sept. 30, 1998 Dec. 31, 1998 March 31, 1999
------------------ ------------------ ------------------ ---------------- ----------------- -----------------
% of total % of total % of total % of total % of total % of total
receivable receivable receivable receivable % receivable % receivable
$ value balance $ value balance $ value balance % value balance value balance value balance
-------- ------- -------- ------- ------- -------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding.......
Receivable
Liquidations):....
Net Losses:.......
</TABLE>
S-19
<PAGE>
The figures for "Receivables Outstanding" in the immediately preceding table
do not take not take into account receivables already in repossession. The
periods of delinquency set out in the immediately preceding table are based on
the number of days payments are contractually past due, assuming 30-day months.
Consequently, a receivable due on the first day of a month is not 30 days
delinquent until the first day of the next month.
The data in this table reflect circumstances as of the end of the period
indicated. Figures for "Receivables Outstanding" include receivables already in
repossession. The information on "Receivable Liquidations" reflects this
activity during each quarter, as a percentage of the total number of receivables
being serviced as of period end. The calculation of net loss includes unpaid
interest to the date of repossession and all expenses of repossession and
liquidation during each quarter.
There can be no assurance that the delinquency, loss or repossession
experience of the Trust with respect to the Receivables will be better than,
worse than or comparable to the experience set forth above. See "Risk Factors--
The Servicer's Limited Delinquency, Loss and Repossession Experience" herein.
WEIGHTED AVERAGE LIFE OF THE NOTES
The following information is given solely to illustrate the effect of
prepayments on the Receivables on the weighted average life of the Notes under
the stated assumptions and is not a prediction of the prepayment rate that might
actually be experienced by the Receivables.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of that security will be
repaid to the investor. The weighted average life of the Notes will be
influenced by the rate at which principal on the Receivables is paid. Principal
payments on the Receivables may be in the form of scheduled amortization or
prepayments, including, for this purpose, liquidations due to default. The rate
of prepayments on the Receivables may be influenced by a variety of social and
other factors and cannot be predicted. In addition, the Depositor has the option
to purchase from the Trust all remaining Receivables, and thereby effect early
redemption of the Notes and early retirement of the Certificates, on any Payment
Date when the Pool Scheduled Principal Balance is 15% or less of the Cut-off
Date Pool Principal Balance. See "Description of the Trust Documents--
Termination" in the prospectus and "Description of the Trust Documents and
Indenture--Termination" herein. Noteholders will bear all reinvestment risks
resulting from the timing of principal payments on the Notes. See "Yield and
Prepayment Considerations" in the prospectus.
The Base Case prepayment model is an example of the prepayment rates that
may be experienced on the Receivables. Because BCI began originating and
servicing Receivables for many of the Products only recently, the model is based
in part on industry experience with similar Receivables rather than BCI's
experience. There can be no assurance that the Receivables will experience
prepayments at projected rates or in the manner assumed by the prepayment model
used for that type of Receivable, or that the Receivables in the aggregate will
experience prepayments similar to the overall prepayment rate or in the manner
assumed in the Base Case.
S-20
<PAGE>
<TABLE>
<CAPTION>
Product Base Case Prepayment Rate
<S> <C>
Horse Trailers and Trucks. . . . . . . . . . . . . . . . . . . . ___% CPR
Power Sports Vehicles. . . . . . . . . . . . . . . . . . . . . . ___% CPR
Keyboard Instruments . . . . . . . . . . . . . . . . . . . . . . ___% CPR
Recreational Vehicles. . . . . . . . . . . . . . . . . . . . . . ___% CPR
Marine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___% CPR
Motorcycles. . . . . . . . . . . . . . . . . . . . . . . . . . . ___% CPR
Golf Carts . . . . . . . . . . . . . . . . . . . . . . . . . . . ___% CPR
Lawn and Garden Equipment. . . . . . . . . . . . . . . . . . . . ___% CPR
Neighborhood Vehicles. . . . . . . . . . . . . . . . . . . . . . ___% CPR
</TABLE>
The model used in this prospectus supplement is the Constant Prepayment Rate
("CPR"). The CPR represents an assumed constant rate of prepayment each month,
expressed as a per annum percentage of the outstanding principal balance of the
Receivables secured by the particular Product types listed above.
As used in the following tables, the columns headed __%, __%, ___%, ___% and
___% assume that prepayments on the Receivables are made at Base Case Prepayment
Rates of __%, __%, ___%, ___% and ___%, respectively. For example, __% Base Case
Prepayment Rate and ___% Base Case Prepayment Rate mean that Receivables related
to horse trailers, power sport vehicles, keyboard instruments and recreational
vehicles have been assumed to have a prepayment rate equal to ___% CPR and ___%
CPR, respectively. CPR DOES NOT PURPORT TO BE AN HISTORICAL DESCRIPTION OF
PREPAYMENT EXPERIENCE OR A PREDICTION OF THE ANTICIPATED RATE OF PREPAYMENT OF
ANY POOL OF RECEIVABLES, INCLUDING THE RECEIVABLES.
The percentages and weighted average lives in the following tables were
determined assuming that:
(1) scheduled interest and principal payments on the Receivables
are received in a timely manner and prepayments are made at the percentages
of the Base Case prepayment model set forth in the table;
(2) the Servicer exercises its right of optional termination
described above;
(3) the aggregate principal balance of the Receivables as of the
Cut-off Date is $___,___,___.__ and the Receivables have the characteristics
described under "Assumed Characteristics of the Receivables as of the
Cut-Off Date";
(4) no interest shortfalls will arise in connection with
prepayments in full of the Receivables;
(5) distributions are made on the Notes on the ___ day of each
month commencing in [Date]; and
(6) the Notes are issued on [Date] (collectively, the "Modeling
Assumptions").
No representation is made that the Receivables will not experience delinquencies
or losses.
S-21
<PAGE>
Assumed Characteristics of the Receivables as of the Cut-off Date
<TABLE>
<CAPTION>
Weighted Average Aggregate Principal Weighted Average Weighted Average
Balance Outstanding Receivable Rate Original Term Remaining Term
<S> <C> <C> <C> <C>
Horse Trailers and
Trucks......................
Power Sports Vehicles.......
Keyboard Instruments........
Recreational Vehicles.......
Marine......................
Motorcycles.................
Golf Carts..................
Lawn and Garden
Equipment...................
Neighborhood Vehicles
Total...................
</TABLE>
- --------
(1) Based on scheduled payments due after the Cut-off Date and assuming no
prepayments on the Receivables.
Based on the foregoing assumptions, the following tables indicate the
projected weighted average lives of each Class of Notes and set forth the
percentages of the original Principal Balance of each Class that would be
outstanding after each of the dates shown, at the indicated percentages of the
Base Case Prepayment Rate. Investors are urged to make their investment
decisions on a basis that includes their determination as to anticipated
prepayment rates under a variety of the assumptions discussed herein.
Percentage of the Original Principal Balance of the Class A-1
Notes at the Respective Percentages of the
Base Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
DATE __% __% __% __% __%
- ---------------------------- ------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Initial Percentage..........
[DATE]......................
Weighted Average Life Years
</TABLE>
The weighted average life of a Class A-1 Note set forth in the immediately
preceding table is determined by adding the products of the amount of cash
distributions in reduction of the principal balance of that Note multiplied by
the number of years from the date of issuance of the Class A-1 Note to the
stated Payment Date and dividing the sum by the initial principal balance of the
Class A-1 Note.
S-22
<PAGE>
Percentage of the Original Principal Balance of the Class A-2
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
DATE __% __% __% __% __%
- ---------------------------- ------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Initial Percentage..........
[DATE]......................
[DATE]......................
[DATE]......................
Weighted Average Life Years.
</TABLE>
The weighted average life of a Class A-2 Note set forth in the immediately
preceding table is determined by adding the products of the amount of cash
distributions in reduction of the principal balance of that Note multiplied by
the number of years from the date of issuance of the Class A-2 Note to the
stated Payment Date and dividing the sum by the initial principal balance of
such Class A-2 Note.
Percentage of the Original Principal Balance of the Class A-3
Notes at the Respective Percentages of the
Base Case Prepayment Model Set Forth Below:
<TABLE>
<CAPTION>
DATE __% __% __% __% __%
- ---------------------------- ------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Initial Percentage..........
[DATE]......................
[DATE]......................
[DATE]......................
[DATE]......................
Weighted Average Life Years.
</TABLE>
The weighted average life of a Class A-3 Note set forth in the immediately
preceding table is determined by adding the products of the amount of cash
distributions in reduction of the principal balance of that Note multiplied by
the number of years from the date of issuance of the Class A-3 Note to the
stated Payment Date and dividing the sum by the initial principal balance of the
Class A-3 Note.
DESCRIPTION OF THE NOTES
The following information supplements and, to the extent inconsistent
therewith, supersedes the information contained in the accompanying prospectus.
Prospective Noteholders should consider, in addition to the information below,
the information in the accompanying prospectus under "The Notes," "Certain
Information Regarding the Securities," and "Description of the Trust Documents."
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, as executed, will be filed with the Commission following the issuance
of the Securities. The following summary describes certain terms of the Notes
and the Indenture. The summary does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, all the provisions of the
Notes and the Indenture. The following summary supplements the description of
the general terms and provisions of the Notes of any given series and the
related Indenture set forth in the
S-23
<PAGE>
accompanying prospectus, to which description reference is hereby made.
___________________, a [national banking association] headquartered in
____________, ______, will be the Indenture Trustee.
DISTRIBUTIONS
Noteholders will be entitled to receive distributions of interest and
principal on each Payment Date commencing in ____ __, to the extent that funds
available are sufficient therefor. Distributions on the Notes generally will be
made from funds available first in respect on interest on the Notes, then in
respect of principal on the Notes, in the manner and order of priority set forth
below.
INTEREST
Interest on the Principal Balance of each Class of Notes will accrue from
the Closing Date, or from the most recent Payment Date on which interest has
been paid, to but excluding the following Payment Date, at the Interest Rate for
that Class. The "Principal Balance" of any Class of Notes as of any Payment Date
will be the original Principal Balance minus all amounts previously distributed
to the Noteholders of that Class in respect of principal.
Interest on the Class A-1 and Class A-3 Notes will be calculated on the
basis of a 360-day year of twelve 30-day months. Interest on the Class A-2 Notes
will be calculated on the basis of the actual number of days in each period
beginning on and including a Payment Date and ending on but excluding the next
Payment Date; provided that the first period begins on and include the Closing
Date and end on but exclude the next Payment Date (each a "Floating Rate
Interest Accrual Period").
Interest will be paid on the Notes on each Payment Date to the extent of
funds available on that date. In the event the funds available are not
sufficient to make a full payment of interest on the Notes, the funds available
will be applied pro rata to each Class of Notes based on the amount payable to
each Class and the amount of the shortfall will be carried forward and added to
the amount of interest payable on the next Payment Date. Any amount carried
forward will bear interest at the Interest Rate for that Class, to the extent
legally permissible.
Determination of LIBOR.
LIBOR, for the purposes of calculating the Class A-2 Rate, will be
determined as described in this paragraph. "LIBOR" with respect to any Interest
Reset Period will be established by the Calculation Agent and will equal the
offered rate for United States dollar deposits for one month that appears on
Telerate Page 3750 as of 11:00 A.M., London time, on the second LIBOR Business
Day prior to that Interest Reset Period (a "LIBOR Determination Date"). The
"Interest Reset Period" for the calculation of LIBOR will be the Floating Rate
Interest Accrual Period. "Telerate Page 3750" means the display page so
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service, or such other service as may be nominated as the
information vendor, for the purpose of displaying London interbank offered rates
of major banks). If such rate appears on Telerate Page 3750, LIBOR will be such
rate. "LIBOR Business Day" as used herein means a day that is both a Business
Day and a day on which banking institutions in the City of London, England are
not required or authorized by law to be closed. If on any LIBOR Determination
Date the offered rate does not appear on Telerate Page 3750, the Calculation
Agent will request each of the reference banks, which shall be major banks that
are engaged in transactions in the London interbank market selected by the
Calculation Agent, to provide the Calculation Agent with its offered quotation
for United States dollar deposits for one month to prime banks in the London
interbank market as of 11:00 A.M., London time, on such date. If at lease two
reference banks provide the Calculation Agent with such offered quotations,
LIBOR on such date will be the arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a
percentage point rounded upward, of all such quotations. If on such date fewer
than two of the reference banks provide the Calculation Agent with such offered
quotations, LIBOR on such date will be the arithmetic mean, rounded upwards, if
necessary, to
S-24
<PAGE>
the nearest 1/100,000 of 15 (.0000001), with five one-millionths of a percentage
point rounded upwards, of the offered per annum rates that one or more leading
banks in The City of New York selected by the Calculation Agent are quoting as
of 11:00 A.M., New York City time, on such date to leading European banks for
United States dollar deposits for one month; provided, however, that if such
banks are not quoting as described above, LIBOR for such date will be LIBOR
applicable to the Interest Reset Period immediately preceding such Interest
Reset Period. The "Calculation Agent" with respect to the Class A-2 Notes will
be the Indenture Trustee.
PRINCIPAL
Noteholders will be entitled to receive on each Payment Date as payment of
principal, in the manner and order of priority set forth below, an amount equal
to the Total Principal Distribution Amount for such Payment Date. Such amount
will paid as principal on the Class A-1 Notes until the Class A-1 Notes have
been paid in full, then on the Class A-2 Notes until the Class A-2 Notes have
been paid in full, and then on the Class A-3 Notes until the Class A-3 Notes
have been paid in full.
To the extent not paid in full prior to such date, the outstanding principal
amount of each Class of Notes will be payable on the following "Stated Maturity
Date" for such Class:
Class A-1: [DATE]
Class A-2: [DATE]
Class A-3: [DATE]
The "Total Principal Distribution Amount" for any Payment Date will equal:
(1) the Formula Principal Distribution Amount for such Payment Date
(described below), plus
(2) the aggregate of all Formula Principal Shortfalls, if any, for
prior Payment Dates (described below).
The "Formula Principal Distribution Amount" with respect to any Payment Date
will be an amount equal to the sum of the following amounts with respect to the
related Monthly Period (as defined below), in each case computed in accordance
with the method specified in each Receivable:
(1) all scheduled payments of principal due on each outstanding
Receivable during the related Monthly Period -- after adjustments for
previous partial principal prepayments and after any adjustments to a
Receivable's amortization schedule as a result of a bankruptcy or similar
proceeding involving the related Obligor;
(2) the Scheduled Principal Balance (as defined below) of each
Receivable which, during the related Monthly Period, was purchased by the
Seller pursuant to the Sale and Servicing Agreement on account of a breach
of a representation or warranty;
(3) all partial principal prepayments applied and all principal
prepayments in full received on Receivables during the related Monthly
Period;
(4) the Scheduled Principal Balance of each Receivable that became
a Liquidated Receivable (as defined below) during the related Monthly
Period, plus the amount of any reduction in the outstanding
S-25
<PAGE>
principal balance of a Receivable during such Monthly Period ordered as a
result of a bankruptcy or similar proceeding involving the related Obligor;
and
(5) all collections in respect of principal on the Receivables
received during the preceding Monthly Period.
A "Monthly Period" with respect to a Payment Date is the calendar month
immediately preceding the month in which such Payment Date occurs. The
"Scheduled Principal Balance" of a Receivable for any Monthly Period is its
principal balance as specified in its amortization schedule, after giving effect
to any previous partial principal prepayments and to the scheduled payment due
on its scheduled payment date (the "Due Date") in that month, and after giving
effect to any adjustments due to bankruptcy or similar proceedings. A
"Liquidated Receivable" means any Defaulted Receivable as to which the Servicer
has determined that all amounts which it expects to recover from or on account
of such Receivable through the date of disposition of the related Product have
been recovered or any defaulted Receivable in respect of which the related
Product has been realized upon and disposed of and the proceeds of such
disposition have been received.
A "Defaulted Receivable" is any Receivable as to which the Servicer has
commenced repossession procedures or assigned such Receivable to a third party
for repossession or other enforcement, but which has not become a Liquidated
Receivable.
In the event the remaining funds available for such Payment Date are not
sufficient to make a full distribution of the Formula Principal Distribution
Amount, the amount of such deficiency (the "Formula Principal Shortfall" for
such Payment Date) will be added to the Total Principal Distribution Amount for
the next Payment Date.
RESERVE ACCOUNT
The Reserve Account held by the Trust for the benefit of the Noteholders
(the "Reserve Account") will be created with an initial deposit by the Depositor
on the Closing Date of cash or Eligible Investments in the amount of $_________
(the "Required Reserve Amount"), which is ___% of the initial principal
balance of the Notes.
Amounts allocated from time to time to the Reserve Account will continue to
be held for the benefit of Noteholders. On each Payment Date, funds will be
withdrawn from the Reserve Account to the extent that the Amount Available
(after the payment of the Servicing Fee [if BCI is not the Servicer]) with
respect to any Monthly Period is less than the sum of the interest due on the
Notes plus the Total Principal Distribution Amount for such Payment Date and
will be paid to the Noteholders. On each Payment Date, the Reserve Account will
be reinstated up to the Required Reserve Amount to the extent of the portion, if
any, of the Amount Available remaining after payment of the Servicing Fee [if
BCI is not the Servicer] and the payment on the Notes of interest due thereon
and the Total Principal Distribution Amount.
After giving effect to all deposits in or withdrawals from the Reserve
Account on any Payment Date, if the amount allocated to the Reserve Account is
greater than the Required Reserve Amount for such Payment Date, except as
described below, such excess amount will be distributed to the Depositor. Upon
any distribution to the Depositor of such amounts, the Noteholders will not have
any rights in, or claims to, such amounts.
After the payment in full, or the provision for such payment, of all accrued
and unpaid interest on the Notes and the outstanding principal balance of the
Notes, any funds allocated to the Reserve Account will be paid to the Depositor.
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,
S-26
<PAGE>
in certain circumstances, the Reserve Account could be depleted. If the Bond
Insurance Policy were unavailable for any reason, and the amount required to be
withdrawn from the Reserve Account to cover shortfalls in collections on the
Receivables exceeds the amount then allocated to 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.
OPTIONAL REDEMPTION
The Notes will be redeemed in whole, but not in part, on any Payment Date on
which the Servicer exercises its option to purchase the Receivables. The
Depositor may purchase the Receivables when the Pool Scheduled Principal Balance
has declined to [15]% or less of the Cut-off Date Pool Principal Balance, as
described in the accompanying prospectus under "Description of the Trust
Documents--Termination." The "Pool Scheduled Principal Balance" is the aggregate
Scheduled Principal Balance of all outstanding Receivables during a Monthly
Period. Redemption would effect early retirement of the Class A-[3] Notes. The
redemption price will be equal to the unpaid principal amount of the Notes
redeemed plus accrued and unpaid interest thereon.
DESCRIPTION OF THE TRUST DOCUMENTS AND INDENTURE
The following summary describes certain terms of the Sale and Servicing
Agreement and the Trust Agreement (together, the "Trust Documents") and the
Indenture. Forms of the Trust Documents and Indenture, as executed, have been
filed as exhibits to the Registration Statement. A copy of each of the Trust
Documents and Indenture 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 Trust
Documents and Indenture. The following summary supplements, the description of
the general terms and provisions of the Trust Documents and Indenture as such
terms are used in the accompanying prospectus and as set forth in the
accompanying prospectus, to which description reference is hereby made.
ACCOUNTS
The Servicer will establish and maintain one or more accounts, in the
name of the Indenture Trustee on behalf of the Noteholders, into which all
payments made on or with respect to the Receivables will be deposited (the
"Collection Account"). The Servicer will establish and maintain an account, in
the name of the Indenture Trustee on behalf of the Noteholders, in which amounts
released from the Collection Account for distribution to Noteholders will be
deposited and from which all distributions to Noteholders will be made (the
"Note Distribution Account"). See "Description of the Trust Documents --
Collections" in the accompanying prospectus.
DISTRIBUTIONS
On each Payment Date, the Servicer shall instruct the Indenture Trustee
to distribute from the Collection Account the Amount Available in the following
order of priority:
1. [If BCI or an affiliate is no longer the Servicer, then] to the
Servicer, the Monthly Servicing Fee for the related Monthly Period.
2. To the Insurer, the premium due on the Bond Insurance Policy.
3. To the Servicer, reimbursement for advances made with respect to
delinquent payments that were recovered during the prior Monthly Period and with
respect to advances no longer deemed collectible by the Servicer out of proceeds
of the related Receivable.
S-27
<PAGE>
3. To the Note Distribution Account, all accrued interest on the Notes.
4. To the Note Distribution Account, the Total Principal Distribution
Amount for such Payment Date.
5. To the Reserve Account, the amount, if any, necessary to restore the
balance thereof to the Required Reserve Account.
6. To an account established for the benefit of the Certificateholders,
all amounts due on the Certificates.
7. To BCI, any remaining amount as the Monthly Servicing Fee.
On each Payment Date, the Indenture Trustee or its paying agent will
distribute all amounts on deposit in the Note Distribution Account in payment of
interest and principal on the Notes in the manner described above.
"Amount Available" with respect to any Payment Date, means generally the
sum of payments on the Receivables received during the preceding month, any
advances made by the Servicer, prepayments and other unscheduled collections
received during the preceding month, any amounts deposited in respect of
Purchased Receivables, any payments made under the Bond Insurance Policy, all
earnings from the investment of funds in the Collection Account.
"Purchased Receivable" means a Receivable that the Seller or Depositor
has become obligated to repurchase, or, under certain circumstances, has elected
to repurchase, as a result of an uncured breach by the Seller or Depositor of a
representation or warranty made by it with respect to such Receivable or that
the Servicer has become obligated to repurchase, or, under certain
circumstances, has elected to repurchase, as a result of an uncured breach of
the covenants made by it with respect to such Receivable.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Payment Date, the Servicer will prepare and provide
to the Indenture Trustee a statement to be delivered to the Noteholders. Such
statements will be based on the information in the related Servicer's
Certificate setting forth certain information required under the Trust
Documents. Each such statement to be delivered to Noteholders will include the
following information as to the Notes, with respect to such Payment Date or the
period since the previous Payment Date, as applicable:
1. the amount of the distribution allocable to interest on or with
respect to each Class of Notes;
2. the amount of the distribution allocable to principal on or with
respect to each Class of Notes;
3. the aggregate outstanding principal balance and the Note Pool Factor
for each Class of Notes after giving effect to all payments reported under (2)
above on such date;
4. the Interest Shortfall for each Class of Notes, if any, and the
change in such amounts from the preceding statement;
5. the amount on deposit in the Reserve Account and the Required Reserve
Account;
6. the amount of the Monthly Servicing paid to the Servicer;
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<PAGE>
7. the number and aggregate principal balances of delinquent
Receivables, the number of Products repossessed and repossessed and remaining in
inventory and the number of Receivables that became Liquidated Receivables with
respect to the immediately preceding Monthly Period; and
8. the aggregate amount of advances made by the Servicer with respect to
such Payment Date, and the aggregate amount paid to the Servicer as
reimbursement of advances made on prior Payment Dates.
Each amount set forth pursuant to subclauses (1) through (6) with
respect to Notes will be expressed as a dollar amount per $______ of the initial
principal amount of the Notes.
Unless and until Notes are issued in registered form ("Definitive
Notes") to the Noteholders or their nominees, rather than to The Depository
Trust Company, such reports will be sent on behalf of the Trust to Cede & Co.,
as registered holder of the Notes and the nominee of The Depositary Trust
Company. Note Owners may receive copies of such reports upon written request,
together with a certification that they are Note Owners, and payment of any
expenses associated with the distribution of such reports, from the Indenture
Trustee. See "Reports to Securityholders" herein and "Reports to
Securityholders" and "Certain Information Regarding the Securities" in the
accompanying prospectus.
Within the required period of time after the end of each calendar year,
the Indenture Trustee will furnish to each person who at any time during such
calendar year was a Noteholder, a statement as to the aggregate amounts of
interest and principal paid to such Noteholder, information regarding the amount
of servicing compensation received by the Servicer and such other information as
the Depositor deems necessary to enable such Noteholder to prepare its tax
returns. See "Certain Federal Income Tax Consequences" herein.
ADMINISTRATOR
BCI will provide the notices and perform other administrative
obligations required by the Indenture and the Trust Agreement (in such capacity,
the Administrator"). The Administrator, will enter into an Administration
Agreement with the Trust and the Indenture Trustee relating to its duties and
obligations as Administrator.
THE BOND INSURANCE POLICY
The following information and the information under "--The Insurer"
herein have been supplied by the Insurer for inclusion in this prospectus
supplement. No representation is made by the Underwriters, the Seller, the
Servicer, the Depositor or any of their affiliates as to the accuracy or
completeness of such information. Terms defined herein are exclusive to this
section and "--The Insurer" herein.
