<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE +
+ACCOMPANYING 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 November 19, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 29, 1997
$564,122,864
CIT RV Trust 1997-A
THE CIT GROUP SECURITIZATION CORPORATION II
Seller
THE CIT GROUP/SALES FINANCING, INC.
Servicer
--------
The CIT RV Trust 1997-A (the "Trust" or the "Issuer") will be formed pursuant
to a Trust Agreement, to be dated as of November 1, 1997, between The CIT
Group Securitization Corporation II (the "Company" or the "Seller") and First
Omni Bank, N.A., 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 amount of $40,300,000, $32,000,000, $89,000,000,
$128,000,000, $74,000,000, $106,000,000, $49,700,000, and $31,000,000,
respectively, pursuant to an Indenture, to be dated as of November 1,
1997, between the Issuer and Harris Trust and Savings Bank, 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
$14,122,864.
(continued on following page)
FOR A DISCUSSION OF SIGNIFICANT MATTERS AFFECTING INVESTMENT IN THE SECURITIES,
SEE "RISK FACTORS" BEGINNING ON PAGE S-20 HEREIN AND PAGE 21 IN THE
PROSPECTUS, "MATURITY AND PREPAYMENT CONSIDERATIONS" BEGINNING ON PAGE S-29
HEREIN, AND "YIELD AND PREPAYMENT CONSIDERATIONS" BEGINNING ON PAGE S-37
HEREIN.
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.
<TABLE>
<CAPTION>
Initial Interest
Note/Certificate Rate/Pass-
Principal Through Price to Underwriting Proceeds to the
Balance Rate Public(1) Discount Company(1)(2)
---------------- ---------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Per Class A-1 Note......................... $ 40,300,000 % % % %
Per Class A-2 Note......................... $ 32,000,000 % % % %
Per Class A-3 Note......................... $ 89,000,000 % % % %
Per Class A-4 Note......................... $128,000,000 % % % %
Per Class A-5 Note......................... $ 74,000,000 % % % %
Per Class A-6 Note......................... $106,000,000 % % % %
Per Class A-7 Note......................... $ 49,700,000 % % % %
Per Class B Note........................... $ 31,000,000 % % % %
Per Certificate............................ $ 14,122,864 % % % %
Total...................................... $564,122,864 % $ $ $
</TABLE>
(1)Plus accrued interest, if any, at the respective Interest Rate or the Pass-
Through Rate, as appropriate, from the Closing Date.
(2)Before deduction of expenses payable by the Company estimated at $700,000.
The Securities are offered by the Underwriters, when, as and if issued,
delivered to and accepted by the Underwriters and subject to their right to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made in book-entry form 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
December , 1997, against payment therefor in immediately available funds.
CREDIT SUISSE FIRST BOSTON
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES, INC.
SALOMON BROTHERS INC
The date of this Prospectus Supplement is November , 1997.
<PAGE>
(continued from preceding page)
The assets of the Trust will primarily include a pool of simple interest
retail installment sale contracts and direct loans (the "Contracts") secured
by the new and used recreation vehicles financed thereby (the "Financed
Vehicles"), certain monies received under the Contracts on and after November
1, 1997 (the "Cut-off Date"), an assignment of the security interests in the
Financed Vehicles, 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 Vehicles or the related
Obligors and certain rights under the Sale and Servicing Agreement, to be
dated as of November 1, 1997 (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 December
15, 1997, to the extent described herein. 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. No principal payments will be made on the Class B Notes until the
Class A-1 Notes have been paid in full. Payments of interest and principal on
the Class B Notes will be subordinated in priority of payment 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") which will
be distributed to Certificateholders on each Distribution Date to the extent
described herein. Interest on the Certificates will be calculated on the basis
of a 360-day year consisting of twelve 30-day months. Distributions of
interest and principal on the Certificates will be subordinated in priority of
payment to payment of interest and principal due 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
recreation vehicle 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 October 29, 1997 (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 RV Trust 1997-A (the "Trust" or the
"Issuer"), a Delaware business trust to be formed
by the Seller and the Owner Trustee pursuant to
the Trust Agreement, to be dated as of November
1, 1997 (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............... First Omni Bank, N.A., as trustee under the Trust
Agreement (the "Owner Trustee").
Indenture Trustee........... Harris Trust and Savings Bank, as trustee under
the Indenture, to be dated as of November 1, 1997
(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 RV Trust 1997-A 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 $40,300,000, $32,000,000,
$89,000,000, $128,000,000, $74,000,000,
$106,000,000, $49,700,000 and $31,000,000
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 November 1,
1997, 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 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 RV Trust 1997-A % Asset-Backed
Certificates (the "Certificates") will represent
fractional undivided interests in the Trust. See
"The Certificates--General."
The Trust will issue $14,122,864 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) any entity
S-5
<PAGE>
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 simple interest retail installment
sale contracts and direct loans (the "Contracts")
secured by the new and used recreation vehicles
financed thereby (the "Financed Vehicles"), (ii)
certain monies received under the Contracts on
and after November 1, 1997 (the "Cut-off Date"),
(iii) an assignment of the security interests in
the Financed Vehicles, (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 Vehicles or the related
Obligors and (vi) certain rights under the Sale
and Servicing Agreement, to be dated as of
November 1, 1997 (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 simple interest recreation vehicle retail
installment sale contracts originated by
recreation vehicle dealers ("Dealers") and
acquired by CITSF or The CIT Group/Consumer
Finance, Inc. (NY) ("CITCF-NY"), originated
directly by CITSF or one of its affiliates, or
acquired by CITSF or one of its affiliates from
unaffiliated third parties. The Financed Vehicles
will consist of motor homes, travel trailers and
other types of recreation vehicles. See "The
Contract Pool." On or prior to the date of
issuance of the Securities (the "Closing Date"),
CITCF-NY will sell certain contracts that will
constitute a portion of the Contracts to CITSF
pursuant to a purchase agreement, to be dated as
of November 1, 1997, and CITSF will sell the
Contracts to the Company pursuant to a purchase
agreement, to be dated as of November 1, 1997
(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 163.20
months and a remaining weighted average maturity
of 158.28 months. The final scheduled payment
date on the Contract with the last maturity
occurs in November 2017. See "The Contract Pool."
The Contracts will generally be
S-6
<PAGE>
prepayable at any time without premium or penalty
to the purchaser of the related Financed Vehicle
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 December 15,
1997. 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, Delaware, Illinois 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
November 1, 1997 and will end on and include
November 30, 1997.
S-7
<PAGE>
Interest Accrual Period..... Interest on the outstanding principal amount of
the Notes and Certificates will accrue at the
applicable Interest Rate or Pass-Through Rate for
any Distribution Date 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 such
Distribution Date (each, an "Interest Accrual
Period").
Interest will be paid to the Noteholders and
Certificateholders of record on the related
Record Date, on each Distribution Date, to the
extent of available funds therefor, in an amount
equal to the sum of (A) the product of (x) the
applicable Interest Rate or Pass-Through Rate, as
applicable, (y) the outstanding principal balance
of the class of Notes or Certificate Balance, as
applicable, immediately preceding such
Distribution Date and (z) a fraction (i) in the
case of the Class A-1 Noteholders, the numerator
of which equals the actual number of days elapsed
in the related Interest Accrual Period and the
denominator of which is 360 and (ii) in the case
of each other class of Notes and the
Certificates, the numerator of which is one and
the denominator of which is twelve (or, in the
case of the first Distribution Date, the
numerator of which is and the denominator of
which is 360), and (B) any applicable Interest
Carryover Shortfall.
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
among 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 Vehicles 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
S-8
<PAGE>
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................. 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.
S-9
<PAGE>
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 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;
provided, however, that prior to the Distribution
Date on which the Class A-1 Notes have been paid
in full, the Class B Noteholders' Principal
Distribution Amount will be zero. 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.
The Principal Distribution Amount on a
Distribution Date will generally be allocable as
follows: first, 100% of the Principal
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Distribution Amount for such Distribution Date to
the Class A-1 Notes until the Class A-1 Notes
have been paid in full; second, 100% of the
Principal Distribution Amount for such
Distribution Date to the Class B Notes until the
outstanding principal amount of the Class B Notes
equals 5.5% of the Pool Balance as of the last
day of the related Due Period; and thereafter,
94.5% of the Principal Distribution Amount for
such Distribution Date to the Class A Notes
(sequentially, in the order of their numerical
class designations) until the Class A Notes have
been paid in full and 5.5% of the Principal
Distribution Amount for such Distribution Date to
the Class B Notes until the Class B Notes have
been paid in full. 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) will be
paid to the Class B Notes until the Class B Notes
have been paid in full. Distributions, however,
on the Class B Notes will be subordinated to the
Class A Notes, as 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. No principal
payments will be made on the Class B Notes until
the Class A-1 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, and
no principal payments will be made on the Class B
Notes until the Class A Notes have been paid in
full.
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
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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 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 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........... 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
to waive 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").
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B. Interest................. 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."
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
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<PAGE>
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.
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.
E. Limited Rights........... 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 to waive 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.
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<PAGE>
The Class A Noteholders will be entitled to
receive current distributions of interest prior
to the Class B Noteholders receiving any current
payments 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 payment of principal prior to the Class B
Noteholders receiving their share of the current
payment of principal. Furthermore, the Class B
Noteholders will not be entitled to receive any
share of the current payment of principal until
the Distribution Date on which the Class A-1
Noteholders have been paid in full. 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 be funded on the
Closing Date in the amount of $11,282,457 (the
"Initial Reserve Amount") from the proceeds of a
loan (the "Loan") to be made by one or more
affiliates of the Company. 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,
exclusive of interest and earnings thereon and
any net investment gains and 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, 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 Vehicles 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 one or more
affiliates of the Company that
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<PAGE>
provided the Loan or 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 2.0% of the Pool Balance as of the first
day of the related Due Period, but in no event
less than $4,230,921 (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 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 (the "Reserve
Account Surplus") will be withdrawn from the
Reserve Account and paid to one or more
affiliates of the Company which provided the Loan
or to the Affiliated Owner. See "Enhancement--
Reserve Account."
In the event that funds are withdrawn from the
Reserve Account to make payments on the
Securities or the Specified Reserve Amount is
increased, the sole source of funding of the
Reserve Account after the Closing Date will be
Excess Collections. Neither the Seller, the
Servicer nor any affiliate will be obligated to
deposit any of their own funds into the Reserve
Account in the event that Excess Collections are
not sufficient to replenish the Reserve Account.
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
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<PAGE>
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 may reimburse itself
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.
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 0.50% (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 1.00%. See "The
Purchase Agreements and The Trust Documents--
Servicing Compensation" herein and in the
Prospectus.
Optional Purchase of the At its option, CITSF may purchase all the
Contracts................... Contracts on any Distribution Date on which the
Pool Balance as of the last day of the related
Due Period is 10% or less of the Initial Pool
Balance, at a purchase price determined as
described under "The Purchase Agreements and The
Trust Documents--Termination" herein and in the
Prospectus. The "Initial Pool Balance" equals the
Pool Balance as of the Cut-off Date.
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<PAGE>
Auction Sale................ After the first Distribution Date on which the
Pool Balance as of the last day of the related
Due Period is 5% or less of the Initial Pool
Balance, the Indenture Trustee (or, if the Notes
have been paid in full and the Indenture has been
discharged in accordance with its terms, the
Owner Trustee) shall solicit bids for the
purchase of the Contracts remaining in the Trust.
In the event that satisfactory bids are received
as described in "The Purchase Agreements and The
Trust Documents--Termination" 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 "A1" 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
be retired following the sale of the Contracts by
the Trustee as described above under "Auction
Sale" or "Optional Purchase of the Contracts."
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
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<PAGE>
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."
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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<PAGE>
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
retail installment sale contracts and direct loans secured by recreation
vehicles. In addition, the credit criteria and underwriting guidelines under
which CITSF originates recreation vehicle retail 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 recreation
vehicles generally declines with age and since in certain states the Trustees
may not have a first perfected security interest in the Financed Vehicles, 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 Vehicles 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. 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 Vehicles for recovery of the outstanding
principal and unpaid interest on the defaulted Contracts. If the Available
Reserve Amount is 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 Vehicles 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. (S)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
S-20
<PAGE>
deposit in the Reserve Account. Funds deposited in the Reserve Account which
are available to pay principal and interest on the Securities on any
Distribution Date will not exceed the Specified Reserve Amount for such
Distribution Date. In addition, amounts to be deposited in the Reserve Account
are limited and will be reduced as the Pool Balance is reduced. 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 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, there is no assurance that the
market value of the Contracts at any time will 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
can be no assurance that sufficient funds will be available to repay
Noteholders in full. In addition, the amount of principal required to be
distributed to Noteholders under the Indenture is generally limited to amounts
available to be deposited in the Note Distribution Account for such purpose.
Therefore, the failure to pay principal on any class of Notes will not result
in the occurrence of an Event of Default until the Note Final Scheduled
Distribution Date applicable to such 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 on and principal of the Class B Notes will be
subordinated in priority of payment to payments of interest and principal due
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 on and principal of
the Certificates will be subordinated in priority of payment to payments of
interest and principal due on the Notes.
5. Limited Source of Funding for Reserve Account. Subsequent to the Closing
Date, Excess Collections will be the only source of funding of the Reserve
Account. 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. Funds deposited in the Reserve Account 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
S-21
<PAGE>
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 Texas,
California, Florida, and Washington. Based on the Pool Balance as of the Cut-
off Date, 15.20%, 14.95%, 7.31% and 5.31% of the Contracts have Obligors with
mailing addresses in Texas, California, Florida, and Washington, respectively.
Because of the relative lack of geographic diversity, losses on the 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 Texas, California, Florida, or Washington may have an
adverse effect on the ability of Obligors in such states to meet their payment
obligations under the Contracts.
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.
