As filed with the Securities and Exchange Commission on January 28, 1998
Registration No. 333-43323
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------
THE CIT GROUP SECURITIZATION CORPORATION II
THE CIT GROUP, INC.
(Exact name of each registrant specified in its charter)
----------
Delaware 22-3328188
Delaware 6146 13-2994534
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
THE CIT GROUP SECURITIZATION CORPORATION II THE CIT GROUP, INC.
650 CIT Drive 1211 Avenue of the Americas
Livingston, New Jersey 07039 New York, New York 10036
(201) 535-3514 (212) 536-1950
(Address of principal (Address of principal
executive offices) executive offices)
----------
ERNEST D. STEIN, ESQ.
Executive Vice President, General Counsel & Secretary
THE CIT GROUP, INC.
1211 Avenue of the Americas
New York, New York 10036
(212)-536-1950
(Name and address of agent for service)
Copies to:
PAUL N. WATTERSON, ESQ.
SCHULTE ROTH & ZABEL LLP
900 Third Avenue
New York, New York 10022
----------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
Proposed Proposed
Amount to Maximum Maximum Amount of
Title of each class of be Offering aggregate registration
securities to be registered registered Price Per offering fee(3)
Unit price(1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset-Backed Securities.................... $1,200,000,000 100% $1,200,000,000 $363,286.37
- --------------------------------------------------------------------------------------------------------------
Limited Guarantees of The CIT
Group, Inc.(2)..........................
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum aggregate offering price, pursuant to Rule
457(c).
(2) May be issued in connection with issuance of the Asset-Backed Securities of
trusts formed by The CIT Group Securitization Corporation II. No additional
consideration will be paid for the Limited Guarantee; accordingly, no
separate filing fee is being paid herewith, pursuant to Rule 457(n).
(3) Pursuant to Rule 457(b), the required fee paid herewith has been reduced by
$350.00, which is the amount equal to the fee previously paid with respect
to this registration statement pursuant to Rule 457.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
Prospectus Supplement
(To Prospectus dated __________, ____)
$
CIT Marine Trust ____-_
The CIT Group Securitization Corporation II,
Seller
The CIT Group/Sales Financing, Inc.,
Servicer
The CIT Marine Trust ____-_ (the "Trust" or the "Issuer") will be formed
pursuant to a Trust Agreement, to be dated as of __________ 1, ____, between The
CIT Group Securitization Corporation II (the "Company" or the "Seller") and
_______________, as trustee (the "Owner Trustee"), and will issue Class A-1
____% Asset-Backed Notes (the "Class A-1 Notes"), Class A-2 ____% Asset-Backed
Notes (the "Class A-2 Notes"), Class A-3 ____% Asset-Backed Notes (the "Class
A-3 Notes"), Class A-4 ____% Asset-Backed Notes (the "Class A-4 Notes"), Class
A-5 ____% Asset-Backed Notes (the "Class A-5 Notes"), Class A-6 ____%
Asset-Backed Notes (the "Class A-6 Notes"), Class A-7 ____% Asset-Backed Notes
(the "Class A-7 Notes" and, together with the Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes, Class A-5 Notes and Class A-6 Notes, the
"Class A Notes") and the Class B ____% Asset-Backed Notes (the "Class B Notes"
and, together with the Class A Notes, the "Notes") in the principal amounts of
$_________, $_________, $_________, $__________, $_________, $_________,
$_________, and $__________, respectively, pursuant to an Indenture, to be dated
as of __________ 1, ____ between the Issuer and _______________, as trustee (the
"Indenture Trustee"). The Trust will also issue ____% Asset-Backed Certificates
(the "Certificates" and, together with the Notes, the "Securities") with an
Original Certificate Balance of $__________.
(Continued on following page)
A discussion of certain risk factors that should be considered by prospective
purchasers of the Securities offered hereby can be found on page S-21 herein and
on page 23 in the accompanying Prospectus.
THE SECURITIES WILL REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST AND WILL
NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE CIT GROUP SECURITIZATION
CORPORATION II, THE CIT GROUP/SALES FINANCING, INC. OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Underwriting Proceeds to the
Public(1) Discount Company(1)(2)
Per Class A-1 Note.............. ________% _______% ________%
Per Class A-2 Note.............. ________% _______% ________%
Per Class A-3 Note.............. ________% _______% ________%
Per Class A-4 Note.............. ________% _______% ________%
Per Class A-5 Note.............. ________% _______% ________%
Per Class A-6 Note.............. ________% _______% ________%
Per Class A-7 Note.............. ________% _______% ________%
Per Class B Note................ ________% _______% ________%
Per Certificate................. ________% _______% ________%
Total........................... $____________ $_________ $___________
(1) Plus accrued interest, if any, at the respective Interest Rate or the
Pass-Through Rate, as appropriate, from __________ 1, ----.
(2) Before deduction of expenses payable by the Company estimated at $_______.
The Securities are offered by the Underwriters, when, as and if delivered to and
accepted by the Underwriters, subject to prior sale, withdrawal or modification
of the offer without notice, approval of counsel and other conditions. It is
expected that delivery of the Notes will be made in book-entry form through the
facilities of The Depository Trust Company ("DTC"), Cedel Bank, societe anonyme
("Cedel") and the Euroclear System ("Euroclear") and that the Certificates will
be ready for delivery in fully registered, certificated form in New York, New
York, in each case on or about __________, ____, against payment therefor in
immediately available funds.
[UNDERWRITERS]
The date of this Prospectus Supplement is __________, ____.
<PAGE>
(continued from preceding page)
The assets of the Trust will primarily include a pool of marine installment sale
contracts, direct loans and U.S. preferred ship mortgages (the "Contracts")
secured by the new and used boats, boat motors and boat trailers financed
thereby (the "Financed Boats"), certain monies received under the Contracts on
and after __________ 1, ____ (the "Cut-off Date"), an assignment of the security
interests in the Financed Boats, the Collection Account, the Certificate
Distribution Account, the Note Distribution Account and the Reserve Account, in
each case together with the proceeds thereof, the proceeds from claims under
certain insurance policies in respect of individual Financed Boats or the
related Obligors and certain rights under the Sale and Servicing Agreement, to
be dated as of __________ 1, ____ (the "Sale and Servicing Agreement"), among
the Seller, the Servicer, and the Trust.
The Notes will be secured by assets of the Trust (other than the
Certificate Distribution Account) pursuant to the Indenture. The Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class
A-5 Notes, the Class A-6 Notes, the Class A-7 Notes and the Class B Notes will
bear interest at the per annum rate of ____%, ____%, ____%, ____%, ____%, ____%,
____% and ____%, respectively (each, an "Interest Rate"). Interest on the Class
A-1 Notes will be calculated on the basis of a 360-day year and the actual
number of days elapsed in the related Interest Accrual Period. Interest on each
other class of Notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on the Notes will generally be
payable on the fifteenth day of each month (each, a "Distribution Date"),
commencing __________ 15, ____. Principal on the Notes will be payable on each
Distribution Date to the extent described herein. No principal payments will be
made (i) on the Class A-2 Notes until the Class A-1 Notes have been paid in
full, (ii) on the Class A-3 Notes until the Class A-2 Notes have been paid in
full, (iii) on the Class A-4 Notes until the Class A-3 Notes have been paid in
full, (iv) on the Class A-5 Notes until the Class A-4 Notes have been paid in
full, (v) on the Class A-6 Notes until the Class A-5 Notes have been paid in
full or (vi) on the Class A-7 Notes until the Class A-6 Notes have been paid in
full, except under certain circumstances described herein. Distributions of
principal and interest on the Class B Notes will be subordinated in priority to
payments due on the Class A Notes to the extent described herein. The
Certificates represent fractional undivided interests in the Trust. The
Certificates will bear interest at the rate of ____% per annum (the
"Pass-Through Rate") and will be distributed to Certificateholders on each
Distribution Date to the extent described herein. Distributions of interest and
principal on the Certificates will be subordinated in priority of payment to
payment of interest and principal on the Notes, to the extent described herein.
No principal will be paid on the Certificates until all of the Notes have been
paid in full. The final scheduled Distribution Date for the Certificates will be
the __________ Distribution Date. The final scheduled Distribution Date for the
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes,
the Class A-5 Notes, the Class A-6 Notes, the Class A-7 Notes and the Class B
Notes will be the __________, __________, __________, __________, __________,
__________, __________ and _____________ Distribution Date, respectively. The
aggregate outstanding principal amount of the Securities is likely to be paid
earlier than such dates due to a variety of factors including an Optional
Purchase or Auction Sale as described herein.
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Underwriters expect, but are not obligated,
to make a market in the Securities. There is no assurance that any such market
will develop, or if one does develop, that it will continue or provide
sufficient liquidity.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES
SEE "PLAN OF DISTRIBUTION" HEREIN.
S-2
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "The CIT Group/Sales
Financing, Inc., Servicer" may constitute forward-looking statements within the
meaning of Section 7A of the Securities Act of 1933, as amended, and as such may
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the marine portfolio of The
CIT Group/Sales Financing, Inc. to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
This Prospectus Supplement does not contain complete information about the
offering of the Securities. Additional information is contained in the
Prospectus of the Seller dated __________, ____ (the "Prospectus") and
purchasers are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Securities may not be consummated unless the purchaser has
received both this Prospectus Supplement and the Prospectus. To the extent, if
any, that any statement in the final Prospectus Supplement is inconsistent with
statements contained in this Prospectus Supplement, the statements in the final
Prospectus Supplement shall control. Terms used and not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Prospectus.
S-3
<PAGE>
SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Certain capitalized terms used in the Summary are
defined elsewhere in this Prospectus Supplement or in the Prospectus.
Issuer........................ CIT Marine Trust ____-_ (the "Trust" or the
"Issuer"), a Delaware business trust to be
formed by the Seller and the Owner Trustee
pursuant to the Trust Agreement, to be dated as
of __________ 1, ____ (the "Trust Agreement").
Seller........................ The CIT Group Securitization Corporation II
(the "Company"), a wholly-owned, limited
purpose subsidiary of The CIT Group, Inc.
("CIT"). Neither CIT nor any of its affiliates,
including the Company and The CIT Group/Sales
Financing, Inc. ("CITSF"), has guaranteed,
insured or is otherwise obligated with respect
to the Securities. See "Risk Factors--Limited
Obligations."
Servicer...................... The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the "Servicer"),
a wholly-owned subsidiary of CIT. The Servicer
will be responsible for managing,
administering, servicing and making collections
on the Contracts held by the Trust.
Owner Trustee................. _______________, as trustee under the Trust
Agreement (the "Owner Trustee").
Indenture Trustee............. _______________, as trustee under the
Indenture, to be dated as of __________ 1, ____
(the "Indenture Trustee" and, together with the
Owner Trustee, the "Trustees").
Risk Factors.................. Certain potential risks and other
considerations are particularly relevant to a
decision to invest in any securities sold
hereunder. See "Risk Factors."
The Notes..................... The CIT Marine Trust ____-_ Class A-1 ____%
Asset-Backed Notes (the "Class A-1 Notes"),
Class A-2 ____% Asset-Backed Notes (the "Class
A-2 Notes"), Class A-3 ____% Asset-Backed Notes
(the "Class A-3 Notes"), Class A-4 ____%
Asset-Backed Notes (the "Class A-4 Notes" ),
Class A-5 ____% Asset-Backed Notes (the "Class
A-5 Notes"), Class A-6 ____% Asset-Backed Notes
(the "Class A-6 Notes"), Class A-7 ____%
Asset-Backed Notes (the "Class A-7 Notes" and,
together with the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes, the Class A-4
Notes, the Class A-5 Notes and the Class A-6
Notes, the "Class A Notes") and Class B ____%
Asset-Backed Notes (the "Class B Notes" and,
together with the Class A Notes, the "Notes"
and, together with the Certificates, the
"Securities") will represent obligations of the
Trust secured by assets of the Trust (other
than the Certificate Distribution Account). See
"The Notes--General."
Payments in respect of the Class B Notes will
be subordinated to payments on the Class A
Notes, to the extent described herein.
S-4
<PAGE>
The Trust will issue $________, $________,
$__________, $__________, $________, $________,
$________ and $________ aggregate principal
amount of Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes, Class A-4 Notes, Class A-5
Notes, Class A-6 Notes, Class A-7 Notes and
Class B Notes, respectively, pursuant to an
Indenture, to be dated as of __________ 1,
____, between the Issuer and the Indenture
Trustee (the "Indenture"). See "The
Notes--General."
The Notes will be issued in minimum
denominations of $1,000 and integral multiples
of $1,000 in excess thereof and will be
available in book-entry form only. Persons
acquiring beneficial interests in the Notes
("Note Owners") will hold their interests
through DTC in the United States or Cedel Bank,
societe anonyme ("Cedel") or the Euroclear
System ("Euroclear") in Europe. Definitive
Notes (as defined in the Prospectus) will be
issued only under the limited circumstances
described herein and in the Prospectus. Unless
and until Notes of a class are issued in
definitive form, all references herein to
distributions, notices, reports and statements
to and to actions by and effects upon the
related Noteholders will refer to the same
actions and effects with respect to DTC or
Cede, as the case may be, for the benefit of
the related Note Owners in accordance with the
DTC procedures. See "Certain Information
Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities" in
the Prospectus and Annex I hereto.
The Certificates.............. The CIT Marine Trust ____-_ ____% Asset-Backed
Certificates (the "Certificates") will
represent fractional undivided interests in the
Trust. See "The Certificates--General."
The Trust will issue $_________ aggregate face
amount of Certificates (the "Original
Certificate Balance") pursuant to the Trust
Agreement. Payments in respect of the
Certificates will be subordinated to payments
on the Notes to the extent described herein and
in the Prospectus. See "The
Certificates--General."
The Certificates will be issued in minimum
denominations of $20,000 and integral multiples
of $1,000 in excess thereof; provided, however,
that one Certificate may be issued in a
denomination other than an integral multiple of
$1,000 such that the Affiliated Owner may be
issued at least 1% of the Original Certificate
Balance. The Certificates will be issued in
fully registered, certificated form
("Definitive Certificates") to
Certificateholders or their nominees. See
"Certain Information Regarding the
Securities--Definitive Securities" in the
Prospectus. Purchasers of Certificates and
their assignees (i) must represent that they
are United States persons (as defined in
Section 7701(a) of the Code) and provide a
certification of non-foreign status under
penalties of perjury and (ii) must represent
and certify that they are not (a) an employee
benefit plan (as defined in Section 3(3) of
ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in
Section 4975(e)(1) of the Code, or (c)
S-5
<PAGE>
any entity whose underlying assets include plan
assets by reason of a plan's investment in the
entity.
Property of the Trust......... The property of the Trust will primarily
include (i) a pool of marine installment sale
contracts, direct loans and U.S. preferred ship
mortgages (the "Contracts") secured by the new
and used boats, boat motors and boat trailers
financed thereby (the "Financed Boats"), (ii)
certain monies received under the Contracts on
and after __________ 1, ____ (the "Cut-off
Date"), (iii) an assignment of the security
interests in the Financed Boats, (iv) the
Collection Account, the Certificate
Distribution Account, the Note Distribution
Account and the Reserve Account, in each case
together with the proceeds thereof, (v) the
proceeds from claims under certain insurance
policies in respect of individual Financed
Boats or the related Obligors and (vi) certain
rights under the Sale and Servicing Agreement,
to be dated as of __________ 1, ____ (the "Sale
and Servicing Agreement"), among the Seller,
the Servicer and the Trust.
CITSF will be obligated to repurchase Contracts
(a "Repurchased Contract") upon the occurrence
of certain breaches of representations and
warranties (a "Repurchase Event"). See "The
Purchase Agreements and the Trust
Documents--Sale and Assignment of the
Contracts" and "--Servicing Procedures" in the
Prospectus.
The Contracts................. The property of the Trust will consist
primarily of marine installment sale contracts
for boats originated by boat dealers
("Dealers") and acquired by CITSF or The CIT
Group/Consumer Finance, Inc. (NY) ("CITCF-NY"),
marine loans originated directly by CITSF or
one of its affiliates, or acquired by CITSF or
one of its affiliates from unaffiliated third
parties and U.S. preferred ship mortgages. The
Financed Boats will consist of boats, boat
motors and boat trailers. See "The Contract
Pool." On or prior to the date of issuance of
the Securities (the "Closing Date"), CITCF-NY
will sell certain contracts that will
constitute a portion of the Contracts to CITSF
pursuant to a purchase agreement, to be dated
as of __________ 1, ____, and CITSF will sell
the Contracts to the Company pursuant to a
purchase agreement, to be dated as of
__________ 1, ____ (the "Purchase Agreement"),
and the Company will sell the Contracts to the
Trust pursuant to the Sale and Servicing
Agreement.
CITSF or one of its affiliates (directly or
through Dealers) originated all of the
Contracts in accordance with CITSF's
underwriting standards or acquired the
Contracts from unaffiliated third parties (in
which event CITSF reviewed the Contracts to
confirm that they conformed to CITSF's
underwriting standards).
As of the Cut-off Date, the Contracts had a
weighted average original maturity of _____
months and a remaining weighted average
maturity of _____ months. The final scheduled
payment date on the Contract with the last
maturity occurs in __________. See "The
Contract Pool." The Contracts will generally be
prepayable at any time without premium or
S-6
<PAGE>
penalty to the purchaser of the related
Financed Boat or other person or persons who
are obligated to make payments under the
Contract (each, an "Obligor").
Distribution Dates............ Payments of interest and principal on the
Securities will be made on the fifteenth day of
each month or, if any such day is not a
Business Day, on the next succeeding Business
Day (each, a "Distribution Date"), commencing
__________ 15, ____. Payments on the Notes on
each Distribution Date will be made to the
holders of record of the related Notes at the
close of business on the Business Day
immediately preceding such Distribution Date
or, in the event Definitive Notes (as defined
in the Prospectus) have been issued, at the
close of business on the last Business Day of
the month immediately preceding the month in
which such Distribution Date occurs and
payments on the Certificates on each
Distribution Date will be made to the holders
of record of the related Certificates, at the
close of business on the last Business Day of
the month immediately preceding the month in
which such Distribution Date occurs (each, a
"Record Date").
To the extent not previously paid in full prior
to such time, the outstanding face amount of
the Certificates will be payable on the
Distribution Date occurring in __________ (the
"Certificate Final Scheduled Distribution
Date") and the outstanding principal amount of
the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the Class
A-5 Notes, the Class A-6 Notes, the Class A-7
Notes and the Class B Notes will be payable on
the Distribution Date occurring in __________,
___________, ___________, ___________,
___________, ___________, ___________ and
__________, respectively (the "Class A-1 Note
Final Scheduled Distribution Date," the "Class
A-2 Note Final Scheduled Distribution Date,"
the "Class A-3 Note Final Scheduled
Distribution Date," the "Class A-4 Note Final
Scheduled Distribution Date," the "Class A-5
Note Final Scheduled Distribution Date," the
"Class A-6 Note Final Scheduled Distribution
Date," the "Class A-7 Note Final Scheduled
Distribution Date" and the "Class B Note Final
Scheduled Distribution Date," respectively).
A "Business Day" is any day other than a
Saturday, Sunday or any day on which banking
institutions or trust companies in the states
of New York, __________, __________ or Oklahoma
are authorized by law, regulation or executive
order to be closed.
Due Period.................... With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and other amounts will be collected on
the Contracts for application towards the
payment of principal and interest to the
Securityholders and the payment of fees on such
Distribution Date. The "Due Period" will be the
calendar month immediately preceding the
Distribution Date. The first Due Period will
commence on and include __________ 1, ____ and
will end on and include __________, ____.
S-7
<PAGE>
Determination Date............ The "Determination Date" is the third Business
Day prior to each Distribution Date. On each
Determination Date, the Servicer will determine
the Available Amount for distribution on the
related Distribution Date, allocate such
amounts between the Notes, the Certificates and
the Servicer Payment, and advise the Trustees
(or the paying agent appointed pursuant to the
Indenture or the Trust Agreement) of the
amounts of the payments to be made to
Securityholders, all as described under "The
Purchase Agreements and The Trust
Documents--Distributions."
The "Available Amount" on any Distribution Date
is equal to the excess of (A) the sum of (i)
all amounts on deposit in the Collection
Account attributable to collections or deposits
made in respect of the Contracts (including any
Late Fees (as defined in the Prospectus)), in
the related Due Period and (ii) the Purchase
Price for any Contract repurchased by CITSF as
a result of breaches of certain representations
and warranties or purchased by the Servicer as
a result of breaches of certain covenants and
any Monthly Advances made by the Servicer, if
such Purchase Price or Monthly Advance is paid
on the Deposit Date immediately preceding such
Distribution Date, over (B) the sum of the
following amounts (to the extent that the
Servicer has not already withheld such amounts
from collections on the Contracts): (i) any
repossession profits on Liquidated Contracts,
Liquidation Expenses incurred and taxes and
insurance advanced by the Servicer in respect
of Financed Boats that are reimbursable to the
Servicer under the Sale and Servicing
Agreement, (ii) any amounts incorrectly
deposited in the Collection Account, (iii) net
investment earnings on the funds in the
Collection Account and (iv) any other amounts
permitted to be withdrawn from the Collection
Account by the Servicer (or to be retained by
the Servicer from collections on the Contracts)
pursuant to the Sale and Servicing Agreement.
Terms of the Notes............ The principal terms of the Notes will be as
described below:
A. Interest Rate............. The Class A-1 Notes will bear interest at the
rate of ____% per annum (the "Class A-1
Interest Rate"), the Class A-2 Notes will bear
interest at the rate of ____% per annum (the
"Class A-2 Interest Rate"), the Class A-3 Notes
will bear interest at the rate of ____% per
annum (the "Class A-3 Interest Rate"), the
Class A-4 Notes will bear interest at the rate
of ____% per annum (the "Class A-4 Interest
Rate"), the Class A-5 Notes will bear interest
at the rate of ____% per annum (the "Class A-5
Interest Rate"), the Class A-6 Notes will bear
interest at the rate of ____% per annum (the
"Class A-6 Interest Rate"), the Class A-7 Notes
will bear interest at the rate of ____% per
annum (the "Class A-7 Interest Rate") and the
Class B Notes will bear interest at the rate of
____% per annum (the "Class B Interest Rate").
The interest rates for the various classes of
Notes are referred to herein collectively as
"Interest Rates."
B. Interest.................. Interest on the outstanding principal amount of
each class of Notes will accrue at the
applicable Interest Rate from and including the
Closing Date (in the case of the first
Distribution
S-8
<PAGE>
Date) or from and including the preceding
Distribution Date to but excluding the
Distribution Date (each, an "Interest Accrual
Period"). On each Distribution Date, the
Indenture Trustee will distribute to the
Noteholders of each class accrued interest at
the applicable Interest Rate on the outstanding
principal amount of such class to the extent of
the Available Amount remaining after payment of
the Servicer Payment. To the extent the
remaining Available Amount on a Distribution
Date is insufficient to pay Noteholders the
entire amount of interest due on such
Distribution Date, such shortfall will be
funded from the Reserve Account, subject to the
Available Reserve Amount, under the
circumstances described herein. Interest on the
Class A-1 Notes will be calculated on the basis
of a 360-day year and the actual number of days
elapsed in the related Interest Accrual Period.
Interest on each other class of Notes will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on
the Notes of any class for any Distribution
Date due but not paid on such Distribution Date
will be due on the next Distribution Date in
addition to an amount equal to interest on such
amount at the applicable Interest Rate (to the
extent lawful). See "The Notes--Payment of
Interest."
The "Servicer Payment" is equal on each
Distribution Date to the sum of the
reimbursement then due to the Servicer for
outstanding Monthly Advances and the Servicing
Fee (including any unpaid Servicing Fees for
past Distribution Dates); provided, however,
that if CITSF or one of its affiliates is the
Servicer, the Servicing Fee (including any
unpaid Servicing Fees for past Distribution
Dates) shall not be included in the Servicer
Payment but instead shall be payable to the
Servicer on each Distribution Date only from
the Available Amount, if any, remaining after
the principal and interest payable on the
Securities on such Distribution Date have been
paid.
Interest payments to all classes of Class A
Noteholders will have the same priority. Under
certain circumstances, the amount available for
interest payments could be less than the amount
of interest payable on the Class A Notes on any
Distribution Date, in which case each class of
Class A Noteholders will receive their ratable
share (based upon the aggregate amount of
interest due to such class of Class A
Noteholders) of the aggregate amount available
to be distributed in respect of interest on the
Class A Notes.
Interest on the Class B Notes will not be paid
on any Distribution Date until interest on the
Class A Notes for such Distribution Date has
been paid in full. In addition, notwithstanding
the foregoing, if an Event of Default has
occurred and the Notes have been accelerated,
payments of interest on and principal of the
Class B Notes will not be paid until the Class
A Notes have been paid in full.
C. Principal................. Principal of the Class A Notes will be payable
on each Distribution Date in an amount equal to
the Class A Noteholders' Principal Distribution
Amount, to the extent of the Available Amount
remaining after payment of the Servicer
S-9
<PAGE>
Payment and interest due on the Notes on such
Distribution Date. To the extent the remaining
Available Amount on a Distribution Date is
insufficient to fund the entire Class A
Noteholders' Principal Distribution Amount due
on such Distribution Date, such shortfall will
be funded from the Reserve Account, subject to
the Available Reserve Amount remaining after
any withdrawals from the Reserve Account to
make payments of interest due on the Notes on
such Distribution Date, under the circumstances
described herein.
Principal of the Class B Notes will be payable
on each Distribution Date in an amount equal to
the Class B Noteholders' Principal Distribution
Amount, to the extent of the Available Amount
remaining after payment of the Servicer Payment
and interest due on the Notes and principal due
on the Class A Notes on such Distribution Date.
To the extent the remaining Available Amount on
a Distribution Date is insufficient to fund the
entire Class B Noteholders' Principal
Distribution Amount due on such Distribution
Date, such shortfall will be funded from the
Reserve Account, subject to the Available
Reserve Amount remaining after any withdrawals
from the Reserve Account to make payments of
interest due on the Notes and principal due on
the Class A Notes on such Distribution Date,
under the circumstances described herein.
Notwithstanding the foregoing, if an Event of
Default has occurred and the Notes have been
accelerated, payments of interest on and
principal of the Class B Notes will not be paid
until the Class A Notes have been paid in full.
On each Distribution Date prior to the
Distribution Date on which the Class A-1 Notes
have been paid in full, principal of the Class
A-1 Notes will be payable in an amount equal to
100% of the Class A Noteholders' Principal
Distribution Amount. On each Distribution Date
on and after the Distribution Date on which the
Class A-1 Notes have been paid in full,
principal of the Class A-2 Notes will be
payable, until the Class A-2 Notes have been
paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution
Amount (less any portion of the Class A
Noteholders' Principal Distribution Amount
applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1
Notes to zero). On each Distribution Date on
and after the Distribution Date on which the
Class A-2 Notes have been paid in full,
principal of the Class A-3 Notes will be
payable, until the Class A-3 Notes have been
paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution
Amount (less any portion of the Class A
Noteholders' Principal Distribution Amount
applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1
Notes and the Class A-2 Notes to zero). On each
Distribution Date on and after the Distribution
Date on which the Class A-3 Notes have been
paid in full, principal of the Class A-4 Notes
will be payable, until the Class A-4 Notes have
been paid in full, in an amount equal to 100%
of the Class A Noteholders' Principal
Distribution Amount (less any portion of the
Class A Noteholders' Principal Distribution
Amount applied on such Distribution Date to
reduce the outstanding principal amount of the
Class A-1 Notes, the
S-10
<PAGE>
Class A-2 Notes and the Class A-3 Notes to
zero). On each Distribution Date on and after
the Distribution Date on which the Class A-4
Notes have been paid in full, principal of the
Class A-5 Notes will be payable, until the
Class A-5 Notes have been paid in full, in an
amount equal to 100% of the Class A
Noteholders' Principal Distribution Amount
(less any portion of the Class A Noteholders'
Principal Distribution Amount applied on such
Distribution Date to reduce the outstanding
principal amount of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes to zero). On each Distribution
Date on and after the Distribution Date on
which the Class A-5 Notes have been paid in
full, principal of the Class A-6 Notes will be
payable, until the Class A-6 Notes have been
paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution
Amount (less any portion of the Class A
Noteholders' Principal Distribution Amount
applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1
Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class A-5
Notes to zero). On each Distribution Date on
and after the Distribution Date on which the
Class A-6 Notes have been paid in full,
principal of the Class A-7 Notes will be
payable, until the Class A-7 Notes have been
paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution
Amount (less any portion of the Class A
Noteholders' Principal Distribution Amount
applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1
Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes, the Class A-5 Notes
and the Class A-6 Notes to zero). On each
Distribution Date, principal of the Class B
Notes will be payable, until the Class B Notes
have been paid in full, in an amount equal to
100% of the Class B Noteholders' Principal
Distribution Amount.
The "Principal Distribution Amount" on each
Distribution Date is equal to the sum of the
following amounts with respect to the related
Due Period, in each case calculated in
accordance with the method specified in each
Contract: (i) all payments of principal
(including all Principal Prepayments applied
during the related Due Period) made on each
Contract during the related Due Period, (ii)
the Stated Principal Balance of each Contract
which, as of the related Deposit Date, was
purchased by CITSF or the Servicer pursuant to
the Sale and Servicing Agreement, and (iii) the
Stated Principal Balance of each Contract which
became a Liquidated Contract during the related
Due Period; provided, however, that (x)
payments of principal (including Principal
Prepayments) with respect to a Liquidated
Contract or a Repurchased Contract received
after the last day of the Due Period in which
the Contract became a Liquidated Contract or a
Repurchased Contract shall not be included in
the Principal Distribution Amount, and (y) if a
Liquidated Contract is purchased by CITSF or
the Servicer pursuant to the Sale and Servicing
Agreement on the Deposit Date immediately
following the Due Period in which it became a
Liquidated Contract, no amount will be included
with respect to such Contract in the Principal
Distribution Amount pursuant to clause (iii) of
the definition thereof.
S-11
<PAGE>
"Class A Noteholders' Principal Distribution
Amount" means, for any Distribution Date, the
sum of (i) the Class A Noteholders' Monthly
Principal Amount for such Distribution Date and
(ii) the Class A Noteholders' Principal
Carryover Shortfall for such Distribution Date;
provided, that the Class A Noteholders'
Principal Distribution Amount shall not exceed
the outstanding principal balance of the Class
A Notes. In addition, on the Note Final
Scheduled Distribution Date of each class of
Class A Notes, the principal required to be
deposited in the Note Distribution Account will
include the amount necessary (after giving
effect to other amounts to be deposited in the
Note Distribution Account on such Distribution
Date and allocable to principal) to reduce the
outstanding principal balance of the related
class of Class A Notes to zero.
"Class B Noteholders' Principal Distribution
Amount" means, for any Distribution Date, the
sum of (i) the Class B Noteholders' Monthly
Principal Amount for such Distribution Date and
(ii) the Class B Noteholders' Principal
Carryover Shortfall for such Distribution Date;
provided, that the Class B Noteholders'
Principal Distribution Amount shall not exceed
the outstanding principal balance of the Class
B Notes. In addition, on the Class B Note Final
Scheduled Distribution Date, the principal
required to be deposited in the Note
Distribution Account will include the amount
necessary (after giving effect to other amounts
to be deposited in the Note Distribution
Account on such Distribution Date and allocable
to principal) to reduce the outstanding
principal balance of the Class B Notes to zero.
No principal payments will be made (i) on the
Class A-2 Notes until the Class A-1 Notes have
been paid in full, (ii) on the Class A-3 Notes
until the Class A-2 Notes have been paid in
full, (iii) on the Class A-4 Notes until the
Class A-3 Notes have been paid in full, (iv) on
the Class A-5 Notes until the Class A-4 Notes
have been paid in full, (v) on the Class A-6
Notes until the Class A-5 Notes have been paid
in full or (vi) on the Class A-7 Notes until
the Class A-6 Notes have been paid in full.
Notwithstanding the foregoing, if an Event of
Default has occurred and the Notes have been
accelerated, principal payments will be made on
each class of Class A Notes pro rata on the
basis of their respective unpaid principal
amounts.
The outstanding principal amount of the Class
A-1 Notes, to the extent not previously paid,
will be payable on the Class A-1 Note Final
Scheduled Distribution Date; the outstanding
principal amount of the Class A-2 Notes, to the
extent not previously paid, will be payable on
the Class A-2 Note Final Scheduled Distribution
Date; the outstanding principal amount of the
Class A-3 Notes, to the extent, not previously
paid, will be payable on the Class A-3 Note
Final Scheduled Distribution Date; the
outstanding principal amount of the Class A-4
Notes, to the extent not previously paid, will
be payable on the Class A-4 Note Final
Scheduled Distribution Date; the outstanding
principal amount of the Class A-5 Notes, to the
extent not previously paid, will be payable on
the
S-12
<PAGE>
Class A-5 Note Final Scheduled Distribution
Date; the outstanding principal amount of the
Class A-6 Notes, to the extent not previously
paid, will be payable on the Class A-6 Note
Final Scheduled Distribution Date; the
outstanding principal amount of the Class A-7
Notes, to the extent not previously paid, will
be payable on the Class A-7 Note Final
Scheduled Distribution Date; and the
outstanding principal amount of the Class B
Notes, to the extent not previously paid, will
be payable on the Class B Note Final Scheduled
Distribution Date. See "The Notes--Payments of
Principal."
D. Redemption................ In the event of an Optional Purchase or Auction
Sale, as described herein, the outstanding
Notes will be redeemed, at a redemption price
equal to the unpaid principal amount of the
Notes plus accrued and unpaid interest thereon
at the applicable Interest Rates. See
"Summary--Optional Purchase of the Contracts,"
"--Auction Sale," "The Notes--Redemption" and
"The Purchase Agreements and The Trust
Documents--Termination" in the Prospectus.
E. Limited Rights............. Except as described herein, if an Event of
Default occurs under the Indenture, the Class B
Noteholders will not have any right to direct
or to consent to any remedies therefor by the
Indenture Trustee, including acceleration of
the Notes or the sale of Contracts, until the
Class A Notes have been paid in full. If an
Event of Termination occurs, the Class B
Noteholders will not have any right to direct
or consent to removal of the Servicer or waiver
of any Event of Termination until the Class A
Notes have been paid in full.
Terms of the Certificates..... The principal terms of the Certificates will be
as described below:
A. Pass-Through Rate......... The Certificates will bear interest at the rate
of ____% per annum (the "Pass-Through Rate").
B. Interest.................. Interest in respect of a Distribution Date will
accrue at the Pass-Through Rate during the
related Interest Accrual Period. On each
Distribution Date, the Owner Trustee will
distribute pro rata to Certificateholders
accrued interest at the Pass-Through Rate on
the outstanding Certificate Balance to the
extent of the Available Amount remaining after
payment of the Servicer Payment and interest
and principal due on the Notes on such
Distribution Date. To the extent the remaining
Available Amount on a Distribution Date is
insufficient to pay Certificateholders the
entire amount of interest due on such
Distribution Date, such shortfall will be
funded from the Reserve Account, subject to the
Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make
payments of interest and principal due on the
Notes on such Distribution Date, under the
circumstances described herein. Interest on the
Certificates for any Distribution Date due but
not paid on such Distribution Date will be due
on the next Distribution Date in addition to an
amount equal to interest on such amount at the
Pass-Through Rate (to the extent lawful).
Interest on the Certificates will be calculated
on the basis of a 360-day year consisting of
twelve 30-day months. See "The Certificates -
Distributions of Interest."
S-13
<PAGE>
The "Certificate Balance" means the Original
Certificate Balance reduced by all
distributions allocable to principal actually
made to Certificateholders.
The rights of Certificateholders to receive
distributions of interest will be subordinated
to the rights of Noteholders to receive
distributions of interest and principal, as
described herein. If an Event of Default has
occurred and the Notes have been accelerated,
Certificateholders will not be entitled to
receive any distributions until the Notes have
been paid in full. See "The
Certificates--Distributions of Interest."
C. Principal................. On each Distribution Date prior to the
Distribution Date on which the Notes have been
paid in full (the "Cross-Over Date"), the
Certificateholders will not be entitled to any
payments of principal.
On each Distribution Date on or after the
Cross-Over Date, principal of the Certificates
will be payable, subject to the remaining
Available Amount and the remaining Available
Reserve Amount, in an amount equal to the
Certificateholders' Principal Distribution
Amount with respect to such Distribution Date.
Such principal payments will be funded to the
extent of the Available Amount remaining after
payment of the Servicer Payment, payment of
interest and principal in respect of the Notes
on the Cross-Over Date, and payment of interest
due on the Certificates on such Distribution
Date. To the extent the remaining Available
Amount on a Distribution Date is insufficient
to fund the entire Certificateholders'
Principal Distribution Amount due on such
Distribution Date, such shortfall will be
funded from the Reserve Account, subject to the
Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make
payments of interest and principal due on the
Notes and interest due on the Certificates on
such Distribution Date, under the circumstances
described herein. The rights of
Certificateholders to receive distributions of
principal (following the payment of interest on
the Certificates) will be subordinated to the
rights of Noteholders to receive distributions
of interest and principal.
In the event that the Certificates are
outstanding on the Certificate Final Scheduled
Distribution Date (after taking into account
distributions on such date), the Indenture
Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account (to the
extent funds are available therefor in the
Reserve Account), and will deposit in the
Certificate Distribution Account for
distribution to the Certificateholders in
retirement of the Certificates, an amount equal
to the Certificate Balance.
D. Redemption................ In the event of an Optional Purchase or Auction
Sale, the Certificates will be redeemed at a
redemption price equal to the Certificate
Balance plus accrued and unpaid interest
thereon at the Pass-Through Rate. See
"Summary--Optional Purchase of the Contracts,"
"--Auction Sale" and "The
Certificates--Redemption" in the Prospectus.
S-14
<PAGE>
E. Limited Rights............ Except as described herein, if an Event of
Default occurs under the Indenture, the
Certificateholders will not have any right to
direct or to consent to any remedies therefor
exercisable by the Indenture Trustee, including
the sale of the Contracts, until the Notes have
been paid in full, and if an Event of
Termination occurs, the Certificateholders will
not have any right to direct or consent to
removal of the Servicer or the waiver of such
Event of Termination until the Notes have been
paid in full. See "Risk Factors--Rights of
Noteholders and Certificateholders" herein and
"The Purchase Agreements and the Trust
Documents--Event of Termination," "--Rights
Upon Event of Termination" and "--Waiver of
Past Defaults" in the Prospectus.
Subordination ................ To the extent described herein, the rights of
the Certificateholders to receive distributions
with respect to the Contracts will be
subordinated to the rights of the Noteholders,
and the rights of the Class B Noteholders to
receive distributions with respect to the
Contracts will be subordinated to the rights of
the Class A Noteholders. This subordination is
intended to enhance the likelihood of timely
receipt by the Class A Noteholders (and to a
lesser extent the Class B Noteholders) of the
full amount of interest and principal required
to be paid to them, and to afford the Class A
Noteholders (and to a lesser extent the Class B
Noteholders) limited protection against losses
in respect of the Contracts.
No distribution will be made to the
Certificateholders on any Distribution Date in
respect of (i) interest until the full amount
of interest and principal on the Notes payable
on such Distribution Date has been distributed
to the Noteholders, and (ii) principal until
the Notes have been paid in full.
No distribution will be made to the Class B
Noteholders on any Distribution Date in respect
of (i) interest until the full amount of
interest on the Class A Notes payable on such
Distribution Date has been distributed to the
Class A Noteholders, and (ii) principal until
the full amount of principal on the Class A
Notes payable on such Distribution Date has
been distributed to the Class A Noteholders.
The Class A Noteholders will be entitled to
receive current distributions of interest prior
to the Class B Noteholders receiving any
current distributions of interest. See
"Summary--Terms of the Notes--Interest" and
"The Notes--Payments of Interest." In addition,
the Class A Noteholders will be entitled to
receive their share of the current distribution
of principal prior to the Class B Noteholders
receiving their share of the current
distribution of principal. See "Summary--Terms
of the Notes--Principal" and "The
Notes--Payments of Principal."
Reserve Account............... On the Closing Date, an account (the "Reserve
Account") will be established pursuant to the
Sale and Servicing Agreement. The Indenture
Trustee will have the right to withdraw (or
cause to be withdrawn) payments from the
Reserve Account under certain circumstances
specified below. The Reserve Account will not
be funded on the Closing Date. After the
S-15
<PAGE>
Closing Date, the Reserve Account will be
funded with the Excess Collections, if any, and
certain investment earnings on funds deposited
in the Reserve Account. With respect to any
Distribution Date, the amount available to be
withdrawn from the Reserve Account (the
"Available Reserve Amount") will equal the
lesser of (i) the Specified Reserve Amount and
(ii) the amount on deposit in the Reserve
Account before giving effect to any deposit to
be made to the Reserve Account on such
Distribution Date. If the Available Amount on
any Distribution Date is insufficient (after
paying the Servicer Payment) to pay the
interest and principal required to be
distributed on the Securities on such
Distribution Date, the Indenture Trustee will
withdraw (or cause to be withdrawn) from the
Reserve Account an amount equal to the lesser
of the amount of such deficiency or the
Available Reserve Amount. The Reserve Account
will be available to provide a source of funds
to make payments of principal or interest on
the Notes and the Certificates in the same
order of priority specified for distributions
of the Available Amount. See
"Enhancement--Reserve Account" and "The
Purchase Agreements and the Trust Documents -
Distributions." If the Available Reserve Amount
is zero (which will be the case on the Closing
Date), holders of the Securities will bear the
risk of loss resulting from default by Obligors
and will have to look primarily to the value of
the related Financed Boats for recovery of the
outstanding principal and unpaid interest on
the defaulted Contracts.
On each Distribution Date, the Servicer will
deposit Excess Collections, if any, into the
Reserve Account in an amount sufficient to
increase the amount on deposit in the Reserve
Account to the Specified Reserve Amount for the
next Distribution Date. Excess Collections, if
any, not so required to be deposited in the
Reserve Account will be paid to the Affiliated
Owner. "Excess Collections" for any
Distribution Date will equal the amounts
collected or deposited in respect of the
Contracts in the related Due Period and which
remain in the Collection Account on such
Distribution Date after taking into account
distributions to be made on the Securities and
payments and reimbursements to be made to the
Servicer on such Distribution Date. See "The
Purchase Agreements and The Trust
Documents--Distributions." The "Specified
Reserve Amount" with respect to any
Distribution Date means ___% of the Pool
Balance as of the first day of the related Due
Period, but in no event less than $__________
(subject to adjustment based on delinquencies
and losses on the Contracts), provided that the
Specified Reserve Amount shall never be greater
than the sum of the aggregate principal amount
of the Notes and the outstanding balance of the
Certificates and may be reduced from time to
time if the Rating Agencies shall have given
prior written notice to the Seller, the
Servicer and the Issuer that such reduction
will not result in a downgrade or withdrawal of
the then current ratings of the Notes or the
Certificates. See "Enhancement--Reserve
Account."
If, on any Distribution Date, the Available
Reserve Amount (after taking into account any
deposits to and withdrawals
S-16
<PAGE>
from the Reserve Account pursuant to the Sale
and Servicing Agreement on such Distribution
Date) exceeds the Specified Reserve Amount for
the next Distribution Date, such excess will be
withdrawn from the Reserve Account and paid to
the Affiliated Owner. See "Enhancement--Reserve
Account."
The sole source of funding for the Reserve
Account will be the Excess Collections, and the
Excess Collections may not be sufficient to
fund the Reserve Account in an amount equal to
the Specified Reserve Amount or to replenish
the Reserve Account after funds are withdrawn
to make payments on the Securities. Neither the
Seller nor the Servicer will be obligated to
deposit any of their own funds into the Reserve
Account in the event that the Excess
Collections are not sufficient to fund the
Reserve Account in an amount equal to the
Specified Reserve Amount. Accordingly, the
Distribution Date by which the Reserve Account
will be funded in an amount equal to the
Specified Reserve Amount for such Distribution
Date cannot be predicted.
Monthly Advances.............. With respect to each Contract as to which there
has been a Payment Shortfall during the related
Due Period (other than a Payment Shortfall
arising from a Contract which has been prepaid
in full or which has been subject to a Relief
Act reduction during the related Due Period),
the Servicer shall advance funds in the amount
of such Payment Shortfall (each, a "Monthly
Advance"), but only to the extent that the
Servicer, in its good faith judgment, expects
to recover such Monthly Advance from subsequent
interest collections on such Contract made by
or on behalf of the Obligor thereunder, or from
Net Liquidation Proceeds or insurance proceeds
with respect to such Contract. The Servicer
shall be reimbursed for any Monthly Advance
from subsequent interest collections with
respect to such Contract. If the Servicer
determines in its good faith judgment that an
unreimbursed Monthly Advance shall not
ultimately be recoverable from subsequent
interest collections, the Servicer shall be
reimbursed for such Monthly Advance from
collections on all Contracts. In determining
whether an advance is or will be
nonrecoverable, the Servicer need not take into
account that it might receive any amounts in a
deficiency judgment against an Obligor. The
Servicer will not make a Monthly Advance in
respect of (i) the principal component of any
scheduled payment or (ii) a Payment Shortfall
arising from a Contract which has been prepaid
in full or which has been subject to a Relief
Act Reduction during the related Due Period.
See "The Purchase Agreements and The Trust
Documents--Monthly Advances" herein and in the
Prospectus.
"Payment Shortfall" means with respect to any
Contract and any Distribution Date, the excess
of (A) the product of (1) one-twelfth of the
Contract Rate of such Contract and (2) the
outstanding principal amount of such Contract
as of the last day of the second preceding Due
Period (or, in the case of the first Due Period
ending after the Contract was acquired by the
Trust, as of the Cut-off Date), over (B) the
amount of interest, if any, collected on such
Contract during the related Due Period.
S-17
<PAGE>
Non-Reimbursable Payments..... The Servicer will not be obligated to make any
Non-Reimbursable Payments (as defined in the
Prospectus).
Servicing Fees................ The Servicer shall receive a monthly fee (the
"Servicing Fee"), payable on each Distribution
Date, equal to the sum of (i) one-twelfth of
the product of _____% (the "Servicing Fee
Rate") and the Pool Balance as of the last day
of the second preceding Due Period (or, in the
case of the first Distribution Date, as of the
Cut-off Date) and (ii) any investment earnings
on amounts on deposit in the Collection
Account, the Note Distribution Account and the
Certificate Distribution Account; provided,
however, if CITSF or an affiliate thereof is
not the Servicer, the Servicing Fee Rate shall
be a rate determined at the time of the
appointment of a successor Servicer but not to
exceed _____%. See "The Purchase Agreements and
The Trust Documents--Servicing Compensation"
herein and in the Prospectus.
Optional Purchase of
the Contracts............... At its option, CITSF may purchase all the
Contracts on any Distribution Date on which the
Pool Balance as of the last day of the related
Due Period is __% or less of the Initial Pool
Balance, at a purchase price determined as
described under "The Purchase Agreements and
The Trust Documents--Termination" herein and in
the Prospectus. The "Initial Pool Balance"
equals the Pool Balance as of the Cut-off Date.
Auction Sale.................. Within ten days after the first Distribution
Date on which the Pool Balance as of the last
day of the related Due Period is __% or less of
the Initial Pool Balance, the Indenture Trustee
(or, if the Notes have been paid in full and
the Indenture has been discharged in accordance
with its terms, the Owner Trustee) shall
solicit bids for the purchase of the Contracts
remaining in the Trust. In the event that
satisfactory bids are received as described in
"The Purchase Agreements and The Trust
Documents--Termination" in the Prospectus, the
net sale proceeds (after the Servicer Payment)
will be distributed to Securityholders, in the
same order of priority as collections received
in respect of the Contracts, on the second
Distribution Date succeeding such Due Period.
If satisfactory bids are not received, such
Trustee shall decline to sell the Contracts and
shall not be under any obligation to solicit
any further bids or otherwise negotiate any
further sale of the Contracts. See "The
Purchase Agreements and The Trust
Documents--Termination" herein and in the
Prospectus.
Ratings....................... It is a condition to the issuance of the Class
A Notes that the Class A-1 Notes be rated
"A-1+" by Standard & Poor's Ratings Service, a
division of The McGraw-Hill Companies, Inc.
("S&P") and "P-1" by Moody's Investors Service,
Inc. ("Moody's") (each, a "Rating Agency") and
that the Class A-2 Notes, Class A-3 Notes,
Class A-4 Notes, Class A-5 Notes, Class A-6
Notes and the Class A-7 Notes be rated "AAA" by
S&P and "Aaa" by Moody's . It is a condition to
the issuance of the Class B Notes that the
Class B Notes be rated at least "A" by S&P and
"A2" by Moody's. It is a condition to the
issuance of the Certificates that the
Certificates be rated at least "BBB" by S&P and
"Baa2" by Moody's. The ratings of the Class A
Notes will be based primarily on the Contracts,
S-18
<PAGE>
the Reserve Account and the terms of the
Securities, including the subordination
provided by the Class B Notes and the
Certificates. The ratings of the Class B Notes
will be based primarily on the Contracts, the
Reserve Account and the terms of the
Securities, including the subordination
provided by the Certificates. The ratings of
the Certificates will be based primarily on the
Contracts and the Reserve Account. The ratings
of the Securities should be evaluated
independently from similar ratings on other
types of securities. The ratings do not address
the possibility that Securityholders may suffer
a lower than anticipated yield. The ratings do
not address the likelihood that the Securities
will be retired following the sale of the
Contracts by the Trustee as described above
under "Auction Sale" or "Optional Purchase of
the Contracts."
There can be no assurance that any rating will
remain in effect for any given period of time
or that a rating will not be lowered or
withdrawn by the assigning Rating Agency if, in
its judgment, circumstances so warrant. In the
event that the rating initially assigned to any
of the Securities is subsequently lowered or
withdrawn for any reason, no person or entity
will be obligated to provide any additional
credit enhancement with respect to such
Securities. There can be no assurance whether
any other rating agency will rate any of the
Securities, or if one does, what rating would
be assigned by any such other rating agency. A
security rating is not a recommendation to buy,
sell or hold securities.
Certain Federal Income
Tax Considerations.......... For Federal income tax purposes: (1) the Notes
will constitute indebtedness and (2) the
Certificates will constitute interests in a
trust fund that will not be treated as an
association taxable as a corporation. Each
Noteholder, by acceptance of a Note, will agree
to treat the Notes as indebtedness, and each
Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust as a
partnership in which the Certificateholders are
partners for Federal income tax purposes.
Alternative characterizations of the Notes and
the Certificates are possible, but would not
result in materially adverse tax consequences
to Noteholders or Certificateholders. See
"Certain Federal Income Tax Consequences."
ERISA Considerations.......... Subject to certain considerations discussed
under "ERISA Considerations" herein, the Notes
will be eligible for purchase by employee
benefit plans that are subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA").
Fiduciaries of employee benefit plans subject
to ERISA, or plans subject to Section 4975 of
the Internal Revenue Code of 1986 (the "Code")
should carefully review with their legal
advisors whether the purchase or holding of the
Notes offered hereby could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or the Code. Any
benefit plan fiduciary considering the purchase
of the Notes should, among other things,
consult with its counsel in determining whether
all required conditions have been satisfied.
See "ERISA Considerations."
S-19
<PAGE>
Employee benefit plans subject to ERISA will
not be eligible to purchase the Certificates.
Legal Investment.............. The Class A-1 Notes will be eligible securities
for purchase by money market funds under Rule
2a-7 under the Investment Company Act of 1940,
as amended. The appropriate characterization of
the Certificates and each class of the Notes
under various legal investment restrictions
applicable to the investment activities of
certain institutions, and thus the ability of
investors subject to these restrictions to
purchase the Certificates and the Notes, may be
subject to significant interpretive
uncertainties. All investors whose investment
authority is subject to legal restrictions
should consult their own legal advisors to
determine whether, and to what extent, the
Certificates and each class of the Notes will
constitute legal investments for them.
S-20
<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
marine installment sale contracts and direct loans secured by boats. In
addition, the credit criteria and underwriting guidelines under which CITSF
originates marine installment sale contracts and direct loans were changed in
1994. The delinquency and loan loss experience for CITSF's portfolio has been
affected adversely by this change in credit criteria. See "The CIT Group/Sales
Financing, Inc., Servicer--Delinquency and Loan Loss Experience." Since the
market value of boats generally declines with age and since in certain states
the Trustees may not have a first perfected security interest in the Financed
Boats, the Servicer may not recover the entire amount owing under a defaulted
Contract. See "Certain Legal Aspects of the Contracts" in the Prospectus. In
such a case, the Securityholders may suffer a corresponding loss. The market
value of the Financed Boats could be or could become lower than the outstanding
principal balances of the Contracts that they secure. Sufficiently high
liquidation losses on the Contracts will have the effect of reducing, and could
eliminate (a) the protection against loss afforded to the Class A Noteholders by
the subordination of the Class B Notes and the Certificates, (b) the protection
against loss afforded to the Class B Noteholders by the subordination of the
Certificates, (c) the protection against loss afforded to the Securityholders by
the Available Reserve Amount, if any, and (d) the amount of the Excess
Collections available to fund the Reserve Account. If the Certificate Balance
and the Available Reserve Amount is reduced to zero, the holders of the Notes
will bear the risk of loss resulting from default by Obligors and will have to
look primarily to the value of the related Financed Boats for recovery of the
outstanding principal and unpaid interest on the defaulted Contracts. If the
Available Reserve Amount is zero (which will be the case on the Closing Date),
holders of the Certificates will bear the risk of loss resulting from default by
Obligors and will have to look primarily to the value of the related Financed
Boats for recovery of the outstanding principal and unpaid interest on the
defaulted Contracts.
3. Certain Matters Relating to Insolvency. CITCF-NY, CITSF and the Company
intend that transfers of Contracts from The CIT Group/Consumer Finance, Inc.
(NY) ("CITCF-NY") to CITSF, from CITSF to the Company and from the Company to
the Trust, constitute sales, rather than pledges of the Contracts to secure
indebtedness. However, if CITCF-NY, CITSF or the Company were to become a debtor
under Title 11 of the United States Code, 11 U.S.C. ss.101 et seq. (the
"Bankruptcy Code"), it is possible that a creditor, receiver, other party in
interest or trustee in bankruptcy of such debtor, or such debtor as
debtor-in-possession, may contend that the sales of the Contracts by CITCF-NY to
CITSF, by CITSF to the Company, or by the Company to the Trust, respectively,
were pledges of the Contracts rather than sales and that, accordingly, such
Contracts should be part of such assigning entity's bankruptcy estate. Such a
position, if presented to a court, even if ultimately unsuccessful, could result
in a delay in or reduction of distributions to the Securityholders. See "Certain
Legal Aspects of the Contracts--Certain Matters Relating to Insolvency" in the
Prospectus.
4. Limited Assets; Subordination. The Trust will not have, nor is it
permitted or expected to have, any significant assets or sources of funds other
than the Contracts and the amounts on deposit in the Reserve Account.
Noteholders generally must rely for repayment upon payments on the Contracts
and, if and to the extent available on each Distribution Date to cover
shortfalls in distributions of interest and principal on the Notes, amounts on
deposit in the Reserve Account. However, funds deposited in the Reserve Account
are limited in amount, and the amount required to be maintained on deposit
therein will be reduced as the Pool Balance declines. If the amount on deposit
in the Reserve Account is exhausted, and, in the case of the Class A
Noteholders, to the extent the subordination of amounts distributable to the
Class B Noteholders and the Certificates is insufficient, and, in the
S-21
<PAGE>
case of the Class B Noteholders, to the extent the subordination of amounts
distributable to Certificateholders is insufficient, the Trust will depend
solely on current collections on the Contracts to make payments on the
Securities.
The Trust will covenant to sell the Contracts if directed to do so by the
Indenture Trustee in accordance with the Indenture following an acceleration of
the Notes upon an Event of Default. However, the market value of the Contracts
at any time may not be equal to or greater than the aggregate outstanding
principal balance of the Notes and the interest accrued thereon. Therefore, upon
an Event of Default with respect to the Notes, there may not be sufficient funds
available to repay Noteholders in full. In addition, the amount of principal
required to be distributed to Noteholders under the Indenture is generally
limited to amounts available to be deposited in the Note Distribution Account
for such purpose. Therefore, the failure to pay principal on the Notes may not
result in the occurrence of an Event of Default until the Note Final Scheduled
Distribution Date applicable to each class of the Notes. Any actions taken by
the Class A Noteholders upon an Event of Default may also increase losses to the
Class B Noteholders and the Certificateholders. Upon a sale by the Trust of the
Contracts, the net proceeds from such sale remaining after payment of all
amounts due to the Servicer and the Noteholders may not be sufficient to pay the
Certificate Balance and interest accrued thereon. See "The Notes-The
Indenture-Events of Default; Rights Upon Event of Default" in the Prospectus.
Payments of interest and principal of the Class B Notes will be
subordinated in priority of payment to payments of interest and principal on the
Class A Notes, to the extent described herein. In addition, if an Event of
Default has occurred and the Notes have been accelerated, payments of interest
on and principal of the Class B Notes will not be made until the Class A Notes
have been paid in full. Payments of interest and principal of the Certificates
will be subordinated in priority of payment to payments of interest and
principal on the Notes.
5. Limited Source of Funding for Reserve Account. On the Closing Date,
there will be no funds on deposit in the Reserve Account. The Reserve Account
will be funded solely from the Excess Collections, and the Excess Collections
may not be sufficient to fund the Reserve Account on any Distribution Date in an
amount equal to the Specified Reserve Amount for such Distribution Date or to
replenish the Reserve Account after funds are withdrawn to make payments on the
Securities. The Excess Collections to be deposited in the Reserve Account are
limited and will be reduced as the Pool Balance is reduced. If funds are
deposited in the Reserve Account, they will be available to pay principal and
interest on the Securities on any Distribution Date, but the funds available for
such purpose will not exceed the Available Reserve Amount for such Distribution
Date. If funds in the Reserve Account are exhausted, the Securityholders will
depend solely on the Contracts as the source of repayment.
Liquidations of Contracts may reduce, and perhaps eliminate, the amount of
Excess Collections that would otherwise have been available on any Distribution
Date to fund the Reserve Account, because before any excess interest collections
are available to fund the Reserve Account such excess interest collections must
be applied first to pay the portion of the Principal Distribution Amount equal
to the difference between the Stated Principal Balance of Liquidated Contracts
and the Net Liquidation Proceeds thereof.
Any event or circumstance which causes the Trust not to receive a full
month's interest at the Contract Rate on a Contract also will reduce the amount
of Excess Collections that would otherwise have been available on any
Distribution Date to fund the Reserve Account. Accordingly, the amount of Excess
Collections will be less than it otherwise would have been if a Contract is
prepaid in full or becomes subject to a Relief Act Reduction. Delinquencies on
the Contracts also will reduce, and perhaps eliminate, the Excess Collections
that otherwise would have been available on any Distribution Date to fund the
Reserve Account if the Servicer does not make a Monthly Advance in respect of
such delinquencies or if the Servicer reimburses itself for a Monthly Advance
from collections on other Contracts as provided herein.
6. Geographic Concentration of Obligors. A significant concentration of the
Contracts have Obligors with mailing addresses in the states of __________,
__________ and __________. Based on the Pool Balance as of the Cut-off Date,
_____%, _____% and _____% of the Contracts have Obligors with mailing addresses
in __________, __________ and __________, respectively. Because of the relative
lack of geographic diversity, losses on the related Contracts may be higher than
would be the case if there were more diversification. The economies of such
states may be adversely affected to a greater degree than that of other areas of
the country by certain regional economic conditions. An economic downturn in
__________, __________ or __________ may have an adverse effect on the ability
of Obligors in such states to meet their payment obligations under the
Contracts.
S-22
<PAGE>
7. Maturity and Prepayment Considerations. The weighted average life of the
Notes and the Certificates will generally be influenced by the rate at which the
principal balances of the Contracts are paid, which payment may be in the form
of scheduled amortization or prepayments. The Contracts are prepayable by the
Obligors at any time. Prepayments may also result from Contracts becoming
Liquidated Contracts or from repurchases of Contracts. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of the Contracts will
be borne entirely by the Securityholders. See "The Purchase Agreements and the
Trust Documents--Termination" regarding CITSF's option to purchase the Contracts
and "The Purchase Agreements and the Trust Documents--Sale and Assignment of the
Contracts" in the Prospectus.