The Insurer, in consideration of the payment of the premium and subject
to the Bond Insurance Policy, thereby unconditionally and irrevocably guarantees
to any Noteholder that an amount equal to each full and complete Insured Payment
will be received by the Indenture Trustee, or its successor, on behalf of the
Noteholder from the Insurer, for distribution by the Indenture Trustee to each
Noteholder of each Noteholder's proportionate share of the Insured Payment. The
Insurer's obligations under the Bond Insurance Policy with respect to a
particular Insured Payment shall be discharged to the extent funds equal to the
applicable Insured Payment are received by the Indenture Trustee, whether or not
such funds are properly applied by the Indenture Trustee. Insured Payments shall
be made only at the time set forth in the Bond Insurance Policy, and no
accelerated Insured Payments shall be made regardless of any acceleration of the
Notes, unless such acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, the Bond Insurance Policy does
not cover shortfalls, if any, attributable to the liability of the Trust or the
Indenture Trustee for withholding taxes, if any, including interest and
penalties in respect of any such liability.
S-29
<PAGE>
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of:
(1) a certified copy of the order requiring the return of a
preference payment;
(2) an opinion of counsel satisfactory to the Insurer that such
order is final and not subject to appeal;
(3) an assignment in such form as is reasonably required by the
Insurer, irrevocably assigning to the Insurer all rights and claims of
the Owner relating to or arising under the related Notes against the
debtor which made such preference payment or otherwise with respect to
such preference payment; and
(4) appropriate instruments to effect the appointment of the
Insurer as agent for such Owner in any legal proceeding related to such
preference payment, such instruments being in a form satisfactory to the
Insurer;
provided that if such documents are received after 12:00 noon New York City time
on such Business Day, they will be deemed to be received on the following
Business Day. Such payments shall be disbursed to the receiver or trustee in
bankruptcy named in the final order of the court exercising jurisdiction on
behalf of the Noteholder and not to any Noteholder directly unless such
Noteholder has returned principal or interest paid on the related Notes to such
receiver or trustee in bankruptcy, in which case such payment shall be disbursed
to such Noteholder.
The Insurer will pay any other amount payable under the Bond Insurance
Policy no later than 12:00 noon, New York City time, on the later of the Payment
Date on which the related Deficiency Amount (as defined below) is due or the
second Business Day following receipt in New York, New York on a Business Day by
________________________, as Fiscal Agent for the Insurer or any successor
fiscal agent appointed by the Insurer (the "Fiscal Agent") of a Notice (as
described below); provided that if such Notice is received after 12:00 noon, New
York City time, on such Business Day, it will be deemed to be received on the
following Business Day. If any such Notice received by the Fiscal Agent is not
in proper form or is otherwise insufficient for the purpose of making a claim
under the Insurance Policy it shall be deemed not to have been received by the
Fiscal Agent for Purposes of this paragraph, and the Insurer or the Fiscal
Agent, as the case may be, shall promptly so advise the Indenture Trustee and
the Indenture Trustee may submit an amended Notice.
Insured Payments due under the Policy, unless otherwise stated therein,
will be disbursed by the Fiscal Agent to the Indenture Trustee on behalf of the
Noteholders by wire transfer of immediately available funds in the amount of the
Insured Payment less, in respect of Insured Payments related to Preference
Amounts, any amount held by the Indenture Trustee for payment of such Insured
Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent shall
in no event be liable to Owners for any acts of the Fiscal Agent or any failure
of the Insurer to deposit, or cause to be deposited, sufficient funds to make
payments due under the Bond Insurance Policy.
As used in the Bond Insurance Policy, the following terms shall have the
following meanings:
"Deficiency Amount" means, as of any Payment Date, the excess of
interest and principle due on the Notes over amounts available in the
Note Distribution Account and Reserve Account but for the payment of any
Insured Payments by the Insurer.
"Insured Payment" means any Preference Amount and, as of any Payment
Date, any Deficiency Amount.
S-30
<PAGE>
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached
to the Bond Insurance Policy, the original of which is subsequently
delivered by registered or certified mail, from the Indenture Trustee
specifying the Insured Payment which shall be due and owing on the
applicable Payment Date.
"Preference Amount" means any amount previously distributed to a
Noteholder on the related Note that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy pursuant
to the United States Bankruptcy Code (11 U.S.C.), as amended from time
to time in accordance with a final nonappealable order of a Court having
competent jurisdiction.
Capitalized terms used in the Bond Insurance Policy and not otherwise
defined in the Bond Insurance Policy shall have the respective meanings set
forth in the Indenture as of the date of execution of the Bond Insurance Policy,
without giving effect to any subsequent amendment or modification to the
Indenture unless such amendment or modification has been approved in writing by
the Insurer.
Any notice under the Bond Insurance Policy or service of process on the
Fiscal Agent may be made at the address listed below for the Fiscal Agent or
such other address as the Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is______________________________,
Attention: _____________________, or such other address as the Fiscal Agent
shall specify in writing to the Trustee.
The Bond Insurance Policy is being issued under and pursuant to and
shall be construed under, the laws of the State of New York, without giving
effect to the conflict of laws principles thereof.
The insurance provided by the Bond Insurance Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
The Bond Insurance Policy is not cancelable for any reason. The premium
on the Bond Insurance Policy is not refundable for any reason including payment,
or provision being made for payment, prior to maturity of the Notes.
THE INSURER
The Insurer is ___________________________, a [ ] company. The
Insurer is domiciled in the State of New York and licensed to do business in and
is subject to regulations under the laws of all 50 states, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the Territory of
Guam. New York has laws prescribing minimum capital requirements, limited
classes and concentrations of investments and requiring the approval of policy
rates and forms. State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by the Insurer,
changes in control and transactions among affiliates. Additionally, the Insurer
is required to maintain contingency reserves on its liabilities in certain
amounts and for certain periods of time.
The consolidated financial statements of the Insurer and its
subsidiaries as of December 31, 1998 and December 31, 1997 and for the three
years ended December 31, 1998, prepared in accordance with generally accepted
accounting principles, included in the Annual Report on Form 10- K of _______
for the year ended December 31, 1998 which was filed with the SEC on _________,
1999 and the consolidated financial statements of the Insurer and its
subsidiaries for the nine months ended September 30, 1999 and for the periods
ending September 30, 1999 and September 30, 1998 included in the Quarterly
Report on Form 10-Q of ________ for the period ending September 30, 1998 which
was filed with the SEC on __________, 1998, are hereby incorporated by reference
into this prospectus supplement and shall be deemed to be a part hereof. Any
statement contained in a
S-31
<PAGE>
document incorporated by reference herein shall be modified or superseded for
purposes of this prospectus supplement to the extent that a statement contained
herein or in any other subsequently filed document which also is incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus supplement.
All financial statements of the Insurer and its subsidiaries included in
documents filed by _______ pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, subsequent to the date of this
prospectus supplement and prior to the termination of the offering of the Notes
shall be deemed to be incorporated by reference into this prospectus supplement
and to be a part hereof from the respective dates of filing such documents.
The tables below present selected financial information of the Insurer
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities ("SAP") and generally accepted
accounting principles ("GAAP").
<TABLE>
<CAPTION>
SAP
----------------------------------------
December 31, 1998 September 30, 1999
----------------- ------------------
(Audited) (Unaudited)
(In millions)
<S> <C> <C>
Admitted Assets ......................
Liabilities ..........................
Capital and Surplus ..................
</TABLE>
<TABLE>
<CAPTION>
GAAP
----------------------------------------
December 31, 1998 September 30, 1999
----------------- ------------------
(Audited) (Unaudited)
(In millions)
<S> <C> <C>
Assets ..............................
Liabilities .........................
Shareholder's Equity ................
</TABLE>
Copies of the financial statements of the Insurer incorporated by
reference herein and copies of the Insurer's 199_ year-end audited financial
statements prepared in accordance with statutory accounting practices are
available, without charge, from the Insurer. The address of the Insurer is
_____________________________. The telephone number of the Insurer is
__________________.
The Insurer does not accept any responsibility for the accuracy or
completeness of this prospectus supplement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy
of the information regarding the Bond Insurance Policy and the Insurer set forth
under the heading "Description of the Trust Documents and Indenture -- The Bond
Insurance Policy" herein. Additionally, the Insurer makes no representation
regarding the Notes or the advisability of investing in the Notes.
Moody's Investors Service, Inc. rates the claims paying ability of the
Insurer "Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., rates the claims paying ability of the Insurer "AAA."
[Fitch Investors Service, L.P. rates the claims paying ability of the
Insurer "AAA."]
S-32
<PAGE>
Each rating of the Insurer should be evaluated independently. The
ratings reflect the respective rating agency's current assessment of the
creditworthiness of the Insurer and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above ratings
may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Notes, and such ratings may be subject to revision or withdrawal at any time by
the rating agencies. Any downward revision or withdrawal of any of the above
ratings may have an adverse effect on the market price of the Notes. The Insurer
does not guaranty the market price of the Notes nor does it guaranty that the
ratings on the Notes will not be revised or withdrawn.
RIGHTS OF THE INSURER
The Indenture provides that the Indenture Trustee is permitted to
distribute Insured Payments only for purposes of paying the Noteholders any
amount for which a claim was made to the Insurer.
In the event an Insured Payment is made, the Insurer, until all such
Insured Payments have been fully reimbursed, will be subrogated to the rights of
Noteholders to receive any payments on the Notes.
Provided no Insurer default has occurred and is continuing, the Insurer
shall have the right to direct certain actions of the Servicer and Indenture
Trustee and shall control all Noteholder consents, approvals and directions
under the Indenture.
The Bond Insurance Policy does not guarantee to the Noteholders any
specified rate of principal prepayments.
CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal and state
income tax consequences relating to the purchase, ownership, and disposition of
the Notes. The discussion is based upon the 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. For additional information
regarding federal and state income tax consequences, see "Certain Federal Income
Tax Consequences--Owner Trust Series" and "Certain State Income Tax
Consequences" in the prospectus.
Prospective investors should consult their own tax advisors to determine
the federal, state, local and other tax consequences of the purchase, ownership
and disposition of the Notes. Prospective investors should note that no rulings
have been or will be sought from the IRS with respect to any of the federal
income tax consequences discussed herein or in the accompanying prospectus, and
no assurance can be given that the IRS will not take contrary positions.
Moreover, there are no cases or IRS rulings on transactions similar to those
described herein with respect to the Trust, involving both debt and equity
interests issued by a trust with terms similar to those of the Notes.
Prospective investors are urged to consult their own tax advisors in determining
the federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the Securities.
In the opinion of Morgan, Lewis & Bockius LLP, for federal income tax
purposes, and in the opinion of ______________, for Delaware state income tax
purposes, the Notes will be characterized as debt and the Trust will not be
characterized as an association or a publicly traded partnership taxable as a
corporation. Each Noteholder, by the acceptance of a Note, agrees to treat the
Notes as debt for federal income tax purposes. The Notes will not be issued with
original issue discount ("OID").
S-33
<PAGE>
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("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. Title
I of ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA
make investments that are prudent, diversified, except if prudent not to
diversify, and in accordance with governing plan documents.
Certain transactions involving the purchase, holding or transfer of the
Securities might be deemed to constitute prohibited transactions under ERISA and
the Code if assets of the Trust were deemed to be assets of a Benefit Plan.
Under a regulation issued by the United States Department of Labor (the "Plan
Assets Regulation"), the assets of the Trust would be treated as plan 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 Assets Regulation is applicable. An equity interest is defined under
the Plan Assets Regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial
equity features. The Depositor believes that the Notes should be treated as
indebtedness without substantial equity features for purposes of the Plan Assets
Regulation. 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 owner
of certificates, 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 acquire a Note. Included among these exemptions are: Prohibited
Transaction Class Exemption ("PTCE") 90-1, regarding investments by insurance
company pooled separate accounts; PTCE 91-38, regarding investments by bank
collective investment funds; PTCE 95-60, regarding investments by insurance
company general accounts; PTCE 96-23, regarding transactions effected by
in-house asset managers; and PTCE 84-14, regarding transactions effected by
"qualified professional asset managers."
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. Such plans may, however, be
subject to the provisions of other applicable federal and state laws, including,
for any such governmental or church plan qualified under Section 401(a) of the
Code and exempt from taxation under Section 501(a) of the Code, the prohibited
transaction rules set forth in Section 503 of the Code.
A plan fiduciary considering the purchase of Notes should consult its
tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
UNDERWRITING
Each of the Underwriters named below severally agreed, subject to the
terms and conditions of the Underwriting Agreement (the "Underwriting
Agreement") among each of the underwriters and the Depositor, to purchase from
the Depositor the respective principal amounts of Notes set forth opposite its
name below:
S-34
<PAGE>
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3
Notes Notes Notes
--------- --------- ---------
<S> <C> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated ..... $ $ $
[Underwriter] ..........................................
Total ..................................................
======== ======= ========
</TABLE>
The Depositor has been advised by the underwriters that they propose
initially to offer the Notes to the public at the respective offering prices set
forth on the cover page of this prospectus supplement and to certain dealers at
such price less a concession not in excess of the respective amounts set forth
in the table below and which is expressed as a percentage of the Principal
Balance of the applicable Class. The underwriters may allow and such dealers may
reallow a discount not in excess of the respective amounts set forth in the
table below to certain other dealers.
<TABLE>
<CAPTION>
Selling Reallowance
Class Concession Discount
----- ---------- ------------
<S> <C> <C>
A-1 ............................... % %
A-2 ............................... % %
A-3 ............................... % %
</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.
If the underwriters create a short position in the Notes in connection
with the offering, i.e., if 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.
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.
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 prices of the Notes. In
addition, neither the Depositor nor any of the underwriters make any
representation that the underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The Depositor does not intend to apply for listing of the Notes on a
national securities exchange, but has been advised by the underwriters that the
underwriters currently intend to make a market in the Notes, as permitted by
applicable laws and regulations. The underwriters are not obligated, however, to
make a market in the Notes and any such market may be discontinued at any time
at the sole discretion of the underwriters. Accordingly, no assurance can be
given as to the liquidity of, or trading markets for, the Notes.
Upon receipt of a request by an investor who has received an electronic
prospectus supplement and prospectus from an underwriter or a request by the
investor's representative within the period during which there is an obligation
to deliver a prospectus supplement and prospectus, the Depositor and the
underwriters will promptly deliver, or cause to be delivered, without charge, a
paper copy of the prospectus supplement and prospectus.
S-35
<PAGE>
LEGAL MATTERS
Certain matters with respect to the legality of the Notes and with
respect to the federal and New York income tax matters discussed under "Certain
Federal and State Income Tax Consequences" will be passed upon for the Seller by
Morgan, Lewis & Bockius LLP, New York, New York. The validity of the Notes will
be passed upon for the Underwriters by Brown & Wood LLP, New York, New York.
S-36
<PAGE>
INDEX OF DEFINED TERMS IN PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Amount Available . . . . . . . . . . . . . . . . . . . . . . S-28
BCI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . S-34
Bond Insurance Policy. . . . . . . . . . . . . . . . . . . . S-13
Calculation Agent. . . . . . . . . . . . . . . . . . . . . . S-25
Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-12
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
Collection Account . . . . . . . . . . . . . . . . . . . . . S-27
CPR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . S-12
Defaulted Receivable . . . . . . . . . . . . . . . . . . . . S-26
Deficiency Amount. . . . . . . . . . . . . . . . . . . . . . S-30
Definitive Notes . . . . . . . . . . . . . . . . . . . . . . S-29
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . S-26
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Fiscal Agent . . . . . . . . . . . . . . . . . . . . . . . . S-30
Floating Rate Interest Accrual Period. . . . . . . . . . . . S-24
Formula Principal Distribution Amount. . . . . . . . . . . . S-25
Formula Principal Shortfall. . . . . . . . . . . . . . . . . S-26
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . S-13
Insured Payment. . . . . . . . . . . . . . . . . . . . . . . S-30
Insurer. . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Interest Reset Period. . . . . . . . . . . . . . . . . . . . S-24
LIBOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-24
LIBOR Business Day . . . . . . . . . . . . . . . . . . . . . S-24
LIBOR Determination Date . . . . . . . . . . . . . . . . . . S-24
Liquidated Receivable. . . . . . . . . . . . . . . . . . . . S-26
Modeling Assumptions . . . . . . . . . . . . . . . . . . . . S-21
Monthly Period . . . . . . . . . . . . . . . . . . . . . . . S-26
Note Distribution Account. . . . . . . . . . . . . . . . . . S-27
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . S-31
OID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
Owner Trustee. . . . . . . . . . . . . . . . . . . . . . . . S-12
Plan Assets Regulation . . . . . . . . . . . . . . . . . . . S-34
Pool Scheduled Principal Balance . . . . . . . . . . . . . . S-27
Preference Amount. . . . . . . . . . . . . . . . . . . . . . S-31
Principal Balance. . . . . . . . . . . . . . . . . . . . . . S-24
Products . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
PTCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Purchased Receivable . . . . . . . . . . . . . . . . . . . . S-28
Receivable Files . . . . . . . . . . . . . . . . . . . . . . S-14
Receivable Rate. . . . . . . . . . . . . . . . . . . . . . . S-14
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . S-12
Required Reserve Amount. . . . . . . . . . . . . . . . . . . S-26
Reserve Account. . . . . . . . . . . . . . . . . . . . . . . S-26
Sale and Servicing Agreement . . . . . . . . . . . . . . . . S-12
</TABLE>
S-37
<PAGE>
<TABLE>
<S> <C>
SAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
Scheduled Principal Balance. . . . . . . . . . . . . . . . . S-26
Securities . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Stated Maturity Date . . . . . . . . . . . . . . . . . . . . S-25
Telerate Page 3750 . . . . . . . . . . . . . . . . . . . . . S-24
Total Principal Distribution Amount. . . . . . . . . . . . . S-25
Transfer Agreement . . . . . . . . . . . . . . . . . . . . . S-12
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . S-12
Trust Documents. . . . . . . . . . . . . . . . . . . . . . . S-27
Underwriting Agreement . . . . . . . . . . . . . . . . . . . S-34
</TABLE>
S-38
<PAGE>
BCI CONSUMER RECEIVABLE TRUST 1999-____
ASSET-BACKED NOTES,
SERIES 1999-__
BOMBARDIER CAPITAL CF II INC.
DEPOSITOR
BOMBARDIER CAPITAL INC.
SELLER AND SERVICER
$___,___,___ ___%ASSET BACKED NOTES, CLASS A-1
$___,___,___ FLOATING RATE ASSET BACKED NOTES, CLASS A-2
$___,___,___ ___% ASSET BACKED NOTES, CLASS A-3
-----------------
PROSPECTUS SUPPLEMENT
-----------------
MERRILL LYNCH & CO.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with different information.
We are not offering the Notes in any state where the offer is not
permitted.
We do not claim the accuracy of the information in this prospectus
supplement and the accompanying prospectus as of any date other than the dates
stated on their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting
as underwriters of the offered certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the Notes will
deliver a prospectus supplement and prospectus until ________________, 1999.
<PAGE>
Information contained in this prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the SEC
but has not yet been declared effective by the SEC. We may not sell these
securities until the final prospectus, accompanied by a final prospectus
supplement, is delivered. This prospectus does not constitute an offer to sell
these securities in any state where it is not permitted.
SUBJECT TO COMPLETION DATED _______ __, 1999
PROSPECTUS
BOMBARDIER RECREATIONAL & CONSUMER TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
BOMBARDIER CAPITAL CF II INC.
(Depositor)
BOMBARDIER CAPITAL INC.
(Seller and Servicer)
CONSIDER CAREFULLY THE
RISK FACTORS BEGINNING
ON PAGE __ IN THIS
PROSPECTUS.
The Asset Backed Notes
of as given series
represent obligations of
the related trust only.
The Asset Backed
Certificates of a given
series represent
beneficial interests in
the related trust only.
Neither the Asset
Backed Notes nor the
Asset Backed
Certificates represent
obligations of or
interests in, and are not
guaranteed or insured
by, Bombardier Capital
CF II Inc. or
Bombardier Capital Inc.
or any of their
respective affiliates.
This prospectus may be
used to offer and sell
any series of securities
only if accompanied by
the prospectus
supplement for that
series.
THE TRUSTS--
A new trust will be formed to issue each series of securities. The assets
of each trust will be limited to those described below:
The primary assets of each trust will be a pool of receivables of one
or more of the following types (as specified in the supplement to this
prospectus):
retail installment sales contracts or promissory notes for the
purchase of a variety of consumer products; and
revolving credit loans secured by these products.
Each trust may also own monies on deposit in a pre-funding account, which
will be used to purchase additional receivables from time to time during
the period specified in the related prospectus supplement.
The property of each trust will include an assignment of the security or
ownership interests in the consumer products financed under the trust's
receivables, any proceeds from claims on certain related insurance
policies, amounts on deposit in the trust accounts identified in the
related prospectus supplement and any credit enhancements specified in the
related prospectus supplement.
THE SECURITIES--
will represent indebtedness of the related trust (in the case of Asset
Backed Notes) or beneficial interests in the related trust (in the case of
Asset Backed Certificates);
will be paid only from the assets of the related trust;
if offered by this prospectus, will be rated in one of the four highest
long-term rating categories or the highest short-term rating category by
at least one nationally recognized rating agency;
may benefit from one or more forms of credit enhancement; and
will be issued as part of a designated series, which will include one or
more classes of Asset Backed Notes and/or one or more classes of Asset
Backed Certificates.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________________, 199__
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Caption Page
- ------- ----
<S> <C>
The Trusts.........................................................3
The Trustee..................................................4
The Receivables....................................................5
The Depositor......................................................5
Bombardier Capital Inc.............................................6
General......................................................6
Purchase of Receivables......................................7
Loss and Delinquency Information.............................9
Yield and Prepayment Considerations................................9
Pool Factors......................................................10
Use of Proceeds...................................................11
The Notes.........................................................11
General......................................................11
Principal and Interest on the Notes..........................12
The Indenture................................................13
The Indenture Trustee........................................19
The Certificates..................................................19
General......................................................19
Distributions of Interest and Principal......................19
Certain Information Regarding the Securities......................20
Book-Entry Registration......................................20
Definitive Securities........................................24
Statements to Securityholders................................25
Lists of Securityholders.....................................27
Description of the Trust Documents................................28
Sale and Assignment of the Receivables.......................28
Custody of Receivable Files..................................31
Collections..................................................31
Servicing Procedures.........................................33
Servicing Compensation.......................................34
Distributions................................................34
Enhancement..................................................35
Advances.....................................................36
Evidence as to Compliance....................................36
Certain Matters Regarding the Servicer.......................37
Indemnification and Limits on Liability......................37
Servicer Termination Events .................................38
Waiver of Past Defaults......................................39
Amendment....................................................39
Termination..................................................40
The Trustee..................................................41
Duties of the Trustee........................................41
Administrator.....................................................42
Certain Legal Aspects of the Receivables..........................42
Rights in the Receivables....................................42
Security Interests in the Products other than Boats..........43
Security Interests in Boats..................................45
Repossession.................................................49
Notice of Sale; Redemption Rights............................50
Deficiency Judgments and Excess Proceeds.....................50
Soldiers' and Sailors' Civil Relief Act......................50
Consumer Protection Laws.....................................51
Other Limitations............................................52
Certain Federal Income Tax Consequences...........................52
ERISA Considerations..............................................68
Plan of Distribution..............................................69
Legal Matters.....................................................69
Reports to Securityholders........................................70
Where You Can Find More Information...............................71
</TABLE>
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THE TRUSTS
With respect to each series of Securities, a new trust (each, a "Trust")
will be formed by the Depositor pursuant to either a Pooling and Servicing
Agreement among the Depositor, Bombardier Capital Inc. as Servicer, and the
Trustee (the "Trustee") specified in a supplement to this Prospectus (each a
"Prospectus Supplement") (each of these Trusts, a "grantor trust"), or a Trust
Agreement between the Depositor and the Trustee specified in the related
Prospectus Statement (each of these Trusts, an "owner trust").
A series of Securities may include one or more classes of Asset Backed
Notes (the "Notes"). The Notes, if any, of a series will be issued by an owner
trust pursuant to an Indenture between the Trust and the Indenture Trustee
specified in the related Prospectus Supplement (the "Indenture Trustee"). A
series of Securities may, if it is issued by an owner trust, and will, if it is
issued by a grantor trust, include one or more classes of Asset Backed
Certificates (the "Certificates" and, collectively with the Notes, the
"Securities"). Each Certificate, if any, will represent a fractional undivided
interest only in the related Trust. Each Note, if any, will represent an
obligation only of the related Trust and will be secured by the related Trust
Property. Prior to the sale and assignment of the related Receivables pursuant
to the related Trust Documents, the Trust will have no assets or obligations.
Each Trust will acquire a Receivable Pool pursuant to the related Pooling and
Servicing Agreement in the case of a grantor trust or pursuant to a Sale and
Servicing Agreement among the Trust, the Depositor, the Servicer and the
Indenture Trustee in the case of an owner trust. In each case, the Depositor
will have acquired the Receivable Pool from the Seller pursuant to a sale or a
contribution and absolute assignment pursuant to a Transfer Agreement (the
"Transfer Agreement") between the Seller and the Depositor. The Trust will not
engage in any business activity other than acquiring and holding the Trust
Property, issuing the Certificates and the Notes, if any, of the related series
and distributing payments thereon.
The assets of each Trust (as described below, the "Trust Property") will
include, among other things:
(1) a Receivable Pool;
(2) all monies paid or payable thereon on or after the date specified
in the related Prospectus Supplement (the "Cut-off Date");
(3) those amounts as from time to time may be held in one or more
separate accounts (the "Collection Account"), including all investments in
the Collection Account and all income from the investment of funds therein
and all proceeds thereof, and certain other accounts including the
proceeds thereof;
(4) an assignment of the security interests of the Seller in the
Products securing the related Receivables;
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(5) an assignment of the right to receive proceeds from claims on
certain insurance policies covering the related Products or Obligors; and
(6) certain other rights under the related Trust Documents.