The distribution of prepayments among Contracts in the Contract Pool may
affect the Contract Pool's overall credit quality. For example, if the
Contracts of Obligors with higher credit scores prepay at a disproportionately
high rate, delinquencies and Net Losses as a percentage of the remaining
principal balance of Contracts in the Contract Pool would increase, and the
relative credit quality of the remaining Contracts in the Contract Pool would
be adversely affected. 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
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<PAGE>
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 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, 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. 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
S-23
<PAGE>
may remove the Servicer without the consent of any of the Class B Noteholders
or the Certificateholders. None of the Class B Noteholders (unless the Class A
Noteholders have been paid in full) or the Certificateholders (unless the
Noteholders have been paid in full) will have the ability 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 Vehicle. 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 recreation vehicle 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 recreation vehicle retail
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 RV Trust 1997-A (the "Issuer" or the "Trust"), is a business
trust formed under the laws of the State of Delaware pursuant to a Trust
Agreement (as amended and supplemented from time to time, the "Trust
Agreement"), to be dated as of November 1, 1997 between the Seller and First
Omni Bank, N.A., 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.
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
$14,122,864 (the "Original Certificate Balance"). Certificates with an
aggregate original face amount of approximately $142,864 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 recreation vehicle retail 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 Vehicle securing each Contract (the "Contract Files").
The Trust's principal offices are in Millsboro, Delaware in care of First
Omni Bank, N.A., as Owner Trustee, at the address listed in "--The Owner
Trustee" below.
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<PAGE>
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust as of the
Cut-off Date, as if the issuance and sale of the Notes and the Certificates
offered hereby had taken place on such date:
<TABLE>
<S> <C>
Class A-1 % Asset-Backed Notes............................ $ 40,300,000
Class A-2 % Asset-Backed Notes............................ $ 32,000,000
Class A-3 % Asset-Backed Notes............................ $ 89,000,000
Class A-4 % Asset-Backed Notes............................ $128,000,000
Class A-5 % Asset-Backed Notes............................ $ 74,000,000
Class A-6 % Asset-Backed Notes............................ $106,000,000
Class A-7 % Asset-Backed Notes............................ $ 49,700,000
Class B % Asset-Backed Notes.............................. $ 31,000,000
% Asset-Backed Certificates............................... $ 14,122,864
------------
Total........................................................ $564,122,864
============
</TABLE>
THE OWNER TRUSTEE
First Omni Bank, N.A., is the Owner Trustee under the Trust Agreement. First
Omni Bank, N.A. is a national banking association formed under the laws of the
United States. The principal offices of First Omni Bank, N.A. are located at
499 Mitchell Street, Millsboro, DE 19966. 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).
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 simple
interest retail installment sale contracts and direct loans secured by the new
and used recreation vehicles 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 proceeds
thereof but excluding the net investment income thereon); (v) assignments of
the security interests in the Financed Vehicles and any accessions thereto;
(vi) the right to proceeds from physical damage, credit life and disability
insurance policies, if any, covering individual Financed Vehicles or Obligors,
as the case may be; (vii) the rights of the Trust under the Sale and Servicing
Agreement and (viii) any and all proceeds of the foregoing.
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<PAGE>
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
November 1, 1997, and CITSF will sell the Contracts to the Company pursuant to
a Purchase Agreement to be dated as of November 1, 1997 (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 November 1, 1997 (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 August 1996 and October 1997.
All Contracts are direct loans secured by recreation vehicles or retail
installment sale contracts secured by recreation vehicles 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 $564,122,864. 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 recreation vehicle
retail 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 one Contract was originated in Puerto Rico; (ii) each
Contract has a Contract Rate equal to or greater than 7.750%; (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
Vehicle has been repossessed without reinstatement as of the Cut-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 $1,114 and not more than
$491,911. The Financed Vehicles consist of motor homes, travel trailers and
other types of recreation vehicles.
Approximately 71.48%, 12.56% and 15.96% of the Pool Balance as of the Cut-
off Date represented Contracts secured by motor homes, travel trailers and
other types of recreation vehicles, respectively. Approximately 64.06% of the
Contracts, by Pool Balance as of the Cut-off Date, represented financing of
recreation vehicles which were new and approximately 35.94% represented
financing of recreation vehicles which were used at the time the related
Contracts were originated. As of the Cut-off Date, the average outstanding
principal balance of the Contracts secured by motor homes, travel trailers and
other types of recreation vehicles was $44,914, $12,846 and $17,466,
respectively.
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<PAGE>
The Obligors under the Contracts have mailing addresses in 50 states, Puerto
Rico and Washington D.C. As of the Cut-off Date, approximately 15.20% of the
Contracts, based upon Pool Balance as of the Cut-off Date, had Obligors with
mailing addresses in the State of Texas, approximately 14.95% had Obligors
with mailing addresses in the State of California, approximately 7.31% had
Obligors with mailing addresses in the State of Florida and approximately
5.31% had Obligors with mailing addresses in the State of Washington. 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 7.750%. 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
158.28 months. The weighted average original term to maturity of the Contracts
was 163.20 months. As of the Cut-off Date, the weighted average Contract Rate
of the Contracts was 10.10%. The final scheduled payment dates on the
Contracts range from July 1998 to November 2017. The average remaining
principal balance per contract, as of the Cut-off Date, was $28,708.54 and the
outstanding principal balances of the Contracts, as of the Cut-off Date,
ranged from $1,114 to $491,911.
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<PAGE>
Set forth below is a description of certain characteristics of the Contracts.
GEOGRAPHICAL DISTRIBUTION OF CONTRACTS (1)
<TABLE>
<CAPTION>
% OF CONTRACT % OF CONTRACT
NUMBER OF POOL BY NUMBER AGGREGATE PRINCIPAL POOL BY PRINCIPAL
CONTRACTS AS OF OF CONTRACTS AS OF BALANCE OUTSTANDING BALANCE OUTSTANDING
STATE CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
- ----- --------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Alabama................. 181 0.92% $ 7,869,221 1.39%
Alaska.................. 26 0.13 1,412,114 0.25
Arizona................. 918 4.67 27,521,022 4.88
Arkansas................ 529 2.69 10,669,419 1.89
California.............. 2,875 14.63 84,363,620 14.95
Colorado................ 522 2.66 15,273,345 2.71
Connecticut............. 310 1.58 6,136,075 1.09
Delaware................ 14 0.07 378,631 0.07
District of Columbia.... 3 0.02 369,111 0.07
Florida................. 1,286 6.54 41,214,213 7.31
Georgia................. 524 2.67 15,897,653 2.82
Hawaii.................. 3 0.02 128,775 0.02
Idaho................... 92 0.47 2,299,965 0.41
Illinois................ 461 2.35 14,442,710 2.56
Indiana................. 148 0.75 4,695,471 0.83
Iowa.................... 53 0.27 1,886,774 0.33
Kansas.................. 400 2.04 10,447,226 1.85
Kentucky................ 81 0.41 1,851,977 0.33
Louisiana............... 203 1.03 6,504,690 1.15
Maine................... 76 0.39 2,219,338 0.39
Maryland................ 257 1.31 5,632,847 1.00
Massachusetts........... 524 2.67 11,099,058 1.97
Michigan................ 92 0.47 5,126,085 0.91
Minnesota............... 145 0.74 4,346,822 0.77
Mississippi............. 103 0.52 2,876,964 0.51
Missouri................ 922 4.69 20,765,030 3.68
Montana................. 75 0.38 2,606,226 0.46
Nebraska................ 45 0.23 1,225,889 0.22
Nevada.................. 410 2.09 10,539,146 1.87
New Hampshire........... 203 1.03 4,307,402 0.76
New Jersey.............. 160 0.81 4,043,986 0.72
New Mexico.............. 173 0.88 4,445,975 0.79
New York................ 603 3.07 15,067,512 2.67
North Carolina.......... 469 2.39 11,057,785 1.96
North Dakota............ 5 0.03 124,405 0.02
Ohio.................... 107 0.54 6,622,351 1.17
Oklahoma................ 895 4.55 22,522,607 3.99
Oregon.................. 696 3.54 24,230,510 4.30
Pennsylvania............ 178 0.91 6,765,373 1.20
Puerto Rico............. 1 0.01 35,419 0.01
Rhode Island............ 112 0.57 2,103,813 0.38
South Carolina.......... 231 1.18 5,948,591 1.05
South Dakota............ 12 0.06 509,231 0.09
Tennessee............... 245 1.25 8,417,653 1.49
Texas................... 2,974 15.13 85,740,769 15.20
Utah.................... 70 0.36 2,539,203 0.45
Vermont................. 50 0.25 1,151,597 0.20
Virginia................ 94 0.48 3,715,745 0.66
Washington.............. 953 4.85 29,945,394 5.31
West Virginia........... 27 0.13 1,009,761 0.18
Wisconsin............... 78 0.39 2,764,257 0.49
Wyoming................. 36 0.18 1,254,108 0.22
------ ------ ------------ ------
Total................... 19,650 100.00% $564,122,864 100.00%
====== ====== ============ ======
</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
NUMBER OF POOL BY NUMBER AGGREGATE PRINCIPAL POOL 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> <C> <C>
7.75%--7.99%............ 37 0.19% $ 3,286,346 0.58%
8.00%--8.99%............ 2,056 10.46 137,473,997 24.37
9.00%--9.99%............ 4,977 25.33 194,298,514 34.44
10.00%--10.99%.......... 5,049 25.70 115,957,197 20.56
11.00%--11.99%.......... 3,193 16.25 55,169,521 9.78
12.00%--12.99%.......... 2,345 11.93 33,936,955 6.02
13.00%--13.99%.......... 1,278 6.50 16,873,248 2.99
14.00%--14.99%.......... 495 2.52 5,062,121 0.90
15.00%--15.99%.......... 119 0.61 1,102,776 0.20
16.00%--16.99%.......... 63 0.32 668,571 0.12
17.00%--21.50%.......... 38 0.19 293,618 0.04
------ ------ ------------ ------
Total................... 19,650 100.00% $564,122,864 100.00%
====== ====== ============ ======
RANGE OF REMAINING MATURITIES
<CAPTION>
% OF CONTRACT AGGREGATE % OF CONTRACT
NUMBER OF POOL BY NUMBER PRINCIPAL POOL BY PRINCIPAL
RANGE OF REMAINING CONTRACTS AS OF OF CONTRACTS AS OF BALANCE OUTSTANDING BALANCE OUTSTANDING
MATURITY IN MONTHS CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
------------------ --------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
9--49................... 1,417 7.21% $ 7,644,178 1.36%
50--59.................. 1,231 6.26 10,179,221 1.80
60--69.................. 428 2.18 4,053,507 0.72
70--79.................. 850 4.33 8,660,257 1.54
80--89.................. 1,038 5.28 10,928,005 1.94
90--99.................. 677 3.45 7,370,813 1.31
100--109................ 420 2.14 6,749,971 1.20
110--119................ 2,906 14.79 49,633,054 8.80
120--129................ 336 1.71 6,250,355 1.11
130--139................ 2,011 10.23 39,776,590 7.05
140--149................ 1,938 9.86 41,270,461 7.32
150--159................ 9 0.04 266,601 0.04
160--169................ 744 3.79 38,952,362 6.90
170--179................ 4,719 24.02 252,806,645 44.81
180--189................ 652 3.32 39,690,920 7.04
190--199................ 5 0.02 399,676 0.07
200--209................ 5 0.02 353,303 0.06
210--219................ 1 0.01 145,227 0.03
220--229................ 19 0.10 3,115,429 0.55
230--239................ 204 1.04 29,644,589 5.25
240..................... 40 0.20 6,231,700 1.10
------ ------ ------------ ------
Total................... 19,650 100.00% $564,122,864 100.00%
====== ====== ============ ======
</TABLE>
MATURITY AND PREPAYMENT CONSIDERATIONS
All of the Contracts are prepayable at any time without any penalty. If
prepayments are received on the Contracts, the actual weighted average life of
the Contracts will be shorter than the scheduled weighted average
S-29
<PAGE>
life, which is based on the assumption that payments will be made as scheduled
and that no prepayments will be made. For this purpose the term "prepayments"
includes, among other items, voluntary prepayments by Obligors, regular
installment payments made in advance of their scheduled due dates,
liquidations due to default, proceeds from physical damage, credit life and
credit disability insurance policies, if any, and purchases by CITSF or the
Servicer of certain Contracts as described herein. Weighted average life means
the average amount of time during which each dollar of principal on a Contract
is outstanding. The rate of prepayments on the Contracts may be influenced by
a variety of economic, social and other factors, including the fact that an
Obligor may not sell or transfer a Financed Vehicle without the consent of
CITSF. Any reinvestment risk resulting from the rate of prepayment of the
Contracts and the distribution of such prepayments to Securityholders will be
borne entirely by the Securityholders. In addition, early retirement of the
Securities may be effected by (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 is 10% 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 5% 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
recreation vehicle retail 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 recreation vehicle retail
installment sale contracts and direct loans similar to the Contracts over an
extended period of time, and its experience with respect to recreation vehicle
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
recreation vehicle retail 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 recreation vehicle
retail 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, no assurance can be given that the prepayment
experience of the Contracts will exhibit payment behavior similar to the
behavior summarized in the following table. In addition to the foregoing,
prospective Securityholders should consider that the table set forth below is
limited to the period covered therein and thus cannot reflect the effects, if
any, of aging on the payment behavior of recreation vehicle retail installment
sale contracts and direct loans 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.
S-30
<PAGE>
The following table sets forth, with respect to all of the recreation
vehicle retail installment sale contracts and direct loans originated by CITSF
directly or through Dealers (excluding contracts purchased in bulk) in each
year since 1990, the aggregate initial principal balance of the contracts
originated in such year (or in the first nine months of 1997), the approximate
aggregate principal balance outstanding on the contracts originated in such
year as of the last day of such year and the approximate aggregate principal
balance outstanding on the contracts originated in such year as of the end of
each subsequent year (and as of September 30, 1997).
