As filed with the Securities and Exchange Commission on December 24, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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THE CIT GROUP SECURITIZATION CORPORATION II
THE CIT GROUP, INC.
(Exact name of each registrant specified in its charter)
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Delaware 22-3328188
Delaware 6146 13-2994534
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
THE CIT GROUP SECURITIZATION CORPORATION II THE CIT GROUP, INC.
650 CIT Drive 1211 Avenue of the Americas
Livingston, New Jersey 07039 New York, New York 10036
(201) 535-3514 (212) 536-1950
(Address of principal (Address of principal
executive offices) executive offices)
----------
ERNEST D. STEIN, ESQ.
Executive Vice President, General Counsel & Secretary
THE CIT GROUP, INC.
1211 Avenue of the Americas
New York, New York 10036
(212)-536-1950
(Name and address of agent for service)
Copies to:
PAUL N. WATTERSON, ESQ.
SCHULTE ROTH & ZABEL LLP
900 Third Avenue
New York, New York 10022
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Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
Proposed Proposed
Amount to Maximum Maximum Amount of
Title of each class of be Offering aggregate registration
securities to be registered registered Price Per offering fee(1)
Unit price(1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset-Backed Securities....................... $1,000,000 100% $1,000,000 $350.00
- --------------------------------------------------------------------------------------------------------------
Limited Guarantees of The CIT Group, Inc.(2)..
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum aggregate offering price, pursuant to Rule
457(c).
(2) May be issued in connection with issuance of the Asset-Backed Securities of
trusts formed by The CIT Group Securitization Corporation II. No additional
consideration will be paid for the Limited Guarantee; accordingly, no
separate filing fee is being paid herewith, pursuant to Rule 457(n).
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
Prospectus Supplement
(To Prospectus dated __________, ____)
$
CIT Marine Trust ____-_
The CIT Group Securitization Corporation II,
Seller
The CIT Group/Sales Financing, Inc.,
Servicer
The CIT Marine Trust ____-_ (the "Trust" or the "Issuer") will be formed
pursuant to a Trust Agreement, to be dated as of __________ 1, ____, between The
CIT Group Securitization Corporation II (the "Company" or the "Seller") and
_______________, as trustee (the "Owner Trustee"), and will issue Class A-1
____% Asset-Backed Notes (the "Class A-1 Notes"), Class A-2 ____% Asset-Backed
Notes (the "Class A-2 Notes"), Class A-3 ____% Asset-Backed Notes (the "Class
A-3 Notes"), Class A-4 ____% Asset-Backed Notes (the "Class A-4 Notes"), Class
A-5 ____% Asset-Backed Notes (the "Class A-5 Notes"), Class A-6 ____%
Asset-Backed Notes (the "Class A-6 Notes"), Class A-7 ____% Asset-Backed Notes
(the "Class A-7 Notes" and, together with the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes, Class A-5 Notes and Class A-6 Notes, the
"Class A Notes") and the Class B ____% Asset-Backed Notes (the "Class B Notes"
and, together with the Class A Notes, the "Notes") in the principal amounts of
$_________, $_________, $_________, $__________, $_________, $_________,
$_________, and $__________, respectively, pursuant to an Indenture, to be dated
as of __________ 1, ____ between the Issuer and _______________, as trustee (the
"Indenture Trustee"). The Trust will also issue ____% Asset-Backed Certificates
(the "Certificates" and, together with the Notes, the "Securities") with an
Original Certificate Balance of $__________.
(Continued on following page)
A discussion of certain risk factors that should be considered by prospective
purchasers of the Securities offered hereby can be found on page S-__ herein and
on page 23 in the accompanying Prospectus.
THE SECURITIES WILL REPRESENT INTERESTS IN OR OBLIGATIONS OF 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.
Price to Underwriting Proceeds to the
Public(1) Discount Company(1)(2)
Per Class A-1 Note.............. ________% _______% ________%
Per Class A-2 Note.............. ________% _______% ________%
Per Class A-3 Note.............. ________% _______% ________%
Per Class A-4 Note.............. ________% _______% ________%
Per Class A-5 Note.............. ________% _______% ________%
Per Class A-6 Note.............. ________% _______% ________%
Per Class A-7 Note.............. ________% _______% ________%
Per Class B Note................ ________% _______% ________%
Per Certificate................. ________% _______% ________%
Total........................... $____________ $_________ $___________
(1) Plus accrued interest, if any, at the respective Interest Rate or the
Pass-Through Rate, as appropriate, from __________ 1, ----.
(2) Before deduction of expenses payable by the Company estimated at $_______.
The Securities are offered by the Underwriters, when, as and if delivered to and
accepted by the Underwriters, subject to prior sale, withdrawal or modification
of the offer without notice, approval of counsel and other conditions. It is
expected that delivery of the Notes will be made in book-entry form through the
facilities of The Depository Trust Company ("DTC"), Cedel Bank, societe anonyme
("Cedel") and the Euroclear System ("Euroclear") and that the Certificates will
be ready for delivery in fully registered, certificated form in New York, New
York, in each case on or about __________, ____, against payment therefor in
immediately available funds.
[UNDERWRITERS]
The date of this Prospectus Supplement is __________, ____.
<PAGE>
(continued from preceding page)
The assets of the Trust will primarily include a pool of marine installment sale
contracts, direct loans and U.S. preferred ship mortgages (the "Contracts")
secured by the new and used boats, boat motors and boat trailers financed
thereby (the "Financed Boats"), certain monies received under the Contracts on
and after __________ 1, ____ (the "Cut-off Date"), an assignment of the security
interests in the Financed Boats, the Collection Account, the Certificate
Distribution Account, the Note Distribution Account and the Reserve Account, in
each case together with the proceeds thereof, the proceeds from claims under
certain insurance policies in respect of individual Financed Boats or the
related Obligors and certain rights under the Sale and Servicing Agreement, to
be dated as of __________ 1, ____ (the "Sale and Servicing Agreement"), among
the Seller, the Servicer, and the Trust.
The Notes will be secured by assets of the Trust (other than the
Certificate Distribution Account) pursuant to the Indenture. The Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class
A-5 Notes, the Class A-6 Notes, the Class A-7 Notes and the Class B Notes will
bear interest at the per annum rate of ____%, ____%, ____%, ____%, ____%, ____%,
____% and ____%, respectively (each, an "Interest Rate"). Interest on the Class
A-1 Notes will be calculated on the basis of a 360-day year and the actual
number of days elapsed in the related Interest Accrual Period. Interest on each
other class of Notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on the Notes will generally be
payable on the fifteenth day of each month (each, a "Distribution Date"),
commencing __________ 15, ____. Principal on the Notes will be payable on each
Distribution Date to the extent described herein. No principal payments will be
made (i) on the Class A-2 Notes until the Class A-1 Notes have been paid in
full, (ii) on the Class A-3 Notes until the Class A-2 Notes have been paid in
full, (iii) on the Class A-4 Notes until the Class A-3 Notes have been paid in
full, (iv) on the Class A-5 Notes until the Class A-4 Notes have been paid in
full, (v) on the Class A-6 Notes until the Class A-5 Notes have been paid in
full or (vi) on the Class A-7 Notes until the Class A-6 Notes have been paid in
full, except under certain circumstances described herein. Distributions of
principal and interest on the Class B Notes will be subordinated in priority to
payments due on the Class A Notes to the extent described herein. The
Certificates represent fractional undivided interests in the Trust. The
Certificates will bear interest at the rate of ____% 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. The final scheduled Distribution Date for the Certificates will be
the __________ Distribution Date. The final scheduled Distribution Date for the
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes,
the Class A-5 Notes, the Class A-6 Notes, the Class A-7 Notes and the Class B
Notes will be the __________, __________, __________, __________, __________,
__________, __________ and _____________ Distribution Date, respectively. The
aggregate outstanding principal amount of the Securities is likely to be paid
earlier than such dates due to a variety of factors including an Optional
Purchase or Auction Sale as described herein.
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.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES
SEE "PLAN OF DISTRIBUTION" HEREIN.
S-2
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "The CIT Group/Sales
Financing, Inc., Servicer" may constitute forward-looking statements within the
meaning of Section 7A of the Securities Act of 1933, as amended, and as such may
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the marine portfolio of The
CIT Group/Sales Financing, Inc. to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
This Prospectus Supplement does not contain complete information about the
offering of the Securities. Additional information is contained in the
Prospectus of the Seller dated __________, ____ (the "Prospectus") and
purchasers are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Securities may not be consummated unless the purchaser has
received both this Prospectus Supplement and the Prospectus. To the extent, if
any, that any statement in the final Prospectus Supplement is inconsistent with
statements contained in this Prospectus Supplement, the statements in the final
Prospectus Supplement shall control. Terms used and not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Prospectus.
S-3
<PAGE>
SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Certain capitalized terms used in the Summary are
defined elsewhere in this Prospectus Supplement or in the Prospectus.
Issuer........................ CIT Marine Trust ____-_ (the "Trust" or the
"Issuer"), a Delaware business trust to be
formed by the Seller and the Owner Trustee
pursuant to the Trust Agreement, to be dated as
of __________ 1, ____ (the "Trust Agreement").
Seller........................ The CIT Group Securitization Corporation II
(the "Company"), a wholly-owned, limited
purpose subsidiary of The CIT Group, 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. See "Risk Factors--Limited
Obligations."
Servicer...................... The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the "Servicer"),
a wholly-owned subsidiary of CIT. The Servicer
will be responsible for managing,
administering, servicing and making collections
on the Contracts held by the Trust.
Owner Trustee................. _______________, as trustee under the Trust
Agreement (the "Owner Trustee").
Indenture Trustee............. _______________, as trustee under the
Indenture, to be dated as of __________ 1, ____
(the "Indenture Trustee" and, together with the
Owner Trustee, the "Trustees").
Risk Factors.................. Certain potential risks and other
considerations are particularly relevant to a
decision to invest in any securities sold
hereunder. See "Risk Factors."
The Notes..................... The CIT Marine Trust ____-_ Class A-1 ____%
Asset-Backed Notes (the "Class A-1 Notes"),
Class A-2 ____% Asset-Backed Notes (the "Class
A-2 Notes"), Class A-3 ____% Asset-Backed Notes
(the "Class A-3 Notes"), Class A-4 ____%
Asset-Backed Notes (the "Class A-4 Notes" ),
Class A-5 ____% Asset-Backed Notes (the "Class
A-5 Notes"), Class A-6 ____% Asset-Backed Notes
(the "Class A-6 Notes"), Class A-7 ____%
Asset-Backed Notes (the "Class A-7 Notes" and,
together with the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes, the Class A-4
Notes, the Class A-5 Notes and the Class A-6
Notes, the "Class A Notes") and Class B ____%
Asset-Backed Notes (the "Class B Notes" and,
together with the Class A Notes, the "Notes"
and, together with the Certificates, the
"Securities") will represent obligations of the
Trust secured by assets of the Trust (other
than the Certificate Distribution Account). See
"The Notes--General."
Payments in respect of the Class B Notes will
be subordinated to payments on the Class A
Notes, to the extent described herein.
S-4
<PAGE>
The Trust will issue $________, $________,
$__________, $__________, $________, $________,
$________ and $________ aggregate principal
amount of Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes, Class A-5
Notes, Class A-6 Notes, Class A-7 Notes and
Class B Notes, respectively, pursuant to an
Indenture, to be dated as of __________ 1,
____, between the Issuer and the Indenture
Trustee (the "Indenture"). See "The
Notes--General."
The Notes will be issued in minimum
denominations of $1,000 and integral multiples
of $1,000 in excess thereof and will be
available in book-entry form only. Persons
acquiring beneficial interests in the Notes
("Note Owners") will hold their interests
through DTC in the United States or Cedel Bank,
societe anonyme ("Cedel") or the Euroclear
System ("Euroclear") in Europe. Definitive
Notes (as defined in the Prospectus) will be
issued only under the limited circumstances
described herein and in the Prospectus. Unless
and until Notes of a class are issued in
definitive form, all references herein to
distributions, notices, reports and statements
to and to actions by and effects upon the
related Noteholders will refer to the same
actions and effects with respect to DTC or
Cede, as the case may be, for the benefit of
the related Note Owners in accordance with the
DTC procedures. See "Certain Information
Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities" in
the Prospectus and Annex I hereto.
The Certificates.............. The CIT Marine Trust ____-_ ____% Asset-Backed
Certificates (the "Certificates") will
represent fractional undivided interests in the
Trust. See "The Certificates--General."
The Trust will issue $_________ aggregate face
amount of Certificates (the "Original
Certificate Balance") pursuant to the Trust
Agreement. Payments in respect of the
Certificates will be subordinated to payments
on the Notes to the extent described herein and
in the Prospectus. See "The
Certificates--General."
The Certificates will be issued in minimum
denominations of $20,000 and integral multiples
of $1,000 in excess thereof; provided, however,
that one Certificate may be issued in a
denomination other than an integral multiple of
$1,000 such that the Affiliated Owner may be
issued at least 1% of the Original Certificate
Balance. The Certificates will be issued in
fully registered, certificated form
("Definitive Certificates") to
Certificateholders or their nominees. See
"Certain Information Regarding the
Securities--Definitive Securities" in the
Prospectus. Purchasers of Certificates and
their assignees (i) must represent that they
are United States persons (as defined in
Section 7701(a) of the Code) and provide a
certification of non-foreign status under
penalties of perjury and (ii) must represent
and certify that they are not (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)
S-5
<PAGE>
any entity whose underlying assets include plan
assets by reason of a plan's investment in the
entity.
Property of the Trust......... The property of the Trust will primarily
include (i) a pool of marine installment sale
contracts, direct loans and U.S. preferred ship
mortgages (the "Contracts") secured by the new
and used boats, boat motors and boat trailers
financed thereby (the "Financed Boats"), (ii)
certain monies received under the Contracts on
and after __________ 1, ____ (the "Cut-off
Date"), (iii) an assignment of the security
interests in the Financed Boats, (iv) the
Collection Account, the Certificate
Distribution Account, the Note Distribution
Account and the Reserve Account, in each case
together with the proceeds thereof, (v) the
proceeds from claims under certain insurance
policies in respect of individual Financed
Boats or the related Obligors and (vi) certain
rights under the Sale and Servicing Agreement,
to be dated as of __________ 1, ____ (the "Sale
and Servicing Agreement"), among the Seller,
the Servicer and the Trust.
CITSF will be obligated to repurchase Contracts
(a "Repurchased Contract") upon the occurrence
of certain breaches of representations and
warranties (a "Repurchase Event"). See "The
Purchase Agreements and the Trust
Documents--Sale and Assignment of the
Contracts" and "--Servicing Procedures" in the
Prospectus.
The Contracts................. The property of the Trust will consist
primarily of marine installment sale contracts
for boats originated by boat dealers
("Dealers") and acquired by CITSF or The CIT
Group/Consumer Finance, Inc. (NY) ("CITCF-NY"),
marine loans originated directly by CITSF or
one of its affiliates, or acquired by CITSF or
one of its affiliates from unaffiliated third
parties and U.S. preferred ship mortgages. The
Financed Boats will consist of boats, boat
motors and boat trailers. 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 Contracts to CITSF
pursuant to a purchase agreement, to be dated
as of __________ 1, ____, and CITSF will sell
the Contracts to the Company pursuant to a
purchase agreement, to be dated as of
__________ 1, ____ (the "Purchase Agreement"),
and the Company will sell the Contracts to the
Trust pursuant to the Sale and Servicing
Agreement.
CITSF or one of its affiliates (directly or
through Dealers) originated all of the
Contracts in accordance with CITSF's
underwriting standards or acquired the
Contracts from unaffiliated third parties (in
which event CITSF reviewed the Contracts to
confirm that they conformed to CITSF's
underwriting standards).
As of the Cut-off Date, the Contracts had a
weighted average original maturity of _____
months and a remaining weighted average
maturity of _____ months. The final scheduled
payment date on the Contract with the last
maturity occurs in __________. See "The
Contract Pool." The Contracts will generally be
prepayable at any time without premium or
S-6
<PAGE>
penalty to the purchaser of the related
Financed Boat or other person or persons who
are obligated to make payments under the
Contract (each, an "Obligor").
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
__________ 15, ____. Payments on the Notes on
each Distribution Date will be made to the
holders of record of the related Notes at the
close of business on the Business Day
immediately preceding such Distribution Date
or, in the event Definitive Notes (as defined
in the Prospectus) have been issued, at the
close of business on the last Business Day of
the month immediately preceding the month in
which such Distribution Date occurs and
payments on the Certificates on each
Distribution Date will be made to the holders
of record of the related Certificates, at the
close of business on the last Business 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 face amount of
the Certificates will be payable on the
Distribution Date occurring in __________ (the
"Certificate Final Scheduled Distribution
Date") and the outstanding principal amount of
the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the Class
A-5 Notes, the Class A-6 Notes, the Class A-7
Notes and the Class B Notes will be payable on
the Distribution Date occurring in __________,
___________, ___________, ___________,
___________, ___________, ___________ and
__________, respectively (the "Class A-1 Note
Final Scheduled Distribution Date," the "Class
A-2 Note Final Scheduled Distribution Date,"
the "Class A-3 Note Final Scheduled
Distribution Date," the "Class A-4 Note Final
Scheduled Distribution Date," the "Class A-5
Note Final Scheduled Distribution Date," the
"Class A-6 Note Final Scheduled Distribution
Date," the "Class A-7 Note Final Scheduled
Distribution Date" and the "Class B Note 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, __________, __________ or Oklahoma
are authorized by law, regulation or executive
order to be closed.
Due Period.................... With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and other amounts 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 __________ 1, ____ and
will end on and include __________, ____.
S-7
<PAGE>
Determination Date............ The "Determination Date" is the third Business
Day prior to each Distribution Date. On each
Determination Date, the Servicer will determine
the Available Amount for distribution on the
related Distribution Date, allocate such
amounts between the Notes, the Certificates and
the Servicer Payment, and advise the Trustees
(or the paying agent appointed pursuant to the
Indenture or the Trust Agreement) of the
amounts of the payments to be made to
Securityholders, all as described under "The
Purchase Agreements and The Trust
Documents--Distributions."
The "Available Amount" on any Distribution Date
is equal to the excess of (A) the sum of (i)
all amounts on deposit in the Collection
Account attributable to collections or deposits
made in respect of the Contracts (including any
Late Fees (as defined in the Prospectus)), in
the related Due Period and (ii) the Purchase
Price for any Contract repurchased by CITSF as
a result of breaches of certain representations
and warranties or purchased by the Servicer as
a result of breaches of certain covenants and
any Monthly Advances made by the Servicer, if
such Purchase Price or Monthly Advance is paid
on the Deposit Date immediately preceding such
Distribution Date, over (B) the sum of the
following amounts (to the extent that the
Servicer has not already withheld such amounts
from collections on the Contracts): (i) any
repossession profits on Liquidated Contracts,
Liquidation Expenses incurred and taxes and
insurance advanced by the Servicer in respect
of Financed Boats that are reimbursable to the
Servicer under the Sale and Servicing
Agreement, (ii) any amounts incorrectly
deposited in the Collection Account, (iii) net
investment earnings on the funds in the
Collection Account and (iv) 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.
Terms of the Notes............ The principal terms of the Notes will be as
described below:
A. Interest Rate............. The Class A-1 Notes will bear interest at the
rate of ____% per annum (the "Class A-1
Interest Rate"), the Class A-2 Notes will bear
interest at the rate of ____% per annum (the
"Class A-2 Interest Rate"), the Class A-3 Notes
will bear interest at the rate of ____% per
annum (the "Class A-3 Interest Rate"), the
Class A-4 Notes will bear interest at the rate
of ____% per annum (the "Class A-4 Interest
Rate"), the Class A-5 Notes will bear interest
at the rate of ____% per annum (the "Class A-5
Interest Rate"), the Class A-6 Notes will bear
interest at the rate of ____% per annum (the
"Class A-6 Interest Rate"), the Class A-7 Notes
will bear interest at the rate of ____% per
annum (the "Class A-7 Interest Rate") and the
Class B Notes will bear interest at the rate of
____% per annum (the "Class B Interest Rate").
The interest rates for the various classes of
Notes are referred to herein collectively as
"Interest Rates."
B. Interest.................. Interest on the outstanding principal amount of
each class of Notes will accrue at the
applicable Interest Rate from and including the
Closing Date (in the case of the first
Distribution
S-8
<PAGE>
Date) or from and including the preceding
Distribution Date to but excluding the
Distribution Date (each, an "Interest Accrual
Period"). On each Distribution Date, the
Indenture Trustee will distribute to the
Noteholders of each class accrued interest at
the applicable Interest Rate on the outstanding
principal amount of such class to the extent of
the Available Amount remaining after payment of
the Servicer Payment. To the extent the
remaining Available Amount on a Distribution
Date is insufficient to pay Noteholders the
entire amount of interest due on such
Distribution Date, such shortfall will be
funded from the Reserve Account, subject to the
Available Reserve Amount, under the
circumstances described herein. Interest on the
Class A-1 Notes will be calculated on the basis
of a 360-day year and the actual number of days
elapsed in the related Interest Accrual Period.
Interest on each other class of Notes will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on
the Notes of any class for any Distribution
Date due but not paid on such Distribution Date
will be due on the next Distribution Date in
addition to an amount equal to interest on such
amount at the applicable Interest Rate (to the
extent lawful). See "The Notes--Payment of
Interest."
The "Servicer Payment" is equal on each
Distribution Date to the sum of the
reimbursement then due to the Servicer for
outstanding Monthly Advances and the Servicing
Fee (including any unpaid Servicing Fees for
past Distribution Dates); provided, however,
that if CITSF or one of its affiliates is the
Servicer, the Servicing Fee (including any
unpaid Servicing Fees for past Distribution
Dates) shall not be included in the Servicer
Payment but instead shall be payable to the
Servicer on each Distribution Date only from
the Available Amount, if any, remaining after
the principal and interest payable on the
Securities on such Distribution Date have been
paid.
Interest payments to all classes of Class A
Noteholders will have the same priority. Under
certain circumstances, the amount available for
interest payments could be less than the amount
of interest payable on the Class A Notes on any
Distribution Date, in which case each class of
Class A Noteholders will receive their ratable
share (based upon the aggregate amount of
interest due to such class of Class A
Noteholders) of the aggregate amount available
to be distributed in respect of interest on the
Class A Notes.
Interest on the Class B Notes will not be paid
on any Distribution Date until interest on the
Class A Notes for such Distribution Date has
been paid in full. In addition, notwithstanding
the foregoing, if an Event of Default has
occurred and the Notes have been accelerated,
payments of interest on and principal of the
Class B Notes will not be paid until the Class
A Notes have been paid in full.
C. Principal................. Principal of the Class A Notes will be payable
on each Distribution Date in an amount equal to
the Class A Noteholders' Principal Distribution
Amount, to the extent of the Available Amount
remaining after payment of the Servicer
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<PAGE>
Payment and interest due on the Notes on such
Distribution Date. To the extent the remaining
Available Amount on a Distribution Date is
insufficient to fund the entire Class A
Noteholders' Principal Distribution Amount due
on such Distribution Date, such shortfall will
be funded from the Reserve Account, subject to
the Available Reserve Amount remaining after
any withdrawals from the Reserve Account to
make payments of interest due on the Notes on
such Distribution Date, under the circumstances
described herein.
Principal of the Class B Notes will be payable
on each Distribution Date in an amount equal to
the Class B Noteholders' Principal Distribution
Amount, to the extent of the Available Amount
remaining after payment of the Servicer Payment
and interest due on the Notes and principal due
on the Class A Notes on such Distribution Date.
To the extent the remaining Available Amount on
a Distribution Date is insufficient to fund the
entire Class B Noteholders' Principal
Distribution Amount due on such Distribution
Date, such shortfall will be funded from the
Reserve Account, subject to the Available
Reserve Amount remaining after any withdrawals
from the Reserve Account to make payments of
interest due on the Notes and principal due on
the Class A Notes on such Distribution Date,
under the circumstances described herein.
Notwithstanding the foregoing, if an Event of
Default has occurred and the Notes have been
accelerated, payments of interest on and
principal of the Class B Notes will not be paid
until the Class A Notes have been paid in full.
On each Distribution Date prior to the
Distribution Date on which the Class A-1 Notes
have been paid in full, principal of the Class
A-1 Notes will be payable in an amount equal to
100% of the Class A Noteholders' Principal
Distribution Amount. On each Distribution Date
on and after the Distribution Date on which the
Class A-1 Notes have been paid in full,
principal of the Class A-2 Notes will be
payable, until the Class A-2 Notes have been
paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution
Amount (less any portion of the Class A
Noteholders' Principal Distribution Amount
applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1
Notes to zero). On each Distribution Date on
and after the Distribution Date on which the
Class A-2 Notes have been paid in full,
principal of the Class A-3 Notes will be
payable, until the Class A-3 Notes have been
paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution
Amount (less any portion of the Class A
Noteholders' Principal Distribution Amount
applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1
Notes and the Class A-2 Notes to zero). On each
Distribution Date on and after the Distribution
Date on which the Class A-3 Notes have been
paid in full, principal of the Class A-4 Notes
will be payable, until the Class A-4 Notes have
been paid in full, in an amount equal to 100%
of the Class A Noteholders' Principal
Distribution Amount (less any portion of the
Class A Noteholders' Principal Distribution
Amount applied on such Distribution Date to
reduce the outstanding principal amount of the
Class A-1 Notes, the
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<PAGE>
Class A-2 Notes and the Class A-3 Notes to
zero). On each Distribution Date on and after
the Distribution Date on which the Class A-4
Notes have been paid in full, principal of the
Class A-5 Notes will be payable, until the
Class A-5 Notes have been paid in full, in an
amount equal to 100% of the Class A
Noteholders' Principal Distribution Amount
(less any portion of the Class A Noteholders'
Principal Distribution Amount applied on such
Distribution Date to reduce the outstanding
principal amount of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes to zero). On each Distribution
Date on and after the Distribution Date on
which the Class A-5 Notes have been paid in
full, principal of the Class A-6 Notes will be
payable, until the Class A-6 Notes have been
paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution
Amount (less any portion of the Class A
Noteholders' Principal Distribution Amount
applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1
Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class A-5
Notes to zero). On each Distribution Date on
and after the Distribution Date on which the
Class A-6 Notes have been paid in full,
principal of the Class A-7 Notes will be
payable, until the Class A-7 Notes have been
paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution
Amount (less any portion of the Class A
Noteholders' Principal Distribution Amount
applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1
Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes, the Class A-5 Notes
and the Class A-6 Notes to zero). On each
Distribution Date, principal of the Class B
Notes will be payable, until the Class B Notes
have been paid in full, in an amount equal to
100% of the Class B Noteholders' Principal
Distribution Amount.
The "Principal Distribution Amount" on each
Distribution Date is equal to the sum of the
following amounts with respect to the related
Due Period, in each case calculated in
accordance with the method specified in each
Contract: (i) all payments of principal
(including all Principal Prepayments applied
during the related Due Period) made on each
Contract during the related Due Period, (ii)
the Stated Principal Balance of each Contract
which, as of the related Deposit Date, was
purchased by CITSF or the Servicer pursuant to
the Sale and Servicing Agreement, and (iii) the
Stated Principal Balance of each Contract which
became a Liquidated Contract during the related
Due Period; provided, however, that (x)
payments of principal (including Principal
Prepayments) with respect to a Liquidated
Contract or a Repurchased Contract received
after the last day of the Due Period in which
the Contract became a Liquidated Contract or a
Repurchased Contract shall not be included in
the Principal Distribution Amount, and (y) if a
Liquidated Contract is purchased by CITSF or
the Servicer pursuant to the Sale and Servicing
Agreement on the Deposit Date immediately
following the Due Period in which it became a
Liquidated Contract, no amount will be included
with respect to such Contract in the Principal
Distribution Amount pursuant to clause (iii) of
the definition thereof.
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<PAGE>
"Class A Noteholders' Principal Distribution
Amount" means, for any Distribution Date, the
sum of (i) the Class A Noteholders' Monthly
Principal Amount for such Distribution Date and
(ii) the Class A Noteholders' Principal
Carryover Shortfall for such Distribution Date;
provided, that the Class A Noteholders'
Principal Distribution Amount shall not exceed
the outstanding principal balance of the Class
A Notes. In addition, on the Note Final
Scheduled Distribution Date of each class of
Class A Notes, the principal required to be
deposited in the Note Distribution Account will
include the amount necessary (after giving
effect to other amounts to be deposited in the
Note Distribution Account on such Distribution
Date and allocable to principal) to reduce the
outstanding principal balance of the related
class of Class A Notes to zero.
"Class B Noteholders' Principal Distribution
Amount" means, for any Distribution Date, the
sum of (i) the Class B Noteholders' Monthly
Principal Amount for such Distribution Date and
(ii) the Class B Noteholders' Principal
Carryover Shortfall for such Distribution Date;
provided, that the Class B Noteholders'
Principal Distribution Amount shall not exceed
the outstanding principal balance of the Class
B Notes. In addition, on the Class B Note Final
Scheduled Distribution Date, the principal
required to be deposited in the Note
Distribution Account will include the amount
necessary (after giving effect to other amounts
to be deposited in the Note Distribution
Account on such Distribution Date and allocable
to principal) to reduce the outstanding
principal balance of the Class B Notes to zero.
No principal payments will be made (i) on the
Class A-2 Notes until the Class A-1 Notes have
been paid in full, (ii) on the Class A-3 Notes
until the Class A-2 Notes have been paid in
full, (iii) on the Class A-4 Notes until the
Class A-3 Notes have been paid in full, (iv) on
the Class A-5 Notes until the Class A-4 Notes
have been paid in full, (v) on the Class A-6
Notes until the Class A-5 Notes have been paid
in full or (vi) on the Class A-7 Notes until
the Class A-6 Notes have been paid in full.
Notwithstanding the foregoing, if an Event of
Default has occurred and the Notes have been
accelerated, principal payments will be made on
each class of Class A Notes pro rata on the
basis of their respective unpaid principal
amounts.
The outstanding principal amount of the Class
A-1 Notes, to the extent not previously paid,
will be payable on the Class A-1 Note Final
Scheduled Distribution Date; the outstanding
principal amount of the Class A-2 Notes, to the
extent not previously paid, will be payable on
the Class A-2 Note Final Scheduled Distribution
Date; the outstanding principal amount of the
Class A-3 Notes, to the extent, not previously
paid, will be payable on the Class A-3 Note
Final Scheduled Distribution Date; the
outstanding principal amount of the Class A-4
Notes, to the extent not previously paid, will
be payable on the Class A-4 Note Final
Scheduled Distribution Date; the outstanding
principal amount of the Class A-5 Notes, to the
extent not previously paid, will be payable on
the
S-12
<PAGE>
Class A-5 Note Final Scheduled Distribution
Date; the outstanding principal amount of the
Class A-6 Notes, to the extent not previously
paid, will be payable on the Class A-6 Note
Final Scheduled Distribution Date; the
outstanding principal amount of the Class A-7
Notes, to the extent not previously paid, will
be payable on the Class A-7 Note Final
Scheduled Distribution Date; and the
outstanding principal amount of the Class B
Notes, to the extent not previously paid, will
be payable on the Class B Note Final Scheduled
Distribution Date. See "The Notes--Payments of
Principal."
D. Redemption................ 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
Notes plus accrued and unpaid interest thereon
at the applicable Interest Rates. See
"Summary--Optional Purchase of the Contracts,"
"--Auction Sale," "The Notes--Redemption" and
"The Purchase Agreements and The Trust
Documents--Termination" in the Prospectus.
E. Limited Rights............. Except as described herein, if an Event of
Default occurs under the Indenture, the Class B
Noteholders will not have any right to direct
or to consent to any remedies therefor by the
Indenture Trustee, including acceleration of
the Notes or the sale of Contracts, until the
Class A Notes have been paid in full. If an
Event of Termination occurs, the Class B
Noteholders will not have any right to direct
or consent to removal of the Servicer or waiver
of any Event of Termination until the Class A
Notes have been paid in full.
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 ____% per annum (the "Pass-Through Rate").
B. Interest.................. Interest in respect of a Distribution Date will
accrue at the Pass-Through Rate during the
related Interest Accrual Period. On each
Distribution Date, the Owner Trustee will
distribute pro rata to Certificateholders
accrued interest at the Pass-Through Rate on
the outstanding Certificate Balance to the
extent of the Available Amount remaining after
payment of the Servicer Payment and interest
and principal due on the Notes on such
Distribution Date. To the extent the remaining
Available Amount on a Distribution Date is
insufficient to pay Certificateholders the
entire amount of interest due on such
Distribution Date, such shortfall will be
funded from the Reserve Account, subject to the
Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make
payments of interest and principal due on the
Notes on such Distribution Date, under the
circumstances described herein. Interest on the
Certificates for any Distribution Date due but
not paid on such Distribution Date will be due
on the next Distribution Date in addition to an
amount equal to interest on such amount at the
Pass-Through Rate (to the extent lawful).
Interest on the Certificates will be calculated
on the basis of a 360-day year consisting of
twelve 30-day months. See "The Certificates -
Distributions of Interest."
S-13
<PAGE>
The "Certificate Balance" means the Original
Certificate Balance reduced by all
distributions allocable to principal actually
made to Certificateholders.
The rights of Certificateholders to receive
distributions of interest will be subordinated
to the rights of Noteholders to receive
distributions of interest and principal, as
described herein. If an Event of Default has
occurred and the Notes have been accelerated,
Certificateholders will not be entitled to
receive any distributions until the Notes have
been paid in full. See "The
Certificates--Distributions of Interest."
C. Principal................. On each Distribution Date prior to the
Distribution Date on which the Notes have been
paid in full (the "Cross-Over Date"), the
Certificateholders will not be entitled to any
payments of principal.
On each Distribution Date on or after the
Cross-Over Date, principal of the Certificates
will be payable, subject to the remaining
Available Amount and the remaining Available
Reserve Amount, in an amount equal to the
Certificateholders' Principal Distribution
Amount with respect to such Distribution Date.
Such principal payments will be funded to the
extent of the Available Amount remaining after
payment of the Servicer Payment, payment of
interest and principal in respect of the Notes
on the Cross-Over Date, and payment of interest
due on the Certificates on such Distribution
Date. To the extent the remaining Available
Amount on a Distribution Date is insufficient
to fund the entire Certificateholders'
Principal Distribution Amount due on such
Distribution Date, such shortfall will be
funded from the Reserve Account, subject to the
Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make
payments of interest and principal due on the
Notes and interest due on the Certificates on
such Distribution Date, under the circumstances
described herein. The rights of
Certificateholders to receive distributions of
principal (following the payment of interest on
the Certificates) will be subordinated to the
rights of Noteholders to receive distributions
of interest and principal.
In the event that the Certificates are
outstanding on the Certificate Final Scheduled
Distribution Date (after taking into account
distributions on such date), the Indenture
Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account (to the
extent funds are available therefor in the
Reserve Account), and will deposit in the
Certificate Distribution Account for
distribution to the Certificateholders in
retirement of the Certificates, an amount equal
to the Certificate Balance.
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" and "The
Certificates--Redemption" in the Prospectus.
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<PAGE>
E. Limited Rights............ Except as described herein, if an Event of
Default occurs under the Indenture, the
Certificateholders will not have any right to
direct or to consent to any remedies therefor
exercisable by the Indenture Trustee, including
the sale of the Contracts, until the Notes have
been paid in full, and if an Event of
Termination occurs, the Certificateholders will
not have any right to direct or consent to
removal of the Servicer or the waiver of such
Event of Termination until the Notes have been
paid in full. See "Risk Factors--Rights of
Noteholders and Certificateholders" herein and
"The Purchase Agreements and the Trust
Documents--Event of Termination," "--Rights
Upon Event of Termination" and "--Waiver of
Past Defaults" in the Prospectus.
Subordination ................ To the extent described herein, the rights of
the Certificateholders to receive distributions
with respect to the Contracts will be
subordinated to the rights of the Noteholders,
and the rights of the Class B Noteholders to
receive distributions with respect to the
Contracts will be subordinated to the rights of
the Class A Noteholders. This subordination is
intended to enhance the likelihood of timely
receipt by the Class A Noteholders (and to a
lesser extent the Class B Noteholders) of the
full amount of interest and principal required
to be paid to them, and to afford the Class A
Noteholders (and to a lesser extent the Class B
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 until the full amount
of interest and principal on the Notes payable
on such Distribution Date has been distributed
to the Noteholders, and (ii) principal until
the Notes have been paid in full.
No distribution will be made to the Class B
Noteholders on any Distribution Date in respect
of (i) interest until the full amount of
interest on the Class A Notes payable on such
Distribution Date has been distributed to the
Class A Noteholders, and (ii) principal until
the full amount of principal on the Class A
Notes payable on such Distribution Date has
been distributed to the Class A Noteholders.
The Class A Noteholders will be entitled to
receive current distributions of interest prior
to the Class B Noteholders receiving any
current distributions of interest. See
"Summary--Terms of the Notes--Interest" and
"The Notes--Payments of Interest." In addition,
the Class A Noteholders will be entitled to
receive their share of the current distribution
of principal prior to the Class B Noteholders
receiving their share of the current
distribution of principal. See "Summary--Terms
of the Notes--Principal" and "The
Notes--Payments of Principal."
Reserve Account............... On the Closing Date, an account (the "Reserve
Account") will be established pursuant to the
Sale and Servicing Agreement. The Indenture
Trustee will have the right to withdraw (or
cause to be withdrawn) payments from the
Reserve Account under certain circumstances
specified below. The Reserve Account will not
be funded on the Closing Date. After the
S-15
<PAGE>
Closing Date, the Reserve Account will be
funded with the Excess Collections, if any, and
certain investment earnings on funds deposited
in the Reserve Account. With respect to any
Distribution Date, the amount available to be
withdrawn from the Reserve Account (the
"Available Reserve Amount") will equal the
lesser of (i) the Specified Reserve Amount and
(ii) the amount on deposit in the Reserve
Account before giving effect to any deposit to
be made to the Reserve Account on such
Distribution Date. If the Available Amount on
any Distribution Date is insufficient (after
paying the Servicer Payment) to pay the
interest and principal required to be
distributed on the Securities on such
Distribution Date, the Indenture Trustee will
withdraw (or cause to be withdrawn) from the
Reserve Account an amount equal to the lesser
of the amount of such deficiency or the
Available Reserve Amount. The Reserve Account
will be available to provide a source of funds
to make payments of principal or interest on
the Notes and the Certificates in the same
order of priority specified for distributions
of the Available Amount. See
"Enhancement--Reserve Account" and "The
Purchase Agreements and the Trust Documents -
Distributions." If the Available Reserve Amount
is zero (which will be the case on the Closing
Date), holders of the Securities will bear the
risk of loss resulting from default by Obligors
and will have to look primarily to the value of
the related Financed Boats for recovery of the
outstanding principal and unpaid interest on
the defaulted Contracts.
On each Distribution Date, the Servicer will
deposit Excess Collections, if any, into the
Reserve Account in an amount sufficient to
increase the amount on deposit in the Reserve
Account to the Specified Reserve Amount for the
next Distribution Date. Excess Collections, if
any, not so required to be deposited in the
Reserve Account will be paid to the Affiliated
Owner. "Excess Collections" for any
Distribution Date will equal the amounts
collected or deposited in respect of the
Contracts in the related Due Period and which
remain in the Collection Account on such
Distribution Date after taking into account
distributions to be made on the Securities and
payments and reimbursements to be made to the
Servicer on such Distribution Date. See "The
Purchase Agreements and The Trust
Documents--Distributions." The "Specified
Reserve Amount" with respect to any
Distribution Date means ___% of the Pool
Balance as of the first day of the related Due
Period, but in no event less than $__________
(subject to adjustment based on delinquencies
and losses on the Contracts), provided that the
Specified Reserve Amount shall never be greater
than the sum of the aggregate principal amount
of the Notes and the outstanding balance of the
Certificates and may be reduced from time to
time if the Rating Agencies shall have given
prior written notice to the Seller, the
Servicer and the Issuer that such reduction
will not result in a downgrade or withdrawal of
the then current ratings of the Notes or the
Certificates. See "Enhancement--Reserve
Account."
If, on any Distribution Date, the Available
Reserve Amount (after taking into account any
deposits to and withdrawals
S-16
<PAGE>
from the Reserve Account pursuant to the Sale
and Servicing Agreement on such Distribution
Date) exceeds the Specified Reserve Amount for
the next Distribution Date, such excess will be
withdrawn from the Reserve Account and paid to
the Affiliated Owner. See "Enhancement--Reserve
Account."
The sole source of funding for the Reserve
Account will be the Excess Collections, and the
Excess Collections may not be sufficient to
fund the Reserve Account in an amount equal to
the Specified Reserve Amount or to replenish
the Reserve Account after funds are withdrawn
to make payments on the Securities. Neither the
Seller nor the Servicer will be obligated to
deposit any of their own funds into the Reserve
Account in the event that the Excess
Collections are not sufficient to fund the
Reserve Account in an amount equal to the
Specified Reserve Amount. Accordingly, the
Distribution Date by which the Reserve Account
will be funded in an amount equal to the
Specified Reserve Amount for such Distribution
Date cannot be predicted.
Monthly Advances.............. With respect to each Contract as to which there
has been a Payment Shortfall during the related
Due Period (other than a Payment 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 Payment Shortfall (each, a "Monthly
Advance"), but only to the extent that the
Servicer, in its good faith judgment, expects
to recover such Monthly Advance from subsequent
interest collections on such Contract made by
or on behalf of the Obligor thereunder, or from
Net Liquidation Proceeds or insurance proceeds
with respect to such Contract. The Servicer
shall be reimbursed for any Monthly Advance
from subsequent interest collections with
respect to such Contract. If the Servicer
determines in its good faith judgment that an
unreimbursed Monthly Advance shall not
ultimately be recoverable from subsequent
interest collections, the Servicer shall be
reimbursed for such Monthly Advance from
collections on all Contracts. In determining
whether an advance is or will be
nonrecoverable, the Servicer need not take into
account that it might receive any amounts in a
deficiency judgment against an Obligor. The
Servicer will not make a Monthly Advance in
respect of (i) the principal component of any
scheduled payment or (ii) a Payment 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.
See "The Purchase Agreements and The Trust
Documents--Monthly Advances" herein and in the
Prospectus.
"Payment Shortfall" means with respect to any
Contract and any Distribution Date, the excess
of (A) the product of (1) one-twelfth of the
Contract Rate of such Contract and (2) 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
ending after the Contract was acquired by the
Trust, as of the Cut-off Date), over (B) the
amount of interest, if any, collected on such
Contract during the related Due Period.
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<PAGE>
Non-Reimbursable Payments..... The Servicer will not be obligated to make any
Non-Reimbursable Payments (as defined in the
Prospectus).
Servicing Fees................ The Servicer shall receive a monthly fee (the
"Servicing Fee"), payable on each Distribution
Date, equal to the sum of (i) one-twelfth of
the product of _____% (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
Cut-off Date) and (ii) any investment earnings
on amounts on deposit in the Collection
Account, the Note Distribution Account and the
Certificate Distribution Account; provided,
however, if CITSF or an affiliate thereof is
not the Servicer, the Servicing Fee Rate shall
be a rate determined at the time of the
appointment of a successor Servicer but not to
exceed _____%. See "The Purchase Agreements and
The Trust Documents--Servicing Compensation"
herein and in the Prospectus.
Optional Purchase of
the Contracts............... At its option, CITSF may purchase all the
Contracts on any Distribution Date on which the
Pool Balance as of the last day of the related
Due Period is __% or less of the Initial Pool
Balance, at a purchase price determined as
described under "The Purchase Agreements and
The Trust Documents--Termination" herein and in
the Prospectus. The "Initial Pool Balance"
equals the Pool Balance as of the Cut-off Date.
Auction Sale.................. Within ten days after the first Distribution
Date on which the Pool Balance as of the last
day of the related Due Period is __% 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" in the Prospectus, the
net sale proceeds (after the Servicer Payment)
will be distributed to Securityholders, in the
same order of priority as collections received
in respect of the Contracts, on the second
Distribution Date succeeding such Due Period.
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" herein and in the
Prospectus.
Ratings....................... It is a condition to the issuance of the Class
A Notes that the Class A-1 Notes be rated
"A-1+" by Standard & Poor's Ratings Service, a
division of The McGraw-Hill Companies, Inc.
("S&P") and "P-1" by Moody's Investors Service,
Inc. ("Moody's") (each, a "Rating Agency") and
that the Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class A-5 Notes, Class A-6
Notes and the Class A-7 Notes be rated "AAA" by
S&P and "Aaa" by Moody's . It is a condition to
the issuance of the Class B Notes that the
Class B Notes be rated at least "A" by S&P and
"A2" by Moody's. It is a condition to the
issuance of the Certificates that the
Certificates be rated at least "BBB" by S&P and
"Baa2" by Moody's. The ratings of the Class A
Notes will be based primarily on the Contracts,
S-18
<PAGE>
the Reserve Account and the terms of the
Securities, including the subordination
provided by the Class B Notes and the
Certificates. The ratings of the Class B Notes
will be based primarily on the Contracts, the
Reserve 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
Contracts and the Reserve Account. The ratings
of the Securities should be evaluated
independently from similar ratings on other
types of securities. The ratings do not address
the possibility that Securityholders may suffer
a lower than anticipated yield. The 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 of
the Contracts."