See "The Receivables" and "Description of the Trust Documents--Collections." The
Trust Property will also include, if so specified in the related Prospectus
Supplement, monies on deposit in a Pre-Funding Account to be established with
the Indenture Trustee or the Trustee, which will be used to purchase Receivables
("Subsequent Receivables") from the Depositor from time to time (and as
frequently as daily) during the period specified in the related Prospectus
Supplement (the "Pre-Funding Period"). Any Subsequent Receivables so purchased
will be included in the related Receivable Pool forming part of the Trust
Property, subject to the prior rights of the related Indenture Trustee and the
Noteholders therein. In addition, to the extent specified in the related
Prospectus Supplement, a form of credit enhancement may be issued to or held by
the Trustee or the Indenture Trustee for the benefit of holders of one or more
classes of Securities.
To the extent provided in the related Prospectus Supplement, for a period
of time specified in that Prospectus Supplement (the "Revolving Period")
collections of principal on the Receivables for the related series may be
applied to purchase additional Receivables ("Additional Receivables") from the
Seller for that series.
The Servicer will service the Receivables held by each Trust and will
receive fees specified in the related Prospectus Supplement for those services
(the "Servicing Fee"). See "Description of the Trust Documents--Servicing
Compensation." Unless otherwise specified in the related Prospectus Supplement,
the Servicer, on behalf of each Trust, will hold the original installment sales
contract or promissory note and account agreements, as applicable, as well as
copies of documents and instruments relating to each Receivable and evidencing
the security interest in the Product securing each Receivable (the "Receivable
Files"). In order to protect the Trust's ownership interest in the Receivables,
the Seller and Depositor will each file financing statements pursuant to the
Uniform Commercial Code in Vermont, Nevada and Florida to give notice of that
Trust's ownership of the related Receivables and the related Trust Property.
THE TRUSTEE
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the Securities of the related series will be limited solely to the express
obligations of this Trustee set forth in the related Trust Documents. A Trustee
may resign at any time, in which event the Servicer or its successor will be
obligated to appoint a successor trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as Trustee under the
related Trust Documents or if the Trustee becomes insolvent. In these
circumstances, the Servicer will be obligated to appoint a successor trustee.
Any resignation or removal of a Trustee and appointment of a successor trustee
will be subject to any conditions or approvals specified in the related
Prospectus Supplement and will not become effective
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until acceptance of the appointment by the successor trustee. In the case of an
owner trust, the Trustee will be referred to in the Prospectus Supplement as the
"Owner Trustee."
THE RECEIVABLES
Each pool of Receivables with respect to a Trust (a "Receivable Pool") may
consist of one of more of the following types or receivables (the "Receivables")
(as specified in the related prospectus supplement): retail installment sales
contracts and promissory notes to finance the purchase of Products (described
below), or revolving credit loans secured by Products. The Receivables will be
originated or purchased by the Seller on an individual basis in the ordinary
course of business. See "Bombardier Capital Inc.--Purchase of Receivables."
Except as otherwise specified in the related Prospectus Supplement, the
Receivables will be fully amortizing and will bear interest at a fixed or
variable rate (the "Receivable Rate").
The Products financed by the Receivables included in a Receivable Pool may
include all the types of consumer products the Seller is then financing for
retail customers. Currently, the Seller has provided financing for the purchase
of:
motorcycles; marine products, including boats, boat trailers and
outboard motors;
pianos and organs; horse trailers and trucks; power sport vehicles,
including snowmobiles, personal watercraft and all-terrain vehicles;
and
golf carts; lawn and garden equipment; neighborhood vehicles and
recreational vehicles.
Any Trust whose Securities are offered pursuant to this Prospectus will include
only Receivables secured by one or more of the foregoing types of Products.
Information with respect to each Receivable Pool will be set forth in the
related Prospectus Supplement, including the types of Products securing a
Receivable Pool, the relative concentrations of each of these types and the
distribution of Receivables by Receivable Rate and geographic concentration.
Because the Seller has less extensive experience in underwriting and servicing
receivables for items similar to the Products, the Seller has no basis upon
which to distinguish the expected delinquency, default or prepayment experience
of Receivables secured by different types of Products.
THE DEPOSITOR
Bombardier Capital CF II Inc. (the "Depositor") was organized in the State
of Delaware on July 7, 1999. The Depositor is a limited purpose corporation
owned by BCI. The Depositor currently maintains its principal executive office
at P.O. Box 200, 1600 Mountain View Drive, Colchester, Vermont 05446. Its
telephone number is 802-655-2607.
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BOMBARDIER CAPITAL INC.
GENERAL
Bombardier Capital Inc. ("BCI" or, in its capacity as Seller of the
Receivables to the Depositor, the "Seller" or, in its capacity as servicer of
the Receivables, the "Servicer") is a financial services company incorporated in
Massachusetts in 1974 and is a wholly-owned subsidiary of Bombardier Capital
Holdings Inc., a Delaware corporation located in Jacksonville, Florida.
Bombardier Capital Holdings Inc. is wholly-owned by Bombardier Corporation, an
Idaho corporation, which in turn is wholly-owned by Bombardier Corporation
(Delaware), a Delaware corporation. Bombardier Corporation (Delaware) is
wholly-owned by Bombardier Inc., a Canadian corporation. BCI's executive office
is located at 1600 Mountain View Drive, Colchester, Vermont 05446. The telephone
number of the executive office is (802) 654-8100.
BCI services and underwrites its consumer finance division through
Bombardier Capital Florida Inc. ("BCIF"), its wholly owned subsidiary, from
BCIF's offices at 12735 Gran Bay Parkway West, Suite 1000, Jacksonville, Florida
32258. The telephone number of the consumer finance division is (888) 201-1865.
BCI's business operations are carried on through five divisions. As of
January 31, 1999, the Inventory Finance Division and the Commercial & Industrial
Finance Division accounted for approximately [66.2]% of the managed assets of
BCI. The Consumer Finance Division, the Mortgage Division and the Technology
Management & Finance Division were created in 1997.
The Inventory Finance Division, which has been in operation since the
inception of BCI, provides secured purchase money inventory financing to dealers
selling recreational, commercial and consumer products. The Commercial &
Industrial Finance Division has been in operation since 1991 and provides
domestic and international lending, leasing and asset management services in
connection with a range of business aircraft and other commercial and industrial
products and provides factoring of accounts receivable and other financial
services to affiliated Bombardier companies. BCI has entered new market segments
by launching its own consumer retail and manufactured housing financing
operations through its Consumer Finance Division and Mortgage Division. In
addition, BCI has begun providing commercial leasing services relating to
computer and telecommunications hardware and software and related equipment
through its Technology Management and Finance Division. BCI operates in highly
competitive markets.
As of January 31, 1997, January 31, 1998 and January 31, 1999, BCI's total
assets under management -- primarily financing assets -- were approximately
$[934] million, $[1,289] million and $_____ million, respectively, and
shareholders' equity was approximately $[139] million, $[159] million and $_____
million, respectively. For the fiscal years ended 1997, 1998 and 1999, total BCI
revenues were approximately $[110] million, $[171] million and $_____ million,
respectively.
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Bombardier Inc. is a Canadian corporation which, directly and through its
subsidiaries, is engaged in design, development, manufacture and marketing in
the aerospace, recreational products and transportation equipment industries. In
addition, Bombardier Inc. and its subsidiaries offer support, maintenance and
training services, as well as operations management in the public and private
sectors. Through various subsidiaries, Bombardier Inc. is engaged in financial
services and one division of Bombardier Inc. is involved in the development of
real estate interests earmarked for new uses. Bombardier Inc. and its
subsidiaries operate plants in Canada, Mexico, the United States, Austria,
Belgium, the Czech Republic, Finland, France, Germany, Switzerland and the
United Kingdom.
Bombardier Inc.'s equity securities are publicly traded on The Montreal
Exchange and The Toronto Stock Exchange, on the Brussels stock exchange in
Belgium and on the Frankfurt Stock Exchange in Germany. Bombardier Inc. is a
reporting issuer under the securities laws of various provinces in Canada,
including Quebec and Ontario, and therefore makes various public filings with
the securities commissions of those provinces, as well as filings with the
exchanges on which its securities are traded. Bombardier does not have
securities registered in the United States.
The registered office of Bombardier Inc. is at 800 Rene-Levesque Boulevard
West, Montreal, Quebec, Canada H3B 1Y8.
PURCHASE OF RECEIVABLES
Through its Consumer Finance Division, BCI purchases contracts directly or
indirectly from approximately 3000 dealers, brokers and finance companies
("Dealers") located throughout the United States who initiate and sell contracts
to BCI pursuant to the terms of approved dealer retail agreements. BCIF's
personnel contact dealers and explain BCI's available financing plans, terms,
prevailing rates and credit and financing policies. BCIF's credit underwriting
department is located in Jacksonville, Florida.
All receivables that BCI purchases are written on forms provided or
approved by BCI and are purchased on an individually approved basis in
accordance with BCI's guidelines. The Dealer submits the customer's credit
application to BCIF's office where an analysis of the creditworthiness of the
proposed buyer is made. The credit application, which requests income, debt
obligations, and employment history of the applicant, is reviewed for
completeness and compliance with BCI's underwriting policies for contracts
purchased from Dealers. Underwriters are assigned to applications on a
progressive scale driven by experience. Junior underwriters are generally
limited to low dollar, high credit scoring applicants while more experienced
underwriters typically underwrite high dollar or low credit scoring applicants.
BCI's evaluation of credit applicants is intended to assess the obligor's
ability and willingness to pay the amounts due on the contract and the adequacy
as collateral of the unit financed rather than to assess solely the collateral
value of the product financed. The maximum loan amount for a purchaser of a
product will depend on a variety of factors, which may include the type of
product,
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whether the product is new or used, the obligor's debt-to-income ratio, and the
manufacturer's invoice or the MSRP. The manufacturer's invoice, credit history
and stability, is used to calculate maximum loan to value ratio for new marine
products, RVs, and keyboard instruments. The MSRP, as stated in the National
Automobile Dealers Association reference guide, is used for all new powersport
products. For used products, maximum loan to value ratio is calculated based on
the "clean wholesale" values found in the National Automobile Dealers
Association reference guide or, for marine products, based on the "low retail"
values found in the National Automobile Dealers Association reference guide or
the BUC reference guides. Prior to April of 1999, the maximum loan to value
ratio for new marine and RV products was calculated at 125% of invoice. The
maximum loan to value ratio on new powersport products was calculated at 115% of
MSRP, inclusive of tax, title, tag, and set up plus 10% for hard adds and
accessories. The maximum loan to value ratio on used products was calculated at
120% of the "high retail" values in the reference guides. BCI may finance
optional credit life, accident and health, extended warranty insurance, and
service contracts for the term of the receivable up to a maximum of 10% of the
invoice, MSRP, or other reference price, as the case may be, of the Product. In
April of 1999, changes were made to the risk based pricing matrix introduced in
October of 1998 eliminating the previous percentage limitations on hard adds,
like accessories, and soft adds, like warranties, and setting a loan to value
ratio limit in each product class based on the credit quality of the obligor.
Generally, maximum advances for new RV and marine products is 150% of dealer
invoice inclusive of tax, title and all hard and soft adds. Maximum advances for
new powersports products is 135% of MSRP inclusive of tax, title and all hard
and soft adds. Since the introduction in October, 1998 of a risk based pricing
matrix, BCI also adjusts maximum term and minimum down payment requirements
based on obligor credit quality. As of April 1999, BCI introduced a $0 down
payment requirement for its most creditworthy obligors and increased down
payment requirements and lowered maximum advance rates for its customers with
the lowest rankings.
In 1999, BCI replaced its receivables origination system. The new system
allows greater ability to set advanced credit controls including the
introduction of the latest consumer bankruptcy scorecards in a matrix
configuration with BCI's current application scorecards.
BCI's current guidelines, which are based on credit scoring criteria, are
intended to provide a basis for credit decisions, but are not meant to supersede
the credit judgment of the credit analysts in deciding upon the approval or
denial of an applicant. Consequently, certain contracts may not comply with all
BCI's credit guidelines, but will be within prescribed limits for which
exceptions to the guidelines are permitted.
If the application meets BCI's guidelines and the credit is approved, BCI
purchases the receivable when the customer accepts delivery of the product.
Each Dealer from which BCI purchases contracts has been selected by BCI
based on the dealer's financial stability, credit worthiness and operating
history. These dealers have made representations and warranties to BCI with
respect to the contracts and the security interests in the products relating
thereto. These representations and warranties do not relate to the
creditworthiness of the obligors
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or to the collectibility of the contracts. BCI has a right of recourse against
any dealers who breach these representations and warranties to require them to
repurchase those contracts. In determining whether to exercise this right, BCI
considers the prior performance of the dealer and other business and commercial
considerations. BCI is obligated to enforce rights with respect to dealer
agreements relating to the receivables only to the extent of standard customary
practices.
BCI conducts collection activity through BCIF on delinquent contracts in
Jacksonville, Florida. In general, obligors are contacted after 15 days
delinquency. Obligor contact is initiated by phone and mail to resolve the
delinquency. The collection team is broken out into front and backend collection
activity.
More junior collectors begin the collection process at 15 days and follow
the contract through 30 days delinquency. At that point, contracts are routed to
senior collectors for further processing. Collection supervisors and managers
work with collectors on contracts greater than 90 days delinquent as well as
reviewing the work of the individual collectors on a regular basis.
Currently, BCI's consumer finance division has financed the purchase of
motorcycles; marine products, including boats, boat trailers and outboard
motors; pianos and organs; horse trailers and trucks; power sport vehicles,
including snowmobiles, personal watercraft and all-terrain vehicles; golf carts;
lawn and garden equipment; neighborhood vehicles and recreational vehicles. The
Products financed by Receivables included in any Trust whose Securities are
offered pursuant to this Prospectus will include only the products listed above.
LOSS AND DELINQUENCY INFORMATION
Each Prospectus Supplement will include BCI's loss and delinquency
experience with respect to its entire servicing portfolio of consumer product
receivables. However, there can be no assurance that this experience will be
indicative of the performance of the Receivables included in a particular
Receivable Pool.
YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, many of
the Receivables will be simple interest retail installment sales contracts and
promissory notes or revolving credit agreements. Payments on simple interest
obligations are applied first to interest accrued through the payment date, then
to reduce principal that is due, then to the payment of "non-sufficient funds
fees," then to other fees, and any remainder is applied to further reduce the
unpaid principal balance. Accordingly, if an Obligor pays an installment before
its due date, the portion of the payment allocable to interest for the period
will be less than if the payment had been made on the due date, the portion of
the payment applied to reduce the principal balance will be correspondingly
greater, and the principal balance will be amortized more rapidly than
scheduled. Conversely, if an Obligor pays an installment after its due date, the
portion of the payment allocable to interest will be greater than if the payment
had been made on the due date, the portion of the payment applied to reduce the
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principal balance will be correspondingly less, and the principal balance will
be amortized slower than scheduled, in which case additional payments may be
necessary and the final payment date would thus be extended past the original
final scheduled payment date but not beyond the number of months permitted
pursuant to the related Trust Documents. Any interest shortfalls resulting from
early payment or prepayment of a Receivable will be funded by collections on
other Receivables or, to the extent collections are insufficient, by payments
under the applicable form of credit enhancement, if any, described in the
related Prospectus Supplement.
The Receivables will be prepayable, without premium or penalty, by
Obligors at any time. Prepayments or, for this purpose, equivalent payments to a
Trust, also may result from liquidations due to default, receipt of proceeds
from insurance policies, repurchases by the Seller due to breach of a
representation or warranty, or as a result of the Depositor exercising its
option to purchase the Receivable Pool. See "Description of the Trust
Documents." The rate of prepayments on the Receivables may be influenced by a
variety of economic, social and other factors. No assurance can be given that
prepayments on the Receivables will conform to any estimated or actual
historical experience, and no prediction can be made as to the actual prepayment
rates which will be experienced on the Receivables. Holders of the Notes and
Certificates (the "Noteholders" and "Certificateholders", respectively, and the
"Securityholders", collectively) will bear all reinvestment risk resulting from
the timing of payments of principal on the Certificates or the Notes, as the
case may be.
In addition, a Prospectus Supplement may provide for a Revolving Period
during which principal collections in respect of the Receivables allocated to
the related series will be applied to purchase Additional Receivables for
inclusion in the Trust Property rather than applied to make distributions on the
related Securities. Any application of this type would increase the weighted
average life of these Securities.
POOL FACTORS
The "Note Pool Factor" for each class of Notes, if any, will be an
eight-digit decimal which the Servicer will compute indicating the remaining
outstanding principal balance with respect to those Notes as of each Payment
Date, after giving effect to all distributions of principal on that Payment
Date, as a fraction of the initial outstanding principal balance of that class
of Notes. The "Certificate Pool Factor" for each class of Certificates, if any,
will be an eight-digit decimal which the Servicer will compute indicating the
principal balance with respect to those Certificates as of each Distribution
Date (the "Certificate Balance"), after giving effect to all distributions of
principal made on that Distribution Date, as a fraction of the Original
Principal Balance of those Certificates. Each Certificate Pool Factor and each
Note Pool Factor will initially be 1.00000000; thereafter, the Certificate Pool
Factor and the Note Pool Factor will decline to reflect reductions in the
Certificate Balance of the applicable class of Certificates or reductions in the
outstanding principal balance of the applicable class of Notes, as the case may
be. The amount of a Certificateholder's pro rata share of the Certificate
Balance for the related class of Certificates can be determined by multiplying
the original denomination of the Certificateholder's Certificate by the then
applicable Certificate Pool
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Factor. The amount of a Noteholder's pro rata share of the aggregate outstanding
principal balance of the applicable class of Notes can be determined by
multiplying the original denomination of this Noteholder's Note by the then
applicable Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents, on
each Distribution Date or Payment Date, as the case may be, the related
Certificateholders and Noteholders will receive periodic reports from the
Trustee stating the Certificate Pool Factor or the Note Pool Factor, as the case
may be, and containing various other items of information. Unless and until
Definitive Certificates or Definitive Notes are issued, these reports will be
sent on behalf of the Trust to the Trustee and the Indenture Trustee (if any)
and Cede & Co., as registered holder of the Certificates and the Notes and the
nominee of The Depository Trust Company. Beneficial owners of Certificates
("Certificate Owners") and beneficial owners of Notes ("Note Owners") may
receive these reports, upon written request, together with a certification that
they are Certificate Owners or Note Owners and payment of any expenses
associated with the distribution of these reports, from the Trustee and the
Indenture Trustee (if any) at the addresses specified in the related Prospectus
Supplement. See "Certain Information Regarding the Securities--Statements to
Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds to be received by the Trust from the sale of each series of Securities
will be used by the Depositor to pay to the Seller the purchase price for the
Receivables and to make the deposit of an amount (the "Pre-Funded Amount") into
the pre-funding account (the "Pre-Funding Account"), if any, to repay warehouse
lenders and/or to provide for other forms of credit enhancement specified in the
related Prospectus Supplement. The net proceeds to be received by the Seller
will be used to pay its warehouse loans, and any additional proceeds will be
added to the Seller's general funds and used for its general corporate purposes.
THE NOTES
GENERAL
A series of Securities may include one or more classes of Notes issued
pursuant to the terms of an Indenture (the "Indenture"), a form of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part (the "Registration Statement"). The following summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Notes and the Indenture, and the
following summary will be supplemented in whole or in part by the related
Prospectus Supplement. Where particular provisions of or terms used in the
Indenture are referred to, the actual provisions (including definition of terms)
are incorporated by reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by a single Note registered in the
name of the nominee of the Depository.
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See "Certain Information Regarding the Securities--Book-Entry Registration."
Unless otherwise specified in the related Prospectus Supplement, Notes will be
available for purchase in denominations of $1,000 and integral multiples
thereof. Notes may be transferred or exchanged without the payment of any
service charge other than any tax or governmental charge payable in connection
with the transfer or exchange. Unless otherwise provided in the related
Prospectus Supplement, the Indenture Trustee will initially be designated as the
registrar for the Notes.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss, rate
of interest ("Interest Rate"), and amount of or method of determining payments
of principal and interest on the Notes 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 class or classes of Notes of the related series, or any class of
Certificates, as described in the related Prospectus Supplement. Unless
otherwise provided in the related Prospectus Supplement, payments of interest on
the Notes will be made prior to payments of principal thereon. A series may
include one or more classes of Notes ("Stripped Notes") entitled to either
principal payments with disproportionate, nominal or no interest payment, or
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, or any combination of the foregoing. The
Interest Rate for some classes of Stripped Notes may be zero. The related
Prospectus Supplement will specify the Interest Rate for each class of Notes, or
the initial Interest Rate and the method for determining the Interest Rate. One
or more classes of Notes of a series may be redeemable under the circumstances
specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
in respect of interest to Noteholders of all classes within a series will have
the same priority. Under certain circumstances, the amount available for these
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 their
ratable share, based upon the aggregate amount of interest due to that class of
Noteholders, of the aggregate amount available to be distributed in respect of
interest on the Notes.
In the case of a series of Securities which includes two or more classes
of Notes, the 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 of these classes will be set forth in the related
Prospectus Supplement. A series with Notes may provide for a Revolving Period,
during which collections of principal in respect of the Receivables are not
applied to payments of principal of those Notes, or may provide for a liquidity
facility of similar arrangement that permits one or more classes of Notes to be
paid in planned amounts on scheduled Payment Dates.
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Unless otherwise specified 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 of the Notes of that class.
THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Depositor will provide a
copy of the applicable Indenture (without exhibits) upon request to a holder of
Notes issued thereunder.
Modification of Indenture Without Noteholder Consent.
Each Trust and related Indenture Trustee (on behalf of that Trust) may,
without consent of the related Noteholders, enter into one or more supplemental
indentures for any of the following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the Note and the Indenture
obligations by a permitted successor to the Trust;
(3) to add additional covenants for the benefit of the related
Noteholders;
(4) to convey, transfer, assign, mortgage or pledge any property to or
with the Indenture Trustee;
(5) to cure any ambiguity or correct or supplement any provision in
the Indenture or in any supplemental indenture;
(6) to provide for the acceptance of the appointment of a successor
Indenture Trustee or to add to or change any of the provisions of the
Indenture or any supplemental indenture which may be inconsistent with any
other provision of the Indenture as shall be necessary and permitted to
facilitate the administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the Indenture in
order to comply with the Trust Indenture Act of 1939, as amended; and
(8) to add any provisions to, change in any manner, or eliminate any
of the provisions of, the Indenture or modify in any manner the rights of
Noteholders under the Indenture; provided that any action specified in
this clause (8) shall not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of any related
Noteholder unless Noteholder consent is otherwise obtained as described
below.
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Modifications of Indenture With Noteholder Consent.
With respect to each Trust, with the consent of the holders representing a
majority of the principal balance of the outstanding related Notes (a "Note
Majority"), the Owner Trustee and the Indenture Trustee may execute a
supplemental indenture to add provisions, to change in any manner or eliminate
any provisions of, the related Indenture, or modify in any manner the rights of
the related Noteholders.
Without the consent of the holder of each outstanding related Note
affected thereby, however, no supplemental indenture may:
(1) change the due date of any installment of principal of or interest
on any Note or reduce the principal amount thereof, the interest rate
specified thereon or the redemption price with respect thereto or change
the manner of calculating any of these payments, any place of payment
where, or the coin or currency in which any Note or any interest thereon
is payable;
(2) impair the right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment;
(3) reduce the percentage of the aggregate amount of the outstanding
Notes the consent of the holders of which is required for any supplemental
indenture or the consent of the holders of which is required for any
waiver of compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided for in the
Indenture;
(4) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the related Trust, any other obligor on the Notes,
the Depositor or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding amount of the
Notes the consent of the holders of which is required to direct the
Indenture Trustee to sell or liquidate the Receivables if the proceeds of
that sale would be insufficient to pay the principal amount and accrued
but unpaid interest on the outstanding Notes;
(6) decrease the percentage of the aggregate principal amount of the
Notes required to amend the sections of the Indenture which specify the
applicable percentage of aggregate principal amount of the Notes necessary
to amend the Indenture or certain other related agreements; or
(7) permit the creation of any lien ranking prior to or on a parity
with the lien of the Indenture with respect to any of the collateral for
the Notes or, except as otherwise permitted or contemplated in the
Indenture, terminate the lien of the Indenture on any of the collateral or
deprive the holder of any Note of the security afforded by the lien of the
Indenture.
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Events of Default; Rights Upon Event of Default.
With respect to each Trust, unless otherwise specified in the related
Prospectus Supplement, "Events of Default" under the related Indenture will
consist of:
(1) a default for five days or more in the payment of any interest on
any Note;
(2) a default in the payment of the principal of or any installment of
the principal of any Note issued by that Trust when the same becomes due
and payable;
(3) a default in the observance or performance in any material respect
of any covenant or agreement of the Trust made in the Indenture, or a
breach of any representation or warranty made by the Trust in the
Indenture or in any certificate delivered pursuant thereto or in
connection therewith, and the continuation of the default or the failure
to cure the breach for a period of 30 days after notice thereof is given
to the Trust by the Indenture Trustee or to the Trust and the Indenture
Trustee by the holders of at least 25% in principal amount of the Notes
then outstanding; or
(4) certain events of bankruptcy, insolvency, receivership or
liquidation of the Trust.
