$200,000,000
CIT RV Owner Trust 1995-A
$188,000,000 Class A 6.25% Asset Backed Notes
$12,000,000 6.55% Asset Backed Certificates
The CIT Group Securitization Corporation II
Seller
The CIT Group/Sales Financing, Inc.
Servicer
-------------------------
The CIT RV Owner Trust 1995-A (the "Trust" or the "Issuer") will be formed
pursuant to a Trust Agreement, to be dated as of June 1, 1995, between The CIT
Group Securitization Corporation II (the "Company" or the "Seller") and The
First National Bank of Chicago, as trustee (the "Owner Trustee"), and will issue
Class A 6.25% Asset Backed Notes (the "Class A Notes") in the principal amount
of $188,000,000 pursuant to an Indenture, to be dated as of June 1, 1995,
between the Issuer and The Chase Manhattan Bank (National Association), as
trustee (the "Indenture Trustee"). The Trust will also issue 6.55% Asset Backed
Certificates (the "Certificates" and, together with the Notes, the "Securities")
in the principal amount of $12,000,000. The Certificates will have the benefit
of a limited guarantee (the "Limited Guarantee") of The CIT Group Holdings, Inc.
("CIT") to protect against losses that would otherwise be absorbed by the
Certificateholders. To the extent that funds on deposit in the Certificate
Distribution Account are insufficient to pay the amounts to which the
Certificateholders are entitled, CIT will be obligated to pay the Guarantee
Payment (as defined herein) provided that the aggregate amount of such Guarantee
Payments does not exceed an aggregate amount initially equal to approximately
$5,000,000, subject to adjustment under certain circumstances (the "Guarantee
Payment Limit"). See "The Purchase Agreements and The Trust Documents--Credit
Enhancement" herein.
The assets of the Trust will include a pool of simple interest retail
installment sale contracts (the "Initial Contracts") secured by the new and used
recreational vehicles financed thereby (the "Initial Financed Vehicles"),
certain monies received under the Initial Contracts on and after June 1, 1995
(the "Initial Cut-off Date"), security interests in the Initial Financed
Vehicles, the Collection Account, the Note Distribution Account, the Certificate
Distribution Account, the Capitalized Interest Account and the Pre-Funding
Account, in each case,together with the proceeds thereof, the proceeds from
claims under certain insurance policies in respect of individual Initial
Financed Vehicles or the related Obligors and certain rights under the Sale and
Servicing Agreement to be dated as of June 1, 1995 (the "Sale and Servicing
Agreement"), among the Seller, the Servicer, and the Indenture Trustee. From
time to time on or before September 15, 1995, additional simple interest retail
installment sale contracts (the "Subsequent Contracts" and, together with the
Initial Contracts, the "Contracts") secured by the new and used recreational
vehicles financed thereby (the "Subsequent Financed Vehicles" and, together with
the Initial Financed Vehicles, the "Financed Vehicles"), certain monies received
under the Subsequent Contracts on and after the related subsequent cut-off dates
(each, a "Subsequent Cut-off Date), security interests in the Subsequent
Financed Vehicles and proceeds from claims under certain insurance policies in
respect of individual Subsequent Financed Vehicles or the related Obligors will
be purchased by the Trust from the Seller from monies on deposit in the
Pre-Funding Account.
(Continued on following page)
-------------------------
THE SECURITIES WILL REPRESENT INTERESTS IN THE TRUST AND WILL NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE CIT GROUP SECURITIZATION CORPORATION II, THE
CIT GROUP/SALES FINANCING, INC. OR ANY OF THEIR RESPECTIVE AFFILIATES.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Underwriting
Price to Discounts and Proceeds to the
Public(1) Commissions Company(1)(2)
---------- ------------ --------------
Per Class A Note....... 99.875% 0.325% 99.550%
Per Certificate........ 99.875% 0.500% 99.375%
Total.................. $199,750,000 $671,000 $199,079,000
(1) Plus accrued interest at the Class A Rate and the Pass-Through Rate, as
appropriate, from June 15, 1995.
(2) Before deduction of expenses payable by the Company estimated at $608,707.
------------------------
The Notes and the Certificates are offered by the several Underwriters
when, as and if issued by the Trust, delivered to and accepted by the
Underwriters and subject to their right to reject orders in whole or in part. It
is expected that the delivery of the Securities in book-entry form will be made
through the facilities of The Depository Trust Company ("DTC") on the Same Day
Funds Settlement System, and in the case of the Notes, Cedel, societe anonyme
("Cedel") and the Euroclear System ("Euroclear") on or about June 21, 1995.
CS First Boston Merrill Lynch & Co.
The date of this Prospectus is June 14, 1995.
<PAGE>
(continued from preceding page)
The Notes will be secured by the assets of the Trust (other than the Certificate
Distribution Account) pursuant to the Indenture. The Class A Notes will bear
interest at the rate of 6.25% per annum. Interest on the Notes will generally be
payable on the fifteenth day of each month (each, a "Distribution Date"),
commencing July 17, 1995. Principal on the Notes will be payable on each
Distribution Date to the extent described herein. The Certificates represent
fractional undivided interests in the Trust. The Certificates will bear interest
at the rate of 6.55% per annum (the "Pass-Through Rate") and will be distributed
to Certificateholders on each Distribution Date to the extent described herein.
Distributions of interest and principal on the Certificates will be subordinated
in priority of payment to payment of interest and principal on the Notes, to the
extent described herein. No principal will be paid on the Certificates until all
of the Notes have been paid in full, except for payments of the Principal
Liquidation Loss Amount (as defined herein), if any. The final scheduled
Distribution Date for the Class A Notes and the Certificates will be the January
2011 Distribution Date.
There currently is no secondary market for the Securities and there is no
assurance that one will develop.
The Underwriters expect, but are not obligated, to make a market in the
Securities. There is no assurance that any such market will develop, or if one
does develop, that it will continue or provide sufficient liquidity.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company and CIT have filed with the Securities and Exchange Commission
(the "Commission") on behalf of the Trust a Registration Statement combined on
Form S-1 and Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended, with respect to the Securities being offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement, including exhibits filed as
part thereof and otherwise incorporated therein. Statements made in this
Prospectus as to the contents of any contract, agreement or other document filed
as an exhibit to the Registration Statement or incorporated by reference
therein, while complete in all material respects, do not necessarily describe
all terms or provisions of such contract, agreement or other document. For a
complete description, reference is made to each such contract, agreement or
other document filed as an exhibit to the Registration Statement or incorporated
therein. CIT is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Commission. Such
reports, copies of the Registration Statement, the exhibits and other
information may be inspected, without charge, at the public reference facilities
of the Commission at Room 1024 Judiciary Plaza, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the regional offices of the Commission
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such information can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Certain securities of CIT are listed on the New York Stock
Exchange and reports and other information concerning CIT can also be inspected
at the offices of the New York Stock Exchange, Inc. at 20 Broad Street, New
York, New York 10005. The Servicer, on behalf of the Trust, will also file or
cause to be filed with the Commission such periodic reports as are required
under the Exchange Act, and the rules and regulations of the Commission
thereunder. Such reports and other information filed on behalf of the Trust will
be available for inspection as set forth above.
2
<PAGE>
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports containing information concerning the Contracts will be
prepared by the Servicer and sent on behalf of the Trust only to Cede & Co.
("Cede"), as nominee of DTC and registered holder of the Notes and the
Certificates. Securityholders may elect to hold their securities through any of
DTC (in the United States) and in the case of Noteholders, Cedel or Euroclear
(in Europe). DTC will forward such reports to Participants, Indirect
Participants, Cedel Participants and Euroclear Participants. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--Reports to
Securityholders." Such reports will not constitute financial statements prepared
in accordance with generally accepted accounting principles.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by CIT are incorporated
by reference in this Prospectus:
(a) CIT's Annual Report on Form 10-K for the year ended December 31,
1994 together with the report of KPMG Peat Marwick LLP, independent
certified public accountants, which report refers to a change in the method
of accounting for postretirement benefits other than pensions in 1993;
(b) CIT's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995; and
(c) CIT's Current Reports on Form 8-K dated January 18, 1995 and April
11, 1995.
All documents filed by CIT pursuant to Sections 13(a) and (c), 14, or 15(d)
of the Exchange Act after the date hereof and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
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.
CIT will provide without charge to each person to whom this Prospectus is
delivered, upon request, a copy of any or all of the documents described above
which have been or may be incorporated by reference in this Prospectus other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Such request should be directed
to:
Corporate Secretary
The CIT Group Holdings, Inc.
1211 Avenue of the Americas
New York, New York 10036
(212) 536-1950
3
<PAGE>
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SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used in the Summary are defined elsewhere in this Prospectus. Reference is made
to the "Index of Principal Terms" for the location herein of defined terms.
Issuer.................... CIT RV Owner Trust 1995-A (the "Trust" or the
"Issuer"), a Delaware business trust to be formed
by the Seller and the Owner Trustee pursuant to
the Trust Agreement dated as of June 1, 1995.
Seller.................... The CIT Group Securitization Corporation II (the
"Company"), a wholly-owned, limited purpose
subsidiary of The CIT Group Holdings, Inc.
("CIT"). Neither CIT nor any of its affiliates,
including the Company and The CIT Group/Sales
Financing, Inc. ("CITSF"), has guaranteed,
insured or is otherwise obligated with respect to
the Securities, except for the Limited Guarantee
provided by CIT in favor of the
Certificateholders (the "Limited Guarantee"). See
"Special Considerations--Limited Obligations".
Servicer.................. The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the "Servicer"), a
wholly-owned subsidiary of CIT.
Indenture Trustee......... The Chase Manhattan Bank (National Association),
as trustee under the Indenture to be dated as of
June 1, 1995 (the "Indenture Trustee").
Owner Trustee............. The First National Bank of Chicago, as trustee
under the Trust Agreement to be dated as of June
1, 1995 (the "Owner Trustee" and, together with
the Indenture Trustee, the "Trustees"). An
individual who is a Delaware Resident is expected
to act as a co-trustee pursuant to a co-trustee
agreement with the Owner Trustee.
Special Considerations.... Certain potential risks and other considerations
are particularly relevant to a decision to invest
in any securities sold hereunder. See "Special
Considerations".
The Notes................. The CIT RV Owner Trust 1995-A Class A 6.25% Asset
Backed Notes (the "Notes" or the "Class A Notes")
will represent obligations of the Trust secured
by the assets of the Trust (other than the
Certificate Distribution Account, the Limited
Guarantee and, if established, the Certificate
Reserve Account and, if delivered, the Alternate
Credit Enhancement). See "The Notes--General".
The Trust will issue $188,000,000 aggregate
principal amount of Class A Notes pursuant to
an Indenture, to be dated as of June 1, 1995,
between the Issuer and the Indenture Trustee (the
"Indenture"). See "The Notes--General".
The Notes will be offered for purchase in minimum
denominations of $1,000 and integral multiples of
$1,000 in excess thereof in book-entry form only.
Definitive Notes will be issued only under the
limited circumstances described herein. Persons
acquiring beneficial interests in the Notes will
hold their interests through The Depository Trust
Company ("DTC") in the United States or Cedel,
societe anonyme ("Cedel") or the Euroclear System
("Euroclear") in Europe. See "Certain Information
Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities" and
Annex I hereto.
The Certificates.......... The CIT RV Owner Trust 1995-A 6.55% Asset Backed
Certificates (the "Certificates" and, together
with the Notes, the "Securities") will represent
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
fractional undivided interests in the Trust. See
"The Certificates--General".
The Trust will issue $12,000,000 aggregate
principal amount of Certificates (the "Original
Certificate Balance") pursuant to a Trust
Agreement, to be dated as of June 1, 1995,
between the Seller and the Owner Trustee (the
"Trust Agreement"). Payments in respect of the
Certificates will be subordinated to payments on
the Notes to the limited extent described herein.
See "The Certificates--General".
The Certificates will be issued in minimum
denominations of $20,000 and integral multiples
of $1,000 in excess thereof in book-entry form
only; provided, however, that one Certificate may
be issued in a denomination other than an
integral multiple of $1,000 such that the
Affiliated Purchaser (as defined herein) may be
issued at least 1% of the Certificate Balance (as
described herein). Persons acquiring beneficial
interests in the Certificates will hold their
interests through DTC. Definitive Certificates
will be issued only under the limited
circumstances described herein. See "Certain
Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities".
Property of the Trust..... The property of the Trust will primarily include
(i) a pool of simple interest retail installment
sale contracts (the "Initial Contracts") secured
by the new and used recreational vehicles
financed thereby (the "Initial Financed
Vehicles"), (ii) certain monies received under
the Initial Contracts on and after June 1, 1995
(the "Initial Cut-off Date"), (iii) security
interests in the Initial Financed Vehicles, (iv)
the Collection Account, the Note Distribution
Account, the Certificate Distribution Account,
the Capitalized Interest Account and the Pre-
Funding Account, in each case together with the
proceeds thereof, (v) the proceeds from claims
under certain insurance policies in respect of
individual Initial Financed Vehicles or the
related Obligors and (vi) certain rights under
the Sale and Servicing Agreement to be dated as
of June 1, 1995 (the "Sale and Servicing
Agreement"), among the Seller, the Servicer, and
the Owner Trustee.
From time to time on or before September 15,
1995, additional simple interest retail
installment sale contracts (the "Subsequent
Contracts" and, together with the Initial
Contracts, the "Contracts") secured by the new
and used recreational vehicles financed thereby
(the "Subsequent Financed Vehicles" and, together
with the Initial Financed Vehicles, the "Financed
Vehicles"), certain monies received under the
Subsequent Contracts on and after the related
Subsequent Cut-off Dates, security interests in
the Subsequent Financed Vehicles and proceeds
from claims under certain insurance policies in
respect of individual Subsequent Financed
Vehicles or the related Obligors will be
purchased by the Trust from the Seller from
monies on deposit in the Pre-Funding Account. See
"The Trust Property".
The Contracts............. The property of the Trust will consist primarily
of installment sale contracts for recreational
vehicles originated by recreational vehicle
dealers ("Dealers") in the ordinary course of
business and acquired by CITSF or the CIT
Group/Consumer Finance, Inc. (NY) ("CITCF-NY") in
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
the ordinary course of its business. The Financed
Vehicles will consist of motor homes, travel
trailers and other types of recreational
vehicles. See "The Contract Pool". On or prior to
the date of issuance of the Securities (the
"Closing Date"), CITCF-NY will sell certain
contracts that will constitute a portion of the
Initial Contracts to CITSF pursuant to a Sale and
Purchase Agreement to be dated as of June 1,
1995, CITSF will sell the Initial Contracts to
the Company pursuant to a Purchase Agreement to
be dated as of June 1, 1995 (the "Purchase
Agreement") and the Company will sell the Initial
Contracts to the Trust pursuant to the Sale and
Servicing Agreement.
As of the Initial Cut-off Date, the Initial
Contracts had an aggregate principal balance of
$155,987,746, a weighted average original
maturity of 152 months and a remaining weighted
average maturity of 150 months. The final
scheduled payment date on the Initial Contract
with the last maturity occurs in June 2010. See
"The Contract Pool".
From time to time on or prior to September 15,
1995, pursuant to the Sale and Servicing
Agreement, CITSF will be obligated to sell, and
the Company will be obligated to purchase,
subject to the satisfaction of certain conditions
described therein, Subsequent Contracts at a
purchase price equal to the aggregate principal
amount thereof as of the first day in the related
month of transfer designated by CITSF and the
Company (each, a "Subsequent Cut-off Date"). A
portion of such Subsequent Contracts may be
acquired by CITSF from CITCF-NY. Pursuant to the
Sale and Servicing Agreement and one or more
subsequent transfer agreements (each, a
"Subsequent Transfer Agreement") among the
Company, the Servicer and the Owner Trustee, and
subject to the satisfaction of certain conditions
described herein and therein, the Company will in
turn sell the Subsequent Contracts to the Trust
at a purchase price equal to the amount paid by
the Company to CITSF for such Subsequent
Contracts, which purchase price shall be paid
from monies on deposit in the Pre-Funding
Account. The aggregate principal balance of the
Subsequent Contracts to be conveyed to the Trust
during the Funding Period will not exceed
$44,012,254. Subsequent Contracts will be
transferred from CITSF to the Company and from
the Company to the Trust on the Business Day
specified by CITSF and the Company during the
month in which the related Subsequent Cut-off
Date occurs (each, a "Subsequent Transfer Date").
The Pre-Funding Account... The Pre-Funding Account will be maintained with
the Owner Trustee and is designed solely to hold
funds to be applied by the Owner Trustee during
the Funding Period to pay to the Company the
purchase price for Subsequent Contracts. Monies
on deposit in the Pre-Funding Account will not be
available to cover losses on or in respect of the
Contracts.
On the Closing Date the Pre-Funding Account will
be created with an initial deposit, from the
proceeds of the Securities, of $44,012,254 (the
"Pre-Funded Amount"). The "Funding Period" will
be the period from the Closing Date until the
earliest to occur of (i) the date on which the
amount on deposit in the Pre-Funding Account is
less than $100,000, (ii) the date on which an
Event of Default occurs under the Indenture,
(iii) the date on which an Event of Termination
occurs under the Sale and Servicing Agreement,
(iv) the insolvency of the Company, CITSF,
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6
<PAGE>
- --------------------------------------------------------------------------------
CITCF-NY or CIT or (v) the close of business on
September 15, 1995. During the Funding Period, on
one or more Subsequent Transfer Dates, the
Pre-Funded Amount will be applied to purchase
Subsequent Contracts from the Company. The
Company expects that the Pre-Funded Amount will
be reduced to less than $100,000 by September 15,
1995, although no assurance can be given that
this will in fact occur. Any portion of the
Pre-Funded Amount remaining on deposit in the
Pre-Funding Account at the end of the Funding
Period will be payable as principal to
Noteholders on the first Distribution Date
thereafter or, if the end of the Funding Period
is on a Distribution Date, then on such date.
Capitalized Interest
Account................... On the Closing Date approximately $414,815 of
the proceeds from the sale of the Securities will
be deposited into an account (the "Capitalized
Interest Account") in the name of the Owner
Trustee on behalf of the Securityholders. Amounts
deposited in the Capitalized Interest Account
will be used on the July 1995, August 1995 and
September 1995 Distribution Dates, if applicable,
to fund the excess, if any, of (i) the product of
(x) the weighted average of the Class A Rate and
the Pass-Through Rate as of the first day of the
related Interest Accrual Period and (y) the
undisbursed funds (excluding investment earnings)
in the Pre-Funding Account (as of the last day of
the related Due Period) over (ii) the amount of
any investment earnings on funds in the
Pre-Funding Account that are available to pay
interest on the Securities on each such
Distribution Date. Any amounts remaining in the
Capitalized Interest Account on the last day of
the Funding Period and not used for such purposes
will be deposited in the Collection Account and
be available for distributions, as described
herein, on the first Distribution Date thereafter
or, if the end of the Funding Period is on a
Distribution Date, then on such date.
Distribution Dates........ Payments of interest and principal on the
Securities will be made on the fifteenth day of
each month or, if any such day is not a Business
Day, on the next succeeding Business Day (each, a
"Distribution Date"), commencing July 17, 1995.
Payments on the Securities on each Distribution
Date will be made to the holders of record of the
related Securities at the close of business on
the day immediately preceding such Distribution
Date or, in the event Definitive Securities have
been issued, at the close of business on the last
day of the month immediately preceding the month
in which such Distribution Date occurs (each, a
"Record Date").
To the extent not previously paid in full prior
to such time, the outstanding principal amount of
the Class A Notes and the Certificates will be
payable on the Distribution Date occurring in
January 2011 (the "Class A Final Scheduled
Distribution Date" and the "Certificate Final
Scheduled Distribution Date", respectively).
A "Business Day" is any day other than a
Saturday, Sunday or any day on which banking
institutions or trust companies in the states of
New York, Illinois or Oklahoma are authorized by
law, regulation or executive order to be closed.
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7
<PAGE>
- --------------------------------------------------------------------------------
Interest Accrual Period... The period for which interest is payable on a
Distribution Date on the Securities shall be the
period from the most recent Distribution Date on
which interest has been paid to but excluding the
following Distribution Date, or in the case of
the initial Distribution Date from June 15, 1995
to but excluding the initial Distribution Date
(each, an "Interest Accrual Period").
Due Period................ With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and fees will be collected on the
Contracts for application towards the payment of
principal and interest to the Securityholders and
the payment of fees on such Distribution Date.
The "Due Period" will be the calendar month
immediately preceding the Distribution Date. The
first Due Period will commence on and include
June 1, 1995 and will end on and include June 30,
1995.
Determination Date........ The "Determination Date" is the third Business
Day prior to each Distribution Date. On each
Determination Date, the Indenture Trustee will
determine the amount in the Collection Account
available for distribution on the related
Distribution Date, allocate such amounts between
the Notes and the Certificates and make payments
to Securityholders all as described under "The
Purchase Agreements and The Trust Documents--
Distributions".
Terms of the Notes........ The principal terms of the Notes will be as
described below:
A. Interest Rate ....... The Class A Notes will bear interest at the rate
of 6.25% per annum (the "Class A Rate").
B. Interest............. Interest on the outstanding principal amount of
the Notes will accrue at the Class A Rate during
the Interest Accrual Period. Interest will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. See "The
Notes--Payment of Interest".
C. Principal............ Principal of the Notes will be payable on each
Distribution Date in an amount equal to the
Principal Distribution Amount, calculated as
described under "The Notes--Payments of
Principal", to the extent of the Available Amount
(as defined under "The Purchase Agreements and
The Trust Documents--Distributions" herein)
remaining after the Servicer has been reimbursed
for any outstanding Advances and has been paid
the Servicing Fee (including any unpaid Servicing
Fee with respect to one or more prior Due
Periods) (collectively, the "Servicer Payment")
and following the payment of interest due on the
Notes on such Distribution Date.
The unpaid principal balance of the Notes will be
payable on the Class A Final Scheduled
Distribution Date. See "The Notes--Payments of
Principal".
D. Redemption........... The Notes will be subject to mandatory redemption
in part in the event that any portion of the
Pre-Funded Amount remains on deposit in the
Pre-Funding Account at the end of the Funding
Period. See "The Notes--Redemption" and "Certain
Information Regarding the Securities".
In the event of an Optional Purchase or Auction
Sale, as described herein, the outstanding Notes
will be redeemed, at a redemption price equal to
the unpaid principal amount of the Class A Notes
plus accrued and unpaid interest thereon at the
Class A Rate. See "Summary--Optional Purchase of
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8
<PAGE>
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the Contracts", "--Auction Sale", "The
Notes--Redemption" and "The Purchase Agreements
and The Trust Documents--Insolvency Event".
Terms of the Certificates.. The principal terms of the Certificates will be
as described below:
A. Pass-Through Rate.... The Certificates will bear interest at the rate
of 6.55% per annum (the "Pass-Through Rate").
B. Interest............. On each Distribution Date, the Owner Trustee will
distribute pro rata to Certificateholders of
record as of the related Record Date interest
accrued during the related Interest Accrual
Period, in an amount equal to one-twelfth of the
product of the Pass-Through Rate and the
Certificate Balance as of the first day of the
immediately preceding Due Period (after giving
effect to distributions of principal to be made
on the Distribution Date occurring in such
immediately preceding Due Period). The
"Certificate Balance" means the Original
Certificate Balance reduced by (i) all
distributions allocable to principal actually
made to Certificateholders, including Guarantee
Payments allocable to principal, (ii) the
aggregate amount of all Principal Liquidation
Loss Amounts distributable to Certificateholders
to the extent such amounts have not been so
previously distributed and (iii) on or after the
Distribution Date on which the Class A Notes have
been paid in full (the "Cross-Over Date"), the
aggregate amount of all Principal Distribution
Amounts distributable to Certificateholders to
the extent such amounts have not been so
previously distributed. Distributions of interest
on the Certificates will be funded to the extent
of the Available Amount after the Servicer has
been reimbursed for any outstanding Monthly
Advances and has been paid the Servicer Payment
and interest and principal has been paid in
respect of the Notes on such Distribution Date
or, to the extent such Available Amount is
insufficient, will be funded through a payment
under the Limited Guarantee, subject to the
Guarantee Payment Limit. Interest will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. The rights of
Certificateholders to receive distributions of
interest will be subordinated to the rights of
Noteholders to receive interest and principal,
as described herein. See "The Certificates
--Distributions of Interest".
C. Principal............ On each Distribution Date on or after the
Cross-Over Date, principal of the Certificates
will be payable, subject to the extent of the
remaining Available Amount and the Guarantee
Payment Limit, in an amount equal to the
Principal Distribution Amount with respect to
such Distribution Date. Such principal payments
will be funded to the extent of the Available
Amount remaining after the Servicer has been
reimbursed for any outstanding Monthly Advances
and has been paid the Servicer Payment, and the
interest due on the Certificates has been paid
or, to the extent such Available Amount is
insufficient, will be funded through a payment
under the Limited Guarantee, subject to the
Guarantee Payment Limit. The rights of
Certificateholders to receive distributions of
principal will be subordinated to the rights of
Noteholders to receive distributions of interest
and principal and following the payment of
distributions of interest in respect of the
Certificates and to the extent described herein.
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On each Distribution Date prior to the Cross-Over
Date, the Certificateholders will be entitled to
receive, subject to the remaining Available
Amount and the Guarantee Payment Limit, the
Principal Liquidation Loss Amount for such
Distribution Date. Such principal payments will
be funded to the extent of the Available Amount
remaining after the Servicer has been reimbursed
for any outstanding Monthly Advances and has been
paid the Servicer Payment, the principal and
interest due on the Notes has been paid and the
interest on the Certificates has been paid or, to
the extent that such remaining Available Amount
is insufficient, will be funded through a payment
under the Limited Guarantee, subject to the
Guarantee Payment Limit. The "Principal
Liquidation Loss Amount" for any Distribution
Date will equal the amount, if any, by which the
sum of the aggregate outstanding principal
balance of the Notes and the Certificate Balance
(after giving effect to all distributions of
principal on such Distribution Date) exceeds the
sum of the aggregate principal balance of the
Contracts (the "Pool Balance") plus the amounts
remaining on deposit in the Pre-Funding Account,
if any, at the close of business on the last day
of the related Due Period. The Principal
Liquidation Loss Amount represents future
principal payments on the Contracts that, because
of the subordination of the Certificates and
liquidation losses on the Contracts, will not be
paid to the Certificateholders.
D. Redemption............ In the event of an Optional Purchase or Auction
Sale, the Certificates will be redeemed at a
redemption price equal to the Certificate Balance
plus accrued and unpaid interest thereon at the
Pass-Through Rate. See "Summary--Optional
Purchase of the Contracts", "--Auction Sale",
"The Certificates--Redemption" and "The Purchase
Agreements and The Trust Documents--Insolvency
Event".
Mandatory Prepayment...... The Notes will be prepaid in part on the
Distribution Date immediately succeeding the day
on which the Funding Period ends (or on the
Distribution Date on which the Funding Period
ends if the Funding Period ends on a Distribution
Date) in the event that any portion of the
Pre-Funded Amount remains on deposit in the
Pre-Funding Account after giving effect to the
acquisition by the Seller and the sale to the
Trust of all Subsequent Contracts, including any
such acquisition and conveyance on the date on
which the Funding Period ends (a "Mandatory
Prepayment"). The amount to be distributed to
Noteholders in connection with any Mandatory
Prepayment will equal the remaining Pre-Funded
Amount.
Subordination of
the Certificates.......... The rights of the Certificateholders to receive
distributions with respect to the Contracts will
be subordinated to the rights of the Class A
Noteholders, to the extent described herein. This
subordination is intended to enhance the
likelihood of timely receipt by Class A
Noteholders of the full amount of interest and
principal required to be paid to them, and to
afford such Class A Noteholders limited
protection against losses in respect of the
Contracts.
No distribution will be made to the
Certificateholders on any Distribution Date in
respect of (i) interest or principal until the
full amount of interest and principal on the
Class A Notes payable on such Distribution Date
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has been distributed to the Class A Noteholders
and (ii) principal until the Class A Notes have
been paid in full, other than distributions in
respect of the Principal Liquidation Loss Amount.
The protection afforded to the Class A
Noteholders by the subordination feature
described above will be effected by the
preferential right of the Class A Noteholders to
receive, to the extent described herein, current
distributions from collections on or in respect
of the Contracts prior to the application of such
collections to making payments in respect of the
Certificates. There is no other protection
against losses on the Contracts afforded the
Class A Notes.
Guarantee Payments
to Certificateholders
under the Limited
Guarantee of CIT.......... In order to mitigate the effect of the
subordination of the Certificates and liquidation
losses and delinquencies on the Contracts, the
Certificateholders are entitled to receive on
each Distribution Date the amount equal to the
Guarantee Payment, if any, under the Limited
Guarantee of CIT subject to the Guarantee Payment
Limit. Prior to the Cross-Over Date, the
"Guarantee Payment" will equal the lesser of (i)
the amount, if any, by which (a) the sum of (x)
the amount of interest payable to the
Certificateholders for such Distribution Date,
and (y) the Principal Liquidation Loss Amount, if
any, exceeds (b) the Available Amount remaining
for distribution to the Certificateholders after
the Servicer has been reimbursed for any
outstanding Monthly Advances and has been paid
the Servicer Payment and distributions of
interest and principal have been paid to the
Noteholders on such Distribution Date and (ii)
the Guarantee Payment Limit. On and after the
Cross-Over Date, the "Guarantee Payment" will
equal the lesser of (i) the amount, if any, by
which (a) the sum of the amount of interest and
principal payable to the Certificateholders on a
Distribution Date exceeds (b) the Available
Amount remaining after the Servicer has been
reimbursed for any outstanding Monthly Advances
and has been paid the Servicer Payment and
distributions of interest and principal, if any,
have been paid to the Noteholders on such
Distribution Date and (ii) the Guarantee Payment
Limit.
The aggregate amount of Guarantee Payments made
under the Limited Guarantee (including Guarantee
Payments in respect of the Principal Liquidation
Loss Amount) will not, except under certain
limited circumstances specified in the Sale and
Servicing Agreement, exceed $5,000,000 (the
"Initial Guarantee Payment Limit"). The
"Guarantee Payment Limit" will at any time
generally equal the Initial Guarantee Payment
Limit reduced by the amount of each Guarantee
Payment made under the Limited Guarantee. Once
the Guarantee Payment Limit has been reduced, it
will not be reinstated except if certain
conditions set forth in the Sale and Servicing
Agreement are met. See "The Purchase Agreements
and The Trust Documents--Credit Enhancement--
Limited Guarantee". At any time that the
Guarantee Payment Limit has been reduced to zero,
holders of Certificates will bear the risk of all
liquidation losses on the Defaulted Contracts and
may suffer a loss.