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 judgment, circumstances so warrant. In the
event that the rating initially assigned to any
of 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 any of the
Securities, 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.
Alternative characterizations of the Notes and
the Certificates are possible, but would not
result in materially adverse tax consequences
to Noteholders or Certificateholders. 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").
Fiduciaries of employee benefit plans subject
to ERISA, or plans subject to Section 4975 of
the Internal Revenue Code of 1986 (the "Code")
should carefully review with their legal
advisors whether the purchase or holding of the
Notes offered hereby could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or the Code. Any
benefit plan fiduciary considering the purchase
of the Notes should, among other things,
consult with its counsel in determining whether
all required conditions have been satisfied.
See "ERISA Considerations."
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<PAGE>
Employee benefit plans subject to ERISA will
not be eligible to purchase the Certificates.
Legal Investment.............. The Class A-1 Notes will be eligible securities
for purchase by money market funds under Rule
2a-7 under the Investment Company Act of 1940,
as amended. The appropriate characterization of
the Certificates and each class of the Notes
under various legal investment restrictions
applicable to the investment activities of
certain institutions, and thus the ability of
investors subject to these restrictions to
purchase the Certificates and the Notes, may be
subject to significant interpretive
uncertainties. All investors whose investment
authority is subject to legal restrictions
should consult their own legal advisors to
determine whether, and to what extent, the
Certificates and each class of the Notes will
constitute legal investments for them.
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RISK FACTORS
Prospective Securityholders should consider the following risk factors 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, Inc. ("CIT"), The CIT Group Securitization
Corporation II (the "Company"), the Affiliated Owner or any Servicer (including
The CIT Group/Sales Financing, Inc. ("CITSF")) or any of their respective
affiliates. 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 Owner, and CITSF), the Underwriters or any of their affiliates,
or any other Servicer or any of its affiliates. CIT will not issue a Limited
Guarantee (as defined in the Prospectus) supporting the Notes or the
Certificates.
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 liquidation experience of pools of
marine installment sale contracts and direct loans secured by boats. In
addition, the credit criteria and underwriting guidelines under which CITSF
originates marine installment sale contracts and direct loans were changed in
1994. The delinquency and loan loss experience for CITSF's portfolio has been
affected adversely by this change in credit criteria. See "The CIT Group/Sales
Financing, Inc., Servicer--Delinquency and Loan Loss Experience." Since the
market value of boats generally declines with age and since in certain states
the Trustees may not have a first perfected security interest in the Financed
Boats, the Servicer may not recover the entire amount owing under a defaulted
Contract. See "Certain Legal Aspects of the Contracts" in the Prospectus. In
such a case, the Securityholders may suffer a corresponding loss. The market
value of the Financed Boats could be or could 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 (a) the protection against loss afforded to the Class A Noteholders by
the subordination of the Class B Notes and the Certificates, (b) the protection
against loss afforded to the Class B Noteholders by the subordination of the
Certificates, (c) the protection against loss afforded to the Securityholders by
the Available Reserve Amount, if any, and (d) the amount of the Excess
Collections available to fund the Reserve Account. If the Certificate Balance
and the Available Reserve Amount is reduced to zero, the 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 Boats for recovery of the
outstanding principal and unpaid interest on the defaulted Contracts. If the
Available Reserve Amount is zero (which will be the case on the Closing Date),
holders of the Certificates will bear the risk of loss resulting from default by
Obligors and will have to look primarily to the value of the related Financed
Boats for recovery of the outstanding principal and unpaid interest on the
defaulted Contracts.
3. Certain Matters Relating to Insolvency. CITCF-NY, CITSF and the Company
intend that transfers of Contracts from The CIT Group/Consumer Finance, Inc.
(NY) ("CITCF-NY") to CITSF, from CITSF to the Company and from the Company to
the Trust, constitute sales, rather than pledges 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 such debtor, or such debtor as
debtor-in-possession, may contend that the sales of the Contracts by CITCF-NY to
CITSF, by CITSF to the Company, or by the Company to the Trust, respectively,
were pledges of the Contracts rather than sales and that, accordingly, such
Contracts should be part of such assigning 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" in the
Prospectus.
4. Limited Assets; Subordination. The Trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds other
than the Contracts and the amounts on deposit in the Reserve Account.
Noteholders generally must rely for repayment upon payments on the Contracts
and, if and to the extent available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Notes, amounts on
deposit in the Reserve Account. However, funds deposited in the Reserve Account
are limited in amount, and the amount required to be maintained on deposit
therein will be reduced as the Pool Balance declines. If the amount on deposit
in the Reserve Account is exhausted, and, in the case of the Class A
Noteholders, to the extent the subordination of amounts distributable to the
Class B Noteholders and the Certificates is insufficient, and, in the
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case of the Class B Noteholders, to the extent the subordination of amounts
distributable to Certificateholders is insufficient, the Trust will depend
solely on current collections on the Contracts to make payments on the
Securities.
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. However, the market value of the Contracts
at any time may not be equal to or greater than the aggregate outstanding
principal balance of the Notes and the interest accrued thereon. Therefore, upon
an Event of Default with respect to the Notes, there may not be sufficient funds
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
for such purpose. Therefore, the failure to pay principal on the Notes may not
result in the occurrence of an Event of Default until the Note Final Scheduled
Distribution Date applicable to each class of the Notes. Any actions taken by
the Class A Noteholders upon an Event of Default may also increase losses to the
Class B Noteholders and the Certificateholders. Upon a sale by the Trust of the
Contracts, the net proceeds from such sale remaining after payment of all
amounts due to the Servicer and the Noteholders may not be sufficient to pay the
Certificate Balance and interest accrued thereon. See "The Notes-The
Indenture-Events of Default; Rights Upon Event of Default" in the Prospectus.
Payments of interest and principal of the Class B Notes will be
subordinated in priority of payment to payments of interest and principal on the
Class A Notes, to the extent described herein. In addition, if an Event of
Default has occurred and the Notes have been accelerated, payments of interest
on and principal of the Class B Notes will not be made until the Class A Notes
have been paid in full. Payments of interest and principal of the Certificates
will be subordinated in priority of payment to payments of interest and
principal on the Notes.
5. Limited Source of Funding for Reserve Account. On the Closing Date,
there will be no funds on deposit in the Reserve Account. The Reserve Account
will be funded solely from the Excess Collections, and the Excess Collections
may not be sufficient to fund the Reserve Account on any Distribution Date in an
amount equal to the Specified Reserve Amount for such Distribution Date or to
replenish the Reserve Account after funds are withdrawn to make payments on the
Securities. The Excess Collections to be deposited in the Reserve Account are
limited and will be reduced as the Pool Balance is reduced. If funds are
deposited in the Reserve Account, they will be available to pay principal and
interest on the Securities on any Distribution Date, but the funds available for
such purpose will not exceed the Available Reserve Amount for such Distribution
Date. If funds in the Reserve Account are exhausted, the Securityholders will
depend solely on the Contracts as the source of repayment.
Liquidations of Contracts may reduce, and perhaps eliminate, the amount of
Excess Collections that would otherwise have been available on any Distribution
Date to fund the Reserve Account, because before any excess interest collections
are available to fund the Reserve Account such excess interest collections must
be applied first to pay the portion of the Principal Distribution Amount equal
to the difference between the Stated Principal Balance of Liquidated Contracts
and the Net Liquidation Proceeds thereof.
Any event or circumstance which causes the Trust not to receive a full
month's interest at the Contract Rate on a Contract also will reduce the amount
of Excess Collections that would otherwise have been available on any
Distribution Date to fund the Reserve Account. Accordingly, the amount of Excess
Collections will be less than it otherwise would have been if a Contract is
prepaid in full or becomes subject to a Relief Act Reduction. Delinquencies on
the Contracts also will reduce, and perhaps eliminate, the Excess Collections
that otherwise would have been available on any Distribution Date to fund the
Reserve Account if the Servicer does not make a Monthly Advance in respect of
such delinquencies or if the Servicer reimburses itself for a Monthly Advance
from collections on other Contracts as provided herein.
6. Geographic Concentration of Obligors. A significant concentration of the
Contracts have Obligors with mailing addresses in the states of __________,
__________ and __________. Based on the Pool Balance as of the Cut-off Date,
_____%, _____% and _____% of the Contracts have Obligors with mailing addresses
in __________, __________ and __________, 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
__________, __________ or __________ may have an adverse effect on the ability
of Obligors in such states to meet their payment obligations under the
Contracts.
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<PAGE>
7. Maturity and Prepayment Considerations. The weighted average life of the
Notes and the Certificates will generally be influenced by the rate at which the
principal balances of the Contracts are paid, which payment may be in the form
of scheduled amortization or prepayments. The Contracts are prepayable by the
Obligors at any time. Prepayments may also result from Contracts becoming
Liquidated Contracts or from repurchases of Contracts. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of the Contracts will
be borne entirely by the Securityholders. See "The Purchase Agreements and the
Trust Documents--Termination" regarding CITSF's option to purchase the Contracts
and "The Purchase Agreements and the Trust Documents--Sale and Assignment of the
Contracts" in the Prospectus.
In addition, the Servicer may, on a case-by-case basis, permit extensions
with respect to the due dates of payments on Contracts in accordance with the
Sale and Servicing Agreement. See "The Purchase Agreements and the Trust
Documents--Modification of Contracts." Any such extensions may increase the
weighted average life of the Securities. However, the Servicer will not be
permitted to grant any such extension if as a result the final scheduled payment
on a Contract would fall after the 180th day prior to the Certificate Final
Scheduled Distribution Date.
8. Ratings of the Securities. It is a condition to the issuance of the
Class A Notes that the Class A-1 Notes be rated "A-1+" by S&P and "P-1" by
Moody's and that the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class
A-5 Notes, Class A-6 Notes and the Class A-7 Notes be rated "AAA" by S&P and
"Aaa" by Moody's . It is a condition to the issuance of the Class B Notes that
the Class B Notes be rated at least "A" by S&P and "A2" by Moody's. It is a
condition to the issuance of the Certificates that the Certificates be rated at
least "BBB" by S&P and "Baa2" by Moody's. The foregoing ratings do not address
the likelihood that the Securities will be retired following the sale of the
Contracts by the applicable Trustee. 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 Rating Agency if, in its judgment, 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 that any other rating agency will rate the
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.
9. Book-Entry Registration. The Notes will be offered for purchase in
book-entry form only and will be initially 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"). No person acquiring an
interest in the Notes through the facilities of DTC (a "Note Owner") will be
entitled to receive a Definitive Note representing such person's interest in the
Notes, except as set forth under "Certain Information Regarding the
Securities--Definitive Securities" in the Prospectus, and such persons will hold
their interests in the Notes through DTC in the United States or Cedel Bank,
societe anonyme ("Cedel") or Euroclear in Europe. Unless and until Definitive
Notes are issued under the limited circumstances described herein and in the
related Prospectus, all references to actions by Noteholders shall refer to
actions taken by DTC upon instructions from its Participants (as defined in the
Prospectus), 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" in the Prospectus and Annex I
hereto.
10. Risk of Commingling. At any time that the requirements as specified
under "The Purchase Agreements and the Trust Documents--Collections" in the
Prospectus are met, the Servicer may deposit payments on or with respect to the
Contracts and proceeds of Contracts in the Collection Account monthly on the
Business Day immediately preceding the next Distribution Date (the "Deposit
Date"). Pending such a monthly deposit into the Collection Account, collections
on the Contracts may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds or if the Servicer became insolvent, the holders of
the Securities could incur a loss with respect to collections not deposited in
the Collection Account. As of the Closing Date, the Servicer meets such
requirements.
11. Rights of Noteholders and Certificateholders. In general, the
Certificateholders may direct the Owner Trustee in the administration of the
Trust. However, because the Trust will pledge the Trust property (other than the
Certificate Distribution Account) to the Indenture Trustee to secure the payment
of the Notes, including in such pledge the rights of the Trust under the Sale
and Servicing Agreement, the Indenture Trustee and not the Certificateholders
will have the power to direct the Owner Trustee to take certain actions in
connection with the administration of the Trust property until the Notes have
been paid in full and the Indenture has been discharged in
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accordance with its terms. In addition, the Certificateholders will not be
allowed to direct the Owner Trustee to take any action that conflicts with the
provisions of the Sale and Servicing Agreement. The Indenture will specifically
prohibit the Owner Trustee from taking any action that would impair the
Indenture Trustee's security interest in the Trust property and will require the
Owner Trustee to obtain the consent of the Indenture Trustee or Noteholders
representing not less than a majority of the aggregate principal amount of the
Notes then outstanding before modifying, amending, supplementing, waiving or
terminating any provision of the Sale and Servicing Agreement. Therefore, except
as described herein, until the Notes have been paid in full, the ability to
direct the Trust with respect to certain actions permitted to be taken under the
Sale and Servicing Agreement rests with the Indenture Trustee and the
Noteholders.
If an Event of Default under the Indenture occurs and the Notes are
accelerated, the Indenture Trustee will have the right or will be required in
certain circumstances to exercise remedies as a secured party, including selling
the Contracts, in order to pay the principal of, and accrued interest on, the
Notes. Except as described herein, upon the occurrence of an Event of Default,
the Class B Noteholders and the Certificateholders will not have any right to
direct or to consent to any action by the Indenture Trustee, including
acceleration of the Notes or the sale of Contracts, until the Class A
Noteholders have been paid in full (and in the case of the Certificateholders,
until the Class B Noteholders have been paid in full). There is no assurance
that the proceeds of any sale of the Contracts would be equal to or greater than
the aggregate outstanding principal amount of the Notes and the Certificate
Balance plus, in each case, accrued interest thereon. Because neither interest
nor principal is distributed to the Class B Noteholders or the
Certificateholders following an Event of Default and acceleration of the Notes
until the full principal amount of the Class A Notes and interest accrued
thereon have been paid in full (and in the case of the Certificateholders, until
the full principal amount of the Class B Notes and interest accrued thereon have
been paid in full), the interests of the Class A Noteholders, the Class B
Noteholders and the Certificateholders may conflict, and the exercise by the
Indenture Trustee of its right to sell the Contracts or exercise other remedies
may cause the Class B Noteholders and the Certificateholders to suffer a loss of
all or part of their investment. See "The Notes--Rights of Noteholders;
Indenture."
In the event that an Event of Termination occurs, the Indenture Trustee or
the Class A Noteholders representing not less than a majority of the aggregate
principal amount of the Class A Notes then outstanding may remove the Servicer
without the consent of any of the Class B Noteholders or the Certificateholders.
None of the Class B Noteholders or the Certificateholders will have the ability,
with certain specified exceptions, to waive defaults by the Servicer, including
defaults that could materially adversely affect the Class B Noteholders and the
Certificateholders. See "The Notes--Rights of Noteholders; Indenture."
12. Insurance. Each Contract requires the Obligor to obtain physical damage
insurance with respect to the related Financed Boat. Since Obligors may choose
their own insurers to provide the required coverage, the specific terms and
conditions of their policies vary. Although insurance will continue to be
required pursuant to the terms of the Contracts, CITSF as Servicer will not be
obligated to purchase physical damage insurance on behalf of any Obligor, verify
if any insurance required under a Contract is being maintained by an Obligor or
be obligated to pursue any remedies under any Contract or applicable law as a
result of any failure of an Obligor to maintain any such insurance. As a result,
any damage to an uninsured boat securing a Contract may result in a reduction of
Liquidation Proceeds available to pay the Securityholders. As of the Cut-off
Date, force-placed insurance has not been obtained on any of the Contracts.
Historically, CITSF has force-placed insurance on a relatively small percentage
of its marine installment sale contracts and direct loans. See "The Purchase
Agreements and the Trust Documents--Physical Damage Insurance" in the
Prospectus.
STRUCTURE OF THE TRANSACTION
The Issuer, CIT Marine Trust ____-_ (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 __________ 1, ____ between the Seller and
_______________, acting thereunder not in its individual capacity but solely as
trustee of the Trust (the "Owner Trustee"). Prior to the sale and assignment of
the Contracts pursuant to the Sale and Servicing Agreement, the Trust will have
no assets or obligations. 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.
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Each Certificate will represent a fractional undivided interest in, and
each Note, will represent an obligation of, the Trust.
The Trust will initially be capitalized with equity equal to approximately
$__________ (the "Original Certificate Balance"). Certificates with an aggregate
original face amount of approximately $_______ will be owned by the Affiliated
Owner 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 Owner, 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 Contracts from the
Seller pursuant to the Sale and Servicing Agreement.
The Servicer will service the Contracts held by the Trust and will receive
fees for such services. CITSF will be appointed as custodian on behalf of the
Trust, and will hold the original marine installment sale contract or promissory
note as well as the originals or copies of documents and instruments relating to
each Contract and evidencing the security interest in the Financed Boat securing
each Contract (the "Contract Files").
The Trust's principal offices are in _______________ in care of
_______________, 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
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-1 ____% Asset-Backed Notes........... $__________
Class A-2 ____% Asset-Backed Notes........... $__________
Class A-3 ____% Asset-Backed Notes........... $__________
Class A-4 ____% Asset-Backed Notes........... $__________
Class A-5 ____% Asset-Backed Notes........... $__________
Class A-6 ____% Asset-Backed Notes........... $__________
Class A-7 ____% Asset-Backed Notes........... $__________
Class B ____% Asset-Backed Notes.......... $__________
____% Asset-Backed Certificates.............. $__________
Total........................................ $
==========
The Owner Trustee
_______________ is the Owner Trustee under the Trust Agreement.
_______________ is a [national] banking association formed under the laws of
[the United States]. The principal offices of _______________ are located at
____________________. 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 forth in the Trust
Agreement and the Sale and Servicing Agreement. The Owner Trustee may appoint a
co-trustee to act as co-trustee pursuant to a co-trustee agreement with the
Owner Trustee.
The Owner Trustee may resign at any time, in which event the Servicer will
be obligated to appoint a successor trustee. The Servicer may also remove the
Owner Trustee if the Owner Trustee ceases to be eligible to continue as Owner
Trustee under the Sale and Servicing Agreement or if the Owner Trustee becomes
insolvent. In such circumstances, the Servicer will be obligated to appoint a
successor trustee. Any resignation or removal of the Owner Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
The Sale and Servicing Agreement will provide that the Servicer will pay
the Owner Trustee's fees. The Sale and Servicing Agreement will further provide
that the Owner Trustee will be entitled to indemnification by the Servicer for,
and will be held harmless against, any loss, liability or expense incurred by
the Owner Trustee not resulting from its own willful misfeasance, bad faith or
negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Sale and Servicing Agreement).
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THE TRUST PROPERTY
The Notes are an obligation of the Trust and will be secured by assets of
the Trust (other than the Certificate Distribution Account). 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 marine
installment sale contracts, direct loans and U.S. preferred ship mortgages
secured by the new and used boats financed thereby, consisting of the Contracts;
(ii) all monies received under the Contracts on and after the 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); (iv) all monies on deposit in the
Reserve Account (including all investments in such accounts and all income from
the funds therein and all proceeds thereof); (v) assignments of the security
interests in the Financed Boats and any accessions thereto; (vi) the right to
proceeds from physical damage, credit life and disability insurance policies, if
any, covering individual Financed Boats 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
CITCF-NY will sell certain contracts that will constitute a portion of the
Contracts to CITSF pursuant to a purchase agreement, to be dated as of
__________ 1, ____, and CITSF will sell the Contracts to the Company pursuant to
a Purchase Agreement to be dated as of __________ 1, ____ (the "Purchase
Agreement") and the Company will sell the Contracts to the Trust pursuant to the
Sale and Servicing Agreement to be dated as of __________ 1, ____ (the "Sale and
Servicing Agreement"), among the Seller, the Servicer and the Trust.
CITSF or CITCF-NY purchased the Contracts from Dealers, or originated the
Contracts directly using the underwriting standards described under "The CIT
Group/Sales Financing, Inc., Servicer--CITSF's Underwriting Guidelines" in the
Prospectus, or acquired the Contracts from unaffiliated third parties (in which
event CITSF reviewed such Contracts to confirm that they conformed to such
underwriting standards).
[All of the Contracts are Simple Interest Contracts. A "Simple Interest
Contract" is a Contract as to which interest accrues under the 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 Contracts were first entered onto CITSF's or CITCF-NY's servicing
system (which, typically, represents the date on which CITSF or CITCF-NY funds
the purchase of such Contracts from Dealers) between __________ and __________.
All Contracts are U.S. preferred ship mortgages or direct loans secured by boats
or marine installment sale contracts secured by boats originated by a Dealer and
purchased by CITCF-NY or CITSF, originated directly by CITSF or one of its
affiliates, or acquired by CITSF or one of its affiliates from unaffiliated
third parties.
Characteristics of Contracts
The Contract Pool consists of contracts having an aggregate unpaid
principal balance as of the Cut-off Date of $__________. For the purposes of the
discussion of the characteristics of the Contracts on the Cut-off Date contained
herein, the principal balance of each Contract is the unpaid principal balance
as of the Cut-off Date.
The Contracts were selected from CITSF's portfolio of U.S. preferred ship
mortgages, marine installment sale contracts and direct loans based on several
criteria, including the following: (i) each Contract was originated in the
United States of America, [except that _____ Contract(s) were originated in
Puerto Rico]; (ii) each Contract has a Contract Rate equal to or greater than
_____%; (iii) each 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 [240] months; (iv) as of the Cut-off Date the most recent scheduled
payment of principal and interest, if any, on each Contract was made by or on
behalf of the related Obligor or was not delinquent more than [29] days; (v) no
Financed Boat has been repossessed without reinstatement as of the Cut-
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off Date; (vi) as of the Cut-off Date no Obligor on any Contract was the subject
of a bankruptcy proceeding and (vii) as of the Cut-off Date each Contract has a
remaining principal balance of not less than $__________ and not more than
$__________. The Financed Boats consist of boats, boat trailers and boat motors.
Approximately _____%, _____% and _____% of the Pool Balance as of the
Cut-off Date represented Contracts secured by boats, boat trailers and boat
motors, respectively. Approximately _____% of the Contracts, by Pool Balance as
of the Cut-off Date, represented financing of boats which were new and
approximately _____% represented financing of boats which were used at the time
the related Contracts were originated. As of the Cut-off Date, the average
outstanding principal balances of the Contracts secured by boats, boat motors
and boat trailers were $__________, $__________ and $__________, respectively.
The Obligors under the Contracts have mailing addresses in 50 states,
[Puerto Rico] and Washington D.C. As of the Cut-off Date, approximately _____%
of the Contracts, based upon Pool Balance as of the Cut-off Date, had Obligors
with mailing addresses in the State of __________, approximately _____% had
Obligors with mailing addresses in the State of __________ and approximately
_____% had Obligors with mailing addresses in the State of __________. Each
other state accounts for less than 5.00% of the Contracts based upon Pool
Balance as of the Cut-off Date.
As of the Cut-off Date, all Contracts have an interest rate specified in
such Contract (the "Contract Rate") of at least _____%. As of the Cut-off Date,
the Contracts have remaining maturities of at least [9] months but not more than
[240] months, original maturities of at least [12] months but not more than
[240] months, and a weighted average remaining term to stated maturity of _____
months. The weighted average original term to maturity of the Contracts was
_____ months. As of the Cut-off Date, the weighted average Contract Rate of the
Contracts was _____%. The final scheduled payment dates on the Contracts range
from __________ to __________. The average remaining principal balance per
contract, as of the Cut-off Date, was $__________ and the outstanding principal
balances of the Contracts, as of the Cut-off Date, ranged from $__________ to
$__________.
S-27
<PAGE>
Set forth below is a description of certain characteristics of the Contracts.
Geographical Distribution of Contracts (1)
<TABLE>
<CAPTION>
% of Contract
% of Contract Aggregate Principal Pool by Principal
Number of Pool by Number Balance Outstanding Balance
Contracts As of of Contracts As of As of Outstanding As of
State Cut-off Date Cut-off Date Cut-off Date Cut-off Date
- ----- ------------ ------------- ------------ ------------
<S> <C> <C> <C>
Alabama...............
Alaska................
Arizona...............
Arkansas..............
California............
Colorado..............
Connecticut...........
Delaware..............
District of Columbia..
Florida...............
Georgia...............
Hawaii................
Idaho.................
Illinois..............
Indiana...............
Iowa..................
Kansas................
Kentucky..............
Louisiana.............
Maine.................
Maryland..............
Massachusetts.........
Michigan..............
Minnesota.............
Mississippi...........
Missouri..............
Montana...............
Nebraska..............
Nevada................
New Hampshire.........
New Jersey............
New Mexico............
New York..............
North Carolina........
North Dakota..........
Ohio..................
Oklahoma..............
Oregon................
Pennsylvania..........
[Puerto Rico].........
Rhode Island..........
South Carolina........
South Dakota..........
Tennessee.............
Texas.................
Utah..................
Vermont...............
Virginia..............
Washington............
West Virginia.........
Wisconsin.............
Wyoming...............
Total................. 100% $ 100%
==== = ====
</TABLE>
(1) In most cases, based on the mailing addresses of the Obligors as of the
Cut-off Date.
S-28
<PAGE>
Range of Contract Rates
<TABLE>
<CAPTION>
% of Contract % of Contract Pool
Number of Pool by Number Aggregate Principal By Principal
Range of Contracts As of of Contracts As of Balance Outstanding Balance Outstanding
Contract Rates Cut-off Date Cut-off Date As of Cut-off Date As of Cut-off Date
- -------------- ------------ ------------ ------------------ ------------------
<S> <C> <C>
Total 100% 100%
==== ====
</TABLE>
Range of Remaining Maturities
<TABLE>
<CAPTION>
Aggregate % of Contract Pool
Principal By Principal
Number of % of Contract Pool Balance Balance
Contracts by Number of Outstanding Outstanding
Range of Remaining As of Contracts As of As of As of
Maturity in Months Cut-off Date Cut-off Date Cut-off Date Cut-off Date
- ------------------ ------------ ------------ ------------ ------------
<S> <C> <C>
9 - 49
50 - 59
60 - 69
70 - 79
80 - 89
90 - 99
100 - 109
110 - 119
120 - 129
130 - 139
140 - 149
150 - 159
160 - 169
170 - 179
180 - 189
190 - 199
200 - 209
210 - 219
220 - 229
230 - 239
240
Total 100% 100%
==== ====
</TABLE>
S-29
<PAGE>
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 Boat 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 (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 __% or less of the Initial Pool Balance, (ii) the sale
by the applicable Trustee of all of the Contracts remaining in the Trust when
the Pool Balance is __% or less of the Initial Pool Balance or (iii) an Event of
Default. See "The Purchase Agreements and The Trust Documents--Termination"
herein and in the Prospectus.
The rate of principal payments (including prepayments) on pools of marine
installment sale contracts and direct loans 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 assurance can be given as to the influence of these factors on the
actual prepayment experience of the Contracts.
CITSF is not aware of any publicly available industry statistics that set
forth principal prepayment experience for marine installment sale contracts and
direct loans similar to the Contracts over an extended period of time, and its
experience with respect to marine receivables included in its portfolio is
insufficient to draw any specific conclusions with respect to the expected
prepayment rates on the Contracts.
Certain Payment Data
Certain statistical information relating to the payment behavior of marine
installment sale contracts and direct loans originated by CITSF directly or
through Dealers 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 marine installment sale contracts and direct loans 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 differ from the underwriting criteria under which the Contracts were
originated. Furthermore, the prepayment experience of the Contracts may not
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 marine
installment sale 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 marine
installment sale contracts and direct loans originated by CITSF directly or
through Dealers (excluding contracts purchased in bulk) in each year since ____,
the aggregate initial principal balance of the contracts originated in such
year, the approximate aggregate principal
S-30
<PAGE>
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 each subsequent year.
Information Regarding Principal Reduction on Marine
Installment Sale Contracts and Direct Loans Originated by CITSF
(Dollars in Thousands)
1992 1993(3) 1994(3) 1995(3) 1996(3) 1997(3)
---- ------- ------- ------- ------- -------
Approximate Volume(1).......
Approximate Aggregate
Principal Balance(2):
December 31, 1992......
December 31, 1993......
December 31, 1994......
December 31, 1995......
December 31, 1996......
December 31, 1997......
(1) Volume represents aggregate initial principal balance of each contract
originated in a particular year [or nine-month period].
(2) Approximate aggregate principal balance as of any date represents the
approximate aggregate principal balance outstanding at the end of the
indicated year [or nine-month period] on each contract originated in a
particular year.
(3) Includes contracts sold by CITSF in previous securitizations which CITSF is
servicing.
Paid-Ahead Simple Interest 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 Simple Interest 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 Simple Interest Contract. The Obligor's Contract
would not be considered delinquent during the Paid-Ahead Period. A Payment
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 Payment Shortfall, as described under "The
Purchase Agreements and The Trust Documents--Monthly Advances" in the
Prospectus; however, no Monthly Advances will be made in respect of principal in
respect of a Paid-Ahead Simple Interest Contract. See "Yield and Prepayment
Considerations."
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 Simple Interest 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. However, depending on the
length of time during
S-31
<PAGE>
which a Paid-Ahead Simple Interest Contract is not amortizing as described
above, the weighted average life of the Securities may be extended. In addition,
to the extent the Servicer makes Monthly Advances with respect to a Paid-Ahead
Simple Interest 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 Cut-off Date, approximately _____% of the number of Contracts in
the Contract Pool were Paid-Ahead Simple Interest Contracts, with at least one
paid-ahead scheduled monthly payment. CITSF's portfolio of marine installment
sale contracts and direct loans 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 Simple
Interest 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 marine installment sale contracts and direct loans can be
measured relative to a prepayment standard or model. The model used in this
Prospectus Supplement, 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 a
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 and the rate at which Contracts become
Liquidated Contracts, final payment of each class of the Notes could occur
significantly earlier than their respective Note Final Scheduled Distribution
Dates. 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 Securities will be borne exclusively by the
Securityholders.
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 certain
characteristics of the Contracts. The ABS Table was prepared assuming 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 Contract
accrues to 30 days each month, (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 fifteenth day of each applicable month), (iv) the Closing Date
occurs on __________, ____ and (v) CITSF exercises its option to purchase the
Contracts as specified under "The Purchase Agreements and The Trust
Documents--Termination" herein and in the Prospectus. The ABS Table indicates
the projected weighted average life of each class of the Notes and the
Certificates and sets forth the percent of the initial principal amount of each
class 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
three 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
Aggregate Weighted Original Term Remaining Term Weighted Average
Principal Average to Maturity to Maturity Seasoning
Balance Contract Rate (Months) (Months) (Months)
<S> <C> <C>
Pool 1.............................. $ %
Pool 2.............................. $ %
Pool 3.............................. $ %
</TABLE>
S-32
<PAGE>
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.
S-33
<PAGE>
Percent of Initial Note Principal Balance at Various ABS Percentages (1)
Class A-1
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class A-2
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class A-3
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
S-34
<PAGE>
Class A-4
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class A-5
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class A-6
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
S-35
<PAGE>
Class A-7
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class B
-------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
(1) Assumes the exercise by CITSF of its option to purchase all of the
Contracts on the Distribution Date on which the Pool Balance as of the last
day of the related Due Period is __% or less of the Initial Pool Balance.
(2) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment of the 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.
S-36
<PAGE>
Percent of Original Certificate Balance at Various ABS Percentages(1)
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
_/15/97.................. % % % % % % % %
_/15/98.................. % % % % % % % %
_/15/99.................. % % % % % % % %
_/15/00.................. % % % % % % % %
_/15/01.................. % % % % % % % %
_/15/02.................. % % % % % % % %
_/15/03.................. % % % % % % % %
_/15/04.................. % % % % % % % %
_/15/05.................. % % % % % % % %
_/15/06.................. % % % % % % % %
_/15/07.................. % % % % % % % %
_/15/08.................. % % % % % % % %
_/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
(1) Assumes the exercise by CITSF of its option to purchase all of the
Contracts on the Distribution Date on which the Pool Balance as of the last
day of the related Due Period is __% or less of the Initial Pool Balance.
(2) The weighted average life of a Certificate is determined by (i) multiplying
in the amount of each principal payment on the 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 face amount 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 AND PREPAYMENT CONSIDERATIONS
Thirty days of interest will be paid to the Noteholders (other than the
Class A-1 Noteholders who will receive interest for the actual number of days
elapsed in the related Interest Accrual Period) on each Distribution Date
(except the first Distribution Date) to the extent of the remaining Available
Amount and the remaining Available Reserve Amount, in an amount equal to
one-twelfth of the product of the applicable Interest Rate and the outstanding
principal balance of each class of the Notes as of the preceding Distribution
Date (after giving effect to any distributions of principal to be made on such
Distribution Date). See "The Notes--Payments of Principal." Thirty days of
interest will be passed through to Certificateholders on each Distribution Date
(except the first Distribution Date) to the extent of the remaining Available
Amount and the remaining Available Reserve Amount, in an amount equal to
one-twelfth of the product of the Pass-Through Rate and the Certificate Balance
immediately preceding such Distribution Date. The "Certificate Balance" means
the Original Certificate Balance reduced by all distributions allocable to
principal actually made to Certificateholders. See "The
Certificates--Distributions of Principal." Payment Shortfalls, to the extent not
covered by Monthly Advances and amounts on deposit in the Collection Account,
will adversely affect the yield on the Securities.
If an Event of Default occurs and the Notes are accelerated, payments of
interest on and principal of the Class B Notes will not be paid until the Class
A Notes have been paid in full.
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 Liquidated Contracts or to fund the Reserve
Account. The Trust will not receive a full month's interest at the Contract Rate
on any Contract which is prepaid in full or which is subject to a Relief Act
Reduction (as defined in the Prospectus), nor will the Servicer make Monthly
Advances for any Payment Shortfall which results from a Relief Act Reduction or
a prepayment in full of a Contract. The Servicer will not make Non-
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Reimbursable Payments. As a result, there will be less interest available to the
Trust to pay interest on the Securities, to cover losses on the Liquidated
Contracts and to fund the Reserve Account.
POOL FACTORS
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 Original Certificate Balance. The
Certificate Pool Factor will be 1.0000000 as of the 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.
The "Note Pool Factor" with respect to a class of Notes, is a seven-digit
decimal which the Servicer will compute each month indicating the remaining
outstanding principal balance of each class of Notes as of the Distribution
Date, as a fraction of the initial outstanding principal balance of such class
of Notes. The Note Pool Factor will be 1.0000000 as of the Cut-off Date, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the applicable class of Notes. A Noteholder's portion of the
aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of the Noteholder's Note and (ii) the
applicable Note Pool Factor.
On each Distribution Date the Certificateholders and 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 Contracts, the Pool Balance,
Certificate Pool Factor and various other items of information. Securityholders
of record (which in the case of the Notes 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. Certificateholders and
Note Owners may receive such reports, upon written request, together with a
certification that they are Certificateholders or Note Owners, as the case may
be, and payment of any expenses associated with the distribution of such
reports, from the Trustee (at the address listed in "Structure of the
Transaction--The Owner Trustee") and the Indenture Trustee at
____________________. See "Certain Information Regarding the
Securities--Statements to Securityholders" in the Prospectus.
USE OF PROCEEDS
The Company will sell the 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 Trust to the purchase of the Contracts and to the payment of
certain expenses connected with pooling the Contracts and issuing the
Securities. Such net proceeds less the payment of such expenses represent the
cash purchase price paid by the Trust to the Company for the sale of the
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
Supplement. The purchase price paid to CITSF for the Contracts will be added to
CITSF's general funds and will be available for general corporate purposes,
including the purchase of new marine installment sale contracts and direct loans
and the payment of the purchase price to CITCF-NY for those Contracts acquired
by CITSF from CITCF-NY.
THE CIT GROUP/SALES FINANCING, INC., SERVICER
General
As of December 31, 1997, CITSF serviced for itself and others approximately
_____ contracts (consisting primarily of recreation vehicle, home equity,
recreational boat and manufactured housing contracts), representing an
outstanding balance of approximately $___ billion. Of this portfolio,
approximately _____ contracts (representing approximately $___ billion
outstanding balance) consisted of marine installment sale contracts and direct
loans. CITSF entered into an agreement in 1996 to service additional
manufactured housing contracts for an unaffiliated third party, which increased
substantially the total number of contracts serviced by CITSF. In addition to
expected growth in its serviced portfolio, in 1997 CITSF entered into an
agreement to provide servicing for approximately
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43,000 additional recreation vehicle and recreational boat consumer contracts
for another financial institution, which CITSF is also servicing at its Asset
Service Center. The addition of these contracts to its servicing portfolio
required CITSF to increase staffing levels at the Asset Service Center to
support these contracts. The effect of this increase on CITSF's performance as a
servicer or subservicer cannot be determined at this time.
Servicing
The following table shows the composition of CITSF's servicing portfolio,
including marine installment sale contracts and direct loans serviced by CITSF
on the dates indicated:
THE CIT GROUP/SALES FINANCING, INC.
Contracts Being Serviced By Product Line
<TABLE>
<CAPTION>
At December 31,
---------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
(Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars)
-------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RV--Owned......
RV--Bulk
Purchases...
RV--Servicing(1)
Total RV......
Total MH......
Home Equity...
Other(2)......
Total
Contracts
Serviced....
</TABLE>
MH = Manufactured Housing
RV = Recreation Vehicle
(1) Includes contracts sold by CITSF in previous securitizations which CITSF is
servicing and a third party servicing arrangement entered into in 1997.
(2) Includes inventory financing receivables.
Delinquency and Loan Loss Experience
The following Delinquency Experience and Loan Loss Experience tables set
forth data for CITSF's marine loan portfolio. The following table sets forth the
delinquency experience for the five years ended December 31, 1997 of the
portfolio of marine installment sale contracts and direct loans originated and
serviced by CITSF, excluding contracts acquired by CITSF through portfolio
purchases and contracts in repossession. Delinquency and loan loss experience
for the serviced portfolio was obtained from the monthly servicer reports for
prior securitization trusts.
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<PAGE>
Delinquency Experience
(Dollars in thousands)
Year Ended December 31,
-----------------------
1992 1993 1994(3) 1995(3) 1996(3) 1997(3)
---- ---- ------- ------- ------- -------
Number of Contracts............
Principal Balance of Con-
tracts Serviced.............
Principal Balance of Delin-
quent Contracts(1):
30-59 Days................
60-89 Days................
90 Days or More...........
Total Principal Balance of
Delinquent Contracts........
Delinquencies as a Percent of
Principal Balances(2)........
(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. A Contract is deemed delinquent only if payments
exceeding $65 are contractually past due 30 days or more.
(2) Based on dollar percent delinquent calculated by dividing Total Principal
Balance of Delinquent Contracts by Principal Balance of Contracts Serviced.
(3) Includes marine installment contracts and direct loans sold by CITSF in
previous securitizations which CITSF is servicing.
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<PAGE>
The following table sets forth the loan loss experience for the five years
ended December 31, 1997 of the portfolio of marine installment sale contracts
and direct loans originated and serviced by CITSF, excluding contracts acquired
by CITSF through portfolio purchases. "Net Losses" are equal to the aggregate
balance of all contracts which are determined to be uncollectible in the period
less any recoveries and liquidation proceeds on contracts charged-off in the
period or any prior periods. Net Losses include outside collection, repossession
and liquidation expenses .
Loan Loss/Liquidation Experience
(Dollars in thousands)
Year Ended December 31,
-----------------------
1992 1993 1994(4) 1995(4) 1996(4) 1997(4)
---- ---- ------- ------- ------- -------
Number of Contracts(1)......
Principal Balance of
Contracts Serviced(1)....
Net Losses:
Dollars(2).............
Percentage(3)..........
Notes:
(1) As of period end and excludes contracts in repossession.
(2) The calculation of net loss includes outside collection, repossession and
liquidation expenses.
(3) As a percentage of the principal balance of contracts as of period end.
(4) Includes marine installment sale contracts and direct loans sold by CITSF
in previous securitizations which CITSF is servicing.
(5) Annualized.
The data presented in the foregoing tables is for illustrative purposes
only. Such data relates to the performance of CITSF's entire portfolio of marine
installment sale contracts and direct loans and is not historical data regarding
solely the portion of CITSF's portfolio constituting the Contracts. [Most] of
CITSF's portfolio of marine installment sale contracts and direct loans secured
by boats was originated under underwriting guidelines in effect prior to August
1994. However, in August 1994 CITSF adopted a risk-adjusted pricing policy and
changed its credit criteria and underwriting guidelines in effect prior to
August 1994 as described under "The CIT Group/Sales Financing, Inc., Servicer--
CITSF's Underwriting Guidelines" in the Prospectus. In connection with this
change, CITSF reduced the minimum credit score for approval of a new credit in
order to extend credit to less creditworthy borrowers than under the credit
criteria previously in effect. The interest rates charged on marine installment
sale contracts and direct loans originated since August 1994 reflect CITSF's
evaluation of the relative risk associated with an individual's application. In
addition to the effects of seasoning, the changes in CITSF's underwriting
standards have resulted and will result in higher delinquency and loan loss
experience than is shown in the above tables since the marine installment sale
contracts and direct loans included in such tables include contracts which were
originated using CITSF's former underwriting guidelines. All of the Contracts
were originated under these new credit criteria adopted by CITSF in August 1994.
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 the delinquency and loan loss
experience presented in the preceding tables may not be indicative of the
experience on the Contracts.
During 1997, CITSF experienced a higher rate of delinquencies and loan
losses on marine installment sale contracts and direct loans. [CITSF attributes
the higher rate of delinquencies to _______________.] CITSF attributes the
higher loss experience to the combined effect of current economic conditions and
a business decision by CITSF to change the credit mix of receivables originated
since August 1994. This has resulted in an increase in delinquency and losses.
CITSF expects that the upward trend in credit losses will continue through the
remainder of 1997. However, no assurance as to future delinquencies, losses or
results of repossessions and sales of boats can be given.
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<PAGE>
THE NOTES
General
The CIT Marine Trust ____-_ Class A-1 ____% Asset-Backed Notes (the "Class
A-1 Notes"), Class A-2 ___% Asset-Backed Notes (the "Class A-2 Notes"), Class
A-3 ___% Asset-Backed Notes (the "Class A-3 Notes"), Class A-4 ___% Asset-Backed
Notes (the "Class A-4 Notes"), Class A-5 ____% Asset-Backed Notes (the "Class
A-5 Notes"), Class A-6 ____% Asset-Backed Notes (the "Class A-6 Notes"), Class
A-7 ____% Asset-Backed Notes (the "Class A-7 Notes" and, together with the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the
Class A-5 Notes and the Class A-6 Notes, the "Class A Notes") and Class B ___%
Asset-Backed Notes (the "Class B Notes" and, together with the Class A Notes,
the "Notes" and, together with the Certificates, the "Securities") will
represent obligations of the Trust secured by assets of the Trust (other than
the Certificate Distribution Account). Payments in respect of the Class B Notes
will be subordinated to payments on the Class A Notes to the extent described
herein. The Trust will issue $___________ aggregate principal amount of Class
A-1 Notes, $____________ aggregate principal amount of Class A-2 Notes,
$__________ aggregate principal amount of Class A-3 Notes, $_______ aggregate
principal amount of Class A-4 Notes, $__________ aggregate principal amount of
Class A-5 Notes, $__________ aggregate principal amount of Class A-6 Notes,
$__________ aggregate principal amount of Class A-7 Notes and $______ aggregate
principal amount of Class B Notes pursuant to the terms of an Indenture, to be
dated as of __________ 1, ____ (as amended and supplemented from time to time,
the "Indenture") between _______________, as trustee (the "Indenture Trustee"),
a form of which was filed as an exhibit to the Registration Statement of which
this Prospectus Supplement 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 issued in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof and will be available in book-entry form
only. Each class of the Notes will initially be represented by a single Note
registered in the name of Cede, the nominee of DTC. 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 under "Certain Information Regarding the
Securities--Definitive Securities" in the Prospectus, 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" in the Prospectus and Annex I hereto.
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 __________ 15, ____. Payments on the Notes on each
Distribution Date will be made to the holders of record of the related Notes on
the related 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, __________, __________ or Oklahoma are authorized or required by
law, regulation or executive order to be closed.
Payments of Interest
The Class A-1 Notes will bear interest at the rate of ____% per annum (the
"Class A-1 Interest Rate"), the Class A-2 Notes will bear interest at the rate
of ___% per annum (the "Class A-2 Interest Rate"), the Class A-3 Notes will bear
interest at the rate of ____% per annum (the "Class A-3 Interest Rate"), the
Class A-4 Notes will bear interest at the rate of ____% per annum (the "Class
A-4 Interest
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<PAGE>
Rate"), the Class A-5 Notes will bear interest at the rate of ____% per annum
(the "Class A-5 Interest Rate"), the Class A-6 Notes will bear interest at the
rate of ____% per annum (the "Class A-6 Interest Rate"), the Class A-7 Notes
will bear interest at the rate of ____% per annum (the "Class A-7 Interest
Rate") and the Class B Notes will bear interest at the rate of ___% per annum
(the "Class B Interest Rate"). The interest rates for the various classes of
Notes are referred to herein collectively as "Interest Rates."