However, the amount of principal due and payable on any class of Notes on any
Payment Date prior to the Final Scheduled Payment Date, if any, for that class
will generally be determined by amounts available to be deposited in the Note
Distribution Account for that Payment Date. Therefore, unless otherwise
specified in the related Prospectus Supplement, the failure to pay principal on
a class of Notes generally will not result in the occurrence of an Event of
Default until the final scheduled Payment Date for that class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an
Event of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or a Note Majority may declare the
principal of the Notes to be immediately due and payable. This type of
declaration may, under certain circumstances, be rescinded by a Note Majority.
Unless otherwise specified in the related Prospectus Supplement, if the
Notes of any series have been declared due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust Property, exercise
remedies as a secured party, sell the related Receivables or elect to have the
Trust maintain possession of the Receivables and continue to apply collections
on these Receivables as if there had been no declaration of acceleration. Unless
otherwise specified in the related Prospectus Supplement, the Indenture Trustee,
however, will be prohibited from selling the related Receivables following an
Event of Default, unless:
(1) the holders of all the outstanding related Notes consent to the
sale;
(2) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding Notes at the date
of the sale; or
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(3) the Indenture Trustee determines that the proceeds of the
Receivables would not be sufficient on an ongoing basis to make all
payments on the Notes as they would have become due if the Notes had not
been declared due and payable, and the Indenture Trustee obtains the
consent of the holders of 66 2/3% of the aggregate outstanding amount of
the Notes.
Unless otherwise specified in the related Prospectus Supplement, following a
declaration upon an Event of Default that the Notes of any series are
immediately due and payable, Note Owners will be entitled to ratable repayment
of principal on the basis of their respective unpaid principal balances and
repayment in full of the accrued interest on and unpaid principal balances of
the Notes will be made prior to any further payment of interest or principal on
any Certificates issued by the related Trust.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of the Notes, if the 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 this
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, a Note Majority in a series will have the right to
direct the time, method and place of conducting any proceeding or any remedy
available to the Indenture Trustee, and a Note Majority 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 the
Indenture that cannot be modified without the waiver or consent of all of the
holders of the 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:
(1) the holder previously has given to the Indenture Trustee written
notice of a continuing Event of Default;
(2) the holders of not less than 25% in principal amount of the
outstanding Notes of the series have made written request of the Indenture
Trustee to institute a proceeding in its own name as Indenture Trustee;
(3) the holder or holders have offered the Indenture Trustee
reasonable indemnity;
(4) the Indenture Trustee has for 60 days failed to institute a
proceeding; and
(5) no direction inconsistent with the written request has been given
to the Indenture Trustee during the 60-day period by a Note Majority.
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In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the Depositor or the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state insolvency laws.
Neither the Indenture Trustee nor the Trustee in its individual capacity,
nor any holder of a Certificate including, without limitation, the Depositor,
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 related
Notes or for any agreement or covenant of the related Trust contained in the
Indenture.
Certain Covenants.
Each Indenture will provide that the related Trust may not consolidate
with or merge into any other entity, unless:
(1) the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States or any state;
(2) the entity expressly assumes the Trust's obligation to make due
and punctual payments upon the Notes and the performance or observance of
every agreement and covenant of the Trust under the Indenture;
(3) no Event of Default shall have occurred and be continuing
immediately after the merger or consolidation;
(4) the Trustee has been advised that the then current rating of the
related Notes or Certificates then in effect would not be reduced or
withdrawn by the Rating Agencies as a result of the merger or
consolidation; and
(5) the Trustee has received an opinion of counsel to the effect that
the consolidation or merger would have no material adverse tax consequence
to the Trust or to any related Note Owner or Certificate Owner.
Each Trust will not, among other things:
(1) except as expressly permitted by the Indenture, the Trust
Documents or certain related documents for the Trust (collectively, the
"Related Documents"), sell, transfer, exchange or otherwise dispose of any
of the assets of the Trust;
(2) claim any credit on or make any deduction from the principal and
interest payable in respect of the related Notes, other than amounts
withheld under the Code or applicable state law, or assert any claim
against any present or former holder of the Notes because of the payment
of taxes levied or assessed upon the Trust;
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(3) dissolve or liquidate in whole or in part;
(4) 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 the related Notes under the Indenture except
as may be expressly permitted thereby; or
(5) except as expressly permitted by the Related Documents, 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 the Trust or any part thereof, or any interest
therein or proceeds thereof.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust." No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture or otherwise in
accordance with the Related Documents.
Annual Compliance Statement.
Each Trust will be required to file annually with the related Indenture
Trustee a written statement as to the fulfillment of its obligations under the
Indenture.
Indenture Trustee's Annual Report.
The Indenture Trustee will be required to mail each year to all related
Noteholders a brief report relating to its eligibility and qualification to
continue as Indenture Trustee under the related Indenture, any amounts advanced
by it under the Indenture, the amount, interest rate and maturity date of
certain indebtedness owing by the Trust to the Indenture Trustee in its
individual capacity, the property and funds physically held by the Indenture
Trustee as trustee and any action taken by it that materially affects the Notes
and that has not been previously reported. Note Owners may receive these reports
upon written request, together with a certification that they are Note Owners
and payment of reproduction and postage expenses associated with the
distribution of these reports, from the Indenture Trustee at the address
specified in the related Prospectus Supplement.
Satisfaction and Discharge of Indenture.
The Indenture will be discharged with respect to the collateral securing
the related Notes upon the delivery to the related Indenture Trustee for
cancellation of all these Notes or, with certain limitations, upon deposit with
the Indenture Trustee of funds sufficient for the payment in full of all of
these 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 may resign at any time, in
which event the related Trust will be obligated to appoint a successor trustee.
The related Trust may also remove the Indenture Trustee if the Indenture Trustee
ceases to be eligible to continue as indenture trustee under the Indenture or if
the Indenture Trustee becomes insolvent. In these circumstances, the related
Trust will be obligated to appoint a successor trustee. Any resignation or
removal of the Indenture Trustee and appointment of a successor trustee will be
subject to any conditions or approvals, if any, specified in the related
Prospectus Supplement and will not become effective until acceptance of the
appointment by a successor trustee.
THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of a given
series may be issued pursuant to Trust Documents to be entered into among the
Depositor, Bombardier Capital Inc. as Servicer, and the Trustee, forms of which
have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. The following summary does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all of the
material provisions of the Trust Documents. Where particular provisions of or
terms used in the Trust Documents are referred to, the actual provisions,
including definitions of terms, are incorporated by reference as part of this
summary.
Unless otherwise specified in the related Prospectus Supplement, each
class of Certificates will initially be represented by a single Certificate
registered in the name of the nominee of The Depository Trust Company (together
with any successor depository selected by the Depositor, the "Depository"). See
"Certain Information Regarding the Securities--Book-Entry Registration." Unless
otherwise specified in the related Prospectus Supplement, the Certificates
evidencing interests in a Trust will be available for purchase in denominations
of $1,000 initial principal amount and integral multiples thereof, except that
one Certificate evidencing an interest in that Trust may be issued in a
denomination that is less than $1,000 initial principal amount. Certificates may
be transferred or exchanged without the payment of any service charge other than
any tax or governmental charge payable in connection with the transfer or
exchange. Unless otherwise specified in the related Prospectus Supplement, the
Trustee will initially be designated as the registrar for the Certificates.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL
The timing and priority of distributions, seniority, allocations of loss,
the specified rate at which interest will accrue on the Certificates (with
respect to each class of Certificates, the "Pass-Through Rate") and amount of or
method of determining distributions with respect to principal and interest (or,
where applicable, with respect to principal only or interest only) on the
Certificates of any series will be described in the related Prospectus
Supplement. Distributions of interest on the Certificates
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will be made on the dates specified in the related Prospectus Supplement (each,
a "Distribution Date") and, unless otherwise specified in the related Prospectus
Supplement, will be made prior to distributions with respect to principal. A
series may include one or more classes of Certificates ("Stripped Certificates")
entitled to either distributions in respect of principal with disproportionate,
nominal or no interest distribution, or 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, or any combination of the
foregoing. The Interest Rate for some classes of Stripped Certificates may be
zero. The related Prospectus Supplement will specify the Pass-Through Rate for
each class of Certificate, or the initial Pass-Through Rate and the method for
determining the Pass-Through Rate. Unless otherwise specified in the related
Prospectus Supplement, interest on the Certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Unless otherwise
specified in the related Prospectus Supplement, distributions in respect of the
Certificates will be subordinate to payments in respect of the Notes, if any, as
more fully described in the related Prospectus Supplement. Distributions in
respect of principal of any class of Certificates will be made on a pro rata
basis among all of the Certificateholders of that class.
A series with Certificates may provide for a Revolving Period, during
which collections of principal on the Receivables are not applied to
distributions on the related Securities.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each of these classes
shall be as set forth in the related Prospectus Supplement.
CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, Note
Owners and Certificate Owners may hold through The Depository Trust Company (in
the United States) or, solely in the case of the Notes, Cedel or Euroclear (in
Europe) if they are participants of these systems, or indirectly through
organizations that are participants in these systems. The Certificates may not
be held, directly or indirectly, through Cedel or Euroclear. Cede & Co., as
nominee for The Depository Trust Company, 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 these positions in customers' securities accounts in the Depositaries'
names on the books of The Depository Trust Company.
The Depository Trust Company is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered
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pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. The
Depository Trust Company was created to hold securities for its Participants and
to facilitate the clearance and settlement of securities transactions between
Participants through electronic bookentries, 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 The Depository Trust Company system also is available to others like 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 The Depository Trust Company's participating
organizations (the "Participants") will occur in accordance with The Depository
Trust Company rules. Transfers between Cedel Participants and Euroclear
Participants will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
Crossmarket transfers between persons holding directly or indirectly
through The Depository Trust Company, on the one hand, and directly or
indirectly through Cedel Participants or Euroclear Participants, on the other,
will be effected in The Depository Trust Company in accordance with The
Depository Trust Company rules on behalf of the relevant European international
clearing system by its Depositary; however, these crossmarket transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in that system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in The Depository Trust Company, and making or receiving payment in accordance
with normal procedures for sameday funds settlement applicable to The Depository
Trust Company. Cedel Participants and Euroclear Participants may not deliver
instructions directly to the Depositaries.
Because of timezone 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 The Depository Trust Company settlement date, and these credits or
any transactions in these securities settled during this processing will be
reported to the relevant Cedel Participant or Euroclear Participant on that
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 The Depository Trust Company
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in The Depository Trust
Company.
Unless otherwise specified in the related Prospectus Supplement, Note
Owners and Certificate Owners 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, Note Owners and Certificate Owners will receive all
distributions
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of principal and interest from the related Indenture Trustee or the related
Trustee, as applicable (the "Applicable Trustee"), only through Participants.
Under a bookentry format, Note Owners and Certificate Owners may therefore
experience some delay in their receipt of payments, since these payments will be
forwarded by the Applicable Trustee to The Depository Trust Company's nominee.
The Depository Trust Company will forward these payments to its Participants,
which thereafter will forward them to Indirect Participants or Note Owners and
Certificate Owners. Except to the extent specified in the related Prospectus
Supplement, with resect to each series of Securities, the only "Securityholder",
"Noteholder" and "Certificateholder" will be The Depository Trust Company's
nominee. Noteowners will not be recognized by each Indenture Trustee as
Noteholders, as this term is used in each Indenture, and Noteowners will be
permitted to exercise the rights of Noteholders only indirectly through The
Depository Trust Company and its Participants. Similarly, Certificate Owners
will not be recognized by each Trustee as Certificateholders as this term is
used in the applicable Trust Documents, and Certificate Owners will be permitted
to exercise the rights of Certificateholders only indirectly through The
Depository Trust Company and its Participants.
Under the rules, regulations and procedures creating and affecting The
Depository Trust Company and its operations (the "Rules"), The Depository Trust
Company is required to make bookentry 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 Note Owners and Certificate
Owners have accounts with respect to the Securities similarly are required to
make bookentry transfers and receive and transmit these payments on behalf of
their respective owners. Accordingly, although Note Owners and Certificate
Owners will not possess Securities, the Rules provide a mechanism by which
Participants will receive payments and will be able to transfer their interests.
Because The Depository Trust Company can only act on behalf of
Participants, who in turn act on behalf of Indirect Participants and certain
banks, the ability of a Note Owner or Certificate Owner to pledge Securities to
persons or entities that do not participate in the The Depository Trust Company
system, or to otherwise act with respect to those Securities, may be limited due
to the lack of a physical certificate for those Securities.
The Depository Trust Company has advised the Depositor that it will take
any action permitted to be taken by a Noteowner under the related Indenture or a
Certificate Owner under the related Trust Documents only at the direction of one
or more Participants to whose accounts with The Depository Trust Company the
applicable Notes or Certificates are credited. The Depository Trust Company may
take conflicting actions with respect to other undivided interests to the extent
that the actions are taken on behalf of Participants whose holdings include the
undivided interests.
Cedel Bank, societe anonyme, is incorporated under the laws of Luxembourg
as a professional depository. Cedel Bank holds securities for its participating
organizations ("Cedel Bank Participants") and facilitates the clearance and
settlement of securities transactions between Cedel Bank Participants through
electronic bookentry changes in accounts of Cedel Bank Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in
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Cedel Bank in any of 28 currencies, including United States dollars. Cedel Bank
provides to its Cedel Bank Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel Bank interfaces with
domestic markets in several countries. As a professional depository, Cedel Bank
is subject to regulation by the Luxembourg Monetary Institute. Cedel Bank
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 series of Securities. Indirect access to Cedel Bank is also
available to others, like banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedel Bank 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 bookentry 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 crossmarket transfers with The Depository Trust Company. 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) of the related series of Securities. 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. Because of
this, 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
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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 Bank or Euroclear
will be credited to the cash accounts of Cedel Bank Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. These distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Certain Federal Income Tax Consequences" in this Prospectus
and "Global Clearance, Settlement and Tax Documentation Procedures" in Annex I
to this Prospectus. Cedel Bank 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 Bank Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect these actions on its behalf through The
Depository Trust Company.
Although The Depository Trust Company, Cedel Bank and Euroclear have
agreed to the foregoing procedures in order to facilitate transfers of Notes
among participants of The Depository Trust Company, Cedel Bank and Euroclear,
they are under no obligation to perform or continue to perform these procedures
and these procedures may be discontinued at any time.
In the event that any of The Depository Trust Company, Cedel Bank 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 this 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 The Depository Trust Company's Nominee, or for
maintaining, supervising or reviewing any records relating to the beneficial
ownership interests.
DEFINITIVE SECURITIES
If so specified in the related Prospectus Supplement, 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
Note Owners or Certificate Owners or their respective nominees, rather than to
The Depository Trust Company or its nominee, only if:
the related Applicable Trustee determines that The Depository Trust
Company is no longer willing or able to discharge properly its
responsibilities as depository with respect to these Securities and
the Applicable Trustee is unable to locate a qualified successor;
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the Applicable Trustee at its option, elects to terminate the
bookentry system through The Depository Trust Company; or
after the occurrence of an Event of Default or a Servicer Termination
Event with respect to the Securities, holders representing at least a
majority of the outstanding principal amount of the Notes or the
Certificates, as the case may be, of the series advise the Applicable
Trustee through The Depository Trust Company in writing that the
continuation of a bookentry system through The Depository Trust
Company, or a successor thereto, with respect to the Notes or
Certificates is no longer in the best interest of the holders of the
Securities.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable Note
Owners and Certificate Owners of a given series through Participants of the
availability of Definitive Securities. Upon surrender by The Depository Trust
Company of the definitive certificates representing the corresponding Securities
and receipt of instructions for reregistration, the Applicable Trustee will
reissue these Securities as Definitive Securities to those Note Owners and
Certificate Owners.
Distributions of principal of, and interest on, the Definitive Securities
will thereafter be made by the Applicable Trustee in accordance with the
procedures set forth in the related Indenture or Trust Documents, 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 these Securities in the related Prospectus Supplement. These
distributions will be made by check mailed to the address of the related holder
as it appears on the register maintained by the Applicable Trustee, or, with
respect to Securityholders satisfying the criteria set forth by the Applicable
Trustee, by wire transfer to a bank in the United States. The final payment on
any Definitive Security, however, will be made only upon presentation and
surrender of that Definitive Security at the office or agency specified in the
notice of final distribution to the applicable Securityholders.
Definitive Securities will be transferable and exchangeable at the offices
of the Applicable Trustee or of a registrar named in a notice delivered to
holders of Definitive Securities. No service charge will be imposed for any
registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and
provide to the Trustee a statement to be delivered to the related
Certificateholders on that Distribution Date. On or prior to each Payment Date,
the Servicer will prepare and provide to the Indenture Trustee a statement to be
delivered to the related Noteholders on that Payment Date. These statements will
be based on the information in the related Servicer's Certificate setting forth
certain information required under the Trust Documents (the "Servicer's
Certificate"). Unless otherwise specified in the related Prospectus
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Supplement, each of these statements to be delivered to Certificateholders will
include the following information as to the Certificates with respect to that
Distribution Date, or the period since the previous Distribution Date, as
applicable, and each of these statement to be delivered to Noteholders will
include the following information as to the Notes with respect to that Payment
Date or the period since the previous Payment Date, as applicable:
(1) the amount of the distribution allocable to interest on or with
respect to each class of Securities;
(2) the amount of the distribution allocable to principal on or with
respect to each class of Securities;
(3) the Certificate Balance and the Certificate Pool Factor for each
class of Certificates and the aggregate outstanding principal balance and
the Note Pool Factor for each class of Notes, after giving effect to all
payments reported under (2) above on that date;
(4) the amount of the Servicing Fee paid to the Servicer with respect
to the related Monthly Period or Periods, as the case may be;
(5) the amount of Advances made by the Servicer with respect to that
Distribution Date or Payment Date, as applicable, and the amount paid to
the Servicer on that Distribution Date or Payment Date as reimbursement of
Advances made on previous Distribution Dates or Payment Dates, as
applicable;
(6) the amount, if any, distributed to Certificateholders and
Noteholders applicable to payments under the related form of credit
enhancement, if any; and
(7) any other information as may be specified in the related
Prospectus Supplement.
Each amount set forth pursuant to subclauses (1), (2), (4) and (5) with
respect to Certificates or Notes will be expressed as a dollar amount per $1,000
of the initial Certificate Balance or the initial principal balance of the
Notes, as applicable.
Unless and until Definitive Certificates or Definitive Notes are issued,
the reports with respect to a series of Securities will be sent on behalf of the
related Trust to the Trustee, the Indenture Trustee and Cede & Co., as
registered holder of the Certificates and the Notes and the nominee of The
Depository Trust Company. Certificate Owners and Note Owners may receive copies
of these reports upon written request, together with a certification that they
are Certificate Owners or Note Owners, as the case may be, and payment of
reproduction and postage expenses associated with the distribution of these
reports, from the Trustee or the Indenture Trustee, as applicable. See "Reports
to Securityholders" and "--Book-Entry Registration" above.
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Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of a Trust, the Trustee and the
Indenture Trustee, as applicable, will mail to each holder of a class of
Securities who at any time during that calendar year has been a Securityholder,
and received any payment thereon, a statement containing certain information for
the purposes of that Securityholder's preparation of federal income tax returns.
The Depository Trust Company will convey this information to its Participants,
who in turn will convey this information to their related indirect participants
in accordance with arrangements among The Depository Trust Company and these
participants. Certificate Owners and Note Owners may receive these reports upon
written request, together with a certification that they are Certificate Owners
or Note Owners and payment of reproduction and postage expenses associated with
the distribution of this information, from the Trustee, with respect to
Certificate Owners, or from the Indenture Trustee, with respect to Note Owners,
at the addresses specified in the related Prospectus Supplement. See "Certain
Federal Income Tax Consequences."
LISTS OF SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, with
respect to each series of Certificates, at the time, if any, as Definitive
Certificates have been issued, the Trustee will, upon written request by three
or more Certificateholders or one or more holders of Certificates evidencing not
less than 25% of the Certificate Balance, within five Business Days after
provision to the Trustee of a statement of the applicants' desire to communicate
with other Certificateholders about their rights under the related Trust
Documents or the Certificates and a copy of the communication that the
applicants propose to transmit, afford those Certificateholders access during
business hours to the current list of Certificateholders for purposes of
communicating with other Certificateholders with respect to their rights under
the Trust Documents. Unless otherwise specified in the related Prospectus
Supplement, the Trust Documents will not provide for holding any annual or other
meetings of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, with
respect to each series of Notes, if any, at the time, if any, as Definitive
Notes have been issued, the Indenture Trustee will, upon written request by
three or more Noteholders or one or more holders of Notes evidencing not less
than 25% of the aggregate principal balance of the related Notes, within five
Business Days after provision to the Indenture Trustee of a statement of the
applicants' desire to communicate with other Noteholders about their rights
under the related Indenture or the Notes and a copy of the communication that
the applicants propose to transmit, afford these Noteholders access during
business hours to the current list of Noteholders for purposes of communicating
with other Noteholders with respect to their rights under the Indenture. Unless
otherwise specified in the related Prospectus Supplement, the Indenture will not
provide for holding any annual or other meetings of Noteholders.
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DESCRIPTION OF THE TRUST DOCUMENTS
Except as otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of either:
the Pooling and Servicing Agreements (the "Pooling and Servicing
Agreements") to be entered into between Bombardier Capital CF II Inc.,
as Depositor, Bombardier Capital Inc., as Servicer, and the Trustee
specified in the related Prospectus Supplement or
the Sale and Servicing Agreements (the "Sale and Servicing
Agreements") to be entered among Bombardier Capital CF II, as
Depositor, Bombardier Capital Inc., as Servicer and the Trust,
and the Trust Agreements (the "Trust Agreements") to be entered into between the
Seller and the Trust (in either case collectively referred to as the "Trust
Documents"). Pursuant to these agreements the Depositor will assign the
Receivables to a Trust and the Servicer will agree to service the Receivables on
behalf of the Trust and pursuant to which this trust will be created and
Certificates will be issued. Forms of the Trust Documents have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The Depositor will provide a copy of these agreements (without exhibits) upon
request to a holder of Securities described therein. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Trust Documents. Where particular
provisions or terms used in the Trust Documents are referred to, the actual
provisions (including definitions of terms) are incorporated by reference as
part of this summary.
SALE AND ASSIGNMENT OF THE RECEIVABLES
On or prior to the closing date specified in the related Prospectus
Supplement for a Trust, BCI, as seller (in this capacity, the "Seller") pursuant
to a Transfer Agreement (a "Transfer Agreement"), will sell or contribute and
absolutely assign to the Depositor, without recourse, the Seller's entire
interest in the related Receivables and the proceeds thereof, including its
security interests in the related Products. On or prior to the Closing Date, the
Depositor will transfer and assign to the related Trust, without recourse,
pursuant to a Sale and Servicing Agreement or Pooling and Servicing Agreement,
as applicable, its entire interest in the related Receivables and the proceeds
thereof, including its security interest in the related Products. Each
Receivable transferred by the Depositor to the Trust will be identified in a
schedule appearing as an exhibit to the related Trust Documents (the "Schedule
of Receivables"). Concurrently with this sale and assignment, the Trustee will
execute and deliver the related certificates representing the Certificates, if
any, to or upon the order of the Depositor, and the Trustee will execute and the
Indenture Trustee will authenticate and deliver the Notes, if any, to or upon
the order of the Depositor.
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Except as otherwise specified in the related Prospectus Supplement, the
Depositor will make certain warranties in the Trust Documents with respect to
each Receivable as of the Closing Date, including that:
(1) as of the Cut-off Date, the most recent scheduled payment was made
or was not delinquent more than 59 days;
(2) no provision of a Receivable has been waived, altered or modified
in any respect, except by instruments or documents contained in the
Receivable file;
(3) each Receivable is a legal, valid and binding obligation of the
Obligor and is enforceable in accordance with its terms; except as may be
limited by laws affecting creditors' rights generally;
(4) no Receivable is subject to any right of rescission, set-off,
counterclaim or defense;
(5) for Receivables with an original balance greater than $25,000, the
related Product is covered by insurance naming the Seller as an additional
insured party;
(6) each Receivable has been originated by a Dealer or the Seller in
the ordinary course of that Dealer's, or the Seller's business and, if
originated by a Dealer, was purchased by the Seller in the ordinary course
of business;
(7) no Receivable was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer of the Receivable or an
interest therein to the Trustee pursuant to the Trust Documents or
pursuant to the Notes or Certificates unlawful;
(8) each Receivable complies with all requirements of law;
(9) no Receivable has been satisfied, subordinated to a lower lien
ranking than its original position in whole or in part or rescinded and
the Product has not been released from the lien of the Receivable in whole
or in part;
(10) each Receivable other than Receivables with respect to pianos and
organs creates a valid and enforceable first priority security interest in
favor of the Seller in the Product covered thereby and that security
interest has been assigned by the Seller to the Depositor and by the
Depositor to the related Trustee;
(11) all parties to each Receivable had capacity to execute the
Receivable;
(12) no Receivable has been sold, assigned or pledged to any other
person and prior to the transfer of the Receivables by the Seller to the
Depositor, the Seller had good and marketable title to each Receivable
free and clear of any encumbrance, equity, loan, pledge,
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charge, claim or security interest, and was the sole owner and had full
right to transfer the Receivable to the Depositor;
(13) as of the Cut-off Date, there was no default, breach, violation
or event permitting acceleration under any Receivable, except for payment
delinquencies permitted by clause (1) above, no event which with notice
and the expiration of any grace or cure period would constitute a default,
breach, violation or event permitting acceleration under that Receivable,
and the Seller has not waived any of the foregoing;
(14) as of the Closing Date there were, to the best of the Seller's
knowledge, no liens or claims which have been filed for work, labor or
materials affecting the Product securing a Receivable, which are or may be
liens prior or equal to the lien of the Receivable;
(15) each Receivable is a fully-amortizing loan and provides for level
payments over the term of the Receivable;
(16) each Receivable contains customary and enforceable provisions
that will render the rights and remedies of the holder thereof adequate
for realization against the collateral of the benefits of the security;
(17) the description of each Receivable set forth in the Schedule of
Receivables delivered to the Trustee is true and correct; and
(18) there is only one original of each Receivable, other than the
copy in the possession of the Obligor.