In addition, the Servicer may, on a case-by-case basis, permit extensions
with respect to the due dates of payments on Contracts in accordance with the
Sale and Servicing Agreement. See "The Purchase Agreements and the Trust
Documents--Modification of Contracts." Any such extensions may increase the
weighted average life of the Securities. However, the Servicer will not be
permitted to grant any such extension if as a result the final scheduled payment
on a Contract would fall after the 180th day prior to the Certificate Final
Scheduled Distribution Date.
8. Ratings of the Securities. It is a condition to the issuance of the
Class A Notes that the Class A-1 Notes be rated "A-1+" by S&P and "P-1" by
Moody's and that the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class
A-5 Notes, Class A-6 Notes and the Class A-7 Notes be rated "AAA" by S&P and
"Aaa" by Moody's . It is a condition to the issuance of the Class B Notes that
the Class B Notes be rated at least "A" by S&P and "A2" by Moody's. It is a
condition to the issuance of the Certificates that the Certificates be rated at
least "BBB" by S&P and "Baa2" by Moody's. The foregoing ratings do not address
the likelihood that the Securities will be retired following the sale of the
Contracts by the applicable Trustee. There can be no assurance that any rating
will remain in effect for any given period of time or that a rating will not be
lowered or withdrawn by the Rating Agency if, in its judgment, circumstances so
warrant. In the event that the rating initially assigned to the Securities is
subsequently lowered or withdrawn for any reason, no person or entity will be
obligated to provide any additional credit enhancement with respect to such
Securities. There can be no assurance that any other rating agency will rate the
Notes or the Certificates, or if one does, what rating would be assigned by any
such other rating agency. A security rating is not a recommendation to buy, sell
or hold securities.
9. Book-Entry Registration. The Notes will be offered for purchase in
book-entry form only and will be initially registered in the name of the nominee
of The Depository Trust Company ("DTC" and, together with any successor
depository selected by the Company, the "Depository"). No person acquiring an
interest in the Notes through the facilities of DTC (a "Note Owner") will be
entitled to receive a Definitive Note representing such person's interest in the
Notes, except as set forth under "Certain Information Regarding the
Securities--Definitive Securities" in the Prospectus, and such persons will hold
their interests in the Notes through DTC in the United States or Cedel Bank,
societe anonyme ("Cedel") or Euroclear in Europe. Unless and until Definitive
Notes are issued under the limited circumstances described herein and in the
related Prospectus, all references to actions by Noteholders shall refer to
actions taken by DTC upon instructions from its Participants (as defined in the
Prospectus), and all references herein to distributions, notices, reports and
statements to Noteholders shall refer to distributions, notices, reports and
statements to DTC in accordance with DTC procedures. See "Certain Information
Regarding The Securities--Definitive Securities" in the Prospectus and Annex I
hereto.
10. Risk of Commingling. At any time that the requirements as specified
under "The Purchase Agreements and the Trust Documents--Collections" in the
Prospectus are met, the Servicer may deposit payments on or with respect to the
Contracts and proceeds of Contracts in the Collection Account monthly on the
Business Day immediately preceding the next Distribution Date (the "Deposit
Date"). Pending such a monthly deposit into the Collection Account, collections
on the Contracts may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds or if the Servicer became insolvent, the holders of
the Securities could incur a loss with respect to collections not deposited in
the Collection Account. As of the Closing Date, the Servicer meets such
requirements.
11. Rights of Noteholders and Certificateholders. In general, the
Certificateholders may direct the Owner Trustee in the administration of the
Trust. However, because the Trust will pledge the Trust property (other than the
Certificate Distribution Account) to the Indenture Trustee to secure the payment
of the Notes, including in such pledge the rights of the Trust under the Sale
and Servicing Agreement, the Indenture Trustee and not the Certificateholders
will have the power to direct the Owner Trustee to take certain actions in
connection with the administration of the Trust property until the Notes have
been paid in full and the Indenture has been discharged in
S-23
<PAGE>
accordance with its terms. In addition, the Certificateholders will not be
allowed to direct the Owner Trustee to take any action that conflicts with the
provisions of the Sale and Servicing Agreement. The Indenture will specifically
prohibit the Owner Trustee from taking any action that would impair the
Indenture Trustee's security interest in the Trust property and will require the
Owner Trustee to obtain the consent of the Indenture Trustee or Noteholders
representing not less than a majority of the aggregate principal amount of the
Notes then outstanding before modifying, amending, supplementing, waiving or
terminating any provision of the Sale and Servicing Agreement. Therefore, except
as described herein, until the Notes have been paid in full, the ability to
direct the Trust with respect to certain actions permitted to be taken under the
Sale and Servicing Agreement rests with the Indenture Trustee and the
Noteholders.
If an Event of Default under the Indenture occurs and the Notes are
accelerated, the Indenture Trustee will have the right or will be required in
certain circumstances to exercise remedies as a secured party, including selling
the Contracts, in order to pay the principal of, and accrued interest on, the
Notes. Except as described herein, upon the occurrence of an Event of Default,
the Class B Noteholders and the Certificateholders will not have any right to
direct or to consent to any action by the Indenture Trustee, including
acceleration of the Notes or the sale of Contracts, until the Class A
Noteholders have been paid in full (and in the case of the Certificateholders,
until the Class B Noteholders have been paid in full). There is no assurance
that the proceeds of any sale of the Contracts would be equal to or greater than
the aggregate outstanding principal amount of the Notes and the Certificate
Balance plus, in each case, accrued interest thereon. Because neither interest
nor principal is distributed to the Class B Noteholders or the
Certificateholders following an Event of Default and acceleration of the Notes
until the full principal amount of the Class A Notes and interest accrued
thereon have been paid in full (and in the case of the Certificateholders, until
the full principal amount of the Class B Notes and interest accrued thereon have
been paid in full), the interests of the Class A Noteholders, the Class B
Noteholders and the Certificateholders may conflict, and the exercise by the
Indenture Trustee of its right to sell the Contracts or exercise other remedies
may cause the Class B Noteholders and the Certificateholders to suffer a loss of
all or part of their investment. See "The Notes--Rights of Noteholders;
Indenture."
In the event that an Event of Termination occurs, the Indenture Trustee or
the Class A Noteholders representing not less than a majority of the aggregate
principal amount of the Class A Notes then outstanding may remove the Servicer
without the consent of any of the Class B Noteholders or the Certificateholders.
None of the Class B Noteholders or the Certificateholders will have the ability,
with certain specified exceptions, to waive defaults by the Servicer, including
defaults that could materially adversely affect the Class B Noteholders and the
Certificateholders. See "The Notes--Rights of Noteholders; Indenture."
12. Insurance. Each Contract requires the Obligor to obtain physical damage
insurance with respect to the related Financed Boat. Since Obligors may choose
their own insurers to provide the required coverage, the specific terms and
conditions of their policies vary. Although insurance will continue to be
required pursuant to the terms of the Contracts, CITSF as Servicer will not be
obligated to purchase physical damage insurance on behalf of any Obligor, verify
if any insurance required under a Contract is being maintained by an Obligor or
be obligated to pursue any remedies under any Contract or applicable law as a
result of any failure of an Obligor to maintain any such insurance. As a result,
any damage to an uninsured boat securing a Contract may result in a reduction of
Liquidation Proceeds available to pay the Securityholders. As of the Cut-off
Date, force-placed insurance has not been obtained on any of the Contracts.
Historically, CITSF has force-placed insurance on a relatively small percentage
of its marine installment sale contracts and direct loans. See "The Purchase
Agreements and the Trust Documents--Physical Damage Insurance" in the
Prospectus.
STRUCTURE OF THE TRANSACTION
The Issuer, CIT Marine Trust ____-_ (the "Issuer" or the "Trust"), is a
business trust formed under the laws of the State of Delaware pursuant to a
Trust Agreement (as amended and supplemented from time to time, the "Trust
Agreement"), to be dated as of __________ 1, ____ between the Seller and
_______________, acting thereunder not in its individual capacity but solely as
trustee of the Trust (the "Owner Trustee"). Prior to the sale and assignment of
the Contracts pursuant to the Sale and Servicing Agreement, the Trust will have
no assets or obligations. After its formation, the Trust will not engage in any
activity other than (i) acquiring, holding and managing the Contracts and the
other assets of the Trust and proceeds therefrom, (ii) issuing the Notes and the
Certificates, (iii) making payments on the Notes and the Certificates and (iv)
engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith.
S-24
<PAGE>
Each Certificate will represent a fractional undivided interest in, and
each Note, will represent an obligation of, the Trust.
The Trust will initially be capitalized with equity equal to approximately
$__________ (the "Original Certificate Balance"). Certificates with an aggregate
original face amount of approximately $_______ will be owned by the Affiliated
Owner and Certificates representing the remainder of the Original Certificate
Balance will be sold to third party investors that are expected to be
unaffiliated with the Affiliated Owner, the Seller, the Servicer or their
affiliates. The equity in the Trust, together with the proceeds of the initial
sale of the Notes, will be used by the Trust to purchase the Contracts from the
Seller pursuant to the Sale and Servicing Agreement.
The Servicer will service the Contracts held by the Trust and will receive
fees for such services. CITSF will be appointed as custodian on behalf of the
Trust, and will hold the original marine installment sale contract or promissory
note as well as the originals or copies of documents and instruments relating to
each Contract and evidencing the security interest in the Financed Boat securing
each Contract (the "Contract Files").
The Trust's principal offices are in _______________ in care of
_______________, as Owner Trustee, at the address listed in "--The Owner
Trustee" below.
Capitalization of the Trust
The following table illustrates the capitalization of the Trust as of the
Cut-off Date, as if the issuance and sale of the Notes and the Certificates
offered hereby had taken place on such date:
Class A-1 ____% Asset-Backed Notes........... $__________
Class A-2 ____% Asset-Backed Notes........... $__________
Class A-3 ____% Asset-Backed Notes........... $__________
Class A-4 ____% Asset-Backed Notes........... $__________
Class A-5 ____% Asset-Backed Notes........... $__________
Class A-6 ____% Asset-Backed Notes........... $__________
Class A-7 ____% Asset-Backed Notes........... $__________
Class B ____% Asset-Backed Notes.......... $__________
____% Asset-Backed Certificates.............. $__________
Total........................................ $
==========
The Owner Trustee
_______________ is the Owner Trustee under the Trust Agreement.
_______________ is a [national] banking association formed under the laws of
[the United States]. The principal offices of _______________ are located at
____________________. The Owner Trustee will perform limited administrative
functions under the Trust Agreement, including making distributions from the
Certificate Distribution Account. The Owner Trustee's liability in connection
with the issuance and sale of the Certificates and the Notes is limited solely
to the express obligations of the Owner Trustee as set forth in the Trust
Agreement and the Sale and Servicing Agreement. The Owner Trustee may appoint a
co-trustee to act as co-trustee pursuant to a co-trustee agreement with the
Owner Trustee.
The Owner Trustee may resign at any time, in which event the Servicer will
be obligated to appoint a successor trustee. The Servicer may also remove the
Owner Trustee if the Owner Trustee ceases to be eligible to continue as Owner
Trustee under the Sale and Servicing Agreement or if the Owner Trustee becomes
insolvent. In such circumstances, the Servicer will be obligated to appoint a
successor trustee. Any resignation or removal of the Owner Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
The Sale and Servicing Agreement will provide that the Servicer will pay
the Owner Trustee's fees. The Sale and Servicing Agreement will further provide
that the Owner Trustee will be entitled to indemnification by the Servicer for,
and will be held harmless against, any loss, liability or expense incurred by
the Owner Trustee not resulting from its own willful misfeasance, bad faith or
negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Sale and Servicing Agreement).
S-25
<PAGE>
THE TRUST PROPERTY
The Notes are an obligation of the Trust and will be secured by assets of
the Trust (other than the Certificate Distribution Account). Each Certificate
represents a fractional undivided interest in the Trust. The Trust property will
include, among other things, (i) a pool (the "Contract Pool") of marine
installment sale contracts, direct loans and U.S. preferred ship mortgages
secured by the new and used boats financed thereby, consisting of the Contracts;
(ii) all monies received under the Contracts on and after the Cut-off Date;
(iii) such amounts as from time to time may be held in one or more accounts
established and maintained by the Servicer pursuant to the Sale and Servicing
Agreement (including all investments in such accounts and all income from the
funds therein and all proceeds thereof); (iv) all monies on deposit in the
Reserve Account (including all investments in such accounts and all income from
the funds therein and all proceeds thereof); (v) assignments of the security
interests in the Financed Boats and any accessions thereto; (vi) the right to
proceeds from physical damage, credit life and disability insurance policies, if
any, covering individual Financed Boats or Obligors, as the case may be; (vii)
the rights of the Trust under the Sale and Servicing Agreement and (viii) any
and all proceeds of the foregoing.
THE CONTRACT POOL
General
CITCF-NY will sell certain contracts that will constitute a portion of the
Contracts to CITSF pursuant to a purchase agreement, to be dated as of
__________ 1, ____, and CITSF will sell the Contracts to the Company pursuant to
a Purchase Agreement to be dated as of __________ 1, ____ (the "Purchase
Agreement") and the Company will sell the Contracts to the Trust pursuant to the
Sale and Servicing Agreement to be dated as of __________ 1, ____ (the "Sale and
Servicing Agreement"), among the Seller, the Servicer and the Trust.
CITSF or CITCF-NY purchased the Contracts from Dealers, or originated the
Contracts directly using the underwriting standards described under "The CIT
Group/Sales Financing, Inc., Servicer--CITSF's Underwriting Guidelines" in the
Prospectus, or acquired the Contracts from unaffiliated third parties (in which
event CITSF reviewed such Contracts to confirm that they conformed to such
underwriting standards).
[All of the Contracts are Simple Interest Contracts. A "Simple Interest
Contract" is a Contract as to which interest accrues under the simple interest
method (i.e., the interest portion of each monthly payment equals the interest
on the outstanding principal balance of the related Contract for the number of
days since the most recent payment made on such Contract and the balance, if
any, of such monthly payment is applied to principal).]
The Contracts were first entered onto CITSF's or CITCF-NY's servicing
system (which, typically, represents the date on which CITSF or CITCF-NY funds
the purchase of such Contracts from Dealers) between __________ and __________.
All Contracts are U.S. preferred ship mortgages or direct loans secured by boats
or marine installment sale contracts secured by boats originated by a Dealer and
purchased by CITCF-NY or CITSF, originated directly by CITSF or one of its
affiliates, or acquired by CITSF or one of its affiliates from unaffiliated
third parties.
Characteristics of Contracts
The Contract Pool consists of contracts having an aggregate unpaid
principal balance as of the Cut-off Date of $__________. For the purposes of the
discussion of the characteristics of the Contracts on the Cut-off Date contained
herein, the principal balance of each Contract is the unpaid principal balance
as of the Cut-off Date.
The Contracts were selected from CITSF's portfolio of U.S. preferred ship
mortgages, marine installment sale contracts and direct loans based on several
criteria, including the following: (i) each Contract was originated in the
United States of America, [except that _____ Contract(s) were originated in
Puerto Rico]; (ii) each Contract has a Contract Rate equal to or greater than
_____%; (iii) each Contract provides for level monthly payments which include
interest at the related Contract Rate and, if paid in accordance with its
schedule, fully amortizes the amount financed over an original term of no
greater than [240] months; (iv) as of the Cut-off Date the most recent scheduled
payment of principal and interest, if any, on each Contract was made by or on
behalf of the related Obligor or was not delinquent more than [29] days; (v) no
Financed Boat has been repossessed without reinstatement as of the Cut-
S-26
<PAGE>
off Date; (vi) as of the Cut-off Date no Obligor on any Contract was the subject
of a bankruptcy proceeding and (vii) as of the Cut-off Date each Contract has a
remaining principal balance of not less than $__________ and not more than
$__________. The Financed Boats consist of boats, boat trailers and boat motors.
Approximately _____%, _____% and _____% of the Pool Balance as of the
Cut-off Date represented Contracts secured by boats, boat trailers and boat
motors, respectively. Approximately _____% of the Contracts, by Pool Balance as
of the Cut-off Date, represented financing of boats which were new and
approximately _____% represented financing of boats which were used at the time
the related Contracts were originated. As of the Cut-off Date, the average
outstanding principal balances of the Contracts secured by boats, boat motors
and boat trailers were $__________, $__________ and $__________, respectively.
The Obligors under the Contracts have mailing addresses in 50 states,
[Puerto Rico] and Washington D.C. As of the Cut-off Date, approximately _____%
of the Contracts, based upon Pool Balance as of the Cut-off Date, had Obligors
with mailing addresses in the State of __________, approximately _____% had
Obligors with mailing addresses in the State of __________ and approximately
_____% had Obligors with mailing addresses in the State of __________. Each
other state accounts for less than 5.00% of the Contracts based upon Pool
Balance as of the Cut-off Date.
As of the Cut-off Date, all Contracts have an interest rate specified in
such Contract (the "Contract Rate") of at least _____%. As of the Cut-off Date,
the Contracts have remaining maturities of at least [9] months but not more than
[240] months, original maturities of at least [12] months but not more than
[240] months, and a weighted average remaining term to stated maturity of _____
months. The weighted average original term to maturity of the Contracts was
_____ months. As of the Cut-off Date, the weighted average Contract Rate of the
Contracts was _____%. The final scheduled payment dates on the Contracts range
from __________ to __________. The average remaining principal balance per
contract, as of the Cut-off Date, was $__________ and the outstanding principal
balances of the Contracts, as of the Cut-off Date, ranged from $__________ to
$__________.
S-27
<PAGE>
Set forth below is a description of certain characteristics of the Contracts.
Geographical Distribution of Contracts (1)
<TABLE>
<CAPTION>
% of Contract
% of Contract Aggregate Principal Pool by Principal
Number of Pool by Number Balance Outstanding Balance
Contracts As of of Contracts As of As of Outstanding As of
State Cut-off Date Cut-off Date Cut-off Date Cut-off Date
- ----- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Alabama...............
Alaska................
Arizona...............
Arkansas..............
California............
Colorado..............
Connecticut...........
Delaware..............
District of Columbia..
Florida...............
Georgia...............
Hawaii................
Idaho.................
Illinois..............
Indiana...............
Iowa..................
Kansas................
Kentucky..............
Louisiana.............
Maine.................
Maryland..............
Massachusetts.........
Michigan..............
Minnesota.............
Mississippi...........
Missouri..............
Montana...............
Nebraska..............
Nevada................
New Hampshire.........
New Jersey............
New Mexico............
New York..............
North Carolina........
North Dakota..........
Ohio..................
Oklahoma..............
Oregon................
Pennsylvania..........
[Puerto Rico].........
Rhode Island..........
South Carolina........
South Dakota..........
Tennessee.............
Texas.................
Utah..................
Vermont...............
Virginia..............
Washington............
West Virginia.........
Wisconsin.............
Wyoming...............
Total................. 100% $ 100%
==== = ====
</TABLE>
(1) In most cases, based on the mailing addresses of the Obligors as of the
Cut-off Date.
S-28
<PAGE>
Range of Contract Rates
<TABLE>
<CAPTION>
% of Contract % of Contract Pool
Number of Pool by Number Aggregate Principal By Principal
Range of Contracts As of of Contracts As of Balance Outstanding Balance Outstanding
Contract Rates Cut-off Date Cut-off Date As of Cut-off Date As of Cut-off Date
- -------------- ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Total 100% 100%
==== ====
</TABLE>
Range of Remaining Maturities
<TABLE>
<CAPTION>
Aggregate % of Contract Pool
Principal By Principal
Number of % of Contract Pool Balance Balance
Contracts by Number of Outstanding Outstanding
Range of Remaining As of Contracts As of As of As of
Maturity in Months Cut-off Date Cut-off Date Cut-off Date Cut-off Date
- ------------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
9 - 49
50 - 59
60 - 69
70 - 79
80 - 89
90 - 99
100 - 109
110 - 119
120 - 129
130 - 139
140 - 149
150 - 159
160 - 169
170 - 179
180 - 189
190 - 199
200 - 209
210 - 219
220 - 229
230 - 239
240
Total 100% 100%
==== ====
</TABLE>
S-29
<PAGE>
MATURITY AND PREPAYMENT CONSIDERATIONS
All of the Contracts are prepayable at any time without any penalty. If
prepayments are received on the Contracts, the actual weighted average life of
the Contracts will be shorter than the scheduled weighted average life, which is
based on the assumption that payments will be made as scheduled and that no
prepayments will be made. For this purpose the term "prepayments" includes,
among other items, voluntary prepayments by Obligors, regular installment
payments made in advance of their scheduled due dates, liquidations due to
default, proceeds from physical damage, credit life and credit disability
insurance policies, if any, and purchases by CITSF or the Servicer of certain
Contracts as described herein. Weighted average life means the average amount of
time during which each dollar of principal on a Contract is outstanding. The
rate of prepayments on the Contracts may be influenced by a variety of economic,
social and other factors, including the fact that an Obligor may not sell or
transfer a Financed Boat without the consent of CITSF. Any reinvestment risk
resulting from the rate of prepayment of the Contracts and the distribution of
such prepayments to Securityholders will be borne entirely by the
Securityholders. In addition, early retirement of the Securities may be effected
by (i) the exercise of the option of CITSF to purchase all of the Contracts
remaining in the Trust when the aggregate principal balance of the Contracts
(the "Pool Balance") is __% or less of the Initial Pool Balance, (ii) the sale
by the applicable Trustee of all of the Contracts remaining in the Trust when
the Pool Balance is __% or less of the Initial Pool Balance or (iii) an Event of
Default. See "The Purchase Agreements and The Trust Documents--Termination"
herein and in the Prospectus.
The rate of principal payments (including prepayments) on pools of marine
installment sale contracts and direct loans may be influenced by a variety of
economic, geographic, social and other factors. In general, if prevailing
interest rates were to fall significantly below the Contract Rates on the
Contracts, the Contracts could be subject to higher prepayment rates than if
prevailing interest rates were to remain at or above the Contract Rates on the
Contracts. Conversely, if prevailing interest rates were to rise significantly,
the rate of prepayments on the Contracts would generally be expected to
decrease. No assurance can be given as to the influence of these factors on the
actual prepayment experience of the Contracts.
CITSF is not aware of any publicly available industry statistics that set
forth principal prepayment experience for marine installment sale contracts and
direct loans similar to the Contracts over an extended period of time, and its
experience with respect to marine receivables included in its portfolio is
insufficient to draw any specific conclusions with respect to the expected
prepayment rates on the Contracts.
Certain Payment Data
Certain statistical information relating to the payment behavior of marine
installment sale contracts and direct loans originated by CITSF directly or
through Dealers is set forth below. In evaluating the information contained in
this table and its relationship to the expected prepayment behavior of the
Contracts, prospective Securityholders should consider that the information set
forth below reflects, with respect to contracts originated in a given year, all
principal payments made in respect of such contracts in a given year, including
regularly scheduled payments, liquidation or insurance proceeds applied to
principal of such contracts, as well as principal prepayments made by or on
behalf of the obligors on the contracts in advance of the date on which such
principal payment was scheduled to be made. The information set forth below also
reflects charge-offs of the contracts during a given year. In addition, the
Company has not performed any statistical analysis to determine whether the
contracts to which the table relates constitute a statistically significant
sample of marine installment sale contracts and direct loans for purposes of
determining expected payment behavior. Payment rates on the contracts are
influenced by a number of economic, social and other factors. Certain of the
contracts included in the table below were originated with underwriting criteria
that differ from the underwriting criteria under which the Contracts were
originated. Furthermore, the prepayment experience of the Contracts may not
exhibit payment behavior similar to the behavior summarized in the following
table. In addition to the foregoing, prospective Securityholders should consider
that the table set forth below is limited to the period covered therein and thus
cannot reflect the effects, if any, of aging on the payment behavior of marine
installment sale contracts beyond such periods. As a result, investors should
not draw any conclusions regarding the prepayment rate of the Contracts from the
information presented in the table below. Each investor must make its own
assumptions regarding the prepayment rate of the Contracts.
The following table sets forth, with respect to all of the marine
installment sale contracts and direct loans originated by CITSF directly or
through Dealers (excluding contracts purchased in bulk) in each year since ____,
the aggregate initial principal balance of the contracts originated in such
year, the approximate aggregate principal
S-30
<PAGE>
balance outstanding on the contracts originated in such year as of the last day
of such year and the approximate aggregate principal balance outstanding on the
contracts originated in such year as of the end of each subsequent year.
Information Regarding Principal Reduction on Marine
Installment Sale Contracts and Direct Loans Originated by CITSF
(Dollars in Thousands)
1992 1993(3) 1994(3) 1995(3) 1996(3) 1997(3)
---- ------- ------- ------- ------- -------
Approximate Volume(1).......
Approximate Aggregate
Principal Balance(2):
December 31, 1992......
December 31, 1993......
December 31, 1994......
December 31, 1995......
December 31, 1996......
December 31, 1997......
(1) Volume represents aggregate initial principal balance of each contract
originated in a particular year [or nine-month period].
(2) Approximate aggregate principal balance as of any date represents the
approximate aggregate principal balance outstanding at the end of the
indicated year [or nine-month period] on each contract originated in a
particular year.
(3) Includes contracts sold by CITSF in previous securitizations which CITSF is
servicing.
Paid-Ahead Simple Interest Contracts
If an Obligor, in addition to making his regularly scheduled payment, makes
one or more additional scheduled payments in any Due Period (for example,
because the Obligor intends to be on vacation the following month), the
additional scheduled payments made in such Due Period will be treated as a
principal prepayment and applied to reduce the principal balance of the related
Contract in such Due Period and, unless otherwise requested by the Obligor, the
Obligor will not be required to make any scheduled payment in respect of such
Contract (a "Paid-Ahead Simple Interest Contract") for the number of due dates
corresponding to the number of such additional scheduled payments (the
"Paid-Ahead Period"). During the Paid-Ahead Period, interest will continue to
accrue on the principal balance of the Contract, as reduced by the application
of the additional scheduled payments made in the Due Period in which such
Contract became a Paid-Ahead Simple Interest Contract. The Obligor's Contract
would not be considered delinquent during the Paid-Ahead Period. A Payment
Shortfall with respect to such Contract will exist during each Due Period
occurring during the Paid-Ahead Period and the Servicer may be required to make
a Monthly Advance in respect of such Payment Shortfall, as described under "The
Purchase Agreements and The Trust Documents--Monthly Advances" in the
Prospectus; however, no Monthly Advances will be made in respect of principal in
respect of a Paid-Ahead Simple Interest Contract. See "Yield and Prepayment
Considerations."
When the Obligor resumes his required payments following the Paid-Ahead
Period, the payments so paid may be insufficient to cover the interest that has
accrued since the last payment by the Obligor. Notwithstanding such
insufficiency, the Obligor's Contract would be considered current. This
situation will continue until the regularly scheduled payments are once again
sufficient to cover all accrued interest and to reduce the principal balance of
the Contract. Depending on the principal balance and Contract Rate of the
related Contract, and on the number of payments that were paid-ahead, there may
be extended periods of time during which Contracts that are current are not
amortizing. During such periods, no distributions in respect of principal will
be made to the Securityholders with respect to such Contracts.
Paid-Ahead Simple Interest Contracts will affect the weighted average life
of the Securities. The distribution of the paid-ahead amount on the Distribution
Date following the Due Period in which such amount was received will generally
shorten the weighted average life of the Securities. However, depending on the
length of time during
S-31
<PAGE>
which a Paid-Ahead Simple Interest Contract is not amortizing as described
above, the weighted average life of the Securities may be extended. In addition,
to the extent the Servicer makes Monthly Advances with respect to a Paid-Ahead
Simple Interest Contract which subsequently goes into default, because
Liquidation Proceeds with respect to such Contract will be applied first to
reimburse the Servicer for such Monthly Advances, the loss with respect to such
Contract may be larger than would have been the case had such Monthly Advances
not been made.
As of the Cut-off Date, approximately _____% of the number of Contracts in
the Contract Pool were Paid-Ahead Simple Interest Contracts, with at least one
paid-ahead scheduled monthly payment. CITSF's portfolio of marine installment
sale contracts and direct loans has historically included contracts which have
been paid-ahead by one or more scheduled monthly payments. There can be no
assurance as to the number of Contracts which may become Paid-Ahead Simple
Interest Contracts or the number or the principal amount of the scheduled
payments which may be paid-ahead.
Weighted Average Life of the Securities
Prepayments on marine installment sale contracts and direct loans can be
measured relative to a prepayment standard or model. The model used in this
Prospectus Supplement, the Absolute Prepayment Model ("ABS"), represents an
assumed rate of prepayment each month relative to the original number of
contracts in a pool of contracts. ABS further assumes that all the Contracts are
the same size and amortize at the same rate and that each Contract in each month
of its life will either be paid as scheduled or be prepaid in full. For example,
in a pool of contracts originally containing 10,000 contracts, a 1.0% ABS rate
means that 100 contracts prepay each month. ABS does not purport to be a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of contracts including the Contracts.
As the rate of payments of principal of the Notes and in respect of the
Certificate Balance will depend on the rate of payment (including prepayments)
of the principal balance of the Contracts and the rate at which Contracts become
Liquidated Contracts, final payment of each class of the Notes could occur
significantly earlier than their respective Note Final Scheduled Distribution
Dates. The final distribution in respect of the Certificates also could occur
prior to the Certificate Final Scheduled Distribution Date. Reinvestment risk
associated with early payment of the Securities will be borne exclusively by the
Securityholders.
The tables captioned "Percent of Initial Note Principal Balance at Various
ABS Percentages" and "Percent of Initial Certificate Balance at Various ABS
Percentages" (the "ABS Table") have been prepared on the basis of certain
characteristics of the Contracts. The ABS Table was prepared assuming that (i)
the Contracts prepay in full at the specified constant percentage of ABS
monthly, with no defaults, losses or repurchases, (ii) each scheduled monthly
payment on the Contracts is made on the last day of each month and each Contract
accrues to 30 days each month, (iii) payments on the Notes and distributions on
the Certificates are made on each Distribution Date (and each such date is
assumed to be the fifteenth day of each applicable month), (iv) the Closing Date
occurs on __________, ____ and (v) CITSF exercises its option to purchase the
Contracts as specified under "The Purchase Agreements and The Trust
Documents--Termination" herein and in the Prospectus. The ABS Table indicates
the projected weighted average life of each class of the Notes and the
Certificates and sets forth the percent of the initial principal amount of each
class of the Notes and the percent of the Original Certificate Balance that is
projected to be outstanding after each of the Distribution Dates shown at
various constant ABS percentages.
The ABS Table also assumes that the Contracts have been aggregated into
three hypothetical pools with all of the Contracts within each such pool having
the following characteristics and that the level scheduled monthly payment for
each of the pools (which is based on its aggregate principal balance, weighted
average APR, weighted average original term to maturity and weighted average
remaining term to maturity as of the Cut-off Date) will be such that each pool
will be fully amortized by the end of its remaining term to maturity.
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Aggregate Weighted Original Term Remaining Term Weighted Average
Principal Average to Maturity to Maturity Seasoning
Balance Contract Rate (Months) (Months) (Months)
------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Pool 1.............................. $ %
Pool 2.............................. $ %
Pool 3.............................. $ %
</TABLE>
S-32
<PAGE>
The actual characteristics and performance of the Contracts will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Contracts will prepay at a constant level
of ABS until maturity or that all of the Contracts will prepay at the same level
of ABS. Moreover, the diverse terms of Contracts within each of the hypothetical
pools could produce slower or faster principal distributions than indicated in
the ABS Table at the various constant percentages of ABS specified, even if the
original and remaining terms to maturity of the Contracts are as assumed. Any
difference between such assumptions and actual characteristics and performance
of the Contracts or actual prepayment experience will affect the percentages of
initial balances outstanding over time and weighted average lives of the Notes
and the Certificates.
S-33
<PAGE>
Percent of Initial Note Principal Balance at Various ABS Percentages (1)
Class A-1
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class A-2
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class A-3
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
S-34
<PAGE>
Class A-4
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class A-5
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class A-6
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
S-35
<PAGE>
Class A-7
---------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
Class B
-------
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
8/15/97.................. % % % % % % % %
8/15/98.................. % % % % % % % %
8/15/99.................. % % % % % % % %
8/15/00.................. % % % % % % % %
8/15/01.................. % % % % % % % %
8/15/02.................. % % % % % % % %
8/15/03.................. % % % % % % % %
8/15/04.................. % % % % % % % %
8/15/05.................. % % % % % % % %
8/15/06.................. % % % % % % % %
8/15/07.................. % % % % % % % %
8/15/08.................. % % % % % % % %
8/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
(1) Assumes the exercise by CITSF of its option to purchase all of the
Contracts on the Distribution Date on which the Pool Balance as of the last
day of the related Due Period is __% or less of the Initial Pool Balance.
(2) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment of the Note by the number of years from
the date of the issuance of the Note to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the related initial
principal amount of the Note.
The ABS Table has been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of the
Contracts which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
S-36
<PAGE>
Percent of Original Certificate Balance at Various ABS Percentages(1)
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
Initial Percent.......... % % % % % % % %
_/15/97.................. % % % % % % % %
_/15/98.................. % % % % % % % %
_/15/99.................. % % % % % % % %
_/15/00.................. % % % % % % % %
_/15/01.................. % % % % % % % %
_/15/02.................. % % % % % % % %
_/15/03.................. % % % % % % % %
_/15/04.................. % % % % % % % %
_/15/05.................. % % % % % % % %
_/15/06.................. % % % % % % % %
_/15/07.................. % % % % % % % %
_/15/08.................. % % % % % % % %
_/15/09.................. % % % % % % % %
Weighted Average
Life..(years)(2):
(1) Assumes the exercise by CITSF of its option to purchase all of the
Contracts on the Distribution Date on which the Pool Balance as of the last
day of the related Due Period is __% or less of the Initial Pool Balance.
(2) The weighted average life of a Certificate is determined by (i) multiplying
in the amount of each principal payment on the Certificate by the number of
years from the date of the issuance of the Certificate to the related
Distribution Date, (ii) adding the results and (iii) dividing the sum by
the related initial face amount of the Certificate.
The ABS Table has been prepared based on the assumptions described above
(including the assumptions regarding the characteristics and performance of the
Contracts which will differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.
YIELD AND PREPAYMENT CONSIDERATIONS
Thirty days of interest will be paid to the Noteholders (other than the
Class A-1 Noteholders who will receive interest for the actual number of days
elapsed in the related Interest Accrual Period) on each Distribution Date
(except the first Distribution Date) to the extent of the remaining Available
Amount and the remaining Available Reserve Amount, in an amount equal to
one-twelfth of the product of the applicable Interest Rate and the outstanding
principal balance of each class of the Notes as of the preceding Distribution
Date (after giving effect to any distributions of principal to be made on such
Distribution Date). See "The Notes--Payments of Principal." Thirty days of
interest will be passed through to Certificateholders on each Distribution Date
(except the first Distribution Date) to the extent of the remaining Available
Amount and the remaining Available Reserve Amount, in an amount equal to
one-twelfth of the product of the Pass-Through Rate and the Certificate Balance
immediately preceding such Distribution Date. The "Certificate Balance" means
the Original Certificate Balance reduced by all distributions allocable to
principal actually made to Certificateholders. See "The
Certificates--Distributions of Principal." Payment Shortfalls, to the extent not
covered by Monthly Advances and amounts on deposit in the Collection Account,
will adversely affect the yield on the Securities.
If an Event of Default occurs and the Notes are accelerated, payments of
interest on and principal of the Class B Notes will not be paid until the Class
A Notes have been paid in full.
Generally, the excess of the amount of interest at the Contract Rate over
the amount of interest payable under such Contract and allocable to pay such
Contract's share of interest on the Securities and the Servicing Fee would be
available to cover losses on Liquidated Contracts or to fund the Reserve
Account. The Trust will not receive a full month's interest at the Contract Rate
on any Contract which is prepaid in full or which is subject to a Relief Act
Reduction (as defined in the Prospectus), nor will the Servicer make Monthly
Advances for any Payment Shortfall which results from a Relief Act Reduction or
a prepayment in full of a Contract. The Servicer will not make Non-
S-37
<PAGE>
Reimbursable Payments. As a result, there will be less interest available to the
Trust to pay interest on the Securities, to cover losses on the Liquidated
Contracts and to fund the Reserve Account.
POOL FACTORS
The "Certificate Pool Factor" is a seven-digit decimal which the Servicer
will compute each month indicating the remaining Certificate Balance as of the
Distribution Date, as a fraction of the Original Certificate Balance. The
Certificate Pool Factor will be 1.0000000 as of the Cut-off Date, and thereafter
will decline to reflect reductions in the outstanding principal balance of the
Certificates. A Certificateholder's portion of the aggregate outstanding
Certificate Balance is the product of (i) the original denomination of the
Certificateholder's Certificate and (ii) the Certificate Pool Factor.
The "Note Pool Factor" with respect to a class of Notes, is a seven-digit
decimal which the Servicer will compute each month indicating the remaining
outstanding principal balance of each class of Notes as of the Distribution
Date, as a fraction of the initial outstanding principal balance of such class
of Notes. The Note Pool Factor will be 1.0000000 as of the Cut-off Date, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the applicable class of Notes. A Noteholder's portion of the
aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of the Noteholder's Note and (ii) the
applicable Note Pool Factor.
On each Distribution Date the Certificateholders and the Noteholders will
receive monthly reports concerning the payments received on the Contracts, the
Pool Balance, the Note Pool Factor and various other items of information.
Pursuant to the Trust Agreement, the Certificateholders will receive monthly
reports concerning the payments received on the Contracts, the Pool Balance,
Certificate Pool Factor and various other items of information. Securityholders
of record (which in the case of the Notes in most cases will be Cede & Co.)
during any calendar year will be furnished information for tax reporting
purposes not later than the latest date permitted by law. Certificateholders and
Note Owners may receive such reports, upon written request, together with a
certification that they are Certificateholders or Note Owners, as the case may
be, and payment of any expenses associated with the distribution of such
reports, from the Trustee (at the address listed in "Structure of the
Transaction--The Owner Trustee") and the Indenture Trustee at
____________________. See "Certain Information Regarding the
Securities--Statements to Securityholders" in the Prospectus.
USE OF PROCEEDS
The Company will sell the Contracts to the Trust concurrently with the sale
of the Securities and the net proceeds from the sale of the Securities will be
applied by the Trust to the purchase of the Contracts and to the payment of
certain expenses connected with pooling the Contracts and issuing the
Securities. Such net proceeds less the payment of such expenses represent the
cash purchase price paid by the Trust to the Company for the sale of the
Contracts to the Trust. Such amount will be determined as a result of the
pricing of the Securities, through the offering described in this Prospectus
Supplement. The purchase price paid to CITSF for the Contracts will be added to
CITSF's general funds and will be available for general corporate purposes,
including the purchase of new marine installment sale contracts and direct loans
and the payment of the purchase price to CITCF-NY for those Contracts acquired
by CITSF from CITCF-NY.
THE CIT GROUP/SALES FINANCING, INC., SERVICER
General
As of December 31, 1997, CITSF serviced for itself and others approximately
_____ contracts (consisting primarily of recreation vehicle, home equity,
recreational boat and manufactured housing contracts), representing an
outstanding balance of approximately $___ billion. Of this portfolio,
approximately _____ contracts (representing approximately $___ billion
outstanding balance) consisted of marine installment sale contracts and direct
loans. CITSF entered into an agreement in 1996 to service additional
manufactured housing contracts for an unaffiliated third party, which increased
substantially the total number of contracts serviced by CITSF. In addition to
expected growth in its serviced portfolio, in 1997 CITSF entered into an
agreement to provide servicing for approximately
S-38
<PAGE>
43,000 additional recreation vehicle and recreational boat consumer contracts
for another financial institution, which CITSF is also servicing at its Asset
Service Center. The addition of these contracts to its servicing portfolio
required CITSF to increase staffing levels at the Asset Service Center to
support these contracts. The effect of this increase on CITSF's performance as a
servicer or subservicer cannot be determined at this time.
Servicing
The following table shows the composition of CITSF's servicing portfolio,
including marine installment sale contracts and direct loans serviced by CITSF
on the dates indicated:
THE CIT GROUP/SALES FINANCING, INC.
Contracts Being Serviced By Product Line
<TABLE>
<CAPTION>
At December 31,
---------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
(Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars)
-------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RV--Owned......
RV--Bulk
Purchases...
RV--Servicing(1)
Total RV......
Total MH......
Home Equity...
Other(2)......
Total
Contracts
Serviced....
</TABLE>
MH = Manufactured Housing
RV = Recreation Vehicle
(1) Includes contracts sold by CITSF in previous securitizations which CITSF is
servicing and a third party servicing arrangement entered into in 1997.
(2) Includes inventory financing receivables.
Delinquency and Loan Loss Experience
The following Delinquency Experience and Loan Loss Experience tables set
forth data for CITSF's marine loan portfolio. The following table sets forth the
delinquency experience for the five years ended December 31, 1997 of the
portfolio of marine installment sale contracts and direct loans originated and
serviced by CITSF, excluding contracts acquired by CITSF through portfolio
purchases and contracts in repossession. Delinquency and loan loss experience
for the serviced portfolio was obtained from the monthly servicer reports for
prior securitization trusts.
S-39
<PAGE>
Delinquency Experience
(Dollars in thousands)
Year Ended December 31,
-----------------------
1992 1993 1994(3) 1995(3) 1996(3) 1997(3)
---- ---- ------- ------- ------- -------
Number of Contracts............
Principal Balance of Con-
tracts Serviced.............
Principal Balance of Delin-
quent Contracts(1):
30-59 Days................
60-89 Days................
90 Days or More...........
Total Principal Balance of
Delinquent Contracts........
Delinquencies as a Percent of
Principal Balances(2)........
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month. A Contract is deemed delinquent only if payments
exceeding $65 are contractually past due 30 days or more.
(2) Based on dollar percent delinquent calculated by dividing Total Principal
Balance of Delinquent Contracts by Principal Balance of Contracts Serviced.
(3) Includes marine installment contracts and direct loans sold by CITSF in
previous securitizations which CITSF is servicing.
S-40
<PAGE>
The following table sets forth the loan loss experience for the five years
ended December 31, 1997 of the portfolio of marine installment sale contracts
and direct loans originated and serviced by CITSF, excluding contracts acquired
by CITSF through portfolio purchases. "Net Losses" are equal to the aggregate
balance of all contracts which are determined to be uncollectible in the period
less any recoveries and liquidation proceeds on contracts charged-off in the
period or any prior periods. Net Losses include outside collection, repossession
and liquidation expenses .
Loan Loss/Liquidation Experience
(Dollars in thousands)
Year Ended December 31,
-----------------------
1992 1993 1994(4) 1995(4) 1996(4) 1997(4)
---- ---- ------- ------- ------- -------
Number of Contracts(1)......
Principal Balance of
Contracts Serviced(1)....
Net Losses:
Dollars(2).............
Percentage(3)..........
Notes:
(1) As of period end and excludes contracts in repossession.
(2) The calculation of net loss includes outside collection, repossession and
liquidation expenses.
(3) As a percentage of the principal balance of contracts as of period end.
(4) Includes marine installment sale contracts and direct loans sold by CITSF
in previous securitizations which CITSF is servicing.
(5) Annualized.
The data presented in the foregoing tables is for illustrative purposes
only. Such data relates to the performance of CITSF's entire portfolio of marine
installment sale contracts and direct loans and is not historical data regarding
solely the portion of CITSF's portfolio constituting the Contracts. [Most] of
CITSF's portfolio of marine installment sale contracts and direct loans secured
by boats was originated under underwriting guidelines in effect prior to August
1994. However, in August 1994 CITSF adopted a risk-adjusted pricing policy and
changed its credit criteria and underwriting guidelines in effect prior to
August 1994 as described under "The CIT Group/Sales Financing, Inc., Servicer--
CITSF's Underwriting Guidelines" in the Prospectus. In connection with this
change, CITSF reduced the minimum credit score for approval of a new credit in
order to extend credit to less creditworthy borrowers than under the credit
criteria previously in effect. The interest rates charged on marine installment
sale contracts and direct loans originated since August 1994 reflect CITSF's
evaluation of the relative risk associated with an individual's application. In
addition to the effects of seasoning, the changes in CITSF's underwriting
standards have resulted and will result in higher delinquency and loan loss
experience than is shown in the above tables since the marine installment sale
contracts and direct loans included in such tables include contracts which were
originated using CITSF's former underwriting guidelines. All of the Contracts
were originated under these new credit criteria adopted by CITSF in August 1994.
Accordingly, the data presented in the foregoing tables should not necessarily
be considered as a basis for assessing the likelihood, amount or severity of
delinquency or losses on the Contracts, and the delinquency and loan loss
experience presented in the preceding tables may not be indicative of the
experience on the Contracts.
During 1997, CITSF experienced a higher rate of delinquencies and loan
losses on marine installment sale contracts and direct loans. [CITSF attributes
the higher rate of delinquencies to _______________.] CITSF attributes the
higher loss experience to the combined effect of current economic conditions and
a business decision by CITSF to change the credit mix of receivables originated
since August 1994. This has resulted in an increase in delinquency and losses.
CITSF expects that the upward trend in credit losses will continue through the
remainder of 1997. However, no assurance as to future delinquencies, losses or
results of repossessions and sales of boats can be given.
S-41
<PAGE>
THE NOTES
General
The CIT Marine Trust ____-_ Class A-1 ____% Asset-Backed Notes (the "Class
A-1 Notes"), Class A-2 ___% Asset-Backed Notes (the "Class A-2 Notes"), Class
A-3 ___% Asset-Backed Notes (the "Class A-3 Notes"), Class A-4 ___% Asset-Backed
Notes (the "Class A-4 Notes"), Class A-5 ____% Asset-Backed Notes (the "Class
A-5 Notes"), Class A-6 ____% Asset-Backed Notes (the "Class A-6 Notes"), Class
A-7 ____% Asset-Backed Notes (the "Class A-7 Notes" and, together with the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the
Class A-5 Notes and the Class A-6 Notes, the "Class A Notes") and Class B ___%
Asset-Backed Notes (the "Class B Notes" and, together with the Class A Notes,
the "Notes" and, together with the Certificates, the "Securities") will
represent obligations of the Trust secured by assets of the Trust (other than
the Certificate Distribution Account). Payments in respect of the Class B Notes
will be subordinated to payments on the Class A Notes to the extent described
herein. The Trust will issue $___________ aggregate principal amount of Class
A-1 Notes, $____________ aggregate principal amount of Class A-2 Notes,
$__________ aggregate principal amount of Class A-3 Notes, $_______ aggregate
principal amount of Class A-4 Notes, $__________ aggregate principal amount of
Class A-5 Notes, $__________ aggregate principal amount of Class A-6 Notes,
$__________ aggregate principal amount of Class A-7 Notes and $______ aggregate
principal amount of Class B Notes pursuant to the terms of an Indenture, to be
dated as of __________ 1, ____ (as amended and supplemented from time to time,
the "Indenture") between _______________, as trustee (the "Indenture Trustee"),
a form of which was filed as an exhibit to the Registration Statement of which
this Prospectus Supplement forms a part. A copy of the Indenture will be
available from the Company, upon request, to the holders of the Notes or
Certificates and will be filed with the Securities and Exchange Commission (the
"Commission") following the issuance of the Notes and Certificates. The
following summary describes certain terms of the Notes and the Indenture. The
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the Notes and the
Indenture. Where particular provisions or terms used in the Indenture are
referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of such summary.
The Notes will be issued in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof and will be available in book-entry form
only. Each class of the Notes will initially be represented by a single Note
registered in the name of Cede, the nominee of DTC. No person acquiring an
interest in the Notes through the facilities of DTC (a "Note Owner") will be
entitled to receive a Note representing such person's interest in the Notes,
except as set forth under "Certain Information Regarding the
Securities--Definitive Securities" in the Prospectus, and such persons will hold
their interests in the Notes through DTC in the United States or Cedel or
Euroclear in Europe. Unless and until Definitive Notes are issued under the
limited circumstances described herein, all references to actions by Noteholders
shall refer to actions taken by DTC upon instructions from its Participants, and
all references herein to distributions, notices, reports and statements to
Noteholders shall refer to distributions, notices, reports and statements to DTC
in accordance with DTC procedures. See "Certain Information Regarding The
Securities--Definitive Securities" in the Prospectus and Annex I hereto.
Payments of interest and principal on the Notes with respect to each Due
Period will be made on the fifteenth day of each month or, if any such day is
not a Business Day, on the next succeeding Business Day (each, a "Distribution
Date"), commencing __________ 15, ____. Payments on the Notes on each
Distribution Date will be made to the holders of record of the related Notes on
the related Record Date. A "Business Day" is any day other than a Saturday,
Sunday or any day on which banking institutions or trust companies in the states
of New York, __________, __________ or Oklahoma are authorized or required by
law, regulation or executive order to be closed.
Payments of Interest
The Class A-1 Notes will bear interest at the rate of ____% per annum (the
"Class A-1 Interest Rate"), the Class A-2 Notes will bear interest at the rate
of ___% per annum (the "Class A-2 Interest Rate"), the Class A-3 Notes will bear
interest at the rate of ____% per annum (the "Class A-3 Interest Rate"), the
Class A-4 Notes will bear interest at the rate of ____% per annum (the "Class
A-4 Interest
S-42
<PAGE>
Rate"), the Class A-5 Notes will bear interest at the rate of ____% per annum
(the "Class A-5 Interest Rate"), the Class A-6 Notes will bear interest at the
rate of ____% per annum (the "Class A-6 Interest Rate"), the Class A-7 Notes
will bear interest at the rate of ____% per annum (the "Class A-7 Interest
Rate") and the Class B Notes will bear interest at the rate of ___% per annum
(the "Class B Interest Rate"). The interest rates for the various classes of
Notes are referred to herein collectively as "Interest Rates."
Interest on the outstanding principal amount of each class of Notes will
accrue at the applicable Interest Rate from and including the Closing Date (in
the case of the first Distribution Date) or from and including the preceding
Distribution Date to but excluding the Distribution Date (each, an "Interest
Accrual Period"). On each Distribution Date, the Indenture Trustee will
distribute to the Noteholders of each class accrued interest at the applicable
Interest Rate on the outstanding principal amount of such class to the extent of
the Available Amount remaining after payment of the Servicer Payment. To the
extent the remaining Available Amount on a Distribution Date is insufficient to
pay Noteholders the entire amount of interest due on such Distribution Date,
such shortfall will be funded from the Reserve Account, subject to the Available
Reserve Amount, under the circumstances described herein. Interest on the Class
A-1 Notes will be calculated on the basis of a 360-day year and the actual
number of days elapsed in the related Interest Accrual Period. Interest on each
other class of Notes will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on the Notes of any class for any
Distribution Date due but not paid on such Distribution Date will be due on the
next Distribution Date in addition to an amount equal to interest on such amount
at the applicable Interest Rate (to the extent lawful).
Interest payments to all classes of Class A Noteholders will have the same
priority. Under certain circumstances, the amount available for interest
payments could be less than the amount of interest payable on the Class A Notes
on any Distribution Date, in which case each class of Class A Noteholders will
receive their ratable share (based upon the aggregate amount of interest due to
such class of Class A Noteholders) of the aggregate amount available to be
distributed in respect of interest on the Class A Notes.
Interest on the Class B Notes will not be paid on any Distribution Date
until interest on the Class A Notes for such Distribution Date has been paid in
full. In addition, notwithstanding the foregoing, if an Event of Default has
occurred and the Notes have been accelerated, payments of interest on and
principal of the Class B Notes will not be paid until the Class A Notes have
been paid in full.
Payments of Principal
Principal of the Class A Notes will be payable on each Distribution Date
in an amount equal to the Class A Noteholders' Principal Distribution Amount, to
the extent of the Available Amount remaining after payment of the Servicer
Payment and interest due on the Notes on such Distribution Date. To the extent
the remaining Available Amount on a Distribution Date is insufficient to fund
the entire Class A Noteholders' Principal Distribution Amount due on such
Distribution Date, such shortfall will be funded from the Reserve Account,
subject to the Available Reserve Amount remaining after any withdrawals from the
Reserve Account to make payments of interest due on the Notes on such
Distribution Date, under the circumstances described herein. Principal of the
Class B Notes will be payable on each Distribution Date in an amount equal to
the Class B Noteholders' Principal Distribution Amount, to the extent of the
Available Amount remaining after payment of the Servicer Payment and interest
due on the Notes and principal due on the Class A Notes on such Distribution
Date. To the extent the remaining Available Amount on a Distribution Date is
insufficient to fund the entire Class B Noteholders' Principal Distribution
Amount due on such Distribution Date, such shortfall will be funded from the
Reserve Account, subject to the Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make payments of interest due on the
Notes and principal due on the Class A Notes on such Distribution Date, under
the circumstances described herein. Notwithstanding the foregoing, if an Event
of Default has occurred and the Notes have been accelerated, payments of
interest on and principal of the Class B Notes will not be paid until the Class
A Notes have been paid in full.
On each Distribution Date prior to the Distribution Date on which the
Class A-1 Notes have been paid in full, principal of the Class A-1 Notes will be
payable in an amount equal to 100% of the Class A Noteholders' Principal
Distribution Amount. On each Distribution Date on and after the Distribution
Date on which the Class A-1 Notes have been paid in full, principal of the Class
A-2 Notes will be payable, until
S-43
<PAGE>
the Class A-2 Notes have been paid in full, in an amount equal to 100% of the
Class A Noteholders' Principal Distribution Amount (less any portion of the
Class A Noteholders' Principal Distribution Amount applied on such Distribution
Date to reduce the outstanding principal amount of the Class A-1 Notes to zero).
On each Distribution Date on and after the Distribution Date on which the Class
A-2 Notes have been paid in full, principal of the Class A-3 Notes will be
payable, until the Class A-3 Notes have been paid in full, in an amount equal to
100% of the Class A Noteholders' Principal Distribution Amount (less any portion
of the Class A Noteholders' Principal Distribution Amount applied on such
Distribution Date to reduce the outstanding principal amount of the Class A-1
Notes and the Class A-2 Notes to zero). On each Distribution Date on and after
the Distribution Date on which the Class A-3 Notes have been paid in full,
principal of the Class A-4 Notes will be payable, until the Class A-4 Notes have
been paid in full, in an amount equal to 100% of the Class A Noteholders'
Principal Distribution Amount (less any portion of the Class A Noteholders'
Principal Distribution Amount applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes to zero). On each Distribution Date on and after the
Distribution Date on which the Class A-4 Notes have been paid in full, principal
of the Class A-5 Notes will be payable, until the Class A-5 Notes have been paid
in full, in an amount equal to 100% of the Class A Noteholders' Principal
Distribution Amount (less any portion of the Class A Noteholders' Principal
Distribution Amount applied on such Distribution Date to reduce the outstanding
principal amount of the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes to zero). On each Distribution Date on and after
the Distribution Date on which the Class A-5 Notes have been paid in full,
principal of the Class A-6 Notes will be payable, until the Class A-6 Notes have
been paid in full, in an amount equal to 100% of the Class A Noteholders'
Principal Distribution Amount (less any portion of the Class A Noteholders'
Principal Distribution Amount applied on such Distribution Date to reduce the
outstanding principal amount of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes and the Class A-5 Notes to zero). On each
Distribution Date on and after the Distribution Date on which the Class A-6
Notes have been paid in full, principal of the Class A-7 Notes will be payable,
until the Class A-7 Notes have been paid in full, in an amount equal to 100% of
the Class A Noteholders' Principal Distribution Amount (less any portion of the
Class A Noteholders' Principal Distribution Amount applied on such Distribution
Date to reduce the outstanding principal amount of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes
and the Class A-6 Notes to zero). On each Distribution Date, principal of the
Class B Notes will be payable, until the Class B Notes have been paid in full,
in an amount equal to 100% of the Class B Noteholders' Principal Distribution
Amount.
No principal payments will be made (i) on the Class A-2 Notes until the
Class A-1 Notes have been paid in full, (ii) on the Class A-3 Notes until the
Class A-2 Notes have been paid in full, (iii) on the Class A-4 Notes until the
Class A-3 Notes have been paid in full (iv) on the Class A-5 Notes until the
Class A-4 Notes have been paid in full, (v) on the Class A-6 Notes until the
Class A-5 Notes have been paid in full or (vi) on the Class A-7 Notes until the
Class A-6 Notes have been paid in full. Notwithstanding the foregoing, if an
Event of Default has occurred and the Notes have been accelerated, principal
payments will be made on each class of Class A Notes pro rata on the basis of
their respective unpaid principal amounts.
The outstanding principal amount of the Class A-1 Notes, to the extent not
previously paid, will be payable on the _______ Distribution Date (the "Class
A-1 Note Final Scheduled Distribution Date"); the outstanding principal amount
of the Class A-2 Notes, to the extent not previously paid, will be payable on
the ___________ Distribution Date (the "Class A-2 Note Final Scheduled
Distribution Date"); the outstanding principal amount of the Class A-3 Notes, to
the extent not previously paid, will be payable on the __________ Distribution
Date (the "Class A-3 Final Scheduled Distribution Date"); the outstanding
principal amount of the Class A-4 Notes, to the extent not previously paid, will
be payable on the _________ Distribution Date (the "Class A-4 Final Scheduled
Distribution Date"); the outstanding principal amount of the Class A-5 Notes, to
the extent not previously paid, will be payable on the _________ Distribution
Date (the "Class A-5 Final Scheduled Distribution Date"); the outstanding
principal amount of the Class A-6 Notes, to the extent not previously paid, will
be payable on the _________ Distribution Date (the "Class A-6 Final Scheduled
Distribution Date"); the outstanding principal amount of the Class A-7 Notes, to
the extent not previously paid, will be payable on the _________ Distribution
Date (the "Class A-7 Final Scheduled Distribution Date"); and the outstanding
principal amount of the Class B Notes, to the extent not previously paid, will
be payable on the ______ Distribution Date (the "Class B Final Scheduled
Distribution Date"). The actual date on which the
S-44
<PAGE>
aggregate outstanding principal amount of each class of Notes is paid may be
earlier than its respective Note Final Scheduled Distribution Date based on a
variety of factors including an Optional Purchase or Auction Sale.
Redemption
In the event of an Optional Purchase or Auction Sale, the outstanding
Notes will be redeemed in whole, but not in part, at a redemption price equal to
the unpaid principal amount of the Notes plus accrued and unpaid interest
thereon at the applicable Interest Rates. An Optional Purchase of all the
Contracts by CITSF may occur at CITSF's option on any Distribution Date on which
the Pool Balance as of the last day of the related Due Period is __% or less of
the Initial Pool Balance. An Auction Sale may occur, and may result in the sale
of the Contracts remaining in the Trust, within ten days following the first
Distribution Date on which the Pool Balance as of the last day of the related
Due Period is __% or less of the Initial Pool Balance.
Rights of Noteholders; Indenture
The Indenture Trustee will have the power to direct the Owner Trustee to
take certain actions in connection with the administration of the Trust property
until the Notes have been paid in full and the Indenture has been discharged in
accordance with its terms. The Indenture will specifically prohibit the Owner
Trustee from taking any action that would impair the Indenture Trustee's
security interest in the Trust property and will require the Owner Trustee to
obtain the consent of the Indenture Trustee or Noteholders representing not less
than a majority of the aggregate principal amount of the Notes then outstanding
before modifying, amending, supplementing, waiving or terminating any provision
of the Sale and Servicing Agreement. Therefore, except as described herein,
until the Notes have been paid in full, the ability to direct the Trust with
respect to certain actions permitted to be taken under the Sale and Servicing
Agreement rests with the Indenture Trustee and the Noteholders.
If an Event of Default under the Indenture occurs and the Notes are
accelerated, the Indenture Trustee will have the right or will be required in
certain circumstances to exercise remedies as a secured party, including selling
the Contracts, in order to pay the principal of, and accrued interest on, the
Notes. Except as described herein, upon the occurrence of an Event of Default,
the Class B Noteholders will not have any right to direct or to consent to any
action by the Indenture Trustee, including acceleration of the Notes or the sale
of Contracts, until the Class A Noteholders have been paid in full. The proceeds
of any sale of the Contracts may not be equal to or greater than the aggregate
outstanding principal amount of the Notes plus, in each case, accrued interest
thereon. Because neither interest nor principal is distributed to Class B
Noteholders following an Event of Default and acceleration of the Notes until
the Class A Notes have been paid in full, the interests of the Class A
Noteholders and the Class B Noteholders may conflict, and the exercise by the
Indenture Trustee of its right to sell the Contracts or exercise other remedies
may cause the Class B Noteholders to suffer a loss of all or part of their
investment.