Interest on the outstanding principal amount of each class of Notes will
accrue at the applicable Interest Rate from and including the Closing Date (in
the case of the first Distribution Date) or from and including the preceding
Distribution Date to but excluding the Distribution Date (each, an "Interest
Accrual Period"). On each Distribution Date, the Indenture Trustee will
distribute to the Noteholders of each class accrued interest at the applicable
Interest Rate on the outstanding principal amount of such class to the extent of
the Available Amount remaining after payment of the Servicer Payment. To the
extent the remaining Available Amount on a Distribution Date is insufficient to
pay Noteholders the entire amount of interest due on such Distribution Date,
such shortfall will be funded from the Reserve Account, subject to the Available
Reserve Amount, under the circumstances described herein. Interest on the Class
A-1 Notes will be calculated on the basis of a 360-day year and the actual
number of days elapsed in the related Interest Accrual Period. Interest on each
other class of Notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on the Notes of any class for any
Distribution Date due but not paid on such Distribution Date will be due on the
next Distribution Date in addition to an amount equal to interest on such amount
at the applicable Interest Rate (to the extent lawful).
Interest payments to all classes of Class A Noteholders will have the same
priority. Under certain circumstances, the amount available for interest
payments could be less than the amount of interest payable on the Class A Notes
on any Distribution Date, in which case each class of Class A Noteholders will
receive their ratable share (based upon the aggregate amount of interest due to
such class of Class A Noteholders) of the aggregate amount available to be
distributed in respect of interest on the Class A Notes.
Interest on the Class B Notes will not be paid on any Distribution Date
until interest on the Class A Notes for such Distribution Date has been paid in
full. In addition, notwithstanding the foregoing, if an Event of Default has
occurred and the Notes have been accelerated, payments of interest on and
principal of the Class B Notes will not be paid until the Class A Notes have
been paid in full.
Payments of Principal
Principal of the Class A Notes will be payable on each Distribution Date
in an amount equal to the Class A Noteholders' Principal Distribution Amount, to
the extent of the Available Amount remaining after payment of the Servicer
Payment and interest due on the Notes on such Distribution Date. To the extent
the remaining Available Amount on a Distribution Date is insufficient to fund
the entire Class A Noteholders' Principal Distribution Amount due on such
Distribution Date, such shortfall will be funded from the Reserve Account,
subject to the Available Reserve Amount remaining after any withdrawals from the
Reserve Account to make payments of interest due on the Notes on such
Distribution Date, under the circumstances described herein. Principal of the
Class B Notes will be payable on each Distribution Date in an amount equal to
the Class B Noteholders' Principal Distribution Amount, to the extent of the
Available Amount remaining after payment of the Servicer Payment and interest
due on the Notes and principal due on the Class A Notes on such Distribution
Date. To the extent the remaining Available Amount on a Distribution Date is
insufficient to fund the entire Class B Noteholders' Principal Distribution
Amount due on such Distribution Date, such shortfall will be funded from the
Reserve Account, subject to the Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make payments of interest due on the
Notes and principal due on the Class A Notes on such Distribution Date, under
the circumstances described herein. Notwithstanding the foregoing, if an Event
of Default has occurred and the Notes have been accelerated, payments of
interest on and principal of the Class B Notes will not be paid until the Class
A Notes have been paid in full.
On each Distribution Date prior to the Distribution Date on which the
Class A-1 Notes have been paid in full, principal of the Class A-1 Notes will be
payable in an amount equal to 100% of the Class A Noteholders' Principal
Distribution Amount. On each Distribution Date on and after the Distribution
Date on which the Class A-1 Notes have been paid in full, principal of the Class
A-2 Notes will be payable, until
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<PAGE>
the Class A-2 Notes have been paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution Amount (less any portion of the
Class A Noteholders' Principal Distribution Amount applied on such Distribution
Date to reduce the outstanding principal amount of the Class A-1 Notes to zero).
On each Distribution Date on and after the Distribution Date on which the Class
A-2 Notes have been paid in full, principal of the Class A-3 Notes will be
payable, until the Class A-3 Notes have been paid in full, in an amount equal to
100% of the Class A Noteholders' Principal Distribution Amount (less any portion
of the Class A Noteholders' Principal Distribution Amount applied on such
Distribution Date to reduce the outstanding principal amount of the Class A-1
Notes and the Class A-2 Notes to zero). On each Distribution Date on and after
the Distribution Date on which the Class A-3 Notes have been paid in full,
principal of the Class A-4 Notes will be payable, until the Class A-4 Notes have
been paid in full, in an amount equal to 100% of the Class A Noteholders'
Principal Distribution Amount (less any portion of the Class A Noteholders'
Principal Distribution Amount applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes to zero). On each Distribution Date on and after the
Distribution Date on which the Class A-4 Notes have been paid in full, principal
of the Class A-5 Notes will be payable, until the Class A-5 Notes have been paid
in full, in an amount equal to 100% of the Class A Noteholders' Principal
Distribution Amount (less any portion of the Class A Noteholders' Principal
Distribution Amount applied on such Distribution Date to reduce the outstanding
principal amount of the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes to zero). On each Distribution Date on and after
the Distribution Date on which the Class A-5 Notes have been paid in full,
principal of the Class A-6 Notes will be payable, until the Class A-6 Notes have
been paid in full, in an amount equal to 100% of the Class A Noteholders'
Principal Distribution Amount (less any portion of the Class A Noteholders'
Principal Distribution Amount applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes to zero). On each
Distribution Date on and after the Distribution Date on which the Class A-6
Notes have been paid in full, principal of the Class A-7 Notes will be payable,
until the Class A-7 Notes have been paid in full, in an amount equal to 100% of
the Class A Noteholders' Principal Distribution Amount (less any portion of the
Class A Noteholders' Principal Distribution Amount applied on such Distribution
Date to reduce the outstanding principal amount of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes
and the Class A-6 Notes to zero). On each Distribution Date, principal of the
Class B Notes will be payable, until the Class B Notes have been paid in full,
in an amount equal to 100% of the Class B Noteholders' Principal Distribution
Amount.
No principal payments will be made (i) on the Class A-2 Notes until the
Class A-1 Notes have been paid in full, (ii) on the Class A-3 Notes until the
Class A-2 Notes have been paid in full, (iii) on the Class A-4 Notes until the
Class A-3 Notes have been paid in full (iv) on the Class A-5 Notes until the
Class A-4 Notes have been paid in full, (v) on the Class A-6 Notes until the
Class A-5 Notes have been paid in full or (vi) on the Class A-7 Notes until the
Class A-6 Notes have been paid in full. Notwithstanding the foregoing, if an
Event of Default has occurred and the Notes have been accelerated, principal
payments will be made on each class of Class A Notes pro rata on the basis of
their respective unpaid principal amounts.
The outstanding principal amount of the Class A-1 Notes, to the extent not
previously paid, will be payable on the _______ Distribution Date (the "Class
A-1 Note Final Scheduled Distribution Date"); the outstanding principal amount
of the Class A-2 Notes, to the extent not previously paid, will be payable on
the ___________ Distribution Date (the "Class A-2 Note Final Scheduled
Distribution Date"); the outstanding principal amount of the Class A-3 Notes, to
the extent not previously paid, will be payable on the __________ Distribution
Date (the "Class A-3 Final Scheduled Distribution Date"); the outstanding
principal amount of the Class A-4 Notes, to the extent not previously paid, will
be payable on the _________ Distribution Date (the "Class A-4 Final Scheduled
Distribution Date"); the outstanding principal amount of the Class A-5 Notes, to
the extent not previously paid, will be payable on the _________ Distribution
Date (the "Class A-5 Final Scheduled Distribution Date"); the outstanding
principal amount of the Class A-6 Notes, to the extent not previously paid, will
be payable on the _________ Distribution Date (the "Class A-6 Final Scheduled
Distribution Date"); the outstanding principal amount of the Class A-7 Notes, to
the extent not previously paid, will be payable on the _________ Distribution
Date (the "Class A-7 Final Scheduled Distribution Date"); and the outstanding
principal amount of the Class B Notes, to the extent not previously paid, will
be payable on the ______ Distribution Date (the "Class B Final Scheduled
Distribution Date"). The actual date on which the
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aggregate outstanding principal amount of each class of Notes is paid may be
earlier than its respective Note Final Scheduled Distribution Date based on a
variety of factors including an Optional Purchase or Auction Sale.
Redemption
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 applicable Interest Rates. An Optional Purchase of all the
Contracts by CITSF may occur at CITSF's option on any Distribution Date on which
the Pool Balance as of the last day of the related Due Period is __% or less of
the Initial Pool Balance. An Auction Sale may occur, and may result in the sale
of the Contracts remaining in the Trust, within ten days following the first
Distribution Date on which the Pool Balance as of the last day of the related
Due Period is __% or less of the Initial Pool Balance.
Rights of Noteholders; Indenture
The Indenture Trustee will have the power to direct the Owner Trustee to
take certain actions in connection with the administration of the Trust property
until the Notes have been paid in full and the Indenture has been discharged in
accordance with its terms. The Indenture will specifically prohibit the Owner
Trustee from taking any action that would impair the Indenture Trustee's
security interest in the Trust property and will require the Owner Trustee to
obtain the consent of the Indenture Trustee or Noteholders representing not less
than a majority of the aggregate principal amount of the Notes then outstanding
before modifying, amending, supplementing, waiving or terminating any provision
of the Sale and Servicing Agreement. Therefore, except as described herein,
until the Notes have been paid in full, the ability to direct the Trust with
respect to certain actions permitted to be taken under the Sale and Servicing
Agreement rests with the Indenture Trustee and the Noteholders.
If an Event of Default under the Indenture occurs and the Notes are
accelerated, the Indenture Trustee will have the right or will be required in
certain circumstances to exercise remedies as a secured party, including selling
the Contracts, in order to pay the principal of, and accrued interest on, the
Notes. Except as described herein, upon the occurrence of an Event of Default,
the Class B Noteholders will not have any right to direct or to consent to any
action by the Indenture Trustee, including acceleration of the Notes or the sale
of Contracts, until the Class A Noteholders have been paid in full. The proceeds
of any sale of the Contracts may not be equal to or greater than the aggregate
outstanding principal amount of the Notes plus, in each case, accrued interest
thereon. Because neither interest nor principal is distributed to Class B
Noteholders following an Event of Default and acceleration of the Notes until
the Class A Notes have been paid in full, the interests of the Class A
Noteholders and the Class B Noteholders may conflict, and the exercise by the
Indenture Trustee of its right to sell the Contracts or exercise other remedies
may cause the Class B Noteholders to suffer a loss of all or part of their
investment.
Upon the occurrence of an Event of Default under the Indenture, the assets
of the Trust may be sold which may result in early retirement of the Notes. If
the net proceeds from the liquidation of the Contracts (after payment of the
Servicer Payment) and any amounts on deposit in the Note Distribution Account
are not sufficient to pay the principal amount of and accrued interest on the
Notes in full, holders of the Notes will incur a loss. Such net proceeds
together with amounts on deposit in the Note Distribution Account will be
distributed to Securityholders (after payment of the fees and expenses of the
Indenture Trustee and the Servicer Payment) in the following order of priority:
(i) to the Class A Noteholders for amounts due and unpaid on the Class A Notes
for interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on each class of the Class A Notes for interest,
(ii) to the Class A Noteholders for amounts due and unpaid on the Class A Notes
for principal, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Class A Notes for principal, until the
principal amount of the Class A Notes is reduced to zero, (iii) to the Class B
Noteholders for amounts due and unpaid on the Class B Notes for interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Class B Notes for interest, (iv) to the Class B
Noteholders for amounts due and unpaid on the Class B Notes for principal,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Class B Notes for principal, until the principal amount
of
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the Class B Notes is reduced to zero, (v) to the Certificateholders for amounts
due and unpaid on the Certificates for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Certificates for interest and (vi) to the Certificateholders for amounts due and
unpaid on the Certificates for the Certificate Balance, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Certificates for the Certificate Balance.
Pursuant to the Trust Indenture Act of 1939, as amended, the Indenture
Trustee will be deemed to have a conflict of interest and be required to resign
as trustee for either the Class A Notes or the Class B Notes if an Event of
Default occurs under the Indenture. In these circumstances, the Indenture will
require that, within 90 days of ascertaining such Event of Default, the
Indenture Trustee will resign as Indenture Trustee for the Class A Notes or the
Class B Notes and provide for a successor indenture trustee to be appointed for
one or both of the Class A Notes and Class B Notes as applicable, in order that
there be separate trustees for each of the Class A Notes and Class B Notes. So
long as any amounts remain unpaid with respect to the Class A Notes, only the
indenture trustee for the Class A Noteholders will have the right to exercise
remedies under the Indenture (but the Class B Noteholders will be entitled to
their share of any proceeds of enforcement, subject to the subordination of the
Class B Notes to the Class A Notes as described herein), and only the Class A
Noteholders will have the right to direct or consent to any action to be taken,
including sale of the Contracts, until the Class A Noteholders are paid in full.
Upon repayment of the Class A Noteholders in full, all rights to exercise
remedies under the Indenture will transfer to the indenture trustee for the
Class B Noteholders. Any resignation of the original Indenture Trustee as
described above with respect to any class of Notes will become effective only
upon the appointment of a successor trustee for such a class of Notes and such
successor's acceptance of such appointment.
In the event that an Event of Termination occurs, the Indenture Trustee or
Class A Noteholders representing not less than a majority of the aggregate
principal amount of the Class A Notes then outstanding may remove the Servicer
without the consent of any of the Class B Noteholders. None of the Class B
Noteholders will have the ability, with certain specified exceptions, to waive
defaults by the Servicer, including defaults that could materially adversely
affect the Class B Noteholders.
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 Supplement 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 Marine Trust ____-_ ____% Asset-Backed Certificates (the
"Certificates") will represent fractional undivided interests in the Trust. The
Trust will issue $____________ aggregate face amount of Certificates pursuant to
a Trust Agreement, to be dated as of __________ 1, ____ between the Seller and
the Owner Trustee (the "Trust Agreement"), a form of which was filed as an
exhibit to the Registration Statement of which this Prospectus Supplement 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
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; provided, however,
that one Certificate may be issued in a denomination other than an integral
multiple of $1,000 such that The CIT GP Corporation III, a Delaware corporation
and a wholly owned subsidiary of CIT (the "Affiliated Owner") may be issued at
least 1% of
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the Original Certificate Balance. The Certificates will be issued in fully
registered, certificated form ("Definitive Certificates") to Certificateholders
or their nominees. See "Certain Information Regarding the Securities--Definitive
Securities" in the Prospectus. Purchasers of Certificates and their assignees
(i) must represent that they are United States persons (as defined in Section
7701(a) of the Code) and provide a certification of non-foreign status under
penalties of perjury and (ii) must represent and certify that they are not (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.
Payments of interest and principal on the Certificates with respect to
each Due Period will be made on each Distribution Date, commencing __________
15, ____. 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 __________ 1, ____ and will end on and
include __________, ____. Payments on the Certificates on each Distribution Date
will be made to the holders of record of the Certificates on the related Record
Date.
Distribution of Interest
The Certificates will bear interest at the rate of ____% per annum (the
"Pass-Through Rate"). Interest in respect of a Distribution Date will accrue at
the Pass-Through Rate during the related Interest Accrual Period. On each
Distribution Date, the Owner Trustee will distribute pro rata to
Certificateholders accrued interest at the Pass-Through Rate on the outstanding
Certificate Balance to the extent of the Available Amount remaining after
payment of the Servicer Payment and interest and principal due on the Notes on
such Distribution Date. To the extent the remaining Available Amount on a
Distribution Date is insufficient to pay Certificateholders the entire amount of
interest due on such Distribution Date, such shortfall will be funded from the
Reserve Account, subject to the Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make payments of interest and principal
due on the Notes on such Distribution Date, under the circumstances described
herein. Interest on the Certificates for any Distribution Date due but not paid
on such Distribution Date will be due on the next Distribution Date in addition
to an amount equal to interest on such amount at the Pass-Through Rate (to the
extent lawful). Interest on the Certificates 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 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. If an Event of Default has occurred and the
Notes have been accelerated, Certificateholders will not be entitled to receive
any distributions of interest or principal until the Notes have been paid in
full.
Distribution of Principal
On each Distribution Date prior to the Cross-Over Date, the
Certificateholders will not be entitled to any payments of principal.
On each Distribution Date on or after the Cross-Over Date, principal of
the Certificates will be payable, subject to the remaining Available Amount and
the remaining Available Reserve Amount, in an amount equal to the
Certificateholders' Principal Distribution Amount with respect to such
Distribution Date. Such principal payments will be funded to the extent of the
Available Amount remaining after payment of the Servicer Payment, payment of
interest and principal in respect of the Notes on the Cross-Over Date, and
payment of interest due on the Certificates on such Distribution Date. To the
extent the remaining Available Amount on a Distribution Date is insufficient to
fund the entire Certificateholders' Principal Distribution Amount due on such
Distribution Date, such shortfall will be funded from the Reserve Account,
subject to the Available Reserve Amount remaining after any withdrawals from the
Reserve Account to make payments of interest and principal due on the Notes and
interest due on the Certificates on such Distribution Date, under the
circumstances described herein. The rights of Certificateholders to receive
distributions of principal (following the payment of interest on the
Certificates) will be subordinated to the rights of Noteholders to receive
distributions of interest and
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principal to the extent described herein. The Certificate Balance of the
Certificates, to the extent not previously paid, will be payable on the
Distribution Date occurring in __________ (the "Certificate Final Scheduled
Distribution Date"). In the event that the Certificates are outstanding on the
Certificate Final Scheduled Distribution Date (after taking into account
distributions on such date), the Indenture Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account (to the extent funds are available therefor
in the Reserve Account), and will deposit in the Certificate Distribution
Account for distribution to the Certificateholders to retire the Certificates,
an amount equal to the Certificate Balance. 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 including an Optional Purchase or Auction Sale.
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. An Optional
Purchase of all the Contracts by CITSF may occur at CITSF's option on any
Distribution Date on which the Pool Balance as of the last day of the related
Due Period is __% or less of the Initial Pool Balance. An Auction Sale may
occur, and may result in the sale of the Contracts remaining in the Trust,
within ten days following the first Distribution Date on which the Pool Balance
as of the last day of the related Due Period is __% or less of the Initial Pool
Balance. The "Initial Pool Balance" equals the Pool Balance as of the Cut-off
Date.
Limited Rights
Except as described herein, if an Event of Default occurs under the
Indenture, the Certificateholders will not have any right to direct or to
consent to any remedies therefor exercisable by the Indenture Trustee, including
the sale of the Contracts, until the Notes have been paid in full. If an Event
of Termination occurs, the Certificateholders will not have any right to direct
or consent to removal of the Servicer or the waiver of such Event of Termination
until the Notes have been paid in full. See "Risk Factors--Rights of Noteholders
and Certificateholders" herein and "The Purchase Agreements and the Trust
Documents--Event of Termination," "--Rights Upon Event of Termination" and
"--Waiver of Past Defaults" in the Prospectus.
ENHANCEMENT
Subordination. To the extent described herein, the rights of the
Certificateholders to receive distributions with respect to the Contracts will
be subordinated to the rights of the Noteholders, and the rights of the Class B
Noteholders to receive distributions with respect to the Contracts will be
subordinated to the rights of the Class A Noteholders. This subordination is
intended to enhance the likelihood of timely receipt by the Class A Noteholders
(and to a lesser extent the Class B Noteholders) of the full amount of interest
and principal required to be paid to them, and to afford the Class A Noteholders
(and to a lesser extent the Class B 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 until the full amount of interest
and principal on the Notes payable on such Distribution Date has been
distributed to the Noteholders, and (ii) principal until the Notes have been
paid in full.
No distribution will be made to the Class B Noteholders on any
Distribution Date in respect of (i) interest until the full amount of interest
on the Class A Notes payable on such Distribution Date has been distributed to
the Class A Noteholders, and (ii) principal until the full amount of principal
on the Class A Notes payable on such Distribution Date has been distributed to
the Class A Noteholders.
The Class A Noteholders will be entitled to receive current
distributions of interest prior to the Class B Noteholders receiving any current
distributions of interest. In addition, the Class A Noteholders will be entitled
to receive their share of the current distribution of principal prior to the
Class B Noteholders receiving their share of the current distribution of
principal.
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Reserve Account. On the Closing Date, an account (the "Reserve Account")
will be established pursuant to the Sale and Servicing Agreement. The Indenture
Trustee will have the right to withdraw (or cause to be withdrawn) payments from
the Reserve Account under certain circumstances specified below. The Reserve
Account will not be funded on the Closing Date. After the Closing Date, the
Reserve Account will be funded with the Excess Collections, if any, and certain
investment earnings on funds deposited in the Reserve Account.
The Reserve Account will be an Eligible Account (as defined in the
Prospectus). Funds on deposit in the Reserve Account will be invested in certain
investments which satisfy the criteria established by each of the Ratings
Agencies (which may include obligations of CIT). The Reserve Account and any
amounts therein shall be held by or on behalf of the Indenture Trustee in
accordance with the Sale and Servicing Agreement for the benefit of the
Securityholders and the Trust.
The Reserve Account will be terminated following the earlier to occur of
(a) the date on which the Certificate Balance is paid in full and any funds
remaining therein have been paid to the Affiliated Owner or (b) the Certificate
Final Scheduled Distribution Date.
On each Distribution Date, the amount available to be withdrawn from the
Reserve Account for the benefit of the Securityholders (the "Available Reserve
Amount") will be equal to the lesser of (i) the Specified Reserve Amount and
(ii) the amount on deposit in the Reserve Account, before giving effect to any
deposit to be made to the Reserve Account on such Distribution Date.
On each Determination Date, the Servicer will determine the amounts, if
any, required to be withdrawn from the Reserve Account on the related
Distribution Date for payment to the Securityholders. If the Available Amount on
any Distribution Date is insufficient (after payment of the Servicer Payment) to
pay the interest and principal required to be distributed on the Securities on
such Distribution Date, the Indenture Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account an amount equal to the lesser of the amount
of such deficiency or the Available Reserve Amount. The Indenture Trustee will
withdraw (or cause to be withdrawn) such amount from the Reserve Account and
will deposit (or cause to be deposited) such amount into the Note Distribution
Account and/or Certificate Distribution Account on the Business Day before the
Distribution Date with respect to which such withdrawal was made. Any amounts
withdrawn from the Reserve Account will be distributed to the Securityholders in
the same order of priority as distributions of the Available Amount. If the
Available Reserve Amount is zero (which will be the case on the Closing Date),
Securityholders will bear the risk of loss resulting from default by Obligors
and will have to look primarily to the value of the related Financed Boats for
recovery of the outstanding principal and unpaid interest on the defaulted
Contracts.
On each Distribution Date, the Servicer will deposit Excess Collections,
if any, into the Reserve Account in an amount sufficient to increase the amount
on deposit in the Reserve Account to the Specified Reserve Amount for the next
Distribution Date. Excess Collections, if any, not so required to be deposited
in the Reserve Account will be paid to the Affiliated Owner.
"Excess Collections" for any Distribution Date will equal the amounts
collected or deposited in respect of the Contracts in the related Due Period and
which remain in the Collection Account on such Distribution Date after taking
into account distributions to be made on the Securities, the Servicer Payment
made to the Servicer on such Distribution Date, and the Servicing Fee (including
any unpaid Servicing Fees for past Distribution Dates) paid on such Distribution
Date.
The Specified Reserve Amount with respect to any Distribution Date will
equal ___% of the Pool Balance as of the first day of the related Due Period,
but in no event less than $___________. If, with respect to any Distribution
Date, (a) the average of the principal balance of Contracts 60 days or more
delinquent (including Contracts relating to Financed Boats that have been
repossessed) as a percentage of the Pool Balance for the three preceding Due
Periods exceeds ____% or (b) the average of the principal balances of all
Contracts which became Liquidated Contracts in the three preceding Due Periods,
less any Net Liquidation Proceeds on Liquidated Contracts, expressed as an
annualized percentage of the average outstanding Pool Balance of the three
preceding Due Periods exceeds ____%, then the Specified Reserve Amount with
respect to such Distribution Date shall be ____% of the Pool Balance as of the
first day of the related Due Period, but in no event (i) less than $___________
or (ii) greater than $__________. The
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Specified Reserve Amount shall never be greater than the sum of the aggregate
principal amount of the Notes and the outstanding Certificate Balance. The
Specified Reserve Amount may be reduced from time to time to amounts less than
the Specified Reserve Amount as described herein if the Rating Agencies shall
have given prior written notice to the Seller, the Servicer and the Issuer that
such reduction will not result in a downgrade or withdrawal of the then current
rating of the Notes or the Certificates. In several circumstances the Servicer
must determine on a Distribution Date the Specified Reserve Amount for the next
Distribution Date; in order to make the calculations required, the Servicer will
use the data for the three Due Periods preceding the Due Period related to such
next Distribution Date.
On each Distribution Date, the Indenture Trustee will withdraw (or cause
to be withdrawn) from the Reserve Account an amount equal to the amount by which
the Available Reserve Amount (after taking into account any deposits to and
withdrawals from the Reserve Account pursuant to the Sale and Servicing
Agreement on such Distribution Date) exceeds the Specified Reserve Amount for
the next Distribution Date and pay such amount to the Affiliated Owner. Any such
amounts paid to the Affiliated Owner will not be available for distribution to
Securityholders.
The sole source of funding for the Reserve Account will be the Excess
Collections, and the Excess Collections may not be sufficient to fund the
Reserve Account in an amount equal to the Specified Reserve Amount or to
replenish the Reserve Account after funds are withdrawn to make payments on the
Securities. Neither the Seller nor the Servicer will be obligated to deposit any
of their own funds into the Reserve Account in the event that the Excess
Collections are not sufficient to fund the Reserve Account in an amount equal to
the Specified Reserve Amount. Accordingly, the Distribution Date by which the
Reserve Account will be funded in an amount equal to the Specified Reserve
Amount for such Distribution Date cannot be predicted.
In the event that the Certificates are outstanding on the Certificate
Final Scheduled Distribution Date (after taking into account distributions on
such date), the Indenture Trustee will withdraw (or cause to be withdrawn) from
the Reserve Account an amount equal to the Certificate Balance, and will
distribute such amount to the Certificateholders to retire the Certificates, to
the extent funds are available therefor in the Reserve Account.
THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
Distributions
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 below.
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 Servicer Payment will (to the extent not previously retained by the
Servicer) be paid to the Servicer;
(b) on and prior to the Cross-Over Date, the Class A Noteholders' Interest
Distribution Amount will be deposited into the Note Distribution Account,
for payment to the Class A Noteholders for amounts due and unpaid on the
Class A Notes for interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on each class of the Class A
Notes for interest;
(c) on and prior to the Cross-Over Date, the Class B Noteholders' Interest
Distribution Amount will be deposited into the Note Distribution Account,
for payment to the Class B Noteholders for amounts due and unpaid on the
Class B Notes for interest, ratably, without
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preference or priority of any kind, according to the amounts due and
payable on the Class B Notes for interest;
(d) on and prior to the Cross-Over Date, the Class A Noteholders' Principal
Distribution Amount will be deposited into the Note Distribution Account,
for payment to the Class A Noteholders in the following order of priority:
(i) to the principal balance of the Class A-1 Notes until the principal
balance of the Class A-1 Notes is reduced to zero; (ii) to the principal
balance of the Class A-2 Notes until the principal balance of the Class A-2
Notes is reduced to zero; (iii) to the principal balance of the Class A-3
Notes until the principal balance of the Class A-3 Notes is reduced to
zero, (iv) to the principal balance of the Class A-4 Notes until the
principal balance of the Class A-4 Notes is reduced to zero; (v) to the
principal balance of the Class A-5 Notes until the principal balance of the
Class A-5 Notes is reduced to zero; (vi) to the principal balance of the
Class A-6 Notes until the principal balance of the Class A-6 Notes is
reduced to zero; and (vii) to the principal balance of the Class A-7 Notes
until the principal balance of the Class A-7 Notes is reduced to zero;
(e) on and prior to the Cross-Over Date, the Class B Noteholders' Principal
Distribution Amount will be deposited into the Note Distribution Account,
for payment to the Class B Noteholders until the principal balance of the
Class B Notes is reduced to zero;
(f) the Certificateholders' Interest Distribution Amount will be deposited
into the Certificate Distribution Account, for payment to the
Certificateholders for interest;
(g) on and after the Cross-Over Date, the Certificateholders' Principal
Distribution Amount will be deposited into the Certificate Distribution
Account, for payment to the Certificateholders for principal;
(h) if CITSF or one of its affiliates is the Servicer, the Servicing Fee
(including any unpaid Servicing Fees for past Distribution Dates) will (to
the extent not previously paid to the Servicer) be paid to the Servicer;
(i) the amount by which the Specified Reserve Amount for the next
Distribution Date exceeds the amount on deposit in the Reserve Account will
be deposited into the Reserve Account; and
(j) the balance, if any, will be distributed to the Affiliated Owner.
For purposes hereof, the following terms shall have the following
meanings:
The "Principal Distribution Amount" on each Distribution Date is equal to
the sum of the following amounts with respect to the related Due Period, in each
case calculated in accordance with the method specified in each Contract: (i)
all payments of principal (including all Principal Prepayments applied during
the related Due Period) made on each Contract during the related Due Period,
(ii) the Stated Principal Balance of each Contract which, as of the related
Deposit Date, was purchased by CITSF or the Servicer pursuant to the Sale and
Servicing Agreement, and (iii) the Stated Principal Balance of each Contract
which became a Liquidated Contract during the related Due Period; provided,
however, that (x) payments of principal (including Principal Prepayments) with
respect to a Liquidated Contract or a Repurchased Contract received after the
last day of the Due Period in which the Contract became a Liquidated Contract or
a Repurchased Contract shall not be included in the Principal Distribution
Amount, and (y) if a Liquidated Contract is purchased by CITSF or the Servicer
pursuant to the Sale and Servicing Agreement on the Deposit Date immediately
following the Due Period in which it became a Liquidated Contract, no amount
will be included with respect to such Contract in the Principal Distribution
Amount pursuant to clause (iii) of the definition thereof. The Principal
Distribution Amount on the Note Final Scheduled Distribution Date of a class
will equal the outstanding principal balance of such class of Notes as of such
date, and the Principal Distribution Amount on the Certificate Final Scheduled
Distribution Date will equal the Certificate Balance on such date. The Principal
Distribution Amount will not exceed the outstanding principal balance of the
Notes or, after the Cross-Over Date, the Certificate Balance (or, on the
Cross-Over Date, the sum of the principal balance of the Notes and the
Certificate Balance).
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The "Stated Principal Balance" of a Contract for any Due Period is its
unpaid principal balance at the end of the related Due Period, but without
giving effect to any adjustments due to bankruptcy or similar proceedings.
A "Liquidated Contract" is a defaulted Contract as to which the Servicer
has recovered all amounts that it expects to recover either by sale or
disposition of the related Financed Boat or otherwise, but in any event a
Contract shall be deemed to become a Liquidated Contract no later than the date
on which the Servicer has received proceeds from the sale or disposition of such
Financed Boat.
"Principal Prepayment" means a payment or other recovery of principal on a
Contract (including insurance proceeds and Net Liquidation Proceeds applied to
principal on a Contract) which is received in advance of its due date and
applied upon receipt to reduce the outstanding principal amount of such Contract
prior to the date or dates on which such principal amount is scheduled to be
paid.
"Net Liquidation Proceeds" means the monies collected (from whatever
source) during a Due Period on a Liquidated Contract, net of the sum of (a)
Liquidation Expenses, plus (b) any payments required by law to be remitted to
the Obligor.
"Liquidation Expenses" means all reasonable fees of third parties and
other expenses incurred by the Servicer in the course of converting any
defaulted Contract or Financed Boat into cash proceeds (including, without
limitation, expenses relating to recovery, repossession and sale of such
Financed Boat).
The "Available Amount" on any Distribution Date is equal to the excess of
(A) the sum of (i) all amounts on deposit in the Collection Account attributable
to collections or deposits made in respect of the Contracts (including any Late
Fees (as defined in the Prospectus)) in the related Due Period and (ii) the
Purchase Price for any Contract repurchased by CITSF as a result of breaches of
certain representations and warranties or purchased by the Servicer as a result
of breaches of certain covenants and any Monthly Advances made by the Servicer,
if such Purchase Price or Monthly Advance is paid on the Deposit Date
immediately preceding such Distribution Date, over (B) the sum of the following
amounts (to the extent that the Servicer has not already withheld such amounts
from collections on the Contracts): (i) any repossession profits on Liquidated
Contracts, Liquidation Expenses incurred and taxes and insurance advanced by the
Servicer in respect of Financed Boats that are reimbursable to the Servicer
under the Sale and Servicing Agreement, (ii) any amounts incorrectly deposited
in the Collection Account, (iii) net investment earnings on the funds in the
Collection Account, and (iv) 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.
The "Purchase Price" for any Contract will be the remaining principal
amount outstanding on such Contract on the date of repurchase, plus thirty days'
interest thereon at the Contract Rate plus the reimbursement then due to the
Servicer for outstanding Monthly Advances on such Contract.
"Certificateholders' Distribution Amount" means, for any Distribution Date,
the sum of the Certificateholders' Principal Distribution Amount and the
Certificateholders' Interest Distribution Amount.
"Certificateholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Certificateholders' Interest Distribution
Amount for the preceding Distribution Date over the amount in respect of
interest at the Pass-Through Rate that was actually deposited into the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on such excess, to the extent permitted by law, at the Pass-Through
Rate from and including such preceding Distribution Date to but excluding the
current Distribution Date.
"Certificateholders' Interest Distribution Amount" means, for any
Distribution Date, the sum of the Certificateholders' Monthly Interest Amount
for such Distribution Date and the Certificateholders' Interest Carryover
Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Amount" means, for any Distribution
Date, one month's interest (or, in the case of the first Distribution Date,
interest accrued from and including the Closing Date to but excluding such
Distribution Date) at the Pass-Through Rate on the Certificate Balance on such
Distribution
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Date (or, in the case of the first Distribution Date, the Original Certificate
Balance), before giving effect to all distributions of principal to the
Certificateholders on such Distribution Date.
"Certificateholders' Monthly Principal Amount" means, for any Distribution
Date prior to the Cross-Over Date, zero; and for any Distribution Date
commencing on and after the Cross-Over Date, 100% of the Principal Distribution
Amount (less the portion of the Principal Distribution Amount required on the
first such Distribution Date to pay the Notes in full).
"Certificateholders' Principal Carryover Shortfall" means, for any
Distribution Date, (a) the excess of (i) the Certificateholders' Principal
Distribution Amount for the preceding Distribution Date, over (ii) the amount in
respect of principal that was actually deposited into the Certificate
Distribution Account on such Distribution Date.
"Certificateholders' Principal Distribution Amount" means, for any
Distribution Date, the sum of (i) the Certificateholders' Monthly Principal
Amount for such Distribution Date and (ii) the Certificateholders' Principal
Carryover Shortfall for such Distribution Date; provided, that the
Certificateholders' Principal Distribution Amount shall not exceed the
Certificate Balance. In addition, on the Certificate Final Scheduled
Distribution Date, the amount required to be distributed to Certificateholders
will be the lesser of (a) any payments of principal due and remaining unpaid on
each Contract owned by the Trust as of the last day of the immediately preceding
Due Period plus any amounts on deposit in the Reserve Account, or (b) the amount
that is necessary (after giving effect to the other amounts to be deposited in
the Certificate Distribution Account on such Distribution Date and allocable to
principal) to reduce the Certificate Balance to zero.
"Noteholders' Distribution Amount" means, for any Distribution Date, the
sum of the Class A Noteholders' Principal Distribution Amount, the Class B
Noteholders' Principal Distribution Amount, the Class A Noteholders' Interest
Distribution Amount and the Class B Noteholders' Interest Distribution Amount.
"Class A Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date for each class of Class A Notes (other than the initial
Distribution Date), the excess of (i) the Class A Noteholders' Interest
Distribution Amount for the preceding Distribution Date for such class of Class
A Notes, over (ii) the amount in respect of interest that was actually deposited
into the Note Distribution Account in respect of such class of Class A Notes on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid to the Class A Noteholders of such class on the preceding
Distribution Date, to the extent permitted by law, at the applicable Interest
Rates borne by such class of Class A Notes.
"Class A Noteholders' Interest Distribution Amount" means, for any
Distribution Date for any class of Class A Notes, the sum of (x) the Class A
Noteholders' Monthly Interest Amount for such Distribution Date for such class
of Class A Notes and (y) the Class A Noteholders' Interest Carryover Shortfall
for such Distribution Date for such class of Class A Notes.
"Class A Noteholders' Monthly Interest Amount" means, for any Distribution
Date for any class of Class A Notes, interest accrued during the related
Interest Accrual Period at the applicable Interest Rate on the outstanding
principal balance of such class of Class A Notes on such Distribution Date (or,
in the case of the first Distribution Date, on the Closing Date) before giving
effect to all distributions of principal to the Class A Noteholders on such
Distribution Date, calculated on the basis of a 360-day year and (a) the actual
number of days elapsed, in the case of the Class A Notes and (b) twelve 30-day
months in the case of each other class of Class A Notes.
"Class A Noteholders' Monthly Principal Amount" means, for any
Distribution Date, prior to the Distribution Date on which the Class A Notes
have been paid in full, an amount equal to _____% of the Principal Distribution
Amount.
"Class A Noteholders' Principal Carryover Shortfall" means, for any
Distribution Date, the excess of (x) the Class A Noteholders' Principal
Distribution Amount for the preceding Distribution Date over (y) the amount in
respect of principal that was actually deposited into the Note Distribution
Account for the Class A Notes on such preceding Distribution Date.
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"Class A Noteholders' Principal Distribution Amount" means, for any
Distribution Date, the sum of (i) the Class A Noteholders' Monthly Principal
Amount for such Distribution Date and (ii) the Class A Noteholders' Principal
Carryover Shortfall for such Distribution Date; provided, that the Class A
Noteholders' Principal Distribution Amount shall not exceed the outstanding
principal balance of the Class A Notes. In addition, on the Note Final Scheduled
Distribution Date of each class of Class A Notes, the principal required to be
deposited in the Note Distribution Account will include the amount necessary
(after giving effect to other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
outstanding principal balance of the related class of Class A Notes to zero.
"Class B Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date for the Class B Notes (other than the initial Distribution
Date), the excess of (i) the Class B Noteholders' Interest Distribution Amount
for the preceding Distribution Date for the Class B Notes, over (ii) the amount
in respect of interest that was actually deposited into the Note Distribution
Account in respect of such Class B Notes on such preceding Distribution Date,
plus interest on the amount of interest due but not paid to the Class B
Noteholders on the preceding Distribution Date, to the extent permitted by law,
at the Class B Interest Rate.
"Class B Noteholders' Interest Distribution Amount" means, for any
Distribution Date for the Class B Notes, the sum of (x) the Class B Noteholders'
Monthly Interest Amount for such Distribution Date and (y) the Class B
Noteholders' Interest Carryover Shortfall for such Distribution Date.
"Class B Noteholders' Monthly Interest Amount" means, for any Distribution
Date for the Class B Notes, interest accrued during the related Interest Accrual
Period at the applicable Interest Rate on the outstanding principal balance of
the Class B Notes on such Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date) before giving effect to all
distributions of principal to the Class B Noteholders on such Distribution Date.
"Class B Noteholders' Monthly Principal Amount" means, for any
Distribution Date, prior to the Distribution Date on which the Class A Notes
have been paid in full, an amount equal to _____% of the Principal Distribution
Amount, and on and after the Distribution Date on which the Class A Notes have
been paid in full, 100% of the Principal Distribution Amount (less the portion
of the Principal Distribution Amount required on the first such Distribution
Date to pay the Class A Notes in full).
"Class B Noteholders' Principal Carryover Shortfall" means, for any
Distribution Date, the excess of (x) the Class B Noteholders' Principal
Distribution Amount for the preceding Distribution Date over (y) the amount in
respect of principal that was actually deposited into the Note Distribution
Account for the Class B Notes on such preceding Distribution Date.
"Class B Noteholders' Principal Distribution Amount" means, for any
Distribution Date, the sum of (i) the Class B Noteholders' Monthly Principal
Amount for such Distribution Date and (ii) the Class B Noteholders' Principal
Carryover Shortfall for such Distribution Date; provided, that the Class B
Noteholders' Principal Distribution Amount shall not exceed the outstanding
principal balance of the Class B Notes. In addition, on the Class B Note Final
Scheduled Distribution Date, the principal required to be deposited in the Note
Distribution Account will include the amount necessary (after giving effect to
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal balance of the Class B Notes to zero.
To the extent that the Available Amount is insufficient to pay the
Certificateholders' Distribution Amount and the Noteholders' Distribution Amount
on any Distribution Date, the Indenture Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account, to the extent available, the excess of the
sum of the Certificateholders' Distribution Amount and the Noteholders'
Distribution Amount over the Available Amount remaining after payment of the
Servicer Payment. Any amount so withdrawn from the Reserve Account by or on
behalf of the Indenture Trustee will be deposited first into the Note
Distribution Account for distribution to the Noteholders in the same order of
priority as described above and second into the Certificate Distribution Account
for distribution to the Certificateholders in the same order of priority as
described above.
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The principal balance of the Class A-1 Notes, to the extent not previously
paid, will be due on the Class A-1 Note Final Scheduled Distribution Date; the
principal balance of the Class A-2 Notes, to the extent not previously paid,
will be due on the Class A-2 Note Final Scheduled Distribution Date; the
principal balance of the Class A-3 Notes, to the extent not previously paid,
will be due on the Class A-3 Note Final Scheduled Distribution Date; the
principal balance of the Class A-4 Notes, to the extent not previously paid,
will be due on the Class A-4 Note Final Scheduled Distribution Date; the
principal balance of the Class B Notes, to the extent not previously paid, will
be due on the Class B Note Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of any class of Notes is paid
may be earlier than the respective Note Final Scheduled Distribution Dates set
forth above based on a variety of factors, including those described under
"Maturity and Prepayment Considerations--Weighted Average Life of the
Securities" herein.
Modification of Contracts
Consistent with its customary servicing practices and procedures, the
Servicer may, in its discretion, arrange with an Obligor to defer, reschedule,
extend or modify the payment schedule of a Contract or otherwise to modify the
terms of a Contract provided that (i) the maturity of such Contract would not
extend beyond the 180th day prior to the Certificate Final Scheduled
Distribution Date and (ii) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sale contract or direct
loan. The Servicer may, in accordance with its customary servicing procedures,
in its good faith judgment, waive any Late Fees that may be due and payable
under any Contract. Notwithstanding the foregoing, in connection with the
settlement by the Servicer of a defaulted Contract, the Servicer may forgive a
portion of such Contract, if in its discretion it believes that the acceptance
of the settlement proceeds from the related Obligor would result in the Trust's
receiving a greater amount of collections than the Net Liquidation Proceeds that
would result from repossessing and liquidating the related Financed Boat.
Monthly Advances
With respect to each Contract as to which there has been a Payment
Shortfall during the related Due Period (other than a Payment 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 Payment Shortfall (each, a "Monthly Advance"), but
only to the extent that the Servicer, in its good faith judgment, expects to
recover such Monthly Advance from subsequent interest collections on such
Contract made by or on behalf of the Obligor thereunder, or from Net Liquidation
Proceeds or insurance proceeds with respect to such Contract. The Servicer shall
be reimbursed for any Monthly Advance from subsequent interest collections with
respect to such Contract. If the Servicer determines in its good faith judgment
that an unreimbursed Monthly Advance shall not ultimately be recoverable from
subsequent interest collections, the Servicer shall be reimbursed for such
Monthly Advance from collections on all Contracts. In determining whether an
advance is or will be nonrecoverable, the Servicer need not take into account
that it might receive any amounts in a deficiency judgment against an Obligor.
The Servicer will not make a Monthly Advance in respect of (i) the principal
component of any scheduled payment or (ii) a Payment 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.
Non-Reimbursable Payments
The Servicer will not be obligated to make any Non-Reimbursable Payments
(as defined in the Prospectus).
Servicing Compensation
The Servicer will be entitled to receive, out of collections on the
Contracts, a monthly fee (the "Servicing Fee") for each Due Period, payable on
the following Distribution Date, equal to the sum of (i) one-twelfth of the
product of _____% (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 Cut-off Date) and
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(ii) any investment earnings (net of investment expenses and losses) on amounts
on deposit in the Collection Account, the Note Distribution Account and the
Certificate Distribution Account; provided, however, if CITSF or an affiliate
thereof is not the Servicer, the Servicing Fee Rate shall be a rate determined
at the time of the appointment of a successor Servicer but not to exceed _____%.
If CITSF or one of its affiliates is the Servicer, the Servicing Fee (including
any unpaid Servicing Fees for past Distribution Dates) shall not be included in
the Servicer Payment but instead shall be payable to the Servicer on each
Distribution Date only from the Available Amount, if any, remaining after the
principal and interest payable on the Securities on such Distribution Date have
been paid.
Payment of Notes
Upon the payment in full of all outstanding Notes and the satisfaction and
discharge of the Indenture, the Owner Trustee will succeed to all the rights of
the Indenture Trustee, and the Certificateholders will succeed to all the rights
of the Noteholders under the Sale and Servicing Agreement, except as otherwise
provided therein.