The warranties of the Seller will be made as of the execution and delivery
of the related Trust Documents and will survive the sale, transfer and
assignment of the related Receivables and other Trust Property to the related
Trust but will speak only as of the date made. The warranties will be assigned
by the Depositor to the related Trust, and if applicable, by the related Trust
to the Indenture Trustee.
The Seller will be obligated to repurchase for the Repurchase Price (as
defined below) any Receivable on the first business day after the first
Determination Date which is more than 90 days after the Seller becomes aware, or
should have become aware, or the Seller's receipt of written notice from the
Depositor, the Trustee, the Indenture Trustee, if applicable, or the Servicer,
of a breach of any representation or warranty of the Seller in the Trust
Documents that materially adversely affects the Trust's interest in any
Receivable if the breach has not been cured. The Repurchase Price for any
Receivable will be the remaining principal amount outstanding on that Receivable
on the date of repurchase plus accrued and unpaid interest thereon at its
Receivable Rate to the date of that repurchase. This repurchase obligation
constitutes the sole remedy available to the Trust and the Securityholders for a
breach of a representation or warranty under the Trust Documents with respect
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to the Receivables, but not with respect to any other breach by the Seller of
its obligations under the Trust Documents.
Upon the purchase by the Seller of a Receivable due to a breach of a
representation or warranty, the Trustee will convey that Receivable and the
related Trust Property to the Seller.
CUSTODY OF RECEIVABLE FILES
Unless otherwise specified in the related Prospectus Supplement, the
Servicer initially will be appointed to act as custodian for the Receivable
Files of each Trust. The Servicer may hold files at its subsidiary BCIF. Prior
to the appointment of any custodian other than the Servicer, the Trust and the
institution specified in the related Prospectus Supplement shall enter into a
custodian agreement pursuant to which that institution will agree to hold the
Receivable Files on behalf of the related Trust. Any custodian agreement of this
type may be terminated by the Trust on 30 days' notice to that institution.
To facilitate servicing and save administrative costs, the documents will
not be physically segregated from other similar documents that are in the
Servicer's possession. Uniform Commercial Code financing statements will be
filed in Vermont, Nevada and Florida reflecting the sale and assignment of the
Receivables to the Trustee, and the Servicer's accounting records and computer
systems will also reflect this sale and assignment. The Receivables that are in
the Servicer's possession will not be stamped or otherwise marked to indicate
that these Receivables have been sold to the related Trust. If, through
inadvertence or otherwise, any of the Receivables were sold to another party (or
a security interest therein were granted to another party) that purchased (or
took the security interest in) any of these Receivables in the ordinary course
of its business and took possession of these Receivables, the purchaser (or
secured party) would acquire an interest in the Receivables superior to the
interest of the related Trust if the purchaser (or secured party) acquired (or
took a security interest in) the Receivables for new value and without actual
knowledge of that Trust's interest. See "Certain Legal Aspects of the
Receivables--Rights in the Receivables."
COLLECTIONS
With respect to each Trust, the Servicer will establish one or more
Collection Accounts in the name of the Trustee or, in the case of any series
including one or more classes of Notes, in the name of the Indenture Trustee for
the benefit of the related Securityholders. With respect to any series including
one or more classes of Certificates, if so specified in the related Prospectus
Supplement, the Trustee will establish and maintain for each series an account,
in the name of the Trustee on behalf of the related Certificateholders, in which
amounts released from the Collection Account and any Pre-Funding Account and any
amounts received from any source of credit enhancement for distribution to these
Certificateholders will be deposited and from which all distributions to these
Certificateholders will be made (the "Certificate Distribution Account"). With
respect to any series including one or more classes of Notes, the Indenture
Trustee will establish and maintain for each series an account, in the name of
the Indenture Trustee on behalf of the related Noteholders, in
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which amounts released from the Collection Account and any Pre-Funding Account
and any amounts received from any source of credit enhancement for payment to
these Noteholders will be deposited and from which all distributions to these
Noteholders will be made (the "Note Distribution Account"). The Collection
Account, the Certificate Distribution Account (if any), and the Note
Distribution Account (if any), are referred to herein collectively as the
"Designated Accounts." Any other accounts to be established with respect to a
Trust will be described in the related Prospectus Supplement.
Each Designated Account will be an Eligible Account maintained with the
Trustee, the Indenture Trustee and/or other depository institutions. "Eligible
Account" means any account which is:
(1) an account maintained with an Eligible Institution (as defined
below);
(2) an account or accounts the deposits in which are fully insured by
either the Bank Insurance Fund or the Savings Association Insurance Fund
of the FDIC;
(3) a "segregated trust account" maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the
benefit of the Trustee, which depository institution or trust company has
capital and surplus (or, if that depository institution or trust company
is a subsidiary of a bank holding company system, the capital and surplus
of the bank holding company) of not less than $50,000,000 and the
securities of the depository institution (or, if the depository
institution is a subsidiary of a bank holding company system and the
depository institution's securities are not rated, the securities of the
bank holding company) has a credit rating from each rating agency rating
the series of Notes and/or Certificates (a "Rating Agency") in one of its
generic credit rating categories which signifies investment grade; or
(4) an account that will not cause any Rating Agency to downgrade or
withdraw its then-current rating assigned to the Securities, as confirmed
in writing by each Rating Agency.
"Eligible Institution" means any depository institution organized under the laws
of the United States or any state, the deposits of which are insured to the full
extent permitted by law by the Bank Insurance Fund (currently administered by
the Federal Deposit Insurance Corporation), whose short-term deposits have been
rated in one of the two highest rating categories or any other rating category
as will not adversely affect the ratings assigned to the Securities of that
series. On the Closing Date specified in the related Prospectus Supplement, the
Servicer will cause to be deposited in the Collection Account all payments on
the Receivables received by the Servicer after the Cut-off Date and on or prior
to the second Business Day preceding the Closing Date.
The Servicer will deposit all payments on the Receivables held by any
Trust received directly by the Servicer from Obligors and all proceeds of
Receivables collected directly by the Servicer during each Monthly Period into
the Collection Account no later than two Business Days after
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receipt. Notwithstanding the foregoing and unless otherwise provided in the
related Prospectus Supplement, the Servicer may utilize an alternative
remittance schedule, if the Servicer provides to the Trustee and the Indenture
Trustee written confirmation from each Rating Agency that this alternative
remittance schedule will not result in the downgrading or withdrawal by that
Rating Agency of the rating(s) then assigned to the Securities. The Depositor
will, for each Receivable to be purchased by it for breach of a representation
or warranty, deposit into the Collection Account on or before the Distribution
Date or Payment Date, as applicable, an amount equal to the principal balance of
that Receivable plus any unpaid interest thereon at the applicable Receivable
Rate (the "Purchase Amount").
For any series of Securities, funds in the Designated Accounts and any
other accounts identified in the related Prospectus Supplement will be invested,
as provided in the related Trust Documents, at the direction of the Servicer in
United States government securities and certain other high-quality investments
meeting the criteria specified in the related Trust Documents ("Eligible
Investments"). Eligible Investments shall mature no later than the Distribution
Date for the Monthly Period to which those amounts relate. Investments in
Eligible Investments will be made in the name of the Trustee or the Indenture
Trustee, as the case may be, and these investments will not be sold or disposed
of prior to their maturity.
Unless otherwise specified in the related Prospectus Supplement,
collections or recoveries on a Receivable, other than late fees or certain other
similar fees or charges, received during a Monthly Period and Purchase Amounts
deposited with the Trustee prior to a Payment Date or Distribution Date will be
applied first to any outstanding Monthly Advances made by the Servicer with
respect to the Receivable, and then to interest and principal on the Receivable
in accordance with the terms of the Receivable.
SERVICING PROCEDURES
The Servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the Servicer with respect to Receivables owned
or serviced by it, to collect all payments due with respect to the Receivables
held by any Trust and, in a manner consistent with the Trust Documents, will
follow its customary collection procedures with respect to secured consumer
loans that it services for itself and others.
Under the Trust Documents, the Servicer will be required to use its best
efforts to repossess or otherwise comparably convert the ownership of any
Product securing a Receivable, with respect to which the Servicer has determined
that payments thereunder are not likely to be resumed as soon as practicable
after default on the Receivable. The Servicer is authorized to follow its normal
collection practices and procedures as it deems necessary or advisable to
realize upon any Receivable. The Servicer may repossess and sell the Product
securing that Receivable at judicial sale, or take any other action permitted by
applicable law. See "Certain Legal Aspects of the Receivables." The Servicer
will be entitled to recover all reasonable expenses incurred by it in connection
therewith.
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The proceeds of this realization (net of expenses) will be deposited in the
Collection Account at the time and in the manner described above under
"--Collections."
The Trust Documents will provide that the Servicer will indemnify and
defend the Trustee, the Indenture Trustee, the Trust and the Securityholders
against, among other things, any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel and
expenses of litigation, or in respect of any action taken or failed to be taken
by the Servicer with respect to any portion of the Trust Property in violation
of the provisions of the Trust Documents. The Servicer's obligations to
indemnify the Trustee, the Indenture Trustee, the Trust and the Securityholders
for the Servicer's actions or omissions will survive the removal of the Servicer
but will not apply to any action or omission of a successor Servicer.
SERVICING COMPENSATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Servicer will be entitled to receive
the Servicing Fee for each Monthly Period in an amount equal to the product of
one-twelfth of the Servicing Rate and the aggregate principal balance of the
Receivables (the "Aggregate Principal Balance") as of the first day of that
Monthly Period.
Unless otherwise provided in the related Prospectus Supplement, the
"Servicing Rate" will equal 1.0% per annum calculated on the basis of a 360-day
year consisting of twelve 30-day months. As long as BCI is the Servicer, the
Servicing Fee and any additional servicing compensation will be paid out of
collections on or with respect to the Receivables after the required
distributions to Noteholders and Certificateholders. If BCI is no longer the
Servicer, the Servicing Fee and any additional servicing compensation will be
paid out of collections on or with respect to the Receivables prior to
distributions to Certificateholders and Noteholders. Unless otherwise specified
in the related Prospectus Supplement, a "Monthly Period" with respect to any
Payment Date or Distribution Date is the calendar month immediately preceding
the month in which the Payment Date or Distribution Date occurs.
With the exception of certain expenses incurred in connection with
realizing upon Receivables, BCI, as Servicer, will be required to pay all
expenses incurred by it in connection with its servicing activities, including
fees, expenses and disbursements of the Trustee, the Indenture Trustee, the
Custodian and independent accountants, taxes imposed on the Servicer and
expenses incurred in connection with distributions and reports to
Certificateholders and Noteholders.
DISTRIBUTIONS
With respect to each Trust, beginning on the Distribution Date or Payment
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 Securities entitled thereto will be made by the
Trustee or the Indenture Trustee, as applicable, to the Certificateholders and
the Noteholders.
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The timing, calculation, allocation, order, source, priorities of and
requirements for all distributions to each class of Certificateholders and all
payments to each class of Noteholders will be set forth in the related
Prospectus Supplement.
Except as otherwise specified in the related Prospectus Supplement, on the
third Business Day prior to each Distribution Date or Payment Date, as
applicable (the "Determination Date"), the Servicer will determine the Amount
Available and the amounts to be distributed on the Notes and Certificates for
that Distribution Date. Except as otherwise specified in the related Prospectus
Supplement, the "Amount Available" for any Distribution Date or Payment Date, as
applicable will be equal to:
(1) the funds on deposit in the Collection Account at the close of
business on the last day of the related Monthly Period, plus
(2) any Advances to be made by the Servicer with respect to delinquent
payments, plus
(3) any Repurchase Amounts to be deposited by the Depositor with
respect to Receivables to be repurchased due to a breach of a
representation or warranty, minus
(4) any amounts paid by Obligors in the related Monthly Period, but to
be applied in respect of a regular monthly payment due in a subsequent
Monthly Period (an "Advance Payment"), minus
(5) any amounts incorrectly deposited in the Collection Account.
Except as otherwise specified in the related Prospectus Supplement, on
each Distribution Date, prior to making distributions in respect of the Notes
and Certificates, the Amount Available will be applied, first, if BCI is no
longer the Servicer, to pay the servicing fee to the successor Servicer, and
second, to reimburse the Servicer (including BCI) for any Advances made with
respect to a prior Monthly Period and subsequently recovered and for any
Advances previously made that the Servicer has determined are Uncollectible
Advances.
ENHANCEMENT
The amounts and types of enhancement arrangements and the provider
thereof, if applicable, with respect to each class of Securities will be set
forth in the related Prospectus Supplement. If and to the extent provided in the
related Prospectus Supplement, enhancement may be in the form of a financial
guaranty insurance policy, letter of credit, cash reserve fund, derivative
product, or other form of enhancement, or any combination thereof, as may be
described in the related Prospectus Supplement. If specified in the applicable
Prospectus Supplement, enhancement for a class of Securities of a series may
cover one or more other classes of Securities in that series, and accordingly
may be exhausted for the benefit of a particular class and thereafter be
unavailable to those other
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classes. Further information regarding any provider of enhancement, including
financial information when material, will be included in the related Prospectus
Supplement.
The presence of enhancement may be intended to enhance the likelihood of
receipt by the Certificateholders and the Noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
Certificateholders and the Noteholders will experience losses, or may be
structured to provide protection against changes in interest rates or against
other risks, to the extent and under the conditions specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the enhancement for a class of Securities will not provide
protection against all risks of loss and will not guarantee repayment of the
entire principal and interest thereon. If losses occur which exceed the amount
covered by any enhancement or which are not covered by any enhancement,
Securityholders will bear their allocable share of deficiencies. In addition, if
a form of enhancement covers more than one class of Securities of a series,
Securityholders of any of those classes will be subject to the risk that the
enhancement will be exhausted by the claims of Securityholders of other classes.
ADVANCES
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will be obligated to make Advances each month for each Receivable in an
amount equal to the product of the principal balance of the Receivable as of the
first day of the related Collection Period and one-twelfth of its interest rate
minus the amount of interest actually received on the Receivable during the
Collection Period. If such a calculation results in a negative number, an amount
equal to that negative amount will be paid to the Servicer in reimbursement of
outstanding Advances. In addition, if a Receivable is liquidated, the amount of
accrued and unpaid interest (but not including interest for the current
Collection Period) shall, up to the amount of outstanding Advances for that
Receivable, be withdrawn from the Collection Account and paid to the Servicer to
reimburse it for outstanding Advances. In addition, the Servicer will be
obligated to make an Advance on a delinquent Receivable only to the extent that
it determines in its sole discretion that this Advance will be recoverable from
subsequent collections or recoveries on the Receivable. No advances of principal
will be made.
EVIDENCE AS TO COMPLIANCE
Annually, the Servicer will deliver to each Trustee and each Indenture
Trustee a report of a nationally recognized accounting firm stating that the
firm has examined certain documents and records relating to the servicing of
Receivables serviced by the Servicer under pooling and servicing agreements or
sale and servicing agreements similar to the Trust Documents and stating that,
on the basis of these procedures, the servicing has been conducted in compliance
with the applicable Trust Documents, except for any exceptions set forth in that
report. A copy of that statement may be obtained by any Certificate Owner or
Note Owner upon compliance with the requirements described above. See "Certain
Information Regarding the Securities--Statements to Securityholders" above.
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CERTAIN MATTERS REGARDING THE SERVICER
Unless otherwise provided in the related Prospectus Supplement, BCI's
appointment as Servicer under the related Trust Documents will continue until it
resigns or is terminated as Servicer, or until the time, if any, as a Servicer
Termination Event shall have occurred under the related Trust Documents. The
related Trust Documents will provide that the Servicer may not resign from its
obligations and duties as Servicer thereunder, except upon a determination,
evidenced by an opinion of independent counsel, delivered and acceptable to the
Trustee and the Indenture Trustee, that by reason of a change in legal
requirements its performance of these duties would cause it to be in violation
of those legal requirements in a manner which would result in a material adverse
effect on the Servicer. No resignation of this type will become effective until
a successor Servicer has assumed the servicing obligations and duties under the
related Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, resulting from any merger or consolidation to which the Servicer
is a party, which acquires by conveyance, transfer or lease substantially all of
the assets of the Servicer or succeeds to all or substantially all the business
of the Servicer, where the Servicer is not the surviving entity, which
corporation or other entity assumes every obligation of the Servicer under each
Trust Document, will be the successor to the Servicer under the related Trust
Documents; provided, however, that this entity is an Eligible Servicer, and
immediately after giving effect to that transaction, no Servicer Termination
Event and no event which, after notice or lapse of time, or both, would become a
Servicer Termination Event shall have occurred and be continuing.
INDEMNIFICATION AND LIMITS ON LIABILITY
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will be liable only to the extent of
the obligations specifically undertaken by it under the Trust Documents and will
have no other obligations or liabilities thereunder. The Trust Documents will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will have any liability to the Trust, the
Certificateholders or the Noteholders, except as provided in the Trust
Documents, for any action taken or for refraining from taking any action
pursuant to the Trust Documents, other than any liability that would otherwise
be imposed by reason of the Servicer's breach of the Trust Documents or willful
misfeasance, bad faith or negligence (including errors in judgment) in the
performance of its duties, or by reason of reckless disregard of obligations and
duties under the Trust Documents or any violation of law.
The Servicer may delegate duties under the related Trust Documents to any
of its affiliates and perform duties like repossessing Products through
subcontractors; provided, however, that no delegation of these duties by the
Servicer shall relieve the Servicer of its responsibility with respect to these
obligations. BCI subservices all servicing and underwriting of the Receivables
to Bombardier Capital Florida Inc., its wholly owned subsidiary.
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SERVICER TERMINATION EVENTS
Except as otherwise specified in the related Prospectus Supplement,
Servicer Termination Events under the Trust Documents ("Service Termination
Events") will include:
(1) any failure by the Servicer to deliver to the Indenture Trustee
for distribution to the Noteholders or to the Trustee for distribution to
the Certificateholders any required payment which continues unremedied for
5 days, or any other period specified in the related Prospectus Supplement,
after the giving of written notice;
(2) any failure by the Servicer duly to observe or perform in any
material respect any other of its covenants or agreements in the Trust
Documents that materially and adversely affects the interests of
Securityholders, which, in either case, continues unremedied for 30 days
after the giving of written notice of this failure of breach;
(3) any assignment or delegation by the Servicer of its duties or
rights under the Trust Documents, except as specifically permitted under
the Trust Documents, or any attempt to make this type of assignment or
delegation;
(4) certain events of insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings regarding the Servicer; and
(5) the Servicer is no longer an Eligible Servicer (as defined in the
Trust Documents).
Notice as used herein shall mean notice to the Servicer by the Trustee, the
Indenture Trustee, if any, or the Depositor, or to the Depositor, the Servicer,
the Indenture Trustee, if any, and the Trustee by the holders of Securities
representing interests aggregating not less than 25% of the outstanding
principal balance of the Securities issued by the related Trust.
Unless otherwise specified in the related Prospectus Supplement, if a
Servicer Termination Event occurs and is continuing, the Trustee, the Indenture
Trustee (if any), or the holders of at least 25% in aggregate principal balance
of the outstanding Securities issued by the related Trust, by notice then given
in writing to the Servicer, and to the Trustee and the Indenture Trustee if
given by the Securityholders, may terminate all of the rights and obligations of
the Servicer under the Trust Documents. Immediately upon the giving of this
notice, and, in the case of a successor Servicer other than the Trustee, the
acceptance by the successor Servicer of its appointment, all authority of the
Servicer will pass to the Trustee or other successor Servicer. The Trustee, the
Indenture Trustee and the successor Servicer may set off and deduct any amounts
owed by the Servicer from any amounts payable to the outgoing Servicer.
On and after the time the Servicer receives a notice of termination, the
Trustee or other successor Servicer specified in the related Prospectus
Supplement (the "Backup Servicer") will be the successor in all respects to the
Servicer and will be subject to all the responsibilities, restrictions,
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duties and liabilities of the Servicer under the related Trust Documents;
provided, however, that the successor Servicer shall have no liability with
respect to any obligation which was required to be performed by the prior
Servicer prior to the date that the successor Servicer becomes the Servicer or
any claim of a third party (including a Securityholder) based on any alleged
action or inaction of the prior Servicer. Notwithstanding this termination, the
Servicer shall be entitled to payment of certain amounts payable to it prior to
this termination, for services rendered prior to this termination. This
termination will not affect in any manner the Depositor's obligation to
repurchase certain Receivables for breaches of representations or warranties
under the Trust Documents. In the event that the Trustee would be obligated to
succeed the Servicer but is unwilling or unable so to act, it may appoint, or
petition to a court of competent jurisdiction for the appointment of a Servicer.
Pending this appointment, the Trustee is obligated to act in that capacity. The
Trustee and the successor Servicer may agree upon the servicing compensation to
be paid, which in no event may be greater than the compensation to the Servicer
under the Trust Documents.
Upon any termination of, or appointment of a successor to, the Servicer,
the Trustee and the Indenture Trustee (if any) will each give prompt written
notice thereof to Certificateholders and Noteholders, respectively, at their
respective addresses appearing in the Certificate register or the Note register
and to each Rating Agency.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, unless otherwise provided
in the related Prospectus Supplement, the holders of Notes evidencing at least a
majority in principal amount of the then outstanding Notes of the related series
- -- or the holders of the Certificates of that series evidencing not less than a
majority of the outstanding principal amount of those Certificates, in the case
of any Servicer Termination Event which does not adversely affect the related
Indenture Trustee or those Noteholders -- may, on behalf of all those
Noteholders and Certificateholders, waive any default by the Servicer in the
performance of its obligations under the related Sale and Servicing Agreement
and its consequences, except a default in making any required deposits to or
payments from any of the Designated Accounts in accordance with this Sale and
Servicing Agreement. With respect to each Trust that has not issued Notes,
holders of Certificates of that series evidencing not less than a majority of
the principal amount of these Certificates then outstanding may, on behalf of
all these Certificateholders, waive any default by the Servicer in the
performance of its obligations under the related Pooling and Servicing
Agreement, except in the case of a Servicer Termination Event related to a
default by the Servicer in making any required deposits to or payments from the
Designated Accounts in accordance with that Pooling and Servicing Agreement. No
waiver of this type will impair these Noteholders' or Certificateholders' rights
with respect to subsequent defaults.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, the Trust
Documents may be amended by the Depositor, the Servicer, the Trustee and the
Indenture Trustee, if any, but without the consent of any of the
Securityholders, to cure any ambiguity or to correct or supplement any
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provision therein, provided that this action will not, in the opinion of counsel
(which may be internal counsel to the Depositor or the Servicer, or any of their
affiliates) reasonably satisfactory to the Trustee and the Indenture Trustee,
materially and adversely affect the interests of the Securityholders. The Trust
Documents may also be amended by the Depositor, the Servicer and the Trustee and
the Indenture Trustee (if any), and a Certificate Majority and a Note Majority
(if applicable), for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Trust Documents or of
modifying, in any manner, the rights of the Certificateholders or the
Noteholders. No amendment of this type may:
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 on any related Certificate
or Note or the related Pass-Through Rate or Interest Rate or
reduce the percentage of the Certificate Balance evidenced by
Certificates or of the aggregate principal amount of Notes then
outstanding required to consent to any amendment of this type,
without the consent of the holders of all Certificates or all Notes, as the case
may be, then outstanding.
TERMINATION
The obligations created by the Trust Documents will terminate upon the date
calculated as specified in the Trust Documents, generally upon:
the later of the final payment or other liquidation of the last
Receivable subject thereto and the disposition of all property
acquired upon repossession of any Product and
the payment to the Securityholders of all amounts held by the Servicer
or the Trustee and required to be paid to the Securityholders pursuant
to the Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, with
respect to each series of Securities, in order to avoid excessive administrative
expense, the Depositor will be permitted, at its option, to purchase from the
Trust, on any Distribution Date or Payment Date, as applicable, immediately
following any Monthly Period as of the last day of which the Aggregate Principal
Balance is equal to or less than [15%], or another percentage as may be
specified in the related Prospectus Supplement, of the Cut-off Date Principal
Balance, all remaining Receivables in the related Trust and the other remaining
Trust Property at a price equal to the aggregate of the Purchase Amounts
therefor and the appraised value of any other remaining Trust Property. The
exercise of this right will effect an early retirement of the related
Certificates and Notes.