Upon the occurrence of an Event of Default under the Indenture, the assets
of the Trust may be sold which may result in early retirement of the Notes. If
the net proceeds from the liquidation of the Contracts (after payment of the
Servicer Payment) and any amounts on deposit in the Note Distribution Account
are not sufficient to pay the principal amount of and accrued interest on the
Notes in full, holders of the Notes will incur a loss. Such net proceeds
together with amounts on deposit in the Note Distribution Account will be
distributed to Securityholders (after payment of the fees and expenses of the
Indenture Trustee and the Servicer Payment) in the following order of priority:
(i) to the Class A Noteholders for amounts due and unpaid on the Class A Notes
for interest, ratably, without preference or priority of any kind, according to
the amounts due and payable on each class of the Class A Notes for interest,
(ii) to the Class A Noteholders for amounts due and unpaid on the Class A Notes
for principal, ratably, without preference or priority of any kind, according to
the amounts due and payable on the Class A Notes for principal, until the
principal amount of the Class A Notes is reduced to zero, (iii) to the Class B
Noteholders for amounts due and unpaid on the Class B Notes for interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Class B Notes for interest, (iv) to the Class B
Noteholders for amounts due and unpaid on the Class B Notes for principal,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Class B Notes for principal, until the principal amount
of
S-45
<PAGE>
the Class B Notes is reduced to zero, (v) to the Certificateholders for amounts
due and unpaid on the Certificates for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Certificates for interest and (vi) to the Certificateholders for amounts due and
unpaid on the Certificates for the Certificate Balance, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Certificates for the Certificate Balance.
Pursuant to the Trust Indenture Act of 1939, as amended, the Indenture
Trustee will be deemed to have a conflict of interest and be required to resign
as trustee for either the Class A Notes or the Class B Notes if an Event of
Default occurs under the Indenture. In these circumstances, the Indenture will
require that, within 90 days of ascertaining such Event of Default, the
Indenture Trustee will resign as Indenture Trustee for the Class A Notes or the
Class B Notes and provide for a successor indenture trustee to be appointed for
one or both of the Class A Notes and Class B Notes as applicable, in order that
there be separate trustees for each of the Class A Notes and Class B Notes. So
long as any amounts remain unpaid with respect to the Class A Notes, only the
indenture trustee for the Class A Noteholders will have the right to exercise
remedies under the Indenture (but the Class B Noteholders will be entitled to
their share of any proceeds of enforcement, subject to the subordination of the
Class B Notes to the Class A Notes as described herein), and only the Class A
Noteholders will have the right to direct or consent to any action to be taken,
including sale of the Contracts, until the Class A Noteholders are paid in full.
Upon repayment of the Class A Noteholders in full, all rights to exercise
remedies under the Indenture will transfer to the indenture trustee for the
Class B Noteholders. Any resignation of the original Indenture Trustee as
described above with respect to any class of Notes will become effective only
upon the appointment of a successor trustee for such a class of Notes and such
successor's acceptance of such appointment.
In the event that an Event of Termination occurs, the Indenture Trustee or
Class A Noteholders representing not less than a majority of the aggregate
principal amount of the Class A Notes then outstanding may remove the Servicer
without the consent of any of the Class B Noteholders. None of the Class B
Noteholders will have the ability, with certain specified exceptions, to waive
defaults by the Servicer, including defaults that could materially adversely
affect the Class B Noteholders.
THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part. The following summary
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Trust Agreement.
General
The CIT Marine Trust ____-_ ____% Asset-Backed Certificates (the
"Certificates") will represent fractional undivided interests in the Trust. The
Trust will issue $____________ aggregate face amount of Certificates pursuant to
a Trust Agreement, to be dated as of __________ 1, ____ between the Seller and
the Owner Trustee (the "Trust Agreement"), a form of which was filed as an
exhibit to the Registration Statement of which this Prospectus Supplement forms
a part. A copy of the Trust Agreement will be available from the Company, upon
request, to holders of the Notes or Certificates and will be filed with the
Commission following the issuance of the Notes and the Certificates. Payments in
respect of the Certificates will be subordinated to payments on the Notes to the
extent described herein. The following summary describes certain terms of the
Certificates and the Trust Agreement. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Certificates and the Trust Agreement. Where
particular provisions or terms used in the Trust Agreement are referred to, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summary.
The Certificates will be offered for purchase in minimum denominations of
$20,000 and integral multiples of $1,000 in excess thereof; provided, however,
that one Certificate may be issued in a denomination other than an integral
multiple of $1,000 such that The CIT GP Corporation III, a Delaware corporation
and a wholly owned subsidiary of CIT (the "Affiliated Owner") may be issued at
least 1% of
S-46
<PAGE>
the Original Certificate Balance. The Certificates will be issued in fully
registered, certificated form ("Definitive Certificates") to Certificateholders
or their nominees. See "Certain Information Regarding the Securities--Definitive
Securities" in the Prospectus. Purchasers of Certificates and their assignees
(i) must represent that they are United States persons (as defined in Section
7701(a) of the Code) and provide a certification of non-foreign status under
penalties of perjury and (ii) must represent and certify that they are not (a)
an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject
to the provisions of Title I of ERISA, (b) a plan described in Section
4975(e)(1) of the Code, or (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity.
Payments of interest and principal on the Certificates with respect to
each Due Period will be made on each Distribution Date, commencing __________
15, ____. With respect to any Distribution Date, the "Due Period" will be the
calendar month preceding the month of such Distribution Date. The first Due
Period will commence on and include __________ 1, ____ and will end on and
include __________, ____. Payments on the Certificates on each Distribution Date
will be made to the holders of record of the Certificates on the related Record
Date.
Distribution of Interest
The Certificates will bear interest at the rate of ____% per annum (the
"Pass-Through Rate"). Interest in respect of a Distribution Date will accrue at
the Pass-Through Rate during the related Interest Accrual Period. On each
Distribution Date, the Owner Trustee will distribute pro rata to
Certificateholders accrued interest at the Pass-Through Rate on the outstanding
Certificate Balance to the extent of the Available Amount remaining after
payment of the Servicer Payment and interest and principal due on the Notes on
such Distribution Date. To the extent the remaining Available Amount on a
Distribution Date is insufficient to pay Certificateholders the entire amount of
interest due on such Distribution Date, such shortfall will be funded from the
Reserve Account, subject to the Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make payments of interest and principal
due on the Notes on such Distribution Date, under the circumstances described
herein. Interest on the Certificates for any Distribution Date due but not paid
on such Distribution Date will be due on the next Distribution Date in addition
to an amount equal to interest on such amount at the Pass-Through Rate (to the
extent lawful). Interest on the Certificates will be calculated on the basis of
a 360-day year consisting of twelve 30-day months.
The rights of Certificateholders to receive distributions of interest will
be subordinated to the rights of the Noteholders to receive payment in full of
all amounts of interest and principal which the Noteholders are entitled to be
paid on such Distribution Date. If an Event of Default has occurred and the
Notes have been accelerated, Certificateholders will not be entitled to receive
any distributions of interest or principal until the Notes have been paid in
full.
Distribution of Principal
On each Distribution Date prior to the Cross-Over Date, the
Certificateholders will not be entitled to any payments of principal.
On each Distribution Date on or after the Cross-Over Date, principal of
the Certificates will be payable, subject to the remaining Available Amount and
the remaining Available Reserve Amount, in an amount equal to the
Certificateholders' Principal Distribution Amount with respect to such
Distribution Date. Such principal payments will be funded to the extent of the
Available Amount remaining after payment of the Servicer Payment, payment of
interest and principal in respect of the Notes on the Cross-Over Date, and
payment of interest due on the Certificates on such Distribution Date. To the
extent the remaining Available Amount on a Distribution Date is insufficient to
fund the entire Certificateholders' Principal Distribution Amount due on such
Distribution Date, such shortfall will be funded from the Reserve Account,
subject to the Available Reserve Amount remaining after any withdrawals from the
Reserve Account to make payments of interest and principal due on the Notes and
interest due on the Certificates on such Distribution Date, under the
circumstances described herein. The rights of Certificateholders to receive
distributions of principal (following the payment of interest on the
Certificates) will be subordinated to the rights of Noteholders to receive
distributions of interest and
S-47
<PAGE>
principal to the extent described herein. The Certificate Balance of the
Certificates, to the extent not previously paid, will be payable on the
Distribution Date occurring in __________ (the "Certificate Final Scheduled
Distribution Date"). In the event that the Certificates are outstanding on the
Certificate Final Scheduled Distribution Date (after taking into account
distributions on such date), the Indenture Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account (to the extent funds are available therefor
in the Reserve Account), and will deposit in the Certificate Distribution
Account for distribution to the Certificateholders to retire the Certificates,
an amount equal to the Certificate Balance. The actual date on which the
aggregate outstanding principal amount of the Certificates is paid may be
earlier than the Certificate Final Scheduled Distribution Date based on a
variety of factors including an Optional Purchase or Auction Sale.
Redemption
In the event of an Optional Purchase or Auction Sale, the Certificates
will be redeemed at a redemption price equal to the Certificate Balance plus
accrued and unpaid interest thereon at the Pass-Through Rate. An Optional
Purchase of all the Contracts by CITSF may occur at CITSF's option on any
Distribution Date on which the Pool Balance as of the last day of the related
Due Period is __% or less of the Initial Pool Balance. An Auction Sale may
occur, and may result in the sale of the Contracts remaining in the Trust,
within ten days following the first Distribution Date on which the Pool Balance
as of the last day of the related Due Period is __% or less of the Initial Pool
Balance. The "Initial Pool Balance" equals the Pool Balance as of the Cut-off
Date.
Limited Rights
Except as described herein, if an Event of Default occurs under the
Indenture, the Certificateholders will not have any right to direct or to
consent to any remedies therefor exercisable by the Indenture Trustee, including
the sale of the Contracts, until the Notes have been paid in full. If an Event
of Termination occurs, the Certificateholders will not have any right to direct
or consent to removal of the Servicer or the waiver of such Event of Termination
until the Notes have been paid in full. See "Risk Factors--Rights of Noteholders
and Certificateholders" herein and "The Purchase Agreements and the Trust
Documents--Event of Termination," "--Rights Upon Event of Termination" and
"--Waiver of Past Defaults" in the Prospectus.
ENHANCEMENT
Subordination. To the extent described herein, the rights of the
Certificateholders to receive distributions with respect to the Contracts will
be subordinated to the rights of the Noteholders, and the rights of the Class B
Noteholders to receive distributions with respect to the Contracts will be
subordinated to the rights of the Class A Noteholders. This subordination is
intended to enhance the likelihood of timely receipt by the Class A Noteholders
(and to a lesser extent the Class B Noteholders) of the full amount of interest
and principal required to be paid to them, and to afford the Class A Noteholders
(and to a lesser extent the Class B Noteholders) limited protection against
losses in respect of the Contracts.
No distribution will be made to the Certificateholders on any
Distribution Date in respect of (i) interest until the full amount of interest
and principal on the Notes payable on such Distribution Date has been
distributed to the Noteholders, and (ii) principal until the Notes have been
paid in full.
No distribution will be made to the Class B Noteholders on any
Distribution Date in respect of (i) interest until the full amount of interest
on the Class A Notes payable on such Distribution Date has been distributed to
the Class A Noteholders, and (ii) principal until the full amount of principal
on the Class A Notes payable on such Distribution Date has been distributed to
the Class A Noteholders.
The Class A Noteholders will be entitled to receive current
distributions of interest prior to the Class B Noteholders receiving any current
distributions of interest. In addition, the Class A Noteholders will be entitled
to receive their share of the current distribution of principal prior to the
Class B Noteholders receiving their share of the current distribution of
principal.
S-48
<PAGE>
Reserve Account. On the Closing Date, an account (the "Reserve Account")
will be established pursuant to the Sale and Servicing Agreement. The Indenture
Trustee will have the right to withdraw (or cause to be withdrawn) payments from
the Reserve Account under certain circumstances specified below. The Reserve
Account will not be funded on the Closing Date. After the Closing Date, the
Reserve Account will be funded with the Excess Collections, if any, and certain
investment earnings on funds deposited in the Reserve Account.
The Reserve Account will be an Eligible Account (as defined in the
Prospectus). Funds on deposit in the Reserve Account will be invested in certain
investments which satisfy the criteria established by each of the Ratings
Agencies (which may include obligations of CIT). The Reserve Account and any
amounts therein shall be held by or on behalf of the Indenture Trustee in
accordance with the Sale and Servicing Agreement for the benefit of the
Securityholders and the Trust.
The Reserve Account will be terminated following the earlier to occur of
(a) the date on which the Certificate Balance is paid in full and any funds
remaining therein have been paid to the Affiliated Owner or (b) the Certificate
Final Scheduled Distribution Date.
On each Distribution Date, the amount available to be withdrawn from the
Reserve Account for the benefit of the Securityholders (the "Available Reserve
Amount") will be equal to the lesser of (i) the Specified Reserve Amount and
(ii) the amount on deposit in the Reserve Account, before giving effect to any
deposit to be made to the Reserve Account on such Distribution Date.
On each Determination Date, the Servicer will determine the amounts, if
any, required to be withdrawn from the Reserve Account on the related
Distribution Date for payment to the Securityholders. If the Available Amount on
any Distribution Date is insufficient (after payment of the Servicer Payment) to
pay the interest and principal required to be distributed on the Securities on
such Distribution Date, the Indenture Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account an amount equal to the lesser of the amount
of such deficiency or the Available Reserve Amount. The Indenture Trustee will
withdraw (or cause to be withdrawn) such amount from the Reserve Account and
will deposit (or cause to be deposited) such amount into the Note Distribution
Account and/or Certificate Distribution Account on the Business Day before the
Distribution Date with respect to which such withdrawal was made. Any amounts
withdrawn from the Reserve Account will be distributed to the Securityholders in
the same order of priority as distributions of the Available Amount. If the
Available Reserve Amount is zero (which will be the case on the Closing Date),
Securityholders will bear the risk of loss resulting from default by Obligors
and will have to look primarily to the value of the related Financed Boats for
recovery of the outstanding principal and unpaid interest on the defaulted
Contracts.
On each Distribution Date, the Servicer will deposit Excess Collections,
if any, into the Reserve Account in an amount sufficient to increase the amount
on deposit in the Reserve Account to the Specified Reserve Amount for the next
Distribution Date. Excess Collections, if any, not so required to be deposited
in the Reserve Account will be paid to the Affiliated Owner.
"Excess Collections" for any Distribution Date will equal the amounts
collected or deposited in respect of the Contracts in the related Due Period and
which remain in the Collection Account on such Distribution Date after taking
into account distributions to be made on the Securities, the Servicer Payment
made to the Servicer on such Distribution Date, and the Servicing Fee (including
any unpaid Servicing Fees for past Distribution Dates) paid on such Distribution
Date.
The Specified Reserve Amount with respect to any Distribution Date will
equal ___% of the Pool Balance as of the first day of the related Due Period,
but in no event less than $___________. If, with respect to any Distribution
Date, (a) the average of the principal balance of Contracts 60 days or more
delinquent (including Contracts relating to Financed Boats that have been
repossessed) as a percentage of the Pool Balance for the three preceding Due
Periods exceeds ____% or (b) the average of the principal balances of all
Contracts which became Liquidated Contracts in the three preceding Due Periods,
less any Net Liquidation Proceeds on Liquidated Contracts, expressed as an
annualized percentage of the average outstanding Pool Balance of the three
preceding Due Periods exceeds ____%, then the Specified Reserve Amount with
respect to such Distribution Date shall be ____% of the Pool Balance as of the
first day of the related Due Period, but in no event (i) less than $___________
or (ii) greater than $__________. The
S-49
<PAGE>
Specified Reserve Amount shall never be greater than the sum of the aggregate
principal amount of the Notes and the outstanding Certificate Balance. The
Specified Reserve Amount may be reduced from time to time to amounts less than
the Specified Reserve Amount as described herein if the Rating Agencies shall
have given prior written notice to the Seller, the Servicer and the Issuer that
such reduction will not result in a downgrade or withdrawal of the then current
rating of the Notes or the Certificates. In several circumstances the Servicer
must determine on a Distribution Date the Specified Reserve Amount for the next
Distribution Date; in order to make the calculations required, the Servicer will
use the data for the three Due Periods preceding the Due Period related to such
next Distribution Date.
On each Distribution Date, the Indenture Trustee will withdraw (or cause
to be withdrawn) from the Reserve Account an amount equal to the amount by which
the Available Reserve Amount (after taking into account any deposits to and
withdrawals from the Reserve Account pursuant to the Sale and Servicing
Agreement on such Distribution Date) exceeds the Specified Reserve Amount for
the next Distribution Date and pay such amount to the Affiliated Owner. Any such
amounts paid to the Affiliated Owner will not be available for distribution to
Securityholders.
The sole source of funding for the Reserve Account will be the Excess
Collections, and the Excess Collections may not be sufficient to fund the
Reserve Account in an amount equal to the Specified Reserve Amount or to
replenish the Reserve Account after funds are withdrawn to make payments on the
Securities. Neither the Seller nor the Servicer will be obligated to deposit any
of their own funds into the Reserve Account in the event that the Excess
Collections are not sufficient to fund the Reserve Account in an amount equal to
the Specified Reserve Amount. Accordingly, the Distribution Date by which the
Reserve Account will be funded in an amount equal to the Specified Reserve
Amount for such Distribution Date cannot be predicted.
In the event that the Certificates are outstanding on the Certificate
Final Scheduled Distribution Date (after taking into account distributions on
such date), the Indenture Trustee will withdraw (or cause to be withdrawn) from
the Reserve Account an amount equal to the Certificate Balance, and will
distribute such amount to the Certificateholders to retire the Certificates, to
the extent funds are available therefor in the Reserve Account.
THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
Distributions
On each Determination Date, the Servicer will determine the amount in the
Collection Account available for distribution on the related Distribution Date
and inform the Indenture Trustee, who shall allocate such amounts between the
Notes and the Certificates and make distributions to Securityholders, all as
described below.
On each Distribution Date, the Indenture Trustee will withdraw the
Available Amount from the Collection Account to make the following payments (to
the extent sufficient funds are available therefor) in the following order:
(a) the Servicer Payment will (to the extent not previously retained by the
Servicer) be paid to the Servicer;
(b) on and prior to the Cross-Over Date, the Class A Noteholders' Interest
Distribution Amount will be deposited into the Note Distribution Account,
for payment to the Class A Noteholders for amounts due and unpaid on the
Class A Notes for interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on each class of the Class A
Notes for interest;
(c) on and prior to the Cross-Over Date, the Class B Noteholders' Interest
Distribution Amount will be deposited into the Note Distribution Account,
for payment to the Class B Noteholders for amounts due and unpaid on the
Class B Notes for interest, ratably, without
S-50
<PAGE>
preference or priority of any kind, according to the amounts due and
payable on the Class B Notes for interest;
(d) on and prior to the Cross-Over Date, the Class A Noteholders' Principal
Distribution Amount will be deposited into the Note Distribution Account,
for payment to the Class A Noteholders in the following order of priority:
(i) to the principal balance of the Class A-1 Notes until the principal
balance of the Class A-1 Notes is reduced to zero; (ii) to the principal
balance of the Class A-2 Notes until the principal balance of the Class A-2
Notes is reduced to zero; (iii) to the principal balance of the Class A-3
Notes until the principal balance of the Class A-3 Notes is reduced to
zero, (iv) to the principal balance of the Class A-4 Notes until the
principal balance of the Class A-4 Notes is reduced to zero; (v) to the
principal balance of the Class A-5 Notes until the principal balance of the
Class A-5 Notes is reduced to zero; (vi) to the principal balance of the
Class A-6 Notes until the principal balance of the Class A-6 Notes is
reduced to zero; and (vii) to the principal balance of the Class A-7 Notes
until the principal balance of the Class A-7 Notes is reduced to zero;
(e) on and prior to the Cross-Over Date, the Class B Noteholders' Principal
Distribution Amount will be deposited into the Note Distribution Account,
for payment to the Class B Noteholders until the principal balance of the
Class B Notes is reduced to zero;
(f) the Certificateholders' Interest Distribution Amount will be deposited
into the Certificate Distribution Account, for payment to the
Certificateholders for interest;
(g) on and after the Cross-Over Date, the Certificateholders' Principal
Distribution Amount will be deposited into the Certificate Distribution
Account, for payment to the Certificateholders for principal;
(h) if CITSF or one of its affiliates is the Servicer, the Servicing Fee
(including any unpaid Servicing Fees for past Distribution Dates) will (to
the extent not previously paid to the Servicer) be paid to the Servicer;
(i) the amount by which the Specified Reserve Amount for the next
Distribution Date exceeds the amount on deposit in the Reserve Account will
be deposited into the Reserve Account; and
(j) the balance, if any, will be distributed to the Affiliated Owner.
For purposes hereof, the following terms shall have the following
meanings:
The "Principal Distribution Amount" on each Distribution Date is equal to
the sum of the following amounts with respect to the related Due Period, in each
case calculated in accordance with the method specified in each Contract: (i)
all payments of principal (including all Principal Prepayments applied during
the related Due Period) made on each Contract during the related Due Period,
(ii) the Stated Principal Balance of each Contract which, as of the related
Deposit Date, was purchased by CITSF or the Servicer pursuant to the Sale and
Servicing Agreement, and (iii) the Stated Principal Balance of each Contract
which became a Liquidated Contract during the related Due Period; provided,
however, that (x) payments of principal (including Principal Prepayments) with
respect to a Liquidated Contract or a Repurchased Contract received after the
last day of the Due Period in which the Contract became a Liquidated Contract or
a Repurchased Contract shall not be included in the Principal Distribution
Amount, and (y) if a Liquidated Contract is purchased by CITSF or the Servicer
pursuant to the Sale and Servicing Agreement on the Deposit Date immediately
following the Due Period in which it became a Liquidated Contract, no amount
will be included with respect to such Contract in the Principal Distribution
Amount pursuant to clause (iii) of the definition thereof. The Principal
Distribution Amount on the Note Final Scheduled Distribution Date of a class
will equal the outstanding principal balance of such class of Notes as of such
date, and the Principal Distribution Amount on the Certificate Final Scheduled
Distribution Date will equal the Certificate Balance on such date. The Principal
Distribution Amount will not exceed the outstanding principal balance of the
Notes or, after the Cross-Over Date, the Certificate Balance (or, on the
Cross-Over Date, the sum of the principal balance of the Notes and the
Certificate Balance).
S-51
<PAGE>
The "Stated Principal Balance" of a Contract for any Due Period is its
unpaid principal balance at the end of the related Due Period, but without
giving effect to any adjustments due to bankruptcy or similar proceedings.
A "Liquidated Contract" is a defaulted Contract as to which the Servicer
has recovered all amounts that it expects to recover either by sale or
disposition of the related Financed Boat or otherwise, but in any event a
Contract shall be deemed to become a Liquidated Contract no later than the date
on which the Servicer has received proceeds from the sale or disposition of such
Financed Boat.
"Principal Prepayment" means a payment or other recovery of principal on a
Contract (including insurance proceeds and Net Liquidation Proceeds applied to
principal on a Contract) which is received in advance of its due date and
applied upon receipt to reduce the outstanding principal amount of such Contract
prior to the date or dates on which such principal amount is scheduled to be
paid.
"Net Liquidation Proceeds" means the monies collected (from whatever
source) during a Due Period on a Liquidated Contract, net of the sum of (a)
Liquidation Expenses, plus (b) any payments required by law to be remitted to
the Obligor.
"Liquidation Expenses" means all reasonable fees of third parties and
other expenses incurred by the Servicer in the course of converting any
defaulted Contract or Financed Boat into cash proceeds (including, without
limitation, expenses relating to recovery, repossession and sale of such
Financed Boat).
The "Available Amount" on any Distribution Date is equal to the excess of
(A) the sum of (i) all amounts on deposit in the Collection Account attributable
to collections or deposits made in respect of the Contracts (including any Late
Fees (as defined in the Prospectus)) in the related Due Period and (ii) the
Purchase Price for any Contract repurchased by CITSF as a result of breaches of
certain representations and warranties or purchased by the Servicer as a result
of breaches of certain covenants and any Monthly Advances made by the Servicer,
if such Purchase Price or Monthly Advance is paid on the Deposit Date
immediately preceding such Distribution Date, over (B) the sum of the following
amounts (to the extent that the Servicer has not already withheld such amounts
from collections on the Contracts): (i) any repossession profits on Liquidated
Contracts, Liquidation Expenses incurred and taxes and insurance advanced by the
Servicer in respect of Financed Boats that are reimbursable to the Servicer
under the Sale and Servicing Agreement, (ii) any amounts incorrectly deposited
in the Collection Account, (iii) net investment earnings on the funds in the
Collection Account, and (iv) any other amounts permitted to be withdrawn from
the Collection Account by the Servicer (or to be retained by the Servicer from
collections on the Contracts) pursuant to the Sale and Servicing Agreement.
The "Purchase Price" for any Contract will be the remaining principal
amount outstanding on such Contract on the date of repurchase, plus thirty days'
interest thereon at the Contract Rate plus the reimbursement then due to the
Servicer for outstanding Monthly Advances on such Contract.
"Certificateholders' Distribution Amount" means, for any Distribution Date,
the sum of the Certificateholders' Principal Distribution Amount and the
Certificateholders' Interest Distribution Amount.
"Certificateholders' Interest Carryover Shortfall" means, for any
Distribution Date, the excess of the Certificateholders' Interest Distribution
Amount for the preceding Distribution Date over the amount in respect of
interest at the Pass-Through Rate that was actually deposited into the
Certificate Distribution Account on such preceding Distribution Date, plus
interest on such excess, to the extent permitted by law, at the Pass-Through
Rate from and including such preceding Distribution Date to but excluding the
current Distribution Date.
"Certificateholders' Interest Distribution Amount" means, for any
Distribution Date, the sum of the Certificateholders' Monthly Interest Amount
for such Distribution Date and the Certificateholders' Interest Carryover
Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Amount" means, for any Distribution
Date, one month's interest (or, in the case of the first Distribution Date,
interest accrued from and including the Closing Date to but excluding such
Distribution Date) at the Pass-Through Rate on the Certificate Balance on such
Distribution
S-52
<PAGE>
Date (or, in the case of the first Distribution Date, the Original Certificate
Balance), before giving effect to all distributions of principal to the
Certificateholders on such Distribution Date.
"Certificateholders' Monthly Principal Amount" means, for any Distribution
Date prior to the Cross-Over Date, zero; and for any Distribution Date
commencing on and after the Cross-Over Date, 100% of the Principal Distribution
Amount (less the portion of the Principal Distribution Amount required on the
first such Distribution Date to pay the Notes in full).
"Certificateholders' Principal Carryover Shortfall" means, for any
Distribution Date, (a) the excess of (i) the Certificateholders' Principal
Distribution Amount for the preceding Distribution Date, over (ii) the amount in
respect of principal that was actually deposited into the Certificate
Distribution Account on such Distribution Date.
"Certificateholders' Principal Distribution Amount" means, for any
Distribution Date, the sum of (i) the Certificateholders' Monthly Principal
Amount for such Distribution Date and (ii) the Certificateholders' Principal
Carryover Shortfall for such Distribution Date; provided, that the
Certificateholders' Principal Distribution Amount shall not exceed the
Certificate Balance. In addition, on the Certificate Final Scheduled
Distribution Date, the amount required to be distributed to Certificateholders
will be the lesser of (a) any payments of principal due and remaining unpaid on
each Contract owned by the Trust as of the last day of the immediately preceding
Due Period plus any amounts on deposit in the Reserve Account, or (b) the amount
that is necessary (after giving effect to the other amounts to be deposited in
the Certificate Distribution Account on such Distribution Date and allocable to
principal) to reduce the Certificate Balance to zero.
"Noteholders' Distribution Amount" means, for any Distribution Date, the
sum of the Class A Noteholders' Principal Distribution Amount, the Class B
Noteholders' Principal Distribution Amount, the Class A Noteholders' Interest
Distribution Amount and the Class B Noteholders' Interest Distribution Amount.
"Class A Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date for each class of Class A Notes (other than the initial
Distribution Date), the excess of (i) the Class A Noteholders' Interest
Distribution Amount for the preceding Distribution Date for such class of Class
A Notes, over (ii) the amount in respect of interest that was actually deposited
into the Note Distribution Account in respect of such class of Class A Notes on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid to the Class A Noteholders of such class on the preceding
Distribution Date, to the extent permitted by law, at the applicable Interest
Rates borne by such class of Class A Notes.
"Class A Noteholders' Interest Distribution Amount" means, for any
Distribution Date for any class of Class A Notes, the sum of (x) the Class A
Noteholders' Monthly Interest Amount for such Distribution Date for such class
of Class A Notes and (y) the Class A Noteholders' Interest Carryover Shortfall
for such Distribution Date for such class of Class A Notes.
"Class A Noteholders' Monthly Interest Amount" means, for any Distribution
Date for any class of Class A Notes, interest accrued during the related
Interest Accrual Period at the applicable Interest Rate on the outstanding
principal balance of such class of Class A Notes on such Distribution Date (or,
in the case of the first Distribution Date, on the Closing Date) before giving
effect to all distributions of principal to the Class A Noteholders on such
Distribution Date, calculated on the basis of a 360-day year and (a) the actual
number of days elapsed, in the case of the Class A Notes and (b) twelve 30-day
months in the case of each other class of Class A Notes.
"Class A Noteholders' Monthly Principal Amount" means, for any
Distribution Date, prior to the Distribution Date on which the Class A Notes
have been paid in full, an amount equal to _____% of the Principal Distribution
Amount.
"Class A Noteholders' Principal Carryover Shortfall" means, for any
Distribution Date, the excess of (x) the Class A Noteholders' Principal
Distribution Amount for the preceding Distribution Date over (y) the amount in
respect of principal that was actually deposited into the Note Distribution
Account for the Class A Notes on such preceding Distribution Date.
S-53
<PAGE>
"Class A Noteholders' Principal Distribution Amount" means, for any
Distribution Date, the sum of (i) the Class A Noteholders' Monthly Principal
Amount for such Distribution Date and (ii) the Class A Noteholders' Principal
Carryover Shortfall for such Distribution Date; provided, that the Class A
Noteholders' Principal Distribution Amount shall not exceed the outstanding
principal balance of the Class A Notes. In addition, on the Note Final Scheduled
Distribution Date of each class of Class A Notes, the principal required to be
deposited in the Note Distribution Account will include the amount necessary
(after giving effect to other amounts to be deposited in the Note Distribution
Account on such Distribution Date and allocable to principal) to reduce the
outstanding principal balance of the related class of Class A Notes to zero.
"Class B Noteholders' Interest Carryover Shortfall" means, for any
Distribution Date for the Class B Notes (other than the initial Distribution
Date), the excess of (i) the Class B Noteholders' Interest Distribution Amount
for the preceding Distribution Date for the Class B Notes, over (ii) the amount
in respect of interest that was actually deposited into the Note Distribution
Account in respect of such Class B Notes on such preceding Distribution Date,
plus interest on the amount of interest due but not paid to the Class B
Noteholders on the preceding Distribution Date, to the extent permitted by law,
at the Class B Interest Rate.
"Class B Noteholders' Interest Distribution Amount" means, for any
Distribution Date for the Class B Notes, the sum of (x) the Class B Noteholders'
Monthly Interest Amount for such Distribution Date and (y) the Class B
Noteholders' Interest Carryover Shortfall for such Distribution Date.
"Class B Noteholders' Monthly Interest Amount" means, for any Distribution
Date for the Class B Notes, interest accrued during the related Interest Accrual
Period at the applicable Interest Rate on the outstanding principal balance of
the Class B Notes on such Distribution Date (or, in the case of the first
Distribution Date, on the Closing Date) before giving effect to all
distributions of principal to the Class B Noteholders on such Distribution Date.
"Class B Noteholders' Monthly Principal Amount" means, for any
Distribution Date, prior to the Distribution Date on which the Class A Notes
have been paid in full, an amount equal to _____% of the Principal Distribution
Amount, and on and after the Distribution Date on which the Class A Notes have
been paid in full, 100% of the Principal Distribution Amount (less the portion
of the Principal Distribution Amount required on the first such Distribution
Date to pay the Class A Notes in full).
"Class B Noteholders' Principal Carryover Shortfall" means, for any
Distribution Date, the excess of (x) the Class B Noteholders' Principal
Distribution Amount for the preceding Distribution Date over (y) the amount in
respect of principal that was actually deposited into the Note Distribution
Account for the Class B Notes on such preceding Distribution Date.
"Class B Noteholders' Principal Distribution Amount" means, for any
Distribution Date, the sum of (i) the Class B Noteholders' Monthly Principal
Amount for such Distribution Date and (ii) the Class B Noteholders' Principal
Carryover Shortfall for such Distribution Date; provided, that the Class B
Noteholders' Principal Distribution Amount shall not exceed the outstanding
principal balance of the Class B Notes. In addition, on the Class B Note Final
Scheduled Distribution Date, the principal required to be deposited in the Note
Distribution Account will include the amount necessary (after giving effect to
other amounts to be deposited in the Note Distribution Account on such
Distribution Date and allocable to principal) to reduce the outstanding
principal balance of the Class B Notes to zero.
To the extent that the Available Amount is insufficient to pay the
Certificateholders' Distribution Amount and the Noteholders' Distribution Amount
on any Distribution Date, the Indenture Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account, to the extent available, the excess of the
sum of the Certificateholders' Distribution Amount and the Noteholders'
Distribution Amount over the Available Amount remaining after payment of the
Servicer Payment. Any amount so withdrawn from the Reserve Account by or on
behalf of the Indenture Trustee will be deposited first into the Note
Distribution Account for distribution to the Noteholders in the same order of
priority as described above and second into the Certificate Distribution Account
for distribution to the Certificateholders in the same order of priority as
described above.
S-54
<PAGE>
The principal balance of the Class A-1 Notes, to the extent not previously
paid, will be due on the Class A-1 Note Final Scheduled Distribution Date; the
principal balance of the Class A-2 Notes, to the extent not previously paid,
will be due on the Class A-2 Note Final Scheduled Distribution Date; the
principal balance of the Class A-3 Notes, to the extent not previously paid,
will be due on the Class A-3 Note Final Scheduled Distribution Date; the
principal balance of the Class A-4 Notes, to the extent not previously paid,
will be due on the Class A-4 Note Final Scheduled Distribution Date; the
principal balance of the Class B Notes, to the extent not previously paid, will
be due on the Class B Note Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of any class of Notes is paid
may be earlier than the respective Note Final Scheduled Distribution Dates set
forth above based on a variety of factors, including those described under
"Maturity and Prepayment Considerations--Weighted Average Life of the
Securities" herein.
Modification of Contracts
Consistent with its customary servicing practices and procedures, the
Servicer may, in its discretion, arrange with an Obligor to defer, reschedule,
extend or modify the payment schedule of a Contract or otherwise to modify the
terms of a Contract provided that (i) the maturity of such Contract would not
extend beyond the 180th day prior to the Certificate Final Scheduled
Distribution Date and (ii) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sale contract or direct
loan. The Servicer may, in accordance with its customary servicing procedures,
in its good faith judgment, waive any Late Fees that may be due and payable
under any Contract. Notwithstanding the foregoing, in connection with the
settlement by the Servicer of a defaulted Contract, the Servicer may forgive a
portion of such Contract, if in its discretion it believes that the acceptance
of the settlement proceeds from the related Obligor would result in the Trust's
receiving a greater amount of collections than the Net Liquidation Proceeds that
would result from repossessing and liquidating the related Financed Boat.
Monthly Advances
With respect to each Contract as to which there has been a Payment
Shortfall during the related Due Period (other than a Payment Shortfall arising
from a Contract which has been prepaid in full or which has been subject to a
Relief Act reduction during the related Due Period), the Servicer shall advance
funds in the amount of such Payment Shortfall (each, a "Monthly Advance"), but
only to the extent that the Servicer, in its good faith judgment, expects to
recover such Monthly Advance from subsequent interest collections on such
Contract made by or on behalf of the Obligor thereunder, or from Net Liquidation
Proceeds or insurance proceeds with respect to such Contract. The Servicer shall
be reimbursed for any Monthly Advance from subsequent interest collections with
respect to such Contract. If the Servicer determines in its good faith judgment
that an unreimbursed Monthly Advance shall not ultimately be recoverable from
subsequent interest collections, the Servicer shall be reimbursed for such
Monthly Advance from collections on all Contracts. In determining whether an
advance is or will be nonrecoverable, the Servicer need not take into account
that it might receive any amounts in a deficiency judgment against an Obligor.
The Servicer will not make a Monthly Advance in respect of (i) the principal
component of any scheduled payment or (ii) a Payment Shortfall arising from a
Contract which has been prepaid in full or which has been subject to a Relief
Act Reduction during the related Due Period.
Non-Reimbursable Payments
The Servicer will not be obligated to make any Non-Reimbursable Payments
(as defined in the Prospectus).
Servicing Compensation
The Servicer will be entitled to receive, out of collections on the
Contracts, a monthly fee (the "Servicing Fee") for each Due Period, payable on
the following Distribution Date, equal to the sum of (i) one-twelfth of the
product of _____% (the "Servicing Fee Rate") and the Pool Balance as of the last
day of the second preceding Due Period (or, in the case of the first
Distribution Date, as of the Cut-off Date) and
S-55
<PAGE>
(ii) any investment earnings (net of investment expenses and losses) on amounts
on deposit in the Collection Account, the Note Distribution Account and the
Certificate Distribution Account; provided, however, if CITSF or an affiliate
thereof is not the Servicer, the Servicing Fee Rate shall be a rate determined
at the time of the appointment of a successor Servicer but not to exceed _____%.
If CITSF or one of its affiliates is the Servicer, the Servicing Fee (including
any unpaid Servicing Fees for past Distribution Dates) shall not be included in
the Servicer Payment but instead shall be payable to the Servicer on each
Distribution Date only from the Available Amount, if any, remaining after the
principal and interest payable on the Securities on such Distribution Date have
been paid.
Payment of Notes
Upon the payment in full of all outstanding Notes and the satisfaction and
discharge of the Indenture, the Owner Trustee will succeed to all the rights of
the Indenture Trustee, and the Certificateholders will succeed to all the rights
of the Noteholders under the Sale and Servicing Agreement, except as otherwise
provided therein.
Termination
In order to avoid excessive administrative expenses, CITSF will be
permitted at its option to purchase from the Trust, on any Distribution Date on
which the Pool Balance as of the last day of the related Due Period is __% or
less of the Initial Pool Balance, all remaining Contracts at a price equal to
the aggregate Purchase Price for the Contracts (including defaulted Contracts),
plus the appraised value of any other property held by the Trust (less
Liquidation Expenses) (the "Optional Purchase"). Exercise of such right will
effect early retirement of the Securities.
Within ten days after the first Distribution Date on which the Pool
Balance as of the last day of the related Due Period is __% or less of the
Initial Pool Balance, the Indenture Trustee (or, if the Notes have been paid in
full and the Indenture has been discharged in accordance with its terms, the
Owner Trustee) shall solicit bids for the purchase of the Contracts remaining in
the Trust (the "Auction Sale"). In the event that satisfactory bids are received
as described in the Prospectus, the net sale proceeds (after paying the Servicer
Payment) will be distributed to Securityholders on the second Distribution Date
succeeding such Due Period. Any purchaser of the Contracts must agree to the
continuation of CITSF as Servicer on terms substantially similar to those in the
Trust Documents. Any such sale will effect early retirement of the Securities.
See "The Certificates--Redemption," "The Notes--Redemption" and "The Purchase
Agreements and The Trust Documents--Termination" in the Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Certain Federal Tax Consequences with Respect to the Notes
Tax Characterization of the Notes and the Trust. Schulte Roth & Zabel LLP
has advised the Trust that, based on the terms of the Notes and the transactions
relating to the Contracts as set forth herein, the Notes will be treated as debt
for Federal income tax purposes. However, there is no specific authority with
respect to the characterization for Federal income tax purposes of securities
having the same terms as the Notes.
Schulte Roth & Zabel LLP is also of the opinion that, based on the
applicable provisions of the Trust Documents and related documents, for Federal
income tax purposes, (i) the Trust will not be classified as an association
taxable as a corporation and (ii) the Trust will not be treated as a publicly
traded partnership taxable as a corporation. If the IRS were to successfully
characterize the Trust as an entity taxable as a corporation for Federal income
tax purposes, the income from the Contracts (reduced by deductions, possibly
including interest on the Notes) would be subject to Federal income tax at
corporate rates, which could reduce the amounts available to make payments on
the Notes. Likewise, if the Trust were subject to state or local income or
franchise tax, the amount of cash available to make payment on the Notes could
be reduced.
S-56
<PAGE>
If, contrary to the opinion of Schulte Roth & Zabel LLP, the IRS
successfully asserted that the Notes were not debt for Federal income tax
purposes, the Notes might be treated as equity interests in the Trust. If so,
and if the Trust were taxable as a corporation with the adverse consequences
described above, the taxable corporation would not be able to deduct interest on
the Notes. The remainder of this discussion assumes that the Notes will be
treated as debt and that the Trust will not be taxable as a corporation.
Interest Income on the Notes. The stated interest on the Notes will be
taxable to a Noteholder as ordinary income when received or accrued in
accordance with such Noteholder's method of tax accounting. [Some or all of the
Notes may be issued with "original issue discount" within the meaning of Section
1273 of the Code ("OID"). The amount of OID on the Notes will equal the
difference between the issue price and the principal amount of the Notes unless
the OID is less then a statutorily defined de minimis amount.]
[OID will accrue to the Noteholders over the life of the Notes, taking
account of a reasonable prepayment assumption, based on a constant yield to
maturity method, using semi-annual compounding, and properly adjusted for actual
prepayments on the Contracts. The portion of OID that accrues during the time a
Noteholder owns the Notes (i) constitutes interest includable in the
Noteholder's gross income for federal income tax purposes and (ii) is added to
the Noteholder's tax basis for purposes of determining gain or loss on the
maturity, redemption, prior sale, or other disposition of the Notes. Thus, the
effect of OID is to increase the amount of taxable income above the actual
interest payments during the life of the Notes.]
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any [OID,] market discount and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of any bond premium previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Subject to the rules of the Code concerning market discount on the Notes,
any such gain or loss will be capital gain or loss if the Note was held as a
capital asset. Capital losses generally may be deducted to the extent the
Noteholder has capital gains for the taxable year, and non-corporate Noteholders
can deduct a limited amount of such losses in excess of available capital gains.
Foreign Holders. If interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other non-United States person (a
"foreign person") is not effectively connected with the conduct of a trade or
business within the United States by the foreign person, the interest generally
will be considered "portfolio interest," and generally will not be subject to
United States Federal income tax and withholding tax, if the foreign person (i)
is not actually or constructively a "10 percent shareholder" of the Trust (in
this case, a holder of 10% of the capital or profits of the Trust) nor a
"controlled foreign corporation" with respect to which the Trust or the
Affiliated Owner is a "related person" within the meaning of the Code and (ii)
provides the person otherwise required to withhold U.S. tax with an appropriate
statement, signed under penalties of perjury, certifying that the beneficial
owner of the Note is a foreign person and providing the foreign person's name
and address. If the information provided in the statement changes, the foreign
person must so inform the person otherwise required to withhold U.S. tax within
30 days of such change. The statement generally must be provided in the year a
payment occurs or in either of the two preceding years. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the withholding agent. However, in that case, unless, in the case of payments
made after December 31, 1998, the clearing organization or financial institution
is a foreign entity that has entered into a withholding agreement with the IRS,
the signed statement must be accompanied by a Form W-8 or substitute form
provided by the foreign person that owns the Note. If such interest is not
portfolio interest, then any payment of such interest will be subject to United
States Federal withholding tax at a rate of 30%, unless reduced or eliminated
pursuant to an applicable income tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States Federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign individual is not present in the United States for 183 days
or more in the taxable year or does not have a tax home in the United States.
S-57
<PAGE>
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person, the holder generally will be subject to United
States Federal income tax on the interest, gain or income at regular Federal
income tax rates. If a holder provides a Form 4224 indicating that interest,
gain or income is effectively connected with the conduct of a trade or business
in the United States, the interest, gain or income will be exempt from the
withholding tax previously discussed. In addition, if the foreign person is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its "effectively connected earnings and profits" within the meaning of the Code
for the taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable income tax treaty (as modified by the branch
profits tax rules).
Under recently issued Treasury Regulations that apply to payments made
after December 31, 1998, current IRS Forms W-8 and 4224 will be replaced by a
single form called Form W-8.
Information Reporting and Backup Withholding. The Trust will be required
to report annually to the IRS, and to each Noteholder of record, the amount of
interest paid on the Notes (and the amount [of accrued OID, if any, and
interest] withheld for Federal income taxes, if any) for each calendar year,
except as to exempt holders (generally, holders that are corporations,
tax-exempt organizations, qualified pension and profit-sharing trusts,
individual retirement accounts, or nonresident aliens who provide certification
as to their status as nonresidents). Accordingly, each holder (other than exempt
holders who are not subject to the reporting requirements) will be required to
provide, under penalties of perjury, a certificate containing the holder's name,
address, correct Federal taxpayer identification number and a statement that the
holder is not subject to backup withholding. Should a non-exempt Noteholder fail
to provide the required certification, the Trust will be required to withhold
31% of the amount otherwise payable to the holder, and remit the withheld amount
to the IRS as a credit against the holder's Federal income tax liability.
Certain Federal Tax Consequences with Respect to the Certificates
Tax Characterization of the Trust. The Affiliated Owner and the Servicer
have agreed, and the other Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of Federal income
tax, with the assets of the partnership being the assets held by the Trust, the
partners of the partnership being the Certificateholders and the Notes being
debt of the partnership. However, the proper characterization of the arrangement
involving the Trust, the Certificates, the Notes, the Affiliated Owner, and the
Servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
If the Trust were held to be taxable as a corporation for Federal income
tax purposes, rather than a partnership, the Trust would be subject to a
corporate level income tax. Any such corporate income tax could materially
reduce or eliminate cash that would otherwise be distributable with respect to
the Certificates (and Certificateholders could be liable for any such tax that
is unpaid by the Trust). See also the discussion above under "--Certain Federal
Tax Consequences with Respect to the Notes--Tax Characterization of the Notes
and the Trust." However, in the opinion of Schulte Roth & Zabel LLP, the Trust
will not be taxable as a corporation.
Nonetheless, because of the lack of cases or rulings on similar
transactions, a variety of alternative characterizations are possible in
addition to the position to be taken by Certificateholders that the Certificates
represent equity interests in a partnership. For example, because the
Certificates have certain features characteristic of debt, the Certificates
might be considered debt of the Trust or of the Seller. The remainder of this
summary assumes that the Certificates represent equity interests in a
partnership that owns the Contracts.
Partnership Taxation. As a partnership, the Trust will not be subject to
Federal income tax, but each Certificateholder will be required to separately
take into account such holder's allocated share of income, gains, losses,
deductions and credits of the Trust. In certain instances, however, the Trust
could have an obligation to make payments of withholding tax on behalf of a
Certificateholder. See "--Backup Withholding" and "--Tax Consequences to Foreign
Owners of Certificates." The Trust's income will consist primarily of interest
accrued on the Contracts (including appropriate adjustments for market discount
(as discussed below), and any original issue discount and bond premium),
investment income
S-58
<PAGE>
from investments in the Collection Account, Note Distribution Account, Reserve
Account and Certificate Distribution Account and any gain upon collection or
disposition of the Contracts. The Trust's deductions will consist primarily of
interest accruing with respect to the Notes, servicing and other fees and losses
or deductions upon collection or disposition of the Contracts.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and Related Documents). The Trust Agreement will provide that
the Certificateholders will be allocated taxable income, if any, of the Trust
for each interest accrual period equal to the sum of (i) the amount of any
interest that accrues on the Certificates for such interest accrual period based
on the Pass-Through Rate; (ii) an amount equivalent to any overdue interest on
the Certificates that accrued during a prior interest accrual period (to the
extent that no allocation of taxable income has previously been made for such
amount under clause (i) or this clause (ii)); and (iii) any Trust income
attributable to discount on the Contracts that corresponds to any excess of the
principal amount of the Certificates over their initial issue price. All
remaining taxable income of the Trust will be allocated to the Affiliated Owner.
It is believed that this allocation will be valid under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Certificateholders. Moreover, under
the foregoing method of allocation, holders may be allocated income greater than
the amount of interest accruing on the Certificates based on the Pass-Through
Rate or may be allocated income greater than the amount of cash distributed to
them.
An individual taxpayer may generally deduct miscellaneous itemized
deductions (which do not include interest expenses) only to the extent they
exceed two percent of the individual's adjusted gross income. Those limitations
would apply to an individual Certificateholder's share of expenses of the Trust
(including fees paid to the Servicer) and might result in such holder having net
taxable income that exceeds the amount of cash actually distributed to such
holder over the life of the Trust. In addition, Section 68 of the Code provides
that the amount of certain itemized deductions otherwise allowable for the
taxable year of an individual whose adjusted gross income exceeds an
inflation-adjusted threshold amount specified in the Code ($121,200 for taxable
years beginning in 1997, in the case of a joint return) will be reduced by the
lesser of (i) 3% of the excess of adjusted gross income over the specified
threshold amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each of the Contracts, the
Trust might be required to incur additional expense, but it is believed that
there would not be a material adverse effect on Certificateholders.
Market Discount. To the extent that the Contracts are purchased by the
Trust for a price that is less than the aggregate stated redemption price at
maturity of the Contracts, the Trust must account for "market discount" on the
Contracts pursuant to Section 1276 of the Code. Any market discount will be
accounted for each of the Contracts on an individual basis, and the Trust will
make an election to calculate such market discount as it economically accrues.
Any income resulting from the accrual of market discount will be allocated to
the Certificateholders as described above.
Original Issue Discount and Bond Premium. It is believed that the
Contracts were not and will not be issued with original issue discount or at a
premium, and, therefore, the Trust should not have original issue discount
income or amortizable bond premium.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of a Certificate in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificate sold.
A Certificateholder's tax basis in a Certificate will generally equal his cost
increased by his share of Trust income that is includable in his gross income
and decreased by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificate and the amount realized on a
sale of a Certificate would include the holder's share of the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a pro rata portion of such aggregate tax basis to the Certificates sold
(rather than maintaining a separate tax basis in each Certificate for purposes
of computing gain or loss on a sale of that Certificate).
S-59
<PAGE>
Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the Contracts would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid these
special reporting requirements, the Trust will elect to include any such market
discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed miscellaneous itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificates.
Allocations Between Transferor and Transferee. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect the tax liability and tax basis of the
holder) attributable to periods before the actual purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or is allowed only for
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Affiliated
Owner is authorized to revise the Trust's method of allocation between
transferors and transferees to conform to a method permitted by any future
authority.
Section 754 Election. In the event that a Certificateholder sells a
Certificate at a profit (or loss), the purchasing Certificateholder will have a
higher (or lower) basis in the Certificate than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust files an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such an election. As
a result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Servicer, on behalf of the Trust, is required
to keep or cause to be kept complete and accurate books of the Trust. Such books
will be maintained for financial reporting and tax purposes on an accrual basis
and the taxable year of the Trust will be the calendar year. The Affiliated
Owner will file a partnership information return (IRS Form 1065) with the IRS
for each taxable year of the Trust and will report to holders (and to the IRS)
each Certificateholder's allocable share of items of Trust income and expense on
Schedule K-1. The Trust will provide the Schedule K-1 information to nominees
that fail to provide the Trust with the information statement described below
and such nominees will be required to forward such information to the beneficial
owners of the Certificates. Generally, holders must file tax returns that are
consistent with the information returns filed by the Trust or be subject to
penalties unless the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee on behalf of another person at any time during a calendar year is
required to furnish the Trust with a statement containing certain information on
the nominee, the beneficial owners and the Certificates so held. Such
information includes (i) the name, address and taxpayer identification number of
the nominee and (ii) as to each beneficial owner (x) the name, address and
taxpayer identification number of such person, (y) whether such person is a
United States person, a tax-exempt entity or a foreign government, an
international organization, or any wholly-owned agency or instrumentality of
either of the foregoing and (z) certain information concerning Certificates that
were held, acquired or transferred on behalf of such person throughout the year.
In addition, brokers and financial institutions that hold Certificates through a
nominee are required to furnish directly to the Trust information as to
themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act that holds Certificates as a nominee is
not required to furnish any such information statement to the Trust. The
information referred to above for any calendar year must be furnished to the
Trust on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Trust with the information described
S-60
<PAGE>
above may be subject to penalties. The Trust will provide the Schedule K-1
information to nominees that fail to provide the Trust with the information
described above and such nominees will be required to forward such information
to the beneficial owners of the Certificates.
The Affiliated Owner, as the "tax matters partner," will be responsible
for representing the Certificateholders in any dispute with the IRS with respect
to partnership items. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the Trust
by the appropriate taxing authorities could result in an adjustment of the
returns of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Trust. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related to
the income and losses of the Trust.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates may be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
Tax Consequences to Foreign Owners of Certificates. As discussed below, an
investment in a Certificate is not suitable for any non-U.S. person which is not
eligible for a complete exemption from U.S. withholding tax on interest under a
tax treaty with the United States. Accordingly, no interest in a Certificate
should be acquired by or on behalf of any such non-U.S. person.
No regulations, published rulings or judicial decisions exist that would
discuss the characterization for Federal withholding tax purposes with respect
to non-U.S. persons of a partnership with activities substantially the same as
the Trust. However, it is not expected that the Trust would be considered to be
engaged in a trade or business in the United States for purposes of Federal
withholding taxes with respect to non-U.S. persons. If the Trust were considered
to be engaged in a trade or business in the United States for such purposes, the
income of the Trust allocable to a non-U.S. person would be subject to Federal
withholding tax at a rate of 35% for persons taxable as a corporation and 39.6%
for all other non-U.S. persons. Also, in such cases, a non-U.S. owner of a
Certificate that is a corporation may be subject to the branch profits tax. If
the Trust is notified that an owner of a Certificate is a foreign person, the
Trust may withhold as if it were engaged in a trade or business in the United
States in order to protect the Trust from possible adverse consequences of a
failure to withhold. Subsequent adoption of Treasury regulations or the issuance
of other administrative pronouncements may require the Trust to change its
withholding procedures.
Each foreign owner of a Certificate might be required to file a U.S.
individual or corporate income tax return (including in the case of a
corporation, the branch profits tax) on its share of the Trust's income. Each
foreign owner of a Certificate must obtain a taxpayer identification number from
the IRS and submit that number to the withholding agent on Form W-8 in order to
assure appropriate crediting of any taxes withheld. A foreign owner of a
Certificate generally would be entitled to file with the IRS a claim for refund
with respect to withheld taxes, taking the position that no taxes were due
because the Trust was not engaged in a U.S. trade or business. However, interest
payments made to (or accrued by) an owner of a Certificate who is a foreign
person may be considered guaranteed payments to the extent such payments are
determined without regard to the income of the Trust and for that reason or
because of the nature of the Contracts, the interest will likely not be
considered "portfolio interest." As a result, even if the Trust is not
considered to be engaged in a U.S. trade or business, foreign owners of
Certificates will likely be subject to United States Federal income tax which
must be withheld at a rate of 30 percent on their share of the Trust's income
(without reduction for interest expense), unless reduced or eliminated pursuant
to an applicable income tax treaty. If the Trust is notified that an owner of a
Certificate is a foreign person, the Trust may be required to withhold and pay
over such tax, which can exceed the amounts otherwise available for distribution
to such owner. A foreign owner would generally be entitled to file with the IRS
a refund claim for such withheld taxes, taking the position that the interest
was portfolio interest and therefore not subject to U.S. tax. However, the IRS
may disagree and no assurance can be given as to the appropriate amount of tax
liability. As a result, each potential foreign owner of a Certificate should
consult its tax advisor as to whether the tax consequences of holding an
interest in a Certificate make it an
S-61
<PAGE>
unsuitable investment. For additional information concerning proposed
regulations which would modify the procedures that a beneficial owner of a
Certificate must comply with to avoid United States withholding tax on payments
to such owner, see the discussion above under "Certain Federal Tax Consequences
with Respect to the Notes--Foreign Holders."
CERTAIN STATE TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and
collecting the Contracts will take place in Oklahoma. The State of Oklahoma
imposes a state income tax on individuals, nonresident aliens (with respect to
Oklahoma taxable income), corporations, certain foreign corporations, and trusts
and estates with Oklahoma taxable income. No ruling on any of the issues
discussed below will be sought from the Oklahoma Tax Commission.
Because of the variation in each state's tax laws based in whole or in
part upon income, it is impossible to predict tax consequences to holders of
Notes and Certificates in all of the state taxing jurisdictions in which they
are already subject to tax. Noteholders and Certificateholders are urged to
consult their own tax advisors with respect to state tax consequences arising
out of the purchase, ownership and disposition of Notes and Certificates.
Tax Consequences With Respect to the Notes
Crowe & Dunlevy, P.C., Oklahoma Tax Counsel to the Seller ("Oklahoma Tax
Counsel") will advise the Trust that, assuming the Notes will be treated as debt
for federal income tax purposes, the Notes will be treated as debt for Oklahoma
income tax purposes, and the Noteholders not otherwise subject to taxation in
Oklahoma should not become subject to taxation in Oklahoma solely because of a
holder's ownership of Notes. However, a Noteholder already subject to Oklahoma's
income tax could be required to pay additional Oklahoma tax as a result of the
holder's ownership or disposition of Notes.
Tax Consequences With Respect to the Certificates Issued by a Trust Treated as a
Partnership
Oklahoma Tax Counsel will deliver its opinion that if the arrangement
created by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for federal income tax purposes, the same treatment should also
apply for Oklahoma income tax purposes.
Under current law, Certificateholders that are nonresidents of Oklahoma
and are not otherwise subject to Oklahoma income tax should not be subject to
Oklahoma income tax on the income from the Trust because it is unlikely that the
Trust has established a nonunitary business or commercial situs in Oklahoma. In
any event, classification of the arrangement as a "partnership" would not cause
a Certificateholder not otherwise subject to taxation in Oklahoma to pay
Oklahoma income tax on income beyond that derived from the Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each, a "Benefit Plan"), from
engaging in certain transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to such
Benefit Plan. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such persons.
The Certificates
An interest in the Certificates may not be acquired by (i) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section
S-62
<PAGE>
4975(e)(1) of the Code, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity. Each Certificateholder
must represent and warrant that it is not subject to the foregoing limitation.
The Notes
The acquisition or holding of Notes by or on behalf of a Benefit Plan
could be considered to give rise to a prohibited transaction if the Seller, the
Trust or any of their respective affiliates is or becomes a party in interest or
a disqualified person with respect to such Benefit Plan. Certain exemptions from
the prohibited transaction rules could be applicable to the purchase and holding
of Notes by a Benefit Plan depending on the type and circumstances of the plan
fiduciary making the decision to acquire such Notes. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38 regarding
investments by bank collective investment funds; PTCE 95-60 regarding
investments by life insurance company general accounts; PTCE 96-23 regarding
transactions effected by "in-house asset managers"; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers." Any purchaser
or holder of the Notes will be deemed to have represented by its purchase and
holding thereof that it either (a) is not a Benefit Plan and is not purchasing
such Notes on behalf of or with plan assets of any Benefit Plan or (b) is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1
or 84-14 with respect to such purchase or holding.
A plan fiduciary considering the purchase of the Notes should consult its
tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") among CITSF, the Company and
[underwriters] (the "Underwriters"), the Company has agreed to sell to the
Underwriters, and the Underwriters have severally agreed to purchase, the
respective principal amount of the Certificates and the Notes offered hereby, as
set forth opposite their respective names below:
Class A-1 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-2 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
S-63
<PAGE>
Class A-3 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-4 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-5 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-6 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class A-7 Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
Class B Notes
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
S-64
<PAGE>
Certificates
Principal Amount
----------------
___________............................. $
___________............................. $
___________............................. $
--------
Total............................ $
========
The Underwriting Agreement provides that the obligation of the
Underwriters to pay for and accept delivery of the Certificates or Notes is
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
Certificates and Notes if any are taken.