INFORMATION REGARDING PRINCIPAL REDUCTION ON RECREATION VEHICLE RETAIL
INSTALLMENT SALE CONTRACTS AND DIRECT LOANS ORIGINATED BY CITSF
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR OF ORIGINATION
-------------------
AT 9/30
1990 1991 1992 1993(3) 1994(3) 1995(3) 1996(3) 1997
-------- -------- -------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Approximate Volume(1)... $287,800 $332,700 $374,800 $ 405,900 $ 294,500 $417,300 $452,700 $493,100
Approximate Aggregate
Principal Balance(2):
December 31, 1990...... $250,300
December 31, 1991...... 202,000 $282,600
December 31, 1992...... 144,300 198,800 $322,700
December 31, 1993...... 100,700 134,300 233,700 $ 354,400
December 31, 1994...... 63,200 84,100 165,200 274,000 $ 260,700
December 31, 1995...... 46,300 61,200 122,300 213,200 208,200 $371,900
December 31, 1996...... 35,300 45,900 92,100 162,300 156,800 271,900 $406,100
September 30, 1997..... 21,900 35,100 72,200 129,700 126,400 209,900 328,800 $458,400
</TABLE>
- --------
(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
S-31
<PAGE>
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 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 11.87% 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 recreation vehicle
retail 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 recreation vehicle retail 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 December 2, 1997 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.
S-32
<PAGE>
The ABS Table also assumes that the Contracts have been aggregated into four
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
ORIGINAL TERM REMAINING TERM WEIGHTED AVERAGE
AGGREGATE WEIGHTED AVERAGE TO MATURITY TO MATURITY SEASONING
PRINCIPAL BALANCE CONTRACT RATE (MONTHS) (MONTHS) (MONTHS)
----------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Pool 1.................. $ 19,013,051 11.44% 54 49 5
Pool 2.................. $ 92,144,704 11.10% 109 104 5
Pool 3.................. $413,028,578 9.91% 173 168 5
Pool 4.................. $ 39,936,531 9.05% 239 235 4
</TABLE>
The actual characteristics and performance of the Contracts will differ from
the assumptions used in constructing the ABS Table. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Contracts will prepay at a constant
level of ABS until maturity or that all of the Contracts will prepay at the
same level of ABS. Moreover, the diverse terms of Contracts within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS Table at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
Contracts are as assumed. Any difference between such assumptions and actual
characteristics and performance of the Contracts or actual prepayment
experience will affect the percentages of initial balances outstanding over
time and weighted average lives of the Notes and the Certificates.
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES (1)
<TABLE>
<CAPTION>
CLASS A-1 NOTES
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- --------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage...... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98................ 36% 0% 0% 0% 0% 0% 0% 0%
11/15/99................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/00................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/01................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/02................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/03................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/04................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/05................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/06................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/07................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/08................ 0% 0% 0% 0% 0% 0% 0% 0%
11/15/09................ 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2): 0.78 0.34 0.21 0.18 0.16 0.14 0.12 0.11
</TABLE>
S-33
<PAGE>
CLASS A-2 NOTES
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent............... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98...................... 100% 52% 0% 0% 0% 0% 0% 0%
11/15/99...................... 66% 0% 0% 0% 0% 0% 0% 0%
11/15/00...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/01...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/02...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/03...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/04...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/05...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/06...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/07...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/08...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/09...................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2): 2.16 1.01 0.62 0.54 0.47 0.42 0.37 0.34
CLASS A-3 NOTES
<CAPTION>
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent............... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98...................... 100% 100% 82% 66% 51% 35% 18% 2%
11/15/99...................... 100% 57% 0% 0% 0% 0% 0% 0%
11/15/00...................... 90% 0% 0% 0% 0% 0% 0% 0%
11/15/01...................... 53% 0% 0% 0% 0% 0% 0% 0%
11/15/02...................... 17% 0% 0% 0% 0% 0% 0% 0%
11/15/03...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/04...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/05...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/06...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/07...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/08...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/09...................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2): 4.09 2.11 1.33 1.14 1.00 0.89 0.80 0.72
CLASS A-4 NOTES
<CAPTION>
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent............... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98...................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/99...................... 100% 100% 91% 71% 50% 29% 7% 0%
11/15/00...................... 100% 97% 29% 0% 0% 0% 0% 0%
11/15/01...................... 100% 56% 0% 0% 0% 0% 0% 0%
11/15/02...................... 100% 19% 0% 0% 0% 0% 0% 0%
11/15/03...................... 85% 0% 0% 0% 0% 0% 0% 0%
11/15/04...................... 55% 0% 0% 0% 0% 0% 0% 0%
11/15/05...................... 22% 0% 0% 0% 0% 0% 0% 0%
11/15/06...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/07...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/08...................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/09...................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2): 7.12 4.18 2.65 2.29 2.00 1.77 1.58 1.43
</TABLE>
S-34
<PAGE>
CLASS A-5 NOTES
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ----- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent............. 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/99.................... 100% 100% 100% 100% 100% 100% 100% 75%
11/15/00.................... 100% 100% 100% 100% 51% 0% 0% 0%
11/15/01.................... 100% 100% 51% 0% 0% 0% 0% 0%
11/15/02.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/03.................... 100% 71% 0% 0% 0% 0% 0% 0%
11/15/04.................... 100% 13% 0% 0% 0% 0% 0% 0%
11/15/05.................... 100% 0% 0% 0% 0% 0% 0% 0%
11/15/06.................... 83% 0% 0% 0% 0% 0% 0% 0%
11/15/07.................... 36% 0% 0% 0% 0% 0% 0% 0%
11/15/08.................... 0% 0% 0% 0% 0% 0% 0% 0%
11/15/09.................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2): 9.68 6.36 4.01 3.44 3.00 2.65 2.36 2.13
CLASS A-6 NOTES
<CAPTION>
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ----- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent............. 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/99.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/00.................... 100% 100% 100% 100% 100% 100% 63% 26%
11/15/01.................... 100% 100% 100% 93% 50% 6% 0% 0%
11/15/02.................... 100% 100% 75% 26% 0% 0% 0% 0%
11/15/03.................... 100% 100% 21% 0% 0% 0% 0% 0%
11/15/04.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/05.................... 100% 70% 0% 0% 0% 0% 0% 0%
11/15/06.................... 100% 37% 0% 0% 0% 0% 0% 0%
11/15/07.................... 100% 11% 0% 0% 0% 0% 0% 0%
11/15/08.................... 89% 0% 0% 0% 0% 0% 0% 0%
11/15/09.................... 49% 0% 0% 0% 0% 0% 0% 0%
11/15/10.................... 5% 0% 0% 0% 0% 0% 0% 0%
11/15/11.................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2): 11.95 8.67 5.45 4.63 4.00 3.51 3.12 2.80
CLASS A-7 NOTES
<CAPTION>
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ----- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent............. 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/99.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/00.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/01.................... 100% 100% 100% 100% 100% 100% 0% 0%
11/15/02.................... 100% 100% 100% 100% 0% 0% 0% 0%
11/15/03.................... 100% 100% 100% 0% 0% 0% 0% 0%
11/15/04.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/05.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/06.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/07.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/08.................... 100% 0% 0% 0% 0% 0% 0% 0%
11/15/09.................... 100% 0% 0% 0% 0% 0% 0% 0%
11/15/10.................... 100% 0% 0% 0% 0% 0% 0% 0%
11/15/11.................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2): 13.27 10.83 6.60 5.59 4.77 4.18 3.69 3.28
</TABLE>
S-35
<PAGE>
CLASS B NOTES
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent............... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98...................... 100% 90% 83% 81% 78% 76% 73% 70%
11/15/99...................... 90% 79% 68% 63% 58% 53% 48% 42%
11/15/00...................... 85% 69% 53% 46% 39% 32% 25% 17%
11/15/01...................... 79% 59% 39% 30% 22% 13% 0% 0%
11/15/02...................... 73% 50% 27% 17% 0% 0% 0% 0%
11/15/03...................... 66% 42% 16% 0% 0% 0% 0% 0%
11/15/04...................... 59% 34% 0% 0% 0% 0% 0% 0%
11/15/05...................... 51% 26% 0% 0% 0% 0% 0% 0%
11/15/06...................... 43% 19% 0% 0% 0% 0% 0% 0%
11/15/07...................... 37% 14% 0% 0% 0% 0% 0% 0%
11/15/08...................... 30% 0% 0% 0% 0% 0% 0% 0%
11/15/09...................... 22% 0% 0% 0% 0% 0% 0% 0%
11/15/10...................... 13% 0% 0% 0% 0% 0% 0% 0%
11/15/11...................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2): 7.95 5.38 3.36 2.87 2.49 2.19 1.95 1.74
</TABLE>
- --------
(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 10% 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.
PERCENT OF ORIGINAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ----- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent............. 100% 100% 100% 100% 100% 100% 100% 100%
11/15/98.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/99.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/00.................... 100% 100% 100% 100% 100% 100% 100% 100%
11/15/01.................... 100% 100% 100% 100% 100% 100% 0% 0%
11/15/02.................... 100% 100% 100% 100% 0% 0% 0% 0%
11/15/03.................... 100% 100% 100% 0% 0% 0% 0% 0%
11/15/04.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/05.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/06.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/07.................... 100% 100% 0% 0% 0% 0% 0% 0%
11/15/08.................... 100% 0% 0% 0% 0% 0% 0% 0%
11/15/09.................... 100% 0% 0% 0% 0% 0% 0% 0%
11/15/10.................... 100% 0% 0% 0% 0% 0% 0% 0%
11/15/11.................... 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life
(years)(2) 13.29 10.87 6.62 5.62 4.79 4.20 3.70 3.29
</TABLE>
- --------
(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 10% 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.
S-36
<PAGE>
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
Interest will be paid to the Noteholders 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 the product
of (x) the applicable Interest Rate (y) 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)
and (z) a fraction equal to (i) in the case of the Class A-1 Noteholders, the
numerator of which equals the actual number of days elapsed in the related
Interest Accrual Period and the denominator of which is 360 and (ii) in the
case of each other class of Notes, one-twelfth. See "The Notes--Payments of
Interest." 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-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 "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.
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.
On each Distribution Date, the Certificateholders and the Noteholders of
record (which in the case of the Notes in most cases will be Cede & Co.) will
receive monthly reports concerning the payments received on the
S-37
<PAGE>
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 311 West Monroe Street, 12th floor, Chicago, IL 60606. 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 recreation vehicle retail 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, INC.
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 from The Dai-Ichi Kangyo Bank, Limited ("DKB") its option to purchase
the 20 percent interest in the Company owned by The Chase Manhattan
Corporation ("CMC") 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. The Stockholders Agreement (as defined in the
Prospectus) no longer exists and CMC cannot designate a nominee to the Board
of Directors of CIT.
THE CIT GROUP/SALES FINANCING, INC., SERVICER
GENERAL
As of September 30, 1997, CITSF serviced for itself and others approximately
281,770 contracts (consisting primarily of recreation vehicle, home equity,
recreational boat and manufactured housing contracts), representing an
outstanding balance of approximately $7.5 billion. Of this portfolio,
approximately 94,978 contracts (representing approximately $2.4 billion
outstanding balance) consisted of recreation vehicle retail 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 42,000
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 recreation vehicle retail installment sale contracts and direct
loans serviced by CITSF on the dates indicated:
S-38
<PAGE>
THE CIT GROUP/SALES FINANCING, INC.
CONTRACTS BEING SERVICED BY PRODUCT LINE
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------
1992 1993 1994
------------------- ------------------- -------------------
(NUMBER) (DOLLARS) (NUMBER) (DOLLARS) (NUMBER) (DOLLARS)
-------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
RV--Owned............... 38,926 $ 845,982 43,530 $ 961,915 39,454 $ 847,142
RV--Bulk Purchases...... 4,383 84,344 3,331 60,487 3,522 50,882
RV--Servicing(1)........ 0 0 0 0 4,827 118,267
Total RV................ 43,309 930,326 46,861 1,022,402 47,803 1,016,291
Total MH................ 49,640 802,379 47,898 809,670 39,599 878,152
Home Equity............. 0 0 3,545 131,322 13,545 570,772
Other(2)................ 1,126 19,485 1,572 41,944 1,310 74,823
------ ---------- ------ ---------- ------- ----------
Total Contracts
Serviced............... 94,075 $1,752,190 99,876 $2,005,338 102,257 $2,540,038
====== ========== ====== ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
--------------------------------------- -------------------
1995 1996 1997
------------------- ------------------- -------------------
(NUMBER) (DOLLARS) (NUMBER) (DOLLARS) (NUMBER) (DOLLARS)
-------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
RV--Owned............... 29,984 $ 662,468 22,161 $ 477,355 35,721 $ 849,457
RV--Bulk Purchases...... 2,648 36,058 2,770 32,704 3,482 23,762
RV--Servicing(1)........ 19,494 445,716 32,606 746,810 55,775 1,497,771
Total RV................ 52,126 1,144,242 57,537 1,256,869 94,978 2,370,990
Total MH................ 69,277 1,368,513 95,999 1,748,363 91,818 1,815,432
Home Equity............. 27,122 1,039,044 52,617 2,005,498 56,114 2,339,245
Other(2)................ 6,196 159,003 13,430 331,203 38,860 1,003,710
------- ---------- ------- ---------- ------- ----------
Total Contracts
Serviced............... 154,721 $3,710,802 219,583 $5,341,933 281,770 $7,529,377
======= ========== ======= ========== ======= ==========
</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 recreation vehicle portfolio. The following table sets
forth the delinquency experience for the five years ended December 31, 1996
and the nine months ended September 30, 1997 of the portfolio of recreation
vehicle retail 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.