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Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Trustee will give written notice of
the final distribution with respect to the Certificates to each
Certificateholder of record and the Indenture Trustee will give written notice
of the final payment with respect to the Notes (if any), to each Noteholder of
record. The final distribution to any Certificateholder and the final payment to
any Noteholder will be made only upon surrender and cancellation of that
holder's Certificate or Note at the office or agency of the Trustee, with
respect to Certificates, or of the Indenture Trustee, with respect to Notes,
specified in the notice of termination. The Certificateholders and Noteholders,
by acceptance of their Certificates and Notes, will waive any rights with
respect to any funds remaining in the Trust, after the Trustee or the Indenture
Trustee has taken certain measures to locate a Certificateholder or Noteholder,
as the case may be, and those measures have failed.
THE TRUSTEE
The Trustee or Owner Trustee, as applicable, for each Trust will be
specified in the related Prospectus Supplement. The Trustee, in its individual
capacity or otherwise, and any of its affiliates may hold Certificates or Notes
in their own names or as pledgee. In addition, for the purpose of meeting the
legal requirements of certain jurisdictions, the Trustee, with the consent of
the Servicer, shall have the power to appoint co-trustees or separate trustees
of all or any part of the related Trust. In the event of this appointment, all
rights, powers, duties and obligations conferred or imposed upon the Trustee by
the related Trust Documents will be conferred or imposed upon the Trustee and
that separate trustee or co-trustee jointly, or, in any jurisdiction where the
Trustee is incompetent or unqualified to perform certain acts, singly upon that
separate trustee or co-trustee who shall exercise and perform those rights,
powers, duties and obligations solely at the direction of the Trustee.
The Trustee of any Trust may resign at any time, in which event the
Servicer or its successor will be obligated to appoint a successor trustee. The
Servicer may also remove the Trustee, if the Trustee ceases to be eligible to
serve, becomes legally unable to act, is adjudged insolvent or is placed in
receivership or similar proceedings. In these circumstances, the Servicer will
be obligated to appoint a successor trustee. Any resignation or removal of the
Trustee and appointment of a successor trustee will not become effective until
acceptance of the appointment by the successor trustee.
DUTIES OF THE TRUSTEE
The Trustee will make no representation as to the validity or sufficiency
of any Trust Document, the Certificates or the Notes (other than its execution
of the Certificates and the Notes), the Receivables or any related documents,
and will not be accountable for the use or application by the Servicer of any
funds paid to the Servicer in respect of the Certificates, the Notes or the
Receivables prior to deposit in the related Collection Account.
The Trustee will be required to perform only those duties specifically
required of it under the Trust Documents. Generally, those duties will be
limited to the receipt of the various certificates,
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reports or other instruments required to be furnished by the Servicer to the
Trustee under the Trust Documents, in which case it will only be required to
examine those certificates, reports or instruments to determine whether they
conform substantially to the requirements of the Trust Documents.
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Trust Documents or to institute, conduct, or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders or Noteholders, unless those
Certificateholders or Noteholders have offered the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby. No Certificateholder nor any Noteholder will have any right
under the related Trust Documents to institute any proceeding with respect to
those Trust Documents, unless the holder has given the Trustee written notice of
default and unless the holders of Certificates evidencing not less than 25% of
the Certificate Balance or the holders of Notes evidencing not less than 25% of
the aggregate principal balance of the Notes then outstanding, as the case may
be, have made written request to the Trustee to institute the proceeding in its
own name as Trustee thereunder and have offered to the Trustee reasonable
indemnity, and the Trustee for 30 days after the receipt of this notice, request
and offer to indemnify has neglected or refused to institute the requested
proceedings.
ADMINISTRATOR
If an Administrator is specified in the related Prospectus Supplement, the
Administrator will enter into an agreement (the "Administration Agreement")
pursuant to which the Administrator will agree, to the extent provided in the
Administration Agreement, to provide the notices and to perform other
administrative obligations required by the related Indenture and the Trust
Agreement. Unless otherwise specified in the related Prospectus Supplement with
respect to any Trust, as compensation for the performance of the Administrator's
obligations under the applicable Administration Agreement and as reimbursement
for its expenses related thereto, the Administrator will be entitled to a
monthly administration fee in the amount as may be set forth in the related
Prospectus Supplement (the "Administration Fee").
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The Receivables are either "chattel paper" or "accounts" as defined in the
Uniform Commercial Code as in effect in the States of Vermont, Nevada and
Florida. Pursuant to the Uniform Commercial Code, an ownership interest in
chattel paper or accounts may be perfected by possession, in the case of chattel
paper, or by filing a UCC-1 financing statement, in the case of chattel paper or
accounts, in the state where the Depositor's principal executive office is
located. Accordingly, financing statements covering the Receivables will be
filed by the Depositor in Vermont and Nevada.
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The Servicer will be obligated from time to time to take those actions as
are necessary to continue the perfection of each Trust's interest in the related
Receivables and the proceeds thereof. The Depositor will warrant in the Trust
Documents with respect to the Receivables held by the related Trust and the
Trustee will pledge the right to enforce this warranty to the Indenture Trustee
as collateral for the Notes, if any, that, as of the Closing Date, these
Receivables have not been sold, pledged or assigned by the Depositor to any
other person, and that it has good and indefeasible title thereto and is the
sole owner thereof free of any Liens and that, immediately upon the transfer of
the Receivables to the Trust pursuant to the related Trust Document, the Trust
will have good and indefeasible title to and will be the sole owner of the
Receivables, free of any Liens. In the event of an uncured breach of any of the
warranties in the Trust Documents that materially and adversely affects the
related Trust's, Certificateholders' or Noteholders' interest in any Receivable
(a "Repurchase Event"), the Depositor will be obligated to repurchase that
Receivable.
Unless otherwise provided in the related Prospectus Supplement, BCIF will
hold the Receivable Files at BCIF's offices in Jacksonville, Florida on behalf
of each Trust. To facilitate servicing and save administrative costs, the
documents will not be physically segregated from other similar documents that
are in BCIF's possession. Uniform Commercial Code financing statements will be
filed in Vermont, Nevada and Florida reflecting the sale and assignment of the
Receivables to the Trustee, and BCI's accounting records and computer systems
will also reflect this sale and assignment. The Receivables will not be stamped
or otherwise marked to indicate that those Receivables have been sold to the
related Trust. If, through inadvertence or otherwise, any of the Receivables
which are chattel paper were sold to another party (or a security interest
therein were granted to another party) that purchased (or took this security
interest in) any of those Receivables in the ordinary course of its business and
took possession of those Receivables, the purchaser (or secured party) would
acquire an interest in the Receivables superior to the interest of the related
Trust if the purchaser (or secured party) acquired (or took a security interest
in) the Receivables for new value and without actual knowledge of that Trust's
interest. See "Description of the Trust Documents--Custody of Receivable Files."
SECURITY INTERESTS IN THE PRODUCTS OTHER THAN BOATS
Security interests in some Products must be perfected by notation of the
secured party's lien on the certificate of title or by actual possession of the
certificate of title, depending on the law of the state where the Product is
located. Security interests in certain other Products must be perfected by the
filing of a Uniform Commercial Code financing statement, naming the Obligor as
debtor and BCI as secured party. Purchase money security interests in Products
that are "consumer goods" (as defined in the Uniform Commercial Code) are deemed
perfected under some states' laws when the receivable is executed and BCI has
advanced the purchase price of the goods. The practice of BCI is to take any
actions required to perfect its security interest under the laws of the state in
which the Product is located. In the event of clerical errors, administrative
delays or otherwise, such actions may not have been taken with respect to a
Product and such security interest may be subordinate to the interests of, among
others, subsequent purchasers of the Products, holders of perfected security
interests in the Product, and the trustee in bankruptcy of the Obligor.
Likewise, where BCI did not
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file a Uniform Commercial Code financing statement because its security interest
was perfected as a purchase money security interest in "consumer goods," such
security interest may be deemed not to be perfected if the Product were
ultimately determined not to be "consumer goods," and a subsequent purchaser of
the Product may acquire the Product free of BCI's security interest. Such events
would, however, give rise to a Repurchase Event and obligate the Depositor to
repurchase the affected Receivable if the interests of the related
Certificateholders, Noteholders or Trust were materially and adversely affected.
BCI will not be required to perfect a security interest in any piano or organ.
Pursuant to the related Trust Document, BCI will assign to the Depositor
and the Depositor will assign to the Owner Trustee on behalf of the related
Trust the security interests in the Products. However, because of the
administrative burden and expense that would be entailed in doing so, none of
BCI, the Depositor, the Trustee or the Servicer will be required, except to the
extent provided below, to amend the certificates of title or Uniform Commercial
Code financing statements to identify the Trustee as the new secured party and,
accordingly, BCI will continue to be named as the secured party on the
certificates of title or Uniform Commercial Code financing statements relating
to the Products. The Servicer will be required to note the interest of the
related Trust on the certificates of title for the Products or to amend the
Uniform Commercial Code financing statements only upon a Servicer Termination
Event. In most states, an assignment such as that under the related Trust
Documents should be an effective transfer of a security interest without
amendment of any lien noted on the related certificate of title or financing
statement, and the assignee should succeed to the assignor's status as the
secured party. In the absence of fraud or forgery by the Obligor or
administrative error by state recording officials, the notation of the lien of
BCI on the certificate of title or the Uniform Commercial Code financing
statement should be sufficient to protect the related Trust against the rights
of subsequent purchasers of a Product or subsequent lenders who take a security
interest in the related Product. However, in the absence of such an amendment,
the security interest of the related Trust in the related Products might be
defeated by, among others, the trustee in bankruptcy of BCI or the Obligor.
However, such failure would give rise to a Repurchase Event and obligate the
Depositor to repurchase the affected Receivable if the interests of the related
Certificateholders, Noteholders or Trust were materially and adversely affected.
In most states, a perfected security interest in a Product subject to
certificate of title or a financing statement continues for four months after
the Product is moved to a different state and thereafter until the owner
re-registers the Product in the new state, but in no event beyond the surrender
of the certificate of title. A majority of states require surrender of a
certificate of title to re-register a Product. Accordingly, the secured party
must surrender possession if it holds the certificate of title to such Product.
In the case of Products registered in states which provide for notation of a
lien but not possession of the certificate of title by the holder of the
security interest in the related Product, the secured party should receive
notice of surrender if the security interest in the Product is noted on the
certificate of title. Accordingly, the secured party should have the opportunity
to re-perfect its security interest in the Product in the state of relocation.
In states that do not require a certificate of title for registration of a
Product, re-registration could defeat perfection.
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In the ordinary course of servicing its secured consumer receivable
portfolio, it is the practice of BCI to effect such re-perfection upon receipt
of notice of re-registration or information from the Obligor as to relocation.
Similarly, when an Obligor sells a Product subject to a certificate of title,
BCI must surrender possession of the certificate of title or receive notice as a
result of its lien noted thereon and accordingly should have an opportunity to
require satisfaction of the related Receivable before release of the lien.
Under the laws of most states, liens for repairs performed on a Product and
liens for unpaid taxes take priority over even a perfected security interest in
a Product. Subject to the preceding sentence, the Depositor will represent in
the related Trust Document that, immediately prior to the sale, assignment and
transfer thereof to the related Trust, each Receivable held by such Trust was
secured by a valid, subsisting and enforceable first priority perfected security
interest in favor of BCI, as secured party. However, liens for taxes, judicial
liens or liens arising by operation of law could arise at any time during the
term of a Receivable. In addition, the laws of certain states and federal law
permit the confiscation of motor vehicles and certain other consumer products 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 product. No notice will be given to the Owner
Trustee, Indenture Trustee, Certificateholders or Noteholders in the event such
a lien or confiscation arises, and if such lien arises or confiscation occurs
after the date of issuance of any series of Certificates and Notes, neither the
Depositor nor the Servicer will be required to repurchase or purchase the
related Receivable.
SECURITY INTERESTS IN BOATS
Generally, security interests in boats may be perfected in one of three
ways:
(1) in "title" states, a security interest is perfected by notation of
the secured party's lien on the certificate of title issued by an
applicable state motor vehicle department or other appropriate state
agency;
(2) in other states, a security interest may be perfected by filing a
UCC-1 financing statement, however, a purchase money lien in consumer
goods is perfected without any filing requirement; and
(3) if a boat qualifies for documentation under Federal law, a
Preferred Mortgage may be obtained under the Federal ship mortgage
statutes codified in Chapter 313 of Title 46 of the U.S. Code (the
"Ship Mortgage Statutes") by filing the mortgage with the Secretary of
Transportation.
Vessels of at least five net tons qualify for documentation under Federal law,
but such documentation is discretionary if the vessel is being used solely for
recreational purposes. If documented, the boat becomes a "vessel of the United
States" and the exclusive method for perfecting a security interest in a "vessel
of the United States" is to comply with Federal law.
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Accordingly, a Preferred Mortgage under the Ship Mortgage Statutes supersedes a
security interest perfected under state law.
The Seller will represent that it has taken such measures necessary to
perfect its security interest in each related financed boat under the laws of
the state in which the financed boat is registered or the Ship Mortgage Act, as
applicable. Typically, a Dealer will make proper and prompt application to any
applicable state motor vehicle department or other appropriate state agency to
have a notation of the lien made on the certificate of title of each financed
boat at the time of sale if the financed boat is subject to a title statute.
When a UCC-1 financing statement is filed, the Dealer is required to obtain the
necessary signature on the UCC-1 financing statement to allow filing by the
Seller. If under Federal or state law a filing or other action is required to
perfect a security interest and if the Seller, because of clerical error or
otherwise, has failed to take such action with respect to a financed boat, the
Seller will not have a perfected security interest in the financed boat under
such law and its security interest may be subordinate to the interest of, among
others, subsequent purchasers of the financed boat, holders of perfected
security interests and the bankruptcy trustee of the Obligor. The Seller's state
law security interest may also be subordinate to such third parties in the event
of fraud or forgery by the Obligor or administrative error by state recording
officials or if the financed boat is documented under Federal law. In addition,
under certain certificate of title statutes the Seller must perfect its security
interest in boat motors otherwise subject to certificate of title statutes under
the Uniform Commercial Code.
Federal law allows documentation under the Ship Mortgage Act of all boats
measuring over five net tons. Once documented, a Preferred Mortgage under the
Ship Mortgage Statutes is obtained. If a qualifying financed boat is not
documented or if the documentation, because of clerical error or otherwise,
fails to comply with applicable procedures under Federal regulations, the Seller
will not have a Preferred Mortgage on the financed boat. In such case, the
Seller's security interest under state law may still be effective. However, if
the financed boat is later documented by a third party, the Seller's state law
security interest will cease to be perfected, and the Seller will be
subordinated to the interests of, among others, subsequent purchasers of the
financed boat, holders of security interests perfected under Federal law and the
trustee-in-bankruptcy of the Obligor.
A security interest perfected by a Preferred Mortgage has a nationwide
scope and no further action is necessary when an Obligor moves or relocates the
collateral. Security interests perfected under state law may have to be refiled
if the Obligor moves to a state other than the state in which a security
interest is originally perfected and in addition if the security interest is
perfected under the Uniform Commercial Code, a new filing must be made under the
Uniform Commercial Code in order to continue the perfected security interest.
If the security interest in the boat is perfected under a title statute and
the related Obligor moves to a state other than the state in which the boat is
registered, under the laws of most title states the perfection of the security
interest in the boat would continue for a brief period of time after such
relocation. A majority of states issuing certificates of title on boats require
surrender of a certificate of title to re-register a boat. In those states that
also provide for possession of the certificate of title
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by the secured party, the Seller must surrender possession of the certificate of
title in such circumstance for any related financed boat to be re-registered.
Some states do not give the secured party possession of the certificate of
title, but indicate the secured party on the certificate of title and provide
notice to such secured party of surrender of the certificate of title by another
person. If either the Servicer is in possession of a certificate of title that
must be surrendered to re-register the financed boat or the Servicer receives
notice of any surrender of the certificate of title by another person, the
Servicer would then have the opportunity to continue the perfection of the
security interest in the financed boat in the state of registration. If the
Obligor moves to a state which does not require surrender of a certificate of
title for re-registration of a boat, re-registration could defeat perfection. In
the ordinary course of servicing its portfolio of marine receivables, the
Servicer generally takes steps to effect such perfection upon receipt of notice
of surrender or information from the Obligor as to relocation in those states
that require any action to be taken. Similarly, when an Obligor sells a boat,
under the laws of many states, the purchaser cannot re-register the boat unless
the related lienholder of record, which in the case of the financed boats
covered by such laws would be the Seller, surrenders possession of the
certificate of title and accordingly the Servicer, in such circumstance, would
have opportunity to require satisfaction of the related Receivable before
release of the lien.
If the Seller has perfected the Seller's security interest by the filing of
a UCC-1 financing statement, or the Obligor moves from a title state to a
non-title state, the Servicer will be required to file a UCC-1 financing
statement in the new state of the Obligor as soon as possible after receiving
notice of the Obligor's change of residence. UCC-1 financing statements expire
after five years. When the term of a loan exceeds five years, the filing must be
continued in order to maintain the Seller's perfected security interest. The
Servicer will be required to take steps to effect such continuation. In the
event that an Obligor moves to a state other than the state in which the UCC-1
financing statement is filed or in certain states to a different county in such
state, under the laws of most states the perfection of the security interest in
the financed boat would continue for four months after such relocation, unless
the perfection in the original jurisdiction would have expired earlier. A new
financing statement must be filed in the state of relocation or, if such state
is a title state, a notation on the certificate of title must be made in order
to continue the Seller's security interest.
Under the laws of many states, liens for storage and repairs or other labor
performed on a boat and certain tax liens take priority even over a perfected
state law security interest. As noted above, a Preferred Mortgage supersedes a
perfected state law security interest. However, under the Ship Mortgage
Statutes, a Preferred Mortgage is subordinate to preferred maritime liens.
Unless otherwise specified in the related Prospectus Supplement, due to the
administrative burden and expense of:
(1) endorsing the certificate of title of each financed boat to
reflect a Trust's interest therein and delivering each such
certificate of title to the Trustee for filing and the payment of
related filing fees, in the case of financed boats licensed in states
where security interests in boats are subject to certificate of title
statutes;
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(2) filing amendments to the UCC-1 financing statement relating to
each financed boat and the payment of related filing fees to reflect
the Trust's interest therein, in the case of financed boats licensed
in states where security interests in boats are perfected by filing a
UCC-1 financing statement; and
(3) filing each assignment of the Preferred Mortgages and the payment
of related filing fees as required under Federal law to perfect the
Trust's interest therein, in the case of financed boats which are
documented under Federal law,
none of such certificates of title will be endorsed, delivered and filed, UCC-1
financing statements amended, or assignments of Preferred Mortgages filed. In
the absence of such procedures, neither the Depositor nor the Trust may have a
perfected security interest in the financed boats licensed in certificate of
title or Uniform Commercial Code states, and will not have a perfected security
interest in financed boats documented under Federal law, but the failure to make
such endorsements, filings or recordations will not affect the validity of the
original security interest as against the Obligor under a Receivable in Uniform
Commercial Code states.
In the case of "title" states, in the absence of the step described in
clause (1) in the immediately preceding paragraph, the Seller will continue to
be named as the secured party on the certificates of title relating to the
financed boats registered in such states. In most such states, such an
assignment would be an effective conveyance of such a security interest and the
new secured party would succeed to the Seller's rights as the secured party. In
the absence of fraud or forgery by the Obligor or administrative error by
Federal, state or local recording officials, the notation of the lien of the
Seller's on the certificate of title will be sufficient to protect the Trust
against the rights of subsequent purchasers of a financed boat covered by the
laws of such state or subsequent lenders who take a security interest in the
financed boat. There exists a risk, however, in not identifying the Trust as the
new secured party on the certificate of title, that the Trust may in some states
be subordinate to claims of creditors or the receiver of the Seller in the event
of the insolvency of the Seller and that, through fraud or negligence, the
security interest of such Trust could be released by the Seller as security
holder of record.
Similarly, unless otherwise provided in the related Prospectus Supplement,
the Seller will not cause assignments be recorded with the Secretary of
Transportation for Federally documented financed boats. Under Federal law no
assignment of a Preferred Mortgage is valid against a third party without notice
until the assignment is recorded. While the interpretation of this provision by
a court might depend upon the factual circumstances, under the terms of the Ship
Mortgage Statutes, a Trust's security interest in Federally documented financed
boats in the absence of such filings is subordinate to creditors and the
receiver of the Seller and its predecessors as owners of the ship mortgages and
obligations secured thereon in the event of the Seller's insolvency. This
provision should not affect the validity of the original security interest as
against the Obligor. Moreover, under Federal law, a Preferred Mortgage can be
subordinate to certain preferred maritime liens, including maritime liens
arising prior to the recording of the Preferred Mortgage, liens for necessaries
(e.g., goods and services) incurred prior to the recording of the Preferred
Mortgage, liens for crew wages,
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salvage and general damages arising out of tort claims, general average and
certain stevedore charges. State law security interests are subordinate to all
such liens whenever they arise. Also, the validity of a Preferred Mortgage or a
state law security interest in a financed boat that has ever been operated other
than for pleasure could be challenged if Securityholders having a controlling
interest in the Trust were determined to be nationals of, or under the control
of entities in, the specific countries that the U.S. Maritime Administration has
named pursuant to applicable regulations as being contrary to United States
foreign policy interests, or were determined to be foreign nationals or subject
to foreign control in time of war or national emergency, and in connection
therewith transfers of Securities to such nationals or entities could also be
challenged. The holder of a preferred maritime lien who arrests a boat under
Federal law to enforce that lien is required to give notice of the suit to all
lienholders of record. However, if the holder of a Preferred Mortgage does not
receive notice of the suit (e.g., because an assignment of the Preferred
Mortgage was not recorded and the current holder did not receive notice of the
arrest) and consequently does not intervene in the arrest action, or otherwise
fails to so intervene, the boat can be sold free and clear of the Preferred
Mortgage. If the holder of the Preferred Mortgage does not arrest the boat and
foreclose the mortgage under Federal law in Federal court, but rather
repossesses and resells the boat under state law, no maritime liens on the boat
are terminated by such sale and may impair the Preferred Mortgage holder's
ability to transfer clear title to the boat.
The Seller will warrant that there shall exist a valid, subsisting and
enforceable first priority security interest in each financed boat in favor of
the Seller as of the Closing Date, and that such security interest will be
assigned to the related Trust albeit unaccompanied, unless otherwise provided in
the related Prospectus Supplement, by any of the procedures described in clauses
(1), (2) and (3) of the third preceding paragraph above. In the event of a
material adverse breach of such warranty, the only recourse of the Trust would
be to require the Seller to repurchase the related Receivables.
REPOSSESSION
In the event of default by an Obligor, the owner of a retail installment
sales contract or installment loan, lease or revolving account has all the
remedies of a secured party under the Uniform Commercial Code, except where
specifically limited by other state laws. The remedies of a secured party under
the Uniform Commercial Code include the right to repossession by self-help
means, unless such means would constitute a breach of the peace. Self-help
repossession is the method employed by BCI in many cases and is accomplished
simply by taking possession of the Product. 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 the Obligor may cure the default prior
to repossession. 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 Product must then be
repossessed in accordance with that order. If a breach of the peace cannot be
avoided, judicial action is required. A secured party may be held responsible
for damages caused by a wrongful repossession of a Product, including a wrongful
repossession
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conducted by an agent of the secured party. In many states, a Product may be
repossessed without notice to the Obligor, but only if the repossession can be
accomplished without a breach of the peace.
NOTICE OF SALE; REDEMPTION RIGHTS
The Uniform Commercial Code and various other state laws require a secured
party who has repossessed the collateral securing an obligation to provide an
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 entire unpaid time balance of the obligation, less any
unaccrued finance charges, plus accrued default charges, reasonable expenses for
repossessing, holding and preparing the collateral for disposition and arranging
for its sale, plus, to the extent provided in the financing documents,
reasonable attorneys' fees, or in some states, by payment of delinquent
installments or the unpaid principal balance of the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of Products generally will be applied first to the
expenses of repossession and resale and then to the satisfaction of the related
Receivable. 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 other states that do not
prohibit or limit such judgments, subject to satisfaction of statutory
procedural requirements by the holder of the obligation. BCI generally seeks to
recover any deficiency existing after repossession and sale of a Product.
However, any 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 certain cases, it may not be useful to seek a deficiency judgment or, if one
is obtained, it may be settled at a significant discount or not paid at all.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
The Soldier's and Sailor's Civil Relief Act of 1940, as amended (the
"Relief Act") imposes certain limitations upon the actions of creditors with
respect to persons serving in the Armed Forces of the United States and, to a
more limited extent, their dependents and guarantors and sureties of debt
incurred by such persons. An obligation incurred by a person prior to entering
military service cannot bear interest at a rate in excess of 6% during the
person's term of military service, unless the obligee petitions a court which
determines that the person's military service does not impair his or her ability
to pay interest at a higher rate. Further, a secured party may not repossess
during a person's military service a Product subject to an installment sales
contract or a promissory note or revolving loan agreement entered into prior to
the person's entering military service, for a loan default which occurred prior
to or during such service, without court action. The Relief Act imposes
penalties for knowingly repossessing property in contravention of its
provisions. Additionally, dependents of military personnel are entitled to the
protection of the Relief Act, upon application to
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a court, if such court determines the obligation of such dependent has been
materially impaired by reason of the military service. To the extent an
obligation is unenforceable against the person in military service or a
dependent, any guarantor or surety of such obligation will not be liable for
performance.