The Underwriters have advised the Company that they propose to offer the
Certificates and Notes directly to the public at the public offering price set
forth on the cover page hereof and to certain dealers at a price that represents
a concession not in excess of ___% of the principal balance of the Certificates
and not in excess of ____% of the principal amount of the Class A-1 Notes, ___%
of the principal amount of the Class A-2 Notes, ____% of the principal amount of
the Class A-3 Notes, ____% of the principal amount of the Class A-4 Notes, ____%
of the principal amount of the Class A-5 Notes, ____% of the principal amount of
the Class A-6 Notes, ____% of the principal amount of the Class A-7 Notes and
____% of the principal amount of the Class B Notes. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of ____% of the
principal balance of the Certificates and not in excess of ___% of the principal
amount of the Class A-1 Notes, ____% of the principal amount of the Class A-2
Notes, ____% of the principal amount of the Class A-3 Notes, ____% of the
principal amount of the Class A-4 Notes, ____% of the principal amount of the
Class A-5 Notes, ____% of the principal amount of the Class A-6 Notes, ____% of
the principal amount of the Class A-7 Notes and ____% of the principal amount of
the Class B Notes to certain other dealers. After the initial public offering,
the public offering price and concessions and discounts to dealers may be
changed by the Underwriters.
CITSF has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act or to
contribute to payments which the Underwriters may be required to make in respect
thereof.
The Trust may, from time to time, invest the funds of the Trust in
Eligible Investments acquired from the Underwriters.
The closing of the sale of the Notes is conditioned on the closing of the
sale of the Certificates, and the closing of the sale of the Certificates is
conditioned on the closing of the sale of the Notes.
RATINGS
It is a condition to the issuance of the Class A Notes that the Class
A-1 Notes be rated "A-1+" by Standard & Poor's Ratings Service, a division of
The McGraw-Hill Companies, Inc. ("S&P") and "P-1" by Moody's Investors Service,
Inc. ("Moody's") (each, a "Rating Agency") and that the Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes, Class A-5 Notes, Class A-6 Notes and the Class A-7
Notes be rated "AAA" by S&P and "Aaa" by Moody's . It is a condition to the
issuance of the Class B Notes that the Class B Notes be rated at least "A" by
S&P and "A2" by Moody's. It is a condition to the issuance of the Certificates
that the Certificates be rated at least "BBB" by S&P and "Baa2" by Moody's. The
ratings of the Class A Notes will be based primarily on the Contracts, the
Reserve Account, and the terms of the Securities, including the subordination
provided by the Class B Notes and the Certificates. The ratings of the Class B
Notes will be based primarily on the Contracts, the Reserve Account and the
terms of the Securities, including the subordination provided by the
Certificates. The ratings of the Certificates will be based primarily on the
Contracts and the Reserve Account. The ratings of the Securities should be
evaluated independently from similar ratings on other types of securities. The
ratings do not address the possibility that Securityholders may suffer a lower
than anticipated yield. The ratings do not address the likelihood that the
Securities will
S-65
<PAGE>
be retired following the sale of the Contracts by the Trustee as described above
under "Auction Sale" or "Optional Purchase of the Contracts."
There can be no assurance that any rating will remain in effect for any
given period of time or that a rating will not be lowered or withdrawn by the
assigning Rating Agency if, in its judgment, circumstances so warrant. In the
event that the rating initially assigned to any of the Securities is
subsequently lowered or withdrawn for any reason, no person or entity will be
obligated to provide any additional credit enhancement with respect to such
Securities. There can be no assurance whether any other rating agency will rate
any of the Securities, or if one does, what rating would be assigned by any such
other rating agency. A security rating is not a recommendation to buy, sell or
hold securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth
& Zabel LLP, New York, New York, for the Trust by ____________________,
____________________, and for the Underwriters by ____________________,
____________________. The material federal income tax consequences of the
Securities will be passed upon for the Company by Schulte Roth & Zabel LLP. The
material Oklahoma state income tax consequences of the Securities will be passed
upon for the Company by Crowe & Dunlevy, P.C. Certain legal matters will be
passed upon for CITSF by its Senior Vice President and General Counsel, Norman
H. Rosen, Esq.
S-66
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes of CIT
Marine Trust ____-_ (the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of DTC, Cedel or Euroclear. The Global Securities will be
tradable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against payment basis
through the respective Depositories of Cedel and Euroclear (in such capacity)
and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their Participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name
of Cede as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective Depositories,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriters. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global securities
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to insure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
S-67
<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 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.
S-68
<PAGE>
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(i) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(ii) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their Cedel or
Euroclear account in order to settle the sale side of the trade; or
(iii) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC Participant is
at least one day prior to the value date for the sale to the Cedel
Participant or Euroclear Participant.
Certain U.S. Federal Withholding Taxes and Documentation Requirements
A beneficial owner of Global Securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. Persons,
unless (i) each clearing system, bank or other financial institution that holds
customer's securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owners take one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of Global
Securities residing in a country that has a tax treaty with the United States
can obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides for a reduced rate, withholding tax will be imposed at that rate
unless the filer alternatively files Form W-8. Form 1001 may be filed by the
Noteholder or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of a Global
Securities or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
Treasury regulations issued on October 14, 1997, which will be applicable
to payments made after December 31, 1998 (with certain transition rules),
provide for the unification and simplification of certain
S-69
<PAGE>
current certification procedures. Under these regulations, a new Form W-8 will
replace current Forms W-8, 1001 and 4224. Further, pursuant to the new
regulations, while a beneficial owner will still be required to submit a Form
W-8 to a "qualified intermediary" through which it holds a Global Security, such
qualified intermediary (i.e., a foreign clearing organization or financial
institution that enters into a withholding agreement with the IRS) generally
will not be required to forward the Form W-8 to the withholding agent. Investors
are urged to consult their own tax advisors with respect to the application of
these new regulations.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includable in gross income for United States tax
purposes, regardless of its source. This summary of documentation requirements
does not deal with all aspects of U.S. Federal income tax withholding that may
be relevant to foreign holders of the Global Securities. Investors are advised
to consult their own tax advisors for specific tax advice concerning their
holding and disposing of the Global Securities.
S-70
<PAGE>
INDEX OF PRINCIPAL TERMS
ABS...........................................................................36
ABS Table.....................................................................36
Affiliated Owner..............................................................51
Auction Sale..................................................................60
Available Amount...........................................................9, 56
Available Reserve Amount..................................................19, 53
Bankruptcy Code...............................................................24
Benefit Plan..................................................................67
Business Day...............................................................9, 46
Cedel...................................................................1, 6, 26
Certificate Balance.......................................................16, 41
Certificate Final Scheduled Distribution Date..............................8, 52
Certificate Pool Factor.......................................................41
Certificateholders' Distribution Amount.......................................56
Certificateholders' Interest Carryover Shortfall..............................56
Certificateholders' Interest Distribution Amount..............................57
Certificateholders' Monthly Interest Amount...................................57
Certificateholders' Monthly Principal Amount..................................57
Certificateholders' Principal Carryover Shortfall.............................57
Certificateholders' Principal Distribution Amount.............................57
Certificates............................................................1, 6, 50
CIT........................................................................5, 24
CITCF-NY...................................................................7, 24
CITSF......................................................................5, 24
Class A Noteholders' Interest Carryover Shortfall.............................57
Class A Noteholders' Interest Distribution Amount.............................57
Class A Noteholders' Monthly Interest Amount..................................57
Class A Noteholders' Monthly Principal Amount.................................58
Class A Noteholders' Principal Carryover Shortfall............................58
Class A Noteholders' Principal Distribution Amount........................14, 58
Class A Notes...........................................................1, 5, 46
Class A-1 Interest Rate...................................................10, 47
Class A-1 Note Final Scheduled Distribution Date...........................9, 48
Class A-1 Notes.........................................................1, 5, 46
Class A-2 Interest Rate...................................................10, 47
Class A-2 Note Final Scheduled Distribution Date...........................9, 48
Class A-2 Notes.........................................................1, 5, 46
Class A-3 Final Scheduled Distribution Date...................................48
Class A-3 Interest Rate...................................................10, 47
Class A-3 Note Final Scheduled Distribution Date...............................9
Class A-3 Notes.........................................................1, 5, 46
Class A-4 Final Scheduled Distribution Date...................................48
Class A-4 Interest Rate...................................................10, 47
Class A-4 Note Final Scheduled Distribution Date...............................9
Class A-4 Notes.........................................................1, 5, 46
Class A-5 Final Scheduled Distribution Date...................................49
Class A-5 Interest Rate...................................................10, 47
Class A-5 Note Final Scheduled Distribution Date...............................9
Class A-5 Notes.........................................................1, 5, 46
Class A-6 Final Scheduled Distribution Date...................................49
Class A-6 Interest Rate...................................................10, 47
Class A-6 Note Final Scheduled Distribution Date...............................9
Class A-6 Notes.........................................................1, 5, 46
Class A-7 Final Scheduled Distribution Date...................................49
Class A-7 Interest Rate...................................................10, 47
S-71
<PAGE>
Class A-7 Note Final Scheduled Distribution Date...............................9
Class A-7 Notes.........................................................1, 5, 46
Class B Final Scheduled Distribution Date.....................................49
Class B Interest Rate.....................................................10, 47
Class B Note Final Scheduled Distribution Date.................................9
Class B Noteholders' Interest Carryover Shortfall.............................58
Class B Noteholders' Interest Distribution Amount.............................58
Class B Noteholders' Monthly Interest Amount..................................58
Class B Noteholders' Monthly Principal Amount.................................58
Class B Noteholders' Principal Carryover Shortfall............................58
Class B Noteholders' Principal Distribution Amount........................14, 58
Class B Notes...........................................................1, 5, 46
Closing Date...................................................................7
Code..........................................................................23
Commission....................................................................46
Company.................................................................1, 5, 24
Contract Files................................................................28
Contract Pool.................................................................29
Contract Rate.................................................................30
Contracts...................................................................3, 7
Cross-Over Date...............................................................16
Cut-off Date................................................................3, 7
Dealers........................................................................7
Definitive Certificates....................................................7, 51
Deposit Date..................................................................27
Depository....................................................................26
Determination Date.............................................................9
Distribution Date.......................................................3, 8, 46
DTC........................................................................1, 26
Due Period.....................................................................9
ERISA.....................................................................23, 67
Euroclear...................................................................2, 6
Excess Collections........................................................19, 53
Financed Boats..............................................................3, 7
Global Securities.............................................................71
Indenture..................................................................6, 46
Indenture Trustee.......................................................1, 5, 46
Initial Pool Balance......................................................21, 52
Interest Accrual Period...................................................10, 47
Interest Rate..................................................................3
Interest Rates............................................................10, 47
Issuer..................................................................1, 5, 28
Liquidated Contract...........................................................56
Liquidation Expenses..........................................................56
Monthly Advance...........................................................20, 59
Moody's...................................................................22, 69
Net Liquidation Proceeds......................................................56
Net Losses....................................................................45
Note Owner................................................................26, 46
Note Owners....................................................................6
Note Pool Factor..............................................................41
Noteholders' Distribution Amount..............................................57
Notes...................................................................1, 5, 46
Obligor........................................................................8
OID...........................................................................61
Oklahoma Tax Counsel..........................................................66
Optional Purchase.............................................................60
Original Certificate Balance...............................................6, 28
S-72
<PAGE>
Owner Trustee...........................................................1, 5, 28
Paid-Ahead Period.............................................................35
Paid-Ahead Simple Interest Contract...........................................35
Pass-Through Rate......................................................3, 16, 51
Payment Shortfall.............................................................21
Pool Balance..................................................................34
Principal Distribution Amount.............................................13, 55
Principal Prepayment..........................................................56
Prospectus.....................................................................4
PTCE..........................................................................67
Purchase Agreement.........................................................8, 29
Purchase Price................................................................56
Rating Agency.............................................................22, 69
Record Date....................................................................8
Repurchase Event...............................................................7
Repurchased Contract...........................................................7
Reserve Account...........................................................18, 53
S&P...................................................................22, 26, 69
Sale and Servicing Agreement............................................3, 7, 29
Securities..............................................................1, 5, 46
Seller.........................................................................1
Servicer.......................................................................5
Servicer Payment..............................................................11
Servicing Fee.............................................................21, 60
Servicing Fee Rate........................................................21, 60
Simple Interest Contract......................................................30
Specified Reserve Amount......................................................19
Stated Principal Balance......................................................56
Trust...................................................................1, 5, 28
Trust Agreement........................................................5, 28, 50
Trustees.......................................................................5
Underwriters..................................................................67
Underwriting Agreement........................................................67
S-73
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION: DATED JANUARY 27, 1998
CIT MARINE TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
THE CIT GROUP/SALES FINANCING, INC., SERVICER
The Asset-Backed Certificates (the "Certificates") and the Asset-Backed
Notes (the "Notes" and, collectively with the Certificates, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on the terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each series of Securities will include either (i) one or more classes of
Certificates, (ii) one or more classes of Notes or (iii) one or more classes of
Certificates and one or more classes of Notes, as set forth in the related
Prospectus Supplement.
Each series of Securities will be issued by a trust (a "Trust") to be
formed with respect to such series by The CIT Group Securitization Corporation
II (the "Company" or the "Seller").
The assets of each Trust will primarily include a pool of marine
installment sale contracts and direct loans (the "Initial Contracts") secured by
the new and used boats, boat motors and boat trailers financed thereby (the
"Initial Financed Boats"), certain monies received under the Initial Contracts
on and after the Initial Cut-off Date specified in the related Prospectus
Supplement (the "Initial Cut-off Date"), an assignment of the security interests
in the Initial Financed Boats, the proceeds from claims under certain insurance
policies in respect of individual Initial Financed Boats or the related Obligors
and certain other property, as more fully described herein and in the related
Prospectus Supplement. In addition, if so specified in the related Prospectus
Supplement, the assets of each Trust will include specified credit or cash flow
enhancement and monies on deposit in one or more trust accounts, which may
include a Pre-Funding Account which would be used to purchase from time to time
additional marine installment sale contracts and direct loans (the "Subsequent
Contracts" and, together with the Initial Contracts, the "Contracts") secured by
the new and used boats, boat motors and boat trailers financed thereby (the
"Subsequent Financed Boats" and, together with the Initial Financed Boats, the
"Financed Boats"), certain monies received under the Subsequent Contracts on and
after the related subsequent cut-off dates (each, a "Subsequent Cut-off Date"),
an assignment of the security interests in the Subsequent Financed Boats and
proceeds from claims under certain insurance policies in respect of individual
Subsequent Financed Boats or the related Obligors, to the extent specified in
the related Prospectus Supplement.
(Continued on following page)
A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY CAN BE FOUND ON PAGE 23
HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THE SECURITIES WILL REPRESENT INTERESTS IN OR OBLIGATIONS OF A TRUST AND
WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE CIT GROUP SECURITIZATION
CORPORATION II, THE CIT GROUP/SALES FINANCING, INC., THE CIT GROUP, INC. OR ANY
OF THEIR RESPECTIVE
1
<PAGE>
AFFILIATES (EXCEPT TO THE LIMITED EXTENT, IF ANY, DESCRIBED HEREIN AND IN THE
RELATED PROSPECTUS SUPPLEMENT).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is _______, 1998.
2
<PAGE>
(continued from preceding page)
Each Trust will be formed pursuant to either (i) a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") to be entered into among the
Seller, The CIT Group/Sales Financing, Inc. (the "Servicer") and the trustee
specified in the related Prospectus Supplement (the "Trustee") or (ii) a Trust
Agreement (the "Trust Agreement") to be entered into among the Seller, the
trustee specified in the related Prospectus Supplement (the "Owner Trustee") and
certain other parties as specified in the related Prospectus Supplement. If the
Trust is formed pursuant to a Trust Agreement, a Sale and Servicing Agreement
(the "Sale and Servicing Agreement") will be entered into among the Seller, the
Servicer and such Owner Trustee. The Trustee or Owner Trustee for any Trust will
be referred to in this Prospectus as the "Owner Trustee." The Notes, if any, of
a series of Securities will be issued and secured pursuant to an Indenture (the
"Indenture") between the Trust and the indenture trustee specified in the
related Prospectus Supplement (the "Indenture Trustee"). The Certificates, if
any, of a series of Securities will represent fractional undivided interests in
the related Trust and/or the residual interest in the Trust.
Except as otherwise provided in the related Prospectus Supplement, each
class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related Contracts,
in the amounts, at the rates, on the dates and in the manner described herein
and in the related Prospectus Supplement. The right of each class of Securities
to receive payments may be senior or subordinate to the rights of one or more of
the other classes of such series. A series may include two or more classes of
Certificates or Notes which differ as to the timing and priority of payment,
interest rate or amount of distributions in respect of principal or interest or
both. A series may include one or more classes of Certificates or Notes entitled
to distributions in respect of principal, with disproportionate, nominal or no
interest distributions, or to distributions of interest, with disproportionate,
nominal or no distributions in respect of principal. Distributions on
Certificates of any series will be subordinated in priority to payments due on
the related Notes, if any, to the extent described herein and in the related
Prospectus Supplement.
The rate of distributions in respect of principal on the Securities of any
class will depend on the priority of payment of such class and the rate and
timing of payments (including prepayments, liquidations and repurchases of
Contracts) on the related Contracts.
If specified in the related Prospectus Supplement, a financial guaranty
insurance policy, letter of credit, surety bond, limited guarantee by The CIT
Group, Inc. ("CIT"), reserve fund, or other form of credit enhancement, or any
combination thereof, may be provided with respect to a Trust or any class of
Securities.
Unless otherwise provided in the related Prospectus Supplement, the
Certificates, if any, and the Notes, if any, of any series initially will be
represented by certificates and notes registered in the name of Cede & Co.
("Cede"), the nominee of The Depository Trust Company ("DTC"). The interests of
beneficial owners of the Securities will be represented by book entries on the
records of the participating members of DTC and, in the case of the Notes, Cedel
Bank, societe anonyme ("Cedel") and the Euroclear System ("Euroclear").
Definitive Securities will be available only under limited circumstances to the
extent described herein and in the related Prospectus Supplement.
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Underwriters expect, but are not obligated,
to make a market in the Securities. There is no assurance that any such market
will develop or, if one does develop, that it will continue or provide
sufficient liquidity.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") on behalf of each Trust a Registration Statement (together with
all amendments and exhibits thereto, the "Registration Statement"), of which
this Prospectus is a part, under the Securities Act of 1933, as amended, with
respect to the Securities offered pursuant to this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement, including exhibits filed as part thereof, which is
available for inspection without charge at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and the
regional offices of the Commission at Suite 1400 Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661, and Seven World Trade Center, New
York, New York 10048. Copies of such information can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Both registrants also file electronically. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's Web site is
http://www.sec.gov. Statements made in this Prospectus as to the contents of any
contract, agreement or other document filed as an exhibit to the Registration
Statement, while complete in all material respects, do not necessarily describe
all terms or provisions of such contract, agreement or other document. For a
complete description, reference is made to each such contract, agreement or
other document filed as an exhibit to the Registration Statement. The Servicer,
on behalf of each Trust, will also file or cause to be filed with the Commission
such periodic reports as are required under The Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder. However,
in accordance with the Exchange Act and the rules and regulations of the
Commission thereunder, the Company expects that each Trust's obligation to file
such reports will be terminated following the end of the year in which such
Trust is formed. Such reports and other information filed on behalf of each
Trust will be available for inspection as set forth above.
REPORTS TO SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, unless and
until Definitive Securities are issued, monthly and annual unaudited reports
containing information concerning each Trust will be prepared by the Servicer
and sent on behalf of each Trust only to the Owner Trustee for the
Certificateholders, the Indenture Trustee for the Noteholders and Cede, as
nominee of DTC and registered holder of the Notes and the Certificates.
Securityholders may elect to hold their securities through any of DTC (in the
United States) and, in the case of Noteholders, Cedel or Euroclear (in Europe).
DTC will forward such reports to Participants, Indirect Participants, Cedel
Participants and Euroclear Participants. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Statements to Securityholders."
Certificateholders and Noteholders are collectively referred to herein as the
"Securityholders." Certificate Owners or Note Owners may receive such reports,
upon written request, together with a certification that they are Certificate
Owners or Note Owners and payment of reproduction and postage expenses
associated with the distribution of such reports, from the Owner Trustee, with
respect to Certificate Owners, or the Indenture Trustee, with respect to Note
Owners, at the addresses specified in the related Prospectus Supplement. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Neither the Seller, the Servicer nor
CIT intends to send any of its financial statements to Securityholders.
4
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by CIT are incorporated
by reference in this Prospectus:
(a) CIT's Annual Report on Form 10-K for the year ended December 31,
1996 together with the report of KPMG Peat Marwick LLP, independent
certified public accountants;
(b) CIT's Quarterly Report on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997;
(c) CIT's Current Reports on Form 8-K dated January 23, 1997 (as
amended by a Form 8-K/A dated February 14, 1997), February 13, 1997, April
17, 1997, July 14, 1997, July 17, 1997, July 23, 1997, September 26, 1997,
October 14, 1997, November 12, 1997 and January 15, 1998; and
(d) CIT's Amendment No. 2 to the Registration Statement on Form S-2
(333-36435) filed on November 12, 1997.
All documents filed by CIT pursuant to Sections 13(a) and (c), 14, or 15(d)
of the Exchange Act after the date hereof and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
CIT WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON REQUEST, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS
DESCRIBED ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUEST SHOULD
BE DIRECTED TO:
CORPORATE SECRETARY
THE CIT GROUP, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 536-1950
5
<PAGE>
SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Securities contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of each
series of Securities. Certain capitalized terms used in the Summary are defined
elsewhere in this Prospectus and in the related Prospectus Supplement. Reference
is made to the "Index of Principal Terms" for the location herein of defined
terms.
- --------------------------------------------------------------------------------
Issuer.......................... With respect to each series of Securities, a
trust (the "Trust" or the "Issuer"), will be
formed by the Seller pursuant to either a
Pooling and Servicing Agreement among the
Seller, the Servicer and the trustee
specified in the related Prospectus
Supplement, or a Trust Agreement among the
Seller, the owner trustee specified in the
related Prospectus Supplement and certain
other parties as specified in the related
Prospectus Supplement.
Seller.......................... The CIT Group Securitization Corporation II
(the "Company" or the "Seller"), a
wholly-owned, limited purpose subsidiary of
The CIT Group, Inc. ("CIT"). If and to the
extent specified in the related Prospectus
Supplement, a trust of which a special
purpose affiliate of CIT is the depositor (a
"Selling Trust") may also be a "Seller."
Except if and to the extent specified in the
related Prospectus Supplement, neither CIT
nor any of its affiliates, including the
Company, The CIT Group/Sales Financing, Inc.
("CITSF") and any Selling Trust, has
guaranteed, insured or is otherwise
obligated with respect to the Securities.
See "Risk Factors--Limited Obligations."
Servicer........................ The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the
"Servicer"), a wholly-owned subsidiary of
CIT. The Servicer will be responsible for
managing, administering, servicing and making
collections on the Contracts held by each
Trust.
Owner Trustee................... The Trustee pursuant to a Pooling and
Servicing Agreement or the Owner Trustee
pursuant to a Trust Agreement, in each case
as specified in the related Prospectus
Supplement. The Trustee or Owner Trustee for
any Trust will be referred to in this
Prospectus as the "Owner Trustee." See "The
Trusts--The Trustee(s)."
Indenture Trustee............... With respect to any series of Securities
including one or more classes of Notes, the
Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture
Trustee"). The Owner Trustee and the
Indenture Trustee for a series are referred
to herein collectively as the "Trustees."
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Risk Factors................... Certain potential risks and other
considerations are particularly relevant to a
decision to invest in any securities sold
hereunder. See "Risk Factors."
The Certificates................ Each series of Asset-Backed Certificates (the
"Certificates") will be issued pursuant to
the related Trust Documents. The Certificates
will represent fractional undivided interests
in the related Trust and/or the residual
interest in the related Trust, and will have
the Original Certificate Balance, if any,
specified in the related Prospectus
Supplement. If specified in the related
Prospectus Supplement, the Company or one of
its affiliates will own the entire beneficial
interest in the Trust. See "The
Certificates--General."
Payments in respect of the Certificates will
be subordinated to payments on the Notes of
the same series to the extent described in
the related Prospectus Supplement. See "The
Certificates--General."
The Certificates will be issued in the
minimum denominations and integral multiples
in excess thereof specified in the related
Prospectus Supplement; provided, however,
that one Certificate of each series may be
issued in a denomination other than such
integral multiple such that the applicable
Affiliated Owner, if any, specified in the
related Prospectus Supplement (the
"Affiliated Owner") may be issued at least
the portion of the Original Certificate
Balance specified in the related Prospectus
Supplement. Unless otherwise specified in the
related Prospectus Supplement, the
Certificates will be issued in book-entry
form only. Unless otherwise specified in the
related Prospectus Supplement, persons
("Certificate Owners") acquiring beneficial
interests in the Certificates will hold their
interests through The Depository Trust
Company ("DTC"). Definitive Certificates will
be issued only under the limited
circumstances described herein or in the
related Prospectus Supplement. Unless and
until Certificates of a class are issued in
definitive form, all references herein to
distributions, notices, reports and
statements to and to actions by and effects
upon the related Certificateholders will
refer to the same actions and effects with
respect to DTC or Cede & Co. ("Cede"), as the
case may be, for the benefit of the related
Certificate Owners in accordance with the DTC
procedures. See "Certain Information
Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of
Certificates will have a stated
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Certificate Balance (as defined in the
related Prospectus Supplement) and will
accrue interest on such Certificate Balance
at a specified rate (with respect to each
class of Certificates, the "Pass-Through
Rate"). Each class of Certificates may have a
different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through
Rate, or any combination of the foregoing.
The related Prospectus Supplement will
specify the Pass-Through Rate for each class
of Certificates, or the initial Pass-Through
Rate and the method for determining
subsequent changes to the Pass-Through Rate.
A series may include two or more classes of
Certificates which differ as to timing of
distributions, sequential order, priority of
payment, seniority, allocation of losses,
Pass-Through Rate or amount of distributions
in respect of principal or interest, or as to
which distributions in respect of principal
or interest on any class may or may not be
made upon the occurrence of specified events
or on the basis of collections from
designated portions of the Contract Pool. In
addition, a series may include one or more
classes of Certificates ("Stripped
Certificates") entitled to (i) distributions
in respect of principal with
disproportionate, nominal or no interest
distributions, or (ii) interest
distributions, with disproportionate, nominal
or no distributions in respect of principal.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are
sold by the Indenture Trustee (or, if the
series did not include Notes or the Notes
have been paid in full and the Indenture has
been discharged in accordance with its terms,
the Owner Trustee) on the terms and
conditions described under "The Purchase
Agreements and the Trust
Documents--Termination," Certificate Owners
may receive an amount in respect of the
Certificates as specified in the related
Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that
the property of a Trust will include a
Pre-Funding Account (as such term is defined
in the related Prospectus Supplement, the
"Pre-Funding Account"), Certificate Owners
may receive a distribution in respect of
principal on or immediately following the end
of the funding period specified in the
related Prospectus Supplement (the "Funding
Period") in an amount and manner specified in
the related Prospectus Supplement.
The Notes....................... Each series of Asset-Backed Notes (the
"Notes" and, together with the Certificates,
the "Securities") will represent obligations
of a Trust secured by assets of such Trust
(other than the accounts or other property
specified in the related Prospectus
Supplement). See
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
"The Notes--General."
The Notes will be issued pursuant to an
Indenture between the Issuer and the
Indenture Trustee (the "Indenture"). See "The
Notes--General."
The Notes will be issued in the minimum
denominations and integral multiples in
excess thereof specified in the related
Prospectus Supplement; provided, however,
that one Note of each class of each series
may be issued in a denomination other than
such integral multiple. Unless otherwise
specified in the related Prospectus
Supplement, the Notes will be issued in
book-entry form only. Unless otherwise
specified in the related Prospectus
Supplement, persons ("Note Owners") acquiring
beneficial interests in the Notes will hold
their interests through DTC in the United
States or Cedel Bank, societe anonyme
("Cedel") or the Euroclear System
("Euroclear") in Europe, and Definitive Notes
will be issued only under the limited
circumstances described herein or in the
related Prospectus Supplement. Unless and
until Notes of a class are issued in
definitive form, all references herein to
distributions, notices, reports and
statements to and to actions by and effects
upon the related Noteholders will refer to
the same actions and effects with respect to
DTC or Cede, as the case may be, for the
benefit of the related Note Owners in
accordance with the DTC procedures. See
"Certain Information Regarding the
Securities--Book-Entry Registration" and
"--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes
will have a stated principal amount and will
bear interest at a specified rate or rates
(with respect to each class of Notes, the
"Interest Rate"). Each class of Notes may
have a different Interest Rate, which may be
a fixed, variable or adjustable Interest
Rate, or any combination of the foregoing.
The related Prospectus Supplement will
specify the Interest Rate and the method for
determining subsequent changes to the
Interest Rate.
A series may include two or more classes of
Notes which differ as to the timing and
priority of payment, seniority, allocations
of loss, Interest Rate or amount of payments
of principal or interest, or as to which
payments of principal may or may not be made
upon the occurrence of specified events or on
the basis of collections from designated
portions of the Contract Pool. In addition, a
series may include one or more classes of
Notes ("Stripped Notes") entitled to (i)
principal payments with disproportionate,
nominal or no interest payments or (ii)
interest payments with
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
disproportionate, nominal or no principal
payments.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are
sold by the Indenture Trustee (or, if the
series did not include Notes or the Notes
have been paid in full and the Indenture has
been discharged in accordance with its terms,
the Owner Trustee) on the terms and
conditions described under "The Purchase
Agreements and the Trust
Documents--Termination," the outstanding
Notes, if any, of such series will be
redeemed as set forth in the related
Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that
the property of a Trust will include a
Pre-Funding Account, all or certain classes
of the outstanding Notes, if any, of such
series will be subject to partial redemption
on or immediately following the end of the
Funding Period in an amount and manner
specified in the related Prospectus
Supplement.
Property of a Trust............ The property of a Trust will primarily
include (i) a pool (the "Contract Pool") of
marine installment sale contracts and direct
loans (the "Initial Contracts") secured by
the new and used boats, boat motors and boat
trailers financed thereby (the "Initial
Financed Boats"), (ii) certain monies
received under the Initial Contracts on and
after the Initial Cut-off Date specified in
the related Prospectus Supplement (the
"Initial Cut-off Date"), (iii) an assignment
of the security interests in the Initial
Financed Boats, (iv) the Collection Account
and the Paid-Ahead Account, if any, including
all investments therein, all income from the
investment of funds therein and all proceeds
thereof, certain other accounts and the
proceeds thereof and certain other rights
under the Trust Documents specified in the
related Prospectus Supplement, and (v) the
proceeds from claims under certain insurance
policies in respect of individual Initial
Financed Boats or the related Obligors. In
addition, if so specified in the related
Prospectus Supplement, the property of a
Trust will include specified credit or cash
flow enhancement and monies on deposit in a
Pre-Funding Account to be established with
the Indenture Trustee or the Owner Trustee,
which will be used to purchase Subsequent
Contracts from the Seller from time to time
during the Funding Period, as well as any
Subsequent Contracts so purchased. See "The
Trust Property."
If and to the extent provided in the related
Prospectus Supplement, a Trust will be
obligated to purchase from the Seller
(subject to the satisfaction of certain
conditions described in the applicable Trust
Documents) from time to time during the
Funding Period, from
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
monies on deposit in the Pre-Funding Account,
additional marine installment sale contracts
and direct loans (the "Subsequent Contracts"
and, together with the Initial Contracts, the
"Contracts") secured by the new and used
boats, boat motors and boat trailers financed
thereby (the "Subsequent Financed Boats" and,
together with the Initial Financed Boats, the
"Financed Boats"), certain monies received
under the Subsequent Contracts on and after
the related Subsequent Cut-off Dates
(specified in the related Prospectus
Supplement), an assignment of the security
interests in the Subsequent Financed Boats,
and proceeds from claims under certain
insurance policies in respect of individual
Subsequent Financed Boats or the related
Obligors. It is expected that the Subsequent
Contracts will have an aggregate principal
balance approximately equal to the Pre-Funded
Amount on the related Closing Date.
CITSF will be obligated to repurchase
Contracts (a "Repurchased Contract") upon the
occurrence of certain breaches of
representations and warranties (a "Repurchase
Event"). See "The Purchase Agreements and the
Trust Documents--Sale and Assignment of the
Contracts" and "--Servicing Procedures."
The Contracts................... The property of a Trust will consist
primarily of marine installment sale
contracts for boats originated by boat
dealers ("Dealers") and acquired by CITSF or
The CIT Group/Consumer Finance, Inc. (NY)
("CITCF-NY") or other affiliates of CITSF and
marine loans originated directly by CITSF or
one of its affiliates or acquired by CITSF or
one of its affiliates from unaffiliated third
parties. On or prior to the date of issuance
of a series of the Securities (the "Closing
Date"), CITCF-NY will sell certain contracts
that will constitute a portion of the Initial
Contracts to CITSF pursuant to a purchase
agreement, and CITSF will sell the Initial
Contracts to the Company pursuant to a
purchase agreement (the "Purchase
Agreement"), and the Company (and, if and to
the extent specified in the related
Prospectus Supplement, a Selling Trust) will
sell the Initial Contracts to a Trust
pursuant to the Trust Documents. If and to
the extent specified in the related
Prospectus Supplement, CITSF or the Seller or
one of their respective affiliates may retain
the right to receive a portion of the
interest accruing on some or all of the
Contracts sold to a Trust. See "The Purchase
Agreements and the Trust Documents--Sale and
Assignment of the Contracts."
The Contracts will generally be prepayable at
any time without penalty to the purchaser of
the related Financed Boats, the borrower
under a loan contract or other
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
person or persons who are obligated to make
payments under the Contract (each, an
"Obligor"). The related Prospectus Supplement
will contain certain information with respect
to each Contract Pool as of the Initial
Cut-off Date or such other date specified
therein, including the proportions of each
type of Financed Boats, the weighted average
annual percentage rate and the weighted
average remaining maturity of the Contracts.
If and to the extent specified in the related
Prospectus Supplement, from time to time
during the Funding Period, CITSF will be
obligated to sell, and the Company will be
obligated to purchase, pursuant to a purchase
agreement (the "Subsequent Purchase
Agreement") subject to the satisfaction of
certain conditions described therein,
Subsequent Contracts at a purchase price
which, unless otherwise specified in the
related Prospectus Supplement, will be equal
to the aggregate principal amounts thereof as
of the first day in the related month of
transfer designated by CITSF and the Company
(each, a "Subsequent Cut-off Date"). A
portion of such Subsequent Contracts may be
acquired by CITSF from CITCF-NY or other
affiliates of CITSF. Pursuant to one or more
subsequent transfer agreements (each, a
"Subsequent Transfer Agreement") between the
Company and the related Trust, and subject to
the satisfaction of certain conditions
described therein, the Company will in turn
sell the Subsequent Contracts to such Trust
at a purchase price equal to the amount paid
by the Company to CITSF for such Subsequent
Contracts, which purchase price shall be paid
from monies on deposit in the Pre-Funding
Account. Subsequent Contracts will be
transferred from CITSF to the Company and
from the Company to such Trust on the
Business Day specified by CITSF and the
Company during the month in which the related
Subsequent Cut-off Date occurs (each, a
"Subsequent Transfer Date").
Pre-Funding Account............. If the Prospectus Supplement for a series of
Securities specifies that a portion of the
proceeds of the offering will be deposited in
a Pre-Funding Account, the Pre-Funding
Account will be maintained as an Eligible
Account, which account may be maintained with
the Owner Trustee or the Indenture Trustee,
and the funds on deposit therein will be
invested solely in Permitted Investments (as
defined in the related Prospectus Supplement)
that mature not later than one Business Day
prior to the next succeeding Distribution
Date, until such funds are applied during the
Funding Period to pay to the Company the
purchase price for Subsequent Contracts. See
"The Purchase Agreements and the Trust
Documents--Accounts." Monies on deposit in
the Pre-Funding Account will not be available
to cover losses on
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
or in respect of the Contracts.
On the Closing Date, the Pre-Funding Account
will be created with an initial deposit, from
the proceeds of the Securities, in the
amount, if any, specified in the related
Prospectus Supplement (the "Pre-Funded
Amount"). The Pre-Funded Amount will not
exceed one-third of the sum of the Original
Certificate Balance and the initial principal
amount of the Notes. Unless otherwise
specified in the related Prospectus
Supplement, the "Funding Period" will be the
period from the Closing Date until the
earliest to occur of (i) the date on which
the amount on deposit in the Pre-Funding
Account (exclusive of investment earnings) is
less than $100,000, (ii) the date on which an
Event of Default occurs under the Indenture
(if any), (iii) the date on which an Event of
Termination occurs under the Trust Documents,
(iv) the insolvency of the Company, CITSF,
CITCF-NY or CIT, or (v) the close of business
on the date specified in the related
Prospectus Supplement (which date will occur
in the third calendar month after the month
in which the Closing Date occurred). Unless
otherwise specified in the related Prospectus
Supplement, during the Funding Period, on one
or more Subsequent Transfer Dates, the
Pre-Funded Amount will be applied to purchase
Subsequent Contracts from the Company. Unless
otherwise specified in the related Prospectus
Supplement, the Company expects that the
Pre-Funded Amount will be reduced to less
than $100,000 by the end of the Funding
Period, although no assurance can be given
that this will in fact occur. Unless
otherwise specified in the related Prospectus
Supplement, any portion of the Pre-Funded
Amount remaining on deposit in the
Pre-Funding Account at the end of the Funding
Period will be payable as principal to
Noteholders and Certificateholders in
accordance with the Pre-Funded Percentage on
the first Distribution Date thereafter or, if
the end of the Funding Period is on a
Distribution Date, then on such date.
Capitalized Interest Account.... If the Prospectus Supplement for a series of
Securities specifies that a portion of the
proceeds of the offering will be deposited in
a Capitalized Interest Account, on the
Closing Date a portion of the proceeds from
the sale of the Securities (in an amount
specified in the related Prospectus
Supplement) will be deposited into an account
(the "Capitalized Interest Account")
maintained as an Eligible Account, which
account may be maintained with the Owner
Trustee or the Indenture Trustee, and the
funds on deposit therein will be invested
solely in Permitted Investments that mature
no later than one Business Day prior to the
next Distribution Date. Amounts deposited in
the Capitalized
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Interest Account will be used on each
Distribution Date to pay interest on the
Securities, in the amount or in accordance
with the formula specified in the related
Prospectus Supplement. Monies on deposit in
the Capitalized Interest Account will not be
available to cover losses on or in respect of
the Contracts.
On each Distribution Date any amount
remaining in the Capitalized Interest Account
in excess of the Required Capitalized
Interest Amount (as defined in the related
Prospectus Supplement) shall be released to
the Affiliated Owner, if any, or other person
specified in the related Prospectus
Supplement. Unless otherwise specified in the
related Prospectus Supplement, any amounts
remaining in the Capitalized Interest Account
on the last day of the Funding Period and not
used for such purposes will be deposited in
the Collection Account and will be available
for distributions, as described herein or in
the related Prospectus Supplement, on the
first Distribution Date thereafter or, if the
end of the Funding Period is on a
Distribution Date, then on such date.
Distribution Dates.............. Unless otherwise specified in the related
Prospectus Supplement, payments of interest
and principal on the Securities will be made
on the fifteenth day of each month or, if any
such day is not a Business Day, on the next
succeeding Business Day (each, a
"Distribution Date"), commencing on the date
specified in the related Prospectus
Supplement. Unless otherwise specified in the
related Prospectus Supplement, payments on
the Securities on each Distribution Date will
be made to the holders of record of the
related Securities at the close of business
on the Business Day immediately preceding
such Distribution Date or, in the event
Definitive Securities have been issued, at
the close of business on the last Business
Day of the month immediately preceding the
month in which such Distribution Date occurs
(each, a "Record Date").
To the extent not previously paid in full
prior to such time, the outstanding principal
amount of the Notes and the Certificates will
be payable on the Distribution Date occurring
in the month or months specified in the
related Prospectus Supplement (the "Note
Final Scheduled Distribution Date" and the
"Certificate Final Scheduled Distribution
Date").
A "Business Day" is any day other than a
Saturday, Sunday or any day on which banking
institutions or trust companies in the states
of New York, Oklahoma and such other states
(if any) specified in the related Prospectus
Supplement are authorized by law, regulation
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
or executive order to be closed.
Interest Accrual Period......... Unless otherwise specified in the related
Prospectus Supplement, the period for which
interest is payable on a Distribution Date on
the Securities shall be the one-month period
from the most recent Distribution Date to but
excluding the following Distribution Date, or
in the case of the initial Distribution Date
from the date specified in the related
Prospectus Supplement to but excluding the
initial Distribution Date (each, an "Interest
Accrual Period").
Due Period...................... With respect to any Distribution Date, the
"Due Period" is the period during which
principal, interest and other amounts will be
collected on the Contracts for application
towards the payment of principal and interest
to the Securityholders and the payment of
fees on such Distribution Date. Unless
otherwise specified in the related Prospectus
Supplement, the "Due Period" will be the
calendar month immediately preceding the
Distribution Date.
Determination Date.............. Unless otherwise specified in the related
Prospectus Supplement, the "Determination
Date" is the third Business Day prior to each
Distribution Date. On each Determination
Date, the Servicer will determine the
Available Amount for distribution on the
related Distribution Date, allocate such
amounts between the Notes, the Certificates
and the Servicer Payment, and advise the
Trustees (or the paying agent appointed
pursuant to the Trust Documents) of the
amounts of the payments to be made to
Securityholders, all as described under "The
Purchase Agreements and the Trust
Documents--Distributions." The "Servicer
Payment" is equal on each Distribution Date
to the sum of the reimbursement then due to
the Servicer for outstanding Monthly Advances
and the Servicing Fee (including any unpaid
Servicing Fees for past Distribution Dates).
Unless otherwise specified in the related
Prospectus Supplement, the "Available Amount"
with respect to each Trust on any
Distribution Date is equal to the excess of
(A) the sum of (i) all amounts on deposit in
the Collection Account attributable to
collections or deposits made in respect of
such Contracts in the related Due Period
(including any late fees, prepayment charges,
extension fees or other administrative fees
or similar charges allowed by applicable law
with respect to the Contracts ("Late Fees"),
and (ii) the Purchase Price for any Contract
repurchased by CITSF as a result of breaches
of certain representations and warranties or
purchased by the Servicer as a result of
breaches of certain covenants and any Monthly
Advances and any
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Non-Reimbursable Payments made by the
Servicer, if such Purchase Price, Monthly
Advance or Non-Reimbursable Payment is paid
on or prior to the Deposit Date immediately
preceding such Distribution Date, over (B)
the sum of the following amounts (to the
extent that the Servicer has not already
withheld such amounts from collections on the
Contracts): (i) any repossession profits on
liquidated Contracts, Liquidation Expenses
(as defined in the Trust Documents) incurred
and taxes and insurance advanced by the
Servicer in respect of Financed Boats that
are reimbursable to the Servicer under the
Trust Documents, (ii) any amounts incorrectly
deposited in the Collection Account, (iii)
any amounts deposited in the Paid-Ahead
Account, if any, during the related Due
Period, (iv) net investment earnings on the
funds in the Collection Account and the
Paid-Ahead Account, if any, and (v) any other
amounts permitted to be withdrawn from the
Collection Account and the Paid-Ahead
Account, if any, by the Servicer (or to be
retained by the Servicer from collections on
the Contracts) pursuant to the Trust
Documents.
Subordination................... The rights of the Certificateholders to
receive distributions with respect to the
Contracts will be subordinated to the rights
of the Noteholders of the same series, to the
extent described in the related Prospectus
Supplement. This subordination is intended to
enhance the likelihood of timely receipt by
Noteholders of the full amount of interest
and principal required to be paid to them,
and to afford the Noteholders limited
protection against losses in respect of the
Contracts.
If and to the extent specified in the related
Prospectus Supplement, one or more classes of
Notes of a series may be subordinated to the
rights of one or more other classes of Notes
of the same series.
The protection afforded to the Noteholders by
the subordination feature described above
will be effected by the preferential right of
the Noteholders to receive, to the extent
described in the related Prospectus
Supplement, current distributions from
collections on or in respect of the Contracts
prior to the application of such collections
to payments in respect of the Certificates or
any subordinated Notes.
Enhancement..................... If and to the extent specified in the related
Prospectus Supplement with respect to a
Trust, the enhancement applicable to a class
of Securities may include any one or more of
the following: a financial guaranty insurance
policy, a letter of credit, a CIT Limited
Guarantee, a reserve fund, a third party
guarantee, a cash collateral account, a
derivative product, a credit facility, a
liquidity
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
facility, another form of credit enhancement,
overcollateralization, or any combination
thereof.
A financial guaranty insurance policy may be
obtained and maintained for one or more
classes of Certificates or Notes of a series
of Securities. Such policies generally
unconditionally and irrevocably guarantee to
Securityholders that the full amount of the
distributions of principal and interest, as
well as any other amounts specified in the
related Prospectus Supplement, will be
received by an agent of the Trustee on behalf
of Securityholders for distribution by the
Trustee to Securityholders. Such policies may
have certain limitations set forth in the
related Prospectus Supplement, including (but
not limited to) limitations on the insurer's
obligation to guarantee the Seller's or the
Servicer's obligation to repurchase or
substitute for any Contracts, to guarantee
any specified rate of prepayments or to
provide funds to redeem Securities on any
specified date.
The enhancement with respect to any class of
Securities may be structured to provide
protection against delinquencies and/or
losses on the Contracts, against changes in
interest rates, or other risks, or to
supplement the interest rate on specified
Contracts, in each case to the extent and
under the conditions specified in the related
Prospectus Supplement. Unless otherwise
specified in the related Prospectus
Supplement, any form of enhancement will have
certain limitations and exclusions from
coverage thereunder, which will be described
in the related Prospectus Supplement. Further
information regarding any provider of credit
enhancement, including financial information
when material, will be included (or
incorporated by reference) in the related
Prospectus Supplement. See "The
Certificates--Enhancement."
Monthly Advances................ Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Contract as to which there has been a Payment
Shortfall during the related Due Period, the
Servicer shall advance funds in the amount of
such Payment Shortfall (each, a "Monthly
Advance"), but only to the extent that the
Servicer, in its good faith judgment, expects
to recover such Monthly Advance from
subsequent collections on such Contract made
by or on behalf of the Obligor thereunder
(but only to the extent of expected interest
collections in the case of a Simple Interest
Contract) or from net liquidation proceeds or
insurance proceeds with respect to such
Contract. The Servicer shall be reimbursed
for any Monthly Advance from subsequent
collections with respect to such Contract. If
the Servicer determines in its
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
good faith judgment that an unreimbursed
Monthly Advance shall not ultimately be
recoverable from subsequent collections, the
Servicer shall be reimbursed for such Monthly
Advance from collections on all Contracts. In
determining whether an advance is or will be
nonrecoverable, the Servicer need not take
into account that it might receive any
amounts in a deficiency judgment against an
Obligor. Unless otherwise specified in the
related Prospectus Supplement, the Servicer
will not make a Monthly Advance in respect of
(i) the principal component of any scheduled
payment on a Simple Interest Contract, or
(ii) a Payment Shortfall arising from a
Contract which has been prepaid in full or
which has been subject to a Relief Act
Reduction during the related Due Period. See
"The Purchase Agreements and the Trust
Documents--Monthly Advances." Unless
otherwise specified in the related Prospectus
Supplement, "Payment Shortfall" means (i)
with respect to any Simple Interest Contract
and any Distribution Date, the excess of (A)
the product of (1) one-twelfth of the
Contract Rate of such Contract and (2) the
outstanding principal amount of such Contract
as of the last day of the second preceding
Due Period (or, in the case of the first Due
Period ending after the Contract was acquired
by the related Trust, as of the Initial
Cut-off Date or the Subsequent Cut-off Date,
as the case may be), over (B) the amount of
interest, if any, collected on such Contract
during the related Due Period and (ii) with
respect to any Precomputed Contract and any
Distribution Date, the excess of (A) the
scheduled payment due on such Contract during
the related Due Period, over (B) the amount
collected on such Contract (including any
amounts allocated from the Paid-Ahead Account
with respect to such Due Period) during the
related Due Period.
Non-Reimbursable Payments....... If and to the extent specified in the related
Prospectus Supplement, with respect to each
Contract as to which there has been a Payment
Shortfall with respect to interest in the
related Due Period arising from either a
prepayment in full of such Contract or a
Relief Act Reduction in respect of such
Contract during such Due Period, the Trust
Documents may require the Servicer to deposit
into the Collection Account on the Business
Day immediately preceding the following
Distribution Date, without the right of
subsequent reimbursement, an amount equal to
such Payment Shortfall (a "Non-Reimbursable
Payment"). If the related Prospectus
Supplement does not specify that the Servicer
will make Non-Reimbursable Payments, the
Servicer will not be obligated to make such
payments with respect to the Trust.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Paid-Ahead Account.............. Early payments by or on behalf of Obligors on
Precomputed Contracts that do not constitute
scheduled payments, full prepayments or
certain partial prepayments which result in a
reduction of an Obligor's periodic payment
below the scheduled payment as of the Initial
Cut-off Date or Subsequent Cut-off Date, as
the case may be, will be deposited into the
Paid-Ahead Account until such time as the
paid-ahead amount becomes due. See "The
Contract Pool" and "The Purchase Agreements
and the Trust Documents--Paid-Ahead
Precomputed Contracts."
Servicing Fees.................. Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, the Servicer shall
receive a monthly fee (the "Servicing Fee"),
payable on each Distribution Date, equal to
the sum of (i) one-twelfth of the product of
the percentage specified in the related
Prospectus Supplement as the "Servicing Fee
Rate" and the Pool Balance as of the last day
of the second preceding Due Period (or, in
the case of the first Distribution Date, as
of the Initial Cut-off Date) and (ii) any
investment earnings on amounts on deposit in
the Collection Account, the Paid-Ahead
Account, if any, the Certificate Distribution
Account, if any, and the Note Distribution
Account, if any; provided, however, that the
Servicing Fee Rate applicable to a Trust may
be increased to a rate (or maximum rate)
specified in the related Prospectus
Supplement if CITSF or an affiliate thereof
is not the Servicer. See "The Purchase
Agreements and the Trust Documents--Servicing
Compensation."
Optional Purchase of the
Contracts .................... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, at its option, CITSF
may purchase all the Contracts in the related
Trust on any Distribution Date on which the
aggregate principal balance of the Contracts
(the "Pool Balance") as of the last day of
the related Due Period is equal to or less
than a percentage specified in the related
Prospectus Supplement of the Initial Pool
Balance, at a purchase price determined as
described under "The Purchase Agreements and
the Trust Documents--Termination." Unless
otherwise specified in the related Prospectus
Supplement, the "Initial Pool Balance" equals
the sum of (i) the Pool Balance as of the
Initial Cut-off Date and (ii) the aggregate
principal balance of all Subsequent Contracts
added to the related Trust as of their
respective Subsequent Cut-off Dates.
Auction Sale.................... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
series of Securities, within ten days after
the first Distribution Date on which
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
the Pool Balance as of the last day of the
related Due Period is equal to or less than a
percentage specified in the related
Prospectus Supplement of the Initial Pool
Balance, the Indenture Trustee (or, if the
series did not include Notes or the Notes
have been paid in full and the Indenture has
been discharged in accordance with its terms,
the Owner Trustee) shall solicit bids for the
purchase of the Contracts remaining in the
related Trust. In the event that satisfactory
bids are received as described in "The
Purchase Agreements and the Trust
Documents--Termination," the net sale
proceeds will be distributed to
Securityholders, in the same order of
priority as collections received in respect
of the Contracts, on the second Distribution
Date succeeding such Due Period. If
satisfactory bids are not received, such
Trustee shall decline to sell the Contracts
and shall not be under any obligation to
solicit any further bids or otherwise
negotiate any further sale of the Contracts.
See "The Purchase Agreements and the Trust
Documents--Termination."
Ratings......................... As a condition of issuance, the Securities of
each series offered pursuant to this
Prospectus will be rated in one of the four
highest rating categories by at least one
nationally recognized statistical rating
organization specified in the related
Prospectus Supplement (each, a "Rating
Agency"). The ratings of the Securities
should be evaluated independently from
similar ratings on other types of securities.
The ratings do not address the possibility
that Securityholders may suffer a lower than
anticipated yield. The ratings do not address
the likelihood that the Securities will be
retired following the sale of the Contracts
by the Trustee as described above under
"--Auction Sale" or "--Optional Purchase of
the Contracts." See "Ratings."
There can be no assurance that any rating
will remain in effect for any given period of
time or that a rating will not be lowered or
withdrawn by the assigning Rating Agency if,
in its judgment, circumstances so warrant. In
the event that the rating initially assigned
to any of the Securities is subsequently
lowered or withdrawn for any reason, no
person or entity will be obligated to provide
any additional credit enhancement with
respect to such Securities. There can be no
assurance whether any other rating agency
will rate any of the Securities or, if one
does, what rating would be assigned by any
such other rating agency. A security rating
is not a recommendation to buy, sell or hold
securities.
Certain Federal Income Tax
Considerations .............. If the related Prospectus Supplement states
that a Trust will be treated as a grantor
trust, in the opinion of counsel to the
Seller, for federal income tax purposes,
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
the Trust will be treated as a grantor trust.
In such event, each Certificateholder, by
acceptance of a Certificate, will be treated
as the owner of an undivided interest in the
Contracts included in the Contract Pool and
any other assets held by the Trust.
If the related Prospectus Supplement does not
state that a Trust will be treated as a
grantor trust, in the opinion of counsel to
the Seller, for federal income tax purposes:
(1) the Notes will constitute indebtedness;
and (2) the Certificates will constitute
interests in a trust fund that will not be
treated as an association taxable as a
corporation (or a publicly traded
partnership). Each Noteholder, by acceptance
of a Note, will agree to treat the Notes as
indebtedness, and each Certificateholder, by
acceptance of a Certificate, will agree to
treat the Trust as a partnership in which the
Certificateholders are partners for federal
income tax purposes.
Alternative characterizations of the Notes
and the Certificates are possible, but would
not result in materially adverse tax
consequences to Noteholders or
Certificateholders. See "Certain Federal
Income Tax Consequences."
ERISA Considerations............ Fiduciaries of employee benefit plans subject
to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or plans
subject to Section 4975 of the Internal
Revenue Code of 1986 (the "Code") should
carefully review with their legal advisors
whether the purchase or holding of the
Certificates offered hereby could give rise
to a transaction prohibited or not otherwise
permissible under ERISA or the Code. See
"ERISA Considerations."
The related Prospectus Supplement will
provide further information with respect to
the eligibility of a class of Securities for
purchase by employee benefit plans. See
"ERISA Considerations" herein and in the
related Prospectus Supplement.
Subject to certain considerations discussed
under "ERISA Considerations" herein and in
the related Prospectus Supplement, and unless
otherwise specified in the related Prospectus
Supplement, the Securities will be eligible
for purchase by employee benefit plans that
are subject to ERISA.
Legal Investment................ The appropriate characterization of the
Certificates and the Notes under various
legal investment restrictions applicable to
the investment activities of certain
institutions, and thus the ability of
investors subject to these restrictions to
purchase the Certificates and the
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
22
<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"), any Affiliated Owner specified in the related
Prospectus Supplement, or any Servicer (including The CIT Group/Sales Financing,
Inc. ("CITSF")) or any of their respective affiliates. Unless and to the extent
otherwise specified in the related Prospectus Supplement, the Securities will
not be insured or guaranteed by any government agency or instrumentality, CIT or
any of its affiliates (including the Company, any Affiliated Owner, and CITSF),
the Underwriters or any of their affiliates, or any other Servicer or any of its
affiliates.
2. Risk of Loss. An investment in the Securities may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically have
affected the delinquency, loan loss and liquidation experience of pools of
marine installment sale contracts and direct loans secured by recreational
boats. Since the market value of boats generally declines with age and since in
certain states the Trustees may not have a first perfected security interest in
the Financed Boats, the Servicer may not recover the entire amount owing under a
defaulted Contract. See "Certain Legal Aspects of the Contracts." In such a
case, the Securityholders may suffer a corresponding loss. The market value of
the Financed Boats could be or could become lower than the outstanding principal
balances of the related Contracts. Sufficiently high liquidation losses on the
Contracts will have the effect of reducing, and could eliminate (a) the
protection against loss afforded to the Noteholders by the subordination of the
Certificates, if any, or by the Enhancement, if any, applicable to the Notes and
(b) the protection against loss afforded to the Certificateholders by the
Enhancement (as specified in the related Prospectus Supplement), if any. If the
amount available under the Enhancement, if any, is reduced to zero, holders of
the Certificates will bear the risk of loss resulting from default by Obligors
and will have to look primarily to the value of the related Financed Boats for
recovery of the outstanding principal and unpaid interest on the defaulted
Contracts. If the Certificate Balance is reduced to zero, the holders of the
Notes will bear the risk of loss resulting from default by Obligors and will
have to look primarily to the value of the related Financed Boats for recovery
of the outstanding principal and unpaid interest on the defaulted Contracts.
3. Security Interests and Certain Other Aspects of the Contracts. When
originated, each Contract was secured by a security interest in the Financed
Boat financed thereby. Each such security interest was required to be perfected
under applicable state law and, in the case of certain Financed Boats eligible
for federal documentation, under applicable federal law. In connection with the
sale of the Contracts to the Trust, the Seller will assign its security interest
in each Financed Boat to the Trust. However, due to administrative burden and
expense, none of the Seller, the Servicer or the Owner Trustee will amend the
certificates of title or file assignments of the UCC-1 financing statements, if
any, with respect to the Financed Boats to identify the Trust or the Indenture
Trustee as the new secured party, nor has any such amendment of filing been made
to identify any Selling Trust as a secured party. Neither of the Seller or the
Owner Trustee will file an assignment to the Trust or the Indenture Trustee of
the Preferred Mortgages with respect to any Financed Boats documented or to be
documented under federal law unless and to the extent provided in the related
Prospectus Supplement, nor has any such assignment of any Preferred Mortgages to
a Selling Trust has been filed. In addition, the certificates of title have not
and will not be amended and the UCC-1 financing statements have not and will not
be assigned with respect to the Financed Boats relating to the Contracts not
originated by the Seller to reflect any interim transfers of ownership of the
security interest in such Financed Boats. Furthermore, those Preferred Mortgages
that will be assigned to the Trust will not have been previously assigned to
reflect any interim transfers of ownership of the security interest in such
Financed Boats. In a majority of states, the assignment of a Contract together
with the related security interest is, as a matter of state law, an effective
conveyance of such security interest without amendment of any lien noted on the
related certificate of title or any assignment of any UCC-1 financing
statements, and the new owner of the Contracts succeeds to the original secured
party's rights in the related Financed Boat as against creditors of the Obligor.
In certain title states, in the absence of such certificate of title amendment
or assignment of record to reflect the successive assignments of the security
interest in such Financed Boat, the Seller (if not the secured party of record),
the Trust and/or the
23
<PAGE>
Indenture Trustee may not have a perfected security interest in the related
Financed Boat. Under the Ship Mortgage Act of 1920 (1988 Recodification) ss.
30101 et seq. (the "Ship Mortgage Statutes"), in the absence of an assignment of
record of a Preferred Mortgage, the assignment of the related Contract by itself
will not convey the perfected preferred mortgage lien on the Financed Boat
subject to such Preferred Mortgage, and neither the Seller (if not the secured
party of record) nor the Trust and/or the Indenture Trustee will have a
perfected preferred mortgage lien on such Financed Boat. The priority of the
Preferred Mortgages and state security interests in the Financed Boats may be
subject to: (i) maritime liens arising under federal statutory or common-law for
captain's or crew's wages, tort claims (so-called "general average" claims) and
salvage claims, all of which take priority over even a Preferred Mortgage or a
state security interest, and (ii) maritime liens arising under federal law or
state laws for repair, storage or supplies which are subordinate to a Preferred
Mortgage but typically have priority over state security interests under federal
law under applicable law of the state where the Contract was originated or under
applicable law of the state to which the related Financed Boats may have been
relocated.
CITSF will be obligated to repurchase any Contract as to which the Seller
has represented that the originator of such Contract has a first perfected
security interest in the Financed Boat securing such Contract if a breach of
such representation shall materially adversely affect the interest of the Trust
in such Contract. If the Trust does not have a perfected security interest in a
Financed Boat, it will not be effective as against third parties. In such case,
if third party liens equal or exceed the value of the Financed Boat, the only
recourse of the Trust would be against the related Obligor on an unsecured basis
or (if CITSF, CITCF-NY or, in those Contracts described above, the Trust did not
have a perfected security interest in such Financed Boat) against CITSF pursuant
to its repurchase obligation.