Termination
In order to avoid excessive administrative expenses, CITSF will be
permitted at its option to purchase from the Trust, on any Distribution Date on
which the Pool Balance as of the last day of the related Due Period is __% 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) (the "Optional Purchase"). Exercise of such right will
effect early retirement of the Securities.
Within ten days after the first Distribution Date on which the Pool
Balance as of the last day of the related Due Period is __% 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 (the "Auction Sale"). In the event that satisfactory bids are received
as described in the Prospectus, the net sale proceeds (after paying the Servicer
Payment) will be distributed to Securityholders on the second Distribution Date
succeeding such Due Period. Any purchaser of the Contracts must agree to the
continuation of CITSF as Servicer on terms substantially similar to those in the
Trust Documents. Any such sale will effect early retirement of the Securities.
See "The Certificates--Redemption," "The Notes--Redemption" and "The Purchase
Agreements and The Trust Documents--Termination" in the Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Certain Federal Tax Consequences with Respect to the Notes
Tax Characterization of the Notes and the Trust. Schulte Roth & Zabel LLP
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 LLP is also of the opinion that, based on the
applicable provisions of the Trust Documents 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. If the IRS were to successfully
characterize the Trust as an entity 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.
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If, contrary to the opinion of Schulte Roth & Zabel LLP, 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,
and if the Trust were taxable as a corporation with the adverse consequences
described above, 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 minimis 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
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 (in
this case, a holder of 10% of the capital or profits of the Trust) nor a
"controlled foreign corporation" with respect to which the Trust or the
Affiliated Owner 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, unless, in the case of payments
made after December 31, 1998, the clearing organization or financial institution
is a foreign entity that has entered into a withholding agreement with the IRS,
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 not 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.
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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, the holder generally will be subject to United
States Federal income tax on the interest, gain or income at regular Federal
income tax rates. If a holder provides a Form 4224 indicating that interest,
gain or income is effectively connected with the conduct of a trade or business
in the United States, the interest, gain or income will be exempt from the
withholding tax previously discussed. 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).
Under recently issued Treasury Regulations that apply to payments made
after December 31, 1998, current IRS Forms W-8 and 4224 will be replaced by a
single form called Form W-8.
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 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 Owner and the Servicer
have agreed, and the other 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 Owner, 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 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 LLP, the Trust
will not be 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
Owners of Certificates." 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
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from investments in the Collection Account, Note Distribution Account, Reserve
Account 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, if any, of the Trust
for each interest accrual period equal to the sum of (i) the amount of any
interest that accrues on the Certificates for such interest accrual period based
on the Pass-Through Rate; (ii) an amount equivalent to any overdue interest on
the Certificates that accrued during a prior interest accrual period (to the
extent that no allocation of taxable income has previously been made for such
amount under clause (i) or this clause (ii)); 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 Owner.
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 Pass-Through
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
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 ($121,200 for taxable
years beginning in 1997, in the case of a joint return) will be reduced by the
lesser of (i) 3% of the excess of adjusted gross income over the specified
threshold amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year.
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 original issue discount or at a
premium, and, therefore, the Trust should not have original issue discount
income or amortizable bond premium.
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).
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Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the Contracts would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid 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.
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
Owner 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
Owner 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-1. The Trust will provide the Schedule K-1 information to nominees
that fail to provide the Trust with the information statement described below
and such nominees will be required to forward such information to the beneficial
owners of the Certificates. Generally, holders must file tax returns that are
consistent with the information 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
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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 Owner, 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 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 Owners of Certificates. 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 purposes 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 allocable 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. owner of a
Certificate that is a corporation may be subject to the branch profits tax. If
the Trust is notified that an owner of a Certificate 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 owner of a Certificate 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 owner of a Certificate 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 owner of a
Certificate 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) an owner of a Certificate 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, foreign owners of
Certificates 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 an owner of a
Certificate 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 owner. A foreign owner 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 owner of a Certificate should
consult its tax advisor as to whether the tax consequences of holding an
interest in a Certificate make it an
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unsuitable investment. For additional information concerning proposed
regulations which would modify the procedures that a beneficial owner of a
Certificate must comply with to avoid United States withholding tax on payments
to such owner, see the discussion above under "Certain Federal Tax Consequences
with Respect to the Notes--Foreign Holders."
CERTAIN STATE TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and
collecting the Contracts will take place in Oklahoma. The State of Oklahoma
imposes a state income tax on individuals, nonresident aliens (with respect to
Oklahoma taxable income), corporations, certain foreign corporations, and trusts
and estates with Oklahoma taxable income. No ruling on any of the issues
discussed below will be sought from the Oklahoma Tax Commission.
Because of the variation in each state's tax laws based in whole or in
part upon income, it is impossible to predict tax consequences to holders of
Notes and Certificates in all of the state taxing jurisdictions in which they
are already subject to tax. Noteholders and Certificateholders are urged to
consult their own tax advisors with respect to state tax consequences arising
out of the purchase, ownership and disposition of Notes and Certificates.
Tax Consequences With Respect to the Notes
Crowe & Dunlevy, P.C., Oklahoma Tax Counsel to the Seller ("Oklahoma Tax
Counsel") will advise the Trust that, assuming the Notes will be treated as debt
for federal income tax purposes, the Notes will be treated as debt for Oklahoma
income tax purposes, and the Noteholders not otherwise subject to taxation in
Oklahoma should not become subject to taxation in Oklahoma solely because of a
holder's ownership of Notes. However, a Noteholder already subject to Oklahoma's
income tax could be required to pay additional Oklahoma tax as a result of the
holder's ownership or disposition of Notes.
Tax Consequences With Respect to the Certificates Issued by a Trust Treated as a
Partnership
Oklahoma Tax Counsel will deliver its opinion that if the arrangement
created by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for federal income tax purposes, the same treatment should also
apply for Oklahoma income tax purposes.
Under current law, Certificateholders that are nonresidents of Oklahoma
and are not otherwise subject to Oklahoma income tax should not be subject to
Oklahoma income tax on the income from the Trust because it is unlikely that the
Trust has established a nonunitary business or commercial situs in Oklahoma. In
any event, classification of the arrangement as a "partnership" would not cause
a Certificateholder not otherwise subject to taxation in Oklahoma to pay
Oklahoma income tax on income beyond that derived from the Certificates.
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 Certificates
An interest in the Certificates may not be acquired by (i) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section
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4975(e)(1) of the Code, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity. Each Certificateholder
must represent and warrant that it is not subject to the foregoing limitation.
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; PTCE 95-60 regarding
investments by life insurance company general accounts; PTCE 96-23 regarding
transactions effected by "in-house asset managers"; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers." Any purchaser
or holder of the Notes will be deemed to have represented by its purchase and
holding thereof that it either (a) is not a Benefit Plan and is not purchasing
such Notes on behalf of or with plan assets of any Benefit Plan or (b) is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1
or 84-14 with respect to such purchase or holding.
A plan fiduciary considering the purchase of the Notes should consult its
tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") among CITSF, the Company and
[underwriters] (the "Underwriters"), the Company has agreed to sell to the
Underwriters, and the Underwriters have severally agreed to purchase, the
respective principal amount of the Certificates and the Notes offered hereby, as
set forth opposite their respective names below:
Class A-1 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-2 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
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Class A-3 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-4 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-5 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-6 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-7 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class B Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
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Certificates
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
The Underwriting Agreement provides that the obligation of the
Underwriters to pay for and accept delivery of the Certificates or Notes is
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
Certificates and Notes if any are taken.
The Underwriters have advised the Company that they propose to offer the
Certificates and Notes directly to the public at the public offering price set
forth on the cover page hereof and to certain dealers at a price that represents
a concession not in excess of ___% of the principal balance of the Certificates
and not in excess of ____% of the principal amount of the Class A-1 Notes, ___%
of the principal amount of the Class A-2 Notes, ____% of the principal amount of
the Class A-3 Notes, ____% of the principal amount of the Class A-4 Notes, ____%
of the principal amount of the Class A-5 Notes, ____% of the principal amount of
the Class A-6 Notes, ____% of the principal amount of the Class A-7 Notes and
____% of the principal amount of the Class B Notes. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of ____% of the
principal balance of the Certificates and not in excess of ___% of the principal
amount of the Class A-1 Notes, ____% of the principal amount of the Class A-2
Notes, ____% of the principal amount of the Class A-3 Notes, ____% of the
principal amount of the Class A-4 Notes, ____% of the principal amount of the
Class A-5 Notes, ____% of the principal amount of the Class A-6 Notes, ____% of
the principal amount of the Class A-7 Notes and ____% of the principal amount of
the Class B Notes 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.
CITSF has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act or to
contribute to payments which the Underwriters may be required to make in respect
thereof.
The Trust may, from time to time, invest the funds of the Trust 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.
RATINGS
It is a condition to the issuance of the Class A Notes that the Class
A-1 Notes be rated "A-1+" by Standard & Poor's Ratings Service, a division of
The McGraw-Hill Companies, Inc. ("S&P") and "P-1" by Moody's Investors Service,
Inc. ("Moody's") (each, a "Rating Agency") and that the Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes, Class A-5 Notes, Class A-6 Notes and the Class A-7
Notes be rated "AAA" by S&P and "Aaa" by Moody's . It is a condition to the
issuance of the Class B Notes that the Class B Notes be rated at least "A" by
S&P and "A2" by Moody's. It is a condition to the issuance of the Certificates
that the Certificates be rated at least "BBB" by S&P and "Baa2" by Moody's. The
ratings of the Class A Notes will be based primarily on the Contracts, the
Reserve Account, and the terms of the Securities, including the subordination
provided by the Class B Notes and the Certificates. The ratings of the Class B
Notes will be based primarily on the Contracts, the Reserve 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
Contracts and the Reserve Account. The ratings of the Securities should be
evaluated independently from similar ratings on other types of securities. The
ratings do not address the possibility that Securityholders may suffer a lower
than anticipated yield. The ratings do not address the likelihood that the
Securities will
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be retired following the sale of the Contracts by the Trustee as described above
under "Auction Sale" or "Optional Purchase of the Contracts."
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 judgment, circumstances so warrant. In the
event that the rating initially assigned to any of 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
any of the Securities, 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.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth
& Zabel LLP, New York, New York, for the Trust by ____________________,
____________________, and for the Underwriters by ____________________,
____________________. The material federal income tax consequences of the
Securities will be passed upon for the Company by Schulte Roth & Zabel LLP. The
material Oklahoma state income tax consequences of the Securities will be passed
upon for the Company by Crowe & Dunlevy, P.C. Certain legal matters will be
passed upon for CITSF by its Senior Vice President and General Counsel, Norman
H. Rosen, Esq.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes of CIT
Marine Trust ____-_ (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.
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Trading between DTC Seller and Cedel or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
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 respective 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:
(i) 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;
(ii) 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
(iii) 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.
Treasury regulations issued on October 14, 1997, which will be applicable
to payments made after December 31, 1998 (with certain transition rules),
provide for the unification and simplification of certain
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current certification procedures. Under these regulations, a new Form W-8 will
replace current Forms W-8, 1001 and 4224. Further, pursuant to the new
regulations, while a beneficial owner will still be required to submit a Form
W-8 to a "qualified intermediary" through which it holds a Global Security, such
qualified intermediary (i.e., a foreign clearing organization or financial
institution that enters into a withholding agreement with the IRS) generally
will not be required to forward the Form W-8 to the withholding agent. Investors
are urged to consult their own tax advisors with respect to the application of
these new regulations.
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
ABS...........................................................................36
ABS Table.....................................................................36
Affiliated Owner..............................................................51
Auction Sale..................................................................60
Available Amount...........................................................9, 56
Available Reserve Amount..................................................19, 53
Bankruptcy Code...............................................................24
Benefit Plan..................................................................67
Business Day...............................................................9, 46
Cedel...................................................................1, 6, 26
Certificate Balance.......................................................16, 41
Certificate Final Scheduled Distribution Date..............................8, 52
Certificate Pool Factor.......................................................41
Certificateholders' Distribution Amount.......................................56
Certificateholders' Interest Carryover Shortfall..............................56
Certificateholders' Interest Distribution Amount..............................57
Certificateholders' Monthly Interest Amount...................................57
Certificateholders' Monthly Principal Amount..................................57
Certificateholders' Principal Carryover Shortfall.............................57
Certificateholders' Principal Distribution Amount.............................57
Certificates............................................................1, 6, 50
CIT........................................................................5, 24
CITCF-NY...................................................................7, 24
CITSF......................................................................5, 24
Class A Noteholders' Interest Carryover Shortfall.............................57
Class A Noteholders' Interest Distribution Amount.............................57
Class A Noteholders' Monthly Interest Amount..................................57
Class A Noteholders' Monthly Principal Amount.................................58
Class A Noteholders' Principal Carryover Shortfall............................58
Class A Noteholders' Principal Distribution Amount........................14, 58
Class A Notes...........................................................1, 5, 46
Class A-1 Interest Rate...................................................10, 47
Class A-1 Note Final Scheduled Distribution Date...........................9, 48
Class A-1 Notes.........................................................1, 5, 46
Class A-2 Interest Rate...................................................10, 47
Class A-2 Note Final Scheduled Distribution Date...........................9, 48
Class A-2 Notes.........................................................1, 5, 46
Class A-3 Final Scheduled Distribution Date...................................48
Class A-3 Interest Rate...................................................10, 47
Class A-3 Note Final Scheduled Distribution Date...............................9
Class A-3 Notes.........................................................1, 5, 46
Class A-4 Final Scheduled Distribution Date...................................48
Class A-4 Interest Rate...................................................10, 47
Class A-4 Note Final Scheduled Distribution Date...............................9
Class A-4 Notes.........................................................1, 5, 46
Class A-5 Final Scheduled Distribution Date...................................49
Class A-5 Interest Rate...................................................10, 47
Class A-5 Note Final Scheduled Distribution Date...............................9
Class A-5 Notes.........................................................1, 5, 46
Class A-6 Final Scheduled Distribution Date...................................49
Class A-6 Interest Rate...................................................10, 47
Class A-6 Note Final Scheduled Distribution Date...............................9
Class A-6 Notes.........................................................1, 5, 46
Class A-7 Final Scheduled Distribution Date...................................49
Class A-7 Interest Rate...................................................10, 47
S-71
<PAGE>
Class A-7 Note Final Scheduled Distribution Date...............................9
Class A-7 Notes.........................................................1, 5, 46
Class B Final Scheduled Distribution Date.....................................49
Class B Interest Rate.....................................................10, 47
Class B Note Final Scheduled Distribution Date.................................9
Class B Noteholders' Interest Carryover Shortfall.............................58
Class B Noteholders' Interest Distribution Amount.............................58
Class B Noteholders' Monthly Interest Amount..................................58
Class B Noteholders' Monthly Principal Amount.................................58
Class B Noteholders' Principal Carryover Shortfall............................58
Class B Noteholders' Principal Distribution Amount........................14, 58
Class B Notes...........................................................1, 5, 46
Closing Date...................................................................7
Code..........................................................................23
Commission....................................................................46
Company.................................................................1, 5, 24
Contract Files................................................................28
Contract Pool.................................................................29
Contract Rate.................................................................30
Contracts...................................................................3, 7
Cross-Over Date...............................................................16
Cut-off Date................................................................3, 7
Dealers........................................................................7
Definitive Certificates....................................................7, 51
Deposit Date..................................................................27
Depository....................................................................26
Determination Date.............................................................9
Distribution Date.......................................................3, 8, 46
DTC........................................................................1, 26
Due Period.....................................................................9
ERISA.....................................................................23, 67
Euroclear...................................................................2, 6
Excess Collections........................................................19, 53
Financed Boats..............................................................3, 7
Global Securities.............................................................71
Indenture..................................................................6, 46
Indenture Trustee.......................................................1, 5, 46
Initial Pool Balance......................................................21, 52
Interest Accrual Period...................................................10, 47
Interest Rate..................................................................3
Interest Rates............................................................10, 47
Issuer..................................................................1, 5, 28
Liquidated Contract...........................................................56
Liquidation Expenses..........................................................56
Monthly Advance...........................................................20, 59
Moody's...................................................................22, 69
Net Liquidation Proceeds......................................................56
Net Losses....................................................................45
Note Owner................................................................26, 46
Note Owners....................................................................6
Note Pool Factor..............................................................41
Noteholders' Distribution Amount..............................................57
Notes...................................................................1, 5, 46
Obligor........................................................................8
OID...........................................................................61
Oklahoma Tax Counsel..........................................................66
Optional Purchase.............................................................60
Original Certificate Balance...............................................6, 28
S-72
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Owner Trustee...........................................................1, 5, 28
Paid-Ahead Period.............................................................35
Paid-Ahead Simple Interest Contract...........................................35
Pass-Through Rate......................................................3, 16, 51
Payment Shortfall.............................................................21
Pool Balance..................................................................34
Principal Distribution Amount.............................................13, 55
Principal Prepayment..........................................................56
Prospectus.....................................................................4
PTCE..........................................................................67
Purchase Agreement.........................................................8, 29
Purchase Price................................................................56
Rating Agency.............................................................22, 69
Record Date....................................................................8
Repurchase Event...............................................................7
Repurchased Contract...........................................................7
Reserve Account...........................................................18, 53
S&P...................................................................22, 26, 69
Sale and Servicing Agreement............................................3, 7, 29
Securities..............................................................1, 5, 46
Seller.........................................................................1
Servicer.......................................................................5
Servicer Payment..............................................................11
Servicing Fee.............................................................21, 60
Servicing Fee Rate........................................................21, 60
Simple Interest Contract......................................................30
Specified Reserve Amount......................................................19
Stated Principal Balance......................................................56
Trust...................................................................1, 5, 28
Trust Agreement........................................................5, 28, 50
Trustees.......................................................................5
Underwriters..................................................................67
Underwriting Agreement........................................................67
S-73
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION: DATED _______, 1997
CIT MARINE TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
THE CIT GROUP/SALES FINANCING, INC., SERVICER
The Asset-Backed Certificates (the "Certificates") and the Asset-Backed
Notes (the "Notes" and, collectively with the Certificates, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on the terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each series of Securities will include either (i) one or more classes of
Certificates, (ii) one or more classes of Notes or (iii) one or more classes of
Certificates and one or more classes of Notes, as set forth in the related
Prospectus Supplement.
Each series of Securities will be issued by a trust (a "Trust") to be
formed with respect to such series by The CIT Group Securitization Corporation
II (the "Company" or the "Seller").
The assets of each Trust will primarily include a pool of marine
installment sale contracts and direct loans (the "Initial Contracts") secured by
the new and used boats, boat motors and boat trailers financed thereby (the
"Initial Financed Boats"), certain monies received under the Initial Contracts
on and after the Initial Cut-off Date specified in the related Prospectus
Supplement (the "Initial Cut-off Date"), an assignment of the security interests
in the Initial Financed Boats, the proceeds from claims under certain insurance
policies in respect of individual Initial Financed Boats or the related Obligors
and certain other property, as more fully described herein and in the related
Prospectus Supplement. In addition, if so specified in the related Prospectus
Supplement, the assets of each Trust will include specified credit or cash flow
enhancement and monies on deposit in one or more trust accounts, which may
include a Pre-Funding Account which would be used to purchase from time to time
additional marine installment sale contracts and direct loans (the "Subsequent
Contracts" and, together with the Initial Contracts, the "Contracts") secured by
the new and used boats, boat motors and boat trailers financed thereby (the
"Subsequent Financed Boats" and, together with the Initial Financed Boats, the
"Financed Boats"), certain monies received under the Subsequent Contracts on and
after the related subsequent cut-off dates (each, a "Subsequent Cut-off Date"),
an assignment of the security interests in the Subsequent Financed Boats and
proceeds from claims under certain insurance policies in respect of individual
Subsequent Financed Boats or the related Obligors, to the extent specified in
the related Prospectus Supplement.
(Continued on following page)
A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY CAN BE FOUND ON PAGE 23
HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THE SECURITIES WILL REPRESENT INTERESTS IN OR OBLIGATIONS OF A TRUST AND
WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE CIT GROUP SECURITIZATION
CORPORATION II, THE CIT GROUP/SALES FINANCING, INC., THE CIT GROUP, INC. OR ANY
OF THEIR RESPECTIVE
1
<PAGE>
AFFILIATES (EXCEPT TO THE LIMITED EXTENT, IF ANY, DESCRIBED HEREIN AND IN THE
RELATED PROSPECTUS SUPPLEMENT).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is _______, 1997.
2
<PAGE>
(continued from preceding page)
Each Trust will be formed pursuant to either (i) a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") to be entered into among the
Seller, The CIT Group/Sales Financing, Inc. (the "Servicer") and the trustee
specified in the related Prospectus Supplement (the "Trustee") or (ii) a Trust
Agreement (the "Trust Agreement") to be entered into among the Seller, the
trustee specified in the related Prospectus Supplement (the "Owner Trustee") and
certain other parties as specified in the related Prospectus Supplement. If the
Trust is formed pursuant to a Trust Agreement, a Sale and Servicing Agreement
(the "Sale and Servicing Agreement") will be entered into among the Seller, the
Servicer and such Owner Trustee. The Trustee or Owner Trustee for any Trust will
be referred to in this Prospectus as the "Owner Trustee." The Notes, if any, of
a series of Securities will be issued and secured pursuant to an Indenture (the
"Indenture") between the Trust and the indenture trustee specified in the
related Prospectus Supplement (the "Indenture Trustee"). The Certificates, if
any, of a series of Securities will represent fractional undivided interests in
the related Trust and/or the residual interest in the Trust.
Except as otherwise provided in the related Prospectus Supplement, each
class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related Contracts,
in the amounts, at the rates, on the dates and in the manner described herein
and in the related Prospectus Supplement. The right of each class of Securities
to receive payments may be senior or subordinate to the rights of one or more of
the other classes of such series. A series may include two or more classes of
Certificates or Notes which differ as to the timing and priority of payment,
interest rate or amount of distributions in respect of principal or interest or
both. A series may include one or more classes of Certificates or Notes entitled
to distributions in respect of principal, with disproportionate, nominal or no
interest distributions, or to distributions of interest, with disproportionate,
nominal or no distributions in respect of principal. Distributions on
Certificates of any series will be subordinated in priority to payments due on
the related Notes, if any, to the extent described herein and in the related
Prospectus Supplement.
The rate of distributions in respect of principal on the Securities of any
class will depend on the priority of payment of such class and the rate and
timing of payments (including prepayments, liquidations and repurchases of
Contracts) on the related Contracts.
If specified in the related Prospectus Supplement, a financial guaranty
insurance policy, letter of credit, surety bond, limited guarantee by The CIT
Group, Inc. ("CIT"), reserve fund, or other form of credit enhancement, or any
combination thereof, may be provided with respect to a Trust or any class of
Securities.
Unless otherwise provided in the related Prospectus Supplement, the
Certificates, if any, and the Notes, if any, of any series initially will be
represented by certificates and notes registered in the name of Cede & Co.
("Cede"), the nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of the Securities will be represented by book entries on the
records of the participating members of DTC and, in the case of the Notes, Cedel
Bank, societe anonyme ("Cedel") and the Euroclear System ("Euroclear").
Definitive Securities will be available only under limited circumstances to the
extent described herein and in the related Prospectus Supplement.
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 UNDERWRITERS 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.
3
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") on behalf of each Trust a Registration Statement (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 offered pursuant to this Prospectus. 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, which is
available for inspection without charge at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and the
regional offices of the Commission at Suite 1400 Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661, and Seven World Trade Center, 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. Both registrants also file electronically. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's Web site is
http://www.sec.gov. Statements made in this Prospectus as to the contents of any
contract, agreement or other document filed as an exhibit to the Registration
Statement, 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. The Servicer,
on behalf of each Trust, will also file or cause to be filed with the Commission
such periodic reports as are required under The Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder. However,
in accordance with the Exchange Act and the rules and regulations of the
Commission thereunder, the Company expects that each Trust's obligation to file
such reports will be terminated following the end of the year in which such
Trust is formed. Such reports and other information filed on behalf of each
Trust will be available for inspection as set forth above.
REPORTS TO SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, unless and
until Definitive Securities are issued, monthly and annual unaudited reports
containing information concerning each Trust will be prepared by the Servicer
and sent on behalf of each Trust only to the Owner Trustee for the
Certificateholders, the Indenture Trustee for the Noteholders and 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 "--Statements to Securityholders."
Certificateholders and Noteholders are collectively referred to herein as the
"Securityholders." Certificate Owners or Note Owners may receive such reports,
upon written request, together with a certification that they are Certificate
Owners or Note Owners and payment of reproduction and postage expenses
associated with the distribution of such reports, from the Owner Trustee, with
respect to Certificate Owners, or the Indenture Trustee, with respect to Note
Owners, at the addresses specified in the related Prospectus Supplement. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Neither the Seller, the Servicer nor
CIT intends to send any of its financial statements to Securityholders.
4
<PAGE>
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,
1996 together with the report of KPMG Peat Marwick LLP, independent
certified public accountants;
(b) CIT's Quarterly Report on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997;
(c) CIT's Current Reports on Form 8-K dated January 23, 1997 (as
amended by a Form 8-K/A dated February 14, 1997), February 13, 1997, April
17, 1997, July 14, 1997, July 17, 1997, July 23, 1997, September 26, 1997,
October 14, 1997 and November 12, 1997; and
(d) CIT's Amendment No. 2 to the Registration Statement on Form S-2
(333-36435) filed on November 12, 1997.
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 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 FOREGOING 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, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 536-1950
5
<PAGE>
SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Securities contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of each
series of Securities. Certain capitalized terms used in the Summary are defined
elsewhere in this Prospectus and in the related Prospectus Supplement. Reference
is made to the "Index of Principal Terms" for the location herein of defined
terms.
- --------------------------------------------------------------------------------
Issuer.......................... With respect to each series of Securities, a
trust (the "Trust" or the "Issuer"), will be
formed by the Seller pursuant to either a
Pooling and Servicing Agreement among the
Seller, the Servicer and the trustee
specified in the related Prospectus
Supplement, or a Trust Agreement among the
Seller, the owner trustee specified in the
related Prospectus Supplement and certain
other parties as specified in the related
Prospectus Supplement.
Seller.......................... The CIT Group Securitization Corporation II
(the "Company" or the "Seller"), a
wholly-owned, limited purpose subsidiary of
The CIT Group, Inc. ("CIT"). If and to the
extent specified in the related Prospectus
Supplement, a trust of which the Company is
the depositor (a "Selling Trust") may also be
a "Seller." Except if and to the extent
specified in the related Prospectus
Supplement, neither CIT nor any of its
affiliates, including the Company, The CIT
Group/Sales Financing, Inc. ("CITSF") and any
Selling Trust, has guaranteed, insured or is
otherwise obligated with respect to the
Securities. See "Risk Factors--Limited
Obligations."
Servicer........................ The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the
"Servicer"), a wholly-owned subsidiary of
CIT. The Servicer will be responsible for
managing, administering, servicing and making
collections on the Contracts held by each
Trust.
Owner Trustee................... The Trustee pursuant to a Pooling and
Servicing Agreement or the Owner Trustee
pursuant to a Trust Agreement, in each case
as specified in the related Prospectus
Supplement. The Trustee or Owner Trustee for
any Trust will be referred to in this
Prospectus as the "Owner Trustee." See "The
Trusts--The Trustee(s)."
Indenture Trustee............... With respect to any series of Securities
including one or more classes of Notes, the
Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture
Trustee"). The Owner Trustee and the
Indenture Trustee for a series are referred
to herein collectively as the "Trustees."
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6
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- --------------------------------------------------------------------------------
Risk Factors................... Certain potential risks and other
considerations are particularly relevant to a
decision to invest in any securities sold
hereunder. See "Risk Factors."
The Certificates................ Each series of Asset-Backed Certificates (the
"Certificates") will be issued pursuant to
the related Trust Documents. The Certificates
will represent fractional undivided interests
in the related Trust and/or the residual
interest in the related Trust, and will have
the Original Certificate Balance, if any,
specified in the related Prospectus
Supplement. If specified in the related
Prospectus Supplement, the Company or one of
its affiliates will own the entire beneficial
interest in the Trust. See "The
Certificates--General."
Payments in respect of the Certificates will
be subordinated to payments on the Notes of
the same series to the extent described in
the related Prospectus Supplement. See "The
Certificates--General."
The Certificates will be issued in the
minimum denominations and integral multiples
in excess thereof specified in the related
Prospectus Supplement; provided, however,
that one Certificate of each series may be
issued in a denomination other than such
integral multiple such that the applicable
Affiliated Owner, if any, specified in the
related Prospectus Supplement (the
"Affiliated Owner") may be issued at least
the portion of the Original Certificate
Balance specified in the related Prospectus
Supplement. Unless otherwise specified in the
related Prospectus Supplement, the
Certificates will be issued in book-entry
form only. Unless otherwise specified in the
related Prospectus Supplement, persons
("Certificate Owners") acquiring beneficial
interests in the Certificates will hold their
interests through The Depository Trust
Company ("DTC"). Definitive Certificates will
be issued only under the limited
circumstances described herein or in the
related Prospectus Supplement. Unless and
until Certificates of a class are issued in
definitive form, all references herein to
distributions, notices, reports and
statements to and to actions by and effects
upon the related Certificateholders will
refer to the same actions and effects with
respect to DTC or Cede & Co. ("Cede"), as the
case may be, for the benefit of the related
Certificate Owners in accordance with the DTC
procedures. See "Certain Information
Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of
Certificates will have a stated
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7
<PAGE>
- --------------------------------------------------------------------------------
Certificate Balance (as defined in the
related Prospectus Supplement) and will
accrue interest on such Certificate Balance
at a specified rate (with respect to each
class of Certificates, the "Pass-Through
Rate"). Each class of Certificates may have a
different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through
Rate, or any combination of the foregoing.
The related Prospectus Supplement will
specify the Pass-Through Rate for each class
of Certificates, or the initial Pass-Through
Rate and the method for determining
subsequent changes to the Pass-Through Rate.
A series may include two or more classes of
Certificates which differ as to timing of
distributions, sequential order, priority of
payment, seniority, allocation of losses,
Pass-Through Rate or amount of distributions
in respect of principal or interest, or as to
which distributions in respect of principal
or interest on any class may or may not be
made upon the occurrence of specified events
or on the basis of collections from
designated portions of the Contract Pool. In
addition, a series may include one or more
classes of Certificates ("Stripped
Certificates") entitled to (i) distributions
in respect of principal with
disproportionate, nominal or no interest
distributions, or (ii) interest
distributions, with disproportionate, nominal
or no distributions in respect of principal.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are
sold by the Indenture Trustee (or, if the
series did not include Notes or the Notes
have been paid in full and the Indenture has
been discharged in accordance with its terms,
the Owner Trustee) on the terms and
conditions described under "The Purchase
Agreements and the Trust
Documents--Termination," Certificate Owners
may receive an amount in respect of the
Certificates as specified in the related
Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that
the property of a Trust will include a
Pre-Funding Account (as such term is defined
in the related Prospectus Supplement, the
"Pre-Funding Account"), Certificate Owners
may receive a distribution in respect of
principal on or immediately following the end
of the funding period specified in the
related Prospectus Supplement (the "Funding
Period") in an amount and manner specified in
the related Prospectus Supplement.
The Notes....................... Each series of Asset-Backed Notes (the
"Notes" and, together with the Certificates,
the "Securities") will represent obligations
of a Trust secured by assets of such Trust
(other than the accounts or other property
specified in the related Prospectus
Supplement). See
- --------------------------------------------------------------------------------
8
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- --------------------------------------------------------------------------------
"The Notes--General."
The Notes will be issued pursuant to an
Indenture between the Issuer and the
Indenture Trustee (the "Indenture"). See "The
Notes--General."
The Notes will be issued in the minimum
denominations and integral multiples in
excess thereof specified in the related
Prospectus Supplement; provided, however,
that one Note of each class of each series
may be issued in a denomination other than
such integral multiple. Unless otherwise
specified in the related Prospectus
Supplement, the Notes will be issued in
book-entry form only. Unless otherwise
specified in the related Prospectus
Supplement, persons ("Note Owners") acquiring
beneficial interests in the Notes will hold
their interests through DTC in the United
States or Cedel Bank, societe anonyme
("Cedel") or the Euroclear System
("Euroclear") in Europe, and Definitive Notes
will be issued only under the limited
circumstances described herein or in the
related Prospectus Supplement. Unless and
until Notes of a class are issued in
definitive form, all references herein to
distributions, notices, reports and
statements to and to actions by and effects
upon the related Noteholders will refer to
the same actions and effects with respect to
DTC or Cede, as the case may be, for the
benefit of the related Note Owners in
accordance with the DTC procedures. See
"Certain Information Regarding the
Securities--Book-Entry Registration" and
"--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes
will have a stated principal amount and will
bear interest at a specified rate or rates
(with respect to each class of Notes, the
"Interest Rate"). Each class of Notes may
have a different Interest Rate, which may be
a fixed, variable or adjustable Interest
Rate, or any combination of the foregoing.
The related Prospectus Supplement will
specify the Interest Rate and the method for
determining subsequent changes to the
Interest Rate.
A series may include two or more classes of
Notes which differ as to the timing and
priority of payment, seniority, allocations
of loss, Interest Rate or amount of payments
of principal or interest, or as to which
payments of principal may or may not be made
upon the occurrence of specified events or on
the basis of collections from designated
portions of the Contract Pool. In addition, a
series may include one or more classes of
Notes ("Stripped Notes") entitled to (i)
principal payments with disproportionate,
nominal or no interest payments or (ii)
interest payments with
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9
<PAGE>
- --------------------------------------------------------------------------------
disproportionate, nominal or no principal
payments.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are
sold by the Indenture Trustee (or, if the
series did not include Notes or the Notes
have been paid in full and the Indenture has
been discharged in accordance with its terms,
the Owner Trustee) on the terms and
conditions described under "The Purchase
Agreements and the Trust
Documents--Termination," the outstanding
Notes, if any, of such series will be
redeemed as set forth in the related
Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that
the property of a Trust will include a
Pre-Funding Account, all or certain classes
of the outstanding Notes, if any, of such
series will be subject to partial redemption
on or immediately following the end of the
Funding Period in an amount and manner
specified in the related Prospectus
Supplement.
Property of a Trust............ The property of a Trust will primarily
include (i) a pool (the "Contract Pool") of
marine installment sale contracts and direct
loans (the "Initial Contracts") secured by
the new and used boats, boat motors and boat
trailers financed thereby (the "Initial
Financed Boats"), (ii) certain monies
received under the Initial Contracts on and
after the Initial Cut-off Date specified in
the related Prospectus Supplement (the
"Initial Cut-off Date"), (iii) an assignment
of the security interests in the Initial
Financed Boats, (iv) the Collection Account
and the Paid-Ahead Account, if any, including
all investments therein, all income from the
investment of funds therein and all proceeds
thereof, certain other accounts and the
proceeds thereof and certain other rights
under the Trust Documents specified in the
related Prospectus Supplement, and (v) the
proceeds from claims under certain insurance
policies in respect of individual Initial
Financed Boats or the related Obligors. In
addition, if so specified in the related
Prospectus Supplement, the property of a
Trust will include specified credit or cash
flow enhancement and monies on deposit in a
Pre-Funding Account to be established with
the Indenture Trustee or the Owner Trustee,
which will be used to purchase Subsequent
Contracts from the Seller from time to time
during the Funding Period, as well as any
Subsequent Contracts so purchased. See "The
Trust Property."
If and to the extent provided in the related
Prospectus Supplement, a Trust will be
obligated to purchase from the Seller
(subject to the satisfaction of certain
conditions described in the applicable Trust
Documents) from time to time during the
Funding Period, from
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monies on deposit in the Pre-Funding Account,
additional marine installment sale contracts
and direct loans (the "Subsequent Contracts"
and, together with the Initial Contracts, the
"Contracts") secured by the new and used
boats, boat motors and boat trailers financed
thereby (the "Subsequent Financed Boats" and,
together with the Initial Financed Boats, the
"Financed Boats"), certain monies received
under the Subsequent Contracts on and after
the related Subsequent Cut-off Dates
(specified in the related Prospectus
Supplement), an assignment of the security
interests in the Subsequent Financed Boats,
and proceeds from claims under certain
insurance policies in respect of individual
Subsequent Financed Boats or the related
Obligors. It is expected that the Subsequent
Contracts will have an aggregate principal
balance approximately equal to the Pre-Funded
Amount on the related Closing Date.
CITSF will be obligated to repurchase
Contracts (a "Repurchased Contract") upon the
occurrence of certain breaches of
representations and warranties (a "Repurchase
Event"). See "The Purchase Agreements and the
Trust Documents--Sale and Assignment of the
Contracts" and "--Servicing Procedures."
The Contracts................... The property of a Trust will consist
primarily of marine installment sale
contracts for boats originated by boat
dealers ("Dealers") and acquired by CITSF or
The CIT Group/Consumer Finance, Inc. (NY)
("CITCF-NY") or other affiliates of CITSF and
marine loans originated directly by CITSF or
one of its affiliates or acquired by CITSF or
one of its affiliates from unaffiliated third
parties. On or prior to the date of issuance
of a series 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 purchase
agreement, and CITSF will sell the Initial
Contracts to the Company pursuant to a
purchase agreement (the "Purchase
Agreement"), and the Company (and, if and to
the extent specified in the related
Prospectus Supplement, a Selling Trust) will
sell the Initial Contracts to a Trust
pursuant to the Trust Documents. If and to
the extent specified in the related
Prospectus Supplement, CITSF or the Seller or
one of their respective affiliates may retain
the right to receive a portion of the
interest accruing on some or all of the
Contracts sold to a Trust. See "The Purchase
Agreements and the Trust Documents--Sale and
Assignment of the Contracts."
The Contracts will generally be prepayable at
any time without penalty to the purchaser of
the related Financed Boats, the borrower
under a loan contract or other
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person or persons who are obligated to make
payments under the Contract (each, an
"Obligor"). The related Prospectus Supplement
will contain certain information with respect
to each Contract Pool as of the Initial
Cut-off Date or such other date specified
therein, including the proportions of each
type of Financed Boats, the weighted average
annual percentage rate and the weighted
average remaining maturity of the Contracts.
If and to the extent specified in the related
Prospectus Supplement, from time to time
during the Funding Period, CITSF will be
obligated to sell, and the Company will be
obligated to purchase, pursuant to a purchase
agreement (the "Subsequent Purchase
Agreement") subject to the satisfaction of
certain conditions described therein,
Subsequent Contracts at a purchase price
which, unless otherwise specified in the
related Prospectus Supplement, will be equal
to the aggregate principal amounts 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 or other
affiliates of CITSF. Pursuant to one or more
subsequent transfer agreements (each, a
"Subsequent Transfer Agreement") between the
Company and the related Trust, and subject to
the satisfaction of certain conditions
described therein, the Company will in turn
sell the Subsequent Contracts to such 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. Subsequent Contracts will be
transferred from CITSF to the Company and
from the Company to such 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").
Pre-Funding Account............. If the Prospectus Supplement for a series of
Securities specifies that a portion of the
proceeds of the offering will be deposited in
a Pre-Funding Account, the Pre-Funding
Account will be maintained as an Eligible
Account, which account may be maintained with
the Owner Trustee or the Indenture Trustee,
and the funds on deposit therein will be
invested solely in Permitted Investments (as
defined in the related Prospectus Supplement)
that mature not later than one Business Day
prior to the next succeeding Distribution
Date, until such funds are applied during the
Funding Period to pay to the Company the
purchase price for Subsequent Contracts. See
"The Purchase Agreements and the Trust
Documents--Accounts." Monies on deposit in
the Pre-Funding Account will not be available
to cover losses on
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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, in the
amount, if any, specified in the related
Prospectus Supplement (the "Pre-Funded
Amount"). The Pre-Funded Amount will not
exceed one-third of the sum of the Original
Certificate Balance and the initial principal
amount of the Notes. Unless otherwise
specified in the related Prospectus
Supplement, 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 (exclusive of investment earnings) is
less than $100,000, (ii) the date on which an
Event of Default occurs under the Indenture
(if any), (iii) the date on which an Event of
Termination occurs under the Trust Documents,
(iv) the insolvency of the Company, CITSF,
CITCF-NY or CIT, or (v) the close of business
on the date specified in the related
Prospectus Supplement (which date will occur
in the third calendar month after the month
in which the Closing Date occurred). Unless
otherwise specified in the related Prospectus
Supplement, 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. Unless
otherwise specified in the related Prospectus
Supplement, the Company expects that the
Pre-Funded Amount will be reduced to less
than $100,000 by the end of the Funding
Period, although no assurance can be given
that this will in fact occur. Unless
otherwise specified in the related Prospectus
Supplement, 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 and Certificateholders in
accordance with the Pre-Funded Percentage 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.... If the Prospectus Supplement for a series of
Securities specifies that a portion of the
proceeds of the offering will be deposited in
a Capitalized Interest Account, on the
Closing Date a portion of the proceeds from
the sale of the Securities (in an amount
specified in the related Prospectus
Supplement) will be deposited into an account
(the "Capitalized Interest Account")
maintained as an Eligible Account, which
account may be maintained with the Owner
Trustee or the Indenture Trustee, and the
funds on deposit therein will be invested
solely in Permitted Investments that mature
no later than one Business Day prior to the
next Distribution Date. Amounts deposited in
the Capitalized
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Interest Account will be used on each
Distribution Date to pay interest on the
Securities, in the amount or in accordance
with the formula specified in the related
Prospectus Supplement. Monies on deposit in
the Capitalized Interest Account will not be
available to cover losses on or in respect of
the Contracts.
On each Distribution Date any amount
remaining in the Capitalized Interest Account
in excess of the Required Capitalized
Interest Amount (as defined in the related
Prospectus Supplement) shall be released to
the Affiliated Owner, if any, or other person
specified in the related Prospectus
Supplement. Unless otherwise specified in the
related Prospectus Supplement, 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 will be available
for distributions, as described herein or in
the related Prospectus Supplement, 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.............. Unless otherwise specified in the related
Prospectus Supplement, 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 on the date
specified in the related Prospectus
Supplement. Unless otherwise specified in the
related Prospectus Supplement, 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 Business Day immediately preceding
such Distribution Date or, in the event
Definitive Securities have been issued, at
the close of business on the last Business
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 Notes and the Certificates will
be payable on the Distribution Date occurring
in the month or months specified in the
related Prospectus Supplement (the "Note
Final Scheduled Distribution Date" and the
"Certificate Final Scheduled Distribution
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, Oklahoma and such other states
(if any) specified in the related Prospectus
Supplement are authorized by law, regulation
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or executive order to be closed.
Interest Accrual Period......... Unless otherwise specified in the related
Prospectus Supplement, the period for which
interest is payable on a Distribution Date on
the Securities shall be the one-month period
from the most recent Distribution Date to but
excluding the following Distribution Date, or
in the case of the initial Distribution Date
from the date specified in the related
Prospectus Supplement 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 other amounts 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. Unless
otherwise specified in the related Prospectus
Supplement, the "Due Period" will be the
calendar month immediately preceding the
Distribution Date.
Determination Date.............. Unless otherwise specified in the related
Prospectus Supplement, the "Determination
Date" is the third Business Day prior to each
Distribution Date. On each Determination
Date, the Servicer will determine the
Available Amount for distribution on the
related Distribution Date, allocate such
amounts between the Notes, the Certificates
and the Servicer Payment, and advise the
Trustees (or the paying agent appointed
pursuant to the Trust Documents) of the
amounts of the payments to be made to
Securityholders, all as described under "The
Purchase Agreements and the Trust
Documents--Distributions." The "Servicer
Payment" is equal on each Distribution Date
to the sum of the reimbursement then due to
the Servicer for outstanding Monthly Advances
and the Servicing Fee (including any unpaid
Servicing Fees for past Distribution Dates).
Unless otherwise specified in the related
Prospectus Supplement, the "Available Amount"
with respect to each Trust on any
Distribution Date is equal to the excess of
(A) the sum of (i) all amounts on deposit in
the Collection Account attributable to
collections or deposits made in respect of
such Contracts in the related Due Period
(including 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"),
and (ii) the Purchase Price for any Contract
repurchased by CITSF as a result of breaches
of certain representations and warranties or
purchased by the Servicer as a result of
breaches of certain covenants and any Monthly
Advances and any
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Non-Reimbursable Payments made by the
Servicer, if such Purchase Price, Monthly
Advance or Non-Reimbursable Payment is paid
on or prior to the Deposit Date immediately
preceding such Distribution Date, over (B)
the sum of the following amounts (to the
extent that the Servicer has not already
withheld such amounts from collections on the
Contracts): (i) any repossession profits on
liquidated Contracts, Liquidation Expenses
(as defined in the Trust Documents) incurred
and taxes and insurance advanced by the
Servicer in respect of Financed Boats that
are reimbursable to the Servicer under the
Trust Documents, (ii) any amounts incorrectly
deposited in the Collection Account, (iii)
any amounts deposited in the Paid-Ahead
Account, if any, during the related Due
Period, (iv) net investment earnings on the
funds in the Collection Account and the
Paid-Ahead Account, if any, and (v) any other
amounts permitted to be withdrawn from the
Collection Account and the Paid-Ahead
Account, if any, by the Servicer (or to be
retained by the Servicer from collections on
the Contracts) pursuant to the Trust
Documents.