CONSUMER PROTECTION LAWS
Numerous Federal and state consumer protection laws and related regulations
impose substantive and disclosure requirements upon lenders and servicers
involved in consumer finance. Some of the Federal laws and regulations include
the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Magnuson-Moss Warranty Act, and the Federal Reserve Board's
Regulations B and Z.
In addition to Federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of retail installment contracts and
promissory notes and revolving loan agreements pursuant to which purchasers
finance the acquisition of consumer products. These laws place finance charge
ceilings on the amount that a creditor may charge in connection with financing
the purchase of a consumer product. These laws also impose 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. In some cases, this liability
could affect the ability of an assignee, such as the related Trust, to enforce
consumer finance contracts such as the Receivables. The Credit Practices Rule of
the Federal Trade Commission imposes additional restrictions on contract
provisions and credit practices.
The Federal Trade Commission's holder-in-due-course rule has the effect of
subjecting persons that finance consumer credit transactions (and certain
related lenders and their assignees) to all claims and defenses which the
purchaser could assert against the Seller of the goods and services. An
assignee's affirmative liability to pay money to such aggrieved purchaser in the
event of a successful claim is limited to amounts paid by the purchaser under
the consumer credit contract. However, the assignee's ability to collect any
balance remaining due thereunder is subject to these claims and defenses.
Accordingly, each Trust, as assignee of the related Receivables, will be subject
to claims or defenses, if any, that the purchaser of the related Product may
assert against the Depositor of such Product.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an Obligor from some or
all of the legal consequences of a default.
The Depositor will warrant in the related Trust Document that as of the
date of origination each Receivable held by the related Trust complied with all
requirements of applicable law in all material respects. Accordingly, if such
Trust's interest in a Receivable were materially and adversely affected by a
violation of any such law, such violation would constitute a Repurchase Event
and would
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obligate the Depositor to repurchase the Receivable unless the breach were
cured. See "Description of the Trust Documents--Sale and Assignment of the
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 lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing collateral, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the collateral at the time of bankruptcy (as determined by the court),
leaving the party providing financing as a general unsecured creditor for the
remainder of the indebtedness. A bankruptcy court may also reduce the monthly
payments due under a receivable, change the rate of interest and time of
repayment of the indebtedness or substitute collateral securing such
indebtedness.
If the originator (whether BCI or a Dealer) of any Receivables were to
become a debtor in a bankruptcy case and a creditor or trustee-in-bankruptcy of
such debtor or such debtor itself were to take the position that the sale of
Receivables (to the Depositor or to BCI, respectively) should instead 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 Depositor or to BCI,
respectively) could occur or, should the court rule in favor of any such
trustee, debtor or creditor, reductions in the amount of such payments could
result.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion represents the opinion of Morgan, Lewis & Bockius
LLP, counsel to the Depositor ("Morgan, Lewis & Bockius LLP"), as to the
material federal income tax consequences relating to the purchase, ownership,
and disposition of the Securities. The discussion is based upon the 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. The
discussion does not deal with federal income tax consequences applicable to all
categories of investors, some of which may be subject to special rules.
Investors are encouraged to consult their own tax advisors with respect to the
federal, state, local, and any other tax consequences of the purchase,
ownership, and disposition of the Securities.
Morgan, Lewis & Bockius LLP will deliver an opinion regarding tax matters
applicable to each Series of Securities. Such an opinion, however, is not
binding on the Internal Revenue Service (the "Service") or the courts. The
opinion of Morgan, Lewis & Bockius LLP will specifically address only those
issues specifically identified below as being covered by such opinion; however,
the opinion of Morgan, Lewis & Bockius LLP also will state that the additional
discussion set forth
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below accurately sets forth Morgan, Lewis & Bockius LLP's advice with respect to
material tax issues. No ruling on any of the issues discussed below will be
sought from the Service.
Many aspects of the federal tax treatment of the purchase, ownership and
disposition of the Securities of any series will depend upon whether the Trust
created with respect to such series is structured as an owner trust -- treated
for federal income tax purposes as either an entity not separate from the
Certificateholder if there is only one Certificateholder (a "disregarded
entity") or as a partnership if there are two or more Certificateholders -- or
as a grantor trust. The Prospectus Supplement for each series of Securities will
indicate whether the Trust created for such series will be treated as a
disregarded entity, as a partnership or as a grantor trust. The following
discussion deals first with series with respect to which the Trust has been
structured as an owner trust, treated either as a disregarded entity or as a
partnership, and then with series with respect to which the Trust has been
structured as a grantor trust.
OWNER TRUST SERIES
TAX STATUS OF THE TRUST
There is no definitive judicial or administrative authority relating to
transactions involving a trust issuing both debt and equity interests with terms
similar to those of the Notes and the Certificates. As a result, the Service may
disagree with all or a part of this discussion. However, with respect to each
series of Securities which includes both Notes and at least one Class of
Certificates, Morgan, Lewis & Bockius LLP will deliver its opinion that the
Trust will not be an association or publicly traded partnership taxable as a
corporation for federal income tax purposes. As a result, in the opinion of
Morgan, Lewis & Bockius LLP, the Trust itself will not be subject to federal
income tax but, instead, the Certificateholder, or each Certificateholder if
there are two or more Certificateholders, will be required to take into account
its distributive share of items of income and deduction (including deductions
for distributions of interest to the Noteholders) of the Trust as though such
items had been realized directly by the Certificateholder. This opinion will be
based on the assumption that the terms of the Trust Agreement and related
documents will be complied with, and on counsel's conclusion that the nature of
the income of the Trust will exempt it from the rule that certain publicly
traded partnerships are taxable as corporations. The Trust may instead make an
election under the Code whereby the Trust will qualify as a "financial asset
securitization trust." For the federal income tax effect of such an election,
see "Treatment of Trust as a FASIT" in this prospectus.
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, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates.
TAX CONSEQUENCES TO NOTEHOLDERS
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Treatment of the Notes as Indebtedness.
No definitive judicial or administrative authority relating to the
characterization of an instrument as debt addresses instruments such as the
Notes, and courts at time have held that obligations purporting to be debt
constituted equity of the issuer for tax purposes. As a result, the Service may
disagree with all or a part of this discussion. However, Morgan, Lewis & Bockius
LLP will deliver its opinion that the Notes will be classified as debt for
federal income tax purposes. In addition, the Owner Trustee, on behalf of the
Trust, will agree, and the Noteholders will agree by their purchase of Notes, to
treat the Notes as debt for federal income tax purposes. The discussion below
assumes this characterization of the Notes is correct.
Interest Income on the Notes.
Interest on the Notes will be taxable as ordinary interest income when
received by Noteholders utilizing the cash-basis method of accounting and when
accrued by Noteholders utilizing the accrual method of accounting. Under the
applicable regulations, the Notes would be considered issued with original issue
discount ("OID") if the "stated redemption price at maturity" of a Note --
generally equal to its principal amount as of the date of issuance plus all
interest other than "qualified stated interest" payable prior to or at maturity
- -- exceeds the original issue price, in this case, the initial offering price at
which a substantial amount of the Notes are sold to the public. Any OID would be
considered de minimis under the OID regulations if it does not exceed 1/4% of
the stated redemption price at maturity of a Note multiplied by the number of
full years until its maturity date. It is anticipated that the Notes will not be
considered issued with more than de minimis OID. Under the OID regulations, an
owner 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.
While it is not anticipated that the Notes will be issued with more than de
minimis OID, it is possible that they will be so issued or will be deemed to be
issued with OID. This deemed OID could arise, for example, if interest payments
on the Notes are not deemed to be "qualified stated interest" because the Notes
do not provide for default remedies ordinarily available to holders of debt
instruments or do not contain terms and conditions that make the likelihood of
late payment or nonpayment a remote contingency. Based upon existing authority,
however, the Trust will treat interest payments on the Notes as qualified stated
interest under the OID regulations. If the Notes are issued or are deemed to be
issued with OID, all or a portion of the taxable income to be recognized with
respect to the Notes would be includible in the income of Noteholders as OID.
Any amount treated as OID would not, however, be includible again when the
amount is actually received. If the yield on a class of Notes were not
materially different from its coupon, this treatment would have no significant
effect on Noteholders using the accrual method of accounting. However, cash
method Noteholders may be required to report income with respect to the Notes in
advance of the receipt of cash attributable to such income.
A Noteholder must include OID in income as interest over the term of the
Notes under a constant yield method. In general, OID must be included in income
in advance of the receipt of cash
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representing that income. Each Noteholder is encouraged to consult its own tax
advisor regarding the impact of the OID rules if the Notes are issued with OID.
Market Discount.
The Notes, whether or not issued with original issue discount, will be
subject to the "market discount rules" of Section 1276 of the Code. In general,
these rules provide that if a Noteholder purchases the Note at a market discount
(i.e., a discount from its original issue price plus any accrued original issue
discount) that exceeds a de minimis amount specified in the Code, and thereafter
recognizes gain upon a disposition, the lesser of such gain or the accrued
market discount will be taxed as ordinary interest income. Market discount also
will be recognized and taxable as ordinary interest income as payments of
principal are received on the Notes to the extent that the amount of such
payments does not exceed the accrued market discount. Generally, the accrued
market discount will be the total market discount on the Note multiplied by a
fraction, the numerator of which is the number of days the Noteholder held the
Note and the denominator of which is the number of days after the date the
Noteholder acquired the Note until and including its maturity date. The
Noteholder may elect, however, to determine accrued market discount under the
constant-yield method, which election shall not be revoked without the consent
of the Service.
Limitations imposed by the Code which are intended to match deductions with
the taxation of income may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
Note with accrued market discount. A Noteholder may elect to include market
discount in gross income as it accrues and, if such Noteholder makes such an
election, is exempt from this rule. The adjusted basis of a Note subject to such
election will be increased to reflect market discount included in gross income,
thereby reducing any gain or increasing any loss on a sale or taxable
disposition. Any such election to include market discount in gross income as it
accrues shall apply to all debt instruments held by the Noteholder at the
beginning of the first taxable year to which the election applies or thereafter
acquired and is irrevocable without the consent of the Service.
Amortizable Bond Premium.
In general, if a Noteholder purchases a Note at a premium (i.e., an amount
in excess of the amount payable upon the maturity thereof), such Noteholder will
be considered to have purchased such Note with "amortizable bond premium" equal
to the amount of such excess. Such Noteholder may elect to deduct the
amortizable bond premium as it accrues under a constant-yield method over the
remaining term of the Note. Such Noteholder's tax basis in the Note will be
reduced by the amount of the amortizable bond premium deducted. Amortizable bond
premium with respect to a Note will be treated as an offset to interest income
on such Note, and a Noteholder's deduction for amortizable bond premium with
respect to a Note will be limited in each year to the amount of interest income
derived with respect to such Note for such year. Any election to deduct
amortizable bond premium shall apply to all debt instruments, other than
instruments the interest on which is excludible from gross income, held by the
Noteholder at the beginning of the first taxable year to
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which the election applies or thereafter acquired and is irrevocable without the
consent of the Service. Bond premium on a Note held by a Noteholder who does not
elect to deduct the premium will decrease the gain or increase the loss
otherwise recognized on the disposition of the Note.
Disposition of Notes.
If a Noteholder sells a Note, the Noteholder will recognize gain or loss in
an amount equal to the difference between the amount realized on the sale and
the Noteholder's adjusted tax basis in the Note. The adjusted tax basis of a
Note to a particular Noteholder generally will equal the Noteholder'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 principal
payments previously received by such Noteholder and the amount of bond premium
previously amortized with respect to the 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, and will be short-term or long-term capital gain or loss
depending upon whether the Note was held for more or less than one year. Capital
losses generally may be used only to offset capital gains.
Foreign Holders.
Generally, interest paid to a Noteholder that is a non-U.S. person (as
defined below), and that has no connection with the United States other than
owning the Note, will not be subject to U.S. withholding or income tax with
respect to the Note provided such Noteholder (i) is not a "10-percent
shareholder", related to the Certificateholder if there is only one
Certificateholder, or related to the Trust if there is more than one
Certificateholder, within the meaning of Code Section 871(h)(3)(B) or a
controlled foreign corporation, related to a Certificateholder, or related to
the Trust if there is more than one Certificateholder, described in Code Section
881(c)(3)(C), and (ii) provides an appropriate statement, signed under penalties
of perjury, identifying the Noteholder and stating, among other things, that the
Noteholder is a non-U.S. person. If these conditions are not met, a 30%
withholding tax will apply to interest (including original issue discount)
unless an income tax treaty reduces or eliminates such tax or unless the
interest is effectively connected with the conduct of a trade or business within
the United States by such Noteholder. In the latter case, such Noteholder will
be subject to United States federal income tax with respect to all income from
the Note at regular U.S. tax rates then applicable to U.S. taxpayers, and in the
case of a corporation, possibly also the "branch profits tax".
The term "non-U.S. person" means any person other than a U.S. person. A
U.S. person is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any state thereof, including the District of Columbia (unless
provided otherwise by future Treasury Contingent Payment Regulations), any trust
if a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States fiduciaries have
the authority to control all substantial decisions of the trust, or an estate
that is subject to U.S. federal income tax regardless of the source of its
income.
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Notwithstanding the last clause of the preceding sentence, to the extent
provided in Treasury Contingent Payment Regulations, certain trusts in existence
on August 20, 1996, and treated as U.S. persons prior to such date, may elect to
continue to be U.S. persons.
Tax Administration and Reporting.
The Indenture Trustee will furnish to each Noteholder with each
distribution a statement setting forth the amount of such distribution allocable
to principal and to interest. Reports will be made annually to the Service and
to holders of record that are not excepted from the reporting requirements
regarding such information as may be required with respect to interest and
original issue discount, if any, with respect to the Notes.
Backup Withholding.
Under certain circumstances, a Noteholder may be subject to "backup
withholding" at a 31% rate. Backup withholding may apply to a Noteholder who is
a United States person if the holder, among other circumstances, fails to
furnish his Social Security number or other taxpayer identification number to
the Indenture Trustee. Backup withholding may apply, under certain
circumstances, to a Noteholder who is a foreign person if the Noteholder fails
to provide the Indenture Trustee or the Noteholder's securities broker with the
statement necessary to establish the exemption from federal income and
withholding tax on interest on the Note. Backup withholding, however, does not
apply to payments on a Note made to certain exempt recipients, such as
corporations and tax-exempt organizations, and to certain foreign persons.
Noteholders should consult their tax advisors for additional information
concerning the potential application of backup withholding to payments received
by them with respect to a Note.
On October 6, 1997, the Treasury Department issued new regulations which
make certain modifications to the withholding, backup withholding and
information reporting rules described above. The new regulations attempt to
unify certification requirements and modify reliance standards, and will
generally be effective for payments made after December 31, 2000, subject to
certain transition rules. Prospective investors are urged to consult their own
tax advisors regarding the new regulations.
Possible Alternative Treatment of the Notes.
If, contrary to the opinion of Morgan, Lewis & Bockius LLP, the Service
successfully asserted that 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, and if the Trust were treated as a partnership, the Noteholders would
be treated as owning an equity interest in such partnership and the Noteholders
would generally be taxed on their pro-rata share of the Trust's income as
partners in a partnership. In the alternative, if the Trust were treated as an
association taxable as a corporation, (i) the Trust would be subject to tax on
its net income at corporate tax rates and (ii) if the Noteholders were treated
as owning equity interests, the Noteholders would be taxed on distributions from
the Trust
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as dividends to the extent of their share of the Trust's earnings and profits
and the Trust would not be entitled to an interest deduction in determining
taxable income.
TAX CONSEQUENCES TO CERTIFICATEHOLDERS
The following discussion is applicable only to the extent that there are
two or more Certificateholders.
Treatment of the Trust as a Partnership.
The Depositor and the Owner Trustee will agree, and the Certificateholders
will agree by their purchase of Certificates, to treat the Trust as a
partnership for purposes of federal and state income tax, franchise tax and any
other tax measured in whole or in part by income, with the assets of the
partnership being the assets held by the Trust, the partners of the partnership
being the Certificateholders, and the Notes being debt of the partnership. The
proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Depositor and the Servicer, however, is not certain
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 Trust. Any such characterization
would not result in materially adverse tax consequences to Certificateholders as
compared to the consequences from treatment of the Certificates as equity in a
partnership, described below. The following discussion assumes that the
Certificates represent equity interests in a partnership.
Partnership Taxation.
As a partnership, the Trust will not be subject to federal income tax.
Rather, each Certificateholder will be required to separately take into account
such holder's allocated share of income, gains, losses, deductions and credits
of the Trust. The Trust's income will consist primarily of interest and finance
charges earned on the Receivables, including appropriate adjustments for market
discount, OID and bond premium, and any gain upon collection or disposition of
the Receivables. The Trust's deductions will consist primarily of interest
accruing with respect to the Notes, servicing and other fees, and losses or
deductions upon collection or disposition of the 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). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust for each month equal to the sum of:
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(1) the interest that accrues on the Certificates in accordance with
their terms for such month, including interest accruing at the Pass-Through
Rate for such month and interest on amounts previously due on the
Certificates but not yet distributed;
(2) 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;
(3) prepayment premium payable to the Certificateholders for such
month; and
(4) any other amounts of income payable to the Certificateholders for
such month.
Although it is not anticipated that the Certificates will be issued at a price
which exceeds their principal amount, such allocations of Trust income to the
Certificateholders will be reduced by any amortization by the Trust of premium
on Receivables that corresponds to any such excess of the issue price of
Certificates over their principal amount. Based on the economic arrangement of
the parties, this approach for allocating Trust income should be permissible
under applicable Treasury regulations, although no assurance can be given that
the Service would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through Rate
plus the other items described above even though the Trust might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis, and Certificateholders may become liable for taxes on
Trust income even if they have not received cash from the Trust to pay such
taxes. In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders and 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.
A Certificateholder's share of expenses of the Trust (including fees to the
Servicer but not interest expense) will constitute miscellaneous itemized
deductions. An individual, an estate, or a trust that holds a Certificate either
directly or through a pass-through entity will be allowed to deduct such
expenses under Section 212 of the Code only to the extent that, in the aggregate
and combined with certain other itemized deductions, they exceed 2% of the
adjusted gross income of the Certificateholder. In addition, Section 68 of the
Code provides that the amount of itemized deductions (including those provided
for in Section 212 of the Code) otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds a threshold amount determined
under the Code ($124,500 in 1998, in the case of a joint return) will be reduced
by the lesser of:
(1) 3% of the excess of adjusted gross income over the specified threshold
amount and
(2) 80% of the amount of itemized deductions otherwise allowable for such
taxable year.
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To the extent that a Certificateholder is not permitted to deduct servicing fees
allocable to a Certificate, the taxable income of the Certificateholder
attributable to that Certificate will exceed the net cash distributions related
to such income. Certificateholders may deduct any loss on disposition of the
Receivables to the extent permitted under the Code.
Discount and Premium.
It is believed that the Receivables were not issued with OID, and,
therefore, the Trust should not have OID income. The purchase price paid by the
Trust for the Receivables may exceed the remaining principal balance of the
Receivables at the time of purchase. If the Trust is deemed to acquire the
Receivables at such a premium or at a market discount, the Trust will elect to
offset any such premium against interest income on the Receivables or to include
any such discount in income currently as it accrues over the life of the
Receivables. The Trust will make this premium or market discount calculation on
an aggregate basis but may be required to recompute it on a Receivable-by-
Receivable basis. As indicated above, a portion of such premium deduction or
market discount income may be allocated to Certificateholders.
Distributions to Certificateholders.
Certificateholders generally will not recognize gain or loss with respect
to distributions from the Trust. A Certificateholder will recognize gain,
however, to the extent that any money distributed exceeds the
Certificateholder's adjusted basis in its Certificates (as described below under
"Disposition of Certificates") immediately before the distribution. A
Certificateholder will recognize loss upon termination of the Trust or
termination of the Certificateholder's interest in the Trust if the Trust only
distributes money to the Certificateholder and the amount distributed is less
than the Certificateholder's adjusted basis in the Certificates. Any such gain
or loss generally will be capital gain or loss if the Certificates are held as
capital assets and will be long-term gain or loss if the holding period of the
Certificates is more than one year.
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. Under Treasury
regulations, if such a termination occurs, the Trust will be considered to have
contributed the assets of the Trust (the "Old Partnership") to a new partnership
(the "New Partnership") in exchange for interests 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 for United
States federal income tax purposes.
Disposition of Certificates.
If a Certificateholder sells a Certificate, the Certificateholder generally
will recognize capital gain or loss in an amount equal to the difference between
the amount realized on the sale and the
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Depositor's tax basis in the Certificate. A Certificateholder's tax basis in a
Certificate generally will equal the Certificateholder's cost increased by the
Certificateholder's share of Trust income and decreased by any distributions
received with respect to such Certificate. In addition, both the tax basis in
the Certificate and the amount realized on a sale of a Certificate would include
the Certificateholder's share of the Notes and other liabilities of the Trust. A
Certificateholder 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 maintain 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
Certificateholder's share of unrecognized accrued market discount on the
receivables would generally be treated as ordinary income to the
Certificateholder 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 generally will 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 related Record Date. As a
result, a Certificateholder purchasing a Certificate may be allocated tax items
(which will affect the Certificateholder's tax liability and tax basis)
attributable to periods before the Certificateholder actually owns the
Certificate. The use of such a convention may not be permitted by existing
regulations. If a monthly convention is not permitted (or only applies to
transfers of less than all of the Certificateholder's interest), taxable income
or losses of the Trust may be reallocated among the Certificateholders.
Section 754 Election.
In the event that a Certificateholder sells a Certificate at a profit or
loss, the purchasing Certificateholder will have a higher or lower basis in the
Certificate 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 files 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,
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Certificateholders may be allocated a greater or lesser amount of Trust income
than would be appropriate based on their own purchase price for Certificates.
Administrative Matters.
Pursuant to the Administration Agreement, the Trustee will monitor the
performance of the following responsibilities of the Trust by other service
providers. The Trust 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 Service for each taxable year of the Trust and will report each
Certificateholder's allocable share of items of Trust income and expense to
Certificateholders and the Service on Schedule K-1. The Trust will provide the
Schedule K-1 information to nominees that fail to provide the Trust with
certain required information statements relating to identification of
beneficial owners of Certificates and such nominees will be required to
forward such information to such beneficial owners. Generally,
Certificateholders must file tax returns that are consistent with the
information return filed by the Trust or be subject to penalties unless the
Certificateholder notifies the Service of all such inconsistencies.
BCI or a subsidiary identified in the related Prospectus Supplement will
be designated as the tax matters partner in the Trust Agreement and, as such,
will be responsible for representing the Certificateholders in any dispute with
the Service. 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 will 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 will 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. It is expected that the Trust will
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
Certificateholders. Subsequent adoption of Treasury regulations or the issuance
of other
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administrative pronouncements may require the Trust to change its withholding
procedures. In determining a Certificateholder's nonforeign status, the Trust
may rely on Form W-8, Form W-9 or the Certificateholder'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 (including, in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each foreign
Certificateholder must obtain a taxpayer identification number from the Service
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 will be
entitled to file with the Service a claim for refund with respect to taxes
withheld by the Trust, taking the position that no taxes are due because the
Trust is not engaged in a U.S. trade or business. However, the Service may
assert that additional taxes are due, and no assurance can be given as to the
appropriate amount of tax liability.
Backup Withholding.
Under certain circumstances, a Certificateholder may be subject to "backup
withholding" at a 31% rate. See the discussion above under "Tax Consequences to
Noteholders--Backup Withholding."
GRANTOR TRUST SERIES
TAX STATUS OF THE TRUST
With respect to each series of Securities which includes only
Certificates, unless otherwise specified in the related Prospectus Supplement,
Morgan, Lewis & Bockius LLP will deliver its opinion that the Trust will be
classified as a grantor trust for federal income tax purposes and not as an
association which is taxable as a corporation. The Trust will be classified as a
trust regardless of whether the Depositor is considered to retain an interest in
the Receivables, as discussed below. While such a retained interest might be
viewed as a second class of beneficial interest in the Trust and Treasury
Regulations Section 301.7701-4(c) generally provides that an investment trust
with more than one class of ownership interest will be classified as an
association taxable as a corporation or a partnership, that regulation would
treat the Trust as a grantor trust because there will be no power under the
Pooling and Servicing Agreement to vary the investment of the
Certificateholders, the purpose of the Trust will be to facilitate direct
investment in the Receivables, and the existence of multiple classes of
ownership interests in the Trust will be incidental to that purpose.