The Limited Guarantee will be an unsecured
general obligation of CIT and will not be
supported by any letter of credit or other credit
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enhancement arrangement. As compensation for
providing the Limited Guarantee, CIT will be
entitled to receive a Guarantee Fee (the
"Guarantee Fee") on each Distribution Date equal
to 1/12 of the product of 0.25% and the aggregate
outstanding principal balance of the Contracts as
of the end of the second Due Period preceding
such Distribution Date (or, in the case of the
first Distribution Date, the Initial Cut-off
Date). The right of CIT to receive payment of the
Guarantee Fee on a Distribution Date will be
subordinated to the rights of the Noteholders and
Certificateholders to receive payments of
interest and principal on such Distribution Date
to the extent described herein.
Alternate Credit
Enhancement............... In the event that, at the Company's option,
Alternate Credit Enhancement (as defined herein)
is provided and, upon prior written notice to the
Rating Agencies (as defined herein) such Rating
Agencies shall have notified the Company, the
Servicer and the Trust in writing that
substitution of such Alternate Credit Enhancement
for the Limited Guarantee will not result in the
downgrade or withdrawal of the then current
rating of the Notes or Certificates, the Limited
Guarantee shall be released and shall terminate.
The Alternate Credit Enhancement may consist of
cash or securities deposited by CIT or any other
Person in a segregated escrow or collateral
account (an "Alternate Credit Enhancement"). On
each Distribution Date after delivery of the
Alternate Credit Enhancement, an amount, equal to
the amount which would have been payable under
the Limited Guarantee, shall be transferred from
such escrow account or collateral account to the
Certificate Distribution Account to make payments
to the Certificateholders. CIT shall have no
obligation to replenish the funds on deposit in
any such escrow account or collateral account
once they have been exhausted. See "The
Notes--The Indenture--Modification of Indenture
without Noteholder Consent" and "The Purchase
Agreements and The Trust Documents--Amendment".
Monthly Advances.......... With respect to each Contract as to which there
has been an Interest Shortfall during the related
Due Period (other than an Interest Shortfall
arising from a Contract which has been prepaid in
full or which has been subject to a Relief Act
Reduction (as defined herein) during the related
Due Period), the Servicer shall advance funds in
the amount of such Interest Shortfall (each, a
"Monthly Advance"), but only to the extent that
the Servicer, in its good faith judgement,
expects to recover such Monthly Advance from
subsequent collections with respect to interest
on such Contract made by or on behalf of the
Obligor thereunder (the "Obligor"), net
liquidation proceeds or insurance proceeds with
respect to such Contract. The Servicer shall be
reimbursed for any Monthly Advance from
subsequent collections with respect to such
Contract. If the Servicer determines in its good
faith judgement that an unreimbursed Monthly
Advance shall not ultimately be recoverable from
such collections, the Servicer shall be
reimbursed for such Monthly Advance from
collections on all Contracts. The Servicer will
not advance funds in respect of the principal
component of any scheduled payment. See "The
Purchase Agreements and The Trust
Documents--Monthly Advances".
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"Interest Shortfall" means with respect to any
Contract and any Distribution Date, the excess of
(x) the sum of (i) the product of one-twelfth of
the weighted average of the Pass-through Rate and
the Class A Rate multiplied by the outstanding
principal amount of such Contract as of the last
day of the second preceding Due Period (or, in
the case of the first Due Period, as of the
Initial Cut-off Date) calculated on the basis of
a 360-day year comprised of twelve 30-day months
and (ii) the product of (A) the Servicing Fee
Rate, (B) the outstanding principal amount of
such Contract as of the last day of the second
preceding Due Period (or, in the case of the
first Due Period, as of the Initial Cut-off Date)
and (C) a fraction, the numerator of which is the
number of days in the related Due Period and the
denominator of which is 365, over (y) the amount
of interest, if any, collected on such Contract
in the related Due Period.
Non-Reimbursable
Payments.................. With respect to each Contract as to which there
has been an Interest Shortfall in the related Due
Period arising from either a prepayment in full
of such Contract or a Relief Act Reduction in
respect of such Contract during such Due Period,
the Sale and Servicing Agreement will require the
Servicer to deposit into the Collection Account
on the Business Day immediately preceding the
following Distribution Date, without the right of
subsequent reimbursement, an amount equal to such
Interest Shortfall (a "Non-Reimbursable
Payment").
Servicing Fees............ The Servicer shall receive a monthly fee (the
"Servicing Fee"), payable on each Distribution
Date, equal to the sum of (i) the product of
1.00% per annum (the "Servicing Fee Rate") and
the Pool Balance as of the last day of the second
preceding Due Period (or, in the case of the
first Distribution Date, as of the Initial
Cut-off Date), based on the number of days in
such Due Period and a 365-day year and (ii) any
investment earnings on amounts on deposit in the
Collection Account, the Note Distribution
Account, the Certificate Distribution Account and
the Certificate Reserve Account. In addition, the
Servicer will be entitled to collect and retain
any late, prepayment, extension and
administrative fees or similar charges ("Late
Fees") paid by the Obligors. See "The Purchase
Agreements and The Trust Documents--Servicing
Compensation."
Optional Purchase of
the Contracts ............ At its option, CITSF may purchase all the
Contracts on any Distribution Date on which the
Pool Balance is 10% or less of the Initial Pool
Balance, at a purchase price determined as
described under "The Purchase Agreements and The
Trust Documents--Termination." The "Initial Pool
Balance" equals the sum of (i) the Pool Balance
as of the Initial Cut-off Date and (ii) the
aggregate principal balance of all Subsequent
Contracts added to the Trust as of their
respective Subsequent Cut-off Dates.
Auction Sale.............. Within ten days following a Distribution Date as
of which the Pool Balance is 5% or less of the
Initial Pool Balance, the Indenture Trustee (or,
if the Notes have been paid in full and the
Indenture has been discharged in accordance with
its terms, the Owner Trustee) shall solicit bids
for the purchase of the Contracts remaining in
the Trust. In the event that satisfactory bids
are received as described in "The Purchase
Agreements and The Trust Documents--Termination,"
the net sale proceeds will be distributed to
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Securityholders, in the same order of priority as
collections received in respect of the Contracts,
on the second Distribution Date succeeding such
Record Date. If satisfactory bids are not
received, such Trustee shall decline to sell the
Contracts and shall not be under any obligation
to solicit any further bids or otherwise
negotiate any further sale of the Contracts. See
"The Purchase Agreements and The Trust
Documents--Termination".
Ratings................... It is a condition to the issuance of the
Securities that the Class A Notes be rated "Aaa"
by Moody's Investors Service, Inc. ("Moody's")
and "AAA" by Standard & Poor's Ratings Group
("Standard & Poor's" and together with Moody's,
the "Rating Agencies") and the Certificates be
rated "A2" by Moody's and "A" by Standard &
Poor's. The ratings of the Class A Notes will be
based primarily on the value of the Initial
Contracts, the Pre-Funding Account and the terms
of the Securities, including the subordination
provided by the Certificates. The ratings of the
Certificates will be based primarily on the
Limited Guarantee provided by CIT. The foregoing
ratings do not address the likelihood that the
Securities will be retired following the sale of
the Contracts by the Trustee as described above
under "Auction Sale" or "Optional Purchase by
CITSF". See "Ratings".
There can be no assurance that any rating will
remain in effect for any given period of time or
that a rating will not be lowered or withdrawn by
the assigning Rating Agency if, in its judgement,
circumstances so warrant. In the event that the
rating initially assigned to the Securities is
subsequently lowered or withdrawn for any reason,
no person or entity will be obligated to provide
any additional credit enhancement with respect to
such Securities. There can be no assurance
whether any other rating agency will rate the
Class A Notes or the Certificates, or if one
does, what rating would be assigned by any such
other rating agency. A security rating is not a
recommendation to buy, sell or hold securities.
Certain Federal Income
Tax Considerations........ For Federal income tax purposes: (1) the Notes
will constitute indebtedness; and (2) the
Certificates will constitute interests in a trust
fund that will not be treated as an association
taxable as a corporation. Each Noteholder, by
acceptance of a Note, will agree to treat the
Notes as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust as a
partnership in which the Certificateholders are
partners for Federal income tax purposes. See
"Certain Federal Income Tax Consequences".
ERISA Considerations...... Subject to certain considerations discussed under
"ERISA Considerations" herein, the Notes will be
eligible for purchase by employee benefit plans
that are subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA").
Employee benefit plans subject to ERISA will not
be eligible to purchase the Certificates.
Any benefit plan fiduciary considering the
purchase of the Securities should, among other
things, consult with its counsel in determining
whether all required conditions have been
satisfied. See "ERISA Considerations".
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SPECIAL CONSIDERATIONS
Prospective Securityholders should consider the following risks in
connection with the purchase of the Securities:
1. Limited Obligations. The Securities will not represent an interest in or
an obligation of The CIT Group Holdings, Inc. ("CIT"), The CIT Group
Securitization Corporation II (the "Company"), the Affiliated Purchaser (as
hereinafter defined) or any Servicer (including The CIT Group/Sales Financing,
Inc. ("CITSF")). Except to the extent of the Limited Guarantee provided by CIT
in favor of the Certificateholders, the Securities will not be insured or
guaranteed by any government agency or instrumentality, CIT or any of its
affiliates, including the Company, the Affiliated Purchaser and CITSF, the
Underwriter or any of its affiliates, or any other Servicer or any of its
affiliates.
2. Risk of Loss. An investment in the Securities may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically have
affected the delinquency, loan loss and repossession experience of pools of
installment sale contracts secured by recreational vehicles. Because the market
value of recreational vehicles generally declines with age and because of the
failure of the Trustees to possess a first perfected security interest in the
Financed Vehicles in certain states, the Servicer may not recover the entire
amount owing under a Defaulted Contract. See "Certain Legal Aspects of the
Contracts." In such a case, the Securityholders may suffer a corresponding loss.
The market value of the Financed Vehicles could be or become lower than the
outstanding principal balances of the Contracts that they secure. Sufficiently
high liquidation losses on the Contracts will have the effect of reducing, and
could eliminate the protection against loss afforded to the Noteholders by the
subordination of the Certificateholders. If the Certificate Balance is reduced
to zero, holders of the Notes will bear the risk of loss resulting from default
by Obligors and will have to look primarily to the value of the related Financed
Vehicles for recovery of the outstanding principal and unpaid interest on the
Defaulted Contracts. If CIT fails to make payments as required under the Limited
Guarantee or at any time that the Guarantee Payment Limit has been reduced to
zero, the Certificateholders will bear the risk of loss resulting from default
by Obligors.
3. Security Interests and Certain Other Aspects of the Contracts. Each
Contract will be secured by a security interest in a Financed Vehicle.
Perfection of security interests in the Financed Vehicles and enforcement of
rights to realize upon the value of the Financed Vehicles as collateral for the
Contracts are subject to a number of state laws, including the Uniform
Commercial Code (the "UCC") as adopted in each state and, in most states,
certificate of title statutes. The steps necessary to perfect the security
interest in a Financed Vehicle vary from state to state. All Contracts in the
Contract Pool were purchased by CITSF from Dealers and name the Dealer as
obligee and as secured party. All Contracts in the Contract Pool were assigned
by the related Dealer to CITSF. In each case, CITSF is named as the secured
party on the certificate of title for the related Financed Vehicle. Because of
the expense and administrative inconvenience involved, CITSF will not amend any
certificate of title to name the Company or either Trustee as the lienholder and
the Company will not deliver any certificate of title to either Trustee or note
thereon either Trustee's interest. Consequently, in some states, in the absence
of such an amendment to the certificate of title to reflect the successive
assignments to the Company, the Owner Trustee and the Indenture Trustee, the
security interest in the Financed Vehicle may not be effective, or such security
interest may not be perfected, and the assignment of the security interest in
the Financed Vehicle to the Owner Trustee and the Indenture Trustee may not be
effective against other creditors or a trustee in bankruptcy.
In addition, numerous federal and state consumer protection laws impose
requirements on lenders under installment sale contracts, such as the Contracts,
and the failure by the seller of goods to comply with such requirements could
give rise to liabilities of assignees for amounts due under such agreements and
the right to set-off against claims by such assignees. These laws would apply to
the Trust as assignee of the Contracts. From time to time, CITSF has been
involved in litigation under consumer or debtor protection laws, some of which
have been class actions. Pursuant to the Sale and Servicing Agreement, CITSF
will represent and warrant that each Contract complies with all requirements of
law and will provide certain warranties relating to the validity, perfection and
priority of the security interest in each Financed Vehicle securing a Contract.
A breach by CITSF of any such warranty that materially adversely affects the
Trust's interest in any Contract would require CITSF to repurchase such Contract
unless such breach is cured within 90 days. If CITSF does not honor its purchase
obligation in respect of a Contract and such Contract were to become defaulted,
recovery of amounts due on such Contract would be dependent on repossession and
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resale of the Financed Vehicle securing such Contract. Certain other factors may
limit the ability of the Securityholders to realize upon the Financed Vehicles
or may limit the amount realized to less than the amount due. See "Certain Legal
Aspects of the Contracts."
Under California law and most state vehicle dealer licensing laws, sellers
of recreational vehicles are required to be licensed to sell vehicles at retail
sale. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and lending pursuant to retail
installemt sale contracts , including the Truth in Lending Act, the Federal
Trade Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting
Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act
and the Uniform Consumer Credit Code. In the case of some of these laws, the
failure to comply with their provisions may affect the enforceability of the
related Contract. Neither the Trust nor the Company has obtained any license
required under any federal or state consumer or mortgage banking laws or
regulations, and the absence of such licenses may impede the enforcement of
certain rights or give rise to certain defenses in actions seeking enforcement
rights. In addition, with respect to used vehicles, the Federal Trade
Commission's Rule on Sale of Used Vehicles requires that all sellers of used
vehicles prepare, complete, and display a "Buyer's Guide" which explains the
warranty coverage for such vehicles. Furthermore, Federal Odometer Regulations
promulgated under the Motor Vehicle Information and Cost Savings Act require
that all sellers of used vehicles furnish a written statement signed by the
seller certifying the accuracy of the odometer reading. If a seller is not
properly licensed or if either a Buyer's Guide or Odometer Disclosure Statement
was not provided to the purchaser of a Financed Vehicle, the obligor may be able
to assert a defense against the seller of the Financed Vehicle. See "Certain
Legal Aspects of the Contracts".
4. Certain Matters Relating to Insolvency. CITSF and the Company intend
that each transfer of Contracts from The CIT Group/Consumer Finance, Inc. (NY)
("CITCF-NY") to CITSF and from CITSF to the Company and from the Company to the
Trust constitutes a sale, rather than a pledge of the Contracts to secure
indebtedness. However, if CITCF-NY, CITSF or the Company were to become a debtor
under Title 11 of the United States Code, 11 U.S.C. ss.101 et seq. (the
"Bankruptcy Code"), it is possible that a creditor, receiver, other party in
interest or trustee in bankruptcy of CITCF-NY, CITSF or the Company, or
CITCF-NY, CITSF or the Company as debtor-in-possession, may argue that the sale
of the Contracts by CITCF-NY to CITSF or by CITSF to the Company, or by the
Company to the Trust, respectively, was a pledge of the Contracts rather than a
sale and that, accordingly, such Contracts should be part of such entity's
bankruptcy estate. Such a position, if presented to a court, even if ultimately
unsuccessful, could result in a delay in or reduction of distributions to the
Securityholders. See "Certain Legal Aspects of the Contracts--Certain Matters
Relating to Insolvency."
The CIT GP Corporation, an Illinois corporation and a wholly owned
subsidiary of CIT (the "Affiliated Purchaser"), will purchase at least 1% of the
principal balance of the Certificates. The Affiliated Purchaser will have the
same rights with regard to the Trust as all other Certificateholders based on
its percentage ownership of the Certificate Balance. The Trust Agreement will
provide that if an Insolvency Event (as defined herein) with respect to the
Affiliated Purchaser occurs, subject to certain conditions, the Trust will
dissolve. Certain steps have been taken in structuring the transactions
contemplated hereby that are intended to make it less likely that an Insolvency
Event with respect to the Affiliated Purchaser will occur. These steps include
the formation of the Affiliated Purchaser as a separate, limited-purpose
corporation pursuant to articles of incorporation containing certain limitations
(including restrictions on the nature of the Affiliated Purchaser's business and
a restriction on the Affiliated Purchaser's ability to commence a voluntary case
or proceeding under the Bankruptcy Code or similar applicable state laws
("Insolvency Laws") without the prior affirmative unanimous vote of its
directors). However, there can be no assurance that the activities or
liabilities of the Affiliated Purchaser would not result in an Insolvency Event.
If an Insolvency Event with respect to the Affiliated Purchaser occurs, the
Indenture Trustee (or, if no Notes are outstanding, the Owner Trustee) will
promptly sell, dispose of or otherwise liquidate the Contracts in a commercially
reasonable manner on commercially reasonable terms, except under certain limited
circumstances. The proceeds from any such sale, disposition or liquidation of
the Contracts will be treated as collections on the Contracts and deposited in
the Collection Account. If the proceeds from the liquidation of the Contracts
and any amounts on deposit in the Note Distribution Account and the Certificate
Distribution Account are not sufficient to pay the Notes and Certificates in
full, distributions will be made first, to the payment of interest and principal
on the Notes and second, to the payment of interest and principal on the
Certificates. In such event, the amount of principal returned to the
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Certificateholders will be reduced and such Certificateholders will incur a
loss, except to the extent of payments under the Limited Guarantee. See "The
Purchase Agreements and The Trust Documents--Insolvency Event".
5. Limited Liquidity. CS First Boston Corporation and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Underwriters") intend to make a
secondary market in the Securities, but have no obligation to do so. There can
be no assurance that a secondary market will develop for the Securities or, if
it does develop, that it will provide the Holders of the Securities with
liquidity of investment or that it will remain for the term of the Securities.
6. The Subsequent Contracts and the Pre-Funding Account. The conveyance of
Subsequent Contracts by CITSF during the Funding Period is subject to the
conditions described herein under "The Contract Pool". If CITSF is unable to
originate Contracts satisfying such criteria during the Funding Period, CITSF
will have insufficient Contracts to sell to the Trust on Subsequent Transfer
Dates, thereby resulting in prepayments of principal to Noteholders as described
below.
To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the purchase of Subsequent Contracts by the Trust by the
end of the Funding Period, Noteholders will receive a prepayment of principal in
an amount equal to the Funded Amount remaining in the Pre-Funding Account at
such time, which prepayment will be made on the first Distribution Date
following the end of the Funding Period or, if the Funding Period ends on a
Distribution Date, on such date. It is anticipated that the principal amount of
Subsequent Contracts purchased by the Trust will not be exactly equal to the
amount on deposit in the Pre-Funding Account and that therefore there will be at
least a nominal amount of principal prepaid to the Noteholders at the end of the
Funding Period.
Each Subsequent Contract must satisfy the eligibility criteria specified
herein and in the Sale and Servicing Agreement at the time of its addition.
Following the transfer of Subsequent Contracts to the Contract Pool the
aggregate characteristics of the Contracts then held in the Contract Pool may
vary from those of the Initial Contracts included therein.
The ability of the Trust to invest in Subsequent Contracts is largely
dependent upon whether CITSF is able to originate recreational vehicle contracts
that meet the requirements for transfer on a Subsequent Transfer Date under a
Subsequent Purchase Agreement transferring Subsequent Contracts from CITSF to
the Company and under the Sale and Servicing Agreement. The ability of CITSF to
originate such contracts may be affected by a variety of social and economic
factors. Moreover, such factors may affect the ability of the Obligors
thereunder to perform their obligations thereunder which may cause contracts
originated by CITSF or its affiliates to fail to meet the requirements for
transfer under the Subsequent Purchase Agreement or the Sale and Servicing
Agreement. Economic factors include interest rates, unemployment levels, the
rate of inflation and consumer perception of economic conditions generally.
However, CITSF is unable to determine and has no basis to predict whether or to
what extent economic or social factors will affect the performance by such
Obligors and the availability of Subsequent Contracts.
7. Limited Assets. Although the Trust will covenant to sell the Contracts
if directed to do so by the Indenture Trustee in accordance with the Indenture
following an acceleration of the Notes upon an Event of Default, there is no
assurance that the market value of the Contracts will at any time be equal to or
greater than the aggregate outstanding principal balance of the Notes.
Therefore, upon an Event of Default with respect to the Notes there can be no
assurance that sufficient funds will be available to repay Noteholders in full.
In addition, the amount of principal required to be distributed to Noteholders
under the Indenture is generally limited to amounts available to be deposited in
the Note Distribution Account. Therefore, the failure to pay principal on the
Notes may not result in the occurrence of an Event of Default until the Class A
Final Scheduled Distribution Date.
8. Limited Guarantee. The aggregate amount of Guarantee Payments made under
the Limited Guarantee in respect of the Certificates will not, except under
certain limited circumstances specified in the Sale and Servicing Agreement,
exceed an amount initially equal to $5,000,000 (the "Initial Guarantee Payment
Limit"). The "Guarantee Payment Limit" will at any time generally equal the
Initial Guarantee Payment Limit reduced by the amount of each Guarantee Payment
made under the Limited Guarantee. Once the Guarantee Payment Limit has been
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reduced, it will not be reinstated except if certain conditions set forth in the
Sale and Servicing Agreement are met. See "The Purchase Agreements and The Trust
Documents--Credit Enhancement--Limited Guarantee". At any time that the
Guarantee Payment Limit (or the amount available under any Alternate Credit
Enhancement) has been reduced to zero, holders of Certificates will bear the
risk of all liquidation losses on the Defaulted Contracts and may suffer a loss.
The Limited Guarantee will terminate if an Alternate Credit Enhancement is
delivered to the Owner Trustee and conditions described herein and in the Sale
and Servicing Agreement have been satisfied.
9. Geographic Concentration of Recreational Vehicles. A significant
concentration of the Initial Contracts were originated in the states of
California, Florida, Arizona and Texas. Based on the Initial Cut-off Date Pool
Principal Balance, 17.13%, 12.77%, 11.87% and 11.21% of the Initial Contracts
were originated in California, Florida, Arizona and Texas, respectively. Because
of the relative lack of geographic diversity, losses on the related Contracts
may be higher than would be the case if there were more diversification. The
economies of such states may be adversely affected to a greater degree than that
of other areas of the country by certain regional economic conditions. An
economic downturn in California, Florida, Arizona and Texas may have an adverse
effect on the ability of Obligors in such states to meet their payment
obligations under the Contracts.
STRUCTURE OF THE TRANSACTION
The Issuer, CIT RV Owner Trust 1995-A (the "Issuer" or the "Trust"), is a
business trust formed under the laws of the State of Delaware pursuant to a
Trust Agreement (as amended and supplemented from time to time, the "Trust
Agreement") to be dated as of June 1, 1995 between the Seller and The First
National Bank of Chicago, acting thereunder not in its individual capacity but
solely as trustee of the Trust (the "Owner Trustee"). After its formation, the
Trust will not engage in any activity other than (i) acquiring, holding and
managing the Contracts and the other assets of the Trust and proceeds therefrom,
(ii) issuing the Notes and the Certificates, (iii) making payments on the Notes
and the Certificates and (iv) engaging in other activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith.
The Trust will initially be capitalized with equity equal to $12,000,000
(the "Original Certificate Balance"). Certificates with an aggregate original
principal balance of at least $120,000 will be sold to the Affiliated Purchaser
and Certificates representing the remainder of the Original Certificate Balance
will be sold to third party investors that are expected to be unaffiliated with
the Affiliated Purchaser, the Seller, the Servicer or their affiliates. The
equity in the Trust, together with the proceeds of the initial sale of the
Notes, will be used by the Trust to purchase the Initial Contracts from the
Seller pursuant to the Sale and Servicing Agreement and to fund the deposit of
the Pre-Funded Amount.
The Trust's principal offices are in Chicago, Illinois, in care of The
First National Bank of Chicago, as Owner Trustee, at the address listed in
"--The Owner Trustee" below.
Capitalization of the Trust
The following table illustrates the capitalization of the Trust as of the
Initial Cut-off Date, as if the issuance and sale of the Notes and the
Certificates offered hereby had taken place on such date:
Class A 6.25% Asset Backed Notes................... $188,000,000
6.55% Asset Backed Certificates.................... $ 12,000,000
------------
Total......................................... $200,000,000
============
The Owner Trustee
The First National Bank of Chicago is the Owner Trustee under the Trust
Agreement. The First National Bank of Chicago is a national banking association
and a wholly-owned subsidiary of First Chicago Corporation. The principal
offices of The First National Bank of Chicago are located at One First National
Plaza, Suite 0126, Chicago, Illinois 60670-0126. The Owner Trustee will perform
limited administrative functions under the Trust Agreement, including making
distributions from the Certificate Distribution Account. 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
18
<PAGE>
forth in the Trust Agreement and the Sale and Servicing Agreement. An individual
who is a Delaware resident is expected to act as a co-trustee pursuant to a
co-trustee agreement with the Owner Trustee.
THE TRUST PROPERTY
The Notes are an obligation of the Trust and will be secured by the assets
of the Trust (other than the Certificate Distribution Account, the Limited
Guarantee and, if established, the Certificate Reserve Account and, if
delivered, the Alternate Credit Enhancement). Each Certificate represents a
fractional undivided interest in the Trust. The Trust property will include,
among other things, (i) a pool (the "Contract Pool") of simple interest retail
installment sale contracts secured by the new and used recreational vehicles
between Dealers and Obligors, consisting of the Initial Contracts and the
Subsequent Contracts; (ii) all monies received under the Initial Contracts on or
after the Initial Cut-off Date and the Subsequent Contracts on or after the
related Subsequent Cut-off Date; (iii) such amounts as from time to time may be
held in one or more accounts established and maintained by the Servicer pursuant
to the Sale and Servicing Agreement (including all investments in such accounts
and all income from the funds therein and all proceeds thereof) as described
herein; (iv) all monies on deposit in the Pre-Funding Account and the
Capitalized Interest Account (as defined herein) (including all investments in
such accounts and all income from the funds therein and all proceeds thereof);
(v) security interests in the Financed Vehicles and any accessions thereto; (vi)
the right to proceeds from physical damage, credit life and disability insurance
policies, if any, covering individual Financed Vehicles or Obligors, as the case
may be; (vii) the rights of the Trust under the Sale and Servicing Agreement;
and (viii) any and all proceeds of the foregoing.
THE CONTRACT POOL
General
The Contract Pool will initially consist of 6,697 conventional fixed-rate
simple interest installment sale contracts secured by recreational vehicles
(collectively, the "Initial Contracts") having an aggregate unpaid principal
balance as of the Initial Cut-off Date of $155,987,746 (the "Initial Cut-off
Date Pool Principal Balance"). For the purposes of the discussion of the
characteristics of the Initial Contracts on the Initial Cut-off Date contained
herein, the principal balance of each Initial Contract is the unpaid principal
balance as of the Initial Cut-off Date.
In addition to the Initial Contracts sold by the Company to the Trust on
the Closing Date the Trust is expected to purchase from the Company additional
conventional fixed-rate simple interest installment sale contracts secured by
recreational vehicles from time to time on or before the September 15, 1995
Distribution Date (collectively, the "Subsequent Contracts" and, together with
the Initial Contracts, the "Contracts"). The Subsequent Contracts to be
purchased by the Trust, if available, will be purchased by CITSF from CITCF-NY
or Dealers and sold by CITSF to the Company and by the Company to the Trust.
Accordingly, the statistical characteristics of the Contract Pool will vary as
of any Subsequent Cut-off Date upon the acquisition of such Subsequent
Contracts.
CITSF will sell the Initial Contracts to the Company pursuant to a Purchase
Agreement to be dated as of June 1, 1995 (the "Purchase Agreement") and the
Company will sell the Initial Contracts to the Trust pursuant to the Sale and
Servicing Agreement to be dated as of June 1, 1995 (the "Sale and Servicing
Agreement"), among the Seller, the Servicer, and the Owner Trustee. CITSF will
sell any Subsequent Contracts to the Company pursuant to a Subsequent Purchase
Agreement and the Company will sell any Subsequent Contracts to the Trust
pursuant to a Subsequent Transfer Agreement.
The obligation of the Trust to purchase the Subsequent Contracts is subject
to the following requirements: (i) such Subsequent Contracts must satisfy the
representations and warranties specified in the Sale and Servicing Agreement;
(ii) such Subsequent Contracts will not be selected by either CIT or the Seller
in a manner that it believes is adverse to the interests of the Securityholders;
(iii) the weighted average Contract Rate of the Contracts (including the related
Subsequent Contracts) is not less than 10.80%; (iv) the weighted average
remaining term of the Contracts (including the Subsequent Contracts) as of the
related Subsequent Transfer Date is not greater than 157 months; (v) the Seller
and the Trustees shall not have been advised by either Rating Agency that the
conveyance of such Subsequent Contracts will result in a qualification,
modification or withdrawal of its then current rating of either the Notes or the
Certificates; (vi) the Owner Trustee shall have received certain opinions of
19
<PAGE>
counsel as to, among other things, the enforceability and validity of the
Subsequent Transfer Agreement relating to such conveyance of Subsequent
Contracts; (vii) each Subsequent Contract will be originated in the United
States of America; (viii) each Subsequent Contract will have a Contract Rate of
at least 8.50%; (ix) each Subsequent Contract will provide for level monthly
payments which provide interest at the related Contract Rate and, if paid in
accordance with its schedule, fully amortizes the amount financed over an
original term of no greater than 180 months; (x) as of the related Subsequent
Cut-off Date, the most recent scheduled payment of principal and interest on
each Subsequent Contract will have been made by or on behalf of the related
Obligor or will not have been delinquent more than 30 days; (xi) no Subsequent
Financed Vehicle will have been repossessed without reinstatement as of the
related Subsequent Cut-off Date;(xii) as of the related Subsequent Cut-off Date,
no Obligor on any Contract will be the subject of a bankruptcy proceeding;
(xiii) as of the related Subsequent Cut-off Date, each Subsequent Contract will
have a remaining principal balance of not less than $1,000 and not more than
$300,000; (xiv) the payment date on the Subsequent Contract with the latest
scheduled payment date is August 2010; and (xv) such other requirements as the
Rating Agencies shall request. The Subsequent Financed Vehicles will consist of
motor homes, travel trailers and other types of recreational vehicles.
Because the Subsequent Contracts will be originated after the Initial
Contracts, following their conveyance to the Trust, the characteristics of the
Contracts, including the Subsequent Contracts, may vary from those of the
Initial Contracts.