To the extent that the Trust's security interest in a Financed Boat is
perfected, the Trust will have a prior claim over subsequent purchasers of such
Financed Boat and holders of subsequently perfected security interests in such
Financed Boat. Under the laws of many states, certain possessory liens for
repairs on a boat and storage, as well as certain rights in favor of federal and
state governmental authorities arising from the use of a boat in connection with
illegal activities, may take priority even over a perfected security interest.
Under the Ship Mortgage Statutes, certain preferred maritime liens will have
priority over security interests in Financed Boats perfected under federal law.
Certain federal tax liens may have priority over the lien of a secured party. In
addition, through fraud or negligence, the Trust could lose its security
interest or the priority of its security interest in a Financed Boat. If a
security interest in a Financed Boat is initially perfected (by titling or UCC
filing) under applicable state law and the Financed Boat subsequently is
federally documented, the Trust could lose the priority of its security interest
in such Financed Boat to a purchaser thereof or to the holder of a subsequently
perfected Preferred Mortgage covering such Financed Boat. See "Certain Legal
Aspects of the Contracts--Security Interests in the Financed Boats" for a
description of CITSF's policies with respect to federal documentation. CITSF
shall not have an obligation to repurchase a Contract as to which any of the
aforementioned occurrences result in the Trust's losing the priority of its
security interest or its security interest in such Financed Boat after the date
such security interest was conveyed to the Trust (other than through fraud or
negligence of the Seller or the Servicer). See "Certain Legal Aspects of the
Contracts--Security Interests in the Financed Boats."
In addition, numerous federal and state consumer protection laws impose
requirements on sellers under marine installment sale contracts and marine
installment loan contracts or notes, such as the Contracts, and the failure by
the seller of goods to comply with such requirements could give rise to
liabilities of assignees for amounts due or paid under such agreements and the
right to set-off against claims by such assignees. These laws would apply to a
Trust as assignee of the Contracts. From time to time, CITSF has been involved
in litigation under consumer or debtor protection laws, some of which have been
class actions. The Trust is subject to the risk of similar litigation. With
respect to each series of Securities, pursuant to the Trust Documents, CITSF
will represent and warrant as of the Initial Cut-off Date with respect to each
Initial Contract, and as of the related Subsequent Cut-off Date with respect to
each Subsequent Contract, that each Contract complies with all requirements of
law and CITSF will provide certain warranties relating to the validity,
perfection and priority of the security interest in each Financed Boat securing
a Contract. A breach by CITSF of any such warranty that materially and adversely
affects the related Trust's interest in any Contract would require CITSF to
repurchase such Contract unless such breach is cured. If CITSF does not honor
its purchase obligation in respect of a Contract and the Obligor for such
Contract were to default, recovery of amounts due on such Contract would be
primarily dependent on repossession and resale of the Financed Boat securing
such Contract. Certain other factors may limit the ability of the
Securityholders to realize
24
<PAGE>
upon the Financed Boats or may limit the amount realized to less than the amount
due. See "Certain Legal Aspects of the Contracts."
Under California law and most state vehicle dealer licensing laws, sellers
of boats are required to be licensed to sell boats at retail sale. Numerous
other federal and state consumer protection laws impose requirements applicable
to the origination and assignment of marine installment sale contracts and
marine installment loan contracts or notes, including the Truth in Lending Act,
the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection
Practices Act and the Uniform Consumer Credit Code. In the case of some of these
laws, the failure to comply with the provisions of these laws may affect the
enforceability of the related Contract. A Trust and the Company may not have
obtained the licenses required under any federal or state consumer laws or
regulations, and the absence of such licenses may impede the enforcement of
certain rights or give rise to certain defenses in actions seeking enforcement
of such rights which may prevent a Trust from collecting amounts due under the
Contracts. See "Certain Legal Aspects of the Contracts."
Any shortfall in payments on or in respect of Contracts, or any liability
of a Trust to Obligors, as a result of noncompliance with the laws summarized
above and under "Certain Legal Aspects of the Contracts" could result in losses
to the Securityholders.
4. Foreclosure. Applicable law also imposes requirements and restrictions
relating to foreclosure sales of boats and on the obtaining of deficiency
judgments following such sales. Even if the Financed Boat securing a Contract is
successfully repossessed or arrested and sold, the full amount due on the
Contract may not be realized because of depreciation, damage or loss of or to
the Financed Boat and because the resale value of the Financed Boat may vary
significantly due to the limited market for used boats, seasonal factors and
other economic and social factors.
In sum, the Trust may not realize the full amount due on a Contract because
of (i) the failure to endorse the certificate of title, failure to file a UCC-1
financing statement or failure to record the assignment of the Preferred
Mortgage, as the case may be, (ii) the application of requirements and
restrictions on foreclosure and deficiency judgments, (iii) depreciation, damage
or loss of or to a Financed Boat, or (iv) the application of federal and state
bankruptcy and insolvency laws, or other factors. As a result, the
Securityholders will be subject to delays in payments and losses.
5. Certain Matters Relating to Insolvency. CITCF-NY, CITSF and the Company
intend that transfers of Contracts from CITCF-NY to CITSF, from CITSF to the
Company and from the Company to the related Trust (and, if and to the extent
specified in the related Prospectus Supplement, from CITCF-NY to CITSF, from
CITSF to a special purpose affiliate of CIT ("SPV"), from SPV to a Selling Trust
and from the Selling Trust to the Trust) constitute sales, rather than pledges,
of the Contracts to secure indebtedness. However, if CITCF-NY, CITSF or the
Company (or, if and to the extent specified in the related Prospectus
Supplement, a Selling Trust) were to become a debtor under Title 11 of the
United States Code, 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code"), it is
possible that a creditor, receiver, other party in interest or trustee in
bankruptcy of such debtor, or such debtor as debtor-in-possession, may contend
that the sales of the Contracts by CITCF-NY to CITSF, by CITSF to the Company,
or by the Company to the related Trust (or, if and to the extent specified in
the related Prospectus Supplement, from CITCF-NY to CITSF, from CITSF to SPV,
from SPV to a Selling Trust and from the Selling Trust to the Trust),
respectively, were pledges of the Contracts rather than sales and that,
accordingly, such Contracts should be part of such assigning entity's bankruptcy
estate. Such a position, if presented to a court, even if ultimately
unsuccessful, could result in a delay in or reduction of distributions to the
Securityholders. See "Certain Legal Aspects of the Contracts--Certain Matters
Relating to Insolvency."
6. Limited Liquidity. There is currently no market for the Securities of
any series. Although the Company expects that the underwriters of any particular
series will make a secondary market for such Securities, they will have no
obligation to do so. There can be no assurance that a secondary market will
develop for the Securities of any series or, if it does develop, that it will
provide any of the Securityholders with liquidity of investment or that it will
continue for the term of any series of Securities. Unless otherwise specified in
the related Prospectus Supplement, the Securities will be issued in book-entry,
rather than physical, form which may adversely affect the
25
<PAGE>
liquidity of the Securities in the secondary market and the ability of the
Certificate Owners and Note Owners to pledge the Securities.
7. The Subsequent Contracts and the Pre-Funding Account. If and to the
extent specified in the related Prospectus Supplement, the conveyance of
Subsequent Contracts by CITSF during the Funding Period will be subject to the
conditions described in the related Prospectus Supplement under "The Contract
Pool." If CITSF does not originate contracts satisfying such criteria during the
Funding Period, CITSF will have insufficient contracts to sell to the related
Trust on Subsequent Transfer Dates, thereby resulting in prepayments of
principal to Noteholders and Certificateholders as described below.
Unless otherwise specified in the related Prospectus Supplement, to the
extent that amounts on deposit in the Pre-Funding Account have not been fully
applied to the purchase of Subsequent Contracts by the related Trust by the end
of the Funding Period, Noteholders and Certificateholders will receive a
prepayment of principal in an amount equal to the Pre-Funded Percentage
allocable to the Noteholders and the Certificateholders, respectively, of the
Pre-Funded Amount remaining in the Pre-Funding Account at such time, which
prepayment will be made on the first Distribution Date following the end of the
Funding Period or, if the Funding Period ends on a Distribution Date, on such
date. Unless otherwise specified in the related Prospectus Supplement, the
"Pre-Funded Percentage" with respect to the Notes or the Certificates is the
percentage derived from the fraction, the numerator of which is the initial
principal balance of the Notes or the Original Certificate Balance, as the case
may be, and the denominator of which is the sum of the initial principal balance
of the Notes and the Original Certificate Balance. It is anticipated that the
principal amount of Subsequent Contracts purchased by the Trust will not be
exactly equal to the amount on deposit in the Pre-Funding Account and that
therefore there will be at least a nominal amount of principal prepaid to the
Noteholders and the Certificateholders at the end of the Funding Period.
Each Subsequent Contract must satisfy the eligibility criteria specified in
the related Prospectus Supplement and the Trust Documents at the time of its
sale to the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Company (the seller of any Subsequent Contracts to the related
Trust) will certify that all such eligibility criteria have been satisfied and
CITSF (the seller of any Subsequent Contracts to the Company) will certify that
all conditions precedent to the sale of the Subsequent Contracts to the Trust
have been satisfied. Unless otherwise specified in the related Prospectus
Supplement, it is a condition to the sale of any Subsequent Contracts to the
Trust that each Rating Agency, after receiving prior notice of the proposed
transfer of Subsequent Contracts to the Trust, shall not have advised the Seller
or the Trustees that the conveyance of such Subsequent Contracts will result in
a qualification, modification or withdrawal of its then current rating of either
the Notes or the Certificates. Following the transfer of Subsequent Contracts to
the Contract Pool the aggregate characteristics of the Contracts then held in
the Contract Pool may vary from those of the Initial Contracts included therein.
The ability of a Trust to invest in Subsequent Contracts is entirely
dependent upon whether CITSF is able to originate boat contracts that meet the
requirements for transfer on a Subsequent Transfer Date under the Trust
Documents. The ability of CITSF to originate such contracts may be affected by a
variety of economic and social factors. Moreover, such factors may affect the
ability of the Obligors thereunder to perform their obligations thereunder,
which may cause contracts originated by CITSF or its affiliates to fail to meet
the requirements for transfer under the Trust Documents. Economic factors
include interest rates, unemployment levels, the rate of inflation and consumer
perception of economic conditions generally. However, CITSF is unable to
determine and has no basis to predict whether or to what extent economic or
social factors will affect CITSF's ability to originate Subsequent Contracts.
8. Prepayment from the Pre-Funding Account. To the extent specified in the
related Prospectus Supplement, if the Pre-Funded Amount has not been fully
applied by the related Trust to purchase Subsequent Contracts by the end of the
Funding Period, then the Pre-Funded Amount will be payable as principal to
Noteholders and Certificateholders in accordance with the Pre-Funded Percentage
on the first Distribution Date following the end of the Funding Period, or, if
the end of the Funding Period is on a Distribution Date, on such date.
In the event that amounts remain on deposit in the Pre-Funding Account at
the end of the Funding Period and are applied to the payment of principal to the
Noteholders and Certificateholders, such partial retirement of the
26
<PAGE>
Notes and Certificates may shorten the average life of the Securities and may
cause the Noteholders and Certificateholders to experience a lower yield on the
Securities. In addition, any reinvestment risk resulting from such partial
retirement will be borne by the holders of such Securities.
9. Limited Assets. Unless otherwise specified in the related Prospectus
Supplement, each Trust will covenant to sell the Contracts (a) if directed to do
so by the related Indenture Trustee in accordance with the related Indenture
following an acceleration of a series of Notes upon an Event of Default, and (b)
in other circumstances specified in the related Prospectus Supplement. However,
there is no assurance that the market value of the related Contracts will at any
time be equal to or greater than the aggregate outstanding principal balance of
such Notes. Therefore, upon an Event of Default with respect to such Notes,
there can be no assurance that sufficient funds will be available to repay
Noteholders in full. In addition, the amount of principal required to be
distributed to Noteholders under the Indenture is generally limited to amounts
available to be deposited in the Note Distribution Account. Therefore, the
failure to pay principal on the Notes may not result in the occurrence of an
Event of Default until the Note Final Scheduled Distribution Date. Furthermore,
upon a sale by the Trust of the Contracts, the net proceeds from such sale
remaining after payment of all amounts due to the Servicer and the Noteholders
may not be sufficient to pay the Certificate Balance and interest accrued
thereon.
If and to the extent specified in the related Prospectus Supplement, one or
more Enhancements will be available to pay principal and/or interest on the
Notes and/or the Certificates on any Distribution Date. However, unless
otherwise specified in the related Prospectus Supplement, the amount of any
Enhancement will be limited and will be reduced as the Pool Balance is reduced.
If the amounts available under the applicable Enhancement are exhausted, a Trust
will depend solely on payments on or with respect to the Contracts, Monthly
Advances and Non-Reimbursable Payments to make distributions to the
Securityholders.
10. Ratings of the Securities. It is a condition to the issuance of a
series of Securities offered pursuant to this Prospectus that the Securities be
rated in one of the four highest rating categories by at least one Rating
Agency. The ratings do not address the likelihood that the Securities will be
retired following the sale of the Contracts by a Trustee as described under "The
Purchase Agreement and the Trust Documents--Termination." There can be no
assurance that any rating will remain in effect for any given period of time or
that a rating will not be lowered or withdrawn by the Rating Agency if, in its
judgment, circumstances so warrant. In the event that the rating initially
assigned to the Securities is subsequently lowered or withdrawn for any reason,
no person or entity will be obligated to provide any additional credit
enhancement with respect to such Securities. There can be no assurance that any
other rating agency will rate the Notes or the Certificates or, if one does,
what rating would be assigned by any such other rating agency. A security rating
is not a recommendation to buy, sell or hold securities.
11. Book Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Securities will be offered for purchase in book-entry
form only and will be initially registered in the name of the nominee of The
Depository Trust Company ("DTC" and, together with any successor depository
selected by the Company, the "Depository"). No person acquiring an interest in
the Notes through the facilities of DTC (a "Note Owner") will be entitled to
receive a Definitive Note representing such person's interest in the Notes,
except as set forth under "Certain Information Regarding the
Securities--Definitive Securities," and such persons will hold their interests
in the Notes through DTC in the United States or Cedel Bank, societe anonyme
("Cedel") or Euroclear in Europe. No person acquiring an interest in the
Certificates through the facilities of DTC (a "Certificate Owner") will be
entitled to receive a Definitive Certificate representing such person's interest
in the Certificates, except as set forth under "Certain Information Regarding
the Securities--Definitive Securities," and such persons will hold their
interests in the Certificates through DTC. Unless and until Definitive
Securities are issued under the limited circumstances described herein and in
the related Prospectus Supplement, all references to actions by Securityholders
shall refer to actions taken by DTC upon instructions from its Participants, and
all references herein to distributions, notices, reports and statements to
Securityholders shall refer to distributions, notices, reports and statements to
DTC in accordance with DTC procedures. See "Certain Information Regarding The
Securities--Definitive Securities."
12. Risk of Commingling. At any time that the requirements as specified
under "The Purchase Agreements and the Trust Documents--Collections," are met,
the Servicer may deposit payments on or with respect to the Contracts and
proceeds of Contracts into the Collection Account or the Paid-Ahead Account, as
applicable, monthly on the
27
<PAGE>
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 marine installment sale contracts, marine
installment loan contracts (or promissory notes) and Preferred Mortgages as well
as copies of documents and instruments relating to each Contract and evidencing
the security interest in the Financed Boat securing each Contract (the "Contract
Files").
The Trustee(s)
The Trustee(s) for each Trust will be specified in the related Prospectus
Supplement. The Trustee(s) will perform limited administrative functions,
including making distributions from the Certificate Distribution Account and/or
the Note Distribution Account. A Trustee's liability in connection with the
issuance and sale of the Securities is limited solely to the express obligations
of such Trustee as set forth in the Trust Documents. A Trustee may appoint a
co-trustee to act as co-trustee pursuant to a co-trustee agreement with such
Trustee.
A Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove a Trustee
if such Trustee ceases to be eligible to continue as Trustee under the related
Trust Documents or if such Trustee becomes insolvent. In such circumstances, the
Servicer will be obligated to appoint a successor trustee. Any resignation or
removal of a Trustee and appointment of a successor trustee will be
28
<PAGE>
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
marine installment sale contracts, direct loans and Preferred Mortgages secured
by new and used boats, boat motors and boat trailers, consisting of the Initial
Contracts and the Subsequent Contracts (if any); (ii) certain monies received
under the Initial Contracts on or after the Initial Cut-off Date and the
Subsequent Contracts (if any) on or after the related Subsequent Cut-off Date;
(iii) such amounts as from time to time may be held in one or more accounts
established and maintained by the Servicer pursuant to the Trust Documents
(including all investments in such accounts and all income from the funds
therein and all proceeds thereof, other than investment earnings on any account
so specified in the related Prospectus Supplement) as described herein; (iv) if
specified in the related Prospectus Supplement, specified credit or cash flow
enhancement and all monies on deposit in the Pre-Funding Account, the
Capitalized Interest Account and any other account specified in the related
Prospectus Supplement (including, unless otherwise specified in the related
Prospectus Supplement, all investments in such accounts and all income from the
funds therein and all proceeds thereof, other than investment earnings on any
account so specified in the related Prospectus Supplement); (v) assignments of
the security interests in the Financed Boats and any accessions thereto; (vi)
the right to proceeds from physical damage, credit life and disability insurance
policies, if any, covering individual Financed Boats or Obligors, as the case
may be; (vii) the rights of the Trust under the Trust Documents; and (viii) any
and all proceeds of the foregoing.
Pursuant to agreements between CITSF or CITCF-NY and many of the Dealers,
the Dealer is obligated after origination to repurchase from CITSF boat
contracts which do not meet certain representations and warranties made by such
Dealer. Such representations and warranties relate primarily to the origination
of the contracts and the perfection of the security interests in the related
boats, and do not typically relate to the creditworthiness of the related
Obligors or the collectability of such Contracts. Unless otherwise specified in
the related Prospectus Supplement, any Dealer agreement with respect to the
Contracts will not be assigned by CITSF or CITCF-NY to the Company or by the
Company to the Trust. However, unless otherwise specified in the related
Prospectus Supplement, the Trust Documents will authorize CITSF or CITCF-NY to
transfer a Contract to a Dealer upon a repurchase by a Dealer pursuant to a
Dealer agreement and will require that any recovery of amounts with respect to a
Contract by CITSF or CITCF-NY pursuant to Dealer repurchase obligations be
deposited in the Collection Account for the related Trust in satisfaction of
CITSF's repurchase obligations under the Trust Documents to the extent, if any,
that CITSF or CITCF-NY has not already satisfied that obligation. In accordance
with its customary servicing practices and procedures, in determining whether to
exercise any right of recourse against a Dealer, CITSF and CITCF-NY consider the
prior performance of the Dealer and other business and commercial factors,
including its own commercial relationship with such Dealer. The assignments by
the Dealers of Contracts to CITSF or CITCF-NY do not generally provide for
recourse to the Dealer for unpaid amounts in the event of a default by an
Obligor, other than in connection with the breach of the Dealer's
representations and warranties.
29
<PAGE>
THE CONTRACT POOL
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of marine installment sale contracts, direct loans and Preferred
Mortgages (collectively, the "Contracts") to finance the purchase or ownership
of new and used boats, boat motors and boat trailers. The Contracts will be
originated or acquired by CITSF or its affiliates (including CITCF-NY). Except
as otherwise specified in the related Prospectus Supplement, the Contracts will
(i) be fully amortizing, (ii) bear interest at a fixed or variable rate (the
"Contract Rate") and (iii) be Simple Interest Contracts or Precomputed
Contracts.
Certain detailed information regarding the Contract Pool as of the Initial
Cut-off Date or such other date specified therein for each Trust will be set
forth in the related Prospectus Supplement. If specific information with respect
to the Contract Pool is not known at the time the related series of Securities
initially is offered, more general information will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report on
a Current Report on Form 8-K to be filed with the Commission within fifteen days
after the initial issuance of such Securities. A copy of the Trust Documents
with respect to each series of Securities will be attached to the Current Report
on Form 8-K and will be available for inspection at the corporate trust office
of the Owner Trustee specified in the related Prospectus Supplement. A schedule
of the Contract Pool relating to such series will be attached to the Trust
Documents delivered to the Owner Trustee upon delivery of the Securities.
Description of Contract Computations
"Simple Interest Contracts" provide for the allocation of each payment made
thereunder to principal and interest in accordance with the "simple interest"
method. For Simple Interest Contracts, the principal balance of the Contract is
amortized over a series of equal monthly payments. Each monthly interest payment
is calculated by multiplying the outstanding principal balance of the loan by
the Contract Rate. Such product is then multiplied by a fraction, the numerator
of which is the number of days elapsed since the preceding payment of interest
was made and the denominator of which is either 365 or 360, depending on
applicable state law. Payments received on a Simple Interest Contract are
applied first to interest accrued to the date payment is received and second to
reduce the unpaid principal balance of the Contract. Accordingly, if an Obligor
makes a payment on the Contract less than 30 days after the previous payment,
the interest collected for the period since the preceding payment was made will
be less than 30 days' interest, and the amount of principal repaid in such month
will be correspondingly greater. Conversely, if an Obligor makes a payment on
the Contract more than 30 days after the previous payment, the interest
collected for the period since the preceding payment was made will be greater
than 30 days' interest, and the amount of principal repaid in the month will be
correspondingly reduced. As a result, based on the payment characteristics of a
particular Obligor, the principal due on the final due date of a Simple Interest
Contract may vary from the principal payment that would be made if payments for
such Contract were always made on their due dates.
If an Obligor pays more than one installment on a Simple Interest Contract
at a time, the regular installment will be treated as described above. However,
the entire amount of the additional installment or installments will be treated
as a principal payment and applied to reduce the principal balance of the
related Contract. The Obligor will not be required to make any payments on such
a Contract (a "Paid-Ahead Simple Interest Contract"), for the number of due
dates (the "Paid-Ahead Period") for which it has paid in advance the full
installment. However, during the Paid-Ahead Period interest will continue to
accrue on the principal balance of such Paid-Ahead Simple Interest Contract, as
reduced by the application of the early installment. As a result, when the
Paid-Ahead Period ends and the Obligor pays the next required installment, such
payment may be insufficient to cover the interest that has accrued since the
last payment by the Obligor. Notwithstanding such insufficiency, such Paid-Ahead
Simple Interest Contract would be considered to be current. This situation would
continue until the monthly installments are once again sufficient to cover all
accrued interest and to reduce the principal balance of the Contract. Depending
on the principal balance and Contract Rate of the related Contract and on the
number of installments paid in advance of their due dates, there may be extended
periods of time during which Simple Interest Contracts that are not amortizing
are considered current.
30
<PAGE>
"Precomputed Contracts" consist of actuarial obligations and Rule of 78's
obligations. Actuarial obligations provide for amortization of the loan over a
series of fixed level payment monthly installments. Each monthly installment,
including the monthly installment representing the final payment on the
Contract, consists of an amount of interest equal to 1/12th of the related
Contract Rate multiplied by the unpaid principal balance of the Contract, and an
amount of principal equal to the remainder of the monthly payment. If an
actuarial obligation is prepaid in full, the Obligor receives a rebate
calculated on the basis of a constant interest rate. Rule of 78's obligations
provide for the payment by the related Obligor of a specified total amount of
payments, payable in equal monthly installments, which total represents the
principal amount financed and add-on interest in an amount calculated based on
the Contract Rate. The rate at which such amount of add-on interest is earned
and, correspondingly, the amount of each fixed monthly payment allocated to
reduction of the outstanding principal are calculated in accordance with the
"Rule of 78's". Unless otherwise specified in the related Prospectus Supplement,
with respect to any Rule of 78's obligation included as a Contract, the Servicer
will calculate the amount of interest paid on a Rule of 78's obligation in the
same manner that it calculates such amounts on actuarial obligations.
If an Obligor with respect to any Precomputed Contract, in addition to
making his or her regularly scheduled payment, makes one or more additional
scheduled payments in any Due Period (such Contract being a "Paid-Ahead
Precomputed Contract"), the additional scheduled payments made in such Due
Period will be deposited into the Paid-Ahead Account and applied on subsequent
Deposit Dates as described under "The Purchase Agreements and the Trust
Documents--Paid-Ahead Precomputed Contracts." Since the Servicer will deposit
paid-ahead amounts on Paid-Ahead Precomputed Contracts into the Paid-Ahead
Account, these additional payments will not cause shortfalls of interest or
principal payments in the Contract Pool.
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that an Obligor may prepay its Contract, in whole or in part,
at any time, without a prepayment premium.
Description of the Financed Boats
The Financed Boats will consist of runabouts (together with boat motors and
boat trailers), motor yachts, bass boats, pontoon boats, fishing skiffs, sport
fishing boats, cabin cruisers, sailboats, and personal watercraft.
Runabouts typically range from 12 to 27 feet in length and are
equipped primarily for fishing.
Motor yachts typically range from 40 to 70 feet in length and are used
for cruising and fishing in large bodies of water.
Bass boats are powered with outboard engines, range from 17 to 21 feet
in length and are primarily used for fresh water fishing on inland
waters.
Pontoon boats range from 16 to 22 feet in length. They provide a
smooth ride and are used for sight seeing.
Fishing skiffs range from 16 to 22 feet in length and can accommodate
two to three people. In a fishing skiff, the fisherman can walk from
side to side without rocking the boat.
Sporting boats range from 25 to 50 feet in length, and have longer
cruising range than the bass boats or fishing skiffs. Sporting boats
are generally used in salt water for larger game fishing.
Cabin cruisers are motor boats that typically range from 25 to 50 feet
in length which include sleeping and galley accommodations.
Sailboats are wind powered crafts that typically range from 27 to 50
feet in length which can accommodate more than one person.
31
<PAGE>
Personal watercraft are water-jet propelled vehicles seating one to
three people, which are used for entertainment and short distance
travel.
The Financed Boats do not include houseboats used as primary residences,
competitive racing boats, or commercial fishing boats.
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. Unless otherwise specified in the
related Prospectus Supplement, 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."
32
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, each
Seller will sell the Initial Contracts to a Trust concurrently with the sale of
the Securities and the net proceeds from the sale of the Securities will be
applied by such Trust to the purchase of the Initial Contracts, to the payment
of certain expenses connected with pooling the Contracts and issuing the
Securities, to the deposit of the Pre-Funded Amount in the Pre-Funding Account,
if any, to the deposit of the initial amount into the Capitalized Interest
Account, if any, and to the deposit of the initial amount, if any, into a
Reserve Fund, if any. Such net proceeds less the payment of such expenses, the
Pre-Funded Amount, if any, the initial deposit into the Capitalized Interest
Account, if any, and the Reserve Fund, if any, represent the purchase price paid
by a Trust to the Company for the sale of the Initial Contracts to such Trust.
Such amount will be determined as a result of the pricing of the Securities,
through the offering described in the related Prospectus Supplement. The net
proceeds to be received by the Company from the sale of the Initial Contracts to
a Trust will be paid by the Company to CITSF as the purchase price for the
Contracts and will be added to CITSF's general funds and will be available for
general corporate purposes, including the purchase of new marine installment
sale contracts and the payment of the purchase price to CITCF-NY for any
Contracts acquired by CITSF from CITCF-NY. The net proceeds to be received by a
Selling Trust from the sale of the Initial Contracts to a Trust will be applied
to pay indebtedness and other obligations of such Selling Trust.
THE CIT GROUP, INC.
CIT, a Delaware corporation, is a leading diversified finance organization
offering secured commercial and consumer financing primarily in the United
States to smaller, middle-market and larger businesses and to individuals
through a nationwide distribution network. CIT commenced operations in 1908. CIT
has developed a broad array of "franchise" and strategic business units that
focus on specific industries, asset types and markets which are balanced by
client, industry and geographic diversification.
The Dai-Ichi Kangyo Bank, Limited ("DKB") owns eighty percent (80%) of the
issued and outstanding shares of common stock of CIT. DKB purchased a sixty
percent (60%) common stock interest in CIT from Manufacturers Hanover
Corporation ("MHC") at year-end 1989 and acquired an additional twenty percent
(20%) common stock interest in CIT on December 15, 1995 from CBC Holding
(Delaware) Inc. ("CBC Holding"), a wholly-owned subsidiary of The Chase
Manhattan Corporation ("CMC"). DKB had an option to purchase the remaining
twenty percent (20%) common stock interest from CBC Holding. On November 18,
1997, CIT completed its initial public offering of 36,225,000 shares of its
common stock. The proceeds from the offering (other than the proceeds received
from the exercise of the over-allotment option of the underwriters) were used to
acquire DKB's option to purchase the 20% interest in CIT owned by CBC Holding,
and to exercise such option. The proceeds received from the exercise of the
underwriters' over-allotment option will be used for general corporate purposes
and for potential acquisitions. As a consequence of the completion of the
offering, DKB will continue to own a majority of the issued and outstanding
shares of common stock of CIT. CMC is no longer a stockholder.
CIT is subject to the informational requirements of the Exchange Act and,
in accordance therewith, files reports and other information with the
Commission. Such reports and other information can be inspected and copied at
the offices of the Commission and at the offices of the New York Stock Exchange,
Inc. See "Additional Information."
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
The Company was incorporated in the State of Delaware on June 24, 1994, and
is a wholly-owned, limited purpose finance subsidiary of CIT. The Company
maintains its principal office at 650 CIT Drive, Livingston, New Jersey 07039.
Its telephone number is (973) 535-3514.
As described herein, the obligations of the Company with respect to the
Securities are limited. The Company will make no representations or warranties
with respect to the Contracts and will have no ongoing servicing
33
<PAGE>
obligations or responsibilities with respect to the Contract Pool. CITSF is an
affiliate of the Company. The Company will acquire the contracts which it will
sell to a Trust in a privately negotiated transaction from CITSF.
Unless otherwise specified in the related Prospectus Supplement, neither
CIT nor any of its affiliates, including the Company and CITSF, will be
obligated with respect to the Securities. Accordingly, the Company has
determined that financial statements of CITSF and the Company are not material
to the offering of the Securities.
THE CIT GROUP/SALES FINANCING, INC., SERVICER
General
CITSF, a Delaware corporation, is a wholly-owned subsidiary of CIT. It has
its principal executive office at 650 CIT Drive, Livingston, New Jersey 07039,
and its telephone number is (973) 740-5000.
CITSF originates, purchases, sells and services retail installment sale
contracts for recreation vehicles, manufactured housing, recreational boat
products and other consumer goods throughout the United States. CITSF has been a
lender to the recreational marine industry for more than five years. CITSF has a
centralized asset service facility (the "Asset Service Center") in Oklahoma
City, Oklahoma. Working through marine dealers and manufacturers, CITSF offers
retail installment credit. CITSF also originates marine loans directly. In
addition to purchasing marine contracts from dealers on an individual basis,
CITSF makes bulk purchases of marine contracts. These bulk purchases may be from
the portfolios of other lending institutions or finance companies or the
portfolios of other entities that purchase and hold marine contracts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for
recreation vehicle, home equity, recreational boat and manufactured housing
retail installment contracts. The servicing portfolio includes both loans
originated or purchased by CITSF, as well as loans originated or purchased by
CITSF and subsequently securitized with servicing retained. The servicing
portfolio also includes loans owned by third parties that are serviced by CITSF
for a fee on a "contract" basis. The Asset Service Center is supplemented by
outside collectors and field remarketers located throughout the United States.
In addition to expected growth in its serviced portfolio, in 1997 CITSF entered
into an agreement to provide servicing for approximately 42,000 recreation
vehicle and recreational boat consumer contracts for another financial
institution, which CITSF is also servicing at its Asset Service Center. The
addition of these contracts to its servicing portfolio required CITSF to
increase staffing levels at the Asset Service Center to support these contracts.
The effect of this increase on CITSF's performance as a servicer or subservicer
cannot be determined at this time.
CITSF's general policies with regard to the origination of marine
installment sale contracts are described under "--Contract Origination" and
"--CITSF's Underwriting Guidelines." See "--Servicing" for a description of
certain of CITSF's servicing policies.
Contract Origination
In accordance with CITSF's marine underwriting criteria, CITSF purchases
marine retail installment sale contracts and loans to finance the purchases of
new and used boats and motors and trailers for boats from boat dealers,
manufacturers and financial intermediaries who regularly originates and sells
such contracts to CITSF pursuant to the terms of approved dealer agreements.
CITSF also makes direct marine loans to obligors secured by recreational boats.
Although CITSF does purchase marine installment sale contracts and marine
installment loans or notes in bulk from other lenders, unless otherwise
specified in the related Prospectus Supplement, all of the Contracts have been
originated by CITSF or CITCF-NY through the purchase of such Contracts from
dealers, manufacturers and intermediaries or through direct loan originations by
CITSF or CITCF-NY.
Through their Regional Business Centers, CITSF and CITCF-NY arrange to
purchase marine installment sale contracts and marine installment loans or notes
from marine dealers located throughout the United States. Regional
34
<PAGE>
Business Center personnel contact the dealers located in their territories and
explain CITSF's available financing plans, terms, prevailing rates and credit
and financing policies. If the dealer wishes to use CITSF's available customer
financing, the dealer must make an application for dealer approval. Upon
satisfactory results of the investigation of the dealer's creditworthiness and
general business reputation, CITSF or CITCF-NY and the dealer execute a dealer
agreement. In the assignment agreement relating to any contracts which a dealer
sold to CITSF or CITCF-NY, each dealer makes representations and warranties
concerning the obligors on such contracts and the security interests in the
financed boats relating thereto. These representations and warranties typically
include, among others, that (i) the obligor was of legal age and competent to
execute the contract; (ii) the documentation submitted by the dealer evidenced a
bona fide sale contract; (iii) the contract was genuine, legally valid and
enforceable for the sale price; (iv) the financed boat was fully and correctly
described in the contract and had been delivered to and accepted by the obligor;
(v) the dealer had clear title to the financed boat and to the contract; (vi)
the dealer had complied with all applicable laws, regulations and rules in
connection with the contract; (vii) the obligor had not asserted a right of
rescission, cancellation, claim, defense, set-off or counterclaim of any kind
relating to the contract; (viii) any down payment was paid in cash and the
dealer received in trade any property shown for the allowance stated in the
contract; (ix) the dealer had fully performed the terms of any purchase
agreement with the obligor at the time CITSF or CITCF-NY funded the transaction;
and (x) application had been made for a certificate of title or other ownership
documents in the name of the obligor with the security interest of the CITSF or
CITCF-NY noted as a lien thereon, or appropriate UCC financing statements had
been filed, or the dealer had followed the assignee's instructions with respect
to financed boats subject to federal documentation, to the extent applicable.
CITSF and CITCF-NY may enter into assignment agreements in which dealers do not
make such representations.
CITSF and CITCF-NY also purchase marine loan agreements from certain
financial intermediaries who originate and fund such transactions within CITSF's
marine underwriting guidelines. These financial intermediaries operate under
agreements with CITSF or CITCF-NY under which the intermediary generally makes
many of the representations and warranties concerning the documentation and the
obligor made by an assigning dealer. Material breaches of any such
representation or warranty generally will also trigger a right of CITSF or
CITCF-NY to demand the repurchase of the contract.
Upon material breach of any representation or warranty with respect to a
contract made by a dealer or financial intermediary, CITSF or CITCF-NY will have
a right of recourse against such dealer or intermediary to require it to
purchase or repurchase such contract. Historically, in determining whether to
exercise any right of recourse, CITSF and CITCF-NY have considered the prior
performance of the dealer or intermediary and other business and commercial
factors. The Servicer will be obligated to determine whether or not to enforce
such rights under the dealer or intermediary agreements relating to the
Contracts in accordance with its customary practices, and the right to any
proceeds received upon such enforcement will be conveyed to the Trust pursuant
to the Sale and Servicing Agreement. The Seller, CITSF and CITCF-NY will make no
representations as to the financial condition of any dealer or intermediary to
which any of them may have recourse, and there can be no assurance as to the
ability of any such dealer or intermediary to perform its obligations under a
dealer agreement, an intermediary agreement or an assignment agreement.
CITSF solicits potential direct marine loan borrowers through targeted
direct marketing programs. CITSF also solicits potential marine loan borrowers
through leads generated by a nationwide network of referral brokers. These
referral brokers usually do not have a written contract with CITSF. If their
referral results in the closing of a direct marine loan transaction with CITSF
and a customer located by the referral broker, CITSF pays the referral broker a
commission after the loan transaction occurs. Generally, the obligor under such
a direct loan transaction will submit his or her application directly to CITSF
or CITCF-NY. Accordingly, dealer or intermediary warranties on documentation
will not apply to these direct loan transactions.
CITSF or CITCF-NY underwrites on an individual basis each contract which it
purchases from dealers or originates directly in accordance with CITSF's marine
underwriting guidelines. CITSF may not individually underwrite each transaction
in a portfolio of contracts which it purchases from other lenders. Unless
otherwise specified in the related Prospectus Supplement, all Contracts were
individually underwritten by CITSF.
35
<PAGE>
If CITSF believes that an obligor on a marine contract is likely to
refinance the contract as a result of interest rate changes or other reasons,
CITSF may in its discretion attempt to retain such obligor as a customer by
soliciting the obligor to refinance the contract with CITSF. CITSF may continue
to apply this practice with respect to the Contracts.
CITSF's Underwriting Guidelines
All marine contracts that are purchased by CITSF from dealers are written
on forms provided or approved by CITSF and are purchased on an individually
approved basis. With respect to each marine contract to be purchased from a
dealer or financial intermediary, CITSF's general practice is to have the dealer
or financial intermediary submit the customer's credit application,
manufacturer's invoice (if the contract is for a new boat) and certain other
information relating to the contract to the applicable Regional Business Center.
Personnel at the Regional Business Center analyze the creditworthiness of the
customer and other aspects of the proposed transaction.
With respect to marine loan contracts originated directly, the customer
will submit his or her credit application, verification of the boat's value and
certain other information directly to the National Business Center at the Asset
Service Center. Generally, personnel at the National Business Center will
analyze the creditworthiness of the customer and the value of the financed boat.
If the amount financed is $35,000 or higher and the financed boat is used,
CITSF's marine underwriting guidelines require that the customer supply a survey
appraising the value of the financed boat. This guideline applies to direct loan
business and to contracts originated by dealers or financial intermediaries.
CITSF will determine the acceptability of the survey and will usually check a
published valuation guide to confirm the accuracy of its valuation. Credit
underwriters at the National Business Center may waive or apply stricter
standards to valuation guidelines based upon the applicant's credit score and
the amount financed. On direct marine loan transactions, CITSF underwrite,
prepare documentation and close such transactions directly, either in person, by
mail or through a third party closing agent.
All credit applications are entered into an application processing system.
During 1997, CITSF installed a new application processing system designed to
enhance productivity and provide greater control over the quality of credits
approved through the use of "decision rules" that alert analysts to further
investigate certain conditions. The new system also requires the proper level of
authority to approve transactions over an individual's dollar limits or
transactions which involve exceptions to underwriting policy. CITSF's
underwriting guidelines require that a credit officer at a Regional Business
Center with the appropriate level of credit authority examine each applicant's
credit history, residence history, employment history and debt-to-income payment
ratio. Although CITSF has certain minimum requirements with respect to these
criteria, as described below, CITSF's management does not believe that these
minimum requirements are sufficient to warrant automatic credit approval of an
applicant. Thus, CITSF will not approve a credit application for a marine
transaction without review by a credit officer. Based on credit score and other
risk factors, each applicant is either approved, declined or, if appropriate,
referred to a credit officer with a higher credit authority.
The retail customer generally has had a five year history of residence,
employment and credit history, with no less than two years at the current
residence and at least three years in his or her present job, a debt ratio (the
ratio of total installment debt and housing expenses to gross monthly income) of
40% or less, a down payment of at least 10% and an overall satisfactory credit
profile. Self-employed applicants should be established in business for a
minimum of five years. The appropriate level credit officer may approve, on a
case by case basis, applications of customers which do not meet the
above-described retail customer profile. Such approval, if granted, is based on
the applicant's length and likelihood of continued employment, ability to pay,
and a review of the applicants' paying habits. No guarantors, endorsers or
co-signers are considered in determining whether to accept or reject an
application. The maximum amount CITSF will advance to such customers is (i) in
the case of a new boat, 110% of the invoice if the amount financed is less than
$100,000 and 100% of the invoice if the amount financed is $100,000 or more, and
(ii) in the case of a used boat (a) 85% of the B.U.C. Book "low retail" value or
110% of NADA wholesale book value for amounts financed up to $35,000, and (b)
85% of the assessed marine survey value plus freight, tax, license, insurance,
warranty, and dealer installed options if the amount financed is over $35,000.
CITSF may waive certain credit requirements, including income verification, job
verification or valuation, in certain
36
<PAGE>
specialized underwriting programs or if a credit score, balance or other factors
provide sufficient support to underwrite the transaction.
Funding of a transaction is authorized after verification of the conditions
of approval of the application and satisfactory delivery of the related boat or
other proof of ownership and condition of the collateral.
In 1992, CITSF's credit criteria were changed to permit greater reliance on
credit scores and overall evaluation instead of using specific disqualifying
criteria (e.g., a minimum of two years of employment). In August 1994, CITSF
initiated an underwriting program to provide for the approval of a broader range
of credit scores with appropriate pricing intended to compensate for the risk in
customers with lower credit profiles. Accordingly, the interest rate charged on
each marine contract originated since August 1994 reflects CITSF's evaluation of
the relative risk associated with an individual's application.
The credit review and approval practices of each Regional Business Center
are subject to internal reviews and internal audits that, through sampling,
examine the quality of the underwriting; the verification of key data such as
income and employment, if required; and the accuracy and completeness of the
documentation.
Unless otherwise specified in the related Prospectus Supplement, almost all
of the Contracts are marine installment sale contracts and direct loans
originated in accordance with CITSF's marine underwriting criteria. In
substantially all cases, CITSF or CITCF-NY did not fund or purchase a Contract
until CITSF or CITCF-NY had reviewed and approved a completed customer file,
including the credit application of the customer, in accordance with CITSF's
underwriting procedures.
The underwriting guidelines of CITSF described above may change in the
future.
Servicing
Through its Asset Service Center, CITSF services recreation vehicle,
manufactured housing, recreational boat, home equity and other consumer loans.
CITSF services all of the marine contracts it originates or purchases, whether
on an individual basis or in bulk (except those it has sold to third parties on
a servicing released basis). CITSF is actively seeking arrangements pursuant to
which it will service marine contracts held by other entities, including
contracts which were not purchased by CITSF or sold to such other entities by
CITSF. Generally, such servicing responsibilities are, and would be, also
carried out through the Asset Service Center. Servicing responsibilities include
collecting principal and interest payments, taxes, insurance premiums, where
applicable, and other payments from obligors and, where such contracts have been
sold, remitting principal and interest payments to the holders thereof, to the
extent such holders are entitled thereto. Collection procedures include
repossession and resale of boats securing defaulted contracts and, if deemed
advisable by CITSF, entering into workout arrangements with obligors under
certain defaulted contracts. Although decisions as to whether to repossess any
boat are made on an individual basis, CITSF's general policy is to institute
repossession procedures promptly after Asset Service Center personnel determine
that it is unlikely that a defaulted contract will be brought current, and
thereafter to diligently pursue the resale of such boat if the market is
favorable. Geographic location, condition and market govern the method of sale
used to sell collateral. CIT uses site auctions, pool auctions, individual bids
on site, brokers, retail sale outlets, newspaper advertisements and
telemarketing. The liquidation team uses computer generated data bases to
maximize their effectiveness in the correct method of sale. The sales strategies
are reviewed at regular staff meetings, and potential markets for the collateral
and the sales plan for each unit are designed. Field personnel recommend to the
internal remarketers and managers the most effective disposition method of the
collateral i.e., move to consignment dealer for retail, move to storage facility
for wholesale, obtain as is/where is bids, or move to auction facility. The
remarketer and/or manager review the recommendation and based on product
knowledge and economic conditions make the decision in the resale of the
collateral.
37
<PAGE>
Insurance Procedures
Each Contract requires the Obligor to obtain insurance against loss by
fire, theft, comprehensive and collision or full boat damage with respect to the
related Financed Boat. The dealer agreements include a representation and
warranty that each Financed Boat was subject to such insurance at the time of
origination of the Contract. Since Obligors may choose their own insurers to
provide the required coverage, the specific terms and conditions of their
policies vary.
The Servicer does not, under its customary servicing practices and
procedures, obtain Force-Placed Insurance when the principal balance of the
related Contract falls below the level or levels periodically established in
accordance with such customary servicing practices and procedures. In accordance
with such customary servicing practices and procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or arrange
other methods of protection of the Financed Boats that it deems necessary or
advisable, provided that the Servicer determines that such actions do not
materially and adversely affect the interests of the Securityholders.
Historically, CITSF has force-placed insurance on a relatively small percentage
of its marine contracts. Unless otherwise specified in the related Prospectus
Supplement, the Servicer may, but will not be obligated to, enforce its rights
under the Contracts to require the Obligors to maintain physical damage
insurance, in accordance with the Servicer's customary practices and procedures
with respect to comparable new or used boats financed by installment sale
contracts or loans that it services for itself or others. If CITSF purchases
physical damage insurance on behalf of an Obligor, the Obligor's premium payment
obligations will not be included in the Principal Balance of the related
Contracts and will not be the property of the Trust. The historical delinquency
and loss experience included in a Prospectus Supplement will include Contracts
as to which CITSF has force-placed insurance.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will permit the Servicer or any affiliate of the Servicer, to the
extent permitted by law, to (i) enter into agreements with one or more insurers
or other persons pursuant to which the Servicer or such affiliate will earn
commissions and fees in connection with any insurance policy purchased by an
Obligor including, without limitation, any physical damage insurance policy
(whether or not such physical damage insurance policy is force-placed pursuant
to the provisions of any Contract), or any other insurance policy whatsoever,
and (ii) in connection with the foregoing, to solicit, or permit and assist any
insurer or any agent thereof to solicit (including, without limitation,
providing such insurer or agent a list of Obligors including name, address or
other information) any Obligor.
Delinquency and Loan Loss Experience
Each Prospectus Supplement will include information on CITSF's loss and
delinquency experience with respect to its servicing portfolio of marine
contracts. However, there can be no assurance that such experience will be
indicative of the performance of the Contracts included in a particular Contract
Pool. Unless otherwise specified in the related Prospectus Supplement, the
tables setting forth the delinquency experience for the portfolio of marine
contracts originated and serviced by CITSF will exclude contracts acquired by
CITSF through portfolio purchases and contracts in repossession.
THE CERTIFICATES
General
A series of Securities may include one or more classes of Asset-Backed
Certificates (the "Certificates") issued pursuant to the Trust Documents to be
entered into among the Seller, the Servicer and the Owner Trustee, forms of
which have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. Payments in respect of the Certificates will be
subordinated to payments on the Notes, if any, to the extent described in the
related Prospectus Supplement. The following summary describes certain terms of
the Certificates and the Trust Documents. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Certificates and the Trust Documents, and the
following summary will be
38
<PAGE>
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 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,
39
<PAGE>
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 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
40
<PAGE>
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.
The Indenture
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. CITSF will provide a copy of
the applicable Indenture (without exhibits) upon request to a holder of Notes
issued thereunder.
Modification of Indenture without Noteholder Consent. With respect to each
Trust, the Issuer and the related Indenture Trustee may, without consent of the
Noteholders, enter into one or more supplemental indentures for any of the
following purposes: (i) to correct or amplify the description of the collateral
or add additional collateral; (ii) to provide for the assumption of the Notes
and the Indenture obligations by a permitted successor to the Trust; (iii) to
add additional covenants for the benefit of the related Noteholders, or for the
Trust to surrender any rights or power conferred upon it; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision which
may be inconsistent with any other provision; (vi) to provide for the acceptance
of the appointment of a successor Indenture Trustee or to add to or change any
provision as shall be necessary and permitted to facilitate the administration
by more than one trustee; (vii) to modify, eliminate or add any provision in
order to comply with the Trust Indenture Act of 1939, as amended; or (viii) to
add, change in any manner, or eliminate any provision, or modify in any manner
the rights of Noteholders; provided that any action specified in this clause
(viii) shall not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any Noteholder unless Noteholder consent is
otherwise obtained as described in the Indenture. Any action specified in clause
(viii) shall be taken only upon satisfaction of the Rating Agency Condition.
"Rating Agency Condition" with respect to any action means the condition that
the Rating Agency or Agencies specified in the related Prospectus Supplement
shall have notified the Seller, the Servicer and the Issuer in writing that such
action will not result in the downgrade or withdrawal of the then current
ratings of the Securities.
Modification of Indenture with Noteholder Consent. With respect to each
Trust, with the consent of the holders of not less than a majority of the
aggregate outstanding principal amount of the Notes, and with prior notice to
the Rating Agencies, the Issuer and the Indenture Trustee may execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the Indenture, or modify in any manner the rights of the
related Noteholders.
41
<PAGE>
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 days; (ii) except as set forth in (iv) below, any
failure to make any installment of the principal of any Note as and when the
same becomes due and payable which failure continues unremedied for thirty days
after the giving of written notice of such failure to the Issuer and the Seller
(or the Servicer, as applicable) by the Indenture Trustee or to the Issuer and
the Seller (or the Servicer, as applicable) and the Indenture Trustee by the
holders of not less than 25% of the aggregate outstanding principal amount of
the Notes; (iii) any default in the observance or performance in any material
respect of any other covenants or agreements in the Indenture, which failure
materially and adversely affects the rights of Noteholders, and which failure
continues unremedied for thirty days after the giving of written notice of such
failure to the Issuer and the Seller (or the Servicer, as applicable) by the
Indenture Trustee or to the Issuer and the Seller (or the Servicer, as
applicable) and the Indenture Trustee by the holders of not less than 25% of the
aggregate outstanding principal amount of the Notes; (iv) any failure to pay in
full the outstanding principal balance of any Notes on or prior to the
applicable Note Final Scheduled Distribution Date; and (v) certain events of
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings and certain actions by the Trust indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. However, unless otherwise specified in the related Prospectus
Supplement, the amount of principal required to be paid to Noteholders under the
Indenture will generally be limited to amounts available to be deposited in the
Note Distribution Account. Therefore, unless otherwise specified in the related
Prospectus Supplement, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Event of Default until the
Note Final Scheduled Distribution Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an
Event of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or holders of not less than a majority in
aggregate outstanding principal amount of the Controlling Notes may declare the
principal of the Notes to be immediately due and payable. Such declaration may,
under certain circumstances, be rescinded by the holders of not less than a
majority of the aggregate outstanding principal amount of such Controlling
Notes.
Unless otherwise specified in the related Prospectus Supplement,
"Controlling Notes" means (i) if there is only one class of Notes, such class of
Notes and (ii) if there is more than one class of Notes (a) all Notes of the
most senior class of Notes then outstanding voting together as a single class
until such class of Notes have been paid in full, and (b) from and after the
payment in full of such senior class of Notes then outstanding, all Notes of the
next most senior class of Notes voting together as a single class until such
class of Notes have been paid in full.
42
<PAGE>
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 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
43
<PAGE>
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 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
44
<PAGE>
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 for a series of Securities will specify
whether there is Enhancement for any class of the Securities of a series and, if
so, the material terms of such Enhancement. Any Enhancement may be intended (i)
to enhance the likelihood of receipt by the Certificateholders, if any, and/or
the Noteholders, if any, of the full amount of principal and interest due
thereon, and to decrease the likelihood that the Certificateholders, if any,
and/or the Noteholders, if any, will experience losses, or (ii) to provide
protection against changes in interest rates or against other risks, or (iii) to
supplement the interest rate on the Contracts, in each case to the extent and
under the conditions specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, any Enhancement for a
class of Securities will not provide protection against all risks of loss and
will not guarantee repayment of the entire principal and interest thereon. If
losses occur which exceed the amount covered by any Enhancement or which are not
covered by any Enhancement, Securityholders will bear their allocable share of
such losses. In addition, if a form of Enhancement covers more than one class of
Securities of a series, Securityholders of any such class will be subject to the
risk that such Enhancement will be exhausted by the claims of Securityholders of
other classes.
Subordination. Unless otherwise specified in the related Prospectus
Supplement, the rights of Certificateholders to receive distributions of
interest and principal are subordinated to the rights of Noteholders to receive
payment in full of all amounts of interest and principal which the Noteholders
are entitled to receive on the related Distribution Date. Consequently, unless
otherwise specified in the related Prospectus Supplement, no distribution will
be made to the Certificateholders on any Distribution Date in respect of (i)
interest until the full amount of interest and principal on the Notes payable on
such Distribution Date has been distributed to the Noteholders, other than
payments from the applicable Enhancement, if any, and (ii) principal until the
Notes have been paid in full, other than distributions in respect of the
Principal Liquidation Loss Amount to the extent, if any, set forth in the
related Prospectus Supplement.
If and to the extent specified in the related Prospectus Supplement, the
rights of one or more classes of Notes of a series to receive distributions of
interest and principal may be subordinated to the rights of one or more other
classes of Notes of the same series to receive payment in full of all amounts of
interest and principal which are payable thereon on each Distribution Date.
Other Enhancement. The amounts and types of credit or cash flow enhancement
arrangements (each, an "Enhancement"), if any, with respect to each class of
Securities will be set forth in the related Prospectus Supplement. If and to the
extent provided in the related Prospectus Supplement, Enhancement may be in the
form of a financial guaranty insurance policy, letter of credit, CIT Limited
Guarantee, reserve fund, third party guarantee, cash collateral account,
derivative product, credit facility, yield supplement agreement,
overcollateralization, guaranteed investment contract, guaranteed rate
agreement, other agreements with respect to third party payments or other
support, or other form of credit or cash flow enhancement, or any combination
thereof, as may be described in the related Prospectus Supplement. If specified
in the related Prospectus Supplement, Enhancement for a class of Securities of a
series may cover one or more other classes of Securities in such series. Further
information regarding
45
<PAGE>
providers of Enhancement, including financial information when material, will be
included in the related Prospectus Supplement.
Financial Guaranty Insurance Policy. If so specified in the related
Prospectus Supplement, a financial guaranty insurance policy (each, a "Financial
Guaranty Insurance Policy") may be obtained and maintained for one or more
classes of Certificates or Notes of a series. The issuer of any Financial
Guaranty Insurance Policy (a "Financial Guaranty Insurer") will be described in
the related Prospectus Supplement. A copy of any such Financial Guaranty
Insurance Policy will be attached as an exhibit to the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, Financial
Guaranty Insurance Policies generally unconditionally and irrevocably guarantee
to Securityholders that an amount equal to each full and complete Insured
Payment will be received by an agent of the Trustee on behalf of
Securityholders, for distribution by the Trustee to each Securityholder. The
"Insured Payment" will equal the full amount of the distributions of principal
and interest to which Securityholders are entitled plus any other amounts
specified in the related Prospectus Supplement.
The specific terms of any Financial Guaranty Insurance Policy will be as
set forth in the related Prospectus Supplement. Financial Guaranty Insurance
Policies may have limitations including (but not limited to) limitations on the
Financial Guaranty Insurer's obligation to guarantee the Seller's or the
Servicer's obligation to repurchase or substitute for any Contracts, to
guarantee any specified rate of prepayments or to provide funds to redeem
Securities on any specified date.
The Financial Guaranty Insurer may be subrogated to the rights of each
Securityholder to receive payments under the Securities to the extent of any
payments by such Financial Guaranty Insurer under the related Financial Guaranty
Insurance Policy.
Reserve Fund or Reserve Account. If so specified in the related Prospectus
Supplement, an account (a "Reserve Fund" or "Reserve Account") may be
established and funded by any combination of cash, one or more irrevocable
letters of credit, Eligible Investments, one or more derivative products,
amounts otherwise distributable to one or more classes of Securityholders or to
the owners of any Retained Yield, or any other instrument satisfactory to the
Rating Agency or Agencies. A Reserve Fund may be funded from the Available
Amount remaining on each Distribution Date after all amounts then due have been
paid to the Securityholders, the Servicer, and any provider of Enhancement. In
addition, with respect to any series of Securities as to which Enhancement
includes a letter of credit or a derivative product, if so specified in the
related Prospectus Supplement, under certain circumstances the remaining amount
of the letter of credit may be drawn by the Owner Trustee or the termination
payment under a derivative product may be demanded by the Owner Trustee, and in
each case deposited in a Reserve Fund. Funds in a Reserve Fund will be applied,
invested and maintained in the manner and under the conditions specified in such
Prospectus Supplement. Amounts in a Reserve Fund may be distributed to
Securityholders, applied to reimburse the Servicer for outstanding advances, or
may be used for other purposes, in the manner and to the extent specified in the
related Prospectus Supplement. In the event that a Reserve Fund is funded
through the application of the Available Amount remaining on each Distribution
Date after all amounts then due have been paid to the Securityholders, the
Servicer and any provider of Enhancement, it may be referred to as a "Spread
Account" or "Reserve Account." In the event that a Reserve Fund is applied to
supplement the monthly interest payments on certain Contracts, it may be
referred to as a "Yield Supplement Account." In the event that the Reserve Fund
is funded through the proceeds of a loan to the Trust by a third party lender,
it may be referred to as a "Cash Collateral Account." The related Prospectus
Supplement will specify whether any Reserve Fund will be established as part of
the Trust or held outside the Trust by a collateral agent or similar third party
(who may be a Trustee acting in a different capacity). The related Prospectus
Supplement will describe the required levels of funding of a Reserve Fund, the
circumstances under which a Reserve Fund may be applied to make distributions on
a class of Securities, and the circumstances in which funds in a Reserve Fund
may be released to persons other than Securityholders. A Trust may contain more
than one Reserve Fund, each of which may apply only to a specified class of
Securities or to specified Contracts.
46
<PAGE>
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
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.
47
<PAGE>
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 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
48
<PAGE>
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 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
49
<PAGE>
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 OWNER, THE
OWNER TRUSTEE, THE INDENTURE TRUSTEE, NOR ANY OF THE UNDERWRITERS WILL HAVE ANY
RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL PARTICIPANTS OR
EUROCLEAR PARTICIPANTS OR SECURITY OWNERS WITH RESPECT TO (1) THE ACCURACY OF
ANY RECORDS MAINTAINED BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT, (2) THE
PAYMENT BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY
SECURITY OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF, OR INTEREST ON, THE
SECURITIES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR EUROCLEAR
PARTICIPANT OF ANY NOTICE TO ANY SECURITY OWNER WHICH IS REQUIRED OR PERMITTED
UNDER THE TERMS OF THE INDENTURE OR THE TRUST DOCUMENTS TO BE GIVEN TO
SECURITYHOLDERS OR (4) ANY OTHER ACTION TAKEN BY DTC AS THE SECURITYHOLDER.
50
<PAGE>
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.
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
51
<PAGE>
(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;
(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;
52
<PAGE>
(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 thereon and
reductions thereto on such Distribution Date);
(xxiv) the amount, if any, by which the amount due to be distributed
to Noteholders (if applicable) and Certificateholders (if applicable)
exceeds the actual amount distributed on the related Distribution Date to
Noteholders (if applicable) and Certificateholders (if applicable),
respectively;
(xxv) if applicable, the amount of surplus to be distributed to the
Affiliated Owner, if any, after all payments have been made in respect of
the Securities, the Servicer Payment has been paid and all deposits to any
Reserve Fund and payments to a Credit Facility Provider have been made;
(xxvi) if applicable, the balance of the Paid-Ahead Account; and
(xxvii) such other information as may be specified in the related
Prospectus Supplement.
If a Limited Guarantee is issued by CIT with respect to a series of
Securities, the monthly and annual reports will include a statement to the
following effect: CIT is subject to the requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission. As a result of the
limited guarantee by CIT, information relating to CIT which is material will be
available through such reports and other information.
Within a reasonable period of time after the end of each calendar year, but
not later than the latest date permitted by law (where applicable law specifies
such date), the Trustee will mail to each person who at any time during such
calendar year shall have been a Securityholder, and received any payment on its
Security, a statement containing the relevant amounts described above for such
calendar year for the purposes of such Securityholder's preparation of federal
income tax returns. See "Certain Federal Income Tax Consequences."