S-39
<PAGE>
DELINQUENCY EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------- SEPTEMBER 30,
1992 1993 1994(3) 1995(3) 1996(3) 1997(3)
-------- -------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts..... 38,926 43,530 44,281 49,478 54,767 62,590
Principal Balance of
Contracts Serviced..... $845,982 $961,915 $965,409 $1,108,184 $1,224,165 $1,440,478
Principal Balance of
Delinquent
Contracts(1):
30-59 Days.............. $ 4,412 $ 6,478 $ 4,986 $ 9,218 $ 14,904 $ 17,898
60-89 Days.............. 1,378 2,211 1,959 3,071 4,342 6,277
90 Days or More......... 4,140 3,383 2,785 4,456 6,205 8,712
-------- -------- -------- ---------- ---------- ----------
Total Principal Balance
of Delinquent
Contracts.............. $ 9,930 $ 12,072 $ 9,730 $ 16,745 $ 25,451 $ 32,887
======== ======== ======== ========== ========== ==========
Delinquencies as a
Percent of Principal
Balances(2)............ 1.17% 1.26% 1.01% 1.51% 2.08% 2.28%
</TABLE>
- --------
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month. 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 recreation vehicle retail installment contracts and direct loans
sold by CITSF in previous securitizations which CITSF is servicing.
The following table sets forth the loan loss experience for the five years
ended December 31, 1996 and the nine months ended September 30, 1997, of the
portfolio of recreation vehicle retail 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)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------- SEPTEMBER 30,
1992 1993 1994(4) 1995(4) 1996(4) 1997(4)
-------- -------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts(1).. 38,926 43,530 44,281 49,478 54,767 62,590
======== ======== ======== ========== ========== ==========
Principal Balance of
Contracts Serviced(1).. $845,982 $961,915 $965,409 $1,108,184 $1,224,165 $1,440,478
======== ======== ======== ========== ========== ==========
Net Losses:
Dollars(2)............ $ 4,040 $ 3,917 $ 4,887 $ 4,762 $ 9,875 $ 10,464
Percentage(3)......... 0.48% 0.41% 0.51% 0.43% 0.81% 0.97%(5)
</TABLE>
- --------
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 recreation vehicle retail installment sale contracts and direct
loans sold by CITSF in previous securitizations which CITSF is servicing.
(5) Annualized.
S-40
<PAGE>
The data presented in the foregoing tables is for illustrative purposes
only. Such data relates to the performance of CITSF's entire portfolio of
recreation vehicle retail installment sale contracts and direct loans and is
not historical data regarding the Contracts alone, since the Contracts
constitute only a portion of CITSF's portfolio. Additionally, the loss and
delinquency experience presented in the preceding tables with respect to
recreation vehicle retail installment sale contracts and direct loans
previously securitized by CITSF prior to May 1996 is calculated using the
method required by the related transaction documents which differs from the
method used by CITSF to calculate losses and delinquencies on the remainder of
its owned or previously securitized contracts. The securitizations prior to
May 1996 require a contract to be reflected as a loss in the month it becomes
120 days delinquent, unless it is in repossession. The data presented in the
tables reflects this calculation method for these securitizations. The loss
data presented in the foregoing tables with respect to CITSF's remaining owned
or previously securitized contracts reflects CITSF's general practice of
recording a loss when all amounts CITSF expects to recover either by sale or
disposition of the related financed vehicle or otherwise have been received.
As a result, the data in the foregoing tables with respect to contacts
securitized prior to May 1996 reflects higher losses and lower delinquencies
than would have been reported had these contracts not been securitized.
In August 1994, CITSF adopted a risk-adjusted pricing policy and changed its
credit criteria and underwriting guidelines 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.
CITSF believes that these changes have resulted in increased delinquencies and
losses. The seasoning of contracts originated using the revised 1994
underwriting guidelines and the continued runoff of contracts originated prior
to August 1994 are reflected in the increased delinquencies and loan losses
during 1996 and 1997. In addition, the delinquency and loss performance of the
CITSF portfolio has been and will continue to be influenced by overall
economic and other trends including the propensity of consumers to fail to
make timely payments on consumer credit obligations and their willingness to
seek bankruptcy protection. All of the Contracts were originated under the
credit criteria adopted by CITSF in August 1994. Accordingly, the data
presented in the preceding tables should not necessarily be considered as a
basis for assessing the likelihood, amount or severity of delinquencies or
losses on the Contracts and no assurance can be given that the delinquency and
loan loss experience presented in the preceding tables will be indicative of
the experience on the Contracts.
THE NOTES
GENERAL
The CIT RV Trust 1997-A 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 $40,300,000 aggregate principal amount
of Class A-1 Notes, $32,000,000 aggregate principal amount of Class A-2 Notes,
$89,000,000 aggregate principal amount of Class A-3 Notes, $128,000,000
aggregate principal amount of Class A-4 Notes, $74,000,000 aggregate principal
amount of Class A-5 Notes, $106,000,000 aggregate principal amount of Class A-
6 Notes, $49,700,000 aggregate principal amount of Class A-7 Notes and
$31,000,000 aggregate principal amount of Class B Notes pursuant to the terms
of an Indenture, to be dated as of November 1, 1997 (as amended and
supplemented from time to time, the "Indenture") between Harris Trust and
Savings Bank, as trustee (the "Indenture Trustee"), a form of which was filed
as an exhibit to the Registration Statement of which this
S-41
<PAGE>
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 December 15, 1997. 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, Delaware, Illinois 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 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 Notes will accrue at the
applicable Interest Rate for any Distribution Date 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 such Distribution
Date. Interest will be paid to the Noteholders of record on the related Record
Date, on each Distribution Date, to the extent of available funds therefor, in
an amount equal to the sum of (A) the product of (x) the applicable Interest
Rate, (y) the outstanding principal balance of the class of Notes immediately
preceding such Distribution Date and (z) a fraction (i) in the case of the
Class A-1 Noteholders, the numerator of which equals the actual number of days
elapsed in the related Interest Accrual Period and the denominator of which is
360 and (ii) in the case of each other class of Notes, the numerator of which
is one and the denominator of which is twelve (or, in the case of the first
Distribution Date, the numerator of which is and the denominator of which
is 360), and (B) any applicable Interest Carryover Shortfall.
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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; provided, however, that prior to the Distribution
Date on which the Class A-1 Notes have been paid in full, the Class B
Noteholders' Principal Distribution Amount will be zero. 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.
The Principal Distribution Amount on a Distribution Date will generally be
allocable as follows: first, 100% of the Principal Distribution Amount for
such Distribution Date to the Class A-1 Notes until the Class A-1 Notes have
been paid in full; second, 100% of the Principal Distribution Amount for such
Distribution Date to the Class B Notes until the outstanding principal amount
of the Class B Notes equals 5.5% of the Pool Balance as of the last day of the
related Due Period; and thereafter, 94.5% of the Principal Distribution Amount
for such Distribution Date to the Class A Notes (sequentially, in the order of
their numerical class designations) until the Class A Notes have been paid in
full and 5.5% of the Principal Distribution Amount for such Distribution Date
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to the Class B Notes until the Class B Notes have been paid in full. 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) will be paid to the Class B Notes until the Class B
Notes have been paid in full. Distributions, however, on the Class B Notes
will be subordinated to the Class A Notes as 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. No principal payments will be made
on the Class B Notes until the Class A-1 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, and no principal payments will be made to the Class B Notes until the
Class A Notes have been paid in full.
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 any class of Notes will not result in the occurrence of an Event
of Default until the Note Final Scheduled Distribution Date applicable to such
class of the Notes. 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 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 10% 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, following the first Distribution Date on
which the Pool Balance as of the last day of the related Due Period is 5% 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
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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,
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 should occur and be continuing with respect to the
Notes, the Indenture Trustee or holders of not less than 66 2/3% of the
aggregate outstanding principal amount of the Controlling Notes (as defined in
the Prospectus) 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 66 2/3% of the aggregate outstanding principal
amount of such Controlling Notes.
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. 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. 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 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 upon giving prior written notice to the Rating
Agencies, 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 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
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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. Until the Class A
Noteholders have been paid in full, none of the Class B Noteholders will have
the ability 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 RV Trust 1997-A % Asset-Backed Certificates (the "Certificates")
will represent fractional undivided interests in the Trust. The Trust will
issue $14,122,864 aggregate face amount of Certificates pursuant to a Trust
Agreement, to be dated as of November 1, 1997 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 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 December 15,
1997, to the extent of amounts available therefor. With respect to any
Distribution Date, the "Due Period" will be the calendar month preceding the
month of such Distribution
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Date. The first Due Period will commence on and include November 1, 1997 and
will end on and include November 30, 1997. 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 on the Certificate Balance will accrue at the Pass-
Through 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. Interest will be paid to the
Certificateholders of record on the related Record Date, on each Distribution
Date, to the extent of available funds therefor, in an amount equal to the sum
of (A) the product of (x) the Pass-Through Rate, (y) the Certificate Balance
immediately preceding such Distribution Date and (z) a fraction the numerator
of which is one and the denominator of which is twelve (or, in the case of the
first Distribution Date, the numerator of which is and the denominator of
which is 360), and (B) any applicable Interest Carryover Shortfall.
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 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
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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 10% 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,
following the first Distribution Date on which the Pool Balance as of the last
day of the related Due Period is 5% or less of the Initial Pool Balance. The
"Initial Pool Balance" equals the Pool Balance as of the Cut-off Date.
LIMITED RIGHTS
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 to waive 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.
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 be funded on the Closing Date in the amount of
$11,282,457 (the "Initial Reserve Amount") from
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the proceeds of a loan (the "Loan") to be made by one or more affiliates of
the Company. The affiliates of CIT that provided the Loan used to fund the
Reserve Account on the Closing Date only have recourse against the Trust for
repayment of the Loan from the Reserve Account Surplus, certain investment
earnings on funds deposited in the Reserve Account and payments from the
Reserve Account upon maturity of the Loan, in each case as set forth in the
Sale and Servicing Agreement and related documents.
The Reserve Account will be an Eligible Account (as defined in the
Prospectus). Funds on deposit in the Reserve Account will be invested (at the
direction of the Company or one or more of its affiliates) 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, and as provided in the Sale and Servicing
Agreement and related documents.
The Reserve Account will be terminated following the earlier to occur of (a)
the date on which the Certificate Balance is paid in full or (b) the
Certificate Final Scheduled Distribution Date and any funds remaining therein
have been paid to one or more affiliates of the Company that provided the Loan
or to the Affiliated Owner.
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, exclusive of interest and
earnings thereon and any net investment gains, and 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, 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 Vehicles 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 one or more affiliates of the Company
that provided the Loan or 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 2.0% of the Pool Balance as of the first day of the related Due Period,
but in no event less than $4,230,921. 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 Vehicles that have been
repossessed) as a percentage of the Pool Balance for the preceding Due
Periods exceeds % or (b) the average of the principal balances of all
Contracts which
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became Liquidated Contracts in the preceding Due Periods, less any Net
Liquidation Proceeds on Liquidated Contracts, expressed as an annualized
percentage of the average outstanding Pool Balance of the 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 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 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 (the "Reserve Account Surplus") and pay such amount
to one or more affiliates of the Company which provided the Loan or to the
Affiliated Owner. Any such amounts paid will not be available for distribution
to Securityholders.
In the event that funds are withdrawn from the Reserve Account to make
payments on the Securities or the Specified Reserve Amount is increased, the
sole source of funding of the Reserve Account after the Closing Date will be
Excess Collections. Neither the Seller, the Servicer nor any affiliate will be
obligated to deposit any of their own funds into the Reserve Account in the
event that Excess Collections are not sufficient to replenish 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 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
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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 one or more affiliates of
the Company that provided the Loan or 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).
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 Vehicle 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 Vehicle.
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"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 Vehicle into cash proceeds (including, without
limitation, expenses relating to recovery, repossession and sale of such
Financed Vehicle).
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
Vehicles 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, the product of (x) one-twelfth (or, in the case of the first
Distribution Date, a fraction the numerator of which equals and the
denominator of which is 360, (y) the Pass-Through Rate and (z) the Certificate
Balance on such Distribution 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).
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"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 the Available Reserve Amount, 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 Rate 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, an amount equal to the product of (x) the
applicable Interest Rate, (y) 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 and (z) in the case of (i) the Class A-1 Notes, a fraction, the numerator
of which equals the number of days elapsed in the related Interest Accrual
Period and the denominator of which is 360 and (ii) in the case of each other
class of Class A Notes, one-twelfth (or, in the case of the first Distribution
Date, a fraction, the numerator of which is and the denominator of which
is 360).
"Class A Noteholders' Monthly Principal Amount" means, for any Distribution
Date, (i) prior to the Stepdown Date, an amount equal to 100% of the Principal
Distribution Amount and (ii) on and after the Stepdown Date, an amount equal
to the sum of (x) the aggregate principal amount of the Class A-1 Notes
(before giving effect to all distributions of principal to the Class A-1
Noteholders on such Distribution Date) and (y) the excess, if any, of (A) the
outstanding principal amount of the Class A Notes and the Certificate Balance
of the Certificates on such Distribution Date (after giving effect to all
distributions of principal to the Class A-1 Noteholders on such Distribution
Date but before giving effect to any distributions of principal to each other
class of Class A Noteholders on such Distribution Date) over (B) 94.5% of the
Pool Balance as of the last day of the related Due Period; provided, however,
that after the Distribution Date on which the outstanding principal amount of
the Class B Notes (after giving effect to all distributions on such
Distribution Date) equals 5.5% of
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the Pool Balance as of the last day of the related Due Period, the "Class A
Noteholders' Monthly Principal Amount" means an amount equal to 94.5% of the
Principal Distribution Amount for such Distribution Date.
"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.
"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, an amount equal to the product of (x) the
applicable Interest Rate, (y) 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 and (z) one-
twelfth (or, in the case of the first Distribution Date, a fraction, the
numerator of which is and the denominator of which is 360).