The Initial Contracts were purchased by CITSF or CITCF-NY from Dealers in
the ordinary course of business. The Initial Contracts were selected from
CITSF's portfolio of recreational vehicle installment sale contracts based on
several criteria, including the following: (i) each Initial Contract was
originated in the United States of America; (ii) each Initial Contract has a
Contract Rate equal to or greater than 8.50%; (iii) each Initial Contract
provides for level monthly payments which include interest at the related
Contract Rate and, if paid in accordance with its schedule, fully amortizes the
amount financed over an original term of no greater than 180 months; (iv) as of
the Initial Cut-off Date the most recent scheduled payment of principal and
interest on each Initial Contract was made by or on behalf of the related
Obligor or was not delinquent more than 30 days; (v) no Initial Financed Vehicle
has been repossessed without reinstatement as of the related Initial Cut-off
Date; (vi) as of the Initial Cut-off Date no Obligor on any Initial Contract was
the subject of a bankruptcy proceeding; and (vii) as of the Initial Cut-off Date
each Initial Contract has a remaining principal balance of not less than $1,034
and not more than $296,648. The Initial Financed Vehicles consist of motor
homes, travel trailers and other types of recreational vehicles.
All of the Initial Contracts are, and all of the Subsequent Contracts will
be, Simple Interest Contracts. A "Simple Interest Contract" is a Contract as to
which interest accrues on a simple interest method (i.e., the interest portion
of each monthly payment equals the interest on the outstanding principal balance
of the related Contract for the number of days since the most recent payment
made on such Contract and the balance, if any, of such monthly payment is
applied to principal).
The Initial Contracts were originated between December 1994 and May 1995.
All Initial Contracts are installment sale contracts secured by recreational
vehicles originated by a Dealer in the ordinary course of its business and
purchased by CITSF in the ordinary course of its business.
Approximately 66.27%, 30.68% and 3.05% of Cut-off Date Pool Principal
Balance represented Contracts secured by motor homes, travel trailers and other
types of recreational vehicles, respectively. Approximately 68.82% of the
Initial Contracts, by Initial Cut-off Date Pool Principal Balance, represented
financing of recreational vehicles which were new and approximately 31.18%
represented financing of recreational vehicles which were used at the time the
related Initial Contract was originated. As of the Initial Cut-off Date, the
average outstanding principal balance of the Initial Contracts secured by motor
homes, travel trailers and other types of recreational vehicles was $36,656,
$14,402 and $8,592, respectively.
Based upon information presented by Obligors in their credit applications
the Initial Contracts were originated in 45 states. Approximately 17.13% of the
Initial Contracts, by Initial Cut-off Date Pool Principal Balance, were
originated in the State of California, approximately 12.77% were originated in
the State of Florida, approximately 11.87% were originated in the State of
Arizona and approximately 11.21% were originated in the State of Texas. Each
other state accounts for less than 7.00% of the Initial Contracts by Initial
Cut-off Date Pool Principal Balance.
20
<PAGE>
All Initial Contracts have a Contract Rate of at least 8.50%. As of the
Initial Cut-off Date, the Initial Contracts have remaining maturities of at
least 7 months but not more than 180 months, original maturities of at least 12
months but not more than 180 months, and a weighted average remaining term to
stated maturity of 150 months. As of the Initial Cut-off Date, the weighted
average contract rate of the Initial Contracts was 11.02%. The final scheduled
payment dates on the Initial Contracts range from February 1996 to June 2010.
The average remaining principal balance per contract, as of the Initial Cut-off
Date, was $23,292 and the outstanding principal balances of the Initial
Contracts, as of the Initial Cut-off Date, ranged from $1,034 to $296,648. The
weighted average original term to maturity of the Initial Contracts was 152
months.
Set forth below is a description of certain characteristics of the Initial
Contracts.
21
<PAGE>
Geographical Distribution of Initial Contracts by State of Origination
<TABLE>
<CAPTION>
% of Contract
% of Contract Pool by
Number of Pool by Number Aggregate Principal Principal Balance
Initial of Initial Balance Outstanding Outstanding
Contracts As of Contracts As of As of As of
State Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date
- ---- ---------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Alabama ........................... 100 1.49% $ 2,330,244 1.49%
Arizona............................ 709 10.59 18,510,849 11.87
Arkansas........................... 2 0.03 75,589 0.05
California......................... 1,239 18.50 26,726,741 17.13
Colorado........................... 240 3.58 6,663,682 4.27
Connecticut........................ 131 1.96 1,885,176 1.21
Delaware........................... 3 0.04 91,781 0.06
Florida............................ 667 9.96 19,922,570 12.77
Georgia ........................... 114 1.70 3,129,279 2.01
Idaho.............................. 34 0.52 914,755 0.59
Illinois........................... 66 0.99 2,097,360 1.34
Indiana............................ 33 0.49 849,641 0.54
Iowa .............................. 5 0.07 83,687 0.05
Kansas............................. 152 2.27 3,069,734 1.97
Louisiana.......................... 86 1.28 2,099,348 1.35
Maine.............................. 6 0.09 140,926 0.09
Maryland........................... 101 1.52 1,629,024 1.04
Massachusetts...................... 84 1.25 1,489,430 0.95
Michigan........................... 5 0.07 153,243 0.10
Minnesota.......................... 10 0.15 188,272 0.12
Mississippi........................ 74 1.10 1,555,112 1.00
Missouri........................... 481 7.18 8,542,256 5.48
Montana............................ 6 0.09 144,424 0.09
Nebraska........................... 5 0.07 76,106 0.05
Nevada............................. 161 2.40 3,800,700 2.44
New Hampshire...................... 47 0.70 783,833 0.50
New Jersey......................... 23 0.34 439,808 0.28
New Mexico......................... 203 3.04 4,380,350 2.81
New York........................... 46 0.69 1,356,460 0.87
North Carolina .................... 124 1.85 2,634,340 1.69
Ohio .............................. 1 0.01 20,156 0.01
Oklahoma .......................... 408 6.09 10,368,052 6.65
Oregon ............................ 142 2.13 4,346,235 2.79
Pennsylvania ...................... 50 0.75 1,061,844 0.68
South Carolina..................... 70 1.05 1,301,406 0.83
South Dakota....................... 6 0.09 152,101 0.10
Tennessee.......................... 79 1.18 1,562,007 1.00
Texas.............................. 828 12.36 17,490,086 11.21
Utah............................... 25 0.37 1,014,922 0.65
Vermont............................ 1 0.01 34,566 0.02
Virginia........................... 16 0.25 279,301 0.18
Washington......................... 105 1.57 2,443,853 1.57
West Virginia...................... 4 0.06 57,310 0.04
Wisconsin.......................... 2 0.03 17,458 0.01
Wyoming............................ 3 0.04 73,729 0.05
------ --------- --------------- ---------
Total.............................. 6,697 100.00% $155,987,746 100.00%
====== ========= =============== =========
</TABLE>
22
<PAGE>
Range of Contract Rates
<TABLE>
<CAPTION>
% of Contract Pool
% of Contract Pool Aggregate Principal By Principal
Number of by Number of Balance Outstanding Balance Outstanding
Range of Initial Contracts As of Initial Contracts as of As of As of
By Contract Rates Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date Initial Cut-off Date
- ---------------------- ----------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
8.50%- 8.99%................ 19 0.28% $ 1,081,490 0.69%
9.00%- 9.99%................ 722 10.78 28,543,515 18.30
10.00%-10.99%................ 2,198 32.83 62,616,529 40.15
11.00%-11.99%................ 1,943 29.01 37,536,681 24.06
12.00%-12.99%................ 1,088 16.25 16,775,896 10.75
13.00%-13.99%................ 469 7.00 6,398,400 4.10
14.00%-14.99%................ 184 2.75 2,226,007 1.43
15.00%-18.00%................ 74 1.10 809,228 0.52
------ ------- --------------- -------
Total.................... 6,697 100.00% $155,987,746 100.00%
====== ======= =============== =======
</TABLE>
MATURITY AND PREPAYMENT CONSIDERATIONS
All of the Contracts are prepayable at any time without any penalty. If
prepayments are received on the Contracts, the actual weighted average life of
the Contracts will be shorter than the scheduled weighted average life, which is
based on the assumption that payments will be made as scheduled and that no
prepayments will be made. For this purpose the term "prepayments" includes,
among other items, voluntary prepayments by Obligors, regular installment
payments made in advance of their scheduled due dates, liquidations due to
default, proceeds from physical damage, credit life and credit disability
insurance policies, if any, and purchases by CITSF or the Servicer of certain
Contracts as described herein. Weighted average life means the average amount of
time during which each dollar of principal on a Contract is outstanding. The
rate of prepayments on the Contracts may be influenced by a variety of economic,
social and other factors, including the fact that an Obligor may not sell or
transfer a Financed Vehicle without the consent of CITSF. Any reinvestment risk
resulting from the rate of prepayment of the Contracts and the distribution of
such prepayments to Securityholders will be borne entirely by the
Securityholders. In addition, early retirement of the Securities may be effected
by either (i) the exercise of the option of CITSF to purchase all of the
Contracts remaining in the Trust when the aggregate principal balance of the
Contracts (the "Pool Balance") is 10% or less of the Initial Pool Balance (as
hereinafter defined), (ii) the sale by the applicable Trustee of all of the
Contracts remaining in the Trust when the Pool Balance is 5% or less of the
Initial Pool Balance or (iii) upon the occurrence of an Insolvency Event with
respect to the Affiliated Purchaser. See "The Purchase Agreements and The Trust
Documents--Termination." Moreover, partial retirement of the Notes will occur to
the extent there is remaining any Pre-Funded Amount on deposit in the
Pre-Funding Account at the end of the Funding Period.
The rate of principal payments (including prepayments) on pools of
recreational vehicle installment sale contracts may be influenced by a variety
of economic, geographic, social and other factors. In general, if prevailing
interest rates were to fall significantly below the Contract Rates on the
Contracts, the Contracts could be subject to higher prepayment rates than if
prevailing interest rates were to remain at or above the Contract Rates on the
Contracts. Conversely, if prevailing interest rates were to rise significantly,
the rate of prepayments on the Contracts would generally be expected to
decrease. No assurances can be given as to the rate of prepayments on the
Contracts in stable or changing interest rate environments.
CITSF is not aware of any publicly available industry statistics that set
forth principal prepayment experience for recreational vehicle installment sale
contracts similar to the Contracts over an extended period of time, and its
experience with respect to recreational vehicle receivables included in its
portfolio is insufficient to draw any specific conclusions with respect to the
expected prepayment rates on the Contracts.
23
<PAGE>
Certain Payment Data
Certain statistical information relating to the payment behavior of
recreational vehicle installment sale contracts originated by CITSF is set forth
below. In evaluating the information contained in this table and its
relationship to the expected prepayment behavior of the Contracts, prospective
Securityholders should consider that the information set forth below reflects,
with respect to contracts originated in a given year, all principal payments
made in respect of such contracts in a given year, including regularly scheduled
payments, liquidation or insurance proceeds applied to principal of such
contracts, as well as principal prepayments made by or on behalf of the obligors
on the contracts in advance of the date on which such principal payment was
scheduled to be made. The information set forth below also reflects charge-offs
of the contracts during a given year. In addition, the Company has not performed
any statistical analysis to determine whether the contracts to which the table
relates constitute a statistically significant sample of recreational vehicle
installment sale contracts for purposes of determining expected payment
behavior. Payment rates on the contracts are influenced by a number of economic,
social and other factors. Certain of the contracts included in the table below
were originated with underwriting criteria that may differ from the Contracts.
Furthermore, no assurance can be given that the prepayment experience of the
Contracts will exhibit payment behavior similar to the behavior summarized in
the following table. In addition to the foregoing, prospective Securityholders
should consider that the table set forth below is limited to the period covered
therein and thus cannot reflect the effects, if any, of aging on the payment
behavior of recreational vehicle contracts beyond such periods. As a result,
investors should not draw any conclusions regarding the prepayment rate of the
Contracts from the information presented in the table below. Each investor must
make its own assumptions regarding the prepayment rate of the Contracts.
The following table sets forth, with respect to all of the recreational
vehicles contracts originated by CITSF (excluding contracts purchased in bulk)
in each year since 1991, the aggregate initial principal balance of the
contracts originated in such year, the approximate aggregate principal balance
outstanding on the contracts originated in such year as of the last day of such
year and the approximate aggregate principal balance outstanding on the
contracts originated in such year as of the end of the subsequent year.
Information Regarding Principal Reduction on Recreational
Vehicle Contracts Originated by CITSF
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year of Origination
-------------------------------------------------------------
1991 1992 1993 1994 (3)
---- ---- ---- -------
<S> <C> <C> <C> <C>
Approximate Volume (1) ................ $332,700 $374,800 $405,900 $294,500
Approximate Aggregate
Principal Balance (2):
December 31, 1991................ $282,600
December 31, 1992................ $198,800 $322,700
December 31, 1993................ $134,300 $233,700 $354,400
December 31, 1994................ $ 84,100 $165,200 $274,000 $260,700
March 31, 1995................... $ 77,900 $154,700 $259,000 $247,000
</TABLE>
- ---------------
(1) Volume represents aggregate initial principal balance of each contract
originated in a particular year.
(2) Approximate aggregate principal balance as of any date represents the
approximate aggregate principal balance outstanding at the end of the
indicated year on each contract originated in a particular year.
(3) Includes Recreational Vehicle contracts sold by CITSF in January 1994 in
connection with another securitization which CITSF is servicing.
24
<PAGE>
Paid-Ahead Contracts
If an Obligor, in addition to making his regularly scheduled payment,
makes one or more additional scheduled payments in any Due Period (for example,
because the Obligor intends to be on vacation the following month), the
additional scheduled payments made in such Due Period will be treated as a
principal prepayment and applied to reduce the principal balance of the related
Contract in such Due Period and, unless otherwise requested by the Obligor, the
Obligor will not be required to make any scheduled payment in respect of such
Contract (a "Paid-Ahead Contract") for the number of due dates corresponding to
the number of such additional scheduled payments (the "Paid-Ahead Period").
During the Paid-Ahead Period, interest will continue to accrue on the principal
balance of the Contract, as reduced by the application of the additional
scheduled payments made in the Due Period in which such Contract became a
Paid-Ahead Contract. The Obligor's Contract would not be considered delinquent
during the Paid-Ahead Period. An Interest Shortfall with respect to such
Contract will exist during each Due Period occurring during the Paid-Ahead
Period and the Servicer may be required to make a Monthly Advance in respect of
such Interest Shortfall, as described under "Description of the
Certificates--Monthly Advances"; however, no Monthly Advances will be made in
respect of principal in respect of a Paid-Ahead Contract.
When the Obligor resumes his required payments following the Paid-Ahead
Period, the payments so paid may be insufficient to cover the interest that has
accrued since the last payment by the Obligor. Notwithstanding such
insufficiency, the Obligor's Contract would be considered current. This
situation will continue until the regularly scheduled payments are once again
sufficient to cover all accrued interest and to reduce the principal balance of
the Contract. Depending on the principal balance and Contract Rate of the
related Contract, and on the number of payments that were paid-ahead, there may
be extended periods of time during which Contracts that are current are not
amortizing. During such periods, no distributions in respect of principal will
be made to the Securityholders with respect to such Contracts.
Paid-Ahead Contracts will affect the weighted average life of the
Securities. The distribution of the paid-ahead amount on the Distribution Date
following the Due Period in which such amount was received will generally
shorten the weighted average life of the Securities. Howevermb deof panments
that were paid-ahead, there may be extended periods of time during which
Contracts that are current are not amortizing. During such periods, no distn
addition, to the extent the Servicer makes Monthly Advances with respect to a
Paid-Ahead Contract which subsequently goes into default, because liquidation
proceeds with respect to such Contract will be applied first to reimburse the
Servicer for such Monthly Advances, the loss with respect to such Contract may
be larger than would have been the case had such Monthly Advances not been made.
As of the Initial Cut-Off Date, approximately 5% of the number of
Contracts in the Contract Pool were Paid-Ahead Contracts, with at least one
scheduled monthly payment having been paid-ahead. CITSF's portfolio of
recreational vehicle installment sale contracts has historically included
contracts which have been paid-ahead by one or more scheduled monthly payments.
There can be no assurance as to the number of Contracts which may become
Paid-Ahead Contracts or the number or the principal amount of the scheduled
payments which may be paid-ahead.
Weighted Average Life of the Securities
Prepayments on recreational vehicle contracts can be measured relative to
a prepayment standard or model. The model used in this Prospectus, the Absolute
Prepayment Model ("ABS"), represents an assumed rate of prepayment each month
relative to the original number of contracts in a pool of contracts. ABS further
assumes that all the Contracts are the same size and amortize at the same rate
and that each Contract in each month of its life will either be paid as
scheduled or be prepaid in full. For example, in a pool of contracts originally
containing 10,000 Contracts, a 1.0% ABS rate means that 100 Contracts prepay
each month. ABS does not purport to be an historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any pool of
contracts including the Contracts.
As the rate of payments of principal of the Notes and in respect of the
Certificate Balance will depend on the rate of payment (including prepayments)
of the principal balance of the Contracts, final payment of the Notes could
occur significantly earlier than the Class A Final Scheduled Distribution Date.
The final distribution in respect of the Certificates also could occur prior to
the Certificate Final Scheduled Distribution Date. Reinvestment risk associated
with early payment of the Notes and the Certificates will be borne exclusively
by the Noteholders and the Certificateholders, respectively.
25
<PAGE>
The tables captioned "Percent of Initial Note Principal Balance at Various
ABS Percentages" and "Percent of Initial Certificate Balance at Various ABS
Percentages" (the "ABS Table") have been prepared on the basis of the
characteristics of the Contracts. The ABS Table assumes that (i) the Contracts
prepay in full at the specified constant percentage of ABS monthly, with no
defaults, losses or repurchases, (ii) each scheduled monthly payment on the
Contracts is made on the last day of each month and each month has 30 days,
(iii) payments on the Notes and distributions on the Certificates are made on
each Distribution Date (and each such date is assumed to be the 15th day of each
applicable month), (iv) the Closing Date occcurs on June 21, 1995, (v) CITSF
exercises its option to purchase the Contracts as specified under "The Purchase
Agreements and The Trust Documents--Termination" and (vi) all of the Subsequent
Contracts are purchased by Trust prior to the first Distribution Date. The ABS
Table indicates the projected weighted average life of the Notes and the
Certificates and sets forth the percent of the initial principal amount of the
Notes and the percent of the original Certificate Balance that is projected to
be outstanding after each of the Distribution Dates shown at various constant
ABS percentages.
The ABS Table also assumes that the Contracts have been aggregated into
two hypothetical pools with all of the Contracts within each such pool having
the following characteristics and that the level scheduled monthly payment for
each of the pools (which is based on its aggregate principal balance, weighted
average APR, weighted average original term to maturity and weighted average
remaining term to maturity as of the Cut-off Date) will be such that each pool
will be fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Weighted Original Term Remaining Term Weighted Average
Aggregate Average to Maturity to Maturity Seasoning
Principal Balance Contract Rate (Months) (Months) (Months)
--------------- ------------ --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Pool 1 ............. $155,987,745.78 11.02% 152 150 2
Pool 2 ............. $ 44,012,254.22 10.75% 152 152 0
</TABLE>
The actual characteristics and performance of the Contracts will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Contracts will prepay at a constant level
of ABS until maturity or that all of the Contracts will prepay at the same level
of ABS. Moreover, the diverse terms of Contracts within each of the hypothetical
pools could produce slower or faster principal distributions than indicated in
the ABS Table at the various constant percentages of ABS specified, even if the
original and remaining terms to maturity of the Contracts are as assumed. Any
difference between such assumptions and actual characteristics and performance
of the Contracts, or actual prepayment experience, will affect the percentages
of initial balances outstanding over time and weighted average lives of the
Notes and the Certificates.
Percent of Initial Note Principal Balance at Various ABS Percentages
<TABLE>
<CAPTION>
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4%
- --------------- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percent ........................... 100% 100% 100% 100% 100%
June 15, 1996 ............................. 96 90 84 81 79
June 15, 1997 ............................. 91 80 68 63 58
June 15, 1998 ............................. 86 69 52 46 39
June 15, 1999 ............................. 80 59 38 30 21
June 15, 2000 ............................. 74 50 25 15 5
June 15, 2001 ............................. 67 40 13 0 0
June 15, 2002 ............................. 58 31 0 0 0
June 15, 2003 ............................. 50 23 0 0 0
June 15, 2004 ............................. 39 15 0 0 0
June 15, 2005 ............................. 28 7 0 0 0
June 15, 2006 ............................. 16 0 0 0 0
June 15, 2007 ............................. 0 0 0 0 0
Weighted Average Life (years) ............. 7.4 5.2 3.3 2.9 2.5
</TABLE>
- -------------
(1) The weighted average life of a Class A Note is determined by (i) multiply-
ing the amount of each principal payment on a Note by the number of years
from the date of the issuance of the Note to the related Distribution Date,
(ii) adding the results and (iii) dividing the sum by the related initial
principal amount of the Note.
The ABS Table has been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of the
Contracts which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
26
<PAGE>
Percent of Initial Certificate Balance at Various ABS Percentages
<TABLE>
<CAPTION>
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4%
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percent ............................. 100% 100% 100% 100% 100%
June 15, 1996 ............................... 100 100 100 100 100
June 15, 1997 ............................... 100 100 100 100 100
June 15, 1998 ............................... 100 100 100 100 100
June 15, 1999 ............................... 100 100 100 100 100
June 15, 2000 ............................... 100 100 100 100 100
June 15, 2001 ............................... 100 100 100 0 0
June 15, 2002 ............................... 100 100 0 0 0
June 15, 2003 ............................... 100 100 0 0 0
June 15, 2004 ............................... 100 100 0 0 0
June 15, 2005 ............................... 100 100 0 0 0
June 15, 2006 ............................... 100 0 0 0 0
June 15, 2007 ............................... 0 0 0 0 0
Weighted Average Life (years) ............... 11.9 10.5 6.9 5.9 5.1
</TABLE>
- --------------
(1) The weighted average life of a Certificate is determined by (i) multiplying
the amount of each principal payment on a Certificate by the number of
years from the date of the issuance of the Certificate to the related
Distribution Date, (ii) adding the results and (iii) dividing the sum by
the related initial principal balance of the Certificate.
The ABS Table has been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of the
Contracts which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
YIELD CONSIDERATIONS
Thirty days of interest on the Contracts will be paid to the Noteholders
on each Distribution Date to the extent of the remaining Available Amount, in an
amount equal to one twelfth of the product of the Class A Rate and the
outstanding principal balance of the Notes as of the first day of the preceding
Interest Accrual Period (after giving effect to any distributions of principal
made on such preceding Interest Accrual Period) or, in the case of the first
Distribution Date, the original principal balance of the Notes. See "The
Notes-Distributions of Principal". Thirty days of interest on the Contracts will
be passed through to Certificateholders on each Distribution Date to the extent
of the remaining Available Amount and any Guarantee Payments, in an amount equal
to one-twelfth of the product of the Pass-Through Rate and the Certificate
Balance or, in the case of the first Distribution Date, the Original Certificate
Principal Balance. The "Certificate Balance" means the Original Certificate
Balance reduced by (i) all distributions allocable to principal actually made to
Certificateholders, including Guarantee Payments allocable to principal, (ii)
the aggregate amount of all Principal Liquidation Loss Amounts distributable to
Certificateholders to the extent such amounts have not been so previously
distributed and (iii) on or after the Cross-Over Date, the aggregate amount of
all Principal Distribution Amounts distributable to Certificateholders to the
extent such amounts have not been so previously distributed. See "The
Certificates -- Distributions of Principal".
The Certificate Balance will be reduced to the extent that prior to the
Cross-Over Date distributions are not made in respect of the Principal Loss
Liquidation Amount and on or after the Cross-Over Date distributions are not
made in respect of the Principal Distribution Amount. As a result of such
reductions, less interest will accrue on the Certificates than would otherwise
be the case.
Generally, the excess of the amount of interest at the Contract Rate over
the amount of interest payable under such Contract and allocable to pay such
Contract's share of interest on the Securities and the Servicing Fee would be
available to cover losses on Defaulted Contracts. Because Monthly Advances and
Non-Reimbursable Payments are calculated at rates that are less than the
Contract Rate, in the event of such a payment, there will be less interest
available to cover losses on Defaulted Contracts. A similar result occurs when
CITSF purchases a Contract at the Purchase Price (as herein after defined).
27
<PAGE>
POOL FACTORS
The "Note Pool Factor" is a seven-digit decimal which the Servicer will
compute each month indicating the remaining outstanding principal balance of the
Notes as of the Distribution Date, as a fraction of the initial outstanding
principal balance of the Notes. The Note Pool Factor will be 1.0000000 as of the
Initial Cut-off Date, and thereafter will decline to reflect reductions in the
outstanding principal balance of the Notes. A Noteholder's portion of the
aggregate outstanding principal balance of the Notes is the product of (i) the
original denomination of the Noteholder's Note and (ii) the Note Pool Factor.
The "Certificate Pool Factor" is a seven-digit decimal which the Servicer
will compute each month indicating the remaining Certificate Balance as of the
Distribution Date, as a fraction of the initial Certificate Balance. The
Certificate Pool Factor will be 1.0000000 as of the Initial Cut-off Date, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the Certificates. A Certificateholder's portion of the aggregate
outstanding Certificate Balance is the product of (i) the original denomination
of the Certificateholder's Certificate and (ii) the Certificate Pool Factor.
Pursuant to the Indenture, the Noteholders will receive monthly reports
concerning the payments received on the Contracts, the Pool Balance, the Note
Pool Factor and various other items of information. Pursuant to the Trust
Agreement, the Certificateholders will receive monthly reports concerning the
payments received on the Receivables, the Pool Balance, Certificate Pool Factor
and various other items of information. Securityholders of record (which in most
cases will be Cede & Co.) during any calendar year will be furnished information
for tax reporting purposes not later than the latest date permitted by law. See
"Certain Information Regarding the Securities--Statements to Securityholders."
USE OF PROCEEDS
The Company will sell the Initial Contracts to the Trust concurrently with
the sale of the Securities and the net proceeds from the sale of the Securities
will be applied by the Trustees to the purchase of the Initial Contracts, to the
payment of certain expenses connected with pooling the Contracts and issuing the
Securities, to the deposit of the Pre-Funded Amount in the Pre-Funding Account
and to the deposit of the initial amount into the Capitalized Interest Account.
Such net proceeds less the payment of such expenses, the Pre-Funded Amount and
the initial deposit into the Capitalized Interest Account represent the purchase
price paid by the Trust to the Company for the sale of the Initial Contracts to
the Trust. Such amount will be determined as a result of the pricing of the
Securities, through the offering described in this Prospectus. The net proceeds
to be received from the sale of the Initial Contracts will be paid to CITSF as
the purchase price for the Contracts and will be added to CITSF's general funds
and will be available for general corporate purposes, including the purchase of
new recreational vehicle installment sales contracts and the payment of the
purchase price to CITCF-NY for those Initial Contracts acquired by CITSF from
CITCF-NY.
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
The CIT Group Securitization Corporation II (the "Company") was
incorporated in the State of Delaware on June 24, 1994 and is a wholly-owned,
limited purpose finance subsidiary of The CIT Group Holdings, Inc., a Delaware
corporation ("CIT"), which is a successor to a company founded in St. Louis,
Missouri, in February 1908. CIT is 60% owned by The Dai-Ichi Kangyo Bank, Ltd.
and 40% by MHC Holdings (Delaware) Inc., a subsidiary of Chemical Banking
Corporation. The Company maintains its principal office at 650 CIT Drive,
Livingston, New Jersey 07039. Its telephone number is (201) 740-5284.
As described herein, the obligations of the Company with respect to the
Certificates are limited. The Company will have no ongoing servicing obligations
or responsibilities with respect to the Contract Pool.
CITSF is an affiliate of the Company. The Company will acquire the
Contract Pool in a privately negotiated transaction from CITSF.
Neither CIT nor any of its affiliates, including the Company and CITSF,
will be obligated with respect to the Securities, except for the Limited
Guarantee provided by CIT in favor of the Certificateholders. Accordingly, the
Company has determined that financial statements of CITSF and the Company, are
not material to the offering of the Securities.
28
<PAGE>
THE CIT GROUP/SALES FINANCING, INC., SERVICER
General
The CIT Group/Sales Financing, Inc., a Delaware corporation ("CITSF"), is
a wholly-owned subsidiary of CIT. It has its principal executive office at 650
CIT Drive, Livingston, New Jersey 07039, and its telephone number is (201)
740-5000.
CITSF originates, purchases, sells and services conditional sales
contracts for recreational vehicles, manufactured housing and other consumer
goods throughout the United States. CITSF has been a lender to the recreational
vehicle industry for more than 30 years. CITSF has Regional Business Centers in
five cities and a centralized asset service facility (the "Asset Service
Center") in Oklahoma City, Oklahoma. Working through dealers and manufacturers,
CITSF offers retail installment credit. In addition to purchasing recreational
vehicle contracts from dealers on an individual basis, CITSF makes bulk
purchases of recreational vehicle contracts. These bulk purchases may be from
the portfolios of other lending institutions or finance companies, the
portfolios of governmental agencies or instrumentalities or the portfolios of
other entities that purchase and hold recreational vehicle contracts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for
recreational vehicle, marine products and manufactured housing retail
installment credit supplemented by outside collectors and field remarketers
located throughout the United States.
As of March 31, 1995, CITSF serviced for itself and others
approximately137,500 contracts (consisting primarily of recreational vehicle and
manufactured housing contracts), representing an outstanding balance of
approximately $2.9 billion. Of this portfolio, approximately 47,100 contracts
(representing approximately $1.0 billion outstanding balance) consisted of
recreational vehicle contracts.
CITSF's general policies with regard to the origination of recreational
vehicle installment sale contracts are described below under "Contract
Origination" and "CITSF's Underwriting Guidelines". See "Servicing" below for a
description of certain of CITSF's servicing policies.
Contract Origination
Although CITSF does, on occasion, purchase recreational vehicle
installment sale contracts in bulk from other lenders, all of the Contracts in
the Contract Pool have been originated by CITSF or CITCF-NY through the purchase
of such Contracts from Dealers.
Through its Regional Business Centers, CITSF arranges to purchase
recreational vehicle contracts from recreational vehicle dealers located
throughout the United States. Regional Business Center personnel contact the
dealers located in their territories and explain CITSF's available financing
plans, terms, prevailing rates and credit and financing policies. If the dealer
wishes to use CITSF's available customer financing, the dealer must make an
application for dealer approval. Upon satisfactory results of CITSF's
investigation of the dealer's creditworthiness and general business reputation,
CITSF and the dealer execute a dealer agreement. CITSF also originates
recreational vehicle installment loan agreements directly. In addition, CITSF
purchases portfolios of recreational vehicle contracts from other lending
institutions or finance companies.