Subordination................... The rights of the Certificateholders to
receive distributions with respect to the
Contracts will be subordinated to the rights
of the Noteholders of the same series, to the
extent described in the related Prospectus
Supplement. This subordination is intended to
enhance the likelihood of timely receipt by
Noteholders of the full amount of interest
and principal required to be paid to them,
and to afford the Noteholders limited
protection against losses in respect of the
Contracts.
If and to the extent specified in the related
Prospectus Supplement, one or more classes of
Notes of a series may be subordinated to the
rights of one or more other classes of Notes
of the same series.
The protection afforded to the Noteholders by
the subordination feature described above
will be effected by the preferential right of
the Noteholders to receive, to the extent
described in the related Prospectus
Supplement, current distributions from
collections on or in respect of the Contracts
prior to the application of such collections
to payments in respect of the Certificates or
any subordinated Notes.
Enhancement..................... If and to the extent specified in the related
Prospectus Supplement with respect to a
Trust, the enhancement applicable to a class
of Securities may include any one or more of
the following: a financial guaranty insurance
policy, a letter of credit, a CIT Limited
Guarantee, a reserve fund, a third party
guarantee, a cash collateral account, a
derivative product, a credit facility, a
liquidity
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acility, another form of credit enhancement,
overcollateralization, or any combination
thereof.
A financial guaranty insurance policy may be
obtained and maintained for one or more
classes of Certificates or Notes of a series
of Securities. Such policies generally
unconditionally and irrevocably guarantee to
Securityholders that the full amount of the
distributions of principal and interest, as
well as any other amounts specified in the
related Prospectus Supplement, will be
received by an agent of the Trustee on behalf
of Securityholders for distribution by the
Trustee to Securityholders. Such policies may
have certain limitations set forth in the
related Prospectus Supplement, including (but
not limited to) limitations on the insurer's
obligation to guarantee the Seller's or the
Servicer's obligation to repurchase or
substitute for any Contracts, to guarantee
any specified rate of prepayments or to
provide funds to redeem Securities on any
specified date.
The enhancement with respect to any class of
Securities may be structured to provide
protection against delinquencies and/or
losses on the Contracts, against changes in
interest rates, or other risks, or to
supplement the interest rate on specified
Contracts, in each case to the extent and
under the conditions specified in the related
Prospectus Supplement. Unless otherwise
specified in the related Prospectus
Supplement, any form of enhancement will have
certain limitations and exclusions from
coverage thereunder, which will be described
in the related Prospectus Supplement. Further
information regarding any provider of credit
enhancement, including financial information
when material, will be included (or
incorporated by reference) in the related
Prospectus Supplement. See "The
Certificates--Enhancement."
Monthly Advances................ Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Contract as to which there has been a Payment
Shortfall during the related Due Period, the
Servicer shall advance funds in the amount of
such Payment Shortfall (each, a "Monthly
Advance"), but only to the extent that the
Servicer, in its good faith judgment, expects
to recover such Monthly Advance from
subsequent collections on such Contract made
by or on behalf of the Obligor thereunder
(but only to the extent of expected interest
collections in the case of a Simple Interest
Contract) or from 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
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good faith judgment that an unreimbursed
Monthly Advance shall not ultimately be
recoverable from subsequent collections, the
Servicer shall be reimbursed for such Monthly
Advance from collections on all Contracts. In
determining whether an advance is or will be
nonrecoverable, the Servicer need not take
into account that it might receive any
amounts in a deficiency judgment against an
Obligor. Unless otherwise specified in the
related Prospectus Supplement, the Servicer
will not make a Monthly Advance in respect of
(i) the principal component of any scheduled
payment on a Simple Interest Contract, or
(ii) a Payment 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. See
"The Purchase Agreements and the Trust
Documents--Monthly Advances." Unless
otherwise specified in the related Prospectus
Supplement, "Payment Shortfall" means (i)
with respect to any Simple Interest Contract
and any Distribution Date, the excess of (A)
the product of (1) one-twelfth of the
Contract Rate of such Contract and (2) 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 ending after the Contract was acquired
by the related Trust, as of the Initial
Cut-off Date or the Subsequent Cut-off Date,
as the case may be), over (B) the amount of
interest, if any, collected on such Contract
during the related Due Period and (ii) with
respect to any Precomputed Contract and any
Distribution Date, the excess of (A) the
scheduled payment due on such Contract during
the related Due Period, over (B) the amount
collected on such Contract (including any
amounts allocated from the Paid-Ahead Account
with respect to such Due Period) during the
related Due Period.
Non-Reimbursable Payments....... If and to the extent specified in the related
Prospectus Supplement, with respect to each
Contract as to which there has been a Payment
Shortfall with respect to interest 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 Trust
Documents may 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 Payment Shortfall (a "Non-Reimbursable
Payment"). If the related Prospectus
Supplement does not specify that the Servicer
will make Non-Reimbursable Payments, the
Servicer will not be obligated to make such
payments with respect to the Trust.
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Paid-Ahead Account.............. Early payments by or on behalf of Obligors on
Precomputed Contracts that do not constitute
scheduled payments, full prepayments or
certain partial prepayments which result in a
reduction of an Obligor's periodic payment
below the scheduled payment as of the Initial
Cut-off Date or Subsequent Cut-off Date, as
the case may be, will be deposited into the
Paid-Ahead Account until such time as the
paid-ahead amount becomes due. See "The
Contract Pool" and "The Purchase Agreements
and the Trust Documents--Paid-Ahead
Precomputed Contracts."
Servicing Fees.................. Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, the Servicer shall
receive a monthly fee (the "Servicing Fee"),
payable on each Distribution Date, equal to
the sum of (i) one-twelfth of the product of
the percentage specified in the related
Prospectus Supplement as 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) and (ii) any
investment earnings on amounts on deposit in
the Collection Account, the Paid-Ahead
Account, if any, the Certificate Distribution
Account, if any, and the Note Distribution
Account, if any; provided, however, that the
Servicing Fee Rate applicable to a Trust may
be increased to a rate (or maximum rate)
specified in the related Prospectus
Supplement if CITSF or an affiliate thereof
is not the Servicer. See "The Purchase
Agreements and the Trust Documents--Servicing
Compensation."
Optional Purchase of the
Contracts .................... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, at its option, CITSF
may purchase all the Contracts in the related
Trust on any Distribution Date on which the
aggregate principal balance of the Contracts
(the "Pool Balance") as of the last day of
the related Due Period is equal to or less
than a percentage specified in the related
Prospectus Supplement of the Initial Pool
Balance, at a purchase price determined as
described under "The Purchase Agreements and
the Trust Documents--Termination." Unless
otherwise specified in the related Prospectus
Supplement, 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 related Trust as of their
respective Subsequent Cut-off Dates.
Auction Sale.................... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, within ten days after
the first Distribution Date on which
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the Pool Balance as of the last day of the
related Due Period is equal to or less than a
percentage specified in the related
Prospectus Supplement of the Initial Pool
Balance, the Indenture Trustee (or, if the
series did not include Notes or 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
related 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
Securityholders, in the same order of
priority as collections received in respect
of the Contracts, on the second Distribution
Date succeeding such Due Period. 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......................... As a condition of issuance, the Securities of
each series offered pursuant to this
Prospectus will be rated in one of the four
highest rating categories by at least one
nationally recognized statistical rating
organization specified in the related
Prospectus Supplement (each, a "Rating
Agency"). The ratings of the Securities
should be evaluated independently from
similar ratings on other types of securities.
The ratings do not address the possibility
that Securityholders may suffer a lower than
anticipated yield. The 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 of
the Contracts." 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 judgment, circumstances so warrant. In
the event that the rating initially assigned
to any of 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 any of the Securities 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 .............. If the related Prospectus Supplement states
that a Trust will be treated as a grantor
trust, in the opinion of counsel to the
Seller, for federal income tax purposes,
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the Trust will be treated as a grantor trust.
In such event, each Certificateholder, by
acceptance of a Certificate, will be treated
as the owner of an undivided interest in the
Contracts included in the Contract Pool and
any other assets held by the Trust. If the
related Prospectus Supplement does not state
that a Trust will be treated as a grantor
trust, in the opinion of counsel to the
Seller, 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 (or a publicly traded
partnership). Each Noteholder, by acceptance
of a Note, will agree to treat the Notes as
indebtedness, and each Certificateholder, by
acceptance of a Certificate, will agree to
treat the Trust as a partnership in which the
Certificateholders are partners for federal
income tax purposes.
Alternative characterizations of the Notes
and the Certificates are possible, but would
not result in materially adverse tax
consequences to Noteholders or
Certificateholders. See "Certain Federal
Income Tax Consequences."
ERISA Considerations............ Fiduciaries of employee benefit plans subject
to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or plans
subject to Section 4975 of the Internal
Revenue Code of 1986 (the "Code") should
carefully review with their legal advisors
whether the purchase or holding of the
Certificates offered hereby could give rise
to a transaction prohibited or not otherwise
permissible under ERISA or the Code. See
"ERISA Considerations."
The related Prospectus Supplement will
provide further information with respect to
the eligibility of a class of Securities for
purchase by employee benefit plans. See
"ERISA Considerations" herein and in the
related Prospectus Supplement.
Subject to certain considerations discussed
under "ERISA Considerations" herein and in
the related Prospectus Supplement, and unless
otherwise specified in the related Prospectus
Supplement, the Securities will be eligible
for purchase by employee benefit plans that
are subject to ERISA.
Legal Investment................ The appropriate characterization of the
Certificates and the Notes under various
legal investment restrictions applicable to
the investment activities of certain
institutions, and thus the ability of
investors subject to these restrictions to
purchase the Certificates and the
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Notes, may be subject to significant
interpretive uncertainties. All investors
whose investment authority is subject to
legal restrictions should consult their own
legal advisors to determine whether, and to
what extent, the Certificates and the Notes
will constitute legal investments for them.
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RISK FACTORS
Prospective Securityholders should consider the following risk factors 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, Inc. ("CIT"), The CIT Group Securitization
Corporation II (the "Company"), any Affiliated Owner specified in the related
Prospectus Supplement, or any Servicer (including The CIT Group/Sales Financing,
Inc. ("CITSF")) or any of their respective affiliates. Unless and to the extent
otherwise specified in the related Prospectus Supplement, the Securities will
not be insured or guaranteed by any government agency or instrumentality, CIT or
any of its affiliates (including the Company, any Affiliated Owner, and CITSF),
the Underwriters or any of their 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 liquidation experience of pools of
marine installment sale contracts and direct loans secured by recreational
boats. Since the market value of boats generally declines with age and since in
certain states the Trustees may not have a first perfected security interest in
the Financed Boats, 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 Boats could be or could become lower than the outstanding principal
balances of the related Contracts. Sufficiently high liquidation losses on the
Contracts will have the effect of reducing, and could eliminate (a) the
protection against loss afforded to the Noteholders by the subordination of the
Certificates, if any, or by the Enhancement, if any, applicable to the Notes and
(b) the protection against loss afforded to the Certificateholders by the
Enhancement (as specified in the related Prospectus Supplement), if any. If the
amount available under the Enhancement, if any, is reduced to zero, holders of
the Certificates will bear the risk of loss resulting from default by Obligors
and will have to look primarily to the value of the related Financed Boats for
recovery of the outstanding principal and unpaid interest on the defaulted
Contracts. If the Certificate Balance is reduced to zero, the 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 Boats for recovery
of the outstanding principal and unpaid interest on the defaulted Contracts.
3. Security Interests and Certain Other Aspects of the Contracts. When
originated, each Contract was secured by a security interest in the Financed
Boat financed thereby. Each such security interest was required to be perfected
under applicable state law and, in the case of certain Financed Boats eligible
for federal documentation, under applicable federal law. In connection with the
sale of the Contracts to the Trust, the Seller will assign its security interest
in each Financed Boat to the Trust. However, due to administrative burden and
expense, none of the Seller, the Servicer or the Owner Trustee will amend the
certificates of title or file assignments of the UCC-1 financing statements, if
any, with respect to the Financed Boats to identify the Trust or the Indenture
Trustee as the new secured party. Neither of the Seller or the Owner Trustee
will file an assignment of the Preferred Mortgages with respect to any Financed
Boats documented or to be documented under federal law. See "Certain Legal
Aspects of the Contracts--Security Interests in the Financed Boats" for a
description of those Preferred Mortgages that the Seller will be obligated to
assign to the Trust subsequent to the Closing Date. In addition, the
certificates of title have not and will not be amended and the UCC-1 financing
statements have not and will not be assigned with respect to the Financed Boats
relating to the Contracts not originated by the Seller to reflect any interim
transfers of ownership of the security interest in such Financed Boats.
Furthermore, those Preferred Mortgages that will be assigned to the Trust will
not have been previously assigned to reflect any interim transfers of ownership
of the security interest in such Financed Boats. In a majority of states, the
assignment of a Contract together with the related security interest is, as a
matter of state law, an effective conveyance of such security interest without
amendment of any lien noted on the related certificate of title or any
assignment of any UCC-1 financing statements, and the new owner of the Contracts
succeeds to the original secured party's rights in the related Financed Boat as
against creditors of the Obligor. In certain title states, in the absence of
such certificate of title amendment or assignment of record to reflect the
successive assignments of the security interest in such Financed Boat, the
Seller (if not the secured party of record), the Trust and/or the Indenture
Trustee may not have a perfected security interest
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in the related Financed Boat. Under the Ship Mortgage Act of 1920 (1988
Recodification) ss. 30101 et seq. (the "Ship Mortgage Statutes"), in the absence
of an assignment of record of a Preferred Mortgage, the assignment of the
related Contract by itself will not convey the perfected preferred mortgage lien
on the Financed Boat subject to such Preferred Mortgage, and neither the Seller
(if not the secured party of record) nor the Trust and/or the Indenture Trustee
will have a perfected preferred mortgage lien on such Financed Boat.
CITSF will be obligated to repurchase any Contract as to which the Seller
has represented that the originator of such Contract has a first perfected
security interest in the Financed Boat securing such Contract if a breach of
such representation shall materially adversely affect the interest of the Trust
in such Contract. If the Trust does not have a perfected security interest in a
Financed Boat, it will not be effective as against third parties. In such case,
if third party liens equal or exceed the value of the Financed Boat, the only
recourse of the Trust would be against the related Obligor on an unsecured basis
or (if CITSF, CITCF-NY or, in those Contracts described above, the Trust did not
have a perfected security interest in such Financed Boat) against CITSF pursuant
to its repurchase obligation.
To the extent that the Trust's security interest in a Financed Boat is
perfected, the Trust will have a prior claim over subsequent purchasers of such
Financed Boat and holders of subsequently perfected security interests in such
Financed Boat. Under the laws of many states, certain possessory liens for
repairs on a boat and storage, as well as certain rights in favor of federal and
state governmental authorities arising from the use of a boat in connection with
illegal activities, may take priority even over a perfected security interest.
Under the Ship Mortgage Statutes, certain preferred maritime liens will have
priority over security interests in Financed Boats perfected under federal law.
Certain federal tax liens may have priority over the lien of a secured party. In
addition, through fraud or negligence, the Trust could lose its security
interest or the priority of its security interest in a Financed Boat. If a
security interest in a Financed Boat is initially perfected (by titling or UCC
filing) under applicable state law and the Financed Boat subsequently is
federally documented, the Trust could lose the priority of its security interest
in such Financed Boat to a purchaser thereof or to the holder of a subsequently
perfected Preferred Mortgage covering such Financed Boat. See "Certain Legal
Aspects of the Contracts--Security Interests in the Financed Boats" for a
description of CITSF's policies with respect to federal documentation. CITSF
shall not have an obligation to repurchase a Contract as to which any of the
aforementioned occurrences result in the Trust's losing the priority of its
security interest or its security interest in such Financed Boat after the date
such security interest was conveyed to the Trust (other than through fraud or
negligence of the Seller or the Servicer). See "Certain Legal Aspects of the
Contracts--Security Interests in the Financed Boats."
In addition, numerous federal and state consumer protection laws impose
requirements on sellers under marine installment sale contracts and marine
installment loan contracts or notes, 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 or paid under such agreements and the
right to set-off against claims by such assignees. These laws would apply to a
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. The Trust is subject to the risk of similar litigation. With
respect to each series of Securities, pursuant to the Trust Documents, CITSF
will represent and warrant as of the Initial Cut-off Date with respect to each
Initial Contract, and as of the related Subsequent Cut-off Date with respect to
each Subsequent Contract, that each Contract complies with all requirements of
law and CITSF will provide certain warranties relating to the validity,
perfection and priority of the security interest in each Financed Boat securing
a Contract. A breach by CITSF of any such warranty that materially and adversely
affects the related Trust's interest in any Contract would require CITSF to
repurchase such Contract unless such breach is cured. If CITSF does not honor
its purchase obligation in respect of a Contract and the Obligor for such
Contract were to default, recovery of amounts due on such Contract would be
primarily dependent on repossession and resale of the Financed Boat securing
such Contract. Certain other factors may limit the ability of the
Securityholders to realize upon the Financed Boats 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 boats are required to be licensed to sell boats at retail sale. Numerous
other federal and state consumer protection laws impose requirements applicable
to the origination and assignment of marine installment sale contracts and
marine installment loan contracts or notes, including the Truth in Lending Act,
the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair
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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 the provisions of these laws may affect the
enforceability of the related Contract. A Trust and the Company may not have
obtained the licenses required under any federal or state consumer 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
of such rights which may prevent a Trust from collecting amounts due under the
Contracts. See "Certain Legal Aspects of the Contracts."
Any shortfall in payments on or in respect of Contracts, or any liability
of a Trust to Obligors, as a result of noncompliance with the laws summarized
above and under "Certain Legal Aspects of the Contracts" could result in losses
to the Securityholders.
4. Foreclosure. Applicable law also imposes requirements and restrictions
relating to foreclosure sales of boats and on the obtaining of deficiency
judgments following such sales. Even if the Financed Boat securing a Contract is
successfully repossessed or arrested and sold, the full amount due on the
Contract may not be realized because of depreciation, damage or loss of or to
the Financed Boat and because the resale value of the Financed Boat may vary
significantly due to the limited market for used boats, seasonal factors and
other economic and social factors.
In sum, the Trust may not realize the full amount due on a Contract because
of (i) the failure to endorse the certificate of title, failure to file a UCC-1
financing statement or failure to record the assignment of the Preferred
Mortgage, as the case may be, (ii) the application of requirements and
restrictions on foreclosure and deficiency judgments, (iii) depreciation, damage
or loss of or to a Financed Boat, or (iv) the application of federal and state
bankruptcy and insolvency laws, or other factors. As a result, the
Securityholders will be subject to delays in payments and losses.
5. Certain Matters Relating to Insolvency. CITCF-NY, CITSF and the Company
intend that transfers of Contracts from CITCF-NY to CITSF, from CITSF to the
Company and from the Company (and, if and to the extent specified in the related
Prospectus Supplement, a Selling Trust) to the related Trust, constitute sales,
rather than pledges, of the Contracts to secure indebtedness. However, if
CITCF-NY, CITSF or the Company (or, if and to the extent specified in the
related Prospectus Supplement, a Selling Trust) 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 such debtor, or such debtor as debtor-in-possession,
may contend that the sales of the Contracts by CITCF-NY to CITSF, by CITSF to
the Company, or by the Company (or, if and to the extent specified in the
related Prospectus Supplement, a Selling Trust) to the related Trust,
respectively, were pledges of the Contracts rather than sales and that,
accordingly, such Contracts should be part of such assigning 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."
6. Limited Liquidity. There is currently no market for the Securities of
any series. Although the Company expects that the underwriters of any particular
series will make a secondary market for such Securities, they will have no
obligation to do so. There can be no assurance that a secondary market will
develop for the Securities of any series or, if it does develop, that it will
provide any of the Securityholders with liquidity of investment or that it will
continue for the term of any series of Securities. Unless otherwise specified in
the related Prospectus Supplement, the Securities will be issued in book-entry,
rather than physical, form which may adversely affect the liquidity of the
Securities in the secondary market and the ability of the Certificate Owners and
Note Owners to pledge the Securities.
7. The Subsequent Contracts and the Pre-Funding Account. If and to the
extent specified in the related Prospectus Supplement, the conveyance of
Subsequent Contracts by CITSF during the Funding Period will be subject to the
conditions described in the related Prospectus Supplement under "The Contract
Pool." If CITSF does not originate contracts satisfying such criteria during the
Funding Period, CITSF will have insufficient contracts to sell to the related
Trust on Subsequent Transfer Dates, thereby resulting in prepayments of
principal to Noteholders and Certificateholders as described below.
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Unless otherwise specified in the related Prospectus Supplement, 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 related Trust by the end
of the Funding Period, Noteholders and Certificateholders will receive a
prepayment of principal in an amount equal to the Pre-Funded Percentage
allocable to the Noteholders and the Certificateholders, respectively, of the
Pre-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. Unless otherwise specified in the related Prospectus Supplement, the
"Pre-Funded Percentage" with respect to the Notes or the Certificates is the
percentage derived from the fraction, the numerator of which is the initial
principal balance of the Notes or the Original Certificate Balance, as the case
may be, and the denominator of which is the sum of the initial principal balance
of the Notes and the Original Certificate Balance. 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 and the Certificateholders at the end of the Funding Period.
Each Subsequent Contract must satisfy the eligibility criteria specified in
the related Prospectus Supplement and the Trust Documents at the time of its
sale to the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Company (the seller of any Subsequent Contracts to the related
Trust) will certify that all such eligibility criteria have been satisfied and
CITSF (the seller of any Subsequent Contracts to the Company) will certify that
all conditions precedent to the sale of the Subsequent Contracts to the Trust
have been satisfied. Unless otherwise specified in the related Prospectus
Supplement, it is a condition to the sale of any Subsequent Contracts to the
Trust that each Rating Agency, after receiving prior notice of the proposed
transfer of Subsequent Contracts to the Trust, shall not have advised the Seller
or the Trustees 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. 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 a Trust to invest in Subsequent Contracts is entirely
dependent upon whether CITSF is able to originate boat contracts that meet the
requirements for transfer on a Subsequent Transfer Date under the Trust
Documents. The ability of CITSF to originate such contracts may be affected by a
variety of economic and social 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 Trust Documents. 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 CITSF's ability to originate Subsequent Contracts.
8. Prepayment from the Pre-Funding Account. To the extent specified in the
related Prospectus Supplement, if the Pre-Funded Amount has not been fully
applied by the related Trust to purchase Subsequent Contracts by the end of the
Funding Period, then the Pre-Funded Amount will be payable as principal to
Noteholders and Certificateholders in accordance with the Pre-Funded Percentage
on the first Distribution Date following the end of the Funding Period, or, if
the end of the Funding Period is on a Distribution Date, on such date.
In the event that amounts remain on deposit in the Pre-Funding Account at
the end of the Funding Period and are applied to the payment of principal to the
Noteholders and Certificateholders, such partial retirement of the Notes and
Certificates may shorten the average life of the Securities and may cause the
Noteholders and Certificateholders to experience a lower yield on the
Securities. In addition, any reinvestment risk resulting from such partial
retirement will be borne by the holders of such Securities.
9. Limited Assets. Unless otherwise specified in the related Prospectus
Supplement, each Trust will covenant to sell the Contracts (a) if directed to do
so by the related Indenture Trustee in accordance with the related Indenture
following an acceleration of a series of Notes upon an Event of Default, and (b)
in other circumstances specified in the related Prospectus Supplement. However,
there is no assurance that the market value of the related Contracts will at any
time be equal to or greater than the aggregate outstanding principal balance of
such Notes. Therefore, upon an Event of Default with respect to such Notes,
there can be no assurance that sufficient funds will be
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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 Note Final Scheduled Distribution
Date. Furthermore, upon a sale by the Trust of the Contracts, the net proceeds
from such sale remaining after payment of all amounts due to the Servicer and
the Noteholders may not be sufficient to pay the Certificate Balance and
interest accrued thereon.
If and to the extent specified in the related Prospectus Supplement, one or
more Enhancements will be available to pay principal and/or interest on the
Notes and/or the Certificates on any Distribution Date. However, unless
otherwise specified in the related Prospectus Supplement, the amount of any
Enhancement will be limited and will be reduced as the Pool Balance is reduced.
If the amounts available under the applicable Enhancement are exhausted, a Trust
will depend solely on payments on or with respect to the Contracts, Monthly
Advances and Non-Reimbursable Payments to make distributions to the
Securityholders.
10. Ratings of the Securities. It is a condition to the issuance of a
series of Securities offered pursuant to this Prospectus that the Securities be
rated in one of the four highest rating categories by at least one Rating
Agency. The ratings do not address the likelihood that the Securities will be
retired following the sale of the Contracts by a Trustee as described under "The
Purchase Agreement and the Trust Documents--Termination." 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 Rating Agency if, in its
judgment, 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 that any
other rating agency will rate the 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.
11. Book Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Securities will be offered for purchase in book-entry
form only and will be initially 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"). No person acquiring an interest in
the Notes through the facilities of DTC (a "Note Owner") will be entitled to
receive a Definitive Note representing such person's interest in the Notes,
except as set forth 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 Bank, societe anonyme
("Cedel") or Euroclear in Europe. 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 under "Certain Information Regarding
the Securities--Definitive Securities," and such persons will hold their
interests in the Certificates through DTC. Unless and until Definitive
Securities are issued under the limited circumstances described herein and in
the related Prospectus Supplement, all references to actions by Securityholders
shall refer to actions taken by DTC upon instructions from its Participants, and
all references herein to distributions, notices, reports and statements to
Securityholders shall refer to distributions, notices, reports and statements to
DTC in accordance with DTC procedures. See "Certain Information Regarding The
Securities--Definitive Securities."
12. Risk of Commingling. At any time that the requirements as specified
under "The Purchase Agreements and the Trust Documents--Collections," are met,
the Servicer may deposit payments on or with respect to the Contracts and
proceeds of Contracts into the Collection Account or the Paid-Ahead Account, as
applicable, monthly on the Business Day immediately preceding the next
Distribution Date (the "Deposit Date"). Pending such a monthly deposit into the
Collection Account or the Paid-Ahead Account, as applicable, collections on the
Contracts may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds or if the Servicer became insolvent, the holders of
the Securities could incur a loss with respect to collections not deposited in
the Collection Account or the Paid-Ahead Account.
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THE TRUSTS
With respect to each series of Securities, the Seller will establish a
Trust pursuant to the related Trust Documents. Prior to the sale and assignment
of the related Contracts pursuant to the related Trust Documents, the Trust will
have no assets or obligations. After its formation, the related Trust will not
engage in any activity other than (i) acquiring, holding and managing the
Contracts and the other assets of such Trust and proceeds therefrom, (ii)
issuing the Securities of the related series, (iii) making payments on the
Securities of the related series, (iv) entering into agreements and transactions
in connection with the Enhancement, if any, for the related series of
Securities, and (v) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected
therewith.
Each Certificate, if any, will represent a fractional undivided interest
and/or residual interest in the related Trust. Each Note, if any, will represent
an obligation of the related Trust.
If specified in the related Prospectus Supplement, the related Trust will
initially be capitalized with equity equal to the "Original Certificate Balance"
specified in the related Prospectus Supplement. If specified in the related
Prospectus Supplement, Certificates with an aggregate original principal balance
of at least the amount specified in the related Prospectus Supplement will be
owned by the Affiliated Owner specified in the related Prospectus Supplement
(the "Affiliated Owner") 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 Owner, the Seller, the Servicer
or their affiliates. If specified in the related Prospectus Supplement, the
Company or one of its affiliates will own the entire beneficial interest in the
Trust. The equity in a Trust, together with the proceeds of the initial sale of
the Notes, if any, will be used by the Trust to purchase the Initial Contracts
from the Seller pursuant to the Trust Documents and, if specified in the related
Prospectus Supplement, to fund the deposit of the Pre-Funded Amount and the
deposit to the Capitalized Interest Account and for such other purposes as are
specified in the related Prospectus Supplement.
The Servicer will service the Contracts held by each Trust and will receive
fees for such services. See "The Purchase Agreement and the Trust
Documents--Servicing Compensation." Unless otherwise specified in the related
Prospectus Supplement, CITSF will be appointed as custodian on behalf of each
Trust, and will hold the original marine installment sale contracts, marine
installment loan contracts (or promissory notes) and Preferred Mortgages as well
as copies of documents and instruments relating to each Contract and evidencing
the security interest in the Financed Boat securing each Contract (the "Contract
Files").
The Trustee(s)
The Trustee(s) for each Trust will be specified in the related Prospectus
Supplement. The Trustee(s) will perform limited administrative functions,
including making distributions from the Certificate Distribution Account and/or
the Note Distribution Account. A Trustee's liability in connection with the
issuance and sale of the Securities is limited solely to the express obligations
of such Trustee as set forth in the Trust Documents. A Trustee may appoint a
co-trustee to act as co-trustee pursuant to a co-trustee agreement with such
Trustee.
A Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove a Trustee
if such Trustee ceases to be eligible to continue as Trustee under the related
Trust Documents or if such Trustee becomes insolvent. In such circumstances, the
Servicer will be obligated to appoint a successor trustee. Any resignation or
removal of a Trustee and appointment of a successor trustee will be subject to
any conditions or approvals specified in the related Prospectus Supplement and
will not become effective until acceptance of the appointment by the successor
trustee.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will pay each Trustee's fees. The Trust
Documents will further provide that each Trustee will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability or expense incurred by
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such Trustee not resulting from its own willful misfeasance, bad faith or gross
negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Trust Documents).
THE TRUST PROPERTY
Each Certificate, if any, will represent a fractional undivided interest
and/or residual interest in the related Trust. Each Note, if any, will be an
obligation of the related Trust and will be secured by assets of the Trust
(other than the Certificate Distribution Account, if any, and other accounts or
property specified in the related Prospectus Supplement). The property of each
Trust will include, among other things, (i) a pool (the "Contract Pool") of
marine installment sale contracts, direct loans and Preferred Mortgages secured
by new and used boats, boat motors and boat trailers, consisting of the Initial
Contracts and the Subsequent Contracts (if any); (ii) certain monies received
under the Initial Contracts on or after the Initial Cut-off Date and the
Subsequent Contracts (if any) 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 Trust Documents
(including all investments in such accounts and all income from the funds
therein and all proceeds thereof, other than investment earnings on any account
so specified in the related Prospectus Supplement) as described herein; (iv) if
specified in the related Prospectus Supplement, specified credit or cash flow
enhancement and all monies on deposit in the Pre-Funding Account, the
Capitalized Interest Account and any other account specified in the related
Prospectus Supplement (including, unless otherwise specified in the related
Prospectus Supplement, all investments in such accounts and all income from the
funds therein and all proceeds thereof, other than investment earnings on any
account so specified in the related Prospectus Supplement); (v) assignments of
the security interests in the Financed Boats and any accessions thereto; (vi)
the right to proceeds from physical damage, credit life and disability insurance
policies, if any, covering individual Financed Boats or Obligors, as the case
may be; (vii) the rights of the Trust under the Trust Documents; and (viii) any
and all proceeds of the foregoing.
Pursuant to agreements between CITSF or CITCF-NY and many of the Dealers,
the Dealer is obligated after origination to repurchase from CITSF boat
contracts which do not meet certain representations and warranties made by such
Dealer. Such representations and warranties relate primarily to the origination
of the contracts and the perfection of the security interests in the related
boats, and do not typically relate to the creditworthiness of the related
Obligors or the collectability of such Contracts. Unless otherwise specified in
the related Prospectus Supplement, any Dealer agreement with respect to the
Contracts will not be assigned by CITSF or CITCF-NY to the Company or by the
Company to the Trust. However, unless otherwise specified in the related
Prospectus Supplement, the Trust Documents will authorize CITSF or CITCF-NY to
transfer a Contract to a Dealer upon a repurchase by a Dealer pursuant to a
Dealer agreement and will require that any recovery of amounts with respect to a
Contract by CITSF or CITCF-NY pursuant to Dealer repurchase obligations be
deposited in the Collection Account for the related Trust in satisfaction of
CITSF's repurchase obligations under the Trust Documents to the extent, if any,
that CITSF or CITCF-NY has not already satisfied that obligation. In accordance
with its customary servicing practices and procedures, in determining whether to
exercise any right of recourse against a Dealer, CITSF and CITCF-NY consider the
prior performance of the Dealer and other business and commercial factors,
including its own commercial relationship with such Dealer. The assignments by
the Dealers of Contracts to CITSF or CITCF-NY do not generally provide for
recourse to the Dealer for unpaid amounts in the event of a default by an
Obligor, other than in connection with the breach of the Dealer's
representations and warranties.
THE CONTRACT POOL
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of marine installment sale contracts, direct loans and Preferred
Mortgages (collectively, the "Contracts") to finance the purchase or ownership
of new and used boats, boat motors and boat trailers. The Contracts will be
originated or acquired by CITSF or its affiliates (including CITCF-NY). Except
as otherwise specified in the related Prospectus Supplement, the Contracts will
(i) be fully amortizing, (ii) bear interest at a fixed or variable rate (the
"Contract Rate") and (iii) be Simple Interest Contracts or Precomputed
Contracts.
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Certain detailed information regarding the Contract Pool as of the Initial
Cut-off Date or such other date specified therein for each Trust will be set
forth in the related Prospectus Supplement. If specific information with respect
to the Contract Pool is not known at the time the related series of Securities
initially is offered, more general information will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report on
a Current Report on Form 8-K to be filed with the Commission within fifteen days
after the initial issuance of such Securities. A copy of the Trust Documents
with respect to each series of Securities will be attached to the Current Report
on Form 8-K and will be available for inspection at the corporate trust office
of the Owner Trustee specified in the related Prospectus Supplement. A schedule
of the Contract Pool relating to such series will be attached to the Trust
Documents delivered to the Owner Trustee upon delivery of the Securities.
Description of Contract Computations
"Simple Interest Contracts" provide for the allocation of each payment made
thereunder to principal and interest in accordance with the "simple interest"
method. For Simple Interest Contracts, the principal balance of the Contract is
amortized over a series of equal monthly payments. Each monthly interest payment
is calculated by multiplying the outstanding principal balance of the loan by
the Contract Rate. Such product is then multiplied by a fraction, the numerator
of which is the number of days elapsed since the preceding payment of interest
was made and the denominator of which is either 365 or 360, depending on
applicable state law. Payments received on a Simple Interest Contract are
applied first to interest accrued to the date payment is received and second to
reduce the unpaid principal balance of the Contract. Accordingly, if an Obligor
makes a payment on the Contract less than 30 days after the previous payment,
the interest collected for the period since the preceding payment was made will
be less than 30 days' interest, and the amount of principal repaid in such month
will be correspondingly greater. Conversely, if an Obligor makes a payment on
the Contract more than 30 days after the previous payment, the interest
collected for the period since the preceding payment was made will be greater
than 30 days' interest, and the amount of principal repaid in the month will be
correspondingly reduced. As a result, based on the payment characteristics of a
particular Obligor, the principal due on the final due date of a Simple Interest
Contract may vary from the principal payment that would be made if payments for
such Contract were always made on their due dates.
If an Obligor pays more than one installment on a Simple Interest Contract
at a time, the regular installment will be treated as described above. However,
the entire amount of the additional installment or installments will be treated
as a principal payment and applied to reduce the principal balance of the
related Contract. The Obligor will not be required to make any payments on such
a Contract (a "Paid-Ahead Simple Interest Contract"), for the number of due
dates (the "Paid-Ahead Period") for which it has paid in advance the full
installment. However, during the Paid-Ahead Period interest will continue to
accrue on the principal balance of such Paid-Ahead Simple Interest Contract, as
reduced by the application of the early installment. As a result, when the
Paid-Ahead Period ends and the Obligor pays the next required installment, such
payment may be insufficient to cover the interest that has accrued since the
last payment by the Obligor. Notwithstanding such insufficiency, such Paid-Ahead
Simple Interest Contract would be considered to be current. This situation would
continue until the monthly installments 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 installments paid in advance of their due dates, there may be extended
periods of time during which Simple Interest Contracts that are not amortizing
are considered current.
"Precomputed Contracts" consist of actuarial obligations and Rule of 78's
obligations. Actuarial obligations provide for amortization of the loan over a
series of fixed level payment monthly installments. Each monthly installment,
including the monthly installment representing the final payment on the
Contract, consists of an amount of interest equal to 1/12th of the related
Contract Rate multiplied by the unpaid principal balance of the Contract, and an
amount of principal equal to the remainder of the monthly payment. If an
actuarial obligation is prepaid in full, the Obligor receives a rebate
calculated on the basis of a constant interest rate. Rule of 78's obligations
provide for the payment by the related Obligor of a specified total amount of
payments, payable in equal monthly installments, which total represents the
principal amount financed and add-on interest in an amount calculated based on
the Contract Rate. The rate at which such amount of add-on interest is earned
and, correspondingly, the amount of each fixed monthly payment allocated to
reduction of the outstanding principal are calculated in accordance with the
"Rule of 78's". Unless otherwise specified in the related Prospectus Supplement,
with respect to any Rule of
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78's obligation included as a Contract, the Servicer will calculate the amount
of interest paid on a Rule of 78's obligation in the same manner that it
calculates such amounts on actuarial obligations.
If an Obligor with respect to any Precomputed Contract, in addition to
making his or her regularly scheduled payment, makes one or more additional
scheduled payments in any Due Period (such Contract being a "Paid-Ahead
Precomputed Contract"), the additional scheduled payments made in such Due
Period will be deposited into the Paid-Ahead Account and applied on subsequent
Deposit Dates as described under "The Purchase Agreements and the Trust
Documents--Paid-Ahead Precomputed Contracts." Since the Servicer will deposit
paid-ahead amounts on Paid-Ahead Precomputed Contracts into the Paid-Ahead
Account, these additional payments will not cause shortfalls of interest or
principal payments in the Contract Pool.
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that an Obligor may prepay its Contract, in whole or in part,
at any time, without a prepayment premium.
Description of the Financed Boats
The Financed Boats will consist of runabouts (together with boat motors and
boat trailers), motor yachts, bass boats, pontoon boats, fishing skiffs, sport
fishing boats, cabin cruisers, sailboats, and personal watercraft.
Runabouts typically range from 12 to 27 feet in length and are
equipped primarily for fishing.
Motor yachts typically range from 40 to 70 feet in length and are used
for cruising and fishing in large bodies of water.
Bass boats are powered with outboard engines, range from 17 to 21 feet
in length and are primarily used for fresh water fishing on inland
waters.
Pontoon boats range from 16 to 22 feet in length. They provide a
smooth ride and are used for sight seeing.
Fishing skiffs range from 16 to 22 feet in length and can accommodate
two to three people. In a fishing skiff, the fisherman can walk from
side to side without rocking the boat.
Sporting boats range from 25 to 50 feet in length, and have longer
cruising range than the bass boats or fishing skiffs. Sporting boats
are generally used in salt water for larger game fishing.
Cabin cruisers are motor boats that typically range from 25 to 50 feet
in length which include sleeping and galley accommodations.
Sailboats are wind powered crafts that typically range from 27 to 50
feet in length which can accommodate more than one person.
Personal watercraft are water-jet propelled vehicles seating one to
three people, which are used for entertainment and short distance
travel.
The Financed Boats do not include houseboats used as primary residences,
competitive racing boats, or commercial fishing boats.
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YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that it is prepayable, without premium, by the Obligor at any
time. Prepayments (or, for this purpose, equivalent payments to a Trust) also
may result from liquidations due to default, receipt of proceeds from insurance
policies, repurchases by CITSF due to breach of a representation or warranty or
breach of a covenant in the Trust Documents, or as a result of CITSF exercising
its option to purchase the Contract Pool. See "The Purchase Agreements and the
Trust Documents." The rate of prepayments on the Contracts may be influenced by
a variety of economic, social and other factors. No assurance can be given that
prepayments on the Contracts will conform to any estimated or actual historical
experience, and no prediction can be made as to the actual prepayment rates
which will be experienced on the Contracts. Certificateholders and Noteholders
will bear all reinvestment risk resulting from the timing of payments of
principal on the Certificates or the Notes, as the case may be.
POOL FACTORS
Unless otherwise specified in the related Prospectus Supplement, the
"Certificate Pool Factor" for each class of Certificates, if any, 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
Original 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.
Unless otherwise specified in the related Prospectus Supplement, the "Note
Pool Factor" for each class of Notes, if any, 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.
With respect to each Trust and pursuant to the related Trust Documents,
unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date, the Securityholders will receive monthly reports concerning
the payments received on the Contracts, the Pool Balance, the Certificate Pool
Factor, if any, the Note Pool Factor, if any, and various other items of
information. Securityholders of record (which in most cases will be Cede) during
any calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by law. Certificate Owners, if any, and
Note Owners, if any, may receive such reports, upon written request, together
with a certification that they are Certificate Owners or Note Owners, as the
case may be, and payment of any expenses associated with the distribution of
such reports, from the Owner Trustee and the Indenture Trustee (if any) at the
addresses specified in the related Prospectus Supplement. See "Certain
Information Regarding the Securities--Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, each
Seller will sell the Initial Contracts to a Trust concurrently with the sale of
the Securities and the net proceeds from the sale of the Securities will be
applied by such Trust 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,
if any, to the deposit of the initial amount into the Capitalized Interest
Account, if any, and to the deposit of the initial amount, if any, into a
Reserve Fund, if any. Such net proceeds less the payment of such expenses, the
Pre-Funded Amount, if any, the initial deposit into the Capitalized Interest
Account, if any, and the Reserve Fund, if any, represent the purchase price paid
by a Trust to the Company for the sale of the Initial Contracts to such Trust.
Such
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amount will be determined as a result of the pricing of the Securities, through
the offering described in the related Prospectus Supplement. The net proceeds to
be received by the Company from the sale of the Initial Contracts to a Trust
will be paid by the Company 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 marine installment sale
contracts and the payment of the purchase price to CITCF-NY for any Contracts
acquired by CITSF from CITCF-NY. The net proceeds to be received by a Selling
Trust from the sale of the Initial Contracts to a Trust will be applied to pay
indebtedness and other obligations of such Selling Trust.
THE CIT GROUP, INC.
CIT, a Delaware corporation, is a leading diversified finance organization
offering secured commercial and consumer financing primarily in the United
States to smaller, middle-market and larger businesses and to individuals
through a nationwide distribution network. CIT commenced operations in 1908. CIT
has developed a broad array of "franchise" and strategic business units that
focus on specific industries, asset types and markets which are balanced by
client, industry and geographic diversification.
The Dai-Ichi Kangyo Bank, Limited ("DKB") owns eighty percent (80%) of the
issued and outstanding shares of common stock of CIT. DKB purchased a sixty
percent (60%) common stock interest in CIT from Manufacturers Hanover
Corporation ("MHC") at year-end 1989 and acquired an additional twenty percent
(20%) common stock interest in CIT on December 15, 1995 from CBC Holding
(Delaware) Inc. ("CBC Holding"), a wholly-owned subsidiary of The Chase
Manhattan Corporation ("CMC"). DKB had an option to purchase the remaining
twenty percent (20%) common stock interest from CBC Holding. On November 18,
1997, CIT completed its initial public offering of 36,225,000 shares of its
common stock. The proceeds from the offering (other than the proceeds received
from the exercise of the over-allotment option of the underwriters) were used to
acquire DKB's option to purchase the 20% interest in CIT owned by CBC Holding,
and to exercise such option. The proceeds received from the exercise of the
underwriters' over-allotment option will be used for general corporate purposes
and for potential acquisitions. As a consequence of the completion of the
offering, DKB will continue to own a majority of the issued and outstanding
shares of common stock of CIT. CMC is no longer a stockholder.
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."
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
The Company was incorporated in the State of Delaware on June 24, 1994, and
is a wholly-owned, limited purpose finance subsidiary of CIT. The Company
maintains its principal office at 650 CIT Drive, Livingston, New Jersey 07039.
Its telephone number is (973) 535-3514.
As described herein, the obligations of the Company with respect to the
Securities are limited. The Company will make no representations or warranties
with respect to the Contracts and 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 contracts which it will sell to a Trust in
a privately negotiated transaction from CITSF.
Unless otherwise specified in the related Prospectus Supplement, neither
CIT nor any of its affiliates, including the Company and CITSF, will be
obligated with respect to the Securities. Accordingly, the Company has
determined that financial statements of CITSF and the Company are not material
to the offering of the Securities.
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THE CIT GROUP/SALES FINANCING, INC., SERVICER
General
CITSF, a Delaware corporation, 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 (973) 740-5000.
CITSF originates, purchases, sells and services retail installment sale
contracts for recreation vehicles, manufactured housing, recreational boat
products and other consumer goods throughout the United States. CITSF has been a
lender to the recreational marine industry for more than five years. CITSF has a
centralized asset service facility (the "Asset Service Center") in Oklahoma
City, Oklahoma. Working through marine dealers and manufacturers, CITSF offers
retail installment credit. CITSF also originates marine loans directly. In
addition to purchasing marine contracts from dealers on an individual basis,
CITSF makes bulk purchases of marine contracts. These bulk purchases may be from
the portfolios of other lending institutions or finance companies or the
portfolios of other entities that purchase and hold marine contracts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for
recreation vehicle, home equity, recreational boat and manufactured housing
retail installment contracts. The servicing portfolio includes both loans
originated or purchased by CITSF, as well as loans originated or purchased by
CITSF and subsequently securitized with servicing retained. The servicing
portfolio also includes loans owned by third parties that are serviced by CITSF
for a fee on a "contract" basis. The Asset Service Center is supplemented by
outside collectors and field remarketers located throughout the United States.