"Class B Noteholders' Monthly Principal Amount" means, for any Distribution
Date, (i) prior to the Stepdown Date, zero, (ii) on and after the Stepdown
Date, an amount equal to the lesser of (x) the Principal Distribution Amount
minus all distributions of principal to the Class A-1 Noteholders on such
Distribution Date and (y) the excess, if any, of (A) the outstanding principal
amount of the Class B Notes on such Distribution Date (before giving effect to
all distributions of principal to the Class B Noteholders on such Distribution
Date) over (B) 5.5% of the Pool Balance as of the last day of the related Due
Period; provided, however, that after the Distribution Date on which the
outstanding principal amount of the Class B Notes (after giving effect to all
distributions on such Distribution Date) equals 5.5% of the Pool Balance as of
the last day of the related Due Period, the "Class B Noteholders' Monthly
Principal Amount" means an amount equal to 5.5% of the Principal Distribution
Amount for such Distribution Date, and (iii) 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.
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"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.
The "Stepdown Date" means the Distribution Date on which the Class A-1
Noteholders have been paid in full.
"Pool Balance" means the aggregate outstanding principal balance of the
Contracts; provided that a Liquidated Contract and a Repurchased Contract
shall cease to be included in the Pool Balance as of the last day of the Due
Period in which such Contract became a Liquidated Contract or a Repurchased
Contract, as the case may be.
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.
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 Vehicle.
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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 may
reimburse itself 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 0.50% (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
(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 1.00%. 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 10% or less
of the Initial Pool Balance, all remaining Contracts at a price equal to the
aggregate Purchase Price for the Contracts (including defaulted Contracts but
excluding Liquidated 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.
After the first Distribution Date on which the Pool Balance as of the last
day of the related Due Period is 5% or less of the Initial Pool Balance, the
Indenture Trustee (or, if the Notes have been paid in full and the Indenture
has been discharged in accordance with its terms, the Owner Trustee) shall
solicit bids for the purchase of the Contracts remaining in the Trust (the
"Auction Sale"). In the event that satisfactory bids are received as
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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.
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
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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.
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.
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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 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
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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).
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
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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 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.
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<PAGE>
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 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
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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 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
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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 Credit Suisse
First Boston as representative of BancAmerica Robertson Stephens, Chase
Securities, Inc. and Salomon Brothers Inc (collectively, 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
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc ..................................... $
----
Total..................................................... $
====
CLASS A-2 NOTES
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc ..................................... $
----
Total..................................................... $
====
CLASS A-3 NOTES
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc .....................................
----
Total..................................................... $
====
</TABLE>
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<PAGE>
CLASS A-4 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc ..................................... $
----
Total..................................................... $
====
CLASS A-5 NOTES
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc ..................................... $
----
Total..................................................... $
====
CLASS A-6 NOTES
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc ..................................... $
----
Total..................................................... $
====
CLASS A-7 NOTES
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc ..................................... $
----
Total..................................................... $
====
CLASS B NOTES
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc ..................................... $
----
Total..................................................... $
====
</TABLE>
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<PAGE>
CERTIFICATES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Credit Suisse First Boston................................ $
BancAmerica Robertson Stephens............................ $
Chase Securities, Inc. ................................... $
Salomon Brothers Inc ..................................... $
----
Total..................................................... $
====
</TABLE>
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 "A1" 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
S-66
<PAGE>
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.
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 Richards, Layton & Finger,
Wilmington, Delaware, and for the Underwriters by Stroock & Stroock & Lavan
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.
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.
S-67
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes of CIT
RV Trust 1997-A (the "Global Securities") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities
through any of DTC, Cedel or Euroclear. The Global Securities will be tradable
as home market instruments in both the European and U.S. domestic markets.
Initial settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against payment
basis through the respective Depositories of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their Participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective
Depositories, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriters. Investor securities
custody accounts will be credited with their holdings against payment in same-
day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
securities and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to insure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
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
A-2
<PAGE>
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.
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.
A-3
<PAGE>
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 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, (iii) a trust where (a) a U.S.
court is able to exercise primary supervision over the administration of the
trust and (b) one or more U.S. persons have the authority to control all
substantial decisions of the trust, or (iv) an estate 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.
A-4
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<S> <C>
ABS.............................................................. S-32
ABS Table........................................................ S-32
Affiliated Owner................................................. S-46
Auction Sale..................................................... S-56
Available Amount................................................. S-8, S-52
Available Reserve Amount......................................... S-15, S-49
Bankruptcy Code.................................................. S-20
Benefit Plan..................................................... S-63
Business Day..................................................... S-7, S-42
Cedel............................................................ S-1, S-5, S-23
Certificate Balance.............................................. S-13, S-37
Certificate Final Scheduled Distribution Date.................... S-7, S-47
Certificate Pool Factor.......................................... S-37
Certificateholders' Distribution Amount.......................... S-52
Certificateholders' Interest Carryover Shortfall................. S-52
Certificateholders' Interest Distribution Amount................. S-52
Certificateholders' Monthly Interest Amount...................... S-52
Certificateholders' Monthly Principal Amount..................... S-52
Certificateholders' Principal Carryover Shortfall................ S-53
Certificateholders' Principal Distribution Amount................ S-53
Certificates..................................................... S-1, S-5, S-46
CIT.............................................................. S-4, S-20
CITCF-NY......................................................... S-6, S-20
CITSF............................................................ S-4, S-20
Class A Noteholders' Interest Carryover Shortfall................ S-53
Class A Noteholders' Interest Distribution Amount................ S-53
Class A Noteholders' Monthly Interest Amount..................... S-53
Class A Noteholders' Monthly Principal Amount.................... S-53
Class A Noteholders' Principal Carryover Shortfall............... S-54
Class A Noteholders' Principal Distribution Amount............... S-54
Class A Notes.................................................... S-1, S-4, S-41
Class A-1 Interest Rate.......................................... S-9, S-42
Class A-1 Note Final Scheduled Distribution Date................. S-7, S-44
Class A-1 Notes.................................................. S-1, S-4, S-41
Class A-2 Interest Rate.......................................... S-9, S-42
Class A-2 Note Final Scheduled Distribution Date................. S-7, S-44
Class A-2 Notes.................................................. S-1, S-4, S-41
Class A-3 Final Scheduled Distribution Date...................... S-44
Class A-3 Interest Rate.......................................... S-9, S-42
Class A-3 Note Final Scheduled Distribution Date................. S-7
Class A-3 Notes.................................................. S-1, S-4, S-41
Class A-4 Final Scheduled Distribution Date...................... S-44
Class A-4 Interest Rate.......................................... S-9, S-42
Class A-4 Note Final Scheduled Distribution Date................. S-7
Class A-4 Notes.................................................. S-1, S-4, S-41
Class A-5 Final Scheduled Distribution Date...................... S-44
Class A-5 Interest Rate.......................................... S-9, S-42
Class A-5 Note Final Scheduled Distribution Date................. S-7
Class A-5 Notes.................................................. S-1, S-4, S-41
Class A-6 Final Scheduled Distribution Date...................... S-44
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
Class A-6 Interest Rate.......................................... S-9, S-42
Class A-6 Note Final Scheduled Distribution Date................. S-7
Class A-6 Notes.................................................. S-1, S-4, S-41
Class A-7 Final Scheduled Distribution Date...................... S-44
Class A-7 Interest Rate.......................................... S-9, S-42
Class A-7 Note Final Scheduled Distribution Date................. S-7
Class A-7 Notes.................................................. S-1, S-4, S-41
Class B Final Scheduled Distribution Date........................ S-44
Class B Interest Rate............................................ S-9, S-42
Class B Note Final Scheduled Distribution Date................... S-7
Class B Noteholders' Interest Carryover Shortfall................ S-54
Class B Noteholders' Interest Distribution Amount................ S-54
Class B Noteholders' Monthly Interest Amount..................... S-54
Class B Noteholders' Monthly Principal Amount.................... S-54
Class B Noteholders' Principal Carryover Shortfall............... S-54
Class B Noteholders' Principal Distribution Amount............... S-55
Class B Notes.................................................... S-1, S-4, S-41
Closing Date..................................................... S-6
Code............................................................. S-19
Commission....................................................... S-42
Company.......................................................... S-1, S-4, S-20
Contract Files................................................... S-24
Contract Pool.................................................... S-25
Contract Rate.................................................... S-27
Contracts........................................................ S-2, S-6
Cross-Over Date.................................................. S-13
Cut-off Date..................................................... S-2, S-6
Dealers.......................................................... S-6
Definitive Certificates.......................................... S-5, S-46
Deposit Date..................................................... S-23
Depository....................................................... S-22
Determination Date............................................... S-8
Distribution Date................................................ S-2, S-7, S-42
DTC.............................................................. S-1, S-22
Due Period....................................................... S-7
ERISA............................................................ S-19, S-63
Euroclear........................................................ S-1, S-5
Excess Collections............................................... S-16, S-49
Financed Vehicles................................................ S-2, S-6
Global Securities................................................ A-1
Indenture........................................................ S-5, S-41
Indenture Trustee................................................ S-1, S-4, S-41
Initial Pool Balance............................................. S-17, S-48
Initial Reserve Amount........................................... S-15, S-48
Interest Accrual Period.......................................... S-8
Interest Rate.................................................... S-2
Interest Rates................................................... S-9, S-42
Issuer........................................................... S-1, S-4, S-24
Liquidated Contract.............................................. S-51
Liquidation Expenses............................................. S-52
Loan............................................................. S-15, S-49
Monthly Advance.................................................. S-16, S-56
</TABLE>
B-2
<PAGE>
<TABLE>
<S> <C>
Moody's......................................................... S-18, S-66
Net Liquidation Proceeds........................................ S-52
Net Losses...................................................... S-40
Note Owner...................................................... S-22, S-42
Note Owners..................................................... S-5
Note Pool Factor................................................ S-37
Noteholders' Distribution Amount................................ S-53
Notes........................................................... S-1, S-4, S-41
Obligor......................................................... S-7
OID............................................................. S-57
Oklahoma Tax Counsel............................................ S-63
Optional Purchase............................................... S-56
Original Certificate Balance.................................... S-5, S-24
Owner Trustee................................................... S-1, S-4, S-24
Paid-Ahead Period............................................... S-31
Paid-Ahead Simple Interest Contract............................. S-31
Pass-Through Rate............................................... S-2, S-12, S-47
Payment Shortfall............................................... S-17
Pool Balance.................................................... S-55
Principal Distribution Amount................................... S-11, S-51
Principal Prepayment............................................ S-52
Prospectus...................................................... S-3
PTCE............................................................ S-63
Purchase Agreement.............................................. S-6, S-26
Purchase Price.................................................. S-52
Rating Agency................................................... S-18, S-66
Record Date..................................................... S-7
Repurchase Event................................................ S-6
Repurchased Contract............................................ S-6
Reserve Account................................................. S-15, S-48
Reserve Account Surplus......................................... S-16, S-50
S&P............................................................. S-18, S-66
Sale and Servicing Agreement.................................... S-2, S-6, S-26
Securities...................................................... S-1, S-4, S-41
Seller.......................................................... S-1
Servicer........................................................ S-4
Servicer Payment................................................ S-9
Servicing Fee................................................... S-17, S-56
Servicing Fee Rate.............................................. S-17, S-56
Simple Interest Contract........................................ S-26
Specified Reserve Amount........................................ S-16, S-49
Stated Principal Balance........................................ S-51
Stepdown Date................................................... S-55
Trust........................................................... S-1, S-4, S-24
Trust Agreement................................................. S-4, S-24, S-46
Trustees........................................................ S-4
Underwriters.................................................... S-64
Underwriting Agreement.......................................... S-64
</TABLE>
B-3
<PAGE>
PROSPECTUS
CIT RV 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 retail installment
sale contracts and direct loans (the "Initial Contracts") secured by the new and
used recreation vehicles financed thereby (the "Initial Financed Vehicles"),
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
Vehicles, the proceeds from claims under certain insurance policies in respect
of individual Initial Financed Vehicles 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
retail installment sale contracts and direct loans (the "Subsequent Contracts"
and, together with the Initial Contracts, the "Contracts") secured by the new
and used recreation vehicles financed thereby (the "Subsequent Financed
Vehicles" and, together with the Initial Financed Vehicles, the "Financed
Vehicles"), certain monies received under the Subsequent Contracts on and after
the related subsequent cut-off dates (each, a "Subsequent Cut-off Date"), an
assignment of the security interests in the Subsequent Financed Vehicles and
proceeds from claims under certain insurance policies in respect of individual
Subsequent Financed Vehicles or the related Obligors, 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 21
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 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 October 29, 1997.
-1-
<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.
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<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.
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<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; and
(b) CIT's Quarterly Report on Form 10-Q for the quarters ended March 31,
1997 and June 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, September 26, 1997 and October 14, 1997; and
(d) CIT's Amendment No. 1 to the Registration Statement on Form S-2
(333-36435) filed on October 14, 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
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<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.
<TABLE>
<CAPTION>
<S> <C>
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 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"). Except if
and to the extent specified in the related Prospectus Supplement, 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
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."
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
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
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 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
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 "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
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
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 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--
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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
retail installment sale contracts and direct loans (the "Initial Contracts")
secured by the new and used recreation vehicles financed thereby (the "Initial
Financed Vehicles"), (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 Vehicles, (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 Vehicles 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 monies on deposit in the Pre-Funding Account, additional
retail installment sale contracts and direct loans (the "Subsequent Contracts" and,
together with the Initial Contracts, the "Contracts") secured by the new and used
recreation vehicles financed thereby (the "Subsequent Financed Vehicles" and,
together with the Initial Financed Vehicles, the "Financed Vehicles"), certain
monies received under the Subsequent Contracts on and after the related Subsequent
Cut-off Dates (specified in the related Prospectus Supplement), an assignment of
the security interests in the Subsequent
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Financed Vehicles, and proceeds from claims under certain insurance policies in
respect of individual Subsequent Financed Vehicles 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.