Contracts that CITSF purchases from dealers or originates itself (as
opposed to portfolios of contracts purchased from other lenders) are purchased
on an individually approved basis in accordance with CITSF's underwriting
guidelines.
CITSF's Underwriting Guidelines
All recreational vehicle contracts that are purchased by CITSF from
dealers are written on forms provided or approved by CITSF and are purchased on
an individually approved basis. With respect to each retail recreational vehicle
contract to be purchased from a dealer, CITSF's general practice is to have the
dealer submit the customer's credit application, manufacturer's invoice (if the
contract is for a new vehicle) and certain other information relating to the
contract to the applicable Regional Business Center. Personnel at the Regional
Business Center prepare an analysis of the creditworthiness of the customer and
of other aspects of the proposed transaction.
29
<PAGE>
All credit applications are entered into an automatic application
processing system. CITSF's underwriting guidelines require, and have required, a
credit officer at a Regional Business Center with the appropriate level of
credit authority to examine each applicant's credit history, residence history,
employment history and debt-to-income payment ratio. Although, with respect to
these criteria, CITSF has, and has had, certain minimum requirements, as
described below, CITSF's management does not believe that these minimum
requirements are themselves generally sufficient to warrant credit approval of
an applicant. Thus, there were and are no requirements on the basis of which, if
they are met, credit is routinely approved without review by a credit officer.
Based on credit score and other risk factors, each applicant is either approved,
declined or, if necessary, referred to a credit officer with a higher credit
authority. Funding of a contract is authorized after verification of the
conditions of approval of the application and satisfactory delivery of the
related recreational vehicle.
The retail customer generally has had a stable residence, employment and
credit history, a minimum of two years in his or her present job, a debt ratio
(the ratio of total installment debt and housing expenses to gross monthly
income) of 40% or less, a down payment of at least 10% and an overall favorable
credit profile. Approval of retail customers that do not meet the
above-described retail customer profile is considered by the appropriate level
credit officer, on a case by case basis. Such approval, if granted, is based on
the applicant's length and likelihood of continued employment, ability to pay,
and a review of the applicants' paying habits. No guarantors, endorsers or
co-signers are to be considered in determining whether to accept or reject an
application. The maximum amount CITSF will advance to such targeted customers is
(i) in the case of a new financed vehicle, 100% of the unpaid cash balance, not
to exceed 110% of the manufacturer's invoice price plus taxes, fees and
insurance and (ii) in the case of a used financed vehicle, 100% of the unpaid
cash balance, not to exceed 100% of the wholesale value as determined by the
Kelly blue book. Funding of a contract is authorized after verification of the
conditions of approval of the application and satisfactory delivery of the
related recreational vehicle.
In August 1994 CITSF's credit criteria were changed to permit greater
reliance on credit scores and overall evaluation instead of using specific
disqualifying criteria (e.g., a minimum of two years of employment). The
interest rate charged on each recreational vehicle contract originated since
August 1994 reflects CITSF's evaluation of the relative risk associated with an
individual's application. It is expected that the changes in CITSF's
underwriting standards may result in higher delinquency and loan loss experience
than is shown in the tables in this Prospectus since most of the recreational
vehicle contracts included in such tables were originated using CITSF's former
underwriting guidelines. All of the Initial Contracts were originated and all
Subsequent Contracts, if any, will be originated under these new credit
criteria. Accordingly, the data presented in the tables in this Prospectus
regarding the portfolio of recreational vehicle contracts serviced by CITSF
should not necessarily be considered as a basis for assessing the likelihood
amount or severity of delinquencies or losses on the Contracts.
The credit review and approval practices of each Regional Business Center
are subject to internal reviews and internal audits that, through sampling,
examine the nature of the verification of credit histories, residence histories,
employment histories, debt ratios of the applicants and evaluate the credit
risks associated with the contracts purchased through such regional office by
rating the obligors on such contracts according to their credit histories,
employment histories, debt ratios and housing ratios.
Servicing
CITSF services, through its Asset Service Center, recreational vehicle,
manufactured housing, home equity, and other consumer loans. CITSF services all
of the recreational vehicle contracts it purchases or originates, whether on an
individual basis or in bulk. CITSF is actively seeking arrangements pursuant to
which it will service recreational vehicle contracts held by other entities.
Such contracts would not be purchased by CITSF or sold to such other entities by
CITSF. Generally, such servicing responsibilities are, and would be, also
carried out through CITSF's Asset Service Center. Servicing responsibilities
include collecting principal and interest payments, taxes, insurance premiums,
where applicable, and other payments from obligors and, where such contracts
have been sold, remitting principal and interest payments to the holders
thereof, to the extent such holders are entitled thereto. Collection procedures
include repossession and resale of recreational vehicles securing defaulted
contracts and, if deemed advisable by CITSF, entering into workout arrangements
with obligors under certain defaulted contracts. Although decisions as to
whether to repossess any recreational vehicle are made on an individual basis,
CITSF's general policy is to institute repossession procedures promptly after
Asset Service Center personnel determine that it is unlikely that a defaulted
30
<PAGE>
contract will be brought current, and thereafter to diligently pursue the resale
of such recreational vehicles if the market is favorable. Recently, the asset
service center has developed a nationwide auction network to facilitate resale
efforts on such repossessions.
The following table shows the composition of CITSF's servicing portfolio,
including recreational vehicle contracts serviced by CITSF on the dates
indicated:
THE CIT GROUP/SALES FINANCING, INC.
Contracts Being Serviced By Product Line
<TABLE>
<CAPTION>
At December 31, At March 31,
--------------------------------------------------------------------------------- -------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
(Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars)
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RV - Owned .............. 33,820 $729,056 38,926 $845,982 43,530 $961,382 39,454 $847,142 39,118 $863,099
RV - Bulk Purchases ..... 5,828 116,545 4,383 84,344 3,331 60,386 3,522 50,882 3,302 47,089
RV - Servicing Retained(1) 0 0 0 0 0 0 4,827 118,267 4,642 111,529
Total RV ................ 39,648 $845,601 43,309 $930,326 46,861 $1,021,768 47,803 $1,016,291 47,062 $1,021,717
Total MH ................ 31,811 $509,400 49,640 $805,345 47,898 $809,670 39,599 $878,152 70,673 $1,163,568
Home Equity ............. 0 0 0 0 3,545 131,322 13,545 570,772 16,705 678,147
Other ................... 6,942 101,022 1,126 19,485 1,572 41,944 1,310 74,823 3,030 84,144
------ -------- ------ -------- ------ ---------- ------ ---------- ------ ----------
Total Contracts Serviced .. 78,401 $1,456,023 94,075 $1,755,156 99,876 $2,004,704 102,257 $2,540,038 137,470 $2,947,576
====== ========== ====== ========== ====== ========== ======= ========== ======= ==========
</TABLE>
- --------------------
RV = Recreational Vehicle
MH = Manufactured Housing
(1) Represents Contracts securitized with servicing retained.
Delinquency, Loan Loss and Repossession Experience
The following Delinquency Experience and Loan Loss/Repossession Experience
tables set forth data for CITSF's recreational vehicle portfolio. The following
table sets forth the delinquency experience for the four years ended December
31, 1994 and the three months ended March 31, 1994 and March 31, 1995, of the
portfolio of recreational vehicle contracts originated and serviced by CITSF,
excluding contracts acquired by CITSF through portfolio purchases and contracts
in repossession.
Delinquency Experience
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Three Months
Year Ended December 31, ended ended
--------------------------------------------- March 31, March 31,
1991 1992 1993 1994(3) 1994(3) 1995(3)
--------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts ............... 33,820 38,926 43,530 44,281 43,290 43,760
Principal Balance of Contracts
Serviced ........................ $ 729,056 $845,982 $961,382 $965,409 $966,905 $974,628
Principal Balance of
Delinquent Contracts (1):
30-59 Days .................... $ 4,363 $ 4,412 $ 6,478 $ 4,986 $ 4,971 $ 5,046
60-89 Days .................... 1,304 1,378 2,211 1,959 1,502 1,812
90 Days or More ............... 3,406 4,140 3,383 2,785 4,121 2,864
----------- ---------- ---------- ----------- ---------- ----------
Total Principal Balance
of Delinquent Contracts ......... $ 9,073 $ 9,930 $ 12,072 $ 9,730 $ 10,594 $ 9,722
=========== ========== ========= ========== ========= ==========
Delinquencies as a
Percent of Principal
Balances (2) .................... 1.24% 1.17% 1.26% 1.01% 1.10% 1.00%
</TABLE>
- ---------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month.
(2) Based on dollar percent delinquent.
(3) Includes Recreational Vehicle contracts sold by CITSF in January 1994 in
connection with another securitization which CITSF is servicing.
31
<PAGE>
The following table sets forth the loan loss and repossession experience
for the four years ended December 31, 1994 and the three months ended March 31,
1994 and March 31, 1995, of the portfolio of recreational vehicle contracts
originated and serviced by CITSF, excluding contracts acquired by CITSF through
portfolio purchases.
Loan Loss/Repossession Experience
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Three Months
Year Ended December 31, ended ended
------------------------------------------------------ March 31, March 31,
1991 1992 1993 1994(5) 1994(5) 1995(5)
--------- ---------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts (1) .................. 33,820 38,926 43,530 44,281 43,290 43,760
Principal Balance of Contracts
Serviced (1) ........................... $729,056 $845,982 $961,382 $965,409 $966,905 $974,628
Net Losses:
Dollars (2) .......................... $ 3,942 $ 4,040 $ 3,917 $ 4,887 $ 1,144 $ 977
Percentage (3) ....................... 0.54% 0.48% 0.41% 0.51% 0.47%(4) 0.40%(4)
</TABLE>
- ---------------------
(1) As of period end and excludes contracts in repossession.
(2) The calculation of net loss includes all expenses of repossession and
liquidation.
(3) As a percentage of the principal balance of contracts as of period end.
(4) Annualized. This ratio has been annualized, and may not reflect the actual
loan loss experience for the year.
(5) Includes Recreational Vehicle contracts sold by CITSF in January 1994 in
connection with another securitization which CITSF is servicing.
The management of CITSF believes that its former underwriting standards
and improving economic conditions have contributed to the decline in
delinquency, default and loan loss rates during the period from January 1991
through March 1995. Since 1991, the level of delinquent contracts (more than 30
days past due after the contractual due date) as a percentage of the principal
balance of the contracts outstanding has declined from 1.24% as of December 31,
1991 to 1.00% as of March 31, 1995. The net charge-off rate has declined from
0.54% for the year ended December 31, 1991 to 0.40%, annualized for the period
ended March 31, 1995.
The data presented in the preceding tables are for illustration purposes
only. Such data relates to the performance of the CITSF originated and serviced
recreational vehicle portfolio, excluding contracts acquired by CITSF through
portfolio purchases, and is not historical data regarding solely the portion of
CITSF's portfolio which comprises the Contracts. The delinquency and loan loss
experience reflected in the preceding tables may be effected by the size, growth
and relative lack of seasoning of the portfolio as well as general and regional
economic conditions. In August 1994, CITSF's credit criteria were changed to
permit greater reliance on credit scores and overall evaluation instead of using
specific disqualifying criteria (e.g., a minimum of two years of employment).
The interest rate charged on each recreational vehicle contract originated since
August 1994 reflects CITSF's evaluation of the relative risk associated with an
individual's application. The changes in CITSF's underwriting standards may
result in higher delinquency and loan loss experience than is shown in the above
tables since most of the recreational vehicle contracts included in such tables
were originated using CITSF's former underwriting guidelines. All of the Initial
Contracts were originated and all Subsequent Contracts, if any, will be
originated under these new credit criteria. Accordingly, the data presented in
the foregoing tables should not necessarily be considered as a basis for
assessing the likelihood, amount or severity of delinquency or losses on the
Contracts, and no assurance can be given that the delinquency and loan loss
experience presented in the preceding tables will be indicative of the
experience on the Contracts.
32
<PAGE>
CIT
CIT is a successor to a company founded in St. Louis, Missouri on February
11, 1908. It has its principal executive offices at 1211 Avenue of the Americas,
New York, New York 10036, and its telephone number is (212) 536-1950. CIT,
operating directly or through its subsidiaries primarily in the United States,
engages in financial services activities through a nationwide distribution
network. CIT provides financing primarily on a secured basis to commercial
borrowers, ranging from middle-market to larger companies, and to consumers in
connection with manufactured housing, recreational vehicles and boat financing,
as well as residential mortgages. While these secured lending activities reduce
the risk of losses from extending credit, CIT's results of operations can also
be affected by other factors, including general economic conditions, competitive
conditions, the level and volatility of interest rates, concentrations of credit
risk and government regulation and supervision. CIT does not finance the
development or construction of commercial real estate. CIT has eight strategic
business units, seven of which offer corporate financing, dealer and
manufacturer financing, and factoring products and services to clients, and an
eighth which offers consumer first and second mortgage financing and home equity
lines of credit.
The Dai-Ichi Kangyo Bank, Limited ("DKB") owns sixty percent (60%) of the
issued and outstanding shares of common stock of CIT, which it purchased from
Manufacturers Hanover Corporation ("MHC") at year-end 1989. The remaining forty
percent (40%) common stock interest in CIT is owned by Chemical Banking
Corporation ("CBC") through a subsidiary MHC Holdings (Delaware) Inc. ("MHC
Holdings"), which CBC acquired as part of the merger between MHC and CBC on
December 31, 1991.
In accordance with a stockholders agreement among DKB, CBC, as successor
to MHC, and CIT (the "Stockholders Agreement"), CIT amended its Certificate of
Incorporation and its By-Laws in conformity therewith. Pursuant to the
Stockholders Agreement, immediately after MHC sold the sixty percent (60%)
interest in CIT to DKB, the stockholders elected a new Board of Directors
comprised of the President and Chief Executive Officer and the Vice Chairman of
CIT, six nominees designated by DKB, and two nominees designated by MHC. The
Stockholders Agreement also contains provisions for the management of CIT,
majority voting by DKB on CIT's Executive Committee, consent of MHC Holdings
with respect to major corporate and business changes, and restrictions with
respect to the transfer of stock of CIT to third parties.
CIT is subject to the informational requirements of the Exchange Act and,
in accordance therewith, files reports and other information with the
Commission. Such reports and other information can be inspected and copied at
the offices of the Commission and at the offices of the New York Stock Exchange,
Inc. See "Additional Information."
33
<PAGE>
THE NOTES
General
The CIT RV Owner Trust 1995-A Class A 6.25% Asset Backed Notes (the "Notes"
or the "Class A Notes") will represent obligations of the Trust secured by the
assets of the Trust (other than the Certificate Distribution Account, the
Limited Guarantee and, if established, the Certificate Reserve Account and, if
delivered, the Alternate Credit Enhancement). The Trust will issue $188,000,000
aggregate principal amount of Class A Notes pursuant to the terms of an
Indenture to be dated as of June 1, 1995 (as amended and supplemented from time
to time, the "Indenture") between the Trust and The Chase Manhattan Bank
(National Association), as trustee (the "Indenture Trustee"), a form of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. A copy of the Indenture will be available from the
Company, upon request, to the holders of the Notes or Certificates and will be
filed with the Securities and Exchange Commission (the "Commission") following
the issuance of the Notes and Certificates. 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 of the provisions of the Notes and the Indenture. Where particular
provisions or terms used in the Indenture are referred to, the actual provisions
(including definitions of terms) are incorporated by reference as part of such
summary.
The Notes will be offered for purchase in minimum denominations of $1,000
and integral multiples of $1,000 in excess thereof in book-entry form only. The
Class A Notes will initially be represented by a single Note registered in the
name of the nominee of The Depository Trust Company ("DTC" and, together with
any successor depository selected by the Company, the "Depository"), except as
provided below. The Company has been informed by DTC that DTC's nominee will be
Cede & Co. ("Cede"). No person acquiring an interest in the Notes through the
facilities of DTC (a "Note Owner") will be entitled to receive a Note
representing such person's interest in the Notes, except as set forth below
under "Certain Information Regarding the Securities--Definitive Securities" and
such persons will hold their interests in the Notes through DTC in the United
States or Cedel or Euroclear in Europe. Unless and until Definitive Notes are
issued under the limited circumstances described herein, all references to
actions by Noteholders shall refer to actions taken by DTC upon instructions
from its Participants, and all references herein to distributions, notices,
reports and statements to Noteholders shall refer to distributions, notices,
reports and statements to DTC in accordance with DTC procedures. See "Certain
Information Regarding The Securities--Definitive Securities" below.
Payments of interest and principal on the Notes with respect to each Due
Period will be made on the fifteenth day of each month or, if any such day is
not a Business Day, on the next succeeding Business Day (each, a "Distribution
Date"), commencing July 17, 1995. With respect to any Distribution Date, the
"Due Period" will be the calendar month preceding the month of such Distribution
Date. The first Due Period will commence on and include June 1, 1995 and will
end on and include June 30, 1995. Payments on the Securities on each
Distribution Date will be made to the holders of record of the related
Securities on the day immediately preceding such Distribution Date or, in the
event Definitive Securities have been issued, as on the last day of the month
immediately preceding the month in which such Distribution Date occurs (each, a
"Record Date"). A "Business Day" is any day other than a Saturday, Sunday or any
day on which banking institutions or trust companies in the states of New York,
Illinois or Oklahoma are generally authorized or required by law, regulation or
executive order to be closed.
Payments of Interest
The Class A Notes will bear interest at the rate of 6.25% per annum (the
"Class A Rate"). Interest on the outstanding principal amount of the Notes will
accrue at the Class A Rate from June 15, 1995 or from the most recent
Distribution Date on which interest has been paid to but excluding the following
Distribution Date (each, an "Interest Accrual Period"). Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest payable on a Distribution Date (the "Class A Interest Distribution
Amount") will be calculated on the basis of the outstanding principal amount of
Class A Notes as of the preceding Distribution Date, after giving effect to any
distributions of principal on the Class A Notes on such preceding Distribution
Date (or, in the case of the first Distribution Date, on the basis of the
original outstanding principal amount of the Class A Notes). Interest accrued as
of any Distribution Date but not paid on such Distribution Date will be due on
the next Distribution Date.
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Payments Of Principal
Principal payments will be made to the Noteholders on each Distribution
Date to the extent of the remaining Available Amount in an amount equal to the
Principal Distribution Amount. The "Principal Distribution Amount" is equal to
the difference between (i) the sum of (x) the Pool Balance on the last day of
the second preceding Due Period (or, in the case of the first Distribution Date,
the Initial Cut-off Date Pool Principal Balance), and (y) the amount on deposit
in the Pre-Funding Account on the last day of the second preceding Due Period
(or, in the case of the first Distribution Date, as of the Initial Cut-off
Date), less (ii) the sum of (x) the Pool Balance on the last day of the
preceding Due Period and (y) the amount on deposit in the Pre-Funding Account on
the last day of the preceding Due Period; provided, however, that the Principal
Distribution Amount on the Class A Final Scheduled Distribution Date will equal
the outstanding principal balance of the Notes as of such date and the Principal
Distribution Amount on the Certificate Final Distribution Date will equal the
Certificate Balance on such date. For the purposes of determining the Principal
Distribution Amount, the unpaid principal balance of a Defaulted Contract or a
Repurchased Contract is deemed to be zero on and after the last day of the Due
Period in which such Contract became a Defaulted Contract or a Repurchased
Contract. The Principal Distribution Amount will not exceed the outstanding
principal balance of the Notes or, after the Cross-Over Date, the Certificate
Balance.
No principal will be paid in respect of the Notes until the Servicer has
been reimbursed for any outstanding Monthly Advances and has been paid the
Servicing Fee (including any unpaid Servicing Fee with respect to one or more
prior Due Periods) (collectively, the "Servicer Payment") and until the entire
Class A Interest Distribution Amount has been paid for the related Distribution
Date. The principal balance of the Class A Notes, to the extent not previously
paid, will be due on the Class A Final Scheduled Distribution Date. The actual
date on which the aggregate outstanding principal amount of the Class A Notes is
paid may be earlier than the Class A Final Scheduled Distribution Date based on
a variety of factors.
On each Determination Date, the Servicer will determine the amount in the
Collection Account available for distribution on the related Distribution Date
and inform the Indenture Trustee, who shall allocate such amounts between the
Notes and the Certificates and make distributions to Securityholders, all as
described herein under "The Purchase Agreements and The Trust Documents --
Distributions". The unpaid principal balance of the Notes will be payable on the
Class A Final Scheduled Distribution Date.
Redemption
The Notes will be redeemed in part on the Distribution Date on or
immediately following the last day of the Funding Period in the event that any
amount remains on deposit in the Pre-Funding Account after giving effect to the
purchase of all Subsequent Contracts, including any such purchase on such date
(a "Mandatory Redemption"). The aggregate principal amount of the Notes to be
redeemed will be an amount equal to the amount then on deposit in the
Pre-Funding Account.
In the event of an Optional Purchase or Auction Sale, the outstanding
Notes will be redeemed in whole, but not in part, at a redemption price equal to
the unpaid principal amount of the Notes plus accrued and unpaid interest
thereon at the Class A Rate. An "Optional Purchase" of all the Contracts by
CITSF, may occur at CITSF's option, on any Distribution Date on which the Pool
Balance is 10% or less of the Initial Pool Balance (as hereinafter defined). An
"Auction Sale" may occur, and may result in the sale of the Contracts remaining
in the Trust, within ten days following any Distribution Date as of which the
Pool Balance is 5% or less of the Initial Pool Balance.
Upon the occurrence of an Insolvency Event with respect to the Affiliated
Purchaser, the Trust shall be terminated and the assets of the Trust will be
sold (unless, within 90 days after such occurrence, the Owner Trustee shall have
received written instructions from (a) each of the Certificateholders (other
than the Affiliated Purchaser) and (b) each of the Noteholders, to the effect
that each such party disapproves of the liquidation of the Contracts and
termination of the Trust). Upon the occurrence of such an event, the outstanding
Notes will be redeemed in whole, but not in part, at a redemption price equal to
the unpaid principal amount of the Notes plus accrued interest thereon at the
Class A Rate.
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The Indenture
Modification of Indenture without Noteholder Consent. The Trust and the
Indenture Trustee may, without consent of the Noteholders, enter into one or
more supplemental indentures for any of the following purposes: (i) to correct
or amplify the description of the collateral or add additional collateral; (ii)
to provide for the assumption of the Note and the Indenture obligations by a
permitted successor to the Trust; (iii) to add additional covenants for the
benefit of the related Noteholders, or to surrender any rights or power
conferred upon the Trust; (iv) to convey, transfer, assign, mortgage or pledge
any property to or with the Indenture Trustee; (v) to cure any ambiguity or
correct or supplement any provision in the Indenture or any supplemental
indenture which may be inconsistent with any other provision of the Indenture or
any supplemental indenture; (vi) to provide for the acceptance of the
appointment of a successor Indenture Trustee or to add to or change any of the
provisions of the Indenture as shall be necessary and permitted to facilitate
the administration by more than one trustee; (vii) to modify, eliminate or add
to the provisions of the Indenture in order to comply with the Trust Indenture
Act of 1939, as amended; and (viii) to add any provisions to, change in any
manner, or eliminate any of the provisions of, the Indenture or modify in any
manner the rights of Noteholders under such Indenture; provided that any action
specified in this clause (viii) shall not, as evidenced by an opinion of
counsel, adversely affect in any material respect the interests of any
Noteholder unless Noteholder consent is otherwise obtained as described herein;
and (ix) to add provisions to, change in any manner or eliminate any provisions
of, the Indenture in connection with delivery of Alternate Credit Enhancement,
establish accounts for the benefit of the provider of Alternate Credit
Enhancement, grant security interests therein and provide for the investment of
funds in any such account, and grant other rights to such provider incidental
thereto without the consent of the Noteholders or the Certificateholders.
Modification of Indenture with Noteholder Consent. With the consent of the
holders of a majority of the aggregate principal amount of the outstanding
Notes, the Trust and the Indenture Trustee may execute a supplemental indenture
to add provisions to, change in any manner or eliminate any provisions of, the
Indenture, or modify in any manner the rights of the related Noteholders.
Without the consent of the holder of each outstanding Note affected
thereby, however, no supplemental indenture will: (i) change the due date of any
instalment 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 any place of payment where or the coin or currency in
which any Note or any interest thereon is payable; (ii) impair the right to
institute suit for the enforcement of certain provisions of the Indenture
regarding payment; (iii) reduce the percentage of the aggregate principal amount
of the outstanding Notes the consent of the holders of which is required for any
such supplemental indenture or the consent of the holders of which is required
for any waiver of compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided for in the
Indenture; (iv) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the Trust, any other obligor on the Notes, the Seller or
an affiliate of any of them; (v) 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 Contracts if the
proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes; (vi) 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 (vii) permit the creation of any lien ranking prior to or
on a parity with the lien of the Indenture with respect to any of the collateral
for the Notes or, except as otherwise permitted or contemplated in the
Indenture, terminate the lien of the Indenture on any such collateral or deprive
the holder of any Note of the security afforded by the lien of the Indenture.
Events of Default; Rights Upon Event of Default. "Events of Default" under
the Indenture will consist of: (i) any failure to pay interest on the Notes as
and when the same becomes due and payable, which failure continues unremedied
for five days; (ii) any failure (a) to make any required payment of principal on
the Notes or (b) to observe or perform in any material respect any other
covenants or agreements in the Indenture, which failure in the case of a default
under clause (ii)(b) materially and adversely affects the rights of Noteholders,
and which failure in either case continues for 30 days after the giving of
written notice of such failure to the Seller or the Servicer, as applicable, by
the Indenture Trustee or to the Seller or the Servicer, as applicable, and the
Indenture Trustee by the holders of not less than 25% of the principal amount of
the Notes; (iii) failure to pay the unpaid principal balance of any Notes on or
prior to the Class A Final Scheduled Distribution Date; and (iv) certain events
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of insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings and certain actions by the Trust indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. However, the amount of principal required to be paid to Noteholders
under the Indenture will generally be limited to amounts available to be
deposited in the Note Distribution Account. Therefore the failure to pay
principal on the Notes generally will not result in the occurrence of an Event
of Default until the Class A Final Scheduled Distribution Date.
If an Event of Default should occur and be continuing with respect to the
Notes, the Indenture Trustee or holders of a majority in principal amount of
such Notes then outstanding may declare the principal of the Notes to be
immediately due and payable. Such declaration may, under certain circumstances,
be rescinded by the holders of a majority in principal amount of the Notes then
outstanding.
If the Notes are due and payable following an Event of Default with
respect thereto, the Indenture Trustee may institute proceedings to collect
amounts due or foreclose on Trust property, exercise remedies as a secured
party, sell the related Contracts or elect to have the Trust maintain possession
of such Contracts and continue to apply collections on such Contracts as if
there had been no declaration of acceleration. The Indenture Trustee, however,
is prohibited from selling the Contracts following an Event of Default, unless
(i) the holders of all the outstanding Notes consent to such sale, (ii) the
proceeds of such sale are sufficient to pay in full the principal of and the
accrued interest on such outstanding Notes at the date of such sale, or (iii)
the Indenture Trustee determines that the proceeds of the Contracts would not be
sufficient on an ongoing basis to make all payments on the Notes as such
payments would have become due if such obligations had not been declared due and
payable, and the Indenture Trustee obtains the consent of the holders of a
majority of the aggregate outstanding amount of the Notes. Following a
declaration upon an Event of Default that the Notes are immediately due and
payable, (i) Noteholders will be entitled to ratable repayment of principal on
the basis of their respective unpaid principal balances and (ii) 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 on the Certificates or in
respect of the Certificate Balance (other than pursuant to the Limited
Guarantee).
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 the 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 such 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 such request. Subject to the
provisions for indemnification and certain limitations contained in the
Indenture, the holders of a majority in principal amount of the outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding or any remedy available to the Indenture Trustee and the holders of a
majority in principal amount of such Notes then outstanding may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default in respect of a covenant or provision of
the Indenture that cannot be modified without the waiver or consent of all of
the holders of such outstanding Notes.
No holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such holder previously has given to the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
holders of not less than 25% in principal amount of the outstanding Notes have
made written request of the Indenture Trustee to institute such proceeding in
its own name as Indenture Trustee, (iii) such holder or holders have offered the
Indenture Trustee reasonable indemnity, (iv) the Indenture Trustee has for 60
days failed to institute such proceeding and (v) no direction inconsistent with
such written request has been given to the Indenture Trustee during such 60-day
period by the holders of a majority in principal amount of such outstanding
Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of Noteholders.
In addition, the Indenture Trustee and Noteholders, by accepting the
Notes, will covenant that they will not, for a period of one year after the
termination of the Indenture, institute against the Affiliated Purchaser, the
Company or the Trust any bankruptcy, reorganization or other proceeding under
any federal or state bankruptcy or similar law.
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Neither the Indenture Trustee nor the Owner Trustee in its Individual
Capacity, nor any Holder of a Certificate Including, without Limitation, the
Affiliated Purchaser or the Company, nor any of their Respective Owners,
Beneficiaries, Agents, Officers, Directors, Employees, Affiliates, Successors or
Assigns will, in the Absence of an Express Agreement to the Contrary, be
Personally Liable for the Payment of the Principal of or Interest on the Notes
or for the Agreements of the Trust Contained in the Indenture.
Certain Covenants. The Indenture provides that the Trust may not
consolidate with or merge into any other entity, unless (i) the entity formed by
or surviving such consolidation or merger is organized under the laws of the
United States, any state or the District of Columbia, (ii) such entity expressly
assumes 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, (iii) no Event of Default shall have occurred and be
continuing immediately after such merger or consolidation, (iv) the Trust has
been advised that the rating of the related Notes or Certificates then in effect
would not be reduced or withdrawn by the Rating Agencies as a result of such
merger or consolidation and (v) the Trust has received an opinion of counsel to
the effect that such consolidation or merger would have no material adverse tax
consequence to the Trust or to any Noteholder or Certificateholder.