In addition to expected growth in its serviced portfolio, in 1997 CITSF entered
into an agreement to provide servicing for approximately 42,000 recreation
vehicle and recreational boat consumer contracts for another financial
institution, which CITSF is also servicing at its Asset Service Center. The
addition of these contracts to its servicing portfolio required CITSF to
increase staffing levels at the Asset Service Center to support these contracts.
The effect of this increase on CITSF's performance as a servicer or subservicer
cannot be determined at this time.
CITSF's general policies with regard to the origination of marine
installment sale contracts are described under "--Contract Origination" and
"--CITSF's Underwriting Guidelines." See "--Servicing" for a description of
certain of CITSF's servicing policies.
Contract Origination
In accordance with CITSF's marine underwriting criteria, CITSF purchases
marine retail installment sale contracts and loans to finance the purchases of
new and used boats and motors and trailers for boats from boat dealers,
manufacturers and financial intermediaries who regularly originates and sells
such contracts to CITSF pursuant to the terms of approved dealer agreements.
CITSF also makes direct marine loans to obligors secured by recreational boats.
Although CITSF does purchase marine installment sale contracts and marine
installment loans or notes in bulk from other lenders, unless otherwise
specified in the related Prospectus Supplement, all of the Contracts have been
originated by CITSF or CITCF-NY through the purchase of such Contracts from
dealers, manufacturers and intermediaries or through direct loan originations by
CITSF or CITCF-NY.
Through their Regional Business Centers, CITSF and CITCF-NY arrange to
purchase marine installment sale contracts and marine installment loans or notes
from marine 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 the investigation of the dealer's creditworthiness and
general business reputation, CITSF or CITCF-NY and the dealer execute a dealer
agreement. In the assignment agreement relating to any contracts which a dealer
sold to CITSF or CITCF-NY, each dealer makes representations and warranties
concerning the obligors on such contracts and the security interests in the
financed boats relating thereto. These representations and warranties typically
include, among others, that (i) the obligor was of legal age and competent to
execute the contract; (ii) the documentation
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submitted by the dealer evidenced a bona fide sale contract; (iii) the contract
was genuine, legally valid and enforceable for the sale price; (iv) the financed
boat was fully and correctly described in the contract and had been delivered to
and accepted by the obligor; (v) the dealer had clear title to the financed boat
and to the contract; (vi) the dealer had complied with all applicable laws,
regulations and rules in connection with the contract; (vii) the obligor had not
asserted a right of rescission, cancellation, claim, defense, set-off or
counterclaim of any kind relating to the contract; (viii) any down payment was
paid in cash and the dealer received in trade any property shown for the
allowance stated in the contract; (ix) the dealer had fully performed the terms
of any purchase agreement with the obligor at the time CITSF or CITCF-NY funded
the transaction; and (x) application had been made for a certificate of title or
other ownership documents in the name of the obligor with the security interest
of the CITSF or CITCF-NY noted as a lien thereon, or appropriate UCC financing
statements had been filed, or the dealer had followed the assignee's
instructions with respect to financed boats subject to federal documentation, to
the extent applicable. CITSF and CITCF-NY may enter into assignment agreements
in which dealers do not make such representations.
CITSF and CITCF-NY also purchase marine loan agreements from certain
financial intermediaries who originate and fund such transactions within CITSF's
marine underwriting guidelines. These financial intermediaries operate under
agreements with CITSF or CITCF-NY under which the intermediary generally makes
many of the representations and warranties concerning the documentation and the
obligor made by an assigning dealer. Material breaches of any such
representation or warranty generally will also trigger a right of CITSF or
CITCF-NY to demand the repurchase of the contract.
Upon material breach of any representation or warranty with respect to a
contract made by a dealer or financial intermediary, CITSF or CITCF-NY will have
a right of recourse against such dealer or intermediary to require it to
purchase or repurchase such contract. Historically, in determining whether to
exercise any right of recourse, CITSF and CITCF-NY have considered the prior
performance of the dealer or intermediary and other business and commercial
factors. The Servicer will be obligated to determine whether or not to enforce
such rights under the dealer or intermediary agreements relating to the
Contracts in accordance with its customary practices, and the right to any
proceeds received upon such enforcement will be conveyed to the Trust pursuant
to the Sale and Servicing Agreement. The Seller, CITSF and CITCF-NY will make no
representations as to the financial condition of any dealer or intermediary to
which any of them may have recourse, and there can be no assurance as to the
ability of any such dealer or intermediary to perform its obligations under a
dealer agreement, an intermediary agreement or an assignment agreement.
CITSF solicits potential direct marine loan borrowers through targeted
direct marketing programs. CITSF also solicits potential marine loan borrowers
through leads generated by a nationwide network of referral brokers. These
referral brokers usually do not have a written contract with CITSF. If their
referral results in the closing of a direct marine loan transaction with CITSF
and a customer located by the referral broker, CITSF pays the referral broker a
commission after the loan transaction occurs. Generally, the obligor under such
a direct loan transaction will submit his or her application directly to CITSF
or CITCF-NY. Accordingly, dealer or intermediary warranties on documentation
will not apply to these direct loan transactions.
CITSF or CITCF-NY underwrites on an individual basis each contract which it
purchases from dealers or originates directly in accordance with CITSF's marine
underwriting guidelines. CITSF may not individually underwrite each transaction
in a portfolio of contracts which it purchases from other lenders. Unless
otherwise specified in the related Prospectus Supplement, all Contracts were
individually underwritten by CITSF.
If CITSF believes that an obligor on a marine contract is likely to
refinance the contract as a result of interest rate changes or other reasons,
CITSF may in its discretion attempt to retain such obligor as a customer by
soliciting the obligor to refinance the contract with CITSF. CITSF may continue
to apply this practice with respect to the Contracts.
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CITSF's Underwriting Guidelines
All marine 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 marine contract to be purchased from a
dealer or financial intermediary, CITSF's general practice is to have the dealer
or financial intermediary submit the customer's credit application,
manufacturer's invoice (if the contract is for a new boat) and certain other
information relating to the contract to the applicable Regional Business Center.
Personnel at the Regional Business Center analyze the creditworthiness of the
customer and other aspects of the proposed transaction.
With respect to marine loan contracts originated directly, the customer
will submit his or her credit application, verification of the boat's value and
certain other information directly to the National Business Center at the Asset
Service Center. Generally, personnel at the National Business Center will
analyze the creditworthiness of the customer and the value of the financed boat.
If the amount financed is $35,000 or higher and the financed boat is used,
CITSF's marine underwriting guidelines require that the customer supply a survey
appraising the value of the financed boat. This guideline applies to direct loan
business and to contracts originated by dealers or financial intermediaries.
CITSF will determine the acceptability of the survey and will usually check a
published valuation guide to confirm the accuracy of its valuation. Credit
underwriters at the National Business Center may waive or apply stricter
standards to valuation guidelines based upon the applicant's credit score and
the amount financed. On direct marine loan transactions, CITSF underwrite,
prepare documentation and close such transactions directly, either in person, by
mail or through a third party closing agent.
All credit applications are entered into an application processing system.
During 1997, CITSF installed a new application processing system designed to
enhance productivity and provide greater control over the quality of credits
approved through the use of "decision rules" that alert analysts to further
investigate certain conditions. The new system also requires the proper level of
authority to approve transactions over an individual's dollar limits or
transactions which involve exceptions to underwriting policy. CITSF's
underwriting guidelines require that a credit officer at a Regional Business
Center with the appropriate level of credit authority examine each applicant's
credit history, residence history, employment history and debt-to-income payment
ratio. Although CITSF has certain minimum requirements with respect to these
criteria, as described below, CITSF's management does not believe that these
minimum requirements are sufficient to warrant automatic credit approval of an
applicant. Thus, CITSF will not approve a credit application for a marine
transaction without review by a credit officer. Based on credit score and other
risk factors, each applicant is either approved, declined or, if appropriate,
referred to a credit officer with a higher credit authority.
The retail customer generally has had a five year history of residence,
employment and credit history, with no less than two years at the current
residence and at least three 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 satisfactory credit
profile. Self-employed applicants should be established in business for a
minimum of five years. The appropriate level credit officer may approve, on a
case by case basis, applications of customers which do not meet the
above-described retail customer profile. 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 considered in determining whether to accept or reject an
application. The maximum amount CITSF will advance to such customers is (i) in
the case of a new boat, 110% of the invoice if the amount financed is less than
$100,000 and 100% of the invoice if the amount financed is $100,000 or more, and
(ii) in the case of a used boat (a) 85% of the B.U.C. Book "low retail" value or
110% of NADA wholesale book value for amounts financed up to $35,000, and (b)
85% of the assessed marine survey value plus freight, tax, license, insurance,
warranty, and dealer installed options if the amount financed is over $35,000.
CITSF may waive certain credit requirements, including income verification, job
verification or valuation, in certain specialized underwriting programs or if a
credit score, balance or other factors provide sufficient support to underwrite
the transaction.
Funding of a transaction is authorized after verification of the conditions
of approval of the application and satisfactory delivery of the related boat or
other proof of ownership and condition of the collateral.
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In 1992, 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). In August 1994, CITSF
initiated an underwriting program to provide for the approval of a broader range
of credit scores with appropriate pricing intended to compensate for the risk in
customers with lower credit profiles. Accordingly, the interest rate charged on
each marine contract originated since August 1994 reflects CITSF's evaluation of
the relative risk associated with an individual's application.
The credit review and approval practices of each Regional Business Center
are subject to internal reviews and internal audits that, through sampling,
examine the quality of the underwriting; the verification of key data such as
income and employment, if required; and the accuracy and completeness of the
documentation.
Unless otherwise specified in the related Prospectus Supplement, almost all
of the Contracts are marine installment sale contracts and direct loans
originated in accordance with CITSF's marine underwriting criteria. In
substantially all cases, CITSF or CITCF-NY did not fund or purchase a Contract
until CITSF or CITCF-NY had reviewed and approved a completed customer file,
including the credit application of the customer, in accordance with CITSF's
underwriting procedures.
The underwriting guidelines of CITSF described above may change in the
future.
Servicing
Through its Asset Service Center, CITSF services recreation vehicle,
manufactured housing, recreational boat, home equity and other consumer loans.
CITSF services all of the marine contracts it originates or purchases, whether
on an individual basis or in bulk (except those it has sold to third parties on
a servicing released basis). CITSF is actively seeking arrangements pursuant to
which it will service marine contracts held by other entities, including
contracts which were not purchased by CITSF or sold to such other entities by
CITSF. Generally, such servicing responsibilities are, and would be, also
carried out through the 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 boats 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
boat 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 contract will be brought current, and
thereafter to diligently pursue the resale of such boat if the market is
favorable. Geographic location, condition and market govern the method of sale
used to sell collateral. CIT uses site auctions, pool auctions, individual bids
on site, brokers, retail sale outlets, newspaper advertisements and
telemarketing. The liquidation team uses computer generated data bases to
maximize their effectiveness in the correct method of sale. The sales strategies
are reviewed at regular staff meetings, and potential markets for the collateral
and the sales plan for each unit are designed. Field personnel recommend to the
internal remarketers and managers the most effective disposition method of the
collateral i.e., move to consignment dealer for retail, move to storage facility
for wholesale, obtain as is/where is bids, or move to auction facility. The
remarketer and/or manager review the recommendation and based on product
knowledge and economic conditions make the decision in the resale of the
collateral.
Insurance Procedures
Each Contract requires the Obligor to obtain insurance against loss by
fire, theft, comprehensive and collision or full boat damage with respect to the
related Financed Boat. The dealer agreements include a representation and
warranty that each Financed Boat was subject to such insurance at the time of
origination of the Contract. Since Obligors may choose their own insurers to
provide the required coverage, the specific terms and conditions of their
policies vary.
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The Servicer does not, under its customary servicing practices and
procedures, obtain 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 practices and procedures. In accordance
with such customary servicing practices and procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or arrange
other methods of protection of the Financed Boats that it deems necessary or
advisable, provided that the Servicer determines that such actions do not
materially and adversely affect the interests of the Securityholders.
Historically, CITSF has force-placed insurance on a relatively small percentage
of its marine contracts. Unless otherwise specified in the related Prospectus
Supplement, the Servicer may, but will not be obligated to, 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 boats financed by installment sale
contracts or loans that it services for itself or others. If CITSF purchases
physical damage insurance on behalf of an Obligor, the Obligor's premium payment
obligations will not be included in the Principal Balance of the related
Contracts and will not be the property of the Trust. The historical delinquency
and loss experience included in a Prospectus Supplement will include Contracts
as to which CITSF has force-placed insurance.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will permit the Servicer or any affiliate of the Servicer, to the
extent permitted by law, to (i) enter into agreements with one or more insurers
or other persons pursuant to which the Servicer or such affiliate will earn
commissions and fees in connection with any insurance policy purchased by an
Obligor including, without limitation, any physical damage insurance policy
(whether or not such physical damage insurance policy is force-placed pursuant
to the provisions of any Contract), or any other insurance policy whatsoever,
and (ii) in connection with the foregoing, to solicit, or permit and assist any
insurer or any agent thereof to solicit (including, without limitation,
providing such insurer or agent a list of Obligors including name, address or
other information) any Obligor.
Delinquency and Loan Loss Experience
Each Prospectus Supplement will include information on CITSF's loss and
delinquency experience with respect to its servicing portfolio of marine
contracts. However, there can be no assurance that such experience will be
indicative of the performance of the Contracts included in a particular Contract
Pool. Unless otherwise specified in the related Prospectus Supplement, the
tables setting forth the delinquency experience for the portfolio of marine
contracts originated and serviced by CITSF will exclude contracts acquired by
CITSF through portfolio purchases and contracts in repossession.
THE CERTIFICATES
General
A series of Securities may include one or more classes of Asset-Backed
Certificates (the "Certificates") issued pursuant to the Trust Documents to be
entered into among the Seller, the Servicer and the Owner Trustee, forms of
which have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. Payments in respect of the Certificates will be
subordinated to payments on the Notes, if any, to the extent described in the
related Prospectus Supplement. The following summary describes certain terms of
the Certificates and the Trust Documents. 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 Documents, and the
following summary will be supplemented in whole or in part by the related
Prospectus Supplement. Where this summary refers to particular provisions or
terms used in the Trust Documents, the actual provisions (including definitions
of terms) are incorporated by reference as part of such summary.
The Certificates will be issued in the minimum denominations and integral
multiples in excess thereof specified in the related Prospectus Supplement;
provided, however, that one Certificate of each series may be issued in a
denomination other than such integral multiple such that the applicable
Affiliated Owner specified in the
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related Prospectus Supplement, if any, may be issued at least the portion of the
Original Certificate Balance specified in the related Prospectus Supplement. If
specified in the related Prospectus Supplement, the Company or one of its
affiliates will own the entire beneficial interest in the Trust. Unless
otherwise specified in the related Prospectus Supplement, the Certificates will
be issued in book-entry form only. Unless otherwise specified in the related
Prospectus Supplement, each class of the Certificates will initially be
represented by a single Certificate registered in the name of the nominee of
DTC, except as provided below. Unless otherwise specified in the related
Prospectus Supplement, DTC's nominee will be Cede & Co. ("Cede"). No person
acquiring an interest in the Certificates through the facilities of DTC (a
"Certificate Owner") will be entitled to receive a Certificate representing such
person's interest in the Certificates, except as set forth under "Certain
Information Regarding The Securities--Definitive Securities." Unless and until
Definitive Certificates are issued under the limited circumstances described in
the related Prospectus Supplement and 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." If specified in
the related Prospectus Supplement, one or more classes of Certificates will be
issued and sold privately.
Distribution of Principal and Interest on the Certificates
The Certificates will bear interest at the rate specified in the related
Prospectus Supplement (the "Pass-Through Rate"). The timing and priority of
distributions, seniority, allocations of loss, Pass-Through Rate and amount of
or method of determining distributions with respect to principal and interest
(or, where applicable, with respect to principal only or interest only) on the
Certificates of any series will be described in the related Prospectus
Supplement. Distributions of interest on the Certificates will be made on the
dates specified in the related Prospectus Supplement (each, a "Distribution
Date") and, unless otherwise specified in the related Prospectus Supplement,
will be made prior to distributions with respect to principal. A series may
include one or more classes of Stripped Certificates entitled to (i)
distributions in respect of principal with disproportionate, nominal or no
interest distributions, or (ii) interest distributions, with disproportionate,
nominal or no distributions in respect of principal. Each class of Certificates
may have a different Pass-Through Rate, which may be a fixed, variable or
adjustable Pass-Through Rate (and which may be zero for certain classes of
Stripped Certificates), or any combination of the foregoing. The related
Prospectus Supplement will specify the Pass-Through Rate for each class of
Certificates, or the initial Pass-Through Rate and the method for determining
the Pass-Through Rate. Unless otherwise specified in the related Prospectus
Supplement, interest on the Certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Unless otherwise specified in
the related Prospectus Supplement, distributions in respect of the Certificates
will be subordinate to payments in respect of the Notes, if any, as more fully
described in the related Prospectus Supplement. Distributions in respect of
principal of any class of Certificates will be made on a pro rata basis among
all of the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall be
as set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
of interest and principal on the Certificates 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 on the date specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, with respect to any Distribution Date, the Due Period
will be the calendar month preceding the month of such Distribution Date. Unless
otherwise specified in the related Prospectus Supplement, payments on the
Certificates on each Distribution Date will be made to the holders of record of
the related Certificates on the day immediately preceding such Distribution Date
or, in the event Definitive Certificates have been issued, at the close of
business of 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, Oklahoma and such other states (if
any) specified in the related Prospectus Supplement are authorized or required
by law, regulation or executive order to be closed.
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THE NOTES
General
A series of Securities may include one or more classes of Asset-Backed
Notes (the "Notes" and, together with the Certificates, the "Securities") issued
pursuant to an Indenture (as amended and supplemented from time to time, the
"Indenture") between a Trust and an Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture Trustee"), a form of which has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The following summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all of the provisions of the
Notes and the Indenture, and the following summary will be supplemented in whole
or in part by the related Prospectus Supplement. Where this summary refers to
particular provisions or terms used in the Indenture, the actual provisions
(including definitions of terms) are incorporated by reference as part of such
summary.
The Notes will be issued in the minimum denominations and integral
multiples in excess thereof specified in the related Prospectus Supplement;
provided, however, that one Note of each class of each series may be issued in a
denomination other than such integral multiple. Unless otherwise specified in
the related Prospectus Supplement, the Notes will be issued in book-entry form
only. Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by a single Note registered in the
name of Cede, the nominee of DTC, except as provided below. No person acquiring
an interest in the Notes through the facilities of DTC (a "Note Owner" and,
together with a Certificate Owner, a "Security Owner") will be entitled to
receive a Note representing such person's interest in the Notes, except as set
forth 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 in the
related Prospectus Supplement and herein, all references to actions by
Noteholders shall refer to actions taken by DTC upon instructions from its
Participants, and all references in the related Prospectus Supplement and 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." If specified in the related Prospectus Supplement, one or more
classes of Notes will be issued and sold privately.
Payment of Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of loss,
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes will be described in the related Prospectus
Supplement. The right of holders of any class of Notes to receive payments of
principal and interest may be senior or subordinate to the rights of holders of
any class or classes of Notes of such series, or any class of Certificates, as
described in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, payments of interest on the Notes will be made
prior to payments of principal thereon. A series may include one or more classes
of Stripped Notes entitled to (i) principal payments with disproportionate,
nominal or no interest payment, or (ii) interest payments with disproportionate,
nominal or no principal payments. Each class of Notes may have a different
Interest Rate, which may be a fixed, variable or adjustable Interest Rate (and
which may be zero for certain classes of Stripped Notes), or any combination of
the foregoing. The related Prospectus Supplement will specify the Interest Rate
for each class of Notes, or the initial Interest Rate and the method for
determining the Interest Rate. One or more classes of Notes of a series may be
redeemable under the circumstances specified herein and in the related
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
in respect of interest to Noteholders of all classes within a series will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the aggregate amount of interest payable on the
Notes on any of the dates specified for payments in the related Prospectus
Supplement, in which case each class of Noteholders will receive its ratable
share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount then available to be distributed in respect
of interest on the Notes. In the case of a series of Securities which includes
two
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or more classes of Notes, the sequential order and priority of payment in
respect of principal and interest, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class will be
set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
of interest and principal on the Notes will be made on each Distribution Date,
commencing on the date specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, with respect to any
Distribution Date, the Due Period will be the calendar month preceding the month
of such Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, payments on the Notes on each Distribution Date will be made to the
holders of record of the related Notes on the related Record Date.
The Indenture
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. CITSF will provide a copy of
the applicable Indenture (without exhibits) upon request to a holder of Notes
issued thereunder.
Modification of Indenture without Noteholder Consent. With respect to each
Trust, the Issuer and the related 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 Notes
and the Indenture obligations by a permitted successor to the Trust; (iii) to
add additional covenants for the benefit of the related Noteholders, or for the
Trust to surrender any rights or power conferred upon it; (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 which
may be inconsistent with any other provision; (vi) to provide for the acceptance
of the appointment of a successor Indenture Trustee or to add to or change any
provision as shall be necessary and permitted to facilitate the administration
by more than one trustee; (vii) to modify, eliminate or add any provision in
order to comply with the Trust Indenture Act of 1939, as amended; or (viii) to
add, change in any manner, or eliminate any provision, or modify in any manner
the rights of Noteholders; 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 in the Indenture. Any action specified in clause
(viii) shall be taken only upon satisfaction of the Rating Agency Condition.
"Rating Agency Condition" with respect to any action means the condition that
the Rating Agency or Agencies specified in the related Prospectus Supplement
shall have notified the Seller, the Servicer and the Issuer in writing that such
action will not result in the downgrade or withdrawal of the then current
ratings of the Securities.
Modification of Indenture with Noteholder Consent. With respect to each
Trust, with the consent of the holders of not less than a majority of the
aggregate outstanding principal amount of the Notes, and with prior notice to
the Rating Agencies, the Issuer 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 related Note affected
thereby, however, no supplemental indenture may: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the interest rate specified thereon or the redemption price with
respect thereto or change 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 related 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
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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. With respect to each
Trust, unless otherwise specified in the related Prospectus Supplement, "Events
of Default" under the Indenture will consist of: (i) any failure to pay interest
on any Note as and when the same becomes due and payable, which failure
continues unremedied for five days; (ii) except as set forth in (iv) below, any
failure to make any installment of the principal of any Note as and when the
same becomes due and payable which failure continues unremedied for thirty days
after the giving of written notice of such failure to the Issuer and the Seller
(or the Servicer, as applicable) by the Indenture Trustee or to the Issuer and
the Seller (or the Servicer, as applicable) and the Indenture Trustee by the
holders of not less than 25% of the aggregate outstanding principal amount of
the Notes; (iii) any default in the observance or performance in any material
respect of any other covenants or agreements in the Indenture, which failure
materially and adversely affects the rights of Noteholders, and which failure
continues unremedied for thirty days after the giving of written notice of such
failure to the Issuer and the Seller (or the Servicer, as applicable) by the
Indenture Trustee or to the Issuer and the Seller (or the Servicer, as
applicable) and the Indenture Trustee by the holders of not less than 25% of the
aggregate outstanding principal amount of the Notes; (iv) any failure to pay in
full the outstanding principal balance of any Notes on or prior to the
applicable Note Final Scheduled Distribution Date; and (v) certain events of
insolvency, readjustment of debt, marshaling 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, unless otherwise specified in the related Prospectus
Supplement, 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, unless otherwise specified in the related
Prospectus Supplement, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Event of Default until the
Note Final Scheduled Distribution Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an
Event of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or holders of not less than a majority in
aggregate outstanding principal amount of the Controlling Notes 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 not less than a
majority of the aggregate outstanding principal amount of such Controlling
Notes.
"Controlling Notes" means (i) if there is only one class of Notes, such
class of Notes and (ii) if there is more than one class of Notes (a) all Notes
of the most senior class of Notes then outstanding voting together as a single
class until such class of Notes have been paid in full, and (b) from and after
the payment in full of such senior class of Notes then outstanding, all Notes of
the next most senior class of Notes voting together as a single class until such
class of Notes have been paid in full.
Unless otherwise specified in the related Prospectus Supplement, if the
Notes of any series are due and payable following an Event of Default with
respect thereto, the related Indenture Trustee may institute proceedings to
collect amounts due or foreclose on Trust property, exercise remedies as a
secured party under the related Contracts, 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. Unless otherwise specified in the related Prospectus Supplement,
the Indenture Trustee, however, is prohibited from selling the related Contracts
following an Event of Default unless (i) the holders of all the outstanding
related 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 related 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
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consent of the holders of not less than 66 2/3% of the aggregate outstanding
principal amount of the Controlling Notes. Unless otherwise specified in the
related Prospectus Supplement, 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 payments of the "Principal Liquidation Loss Amount" (as defined in the
related Prospectus Supplement) and other payments from the Enhancement (if any)
applicable to the Certificates).
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of 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 not less than a majority in aggregate
outstanding principal amount of the Controlling Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee and the holders of not less than a majority
in aggregate outstanding principal amount of such Controlling Notes may, in
certain cases, waive any past default with respect thereto, except a default (i)
in the payment of principal of or interest on any of the Notes or (ii) in
respect of a covenant or provision of the Indenture that cannot be modified or
amended without the consent of the holder of each Note.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in aggregate outstanding
principal amount of the Controlling Notes have made written request of the
Indenture Trustee to institute such proceeding, (iii) such holder or holders
have offered the Indenture Trustee reasonable indemnity, (iv) the Indenture
Trustee has for sixty days after its receipt of such notice, request and offer
of indemnity failed to institute such proceeding, and (v) no direction
inconsistent with such written request has been given to the Indenture Trustee
during such sixty-day period by the holders of not less than a majority in
aggregate outstanding principal amount of such Controlling 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 ninety 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, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not, for a period of
one year and one day after the termination of the Indenture, institute against
the Affiliated Owner, if any, the Company or the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
Neither the Indenture Trustee in its individual capacity nor the Owner
Trustee in its individual capacity, nor any holder of a Certificate including,
without limitation, the Affiliated Owner (if any) 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 related Notes or for the agreements of the related Trust
contained in the Indenture.
Certain Covenants. Unless otherwise specified in the related Prospectus
Supplement, each Indenture will provide that the related Trust may not
consolidate with or merge with or 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 timely 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
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not be reduced or withdrawn by the Rating Agencies as a result of such merger or
consolidation, (v) any action as is necessary to maintain the lien and security
interest created by the Indenture shall have been taken, and (vi) the Trust has
received an opinion of counsel to the effect that such consolidation or merger
will have no material adverse tax consequences to the Trust or to any related
Noteholder or Certificateholder.
Unless otherwise specified in the related Prospectus Supplement, each Trust
will covenant that it will not, among other things, (i) except as expressly
permitted by the Indenture, the Purchase Agreements or the Trust Documents
(collectively, the "Related Documents"), sell, convey, 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 or interest payable in respect of the
related Notes (other than amounts withheld under the Code or applicable state
law) or assert any claim against any present or former holder of 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 related Indenture to be impaired or permit the lien of the
Indenture to be amended, hypothecated, subordinated, terminated or discharged,
or permit any person to be released from any covenants or obligations with
respect to the 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 (other than the lien of the Indenture)
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.
No Trust will incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the related Notes and the related Indenture or
otherwise in accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required
to mail each year to all related Noteholders a brief report relating to its
eligibility and qualification to continue as Indenture Trustee under the related
Indenture, any amounts advanced by it under the Indenture, the amount, interest
rate and maturity date of certain indebtedness owing by the Trust to the
Indenture Trustee in its individual capacity, the property and funds physically
held by the Indenture Trustee as such and any action taken by it that materially
affects the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the assets of the Trust securing the related Notes upon the
delivery to the related Indenture Trustee for cancellation of all such Notes or,
with certain limitations, upon deposit with the Indenture Trustee of funds
sufficient for the payment in full of all of such Notes.
The Indenture Trustee. The Indenture Trustee for a series of Notes will be
specified in the related Prospectus Supplement. The Indenture Trustee may resign
at any time, in which event the 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 will
not become effective until acceptance of the appointment by the successor
trustee and will be subject to any conditions or approvals, if any, specified in
the related Prospectus Supplement.
In addition, the Indenture Trustee shall agree that if for any reason it
shall cease to be an approved trustee under the Ship Mortgage Act, it shall
immediately give notice thereof to the Servicer and shall cause a successor
indenture trustee to be appointed. Any such successor indenture trustee must be
an approved trustee under the Ship Mortgage Act and must also be an eligible
servicer or an affiliate of an eligible servicer, which eligible servicer is
willing to act as servicer upon a servicing transfer.
The Trust Documents will provide that the Servicer will pay the Indenture
Trustee's fees. The Trust Documents will further provide that the Indenture
Trustee will be entitled to indemnification by the Servicer for, and will be
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held harmless against, any cost, loss, liability, claim, damage or expense
incurred by the Indenture Trustee in connection with the acceptance or
performance of the trusts and duties contained in the Indenture in accordance
with the terms and conditions therein, not resulting from its own willful
misfeasance, bad faith or gross negligence (other than by reason of a breach of
any of its representations or warranties set forth in the Indenture).
Trust Indenture Act. Each Indenture will comply with all applicable
provisions of the Trust Indenture Act of 1939, as amended.
ENHANCEMENT
General. The Prospectus Supplement for a series of Securities will specify
whether there is Enhancement for any class of the Securities of a series and, if
so, the material terms of such Enhancement. Any Enhancement may be intended (i)
to enhance the likelihood of receipt by the Certificateholders, if any, and/or
the Noteholders, if any, of the full amount of principal and interest due
thereon, and to decrease the likelihood that the Certificateholders, if any,
and/or the Noteholders, if any, will experience losses, or (ii) to provide
protection against changes in interest rates or against other risks, or (iii) to
supplement the interest rate on the Contracts, in each case to the extent and
under the conditions specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, any Enhancement for a
class of Securities will not provide protection against all risks of loss and
will not guarantee repayment of the entire principal and interest thereon. If
losses occur which exceed the amount covered by any Enhancement or which are not
covered by any Enhancement, Securityholders will bear their allocable share of
such losses. In addition, if a form of Enhancement covers more than one class of
Securities of a series, Securityholders of any such class will be subject to the
risk that such Enhancement will be exhausted by the claims of Securityholders of
other classes.
Subordination. Unless otherwise specified in the related Prospectus
Supplement, 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 which the Noteholders
are entitled to receive on the related Distribution Date. Consequently, unless
otherwise specified in the related Prospectus Supplement, no distribution will
be made to the Certificateholders on any Distribution Date in respect of (i)
interest until the full amount of interest and principal on the Notes payable on
such Distribution Date has been distributed to the Noteholders, other than
payments from the applicable Enhancement, if any, and (ii) principal until the
Notes have been paid in full, other than distributions in respect of the
Principal Liquidation Loss Amount to the extent, if any, set forth in the
related Prospectus Supplement.
If and to the extent specified in the related Prospectus Supplement, the
rights of one or more classes of Notes of a series to receive distributions of
interest and principal may be subordinated to the rights of one or more other
classes of Notes of the same series to receive payment in full of all amounts of
interest and principal which are payable thereon on each Distribution Date.
Other Enhancement. The amounts and types of credit or cash flow enhancement
arrangements (each, an "Enhancement"), if any, with respect to each class of
Securities will be set forth in the related Prospectus Supplement. If and to the
extent provided in the related Prospectus Supplement, Enhancement may be in the
form of a financial guaranty insurance policy, letter of credit, CIT Limited
Guarantee, reserve fund, third party guarantee, cash collateral account,
derivative product, credit facility, yield supplement agreement,
overcollateralization, guaranteed investment contract, guaranteed rate
agreement, other agreements with respect to third party payments or other
support, or other form of credit or cash flow enhancement, or any combination
thereof, as may be described in the related Prospectus Supplement. If specified
in the related Prospectus Supplement, Enhancement for a class of Securities of a
series may cover one or more other classes of Securities in such series. Further
information regarding providers of Enhancement, including financial information
when material, will be included in the related Prospectus Supplement.
Financial Guaranty Insurance Policy. If so specified in the related
Prospectus Supplement, a financial guaranty insurance policy (each, a "Financial
Guaranty Insurance Policy") may be obtained and maintained for one or more
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classes of Certificates or Notes of a series. The issuer of any Financial
Guaranty Insurance Policy (a "Financial Guaranty Insurer") will be described in
the related Prospectus Supplement. A copy of any such Financial Guaranty
Insurance Policy will be attached as an exhibit to the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, Financial
Guaranty Insurance Policies generally unconditionally and irrevocably guarantee
to Securityholders that an amount equal to each full and complete Insured
Payment will be received by an agent of the Trustee on behalf of
Securityholders, for distribution by the Trustee to each Securityholder. The
"Insured Payment" will equal the full amount of the distributions of principal
and interest to which Securityholders are entitled plus any other amounts
specified in the related Prospectus Supplement.
The specific terms of any Financial Guaranty Insurance Policy will be as
set forth in the related Prospectus Supplement. Financial Guaranty Insurance
Policies may have limitations including (but not limited to) limitations on the
Financial Guaranty Insurer's obligation to guarantee the Seller's or the
Servicer's obligation to repurchase or substitute for any Contracts, to
guarantee any specified rate of prepayments or to provide funds to redeem
Securities on any specified date.
The Financial Guaranty Insurer may be subrogated to the rights of each
Securityholder to receive payments under the Securities to the extent of any
payments by such Financial Guaranty Insurer under the related Financial Guaranty
Insurance Policy.
Reserve Fund or Reserve Account. If so specified in the related Prospectus
Supplement, an account (a "Reserve Fund" or "Reserve Account") may be
established and funded by any combination of cash, one or more irrevocable
letters of credit, Eligible Investments, one or more derivative products,
amounts otherwise distributable to one or more classes of Securityholders or to
the owners of any Retained Yield, or any other instrument satisfactory to the
Rating Agency or Agencies. A Reserve Fund may be funded from the Available
Amount remaining on each Distribution Date after all amounts then due have been
paid to the Securityholders, the Servicer, and any provider of Enhancement. In
addition, with respect to any series of Securities as to which Enhancement
includes a letter of credit or a derivative product, if so specified in the
related Prospectus Supplement, under certain circumstances the remaining amount
of the letter of credit may be drawn by the Owner Trustee or the termination
payment under a derivative product may be demanded by the Owner Trustee, and in
each case deposited in a Reserve Fund. Funds in a Reserve Fund will be applied,
invested and maintained in the manner and under the conditions specified in such
Prospectus Supplement. Amounts in a Reserve Fund may be distributed to
Securityholders, applied to reimburse the Servicer for outstanding advances, or
may be used for other purposes, in the manner and to the extent specified in the
related Prospectus Supplement. In the event that a Reserve Fund is funded
through the application of the Available Amount remaining on each Distribution
Date after all amounts then due have been paid to the Securityholders, the
Servicer and any provider of Enhancement, it may be referred to as a "Spread
Account" or "Reserve Account." In the event that a Reserve Fund is applied to
supplement the monthly interest payments on certain Contracts, it may be
referred to as a "Yield Supplement Account." In the event that the Reserve Fund
is funded through the proceeds of a loan to the Trust by a third party lender,
it may be referred to as a "Cash Collateral Account." The related Prospectus
Supplement will specify whether any Reserve Fund will be established as part of
the Trust or held outside the Trust by a collateral agent or similar third party
(who may be a Trustee acting in a different capacity). The related Prospectus
Supplement will describe the required levels of funding of a Reserve Fund, the
circumstances under which a Reserve Fund may be applied to make distributions on
a class of Securities, and the circumstances in which funds in a Reserve Fund
may be released to persons other than Securityholders. A Trust may contain more
than one Reserve Fund, each of which may apply only to a specified class of
Securities or to specified Contracts.
The Seller or the Affiliated Owner, if any, may at any time, without
consent of the Securityholders, sell, transfer, convey or assign in any manner
its rights to and interests in distributions from the Reserve Fund provided that
(i) the Rating Agency Condition is satisfied, (ii) the Seller or the Affiliated
Owner, as the case may be, provides to the Trustees an opinion from independent
counsel that such action will not cause the related Trust to be classified as an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes, and (iii)
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such transferee or assignee agrees in writing to take positions for federal
income tax purposes consistent with the federal income tax positions agreed to
be taken by the Seller or the Affiliated Owner, as the case may be.
Limited Guarantee. If specified in the related Prospectus Supplement,
certain payments on a class of the Securities of a series, certain deficiencies
in principal or interest payments on the Contracts, or certain liquidation
losses on the Contracts, may be covered by a limited guarantee or other similar
instrument (the "Limited Guarantee"), limited in scope and amount, issued by
CIT. If not so specified, the Securityholders will have no recourse to CIT for
any amounts due on the Securities. If so specified, CIT may be obligated to take
one or more of the following actions in the event the Company fails to do so:
make deposits to an account, make advances, or purchase defaulted Contracts. Any
such Limited Guarantee will be limited in amount and a portion of the coverage
of any such Limited Guarantee may be separately allocated to certain events. The
scope, amount and, if applicable, the allocation of any Limited Guarantee will
be described in the related Prospectus Supplement.
Credit Facility. With respect to a series of Securities, one or more
classes may be entitled to the benefit of one or more letters of credit,
guarantees, limited guarantees, surety bonds or similar credit facilities (each,
a "Credit Facility"). Each such Credit Facility may be in an amount greater
than, equal to or less than the Certificate Balance of the Certificates of each
class (or the principal balance of the Notes of each class) entitled to the
benefits thereof, and may be subject to reduction or be limited as to duration,
all as described in the related Prospectus Supplement. To the extent specified
in the related Prospectus Supplement, amounts realized under a Credit Facility
supporting any class of Securities may be used for the same purposes as amounts
on deposit in a Reserve Fund. A Credit Facility may be held by a Trustee as part
of the related Trust or may be held by a collateral agent or other third party
(who may be a Trustee acting in a different capacity). The related Prospectus
Supplement will contain a description of the material terms of any Credit
Facility and any arrangement pursuant to which the Credit Facility is held
outside of the Trust and will state whether the Trust, the Seller, the Servicer
or a third party will pay the fees of the provider of the Credit Facility (the
"Credit Facility Provider"). Such Prospectus Supplement will also contain
certain information concerning the Credit Facility Provider, which information
will have been provided to the Seller by the Credit Facility Provider for use in
such Prospectus Supplement. CIT, CITSF or an affiliate thereof may be a Credit
Facility Provider.
If specified in the related Prospectus Supplement, a Credit Facility,
rather than guaranteeing distributions of particular amounts to the holders of
Securities of particular classes, may instead guarantee certain collections on
the related Contract Pool. These guaranteed collections may be attributable to
all or a portion of the amounts due on Contracts in liquidation, all or a
portion of the scheduled monthly payments due on the Contracts or other amounts.
The extent to which any such collections are guaranteed under a Credit Facility
which functions in this manner will be described in the related Prospectus
Supplement.
Liquidity Facility. With respect to a series of Securities, one or more
classes may be entitled to the benefit of one or more purchase agreements or
other liquidity facilities (each, a "Liquidity Facility"), pursuant to which the
provider of such Liquidity Facility (the "Liquidity Facility Provider") will
provide funds to be used to purchase some or all of such Securities. Unless
otherwise specified in the related Prospectus Supplement, a Liquidity Facility
will be held outside of the Trust by a third party (which may be a Trustee
acting in another capacity). The related Prospectus Supplement will contain a
description of the material terms of any such Liquidity Facility and any
arrangement pursuant to which it is held outside of the Trust, and will contain
certain information concerning the Liquidity Facility Provider, which
information will have been provided to the Seller by the Liquidity Facility
Provider for use in such Prospectus Supplement. CIT, CITSF or an affiliate
thereof may be a Liquidity Facility Provider. If specified in the related
Prospectus Supplement, a Reserve Fund or Credit Facility may also serve as a
Liquidity Facility.
Replacement. If specified in the related Prospectus Supplement, the Seller
may replace the Enhancement for any class of Securities with another form of
Enhancement without the consent of Securityholders, provided the Rating Agency
Condition is satisfied.
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CERTAIN INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement, persons
acquiring beneficial ownership interests in the Notes may hold their interests
through DTC in the United States or Cedel or Euroclear in Europe and persons
acquiring beneficial ownership interests in the Certificates may hold their
interests through DTC. Unless otherwise specified in the related Prospectus
Supplement, 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.
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, as amended. 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, banks, 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 will receive payments
after the related Distribution Date because such payments will be forwarded by
the Trustees on the Distribution Date 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 Trust Documents. Security
Owners will only be permitted to exercise the rights of Securityholders or to
communicate with other Securityholders indirectly through DTC and its
Participants which in turn will exercise their rights through DTC. Security
Owners will not have access to the list of Security Owners of a series, which
may impede the ability of Security Owners to communicate with each other.
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 and such
other circumstances, if any, as may be specified in the related Prospectus
Supplement.
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.
Due to 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 Participant on such business day. Cash received in Cedel or Euroclear as a
result of sales of Securities by or through a Cedel Participant or 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
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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 counterparty 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 directly to the Depositories.
With respect to any series of Securities, 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.
Since 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. Issuance of the
Securities in book-entry form may reduce the liquidity of such Securities in the
secondary market since certain potential investors may be unwilling to purchase
Securities for which they cannot obtain physical certificates.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for 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
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 Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear through, or
maintain a custodial relationship with, a Euroclear Participant, either directly
or indirectly.
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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's 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 that, unless and until Definitive Securities
are issued, DTC will take any action permitted to be taken by a Securityholder
under the Trust Documents only at the direction of one or more Participants to
whose DTC accounts the Securities are credited. Additionally, DTC has advised
the Company that it will take such actions with respect to specified percentages
of a class of the Securities only at the direction of Participants whose
holdings include principal amounts of the Securities that satisfy such
percentages. DTC may take conflicting actions with respect to other principal
amounts of the Securities to the extent that such actions are taken on behalf of
Participants whose holdings include such principal amounts.
NEITHER THE TRUST, THE SELLER, THE SERVICER, CIT, ANY AFFILIATED OWNER, 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 SECURITY OWNERS 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
SECURITY OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF, OR INTEREST ON, THE
SECURITIES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR EUROCLEAR
PARTICIPANT OF ANY NOTICE TO ANY SECURITY OWNER WHICH IS REQUIRED OR PERMITTED
UNDER THE TERMS OF THE INDENTURE OR THE TRUST DOCUMENTS TO BE GIVEN TO
SECURITYHOLDERS OR (4) ANY OTHER ACTION TAKEN BY DTC AS THE SECURITYHOLDER.
Definitive Securities
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, the Notes and Certificates will be issued in
fully registered, certificated form ("Definitive Notes" and "Definitive
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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 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 or an Event of Termination,
Note Owners or Certificate Owners representing in the aggregate not less than a
majority of the outstanding principal balance of the Notes of a series or the
Certificate Balance of the Certificates of a series 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 related Trustees are 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 of a series and
instructions for re-registration, the Trustees will issue the Notes of a series
as Definitive Notes and the Certificates of a series as Definitive Certificates,
and thereafter the Trustees will recognize the holders of such Definitive Notes
and Definitive Certificates as Noteholders and Certificateholders, respectively,
under the Trust Documents ("Noteholders" and "Certificateholders" respectively,
and together, "Securityholders" or "Holders").
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal of the Securities and interest on the Securities
thereafter will be made by the related Trustees directly to Holders in
accordance with the procedures set forth herein and in the Trust Documents.
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 such Trustees or other
person appointed pursuant to the Trust Documents. The final payment on any
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.
Unless otherwise specified in the related Prospectus Supplement, Definitive
Securities will be transferable and exchangeable at the offices of the related
Trustees. No service charge will be imposed for any registration of transfer or
exchange, but such Trustees may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith.
List of Securityholders
Unless otherwise specified in the related Prospectus Supplement, if
Definitive Certificates have been issued, the related 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 Business Days after receipt of such request, afford such Certificateholders
access during normal 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 the Certificates and (ii) provide the Owner 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.
Unless otherwise specified in the related Prospectus Supplement, if
Definitive Notes have been issued, the Indenture Trustee will, upon written
request by three or more Noteholders within five Business Days after receipt of
such request, 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 Indenture 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.