The Financed Vehicles consist of motor homes, travel trailers and other types of
recreation vehicles. See "The Contract Pool."
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 installment sale contracts for
recreation vehicles originated by recreation vehicle dealers ("Dealers") and
acquired by CITSF or The CIT Group/Consumer Finance, Inc. (NY) ("CITCF-NY") or
other affiliates of CITSF, or if specified in the related Prospectus Supplement,
originated directly by CITSF or one of its affiliates or acquired by CITSF or one
of its affiliates from unaffiliated third parties, and direct loans. 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 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 Vehicles or other person or persons who are
obligated to make payments under the Contract (each, an "Obligor"). The related
Prospectus Supplment 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 Vehicle, the weighted average annual
percentage rate and the weighted average remaining maturity of Contracts in the
Contract Pool.
</TABLE>
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<CAPTION>
<S> <C>
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").
The Pre-Funding Account..................... If the Prospectus Supplement for a series of the 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 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
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
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). 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 the 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 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
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
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 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").
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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 (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") 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 and any Non-Reimbursable Payments made by the Servicer, if such
Purchase Price, Monthly Advance or Non-Reimbursable Payment 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 (as defined in the Trust Documents)
incurred and taxes and insurance advanced by the Servicer in respect of Financed
Vehicles that are reimbursable to the Servicer under the Trust Documents, (ii) any
amounts incorrectly
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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 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 facility, another
form of credit enhancement, or any combination thereof. 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
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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 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
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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.
Paid-Ahead Account.......................... 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 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
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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 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 a
Trustee as described above under "--Auction Sale" or "--Optional Purchase of the
Contracts." See "Ratings" herein.
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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 is structured as an owner
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. 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" herein.
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" herein.
The related Prospectus Supplement will provide further information with respect to
the eligibility of a class of Certificates 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 Notes will be eligible for purchase by employee benefit
plans that are subject to ERISA.
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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 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
installment sale contracts and direct loans secured by recreation vehicles. The
credit criteria and underwriting guidelines under which CITSF originates
recreation vehicle installment sale contracts and direct loans were changed in
1994. The delinquency and loan loss experience for CITSF's portfolio will be
affected adversely by this change in credit criteria. See "The CIT Group/Sales
Financing, Inc., Servicer--Delinquency and Loan Loss Experience" herein and in
the related Prospectus Supplement. Since the market value of recreation vehicles
generally declines with age and since in certain states the Trustees may not
have a first perfected security interest in the Financed Vehicles, the Servicer
may not recover the entire amount owing under a defaulted Contract. See "Certain
Legal Aspects of the Contracts." In such a case, the Securityholders may suffer
a corresponding loss. The market value of the Financed Vehicles could be or
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 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 Vehicles 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 Vehicles for recovery of the outstanding
principal and unpaid interest on the defaulted Contracts.
3. Security Interests and Certain Other Aspects of the Contracts. Each
Contract will be secured by a security interest in a Financed Vehicle.
Perfection of security interests in the Financed Vehicles and enforcement of
rights to realize upon the value of the Financed Vehicles as collateral for the
Contracts are subject to a number of state laws, including the Uniform
Commercial Code (the "UCC") as adopted in each state and certificate of title
statutes. The steps necessary to perfect a security interest in a Financed
Vehicle vary from state to state. Unless otherwise specified in the related
Prospectus Supplement, all Contracts in the Contract Pool were acquired by CITSF
or The CIT Group/Consumer Finance, Inc. (NY) ("CITCF-NY") from recreation
vehicle dealers ("Dealers") and name the Dealer as obligee and as secured party.
Most of the Contracts in the Contract Pool were assigned by the related Dealer
to CITSF or CITCF-NY. In each such case, CITSF or CITCF-NY is named as the
secured party on the certificate of title for the related Financed Vehicle. Due
to the expense and administrative inconvenience involved, CITSF will not amend
any certificate of title to name the Company or any Trustee as the lienholder
and the Company will not deliver any certificate of title to such Trustee or
note thereon such Trustee's interest. Consequently, in some states, in the
absence of such an amendment to the certificate of title to reflect the
successive assignments by CITCF-NY to CITSF, by CITSF to the Company, and by the
Company to the Trust, the security interest in the Financed Vehicle may not be
effective or such security interest may not be perfected, and the assignment of
the security interest in the Financed Vehicle to the Trust may not be effective
against other creditors of the related Obligor or a trustee in bankruptcy.
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In addition, numerous federal and state consumer protection laws impose
requirements on sellers under retail installment sale contracts, such as the
Contracts, and the failure by the seller of goods to comply with such
requirements could give rise to liabilities of assignees for amounts due 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
Vehicle 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
Vehicle securing such Contract. Certain other factors may limit the ability of
the Securityholders to realize upon the Financed Vehicles or may limit the
amount realized to less than the amount due. See "Certain Legal Aspects of the
Contracts."
Under California law and most state vehicle dealer licensing laws, sellers
of recreation vehicles are required to be licensed to sell vehicles at retail
sale. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and assignment of retail installment
sale contracts, including the Truth in Lending Act, the Federal Trade Commission
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Fair Debt Collection Practices Act and the Uniform
Consumer Credit Code. In the case of some of these laws, the failure to comply
with 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. In addition, with respect to
used vehicles, the Federal Trade Commission's Rule on Sale of Used Vehicles
requires that all sellers of used vehicles prepare, complete, and display a
"Buyer's Guide" which explains the warranty coverage for such vehicles.
Furthermore, Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of used vehicles
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a seller is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not provided to the purchaser of a
Financed Vehicle, the obligor may be able to assert a defense against the seller
of the Financed Vehicle which defense may prevent a Trust from collecting
amounts due under the affected 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. 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 to the related 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 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."
5. 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
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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.
6. 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.
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 recreation vehicle 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.
7. 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
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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.
8. 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 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.
9. 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.
10. 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."
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11. 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.
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 installment sales contract (or promissory
note) as well as copies of documents and instruments relating to each Contract
and evidencing the security interest in the Financed Vehicle 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.
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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 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
retail installment sale contracts secured by new and used recreation vehicles
between Dealers and Obligors, consisting of the Initial Contracts and the
Subsequent Contracts (if any); (ii) all 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 Vehicles and any accessions thereto; (vi) the right to proceeds from
physical damage, credit life and disability insurance policies, if any, covering
individual Financed Vehicles or Obligors, as the case may be; (vii) the rights
of the Trust under the Trust Documents; and (viii) any and all proceeds of the
foregoing.
Pursuant to agreements between CITSF and many of the Dealers, the Dealer is
obligated after origination to repurchase from CITSF recreation vehicle
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
recreation vehicles, 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 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 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 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 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 considers 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 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.
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THE CONTRACT POOL
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of retail installment sales contracts to finance the purchase of new and
used recreation vehicles and direct loans (collectively, the "Contracts"). 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.
"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" 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 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 herein under "The Purchase Agreements and the Trust
Documents-Paid-Ahead Precomputed Contracts." Because paid-ahead amounts on
Paid-Ahead Precomputed Contracts are deposited into the Paid-Ahead Account, no
shortfalls of interest or principal will result therefrom.
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.
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The Financed Vehicles will consist of motor homes, travel trailers and other
types of recreation vehicles. Motor homes are recreation camping and travel
vehicles built on or as an integral part of a self-propelled motor vehicle
chassis. A motor home may provide kitchen, sleeping and bathroom facilities, is
equipped with the ability to carry fresh water and sewage and may be one of the
following types:
Motor Home: The living unit has been constructed on a bare, specially
designed motor vehicle chassis.
Van Camper: A panel-type truck to which the manufacturer typically adds
any two of the following conveniences: sleeping, kitchen and toilet
facilities. The manufacturer also typically adds electrical hookup, water
storage, water hookup and top extension to provide more headroom.
Mini Motor Home: This unit is built on an automotive manufactured van
frame with an attached cab section typically having a gross vehicle weight
rating of 6,500 pounds or more, with an overall height of less than eight
feet. The manufacturer completes the body section containing the living area
and attaches it to the cab section.
Compact Motor Home: This unit is built on an automotive manufactured cab
and chassis typically having a gross vehicle weight rating of less than
6,500 pounds. It may provide any or all of the features of the larger units.
Travel trailers are trailers designed to be towed by a motorized vehicle
(e.g., automobile, van or pickup truck) and are of a size and weight that does
not require a special highway movement permit. A travel trailer is designed to
provide temporary living quarters for recreation, camping or travel use, does
not require permanent on-site hookup and may be one of the following types:
Conventional Travel Trailer: This unit ranges typically from 12 feet to
35 feet in length, and is towed by means of a bumper or frame hitch attached
to the towing vehicle.
Park Trailer: These units are designed for seasonal or temporary living.
When set up, the unit may be connected to utilities necessary for operation
of installed fixtures and appliances. The unit is built on a single chassis
mounted on wheels. Park trailers are no more than 40 feet in overall body
length and no more than 12 feet in overall body width when in the traveling
mode. The unit is designed for set-up by persons without special skills
using only hand tools.
Fifth-Wheel Travel Trailer: This unit can be equipped in the same way as
the conventional travel trailer, but is constructed with a raised forward
section that allows a bi-level floor plan. This style is designed to be
towed by a vehicle equipped with a device known as a fifth-wheel hitch.
Folding Camping Trailer: This is a portable unit mounted on wheels and
constructed with collapsible partial sidewalls which fold for towing by
another vehicle and unfold at the campsite to provide temporary living
quarters for recreation, camping or travel use.
Truck Camper: This is a portable unit designed to be loaded onto and
unloaded from the bed of a pickup truck, constructed to provide temporary
living quarters for recreation travel or camping use.
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.
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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, the Company
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, and 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
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Trust. Such 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
recreation vehicle installment sales contracts and the payment of the purchase
price to CITCF-NY for any Contracts acquired by CITSF from CITCF-NY.
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" 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 has an option, expiring December 15, 2000, to
purchase the remaining twenty percent (20%) common stock interest from CBC
Holding.
On September 26, 1997, CIT changed its name to The CIT Group, Inc. and filed
a registration statement with the Securities and Exchange Commission for an
initial public offering of 20% of its common stock. The proceeds of that
offering will be used to fund CIT's acquisition of DKB's option to purchase CBC
Holdings' 20% interest in CIT and the exercise of such option. Following
consummation of such offering, DKB will continue to hold its present investment
in CIT.
In accordance with a stockholders agreement among DKB, CMC, as direct
successor to CBC and indirect successor to MHC, and CIT, dated as of December
29, 1989, as amended by an Amendment to Stockholders' Agreement, dated December
15, 1995 (as amended, the "Stockholders Agreement"), one nominee of the Board of
Directors is designated by CMC. The Stockholders Agreement also contains
restrictions with respect to the transfer of the stock of CIT to third parties.
CIT is subject to the informational requirements of the Exchange Act and, in
accordance therewith, files reports and other information with the Commission.
Such reports and other information can be inspected and copied at the offices of
the Commission and at the offices of the New York Stock Exchange, Inc. See
"Additional Information."
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 (201) 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 Contract Pool 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 (201) 740-5000.
CITSF originates, purchases, sells and services retail installment sales
contracts for recreation vehicles, manufactured housing, recreational boat
products and other consumer goods throughout the United States. CITSF has been a
lender to the recreation vehicle industry for more than 30 years. CITSF has a
centralized asset service facility (the "Asset Service Center") in Oklahoma
City, Oklahoma. Working through Dealers and manufacturers, CITSF offers retail
installment credit. In addition to purchasing recreation vehicle contracts from
Dealers on an individual basis, CITSF makes bulk purchases of recreation vehicle
contracts. These bulk purchases may be from the portfolios of other lending
institutions or finance companies, the portfolios of governmental agencies or
instrumentalities or the portfolios of other entities that purchase and hold
recreation vehicle contracts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for
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.
CITSF's general policies with regard to the origination of recreation
vehicle 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
Although CITSF does purchase recreation vehicle installment sale contracts
in bulk from other lenders, unless otherwise specified in the related Prospectus
Supplement, all of the Contracts in the Contract Pool have been originated by
CITSF or CITCF-NY through the purchase of such Contracts from Dealers.
Through its Regional Business Centers, CITSF arranges to purchase recreation
vehicle contracts from recreation vehicle Dealers located throughout the United
States. New business development officers contact the Dealers located in their
territories and explain CITSF's available financing plans, terms, prevailing
rates and credit and financing policies. If the Dealer wishes to use CITSF's
available customer financing, the Dealer must make an application for Dealer
approval. Upon satisfactory results of CITSF's investigation of the Dealer's
creditworthiness and general business reputation, CITSF and the Dealer execute a
Dealer agreement. CITSF also originates recreation vehicle installment loan
agreements directly. In addition, CITSF purchases portfolios of recreation
vehicle contracts from other lending institutions or finance companies.
Contracts that CITSF purchases from Dealers or originates itself (as opposed
to portfolios of contracts purchased from other lenders) are purchased on an
individually approved basis in accordance with CITSF's underwriting guidelines.
If CITSF believes that an obligor on a recreation vehicle contract
(including one of the Contracts) 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.
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CITSF'S UNDERWRITING GUIDELINES
All recreation vehicle contracts that are purchased by CITSF from Dealers
are written on forms provided or approved by CITSF and are purchased on an
individually approved basis. With respect to each retail recreation vehicle
contract to be purchased from a Dealer, CITSF's general practice is to have the
Dealer submit the customer's credit application, manufacturer's invoice (if the
contract is for a new vehicle) and certain other information relating to the
contract to the applicable Regional Business Center. Personnel at the Regional
Business Center analyze the creditworthiness of the customer and of other
aspects of the proposed transaction.