The Trust will not, among other things, (i) except as expressly permitted
by the Indenture, the Purchase Agreements (as defined herein) or the Trust
Documents (as defined herein) for such Trust (collectively, the "Related
Documents"), sell, transfer, exchange or otherwise dispose of any of the assets
of the Trust, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Notes (other than amounts withheld under
the Code or applicable state law) or assert any claim against any present or
former holder of such Notes because of the payment of taxes levied or assessed
upon the Trust, (iii) dissolve or liquidate in whole or in part, (iv) permit the
validity or effectiveness of the Indenture to be impaired or permit any person
to be released from any covenants or obligations with respect to the related
Notes under such Indenture except as may be expressly permitted thereby or (v)
permit any lien, charge, excise, claim, security interest, mortgage or other
encumbrance to be created on or extend to or otherwise arise upon or burden the
assets of the Trust or any part thereof, or any interest therein or the proceeds
thereof.
The Trust will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the Notes and the Indenture or otherwise in
accordance with the Related Documents.
Annual Compliance Statement. The Trust will be required to file annually
with the 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 Noteholders a brief report relating to its eligibility
and qualification to continue as Indenture Trustee under the 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 such and any action taken by it that materially affects
the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. The Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the Indenture Trustee for cancellation of all such Notes or, with certain
limitations, upon deposit with the Indenture Trustee of funds sufficient for the
payment in full of all of such Notes.
The Indenture Trustee. The Indenture Trustee under the Indenture will be
The Chase Manhattan Bank (National Association). The Indenture 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
Indenture Trustee if the Indenture Trustee ceases to be eligible to continue as
such under the Indenture or if the Indenture Trustee becomes insolvent. In such
circumstances, the Servicer will be obligated to appoint a successor trustee.
Any resignation or removal of the Indenture Trustee and appointment of a
successor trustee does not become effective until acceptance of the appointment
by the successor trustee.
Trust Indenture Act. The Indenture will comply with all applicable
provisions of the Trust Indenture Act of 1939, as amended.
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THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Trust Agreement.
General
The CIT RV Owner Trust 1995-A Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities") will represent
fractional undivided interests in the Trust. The Trust will issue $12,000,000
aggregate principal amount of Certificates pursuant to a Trust Agreement, to be
dated as of June 1, 1995, between the Company and the Owner Trustee (the "Trust
Agreement"), a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. A copy of the Trust Agreement
will be available from the Company, upon request, to holders of the Notes or
Certificates and will be filed with the Commission following the issuance of the
Notes and the Certificates. Payments in respect of the Certificates will be
subordinated to payments on the Notes to the limited extent described herein.
The following summary describes certain terms of the Certificates and the Trust
Agreement. The summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the
Certificates and the Trust Agreement. Where particular provisions or terms used
in the Trust Agreement are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
The Certificates will be offered for purchase in minimum denominations of
$20,000 and integral multiples of $1,000 in excess thereof in book-entry form
only; provided, however, that one Certificate may be issued in a denomination
other than an integral multiple of $1,000 such that the Affiliated Purchaser may
be issued at least 1% of the Certificate Balance. The Certificates will
initially be represented by a single Certificate registered in the name of Cede,
the nominee of DTC. No person acquiring an interest in the Certificates through
the facilities of DTC (a "Certificate Owner") will be entitled to receive a
Definitive Certificate representing such person's interest in the Certificates,
except as set forth below under "Certain Information Regarding The
Securities--Definitive Securities". Unless and until Definitive Certificates are
issued under the limited circumstances described herein, all references to
actions by Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants, and all references herein to distributions,
notices, reports and statements to Certificateholders shall refer to
distributions, notices, reports and statements to DTC in accordance with DTC
procedures. See "Certain Information Regarding The Securities--Definitive
Securities" below.
Payments of interest and principal on the Certificates with respect to
each Due Period will be made on each Distribution Date, commencing July 17,
1995. Payments on the Securities on each Distribution Date will be made to the
holders of record of the related Securities on the related Record Date.
Distribution of Interest
The Certificates will bear interest at the rate of 6.55% per annum (the
"Pass-Through Rate"). Interest on the Certificate Balance will accrue during the
related Interest Accrual Period at the Pass-Through Rate. Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest payable on a Distribution Date will be calculated on the basis of the
Certificate Balance as of the preceding Distribution Date, after giving effect
to distributions of principal on the Certificates and other reductions in the
Certificate Balance on such preceding Distribution Date (or, in the case of the
first Distribution Date, the Original Certificate Balance) (the "Certificate
Interest Distribution Amount"). Interest accrued as of any Distribution Date but
not paid on such Distribution Date will be due on the next Distribution Date.
The rights of Certificateholders to receive distributions of interest will be
subordinated to the rights of the Noteholders to receive payment in full of all
amounts of interest and principal which the Noteholders are entitled to be paid
on such Distribution Date.
Distribution of Principal
On each Distribution Date prior to the Cross-Over Date, the
Certificateholders will not be entitled to any payments of principal, except to
the extent of the Principal Liquidation Loss Amount.
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On each Distribution Date on and after the Cross-Over Date, principal of
the Certificates will be payable, subject to the remaining Available Amount and
the Guarantee Payment Limit, in an amount equal to the Principal Distribution
Amount for the related Due Period. Such principal payments will be funded to the
extent of the Available Amount remaining after the Servicer has been reimbursed
for any outstanding Monthly Advances and has been paid the Servicer Payment, and
payment of interest and principal in respect of the Notes, if any, and interest
in respect to the Certificates has been made or, to the extent such Available
Amount is insufficient, will be funded through a payment under the Limited
Guarantee, subject to the Guarantee Payment Limit. The rights of
Certificateholders to receive distributions of interest and principal will be
subordinated to the rights of Noteholders to receive distributions of interest
and principal and to the extent described herein. The principal balance of the
Certificates, to the extent not previously paid, will be due on the Certificate
Final Scheduled Distribution Date. The actual date on which the aggregate
outstanding principal amount of the Certificates is paid may be earlier than the
Certificate Final Scheduled Distribution Date based on a variety of factors.
On each Distribution Date, prior to the Cross-Over Date, the
Certificateholders will be entitled to receive, subject to the remaining
Available Amount and the Guarantee Payment Limit, the Principal Liquidation Loss
Amount for such Distribution Date. Such principal payments will be funded to the
extent of the Available Amount remaining after the Servicer has been reimbursed
for any outstanding Monthly Advances and has been paid the Servicer Payment, the
principal and interest due on the Notes has been paid and the interest on the
Certificates has been paid, or to the extent such remaining Available Amount is
insufficient, will be funded through a payment under the Limited Guarantee,
subject to the Guarantee Payment Limit. The "Principal Liquidation Loss Amount"
for any Distribution Date will equal the amount, if any, by which the sum of the
aggregate outstanding principal balance of the Notes and the Certificate Balance
(after giving effect to all distributions of principal on such Distribution
Date) exceeds the sum of the Pool Balance plus the amounts remaining on deposit
in the Pre-Funding Account, if any, at the close of business on the last day of
the related Due Period. The Principal Liquidation Loss Amount represents future
principal payments on the Contracts that, because of the subordination of the
Certificates and liquidation losses on the Contracts, will not be paid to the
Certificateholders. See "--Subordination" below.
Redemption
In the event of an Optional Purchase or Auction Sale, the Certificates
will be redeemed at a redemption price equal to the Certificate Balance plus
accrued interest thereon at the Pass-Through Rate. An Optional Purchase of all
the Contracts by CITSF, may occur at CITSF's option, on any Distribution Date on
which the Pool Balance is 10% or less of the Initial Pool Balance (as
hereinafter defined). An Auction Sale will occur at any time, and may result in
the sale of the Contracts remaining in the Trust, within ten days following a
Distribution Date as of which the Pool Balance is 5% or less of the Initial Pool
Balance.
If an Insolvency Event with respect to the Affiliated Purchaser occurs,
the Indenture Trustee (or, if no Notes are outstanding, the Owner Trustee) will
promptly sell, dispose of or otherwise liquidate the Contracts in a commercially
reasonable manner on commercially reasonable terms, except under certain limited
circumstances. The proceeds from any such sale, disposition or liquidation of
the Contracts will be treated as collections on the Contracts and deposited in
the Collection Account. If the proceeds from the liquidation of the Contracts
and any amounts on deposit in the Note Distribution Account and the Certificate
Distribution Account are not sufficient to pay the Notes and Certificates in
full, distributions will be made first, to the payment of interest and principal
on the Notes and second, to the payment of interest and principal on the
Certificates. In such event, the amount of principal returned to the
Certificateholders will be reduced and such Certificateholders will incur a
loss, except to the extent of payments under the Limited Guarantee.
Subordination
The rights of Certificateholders to receive distributions of interest and
principal are subordinated to the rights of Noteholders to receive payment in
full of all amounts of interest and principal to which the Noteholders are
entitled to receive on the related Distribution Date. Consequently, no
distribution will be made to the Certificateholders on any Distribution Date
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(except pursuant to the Limited Guarantee) in respect of (i) interest or
principal until the full amount of interest and principal on the Class A Notes
payable on such Distribution Date has been distributed to the Class A
Noteholders and (ii) principal until the Class A Notes have been paid in full,
other than distributions in respect of the Principal Liquidation Loss Amount.
The only credit enhancement for the Certificates is the Limited Guarantee
or, if Alternate Credit Enhancement has been delivered, such Alternate Credit
Enhancement. The aggregate amount of Guarantee Payments made under the Limited
Guarantee will not, except under certain limited circumstances specified in the
Sale and Servicing Agreement, exceed the Initial Guarantee Payment Limit.
Guarantee Payments under the Limited Guarantee will reduce the Guarantee Payment
Limit. Once the Guarantee Payment Limit has been reduced, it will not be
reinstated except if certain conditions set forth in the Sale and Servicing
Agreement are met. See "The Purchase Agreements and The Trust Documents--Credit
Enhancement--Limited Guarantee". At any time that the Guarantee Payment Limit
(or the amount available under any Alternate Credit Enhancement) has been
reduced to zero, holders of Certificates will bear the risk of all liquidation
losses on the Defaulted Contracts and may suffer a loss. The Certificate Balance
will be reduced to the extent that prior to the Cross-Over Date distributions
are not made in respect of the Principal Loss Liquidation Amount and on or after
the Cross-Over Date distributions are not made in respect of the Principal
Distribution Amount. As a result of such reductions, less interest will accrue
on the Certificates than would otherwise be the case.
CERTAIN INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Persons acquiring beneficial ownership interests in the Securities may
hold their interests through DTC in the United States or, in the case of the
Notes, Cedel or Euroclear in Europe and persons acquiring beneficial ownership
interests in the Certificates may hold their interests through DTC. Securities
will be registered in the name of Cede as nominee for DTC. Cedel and Euroclear
will hold omnibus positions with respect to the Notes on behalf of Cedel
Participants and Euroclear Participants, respectively, through customers'
securities accounts in Cedel's and Euroclear's name on the books of their
respective depositories (collectively, the "Depositories") which in turn will
hold such positions in customers' securities accounts in the Depositories' names
on the books of DTC. For additional information regarding clearance and
settlement procedures see Annex I hereto.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC accepts securities for deposit from its
participating organizations ("Participants") and facilitates the clearance and
settlement of securities transactions between Participants in such securities
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers (including the Underwriter), banks and trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Security Owners who are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of Securities may do so
only through Participants or Indirect Participants (unless and until Definitive
Securities are issued). In addition, Security Owners will receive all
distributions of principal and interest on the Securities through DTC and its
Participants. Under a book-entry format, Security Owners may experience some
delay in their receipt of payments, since such payments will be forwarded by the
Trustees to Cede, as nominee for DTC. DTC will forward such payments to its
Participants which thereafter will forward them to Indirect Participants or
Security Owners. It is anticipated that the only "Holder" or "Securityholder,"
as such terms are used herein, will be Cede, as nominee of DTC. Security Owners
will not be recognized by the Trustees as Securityholders, as such term will be
used in the Sale and Servicing Agreement, and Security Owners will only be
permitted to exercise the rights of Securityholders indirectly through DTC and
its Participants. Security Owners will not receive or be entitled to receive
Definitive Notes or Definitive Certificates representing their respective
interests in the Securities, except under the limited circumstances described
below.
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Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Because of time zone differences, credits of securities received in Cedel
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date, such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participants on such business day. Cash received in Cedel or Euroclear as
result of sales of Securities by or through a Cedel Participant or Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly or indirectly holding
Notes through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC Rules on behalf of the relevant European international
clearing system by its Depository; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterpart in such system in accordance with its rules and
procedures and within its established deadline (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depository to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions to the Depositories.
While the Securities are outstanding (except under the circumstances
described below), under the rules, regulations and procedures creating and
affecting DTC and its operations (the "DTC Rules"), DTC will be required to make
book-entry transfers among Participants on whose behalf it acts with respect to
the Notes and Certificates and will be required to receive and transmit
distributions of principal and interest on the Securities. Participants and
Indirect Participants with which Security Owners have accounts with respect to
the Securities will be similarly required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Security
Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, the ability of a Security Owner to pledge Notes
or Certificates to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such Securities, may be limited
due to the lack of physical certificates for such Securities.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trusts companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participants, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for its
participants ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled in any of 32 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by the Brussels, Belgium
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Office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance Systems, 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 Operators, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of the dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear thorough, or
maintain a custodial relationship with a Euroclear Participants, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will
be credited to the cash accounts of Cedel Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depository. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a beneficial holder of notes under the Indenture on behalf of a
Cedel Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Depository ability to effect such
actions on its behalf through DTC.
Unless and until Definitive Securities are issued, Security Owners who are
not Participants may transfer ownership of Notes and Certificates only through
Participants by instructing such Participants to transfer such Notes and
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Securities, which account is maintained with their respective
Participants. Under the DTC Rules and in accordance with DTC's normal
procedures, transfers of ownership of Securities will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited. Similarly, the respective Participants will make debits or credits, as
the case may be, on their records on behalf of the selling and purchasing
Securities Owners.
DTC has advised the Company and the Trustees that, unless and until
Definitive Securities are issued, DTC will take any action permitted to be taken
by a Securityholder under the Sale and Servicing Agreement only at the direction
of one or more Participants to whose DTC accounts the Securities are credited.
DTC may take conflicting actions with respect to other undivided interests to
the extent that such actions are taken on behalf of Participants whose holdings
include such undivided interests.
NEITHER THE TRUST, THE SELLER, THE SERVICER, CIT, THE AFFILIATED
PURCHASER, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE NOR ANY OF THE UNDERWRITERS
WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL
PARTICIPANTS OR EUROCLEAR PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS
NOMINEES WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC,
CEDEL, EUROCLEAR OR ANY PARTICIPANT (2) THE PAYMENT BY DTC, CEDEL, EUROCLEAR OR
ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE
PRINCIPAL AMOUNT OF, OR INTEREST ON, THE SECURITIES, (3) THE DELIVERY BY ANY
PARTICIPANT, CEDEL PARTICIPANT, EUROCLEAR PARTICIPANT OF ANY NOTICE TO ANY
BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE
OR THE TRUST AGREEMENT TO BE GIVEN TO SECURITYHOLDERS OR (4) ANY OTHER ACTION
TAKEN BY DTC AS THE SECURITYHOLDER.
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Definitive Securities
The Notes and Certificates will be issued in fully registered,
certificated form ("Definitive Notes" and "Definitive Certificates",
respectively, and, together "Definitive Securities") to Security Owners or their
nominees, rather than to DTC or its nominee, only if (i) the Servicer advises
the Trustees in writing that DTC is no longer willing or able to discharge
properly its responsibilities as Depository with respect to the Securities and
the Trustees or the Servicer is unable to locate a qualified successor, (ii) the
Servicer, at its option, elects to terminate the book-entry system through DTC
or (iii) after the occurrence of an Event of Default, Note Owners and
Certificate Owners representing in the aggregate not less than a majority of the
Notes Principal Balance or Certificate Principal Balance advise DTC through
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interest of such Note Owners
or Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee is required to notify DTC of the availability
of Definitive Securities. Upon surrender by DTC of the global notes and global
certificates representing the Notes and Certificates and instructions for
re-registration, the Trustee will issue the Notes as Definitive Notes and the
Certificates as Definitive Certificates, and thereafter the Trustee will
recognize the holders of such Definitive Notes and Definitive Certificates as
Noteholders and Certificateholders, respectively under the Sale and Servicing
Agreement ("Noteholders" and "Certificateholders" respectively, and together
"Securityholders" or "Holders").
Distributions of principal of the Securities and interest on the
Securities will be made by the Trustee directly to Holders in accordance with
the procedures set forth herein and in the Sale and Servicing Agreement.
Distributions of principal and interest on each Distribution Date will be made
to Holders in whose names the Definitive Securities were registered on the
Record Date. Such distributions will be made by check mailed to the address of
such Holder as it appears on the register maintained by the Trustee or the
Security Registrar. The final payment on any Securities (whether Definitive
Securities or the Securities registered in the name of Cede representing the
Securities), however, will be made only upon presentation and surrender of such
Note or Certificate at the office or agency specified in the notice of final
distribution to Holders.
Definitive Securities will be transferable and exchangeable at the offices
of the Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
List of Security Holders
If Definitive Certificates have been issued, the Owner Trustee will, upon
written request by three or more Certificateholders or by holders of
Certificates evidencing not less than 25% of the Certificate Balance, within
five (5) Business Days afford such 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 Purchase
Agreements and the Trust Documents (provided such Certificateholders (i) state
that they wish to communicate with other Certificateholders with respect to
their rights under the Purchase Agreements, the Trust Documents or under the
Certificates and (ii) provide the Trustee and the Servicer with a copy of the
proposed communication). The Purchase Agreements and Trust Documents will not
provide for the holding of any annual or other meetings of Certificateholders.
If Definitive Notes have been issued, the Indenture Trustee will, upon
written request by three or more Noteholders or by holders of Notes evidencing
not less than 25% of the aggregate principal balance of the Notes, within five
(5) Business Days afford such 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 (provided such Noteholders (i)
state that they wish to communicate with other Noteholders with respect to their
rights under the Indenture and (ii) provide the Trustee and the Servicer with a
copy of the proposed communication). The Indenture will not provide for the
holding of any annual or other meetings of Noteholders.
Statements to Securityholders
On each Distribution Date, the Servicer will include with each
distribution to each Securityholder a statement, setting forth the following
information for the related Due Period:
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(i) the amount of the distribution allocable to principal of the Notes
and to the Certificate Balance of the Certificates, including any overdue
principal;
(ii) the amount of the distribution allocable to interest on or with
respect to each class of Securities, including any overdue interest;
(iii) the Pool Balance, the Note Pool Factor and the Certificate Pool
Factor as of the end of the related Due Period;
(iv) the Servicing Fee for the related Due Period, including any
overdue Servicing Fee;
(v) the amount of Monthly Advances and Non-Reimbursable Payments on
such date;
(vi) the aggregate principal balance of all Contracts which were
delinquent 30 days or more as of the last day of the related Due Period;
(vii) during the Funding Period, the amount of funds on deposit in the
Pre-Funding Account;
(viii) during the Funding Period, the number and aggregate principal
balance of Subsequent Contracts;
(ix) during the Funding Period, the number and aggregate principal
balance of Subsequent Contracts purchased by the Trust on the related
Distribution Date;
(x) the aggregate outstanding principal balance of the Notes as of
such Distribution Date after giving effect to any distributions on such
Distribution Date; and
(xi) the Certificate Balance as of such Distribution Date (after
giving effect to any distributions on such Distribution Date).
Within a reasonable period of time after the end of each calendar year, but
not later than the latest date permitted by law, the Servicer will furnish to
each person who at any time during such calendar year shall have been a
Securityholder a statement containing the sum of the amounts described in
clauses (i) through (xi) above for such calendar year for the purposes of such
Certificateholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Consequences".
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THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
The following summary describes certain terms of the Purchase Agreement and
any Subsequent Purchase Agreement (together, the "Purchase Agreements") and the
Sale and Servicing Agreement, any Subsequent Transfer Agreements and the Trust
Agreement (together, the "Trust Documents"). Forms of the Purchase Agreements
and the Trust Documents have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part. This summary does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
all of the provisions of the Purchase Agreements and the Trust Documents.
Sale and Assignment of the Contracts
On or prior to the Closing Date and each Subsequent Transfer Date, pursuant
to a Purchase Agreement between CITSF and the Company, CITSF will sell and
assign to the Company, without recourse, its entire interest in and to the
Initial Contracts and Subsequent Contracts, respectively, including its security
interests in the related Financed Vehicles. On the Closing Date and each
Subsequent Transfer Date, the Company will sell and assign to the Owner Trustee,
without recourse, all of its right, title and interest in and to such Contracts,
including its security interests in the Financed Vehicles. Certain of the
Contracts will be purchased by CITSF from CITCF-NY before they are sold to the
Company. Each Contract will be identified in a schedule appearing as an exhibit
to each of the Purchase Agreement and the Sale and Servicing Agreement (the
"List of Contracts") which includes, among other things, the Contract Rate,
Initial Cut-off Date Principal Balance and date of the last scheduled payment
for each Contract. The Owner Trustee will, concurrently with the sale and
assignment of the Initial Contracts to it pursuant to the Sale and Servicing
Agreement, execute, authenticate and deliver the Notes and Certificates to the
Company in exchange for the Initial Contracts. The Company will sell the Notes
and the Certificates to the Underwriters.
CITSF will make certain representations and warranties in the Sale and
Servicing Agreement with respect to each Initial Contract as of the Closing
Date, including that (i) as of the Initial Cut-off Date, the most recent
scheduled payment of principal and interest was made by or on behalf of the
related Obligor or was not delinquent more than 60 days; (ii) no provision of a
Contract has been waived, altered or modified in any respect, except by
instruments or documents contained in the Contract File; (iii) each Contract is
a legal, valid and binding obligation of the related Obligor and is enforceable
in accordance with its terms (except as may be limited by laws affecting
creditors' rights generally); (iv) no right of rescission, set-off, counterclaim
or defense, including the defense of usury, has been asserted with respect to
any Contract; (v) the Obligor on each Contract is required to maintain physical
damage insurance covering the related Financed Vehicle in accordance with
CITSF's normal requirements; (vi) each Contract was originated by a Dealer and
was purchased by CITSF in the ordinary course of its business; (vii) no Contract
was originated in or is subject to the laws of any jurisdiction whose laws would
make the transfer of the Contract to the Company under the Purchase Agreement,
to the Owner Trustee pursuant to the Sale and Servicing Agreement or pursuant to
a transfer of the Notes and Certificates, or the ownership of the Contracts by
the Trust, unlawful; (viii) each Contract complies with all requirements of law
in all material respects; (ix) no Contract has been satisfied, subordinated in
whole or in part or rescinded, and no Financed Vehicle has been released from
the lien of the related Contract in whole or in part; (x) each Contract creates
a valid and enforceable first priority security interest in favor of CITSF or
the related Dealer in the Financed Vehicle covered thereby (which security
interest, if in favor of the related Dealer, has been assigned to CITSF), such
security interest has been assigned by CITSF to the Company and by the Company
to the Trust, and all necessary action with respect to such Contract has been
taken to perfect the security interest in the related Financed Vehicle in favor
of CITSF; (xi) all parties to each Contract had capacity to execute such
Contract; (xii) no Contract has been sold, assigned or pledged by CITSF to any
person other than the Company (or by the Company to any person other than the
Trust) and, prior to the transfer of the Contracts by CITSF to the Company and
the transfer thereof by the Company to the Trust, CITSF or the Company,
respectively, had good and marketable title to each Contract, free and clear of
any encumbrance, equity, loan, pledge, charge, claim or security interest, and
was the sole owner and had full right to transfer such Contract to the Company;
(xiii) as of the Initial Cut-off Date, there was no default, breach, violation
or event permitting acceleration under any Contract (except for payment
delinquencies permitted by clause (i) above), no event which with notice and the
expiration of any grace or cure period would constitute a default, breach,
violation or event permitting acceleration under such Contract, and CITSF has
not waived any of the foregoing; (xiv) there are, to the best of CITSF's
knowledge, no liens or claims which have been filed for work, labor or materials
affecting a Financed Vehicle securing a Contract, which are or may be liens
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prior or equal to the lien of the Contract; (xv) each Contract is a
fully-amortizing loan with a fixed Contract Rate and provides for level payments
over the term of such Contract; (xvi) each Contract contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for realization against the collateral of the benefits of the
security (except as may be limited by creditors' rights generally); (xvii) the
description of each Contract set forth in the List of Contracts is true and
correct; (xviii) no Obligor is the United States of America or any state or any
agency, department, instrumentality or political subdivision thereof; (xix) if
the Obligor is in the military (including an Obligor who is a member of the
National Guard or is in the reserves) and the Contract is subject to the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Soldiers' and
Sailors' Civil Relief Act"), or the California Military Reservist Relief Act of
1991 (the "Military Reservist Relief Act"), such Obligor (each, a "Relief Act
Obligor") has not made a claim to CITSF that (A) the amount of interest on the
Contract should be limited to 6% pursuant to the Soldiers' and Sailors' Civil
Relief Act during the period of such Obligor's active duty status or (B)
payments on the Contract should be delayed pursuant to the Military Reservist
Relief Act, in either case unless a court has ordered otherwise upon application
of CITSF; (xx) there is only one original executed copy of each Contract, which,
immediately prior to the execution of the Sale and Servicing Agreement, was in
the possession of CITSF; (xxi) the Contract is "chattel paper" as defined in the
New Jersey UCC; and (xxii) the Contract satisfies the selection criteria
discussed above under "The Contract Pool--General."
The Sale and Servicing Agreement will require CITSF to make the same
representation and warranties with respect to each individual Subsequent
Contract as it is required to make with respect to each Initial Contract sold to
the Trust except that each such representation and warranty shall be made as of
the Subsequent Transfer Date relating to such Subsequent Contract. In addition,
no Subsequent Contract will be sold to the Trust on a Subsequent Transfer Date
unless such Subsequent Contract satisfies the criteria described in the fourth
paragraph under the heading "The Contract Pool--General." The Subsequent
Financed Vehicles will consist of motor homes, travel trailers and other types
of recreational vehicles.
Under the terms of the Sale and Servicing Agreement and subject to certain
conditions specified in the Sale and Servicing Agreement, CITSF will be
obligated to purchase for the Purchase Price (as defined below) any Contract not
later than 90 days after CITSF becomes aware, or 85 days after CITSF's receipt
of written notice from either Trustee or the Servicer, of a breach of any
representation or warranty of CITSF in the Sale and Servicing Agreement referred
to in the preceding paragraph that materially adversely affects the Trust's
interest in any Contract if such breach has not been cured. CITSF shall effect
such purchase by depositing the Purchase Price for such Contract in the
Certificate Account on the date specified in the Sale and Servicing Agreement.
The "Purchase Price" for any Contract will be the remaining principal amount
outstanding on such Contract on the date of purchase, 30 days' interest thereon
in an amount equal to the sum of (i) the product of one-twelfth of the weighted
average of the Pass-Through Rate and of the Class A Rate and the remaining
principal amount outstanding on the Contract and (ii) accrued and unpaid
Servicing Fees thereon at the Servicing Fee Rate to the date of such purchase.
This purchase obligation constitutes the sole remedy available to the Trust and
the Securityholders for a breach of a warranty under the Sale and Servicing
Agreement with respect to the Contracts (but not with respect to any other
breach by CITSF of its obligations under the Sale and Servicing Agreement).
To reduce administrative costs, the Owner Trustee will appoint the Servicer
as initial custodian of the Contracts. The Contracts will not be stamped or
otherwise marked to reflect the transfer of the Contracts by CITSF to the
Company and by the Company to the Trust, and will not be segregated from the
other installment sale contracts of CITSF. CITSF's accounting records and
computer systems will reflect the sale and assignment of the Contracts by CITSF
to the Company and by the Company to the Trust, and UCC financing statements
perfecting such sale and assignment will be filed. The Obligors under the
Contracts will not be notified of the transfer of the Contracts to the Company
or to the Trust. See "Certain Legal Aspects of the Contracts."
CITSF, the Company and the Trust will treat each of the transfers of the
Contracts from CITSF to the Company and from the Company to the Trust as a sale.
As a result of the sale of the Contracts by CITSF to the Company and by the
Company to the Trust, the Contracts will not be part of the assets of either
CITSF or the Company and should not be available to their respective creditors.
However, in the event of the insolvency of CITSF or the Company, it is possible
that a trustee in bankruptcy, conservator or receiver for, or a creditor of,
CITSF or the Company, as the case may be, may argue that the transaction between
CITSF and the Company or between the Company and the Trust, as the case may be,
was a pledge of the Contracts to secure a loan, rather than a true sale. This
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position, if asserted, could prevent timely payments of amounts due on the
Certificates and, if accepted by the court, may result in delays or reductions
in distributions of principal and interest on such Securities. Because the
Contracts will remain in CITSF's possession and will not be stamped or otherwise
marked to reflect the assignment to the Trust, the Trust's interest in the
Contracts could be defeated, if a subsequent purchaser were to take physical
possession of the Contracts without knowledge of the assignment. See "Certain
Legal Aspects of the Contracts."
Accounts
The Servicer will establish and maintain with the Indenture Trustee one or
more accounts, in the name of the Indenture Trustee on behalf of the Noteholders
and Certificateholders, into which all payments made on or with respect to the
Contracts will be deposited (the "Collection Account") by the Servicer. The
Servicer will establish and maintain with the Indenture Trustee an account in
the name of the Indenture Trustee on behalf of the Noteholders, in which amounts
released from the Collection Account for payment to the Noteholders will be
deposited and from which distributions to the Noteholders will be made (the
"Note Distribution Account"). The Servicer will establish and maintain with the
Owner Trustee an account in the name of the Owner Trustee on behalf of the
Certificateholders, in which amounts released from the Collection Account and
Guarantee Payments for payment to the Certificateholders will be deposited and
from which distributions to the Certificateholders will be made (the
"Certificate Distribution Account"). On and after the Trigger Date (as
hereinafter defined), if CIT (at its option) delivers the Nonreinstatement
Notice (as hereinafter defined), the Servicer shall establish and maintain with
the Owner Trustee an account in the name of the Owner Trustee on behalf of
Certificateholders, in which Excess Spread (as hereinafter defined) shall be
deposited (the "Certificate Reserve Account"). Amounts held in the Certificate
Distribution Account and the Certificate Reserve Account will not be available
to make payments of amounts due on the Notes, and will not be pledged to the
Indenture Trustee as collateral security for the Notes. CIT, the Company, the
Servicer and their affiliates shall have no obligation to deposit any of their
funds in the Certificate Reserve Account, or to replenish the funds in such
account once they have been exhausted.
All amounts held in each of the accounts established by the Servicer shall
be invested in Eligible Investments that mature not later than the Business Day
preceding the Distribution Date next succeeding the date of investment.
"Eligible Investments" are limited to investments, specified in the Sale and
Servicing Agreement, which meet the criteria of Moody's and Standard & Poor's
from time to time as being consistent with their then-current ratings of the
Securities.