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Statements to Securityholders
On each Distribution Date, the Servicer will prepare and provide to the
Trustees a statement, to be delivered on the Distribution Date to each
Securityholder. Unless otherwise specified in the related Prospectus Supplement,
the statement will set forth at least the following information for the related
Due Period:
(i) the amount of collections on the Contracts during the immediately
preceding Due Period;
(ii) the Available Amount for payment of all amounts distributable in
respect of the Securities and the Servicer Payment;
(iii) the amount of the distribution allocable to principal of the
Notes (if applicable) and to the Certificate Balance of the Certificates
(if applicable), including any overdue principal;
(iv) the amount of the distribution allocable to interest on or with
respect to each class of Securities, including any overdue interest;
(v) the Pool Balance, the Note Pool Factor (if applicable) and the
Certificate Pool Factor (if applicable) as of the end of the related Due
Period;
(vi) the Servicer Payment for such Distribution Date;
(vii) the amount of Monthly Advances and Non-Reimbursable Payments, if
any, on such date;
(viii) the amount, if any, withdrawn from any Enhancement (if
applicable) and distributed to the Securityholders with respect to such
Distribution Date;
(ix) the amount available under any Enhancement (if applicable), after
giving effect to any deposit to or withdrawal from the Enhancement with
respect to such Distribution Date, and such amount expressed as a
percentage of the Pool Balance;
(x) the aggregate principal balance of all Contracts which were
delinquent 30, 60 and 90 days or more as of the last day of the related Due
Period;
(xi) the amount of investment earnings, net of losses and investment
expenses, on amounts on deposit in the Collection Account;
(xii) during the Funding Period, if any, the amount of funds on
deposit in the Pre-Funding Account;
(xiii) during the Funding Period, if any, the number and aggregate
principal balance of Subsequent Contracts;
(xiv) during the Funding Period, if any, the number and aggregate
principal balance of Subsequent Contracts purchased by the Trust since the
preceding Distribution Date;
(xv) during the Funding Period, if any, the amount, if any, withdrawn
from the Capitalized Interest Account, if any, to make payments of interest
on the Securities;
(xvi) during the Funding Period, if any, the amount remaining on
deposit in the Capitalized Interest Account, if any;
(xvii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in
the Pre-Funding Account;
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(xviii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in
the Capitalized Interest Account, if any;
(xix) on the Distribution Date immediately following the end of the
Funding Period (or if the Funding Period ends on a Distribution Date on
such Distribution Date), if any, the aggregate principal amount and
percentage of each of the Notes, if any, and Certificates, if any, which
are being redeemed;
(xx) the aggregate principal balance of all Contracts which became
either "Defaulted Contracts" or "Liquidated Contracts" (as defined in the
related Prospectus Supplement) during the related Due Period (if the
related Prospectus Supplement includes definitions of such term or terms);
(xxi) the number and aggregate principal amount of Contracts which
were prepaid, in part or in whole, during the related Due Period;
(xxii) the aggregate outstanding principal balance of the Notes (if
applicable) as of such Distribution Date (after giving effect to any
distributions thereon and reductions thereto on such Distribution Date);
(xxiii) the Certificate Balance (if applicable) as of such
Distribution Date (after giving effect to any distributions thereon and
reductions thereto on such Distribution Date);
(xxiv) the amount, if any, by which the amount due to be distributed
to Noteholders (if applicable) and Certificateholders (if applicable)
exceeds the actual amount distributed on the related Distribution Date to
Noteholders (if applicable) and Certificateholders (if applicable),
respectively;
(xxv) if applicable, the amount of surplus to be distributed to the
Affiliated Owner, if any, after all payments have been made in respect of
the Securities, the Servicer Payment has been paid and all deposits to any
Reserve Fund and payments to a Credit Facility Provider have been made;
(xxvi) if applicable, the balance of the Paid-Ahead Account; and
(xxvii) such other information as may be specified in the related
Prospectus Supplement.
If a Limited Guarantee is issued by CIT with respect to a series of
Securities, the monthly and annual reports will include a statement to the
following effect: CIT is subject to the requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission. As a result of the
limited guarantee by CIT, information relating to CIT which is material will be
available through such reports and other information.
Within a reasonable period of time after the end of each calendar year, but
not later than the latest date permitted by law (where applicable law specifies
such date), the Trustee will mail to each person who at any time during such
calendar year shall have been a Securityholder, and received any payment on its
Security, a statement containing the relevant amounts described above for such
calendar year for the purposes of such Securityholder's preparation of federal
income tax returns. See "Certain Federal Income Tax Consequences."
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Trustees and Cede, as registered holder of the
Certificates and the Notes and the nominee of DTC. Certificate Owners and Note
Owners may receive copies of such reports upon written request, together with a
certification that they are Certificate Owners or Note Owners, as the case may
be, and payment of reproduction and postage expenses associated with the
distribution of such reports, from the Owner Trustee or the Indenture Trustee,
as applicable. See "--Statements to Securityholders" and "--Book-Entry
Registration" above.
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THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
Unless otherwise specified in the related Prospectus Supplement, 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 or the Pooling and Servicing Agreement (collectively, 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. CITSF will provide a copy of such agreements (without exhibits) upon
request to a holder of Securities described therein. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Purchase Agreements and the Trust
Documents, and the following summary will be supplemented in whole or in part by
the related Prospectus Supplement. Where this summary refers to particular
provisions or terms used in the Purchase Agreements or Trust Documents, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summary.
Sale and Assignment of the Contracts
On or prior to the Closing Date for a series of Securities and on each
Subsequent Transfer Date, if any, pursuant to the Purchase Agreement or a
Subsequent Purchase Agreement, as the case may be, 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 Boats. On the Closing
Date and each Subsequent Transfer Date, the Seller will sell and assign to the
Trust, without recourse, all of its right, title and interest in and to the
Contracts, including its security interests in the Financed Boats. Unless
otherwise specified in the related Prospectus Supplement, certain of the
Contracts will be purchased by CITSF from CITCF-NY before they are sold to the
Company. The Company established a Selling Trust in 1996, and the Company and
its affiliates may in the future establish one or more additional Selling
Trusts. The Company has sold and assigned Contracts to the existing Selling
Trust, without recourse, which the Company purchased from CITSF, without
recourse (and which, in some cases, CITSF purchased from CITCF-NY, without
recourse). In the future, the Company may sell and assign Contracts, without
recourse, to the existing Selling Trust and one or more additional Selling
Trusts. The existing Selling Trust has funded its purchases of Contracts through
its issuance of securities secured by a security interest in the Contracts. A
Selling Trust will make no representations with respect to its Contracts, and
will have no obligations with respect to the Securities.
Each Contract will be identified in a schedule appearing as an exhibit to
the relevant Purchase Agreement and the Trust Documents (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 or its designated agent will, concurrently with the
sale and assignment of the Initial Contracts to the Trust, either (i) execute,
authenticate and deliver the Securities to the Company in exchange for the
Initial Contracts transferred by the Company and/or the Selling Trsut (or the
Company on behalf of the Company and/or the Selling Trust) to the Trust, in
which event the Company and/or the Selling Trust will sell all or a portion of
the Securities to the Underwriters or (ii) execute, authenticate and deliver the
Securities to the Underwriters in exchange for the price specified in the
related Prospectus Supplement, and transfer to the Company and the Selling Trust
the respective prices for the Initial Contracts transferred by the Company and
the Selling Trust, respectively, to the Trust.
CITSF will make certain representations and warranties in the Trust
Documents with respect to each Initial Contract as of the Closing Date,
including, unless otherwise specified in the related Prospectus Supplement, 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 sixty days, unless otherwise specified in the related
Prospectus Supplement; (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 Contract
is or will be subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, and, to the knowledge of CITSF, no such
right has been asserted with respect to any Contract; (v) the Obligor on each
Contract is required to maintain physical damage
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insurance covering the related Financed Boat in accordance with CITSF's normal
requirements or, if the related Financed Boat is not so covered by an Obligor's
insurance, it is covered by a blanket insurance policy maintained by CITSF or
the Servicer; (vi) no Contract was originated in or is subject to the laws of
any jurisdiction whose laws would prohibit (A) the transfer of the Contract to
the Company under the Purchase Agreements, (B) the transfer of the Contract to
the Trust pursuant to the Trust Documents, or (C) the ownership of the Contracts
by the Trust; (vii) each Contract complies with all requirements of law in all
material respects; (viii) no Contract has been satisfied, subordinated in whole
or in part or rescinded, and no Financed Boat has been released from the
security interest of the related Contract in whole or in part; (ix) each
Contract creates a valid and enforceable first priority security interest in
favor of CITSF, CITCF-NY, or the related Dealer or financial intermediary in the
Financed Boat covered thereby (which security interest, if in favor of the
related Dealer or CITCF-NY, has been assigned to CITSF), such security interest
has been assigned by CITSF to the Company and by the Company (and, if and to the
extent specified in the related Prospectus Supplement, a Selling Trust) to the
Trust, and all necessary action with respect to such Contract has been taken to
perfect the security interest in the related Financed Boat in favor of CITSF or
CITCF-NY; (x) all parties to each Contract had capacity to execute such
Contract; (xi) no Contract has been sold, assigned or pledged by CITSF to any
person other than the Company (or by the Company (or, if and to the extent
specified in the related Prospectus Supplement, a Selling Trust) to any person
other than the Trust) and, prior to the transfer of the Contracts by CITSF to
the Company and the transfer of the Contracts by the Company (and, if and to the
extent specified in the related Prospectus Supplement, a Selling Trust) to the
Trust, CITSF or the Company, respectively, had good and marketable title to each
Contract, free and clear of any lien, 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 and the Trust, respectively; (xii) as of
the Initial Cut-off Date, there was no default, breach, violation or event
permitting acceleration under any Contract, and no event which with notice
and/or the expiration of any grace or cure period would constitute a default,
breach, violation or event permitting acceleration under such Contract (except
for payment delinquencies permitted by clause (i) above), and CITSF has not
waived any of the foregoing (except for payment delinquencies permitted by
clause (i) above); (xiii) there are no liens or claims which have been filed for
work, labor or materials affecting a Financed Boat securing a Contract, which
are or may be liens prior to or equal or coordinate with the security interest
of the Contract; (xiv) each Contract is a fully-amortizing loan with interest at
the stated Contract Rate and provides for level payments over the term of such
Contract; (xv) 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); (xvi) the description of each
Contract set forth in the List of Contracts is true and correct as of its date;
(xvii) no Obligor is the United States of America or any state or any agency,
department, instrumentality or political subdivision thereof; (xviii) 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 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; (xix) there is only one original
executed copy of each Contract, which, immediately prior to the execution of the
Trust Documents, was in the possession of CITSF; (xx) the Contract is "chattel
paper" as defined in the New Jersey UCC; (xxi) the Contract satisfies the
selection criteria set forth in the related Prospectus Supplement; (xxii) all of
the right, title and interest of CITSF, the Company and, if applicable, CITCF-NY
in the Contract has been validly sold, transferred and assigned to the Trust and
all filings necessary to evidence such sale, transfer and conveyance have been
made in all appropriate jurisdictions; and (xxiii) no adverse selection
procedure was utilized in selecting the Contracts for sale by CITSF to the
Company.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require CITSF to make on each Subsequent Transfer Date the same
representations 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 Cut-off 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 related
Prospectus Supplement. Unless otherwise specified
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in the related Prospectus Supplement, the Subsequent Financed Boats will consist
of new and used boats, boat motors and boat trailers.
Unless otherwise specified in the related Prospectus Supplement, under the
terms of the Trust Documents and subject to certain conditions specified in the
Trust Documents, CITSF will be obligated to repurchase from the Trust for the
Purchase Price (as defined below) any Contract (a "Repurchased Contract") not
later than ninety days after CITSF becomes aware, or eighty-five days after
CITSF's receipt of written notice from a Trustee or the Servicer, of a breach of
any representation or warranty by CITSF in the Trust Documents that materially
and adversely affects the Trust's interest in such Contract if such breach has
not been cured. CITSF shall effect such repurchase from the Trust by depositing
the Purchase Price for such Contract in the Collection Account on the Deposit
Date immediately following the determination that such Purchase Price is owed.
Unless otherwise specified in the related Prospectus Supplement, the "Purchase
Price" for any Contract will be the remaining principal amount outstanding on
such Contract on the date of repurchase, plus thirty days' interest thereon at
the Contract Rate on the Contract, and (ii) accrued and unpaid Servicing Fees
thereon at the Servicing Fee Rate to the date of such repurchase. Upon such
repurchase, the Trust shall transfer all right, title and interest in the
Contract to CITSF, free and clear of the lien of the applicable Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, this repurchase
obligation constitutes the sole remedy available to the Trust and the
Securityholders for a breach of a representation and warranty under the Trust
Documents with respect to the Contracts (but not with respect to any other
breach by CITSF of its obligations under the Trust Documents).
Unless otherwise specified in the related Prospectus Supplement, CITSF, the
Company and the Trust will treat each of the transfers of the Contracts from
CITSF to the Company and from the Company (and, if and to the extent specified
in the related Prospectus Supplement, a Selling Trust) to the Trust as a sale.
As a result of the sale of the Contracts by CITSF to the Company and by the
Company (and, if and to the extent specified in the related Prospectus
Supplement, a Selling Trust) to the Trust, the Contracts should 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 assert that
the transaction between CITSF and the Company or between the Company (and, if
and to the extent specified in the related Prospectus Supplement, a Selling
Trust) and the Trust, as the case may be, was a pledge of the Contracts to
secure a loan, rather than a true sale. This position, if asserted, could
prevent timely receipt by the Trust of payments of amounts due on the Contracts
and, if accepted by a court, may result in delays or reductions in distributions
of principal and interest on the Securities. Since the Contracts will remain in
CITSF's possession and will not be stamped or otherwise marked to reflect the
sale and 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 sale and assignment. See "Certain Legal
Aspects of the Contracts."
If specified in the related Prospectus Supplement, the terms of the sale of
some or all of the Contracts from CITSF or the Seller or a Selling Trust or any
of them to the related Trust may provide for the retention by CITSF or the
Seller or such Selling Trust, as the case may be, of the right to receive a
portion of the interest accruing thereon (the "Retained Yield").
Custody of Contract Files
Unless otherwise specified in the related Prospectus Supplement, to reduce
administrative costs, each Trust will appoint CITSF as initial custodian of the
Contracts. Prior to the appointment of any custodian other than CITSF, the Trust
and such proposed successor custodian specified in the related Prospectus
Supplement shall enter into a custodian agreement pursuant to which such
successor custodian will agree to hold the Contract Files on behalf of the
related Trust. Any such custodian agreement may be terminated by the Trust on
thirty days' notice to such successor custodian.
Unless otherwise specified in the related Prospectus Supplement, to
facilitate servicing and reduce administrative costs, the documents will not be
physically segregated from other similar documents which are in
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CITSF's possession. UCC financing statements will be filed in New Jersey and
Oklahoma reflecting the sale and assignment of the Contracts to the Owner
Trustee, and CITSF's accounting records and computer systems will also reflect
such sale and assignment. 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 (and, if and to the extent specified in the related Prospectus
Supplement, a Selling Trusts) to the Trust, and will not be segregated from the
other installment sale contracts of CITSF. The Obligors under the Contracts will
not be notified of the transfer of the Contracts to the Company or to the Trust.
If, through inadvertence or otherwise, any of the Contracts were sold to another
party (or a security interest therein were granted to another party) that
purchased (or took such security interest in) any of such Contracts in the
ordinary course of its business and took possession of such Contracts, the
purchaser (or secured party) would acquire an interest in the Contracts superior
to the interest of the related Trust if the purchaser (or secured party)
acquired (or took a security interest in) the Contracts for new value and
without actual knowledge of such Trust's interest. See "Certain Legal Aspects of
the Contracts."
Accounts
For each Trust, the Servicer will establish and maintain with a Trustee one
or more accounts, in the name of such Trustee on behalf of the Securityholders
(the "Collection Account"), into which all payments made (after the Initial
Cut-off Date or the Subsequent Cut-off Date, as applicable) on or with respect
to the Contracts in the related Contract Pool will be deposited by the Servicer.
See "--Collections." The Servicer will establish and maintain with a Trustee (or
its designated agent) an account in the name of such Trustee on behalf of the
Certificateholders, if any, into which amounts released from the Collection
Account and any Enhancement for payment to the Certificateholders will be
deposited and from which distributions to the Certificateholders will be made
(the "Certificate Distribution Account"). The Servicer will establish and
maintain with the Indenture Trustee (or its designated agent) an account in the
name of the Indenture Trustee on behalf of the Noteholders, if any, into which
amounts released from the Collection Account and from any Enhancement for
payment to the Noteholders will be deposited and from which distributions to the
Noteholders will be made (the "Note Distribution Account"). If the related
Prospectus Supplement provides that the Contract Pool contains Precomputed
Contracts, the Servicer will establish and maintain with a Trustee (or its
designated agent) an account in the name of such Trustee on behalf of the
Securityholders, into which early payments by or on behalf of Obligors on
Precomputed Contracts which do not constitute scheduled payments, full
prepayments or certain partial prepayments that result in a reduction of an
Obligor's periodic payment below the scheduled payment as of the Initial Cut-off
Date or Subsequent Cut-off Date, as the case may be, will be deposited (the
"Paid-Ahead Account").
Amounts held in the Certificate Distribution Account and in such other
accounts as may be specified in the related Prospectus Supplement will not be
available to make payments of amounts due on the Notes, if any, and will not be
pledged to the Indenture Trustee as collateral security for the Notes.
Each Account will be an Eligible Account maintained with the Owner Trustee,
the Indenture Trustee and/or other depository institutions. "Eligible Account"
means any account which is (i) an account maintained with an Eligible
Institution; (ii) an account or accounts the deposits in which are fully insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the FDIC; (iii) a "segregated trust account" maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the benefit
of a Trustee, which depository institution or trust company has capital and
surplus (or, if such depository institution or trust company is a subsidiary of
a bank holding company system, the capital and surplus of the bank holding
company) of not less than $50,000,000 and the securities of such depository
institution (or, if such depository institution is a subsidiary of a bank
holding company system and such depository institution's securities are not
rated, the securities of the bank holding company) have a credit rating from
each Rating Agency in one of its generic credit rating categories which
signifies investment grade; or (iv) an account that will not cause any Rating
Agency to downgrade or withdraw its then-current rating assigned to the
Securities of such series, as confirmed in writing by each Rating Agency.
"Eligible Institution" means any depository institution organized under the laws
of the United States or any state, the deposits of which are insured to the full
extent permitted by law by the Bank Insurance Fund (currently administered by
the Federal Deposit
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Insurance Corporation), whose short-term deposits have been rated in one of the
two highest rating categories or such other rating category as will not
adversely affect the ratings assigned to the Securities of such series.
Unless otherwise specified in the related Prospectus Supplement, all
amounts held in each of the accounts established by the Servicer on behalf of a
Trust 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
applicable Trust Documents, which meet the criteria of each Rating Agency from
time to time as being consistent with their then-current ratings of the
Securities. Investment earnings on amounts on deposit in the Collection Account,
Paid-Ahead Account, if any, Certificate Distribution Account, if any, Note
Distribution Account, if any, and any cash collateral account will not be
available to make payments on the Securities, unless otherwise specified in the
related Prospectus Supplement.
Servicing Procedures
The Servicer will make reasonable efforts, consistent with the customary
servicing practices and procedures employed by the Servicer with respect to
Contracts owned or serviced by it, to collect all payments due with respect to
the Contracts and, in a manner consistent with the Trust Documents, will
continue such normal collection practices and procedures as it follows with
respect to comparable marine installment sale contracts that it services for
itself and others. See "Certain Legal Aspects of the Contracts." The Servicer
may sell the related Financed Boat securing a defaulted Contract at a public or
private sale, or take any other action permitted by applicable law. See "Certain
Legal Aspects of the Contracts." The proceeds of such realization (net of
expenses) will be deposited in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer shall keep in force throughout the term of the Trust Documents a
fidelity bond. Such fidelity bond shall have such deductibles, and be in such
form and amount as is generally customary among persons which service a
portfolio of marine contracts having an aggregate principal amount of
$100,000,000 or more and which are generally regarded as servicers acceptable to
institutional investors.
Purchase by the Servicer
A breach of certain covenants made by the Servicer in the Trust Documents
that materially and adversely affects the Trust's interest in any Contract will
require the Servicer to purchase such Contract for the Purchase Price, unless
such breach is cured within the period specified in the Trust Documents. Unless
otherwise specified in the related Prospectus Supplement, such covenants will
obligate the Servicer not to, except as permitted by the Trust Documents and in
accordance with the terms of such Contract and applicable law (i) release the
Financed Boat securing such Contract from the security interest granted by such
Contract, (ii) impair the rights of the Trust in such Contract or take any
action inconsistent with the Trust's ownership of such Contract, (iii) increase
the number of payments under such Contract, nor increase the principal amount of
such Contract which is used to finance the purchase price of the related
Financed Boat, nor extend or forgive payments on such Contract, and (iv) fail to
comply with the provisions of any insurance policy covering such Contract, if
the failure to comply would impair the protection or benefit to be afforded by
such insurance policy.
Modification of Contracts
Consistent with its customary servicing practices and procedures, the
Servicer may, in its discretion, arrange with an Obligor to defer, reschedule,
extend or modify the payment schedule of a Contract or otherwise to modify the
terms of a Contract provided that (i) the maturity of such Contract would not
extend beyond the 180th day prior to the Certificate Final Scheduled
Distribution Date and (ii) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sale contract or direct
loan. The Servicer may, in accordance with its customary servicing procedures,
in its good faith judgment, waive any Late Fees that may be due and payable
under any Contract.
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Notwithstanding the foregoing, in connection with the settlement by the Servicer
of a defaulted Contract, the Servicer may forgive a portion of such Contract if
in its discretion it believes that the acceptance of the settlement proceeds
from the related Obligor would result in the Trust's receiving a greater amount
of collections than the Net Liquidation Proceed that would result from
repossessing and liquidating the related Financed Boat.
Removal of Contracts
Except as otherwise specified herein or in the related Prospectus
Supplement, neither the Seller nor the Servicer will have the right to remove
any Contracts from the Contract Pool after the Closing Date. In certain
circumstances, CITSF or the Servicer may have the obligation to repurchase, or
CITSF may have the option to purchase, a Contract from the Trust, but all such
repurchases or purchases will be made at the Purchase Price.
Paid-Ahead Precomputed Contracts
Early payments by or on behalf of Obligors on Paid-Ahead Precomputed
Contracts which do not constitute scheduled payments, full prepayments, or
certain partial prepayments that result in a reduction of the Obligor's periodic
payment below the scheduled payment as of the Initial Cut-off Date or Subsequent
Cut-off Date, as the case may be, will be deposited into the Paid-Ahead Account
until such time as the paid-ahead payment becomes due. Until such time as
payments are transferred from the Paid-Ahead Account to the Collection Account,
they will not constitute collected interest or collected principal and will not
be available for distribution to the Securityholders. Unless otherwise specified
in the related Prospectus Supplement, paid-ahead amounts with respect to
Paid-Ahead Precomputed Contracts may be retained by the Servicer until the
applicable Deposit Date so long as the requirements for monthly deposits as
described under "ACollections" are met.
Servicing Compensation
With respect to each series of the Securities, the Servicer will be
entitled to receive, out of collections on the Contracts, a monthly fee (the
"Servicing Fee") for each Due Period, payable on the following Distribution
Date, equal, unless otherwise specified in the related Prospectus Supplement, to
the sum of (i) one-twelfth of the product of the percentage specified in the
related Prospectus Supplement (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) and (ii) any investment
earnings (net of investment expenses and losses) on amounts on deposit in the
Collection Account, the Paid-Ahead Account, if any, the Note Distribution
Account, if any, and the Certificate Distribution Account, if any; provided,
however, that the Servicing Fee Rate applicable to a Trust may be increased to a
rate (or maximum rate) specified in the related Prospectus Supplement if CITSF
or an affiliate thereof is not the Servicer. Payments to the Servicer of such
amounts will compensate the Servicer for performing the functions of a third
party servicer of marine contracts as an agent for the Trust, including
collecting and posting all payments, responding to inquiries of Obligors,
investigating delinquencies, reporting federal income tax information to
Obligors, monitoring the collateral in cases of Obligor default and handling the
foreclosure or other liquidation of the Financed Boat in appropriate instances
(subject to reimbursement of its expenses incurred in connection with such
foreclosure, liquidation or other realization on the Contracts).
The Servicing Fee also will compensate the Servicer for administering the
Contracts, including reimbursing the Servicer for accounting for collections,
furnishing monthly and annual statements to the Owner Trustee with respect to
distributions and generating federal income tax information. The Servicing Fee
also will compensate the Servicer for accounting fees, outside auditor fees and
data processing costs incurred in connection with administering and servicing
the Contracts.
Collections
With respect to each series of the Securities, the Servicer will deposit
all payments on or with respect to the Contracts and all proceeds of Contracts
collected during each Due Period into the Collection Account or the Paid-
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Ahead Account, as applicable, not later than two Business Days after receipt.
Notwithstanding the foregoing, unless otherwise specified in the related
Prospectus Supplement, the Servicer may make such deposits into the Collection
Account or the Paid-Ahead Account, as applicable, monthly on the Deposit Date
following the last day of each Due Period, provided that (i) the Servicer or the
direct or indirect parent of the Servicer has and maintains a short-term debt
rating of at least "A-1" by Standard & Poor's Ratings Group (if it is a Rating
Agency for the series of Securities), and a short-term debt rating of at least
"P-1" by Moody's Investors Service, Inc. (if it is a Rating Agency for the
series of Securities) (the "Required Servicer Ratings"), or (ii) the Servicer
obtains a letter of credit, surety bond or insurance policy (the "Servicer
Letter of Credit") as will be provided for in the related Trust Documents, under
which demands for payment may be made to secure timely remittance of monthly
collections to the Collection Account or the Paid-Ahead Account, as applicable,
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 then-current rating of the Securities. As of the date of this Prospectus,
CITSF, as Servicer, will be permitted to remit collections to the Collection
Account and the Paid-Ahead Account, as applicable, on a monthly basis by virtue
of clause (i) above. In the event that the Servicer is permitted to make
remittances of collections to the Collection Account and the Paid-Ahead Account,
if any, on a monthly basis pursuant to satisfaction of clause (ii) above, the
Trust Documents will be modified, to the extent necessary, without the consent
of any Securityholder. Pending such a monthly deposit into the Collection
Account and the Paid-Ahead Account, if any, collections on the Contracts may be
invested by the Servicer at its own risk and for its own benefit and will not be
segregated from its own funds. See "Risk Factors--Risk of Commingling."
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 next succeeding Deposit Date.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will not be required to deposit in the Collection Account or the
Paid-Ahead Account, as applicable, amounts relating to the Contracts
attributable to the following: (a) amounts received with respect to each
Contract (or property acquired in respect thereof) which has been purchased by
CITSF or the Servicer pursuant to the Trust Documents, (b) net investment
earnings on funds deposited in the Collection Account, the Paid-Ahead Account,
if any, the Note Distribution Account, if any, and the Certificate Distribution
Account, if any, (c) amounts to be reimbursed to the Servicer in respect of
nonrecoverable Monthly Advances, (d) 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, (e) amounts received
as liquidation proceeds, to the extent the Servicer is entitled to reimbursement
of liquidation expenses related thereto, and (f) repossession profits on
liquidated Contracts.
Monthly Advances
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Contract as to which there has been a Payment Shortfall during
the related Due Period, the Servicer shall advance funds in the amount of such
Payment Shortfall (each, a "Monthly Advance"), but only to the extent that the
Servicer, in its good faith judgment, expects to recover such Monthly Advance
from subsequent collections on such Contract made by or on behalf of the obligor
thereunder (the "Obligor") (but only to the extent of expected interest
collections in the case of a Simple Interest Contract), or from 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 judgment 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. In determining whether an advance is or will be
nonrecoverable, the Servicer need not take into account that it might receive
any amounts in a deficiency judgment. Unless otherwise specified in the related
Prospectus Supplement, the Servicer will not make a Monthly Advance in respect
of (i) the principal component of any scheduled payment on a Simple Interest
Contract or (ii) a Payment 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.
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Unless otherwise specified in the related Prospectus Supplement, "Payment
Shortfall" means (i) with respect to any Simple Interest Contract and any
Distribution Date, the excess of (A) the product of (1) one-twelfth of the
Contract Rate of such Contract and (2) 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 ending after the Contract was acquired by the related
Trust, as of the Initial Cut-off Date or the Subsequent Cut-off Date, as the
case may be) over (B) the amount of interest, if any, collected on such Contract
during the related Due Period and (ii) with respect to any Precomputed Contract
and any Distribution Date, the excess of (A) the scheduled payment due on such
Contract during the related Due Period, over (B) the amount collected on such
Contract (including any amounts allocated from the Paid-Ahead Account with
respect to such Due Period) during the related Due Period.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will remit any Monthly Advance with respect to each Due Period into the
Collection Account not later than the Deposit Date following the Due Period.
Non-Reimbursable Payment
When a payment of principal is made on or in respect of a Simple Interest
Contract, interest is paid on the unpaid principal balance of such Contract only
to the date of such payment. If and to the extent specified in the related
Prospectus Supplement, with respect to each Contract as to which there has been
a Payment Shortfall with respect to interest 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 Trust Documents 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 Payment Shortfall (a
"Non-Reimbursable Payment"). If the related Prospectus Supplement does not
specify that the Servicer will make Non-Reimbursable Payments, the Servicer will
not be obligated to make such payments with respect to the Trust.
Distributions
With respect to each Trust, on or before each Determination Date, the
Servicer will make a determination and inform the Trustees 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 (if any); (iii) the aggregate Purchase Price of
Contracts to be purchased by CITSF or the Servicer (if any); (iv) if applicable,
the aggregate amount to be distributed as principal and interest on the Notes on
the related Distribution Date; (v) if applicable, the aggregate amount to be
distributed as principal and interest on the Certificates on the related
Distribution Date; (vi) the Servicing Fee; (vii) the aggregate amount of
Non-Reimbursable Payments (if any); (viii) the amounts required to be withdrawn
from the Enhancement (if any) for such Distribution Date; (ix) the amount which
is payable to the provider of the Enhancement (if any) or the Affiliated Owner
(if any); (x) the amounts to be deposited into the accounts established pursuant
to the Trust Documents; and (xi) the aggregate amount of unreimbursed Monthly
Advances to be reimbursed to the Servicer (if any).
Unless otherwise specified in the related Prospectus Supplement, the
"Available Amount" with respect to each Trust on any Distribution Date is equal
to the excess of (A) the sum of (i) all amounts on deposit in the Collection
Account attributable to collections or deposits made in respect of such
Contracts (including 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")) during the Due Period preceding the Distribution
Date, and (ii) the Purchase Price for any Contract repurchased by CITSF as a
result of breaches of certain representations and warranties or purchased by the
Servicer as a result of breaches of certain covenants and any Monthly Advances
and any Non-Reimbursable Payments made by the Servicer, if such Purchase Price,
Monthly Advance or Non-Reimbursable Payment is paid on or prior to the Deposit
Date immediately preceding such Distribution Date, over (B) the sum of the
following amounts (to the extent that the Servicer has not already withheld such
amounts from collections on the Contracts): (i) any repossession profits on
liquidated Contracts, Liquidation Expenses (as defined in the Trust Documents)
incurred and taxes and insurance advanced by the Servicer in respect of Financed
Boats that are reimbursable to the Servicer under the Trust Documents; (ii) any
amounts incorrectly deposited in the Collection
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Account; (iii) any amounts deposited in the Paid-Ahead Account, if any, during
the related Due Period; (iv) net investment earnings on the funds in the
Collection Account and the Paid-Ahead Account, if any; and (v) any other amounts
permitted to be withdrawn from the Collection Account and the Paid-Ahead
Account, if any, by the Servicer (or to be retained by the Servicer from
collections on the Contracts) pursuant to the Trust Documents.
With respect to each Trust, beginning on the Distribution Date specified in
the related Prospectus Supplement, distributions of principal and interest (or,
where applicable, of principal or interest only) on each class of Securities
entitled thereto will be made by the Owner Trustee or the Indenture Trustee, as
applicable, to the Certificateholders, if any, and the Noteholders, if any, from
the Available Amount. Unless otherwise specified in the related Prospectus
Supplement, the Servicing Fee and any additional servicing compensation will be
paid from the Available Amount prior to distributions to the Securityholders.
The timing, calculation, allocation, order, source, priorities of and
requirements for all distributions to each class of Certificateholders, if any,
and all payments to each class of Noteholders, if any, will be set forth in the
related Prospectus Supplement.
Net Deposits
Unless otherwise specified in the related Prospectus Supplement, as an
administrative convenience, the Servicer will be permitted to make deposits of
collections, Monthly Advances, Non-Reimbursable Payments and the aggregate
Purchase Price of Contracts for, or with respect to, a Due Period net of
distributions to be made to the Servicer with respect to such Due Period
(including, without limitation, the 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 Trustees 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
Unless otherwise specified in the related Prospectus Supplement, on or
before each Determination Date, the Servicer will provide to the Trustees, any
paying agent and the Affiliated Owner (if any) 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." Each such report 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 Trust Documents (or,
if such default has occurred, describing each such default).
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require that on or before March 31 of each year, the Servicer
will deliver to the Owner Trustee a report of independent public accountants
which opines on, at a minimum, the servicing entity's compliance with the
minimum servicing standards set forth in the Uniform Single Attestation Program
for Mortgage Bankers (in accordance with the 1995 revisions made thereto). The
Trust Documents will require that such examination and report of independent
public accountants be prepared in accordance with the requirements set forth in
the Uniform Single Attestation Program for Mortgage Bankers (in accordance with
the 1995 revisions made thereto).
The Servicer, on request of the Trustees, will furnish to the Trustees such
reasonably pertinent underlying data on the Contracts as can be generated by the
Servicer's existing data processing system without undue modification or
expense.
Certain Matters Regarding the Servicer
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer may not resign from its obligations and
duties as Servicer thereunder, except upon a determination that the Servicer's
performance of such duties is no longer permissible under applicable law. Such
resignation will not
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become effective until the Owner Trustee or a successor Servicer has assumed the
Servicer's servicing obligations and duties under the Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will further provide that neither the Servicer nor the Company nor any
of their shareholders, affiliates, directors, officers, employees and agents
shall be under any liability to the Trustees, the Trust or the Securityholders
for taking any action or for refraining from taking any action pursuant to the
Trust Documents or for errors in judgment; provided, however, that neither the
Servicer nor any such person will be protected against any liability which
otherwise would be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason or reckless disregard of
obligations and duties thereunder. In addition, unless otherwise specified in
the related Prospectus Supplement, the Trust Documents will provide that the
Servicer is under no obligation to appear in, prosecute or defend any legal
action which arises under the Trust Documents 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
Trust Documents and the rights and duties of the parties thereto and the
interests of the Securityholders thereunder. 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 Trust Documents
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.
Unless otherwise specified in the related Prospectus Supplement, 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 Trust Documents.
The Servicer may sell, transfer, assign or convey its rights as Servicer to
any entity qualified to act as servicer under the Trust Documents, upon written
notice to the Trustees and the Rating Agencies, without the consent of the
Securityholders, provided that the Rating Agency Condition is satisfied.
Physical Damage Insurance
Unless otherwise specified in the related Prospectus Supplement, the
Servicer may, but will not be obligated to, 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 boats financed by installment sale contracts or loans
that it services for itself or others. Unless otherwise specified in the related
Prospectus Supplement, if an Obligor fails to maintain such insurance, the
Servicer will not be obligated to obtain such physical damage insurance and
advance such premiums for such insurance on behalf of such Obligor. If the
Servicer obtains such physical damage insurance and advances such premiums for
such insurance on behalf of such Obligor, such insurance policy will name the
Servicer as an additional insured and loss payee (such insurance being referred
to herein as "Force-Placed Insurance"). Such Force-Placed Insurance and any
commissions or finance charges collected by the Servicer in connection therewith
shall be, to the extent permitted by law, in an amount in accordance with
customary servicing practices and procedures, but in no event in an amount
greater than the outstanding principal balance of the related Contract or, if
such insurance also covers the interest of the related Obligor in the Financed
Boat, no greater than the greater of the outstanding principal balance of the
related Contract and the value of the Financed Boat, or such lesser amount
permitted by applicable law. The Servicer shall be required to disclose to the
related Obligor all information with respect to such Force-Placed Insurance,
commissions and finance charges as required by applicable law.
The Servicer does not, under its customary servicing practices and
procedures, obtain 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 practices and procedures. In accordance
with such customary servicing practices and procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or
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arrange other methods of protection of the Financed Boats that it deems
necessary or advisable, provided that the Servicer determines that such actions
do not materially and adversely affect the interests of the Securityholders.
The Servicer may elect to make advances ("Insurance Advances") to an
Obligor to finance insurance premiums related to the Financed Boat. Any such
Insurance Advances may be secured by the related Financed Boat.
Any portion of the principal balance of a Contract attributable to
Insurance Advances or premiums for Force-Placed Insurance acquired after the
Initial Cut-off Date or the Subsequent Cut-off Date, as the case may be, will
not be owned by the Trust, and amounts allocable thereto will not be available
for distribution in respect of the Securities. Unless otherwise designated by
the Obligor, the Servicer will not allocate payments by the Obligor to pay
Insurance Advances or Force-Placed Insurance premiums added to the Contracts
after the Initial Cut-off Date or Subsequent Cut-off Date, as the case may be,
if any amount of principal or interest is due but unpaid on the Contracts. The
Servicer shall not deposit payments posted with respect to such Insurance
Advances or 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 made Insurance Advances or obtained Force-Placed Insurance makes
scheduled payments under the Contract, but fails to make scheduled payments of
such Insurance Advances or 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 repayment of
any such Insurance Advances or Force-Placed Insurance premiums added to the
Initial Contracts after the Initial Cut-off Date or to any Subsequent Contracts
after the related Subsequent Cut-off Date.
Event of Termination
Unless otherwise specified in the related Prospectus Supplement, an "Event
of Termination" under the Trust Documents will consist of (i) any failure by the
Servicer to make any deposit into an account required to be made under the Trust
Documents 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 Trust Documents (other than those described in
clause (i)) which materially and adversely affects the rights of the
Securityholders and which continues unremedied for 60 days after the giving of
written notice of such failure; (iii) any assignment or delegation by the
Servicer of its duties or rights under the Trust Documents, except as
specifically permitted under the Trust Documents, or any attempt to make such an
assignment or delegation; (iv) certain events of insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings regarding the
Servicer; or (v) any disqualification of the Servicer as an Eligible Servicer
(as defined in the Trust Documents). "Notice" as used herein means notice to the
Servicer by the Trustees or the Company, or to the Company, the Servicer and the
Trustees by the Noteholders holding not less than 25% of the aggregate
outstanding principal amount of the Controlling Notes issued by such Trust (or,
if no Notes of such series are outstanding, the Certificateholders holding not
less than 25% of the outstanding Certificate Balance of such Trust).
Rights Upon Event of Termination
Unless otherwise specified in the related Prospectus Supplement, as long as
an Event of Termination under the Trust Documents remains unremedied, the
Indenture Trustee (or, if no Notes of the series are outstanding, the Owner
Trustee) may, and at the written direction of the holders of related Notes
evidencing not less than a majority of the aggregate outstanding principal
amount of the Notes issued by such Trust (or, if no Notes of such series are
outstanding, the holders of related Certificates evidencing not less than a
majority of the Certificate Balance of such Trust), will, unless prohibited by
applicable law, terminate all (but no less than all) of the rights and
obligations of the Servicer with respect to a Trust under the Trust Documents
and in and to the Contracts, and the proceeds thereof, whereupon (subject to
applicable law) all authority and power of the Servicer under the Trust
Documents, whether with respect to the Contracts, the Contract Files or
otherwise, will pass to and be vested in the Indenture
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Trustee (or, if no Notes of the series are outstanding, such authority will pass
to and be vested in the Owner Trustee); provided, however, that neither the
Indenture Trustee (or, if no Notes of the series are outstanding, the Owner
Trustee) nor any successor servicer will assume any obligation of CITSF to
repurchase Contracts for breaches of representations or warranties, and the
Indenture Trustee (or, if no Notes of the series are outstanding, the Owner
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 Trust Documents. Notwithstanding such termination, the Servicer
will be entitled to payment of certain amounts payable to it for services
rendered prior to such termination. No such termination will affect in any
manner CITSF's obligation to repurchase certain Contracts for breaches of
representations or warranties under the Trust Documents. In the event that the
Owner 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 which meets the requirements for
an Eligible Servicer under the Trust Documents. Pending such appointment, such
Trustee is obligated to act in such capacity, unless it is prohibited by law
from so acting. The Indenture Trustee (or, if no Notes of the series are
outstanding, the Owner Trustee) and such successor may agree upon the servicing
compensation to be paid, which in no event, without written consent of not less
than 66 2/3% in principal amount of the related Securityholders, may be greater
than the compensation to CITSF as Servicer under the Trust Documents.
Waiver of Past Defaults
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, the holders of Notes evidencing not less than a
majority of the aggregate outstanding principal amount of the Controlling Notes
(or the holders of the Certificates evidencing not less than a majority of the
Certificate Balance of such series, in the case that all of the Notes have been
paid in full and the Indenture has been discharged in accordance with its terms)
may, on behalf of all such Noteholders and Certificateholders, waive any default
by the Servicer in the performance of its obligations under the Trust Documents
and its consequences, except an Event of Termination in making any required
deposits to or payments from any of the accounts in accordance with the Trust
Documents. No such waiver will impair such Noteholders' or Certificateholders'
right with respect to subsequent defaults.
Amendment
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents may be amended by the parties thereto and, in the event that such
amendment affects the Indenture Trustee, the Indenture Trustee, without prior
notice to or the consent of the related Securityholders (i) to correct manifest
error or cure any ambiguity; (ii) to correct or supplement any provision therein
which may be inconsistent with any other provision therein; (iii) to add or
amend any provision as requested by the Rating Agencies to maintain or improve
the rating of the Securities; (iv) to add to the covenants, restrictions or
obligations of the Company, the Servicer or the Owner Trustee or to provide for
the delivery of or substitution for an Enhancement or a Servicer Letter of
Credit; (v) to evidence and provide for the acceptance of the appointment of a
successor trustee with respect to the property owned by the related Trust and
add to or change any provisions as shall be necessary to facilitate the
administration of the trusts under the Trust Documents by more than one trustee;
(vi) to add, change or amend any provision to maintain the related Trust as an
entity not subject to federal income tax; or (vii) to add, change or eliminate
any other provisions, provided that an amendment pursuant to this clause (vii)
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 Trust or the Securityholders. Unless otherwise specified in the related
Prospectus Supplement, the Trust Documents may also be amended by the parties
thereto, with the consent of the holders of not less than a majority in
principal amount of such then outstanding Notes and the holders of such
Certificates evidencing not less than a majority of the Certificate Balance of
such series for the purpose of adding any provisions to or changing in any
manner or eliminating any provisions of the Trust Documents, or of modifying in
any manner the rights of such Noteholders or Certificateholders, respectively;
except that no such amendment may except as described above, increase or reduce
in any manner the amount of, or accelerate or delay the timing of, distributions
that are required to be made on any related Note or
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Certificate, the related Pass-Through Rate or the Interest Rate. Any action
specified in clauses (v) and (vii) shall be taken only upon satisfaction of the
Rating Agency Condition.
Termination
Unless otherwise specified in the related Prospectus Supplement, the
obligations of the Servicer, the Company, the Affiliated Owner, if any, and the
Trustees pursuant to the Trust Documents for a series of the Securities will
terminate upon the earliest to occur of (i) the maturity or other liquidation of
the last related Contract and the disposition of any amounts received upon
liquidation of any property remaining in the related Trust, (ii) the payment to
Securityholders of the series of all amounts required to be paid to them
pursuant to the Trust Documents, (iii) the occurrence of either event described
below, and (iv) as otherwise required by law, as described in the Trust
Documents.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, in order to avoid excessive administrative
expenses, CITSF will be permitted at its option to purchase from the Trust, on
any Distribution Date on which the Pool Balance as of the last day of the
related Due Period is less than or equal to a percentage specified in the
related Prospectus Supplement of the Initial Pool Balance, all remaining related
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). CITSF will give notice to the
Trustees and the Depository of the exercise of such option no later than the
Determination Date succeeding such Due Period and will deposit the amount
required to purchase such Contracts on the Deposit Date succeeding such Due
Period. Exercise of such right will effect early retirement of the Securities.
Unless otherwise specified in the related Prospectus Supplement, 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.
Unless otherwise specified in the related Prospectus Supplement, within ten
days after the first Distribution Date on which the Pool Balance as of the last
day of the related Due Period is less than or equal to a percentage specified in
the related Prospectus Supplement 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
Due Period. Any purchaser of the Contracts must agree to the continuation of
CITSF as Servicer on terms substantially similar to those in the Trust
Documents. Any such sale will effect early retirement of the Securities.
Unless otherwise specified in the related Prospectus Supplement, 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 marine
installment sale contracts. The highest bid may not be less than the fair market
value of such Contracts and must equal or exceed 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 Distribution Date would result in proceeds sufficient
to distribute to Securityholders the amounts of interest due to Securityholders
for such Distribution Date and any unpaid interest payable to the
Securityholders with respect to one or more prior Distribution Dates and the
outstanding principal amount of the Notes, if any, and the Certificate Balance,
if any, 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 a bid is equal to or greater than the fair market value of such
Contracts. 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
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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.