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. CITSF's
underwriting guidelines require, and have required, a credit officer at a
Regional Business Center with the appropriate level of credit authority to
examine each applicant's credit history, residence history, employment history
and debt-to-income payment ratio. Although, with respect to these criteria,
CITSF has, and has had, certain minimum requirements, as described below,
CITSF's management does not believe that these minimum requirements are
themselves generally sufficient to warrant credit approval of an applicant.
Thus, there were and are no requirements on the basis of which, if they are met,
credit is routinely approved without review by a credit officer. Based on credit
score and other risk factors, each applicant is either approved, declined or, if
necessary, referred to a credit officer with a higher credit authority.
The retail customer generally has had a stable residence, employment and
credit history, a minimum of two years in his or her present job, a debt ratio
(the ratio of total installment debt and housing expenses to gross monthly
income) of 40% or less, a down payment of at least 10% and an overall favorable
credit profile. Approval of retail customers that do not meet the
above-described retail customer profile is considered by the appropriate level
credit officer, on a case by case basis. Such approval, if granted, is based on
the applicant's length and likelihood of continued employment, ability to pay,
and a review of the applicants' paying habits. No guarantors, endorsers or
co-signers are considered in determining whether to accept or reject an
application. The maximum amount CITSF will advance to such targeted customers is
(i) in the case of a new financed vehicle, 100% of the unpaid cash balance, not
to exceed 110% of the manufacturer's invoice price plus taxes, fees and
insurance, and (ii) in the case of a used financed vehicle, 100% of the unpaid
cash balance, not to exceed 110% of the wholesale value as determined by the
Kelly blue book or the NADA Guide book. Funding of a contract is authorized
after verification of the conditions of approval of the application and
satisfactory delivery of the related recreation vehicle.
In August 1994, CITSF's credit criteria were changed to permit greater
reliance on credit scores and overall evaluation instead of using specific
disqualifying criteria (e.g., a minimum of two years of employment). The
interest rate charged on each recreation vehicle 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 nature of the verification of credit histories, residence histories,
employment histories, debt ratios of the applicants and evaluate the credit
risks associated with the contracts purchased through such regional office by
rating the obligors on such contracts according to their credit histories,
employment histories, debt ratios and housing ratios.
SERVICING
Through its Asset Service Center, CITSF services recreation vehicle,
manufactured housing, recreational boat, home equity, and other consumer loans.
CITSF services all of the recreation vehicle 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 recreation vehicle contracts held
by other entities, including contracts which were not purchased by CITSF or sold
to such other entities by CITSF.
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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 recreation vehicles securing defaulted contracts and, if deemed
advisable by CITSF, entering into workout arrangements with obligors under
certain defaulted contracts. Although decisions as to whether to repossess any
recreation vehicle are made on an individual basis, CITSF's general policy is to
institute repossession procedures promptly after Asset Service Center personnel
determine that it is unlikely that a defaulted contract will be brought current,
and thereafter to diligently pursue the resale of such recreation vehicles if
the market is favorable. The Asset Service Center has developed a nationwide
auction network to facilitate resale efforts on such repossessions .
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 recreation
vehicle 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
recreation vehicle 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 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
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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.
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
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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 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.
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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 to
surrender any rights or power conferred upon the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision 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 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
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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
Controlling 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 Controlling Notes; (iv) any
failure to pay in full the outstanding principal balance of any Notes on or
prior to the 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 classes 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 classes
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
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
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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 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
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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.
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
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 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
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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.
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 in the Contract
Pool, 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
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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) 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
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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.
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
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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
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
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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.
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 PURCHASER,
THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, NOR ANY OF THE UNDERWRITERS WILL HAVE
ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL PARTICIPANTS OR
EUROCLEAR PARTICIPANTS OR 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
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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
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.
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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.
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;
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(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;
(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 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 Servicer 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
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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.
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 Vehicles. On the
Closing Date and each Subsequent Transfer Date, the Company will sell and assign
to the Trust, without recourse, all of its right, title and interest in and to
such Contracts, including its security interests in the Financed Vehicles.
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. 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, execute, authenticate
and deliver the Securities, to the Company in exchange for the Initial
Contracts. The Company will sell all or a portion of the Securities to the
Underwriters.
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 thirty days; (ii) no provision of a Contract has been waived, altered
or modified in any respect, except by instruments or documents contained in the
Contract File; (iii) each Contract is a legal, valid and binding obligation of
the related Obligor and is enforceable in accordance with its terms (except as
may be limited by laws affecting creditors' rights generally); (iv) no 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 insurance covering the related
Financed Vehicle in accordance with CITSF's normal requirements or, if the
related Financed Vehicle is not so covered by an Obligor's insurance, it is
covered by a blanket insurance policy maintained by CITSF or the Servicer; (vi)
neither CITSF nor the Servicer has obtained Force-Placed Insurance with respect
to any Contract; (vii) 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
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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; (viii)
each Contract complies with all requirements of law in all material respects;
(ix) no Contract has been satisfied, subordinated in whole or in part or
rescinded, and no Financed Vehicle has been released from the security interest
of the related Contract in whole or in part; (x) each Contract creates a valid
and enforceable first priority security interest in favor of CITSF, CITCF-NY or
the related Dealer in the Financed Vehicle covered thereby (which security
interest, if in favor of the related Dealer or CITCF-NY, has been assigned to
CITSF), such security interest has been assigned by CITSF to the Company and by
the Company to the Trust, and all necessary action with respect to such Contract
has been taken to perfect the security interest in the related Financed Vehicle
in favor of CITSF or CITCF-NY; (xi) all parties to each Contract had capacity to
execute such Contract; (xii) no Contract has been sold, assigned or pledged by
CITSF to any person other than the Company (or by the Company to any person
other than the Trust) and, prior to the transfer of the Contracts by CITSF to
the Company and the transfer of the Contracts by the Company 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; (xiii) 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); (xiv) there are no liens or claims which have been filed for work, labor
or materials affecting a Financed Vehicle securing a Contract, which are or may
be liens prior to or equal or coordinate with the security interest of the
Contract; (xv) 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; (xvi) each Contract contains customary and enforceable provisions such
as to render the rights and remedies of the holder thereof adequate for
realization against the collateral of the benefits of the security (except as
may be limited by creditors' rights generally); (xvii) the description of each
Contract set forth in the List of Contracts is true and correct as of its date;
(xviii) no Obligor is the United States of America or any state or any agency,
department, instrumentality or political subdivision thereof; (xix) if the
Obligor is in the military (including an Obligor who is a member of the National
Guard or is in the reserves) and the Contract is subject to the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended (the "Soldiers' and Sailors' Civil
Relief Act"), or the California Military Reservist Relief Act of 1991 (the
"Military Reservist Relief Act"), such Obligor has not made a claim to CITSF
that (A) the amount of interest on the Contract should be limited to 6% pursuant
to the Soldiers' and Sailors' Civil Relief Act during the period of such
Obligor's active duty status, or (B) payments on the Contract should be delayed
pursuant to the Military Reservist Relief Act, in either case unless a court has
ordered otherwise upon application of CITSF; (xx) there is only one original
executed copy of each Contract, which, immediately prior to the execution of the
Trust Documents, was in the possession of CITSF; (xxi) the Contract is "chattel
paper" as defined in the New Jersey UCC; (xxii) the Contract satisfies the
selection criteria set forth in the related Prospectus Supplement; (xxiii) 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 (xxiv) 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 in the related Prospectus
Supplement, the Subsequent Financed Vehicles will consist of motor homes, travel
trailers and other types of recreation vehicles.
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
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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 in an amount equal to the sum of (i) the product of (A) one-
twelfth of the weighted average of the Pass-Through Rate and the Interest Rate
and (B) the remaining principal amount outstanding (without giving effect to any
reductions thereof for unrecoverable Monthly Advances) 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 to the Trust as a sale. As a result
of the sale of the Contracts by CITSF to the Company and by the Company to the
Trust, the Contracts 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 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 both to the related
Trust may provide for the retention by CITSF or the Seller or both, 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 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 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
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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 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.
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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 recreation vehicle installment sale contracts that it
services for itself and others. See "Certain Legal Aspects of the Contracts."
The Servicer may sell the related Financed Vehicle 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 (i) a policy or
policies of insurance covering errors and omissions for failure to maintain
insurance as required by the Trust Documents and (ii) a fidelity bond. Such
policy or policies and 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 recreation vehicle 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 Vehicle 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 Vehicles, 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 latest Final Scheduled Distribution Date of any
Security 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 sales contract.
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
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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 "-Collections" 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 recreation vehicle 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 Vehicle 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-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
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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.
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
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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 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 Vehicles
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.
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
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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 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
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
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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 Trust
Documents will provide that the Servicer, in accordance with its customary
servicing practices and procedures, shall use its best efforts to require that
each Obligor shall have obtained and shall maintain physical damage insurance
covering the Financed Vehicle, provided that such insurance shall be in an
amount no greater than the outstanding principal balance of the related Contract
or, if such insurance covers the interest of the related Obligor in the Financed
Vehicle, no greater than the greater of the outstanding principal balance of the
related Contract and the value of the Financed Vehicle, or such lesser amount
permitted by applicable law. Unless otherwise specified in the related
Prospectus Supplement, the Servicer may, but will not be obligated to, enforce
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 recreation vehicles financed by
installment sale contracts 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
and will be issued by an insurer having a rating of "A" or better by A.M. Best
(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 Vehicle, no greater than the greater of the outstanding
principal balance of the related Contract and the value of the Financed Vehicle,
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 arrange other methods of protection of
the Financed Vehicles that it deems necessary or advisable, provided that the
Servicer determines that such actions do not materially and adversely affect the
interests of the Securityholders.
The Servicer may make advances ("Insurance Advances") to an Obligor to finance
insurance premiums related to the Financed Vehicle. Any such Insurance Advances
may be secured by the related Financed Vehicle.
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
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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.
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.
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 Controlling
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 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,
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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 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.
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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 recreation vehicle
retail installment sale contracts. The highest bid may not be less than the
fair market value of such Contracts and must equal the sum of (i) the greater of
(a) the aggregate Purchase Price for the Contracts (including defaulted
Contracts) plus the appraised value of any other property held by the Trust
(less liquidation expenses), or (b) an amount that when added to amounts on
deposit in the Collection Account available for distribution to Securityholders
for such second succeeding 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 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
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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
recreation vehicle 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 Vehicle 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 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.
SECURITY INTERESTS IN THE FINANCED VEHICLES
General. The Contracts are installment sale contracts that evidence the
credit sale of recreation vehicles by Obligors. The Contracts also constitute
personal property security agreements and include grants of security interests
in the related recreation vehicles under the UCC. Perfection rules relating to
security interests in recreation
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vehicles are generally governed under state certificate of title statutes
(Alabama, Connecticut, Georgia, Maine, Massachusetts, Minnesota, Mississippi,
New Hampshire, New York, Rhode Island and Vermont have adopted the Uniform Motor
Vehicle Certificate of Title and Anti-Theft Act) or by the vehicle registration
laws of the state in which each recreation vehicle is located. In states which
have adopted the Uniform Motor Vehicle Certificate of Title and Anti-Theft Act,
security interests in recreation vehicles may be perfected either by notation of
the secured party's lien on the certificate of title or by delivery of the
certificate of title and payment of a fee to the state motor vehicle authority,
depending on the particular state law. In states in which perfection of a
security interest in a particular motor vehicle is not governed by a certificate
of title statute, perfection is usually accomplished by filing pursuant to the
provisions of the UCC. Notwithstanding the foregoing, in certain states,
folding camping trailers and/or slide-in campers are not subject to state
titling and vehicle registration laws and a security interest in such recreation
vehicles is perfected by filing pursuant to the provisions of the UCC. In most
states, a security interest in a recreation vehicle is perfected by notation of
the secured party's lien on the vehicle's certificate of title. Each Contract
prohibits the sale or transfer of the related Financed Vehicle without the
consent of CITSF.
Perfection of Sale. Pursuant to the Purchase Agreement, CITSF will sell and
assign its interests in the Contracts, including the security interests in the
Financed Vehicles granted thereunder, to the Company and, pursuant to the Trust
Documents, the Company will sell and assign its interest in the Contracts,
including the security interests in the Financed Vehicles granted thereunder, to
the Owner Trustee. UCC financing statements will be filed to perfect the sale
of (i) CITSF's interests in the Contracts to the Company and (ii) the Company's
interests in the Contracts to the Trust.
Perfection of CITSF's or CITCF-NY's Security Interest in the Financed
Vehicles. CITSF and CITCF-NY will take all actions necessary under the laws of
the state in which the related recreation vehicles are located at the time of
origination of the Contract to perfect their respective security interests in
such recreation vehicles, including, where applicable, having a notation of
their respective liens recorded on the related certificate of title or
delivering the required documents and fees, obtaining possession of the
certificate of title (if possible), or, where applicable, by perfecting its
security interest in the related recreation vehicles under the UCC. In the
event CITSF (or CITCF-NY) fails, due to clerical errors, to effect such notation
or delivery, or perfects the security interest under an inapplicable statute
(for example, under the UCC rather than under a motor vehicle title law), the
Trust may not have a first priority security interest in the Financed Vehicle
securing a Contract. In the Trust Documents, CITSF has represented as of the
Closing Date that each Contract creates a valid and enforceable first priority
security interest in favor of CITSF (or CITCF-NY) or the related Dealer in the
Financed Vehicle covered thereby (which security interest, if in favor of the
related Dealer (or CITCF-NY), has been assigned to CITSF) and such security
interest has been assigned by CITSF to the Company, and all necessary action
with respect to such Contract has been taken to perfect the security interest in
the related Financed Vehicle in favor of CITSF (or CITCF-NY). A breach by CITSF
of such warranty that materially adversely affects the Trust's interest in any
Contract would require CITSF to purchase such Contract unless such breach is
cured.