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Trustees and Cede, as registered holder of the
Certificates and the Notes and the nominee of DTC. Certificate Owners and Note
Owners may receive copies of such reports upon written request, together with a
certification that they are Certificate Owners or Note Owners, as the case may
53
<PAGE>
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 Boats. On the Closing
Date and each Subsequent Transfer Date, the Seller will sell and assign to the
Trust, without recourse, all of its right, title and interest in and to the
Contracts, including its security interests in the Financed Boats. Unless
otherwise specified in the related Prospectus Supplement, certain of the
Contracts will be purchased by CITSF from CITCF-NY before they are sold to the
Company. The Company established a Selling Trust in 1996, and the Company and
its affiliates may in the future establish one or more additional Selling
Trusts. The Company has sold and assigned Contracts to the existing Selling
Trust, without recourse, which the Company purchased from CITSF, without
recourse (and which, in some cases, CITSF purchased from CITCF-NY, without
recourse). In the future, the Company may sell and assign Contracts, without
recourse, to the existing Selling Trust and one or more additional Selling
Trusts. The existing Selling Trust has funded its purchases of Contracts through
its issuance of securities secured by a security interest in the Contracts. A
Selling Trust will make no representations with respect to its Contracts, and
will have no obligations with respect to the Securities.
Each Contract will be identified in a schedule appearing as an exhibit to
the relevant Purchase Agreement and the Trust Documents (the "List of
Contracts") which includes, among other things, the Contract Rate, Initial
Cut-off Date Principal Balance and date of the last scheduled payment for each
Contract. The Owner Trustee or its designated agent will, concurrently with the
sale and assignment of the Initial Contracts to the Trust, either (i) execute,
authenticate and deliver the Securities to the Company in exchange for the
Initial Contracts transferred by the Company and/or the Selling Trsut (or the
Company on behalf of the Company and/or the Selling Trust) to the Trust, in
which event the Company and/or the Selling Trust will sell all or a portion of
the Securities to the Underwriters or (ii) execute, authenticate and deliver the
Securities to the Underwriters in exchange for the price specified in the
related Prospectus Supplement, and transfer to the Company and the Selling Trust
the respective prices for the Initial Contracts transferred by the Company and
the Selling Trust, respectively, to the Trust.
CITSF will make certain representations and warranties in the Trust
Documents with respect to each Initial Contract as of the Closing Date,
including, unless otherwise specified in the related Prospectus Supplement, that
(i) as of the Initial Cut-off Date, the most recent scheduled payment of
principal and interest was made by or on behalf of the related Obligor or was
not delinquent more than sixty days, unless otherwise specified in the related
Prospectus Supplement; (ii) no provision of a Contract has been waived, altered
or modified in any respect, except
54
<PAGE>
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
Boat in accordance with CITSF's normal requirements or, if the related Financed
Boat is not so covered by an Obligor's insurance, it is covered by a blanket
insurance policy maintained by CITSF or the Servicer; (vi) no Contract was
originated in or is subject to the laws of any jurisdiction whose laws would
prohibit (A) the transfer of the Contract to the Company under the Purchase
Agreements, (B) the transfer of the Contract to the Trust pursuant to the Trust
Documents, or (C) the ownership of the Contracts by the Trust; (vii) each
Contract complies with all requirements of law in all material respects; (viii)
no Contract has been satisfied, subordinated in whole or in part or rescinded,
and no Financed Boat has been released from the security interest of the related
Contract in whole or in part; (ix) each Contract creates a valid and enforceable
first priority security interest in favor of CITSF, CITCF-NY, or the related
Dealer or financial intermediary in the Financed Boat covered thereby (which
security interest, if in favor of the related Dealer or CITCF-NY, has been
assigned to CITSF), such security interest has been assigned by CITSF to the
Company and by the Company to the Trust (and, if and to the extent specified in
the related Prospectus Supplement, from CITSF to SPV, from SPV to a Selling
Trust and from the Selling Trust to the Trust), and all necessary action with
respect to such Contract has been taken to perfect the security interest in the
related Financed Boat in favor of CITSF or CITCF-NY; (x) all parties to each
Contract had capacity to execute such Contract; (xi) no Contract has been sold,
assigned or pledged by CITSF to any person other than the Company (or by the
Company (or, if and to the extent specified in the related Prospectus
Supplement, a Selling Trust) to any person other than the Trust) and, prior to
the transfer of the Contracts by CITSF to the Company and the transfer of the
Contracts by the Company to the Trust (and, if and to the extent specified in
the related Prospectus Supplement, by CITSF to SPV, by SPV to a Selling Trust
and by the Selling Trust to the Trust), CITSF or the Company, respectively, had
good and marketable title to each Contract, free and clear of any lien,
encumbrance, equity, loan, pledge, charge, claim or security interest, and was
the sole owner and had full right to transfer such Contract to the Company and
the Trust, respectively; (xii) as of the Initial Cut-off Date, there was no
default, breach, violation or event permitting acceleration under any Contract,
and no event which with notice and/or the expiration of any grace or cure period
would constitute a default, breach, violation or event permitting acceleration
under such Contract (except for payment delinquencies permitted by clause (i)
above), and CITSF has not waived any of the foregoing (except for payment
delinquencies permitted by clause (i) above); (xiii) there are no liens or
claims which have been filed for work, labor or materials affecting a Financed
Boat securing a Contract, which are or may be liens prior to or equal or
coordinate with the security interest of the Contract; (xiv) each Contract is a
fully-amortizing loan with interest at the stated Contract Rate and provides for
level payments over the term of such Contract; (xv) each Contract contains
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for realization against the collateral of the
benefits of the security (except as may be limited by creditors' rights
generally); (xvi) the description of each Contract set forth in the List of
Contracts is true and correct as of its date; (xvii) no Obligor is the United
States of America or any state or any agency, department, instrumentality or
political subdivision thereof; (xviii) if the Obligor is in the military
(including an Obligor who is a member of the National Guard or is in the
reserves) and the Contract is subject to the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Soldiers' and Sailors' Civil Relief Act"), or the
California Military Reservist Relief Act of 1991 (the "Military Reservist Relief
Act"), such Obligor has not made a claim to CITSF that (A) the amount of
interest on the Contract should be limited to 6% pursuant to the Soldiers' and
Sailors' Civil Relief Act during the period of such Obligor's active duty
status, or (B) payments on the Contract should be delayed pursuant to the
Military Reservist Relief Act, in either case unless a court has ordered
otherwise upon application of CITSF; (xix) there is only one original executed
copy of each Contract, which, immediately prior to the execution of the Trust
Documents, was in the possession of CITSF; (xx) the Contract is "chattel paper"
as defined in the New Jersey UCC; (xxi) the Contract satisfies the selection
criteria set forth in the related Prospectus Supplement; (xxii) all of the
right, title and interest of CITSF, the Company and, if applicable, CITCF-NY
(and, if and to the extent specified in the related Prospectus Supplement, the
Selling Trust), in the Contract has been validly sold, transferred and assigned
to the Trust and all filings necessary to evidence such sale, transfer and
conveyance have been made in all appropriate jurisdictions; and (xxiii) no
adverse selection procedure was utilized in selecting the Contracts for sale by
CITSF to the Company (and, if to the extent specified in the related Prospectus
Supplement, by CITSF to SPV or by SPV to a Selling Trust).
55
<PAGE>
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 Boats will consist of new and used boats,
boat motors and boat trailers.
Unless otherwise specified in the related Prospectus Supplement, under the
terms of the Trust Documents and subject to certain conditions specified in the
Trust Documents, CITSF will be obligated to repurchase from the Trust for the
Purchase Price (as defined below) any Contract (a "Repurchased Contract") not
later than ninety days after CITSF becomes aware, or eighty-five days after
CITSF's receipt of written notice from a Trustee or the Servicer, of a breach of
any representation or warranty by CITSF in the Trust Documents that materially
and adversely affects the Trust's interest in such Contract if such breach has
not been cured. CITSF shall effect such repurchase from the Trust by depositing
the Purchase Price for such Contract in the Collection Account on the Deposit
Date immediately following the determination that such Purchase Price is owed.
Unless otherwise specified in the related Prospectus Supplement, the "Purchase
Price" for any Contract will be the remaining principal amount outstanding on
such Contract on the date of repurchase, plus thirty days' interest thereon at
the Contract Rate on the Contract, and (ii) accrued and unpaid Servicing Fees
thereon at the Servicing Fee Rate to the date of such repurchase. Upon such
repurchase, the Trust shall transfer all right, title and interest in the
Contract to CITSF, free and clear of the lien of the applicable Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, this repurchase
obligation constitutes the sole remedy available to the Trust and the
Securityholders for a breach of a representation and warranty under the Trust
Documents with respect to the Contracts (but not with respect to any other
breach by CITSF of its obligations under the Trust Documents).
Unless otherwise specified in the related Prospectus Supplement, CITSF, the
Company and the Trust will treat each of the transfers of the Contracts from
CITSF to the Company and from the Company (and, if and to the extent specified
in the related Prospectus Supplement, a Selling Trust) to the Trust as a sale.
As a result of the sale of the Contracts by CITSF to the Company and by the
Company (and, if and to the extent specified in the related Prospectus
Supplement, a Selling Trust) to the Trust, the Contracts should not be part of
the assets of either CITSF or the Company and should not be available to their
respective creditors. However, in the event of the insolvency of CITSF or the
Company, it is possible that a trustee in bankruptcy, conservator or receiver
for, or a creditor of, CITSF or the Company, as the case may be, may assert that
the transaction between CITSF and the Company or between the Company (and, if
and to the extent specified in the related Prospectus Supplement, a Selling
Trust) and the Trust, as the case may be, was a pledge of the Contracts to
secure a loan, rather than a true sale. This position, if asserted, could
prevent timely receipt by the Trust of payments of amounts due on the Contracts
and, if accepted by a court, may result in delays or reductions in distributions
of principal and interest on the Securities. Since the Contracts will remain in
CITSF's possession and will not be stamped or otherwise marked to reflect the
sale and assignment to the Trust, the Trust's interest in the Contracts could be
defeated if a subsequent purchaser were to take physical possession of the
Contracts without knowledge of the sale and assignment. See "Certain Legal
Aspects of the Contracts."
If specified in the related Prospectus Supplement, the terms of the sale of
some or all of the Contracts from CITSF or the Seller or a Selling Trust or any
of them to the related Trust may provide for the retention by CITSF or the
Seller or such Selling Trust, as the case may be, of the right to receive a
portion of the interest accruing thereon (the "Retained Yield").
Custody of Contract Files
Unless otherwise specified in the related Prospectus Supplement, to reduce
administrative costs, each Trust will appoint CITSF as initial custodian of the
Contracts. Prior to the appointment of any custodian other than CITSF, the Trust
and such proposed successor custodian specified in the related Prospectus
Supplement shall enter into a
56
<PAGE>
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, if and to the extent specified in the related Prospectus Supplement,
by CITSF to SPV, by SPV to a Selling Trust and by the Selling Trust to the
Trust), and will not be segregated from the other installment sale contracts of
CITSF. The Obligors under the Contracts will not be notified of the transfer of
the Contracts to the Company or to the Trust. If, through inadvertence or
otherwise, any of the Contracts were sold to another party (or a security
interest therein were granted to another party) that purchased (or took such
security interest in) any of such Contracts in the ordinary course of its
business and took possession of such Contracts, the purchaser (or secured party)
would acquire an interest in the Contracts superior to the interest of the
related Trust if the purchaser (or secured party) acquired (or took a security
interest in) the Contracts for new value and without actual knowledge of such
Trust's interest. See "Certain Legal Aspects of the Contracts."
Accounts
For each Trust, the Servicer will establish and maintain with a Trustee one
or more accounts, in the name of such Trustee on behalf of the Securityholders
(the "Collection Account"), into which all payments made (after the Initial
Cut-off Date or the Subsequent Cut-off Date, as applicable) on or with respect
to the Contracts in the related Contract Pool will be deposited by the Servicer.
See "--Collections." The Servicer will establish and maintain with a Trustee (or
its designated agent) an account in the name of such Trustee on behalf of the
Certificateholders, if any, into which amounts released from the Collection
Account and any Enhancement for payment to the Certificateholders will be
deposited and from which distributions to the Certificateholders will be made
(the "Certificate Distribution Account"). The Servicer will establish and
maintain with the Indenture Trustee (or its designated agent) an account in the
name of the Indenture Trustee on behalf of the Noteholders, if any, into which
amounts released from the Collection Account and from any Enhancement for
payment to the Noteholders will be deposited and from which distributions to the
Noteholders will be made (the "Note Distribution Account"). If the related
Prospectus Supplement provides that the Contract Pool contains Precomputed
Contracts, the Servicer will establish and maintain with a Trustee (or its
designated agent) an account in the name of such Trustee on behalf of the
Securityholders, into which early payments by or on behalf of Obligors on
Precomputed Contracts which do not constitute scheduled payments, full
prepayments or certain partial prepayments that result in a reduction of an
Obligor's periodic payment below the scheduled payment as of the Initial Cut-off
Date or Subsequent Cut-off Date, as the case may be, will be deposited (the
"Paid-Ahead Account").
Amounts held in the Certificate Distribution Account and in such other
accounts as may be specified in the related Prospectus Supplement will not be
available to make payments of amounts due on the Notes, if any, and will not be
pledged to the Indenture Trustee as collateral security for the Notes.
Each Account will be an Eligible Account maintained with the Owner Trustee,
the Indenture Trustee and/or other depository institutions. "Eligible Account"
means any account which is (i) an account maintained with an Eligible
Institution; (ii) an account or accounts the deposits in which are fully insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the FDIC; (iii) a "segregated trust account" maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the benefit
of a Trustee, which depository institution or trust company has capital and
surplus (or, if such depository institution or trust company is a subsidiary of
a bank holding company system, the capital and surplus of the bank holding
company) of not less than $50,000,000 and the securities of such depository
institution (or, if such depository institution is a subsidiary of a bank
holding company system and such
57
<PAGE>
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.
Servicing Procedures
The Servicer will make reasonable efforts, consistent with the customary
servicing practices and procedures employed by the Servicer with respect to
Contracts owned or serviced by it, to collect all payments due with respect to
the Contracts and, in a manner consistent with the Trust Documents, will
continue such normal collection practices and procedures as it follows with
respect to comparable marine installment sale contracts that it services for
itself and others. See "Certain Legal Aspects of the Contracts." The Servicer
may sell the related Financed Boat securing a defaulted Contract at a public or
private sale, or take any other action permitted by applicable law. See "Certain
Legal Aspects of the Contracts." The proceeds of such realization (net of
expenses) will be deposited in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer shall keep in force throughout the term of the Trust Documents a
fidelity bond. Such fidelity bond shall have such deductibles, and be in such
form and amount as is generally customary among persons which service a
portfolio of marine contracts having an aggregate principal amount of
$100,000,000 or more and which are generally regarded as servicers acceptable to
institutional investors.
Purchase by the Servicer
A breach of certain covenants made by the Servicer in the Trust Documents
that materially and adversely affects the Trust's interest in any Contract will
require the Servicer to purchase such Contract for the Purchase Price, unless
such breach is cured within the period specified in the Trust Documents. Unless
otherwise specified in the related Prospectus Supplement, such covenants will
obligate the Servicer not to, except as permitted by the Trust Documents and in
accordance with the terms of such Contract and applicable law (i) release the
Financed Boat securing such Contract from the security interest granted by such
Contract, (ii) impair the rights of the Trust in such Contract or take any
action inconsistent with the Trust's ownership of such Contract, (iii) increase
the number of payments under such Contract, nor increase the principal amount of
such Contract which is used to finance the purchase price of the related
Financed Boat, nor extend or forgive payments on such Contract, and (iv) fail to
comply with the provisions of any insurance policy covering such Contract, if
the failure to comply would impair the protection or benefit to be afforded by
such insurance policy.
58
<PAGE>
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 Proceed that
would result from repossessing and liquidating the related Financed Boat.
Removal of Contracts
Except as otherwise specified herein or in the related Prospectus
Supplement, neither the Seller nor the Servicer will have the right to remove
any Contracts from the Contract Pool after the Closing Date. In certain
circumstances, CITSF or the Servicer may have the obligation to repurchase, or
CITSF may have the option to purchase, a Contract from the Trust, but all such
repurchases or purchases will be made at the Purchase Price.
Paid-Ahead Precomputed Contracts
Early payments by or on behalf of Obligors on Paid-Ahead Precomputed
Contracts which do not constitute scheduled payments, full prepayments, or
certain partial prepayments that result in a reduction of the Obligor's periodic
payment below the scheduled payment as of the Initial Cut-off Date or Subsequent
Cut-off Date, as the case may be, will be deposited into the Paid-Ahead Account
until such time as the paid-ahead payment becomes due. Until such time as
payments are transferred from the Paid-Ahead Account to the Collection Account,
they will not constitute collected interest or collected principal and will not
be available for distribution to the Securityholders. Unless otherwise specified
in the related Prospectus Supplement, paid-ahead amounts with respect to
Paid-Ahead Precomputed Contracts may be retained by the Servicer until the
applicable Deposit Date so long as the requirements for monthly deposits as
described under "ACollections" are met.
Servicing Compensation
With respect to each series of the Securities, the Servicer will be
entitled to receive, out of collections on the Contracts, a monthly fee (the
"Servicing Fee") for each Due Period, payable on the following Distribution
Date, equal, unless otherwise specified in the related Prospectus Supplement, to
the sum of (i) one-twelfth of the product of the percentage specified in the
related Prospectus Supplement (the "Servicing Fee Rate") and the Pool Balance as
of the last day of the second preceding Due Period (or, in the case of the first
Distribution Date, as of the Initial Cut-off Date) and (ii) any investment
earnings (net of investment expenses and losses) on amounts on deposit in the
Collection Account, the Paid-Ahead Account, if any, the Note Distribution
Account, if any, and the Certificate Distribution Account, if any; provided,
however, that the Servicing Fee Rate applicable to a Trust may be increased to a
rate (or maximum rate) specified in the related Prospectus Supplement if CITSF
or an affiliate thereof is not the Servicer. Payments to the Servicer of such
amounts will compensate the Servicer for performing the functions of a third
party servicer of marine contracts as an agent for the Trust, including
collecting and posting all payments, responding to inquiries of Obligors,
investigating delinquencies, reporting federal income tax information to
Obligors, monitoring the collateral in cases of Obligor default and handling the
foreclosure or other liquidation of the Financed Boat in appropriate instances
(subject to reimbursement of its expenses incurred in connection with such
foreclosure, liquidation or other realization on the Contracts).
59
<PAGE>
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 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
60
<PAGE>
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 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
61
<PAGE>
Account attributable to collections or deposits made in respect of such
Contracts (including any late fees, prepayment charges, extension fees or other
administrative fees or similar charges allowed by applicable law with respect to
the Contracts ("Late Fees")) during the Due Period preceding the Distribution
Date, and (ii) the Purchase Price for any Contract repurchased by CITSF as a
result of breaches of certain representations and warranties or purchased by the
Servicer as a result of breaches of certain covenants and any Monthly Advances
and any Non-Reimbursable Payments made by the Servicer, if such Purchase Price,
Monthly Advance or Non-Reimbursable Payment is paid on or prior to the Deposit
Date immediately preceding such Distribution Date, over (B) the sum of the
following amounts (to the extent that the Servicer has not already withheld such
amounts from collections on the Contracts): (i) any repossession profits on
liquidated Contracts, Liquidation Expenses (as defined in the Trust Documents)
incurred and taxes and insurance advanced by the Servicer in respect of Financed
Boats that are reimbursable to the Servicer under the Trust Documents; (ii) any
amounts incorrectly deposited in the Collection Account; (iii) any amounts
deposited in the Paid-Ahead Account, if any, during the related Due Period; (iv)
net investment earnings on the funds in the Collection Account and the
Paid-Ahead Account, if any; and (v) any other amounts permitted to be withdrawn
from the Collection Account and the Paid-Ahead Account, if any, by the Servicer
(or to be retained by the Servicer from collections on the Contracts) pursuant
to the Trust Documents.
With respect to each Trust, beginning on the Distribution Date specified in
the related Prospectus Supplement, distributions of principal and interest (or,
where applicable, of principal or interest only) on each class of Securities
entitled thereto will be made by the Owner Trustee or the Indenture Trustee, as
applicable, to the Certificateholders, if any, and the Noteholders, if any, from
the Available Amount. Unless otherwise specified in the related Prospectus
Supplement, the Servicing Fee and any additional servicing compensation will be
paid from the Available Amount prior to distributions to the Securityholders.
The timing, calculation, allocation, order, source, priorities of and
requirements for all distributions to each class of Certificateholders, if any,
and all payments to each class of Noteholders, if any, will be set forth in the
related Prospectus Supplement.
Net Deposits
Unless otherwise specified in the related Prospectus Supplement, as an
administrative convenience, the Servicer will be permitted to make deposits of
collections, Monthly Advances, Non-Reimbursable Payments and the aggregate
Purchase Price of Contracts for, or with respect to, a Due Period net of
distributions to be made to the Servicer with respect to such Due Period
(including, without limitation, the Servicing Fee, reimbursement of
nonrecoverable Monthly Advances and amounts to be deducted in the definition of
"Available Amount" set forth under "--Distributions" above). The Servicer,
however, will account to the Trustees and to the Securityholders as if all such
deposits and distributions were made on an aggregate basis for each type of
payment or deposit.
Statements to Trustees and Trust
Unless otherwise specified in the related Prospectus Supplement, on or
before each Determination Date, the Servicer will provide to the Trustees, any
paying agent and the Affiliated Owner (if any) as of the close of business on
the last day of the preceding Due Period, a statement setting forth
substantially the same information as is required to be provided in the periodic
reports provided to Securityholders described above under "Certain Information
Regarding The Securities--Statements to Securityholders." Each such report will
be accompanied by a statement from an appropriate officer of the Servicer
certifying the accuracy of such report and stating that the Servicer has not
defaulted in the performance of its obligations under the Trust Documents (or,
if such default has occurred, describing each such default).
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require that on or before March 31 of each year, the Servicer
will deliver to the Owner Trustee a report of independent public accountants
which opines on, at a minimum, the servicing entity's compliance with the
minimum servicing standards set forth in the Uniform Single Attestation Program
for Mortgage Bankers (in accordance with the 1995 revisions made thereto). The
Trust Documents will require that such examination and report of independent
public accountants be prepared in accordance with the requirements set forth in
the Uniform Single Attestation Program for Mortgage Bankers (in accordance with
the 1995 revisions made thereto).
62
<PAGE>
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 gross
negligence in the performance of duties or by reason or reckless disregard of
obligations and duties thereunder. In addition, unless otherwise specified in
the related Prospectus Supplement, the Trust Documents will provide that the
Servicer is under no obligation to appear in, prosecute or defend any legal
action which arises under the Trust Documents and that, in its opinion, may
cause it to incur any expense or liability. The Servicer may, however, undertake
any reasonable action that it may deem necessary or desirable in respect of the
Trust Documents and the rights and duties of the parties thereto and the
interests of the Securityholders thereunder. In the event that the Servicer or
the Company, in its discretion, undertakes any action which it deems necessary
or desirable in connection with its rights and duties under the Trust Documents
or the interests of the Securityholders thereunder, the legal expenses and costs
of such action and any liability resulting therefrom will be expenses, costs and
liabilities of the Trust, and the Servicer and the Company will be entitled to
be reimbursed therefor out of the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, or any corporation or other entity resulting from any merger,
conversion or consolidation to which the Servicer is a party, or any corporation
or other entity succeeding to the business of the Servicer, which corporation or
other entity assumes the obligations of the Servicer, will be the successor of
the Servicer under the Trust Documents.
The Servicer may sell, transfer, assign or convey its rights as Servicer to
any entity qualified to act as servicer under the Trust Documents, upon written
notice to the Trustees and the Rating Agencies, without the consent of the
Securityholders, provided that the Rating Agency Condition is satisfied.
Physical Damage Insurance
Unless otherwise specified in the related Prospectus Supplement, the
Servicer may, but will not be obligated to, enforce its rights under the
Contracts to require the Obligors to maintain physical damage insurance, in
accordance with the Servicer's customary practices and procedures with respect
to comparable new or used boats financed by installment sale contracts or loans
that it services for itself or others. Unless otherwise specified in the related
Prospectus Supplement, if an Obligor fails to maintain such insurance, the
Servicer will not be obligated to obtain such physical damage insurance and
advance such premiums for such insurance on behalf of such Obligor. If the
Servicer obtains such physical damage insurance and advances such premiums for
such insurance on behalf of such Obligor, such insurance policy will name the
Servicer as an additional insured and loss payee (such insurance being referred
to herein as "Force-Placed Insurance"). Such Force-Placed Insurance and any
commissions or finance charges collected by the Servicer in connection therewith
shall be, to the extent permitted by law, in an amount in accordance with
customary servicing practices and procedures, but in no event in an amount
greater than the outstanding principal balance of the related Contract or, if
such insurance also covers the interest of the related
63
<PAGE>
Obligor in the Financed Boat, no greater than the greater of the outstanding
principal balance of the related Contract and the value of the Financed Boat, or
such lesser amount permitted by applicable law. The Servicer shall be required
to disclose to the related Obligor all information with respect to such
Force-Placed Insurance, commissions and finance charges as required by
applicable law.
The Servicer does not, under its customary servicing practices and
procedures, obtain Force-Placed Insurance when the principal balance of the
related Contract falls below the level or levels periodically established in
accordance with such customary servicing practices and procedures. In accordance
with such customary servicing practices and procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or arrange
other methods of protection of the Financed Boats that it deems necessary or
advisable, provided that the Servicer determines that such actions do not
materially and adversely affect the interests of the Securityholders.
The Servicer may elect to make advances ("Insurance Advances") to an
Obligor to finance insurance premiums related to the Financed Boat. Any such
Insurance Advances may be secured by the related Financed Boat.
Any portion of the principal balance of a Contract attributable to
Insurance Advances or premiums for Force-Placed Insurance acquired after the
Initial Cut-off Date or the Subsequent Cut-off Date, as the case may be, will
not be owned by the Trust, and amounts allocable thereto will not be available
for distribution in respect of the Securities. Unless otherwise designated by
the Obligor, the Servicer will not allocate payments by the Obligor to pay
Insurance Advances or Force-Placed Insurance premiums added to the Contracts
after the Initial Cut-off Date or Subsequent Cut-off Date, as the case may be,
if any amount of principal or interest is due but unpaid on the Contracts. The
Servicer shall not deposit payments posted with respect to such Insurance
Advances or Force-Placed Insurance in the Collection Account and shall instead
promptly pay such amounts to an account of the Servicer maintained for that
purpose. In the event that an Obligor under a Contract with respect to which the
Servicer has made Insurance Advances or obtained Force-Placed Insurance makes
scheduled payments under the Contract, but fails to make scheduled payments of
such Insurance Advances or Force-Placed Insurance as due, and the Servicer has
determined that eventual payment of such amount is unlikely, the Servicer may,
but shall not be required to, take any action available to it, including
determining that the related Contract is a defaulted Contract; provided,
however, that any net liquidation proceeds with respect to such Contract shall
be applied first to the accrued and unpaid interest at the Contract Rate, then
to the principal amount outstanding, and the remainder, if any, to repayment of
any such Insurance Advances or Force-Placed Insurance premiums added to the
Initial Contracts after the Initial Cut-off Date or to any Subsequent Contracts
after the related Subsequent Cut-off Date.
Event of Termination
Unless otherwise specified in the related Prospectus Supplement, an "Event
of Termination" under the Trust Documents will consist of (i) any failure by the
Servicer to make any deposit into an account required to be made under the Trust
Documents which failure continues unremedied for five (5) Business Days after
the Servicer becomes aware that such deposit was required; (ii) any failure by
the Servicer duly to observe or perform in any material respect any other of its
covenants or agreements in the Trust Documents (other than those described in
clause (i)) which materially and adversely affects the rights of the
Securityholders and which continues unremedied for 60 days after the giving of
written notice of such failure; (iii) any assignment or delegation by the
Servicer of its duties or rights under the Trust Documents, except as
specifically permitted under the Trust Documents, or any attempt to make such an
assignment or delegation; (iv) certain events of insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings regarding the
Servicer; or (v) any disqualification of the Servicer as an Eligible Servicer
(as defined in the Trust Documents). "Notice" as used herein means notice to the
Servicer by the Trustees or the Company, or to the Company, the Servicer and the
Trustees by the Noteholders holding not less than 25% of the aggregate
outstanding principal amount of the Controlling Notes issued by such Trust (or,
if no Notes of such series are outstanding, the Certificateholders holding not
less than 25% of the outstanding Certificate Balance of such Trust).
64
<PAGE>
Rights Upon Event of Termination
Unless otherwise specified in the related Prospectus Supplement, as long as
an Event of Termination under the Trust Documents remains unremedied, the
Indenture Trustee (or, if no Notes of the series are outstanding, the Owner
Trustee) may, and at the written direction of the holders of related Notes
evidencing not less than a majority of the aggregate outstanding principal
amount of the Notes issued by such Trust (or, if no Notes of such series are
outstanding, the holders of related Certificates evidencing not less than a
majority of the Certificate Balance of such Trust), will, unless prohibited by
applicable law, terminate all (but no less than all) of the rights and
obligations of the Servicer with respect to a Trust under the Trust Documents
and in and to the Contracts, and the proceeds thereof, whereupon (subject to
applicable law) all authority and power of the Servicer under the Trust
Documents, whether with respect to the Contracts, the Contract Files or
otherwise, will pass to and be vested in the Indenture Trustee (or, if no Notes
of the series are outstanding, such authority will pass to and be vested in the
Owner Trustee); provided, however, that neither the Indenture Trustee (or, if no
Notes of the series are outstanding, the Owner Trustee) nor any successor
servicer will assume any obligation of CITSF to repurchase Contracts for
breaches of representations or warranties, and the Indenture Trustee (or, if no
Notes of the series are outstanding, the Owner Trustee) or the successor
Servicer will not be liable for any acts or omissions of the Servicer occurring
prior to a transfer of the Servicer's servicing and related functions or for any
breach by the Servicer of any of its obligations contained in the Trust
Documents. Notwithstanding such termination, the Servicer will be entitled to
payment of certain amounts payable to it for services rendered prior to such
termination. No such termination will affect in any manner CITSF's obligation to
repurchase certain Contracts for breaches of representations or warranties under
the Trust Documents. In the event that the Owner Trustee would be obligated to
succeed the Servicer but is unwilling or unable so to act, it may appoint, or
petition to a court of competent jurisdiction for the appointment of, a Servicer
which meets the requirements for an Eligible Servicer under the Trust Documents.
Pending such appointment, such Trustee is obligated to act in such capacity,
unless it is prohibited by law from so acting. The Indenture Trustee (or, if no
Notes of the series are outstanding, the Owner Trustee) and such successor may
agree upon the servicing compensation to be paid, which in no event, without
written consent of not less than 66 2/3% in principal amount of the related
Securityholders, may be greater than the compensation to CITSF as Servicer under
the Trust Documents.
Waiver of Past Defaults
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, the holders of Notes evidencing not less than a
majority of the aggregate outstanding principal amount of the Controlling Notes
(or the holders of the Certificates evidencing not less than a majority of the
Certificate Balance of such series, in the case that all of the Notes have been
paid in full and the Indenture has been discharged in accordance with its terms)
may, on behalf of all such Noteholders and Certificateholders, waive any default
by the Servicer in the performance of its obligations under the Trust Documents
and its consequences, except an Event of Termination in making any required
deposits to or payments from any of the accounts in accordance with the Trust
Documents. No such waiver will impair such Noteholders' or Certificateholders'
right with respect to subsequent defaults.
Amendment
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents may be amended by the parties thereto and, in the event that such
amendment affects the Indenture Trustee, the Indenture Trustee, without prior
notice to or the consent of the related Securityholders (i) to correct manifest
error or cure any ambiguity; (ii) to correct or supplement any provision therein
which may be inconsistent with any other provision therein; (iii) to add or
amend any provision as requested by the Rating Agencies to maintain or improve
the rating of the Securities; (iv) to add to the covenants, restrictions or
obligations of the Company, the Servicer or the Owner Trustee or to provide for
the delivery of or substitution for an Enhancement or a Servicer Letter of
Credit; (v) to evidence and provide for the acceptance of the appointment of a
successor trustee with respect to the property owned by the related Trust and
add to or change any provisions as shall be necessary to facilitate the
administration of the trusts under the Trust Documents by more than one trustee;
(vi) to add, change or amend any provision to maintain the related Trust as an
65
<PAGE>
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.
Termination
Unless otherwise specified in the related Prospectus Supplement, the
obligations of the Servicer, the Company, the Affiliated Owner, if any, and the
Trustees pursuant to the Trust Documents for a series of the Securities will
terminate upon the earliest to occur of (i) the maturity or other liquidation of
the last related Contract and the disposition of any amounts received upon
liquidation of any property remaining in the related Trust, (ii) the payment to
Securityholders of the series of all amounts required to be paid to them
pursuant to the Trust Documents, (iii) the occurrence of either event described
below, and (iv) as otherwise required by law, as described in the Trust
Documents.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, in order to avoid excessive administrative
expenses, CITSF will be permitted at its option to purchase from the Trust, on
any Distribution Date on which the Pool Balance as of the last day of the
related Due Period is less than or equal to a percentage specified in the
related Prospectus Supplement of the Initial Pool Balance, all remaining related
Contracts at a price equal to the aggregate Purchase Price for the Contracts
(including defaulted Contracts), plus the appraised value of any other property
held by the Trust (less liquidation expenses). CITSF will give notice to the
Trustees and the Depository of the exercise of such option no later than the
Determination Date succeeding such Due Period and will deposit the amount
required to purchase such Contracts on the Deposit Date succeeding such Due
Period. Exercise of such right will effect early retirement of the Securities.
Unless otherwise specified in the related Prospectus Supplement, the "Initial
Pool Balance" equals the sum of (i) the Pool Balance as of the Initial Cut-off
Date, and (ii) the aggregate principal balance of all Subsequent Contracts added
to the Trust as of their respective Subsequent Cut-off Dates.
Unless otherwise specified in the related Prospectus Supplement, within ten
days after the first Distribution Date on which the Pool Balance as of the last
day of the related Due Period is less than or equal to a percentage specified in
the related Prospectus Supplement of the Initial Pool Balance, the Indenture
Trustee (or, if the Notes have been paid in full and the Indenture has been
discharged in accordance with its terms, the Owner Trustee) shall solicit bids
for the purchase of the Contracts remaining in the Trust. In the event that
satisfactory bids are received as described below, the sale proceeds will be
distributed to Securityholders on the second Distribution Date succeeding such
Due Period. Any purchaser of the Contracts must agree to the continuation of
CITSF as Servicer on terms substantially similar to those in the Trust
Documents. Any such sale will effect early retirement of the Securities.
Unless otherwise specified in the related Prospectus Supplement, such
Trustee must receive at least two bids from prospective purchasers that are
considered at the time to be competitive participants in the market for marine
installment sale contracts. The highest bid may not be less than the fair market
value of such Contracts and must equal or exceed the sum of (i) the greater of
(a) the aggregate Purchase Price for the Contracts (including defaulted
Contracts) plus the appraised value of any other property held by the Trust
(less liquidation expenses), or (b) an amount that when added to amounts on
deposit in the Collection Account available for distribution to Securityholders
for such second succeeding Distribution Date would result in proceeds sufficient
to distribute to
66
<PAGE>
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 termination to each Securityholder of
record. The final distribution to each Securityholder will be made only upon
surrender and cancellation of such holder's Securities at any office or agency
of such Trustee specified for such purpose. Any funds remaining in the Trust,
after such Trustee has taken certain measures to locate a Securityholder and
such measures have failed, will be distributed to the Affiliated Owner, if any,
or as specified in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
marine contracts, which are general in nature. Since such legal aspects are
governed by applicable state law (which laws may differ substantially), the
summaries do not purport to be complete nor to reflect the laws of any
particular state, nor to encompass the laws of all states in which the security
for the Contracts is situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Contracts.
General
As a result of the assignment of the Contracts to the Trust, each Trust
will succeed collectively to the rights (including the right to receive payment
on the Contracts), and will assume the obligations, of CITSF under the related
Contracts. Each Contract evidences both (a) the obligation of the obligor to
repay the loan evidenced thereby, and (b) the grant of a security interest in
the Financed Boat to secure repayment of such loan. Certain aspects of both
features of the Contracts are described more fully below.
The Contracts are "chattel paper" as defined in the Uniform Commercial Code
(the "UCC") as in effect in the various states of origination of the Contracts.
Pursuant to the UCC, the sale of chattel paper is treated in a manner similar to
perfection of a security interest in chattel paper. Under the Trust Documents,
the Servicer will retain possession of the Contracts as custodian for the Owner
Trustee, and will make an appropriate filing of a UCC financing statement in New
Jersey to perfect the sale of the Contracts by the Company (and, if and to the
extent specified in the related Prospectus Supplement, a Selling Trust) to the
Owner Trustee. The Contracts and the related certificates of title will not be
stamped to reflect their assignment from CITCF-NY to CITSF, from CITSF to the
Company or from the Company to the Trust (or, if and to the extent specified in
the related Prospecus Supplement, from CITSF to SPV, from SPV to a Selling Trust
and from the Selling Trust 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.
67
<PAGE>
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 (or, if and to the extent
specified in the related Prospectus Supplement, SPV), that immediately prior to
the transfer and assignment of the Contract to the Company (or, if and to the
extent specified in the related Prospectus Supplement, SPV), 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 (or, if and to the extent specified in the related
Prospectus Supplement, SPV) 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 (or,
if and to the extent specified in the related Prospectus Supplement, SPV), 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 Boats
General. The Contracts are installment sale contracts that evidence the
credit sale of boats by Obligors. The Contracts also constitute personal
property security agreements and include grants of security interests in the
related boats under the UCC. Perfection rules relating to security interests in
boats are governed in a majority of states under state boat certificate of title
statutes. In states in which perfection of a security interest in a particular
boat is not governed by a certificate of title statute, perfection is usually
accomplished by filing pursuant to the provisions of the UCC. Each Contract
prohibits the sale or transfer of the related Financed Boat without the consent
of CITSF.
Perfection of Sale. Pursuant to the Purchase Agreement, CITSF will sell and
assign its interests in the Contracts, including the security interests in the
Financed Boats granted thereunder, to the Company and, pursuant to the Trust
Documents, the Company (and, if and to the extent specified in the related
Prospectus Supplement, a Selling Trust) will sell and assign its interest in the
Contracts, including the security interests in the Financed Boats granted
thereunder, to the Owner Trustee. UCC financing statements will be filed to
perfect the sale of (i) CITSF's interests in the Contracts to the Company and
(ii) the Company's interests (and, if and to the extent specified in the related
Prospectus Supplement, the interest of such Selling Trust) in the Contracts to
the Trust.
Perfection of CITSF's or CITCF-NY's Security Interest in the Financed
Boats. The Contracts represent marine retail installment sale contracts and
direct loans that finance the sale or ownership of Financed Boats. When
originated, each Contract was secured by a security interest in the Financed
Boat financed thereby. Each such security interest was required to be perfected
under applicable state law and, in the case of certain Financed Boats described
below, under applicable federal law. Generally, security interests in boats may
be perfected in one of three ways: (i) in "title" states, by notation of the
secured party's lien on the certificate of title issued by an applicable state
motor vehicle or wildlife department or other appropriate state agency; (ii) in
non-title states, by filing a UCC-1 financing statement; and (iii) in respect of
a boat eligible for documentation under federal law, by filing all documents
necessary to create a first preferred ship mortgage (a "Preferred Mortgage")
under the Ship Mortgage Act of 1920 (1988 Recodification) ss. 30101 et seq. (the
"Ship Mortgage Statutes"). Vessels that meet the federal five net ton standard
(determined in a manner prescribed by 46 CFR Part 69 (Measurement of Vessels))
qualify for documentation under federal law ("U.S. Documentable Boats").
However, federal documentation of vessels used exclusively for recreational
purposes is discretionary.
CITSF has policies and procedures in place to ensure that all actions
necessary under the laws of the states in which the Financed Boats were located
at the time of origination of the Contracts were taken to perfect the
originators' security interests in the Financed Boats. In addition, it is
CITSF's practice to require that substantially all Financed Boats of 27 feet or
more in length be federally documented and that a Preferred Mortgage on each
such boat be filed. CITSF's policy also requires prior perfection of a security
interest in any such boat under applicable state law in order to protect itself
prior to completion of federal documentation. If a security interest in a boat
is
68
<PAGE>
initially perfected by a UCC-1 filing or notation on a title under state law and
such boat subsequently becomes a federally documented vessel, the holder of such
security interest could lose the priority of its security interest in such boat
under state law to the holder of a subsequently perfected Preferred Mortgage
covering such boat.
In the event that the originator of a Contract failed to perfect the
security interest in a Financed Boat (for example, by complying with the UCC
rather than the applicable certificate of title statute, or by failing to comply
with applicable state title law, or the Ship Mortgage Statutes or applicable
United States Coast Guard (the "Coast Guard") regulations), such originator
would not have a perfected first priority security interest in such Financed
Boat. In this event, if third party liens equal or exceed the value of the
Financed Boat, the only recourse of the Trust would be against the Obligor on an
unsecured basis, if applicable, against a Dealer or financial intermediary
pursuant to its repurchase obligation or against the Seller.
Pursuant to the terms of the Sale and Servicing Agreement, the Seller will
assign its security interest in the Financed Boat to the Trust and the Trust
will pledge its security interest in the Financed Boats to the Indenture
Trustee. However, due to administrative burden and expense, none of the Seller,
the Servicer, the Trust or any previous owner of the Contract will amend the
certificates of title or file assignments of the UCC-1 financing statements with
respect to the Financed Boats to identify the Trust or the Indenture Trustee as
the new secured party, nor will the Seller or the Owner Trustee execute or file
any transfer instruments with the appropriate governmental authorities. In a
majority of states, the assignment of a Contract together with the related
security interest is, as a matter of state law, an effective conveyance of such
security interest without amendment of any lien noted on the related
certificates of title or of any UCC-1 financing statements or the filing of any
transfer instruments with the appropriate governmental authorities, and the new
owner of the Contract succeeds to the original secured party's rights as owner
of the Contract against creditors of the Obligor. In certain title states, in
the absence of such certificate of title amendment or assignment of record to
reflect the successive assignments of the security interest in the Financed
Boat, the related Seller (if not the secured party of record), the Trust and/or
the Indenture Trustee may not have a perfected security interest in the related
Financed Boat. Under the Ship Mortgage Statutes, in the absence of an assignment
of record of a Preferred Mortgage, the assignment of the related Contract by
itself will not convey the perfected preferred mortgage lien on the Financed
Boat subject to such Preferred Mortgage and neither the Seller (if not the
secured party of record) nor the Trust will have a perfected security interest
in such Financed Boat.
Due to administrative burden and expense, assignments will not be made of
all Preferred Mortgages relating to the Contracts. Under the Ship Mortgage
Statutes, in the absence of an assignment of a Preferred Mortgage, or in the
event an assignment of a Preferred Mortgage is not effective, the Trust will not
have a perfected security interest in the related Financed Boat. In such case,
if third party liens equal or exceed the value of such Financed Boat, the only
recourse of the Trust would be against the related Obligor on an unsecured
basis.
Except as described above, in the absence of fraud or forgery by a boat
owner or administrative error by state recording officials or the Coast Guard,
the notation of the lien of the originator of each Contract on the certificate
of title with respect to the related Financed Boat, the filing of a UCC-1
financing statement against the Obligor or the filing of an assignment of the
related Preferred Mortgage, if any, as described above will be sufficient to
protect the Trust against the rights of subsequent purchasers of such Financed
Boat or subsequent lenders who take a security interest in such Financed Boat.
If there are any Financed Boats as to which the originator of the related
Contract has failed to perfect the security interest assigned to the Trust, (i)
such security interest would be subordinate to, among others, holders of
perfected security interests in such Financed Boats and (ii) subsequent
purchasers of such Financed Boats would take possession free and clear of such
security interest. There is also a risk that, in not identifying the Trust as
the new secured party on the certificates of title or executing and filing of
transfer instruments with the Coast Guard or assignments of UCC-1 financing
statements with state officials, the security interest of the Trust or Indenture
Trustee could be released through fraud or negligence.
A security interest perfected by a Preferred Mortgage has a nationwide
scope and no further action is necessary when an obligor moves or the related
boat is relocated. Actions must be taken to maintain the perfection of security
interests in boats perfected under state law if the boat (in the case of a
"title" state) or the Obligor (in the case of a "UCC" state) moves to a state
other than the state in which such security interest was originally perfected.
Under
69
<PAGE>
the laws of most states, a perfected security interest in a Financed Boat
continues for four months after the Financed Boat is relocated in a new state
(from the state in which a financing statement was properly filed initially to
perfect the security interest or in which the certificate of title was issued)
and thereafter until the owner re-registers such Financed Boat in the new state.
Many "title" states require surrender of a certificate of title to re-register a
Financed Boat. Accordingly, to allow re-registration the Servicer must surrender
possession if it holds the certificate of title to a Financed Boat or, in the
case of a Financed Boat registered in a state which provides for notation of
liens on certificates of title but not possession of the certificates of title
by the lienholder, the Servicer would typically receive notice of surrender if
the security interest in the Financed Boat is noted on the certificate of title.
Accordingly, in such cases, the Servicer should have the opportunity to
re-perfect the security interest in the Financed Boat in the state of
relocation. In states that do not issue a certificate of title at registration
of a Financed Boat, re-registration in a different state could defeat
perfection. In the ordinary course of servicing its portfolio of marine loans,
the Servicer takes steps to effect such re-perfection upon receipt of notice of
re-registration or information from the Obligor as to relocation. Similarly,
when an Obligor sells a titled Financed Boat showing a lienholder, unless the
Servicer surrenders possession of the certificate of title, it generally will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Contract before release of
the lien. Under the Sale and Servicing Agreement, the Servicer is obligated to
take such steps, at the Servicer's expense, as are necessary to maintain
perfection of security interests in the Financed Boats.
Under the laws of many states, certain possessory liens for repairs
performed on a Financed Boat and storage, as well as certain rights in favor of
federal and state governmental authorities arising from the use of a boat in
connection with illegal activities, may take priority over a security interest
perfected under state law. Certain U.S. federal tax liens may also have priority
over the lien of a secured party. Under the Ship Mortgage Statutes, a Preferred
Mortgage supersedes a perfected state law security interest, a state created
lien or forfeiture rights (so long as the secured party is innocent of
wrongdoing) but is subordinate to preferred maritime liens. The Seller will
represent in the Sale and Servicing Agreement that, as of the Initial Cut-off
Date or Subsequent Cut-off Date, as the case may be, it has no knowledge of any
such liens with respect to any Financed Boat related to a Contract. However,
such liens could arise at any time during the term of a Contract. No notice will
be given to the Owner Trustee or the Indenture Trustee in the event such a lien
arises.
Possible Loss of Perfection or Priority of Trust's Security Interest in
Financed Boats or Proceeds Thereof. The certificate of title names CITSF (or
CITCF-NY) as the secured party. Because of the administrative burden and
expense, neither CITCF-NY, CITSF, the Company nor the Trust will amend any
certificate of title to note the lien of the Trust as the new secured party on
the certificate of title relating to the Financed Boat nor will any such entity
execute and file any transfer instruments (including, among other instruments,
UCC-3 assignments). In some states, in the absence of such an amendment or
execution, the assignment to the Trust of a security interest in Financed Boats
may not be perfected, such assignment of the security interest to the Trust may
not be effective against creditors or a trustee in bankruptcy of CITSF or
CITCF-NY, which continue to be specified as lienholder on any certificates of
title or as secured party of any UCC filing.
(i) California. A security interest in a boat registered in the State of
California (in which the greatest number of Financed Boats are currently
registered) may be perfected only by depositing with the Department of Motor
Vehicles a properly endorsed certificate of title for the boat showing the
secured party as "legal owner" thereon or if the boat has not been previously
registered, an application in usual form for an original registration together
with an application for registration of the secured party as "legal owner."
However, under the California Vehicle Code, a transferee of a security interest
in a boat is not required to reapply to the Department of Motor Vehicles for a
transfer of registration when the interest of the transferee arises from the
transfer of a security agreement by the "legal owner" to secure payment or
performance of an obligation. Accordingly, under California law, an assignment
such as that under each of the Purchase Agreement and the Trust Documents is an
effective conveyance of CITSF's and the Company's (or, if and to the extent
specified in the related Prospectus Supplement, SPV's and the Selling Trust's),
perfected security interest, as the case may be, without such re-registration,
and under the Purchase Agreement the Company (or, if and to the extent specified
in the related Prospectus Supplement, SPV's and the Selling Trust) will succeed
to CITSF's, and under the Trust Documents the Trust will succeed to the
Company's (or, if and to the extent specified in the related Prospectus
Supplement, SPV's), rights as secured party.
70
<PAGE>
(ii) Other States. In most states, assignments such as those under the
Purchase Agreement and the Trust Documents are an effective conveyance of a
security interest without amendment of any lien noted on a boat's certificate of
title, and the assignee succeeds thereby to the assignor's rights as secured
party. However, in some states the Trust's security interest will be unperfected
because the Trust will not be noted as the secured party on the certificates of
title to the Financed Boats, and therefore the Trust's security interest would
be subordinate to, among others, subsequent purchasers of such Financed Boats
and holders of prior perfected security interests therein. However, in the
absence of fraud, forgery or administrative error, the notation of CITSF's or
CITCF-NY's lien on the certificates of title will be sufficient in most states
to protect the Trust against the rights of subsequent purchasers of a Financed
Boat, judgment creditors or other creditors who take a security interest in a
Financed Boat.
Continuity of Perfection. Under the laws of most states, a perfected
security interest in a boat continues for four months after the boat is moved to
a new state (from the state in which a financing statement was properly filed
initially to perfect the security interest or in which the certificate of title
was issued) and thereafter until the owner re-registers such boat in the new
state. A majority of states require surrender of a certificate of title to
obtain a new certificate of title for the boat. In those states (including
California) that call for return of the certificate of title to the holder of
the first security interest noted thereon, the secured party would learn of the
re-registration through the request from the obligor under the related marine
installment sale contract to surrender possession of the certificate of title.
In the case of boats registered in states providing for perfection of a lien by
notation of the lien on the certificate of title without possession of the
certificate of title by the secured party, the secured party would receive
notice of surrender from the state of re-registration if the security interest
were noted on the certificate of title. Thus, the secured party would have the
opportunity to re-perfect its security interest in the boat in the state to
which the boat is moved. However, these procedural safeguards will not protect
the secured party if through fraud, forgery or administrative error, the debtor
somehow procures a new certificate of title that does not note the secured
party's lien. Additionally, in states that do not require a certificate of title
for registration of a boat, re-registration could defeat perfection.
In the ordinary course of servicing the Contracts, CITSF will take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Financed
Boat, CITSF must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Contract before release of
the lien. Under the Trust Documents, the Servicer will be obligated to take
appropriate steps, at its own expense, to maintain perfection of a security
interest in the Financed Boats.
In most states, CITSF, as Servicer, will hold certificates of title
relating to the Financed Boats in its possession as custodian for the Trust
pursuant to the Trust Documents. In some states, the certificate of title is
held by the Obligor, but only after it is endorsed by the state motor vehicle
department with a notation of CITSF's lien. In the Trust Documents, CITSF, as
Servicer, will covenant that it will not release its security interest in the
Financed Boat securing any Contract except as contemplated by the Trust
Documents. CITSF, as Servicer, will also covenant that it will not impair the
rights of the Trust in the Contacts or take any action inconsistent with the
Trust's ownership of the Contracts, except as permitted by the Trust Documents.
A breach of either such covenant that materially and adversely affects the
Trust's interest in any Contract, would require the Servicer to purchase such
Contract unless such breach is cured within the period specified in the Trust
Documents.
Priority of Certain Liens Arising by Operation of Law. Under the laws of
California and of most states, liens for repairs performed on a boat and liens
for certain unpaid taxes take priority over even a first perfected security
interest in such boat. The Internal Revenue Code of 1986, as amended, also
grants priority to certain federal tax liens over the lien of a secured party.
The laws of certain states and federal law permit the confiscation of boats by
governmental authorities under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected security
interest in a confiscated boat. A Preferred Mortgage supersedes a perfected
state law security interest. However, under the Ship Mortgage Act, a Preferred
Mortgage is subordinate to preferred maritime liens. Therefore, certain
preferred maritime liens will have priority over security interests in Boats
perfected under state and federal law. CITSF will represent and warrant in the
Trust Documents that, as of the Closing Date, there were no liens or claims
which have been filed for work, labor or materials affecting a Financed Boat
securing a Contract which are or may be liens prior or equal to the lien of the
Contract. However, liens for repairs or taxes could arise at
71
<PAGE>
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.
The priority of the Preferred Mortgages and state security interests in the
Financed Boats may be subject to: (i) maritime liens arising under federal
statutory or common-law for captain's or crew's wages, tort claims (so-called
"general average" claims) and salvage claims, all of which take priority over
even a preferred ship mortgage lien and a state security interest, and (ii)
maritime liens arising under federal law or state laws for repair, storage or
supplies which are subordinate to a preferred ship mortgage lien but typically
have priority over state security interests under federal law or under
applicable law of the state where the Contract was originated under applicable
law of the state to which the related Financed Boats may have been relocated.
Repossession
In the event of default by an obligor, the holder of the related marine
installment sale contract has all the remedies of a secured party under the UCC,
except where specifically limited by other state laws. The UCC remedies of a
secured party include the right to repossession by self-help means, unless such
means would constitute a breach of the peace. Self-help repossession is the
method employed by the Servicer in most cases and is accomplished simply by
taking possession of the related boat. In cases where the obligor objects or
raises a defense to repossession, or if otherwise required by applicable state
law, a court order must be obtained from the appropriate state court, and the
boat must then be recovered in accordance with that order. In some jurisdictions
(not including California), the secured party is required to notify the debtor
of the default and the intent to repossess the collateral and the debtor must be
given a time period within which to cure the default prior to repossession. In
most states (including California), under certain circumstances after the boat
has been repossessed, the obligor may reinstate the related contract by paying
the delinquent installments and other amounts due.
Notice of Sale; Redemption Rights
In the event of default by the Obligor, some jurisdictions (not including
California) require that the Obligor be notified of the default and be given a
time period within which to cure the default prior to repossession. Generally,
this right of cure may only be exercised on a limited number of occasions during
the term of the related Contract.
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party (i) the unpaid principal balance of the obligation, accrued
interest thereon plus reasonable expenses for repossessing, holding and
preparing the collateral for disposition and arranging for its sale, plus, in
some jurisdictions, reasonable attorneys' fees or (ii) in some states, the
delinquent installments or the unpaid principal balance of the related
obligation.
Under federal law, to transfer title in a non-judicial sale, a seller of a
Financed Boat subject to a Preferred Mortgage must give prior notice of the sale
to (i) the owner of a Financed Boat subject to a Preferred Mortgage, (ii) any
other lienholders who have filed notice with the Coast Guard and (iii) the Coast
Guard.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of the Financed Boats generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the related indebtedness. While some states impose prohibitions or limitations
on deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in California
and certain other states that do not prohibit or limit such judgments. In
addition to the notice requirement, the UCC requires that every aspect of the
sale or other disposition, including the method, manner, time, place and terms,
be "commercially reasonable." Some courts have held that when a sale is not
"commercially reasonable," the secured party loses its right to a deficiency
judgment and courts in
72
<PAGE>
some other states have held that when a sale is not "commercially reasonable"
there is a rebuttable presumption that there is no deficiency. In addition, the
UCC permits the debtor or other interested party to recover for any loss caused
by noncompliance with the provisions of the UCC. Also, prior to a sale, the UCC
permits the debtor or other interested person to restrain the secured party from
disposing of the collateral if it is established that the secured party is not
proceeding in accordance with the "default" provisions under the UCC. A
deficiency judgment is a judgment against the obligor or guarantor for the
shortfall; however, a defaulting obligor or guarantor may have very little
capital or sources of income available following repossession. Therefore, in
many cases, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount or be uncollectible.
Occasionally, after resale of a boat and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a subordinate lien with respect
to such boat or, if no such lienholder exists, to the former owner of the boat.
Certain Matters Relating to Insolvency
CITSF, CITCF-NY and the Company intend that the transfers of Contracts from
CITCF-NY to CITSF, from CITSF to the Company and from the Company to the Trust
(and, if and to the extent specified in the related Prospectus Supplement, from
CITCF-NY to CITSF, from CITSF to SPV, from SPV to a Selling Trust and from the
Selling Trust to the Trust), constitute sales, rather than pledges, of the
Contracts to secure indebtedness. However, if CITCF-NY, CITSF or the Company
(or, if and to the extent specified in the related Prospectus Supplement, a
Selling Trust) were to become a debtor under Title 11 of the United States Code,
11 U.S.C. ss.101 et seq. (the "Bankruptcy Code"), it is possible that a
creditor, receiver, other party in interest or trustee in bankruptcy of such
debtor, or such debtor as debtor-in-possession, may contend that the sales of
the Contracts by CITCF-NY to CITSF, by CITSF to the Company, or by the Company
to the Trust (and, if and to the extent specified in the related Prospectus
Supplement, from CITCF-NY to CITSF, from CITSF to SPV, from SPV to a Selling
Trust and from the Selling Trust to the Trust), respectively, were pledges of
the Contracts rather than sales and that, accordingly, such Contracts should be
part of such assigning entity's bankruptcy estate. Such a 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
73
<PAGE>
Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act, the Military
Reservist Relief Act, state adaptations of the National Consumer Act and of the
Uniform Consumer Credit Code, state retail installment sales acts and other
similar laws. Also, the laws of California and of certain other states impose
finance charge ceilings and other restrictions on consumer transactions and
require contract disclosures in addition to those required under federal law.
These requirements impose specific statutory liabilities upon creditors which
fail to comply with their provisions. In some cases, this liability could affect
the ability of an assignee such as the Trust to enforce consumer finance
contracts such as the Contracts.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule") has the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states. Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, the Trust, as holder of the Contracts, will be subject to any
claims or defenses that the purchaser of the related Financed Boat may assert
against the seller of the Financed Boat. Such claims are limited to a maximum
liability equal to the amounts paid by the Obligor under the related Contracts.
Under California law and most state vehicle dealer licensing laws, sellers
of boats are required to be licensed to sell boats at retail sale. Numerous
other federal and state consumer protection laws impose requirements applicable
to the origination and assignment of marine installment sale contracts and
marine installment loan contracts or notes, including the Truth in Lending Act,
the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection
Practices Act and the Uniform Consumer Credit Code. In the case of some of these
laws, the failure to comply with the provisions of these laws may affect the
enforceability of the related Contract. The Trust and the Company and, if
specified in the Prospectus Supplement, the Selling Trust, may not have obtained
all licenses required under any federal or state consumer laws or regulations,
and the absence of such licenses may impede the enforcement of certain rights or
give rise to certain defenses in enforcement actions.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default and be used as a defense to repayment
of the obligation.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the Fourteenth Amendment to the Constitution of the United States
of America. Courts have generally either upheld the notice provisions of the UCC
and related laws as reasonable or have found that the creditor's repossession
and resale do not involve sufficient state action to afford constitutional
protection to consumers.
CITSF will represent and warrant under the Trust Documents that each
Contract complies with all requirements of law in all material respects. A
breach of such representation and warranty that materially adversely affects the
interests of the Trust in any Contract will create an obligation of CITSF to
purchase such Contract. See "The Purchase Agreements and the Trust
Documents--Sale and Assignment of the Contracts."
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a boat, and, as part of the rehabilitation plan,
reduce the amount of the secured indebtedness to the market value of the boat at
the time of bankruptcy (as determined by the court), leaving the party providing
financing as a general unsecured creditor for the remainder of
74
<PAGE>
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under the related contract or change the rate of interest and time of repayment
of the indebtedness.
Under the terms of the Soldiers' and Sailors' Civil Relief Act, an Obligor
who enters the military service after the origination of such Obligor's Contract
(including an Obligor who is a member of the National Guard or is in reserve
status at the time of the origination of the Obligor's contract and is later
called to active duty) may not be charged interest above an annual rate of 6%
during the period of such Obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the Military
Reservist Relief Act, under certain circumstances California residents called
into active duty with the reserves can delay payments on marine installment sale
contracts, including the Contracts, for a period, not to exceed 180 days,
beginning with the order to active duty and ending 30 days after release. It is
possible that the foregoing could have an effect on the ability of the Servicer
to collect full amounts of interest on certain of the Contracts. In addition,
the Relief Acts impose limitations which would impair the ability of the
Servicer to repossess a Financed Boat subject to an affected Contract during the
Obligor's period of active duty status. Thus, in the event that such a Contract
goes into default, there may be delays and losses caused by the inability to
realize upon the related Financed Boat in a timely fashion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below and in the related Prospectus Supplement for each series of
the Securities is a summary of certain federal income tax consequences of the
purchase, ownership and disposition of the Securities, applicable to initial
purchasers of the Securities. This summary does not deal with all aspects of
federal income taxation applicable to all categories of holders of the
Securities, some of which may be subject to special rules or special treatment
under the federal income tax laws. For example, it does not discuss the specific
tax treatment of Securityholders that are insurance companies, banks and certain
other financial institutions, regulated investment companies, individual
retirement accounts, tax-exempt organizations or dealers in securities.