Unless otherwise specified in the related Prospectus Supplement, 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 for such purpose. 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 Affiliated Owner, if any,
or as specified in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
marine contracts, which are general in nature. Since 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 Trust, each Trust
will succeed collectively to the rights (including the right to receive payment
on the Contracts), and will assume the obligations, of CITSF under the related
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 Boat to secure repayment of such loan. Certain aspects of both
features of the Contracts are described more fully below.
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 Trust Documents,
the Servicer will retain possession of the Contracts as custodian for the Owner
Trustee, and will make an appropriate filing of a UCC financing statement in New
Jersey to perfect the sale of the Contracts by the Company (and, if and to the
extent specified in the related Prospectus Supplement, a Selling Trust) to the
Owner Trustee. The Contracts and the related certificates of title will not be
stamped to reflect their assignment from CITCF-NY to CITSF, from CITSF to the
Company or from the Company to the Trust. The Contract Files will not be
physically segregated from the contract files for contracts owned by CITSF. If,
through inadvertence or otherwise, another party in good faith purchases (or
takes 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 or secured party may acquire an
interest in the Contracts superior to the interest of the Trust.
Under the Trust Documents, 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
Trust Documents, with respect to each Contract, as of the Closing Date for each
Initial Contract, and as of the related Subsequent Transfer Date for each
Subsequent Contract, if any, that the Contract has not been sold, assigned or
pledged by CITSF to any person other than the Company, that immediately prior to
the transfer and assignment of the Contract to the Company, CITSF had good and
marketable title thereto, free and clear of any encumbrance, equity, loan,
pledge, charge, claim or security interest and, immediately upon the transfer
thereof, the Company will have good and marketable title to the Contract, free
and clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest 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 Trustees, or the
Trust would be to require CITSF to repurchase such Contract.
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Security Interests in the Financed Boats
General. The Contracts are installment sale contracts that evidence the
credit sale of boats by Obligors. The Contracts also constitute personal
property security agreements and include grants of security interests in the
related boats under the UCC. Perfection rules relating to security interests in
boats are governed in a majority of states under state boat certificate of title
statutes. In states in which perfection of a security interest in a particular
boat is not governed by a certificate of title statute, perfection is usually
accomplished by filing pursuant to the provisions of the UCC. Each Contract
prohibits the sale or transfer of the related Financed Boat 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 Boats granted thereunder, to the Company and, pursuant to the Trust
Documents, the Company (and, if and to the extent specified in the related
Prospectus Supplement, a Selling Trust) will sell and assign its interest in the
Contracts, including the security interests in the Financed Boats granted
thereunder, to the Owner Trustee. UCC financing statements will be filed to
perfect the sale of (i) CITSF's interests in the Contracts to the Company and
(ii) the Company's interests (and, if and to the extent specified in the related
Prospectus Supplement, the interest of such Selling Trust) in the Contracts to
the Trust.
Perfection of CITSF's or CITCF-NY's Security Interest in the Financed
Boats. The Contracts represent marine retail installment sale contracts and
direct loans that finance the sale or ownership of Financed Boats. When
originated, each Contract was secured by a security interest in the Financed
Boat financed thereby. Each such security interest was required to be perfected
under applicable state law and, in the case of certain Financed Boats described
below, under applicable federal law. Generally, security interests in boats may
be perfected in one of three ways: (i) in "title" states, by notation of the
secured party's lien on the certificate of title issued by an applicable state
motor vehicle or wildlife department or other appropriate state agency; (ii) in
non-title states, by filing a UCC-1 financing statement; and (iii) in respect of
a boat eligible for documentation under federal law, by filing all documents
necessary to create a first preferred Ship Mortgage (a "Preferred Mortgage")
under the Ship Mortgage Act of 1920 (1988 Recodification) ss. 30101 et seq. (the
"Ship Mortgage Statutes"). Vessels that meet the federal five net ton standard
qualify for documentation under federal law ("U.S. Documentable Boats").
However, federal documentation of vessels used exclusively for recreational
purposes is discretionary.
CITSF has policies and procedures in place to ensure that all actions
necessary under the laws of the states in which the Financed Boats were located
at the time of origination of the Contracts were taken to perfect the
originators' security interests in the Financed Boats. In addition, it is
CITSF's practice to require that substantially all Financed Boats of 27 feet or
more in length be federally documented and that a Preferred Mortgage on each
such boat be filed. CITSF's policy also requires prior perfection of a security
interest in any such boat under applicable state law in order to protect itself
prior to completion of federal documentation. If a security interest in a boat
is initially perfected by a UCC-1 filing or notation on a title under state law
and such boat subsequently becomes a federally documented vessel, the holder of
such security interest could lose the priority of its security interest in such
boat under state law to the holder of a subsequently perfected Preferred
Mortgage covering such boat.
In the event that the originator of a Contract failed to perfect the
security interest in a Financed Boat (for example, by complying with the UCC
rather than the applicable certificate of title statute, or by failing to comply
with applicable state title law, or the Ship Mortgage Statutes or applicable
United States Coast Guard (the "Coast Guard") regulations), such originator
would not have a perfected first priority security interest in such Financed
Boat. In this event, if third party liens equal or exceed the value of the
Financed Boat, the only recourse of the Trust would be against the Obligor on an
unsecured basis, if applicable, against a Dealer or financial intermeddiary
pursuant to its repurchase obligation or against the Seller.
Pursuant to the terms of the Sale and Servicing Agreement, the Seller will
assign its security interest in the Financed Boat to the Trust and the Trust
will pledge its security interest in the Financed Boats to the Indenture
Trustee. However, due to administrative burden and expense, none of the Seller,
the Servicer, the Trust or any previous owner of the Contract will amend the
certificates of title or file assignments of the UCC-1 financing statements with
respect to the Financed Boats to identify the Trust or the Indenture Trustee as
the new secured party, nor will the Seller or the Owner Trustee execute or file
any transfer instruments with the appropriate governmental
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authorities. In a majority of states, the assignment of a Contract together with
the related security interest is, as a matter of state law, an effective
conveyance of such security interest without amendment of any lien noted on the
related certificates of title or of any UCC-1 financing statements or the filing
of any transfer instruments with the appropriate governmental authorities, and
the new owner of the Contract succeeds to the original secured party's rights as
owner of the Contract against creditors of the Obligor. In certain title states,
in the absence of such certificate of title amendment or assignment of record to
reflect the successive assignments of the security interest in the Financed
Boat, the related Seller (if not the secured party of record), the Trust and/or
the Indenture Trustee may not have a perfected security interest in the related
Financed Boat. Under the Ship Mortgage Statutes, in the absence of an assignment
of record of a Preferred Mortgage, the assignment of the related Contract by
itself will not convey the perfected preferred mortgage lien on the Financed
Boat subject to such Preferred Mortgage and neither the Seller (if not the
secured party of record) nor the Trust will have a perfected security interest
in such Financed Boat.
Due to administrative burden and expense, assignments will not be made of
all Preferred Mortgages relating to the Contracts. Under the Ship Mortgage
Statutes, in the absence of an assignment of a Preferred Mortgage, or in the
event an assignment of a Preferred Mortgage is not effective, the Trust will not
have a perfected security interest in the related Financed Boat. In such case,
if third party liens equal or exceed the value of such Financed Boat, the only
recourse of the Trust would be against the related Obligor on an unsecured
basis.
Except as described above, in the absence of fraud or forgery by a boat
owner or administrative error by state recording officials or the Coast Guard,
the notation of the lien of the originator of each Contract on the certificate
of title with respect to the related Financed Boat, the filing of a UCC-1
financing statement against the Obligor or the filing of an assignment of the
related Preferred Mortgage, if any, as described above will be sufficient to
protect the Trust against the rights of subsequent purchasers of such Financed
Boat or subsequent lenders who take a security interest in such Financed Boat.
If there are any Financed Boats as to which the originator of the related
Contract has failed to perfect the security interest assigned to the Trust, (i)
such security interest would be subordinate to, among others, holders of
perfected security interests in such Financed Boats and (ii) subsequent
purchasers of such Financed Boats would take possession free and clear of such
security interest. There is also a risk that, in not identifying the Trust as
the new secured party on the certificates of title or executing and filing of
transfer instruments with the Coast Guard or assignments of UCC-1 financing
statements with state officials, the security interest of the Trust or Indenture
Trustee could be released through fraud or negligence.
A security interest perfected by a Preferred Mortgage has a nationwide
scope and no further action is necessary when an obligor moves or the related
boat is relocated. Actions must be taken to maintain the perfection of security
interests in boats perfected under state law if the boat (in the case of a
"title" state) or the Obligor (in the case of a "UCC" state) moves to a state
other than the state in which such security interest was originally perfected.
Under the laws of most states, a perfected security interest in a Financed Boat
continues for four months after the Financed Boat is relocated in a new state
(from the state in which a financing statement was properly filed initially to
perfect the security interest or in which the certificate of title was issued)
and thereafter until the owner re-registers such Financed Boat in the new state.
Many "title" states require surrender of a certificate of title to re-register a
Financed Boat. Accordingly, to allow re-registration the Servicer must surrender
possession if it holds the certificate of title to a Financed Boat or, in the
case of a Financed Boat registered in a state which provides for notation of
liens on certificates of title but not possession of the certificates of title
by the lienholder, the Servicer would typically receive notice of surrender if
the security interest in the Financed Boat is noted on the certificate of title.
Accordingly, in such cases, the Servicer should have the opportunity to
re-perfect the security interest in the Financed Boat in the state of
relocation. In states that do not issue a certificate of title at registration
of a Financed Boat, re-registration in a different state could defeat
perfection. In the ordinary course of servicing its portfolio of marine loans,
the Servicer takes steps to effect such re-perfection upon receipt of notice of
re-registration or information from the Obligor as to relocation. Similarly,
when an Obligor sells a titled Financed Boat showing a lienholder, unless the
Servicer surrenders possession of the certificate of title, it generally 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 is obligated to
take such steps, at the Servicer's expense, as are necessary to maintain
perfection of security interests in the Financed Boats.
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Under the laws of many states, certain possessory liens for repairs
performed on a Financed Boat and storage, as well as certain rights in favor of
federal and state governmental authorities arising from the use of a boat in
connection with illegal activities, may take priority over a security interest
perfected under state law. Certain U.S. federal tax liens may also have priority
over the lien of a secured party. Under the Ship Mortgage Statutes, a Preferred
Mortgage supersedes a perfected state law security interest, a state created
lien or forfeiture rights (so long as the secured party is innocent of
wrongdoing) but is subordinate to preferred maritime liens. The Seller will
represent in the Sale and Servicing Agreement that, as of the Initial Cut-off
Date or Subsequent Cut-off Date, as the case may be, it has no knowledge of any
such liens with respect to any Financed Boat related to a Contract. However,
such liens could arise at any time during the term of a Contract. No notice will
be given to the Owner Trustee or the Indenture Trustee in the event such a lien
arises.
Possible Loss of Perfection or Priority of Trust's Security Interest in
Financed Boats or Proceeds Thereof. The certificate of title names CITSF (or
CITCF-NY) as the secured party. Because of the administrative burden and
expense, neither CITCF-NY, CITSF, the Company nor the Trust will amend any
certificate of title to note the lien of the Trust as the new secured party on
the certificate of title relating to the Financed Boat nor will any such entity
execute and file any transfer instruments (including, among other instruments,
UCC-3 assignments). In some states, in the absence of such an amendment or
execution, the assignment to the Trust of a security interest in Financed Boats
may not be perfected, such assignment of the security interest to the Trust may
not be effective against creditors or a trustee in bankruptcy of CITSF or
CITCF-NY, which continue to be specified as lienholder on any certificates of
title or as secured party of any UCC filing.
(i) California. A security interest in a boat registered in the State of
California (in which the greatest number of Financed Boats are currently
registered) may be perfected only by depositing with the Department of Motor
Vehicles a properly endorsed certificate of title for the boat showing the
secured party as "legal owner" thereon or if the boat 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 boat 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" to secure payment or
performance of an obligation. Accordingly, under California law, an assignment
such as that under each of the Purchase Agreement and the Trust Documents 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 Trust Documents 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 Trust Documents are an effective conveyance of a
security interest without amendment of any lien noted on a boat's certificate of
title, and the assignee succeeds thereby to the assignor's rights as secured
party. However, in some states the Trust's security interest will be unperfected
because the Trust will not be noted as the secured party on the certificates of
title to the Financed Boats, and therefore the Trust's security interest would
be subordinate to, among others, subsequent purchasers of such Financed Boats
and holders of prior perfected security interests therein. However, 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
Boat, judgment creditors or other creditors who take a security interest in a
Financed Boat.
Continuity of Perfection. Under the laws of most states, a perfected
security interest in a boat continues for four months after the boat is moved to
a new state (from the state in which a financing statement was properly filed
initially to perfect the security interest or in which the certificate of title
was issued) and thereafter until the owner re-registers such boat in the new
state. A majority of states require surrender of a certificate of title to
obtain a new certificate of title for the boat. In those states (including
California) that call for return of the certificate of title to the holder of
the first security interest noted thereon, the secured party would learn of the
re-registration through the request from the obligor under the related marine
installment sale contract to surrender possession of the certificate of title.
In the case of boats registered in states providing for perfection of a lien by
notation of the lien on the certificate of title without possession of the
certificate of title by the secured party, the secured party would receive
notice of surrender from the state of re-registration if the security interest
were noted on the certificate of title. Thus,
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the secured party would have the opportunity to re-perfect its security interest
in the boat in the state to which the boat is moved. 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 note the secured party's lien. Additionally, in states that do not
require a certificate of title for registration of a boat, 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
Boat, 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 Trust Documents, the Servicer will be obligated to take
appropriate steps, at its own expense, to maintain perfection of a security
interest in the Financed Boats.
In most states, CITSF, as Servicer, will hold certificates of title
relating to the Financed Boats in its possession as custodian for the Trust
pursuant to the Trust Documents. In some states, the certificate of title is
held by the Obligor, but only after it is endorsed by the state motor vehicle
department with a notation of CITSF's lien. In the Trust Documents, CITSF, as
Servicer, will covenant that it will not release its security interest in the
Financed Boat securing any Contract except as contemplated by the Trust
Documents. CITSF, as Servicer, will also covenant that it will 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 Trust Documents.
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 Trust
Documents.
Priority of Certain Liens Arising by Operation of Law. Under the laws of
California and of most states, liens for repairs performed on a boat and liens
for certain unpaid taxes take priority over even a first perfected security
interest in such boat. 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 boats by
governmental authorities under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected security
interest in a confiscated boat. A Preferred Mortgage supersedes a perfected
state law security interest. However, under the Ship Mortgage Act, a Preferred
Mortgage is subordinate to preferred maritime liens. Therefore, certain
preferred maritime liens will have priority over security interests in Boats
perfected under state and federal law. CITSF will represent and warrant in the
Trust Documents that, as of the Closing Date, there were no liens or claims
which have been filed for work, labor or materials affecting a Financed Boat
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 Trustees 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 an obligation of CITSF to purchase the Contract under the Trust
Documents.
Repossession
In the event of default by an obligor, the holder of the related marine
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 boat. In cases where the obligor objects or
raises a defense to repossession, or if otherwise required by applicable state
law, a court order must be obtained from the appropriate state court, and the
boat must then be 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 the debtor must be
given a time period within which to cure the default prior to repossession. In
most states (including California), under certain circumstances after the boat
has been repossessed, the obligor may reinstate the related contract by paying
the delinquent installments and other amounts due.
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Notice of Sale; Redemption Rights
In the event of default by the Obligor, some jurisdictions (not including
California) require that the Obligor be notified of the default and be given a
time period within which to cure the default prior to repossession. Generally,
this right of cure may only be exercised on a limited number of occasions during
the term of the related Contract.
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 (i) 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 (ii) in some states, the
delinquent installments or the unpaid principal balance of the related
obligation.
Under federal law, to transfer title in a non-judicial sale, a seller of a
Financed Boat subject to a Preferred Mortgage must give prior notice of the sale
to (i) the owner of a Financed Boat subject to a Preferred Mortgage, (ii) any
other lienholders who have filed notice with the Coast Guard and (iii) the Coast
Guard.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of the Financed Boats 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 certain other states that do not prohibit or limit such judgments. 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." Some courts have held that when a sale is not
"commercially reasonable," the secured party loses its right to a deficiency
judgment and courts in some other states have held that when a sale is not
"commercially reasonable" there is a rebuttable presumption that there is no
deficiency. 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. A deficiency judgment is a judgment against the
obligor or guarantor for the shortfall; however, a defaulting obligor or
guarantor 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 boat 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 boat or, if no such lienholder exists, to the former owner of the boat.
Certain Matters Relating to Insolvency
CITSF, CITCF-NY and the Company intend that the transfers of Contracts from
CITCF-NY to CITSF, from CITSF to the Company and from the Company (and, if and
to the extent specified in the related Prospectus Supplement, a Selling Trust)
to the Trust, constitute sales, rather than pledges, of the Contracts to secure
indebtedness. However, if CITCF-NY, CITSF or the Company (or, if and to the
extent specified in the related Prospectus Supplement, a Selling Trust) 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 such debtor, or such debtor as
debtor-in-possession, may contend that the sales of the Contracts by CITCF-NY to
CITSF, by CITSF to the Company, or by the Company (and, if and to the extent
specified in the related Prospectus Supplement, a Selling Trust) to the Trust,
respectively, were pledges of the Contracts rather than sales and that,
accordingly, such Contracts should be part of such assigning entity's bankruptcy
estate. Such a
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position, if presented to a court, even if ultimately unsuccessful, could result
in a delay in or reduction of distributions to the Securityholders.
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 or against CIT under the Bankruptcy Code or similar
applicable state laws (collectively, "Insolvency Laws") would 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 a requirement that the Company have at least one
"independent director" and restrictions on the nature of the Company's
business). Additionally, the Company's certificate of incorporation prohibits
merger, consolidation and the sale of all or substantially all of its assets in
certain circumstances or the commencement of a voluntary case or proceeding
under any insolvency law, without the prior affirmative unanimous vote of its
directors including any independent director. Notwithstanding the foregoing, in
the event that (i) a court concluded that the assets and liabilities of the
Company should be consolidated with those of CIT (or one of its affiliates) in
the event of the application of applicable insolvency laws to CIT (or one of its
affiliates) or following the bankruptcy or insolvency of CIT (or one of its
affiliates) the security interest in the Contracts granted by the Company to the
Trust should be avoided; (ii) a filing were made under any insolvency law by or
against the Company, or (iii) an attempt were made to litigate any of the
foregoing issues, delays in payments on the Securities and possible reductions
in the amount of such payments could occur.
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, state 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 which fail to comply with
their provisions. In some cases, this liability could affect the ability of an
assignee such as the Trust 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 Trust, as holder of the Contracts, will be subject to any
claims or defenses that the purchaser of the related Financed Boat may assert
against the seller of the Financed Boat. Such claims are limited to a maximum
liability equal to the amounts paid by the Obligor under the related Contracts.
Under California law and most state vehicle dealer licensing laws, sellers
of boats are required to be licensed to sell boats at retail sale. Numerous
other federal and state consumer protection laws impose requirements applicable
to the origination and assignment of marine installment sale contracts and
marine installment loan contracts or notes, 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 the provisions of these laws may affect the
enforceability of the related Contract. The Trust and the Company and, if
specified in the Prospectus Supplement, the Selling Trust, may not have obtained
all licenses required under any federal or state consumer laws
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or regulations, and the absence of such licenses may impede the enforcement of
certain rights or give rise to certain defenses in enforcement actions.
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 and be used as a defense to repayment
of the obligation.
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 Trust Documents that each
Contract complies with all requirements of law in all material respects. A
breach of such representation and warranty that 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 boat, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the boat at
the time of bankruptcy (as determined by the court), leaving the 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 marine 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 a Financed Boat subject to 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 caused by the inability to
realize upon the related Financed Boat in a timely fashion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below and in the related Prospectus Supplement for each series of
the Securities 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. 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
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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 and in the related Prospectus Supplement.
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. Each Trust will be
provided with an opinion of Schulte Roth & Zabel LLP, counsel for the Seller,
regarding certain of the federal income tax matters discussed below and in the
related Prospectus Supplement. 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. For purposes of the following summary, references to the Trust, the
Notes, the Certificates and related terms, parties and documents will be deemed
to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a grantor trust or a
partnership under the Code or is intended to be given an alternative
characterization for federal income tax purposes. The related Prospectus
Supplement for each series of Certificates will specify whether the Trust is
intended to be treated as a grantor trust or a partnership for federal income
tax purposes or how the Trust is otherwise intended to be treated.
Scope of the Tax Opinions
If the related Prospectus Supplement states that a Trust will be treated as
a grantor trust, it is expected that Schulte Roth & Zabel LLP will deliver its
opinion that, for federal income tax purposes, the Trust will be treated as a
grantor trust. In such event, each Certificateholder, by acceptance of a
Certificate, will be treated as the owner of an undivided interest in the
Contracts included in the Contract Pool and any other assets held by the Trust.
If the related Prospectus Supplement does not state that a Trust will be
treated as grantor trust, it is expected that Schulte Roth & Zabel LLP will
deliver its opinion that, 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
(or a publicly traded partnership). Each Noteholder, by acceptance of a Note,
will agree to treat the Notes as indebtedness, and each Certificateholder, by
acceptance of a Certificate, will agree to treat the Trust as a partnership in
which the Certificateholders are partners for federal income tax purposes.
In addition, Schulte Roth & Zabel LLP will render its opinion that it has
reviewed the statements herein and in the related Prospectus Supplement under
the heading "Certain Federal Income Tax Consequences," and is of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion for the possible effects of the
classification of the Trust as a partnership, as a grantor trust or other
classification, as the case may be, for federal income tax purposes on investors
generally and of related tax matters affecting investors generally, but do not
purport to furnish information in the level of detail or with the attention to
the investor's specific tax circumstances that would be provided by an
investor's own tax adviser. Accordingly, each investor is advised to consult its
own tax advisers with regard to the tax consequences to it of investing in the
Securities.
Other Tax Consequences
No advice has been received as to local income, franchise, personal
property, or other taxation in 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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Alternative Tax Treatment
In the event that, as a result of a change in applicable laws or
regulations or the interpretation thereof, the federal income tax
characteristics of the Notes or the Certificates are not anticipated to be as
described above, the related Prospectus Supplement will include a discussion of
the anticipated federal income tax treatment of the Notes or Certificates.
CERTAIN STATE TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and collecting
the Contracts will take place in Oklahoma. The State of Oklahoma imposes a state
income tax on individuals, nonresident aliens (with respect to Oklahoma taxable
income), corporations, certain foreign corporations, and trusts and estates with
Oklahoma taxable income. No ruling on any of the issues discussed below will be
sought from the Oklahoma Tax Commission.
Because of the variation in each state's or locality's tax laws, it is
impossible to predict tax consequences to Securityholders in all of the other
state and local taxing jurisdictions. Securityholders are urged to consult their
own tax advisors with respect to state and local tax consequences arising out of
the purchase, ownership and disposition of Securities.
Tax Consequences with Respect to the Notes
Crowe and Dunlevy, P.C., Oklahoma tax counsel to the Sellers ("Oklahoma Tax
Counsel") will advise the Trust that, assuming the Notes will be treated as debt
for federal income tax purposes, the Notes will be treated as debt for Oklahoma
income tax purposes, and the Noteholders not otherwise subject to taxation in
Oklahoma should not become subject to taxation in Oklahoma solely because of a
holder's ownership of Notes. However, a Noteholder already subject to Oklahoma's
income tax could be required to pay additional Oklahoma tax as a result of the
holder's ownership or disposition of Notes.
Tax Consequences with Respect to the Certificates Issued by a
Trust Treated as a Partnership
Oklahoma Tax Counsel will advise the Trust that if the arrangement created
by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for U.S. federal income tax purposes, the same treatment should
also apply for Oklahoma income tax purposes; under current law,
Certificateholders that are nonresidents of Oklahoma and are not otherwise
subject to Oklahoma income tax should not be subject to Oklahoma income tax on
the income from the Trust because it is unlikely that the Trust has established
a nonunitary business or commercial situs in Oklahoma. In any event,
classification of the arrangement as a "partnership" would not cause a
Certificateholder not otherwise subject to taxation in Oklahoma to pay Oklahoma
income tax on income beyond that derived from the Certificates.
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 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
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Code, or (c) any entity whose underlying assets include plan assets by reason of
a plan's investment in the entity (other than an insurance company purchasing
the Certificates for its general accounts). By its acceptance of a Certificate
or its acquisition of an interest in a Certificate through a Participant or DTC,
each Certificateholder or Certificate Owner 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 Certificates should
consult its tax and or legal advisors regarding whether the assets of the Trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
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."
A plan fiduciary considering the purchase of the Notes should consult its
tax and or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, either the Company or the
Trust will agree to sell to each of the underwriters (the "Underwriters") named
therein and in the related Prospectus Supplement, and each of such Underwriters
will severally agree to purchase from the Company or the Trust, as applicable,
the principal amount of each class of Securities of the related series set forth
therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several Underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event of a
default by any such underwriter, each Underwriting Agreement will provide that,
in certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the Underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that CITSF and/or the Company will
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act.
A Trustee may, from time to time, invest the funds of the Trust in Eligible
Investments acquired from the Underwriters.
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FINANCIAL INFORMATION
The Company has determined that its financial statements are not material
to the offering made hereby.
Each Trust will be formed to own the related Contracts and the other Trust
assets and to issue the related Securities. Each Trust will have had no assets
or obligations prior to the issuance of the Securities and will not engage in
any activities other than those described herein and in the related Prospectus
Supplement. Accordingly, no financial statements with respect to each Trust are
included in this Prospectus or in the related Prospectus Supplement.
RATINGS
It is a condition to the issuance of any class of Securities offered
pursuant to this Prospectus that the Securities be rated in one of the four
highest rating categories by at least one nationally recognized statistical
rating organization rating such series of Securities (each, a "Rating Agency").
The foregoing ratings do not address the likelihood that the Securities will be
retired following the sale of the Contracts by the Trust. 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 Securities 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 LLP, New York, New York. The material federal income tax consequences of
the Securities will be passed upon for the Company by Schulte Roth & Zabel LLP.
Certain legal matters will be passed upon for CITSF, CITCF-NY and the Company by
Norman H. Rosen, Esq., Senior Vice President and General Counsel of CITSF. If
the Enhancement for a class of Securities includes a CIT Limited Guarantee,
certain legal matters will be passed upon for CIT by its Executive Vice
President and General Counsel, Ernest D. Stein, Esq. If a Trust is formed
pursuant to the laws of the State of Delaware, certain legal matters will be
passed upon for the Trust by its special Delaware counsel named in the related
Prospectus Supplement.
EXPERTS
The consolidated balance sheets of CIT as of December 31, 1996 and 1995 and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1996 in CIT's Amendment No. 2 to the Registration Statement on Form S-2 have
been incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, also incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
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INDEX OF PRINCIPAL TERMS
Affiliated Owner...........................................................6, 26
Asset Service Center..........................................................31
Available Amount..........................................................14, 56
Bankruptcy Code...........................................................23, 66
Benefit Plan..................................................................70
Business Day..............................................................13, 34
Capitalized Interest Account..................................................12
Cash Collateral Account.......................................................41
CBC...........................................................................30
CBC Holding...................................................................30
Cede.......................................................................6, 33
Cedel...................................................................3, 8, 25
Cedel Participants............................................................44
Certificate Distribution Account..............................................51
Certificate Final Scheduled Distribution Date.................................13
Certificate Owner.........................................................25, 33
Certificate Owners.............................................................6
Certificate Pool Factor.......................................................29
Certificateholders............................................................45
Certificates............................................................2, 6, 33
CIT.....................................................................3, 5, 21
CITCF-NY..................................................................10, 21
CITSF......................................................................5, 21
Closing Date..................................................................10
CMC...........................................................................30
Code......................................................................19, 68
Collection Account............................................................51
Commission.....................................................................3
Company.................................................................2, 5, 21
Contract Files................................................................26
Contract Pool..............................................................9, 27
Contract Rate.................................................................27
Contracts...............................................................2, 9, 27
Cooperative...................................................................44
Credit Facility...............................................................41
Credit Facility Provider......................................................42
Dealers...................................................................10, 21
Definitive Certificates.......................................................45
Definitive Notes..............................................................45
Definitive Securities.........................................................45
Deposit Date..................................................................25
Depositories..................................................................42
Depository....................................................................25
Determination Date............................................................14
Distribution Date.........................................................13, 34
DKB...........................................................................30
DTC.....................................................................3, 6, 25
DTC Rules.....................................................................43
Due Period....................................................................14
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Eligible Account..............................................................52
Eligible Institution..........................................................52
Eligible Investments..........................................................52
Enhancement...................................................................40
ERISA.....................................................................19, 70
Euroclear...............................................................3, 8, 44
Euroclear Operator............................................................44
Euroclear Participants........................................................44
Event of Termination..........................................................59
Events of Default.............................................................36
Financed Boats..............................................................2, 9
Financial Guaranty Insurance Policy...........................................40
Financial Guaranty Insurer....................................................40
Force-Placed Insurance........................................................58
FTC Rule......................................................................67
Funding Period.........................................................7, 11, 12
Holder........................................................................43
Holders.......................................................................45
Indenture...............................................................3, 7, 34
Indenture Trustee....................................................3, 5, 6, 34
Indirect Participants.........................................................43
Initial Contracts...........................................................2, 9
Initial Cut-off Date........................................................2, 9
Initial Financed Boats......................................................2, 9
Initial Pool Balance......................................................18, 61
Insolvency Laws...............................................................66
Insurance Advances............................................................58
Insured Payment...............................................................40
Interest Accrual Period...................................................13, 14
Interest Rate..................................................................8
IRS...........................................................................68
Issuer.........................................................................5
Late Fees.................................................................14, 56
Limited Guarantee.............................................................41
Liquidity Facility............................................................42
Liquidity Facility Provider...................................................42
List of Contracts.............................................................49
MHC...........................................................................30
Military Reservist Relief Act.................................................50
Monthly Advance...........................................................16, 55
Non-Reimbursable Payment..................................................17, 55
Note Distribution Account.....................................................51
Note Final Scheduled Distribution Date........................................13
Note Owner................................................................25, 35
Note Owners....................................................................8
Note Pool Factor..............................................................29
Noteholders...................................................................45
Notes...................................................................2, 7, 34
Notice........................................................................59
Obligor...................................................................10, 55
Oklahoma Tax Counsel..........................................................70
Original Certificate Balance..................................................26
Owner Trustee..................................................................5
Paid-Ahead Account............................................................52
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Paid-Ahead Period.............................................................28
Paid-Ahead Precomputed Contract...............................................28
Paid-Ahead Simple Interest Contract...........................................28
Participants..................................................................42
Pass-Through Rate.......................................................6, 7, 34
Payment Shortfall.....................................................16, 17, 55
Pool Balance..................................................................18
Pooling and Servicing Agreement................................................3
Precomputed Contracts.........................................................28
Preferred Mortgage........................................................22, 63
Pre-Funded Amount.............................................................11
Pre-Funded Percentage.........................................................23
Pre-Funding Account............................................................7
Prospectus Supplement..........................................................2
PTCE..........................................................................70
Purchase Agreement............................................................10
Purchase Agreements...........................................................48
Purchase Price................................................................50
Rating Agency.............................................................19, 71
Rating Agency Condition.......................................................36
Record Date...............................................................13, 34
Registration Statement.........................................................3
Related Documents.............................................................38
Repurchase Event..............................................................10
Repurchased Contract......................................................10, 50
Required Servicer Ratings.....................................................54
Reserve Account...............................................................41
Reserve Fund..................................................................41
Retained Yield................................................................51
Sale and Servicing Agreement...................................................3
Securities..............................................................2, 7, 34
Security Owner................................................................35
Securityholder................................................................43
Securityholders...............................................................45
Seller......................................................................2, 5
Selling Trust..................................................................5
Servicer....................................................................3, 5
Servicer Letter of Credit.....................................................54
Servicer Payment..............................................................14
Servicing Fee.........................................................17, 18, 53
Servicing Fee Rate....................................................17, 18, 54
Ship Mortgage Act.........................................................22, 63
Simple Interest Contracts.....................................................27
Soldiers' and Sailors' Civil Relief Act.......................................50
Spread Account................................................................41
Stockholders Agreement........................................................30
Stripped Certificates..........................................................7
Stripped Notes.................................................................8
Subsequent Contracts........................................................2, 9
Subsequent Cut-off Date....................................................2, 11
Subsequent Financed Boats...................................................2, 9
Subsequent Purchase Agreement.................................................11
Subsequent Transfer Agreement.................................................11
Subsequent Transfer Date......................................................11
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Terms and Conditions..........................................................44
Trust.......................................................................2, 5
Trust Agreement................................................................3
Trust Documents...............................................................48
Trustee.....................................................................3, 5
Trustees....................................................................5, 6
UCC.......................................................................21, 62
Underwriters..................................................................71
Underwriting Agreement........................................................71
Yield Supplement Account......................................................41
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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
Supplement and the accompanying Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company, CITSF or any Underwriter. This Prospectus Supplement and the
accompanying Prospectus do 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 Supplement or the accompanying 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.
--------------
Table of Contents
Prospectus Supplement
Page
----
Summary ................................................................... S-3
Risk Factors .............................................................. S-19
Structure of the Transaction .............................................. S-23
The Trust Property ........................................................ S-24
The Contract Pool ......................................................... S-25
Maturity and Prepayment Considerations .................................... S-29
Yield and Prepayment Considerations ....................................... S-34
Pool Factors .............................................................. S-34
Use of Proceeds ........................................................... S-35
The CIT Group/Sales Financing, Inc., Servicer ............................. S-35
The Certificates .......................................................... S-39
The Notes ................................................................. S-41
Enhancement ............................................................... S-43
The Purchase Agreements and the Trust Documents ........................... S-45
Certain Federal Income Tax Consequences ................................... S-47
Plan of Distribution ...................................................... S-47
Ratings ................................................................... S-48
Legal Matters ............................................................. S-48
Annex I ................................................................... S-49
Index of Principal Terms .................................................. S-52
Prospectus
Available Information ..................................................... 3
Reports to Securityholders ................................................ 3
Documents Incorporated by Reference ....................................... 4
Summary ................................................................... 5
Risk Factors .............................................................. 21
The Trusts ................................................................ 25
The Trust Property ........................................................ 26
The Contract Pool ......................................................... 26
Yield and Prepayment Considerations ....................................... 28
Pool Factors .............................................................. 29
Use of Proceeds ........................................................... 29
The CIT Group, Inc. ....................................................... 30
The CIT Group Securitization Corporation II, Seller ....................... 30
The CIT Group/Sales Financing, Inc., Servicer ............................. 31
The Certificates .......................................................... 33
The Notes ................................................................. 34
Enhancement ............................................................... 39
Certain Information Regarding the Securities .............................. 42
The Purchase Agreements and the Trust Documents ........................... 48
Certain Legal Aspects of the Contracts .................................... 61
Certain Federal Income Tax Consequences ................................... 67
Certain State Tax Consequences ............................................ 68
ERISA Considerations ...................................................... 68
Plan of Distribution ...................................................... 69
Financial Information ..................................................... 70
Ratings ................................................................... 70
Legal Matters ............................................................. 70
Experts ................................................................... 70
Index of Principal Terms .................................................. i
Until ninety days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Securities, whether or not participating in this
distribution, may be required to deliver a Prospectus Supplement and the
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus Supplement and the Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
$-----------
(Approximate)
CIT Marine
Trust ____-_
$---------- --%
Asset-Backed Notes
$________ ___% Asset-Backed
Certificates
The CIT Group
Securitization
Corporation II,
Seller
The CIT Group/Sales
Financing, Inc.,
Servicer
[Underwriters]
Prospectus
Dated
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
SEC registration fee................................ $ 350.00
Attorney's fees and expenses ....................... *
Accounting fees and expenses ....................... *
Blue sky fees and expenses ......................... *
Rating agency fees ................................. *
Trustee's fees and expenses ........................ *
Printing expenses .................................. *
Miscellaneous fees and expenses .................... *
Total........................................... *
*To be completed by amendment.
Item 15. Indemnification of Directors and Officers.
Subsection (a) of Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation except that no indemnification may be made in
respect of any claim, issue, or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee, or agent of a corporation has been successful in the defense of any
action, suit, or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue, or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and empowers the corporation to purchase and maintain insurance on
behalf of any person acting in any of the capacities set forth in the second
preceding paragraph against any liability asserted against him or incurred by
him in any such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
The Registrants' By-Laws provide for indemnification of directors and
officers of each Registrant to the full extent permitted by Delaware law.
II-1
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Article X of the By-laws of CIT and Article VIII of the By-laws of the
Company provide, in effect, that, in addition to any rights afforded to an
officer, director or employee of such Registrant by contract or operation of
law, such Registrant may indemnify any person who is or was a director, officer,
employee, or agent of such Registrant, or of any other corporation which he
served at the request of such Registrant, against any and all liability and
reasonable expense incurred by him in connection with or resulting from any
claim, action, suit, or proceeding (whether brought by or in the right of such
Registrant or such other corporation or otherwise), civil or criminal, in which
he may have become involved, as a party or otherwise, by reason of his being or
having been such director, officer, employee, or agent of such Registrant or
such other corporation, whether or not he continues to be such at the time such
liability or expense is incurred, provided that such person acted in good faith
and in what he reasonably believed to be the best interests of such Registrant
or such other corporation, and, in connection with any criminal action
proceeding, had no reasonable cause to believe his conduct was unlawful.
Such Articles further provide that any person who is or was a director,
officer, employee, or agent of each Registrant or any director or indirect
wholly-owned subsidiary of each Registrant shall be entitled to indemnification
as a matter of right if he has been wholly successful, on the merits or
otherwise, with respect to any claim, action, suit, or proceeding of the type
described in the foregoing paragraph.
In addition, the Registrants maintain directors' and officers'
reimbursement and liability insurance pursuant to standard form policies with
aggregate limits of $90,000,000. The risks covered by such policies do not
exclude liabilities under the Securities Act of 1933.
Pursuant to the form of Underwriting Agreement, the Underwriters will
agree, subject to certain conditions, to indemnify the Registrants, their
directors, certain of their officers and persons who control the Registrants
within the meaning of the Securities Act of 1933 against certain liabilities.
Item 16. Exhibits and Financial Statement Schedules.
a. Exhibits:
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended, of The CIT Group
Securitization Corporation II, incorporated by reference
herein to Exhibit 3.1 to Registration Statement 33-65057
3.2 By-laws of The CIT Group Securitization Corporation II,
incorporated by reference herein to Exhibit 3.2 to
Registration Statement 333-07249
4.1* Form of Indenture between the Trust and the Indenture
Trustee
4.2* Form of Trust Agreement between the Company and the Owner
Trustee
4.3* Form of Sale and Servicing Agreement among the Company,
CITSF and the Trust
4.5* Form of Limited Guarantee
4.6* Form of Pooling and Servicing Agreement
5.1* Opinion of Schulte Roth & Zabel LLP with respect to legality
8.1* Opinion of Schulte Roth & Zabel LLP with respect to tax
matters
8.2* Opinion of Crowe & Dunlevy PC with respect to Oklahoma tax
matters
10.1* Form of Purchase Agreement
10.2* Form of Subsequent Purchase Agreement
23.1* Consent of Schulte Roth & Zabel LLP (included as part of
Exhibit 5.1)
23.2* Consent of Crowe and Dunlevy, P.C. (included as part of
Exhibit 8.2) 23.3** Consent of KPMG Peat Marwick LLP
24.1** Powers of Attorney of The CIT Group Securitization
Corporation II (included on page II-4)
24.2** Powers of Attorney of The CIT Group, Inc.
- ------------
* To be filed by amendment.
** Filed herewith.
II-2
<PAGE>
b. Financial Statement Schedules:
Not applicable.
Item 17. Undertakings.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any fact or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrants undertake that, for purposes of determining any
liability under the Act, each filing of the Registrants' annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrants hereby agree to provide to the underwriter at
the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrants
pursuant to the foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Livingston, State of New Jersey, on December 24,
1997.
THE CIT GROUP SECURITIZATION CORPORATION II
By: /s/ JAMES J. EGAN, JR.
--------------------------------------
Name: James J. Egan, Jr.
Title: President
POWER OF ATTORNEY
Each person whose signature to this Registration Statement appears below
hereby constitutes and appoints Norman H. Rosen, James J. Egan, Jr. and Richard
W. Bauerband, or any of them (with the full power of each of them to act alone),
as his true and lawful attorney-in-fact and agent, with full power of
substitution, to sign on his behalf individually and in the capacity stated
below and to perform any acts necessary to be done in order to file all
amendments and post-effective amendments to this Registration Statement, and any
and all instruments or documents filed as part of or in connection with this
Registration Statement or the amendments thereto, and each of the undersigned
does hereby ratify and confirm all that said attorney-in-fact and agent, or his
substitutes, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ JAMES J. EGAN, JR. President and Director December 24, 1997
- --------------------------- (principal executive officer)
/s/ RICHARD W. BAUERBAND Executive Vice President December 24, 1997
- --------------------------- and Director
/s/ JOSEPH J. CARROLL Director December 24, 1997
- ---------------------------
/s/ FRANK GARCIA Vice President December 24, 1997
- --------------------------- (principal financial and
accounting officer)
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York, on
December 24, 1997.
THE CIT GROUP, INC.
By: /s/ DONALD R. RAPSON
---------------------------------
Donald J. Rapson
Senior Vice President,
Assistant General
Counsel and Secretary
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature and Title Date
------------------- ----
Albert R. Gamper, Jr.*
- -------------------------------------
President, Chief Executive Officer,
and Director
(Principal executive officer)
Hisao Kobayashi*
- -------------------------------------
Director
Takasuke Kaneko*
- -------------------------------------
Director
Joseph A. Pollicino* *By /s/ DONALD J. RAPOSN December 24, 1997
- ------------------------------------- -------------------
Director Donald J. Rapson
Attorney-in-fact
Paul N. Roth*
- -------------------------------------
Director
Peter J. Tobin*
- -------------------------------------
Director
Yukiharu Uno*
- -------------------------------------
Director
Yoshiro Aoki*
- -------------------------------------
Director
Keiji Torii*
- -------------------------------------
Director
Tohru Tonoike*
- -------------------------------------
Director
/s/ JOSEPH M. LEONE
- -------------------------------------
Joseph M. Leone December 24, 1997
Executive Vice President and Chief
Financial Officer
principal financial and accounting officer)
Original powers of attorney authorizing Albert R. Gamper, Jr., Ernest D.
Stein, and Donald J. Rapson and each of them to sign the Registration Statement
and amendments thereto on behalf of the directors and officers of the Registrant
indicated above are held by The CIT Group, Inc. and available for examination
pursuant to Item 302(b) of Regulation S-T.
II-5
Exhibit 23.3
Independent Auditors' Consent
The Board of Directors
The CIT Group, Inc.
We consent to the use of our report dated January 17, 1997, except as to note 21
which is as of February 21, 1997 and note 22 which is as of September 26, 1997,
relating to the consolidated balance sheets of The CIT Group, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1996, incorporated by
reference in this Registration Statement on Form S-3 of The CIT Group
Securitization Corporation II, which report appears in Amendment No. 2 to the
Registration Statement of Form S-2 of The CIT Group, Inc., and to the reference
to our firm under the heading "Experts" in the Registration Statement on Form
S-3.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Short Hills, New Jersey
December 19, 1997
Exhibit 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ Albert R. Gamper, Jr.
------------------------------------
Albert R. Gamper, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ Hisao Kobayashi
------------------------------------
Hisao Kobayashi
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ T. Kaneko
------------------------------------
Takasuke Kaneko
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ J. A. Pollicino
------------------------------------
Joseph A. Pollicino
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ Paul N. Roth
------------------------------------
Paul N. Roth
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ Peter J. Tobin
------------------------------------
Peter J. Tobin
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ Yukiharu Uno
------------------------------------
Yukiharu Uno
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ Yoshiro Aoki
------------------------------------
Yoshiro Aoki
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ Keiji Torii
------------------------------------
Keiji Torii
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP, INC., a Delaware corporation (the "Corporation"),
which is about to file with the Securities and Exchange Commission, Washington,
D.C., under the provisions of the Securities Act of 1933, as amended, a
Registration Statement on Form S-3, for the registration of the Corporation's
guarantee of certain notes and certificates issued by The CIT Group
Securitization Corporation II, a wholly-owned subsidiary of the Corporation,
under said Act, which notes and certificates may be issued in an aggregate
principal amount of up to $1,400,000,000, or if issued at an original discount,
such greater principal amount as shall result in an aggregate initial public
offering price of up to $1,400,000,000 (all in United States dollars or an
equivalent amount in another currency or composite currency), hereby constitutes
and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J. RAPSON his
true and lawful attorneys-in-fact and agents, and each of them with full power
to act without the others, for him and in his name, place, and stead, in any and
all capacities, to sign such Registration Statement and any and all amendments
thereof, with power where appropriate to affix the corporate seal of said
Corporation thereto and to attest to said seal, and to file such Registration
Statement and each such amendment, with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person and hereby ratifies and
confirms all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 15th
day of October, 1997.
/s/ Tohru Tonoike
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Tohru Tonoike