Servicing Procedures
The Servicer will make reasonable efforts to collect all payments due with
respect to the Contracts and, in a manner consistent with the Sale and Servicing
Agreement, will continue such normal collection practices and procedures as it
follows with respect to comparable recreational vehicle installment sale
contracts it services for itself and others. See "Certain Legal Aspects of the
Contracts." Consistent with its normal procedures, the Servicer may, in its
discretion, arrange with an Obligor to extend or modify the payment schedule on
a Contract. Notwithstanding the foregoing, the Servicer may not extend the
stated maturity of a Contract beyond the last day of the Due Period ending
immediately prior to the Class A Final Scheduled Distribution Date. The Servicer
will follow such normal collection practices and procedures as it deems
necessary or advisable to realize upon any Contract with respect to which it
determines that eventual payment in full is unlikely or to realize upon any
Defaulted Contract. With respect to any Due Period, a "Defaulted Contract" means
any Contract (except for a Repurchased Contract) in respect of which payments
exceeding $25 in the aggregate were delinquent 120 days or more as of the last
day of such Due Period. The Servicer may sell the related Financed Vehicle
securing such Contract at a public or private sale, or take any other action
permitted by applicable law. See "Certain Legal Aspects of the Contracts." The
net proceeds of such realization will be deposited in the Collection Account.
Under the Sale and Servicing Agreement, the Servicer will be required to
use its best efforts to require the Obligors to obtain and maintain theft and
physical damage insurance on the Financed Vehicles in accordance with the
policies and procedures employed by the Servicer with respect to comparable new
or used recreational vehicle receivables that it services for itself or others.
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The Sale and Servicing Agreement provides that neither the Servicer nor the
Company, nor any director, officer, employee or agent of the Servicer or the
Company, will be under any liability to the Trust or the Securityholders for any
action taken or for restraining from the taking of any action in good faith
pursuant to the Sale and Servicing Agreement, or for errors in judgment;
provided, however, that the Servicer, the Company or any such person will not be
protected against any liability which would otherwise be imposed by reason of
the failure to perform its obligations in compliance with the standards of care
set forth in the Sale and Servicing Agreement. In the event that the Servicer or
the Company, in its discretion, undertakes any action which it deems necessary
or desirable in connection with its rights and duties under the Sale and
Servicing Agreement or the interests of the Securityholders thereunder, the
legal expenses and costs of such action and any liability resulting therefrom
will be expenses, costs and liabilities of the Trust and the Servicer and the
Company will be entitled to be reimbursed therefor out of the Collection
Account.
The Servicer shall keep in force throughout the term of the Agreement (i)
at such time as the long-term debt of its parent is rated less than "A" by
Standard & Poor's or less than "A3" by Moody's, policy or policies of insurance
covering errors and omissions for failure to maintain insurance as required by
the Sale and Servicing Agreement, and (ii) a fidelity bond. Such policy or
policies and such fidelity bond shall be in such form and amount as is generally
customary among persons which service a portfolio of recreational vehicle
contracts having an aggregate principal amount of $100 million or more and which
are generally regarded as servicers acceptable to institutional investors.
A breach of certain covenants made by CITSF as Servicer in the Sale and
Servicing Agreement that materially and adversely affects the Trust's interest
in any Contract, would require the Servicer to purchase such Contract unless
such breach is cured within the period specified in the Sale and Servicing
Agreement.
Servicing Compensation
The Servicer will be entitled to receive the Servicing Fee for each Due
Period, payable on the following Distribution Date, equal to the sum of (i) the
product of 1.00% per annum (the "Servicing Fee Rate") and the Pool Balance as of
the last day of the second preceding Due Period (or, in the case of the first
Distribution Date, as of the Initial Cut-off Date), based on the number of days
in such Due Period and a 365-day year and (ii) any investment earnings on
amounts on deposit in the Collection Account, the Note Distribution Account, the
Certificate Distribution Account and the Certificate Reserve Account. In
addition, the Servicer will be entitled to collect and retain any late fees,
prepayment charges, extension fees or other administrative fees or similar
charges allowed by applicable law with respect to the Contracts ("Late Fees").
Payments to the Servicer of such amounts will compensate the Servicer for
performing the functions of a third party servicer of recreational vehicle
receivables as an agent for the Trustee, including collecting and posting all
payments, responding to inquiries of Obligors, investigating delinquencies,
reporting federal income tax information to Obligors, paying costs of
disposition of defaults, monitoring the collateral in cases of Obligor default
and handling the foreclosure or other liquidation of the Financed Vehicle in
appropriate instances.
The Servicing Fee and Late Fees also will compensate the Servicer for
administering the Contracts, including reimbursing the Servicer for accounting
for collections, furnishing monthly and annual statements to the Trustee with
respect to distributions and generating federal income tax information. The
Servicing Fee and Late Fees also will compensate the Servicer for certain taxes,
accounting fees, outside auditor fees, data processing costs and other costs
incurred in connection with administering and servicing the Contracts.
Collections
The Servicer will deposit all payments on or with respect to the Contracts
received from obligors and all proceeds of Contracts collected during each Due
Period into the Collection Account not later than two Business Days after
receipt. However, at any time that (i) CITSF remains the Servicer under the Sale
and Servicing Agreement and The CIT Group Holdings, Inc. (the parent of the
Servicer) has and maintains a short-term debt rating of "A1" or higher by
Moody's and "P-1" by Standard & Poor's (the "Required Servicer Ratings"), or
(ii) the Servicer obtains a letter of credit, surety bond or insurance policy
(the "Servicer Letter of Credit") as provided in the Sale and Servicing
Agreement under which demands for payment will be made to secure timely
remittance of monthly collections to the Collection Account and, in the case of
clause (ii) above, the Trustees are provided with a letter from each Rating
Agency to the effect that the utilization of such alternative remittance
schedule will not result in a qualification, reduction or withdrawal of its
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then-current rating of the Securities, the Servicer will not be required to
deposit payments by Obligors on the Contracts in the Collection Account within
two Business Days of the date of processing. In such an event, the Servicer may
make such deposits on the Business Day immediately preceding the next
Distribution Date in an amount equal to the net amount of such deposits and
payments which would have been made had the conditions of the preceding sentence
not applied. In the event that the Servicer is permitted to make remittances of
collections to the Collection Account on a monthly basis pursuant to
satisfaction of the second condition described above, the Sale and Servicing
Agreement will be modified, to the extent necessary, without the consent of any
Securityholder. Pending deposit into the Collection Account, collections may be
invested by the Servicer at its own risk and for its own benefit and will not be
segregated from its own funds.
The Company, CITSF or the Servicer, as the case may be, will remit the
aggregate Purchase Price of any Contracts to be purchased from the Trust into
the Collection Account on or before the Business Day immediately preceding the
related Distribution Date.
The Servicer will not be required to deposit in the Collection Account
amounts relating to the Contracts attributable to the following: (a) amounts
received with respect to each Contract (or property acquired in respect thereof)
that has been purchased by CITSF, the Servicer or the Company pursuant to the
Sale and Servicing Agreement and that are not required to be distributed to
Securityholders, (b) net investment earnings on funds deposited in the
Collection Account, (c) amounts received as Late Fees, (d) amounts to be
reimbursed to the Servicer in respect of unrecoverable Monthly Advances, (e)
amounts received in respect of the amounts, if any, of insurance premiums added
to the principal balance of a Contract after the Initial Cut-off Date for each
such Initial Contract, or after the related Subsequent Cut-off Date for each
such Subsequent Contract, and (f) amounts received as liquidation proceeds, to
the extent the Servicer is entitled to reimbursement of liquidation expenses
related hereto.
Monthly Advances
With respect to each Contract as to which there has been an Interest
Shortfall during the related Due Period (other than an Interest Shortfall
arising from a Contract which has been prepaid in full or which has been subject
to a Relief Act Reduction during the related Due Period), the Servicer shall
advance funds in the amount of such Interest Shortfall (each, a "Monthly
Advance") but only to the extent that the Servicer, in its good faith judgement,
expects to recover such Monthly Advance from subsequent collections with respect
to interest on such Contract made by or on behalf of the Obligor thereunder (the
"Obligor"), net liquidation proceeds or insurance proceeds with respect to such
Contract. The Servicer shall be reimbursed for any Monthly Advance from
subsequent collections with respect to such Contract. If the Servicer determines
in its good faith judgement that an unreimbursed Monthly Advance shall not
ultimately be recoverable from such collections, the Servicer shall be
reimbursed for such Monthly Advance from collections on all Contracts. The
Servicer will not advance funds in respect of the principal component of any
scheduled payment.
"Interest Shortfall" means with respect to any Contract and any
Distribution Date, the excess of (x) the sum of (i) the product of one-twelfth
of the weighted average of the Pass-through Rate and the Class A Rate multiplied
by the outstanding principal amount of such Contract as of the last day of the
second preceding Due Period (or, in the case of the first Due Period, as of the
Initial Cut-off Date) calculated on the basis of a 360-day year comprised of
twelve 30-day months and (ii) the product of (A) the Servicing Fee Rate, (B) the
outstanding principal amount of such Contracts as of the last day of the second
preceding Due Period (or, in the case of the first Due Period, as of the Initial
Cut-off Date) and (C) a fraction, the numerator of which is the number of days
in the related Due Period and the denominator of which is 365, over (y) the
amount of interest collected on such Contract in the related Due Period.
The Servicer will remit any Monthly Advance with respect to each Due
Period into the Collection Account not later than the Business Day preceding the
next following Distribution Date.
Non-Reimbursable Payment
When a payment of principal is made on or in respect of a Contract,
interest is paid on the unpaid principal balance of such Contract only to the
date of such payment. With respect to each Contract as to which there has been
an Interest Shortfall in the related Due Period arising from either a prepayment
in full of such Contract or a Relief Act Reduction in respect of such Contract
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during such Due Period, the Sale and Servicing Agreement will require the
Servicer to deposit into the Collection Account on the Business Day immediately
preceding the following Distribution Date, without the right of subsequent
reimbursement, an amount equal to such Interest Shortfall (a "Non-Reimbursable
Payment").
Distributions
On or before the Determination Date preceding a Distribution Date, the
Servicer will make a determination and inform the Indenture Trustee and the
Owner Trustee of the following amounts with respect to the preceding Due Period:
(i) the aggregate amount of collections on the Contracts; (ii) the aggregate
amount of Monthly Advances to be remitted by the Servicer; (iii) the aggregate
Purchase Price of Contracts to be purchased by CITSF or the Servicer; (iv) the
aggregate amount to be distributed as principal and interest on the Notes on the
related Distribution Date; (v) the aggregate amount to be distributed as
principal and interest on the Certificates on the related Distribution Date;
(vi) the Servicing Fee; (vii) the Guarantee Fee; and (viii) the aggregate amount
of Non-Reimbursable Payments, all as described below.
The "Available Amount" on any Distribution Date is equal to all amounts on
deposit in the Collection Account attributable to collections or deposits made
in respect of such Contracts in the related Due Period less the following
amounts (to the extent that the Servicer has not already withheld such amounts
from collections on the Contracts) any repossession profits on defaulted
Contracts, Liquidation Expenses (as defined in the Sale and Servicing Agreement)
incurred and taxes and insurance advanced by the Servicer in respect of Financed
Vehicles that are reimbursable to the Servicer under the Sale and Servicing
Agreement; any amounts incorrectly deposited in the Collection Account; and net
investment earnings on the funds in the Collection Account due to the Servicer
pursuant to the Sale and Servicing Agreement and any other amounts permitted to
be withdrawn from the Collection Account by the Servicer (or to be retained by
the Servicer from collections on the Contracts) pursuant to the Sale and
Servicing Agreement.
On each Distribution Date the Indenture Trustee will withdraw the Available
Amount from the Collection Account to make the following payments (to the extent
sufficient funds are available therefor) in the following order:
(a) the aggregate amount of any unreimbursed Monthly Advances made by
the Servicer (and which are then due to be reimbursed to the Servicer)
shall be paid to the Servicer;
(b) the Servicing Fee, including any overdue Servicing Fee, will (to
the extent not previously retained by the Servicer) be paid to the
Servicer;
(c) the Class A Interest Distribution Amount, including any overdue
Class A Interest Distribution Amount will be deposited into the Note
Distribution Account, for payment to the Noteholders;
(d) prior to the Cross-over Date, the Principal Distribution Amount,
including any overdue Principal Distribution Amount, will be deposited into
the Note Distribution Account, for payment to the Noteholders;
(e) the Certificate Interest Distribution Amount, including any
overdue Certificate Interest Distribution Amount will be deposited into the
Certificate Distribution Account, for payment to the Certificateholders;
(f) prior to the Cross-over Date, the Principal Liquidation Loss
Amount, if any, will be deposited into the Certificate Distribution
Account, for payment to the Certificateholders;
(g) subsequent to the Cross-over Date, the Principal Distribution
Amount, including any overdue Principal Distribution Amount;
(h) the Guarantee Fee (as hereinafter defined), including any overdue
Guarantee Fees, will be paid to CIT (or the fees due to any Alternate
Credit Enhancer will be paid to it);
(i) amounts, if any, required to be deposited in the Certificate
Reserve Account on and after the Trigger Date and delivery by CIT of the
Nonreinstatement Notice (each, as hereinafter defined); and
(j) the balance, if any, will be distributed to the Affiliated
Purchaser (provided that, if any amounts are due to the Alternate Credit
Enhancer or are to be transferred to any account for the benefit of the
Alternate Credit Enhancer, such amounts shall be so deposited or so paid
prior to any distribution to the Affiliated Purchaser).
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To the extent that the Available Amount is insufficient to satisfy the
distributions set forth in clauses (e), (f) or (g) on any Distribution Date, (i)
amounts shall be withdrawn from the Certificate Reserve Account, if such account
has been established (see "Credit Enhancement"), and transferred to the
Certificate Distribution Account, and (ii) if the amount, if any, transferred
from the Certificate Reserve Account is not sufficient, the Guarantor shall make
a Guarantee Payment to the Certificate Distribution Account to satisfy such
distributions, subject to the Guarantee Payment Limit. See "--Credit
Enhancement-- Limited Guarantee" and "--Alternate Credit Enhancement" below.
Credit Enhancement
Subordination of Certificates. The rights of the Certificateholders to
receive distributions with respect to the Contracts will be subordinated to the
rights of the Class A Noteholders, to the limited extent described herein. This
subordination is intended to enhance the likelihood of timely receipt by Class A
Noteholders of the full amount of interest and principal required to be paid to
them, and to afford such Class A Noteholders limited protection against losses
in respect of the Contracts.
No distribution will be made to the Certificateholders on any Distribution
Date in respect of (i) interest or principal until the full amount of interest
and principal on the Class A Notes payable on such Distribution Date has been
distributed to the Class A Noteholders and (ii) principal until the Class A
Notes have been paid in full, other than distributions in respect of the
Principal Liquidation Loss Amount.
The protection afforded to the Class A Noteholders by the subordination
feature described above will be effected by the preferential right of the Class
A Noteholders to receive, to the extent described herein, current distributions
from collections on or in respect of the Contracts prior to the application of
such collections to making payments in respect of the Certificates. There is no
other protection against losses on the Contracts afforded the Class A Notes, and
the Limited Guarantee (and any Alternate Credit Enhancement, if any is provided,
or Certificate Reserve Account, if any is established) will not be available to
provide a source of funds to make payments of principal or interest on the
Notes.
Limited Guarantee. In order to mitigate the effect of the subordination of
the Certificates and liquidation losses on the Contracts, CIT will provide a
guarantee (the "Limited Guarantee") against losses that would otherwise be
absorbed by the Certificates. Each payment required to be made under the Limited
Guarantee is referred to as a "Guarantee Payment". Prior to the Cross-Over Date,
the "Guarantee Payment" will equal the lesser of (i) the amount, if any, by
which (a) the sum of (x) the amount of interest payable to the
Certificateholders for such Distribution Date, and (y) the Principal Liquidation
Loss Amount, if any, exceeds (b) the Available Amount remaining for distribution
to the Certificateholders after the Servicer has been reimbursed for any
outstanding Monthly Advances and has been paid the Servicer Payment and
distributions of interest and principal have been paid to the Noteholders on
such Distribution Date and (ii) the Guarantee Payment Limit. On or after the
Cross-Over Date, the "Guarantee Payment" will equal the lesser of (i) the
amount, if any, by which (a) the sum of the amount of interest and principal
payable to the Certificateholders on such Distribution Date exceeds (b) the
Available Amount remaining after the Servicer has been reimbursed for any
outstanding Monthly Advances and has been paid the Servicer Payment and (ii) the
Guarantee Payment Limit. On and after, the Trigger Date and delivery by CIT of
the Nonreinstatement Notice, the amount of the Guarantee Payment will be reduced
by the amount, if any, transferred from the Certificate Reserve Account.
The aggregate amount of Guarantee Payments made under the Limited Guarantee
(including the Principal Liquidation Loss Amount) will not, except under the
limited circumstances specified in the immediately following paragraph, exceed
$5,000,000 (the "Initial Guarantee Payment Limit"). The "Guarantee Payment
Limit" will at any time generally equal the Initial Guarantee Payment Limit
reduced by the amount of each Guarantee Payment made under the Limited
Guarantee. Once the Guarantee Payment Limit has been reduced, it will not be
reinstated except if certain conditions set forth in the immediately following
paragraph are met. At any time that the Guarantee Payment Limit (or the amount
available under any Alternate Credit Enhancement) has been reduced to zero,
holders of Certificates will bear the risk of all liquidation losses on the
Defaulted Contracts and may suffer a loss.
One each Distribution Date on and after the first Distribution
Date (the "Trigger Date") on which the Guarantee Payment Limit is less than
$4,000,000, unless CIT has delivered the "Nonreinstatement Notice" to the
Servicer and the Owner Trustee, the Guarantee Payment Limit will equal
an amount equal to the least of: (i) $5,000,000, (ii) the Certificate
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Balance, and (iii) the aggregate amount of the distributions, on and after the
Trigger Date, made to the Affiliated Purchaser of Excess Spread (as hereinafter
defined) plus the Guarantee Payment Limit for such Distribution Date calculated
as if there had been no reinstatement(s) thereof. The "Nonreinstatement Notice"
shall mean a written notice given by CIT to the Servicer and the Owner Trustee,
stating that the Guarantee Payment Limit shall not be reinstated.
If the Nonreinstatement Notice shall have been given by CIT, then on each
Distribution Date on and after the Trigger Date, the Available Amount remaining
after the application to the uses specified in clauses (a) through (h) under
"Distributions" above (the "Excess Spread") shall be deposited in the
Certificate Reserve Account, except to the extent that such deposit would cause
the sum of the balance (including cash and Eligible Investments, but excluding
investment earnings thereon) in such account (after the making of all payments
due on such Distribution Date) plus the Guarantee Payment Limit (calculated
without giving effect to the preceding paragraph) to exceed the Certificate
Reserve Account Maximum Balance. The "Certificate Reserve Account Maximum
Balance" is equal to the lesser of (i) $5,000,000, or (ii) the Certificate
Balance. If, on any Distribution Date, a Guarantee Payment would be required to
be made under the third preceding paragraph, funds shall be transferred from the
Certificate Reserve Account to the Certificate Distribution Account prior to
requesting any payment under the Limited Guarantee, and the amount so
transferred will reduce, pro tanto, the amount of such Guarantee Payment.
No Certificate Reserve Account will be established unless and until the
Trigger Date has occurred, the Nonreinstatement Notice has been given by CIT and
thereafter there is Excess Spread available for deposit in such account.
Therefore, it is possible that no such reserve account will be established for
the benefit of Certificateholders or that, if it is established, there may be
little or no Excess Spread available after the Trigger Date for deposit in such
account.
The Limited Guarantee will be an unsecured general obligation of CIT and
will not be supported by any letter of credit or other credit enhancement
arrangement. The Limited Guarantee will not benefit in any way, or result in any
payment to, the Noteholders.
The Sale and Servicing Agreement will specify the circumstances under which
distributions that would otherwise be paid to the Affiliated Purchaser will
instead (i) be paid to CIT to reimburse it for Guarantee Payments and interest
thereon, or (ii) be paid to the Alternate Credit Enhancer.
As compensation for providing the Limited Guarantee (or the Alternate
Credit Enhancement), CIT (or the Alternate Credit Enhancer) will be entitled to
receive a Guarantee Fee on each Distribution Date equal to 1/12 of the product
of 0.25% and the aggregate outstanding principal balance of the Contracts as of
the end of the second Due Period preceding such Distribution Date (or, in the
case of the first Distribution Date, the Initial Cut-off Date) (the "Guarantee
Fee").
The Limited Guarantee may be amended from time to time by CIT, the Servicer
and the Owner Trustee, without the consent of any of the Certificateholders, (i)
to correct manifest error, to cure any ambiguity, to correct or supplement any
provisions therein which may be inconsistent with any other provisions therein,
as the case may be, (ii) to add any other provisions with respect to matters or
questions arising under the Limited Guarantee which shall not be inconsistent
with the provisions of the Limited Guarantee, and (iii) to add or amend any
provisions as requested by Moody's, Standard & Poor's or another national
statistical rating organization in order to maintain or improve the rating of
the Certificates (it being understood that, after the rating required by the
Sale and Servicing Agreement has been obtained, neither the Owner Trustee, the
Company, CITSF or CIT is obligated to maintain or improve such rating);
provided, however, that such action in clause (iii) shall not, as evidenced by
an opinion of counsel for CIT, adversely affect in any material respect the
interests of any Certificateholder.
The Limited Guarantee may also be amended from time to time by CIT, the
Servicer and the Owner Trustee, with the consent of Holders of the Certificates
aggregating 51% or more of the Certificate Balance as of the preceding
Determination Date, for the purpose of adding any of the provisions to or
changing in any manner or eliminating any of the provisions of the Limited
Guarantee which shall not be inconsistent with the provisions of the Limited
Guarantee or of modifying in any manner the rights of the Certificateholders;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, any Guarantee Payment or (ii) grant by
contract or operation of law any defense to the payment of any Guarantee Payment
without the consent of the Holder of each Certificate affected thereby.
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Alternate Credit Enhancement
In the event that, at the Company's option, Alternate Credit Enhancement
(as defined herein) is provided and, upon prior written notice to the Rating
Agencies (as defined herein) such Rating Agencies shall have notified the
Company, the Servicer and the Trust in writing that the substitution of such
Alternative Credit Enhancement for the Limited Guarantee will not result in the
downgrade or withdrawal of the then current rating of the Notes or Certificates,
the Limited Guarantee shall be released and shall terminate. The Alternate
Credit Enhancement may consist of cash or securities deposited by CIT or another
Person in a segregated escrow or collateral account (an "Alternate Credit
Enhancement"). On each Distribution Date after delivery of the Alternate Credit
Enhancement, an amount, equal to the amount which would have been payable under
the Limited Guarantee, shall be transferred from such escrow account or
collateral account to the Certificate Distribution Account to make payments to
the Certificateholders. CIT shall have no obligation to replenish the funds on
deposit in any such escrow account or the collateral account once they have been
exhausted.
In connection with the delivery of such Alternate Credit Enhancement, the
Company, the Owner Trustee, the Indenture Trustee and the Servicer may execute
supplements to the Indenture, the Trust Agreement and the Sale and Servicing
Agreement to add provisions to, change or eliminate provisions of each such
document, establish accounts for the benefit of the Alternate Credit Enhancer,
grant security interests therein and provide for the investment of funds in any
such account, and grant other rights to such Alternate Credit Enhancer
incidental thereto, without the consent of the Noteholders or the
Certificateholders.
In connection with the delivery of Alternate Credit Enhancement, the
Company may, at its option, terminate the obligation to establish and maintain
the Certificate Reserve Account under the circumstances specified above (if the
conditions in the second preceding paragraph are satisfied).
Net Deposits
As an administrative convenience, the Servicer will under certain
circumstances be permitted to make deposits of collections, Monthly Advances,
Non-Reimbursable Payments and the aggregate Purchase Price of Contracts
purchased by it for, or with respect to, a Distribution Date net of
distributions to be made to the Servicer with respect to such Distribution Date
(including, without limitation, Servicing Fee, reimbursement of nonrecoverable
Monthly Advances and amounts to be deducted in the definition of "Available
Amount" set forth under "--Distributions" above). The Servicer, however, will
account to the Indenture Trustee, the Owner Trustee and to the Securityholders
as if all such deposits and distributions were made on an aggregate basis for
each type of payment or deposit.
Statements to Trustees and Trust
Prior to each Distribution Date, the Servicer will provide to the Indenture
Trustee and the Owner Trustee as of the close of business on the last day of the
preceding Due Period a statement setting forth substantially the same
information as is required to be provided in the periodic reports provided to
Securityholders described above under "Certain Information Regarding The
Securities--Statements to Securityholders".
Evidence as to Compliance
The Sale and Servicing Agreement will require the Servicer to deliver to
the Trustees a monthly report prior to each Distribution Date, setting forth
certain information regarding the Contract Pool and the Securities. Each such
report to the Trustees will be accompanied by a statement from an appropriate
officer of the Servicer certifying the accuracy of such report and stating that
the Servicer has not defaulted in the performance of its obligations under the
Sale and Servicing Agreement.
The Sale and Servicing Agreement will require that on or before April 1 of
each year, the Servicer will deliver to the Trustees a report of independent
public accountants stating that such firm has, with respect to the Servicer's
overall servicing operations, examined such operations in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers, and
stating such firm's conclusions relating thereto.
The Servicer will furnish to the Trustees such reasonably pertinent
underlying data as can be generated by the Servicer's existing data processing
system without undue modification or expense.
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Certain Matters Regarding the Servicer
The Sale and Servicing Agreement will provide that the Servicer may not
resign from its obligations and duties as Servicer thereunder, except upon
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. Such resignation will not become effective
until the Indenture Trustee or a successor Servicer has assumed the Servicer's
servicing obligations and duties under the Sale and Servicing Agreement.
The Sale and Servicing Agreement will further provide that neither the
Servicer nor any of its directors, officers, employees and agents shall be under
any liability to the Trustee, the Trust or the Noteholders or Certificateholders
for taking any action or for refraining from taking any action pursuant to the
Sale and Servicing Agreement, or for errors in judgment; provided, however, that
neither the Servicer nor any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations and duties thereunder. In addition, the Sale and Servicing
Agreement will provide that the Servicer is under no obligation to appear in,
prosecute or defend any legal action that is not incidental to the Servicer's
servicing responsibilities under the Sale and Servicing Agreement and that, in
its opinion, may cause it to incur any expense or liability. The Servicer may,
however, undertake any reasonable action that it may deem necessary or desirable
in respect of the Sale and Servicing Agreement and the rights and duties of the
parties thereto and the interests of the Noteholders and Certificateholders
thereunder.
Any corporation or other entity into which the Servicer may be merged or
consolidated, or any corporation or other entity resulting from any merger,
conversion or consolidation to which the Servicer is a party, or any corporation
or other entity succeeding to the business of the Servicer, which corporation or
other entity assumes the obligations of the Servicer, will be the successor of
the Servicer under the Sale and Servicing Agreement.
Physical Damage Insurance
The Sale and Servicing Agreement will provide that the Servicer, in
accordance with its customary servicing procedures, shall require that each
Obligor shall have obtained and shall maintain physical damage insurance
covering the Financed Vehicle. The Servicer shall enforce its rights under the
Contracts to require the Obligors to maintain physical damage insurance, in
accordance with the Servicer's customary practices and procedures with respect
to comparable new or used recreational vehicle installment sale contracts that
it services for itself or others. If an Obligor fails to maintain such
insurance, the Servicer shall obtain and advance on the behalf of such Obligor,
as required under the terms of the insurance policy, the premiums for such
insurance, with uninsured physical damage loan insurance endorsements, each
naming the Servicer as an additional insured and loss payee (such insurance
being referred to herein as "Force-Placed Insurance"). Such Force-Placed
Insurance shall be, to the extent permitted by law and in accordance with
customary servicing procedures, in an amount at least equal to the outstanding
principal balance of the related Contract. The Servicer does not, under its
customary servicing procedures, require Force-Placed Insurance when the
principal balance of the related Contract falls below the level or levels
periodically established in accordance with such customary servicing procedures.
In accordance with such customary servicing procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or arrange
other methods of protection of the Financed Vehicles that it deems necessary or
advisable, provided that the Servicer determines that such actions do not
materially and adversely affect the interests of the Certificateholders or the
Noteholders. Any portion of the principal balance of a Contract consisting of
Force-Placed Insurance acquired after the Initial Cut-off Date, or the related
Subsequent Cut-off Date, will not be owned by the Trust, and amounts allocable
thereto will not be available for distribution on the Securities. The Servicer
shall not deposit payments posted with respect to such Force-Placed Insurance in
the Collection Account and shall instead promptly pay such amounts to an account
of the Servicer maintained for that purpose. In the event that an Obligor under
a Contract with respect to which the Servicer has advanced funds to obtain
Force-Placed Insurance makes scheduled payments under the Contract, but has
failed to make scheduled payments of such Force-Placed Insurance as due, and the
Servicer has determined that eventual payment of such amount is unlikely, the
Servicer may, but shall not be required to, take any action available to it,
including determining that the related Contract is a Defaulted Contract;
provided, however, that any Net Liquidation Proceeds with respect to such
Contract shall be applied first to the accrued and unpaid interest at the
Contract Rate, then to the principal amount outstanding, and the remainder, if
any, to the Force-Placed Insurance.
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Event of Termination
An "Event of Termination" under the Sale and Servicing Agreement will
consist of (i) any failure by the Servicer to make any required deposit in any
of the Trust Accounts or the Certificate Distribution Account which failure
continues unremedied for five (5) Business Days after the Servicer becomes aware
that such deposit was required; (ii) any failure by the Servicer duly to observe
or perform in any material respect any other of its covenants or agreements in
the Sale and Servicing Agreement (other than those described in clause (i)) that
materially and adversely affects the rights of the Noteholders or
Certificateholders which continues unremedied for 30 days after the giving of
written notice of such failure or breach; (iii) any assignment or delegation by
the Servicer of its duties or rights under the Sale and Servicing Agreement,
except as specifically permitted under the Sale and Servicing Agreement, or any
attempt to make such an assignment or delegation; (iv) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings regarding the Servicer; or (v) the Servicer no longer
qualifies as an Eligible Servicer (as defined in the Sale and Servicing
Agreement). "Notice" as used herein shall mean notice to the Servicer by the
Trustees or the Company, or to the Company, the Servicer and the Trustees by the
Certificateholders holding not less than 25% of the Certificate Balance and by
Noteholders holding not less than 25% of the outstanding principal amount of the
Notes.