Possible Loss of Perfection or Priority of Trust's Security Interest in
Financed Vehicles 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 Vehicles 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 Vehicles 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 motor vehicle registered in the
State of California (in which the greatest number of Financed Vehicles are
currently registered) may be perfected only by depositing with the Department of
Motor Vehicles a properly endorsed certificate of title for the vehicle showing
the secured party as "legal owner" thereon or if the vehicle has not been
previously registered, an application in usual form for an original registration
together with an application for registration of the secured party as "legal
owner." However, under the California Vehicle Code, a transferee of a security
interest in a motor vehicle is not required to reapply to the Department of
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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 vehicle'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 Vehicles, and therefore the Trust's
security interest would be subordinate to, among others, subsequent purchasers
of such Financed Vehicles 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 Vehicle, judgment creditors or other creditors who take
a security interest in a Financed Vehicle.
Continuity of Perfection. Under the laws of most states, a perfected security
interest in a recreation vehicle continues for four months after the vehicle 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 recreation
vehicle in the new state. A majority of states require surrender of a
certificate of title to obtain a new certificate of title for the vehicle. 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 installment sales contract to surrender possession of the
certificate of title. In the case of vehicles 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, the secured
party would have the opportunity to re-perfect its security interest in the
vehicle in the state to which the vehicle 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 vehicle, re-
registration could defeat perfection.
In the ordinary course of servicing the Contracts, CITSF will take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Financed
Vehicle, CITSF must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Contract before release of
the lien. Under the 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 Vehicles.
In most states, CITSF, as Servicer, will hold certificates of title relating
to the Financed Vehicles 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
Vehicle 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 recreation
vehicle and liens for certain unpaid taxes take priority over even a first
perfected security interest in such vehicle. The Internal Revenue Code of 1986,
as amended, also grants priority to
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certain federal tax liens over the lien of a secured party. The laws of certain
states and federal law permit the confiscation of motor vehicles by governmental
authorities under certain circumstances if used in unlawful activities, which
may result in the loss of a secured party's perfected security interest in a
confiscated recreation vehicle. 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 Vehicle securing a
Contract which are or may be liens prior or equal to the lien of the Contract.
However, liens for repairs or taxes could arise at any time during the term of a
Contract. No notice will be given to the 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 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 recreation vehicle. In cases where the obligor
objects or raises a defense to repossession, or if otherwise required by
applicable state law, a court order must be obtained from the appropriate state
court, and the vehicle must then be recovered in accordance with that order. In
some jurisdictions (not including California), the secured party is required to
notify the debtor of the default and the intent to repossess the collateral and
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 vehicle has been repossessed, the obligor may reinstate
the related contract by paying the delinquent installments and other amounts
due.
NOTICE OF SALE; REDEMPTION RIGHTS
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.
DEFICIENCY JUDGEMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Financed Vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the related indebtedness. While some states impose prohibitions or limitations
on deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in California
and 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
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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 recreation vehicle and payment of all expenses
and indebtedness, there is a surplus of funds. In that case, the UCC requires
the creditor to remit the surplus to any holder of a subordinate lien with
respect to such vehicle or, if no such lienholder exists, to the former owner of
the vehicle.
CERTAIN MATTERS RELATING TO INSOLVENCY
CITSF, 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 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. 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.
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 motor vehicle retail installment sales acts, 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
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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 Vehicle may
assert against the seller of the Financed Vehicle. Such claims are limited to a
maximum liability equal to the amounts paid by the Obligor under the related
Contracts.
Under California law and most state vehicle dealer licensing laws, sellers of
recreation vehicles are required to be licensed to sell vehicles at retail sale.
Numerous other federal and state consumer protection laws impose requirements
applicable to the origination and assignment of retail installment sale
contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with
provisions of these laws may affect the enforceability of the related Contract.
The Trust and the Company may not have obtained all 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
enforcement actions. In addition, with respect to used vehicles, the Federal
Trade Commission's Rule on Sale of Used Vehicles requires that all sellers of
used vehicles prepare, complete, and display a "Buyer's Guide" which explains
the warranty coverage for such vehicles. Furthermore, Federal Odometer
Regulations promulgated under the Motor Vehicle Information and Cost Savings Act
require that all sellers of used vehicles furnish a written statement signed by
the seller certifying the accuracy of the odometer reading. If a seller is not
properly licensed or if either a Buyer's Guide or Odometer Disclosure Statement
was not provided to the purchaser of a Financed Vehicle, the obligor may be able
to assert a defense against the seller of the Financed Vehicle, which defense
may prevent the Trust from collecting amounts due under the Contract.
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 recreation vehicle, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the
recreation vehicle at the time of bankruptcy (as determined by the court),
leaving the party providing financing as a general unsecured creditor for the
remainder of the indebtedness. A bankruptcy court may also reduce the monthly
payments due under the related contract or change the rate of interest and time
of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Civil Relief Act, an Obligor who
enters the military service after
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the origination of such Obligor's Contract (including an Obligor who is a member
of the National Guard or is in reserve status at the time of the origination of
the Obligor's contract and is later called to active duty) may not be charged
interest above an annual rate of 6% during the period of such Obligor's active
duty status, unless a court orders otherwise upon application of the lender. In
addition, pursuant to the Military Reservist Relief Act, under certain
circumstances California residents called into active duty with the reserves can
delay payments on retail installment sale contracts, including the Contracts,
for a period, not to exceed 180 days, beginning with the order to active duty
and ending 30 days after release. It is possible that the foregoing could have
an effect on the ability of the Servicer to collect full amounts of interest on
certain of the Contracts. In addition, the Relief Acts impose limitations which
would impair the ability of the Servicer to repossess a Financed Vehicle 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 Vehicle 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 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 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 partnership for
Federal income tax purposes and, if not, how the Trust is intended to be
treated.
SCOPE OF THE TAX OPINIONS
It is expected that Schulte Roth & Zabel LLP will, upon issuance of a series
of Securities, deliver its opinion that the applicable Trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation for Federal income tax purposes. Further, with respect to each
series of Notes, Schulte Roth & Zabel LLP expects to advise the Trust that the
Notes will be classified as debt for federal income tax purposes.
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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.
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
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<PAGE>
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 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 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.
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."
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller 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 Seller, 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.
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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.
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. 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.1 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
<TABLE>
<S> <C>
Affiliated Owner............................... 6, 25
Asset Service Center........................... 31
Available Amount............................... 14, 55
Bankruptcy Code................................ 65
Benefit Plan................................... 69
Business Day................................... 13, 34
Capitalized Interest Account................... 12
Cash Collateral Account........................ 40
CBC Holding.................................... 30
Cede........................................... 2, 6, 33
Cedel.......................................... 2, 8, 24
Cedel Participants............................. 43
Certificate Balance............................ 6
Certificate Distribution Account............... 51
Certificate Final Scheduled Distribution Date.. 13
Certificate Owner.............................. 24
Certificate Owners............................. 6
Certificate Pool Factor........................ 29
Certificateholders............................. 45
Certificates................................... 1, 5, 33
CIT............................................ 2, 5, 21
CITCF-NY....................................... 10, 21
CITSF.......................................... 5, 21
Closing Date................................... 10
CMC............................................ 30
Code........................................... 19, 67
Collection Account............................. 51
Commission..................................... 3
Company........................................ 1, 5, 21
Contract Files................................. 25
Contract Pool.................................. 9, 26, 27
Contract Rate.................................. 27
Contracts...................................... 1, 9, 27
Controlling Notes.............................. 37
Cooperative.................................... 44
Credit Facility................................ 41
Credit Facility Provider....................... 41
Dealers........................................ 10, 21
Defaulted Contracts............................ 47
Definitive Certificates........................ 45
Definitive Notes............................... 45
Definitive Securities.......................... 45
Deposit Date................................... 25
Depositories................................... 42
Depository..................................... 24
Determination Date............................. 14
Distribution Date.............................. 13, 34
DKB............................................ 30
DTC............................................ 2, 6, 24
DTC Rules...................................... 43
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Due Period..................................... 14
Eligible Account............................... 51
Eligible Institution........................... 51
Eligible Investments........................... 51
Enhancement.................................... 40
<C>
ERISA.......................................... 19
Euroclear...................................... 2, 7, 8
Euroclear Operator............................. 44
Euroclear Participants......................... 43
Event of Termination........................... 58
Events of Default.............................. 36
Financed Vehicles.............................. 1, 9
Force-Placed Insurance......................... 57
FTC Rule....................................... 65
Funding Period................................. 7, 12
Holder......................................... 42
Holders........................................ 45
Indenture...................................... 2, 7, 34
Indenture Trustee.............................. 2, 5
Indirect Participants.......................... 42
Initial Contracts.............................. 1
Initial Cut-off Date........................... 1, 9
Initial Financed Vehicles...................... 1, 9
Initial Pool Balance........................... 17, 18, 60
Insolvency Laws................................ 65
Insurance Advances............................. 57
Interest Accrual Period........................ 13
Interest Rate.................................. 8
IRS............................................ 67
Issuer......................................... 5
Late Fees...................................... 14, 55
Limited Guarantee.............................. 41
Liquidated Contracts........................... 47
Liquidity Facility............................. 41
Liquidity Facility Provider.................... 41
List of Contracts.............................. 48
MHC............................................ 30
Military Reservist Relief Act.................. 49
Monthly Advance................................ 16, 54
Non-Reimbursable Payment....................... 17, 55
Note Distribution Account...................... 51
Note Final Scheduled Distribution Date......... 13
Note Owner..................................... 24, 35
Note Owners.................................... 7, 8
Note Pool Factor............................... 29
Noteholders.................................... 45
Notes.......................................... 1, 7, 34
Obligor........................................ 10, 54
Oklahoma Tax Counsel........................... 68
Original Certificate Balance................... 25
Owner Trustee.................................. 2, 5
Paid-Ahead Account............................. 51
Paid-Ahead Period.............................. 27
Paid-Ahead Precomputed Contract................ 27
</TABLE>
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<TABLE>
<S> <C>
Paid-Ahead Simple Interest Contract............ 27
Participants................................... 42
Pass-Through Rate.............................. 6, 34
Payment Shortfall.............................. 16, 54
Permitted Investments.......................... 11
Pool Balance................................... 17, 18
Pooling and Servicing Agreement................. 2
Precomputed Contracts........................... 27
Pre-Funded Amount............................... 11
Pre-Funded Percentage........................... 23
Pre-Funding Account............................. 7
Principal Liquidation Loss Amount............... 37, 40
Prospectus Supplement........................... 1
PTCE............................................ 69
Purchase Agreement.............................. 10
Purchase Agreements............................. 48
Purchase Price.................................. 50
Rating Agency................................... 18, 70
Rating Agency Condition......................... 36
Record Date..................................... 13, 34
Registration Statement.......................... 3
Related Documents............................... 38
Repurchase Event................................ 10
Repurchased Contract............................ 10, 49
Required Capitalized Interest Amount............ 12
Required Servicer Ratings....................... 53
Reserve Account................................. 40
Reserve Fund.................................... 40
Retained Yield.................................. 50
Sale and Servicing Agreement.................... 2
Securities...................................... 1, 7, 34
Security Owner.................................. 35
Securityholder.................................. 42
Securityholders................................. 45
Seller.......................................... 5
Servicer........................................ 2, 5
Servicer Letter of Credit....................... 53
Servicer Payment................................ 14
Servicing Fee................................... 17, 53
Servicing Fee Rate.............................. 17, 53
Simple Interest Contracts....................... 27
Soldiers' and Sailors' Civil Relief Act......... 49
Spread Account.................................. 40
Stockholders Agreement.......................... 30
Stripped Certificates........................... 7
Stripped Notes.................................. 8
Subsequent Contracts............................ 1, 9
Subsequent Cut-off Date......................... 1, 11
Subsequent Financed Vehicles.................... 1, 9
Subsequent Purchase Agreement................... 11
Subsequent Transfer Agreement................... 11
Subsequent Transfer Date........................ 11
Terms and Conditions............................ 44
Trust........................................... 1, 5
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Trust Agreement................................. 2
Trust Documents................................. 48
Trustee......................................... 2
Trustees........................................ 5
UCC............................................. 21
Underwriters.................................... 69
Underwriting Agreement.......................... 69
Yield Supplement Account........................ 40
</TABLE>
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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 OR THE 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
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 IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary.................................................................... S-4
Risk Factors............................................................... S-20
Structure of the Transaction............................................... S-24
The Trust Property......................................................... S-25
The Contract Pool.......................................................... S-26
Maturity and Prepayment Considerations..................................... S-29
Yield and Prepayment Considerations........................................ S-37
Pool Factors............................................................... S-37
Use of Proceeds............................................................ S-38
The CIT Group, Inc. ....................................................... S-38
The CIT Group/Sales Financing, Inc., Servicer.............................. S-38
The Notes.................................................................. S-41
The Certificates........................................................... S-46
Enhancement................................................................ S-48
The Purchase Agreements and the Trust Documents............................ S-50
Certain Federal Income Tax Consequences.................................... S-57
Certain State Tax Consequences............................................. S-62
ERISA Considerations....................................................... S-63
Plan of Distribution....................................................... S-64
Ratings.................................................................... S-66
Legal Matters.............................................................. S-67
Annex I.................................................................... A-1
Index of Principal Terms................................................... B-1
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.......................................................... 27
Yield and Prepayment Considerations........................................ 29
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....................................................... 69
Plan of Distribution....................................................... 69
Financial Information...................................................... 70
Ratings.................................................................... 70
Legal Matters.............................................................. 70
Experts.................................................................... 70
Index of Principal Terms................................................... 71
</TABLE>
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
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
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$564,122,864
CIT RV Trust 1997-A
THE CIT GROUP SECURITIZATION CORPORATION II
Seller
THE CIT GROUP/SALES FINANCING, INC.
Servicer
PROSPECTUS SUPPLEMENT
CREDIT SUISSE FIRST BOSTON
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES, INC.
SALOMON BROTHERS INC
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