Furthermore, this summary is based upon present provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the regulations promulgated
thereunder, and judicial or ruling authority, all of which are subject to
change, which change may be retroactive. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving a
trust that issues debt and equity interests with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or part
of the discussion below and in the related Prospectus Supplement.
Prospective investors are advised to consult their own tax advisors with
regard to the federal income tax consequences of the purchase, ownership and
disposition of the Securities, as well as the tax consequences arising under the
laws of any state, foreign country or other jurisdiction. Each Trust will be
provided with an opinion of Schulte Roth & Zabel LLP, counsel for the Seller,
regarding certain of the federal income tax matters discussed below and in the
related Prospectus Supplement. An opinion of counsel, however, is not binding on
the IRS, and no ruling on any of the issues discussed below will be sought from
the IRS. For purposes of the following summary, references to the Trust, the
Notes, the Certificates and related terms, parties and documents will be deemed
to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a grantor trust or a
partnership under the Code or is intended to be given an alternative
characterization for federal income tax purposes. The related Prospectus
Supplement for each series of Certificates will specify whether the Trust is
intended to be treated as a grantor trust or a partnership for federal income
tax purposes or how the Trust is otherwise intended to be treated.
Scope of the Tax Opinions
If the related Prospectus Supplement states that a Trust will be treated as
a grantor trust, it is expected that Schulte Roth & Zabel LLP will deliver its
opinion that, for federal income tax purposes, the Trust will be treated as
75
<PAGE>
a grantor trust. In such event, each Certificateholder, by acceptance of a
Certificate, will be treated as the owner of an undivided interest in the
Contracts included in the Contract Pool and any other assets held by the Trust.
If the related Prospectus Supplement does not state that a Trust will be
treated as grantor trust, it is expected that Schulte Roth & Zabel LLP will
deliver its opinion that, for federal income tax purposes: (1) the Notes will
constitute indebtedness; and (2) the Certificates will constitute interests in a
trust fund that will not be treated as an association taxable as a corporation
(or a publicly traded partnership). Each Noteholder, by acceptance of a Note,
will agree to treat the Notes as indebtedness, and each Certificateholder, by
acceptance of a Certificate, will agree to treat the Trust as a partnership in
which the Certificateholders are partners for federal income tax purposes.
In addition, Schulte Roth & Zabel LLP will render its opinion that it has
reviewed the statements herein and in the related Prospectus Supplement under
the heading "Certain Federal Income Tax Consequences," and is of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion for the possible effects of the
classification of the Trust as a partnership, as a grantor trust or other
classification, as the case may be, for federal income tax purposes on investors
generally and of related tax matters affecting investors generally, but do not
purport to furnish information in the level of detail or with the attention to
the investor's specific tax circumstances that would be provided by an
investor's own tax adviser. Accordingly, each investor is advised to consult its
own tax advisers with regard to the tax consequences to it of investing in the
Securities.
Other Tax Consequences
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect of
ownership of the Securities in any state or locality. Securityholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of the Securities.
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
76
<PAGE>
already subject to Oklahoma's income tax could be required to pay additional
Oklahoma tax as a result of the holder's ownership or disposition of Notes.
Tax Consequences with Respect to the Certificates Issued by a
Trust Treated as a Partnership
Oklahoma Tax Counsel will advise the Trust that if the arrangement created
by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for U.S. federal income tax purposes, the same treatment should
also apply for Oklahoma income tax purposes; under current law,
Certificateholders that are nonresidents of Oklahoma and are not otherwise
subject to Oklahoma income tax should not be subject to Oklahoma income tax on
the income from the Trust because it is unlikely that the Trust has established
a nonunitary business or commercial situs in Oklahoma. In any event,
classification of the arrangement as a "partnership" would not cause a
Certificateholder not otherwise subject to taxation in Oklahoma to pay Oklahoma
income tax on income beyond that derived from the Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such persons.
The Certificates
An interest in the Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1) of
the Code, or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (other than an insurance company
purchasing the Certificates for its general accounts). By its acceptance of a
Certificate or its acquisition of an interest in a Certificate through a
Participant or DTC, each Certificateholder or Certificate Owner will be deemed
to have represented and warranted that it is not subject to the foregoing
limitation.
A plan fiduciary considering the purchase of the Certificates should
consult its tax and or legal advisors regarding whether the assets of the Trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
The Notes
The acquisition or holding of Notes by or on behalf of a Benefit Plan could
be considered to give rise to a prohibited transaction if the Seller, the Trust
or any of their respective affiliates is or becomes a party in interest or a
disqualified person with respect to such Benefit Plan. Certain exemptions from
the prohibited transaction rules could be applicable to the purchase and holding
of Notes by a Benefit Plan depending on the type and circumstances of the plan
fiduciary making the decision to acquire such Notes. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38 regarding
investments by bank collective investment funds; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers."
A plan fiduciary considering the purchase of the Notes should consult its
tax and or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
77
<PAGE>
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, either the Company or the
Trust will agree to sell to each of the underwriters (the "Underwriters") named
therein and in the related Prospectus Supplement, and each of such Underwriters
will severally agree to purchase from the Company or the Trust, as applicable,
the principal amount of each class of Securities of the related series set forth
therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several Underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event of a
default by any such underwriter, each Underwriting Agreement will provide that,
in certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the Underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that CIT, 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
78
<PAGE>
Norman H. Rosen, Esq., Senior Vice President and General Counsel of CITSF. If
the Enhancement for a class of Securities includes a CIT Limited Guarantee,
certain legal matters will be passed upon for CIT by its Executive Vice
President and General Counsel, Ernest D. Stein, Esq. If a Trust is formed
pursuant to the laws of the State of Delaware, certain legal matters will be
passed upon for the Trust by its special Delaware counsel named in the related
Prospectus Supplement.
EXPERTS
The consolidated balance sheets of CIT as of December 31, 1996 and 1995 and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1996 in CIT's Amendment No. 2 to the Registration Statement on Form S-2 have
been incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, also incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
79
<PAGE>
INDEX OF PRINCIPAL TERMS
Affiliated Owner...........................................................6, 26
Asset Service Center..........................................................31
Available Amount..........................................................14, 56
Bankruptcy Code...........................................................23, 66
Benefit Plan..................................................................70
Business Day..............................................................13, 34
Capitalized Interest Account..................................................12
Cash Collateral Account.......................................................41
CBC...........................................................................30
CBC Holding...................................................................30
Cede.......................................................................6, 33
Cedel...................................................................3, 8, 25
Cedel Participants............................................................44
Certificate Distribution Account..............................................51
Certificate Final Scheduled Distribution Date.................................13
Certificate Owner.........................................................25, 33
Certificate Owners.............................................................6
Certificate Pool Factor.......................................................29
Certificateholders............................................................45
Certificates............................................................2, 6, 33
CIT.....................................................................3, 5, 21
CITCF-NY..................................................................10, 21
CITSF......................................................................5, 21
Closing Date..................................................................10
CMC...........................................................................30
Code......................................................................19, 68
Collection Account............................................................51
Commission.....................................................................3
Company.................................................................2, 5, 21
Contract Files................................................................26
Contract Pool..............................................................9, 27
Contract Rate.................................................................27
Contracts...............................................................2, 9, 27
Cooperative...................................................................44
Credit Facility...............................................................41
Credit Facility Provider......................................................42
Dealers...................................................................10, 21
Definitive Certificates.......................................................45
Definitive Notes..............................................................45
Definitive Securities.........................................................45
Deposit Date..................................................................25
Depositories..................................................................42
Depository....................................................................25
Determination Date............................................................14
Distribution Date.........................................................13, 34
DKB...........................................................................30
DTC.....................................................................3, 6, 25
DTC Rules.....................................................................43
Due Period....................................................................14
Eligible Account..............................................................52
Eligible Institution..........................................................52
80
<PAGE>
Eligible Investments..........................................................52
Enhancement...................................................................40
ERISA.....................................................................19, 70
Euroclear...............................................................3, 8, 44
Euroclear Operator............................................................44
Euroclear Participants........................................................44
Event of Termination..........................................................59
Events of Default.............................................................36
Financed Boats..............................................................2, 9
Financial Guaranty Insurance Policy...........................................40
Financial Guaranty Insurer....................................................40
Force-Placed Insurance........................................................58
FTC Rule......................................................................67
Funding Period.........................................................7, 11, 12
Holder........................................................................43
Holders.......................................................................45
Indenture...............................................................3, 7, 34
Indenture Trustee....................................................3, 5, 6, 34
Indirect Participants.........................................................43
Initial Contracts...........................................................2, 9
Initial Cut-off Date........................................................2, 9
Initial Financed Boats......................................................2, 9
Initial Pool Balance......................................................18, 61
Insolvency Laws...............................................................66
Insurance Advances............................................................58
Insured Payment...............................................................40
Interest Accrual Period...................................................13, 14
Interest Rate..................................................................8
IRS...........................................................................68
Issuer.........................................................................5
Late Fees.................................................................14, 56
Limited Guarantee.............................................................41
Liquidity Facility............................................................42
Liquidity Facility Provider...................................................42
List of Contracts.............................................................49
MHC...........................................................................30
Military Reservist Relief Act.................................................50
Monthly Advance...........................................................16, 55
Non-Reimbursable Payment..................................................17, 55
Note Distribution Account.....................................................51
Note Final Scheduled Distribution Date........................................13
Note Owner................................................................25, 35
Note Owners....................................................................8
Note Pool Factor..............................................................29
Noteholders...................................................................45
Notes...................................................................2, 7, 34
Notice........................................................................59
Obligor...................................................................10, 55
Oklahoma Tax Counsel..........................................................70
Original Certificate Balance..................................................26
Owner Trustee..................................................................5
Paid-Ahead Account............................................................52
Paid-Ahead Period.............................................................28
Paid-Ahead Precomputed Contract...............................................28
81
<PAGE>
Paid-Ahead Simple Interest Contract...........................................28
Participants..................................................................42
Pass-Through Rate.......................................................6, 7, 34
Payment Shortfall.....................................................16, 17, 55
Pool Balance..................................................................18
Pooling and Servicing Agreement................................................3
Precomputed Contracts.........................................................28
Preferred Mortgage........................................................22, 63
Pre-Funded Amount.............................................................11
Pre-Funded Percentage.........................................................23
Pre-Funding Account............................................................7
Prospectus Supplement..........................................................2
PTCE..........................................................................70
Purchase Agreement............................................................10
Purchase Agreements...........................................................48
Purchase Price................................................................50
Rating Agency.............................................................19, 71
Rating Agency Condition.......................................................36
Record Date...............................................................13, 34
Registration Statement.........................................................3
Related Documents.............................................................38
Repurchase Event..............................................................10
Repurchased Contract......................................................10, 50
Required Servicer Ratings.....................................................54
Reserve Account...............................................................41
Reserve Fund..................................................................41
Retained Yield................................................................51
Sale and Servicing Agreement...................................................3
Securities..............................................................2, 7, 34
Security Owner................................................................35
Securityholder................................................................43
Securityholders...............................................................45
Seller......................................................................2, 5
Selling Trust..................................................................5
Servicer....................................................................3, 5
Servicer Letter of Credit.....................................................54
Servicer Payment..............................................................14
Servicing Fee.........................................................17, 18, 53
Servicing Fee Rate....................................................17, 18, 54
Ship Mortgage Act.........................................................22, 63
Simple Interest Contracts.....................................................27
Soldiers' and Sailors' Civil Relief Act.......................................50
Spread Account................................................................41
Stockholders Agreement........................................................30
Stripped Certificates..........................................................7
Stripped Notes.................................................................8
Subsequent Contracts........................................................2, 9
Subsequent Cut-off Date....................................................2, 11
Subsequent Financed Boats...................................................2, 9
Subsequent Purchase Agreement.................................................11
Subsequent Transfer Agreement.................................................11
Subsequent Transfer Date......................................................11
Terms and Conditions..........................................................44
Trust.......................................................................2, 5
Trust Agreement................................................................3
Trust Documents...............................................................48
82
<PAGE>
Trustee.....................................................................3, 5
Trustees....................................................................5, 6
UCC.......................................................................21, 62
Underwriters..................................................................71
Underwriting Agreement........................................................71
Yield Supplement Account......................................................41
83
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement and the accompanying Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company, CITSF or any Underwriter. This Prospectus Supplement and the
accompanying Prospectus do not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus Supplement or the accompanying Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
the information herein is correct as of any time subsequent to the date hereof
or that there has been no change in the affairs of the Company since such date.
--------------
Table of Contents
Prospectus Supplement
Page
----
Summary ................................................................... S-3
Risk Factors .............................................................. S-19
Structure of the Transaction .............................................. S-23
The Trust Property ........................................................ S-24
The Contract Pool ......................................................... S-25
Maturity and Prepayment Considerations .................................... S-29
Yield and Prepayment Considerations ....................................... S-34
Pool Factors .............................................................. S-34
Use of Proceeds ........................................................... S-35
The CIT Group/Sales Financing, Inc., Servicer ............................. S-35
The Certificates .......................................................... S-39
The Notes ................................................................. S-41
Enhancement ............................................................... S-43
The Purchase Agreements and the Trust Documents ........................... S-45
Certain Federal Income Tax Consequences ................................... S-47
Plan of Distribution ...................................................... S-47
Ratings ................................................................... S-48
Legal Matters ............................................................. S-48
Annex I ................................................................... S-49
Index of Principal Terms .................................................. S-52
Prospectus
Available Information ..................................................... 3
Reports to Securityholders ................................................ 3
Documents Incorporated by Reference ....................................... 4
Summary ................................................................... 5
Risk Factors .............................................................. 21
The Trusts ................................................................ 25
The Trust Property ........................................................ 26
The Contract Pool ......................................................... 26
Yield and Prepayment Considerations ....................................... 28
Pool Factors .............................................................. 29
Use of Proceeds ........................................................... 29
The CIT Group, Inc. ....................................................... 30
The CIT Group Securitization Corporation II, Seller ....................... 30
The CIT Group/Sales Financing, Inc., Servicer ............................. 31
The Certificates .......................................................... 33
The Notes ................................................................. 34
Enhancement ............................................................... 39
Certain Information Regarding the Securities .............................. 42
The Purchase Agreements and the Trust Documents ........................... 48
Certain Legal Aspects of the Contracts .................................... 61
Certain Federal Income Tax Consequences ................................... 67
Certain State Tax Consequences ............................................ 68
ERISA Considerations ...................................................... 68
Plan of Distribution ...................................................... 69
Financial Information ..................................................... 70
Ratings ................................................................... 70
Legal Matters ............................................................. 70
Experts ................................................................... 70
Index of Principal Terms .................................................. i
Until ninety days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Securities, whether or not participating in this
distribution, may be required to deliver a Prospectus Supplement and the
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus Supplement and the Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
$-----------
(Approximate)
CIT Marine
Trust ____-_
$---------- --%
Asset-Backed Notes
$________ ___% Asset-Backed
Certificates
The CIT Group
Securitization
Corporation II,
Seller
The CIT Group/Sales
Financing, Inc.,
Servicer
[Underwriters]
Prospectus
Dated
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
SEC registration fee................................ $ 363,286.37
Attorney's fees and expenses ....................... 450,000.00
Accounting fees and expenses ....................... 120,000.00
Blue sky fees and expenses ......................... 60,000.00
Rating agency fees ................................. 370,000.00
Trustee's fees and expenses ........................ 40,000.00
Printing expenses .................................. 160,000.00
Miscellaneous fees and expenses .................... 50,000.00
-------------
Total........................................... $1,613,286.37
=============
Item 15. Indemnification of Directors and Officers.
Subsection (a) of Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation except that no indemnification may be made in
respect of any claim, issue, or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee, or agent of a corporation has been successful in the defense of any
action, suit, or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue, or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and empowers the corporation to purchase and maintain insurance on
behalf of any person acting in any of the capacities set forth in the second
preceding paragraph against any liability asserted against him or incurred by
him in any such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
The Registrants' By-Laws provide for indemnification of directors and
officers of each Registrant to the full extent permitted by Delaware law.
Article X of the By-laws of CIT and Article VIII of the By-laws of the
Company provide, in effect, that, in addition to any rights afforded to an
officer, director or employee of such Registrant by contract or operation of
law,
II-2
<PAGE>
such Registrant may indemnify any person who is or was a director, officer,
employee, or agent of such Registrant, or of any other corporation which he
served at the request of such Registrant, against any and all liability and
reasonable expense incurred by him in connection with or resulting from any
claim, action, suit, or proceeding (whether brought by or in the right of such
Registrant or such other corporation or otherwise), civil or criminal, in which
he may have become involved, as a party or otherwise, by reason of his being or
having been such director, officer, employee, or agent of such Registrant or
such other corporation, whether or not he continues to be such at the time such
liability or expense is incurred, provided that such person acted in good faith
and in what he reasonably believed to be the best interests of such Registrant
or such other corporation, and, in connection with any criminal action
proceeding, had no reasonable cause to believe his conduct was unlawful.
Such Articles further provide that any person who is or was a director,
officer, employee, or agent of each Registrant or any director or indirect
wholly-owned subsidiary of each Registrant shall be entitled to indemnification
as a matter of right if he has been wholly successful, on the merits or
otherwise, with respect to any claim, action, suit, or proceeding of the type
described in the foregoing paragraph.
In addition, the Registrants maintain directors' and officers'
reimbursement and liability insurance pursuant to standard form policies with
aggregate limits of $90,000,000. The risks covered by such policies do not
exclude liabilities under the Securities Act of 1933.
Pursuant to the form of Underwriting Agreement, the Underwriters will
agree, subject to certain conditions, to indemnify the Registrants, their
directors, certain of their officers and persons who control the Registrants
within the meaning of the Securities Act of 1933 against certain liabilities.
Item 16. Exhibits and Financial Statement Schedules.
a. Exhibits:
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended, of The CIT Group
Securitization Corporation II, incorporated by reference
herein to Exhibit 3.1 to Registration Statement 33-65057
3.2 By-laws of The CIT Group Securitization Corporation II,
incorporated by reference herein to Exhibit 3.2 to
Registration Statement 333-07249
4.1* Form of Indenture between the Trust and the Indenture
Trustee
4.2* Form of Trust Agreement between the Company and the Owner
Trustee
4.3* Form of Sale and Servicing Agreement among the Company,
CITSF and the Trust
4.4* Form of Pooling and Servicing Agreement
4.5* Form of Limited Guarantee
5.1* Opinion of Schulte Roth & Zabel LLP with respect to legality
5.2* Opinion of Richards, Layton & Finger with respect to
legality
8.1* Opinion of Schulte Roth & Zabel LLP with respect to tax
matters
8.2* Opinion of Crowe & Dunlevy PC with respect to Oklahoma tax
matters
10.1* Form of Purchase Agreement
10.2* Form of Subsequent Purchase Agreement
23.1* Consent of Schulte Roth & Zabel LLP (included as part of
Exhibit 5.1)
23.2* Consent of Richards, Layton & Finger (included as part of
Exhibit 5.2)
23.3** Consent of KPMG Peat Marwick LLP
24.1** Powers of Attorney of The CIT Group Securitization
Corporation II (included on page II-4)
23.4* Consent of Crowe and Dunlevy, P.C. (included as part of
Exhibit 8.2)
24.2** Powers of Attorney of The CIT Group, Inc.
- ------------
* To be filed by amendment.
** Previously filed.
II-3
<PAGE>
b. Financial Statement Schedules:
Not applicable.
Item 17. Undertakings.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any fact or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrants undertake that, for purposes of determining any
liability under the Act, each filing of the Registrants' annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrants hereby agree to provide to the underwriter at
the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrants
pursuant to the foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrants hereby undertake to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Livingston, State of New
Jersey, on January 27, 1998.
THE CIT GROUP SECURITIZATION CORPORATION II
By: /s/ JAMES J. EGAN, JR.
--------------------------------------
Name: James J. Egan, Jr.
Title: President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ JAMES J. EGAN, JR. President and Director January 27, 1998
- --------------------------- (principal executive officer)
* Executive Vice President January 27, 1998
- --------------------------- and Director
* Director January 27, 1998
- ---------------------------
/s/ FRANK GARCIA Vice President January 27, 1998
- --------------------------- (principal financial and
accounting officer)
By: /s/ JAMES J. EGAN, JR. January 27, 1998
-------------------------
James J. Egan, Jr.
Attorney-in-fact
Original powers of attorney authorizing Norman H. Rosen, James J. Egan, Jr.
and Richard W. Bauerband and each of them to sign the Registration Statement and
amendments thereto on behalf of the directors and officers of the Registrant
indicated above are held by The CIT Group Securitization Corporation II and
available for examination pursuant to Item 302(b) of Regulation S-T.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York, on January 27, 1998.
THE CIT GROUP, INC.
By: /s/ ERNEST D. STEIN
---------------------------------
Ernest D. Stein
Executive Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Signature and Title Date
------------------- ----
Albert R. Gamper, Jr.*
- -------------------------------------
President, Chief Executive Officer,
and Director
(Principal executive officer)
Hisao Kobayashi*
- -------------------------------------
Director
Takasuke Kaneko*
- -------------------------------------
Director
Joseph A. Pollicino* *By /s/ ERNEST D. STEIN January 27, 1998
- ------------------------------------- -------------------
Director Ernest D. Stein
Attorney-in-fact
II-6
<PAGE>
Paul N. Roth*
- -------------------------------------
Director
Peter J. Tobin*
- -------------------------------------
Director
Yukiharu Uno*
- -------------------------------------
Director
Yoshiro Aoki*
- -------------------------------------
Director
Keiji Torii*
- -------------------------------------
Director
Tohru Tonoike*
- -------------------------------------
Director
/s/ JOSEPH M. LEONE
- -------------------------------------
Joseph M. Leone January 27, 1998
Executive Vice President and Chief
Financial Officer
principal financial and accounting officer)
Original powers of attorney authorizing Albert R. Gamper, Jr., Ernest D.
Stein, and Donald J. Rapson and each of them to sign the Registration Statement
and amendments thereto on behalf of the directors and officers of the Registrant
indicated above are held by The CIT Group, Inc. and available for examination
pursuant to Item 302(b) of Regulation S-T.
II-7
Exhibit 1.1
CIT MARINE TRUST ____-_
$___________ CLASS A ____% ASSET BACKED NOTES
$___________ ____% ASSET BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II
(SELLER)
____________, ____
UNDERWRITING AGREEMENT
[ ]
as Representative of the Several Underwriters (the "Representative"),
[address]
Ladies and Gentlemen:
1. Introductory The CIT Group Securitization Corporation II, a Delaware
corporation (the "Seller") and a wholly-owned limited-purpose finance subsidiary
of The CIT Group Holdings, Inc., a Delaware corporation ("CIT") proposes to
cause CIT Marine Trust ____-_ (the "Trust") to issue and sell $ ___________
principal amount of its Class A ____ % Asset Backed Notes (the "Notes") and
$___________ principal amount of its ____ % Asset Backed Certificates (the
"Certificates" and, together with the Notes, the "Securities"). The Securities
are registered under the registration statement referred to in Section 2(a). The
assets of the Trust include, among other things, a pool of receivables generated
pursuant to marine installment sale contracts, marine installment loan contracts
or notes and U.S. Preferred Ship Mortgages (the "Initial Contracts") secured by
the new and used boats financed thereby (the "Initial Financed Boats") and
certain monies received thereunder on or after ____________ , ____, [amounts
deposited in the Pre-Funding Account and Capitalized Interest Account,] [the
right to receive payments under certain circumstances from funds deposited in
the Cash Collateral Account pursuant to the Cash Collateral Agreement to be
dated as of ____________ , ____ (the "Cash Collateral Agreement") between the
Trust, the Owner Trustee, the Servicer and ____________________ (the "Cash
Collateral Depositor") and the Sale and Servicing Agreement (as defined below),]
[additional receivables generated pursuant to marine installment sale contracts
(the "Subsequent Contracts"; and together with the Initial Contracts, the
"Contracts") secured by the new and used boats financed thereby (the "Subsequent
Financed
<PAGE>
Boats;" and together with the Initial Financed Boats, the "Financed Boats") to
be conveyed to the Trust subsequent to the date of issuance of the Securities
and certain monies received thereunder on or after their respective subsequent
cutoff dates,] and the other property and the proceeds thereof to be conveyed to
the Trust pursuant to the Sale and Servicing Agreement to be dated as of
____________ , ____ (the "Sale and Servicing Agreement") among the Trust, the
Seller, and The CIT Group/Sales Financing, Inc., a wholly-owned subsidiary of
CIT, as servicer ("CITSF" or the "Servicer"). The Contracts and other assets of
the Trust will be sold by CITSF to the Seller pursuant to a Purchase Agreement
to be dated as of ____________ , ____ (the "Purchase Agreement") between CITSF
and the Seller, and finally by the Seller to the Trust pursuant to the Sale and
Servicing Agreement. Certain of the Contracts and other property sold by CITSF
to the Seller will first be purchased by CITSF from The CIT Group/Consumer
Finance, Inc. (NY) ("CITCF-NY") pursuant to a Purchase Agreement to be dated as
of _____________ , ____ (the "CITCF-NY Sale Agreement") between CITCF-NY and
CITSF. The Servicer will service the Contracts on behalf of the Trust pursuant
to the Sale and Servicing Agreement. The Notes will be issued pursuant to the
Indenture to be dated as of _____________ , ____ (as amended and supplemented
from time to time, the "Indenture"), between the Trust and ____________________
(the "Indenture Trustee"). Pursuant to the Sale and Servicing Agreement, the
Servicer will agree to perform certain administrative tasks imposed on the Trust
under the Indenture. The Certificates, each representing a fractional undivided
interest in the Trust, will be issued pursuant to a Trust Agreement to be dated
as of ____________ , ____ (the "Trust Agreement"), between the Seller and
____________________ , as owner trustee (the "Owner Trustee").
Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Sale and Servicing Agreement and the Indenture.
The Seller and CITSF hereby agree with the several Underwriters named
in Schedule I hereto (the "Underwriters") as follows:
2. Representations and Warranties of the Seller and CITSF. Each of the
Seller and CITSF, jointly and severally, represents and warrants to, and agrees
with, the Underwriters, as of the date hereof and as of the date of the purchase
and sale of the Securities pursuant to Section 3 hereof (the "Closing Date")
that:
(a) A registration statement on Form S-3 (No. 333-______)
relating to the Securities, including a form of prospectus, has been
filed with the Securities and Exchange Commission (the "Commission")
and either (i) has been declared effective under the Securities Act of
1933, as amended (the "Act"), and is not proposed to be amended or (ii)
is proposed to be amended by amendment or post-effective amendment. If
the Seller does not propose to amend such registration statement and if
any post-effective amendment to such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent such amendment has been declared effective
by the Commission. For purposes of this Agreement, "Effective Time"
means (i) if the Seller has advised the Representative that it does not
propose to amend such registration statement, the date and time as of
which such
<PAGE>
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission, or (ii) if the
Seller has advised the Representative that it proposes to file an
amendment or post-effective amendment to such registration statement,
the date and time as of which such registration statement, as amended
by such amendment or post-effective amendment, as the case may be, is
declared effective by the Commission. "Effective Date" means the date
of the Effective Time. Such registration statement, as amended at the
Effective Time, including all material incorporated by reference
therein and including all information (if any) deemed to be a part of
such registration statement as of the Effective Time pursuant to Rule
430A(b) under the Act, is hereinafter referred to as the "Registration
Statement," and the form of prospectus relating to the Securities, as
first filed with the Commission pursuant to and in accordance with Rule
424(b) ("Rule 424(b)") under the Act or (if no such filing is required)
as included in the Registration Statement, including all material
incorporated by reference in such prospectus is hereinafter referred to
as the "Prospectus."
(b) If the Effective Time is prior to the execution and
delivery of this Agreement: (i) on the Effective Date, the Registration
Statement conformed in all respects to the requirements of the Act, the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and
the rules and regulations of the Commission promulgated under the Act
and the Trust Indenture Act (the "Rules and Regulations") and did not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) on the date of this
Agreement, the Registration Statement conforms, and at the time of
filing of the Prospectus pursuant to Rule 424(b), the Registration
Statement and the Prospectus will conform, in all respects to the
requirements of the Act, the Trust Indenture Act and the Rules and
Regulations, and neither of such documents includes, or will include,
any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading. If the Effective Time is
subsequent to the execution and delivery of this Agreement: (i) on the
Effective Date, the Registration Statement and the Prospectus will
conform in all material respects to the requirements of the Act, the
Trust Indenture Act and the Rules and Regulations, (ii) on the
Effective Date, the Registration Statement will not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading and (iii) on the Effective Date, at
the time of filing of the Prospectus pursuant to Rule 424(b) and at the
Closing Date, the Prospectus will not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
two preceding sentences do not apply to statements in or omissions from
the Registration Statement or Prospectus based upon written information
furnished to the Seller by any Underwriter through the Representative
specifically for use therein. The Seller and CITSF acknowledge that any
information furnished by any of the Underwriters specifically for use
in the Registration Statement, any preliminary prospectus or the
Prospectus is the Underwriters' Information (as defined in Section
7(a)).
<PAGE>
(c) Each of the Seller and CITSF have been duly organized and
are validly existing as corporations in good standing under the laws of
the State of Delaware. CITCF-NY has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of New York. Each of the Seller, CITSF and CITCF-NY have corporate
power and authority to own, lease and operate their respective
properties and conduct their respective businesses as described in the
Prospectus and to enter into and perform their obligations under each
of the Basic Documents (as defined below) to which it is a party; and
each of the Seller, CITSF and CITCF-NY is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction
in which the character of the business transacted by it or properties
owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on its
respective business, properties, assets, or condition (financial or
other) or on its ability to perform its obligations under any of the
Basic Documents to which it is a party. "Basic Documents" means this
Agreement, the Sale and Servicing Agreement, the Trust Agreement, the
Indenture, [the Cash Collateral Agreement,] the CITCF-NY Sale
Agreement, the Purchase Agreement, the Note Depository Agreement and
the Certificate Depository Agreement.
(d) The Seller is not in violation of its certificate of
incorporation or by-laws or in default in the performance or observance
of any material obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which it is a party or by which it or its
properties may be bound, which default might result in any material
adverse change in the financial condition, earnings, affairs or
business of the Seller, or which might materially and adversely affect
the properties or assets thereof or the ability to perform its
obligations under any of the Basic Documents to which it is a party.
(e) Neither CITSF nor CITCF-NY is in violation of its
certificate of incorporation or by-laws or in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any material contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it or its respective properties may be bound,
which default might result in any material adverse change in the
financial condition, earnings, affairs or business of either of CITSF
or CITCF-NY or which might materially and adversely affect the
properties or assets thereof or their ability to perform its
obligations under any of the Basic Documents to which it is a party.
(f) The execution and delivery by the Seller on the Closing
Date of the Basic Documents to which it is a party and the performance
of its obligations thereunder will be within its corporate power and
duly authorized by all necessary corporate action on the part of the
Seller on and as of the Closing Date; and neither the issuance and sale
of the Securities to the Underwriters, nor the execution and delivery
by the Seller of the Basic Documents to which it is a party, nor the
consummation by the Seller of the transactions therein contemplated,
nor compliance by the Seller with the provisions hereof or thereof,
<PAGE>
nor the grant of the security interest in the Collateral to the
Indenture Trustee pursuant to the Indenture, will materially conflict
with or result in a material breach of, or constitute a material
default under, any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Seller or its
properties or its certificate of incorporation or by-laws or any of the
provisions of any indenture, mortgage, contract or other instrument to
which the Seller is a party or by which the Seller is bound or result
in the creation or imposition of any lien, charge or encumbrance upon
any of its property pursuant to the terms of any such indenture,
mortgage, contract or other instrument.
(g) The execution and delivery by each of CITSF and CITCF-NY
on and as of the Closing Date of any of the Basic Documents to which it
is a party and the performance of its obligations thereunder, will be
within the corporate power of each of CITSF and CITCF-NY and duly
authorized by all necessary corporate action on the part of each of
CITSF and CITCF-NY on and as of the Closing Date; and neither the
issuance and sale of the Securities to the Underwriters, nor the
execution and delivery by CITSF and CITCF-NY of any of the Basic
Documents to which it is a party, nor the consummation by CITSF and
CITSF-NY of the transactions therein contemplated, nor compliance by
CITSF and CITCF-NY with the provisions hereof or thereof, nor the grant
of the security interest in the Collateral to the Indenture Trustee
pursuant to the Indenture, will materially conflict with or result in a
material breach of, or constitute a material default under, any of the
provisions of any law, governmental rule, regulation, judgment, decree
or order binding on CITSF or CITCF-NY or their respective properties or
the certificate of incorporation or by-laws of CITSF or CITCF-NY, or
any of the provisions of any material indenture, mortgage, contract or
other instrument to which CITSF or CITCF-NY is a party or by which
CITSF or CITCF-NY is bound or result in the creation or imposition of
any lien, charge or encumbrance upon any of their respective property
pursuant to the terms of any such material indenture, mortgage,
contract or other instrument.
(h) This Agreement has been duly authorized, executed and
delivered by each of the Seller and CITSF, and it constitutes a legal,
valid and binding instrument enforceable against each of the Seller and
CITSF in accordance with its terms, subject (i) to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting creditors' rights generally, (ii) as to enforceability,
to general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law) and (iii) as to
enforceability with respect to rights of indemnity thereunder, to
limitations of public policy under applicable securities laws.
(i) The Sale and Servicing Agreement when executed and
delivered on the Closing Date will be duly authorized, executed and
delivered by each of the Seller and CITSF, and will constitute a legal,
valid and binding instrument enforceable against each of the Seller and
CITSF in accordance with its terms, subject (i) to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting creditors' rights generally and (ii) as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
<PAGE>
(j) The Trust Agreement when executed and delivered on the
Closing Date will be duly authorized, executed and delivered by the
Seller, and will constitute a legal, valid and binding instrument
enforceable against the Seller in accordance with its terms, subject
(i) to applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws affecting creditors' rights generally and (ii) as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
[(k) The Cash Collateral Agreement when executed and delivered
on the Closing Date will be duly authorized, executed and delivered by
CITSF and will constitute a legal, valid and binding instrument
enforceable against CITSF in accordance with its terms, subject (i) to
applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws affecting creditors' rights generally, and (ii) as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).]
(l) The Certificates, when duly and validly executed by the
Owner Trustee or an agent thereof on behalf of the Trust, authenticated
and delivered in accordance with the Trust Agreement, and delivered to
and paid for pursuant hereto will be validly issued and outstanding and
entitled to the benefits of the Trust Agreement.
(m) The Notes, when duly and validly executed by the Owner
Trustee or an agent thereof on behalf of the Trust, authenticated and
delivered in accordance with the Indenture, and delivered and paid for
pursuant hereto will be validly issued and outstanding and entitled to
the benefits of the Indenture.
(n) no filing or registration with, notice to or consent,
approval, authorization or order of any court or governmental authority
or agency is required for the consummation by the Seller or CITSF of
the transactions contemplated by any of the Basic Documents to which it
is a party, except such as may be required under the Act, the Rules and
Regulations, or state securities or Blue Sky laws.
(o) The Seller, CITSF and CITCF-NY each possess all material
licenses, certificates, authorities or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct the businesses now operated by them and as
described in the Prospectus, other than such licenses, certificates,
authorities or permits the failure of which to possess would not have a
material adverse effect on the interests of the Certificateholders or
the Noteholders under the Basic Documents, and none of the Seller,
CITSF or CITCF-NY has received any notice of proceedings relating to
the revocation or modification of any such license, certificate,
authority or permit which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially and
adversely affect the conduct of the business, operations, financial
condition or income of any of the Seller, CITSF or CITCF-NY or their
ability to
<PAGE>
perform their respective obligations under any of the Basic Documents
to which it is a party.
(p) As of the Closing Date, the Initial Contracts and related
property will have been duly and validly assigned to the Owner Trustee
in accordance with the Basic Documents; and when such assignment is
effected, a duly and validly perfected transfer of all such Initial
Contracts subject to no prior lien, mortgage, security interest,
pledge, charge or other encumbrance created by the Seller, CITSF or
CITCF-NY will have occurred. As of the Closing Date, the Trust's grant
of a security interest in the Collateral to the Indenture Trustee
pursuant to the Indenture will vest in the Indenture Trustee, for the
benefit of the Noteholders, a first priority perfected security
interest therein, subject to no prior lien, mortgage, security
interest, pledge, charge or other encumbrance created by the Seller,
CITSF or CITCF-NY. [As of each Subsequent Transfer Date, the Subsequent
Contracts and related property conveyed to the Trust on such date will
have been duly and validly assigned to the Owner Trustee in accordance
with the Basic Documents; and when such assignment is effected, the
duly and validly perfected transfer of all such Subsequent Contracts
will be subject to no prior lien, mortgage, security interest, pledge,
charge or other encumbrance created by the Seller, CITSF or CITCF-NY.
As of each Subsequent Transfer Date, the Trust's grant of a security
interest in the Collateral sold to the Trust on such Subsequent
Transfer Date pursuant to the Indenture will vest in the Indenture
Trustee, for the benefit of the Noteholders, a first priority perfected
security interest therein, subject to no prior lien, mortgage, security
interest, pledge, charge or other encumbrance created by the Seller,
CITSF or CITCF-NY.
(q) As of the Closing Date, each of the Initial Contracts will
meet the eligibility criteria described in the Prospectus [and as of
each Subsequent Transfer Date, each of the Subsequent Contracts being
transferred to the Trust will meet the eligibility criteria described
in the Prospectus].
(r) The chief executive office of each of the Seller, CITSF
and CITCF-NY is listed opposite its name on Schedule II hereto, which
office is the place where it is "located" for the purposes of Section
9-103(3)(d) of the Uniform Commercial Code as in effect in the State of
New York, and the offices of each of the Seller, CITSF and CITCF-NY
where it keeps its respective records concerning the Contracts are also
listed in said Schedule opposite its name and there have been no other
such locations during the four months preceding the Closing Date.
(s) Neither the Seller, CITSF nor the Trust Fund created by
the Sale and Servicing Agreement will be subject to registration as an
"investment company" under the Investment Company Act of 1940, as
amended (the "Investment Company Act").
(t) In connection with the offering of the Securities in the
State of Florida, the Seller hereby certifies that they have complied
with all provisions of Section 5.17.075 of the Florida Securities and
Investor Protection Act.
<PAGE>
(u) As of the Closing Date, each of the respective
representations and warranties of the Seller, CITSF and CITCF-NY set
forth in the Basic Documents will be true and correct, and the
Underwriters may rely on such representations and warranties as if they
were set forth herein in full.
3. Purchase, Sale and Delivery of Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Seller agrees to cause the Trust to
sell to the Underwriters, and the Underwriters agree, severally and not jointly,
to purchase from the Trust, the principal amount of the Notes set forth opposite
the name of such Underwriter in Schedule I hereto at a purchase price equal to
the Total Price to Seller specified in Schedule III hereto plus accrued interest
at the Class A Rate from ____________, ____ to (but excluding) the Closing Date,
and the principal balance of the Certificates set forth opposite the name of
such Underwriter in Schedule I hereto at a purchase price equal to the Total
Price to Seller specified in Schedule IV hereto plus accrued interest at the
Pass-Through Rate from ____________, ____ to (but excluding) the Closing Date.
The Seller will deliver the Securities to the Representative,
for the account of the Underwriters, against payment of the purchase price by
wire transfer of immediately available funds to the Seller, or to such bank as
may be designated by the Seller, at the office of Schulte Roth & Zabel LLP, 900
Third Avenue, New York, New York 10022 on ____________ , ___ at 10:00 a.m., New
York City time, or at such other time not later than seven full business days
thereafter as the Representative and the Seller determine, such time being
herein referred to as the "Closing Date." The Securities to be so delivered will
be initially represented by one or more Notes and one or more Certificates
registered in the name of Cede & Co., 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 DTC and participating members
thereof. [One Certificate in definitive form in the principal amount of
$___________ will be registered in the name of ____________________ (the
"Affiliated Purchaser Certificate"). Definitive Notes and Definitive
Certificates (other than the Affiliated Purchaser Certificate) will be available
only under the limited circumstances set forth in the Indenture and Trust
Agreement. The notes and certificates evidencing the Notes and Certificates will
be made available for checking and packaging at the offices of Schulte Roth &
Zabel LLP at least 24 hours prior to the Closing Date.
4. Offering by Underwriters. It is understood that, after the
Registration Statement becomes effective, the Underwriters propose to offer the
Securities for sale to the public (which may include selected dealers), on the
terms set forth in the Prospectus.
5. Covenants of the Seller and CITSF. Each of the Seller and CITSF,
jointly and severally, covenants and agrees with the several Underwriters that:
(a) If the Effective Time is prior to the execution and
delivery of this Agreement, the Seller will file the Prospectus,
properly completed, with the Commission pursuant to and in accordance
with subparagraph (1) (or, if applicable and if consented to by the
Representative, subparagraph (4)) of Rule 424(b) not later than the
earlier of (i) the second business day following the execution and
delivery of this Agreement or (ii) the
<PAGE>
fifth business day after the Effective Date. The Seller will advise the
Representative promptly of any such filing pursuant to Rule 424(b).
(b) The Seller will advise the Representative promptly of any
proposal to amend or supplement the registration statement as filed or
the related prospectus or the Registration Statement or the Prospectus,
and will not effect any such amendment or supplementation without the
Representative's consent which consent shall not be unreasonably
withheld; and the Seller will also advise the Representative promptly
of the effectiveness of the Registration Statement (if the Effective
Time is subsequent to the execution and delivery of this Agreement) and
of any amendment or supplementation of the Registration Statement or
the Prospectus and of the institution by the Commission of any stop
order proceedings in respect of the Registration Statement and will use
its best efforts to prevent the issuance of any such stop order and to
obtain as soon as possible its lifting, if issued.
(c) The Seller will arrange for the qualification of the
Securities for offering and sale under the securities laws of such
jurisdictions in the United States as the Representative may reasonably
designate and will continue such qualifications in effect so long as
necessary under such laws for the distribution of such Securities,
provided that in connection therewith the Seller shall not be required
to qualify as a foreign corporation to do business nor become subject
to service of process generally, but only to the extent required for
such qualification, in any jurisdiction in which it is not currently so
qualified.
(d) If, at any time when a prospectus relating to the
Securities is required to be delivered by law in connection with sales
by any Underwriter or dealer, either (i) any event shall have occurred
as a result of which the Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, or (ii) for any other reason it shall be necessary to amend
or supplement the Prospectus to comply with the Act, the Seller will
promptly notify the Representative and will promptly prepare and file
with the Commission, at their own expense, an amendment or a supplement
to the Prospectus which will correct such statement or omission or
effect such compliance. Neither the consent of the Representative to,
nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section
6 hereof.
(e) As soon as practicable, but not later than the
Availability Date (as defined below), the Seller will cause the Trust
to make generally available to Noteholders and Certificateholders an
earnings statement of the Trust covering a period of at least 12 months
beginning after the Effective Date which will satisfy the provisions of
Section 11(a) of the Act and Rule 158 of the applicable Rules and
Regulations thereunder. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes the Effective
<PAGE>
Date, except that, if such fourth fiscal quarter is the last quarter of
the Trust's fiscal year, "Availability Date" means the 90th day after
the end of such fourth fiscal quarter.
(f) The Seller will furnish to each of the Underwriters copies
of the Registration Statement (two of which will be signed and include
all exhibits), each related preliminary prospectus, the Prospectus and
all amendments and supplements to such documents, in each case as soon
as available and in such quantities as the Representative may from time
to time reasonably request.
(g) So long as any of the Securities are outstanding, the
Seller or CITSF, as the case may be, will furnish to the Representative
copies of all written reports or other written communications
(financial or otherwise) furnished or made available to Noteholders
and/or Certificateholders, and deliver to the Representative during
such same period, (i) as soon as they are available, copies of any
reports and financial statements filed by or on behalf of the Trust by
the Seller with the Commission pursuant to the Exchange Act and (ii)
such additional information concerning the Seller or CITSF (relating to
the Contracts, the servicing thereof or the ability of CITSF to act as
Servicer), the Notes, the Certificates or the Trust as the
Representative may reasonably request from time to time.
(h) Whether or not the transactions contemplated by this
Agreement are consummated, the Seller and CITSF will pay or cause to be
paid all costs and expenses incident to the performance of their
respective obligations hereunder, including (i) the preparation,
issuance and delivery of the Securities, (ii) any fees charged by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Structured Ratings Group, a Division of The McGraw-Hill Companies, Inc.
("S&P" and, together with Moody's, the "Rating Agencies"), for the
rating of the Securities, (iii) the expenses incurred in printing,
reproducing and distributing the registration statement as filed, the
Registration Statement, preliminary prospectuses and the Prospectus
(including any amendments and supplements thereto required pursuant to
Section 5(d) hereof), (iv) the fees and disbursements of counsel to the
Seller and CITSF and the independent public accountants of the Seller,
(v) the fees and disbursements of the Indenture Trustee and its
counsel, (vi) the fees and disbursement of the Owner Trustee and its
counsel, (vii) the fees of DTC in connection with the book-entry
registration of the Securities, (viii) the reasonable expenses of the
Representative including the reasonable fees and disbursements of its
counsel, in connection with the initial qualification of the Securities
for sale in the jurisdictions that the Representative may designate
pursuant to Section 5(c) hereof and in connection with the preparation
of any blue sky survey and legal investment survey and (ix) the
printing and delivery to the Underwriters, in such quantities as the
Underwriters may reasonably request, of copies of the Basic Documents.
Subject to Section 8 hereof, the Underwriters shall be responsible for
their own costs and expenses, including the fees and expenses of their
counsel (other than the reasonable expenses of the Representative
including the reasonable fees and disbursements of its counsel, in
connection with the initial qualification of the Securities for sale in
the jurisdictions that the Representative
<PAGE>
may designate pursuant to Section 5(c) hereof and in connection with
the preparation of any blue sky survey and legal investment survey).
(i) On or before the Closing Date, the Seller, CITSF and
CITCF-NY shall cause each of their respective books and records
(including any computer records) relating to the Initial Contracts to
be marked to show the absolute ownership by the Owner Trustee in
accordance with Section 3.01B(d) of the Sale and Servicing Agreement,
on behalf of the Trust, of the Initial Contracts, and from and after
the Closing Date neither the Seller, CITSF, as Servicer, nor CITCF-NY
shall take any action inconsistent with the ownership by the Owner
Trustee on behalf of the Trust of the Initial Contracts, other than as
permitted by the Basic Documents.
(j) On or before each Subsequent Transfer Date, the Seller,
CITSF and CITCF-NY shall cause each of their respective books and
records (including any computer records) relating to the Subsequent
Contracts to be sold on such Subsequent Transfer Date to be marked to
show the absolute ownership by the Owner Trustee in accordance with
Section 3.01B(d) of the Sale and Servicing Agreement, on behalf of the
Trust, of such Subsequent Contracts, and from and after such Subsequent
Transfer Date neither the Seller, CITSF, as Servicer, nor CITCF-NY
shall take any action inconsistent with the ownership by the Owner
Trustee on behalf of the Trust of such Subsequent Contracts, other than
as permitted by the Basic Documents.
(k) Until the retirement of the Securities, or until such time
as the Underwriters shall cease to maintain a secondary market in the
Securities, whichever occurs first, the Seller or CITSF will deliver to
the Representative the certified public accountants' annual statements
of compliance furnished to the Indenture Trustee or the Owner Trustee
pursuant to the Indenture and the Sale and Servicing Agreement, as soon
as such statements are furnished to the Indenture Trustee or the Owner
Trustee.
(l) To the extent, if any, that either of the ratings provided
with respect to the Securities by either Rating Agency is conditional
upon the furnishing of documents or the taking of any other actions by
the Seller, CITSF or CITCF-NY, the Seller, CITSF or CITCF-NY, as the
case may be, shall furnish such documents and take any such other
actions as may be required to satisfy such conditions. A copy of any
such document shall be provided to the Representative at the time it is
delivered to the Rating Agencies.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Securities will be
subject to the accuracy of the representations and warranties on the part of the
Seller and CITSF, and contained or incorporated herein, to the accuracy of the
statements of officers of the Seller and CITSF made pursuant to the provisions
hereof, to the performance by the Seller and CITSF of its obligations hereunder
and to the following additional conditions precedent:
(a) On the date of this Agreement, the Representative and the
Seller shall have received a letter, dated the date of delivery
thereof, of KPMG Peat Marwick LLP
<PAGE>
confirming that they are independent public accountants with respect to
the Seller and CITSF within the meaning of the Act and the Rules and
Regulations, substantially in the form of the draft to which the
Representative has previously agreed and otherwise in form and
substance satisfactory to the Representative and counsel for the
Underwriters.
(b) If the Effective Time is not prior to the execution and
delivery of this Agreement, the Effective Time shall have occurred not
later than 10:00 p.m., New York City time, on the date of this
Agreement or such later date as shall have been consented to by the
Representative. If the Effective Time is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and Section
5(a) hereof. On or prior to the Closing Date, no stop order suspending
the effectiveness of the Registration Statement shall have been issued
and no proceedings for that purpose shall have been instituted or, to
the knowledge of the Seller, shall be contemplated by the Commission.
(c) The Representative shall have received a certificate,
dated the Closing Date, executed by any two of the President, any Vice
President, the principal financial officer or the principal accounting
officer of (i) the Seller representing and warranting that, as of the
Closing Date, to the best of each such officer's knowledge after
reasonable investigation, the representations and warranties of the
Seller in this Agreement and the other Basic Documents to which it is a
party are true and correct, that the Seller has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder or thereunder at or prior to the Closing Date, that
no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the best of their knowledge, are contemplated by the
Commission and (ii) CITSF in which such officers shall state that, to
the best of each such officer's knowledge after reasonable
investigation, the representations and warranties of CITSF in this
Agreement and the other Basic Documents to which it is a party are true
and correct and that CITSF has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder or thereunder at or prior to the Closing Date.
(d) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development involving a prospective change, in or affecting
particularly the business or properties of the Trust, the Seller, CITSF
or CITCF-NY which, in the judgment of a majority in interest of the
Underwriters (including the Representative), materially impairs the
investment quality of the Securities or makes it impractical or
inadvisable to proceed with completion of the sale of and payment for
the Securities; (ii) any downgrading in the rating of any debt
securities of CIT or CITSF or any of their direct or indirect
subsidiaries by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act),
or any public announcement that any such organization has under
surveillance or review its rating of any such debt securities (other
than an announcement with positive implications of a possible
upgrading, and no implication of a possible downgrading, of such
rating); (iii) any suspension or limitation of trading in securities
generally on the New York Stock
<PAGE>
Exchange or any setting of minimum prices for trading on such exchange;
(iv) any banking moratorium declared by Federal, New Jersey or New York
authorities; or (v) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress
or any other substantial national or international calamity or
emergency if, in the judgment of a majority in interest of the
Underwriters (including the Representative), the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the sale of
and payment for the Securities.
(e) The Representative shall have received a written opinion
of in-house General Counsel of the Seller, CITSF and CITCF-NY, or other
counsel satisfactory to the Representative in its reasonable judgment,
dated the Closing Date, in substantially the form set forth below, with
such changes therein as the Representative and counsel for the
Underwriters shall reasonably agree:
(i) The Seller and CITSF have each been duly
organized and are validly existing as corporations in good
standing under the laws of the State of Delaware. CITCF-NY has
been duly organized and is validly existing as a corporation
in good standing under the laws of the State of New York.
(ii) The Seller, CITSF and CITCF-NY each have the
corporate power and corporate authority to carry on their
respective businesses as described in the Prospectus and to
own and operate their respective properties in connection
therewith.
(iii) The Seller, CITSF and CITCF-NY are each
corporations duly organized, validly existing and in good
standing under the laws of the jurisdiction of their
organization and each has the corporate power to own its
assets and to transact the business in which it is currently
engaged and to perform their respective obligations under each
of the Basic Documents to which it is a party. The Seller,
CITSF and CITCF-NY are each qualified to do business as a
foreign corporation and each is in good standing in each
jurisdiction in which the character of the business transacted
by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would
have a material adverse effect on the business, properties,
assets, or condition (financial or other) of the Seller, CITSF
or CITCF-NY, respectively or on their ability to perform their
respective obligations under the Basic Documents.
(iv) This Agreement has been duly authorized,
executed and delivered by each of the Seller and CITSF, and is
a valid and binding obligation of each of the Seller and CITSF
enforceable against each of the Seller and CITSF in accordance
with its terms, except that (A) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally, (B) such enforcement may be
limited by general principles of equity (regardless of whether
enforcement is
<PAGE>
sought in a proceeding in equity or at law), and (C) the
enforceability as to rights to indemnity thereunder may be
limited under applicable law.
(v) Each of the Basic Documents to which the Seller,
CITSF or CITCF-NY is a party have been duly authorized,
executed and delivered by each of the Seller, CITSF and
CITCF-NY, and each constitutes a valid and binding obligation
of, each of the Seller, CITSF and CITCF-NY, enforceable
against each of the Seller, CITSF and CITCF-NY in accordance
with its terms, except that (A) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) such enforcement may be
limited by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(vi) The execution and delivery by each of the
Seller, CITSF and CITCF-NY of each of the Basic Documents to
which it is a party, the performance of their respective
obligations thereunder and the signing of the Registration
Statement by the Seller are within the corporate power of the
Seller, CITSF and CITCF-NY, as applicable, and have been duly
authorized by all necessary corporate action on the part of
the Seller, CITSF and CITCF-NY, as applicable; and neither the
issue and sale of the Securities, nor the consummation of the
transactions contemplated by the Basic Documents nor the
fulfillment of the terms thereof, nor the grant of the
security interest in the Collateral to the Indenture Trustee
pursuant to the Indenture will, to the best of such counsel's
knowledge, conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or asset of the
Seller, CITSF or CITCF-NY pursuant to, any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument, if any, to which the Seller, CITSF or CITCF-NY is
a party or by which either may be bound or to which the
property or assets of the Seller, CITSF or CITCF-NY are
subject (which contracts, indentures, mortgages, loan
agreements, notes, leases and other such instruments, if any,
have been identified by the Seller, CITSF or CITCF-NY to such
counsel), nor will such action result in any violation of the
provisions of the certificate of incorporation or by-laws of
the Seller, CITSF or CITCF-NY or, to the best of such
counsel's knowledge, any law, administrative regulation or
administrative or court decree of any state or federal courts,
regulatory bodies, other body, governmental entity or
arbitrator having jurisdiction over the Seller, CITSF or
CITCF-NY.
(vii) The Seller has duly authorized, executed and
delivered the written order to the Owner Trustee to execute
and deliver the Issuer Order to the Indenture Trustee.
(viii) The Seller has duly authorized, executed and
delivered the written order to the Owner Trustee to execute
and deliver the Certificates.
<PAGE>
(ix) To the best of such counsel's knowledge, no
filing or registration with or notice to or consent, approval,
authorization or order of any New Jersey, New York or federal
court or governmental authority or agency is required for the
consummation by the Seller, CITSF or CITCF-NY of the
transactions contemplated by this Agreement, except such as
may be required under the Act or the Rules and Regulations, or
state securities or Blue Sky laws.
(x) There are no legal or governmental proceedings
pending to which the Seller, CITSF or CITCF-NY is a party or
of which any property of the Seller, CITSF or CITCF-NY is the
subject, and no such proceedings are known by such counsel to
be threatened or contemplated by governmental authorities or
threatened by others, (A) that are required to be disclosed in
the Registration Statement or (B)(1) asserting the invalidity
of all or part of any of the Basic Documents, (2) seeking to
prevent the issuance of the Notes or the Certificates, (3)
that could materially and adversely affect the Seller's,
CITSF's or CITCF-NY's obligations under any of the Basic
Documents or (4) seeking to affect adversely the federal or
state income tax attributes of the Securities.
(xi) Such counsel is familiar with CITSF's and
CITCF-NY's standard operating procedures relating to CITSF's
and CITCF-NY's acquisition of a perfected first priority
security interest in the boats financed by CITSF and
CITCF-NY's pursuant to marine installment sale contracts and
marine installment loan contracts and notes and U.S. Preferred
Ship Mortgages in the ordinary course of CITSF's and
CITCF-NY's business. Other than with respect to mechanic's and
materialmen's liens, assuming that CITSF's standard procedures
are followed with respect to the perfection of security
interests in the Financed Boats (and such counsel has no
reason to believe that either CITSF or CITCF-NY has not or
will not continue to follow its standard procedures in
connection with the perfection of security interests in the
Financed Boats), CITSF and CITCF-NY have acquired or will
acquire a perfected first priority security interest in the
Financed Boats.
(xii) The Contracts are chattel paper, as defined in
the UCC in the State of New Jersey.
(xiii) The form of assignment to be executed and
delivered by CITSF to the Seller pursuant to the Purchase
Agreement is sufficient in form and substance to convey to the
Seller all of CITSF's right, title and interest in and to the
Contracts and any security interests securing the Contracts.
When the Purchase Agreement has been duly executed and
delivered by all parties thereto, the assignment described in
the Purchase Agreement has been duly executed and delivered to
the Seller by CITSF, and the purchase price has been paid to
CITSF by the Seller in the manner specified in the Purchase
Agreement, all of CITSF's right, title and interest in and to
the Contracts and any security interests securing
<PAGE>
the Contracts will have been conveyed to the Seller and the
Seller will be the holder of a valid, binding and enforceable
security interest in the Contracts.
(xiv) The form of assignment to be executed and
delivered by the Seller to the Owner Trustee pursuant to the
Sale and Servicing Agreement is sufficient in form and
substance to convey to the Owner Trustee all of the Seller's
right, title and interest in and to the Contracts and any
security interests securing the Contracts. When the Basic
Documents have each been duly executed and delivered by all
parties thereto, the assignment described in the Sale and
Servicing Agreement has been duly executed and delivered to
the Trust by the Seller, the purchase price therefor has been
paid to the Seller by the Trust in the manner specified in the
Sale and Servicing Agreement, and the Notes and the
Certificates have been duly executed and duly authenticated
and delivered by the Owner Trustee or the Indenture Trustee,
as applicable, to or upon the order of the Seller in
accordance with the Sale and Servicing Agreement, the
Indenture and the Trust Agreement, all of the Seller's right,
title and interest in and to the Contracts and any security
interests securing the Contracts will have been conveyed to
the Trust and the Trust will be the holder of a valid and
binding security interest in the Contracts.