Rights Upon Event of Termination
As long as an Event of Termination under the Sale and Servicing Agreement
remains unremedied, the Indenture Trustee may, and at the written direction of
the holders of Notes evidencing not less than a majority in principal amount of
such then outstanding Notes, shall, unless prohibited by applicable law,
terminate all of the rights and obligations of the Servicer under the Sale and
Servicing Agreement and in and to the Contracts, and the proceeds thereof,
whereupon (subject to applicable law) the Indenture Trustee or a successor
Servicer under the Sale and Servicing Agreement will succeed to all the
responsibilities, duties and liabilities of the Servicer under the Sale and
Servicing Agreement and will be entitled to similar compensation arrangements;
provided, however, that neither the Indenture Trustee nor any successor servicer
will assume any obligation of CITSF to purchase Contracts for breaches of
representations or warranties, and the Indenture Trustee or the successor
Servicer will not be liable for any acts or omissions of the Servicer occurring
prior to a transfer of the Servicer's servicing and related functions or for any
breach by the Servicer of any of its obligations contained in the Sale and
Servicing Agreement. Notwithstanding such termination, the Servicer shall be
entitled to payment of certain amounts payable to it prior to such termination,
for services rendered prior to such termination. No such termination will affect
in any manner CITSF's obligation to purchase certain Contracts for breaches of
representations or warranties under the Sale and Servicing Agreement. In the
event that the Indenture 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 such
appointment, the Indenture Trustee is obligated to act in such capacity, unless
the Indenture Trustee is prohibited by law from so acting. The Indenture Trustee
and such successor may agree upon the servicing compensation to be paid, which
in no event may be greater than the compensation to CITSF as Servicer under the
Sale and Servicing Agreement.
Waiver of Past Defaults
The holders of Notes evidencing at least a majority in principal amount of
the then outstanding Notes (or the holders of the Certificates evidencing not
less than a majority of the Certificate Balance, in the case of any Event of
Termination which does not adversely affect the Indenture Trustee or the
Noteholders) may, on behalf of all such Noteholders and Certificateholders,
waive any default by the Servicer in the performance of its obligations under
the Sale and Servicing Agreement and its consequences, except an Event of
Termination in making any required deposits to or payments from any of the trust
accounts in accordance with the Sale and Servicing Agreement. No such waiver
will impair such Noteholders' or Certificateholders' right with respect to
subsequent defaults.
Amendment
Each of the Sale and Servicing Agreement and Trust Agreement may be amended
by the parties thereto, without prior notice to or the consent of the related
Noteholders or Certificateholders (i) to correct manifest error or cure any
ambiguity; (ii) correct or supplement any provision therein which may be
inconsistent with any other provision therein; (iii) to add or amend any
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provision as requested by Moody's or Standard & Poor's to maintain or improve
the rating of the Notes or Certificates; (iv) to add to the covenants,
restrictions or obligations of the Company, the Servicer, the Owner Trustee or
the Indenture Trustee; (v) evidence and provide for the acceptance of the
appointment of a successor trustee with respect to the property owned by the
Trust and add to or change any provisions as shall be necessary to facilitate
the administration of the trusts under the Trust Agreement by more than one
trustee pursuant to Article VI of the Trust Agreement; (vi) to add, change or
eliminate any other provisions provided that an amendment pursuant to clause
(vi) will not, in the opinion of counsel (which may be internal counsel to the
Company or the Servicer), adversely affect in any material respect the interests
of the Noteholders or the Certificateholders; or (vii) add such provisions or
change in any manner or eliminate any provisions of such Agreement in connection
with the delivery of Alternate Credit Enhancement, establish accounts for the
benefit of the Alternate Credit Enhancer, grant security interests therein and
provide for the investment of funds in any such account, and grant other rights
to such Alternate Credit Enhancer incidental thereto. Each such agreement may
also be amended by the parties thereto, with the consent of the holders of at
least a majority in principal amount of such then outstanding Notes and the
holders of such Certificates evidencing at least a majority of the Certificate
Balance for the purpose of adding any provisions to or changing in any manner
the rights of such Noteholders or Certificateholders; except, that no such
amendment, may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments on Contracts or distributions
that are required to be made on any Note or Certificate, any Contract Rate, the
Pass-Through Rate or the Class A Rate or (ii) reduce the aforesaid percentage
required of Noteholders and Certificateholders to consent to any such amendment
without the consent of all of the Noteholders or Certificateholders, as the case
may be.
Insolvency Event
If any of certain events of insolvency, readjustment of debt, marshalling
of assets and liabilities, or similar proceedings with respect to such person
indicating its insolvency or inability to pay its obligations (each, an
"Insolvency Event") occurs with respect to the Affiliated Purchaser, the
Contracts shall be liquidated and the Trust will be terminated 90 days after the
date of such Insolvency Event, unless, before the end of such 90-day period, the
Owner Trustee shall have received written instructions from (i) each of the
Certificateholders (other than the Affiliated Purchaser), and (ii) each of the
Noteholders to the effect that each such party disapproves of the liquidation of
such Contracts and termination of such Trust. Promptly after the occurrence of
any Insolvency Event with respect to the Affiliated Purchaser, notice thereof is
required to be given to the Noteholders and Certificateholders; except that any
failure to give such required notice will not prevent or delay termination of
the Trust. Upon termination of the Trust, the Owner Trustee shall direct the
Indenture Trustee promptly to sell the assets of such Trust (other than the
Certificate Distribution Account) in a commercially reasonable manner and on
commercially reasonable terms. The proceeds from any such sale, disposition or
liquidation of the Contracts will be treated as collections on the Contracts and
deposited in the related Collection Account. If the proceeds from the
liquidation of the Contracts, the Note Distribution Account and the Certificate
Distribution Account are not sufficient to pay the Notes and Certificates in
full, the amount of principal returned to the Certificateholders will be reduced
and the Certificateholders will incur a loss. See "Special
Considerations--Certain Legal Aspects".
Affiliated Purchaser Liability
Under the Trust Agreement, the Affiliated Purchaser will agree to be
liable directly to an injured party for the entire amount of any losses, claims,
damages or liabilities (other than those incurred by a Noteholder or a
Certificateholder in the capacity of an investor) arising out of or based on the
arrangement created by such Trust Agreement as though such arrangement created a
partnership under the Delaware Revised Uniform Limited Partnership Act of which
the Affiliated Purchaser were a general partner.
Termination
The obligations of the Servicer, the Company, the Affiliated Purchaser, the
Owner Trustee and the Indenture Trustee pursuant to the Purchase Agreements and
the Trust Documents will terminate with respect upon the earliest to occur of
(i) the maturity or other liquidation of the last Contract and the disposition
of any amounts received upon liquidation of any property remaining in the Trust,
(ii) the payment to Securityholders of all amounts required to be paid to them
pursuant to the Purchase Agreements and the Trust Agreement and (iii) the
occurrence of either event described below.
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In order to avoid excessive administrative expenses, CITSF will be
permitted at its option to purchase from the Trust, on any Distribution Date
following a Record Date as of which the Pool Balance is 10% or less of the
Initial Pool Balance, all remaining Contracts at a price equal to the aggregate
Purchase Price for the Contracts (including Defaulted Contracts), plus the
appraised value of any other property held by the Trust (less liquidation
expenses). Exercise of such right will effect early retirement of the
Securities. The "Initial Pool Balance" equals the sum of (i) the Pool Balance as
of the Initial Cut-off Date and (ii) the aggregate principal balance of all
Subsequent Contracts added to the Trust as of their respective Subsequent
Cut-off Dates.
Within ten days following a Distribution Date as of which the Pool Balance
is 5% or less of the Initial Pool Balance, the Indenture Trustee (or, if the
Notes have been paid in full and the Indenture has been discharged in accordance
with its terms, the Owner Trustee) shall solicit bids for the purchase of the
Contracts remaining in the Trust. In the event that satisfactory bids are
received as described below, the sale proceeds will be distributed to
Securityholders on the second Distribution Date succeeding such Record Date. Any
purchaser of the Contracts must agree to the continuation of CITSF as Servicer
on terms substantially similar to those in the Sale and Servicing Agreement. Any
such sale will effect early retirement of the Securities.
Such Trustee must receive at least two bids from prospective purchasers
that are considered at the time to be competitive participants in the market for
recreational vehicle retail installment sale contracts. The highest bid may not
be less than the fair market value of such Contracts and must equal the sum of
(i) the greater of (a) the aggregate Purchase Price for the Contracts (including
Defaulted Contracts), plus the appraised value of any other property held by the
Trust (less liquidation expenses) or (b) an amount that when added to amounts on
deposit in the Collection Account available for distribution to Securityholders
for such second succeeding Determination Date would result in proceeds
sufficient to distribute the amount of monthly principal and interest for such
Distribution Date and any unpaid principal and interest with respect to one or
more prior Distribution Dates, and (ii) the sum of (a) an amount sufficient to
reimburse the Servicer for any unreimbursed Monthly Advances for which it is
entitled to reimbursement and (b) the Servicing Fee payable on such final
Distribution Date, including any unpaid Servicing Fees with respect to one or
more prior Due Periods. Such Trustee may consult with financial advisors,
including any Underwriter, to determine if the fair market value of such
Contracts has been offered. Upon the receipt of such bids, such Trustee shall
sell and assign such Contracts to the highest bidder and the Securities shall be
retired on such Distribution Date. If any of the foregoing conditions are not
met, such Trustee shall decline to consummate such sale and shall not be under
any obligation to solicit any further bids or otherwise negotiate any further
sale of Contracts remaining in the Trust. In such event, however, such Trustee
may from time to time solicit bids in the future for the purchase of such
Contracts upon the same terms described above.
Such Trustee will give written notice of termination to each Securityholder
of record. The final distribution to each Securityholder will be made only upon
surrender and cancellation of such holder's Securities at any office or agency
of such Trustee specified in the notice of termination. Any funds remaining in
the Trust, after such Trustee has taken certain measures to locate a
Securityholder and such measures have failed, will be distributed to the
Servicer for deposit into an escrow account. Thereafter, Securityholders shall
look only to such escrow account.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
recreational vehicle contracts, which are general in nature. Because such legal
aspects are governed by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor to reflect the
laws of any particular state, nor to encompass the laws of all states in which
the security for the Contracts is situated. The summaries are qualified in their
entirety by reference to the applicable federal and state laws governing the
Contracts.
General
As a result of the assignment of the Contracts to the Owner Trustee, the
Trust will succeed collectively to the rights (including the right to receive
payment on the Contracts) and will assume the obligations of the obligee under
the Contracts. Each Contract evidences both (a) the obligation of the obligor to
repay the loan evidenced thereby, and (b) the grant of a security interest in
the Financed Vehicle to secure repayment of such loan. Certain aspects of both
features of the Contracts are described more fully below.
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The Contracts are "chattel paper" as defined in the Uniform Commercial Code
(the "UCC") as in effect in the various states of origination of the Contracts.
Pursuant to the UCC, the sale of chattel paper is treated in a manner similar to
perfection of a security interest in chattel paper. Under the Sale and Servicing
Agreement, the Servicer will retain possession of the Contracts as custodian for
the Owner Trustee, and will make an appropriate filing of a UCC-1 financing
statement in New Jersey to perfect the sale of the Contracts by the Company to
the Owner Trustee. The Contracts will not be stamped to reflect their assignment
from CITCF-NY to CITSF, from CITSF to the Company or from the Company to the
Owner Trustee.
Under the Sale and Servicing Agreement, the Servicer will be obligated from
time to time to take such actions as are necessary to continue the perfection of
the Trust's interest in the Contracts and the proceeds thereof. CITSF will
warrant in the Sale and Servicing Agreement, with respect to each Contract,
that, as of the Closing Date for each Initial Contract, and as of the related
Subsequent Transfer Date for each Subsequent Contract, the Contract has not been
sold, transferred, assigned or pledged by CITSF to any person other than the
Company, that immediately prior to the transfer and assignment of the Contracts
to the Company, CITSF has good and marketable title thereto, free and clear of
all liens, encumbrances, security interests and rights of others and,
immediately upon the transfer thereof, the Company will have good and marketable
title to the Contract, free and clear of all liens, encumbrances, security
interests and rights of others, and that the transfer has been perfected under
applicable law. In the event of an uncured breach of any such warranty that
materially adversely affects the interest of the Trust in a Contract transferred
by the Company to the Trust, the only recourse of the Certificateholders, the
Owner Trustee, or the Trust would be to require CITSF to purchase such Contract.
Pursuant to the Sale and Servicing Agreement, the Servicer will have
custody of the Contracts sold to the Trust. The Contracts and related
certificates of title will not be physically marked or segregated to indicate
that such Contracts have been sold to the Trust. If, through inadvertence or
otherwise, another party purchases (including the taking of a security interest
in) the Contracts for new value in the ordinary course of its business, without
actual knowledge of the Trust's interest, and takes possession of the Contracts,
such purchaser would acquire an interest in the Contracts superior to the
interest of the Trust.
Security Interests in the Financed Vehicles
General. Installment sale contracts such as the Contracts evidence the
credit sale of recreational vehicles by dealers to obligors; the contracts also
constitute personal property security agreements and include grants of security
interests in the related recreational vehicles under the UCC. In most states
(including California), perfection rules relating to security interests in
recreational vehicles are generally governed under state certificate of title
statutes (Alabama, Connecticut, Georgia, Maine, Massachusetts, Minnesota,
Mississippi, New Hampshire, New York, Rhode Island and Vermont have adopted the
Uniform Motor Vehicle Certificate of Title and Anti-Theft Act) or by the vehicle
registration laws of the state in which each recreational vehicle is located. In
states which have adopted the Uniform Motor Vehicle Certificate of Title and
Anti-Theft Act, security interests in recreational vehicles may be perfected
either by notation of the secured party's lien on the certificate of title or by
delivery of the certificate of title and payment of a fee to the state motor
vehicle authority, depending on particular state law. In states that do not have
a certificate of title statute or that make no provision for notation of a
security interest on a certificate of title, perfection is usually accomplished
by filing pursuant to the provisions of the UCC. In most states, including
California, a security interest in a recreational vehicle is perfected by
notation of the secured party's lien on the vehicle's certificate of title. Each
Contract prohibits the sale or transfer of the related Financed Vehicle without
the consent of CITSF.
Perfection of Sale. Pursuant to the Purchase Agreement, CITSF will sell and
assign its interests in the Contracts, including the security interests in the
Financed Vehicles granted thereunder, to the Company and, pursuant to the Sale
and Servicing Agreement, the Company will sell and assign its interest in the
Contracts, including the security interests in the Financed Vehicles granted
thereunder, to the Owner Trustee. UCC financing statements to perfect the sale
of (i) CITSF's interests in the Contracts and the Financed Vehicles to the
Company and (ii) the Company's interests in the Contracts and the Financed
Vehicles to the Owner Trustee, will be filed.
Perfection of CITSF's Security Interest in the Financed Vehicles. The
certificates of title relating to the Financed Vehicles name CITSF (or CITCF-NY)
as the secured party. In those instances where no certificate of title is
applicable under state law, a UCC-1 financing statement has been filed. CITSF
takes all actions necessary under the laws of the state in which the related
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recreational vehicles are located to perfect its security interest in such
recreational vehicles, including, where applicable, having a notation of its
lien recorded on the related certificate of title or delivering the required
documents and fees, and obtaining possession of the certificate of title (if
possible). In the event CITSF (or CITCF-NY) fails, due to clerical errors, to
effect such notation or delivery, or files the security interest under the wrong
law (for example, under the UCC rather than under a motor vehicle title law),
the Securityholders may not have a first priority security interest in the
Financed Vehicle securing a Contract. In the Sale and Servicing Agreement, CITSF
has represented as of the Closing Date that each Contract creates a valid and
enforceable first priority security interest in favor of CITSF (or CITCF-NY) or
the related Dealer in the Financed Vehicle covered thereby (which security
interest, if in favor of the related Dealer (or CITCF-NY), has been assigned to
CITSF) and such security interest has been assigned by CITSF to the Company, and
all necessary action with respect to such Contract has been taken to perfect the
security interest in the related Financed Vehicle in favor of CITSF (or
CITCF-NY). A breach by CITSF of such warranty that materially adversely affects
the Trust's interest in any Contract would require CITSF to purchase such
Contract unless such breach is cured within 90 days.
Perfection of Trust's Security Interest in Financed Vehicles. In each case,
except where applicable laws require the filing of a UCC-1 financing statement,
the certificate of title names CITSF (or CITCF-NY) as the secured party. In the
case of Contracts which have CITCF-NY as the secured party, CITSF has not
amended the certificates of title to substitute CITSF as secured party.
Moreover, because of the administrative burden and expense, neither CITSF, the
Company nor the Trust will amend any certificate of title to identify the Trust
as the new secured party on the certificate of title relating to the Financed
Vehicles. However, the Servicer will continue to hold any certificates of title
relating to the Financed Vehicles in its possession as custodian for the Trust
pursuant to the Sale and Servicing Agreement. See "The Purchase Agreements and
the Trust Documents--Sale and Assignment of the Contracts." Accordingly, CITSF
(or CITCF-NY) will continue to be named as the secured party on the certificates
of title relating to the Financed Vehicles.
(i) California. A security interest in a motor vehicle registered in the
State of California (in which the greatest number of Financed Vehicles are
currently registered) may be perfected only by depositing with the Department of
Motor Vehicles a properly endorsed certificate of title for the vehicle showing
the secured party as "legal owner" thereon or if the vehicle has not been
previously registered, an application in usual form for an original registration
together with an application for registration of the secured party as "legal
owner." However, under the California Vehicle Code, a transferee of a security
interest in a motor vehicle is not required to reapply to the Department of
Motor Vehicles for a transfer of registration when the interest of the
transferee arises from the transfer of a security agreement by the "legal
owner." Accordingly, under California law, an assignment such as that under each
of the Purchase Agreement and the Sale and Servicing Agreement is an effective
conveyance of CITSF's and the Company's perfected security interest, as the case
may be, without such re-registration, and under the Purchase Agreement the
Company will succeed to CITSF's, and under the Sale and Servicing Agreement the
Trust will succeed to the Company's, rights as secured party.
(ii) Other States. In most states, assignments such as those under the
Purchase Agreement and the Sale and Servicing Agreement are an effective
conveyance of a security interest without amendment of any lien noted on a
vehicle's certificate of title, and the assignee succeeds thereby to the
assignor's rights as secured party. Because of the administrative burden and
expense, none of CITSF, the Company or the Trust will amend any certificate of
title to identify the Trust as the new secured party on the certificate of title
relating to the Financed Vehicles. Although re-registration of the recreational
vehicle in such states is not necessary to convey a perfected security interest
in the Financed Vehicles to the Trust, because the Trust will not be listed as
the secured party on the certificates of title to the Financed Vehicles, its
security interest could be defeated through fraud or negligence. In the absence
of fraud, forgery or administrative error, the notation of CITSF's or CITCF-NY's
lien on the certificates of title will be sufficient in most states to protect
the Trust against the rights of subsequent purchasers of a Financed Vehicle or
subsequent creditors who take a security interest in a Financed Vehicle.
However, with respect to Financed Vehicles in states in which the Trust failed
to obtain a first perfected security interest because it is not identified as
the secured party on the certificate of title, its security interest would be
subordinate to, among others, subsequent purchasers of such Financed Vehicles
and holders of first perfected security interests therein.
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Continuity of Perfection. Under the laws of most states, a perfected
security interest in a recreational vehicle continues for four months after the
vehicle is moved to a new state from the one in which it is initially registered
and thereafter until the owner re-registers such recreational vehicle in the new
state. A majority of states require surrender of a certificate of title to
re-register a vehicle. In those states (including California) that require a
secured party to hold possession of the certificate of title to maintain
perfection of the security interest, the secured party would learn of the
re-registration through the request from the obligor under the related
installment sale contract to surrender possession of the certificate of title.
In the case of vehicles registered in states providing for the notation of a
lien on the certificate of title but not possession by the secured party, the
secured party would receive notice of surrender from the state of
re-registration if the security interest is noted on the certificate of title.
Thus, the secured party would have the opportunity to re-perfect its security
interest in the vehicles in the state of relocation. However, these procedural
safeguards will not protect the secured party if through fraud, forgery or
administrative error, the debtor somehow procures a new certificate of title
that does not list the secured party's lien. Additionally, in states that do not
require a certificate of title for registration of a vehicle, re-registration
could defeat perfection.
In the ordinary course of servicing the Contracts, CITSF will take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the obligor as to relocation. Similarly, when an obligor sells a Financed
Vehicle, CITSF must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Contract before release of
the lien. Under the Sale and Servicing Agreement, the Servicer will be obligated
to take appropriate steps, at its own expense, to maintain perfection of a
security interest in the Financed Vehicles.
CITSF, as Servicer, will continue to hold certificates of title relating to
the Financed Vehicles in its possession as custodian for the Trust pursuant to
the Sale and Servicing Agreement. In the Sale and Servicing Agreement, CITSF, as
Servicer, will covenant that it will not release the Financed Vehicle securing
any Contract from the security interest granted therein except as contemplated
by the Sale and Servicing Agreement. CITSF, as Servicer, will also covenant that
it shall not impair the rights of the Trust in the Contacts or take any action
inconsistent with the Trust's ownership of the Contracts, except as permitted by
the Sale and Servicing Agreement. A breach of either such covenant that
materially and adversely affects the Trust's interest in any Contract, would
require the Servicer to purchase such Contract unless such breach is cured
within the period specified in the Sale and Servicing Agreement.
Priority of Certain Liens Arising by Operation of Law. Under the laws of
California and of most states, liens for repairs performed on a recreational
vehicle and liens for unpaid taxes take priority over even a first perfected
security interest in such vehicle. The Internal Revenue Code of 1986, as
amended, also grants priority to certain federal tax liens over the lien of a
secured party. The laws of certain states and federal law permit the
confiscation of motor vehicles by governmental authorities under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in a confiscated recreational
vehicle. CITSF will represent and warrant in the Sale and Servicing Agreement
that, as of the Closing Date, there were, to the best of CITSF's knowledge, no
liens or claims which have been filed for work, labor or materials affecting a
Financed Vehicle securing a Contract, which are or may be liens prior or equal
to the lien of the Contract. However, liens for repairs or taxes could arise at
any time during the term of a Contract. No notice will be given to the Owner
Trustee or Securityholders in the event such a lien or confiscation arises and
any such lien or confiscation arising after the date of initial issuance of the
Securities would not give rise to CITSF's purchase obligation under the Sale and
Servicing Agreement.
Repossession
In the event of default by an obligor, the holder of the related
installment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. The UCC remedies of a
secured party 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 the Servicer in most cases and is accomplished simply by
taking possession of the related recreational vehicle. In cases where the
obligor objects or raises a defense to repossession, or if otherwise required by
applicable state law, a court order must be obtained from the appropriate state
court, and the vehicle must then be recovered in accordance with that order. In
some jurisdictions (not including California), the secured party is required to
notify the debtor of the default and the intent to repossess the collateral and
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be given a time period within which to cure the default prior to repossession.
In most states (including California), under certain circumstances after the
vehicle has been repossessed, the obligor may reinstate the related contract by
paying the delinquent installments and other amounts due.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation, accrued
interest thereon plus reasonable expenses for repossessing, holding and
preparing the collateral for disposition and arranging for its sale, plus, in
some jurisdictions, reasonable attorneys' fees or in some states, by payment of
delinquent installments or the unpaid principal balance of the related
obligation.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of the Financed Vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the related indebtedness. While some states impose prohibitions or limitations
on deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in California
and most other states. In addition to the notice requirement, the UCC requires
that every aspect of the sale or other disposition, including the method,
manner, time, place and terms, be "commercially reasonable." Most courts
(including courts in California) have held that when a sale is not "commercially
reasonable," the secured party loses its right to a deficiency judgment. In
addition, the UCC permits the debtor or other interested party to recover for
any loss caused by noncompliance with the provisions of the UCC. Also, prior to
a sale, the UCC permits the debtor or other interested person to restrain the
secured party from disposing of the collateral if it is established that the
secured party is not proceeding in accordance with the "default" provisions
under the UCC. However, the deficiency judgment would be a personal judgment
against the obligor for the shortfall, and a defaulting obligor may have very
little capital or sources of income available following repossession. Therefore,
in many cases, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount or be uncollectible.
Occasionally, after resale of a recreational vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or, if no such lienholder exists, to the former
owner of the vehicle.
Certain Matters Relating to Insolvency
CITSF and the Company intend that the transfer of Contracts from CITCF-NY
to CITSF, from CITSF to the Company and from the Company to the Trust
constitutes a sale, rather than a pledge of the Contracts to secure
indebtedness. However, if CITCF-NY, CITSF or the Company were to become a debtor
under Title 11 of the United States Code, 11 U.S.C. ss.101 et seq. (the
"Bankruptcy Code"), it is possible that a creditor, receiver, other party in
interest or trustee in bankruptcy of CITCF-NY, CITSF or the Company, or
CITCF-NY, CITSF or the Company as debtor-in-possession, may argue that the sale
of the Contracts by CITCF-NY to CITSF, CITSF to the Company, or by the Company
to the Trust, respectively, was a pledge of the Contracts rather than a sale and
that, accordingly, such Contracts should be part of such entity's bankruptcy
estate. Such a position, if presented to a court, even if ultimately
unsuccessful, could result in a delay in or reduction of distributions to the
Securityholders.
The CIT GP Corporation, an Illinois corporation and a wholly owned
subsidiary of CIT (the "Affiliated Purchaser"), will purchase 1% of the
principal balance of the Certificates. The Affiliated Purchaser will have the
same rights with regard to the Trust as all other Certificateholders based on
its percentage ownership of the Certificate Balance. The Trust Agreement will
provide that if an Insolvency Event with respect to the Affiliated Purchaser
occurs, subject to certain conditions, the Trust will dissolve. Certain steps
have been taken in structuring the transactions contemplated hereby that are
intended to make it less likely that an Insolvency Event with respect to the
Affiliated Purchaser will occur. These steps include the formation of the
Affiliated Purchaser as a separate, limited-purpose corporation pursuant to
articles of incorporation containing certain limitations (including restrictions
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on the nature of the Affiliated Purchaser's business and a restriction on the
Affiliated Purchaser's ability to commence a voluntary case or proceeding under
the United States Bankruptcy Code or similar applicable state laws ("Insolvency
Laws") without the prior affirmative unanimous vote of its directors). However,
there can be no assurance that the activities or liabilities of the Affiliated
Purchaser would not result in an Insolvency Event.
Although other courts have held otherwise, a case (Octagon Gas Systems,
Inc. v. Rimmer, 995 F.2d 948 (10th Cir.), cert. denied 114 S.Ct. 554 (1993))
decided by the United States Court of Appeals for the Tenth Circuit contains
language to the effect that, under Article 9 of the UCC, "accounts" (as defined
in the UCC) sold by a debtor would remain property of the debtor's bankruptcy
estate, whether or not the sale of the accounts was perfected under the UCC. UCC
Article 9 applies to the sale of "chattel paper" (as defined in the UCC) as well
as the sale of "accounts" and, although the Contracts constitute chattel paper
under the UCC rather than accounts, perfection of a security interest in both
chattel paper and accounts may be accomplished under the UCC by the filing of a
UCC-1 financing statement. If, following a bankruptcy of CITCF-NY, CITSF or of
the Company, a court were to follow the reasoning of the Tenth Circuit reflected
in the case described above, then the Contracts would be included in the
bankruptcy estate of CITCF-NY, CITSF or the Company, as the case may be, and
delays in payments of collections on or in respect of the Contracts, or loss of
principal and interest in respect of the Certificates, could occur.
The Company has taken steps in structuring the transactions described
herein that are intended to make it unlikely that the voluntary or involuntary
application for relief by CITSF under the Bankruptcy Code or similar applicable
state laws (collectively, "Insolvency Laws") will result in consolidation of the
assets and liabilities of the Company with those of CIT. These steps include the
creation of the Company as a wholly owned, limited purpose subsidiary of CIT
pursuant to a certificate of incorporation containing certain limitations
(including restrictions on the nature of the Company's business).
Consumer Protection Laws
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act, the Military Reservist Relief Act,
state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code and state motor vehicle retail installment sales acts, retail
installment sales acts and other similar laws. Also, the laws of California and
of certain other states impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect the ability of an assignee such as the Owner
Trustee to enforce consumer finance contracts such as the Contracts.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule"), has the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states. Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, the Owner Trustee, as holder of the Contracts, will be
subject to any claims or defenses that the purchaser of the related Financed
Vehicle may assert against the seller of the Financed Vehicle. Such claims are
limited to a maximum liability equal to the amounts paid by the obligor under
the related Contracts.
Under California law and most state vehicle dealer licensing laws, sellers
of recreational vehicles are required to be licensed to sell vehicles at retail
sale. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and lending pursuant to the
Contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with their
provisions may affect the enforceability of the related Contract. Neither the
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Trust nor the Company has obtained any license required under any federal or
state consumer or mortgage banking laws or regulations, and the absence of such
licenses may impede the enforcement of certain rights or give rise to certain
defenses in actions seeking enforcement rights. In addition, with respect to
used vehicles, the Federal Trade Commission's Rule on Sale of Used Vehicles
requires that all sellers of used vehicles prepare, complete, and display a
"Buyer's Guide" which explains the warranty coverage for such vehicles.
Furthermore, Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of used vehicles
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a seller is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not provided to the purchaser of a
Financed Vehicle, the obligor may be able to assert a defense against the seller
of the Financed Vehicle.
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.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the Fourteenth Amendment to the Constitution of the United States
of America. Courts have generally either upheld the notice provisions of the UCC
and related laws as reasonable or have found that the creditor's repossession
and resale do not involve sufficient state action to afford constitutional
protection to consumers.
CITSF will represent and warrant under the Sale and Servicing Agreement
that each Contract complies with all requirements of law in all material
respects. A breach of such representation and warranty which materially
adversely affects the interests of the Trust in any Contract will create an
obligation of CITSF to purchase such Contract. See "The Purchase Agreements and
The Trust Documents--Sale and Assignment of the Contracts."