TAX CONSEQUENCES TO CERTIFICATEHOLDERS
Because the Trust will be classified as a grantor trust, each
Certificateholder (including any holder of a subordinated Certificate) will, in
the opinion of Morgan, Lewis & Bockius LLP, be treated for federal income tax
purposes as the owner of an undivided interest in the Receivables and other
Trust Property. Accordingly, subject to the discussion below of certain
limitations on
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deductions and the "stripped bond" rules of the Code, each Certificateholder
must report on its federal income tax return its pro rata share of the entire
income from the Receivables and other Trust Property, and may deduct its pro
rata share of the fees paid by the Trust, at the same time as such items would
be reported under the Certificateholder's tax accounting method if it held
directly a pro rata interest in the assets of the Trust and received and paid
directly the amounts received and paid by the Trust. A Certificateholder's share
of expenses of the Trust will be miscellaneous itemized deductions subject to
certain limits on deductibility. See the discussion above under "OWNER TRUST
SERIES--Tax Consequences to Certificateholders--Partnership Taxation."
A purchaser of a Certificate will be treated as purchasing an interest in
each Receivable in the Trust at a price determined by allocating the purchase
price paid for the Certificate among all Receivables in proportion to their fair
market values at the time of purchase of the Certificate. To the extent that the
portion of the purchase price of a Certificate allocated to a Receivable is
greater than or less than the portion of the principal balance of the Receivable
allocable to the Certificate, that interest in the Receivable will be deemed to
have been acquired with premium or discount, respectively. See the discussions
above under "OWNER TRUST SERIES--Tax Consequences to Noteholders--Market
Discount" and "--Amortizable Bond Premium."
The treatment of any discount will depend on whether the discount
represents original issue discount or market discount. It is not anticipated
that the Receivables will have original issue discount, unless they are subject
to the "stripped bond" rules of the Code described below. If the Receivables are
subject to the stripped bond rules of the Code, the market discount rules
discussed above may not apply.
Subordinated Certificates.
If the subordinated Certificateholders receive distributions of less than
their share of the Trust's receipts of principal or interest (the "Shortfall
Amount") because of the subordination of the subordinated Certificates, holders
of subordinated Certificates would probably be treated for federal income tax
purposes as if they had:
received as distributions their full share of such receipts;
paid over to the senior Certificateholders an amount equal to such
Shortfall Amount; and
retained the right to reimbursement of such amounts to the extent
available from future collections on the Receivables.
Under this analysis,
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(1) subordinated Certificateholders would be required to accrue as
current income any interest or OID income of the Trust that was a
component of the Shortfall Amount, even though such amount was in fact
paid to the senior Certificateholders;
(2) a loss would only be allowed to the subordinated
Certificateholders when their right to receive reimbursement of such
Shortfall Amount became worthless (i.e., when it becomes clear that
amount will not be available from any source to reimburse such loss);
and
(3) reimbursement of such Shortfall Amount prior to such a claim of
worthlessness would not be taxable income to subordinated
Certificateholders because such amount was previously included in
income.
Those results should not significantly affect the inclusion of income for
subordinated Certificateholders on the accrual method of accounting, but could
accelerate inclusion of income to subordinated Certificateholders on the cash
method of accounting by, in effect, placing them on the accrual method.
Moreover, the character and timing of loss deductions is unclear.
Under current Service interpretations of applicable Treasury Regulations,
the Depositor would be able to sell or otherwise dispose of any subordinated
Certificates. Accordingly, the Depositor may offer subordinated Certificates for
sale to investors.
Stripped Certificates.
Certain classes of Certificates may be subject to the stripped bond rules
of Section 1286 of the Code and for purposes of this discussion will be referred
to as Stripped Certificates. In general, a Stripped Certificate will be
subject to the stripped bond rules where there has been a separation of
ownership of the right to receive some or all of the principal payments on a
Receivable from ownership of the right to receive some or all of the related
interest payments. Certificates will constitute Stripped Certificates and will
be subject to these rules under various circumstances, including the following:
(1) if any servicing compensation is deemed to exceed a reasonable
amount;
(2) if two or more classes of Certificates are issued representing the
right to non-pro rata percentages of the interest or principal
payments on the Receivables; or
(3) if Certificates are issued which represent the right to interest
only payments or principal only payments.
Although not entirely clear, each Stripped Certificate should be
considered to be a single debt instrument issued on the day it is purchased for
purposes of calculating any original issue discount. Original issue discount
with respect to a Stripped Certificate, if any, must be included in ordinary
gross income for federal income tax purposes as it accrues in accordance with
the constant-yield
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method that takes into account the compounding of interest and such accrual of
income may be in advance of the receipt of any cash attributable to such income.
See "Owner Trust Series---Tax Consequences to Noteholders--Interest Income on
the Notes" above. For purposes of applying the original issue discount
provisions of the Code, the issue price of a Stripped Certificate will be the
purchase price paid by the holder thereof and the stated redemption price at
maturity may include the aggregate amount of all payments to be made with
respect to the Stripped Certificate whether or not denominated as interest. The
amount of original issue discount with respect to a Stripped Certificate may be
treated as zero under the original issue discount de minimis rules described
above. Under rules similar to those provided in Rev. Proc. 91-49, applicable
only to mortgages secured by real property, a Certificateholder may be required
to account for any discount on a Stripped Certificate as market discount rather
than original issue discount if either the amount of original issue discount
with respect to the Certificate was treated as zero under the original issue
discount de minimis rule when the Certificate was stripped or no more than 100
basis points (including any amount of servicing in excess of reasonable
servicing) is stripped off of the Receivables.
When an investor purchases more than one class of Stripped Certificates,
it is currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes of
applying the original issue discount rules described above.
It is possible that the Service may take a contrary position with respect
to some or all of the foregoing tax consequences. For example, a holder of a
Stripped Certificate may be treated as the owner of as many stripped bonds or
stripped coupons as there are scheduled payments of principal and/or interest on
each Receivable or of a separate installment obligation for each Receivable
representing the Stripped Certificate's pro rata share of principal and/or
interest payments to be made with respect thereto. In addition, if a Trust
issues more than one class of Certificates with different Pass-Through Rates, a
holder of such a Certificate may be treated as the owner of a stripped bond with
a rate equal to the lowest such Pass-Through Rate and a stripped coupon
representing the excess, if any, of the Pass-Through Rate on such Certificate
over the lowest Pass-Through Rate. As a result of these possible alternative
characterizations, investors should consult their own tax advisors regarding the
proper treatment of Stripped Certificates for federal income tax purposes.
The Servicing Fee to be received by the Servicer and the fee for the
enhancement, if any, provided with respect to a series of Certificates may be
questioned by the Service with respect to certain Certificates or Receivables as
exceeding a reasonable fee for the services being performed in exchange
therefor, and a portion of such servicing compensation could be recharacterized
as an ownership interest retained by the Servicer or other party in a portion of
the interest payments to be made pursuant to the Receivables. In this event, a
Certificate might be treated as a Stripped Certificate subject to the stripped
bond rules of Section 1286 of the Code and the original issue discount
provisions rather than to the market discount and premium rules.
Disposition of Certificates.
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If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Certificateholder's
adjusted tax basis in the Certificate. See the discussion above under "OWNER
TRUST SERIES--Tax Consequences to Noteholders--Disposition of Notes."
Foreign Holders.
A Certificateholder that is not a U.S. person (as defined under Owner
Trust Series --- "Tax Consequences to Noteholders -- Foreign Holders" above) and
that is not subject to federal income tax as a result of any direct or indirect
connection to the United States in addition to its ownership of a Certificate
will not be subject to United States income or withholding tax in respect of a
Certificate (assuming the underlying transactions with respect to the
Receivables were originated after July 18, 1984), if the Certificateholder
provides an appropriate statement, signed under penalties of perjury,
identifying the Certificateholder and stating, among other things, that the
Certificateholder is not a U.S. person. If these conditions are not met, a 30%
withholding tax will apply to interest (including original issue discount)
unless an income tax treaty reduces or eliminates such tax or unless the
interest is effectively connected with the conduct of a trade or business within
the United States by such Certificateholder. Income effectively connected with a
U.S. trade or business will be subject to United States federal income tax at
regular rates then applicable to U.S. taxpayers (and in the case of a
corporation, possibly also the branch profits tax). See the discussion above
under "Certificateholder Owner Trust Series--Tax Consequences to
Noteholders---Foreign Holders."
TAX ADMINISTRATION AND REPORTING
The Trustee will furnish to each Certificateholder with each distribution
a statement setting forth the amount of such distribution allocable to principal
and to interest. In addition, the Trustee will furnish, within a reasonable time
after the end of each calendar year, to each Certificateholder who was a
Certificateholder at any time during such year, information regarding the amount
of servicing compensation received by the Servicer and such other factual
information as the Depositor deems necessary to enable Certificateholders to
prepare their tax returns. Reports will be made annually to the Internal Revenue
Service and to holders of record that are not excepted from the reporting
requirements regarding information as may be required with respect to interest
and original issue discount, if any, with respect to the Certificates.
BACKUP WITHHOLDING
Under certain circumstances, a Certificateholder may be subject to "backup
withholding" at a 31% rate. See the discussion above under "OWNER TRUST
SERIES--Tax Consequences to Noteholders--Backup Withholding."
TREATMENT OF TRUST AS A FASIT
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The Seller may make an election whereby the Trust will qualify as one or
more "financial asset securitization investment trusts" ("FASITs") under the
relevant provisions of the Code ("FASIT Provisions"). Under the FASIT
Provisions, a FASIT avoids federal income taxation and can issue "regular
interests," which are treated as debt for federal income tax purposes. Further,
if the trust qualifies as a FASIT for federal income tax purposes, the Trust
will not be treated as an association (or publicly traded partnership) taxable
as a corporation. If the Trust fails to comply with the FASIT provisions for any
taxable year, however, the Trust may be subject to the imposition of a corporate
tax on all or part of its income. If Seller makes the FASIT election, the
federal consequences will be explained in more detail in the applicable
prospectus supplement.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit or other plan like an individual retirement
account (each a "Benefit Plan") from engaging in certain transactions involving
"plan assets" with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the Benefit Plan. ERISA
also imposes certain prohibitions and certain duties, including the requirements
of investment prudence and diversification, and the requirement that investments
of such a Benefit Plan be made in accordance with the documents governing the
Benefit Plans on persons who are fiduciaries of plans subject to ERISA. Under
ERISA, generally any person who exercises any authority or control with respect
to the management or disposition of the assets of a Benefit Plan is considered
to be a fiduciary of such plan. A violation of these "prohibited transaction"
rules may generate excise tax and other liabilities under ERISA and the Code for
such persons.
Certain transactions involving the related Trust might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Benefit Plan that purchased Securities if assets of the related Trust were
deemed to be assets of the Benefit Plan. Under a regulation issued by the United
States Department of Labor (the "Plan Assets Regulation"), the assets of a Trust
would be treated as plan assets of a Benefit Plan for the purposes of ERISA and
the Code only if the Benefit Plan acquired an "equity interest" in the Trust and
none of the exceptions contained in the Plan Assets Regulation was applicable.
An equity interest is defined under the Plan Assets Regulation as an interest
other than an instrument which is treated as indebtedness under applicable local
law and which has no substantial equity features. The likely treatment of Notes
and Certificates will be discussed in the related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A Benefit Plan fiduciary considering the purchase of Securities should
consult its tax and/or legal advisors regarding whether the assets of the Trust
would be considered plan assets, the
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possibility of exemptive relief from the prohibited transaction rules and other
issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement with
respect to each Trust, the Depositor will agree to sell to each of the
underwriters named therein and in the related Prospectus Supplement, and each of
such underwriters will severally agree to purchase from the Depositor, the
principal amount of each class of Securities of the related series set forth
therein and in the related Prospectus Supplement.
In each underwriting agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event of a
default by any such underwriter, each underwriting agreement will provide that,
in certain circumstances, purchase commitments of the nondefaulting underwriters
may be increased, or the underwriting agreement may be terminated.
Each Prospectus Supplement will either set forth the price at which each
class of Securities 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 Securities or specify that the related Securities 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 Securities,
the public offering price and such concessions may be changed.
Each underwriting agreement will provide that the Depositor will indemnify
the underwriters against certain liabilities, including liabilities under the
Securities Act.
The Indenture Trustee, if any, may, from time to time, invest the funds in
the Designated Accounts in Eligible Investments acquired from the underwriters.
Under each underwriting agreement, the closing of the sale of any class of
Securities subject thereto will be conditioned on the closing of the sale of all
other such classes.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain matters with respect to the validity of the Certificates and the
Notes will be passed upon for the Depositor by Morgan, Lewis & Bockius LLP. The
validity of the Certificates and the Notes will be passed upon for the
underwriters named in the related Prospectus Supplement by the counsel for the
underwriters identified in the applicable Prospectus Supplement.
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IMPORTANT NOTICE ABOUT THE INFORMATION IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the offered securities is contained in this prospectus,
which provides general information, some of which may not apply to a particular
series of Securities, including your series; and the accompanying prospectus
supplement, which will describe the specific terms of your series of securities,
including:
the timing of interest and principal payments;
financial and other information about the Receivables;
information about enhancement for each Class;
the ratings for each Class; and
the method for selling the Securities.
IF THE TERMS OF THE OFFERED SECURITIES VARY BETWEEN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement. We have not authorized anyone to provide
you with information that is different from that contained in this prospectus
and the prospectus supplement. The information in this prospectus is accurate
only as of the date of this prospectus.
This prospectus and the accompanying prospectus supplement include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus and the prospectus
supplement identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus and the
accompanying prospectus supplement to assist you in understanding the terms of
the offered securities and this offering. The capitalized terms used in this
prospectus are defined on the pages indicated under the caption "Index of
Certain Prospectus Definitions" beginning on page ___ in this prospectus.
REPORTS TO SECURITYHOLDERS
The Servicer will prepare monthly and annual reports that will contain
information about the Trust. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until Definitive Securities are issued, the reports will
be sent to Cede & Co. which is the nominee of The Depository Trust Company and
the registered holder of the Securities. No financial reports will be sent to
you. See "Certain Information Regarding the Securities -- Book-Entry
Registration," "-- Statements to Securityholders" and "Description of the Trust
Documents -- Evidence as to Compliance" in this prospectus.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Securities with the SEC.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about each Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we filed with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus or the accompanying prospectus supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf of the Trust until we terminate our offering of the
Securities.
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<PAGE>
INDEX OF CERTAIN PROSPECTUS DEFINITIONS
<TABLE>
<S> <C>
Administration Agreement.........................................................................................42
Advance Payment..................................................................................................35
Aggregate Principal Balance......................................................................................34
Amount Available.................................................................................................35
Backup Servicer..................................................................................................38
BCI...............................................................................................................6
Benefit Plan.....................................................................................................68
Certificate Distribution Account.................................................................................31
Certificate Pool Factor..........................................................................................10
Code.............................................................................................................52
Collection Account................................................................................................3
Cut-off Date......................................................................................................3
Depository.......................................................................................................19
Designated Accounts..............................................................................................32
Determination Date...............................................................................................35
Disposition of Certificates......................................................................................60
Distribution Date................................................................................................20
Eligible Account.................................................................................................32
Eligible Institution.............................................................................................32
Eligible Investments.............................................................................................33
ERISA............................................................................................................68
Indenture........................................................................................................11
Indenture Trustee.................................................................................................3
Interest Rate....................................................................................................12
Monthly Period...................................................................................................34
New Partnership..................................................................................................60
Note Distribution Account........................................................................................32
Note Majority....................................................................................................14
Note Owners......................................................................................................11
Obligor...........................................................................................................7
OID..............................................................................................................54
Old Partnership..................................................................................................60
Pass-Through Rate................................................................................................19
Payment Date.....................................................................................................10
Plan Assets Regulation...........................................................................................68
Pooling and Servicing Agreements.................................................................................28
Pre-Funding Period................................................................................................4
Rating Agency....................................................................................................32
Receivable Files..................................................................................................4
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Receivable Pool...................................................................................................5
Receivable Rate...................................................................................................5
Receivables.......................................................................................................5
Registration Statement...........................................................................................11
Related Documents................................................................................................17
Repurchase Event.................................................................................................43
Sale and Servicing Agreements....................................................................................28
Schedule of Receivables..........................................................................................28
Service..........................................................................................................52
Servicer..........................................................................................................6
Servicer's Certificate...........................................................................................25
Servicing Fee.....................................................................................................4
Servicing Rate...................................................................................................34
Ship Mortgage Statutes...........................................................................................45
Shortfall Amount.................................................................................................64
Stripped Certificates............................................................................................20
Stripped Notes...................................................................................................12
Trust Agreements.................................................................................................28
Trust Documents..................................................................................................28
Trustee...........................................................................................................3
</TABLE>
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<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Securities
(the "Global Securities") will be available only in bookentry form. Investors in
the Global Securities may hold such Global Securities through any of The
Depository Trust Company, 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 sameday
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 The Depository Trust Company will be conducted according to the rules
and procedures applicable to U.S. corporate debt obligations.
Secondary crossmarket trading between CEDEL or Euroclear and The
Depository Trust Company Participants holding Notes will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL and
Euroclear (in such capacity) and The Depository Trust Company 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 bookentry form by The Depository
Trust Company in the name of Cede & Co. as nominee of The Depository Trust
Company. Investors' interests in the Global Securities will be represented
through financial institutions acting on their behalf as direct and indirect
Participants in The Depository Trust Company. 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 The
Depository Trust Company Participants.
Investors electing to hold their Global Securities through The Depository
Trust Company will follow the settlement practices applicable to prior debt
issues. Investors' securities custody
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<PAGE>
accounts will be credited with their holdings against payment in sameday 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 "lockup" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payments in sameday
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 THE DEPOSITORY TRUST COMPANY PARTICIPANTS. Secondary
market trading between The Depository Trust Company Participants will be settled
using the procedures applicable to bookentry securities in sameday 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 sameday funds.
TRADING BETWEEN THE DEPOSITORY TRUST COMPANY SELLER AND CEDEL OR EUROCLEAR
PURCHASER. When Global Securities are to be transferred from the account of a
The Depository Trust Company 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 The Depository Trust Company
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 backvalued 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 sameday funds
settlement. The most direct
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means of doing so is to preposition 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 preposition
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, The
Depository Trust Company 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 The Depository Trust Company seller on the settlement date. Thus, to the The
Depository Trust Company Participant a crossmarket transaction will settle no
differently than a trade between two The Depository Trust Company Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND THE DEPOSITORY TRUST COMPANY
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 The Depository Trust
Company 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 The
Depository Trust Company 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 backvalued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
CEDEL Participant or Euroclear Participant have a line of credit with its
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the backvaluation 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 The Depository Trust Company
Participants for delivery to CEDEL Participants or Euroclear Participants should
note that these trades would
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<PAGE>
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 The Depository
Trust Company 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 The Depository Trust Company
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 The Depository Trust Company 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 NONU.S. PERSONS (FORM W8). Beneficial owners of Notes
that are nonU.S. Persons generally can obtain a complete exemption
from the withholding tax by filing a signed Form W8 (Certificate of
Foreign Status). If the information shown on Form W8 changes, a new
Form W8 must be filed within 30 days of such change.
EXEMPTION FOR NONU.S. PERSON WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A nonU.S. Person, including a nonU.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 NONU.S. PERSONS RESIDENT IN TREATY
COUNTRIES (FORM 1001). NonU.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
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<PAGE>
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 W8. Form 1001 may
be filed by the beneficial owner of Notes or such owner's agent.
EXEMPTION FOR U.S. PERSONS (FORM W9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer,
such owner's agent, files by submitting the appropriate form to the
person through whom it holds the security (the clearing agency, in the
case of persons holding directly on the books of the clearing agency).
Form W8 and Form 1001 are effective for three calendar years and Form
4224 is effective for one calendar year.
The term "U.S. Person" means a citizen or resident of the United States, a
corporation or a partnership organized in or under the laws of the United States
or any political subdivision thereof or an estate, the income of which from
sources outside the United States is includible in gross income for federal
income tax purposes regardless of its connection with the conduct of a trade or
business within the United States or a trust if a court within the United States
is able to exercise primary supervision of the administration of the trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of the trust.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
A-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred in connection
with the offering of the Asset-Backed Certificates and the Asset-Backed Notes,
other than underwriting discounts and commissions, described in this
Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............................
Printing and Engraving..........................................................
Legal Fees and Expenses.........................................................
Blue Sky Filing and Counsel Fees................................................
Accounting Fees and Expenses....................................................
Trustee Fees and Expenses.......................................................
Rating Agencies' Fees...........................................................
Miscellaneous Expenses..........................................................
Total.....................................................................
</TABLE>
- ---------------
* All fees and expenses, other than the Securities and Exchange Commission
Registration Fee, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Fourteenth of the Registrant's Certificate of Incorporation
provides for indemnification of directors and officers of the Registrant to the
full extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits and proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they were
or are such directors, officers, employees or agents, against expenses incurred
in any such action, suit or proceeding. The Delaware General Corporation Law
also provides that Delaware corporations may purchase insurance on behalf of any
such director, officer, employee or agent.
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<PAGE>
ITEM 16. EXHIBITS.
The Exhibits filed as part of this Registration Statement are:
<TABLE>
<S> <C>
*1.1 -- Form of Underwriting Agreement (for Grantor Trusts).
*1.2 -- Form of Underwriting Agreement (for Owner Trusts).
*3.1 -- Certificate of Incorporation of the Depositor.
*3.2 -- Restated By-Laws of the Depositor.
*4.1 -- Form of Pooling and Servicing Agreement among Bombardier Capital
CF Inc., as Depositor, Bombardier Capital Inc., as Servicer, and the
Owner Trustee (for Grantor Trusts).
*4.2 -- Form of Sale and Servicing Agreement relating to Owner Trusts.
*4.3 -- Form of Trust Agreement relating to Owner Trusts.
*4.4 -- Form of Indenture between the Trust and the Indenture Trustee,
including form of Note.
*5.1 -- Opinion and consent of Morgan, Lewis & Bockius LLP with respect to legality.
*8.1 -- Opinion and consent of Morgan, Lewis & Bockius LLP with respect to tax
*23.2 -- Consent of Morgan, Lewis & Bockius LLP (included as part of Exhibit
5.1).
*23.3 -- Consent of Morgan, Lewis & Bockius LLP (included as part of
Exhibit 8.1).
*25.1 -- Form of T-1 Statement of Eligibility under the Trustee Indenture Act of
1939 of the Indenture Trustee.
</TABLE>
- --------
*To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant on behalf of the Trust hereby undertakes that,
for purposes of determining any liability under the Securities Act of 1933, each
filing of the Owner Trust's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
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<PAGE>
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement.
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change in the information set forth in the registration
statement;
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<PAGE>
Provided, however, that paragraphs (1)(a) and (1)(b) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under section 305(b)(2) of
the Trust Indenture Act.
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<PAGE>
SIGNATURES
Pursuant to the Requirements of the Securities Act of 1933, the Registrant
Certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Burlington, State of Vermont, on the 15th Day of
July, 1999.
BOMBARDIER CAPITAL CF II INC.
By /s/ George W. Calver
______________________________________
Name: George W. Calver
Title: President
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<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints George W. Calver and Andrew Baranowsky, and each
of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for and in his or her own name, place
and stead, in any and all capacities to sign any or all amendments (including
post-effective amendments) to this Registration Statement and any or all other
documents in connection therewith, and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection with such
matters, as fully to all intents and purposes as he or she might or could do in
person, and hereby ratifying and confirming all that each said attorney-in-fact
and agent or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the Requirements of the Securities Act, this Registration
Statement Has Been Signed by the Following Persons in the Capacities and on the
Date Indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ George W. Calver President (Principal July 15, 1999
_________________________________ Executive Officer) and
George W. Calver Director
/s/ Andrew Baranowsky Treasurer (Principal Financial July 15, 1999
_________________________________ and Accounting Officer)
Andrew Baranowsky
/s/ Blaine H. Filthaut Director July 15, 1999
_________________________________
Blaine H. Filthaut
/s/ R. William Crowe Director July 15, 1999
_________________________________
R. William Crowe
</TABLE>
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
*1.1 -- Form of Underwriting Agreement (for Grantor Trusts).
*1.2 -- Form of Underwriting Agreement (for Owner Trusts).
*3.1 -- Certificate of Incorporation of Bombardier Capital CF II Inc.
*3.2 -- Restated By-Laws of Bombardier Capital CF II Inc.
*4.1 -- Form of Pooling and Servicing Agreement among Bombardier Capital CF II Inc.,
as Depositor, Bombardier Capital Inc., as Servicer, and the Owner Trustee
(for Grantor Trusts).
*4.2 -- Form of Sale and Servicing Agreement relating to Owner Trusts.
*4.3 -- Form of Trust Agreement relating to Owner Trusts.
*4.4 -- Form of Indenture between the Trust and the Indenture Trustee,
including form of Note.
*5.1 -- Opinion and consent of Morgan, Lewis & Bockius LLP with respect to
legality.
*8.1 -- Opinion and consent of Morgan, Lewis & Bockius LLP with respect to
tax matters.
*23.2 -- Consent of Morgan, Lewis & Bockius LLP (included as part of Exhibit
5.1).
*23.3 -- Consent of Morgan, Lewis & Bockius LLP (included as part of Exhibit 8.1).
*25.1 -- Form of T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of the Indenture Trustee.
</TABLE>
- --------
*To be filed by amendment.
II-7