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 creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a recreational vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the recreational vehicle 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 the related contract or change the rate of
interest and time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Civil Relief Act, an obligor
who enters the military service after the origination of such obligor's Contract
(including an Obligor who is a member of the National Guard or is in reserve
status at the time of the origination of the obligor's Contract and is later
called to active duty) may not be charged interest above an annual rate of 6%
during the period of such obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the Military
Reservist Relief Act, under certain circumstances, California residents called
into active duty with the reserves can delay payments on retail installment sale
contracts, including the Contracts, for a period, not to exceed 180 days,
beginning with the order to active duty and ending 30 days after release. It is
possible that the foregoing could have an effect on the ability of the Servicer
to collect full amounts of interest on certain of the Contracts. In addition,
the Relief Acts impose limitations which would impair the ability of the
Servicer to repossess an affected Contract during the obligor's period of active
duty status. Thus, in the event that such a Contract goes into default, there
may be delays and losses occasioned by the inability to realize upon the related
Financed Vehicle in a timely fashion.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a summary of certain Federal income tax consequences of
the purchase, ownership and disposition of the Securities, applicable to initial
purchasers of the Securities. Schulte Roth & Zabel, counsel for the Trust is of
the opinion that the discussion hereunder fully and fairly discloses all
material Federal tax risks associated with the purchase, ownership and
disposition of the Securities.
This summary does not deal with all aspects of Federal income taxation
applicable to all categories of holders of the Securities, some of which may be
subject to special rules or special treatment under the Federal income tax laws.
For example, it does not discuss the specific tax treatment of Securityholders
that are insurance companies, banks and certain other financial institutions,
regulated investment companies, individual retirement accounts, tax-exempt
organizations or dealers in securities. Furthermore, this summary is based upon
present provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial or ruling
authority, all of which are subject to change, which change may be retroactive.
Moreover, there are no cases or Internal Revenue Service ("IRS") rulings on
similar transactions involving a trust that issues debt and equity interests
with terms similar to those of the Notes and the Certificates. As a result, the
IRS may disagree with all or part of the discussion below.
Prospective investors are advised to consult their own tax advisors with
regard to the Federal income tax consequences of the purchase, ownership and
disposition of the Securities, as well as the tax consequences arising under the
laws of any state, foreign country or other jurisdiction. The Trust has been
provided with an opinion of Schulte Roth & Zabel regarding certain of the
Federal income tax matters discussed below. An opinion of counsel, however, is
not binding on the IRS, and no ruling on any of the issues discussed below will
be sought from the IRS.
Certain Federal Tax Consequences with Respect to the Notes
Tax Characterization of the Notes and the Trust. Schulte Roth & Zabel has
advised the Trust that, based on the terms of the Notes and the transactions
relating to the Contracts as set forth herein, the Notes will be treated as debt
for Federal income tax purposes. However, there is no specific authority with
respect to the characterization for Federal income tax purposes of securities
having the same terms as the Notes.
Schulte Roth & Zabel is also of the opinion that, based on the applicable
provisions of the Trust Agreement and related documents, for Federal income tax
purposes, (i) the Trust will not be classified as an association taxable as a
corporation and (ii) the Trust will not be treated as a publicly traded
partnership taxable as a corporation. However, there are no authorities directly
dealing with similar transactions. If the IRS were to successfully characterize
the Trust as an association taxable as a corporation for Federal income tax
purposes, the income from the Contracts (reduced by deductions, possibly
including interest on the Notes) would be subject to Federal income tax at
corporate rates, which could reduce the amounts available to make payments on
the Notes. Likewise, if the Trust were subject to state or local income or
franchise tax, the amount of cash available to make payment on the Notes could
be reduced.
If, contrary to the opinion of Schulte Roth & Zabel, the IRS successfully
asserted that the Notes were not debt for Federal income tax purposes, the Notes
might be treated as equity interests in the Trust. If so, the Trust might be
taxable as a corporation with the adverse consequences described above (and the
taxable corporation would not be able to deduct interest on the Notes). The
remainder of this discussion assumes that the Notes will be treated as debt and
that the Trust will not be taxable as a corporation.
Interest Income on the Notes. The stated interest on the Notes will be
taxable to a Noteholder as ordinary income when received or accrued in
accordance with such Noteholder's method of tax accounting. Some or all of the
Notes may be issued with "original issue discount" within the meaning of Section
1273 of the Code ("OID"). The amount of OID on the Notes will equal the
difference between the issue price and the principal amount of the Notes unless
the OID is less then a statutorily defined de minimus amount.
OID will accrue to the Noteholders over the life of the Notes, taking
account of a reasonable prepayment assumption, based on a constant yield to
maturity method, using semi-annual compounding, and properly adjusted for actual
prepayments on the Contracts. The portion of OID that accrues during the time a
Noteholder owns the Notes (i) constitutes interest includable in the
Noteholder's gross income for federal income tax purposes and (ii) is added to
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the Noteholder's tax basis for purposes of determining gain or loss on the
maturity, redemption, prior sale, or other disposition of the Notes. Thus, the
effect of OID is to increase the amount of taxable income above the actual
interest payments during the life of the Notes.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any OID, market discount and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of any bond premium previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Subject to the rules of the Code concerning market discount on the Notes,
any such gain or loss will be capital gain or loss if the Note was held as a
capital asset. Capital losses generally may be deducted to the extent the
Noteholder has capital gains for the taxable year, and non-corporate Noteholders
can deduct a limited amount of such losses in excess of available capital gains.
Foreign Holders. If interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other non-United States person (a
"foreign person") is not effectively connected with the conduct of a trade or
business within the United States by the foreign person, the interest generally
will be considered "portfolio interest," and generally will not be subject to
United States Federal income tax and withholding tax, if the foreign person (i)
is not actually or constructively a "10 percent shareholder" of the Trust
(including a holder of 10% of the outstanding Certificates) or the Affiliated
Purchaser nor a "controlled foreign corporation" with respect to which the Trust
or the Affiliated Purchaser is a "related person" within the meaning of the Code
and (ii) provides the person otherwise required to withhold U.S. tax with an
appropriate statement, signed under penalties of perjury, certifying that the
beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If the information provided in the statement changes,
the foreign person must so inform the person otherwise required to withhold U.S.
tax within 30 days of such change. The statement generally must be provided in
the year a payment occurs or in either of the two preceding years. If a Note is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the withholding agent. However, in that case, the signed statement must be
accompanied by a Form W-8 or substitute form provided by the foreign person that
owns the Note. If such interest is not portfolio interest, then any payment of
such interest will be subject to United States Federal withholding tax at a rate
of 30%, unless reduced or eliminated pursuant to an applicable income tax
treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States Federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign individual is present in the United States for 183 days or
more in the taxable year or does not have a tax home in the United States.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person (although exempt from the withholding tax
previously discussed if the holder provides an appropriate statement), the
holder generally will be subject to United States Federal income tax on the
interest, gain or income at regular Federal income tax rates. In addition, if
the foreign person is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable income tax
treaty (as modified by the branch profits tax rules).
Information Reporting and Backup Withholding. The Trust will be required
to report annually to the IRS, and to each Noteholder of record, the amount of
interest paid on the Notes (and the amount of accrued OID, if any, and interest
withheld for Federal income taxes, if any) for each calendar year, except as to
exempt holders (generally, holders that are corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to their
status as nonresidents). Accordingly, each holder (other than exempt holders who
are not subject to the reporting requirements) will be required to provide,
under penalties of perjury, a certificate containing the holder's name, address,
correct Federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a non-exempt Noteholder fail to
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provide the required certification, the Trust will be required to withhold 31%
of the amount otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's Federal income tax liability.
Certain Federal Tax Consequences with Respect to the Certificates
Tax Characterization of the Trust. The Affiliated Purchaser and the
Servicer have agreed, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of Federal income
tax, with the assets of the partnership being the assets held by the Trust, the
partners of the partnership being the Certificateholders and the Notes being
debt of the partnership. However, the proper characterization of the arrangement
involving the Trust, the Certificates, the Notes, the Affiliated Purchaser, and
the Servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
If the Trust were held to be an "association" taxable as a corporation for
Federal income tax purposes, rather than a partnership, the Trust would be
subject to a corporate level income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificateholders could be liable for any such
tax that is unpaid by the Trust). See also the discussion above under "--Certain
Federal Tax Consequences with Respect to the Notes--Tax Characterization of the
Notes and the Trust." However, in the opinion of Schulte Roth & Zabel, the Trust
will not be classified as an association taxable as a corporation because of the
nature of its income and because it will not have certain "corporate"
characteristics necessary for a business trust to be an association taxable as a
corporation.
Nonetheless, because of the lack of cases or rulings on similar
transactions, a variety of alternative characterizations are possible in
addition to the position to be taken by Certificateholders that the Certificates
represent equity interests in a partnership. For example, because the
Certificates have certain features characteristic of debt, the Certificates
might be considered debt of the Trust or of the Seller. The remainder of this
summary assumes that the Certificates represent equity interests in a
partnership that owns the Contracts.
Partnership Taxation. As a partnership, the Trust will not be subject to
Federal income tax, but 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. In certain instances, however, the Trust
could have an obligation to make payments of withholding tax on behalf of a
Certificateholder. See "Backup Withholding" and "Tax Consequences to Foreign
Certificateholders" below. The Trust's income will consist primarily of interest
accrued on the Contracts including appropriate adjustments for market discount
(as discussed below), and any original issue discount and bond premium),
investment income from investments in the Trust Accounts and Certificate
Distribution Account and any gain upon collection or disposition of the
Contracts. The Trust's deductions will consist primarily of interest accruing
with respect to the Notes, servicing and other fees and losses or deductions
upon collection or disposition of the Contracts.
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 that
the Certificateholders will be allocated taxable income of the Trust for each
Interest Period equal to the sum of (i) the amount of interest that accrues on
the Certificates for such Interest Period based on the Certificate Rate; (ii) an
amount equivalent to interest that accrues during such Interest Period on
amounts previously due on the Certificates but not yet distributed; and (iii)
any Trust income attributable to discount on the Contracts that corresponds to
any excess of the principal amount of the Certificates over their initial issue
price. All remaining taxable income of the Trust will be allocated to the
Affiliated Purchaser. It is believed that this allocation will be valid under
applicable Treasury regulations, although no assurance can be given that the IRS
would not require a greater amount of income to be allocated to
Certificateholders. Moreover, under the foregoing method of allocation, holders
may be allocated income greater than the amount of interest accruing on the
Certificates based on the Certificate Rate or may be allocated income greater
than the amount of cash distributed to them.
An individual taxpayer may generally deduct miscellaneous itemized
deductions (which do not include interest expenses) only to the extent they
exceed two percent of the individual's adjusted gross income. Those limitations
would apply to an individual Certificateholder's share of expenses of the Trust
(including fees paid to the Servicer) and might result in such holder having net
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taxable income that exceeds the amount of cash actually distributed to such
holder over the life of the Trust. In addition, Section 68 of the Code provides
that the amount of certain itemized deductions otherwise allowable for the
taxable year of an individual whose adjusted gross income exceeds an
inflation-adjusted threshold amount specified in the Code ($114,700 for taxable
years beginning in 1995, in the case of a joint return) will be reduced by the
lesser of (i) 3% of the excess of adjusted gross income over the specified
threshold amount or (ii) 80% of the amount of itemized deduction otherwise
allowable for such taxable year.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each of the Contracts, the
Trust might be required to incur additional expense, but it is believed that
there would not be a material adverse effect on Certificateholders.
Market Discount. To the extent that the Contracts are purchased by the
Trust for a price that is less than the aggregate stated redemption price at
maturity of the Contracts, the Trust must account for "market discount" on the
Contracts pursuant to Section 1276 of the Code. Any market discount will be
accounted for each of the Contracts on an individual basis, and the Trust will
make an election to calculate such market discount as it economically accrues.
Any income resulting from the accrual of market discount will be allocated to
the Certificateholders as described above.
Original Issue Discount and Bond Premium. It is believed that the
Contracts were not and will not be issued with OID or at a premium, and,
therefore, the Trust should not have OID income or amortizable bond premium.
Section 708 Termination. Under Section 708 of the Code, a partnership will
be deemed to terminate for Federal income tax purposes if 50% or more of the
capital and profits interests in the partnership are sold or exchanged within a
12-month period. If such a termination occurs, the partnership will be
considered to distribute its assets to the partners, who would then be treated
as recontributing those assets to a new partnership. The Trust may not comply
with certain technical requirements that might apply when such a constructive
termination occurs. As a result, the Trust may be subject to certain tax
penalties and may incur additional expenses if it is required to comply with
those requirements. Furthermore, the Trust might not be able to comply due to
lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of a Certificate in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificate sold.
A Certificateholder's tax basis in a Certificate will generally equal his cost
increased by his share of Trust income that is includable in his gross 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 holder's share of the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a pro rata portion of such aggregate tax basis to the Certificates sold
(rather than maintaining a separate tax basis in each Certificate for purposes
of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the Contracts would generally he
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid these
special reporting requirements, the Trust will elect to include any such 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 miscellaneous itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificates.
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Allocations Between Transferor and Transferee. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect the tax liability and tax basis of the
holder) attributable to periods before the actual purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or is allowed only for
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Affiliated
Purchaser is authorized to revise the Trust's method of allocation between
transferors and transferees to conform to a method permitted by any future
authority.
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 an election. As
a result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Servicer, on behalf of the Trust, is required
to keep or cause to be 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 taxable year of the Trust will be the calendar year. The Affiliated
Purchaser will file a partnership information return (IRS Form 1065) with the
IRS for each taxable year of the Trust and will report to holders (and to the
IRS) each Certificateholder's allocable share of items of Trust income and
expense on Schedule K-l. The Trust will provide the Schedule K-l information to
nominees that fail to provide the Trust with the information statement described
below and such nominees will be required to forward such information to the
beneficial owners of the Certificates. Generally, holders must file tax returns
that are consistent with the information returns filed by the Trust or be
subject to penalties unless the holder notifies the IRS of all such
inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee on behalf of another person at any time during a calendar year is
required to furnish the Trust with a statement containing certain information on
the nominee, the beneficial owners and the Certificates so held. Such
information includes (i) the name, address and taxpayer identification number of
the nominee and (ii) as to each beneficial owner (x) the name, address and
taxpayer identification number of such person, (y) whether such person is a
United States person, a tax-exempt entity or a foreign government, an
international organization, or any wholly owned agency or instrumentality of
either of the foregoing and (z) certain information concerning Certificates that
were held, acquired or transferred on behalf of such person throughout the year.
In addition, brokers and financial institutions that hold Certificates through a
nominee are required to furnish directly to the Trust information as to
themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act that holds Certificates as a nominee is
not required to furnish any such information statement to the Trust. The
information referred to above for any calendar year must be furnished to the
Trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust with the information described above
may be subject to penalties. The Trust will provide the Schedule K-1 information
to nominees that fail to provide the Trust with the information described above
and such nominees will be required to forward such information to the beneficial
owners of the Certificates.
The Affiliated Purchaser, as the "tax matters partner," will be
responsible for representing the Certificateholders in any dispute with the IRS
with respect to partnership items. 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
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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.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates may be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
Tax Consequences to Foreign Certificateowners. As discussed below, an
investment in a Certificate is not suitable for any non-U.S. person which is not
eligible for a complete exemption from U.S. withholding tax on interest under a
tax treaty with the United States. Accordingly, no interest in a Certificate
should be acquired by or on behalf of any such non-U.S. person.
No regulations, published rulings or judicial decisions exist that would
discuss the characterization for Federal withholding tax puposes with respect to
non-U.S. persons of a partnership with activities substantially the same as the
Trust. However, it is not expected that the trust would be considered to be
engaged in a trade or business in the United States for purposes of Federal
withholding taxes with respect to non-U.S. persons. If the Trust were considered
to be engaged in a trade or business in the United States for such purposes, the
income of the Trust distributable to a non-U.S. person would be subject to
Federal withholding tax at a rate of 35% for persons taxable as a corporation
and 39.6% for all other non-U.S. persons. Also, in such cases, a non-U.S.
Certificateowner that is a corporation may be subject to the branch profits tax.
If the Trust is notified that a Certificateowner is a foreign person, the Trust
may withhold as if it were engaged in a trade or business in the United States
in order to protect the Trust from possible adverse consequences of a failure to
withhold. Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the Trust to change its withholding
procedures.
Each foreign Certificateowner might be required to file a U.S. individual
or corporate income tax return (including in the case of a corporation, the
branch profits tax) on its share of the Trust's income. Each foreign holder must
obtain a taxpayer identification number from the IRS and submit that number to
the withholding agent on Form W-8 in order to assure appropriate crediting of
any taxes withheld. A foreign holder generally would be entitled to file with
the IRS a claim for refund with respect to withheld taxes, taking the position
that no taxes were due because the Trust was not engaged in a U.S. trade or
business. However, interest payments made to (or accrued by) a Certificateholder
who is a foreign person may be considered guaranteed payments to the extent such
payments are determined without regard to the income of the Trust and for that
reason or because of the nature of the Contracts, the interest will likely not
be considered "portfolio interest." As a result, even if the Trust is not
considered to be engaged in a U.S. trade or business, Certificateholders will
likely be subject to United States Federal income tax which must be withheld at
a rate of 30 percent on their share of the Trust's income (without reduction for
interest expense), unless reduced or eliminated pursuant to an applicable income
tax treaty. If the Trust is notified that a Certificateholder or
Certificateowner is a foreign person, the Trust may be required to withhold and
pay over such tax, which can exceed the amounts otherwise available for
distribution to such a Certificateholder. A foreign holder would generally be
entitled to file with the IRS a refund claim for such withheld taxes, taking the
position that the interest was portfolio interest and therefore not subject to
U.S. tax. However, the IRS may disagree and no assurance can be given as to the
appropriate amount of tax liability. As a result, each potential foreign
Certificateowner should consult its tax advisor as to whether the tax
consequences of holding an interest in a Certificate make it an unsuitable
investment.
Other Tax Consequences
No advice has been received as to local income, franchise, personal
property, or other taxation an any state or locality, or as to the tax effect of
ownership of the Securities in any state or locality. Securityholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of the Securities.
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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 generate excise tax and
other liabilities under ERISA and the Code for such persons.
The Notes
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 Seller, the
Trust or any of their respective affiliates is or becomes a party in interest or
a disqualified person with respect to such Benefit Plan. Certain exemptions from
the prohibited transaction rules could be applicable to the purchase and holding
of Notes by a Benefit Plan depending on the type and circumstances of the plan
fiduciary making the decision to acquire such Notes. 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; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers."
The Certificates
An interest in the Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1) of
the Code, or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity. By its acceptance of a Certificate
or its acquisition of an interest in a Certificate through a Participant or DTC,
each Certificateholder or Certificateowner will be deemed to have represented
and warranted that it is not subject to the foregoing limitation.
A plan fiduciary considering the purchase of the Securities 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
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among CIT, CITSF, the Company and CS First Boston
Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Underwriters"), the Company has agreed to sell to the Underwriters, and the
Underwriters have agreed to purchase, the respective principal amount of the
Notes and Certificates offered hereby, as set forth opposite their respective
names below:
Principal Amount Principal Amount
of Notes of Certificates
---------------- ----------------
CS First Boston Corporation ......... $ 94,000,000 $ 6,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated. ........... $ 94,000,000 $ 6,000,000
============ ===========
Total ............................. $188,000,000 $12,000,000
============ ===========
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all such Notes or Certificates if any
are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Notes and Certificates to the public initially at the
public offering prices set forth on the cover page of this Prospectus and, to
certain dealers at such prices less a concession of 0.20% of the principal
amount per Note and 0.30% of the principal balance per Certificate. The
Underwriters and such dealers may allow discounts of 0.15% of the principal
amount per Note and 0.25% of the principal balance per Certificate to certain
other dealers. After the initial public offering, the public offering price and
concessions and discounts to dealers may be changed by the Underwriters.
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The Securities are new issues of securities with no established trading
market. The Underwriters have advised the Company that they intend to act as
market makers for the Securities. However, the Underwriters are not obligated to
do so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
Securities.
CIT and CITSF have jointly and severally agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act or to contribute to payments which the Underwriter may be
required to make in respect thereof. Certain of the Underwriters have agreed to
reimburse CIT for certain expenses in connection with this offering.
The Trust may, from time to time, invest the funds in the Trust Accounts
in Eligible Investments acquired from the Underwriters.
The closing of the sale of the Notes is conditioned on the closing of the
sale of the Certificates, and the closing of the sale of the Certificates is
conditioned on the closing of the sale of the Notes.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Trust prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of the Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be made
in accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Notes.
Representations of Purchasers
Each purchaser of Notes in Canada who receives a purchase confirmation
will be deemed to represent to the Seller, the Trust and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Notes without the benefit
of a prospectus qualified under such securities laws, (ii) where required by
law, that such purchaser is purchasing as principal and not as agent, and (iii)
such purchaser has reviewed the text above under "Resale Restrictions".
Rights of Actions and Enforcement
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
The Trust, the Seller, the Servicer, the Affiliated Purchaser, the Owner
Trustee and the Indenture Trustee and their respective directors and officers,
if any, as well as the experts named herein, may be located outside of Canada
and, as a result, it may not be possible for Ontario purchasers to effect
service of process within Canada upon the Issuer or such persons. All or a
substantial portion of the assets of the Issuer and such persons may be located
outside of Canada and, as a result, it may not be possible to satisfy a judgment
against the Issuer or such persons in Canada or to enforce a judgment obtained
in Canadian courts against such Issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of the Notes to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any of
the Notes or Certificates acquired by such purchaser pursuant to this offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #88/5. Only one such report must be filed in
respect of the Notes acquired on the same date and under the same prospectus
exemption.
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FINANCIAL INFORMATION
The Company has determined that its financial statements are not material
to the offering made hereby.
The Trust has been formed to own the Contracts and the other Trust assets
and to issue the Notes and Certificates. The Trust had no assets or obligations
prior to the issuance of the Notes and Certificates and will not engage in any
activities other than those described herein. Accordingly, no financial
statements with respect to the Trust are included in this Prospectus.
RATINGS
It is a condition to the issuance of the Securities that the Class A Notes
be rated "Aaa" by Moody's and "AAA" by Standard & Poor's and the Certificates be
rated "A2" by Moody's and "A" by Standard & Poor's. The ratings of the Class A
Notes will be based primarily on the value of the Initial Contracts, the
Pre-Funding Account and the terms of the Securities, including the subordination
provided by the Certificates. The ratings of the Certificates will be based
primarily on the Limited Guarantee provided by CIT. The foregoing ratings do not
address the likelihood that the Securities will be retired following the sale of
the Contracts by the Trustee. A security rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or withdrawal at any time
by the assigning rating agency. The security ratings of the Notes and
Certificates should be evaluated independently of similar security ratings
assigned to other kinds of securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth &
Zabel, New York, New York, for the Trust by Richards, Layton & Finger,
Wilmington, Delaware, and for the Underwriters by Stroock & Stroock & Lavan, New
York, New York. The material federal income tax consequences of the Notes and
the Certificates will be passed upon for the Company by Schulte Roth & Zabel.
EXPERTS
The financial statements listed under the heading "Exhibits, Financial
Statement Schedule and Reports on Form 8-K" in the Corporation's 1994 Annual
Report on Form 10-K incorporated by reference herein have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1994 consolidated
financial statements refers to a change in the method of accounting for
post-retirement benefits other than pensions in 1993.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION
PROCEDURES
Except in certain limited circumstances, the globally offered Notes of CIT
RV Owner Trust 1995-A(the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of DTC, Cedel or Euroclear. The Global Securities will be
tradable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against payment basis
through the respective Depositories of Cedel and Euroclear (in such capacity)
and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their Participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name
of Cede as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective Depositories,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriters. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global securities
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's'
accounts are located to insure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC Seller and Cedel or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
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Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depository, as the case may be, 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, on the basis of the actual number of days in such
accrual period and year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective Depository of the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the receptive clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debt
will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to 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 the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depository for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depository, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases Cedel or Euroclear
will instruct the respective Depository, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
payment to and excluding the settlement date on the basis of the actual number
of days in such accrual period and a year assumed to consist of 360 days. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. The payment will
then be reflected in the account of the Cedel Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the Cedel
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft 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.
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Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their Cedel or
Euroclear account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC Participant is
at least one day prior to the value date for the sale to the Cedel
Participant or Euroclear Participant.
Certain U.s. Federal Withholding Taxes and Documentation Requirements
A beneficial owner of Global Securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
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
customer's 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 owners take one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of Global
Securities residing in a country that has a tax treaty with the United States
can obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides for a reduced rate, withholding tax will be imposed at that rate
unless the filer alternatively files Form W-8. Form 1001 may be filed by the
Noteholder or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of a Global
Securities or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includable in gross income for United States tax
purposes, regardless of its source. This summary of documentation requirements
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.
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INDEX OF PRINCIPAL TERMS
Affiliated Purchaser .................................................. 16
Asset Service Center .................................................. 29
Auction Sale .......................................................... 35
Bankruptcy Code ....................................................... 16
Business Day .......................................................... 7
Cede .................................................................. 34
Cedel ................................................................. 4
Certificate Distribution Account ...................................... 48
Certificate Final Scheduled Distribution Date ......................... 7
Certificate Interest Distribution Amount .............................. 39
Certificate Owner ..................................................... 9
Certificate Pool Factor ............................................... 28
Certificate Reserve Account ........................................... 48
Certificate Reserve Account Maximum Balance ........................... 53
Certificates .......................................................... 4
CIT ................................................................... 4
CITCF-NY .............................................................. 16
CITSF ................................................................. 4
Class A Final Scheduled Distribution Date ............................. 7
Class A Interest Distribution Amount .................................. 34
Class A Notes ......................................................... 4
Class A Rate .......................................................... 8
Closing Date .......................................................... 6
Code .................................................................. 65
Collection Account .................................................... 48
Company ............................................................... 4
Contracts ............................................................. 5
Dealers ............................................................... 5
Defaulted Contracts ................................................... 48
Definitive Certificates ............................................... 44
Definitive Notes ...................................................... 44
Definitive Securities ................................................. 44
Depository ............................................................ 34
Determination Date .................................................... 8
Distribution Date ..................................................... 7
DTC ................................................................... 4
DTC Rules ............................................................. 42
Due Period ............................................................ 8
Eligible Investments .................................................. 48
ERISA ................................................................. 14
Euroclear ............................................................. 4
Event of Termination .................................................. 56
Events of Default ..................................................... 36
Excess Spread ......................................................... 53
Financed Vehicles ..................................................... 5
FTC Rule .............................................................. 63
Funding Period ........................................................ 6
Guarantee Payment ..................................................... 11
Indenture ............................................................. 4
Indenture Trustee ..................................................... 4
Indirect Participants ................................................. 41
Initial Contracts ..................................................... 5
Initial Cut-off Date .................................................. 5
Initial Cut-off Date Pool Principal Balance ........................... 19
Initial Financed Vehicles ............................................. 5
Initial Guarantee Payment Limit ....................................... 11
Initial Pool Balance .................................................. 13
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Insolvency Event ...................................................... 57
Insolvency Laws ....................................................... 16
Interest Accrual Period ............................................... 8
Interest Shortfall .................................................... 13
IRS ................................................................... 65
Issuer ................................................................ 4
Late Fees ............................................................. 13
Limited Guarantee ..................................................... 4
List of Contracts ..................................................... 46
Mandatory Prepayment .................................................. 10
Military Reservist Relief Act ......................................... 47
Monthly Advance ....................................................... 12
Moody's ............................................................... 14
Non-Reimbursable Payment .............................................. 13
Nonreinstatement Notice ............................................... 53
Note Owner ............................................................ 34
Note Distribution Account ............................................. 48
Note Pool Factor ...................................................... 28
Notes ................................................................. 4
Obligor ............................................................... 12
OID ................................................................... 65
Optional Purchase ..................................................... 35
Original Certificate Balance .......................................... 5
Owner Trustee ......................................................... 4
Participants .......................................................... 41
Pass-Through Rate ..................................................... 9
Pool Balance .......................................................... 10
Pre-Funded Amount ..................................................... 6
prepayments ........................................................... 23
Principal Distribution Amount ......................................... 35
Purchase Agreement .................................................... 6
Purchase Price ........................................................ 47
Rating Agencies ....................................................... 14
Record Date ........................................................... 7
Related Documents ..................................................... 38
Relief Act Obligor .................................................... 47
Required Servicer Ratings ............................................. 49
Sale and Servicing Agreement .......................................... 5
Securities ............................................................ 4
Servicer .............................................................. 4
Servicer Letter of Credit ............................................. 49
Servicer Payment ...................................................... 8
Servicing Fee Rate .................................................... 13
Servicing Fee ......................................................... 13
Simple Interest Contract .............................................. 20
Soldiers' and Sailors' Civil Relief Act ............................... 47
Standard & Poor's ..................................................... 14
Subsequent Contracts .................................................. 5
Subsequent Cut-off Date ............................................... 6
Subsequent Financed Vehicles .......................................... 5
Subsequent Transfer Agreement ......................................... 6
Subsequent Transfer Date .............................................. 6
Trigger Date .......................................................... 52
Trust ................................................................. 4
Trust Agreement ....................................................... 5
UCC ................................................................... 15
Underwriters .......................................................... 71
Underwriting Agreement ................................................ 71
78
<PAGE>
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No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or any Underwriter. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time subsequent
to the date hereof or that there has been no change in the affairs of the
Company since such date.
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TABLE OF CONTENTS
Page
----
Available Information ..................................................... 2
Reports to Securityholders ................................................ 3
Documents Incorporated by Reference ....................................... 3
Summary ................................................................... 4
Special Considerations .................................................... 15
Structure of the Transaction .............................................. 18
The Trust Property ........................................................ 19
The Contract Pool ......................................................... 19
Maturity and Prepayment Considerations .................................... 23
Yield Considerations ...................................................... 27
Pool Factors .............................................................. 28
Use of Proceeds ........................................................... 28
The CIT Group Securitization Corporation II,
Seller .................................................................. 28
The CIT Group/Sales Financing, Inc., Servicer ............................. 29
CIT ....................................................................... 33
The Notes ................................................................. 34
The Certificates .......................................................... 39
Certain Information Regarding the Securities .............................. 41
The Purchase Agreements and The Trust
Documents ............................................................... 46
Certain Legal Aspects of the Contracts .................................... 57
Certain Federal Income Tax Consequences ................................... 64
ERISA Considerations ...................................................... 70
Underwriting .............................................................. 70
Notice to Canadian Residents .............................................. 71
Financial Information ..................................................... 72
Ratings ................................................................... 72
Legal Matters ............................................................. 72
Experts ................................................................... 72
Annex I ................................................................... 73
Index of Principal Terms .................................................. 76
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Until September 12, 1995, all dealers effecting transactions in the
registered Securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
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CIT RV
Owner Trust 1995-A
$200,000,000
$188,000,000 Class A 6.25% Asset Backed Notes
$12,000,000 6.55% Asset Backed Certificates
The CIT Group Securitization
Corporation II,
Seller
The CIT Group/Sales
Financing, Inc.
Servicer
PROSPECTUS
CS First Boston
Merrill Lynch & Co.
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