(f) The Representative shall have received a written opinion
of [Lowenstein, Sandler, Kohl, Fisher and Boylan], special local New
Jersey counsel for the Seller and CITSF, dated the Closing Date, in
form and substance satisfactory to the Representative and counsel for
the Underwriters, to the effect that:
(i)(A) If the transfer of the Contracts is deemed to
be the grant of a security interest, and not a true sale, (1)
to the extent that the Uniform Commercial Code as in effect in
the State of New Jersey (the "New Jersey UCC") applies to the
perfection of the Seller's security interests in the Contracts
and the proceeds thereof under Section 9-103 of the New Jersey
UCC, when the financing statements executed by CITSF as debtor
(the "First Step Financing Statements") have been duly
executed and delivered and filed or recorded, as appropriate,
in the office of the Secretary of State of New Jersey, such
security interests will be perfected and (2) to the extent
that the New Jersey UCC applies to the perfection of the
Trust's security interests in the Contracts and the proceeds
thereof under Section 9-103 of the New Jersey UCC, when the
First Step Financing Statements and the financing statements
executed by the Seller as "debtor" ("Second Step Financing
Statements") have been duly executed and delivered and filed
or recorded, as appropriate, in the office of the Secretary of
State of New Jersey, such security interests will be perfected
and (B) based solely on such counsel's review of those
Financing Statements, officer certificates and specified New
Jersey UCC search reports, the security interests of the Trust
in the Contracts are subject to no equal or prior security
interest under the New Jersey UCC; provided, however that (1)
for purposes of its opinions in this paragraph, such counsel
may assume that: (a) the Seller is the holder of valid,
binding and enforceable security
<PAGE>
interests in the Contracts and the Trust is the holder of
valid, binding and enforceable security interests in the
Contracts; (b) the Contracts constitute "chattel paper," as
such term is defined in Section 9-105 of the New Jersey UCC;
(c) the New Jersey UCC governs the perfection of the security
interest in the Contracts, the priority of those security
interests and the classification of the Contracts; (d) the
chief executive office of each of the Company and the Seller
is, and during the past four months has been, in the State of
New Jersey; (e) neither CITSF, the Seller nor the Trust has
assigned, nor will assign, any Contract to a buyer who takes
possession of it in the ordinary course of its business and
who acts without knowledge that such Contract is subject to a
security interest; (f) the Contracts exist and each of CITSF
and the Seller, respectively, has rights in the Contracts; (g)
(i) no lien creditor has executed on or attached to the
Contracts prior to the perfection of the security interests of
the Seller or the Trust in the Contracts and the proceeds
thereof; and (ii) the Contracts are not subject to the rights
of the holder of a perfected "purchase money security
interest" (as such term is defined in Section 9-107 of the New
Jersey UCC); (h) no Contract, or the proceeds thereof,
constitutes proceeds of any property subject to the security
interest of a third party; (i) none of the proceeds of the
Contracts which constitute "securities" under Article 8 of the
New Jersey UCC are transferred to a bona fide purchaser (other
than the Indenture Trustee) under Section 8-302 of the New
Jersey UCC; (j) the Seller, the Indenture Trustee and the
Owner Trustee have and will maintain a list describing the
Contracts for inspection during normal business hours by
interested parties; (k) the underlying facts in the officer
certificates to be received by such counsel are correct; (l)
all financing statements or other notice of liens, other than
the financing statements, in which CITSF, the Seller or the
Trust is named as debtor were properly filed and indexed, that
the New Jersey UCC search reports have revealed all recorded
liens against CITSF and the Seller and that no filings or
notices covering CITSF or the Seller were made between the
dates last searched and reported on in the New Jersey UCC
search reports and the time of such financing statements, and
(m) from and after the date hereof CITSF, acting in a capacity
as servicer and custodian for the Trustee, will have taken,
and will maintain, exclusive possession of the Contracts; and
(2) such counsel need express no opinion: (a) regarding
perfection as to any government or governmental agency
(including without limitation the United States of America or
any State thereof or any agency or department of the United
States of America or any State thereof) of any security
interest in any Contracts with respect to which such
government or agency is obligated; (b) on the perfection of
any security interests in the collateral described in the
Contracts; (c) as to the priority of any perfected security
interests under the New Jersey UCC of any liens, claims or
other interests that do not require filing or similar action
to attach or that arise by operation of law against any claim
or lien in favor of the United States or any State or any
agency or instrumentality of the United States or any State
(including, without limitation, liens arising under the
federal tax laws or the Employment Retirement Income Security
Act of 1974, as amended) or against the rights of a "lien
creditor" (as defined in the New Jersey UCC); and (d) as to
the
<PAGE>
effect of the laws of any other state that may govern the
perfection or priority of the security interest in the
Contracts by possession or other than by filing a financing
statement under the UCC; (3) such opinions may be subject to
the effect of (i) the limitations on the existence and
perfection of security interests in proceeds resulting from
the operation of Section 9-306 of the New Jersey UCC; (ii) the
limitations with respect to documents and instruments imposed
by Section 9-309 of the New Jersey UCC; (iii) bankers' liens,
rights of set-off and other rights of persons in possession of
money, instruments and proceeds constituting certificated or
uncertificated securities; and (iv) Section 552 of the
Bankruptcy Code with respect to any Contracts acquired by the
Seller or the Trust subsequent to the commencement of a case
by or against CITSF, the Seller or the Trust under the
Bankruptcy Code; (4) such counsel's opinions may be
inapplicable to any Subsequent Contracts unless, upon the
proper filing of New Jersey UCC financing statements
describing the Subsequent Contracts, (i) the assumptions,
qualifications and limitations in this letter shall be true as
to conditions then existing and as to the Subsequent
Contracts, (ii) there are no changes in law, and (iii) all
searches have been updated and reveal no liens against any of
the Subsequent Contracts; and (5) such counsel's opinion may
be further subject to the effect of general principles of
equity, regardless of whether such principles are considered
in a proceeding in equity or at law, as the same may be
applied in a proceeding seeking to enforce any obligation.
(ii) Solely insofar as the present laws of the State
of New Jersey and the Federal law of the United States of
America are concerned, in a properly presented and decided
case, a court would conclude that the transfer of the
Contracts and the proceeds thereof by CITSF to the Seller
constitute true sales of such Contracts and, assuming a court
reached that conclusion, in such a case a court would conclude
that the Contracts and the proceeds would not be considered
property of the estate of CITSF pursuant to Section 541 of the
Bankruptcy Code, and the Contracts and the proceeds thereof
would not be subject to the automatic stay pursuant to Section
362 of the Bankruptcy Code; provided, however, such counsel
need express no opinion (A) with respect to how long the
Seller could be denied possession of the Contracts before the
issues discussed in this paragraph are finally decided on
appeal or other review, (B) with respect to the availability
of a preliminary injunction or temporary restraining order
pursuant to the broad equitable powers granted to a bankruptcy
court and (C) as to the conveyance of any Subsequent Contracts
unless, upon the proper filing of UCC financing statements
describing the Subsequent Contracts, (1) the assumptions,
qualifications and limitations in such opinion shall be true
as to conditions then existing and (2) all searches have been
updated and reveal no liens against any of the Subsequent
Contracts.
(iii) Solely insofar as the present laws of the State
of New Jersey and the Federal law of the United States of
America are concerned, in a properly presented and decided
case, a court would conclude that the transfer of the
<PAGE>
Contracts and the proceeds thereof by the Seller to the Trust
constitute true sales of such Contracts and, assuming a court
reached that conclusion, in such a case a court would conclude
that the Contracts and the proceeds would not be considered
property of the estate of the Seller pursuant to Section 541
of the Bankruptcy Code, and the Contracts and the proceeds
thereof would not be subject to the automatic stay pursuant to
Section 362 of the Bankruptcy Code; provided, however, such
counsel need express no opinion (A) with respect to how long
the Trust could be denied possession of the Contracts before
the issues discussed in this paragraph are finally decided on
appeal or other review, (B) with respect to the availability
of a preliminary injunction or temporary restraining order
pursuant to the broad equitable powers granted to a bankruptcy
court and (C) as to the conveyance of any Subsequent Contracts
unless, upon the proper filing of UCC financing statements
describing the Subsequent Contracts, (1) the assumptions,
qualifications and limitations in such opinion shall be true
as to conditions then existing and (2) all searches have been
updated and reveal no liens against any of the Subsequent
Contracts.
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are
reasonably acceptable to counsel to the Underwriters. In rendering such
opinion, such counsel may state that they express no opinion as to the
laws of any jurisdiction other than the Federal law of the United
States of America and the laws of the State of New Jersey.
(g) The Representative shall have received a written opinion
of Schulte Roth & Zabel LLP, special counsel to the Seller, CITSF and
CITCF-NY, dated the Closing Date, in substantially the form set forth
below, with such changes therein as the Representative and counsel for
the Underwriters shall reasonably agree:
(i) When the Notes have been duly executed, delivered
and authenticated in accordance with the Indenture and
delivered and paid for pursuant to this Agreement, the Notes
will be validly issued, outstanding and entitled to the
benefits of the Indenture, except that (A) enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) enforcement may be limited
by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(ii) The Registration Statement became effective
under the Act as of ____________, ____ and, to the best of
such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or any part
thereof or any amendment thereto has been issued under the Act
and no proceeding for that purpose has been instituted or
threatened by the Commission.
(iii) The form of the Indenture has been qualified
under the Trust Indenture Act.
<PAGE>
(iv) Neither the Trust Agreement nor the Sale and
Servicing Agreement need to be qualified under the Trust
Indenture Act. The Trust is not, and will not as a result of
the offer and sale of the Securities as contemplated in the
Prospectus and in this Agreement become, required to register
as an "investment company" under the Investment Company Act.
(v) The statements in the Prospectus under the
caption "The Notes," "The Certificates" and "The Purchase
Agreements and The Trust Documents" insofar as such statements
purport to summarize certain terms of the Notes, the
Certificates and the Basic Documents, present a fair summary
of such documents.
(vi) To the best of such counsel's knowledge, there
are no contracts or documents of the Seller which are required
to be filed as exhibits to the Registration Statement pursuant
to the Act or the Rules or Regulations which have not been so
filed.
(vii) The statements in the Prospectus under the
headings "Certain Federal Income Tax Consequences" and "ERISA
Considerations," to the extent that they constitute matters of
law or legal conclusions with respect thereto are correct in
all material respects.
(viii) The Registration Statement and the Prospectus
as of the date of this Agreement, and any amendment or
supplement thereto, as of its date, complied as to form in all
material respects with the requirements of the Act and the
applicable Rules and Regulations. Such counsel need express no
opinion with respect to the financial statements, the
exhibits, annexes and other financial, statistical, numerical
or portfolio data, economic conditions or financial condition
of the portfolio information included in the Registration
Statement, the Prospectus or any amendment or supplement
thereto.
Such counsel shall state that it has participated in
conferences with officers and representatives of the Seller, CITSF,
Counsel to CITSF and officers and representatives of the Underwriters,
at which conferences certain of the contents of the Registration
Statement and the Prospectus were discussed and, although such counsel
is not passing upon and does not assume any responsibility whatsoever
for, the factual accuracy, completeness or fairness of the statements
contained in the Registration Statement or Prospectus (except as stated
in Sections 6(g)(v) and 6(g)(vii) above) and has made no independent
check or verification thereof for the purpose of rendering this
opinion, on the basis of the foregoing (relying as to materiality to a
large extent upon the certificates of officers and other
representatives of the Seller and CITSF), no facts have come to their
attention that leads such counsel to believe that the Registration
Statement, when it became effective, contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus on its date contained or on the
Closing Date contains,
<PAGE>
any untrue statement of a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except that such counsel need express no view
with respect to the financial statements, tables, schedules, exhibits,
annexes and other financial, statistical, numerical or portfolio data,
economic conditions or financial condition of the portfolio included in
or incorporated by reference into, the Registration Statement or
Prospectus.
Said counsel may state that they are admitted to practice only
in the State of New York, that they are not admitted to the Bar in any
other State and are not experts in the law of any other State and to
the extent that the foregoing opinions concern the laws of any other
State such counsel may rely upon the opinion of counsel satisfactory to
the Underwriters and admitted to practice in such jurisdiction. Any
opinions relied upon by such counsel as aforesaid shall be addressed to
the Underwriters and shall be delivered together with the opinion of
such counsel, which shall state that such counsel believes that their
reliance thereon is justified.
(h) The Representative shall have received, in form and
substance satisfactory to the Representative and counsel for the
Underwriters an opinion of Schulte Roth & Zabel LLP, special counsel to
the Trust, dated the Closing Date, regarding the creation of a security
interest in the Collateral in favor of the Indenture Trustee on behalf
of the Noteholders to the extent that a security interest in such
Collateral can be created under Article 9 of the UCC as currently in
effect in the State of New York. Such opinion may contain such
assumptions, qualifications and limitations as are customary in
opinions of this type and as are reasonably acceptable to counsel to
the Underwriters. In rendering such opinion, such counsel may state
that they express no opinion as to the laws of any jurisdiction other
than the Federal law of the United States of America and the laws of
the State of New York.
(i) The Representative shall have received an opinion of
[____________________], counsel for the Underwriters, dated the Closing
Date, with respect to the validity of the Securities and such other
related matters as the Representative shall require and the Seller
shall have furnished or caused to be furnished to such counsel such
documents as they may reasonably request for the purpose of enabling
them to pass upon such matters.
[(j) The Representative shall have received an opinion of
counsel to the Cash Collateral Depositor, dated the Closing Date, in
form and substance satisfactory to the Representative and counsel for
the Underwriters, to the effect that:
(i) The Cash Collateral Depositor is licensed to
maintain a branch in the State of New York and has full power
and authority to enter into, and to take all action required
of it, under the Cash Collateral Agreement.
(ii) The Cash Collateral Agreement has been duly
authorized, executed and delivered by the Cash Collateral
Depositor.
<PAGE>
(iii) The Cash Collateral Agreement constitutes a
legal, valid and binding agreement of the Cash Collateral
Depositor, enforceable against the Cash Collateral Depositor
in accordance with its terms, except as enforceability thereof
may be limited by bankruptcy, insolvency, liquidation,
reorganization, moratorium or other similar laws affecting the
enforcement of rights of creditors against the Cash Collateral
Depositor generally, as such laws would apply in the event of
bankruptcy, insolvency, liquidation, receivership, or
reorganization or any moratorium or similar occurrence
affecting the Cash Collateral Depositor, and the application
of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or
law).]
(k) The Representative shall have received an opinion of
[____________________], counsel to the Indenture Trustee, dated the
Closing Date, in form and substance satisfactory to the Representative
and counsel for the Underwriters, to the effect that:
(i) The Indenture constitutes a legal, valid and
binding agreement of the Indenture Trustee, enforceable
against the Indenture Trustee in accordance with its terms,
except as enforceability thereof may be limited by bankruptcy,
insolvency, liquidation, reorganization, moratorium or other
similar laws affecting the enforcement of rights of creditors
against the Indenture Trustee generally, as such laws would
apply in the event of bankruptcy, insolvency, liquidation,
receivership, or reorganization or any moratorium or similar
occurrence affecting the Indenture Trustee, and the
application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or law).
(ii) The Notes have been duly authenticated and
delivered by the Indenture Trustee in accordance with the
terms of the Indenture.
(iii) he Indenture Trustee is a banking corporation
validly existing under the laws of the state of __________ and
has full power and authority to enter into, and to take all
action required of it, under the Indenture.
(iv) The Indenture has been duly authorized, executed
and delivered by the Indenture Trustee.
(l) The Representative shall have received an opinion of
[____________________], counsel to the Owner Trustee, dated the Closing
Date, in form and substance satisfactory to the Representative and
counsel for the Underwriters, to the effect that:
(i) The Owner Trustee is a banking corporation duly
incorporated and validly existing under the laws of the State
of __________.
<PAGE>
(ii) The Owner Trustee has the full power and
authority to accept the office of owner trustee under the
Trust Agreement and to enter into and perform its obligations
under the Trust Agreement and the transactions contemplated
thereby.
(iii) The execution and delivery of the Trust
Agreement by the Owner Trustee and the performance by the
Owner Trustee of its obligations under the Trust Agreement
have been duly authorized by all necessary action of the Owner
Trustee and the Trust Agreement has been duly executed and
delivered by the Owner Trustee.
(iv) The Trust Agreement constitutes valid and
binding obligations of the Owner Trustee enforceable against
the Owner Trustee in accordance with its terms, except as the
enforceability thereof may be (a) limited by bankruptcy,
insolvency, reorganization, moratorium, liquidation or other
similar laws affecting the rights of creditors generally, and
(b) subject to general principals of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
(v) The execution and delivery by the Owner Trustee
of the Trust Agreement and the transactions contemplated
thereby do not require any consent, approval or authorization
of, or any registration or filing with, any applicable
governmental authority of the State of Delaware which has not
been obtained or done.
(vi) Neither the consummation by the Owner Trustee of
the transactions contemplated in the Trust Agreement, nor the
fulfillment of the terms thereof by the Owner Trustee will
conflict with, result in a breach or violation of, or
constitute a default under the Article of Association, By-Laws
or other organizational documents of the Owner Trustee
(m) The Representative shall have received an opinion of
Richards, Layton & Finger, special Delaware counsel for the Trust,
dated the Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriters, to the effect that:
(i) The Trust Agreement is the legal, valid and
binding agreement of the Owner Trustee and the Seller,
enforceable against the Owner Trustee and the Seller in
accordance with its terms subject to (i) applicable
bankruptcy, insolvency, moratorium, receivership,
reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether
considered and applied in a proceeding in equity or at law),
and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or
contribution.
<PAGE>
(ii) The Certificate of Trust has been duly filed
with the Secretary of State of the State of Delaware. The
Trust has been duly formed and is validly existing as a
business trust under the Delaware Business Trust Act.
(iii) The Trust has the power and authority under the
Trust Agreement and the Delaware Business Trust Act to
execute, deliver and perform its obligations under the Trust
Agreement, the Indenture, the Cash Collateral Agreement, the
Sale and Servicing Agreement, the Notes and the Certificates,
and to issue the Notes and the Certificates.
(iv) The Trust has duly authorized and executed the
Trust Agreement, the Indenture, the Cash Collateral Agreement,
the Sale and Servicing Agreement, the Notes and the
Certificates.
(v) The Trust has the power under the Trust Agreement
and the Delaware Business Trust Act to pledge the Trust Estate
to the Indenture Trustee as security for the Notes.
(vi) The Certificates have been executed,
authenticated and delivered by the Owner Trustee upon the
order of the Seller in accordance with the Trust Agreement and
when delivered to and paid for pursuant to this Agreement, the
Certificates will be validly issued and outstanding, and the
holder of record of any such Certificates will be entitled to
the benefits accorded by the Trust Agreement subject to (i)
applicable bankruptcy, insolvency, moratorium, receivership,
reorganization, fraudulent conveyance and similar laws
relating to and affecting the rights and remedies of creditors
generally, (ii) principles of equity (regardless of whether
considered and applied in a proceeding in equity or at law),
and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or
contribution.
(vii) The Notes have been executed, authorized and
delivered by the Owner Trustee upon the order of the Seller in
accordance with the Trust Agreement and the Indenture.
(viii) To the extent that Article 9 of the Uniform
Commercial Code as in effect in the State of Delaware (the
"Delaware UCC") is applicable (without regard to conflicts of
laws principles), and assuming that the security interest
created by the Indenture in the Collateral has been duly
created and has attached, upon the filing of a UCC-1 financing
statement with the Secretary of State of the State of
Delaware, the Indenture Trustee will have a perfected security
interest in such Collateral and the proceeds thereof; and such
security interest will be prior to any other security interest
granted by the Trust that is perfected solely by the filing of
financing statements under the Delaware UCC, excluding
purchase
<PAGE>
money security interests under ss. 9-312 of the Delaware UCC
and temporarily perfected security interests in proceeds under
ss. 9-306 of the Delaware UCC.
(ix) No re-filing or other action is necessary under
the Delaware UCC in the State of Delaware in order to maintain
the perfection of the security interest referenced above
except for the filing of continuation statements at five-year
intervals.
(x) Under ss. 3805(b) of the Delaware Business Trust
Act, no creditor of any Certificateholder shall have any right
to obtain possession of, or otherwise exercise legal or
equitable remedies with respect to, the property of the Trust
except in accordance with the terms of the Trust Agreement
subject to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and
similar laws relating to and affecting the rights and remedies
of creditors generally, (ii) principles of equity (regardless
of whether considered and applied in a proceeding in equity or
at law), and (iii) the effect of applicable public policy on
the enforceability of provisions relating to indemnification
or contribution.
(xi) Under ss. 3805(c) of the Delaware Business Trust
Act, and assuming that the Sale and Servicing Agreement
conveys good title to the Contracts to the Trust as a true
sale and not as a security arrangement, the Trust, rather than
the Certificateholders, is the owner of the Contracts subject
to (i) applicable bankruptcy, insolvency, moratorium,
receivership, reorganization, fraudulent conveyance and
similar laws relating to and affecting the rights and remedies
of creditors generally, (ii) principles of equity (regardless
of whether considered and applied in a proceeding in equity or
at law), and (iii) the effect of applicable public policy on
the enforceability of provisions relating to indemnification
or contribution.
(xii) The execution and delivery by the Owner Trustee
of the Trust Agreement and, on behalf of the Trust, of the
Indenture and the Sale and Servicing Agreement do not require
any consent, approval or authorization of, or any registration
or filing with, any governmental authority of the State of
Delaware, except for the filing of the certificate of Trust
with the Secretary of State.
(xiii) Neither the consummation by the Owner Trustee
of the transactions contemplated by the Trust Agreement or, on
behalf of the Trust, the transactions contemplated by the
Trust Agreement, Indenture and the Sale and Servicing
Agreement nor the fulfillment of the terms thereof by the
Owner Trustee will conflict with or result in a breach or
violation of any law of the State of Delaware.
<PAGE>
Such opinion may contain such assumptions, qualifications and
limitations as are customary in opinions of this type and are
reasonably acceptable to counsel to the Underwriters. In rendering such
opinion, such counsel may state that they express no opinion as to the
laws of any jurisdiction other than the Federal law of the United
States of America and the laws of the State of Delaware.
(q) The Notes shall have been rated "[___]" by Moody's and
"[___]" by S&P, and the Certificates shall have been rated at least
"[__]" by Moody's and "[__]" by S&P.
(r) The Representative shall have received copies of each
opinion of counsel delivered to either Rating Agency or the Cash
Collateral Depositor, together with a letter addressed to the
Representative, dated the Closing Date, to the effect that each
Underwriter may rely on each such opinion to the same extent as though
such opinion was addressed to each as of its date.
(s) The Representative shall have received evidence
satisfactory to it and counsel for the Underwriters that, on or before
the Closing Date, UCC-1 financing statements shall have been submitted
to the Trustee for filing in the appropriate filing offices reflecting
(1) the transfer of the interest in the Contracts and the proceeds
thereof (A) from CITCF-NY to CITSF, to the extent such Contracts have
been transferred to CITSF from CITCF-NY, (B) from CITSF to the Seller,
(C) from the Seller to the Owner Trustee, on behalf of the Trust, or
the Trust, as the case may be, and (2) the grant of the security
interest by the Trust in the Contracts and the proceeds thereof to the
Indenture Trustee.
(t) On the Closing Date, counsel for the Underwriters shall
have been furnished with such documents and opinions as they reasonably
may require for the purpose of enabling them to pass upon the issuance
and sale of the Securities as herein contemplated and related
proceedings or in order to evidence the accuracy and completeness of
any of the representations and warranties, or the fulfillment of any of
the conditions, herein contained; and all proceedings taken by the
Seller in connection with the issuance and sale of the Securities as
herein contemplated shall be in form and substance satisfactory to the
Representative and counsel for the Underwriters.
7. Indemnification and Contribution.
(a) CITSF will indemnify and hold each Underwriter harmless
against any losses, claims, damages or liabilities, joint or several,
to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter
for any legal or
<PAGE>
other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that (i)
CITSF will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity
with written information furnished to the Seller or CITSF by any
Underwriter through the Representative specifically for use therein it
being understood and agreed that the only such information furnished by
any Underwriter consists of the Underwriters' Information and (ii)
CITSF shall not, in connection with any one such action or separate but
substantially similar or related transactions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters, which firm shall be designated in
accordance with Section 7(c) hereof.
(b) Each Underwriter, severally and not jointly, will
indemnify and hold harmless the Seller and CITSF against any losses,
claims, damages or liabilities to which the Seller or CITSF may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus
or any amendment or supplement thereto, or any related preliminary
prospectus or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to the Seller or CITSF by such Underwriter through the
Representative specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Seller or CITSF in
connection with investigating or defending any such action or claim as
such expenses are incurred, it being understood and agreed that (i) the
only such information furnished by any Underwriter consists of the
following information contained in the Prospectus: (a) the last
paragraph at the bottom of the cover page concerning the terms of the
offering by the Underwriters, (b) the legend concerning over-allotments
and (c) the information contained under the caption "Underwriting" (the
"Underwriters' Information") and (ii) the Underwriters shall not, in
connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys for each
of the Seller and CITSF, which firm shall be designated in accordance
with Section 7(c) hereof.
(c) Promptly after receipt by an indemnified party under this
Section of written notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under subsection (a) or (b) above,
notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from
any liability which it may have to
<PAGE>
any indemnified party otherwise than under such subsection. In case any
such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that
it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and after acceptance by the
indemnified party of counsel, the indemnifying party will not be liable
to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional
release of such indemnified party from all liability on any claims that
are the subject matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above in such proportion as is appropriate to
reflect not only the relative benefits received by the Seller and CITSF
on the one hand and the Underwriters on the other from the offering of
the Securities but also the relative fault of the Seller and CITSF on
the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations.
The relative benefits received by the Seller and CITSF on the one hand
and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) received by the Seller and CITSF
bear to the total underwriting discounts and commissions received by
the Underwriters. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Seller, CITSF or
by the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to above
in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the
subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue
or alleged
<PAGE>
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of CITSF under this Section shall be in
addition to any liability which the Seller or CITSF may otherwise have
and shall extend, upon the same terms and conditions, to each person,
if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section shall be in
addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to
each director of the Seller or CITSF, to each officer of the Seller or
CITSF who has signed the Registration Statement and to each person, if
any, who controls the Seller or CITSF within the meaning of the Act.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Seller and CITSF or their respective officers and of the Underwriters set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation or statement as to the results thereof, made by
or on behalf of any Underwriter, the Seller, CITSF or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Securities. If this Agreement is
terminated pursuant to Section 9 or if for any reason the purchase of the
Securities by the Underwriters is not consummated, the Seller, CITSF and
CITCF-NY shall remain responsible for the expenses to be paid or reimbursed by
it pursuant to Section 5 hereof and the respective obligations of the Seller,
CITSF and the Underwriters pursuant to Section 7 hereof shall remain in effect.
If the purchase of the Securities by the Underwriters is not consummated for any
reason other than solely because of the termination of this Agreement pursuant
to Section 9 or the occurrence of any event specified in clauses (iii), (iv) or
(v) of Section 6(e) hereof, the Seller and CITSF will reimburse the Underwriters
for all out-of-pocket expenses (including fees and disbursements of counsel)
reasonably incurred by them in connection with the offering of the Securities.
9. Failure to Purchase the Securities. If any Underwriter or
Underwriters default in their obligations to purchase the principal amount of
the Notes and/or the Certificates opposite such Underwriter's name on Schedule I
hereto and the aggregate principal amount of the Securities that such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of
the total principal amount of the Securities, the Representative may make
arrangements satisfactory to the Seller and CITSF for the purchase of such Notes
or Certificates by other persons, including any of the Underwriters, but if no
such arrangements are made by the Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Notes and/or the Certificates that such defaulting
Underwriters agreed but failed to purchase. If any Underwriter or Underwriters
so default and the aggregate principal amount of the Notes and/or the
Certificates with respect to such default or defaults exceeds 10% of the total
principal amount of the Securities and arrangements satisfactory to the
Representative, the Seller and CITSF for the purchase of such
<PAGE>
Notes and/or Certificates by other persons are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Seller or CITSF, except as provided in Section
8. As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve a
defaulting Underwriter or Underwriters from liability for its default.
10. Notices. All communications hereunder will be in writing and, if
sent to the Representative or the Underwriters, will be mailed, delivered or
sent by facsimile transmission and confirmed to the Representative at
[____________________], Attention: [__________] (facsimile number
[______________]); if sent to the Seller, will be mailed, delivered or sent by
facsimile transmission and confirmed to it at The CIT Group Securitization
Corporation II, 650 CIT Drive, Livingston, New Jersey 07039, Attention: James J.
Egan, Jr., President (facsimile number (201) 740-5410); if sent to CIT, will be
mailed, delivered or sent by facsimile transmission and confirmed to it by The
CIT Group Holdings, Inc., 1211 Avenue of the Americas, New York, New York 10036,
Attention: Joseph J. Carrol, Executive Vice President and Chief Financial
Officer (facsimile number (212) 536-1971); and if sent to CITSF, will be mailed,
delivered or sent by facsimile transmission and confirmed to it at The CIT
Group/Sales Financing, Inc., 650 CIT Drive, Livingston, New Jersey 07039,
Attention: James J. Egan, Jr., President (facsimile number (201) 740-5410).
11. No Bankruptcy Petition. Each Underwriter agrees that, prior to the
date which is one year and one day after the payment in full of all securities
issued by the Seller or by a trust for which the Seller was the depositor or by
the Trust, which securities were rated by any nationally recognized statistical
rating organization, it will not institute against, or join any other person in
instituting against, the Seller or the Trust in any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other proceedings under
any Federal or state bankruptcy or similar law.
12. Successors. This Agreement will inure to the benefit of and be
binding upon the Underwriters, the Seller, CIT and CITSF and their respective
successors and the officers and directors and controlling persons referred to in
Section 7, and no other person will have any right or obligations hereunder.
13. Representation of Underwriters. The Representative will act for the
several Underwriters in connection with the transactions described in this
Agreement, and any action taken by Representative under this Agreement will be
binding upon all the Underwriters.
14. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
15. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
principles of conflicts of laws.
<PAGE>
If the foregoing is in accordance with the Representative's
understanding of our agreement, kindly sign and return to us a counterpart
hereof, whereupon it will become a binding agreement among the Seller, CITSF and
the several Underwriters in accordance with its terms.
Very truly yours,
THE CIT GROUP SECURITIZATION CORPORATION II
By: ________________________________________
Name:
Title:
THE CIT GROUP/SALES FINANCING, INC.
By: ________________________________________
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written:
[____________________]
Acting on behalf of itself and as the
Representative of the several Underwriters
By:________________________________________
Name:
Title:
<PAGE>
SCHEDULE I
Underwriter Initial Principal Amount of Notes
- ----------- ---------------------------------
$
$
TOTAL $
Underwriter Initial Principal Amount of Certificates
- ----------- ----------------------------------------
$
$
TOTAL $
<PAGE>
SCHEDULE II
Locations of Chief Executive Offices and Principal Places of Business
The CIT Group Securitization Corporation II
650 CIT Drive
Livingston, New Jersey 07039-0491
The CIT Group/Sales Financing, Inc.
650 CIT Drive
Livingston, New Jersey 07039-0491
The CIT Group/Consumer Finance, Inc. (NY)
650 CIT Drive
Livingston, New Jersey 07039-0491
Locations of Records
The CIT Group Securitization Corporation II
715 South Metropolitan Avenue
Suite 150
Oklahoma City, Oklahoma 73124-0610
The CIT Group/Sales Financing, Inc.
715 South Metropolitan Avenue
Suite 150
Oklahoma City, Oklahoma 73124-0610
The CIT Group/Consumer Finance, Inc. (NY)
715 South Metropolitan Avenue
Suite 150
Oklahoma City, Oklahoma 73124-0610
<PAGE>
SCHEDULE III
Original Principal
Notes Amount Price Price Interest Rate
Class A-__ $ % $ %
Class A-__ $ % $ %
Total Price to Public: $
Total Price to Seller: $
Underwriting Discounts and Commissions: $
<PAGE>
SCHEDULE IV
Original Principal Pass-Through
Certificates Amount Price Price Rate
Class A-__ $ % $ %
Total Price to Public: $
Total Price to Seller: $
Underwriting Discounts and Commissions: $
Exhibit 4.1
CIT MARINE TRUST ____-_
Class A ____% Asset Backed Notes
INDENTURE
Dated as of ____________, ____
______________________,
Indenture Trustee
<PAGE>
CROSS-REFERENCE TABLE
TIA Section Indenture Section
310(a)(1) 6.11
310(a)(2) 6.11
310(a)(3) 6.10
310(a)(4) 6.14
310(b) 6.11
310(c) Not Applicable
311(a) 6.12
311(b) 6.12
311(c) Not Applicable
312(a) 7.1, 7.2
312(b) 7.2
312(c) 7.2
313(a) 7.4(a), 7.4(b)
313(b)(1) 7.4(a)
313(b)(2) 7.4(a)
313(c) 7.4(a)
313(d) 7.4(a)
314(a) 3.9, 7.3(a)
314(b) 3.6
314(c)(1) 2.2, 2.9, 4.1, 11.1
314(c)(2) 11.1(a)
314(c)(3) 11.1(a)
314(d) 2.9, 11.1(b)
314(e) 11.1(a)
314(f) 11.1(a)
315(a) 6.1(b)
315(b) 6.5
315(c) 6.1(a)
315(d) 6.2, 6.1(c)
315(e) 5.13
316 (a) last sentence 1.1
316(a)(1)(A) 5.11
316(a)(1)(B) 5.12
316(a)(2) Omitted
316(b), (c) 5.7
317(a)(1) 5.3(b)
317(a)(2) 5.3(d)
317(b) 3.3
318(a) 11.7
Note: This cross-reference table shall not for any purpose be deemed to be
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE..........................2
SECTION 1.1 Definitions.......................................................2
SECTION 1.2 Incorporation by Reference of Trust Indenture Act................2
ARTICLE II THE NOTES..........................................................2
SECTION 2.1 Form..............................................................2
SECTION 2.2 Execution, Authentication and Delivery............................3
SECTION 2.3 Temporary Notes...................................................4
SECTION 2.4 Registration; Registration of Transfer and Exchange of Notes......4
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes........................5
SECTION 2.6 Persons Deemed Noteholders........................................6
SECTION 2.7 Payment of Principal and Interest.................................7
SECTION 2.8 Cancellation of Notes.............................................8
SECTION 2.9 Release of Collateral.............................................8
SECTION 2.10 Book-Entry Notes.................................................9
SECTION 2.11 Notices to Depository............................................9
SECTION 2.12 Definitive Notes.................................................9
SECTION 2.13 Seller as Noteholder............................................10
SECTION 2.14 Tax Treatment...................................................10
ARTICLE III COVENANTS........................................................10
SECTION 3.1 Payment of Principal and Interest................................10
SECTION 3.2 Maintenance of Agency Office.....................................10
SECTION 3.3 Money for Payments To Be Held in Trust...........................11
SECTION 3.4 Existence........................................................12
SECTION 3.5 Protection of Trust Estate; Acknowledgment of Pledge.............13
SECTION 3.6 Opinions as to Trust Estate......................................13
SECTION 3.7 Performance of Obligations; Servicing of Contracts...............13
SECTION 3.8 Negative Covenants...............................................15
SECTION 3.9 Annual Statement as to Compliance................................15
SECTION 3.10 Consolidation, Merger, etc. of Issuer; Disposition of
Trust Assets..................................................15
SECTION 3.11 Successor or Transferee.........................................17
SECTION 3.12 No Other Business...............................................18
SECTION 3.13 No Borrowing....................................................18
SECTION 3.14 Guarantees, Loans, Advances and Other Liabilities...............18
SECTION 3.15 Servicer's Obligations..........................................18
SECTION 3.16 Capital Expenditures............................................18
SECTION 3.17 Removal of Servicer.............................................18
SECTION 3.18 Restricted Payments.............................................19
SECTION 3.19 Notice of Events of Default.....................................19
SECTION 3.20 Further Instruments and Acts....................................19
(i)
<PAGE>
SECTION 3.21 Representations and Warranties by the Issuer to the
Indenture Trustee.............................................19
ARTICLE IV __________........................................................20
SECTION 4.1 Satisfaction and Discharge of Indenture..........................20
SECTION 4.2 Application of Trust Money.......................................21
SECTION 4.3 Repayment of Monies Held by Paying Agent.........................21
SECTION 4.4 Duration of Position of Indenture Trustee........................21
ARTICLE V DEFAULT AND REMEDIES...............................................21
SECTION 5.1 Events of Default................................................21
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment...............23
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee..............................................24
SECTION 5.4 Remedies; Priorities.............................................26
SECTION 5.5 Optional Preservation of the Contracts...........................27
SECTION 5.6 Limitation of Suits..............................................28
SECTION 5.7 Unconditional Rights of Noteholders To Receive
Principal and Interest.........................................28
SECTION 5.8 Restoration of Rights and Remedies...............................29
SECTION 5.9 Rights and Remedies Cumulative...................................29
SECTION 5.10 Delay or Omission Not a Waiver..................................29
SECTION 5.11 Control by Noteholders..........................................29
SECTION 5.12 Waiver of Past Defaults.........................................30
SECTION 5.13 Undertaking for Costs...........................................30
SECTION 5.14 Waiver of Stay or Extension Laws................................31
SECTION 5.15 Action on Notes.................................................31
SECTION 5.16 Performance and Enforcement of Certain Obligations..............31
ARTICLE VI THE INDENTURE TRUSTEE.............................................32
SECTION 6.1 Duties of Indenture Trustee......................................32
SECTION 6.2 Rights of Indenture Trustee......................................33
SECTION 6.3 Indenture Trustee May Own Notes..................................34
SECTION 6.4 Indenture Trustee's Disclaimer...................................34
SECTION 6.5 Notice of Defaults...............................................34
SECTION 6.6 Reports by Indenture Trustee to Holders..........................35
SECTION 6.7 Compensation; Indemnity..........................................35
SECTION 6.8 Replacement of Indenture Trustee.................................35
SECTION 6.9 Merger or Consolidation of Indenture Trustee.....................36
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate
Indenture Trustee.............................................37
SECTION 6.11 Eligibility; Disqualification...................................38
SECTION 6.12 Preferential Collection of Claims Against Issuer................38
SECTION 6.13 Representations and Warranties of Indenture Trustee.............39
SECTION 6.14 Indenture Trustee May Enforce Claims Without
Possession of Notes...........................................39
SECTION 6.15 Suit for Enforcement............................................39
SECTION 6.16 Rights of Noteholders to Direct Indenture Trustee...............40
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS...................................40
(ii)
<PAGE>
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders.......................................40
SECTION 7.2 Preservation of Information, Communications to Noteholders.......40
SECTION 7.3 Reports by Issuer................................................41
SECTION 7.4 Reports by Trustee...............................................41
ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES............................42
SECTION 8.1 Collection of Money..............................................42
SECTION 8.2 Designated Accounts and the Cash Collateral Account; Payments....42
SECTION 8.3 General Provisions Regarding Accounts............................42
SECTION 8.4 Release of Trust Estate..........................................43
SECTION 8.5 Opinion of Counsel...............................................44
ARTICLE IX SUPPLEMENTAL INDENTURES...........................................44
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders...........44
SECTION 9.2 Supplemental Indentures With Consent of Noteholders..............45
SECTION 9.3 Execution of Supplemental Indentures.............................47
SECTION 9.4 Effect of Supplemental Indenture.................................47
SECTION 9.5 Conformity with Trust Indenture Act..............................47
SECTION 9.6 Reference in Notes to Supplemental Indentures....................47
ARTICLE X REDEMPTION OF NOTES................................................48
SECTION 10.1 Redemption......................................................48
SECTION 10.2 Form of Redemption Notice.......................................48
SECTION 10.3 Notes Payable on Redemption Date................................49
ARTICLE XI MISCELLANEOUS.....................................................49
SECTION 11.1 Compliance Certificates and Opinions, etc.......................49
SECTION 11.2 Form of Documents Delivered to Indenture Trustee................51
SECTION 11.3 Acts of Noteholders.............................................52
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and Rating Agencies.53
SECTION 11.5 Notices to Noteholders; Waiver..................................53
SECTION 11.6 Alternate Payment and Notice Provisions.........................54
SECTION 11.7 Conflict with Trust Indenture Act...............................54
SECTION 11.8 Effect of Headings and Table of Contents........................54
SECTION 11.9 Successors and Assigns..........................................54
SECTION 11.10 Separability...................................................55
SECTION 11.11 Benefits of Indenture..........................................55
SECTION 11.12 Legal Holidays.................................................55
SECTION 11.13 Governing Law..................................................55
SECTION 11.14 Counterparts...................................................55
SECTION 11.15 Recording of Indenture.........................................55
SECTION 11.16 No Recourse....................................................55
SECTION 11.17 No Petition....................................................56
SECTION 11.18 Inspection.....................................................56
SECTION 11.19 Indemnification by and Reimbursement of the Servicer...........57
(iii)
<PAGE>
EXHIBIT A - Form of Asset Backed Notes
(iv)
<PAGE>
INDENTURE, dated as of ____________, ____, between CIT MARINE TRUST
____-_, a Delaware business trust (the "Issuer"), and [____________________], a
__________ banking corporation, as trustee and not in its individual capacity
(the "Indenture Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Notes:
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date,
as trustee for the benefit of the Noteholders and (only to the extent expressly
provided herein) the Certificateholders, all of the Issuer's right, title and
interest in and to (i) the Contracts (except, to the extent provided in the Sale
and Servicing Agreement, any Post Cut-off Date Insurance Add-Ons); (ii) all
monies received under the Initial Contracts on or after the Initial Cut-off Date
and under the Subsequent Contracts on or after the related Subsequent Cut-off
Date; (iii) such amounts as from time to time may be held in one or more
accounts (other than the Excluded Assets) 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 Pre-Funding Account and the
Capitalized Interest Account (including all investments in such accounts and all
income from the funds therein and all proceeds thereof); (v) security interests
in the Financed Boats granted by the Obligors and any accessions thereto and any
other interest of the Issuer in the Financed Boats; (vi) the right to proceeds
from physical damage, credit life and disability insurance policies, if any,
covering individual Financed Boats or Obligors, as the case may be; (vii) the
rights of the Issuer under the Sale and Servicing Agreement (but excluding all
rights of the Issuer to the Excluded Assets) and the Subsequent Transfer
Agreements and the Subsequent Purchase Agreements; and (viii) all present and
future claims, demands, causes and choses in action in respect of any or all of
the foregoing and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any and all
proceeds of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as trustee on behalf of the Noteholders,
acknowledges such Grant, accepts the trusts under this Indenture in accordance
with the provisions of this Indenture.
<PAGE>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions. Certain capitalized terms used in this
Indenture and not otherwise defined herein shall have the respective meanings
assigned them in the Sale and Servicing Agreement (the "Sale and Servicing
Agreement") dated as of ____________, ____ among the Issuer, The CIT Group
Securitization Corporation II (the "Company" or the "Seller") and The CIT
Group/Sales Financing, Inc., as Servicer ("CITSF"). All references in this
Indenture to Articles, Sections, subsections and exhibits are to the same
contained in or attached to this Indenture unless otherwise specified. All terms
defined in this Indenture shall have the defined meanings when used in any
certificate, notice, Note or other document made or delivered pursuant hereto
unless otherwise defined therein.
SECTION 1.2 Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, such provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a Commission rule have
the respective meanings assigned to them by such definitions.
ARTICLE II
THE NOTES
SECTION 2.1 Form.
(a) The Class A Notes, with the Indenture Trustee's
certificate of authentication, shall be substantially in the form set
forth in Exhibit A, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of
A-2
<PAGE>
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution of the Notes. Any portion of the
text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
(b) The Definitive Notes shall be typewritten, printed,
lithographed or engraved or produced by any combination of these
methods (with or without steel engraved borders), all as determined by
the officers executing such Notes, as evidenced by their execution of
such Notes.
(c) The terms of the Notes as provided in Exhibit A are part
of the terms of this Indenture.
SECTION 2.2 Execution, Authentication and Delivery.
(a) Each Note shall be dated the date of its authentication,
and shall be issuable as a registered Note in the minimum denomination
of $1,000 and in integral multiples thereof (except for one Note which
may be issued in a denomination other than an integral multiple of
$1,000).
(b) The Notes shall be executed on behalf of the Issuer by any
of its Authorized Officers. The signature of any such Authorized
Officer on the Notes may be manual or facsimile.
(c) Notes bearing the manual or facsimile signature of
individuals who were Authorized Officers of the Issuer at the time such
signatures were affixed shall bind the Issuer, notwithstanding that
such individuals or any of them have ceased to hold such office prior
to the authentication and delivery of such Notes or did not hold such
office at the date of such Notes.
(d) The Indenture Trustee, in exchange for the Grant of the
Contracts and the other components of the Trust, and simultaneously
with the constructive delivery to the Indenture Trustee of the Contract
Files with respect to the Initial Contracts and the other components
and assets of the Trust, shall cause to be authenticated and delivered
to or upon the order of the Issuer, the Class A Notes for original
issue in aggregate principal amount of $___________. The aggregate
principal amount of Notes outstanding at any time may not exceed
$___________ except as provided in Section 2.5.
(e) No Notes shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there
appears on such Note a certificate of authentication substantially in
the form set forth in Exhibit A, executed by the Indenture Trustee the
manual signature of one of its Authorized Officers, and such
certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered
hereunder.
A-3
<PAGE>
SECTION 2.3 Temporary Notes.
(a) Pending the preparation of Definitive Notes, if any, the
Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, such Temporary Notes which are
printed, lithographed, typewritten, mimeographed or otherwise produced,
of the tenor of the Definitive Notes in lieu of which they are issued
and with such variations as are consistent with the terms of this
Indenture as the officers executing such Notes may determine, as
evidenced by their execution of such Notes.
(b) If Temporary Notes are issued, the Issuer shall cause
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Definitive Notes, the Temporary Notes shall be
exchangeable for Definitive Notes upon surrender of the Temporary Notes
at the Agency Office of the Issuer to be maintained as provided in
Section 3.2, without charge to the Noteholder. Upon surrender for
cancellation of any one or more Temporary Notes, the Issuer shall
execute and the Indenture Trustee shall authenticate and deliver in
exchange therefor a like principal amount of Definitive Notes of
authorized denominations. Until so delivered in exchange, the Temporary
Notes shall in all respects be entitled to the same benefits under this
Indenture as Definitive Notes.
SECTION 2.4 Registration; Registration of Transfer and Exchange of
Notes.
(a) The Issuer shall cause to be kept the Note Register, in
which, subject to such reasonable regulations as the Issuer may
prescribe, the Issuer shall provide for the registration of the Notes
and the registration of transfers and exchanges of the Notes. The
Indenture Trustee shall initially be the Note Registrar for the purpose
of registering the Notes and transfers of the Notes as herein provided.
Upon any resignation of any Note Registrar, the Issuer shall promptly
appoint a successor Note Registrar or, if it elects not to make such an
appointment, assume the duties of the Note Registrar.
(b) If a Person other than the Indenture Trustee is appointed
by the Issuer as Note Registrar, the Issuer will give the Indenture
Trustee prompt written notice of the appointment of such Note Registrar
and of the location, and any change in the location, of the Note
Register. The Indenture Trustee shall have the right to inspect the
Note Register at all reasonable times and to obtain copies thereof. The
Indenture Trustee shall have the right to rely upon a certificate
executed on behalf of the Note Registrar by an Executive Officer
thereof as to the names and addresses of the Noteholders and the
principal amounts and number of such Notes.
(c) Upon surrender for registration of transfer of any Note at
the Corporate Trust Office of the Indenture Trustee or the Agency
Office of the Issuer (and following the delivery, in the former case,
of such Notes to the Issuer by the Indenture Trustee), the Issuer shall
execute, the Indenture Trustee shall authenticate and the Noteholder
shall obtain from the Indenture Trustee, in the name of the designated
transferee or transferees,
A-4
<PAGE>
one or more new Notes in any authorized denominations, of a like
aggregate principal amount.
(d) At the option of the Noteholder, Notes may be exchanged
for other Notes of the same class in any authorized denominations, of a
like aggregate principal amount, upon surrender of the Notes to be
exchanged at the Corporate Trust Office of the Indenture Trustee or the
Agency Office of the Issuer (and following the delivery, in the former
case, of such Notes to the Issuer by the Indenture Trustee), the Issuer
shall execute, and the Indenture Trustee shall authenticate and the
Noteholder shall obtain from the Indenture Trustee, the Notes which the
Noteholder making the exchange is entitled to receive.
(e) All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuer,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Notes surrendered upon such registration of transfer
or exchange.
(f) Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a
written instrument of transfer in form satisfactory to the Indenture
Trustee, (i) duly executed by the Holder thereof or such Holder's
attorney duly authorized in writing, with such signature guaranteed by
an "eligible guarantor institution" meeting the requirements of the
Note Registrar which requirements include membership or participation
in Securities Transfer Agents Medallion Program ("Stamp") or such other
"signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Indenture Trustee may require.
(g) No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Issuer or
Indenture Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with
any registration of transfer or exchange of Notes, other than exchanges
pursuant to Sections 2.3 or 9.6 not involving any transfer.
(h) The preceding provisions of this Section 2.4
notwithstanding, the Issuer shall not be required to transfer or make
exchanges, and the Note Registrar need not register transfers or
exchanges, of Notes that: (i) have been selected for redemption
pursuant to Article X, if applicable; or (ii) are due for repayment
within 15 days of submission to the Corporate Trust Office or the
Agency Office.
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen Notes.
(a) If (i) any mutilated Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its satisfaction
of the destruction, loss or theft of any Note, and (ii) there is
delivered to the Indenture Trustee such security or indemnity as
A-5
<PAGE>
may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by
a bona fide purchaser, the Issuer shall execute and upon the Issuer's
request the Indenture Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a replacement Note of a like class and aggregate principal
amount; provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become or within seven days
shall be due and payable, or shall have been called for redemption,
instead of issuing a replacement Note, the Issuer may make payment to
the Holder of such destroyed, lost or stolen Note when so due or
payable or upon the Redemption Date, if applicable, without surrender
thereof.
(b) If, after the delivery of a replacement Note or payment in
respect of a destroyed, lost or stolen Note pursuant to subsection (a),
a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note,
the Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from (i) any Person to whom it was
delivered, (ii) the Person taking such replacement Note from the Person
to whom such replacement Note was delivered; or (iii) any assignee of
such Person, except a bona fide purchaser, and the Issuer and the
Indenture Trustee shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or
expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
(c) In connection with the issuance of any replacement Note
under this Section 2.5, the Issuer may require the payment by the
Holder of such Note of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any
other reasonable expenses (including all fees and expenses of the
Indenture Trustee) connected therewith.
(d) Any duplicate Note issued pursuant to this Section 2.5 in
replacement for any mutilated, destroyed, lost or stolen Note shall
constitute an original additional contractual obligation of the Issuer,
whether or not the mutilated, destroyed, lost or stolen Note shall be
found at any time or be enforced by any Person, and shall be entitled
to all the benefits of this Indenture equally and proportionately with
any and all other Notes duly issued hereunder.
(e) The provisions of this Section 2.5 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or
stolen Notes.
SECTION 2.6 Persons Deemed Noteholders. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the Noteholder for
the purpose of receiving payments of principal of and interest on such Note and
for all other purposes whatsoever, whether or not such Note be
A-6
<PAGE>
overdue, and neither the Issuer, the Indenture Trustee nor any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.7 Payment of Principal and Interest.
(a) Interest on the Notes shall accrue in the manner set forth
in the form of the Class A Notes set forth in Exhibit A at the Class A
Rate, and such interest shall be payable on each Distribution Date as
specified in the form of Class A Note set forth in Exhibit A. Any
interest payable on any Note shall be punctually paid or duly provided
for by a deposit by or at the direction of the Issuer into the Note
Distribution Account on the applicable Distribution Date and shall be
paid to the Person in whose name such Note (or one or more Predecessor
Notes) is registered on the applicable Record Date, by check mailed
first-class, postage prepaid to such Person's address as it appears on
the Note Register on such Record Date; provided, however, that, unless
and until Definitive Notes have been issued pursuant to Section 2.12,
with respect to Notes registered on the applicable Record Date in the
name of the Depository (initially, Cede & Co.), payment shall be made
by wire transfer in immediately available funds to the account
designated by the Depository.
(b) Prior to the occurrence of an Event of Default and a
declaration in accordance with Section 5.2 that the Notes have become
immediately due and payable, the outstanding principal of the Notes
shall be payable in full on the Class A Final Scheduled Distribution
Date and, to the extent of funds available therefor, in installments on
the Distribution Dates (if any) preceding the Class A Final Scheduled
Distribution Date, in accordance with Section 8.2(c). All principal
payments on the Notes shall be made pro rata to the Noteholders
entitled thereto. Any principal payable on any Note shall be punctually
paid or duly provided for by a deposit by or at the direction of the
Issuer into the Note Distribution Account on the applicable
Distribution Date and shall be paid to the Person in whose name such
Note (or one or more Predecessor Notes) is registered on the applicable
Record Date, by check mailed first-class, postage prepaid to such
Person's address as it appears on the Note Register on such Record
Date; provided, however, that, unless and until Definitive Notes have
been issued pursuant to Section 2.12, with respect to Notes registered
on the Record Date in the name of the Depository (initially, Cede &
Co.), payment shall be made by wire transfer in immediately available
funds to the account designated by the Depository, except for: (i) the
final installment of principal on any Note; and (ii) the Redemption
Price (as hereinafter defined) for any Notes, if so called, which, in
each case, shall be payable as provided herein. The funds represented
by any such checks in respect of interest or principal returned
undelivered shall be held in accordance with Section 3.3.
(c) The entire unpaid principal amount of the Notes shall be
due and payable, if not previously paid, if:
(i) an Event of Default shall have occurred and be
continuing; and
A-7
<PAGE>
(ii) the Indenture Trustee or the Noteholders
representing not less than a majority of the aggregate
outstanding principal amount of the Notes have declared the
Notes to be immediately due and payable in the manner provided
in Section 5.2.
(d) If the Issuer defaults in a payment of interest on the
Notes, the Issuer shall pay defaulted interest at the Class A Rate in
any lawful manner. The Issuer may pay such defaulted interest to the
Persons who are Noteholders on a subsequent special record date, which
date shall be at least five Business Days prior to the payment date.
The Issuer shall fix or cause to be fixed any such special record date
and payment date, and, at least 15 days before any such special record
date, the Issuer shall mail to each Noteholder and the Trustee a notice
that states the special record date, the payment date and the amount of
defaulted interest to be paid.
(e) With respect to any Distribution Date on which the final
installment of principal and interest on the Notes is to be paid, the
Indenture Trustee shall notify each Noteholder of record as of the
Record Date for such Distribution Date of the fact that the final
installment of principal of and interest on such Note is to be paid on
such Distribution Date. Such notice shall be sent (i) on such Record
Date by facsimile, if Book-Entry Notes are outstanding; or (ii) not
later than three Business Days after such Record Date in accordance
with Section 11.5(a) if Definitive Notes are outstanding, and shall
specify that such final installment shall be payable only upon
presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be
mailed to Noteholders as provided in Section 10.2.
SECTION 2.8 Cancellation of Notes. All Notes surrendered for payment,
redemption, exchange or registration of transfer shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section 2.8, except as expressly
permitted by this Indenture. All canceled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided, however, that such
Issuer Order is timely and the Notes have not been previously disposed of by the
Indenture Trustee.
SECTION 2.9 Release of Collateral. Subject to Section 11.1, the
Indenture Trustee shall release property from the lien of this Indenture only
upon receipt of an Issuer Request accompanied by an Officers' Certificate, an
Opinion of Counsel and Independent Certificates in accordance with TIA ss.314(c)
and 314(d)(1) or an Opinion of Counsel in lieu of such Independent Certificates
to the effect that the TIA does not require any such Independent Certificates.
A-8
<PAGE>
SECTION 2.10 Book-Entry Notes. The Notes, upon original issuance, shall
be issued in the form of a typewritten Note or Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Depository
by or on behalf of the Issuer. Such Note or Notes shall be registered on the
Note Register in the name of the Depository, and no Note Owner shall receive a
Definitive Note representing such Note Owner's interest in such Note, except as
provided in Section 2.12. Unless and until the Definitive Notes have been issued
to Note Owners pursuant to Section 2.12:
(a) the provisions of this Section 2.10 shall be in full force
and effect;
(b) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Depository for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and
the giving of instructions or directions hereunder) as the sole holder
of the Notes and shall have no obligation to the Note Owners;
(c) to the extent that the provisions of this Section 2.10
conflict with any other provisions of this Indenture, the provisions of
this Section 2.10 shall control;
(d) the rights of the Note Owners shall be exercised only
through the Depository and shall be limited to those established by law
and agreements between such Note Owners and the Depository and/or the
Depository Participants. Unless and until Definitive Notes are issued
pursuant to Section 2.12, the initial Depository shall make book-entry
transfers between the Depository Participants and receive and transmit
payments of principal of and interest on the Notes to such Depository
Participants, pursuant to the Depository Agreement; and
(e) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the aggregate outstanding
principal amount of the Notes, the Depository shall be deemed to
represent such percentage only to the extent that it has (i) received
instructions to such effect from Note Owners and/or Depository
Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Notes; and (ii) has
delivered such instructions to the Indenture Trustee.
SECTION 2.11 Notices to Depository. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Indenture Trustee shall give all such notices and communications
specified herein to be given to Noteholders to the Depository and shall have no
obligation to the Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Servicer advises the
Indenture Trustee in writing that the Depository is no longer willing or able to
properly discharge its responsibilities with respect to the Notes and the Issuer
is unable to locate a qualified successor; (ii) the Servicer, at its option,
advises the Indenture Trustee in writing that it elects to terminate the
book-entry
A-9
<PAGE>
system through the Depository; or (iii) after the occurrence of an Event of
Default or an Event of Termination, Note Owners representing beneficial
interests aggregating at least a majority of the aggregate outstanding principal
amount of the Notes advise the Depository in writing that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Note Owners, then the Depository shall notify all Note Owners and the
Indenture Trustee of the occurrence of any such event and the Depository shall,
after being informed by the Indenture Trustee, notify the Note Owners of the
availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Note or Notes representing
the Book-Entry Notes by the Depository, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Depository. None of the Issuer, the Servicer, the Note Registrar or the
Indenture Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes, the Indenture Trustee shall
recognize the Holders of the Definitive Notes as Noteholders.
SECTION 2.13 Seller as Noteholder. The Seller in its individual or any
other capacity may become the owner or pledgee of the Notes and may otherwise
deal with the Issuer or its affiliates with the same rights it would have if it
were not the Seller.
SECTION 2.14 Tax Treatment. The Issuer and the Indenture Trustee, by
entering into this Indenture, and the Noteholders, by acquiring any Note or
interest therein, (i) express their intention that the Notes qualify under
applicable tax law as indebtedness secured by the Contracts, and (ii) unless
otherwise required by appropriate taxing authorities, agree to treat the Notes
as indebtedness secured by the Contracts for the purpose of federal income
taxes, state and local income and franchise taxes, and any other taxes imposed
upon, measured by or based upon gross or net income.
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest. The Issuer shall duly
and punctually pay the principal of and interest on the Notes in accordance with
the terms of the Notes and this Indenture. On each Distribution Date and on the
Redemption Date (if applicable), the Issuer shall cause amounts on deposit in
the Note Distribution Account to be distributed to the Noteholders in accordance
with Sections 2.7 and 8.2, less amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal. Any
amounts so withheld shall be considered as having been paid by the Issuer to
such Noteholder for all purposes of this Indenture.
SECTION 3.2 Maintenance of Agency Office. As long as any of the Notes
remains outstanding, the Issuer shall maintain in the Borough of Manhattan, the
City of New York, an office (the "Agency Office"), being an office or agency
where Notes may be surrendered to the
A-10
<PAGE>
Issuer for registration of transfer or exchange, and where notices and demands
to or upon the Issuer in respect of the Notes and this Indenture may be served.
The Issuer hereby initially appoints the Indenture Trustee to serve as its agent
for the foregoing purposes. The Issuer shall give prompt written notice to the
Indenture Trustee of the location, and of any change in the location, of any
such office or agency. If at any time the Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Indenture Trustee with the address
thereof, such surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Indenture Trustee, and the Issuer hereby appoints
the Indenture Trustee as its agent to receive all such surrenders, notices and
demands.
SECTION 3.3 Money for Payments To Be Held in Trust.
(a) As provided in Section 8.2(a) and (b), all payments of
amounts due and payable with respect to any Notes that are to be made
from amounts withdrawn from the Note Distribution Account pursuant to
Section 8.2(c) shall be made on behalf of the Issuer by the Indenture
Trustee or by another Paying Agent, and no amounts so withdrawn from
the Note Distribution Account for payments of Notes shall be paid over
to the Issuer except as provided in this Section 3.3.
(b) On or before each Distribution Date or the Redemption Date
(if applicable), the Issuer shall deposit or cause to be deposited in
the Note Distribution Account an aggregate sum sufficient to pay the
amounts then becoming due with respect to the Notes, such sum to be
held in trust for the benefit of the Persons entitled thereto and
(unless the Paying Agent is the Indenture Trustee) shall promptly
notify the Indenture Trustee of its action or failure so to act.
(c) The Issuer shall cause each Paying Agent other than the
Indenture Trustee to execute and deliver to the Indenture Trustee an
instrument in which such Paying Agent shall agree with the Indenture
Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby
so agrees), subject to the provisions of this Section 3.3, that such
Paying Agent shall:
(i) hold all sums held by it for the payment of
amounts due with respect to the Notes in trust for the benefit
of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided
and pay such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default
by the Issuer (or any other obligor upon the Notes) of which
it has actual knowledge in the making of any payment required
to be made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee,
forthwith pay to the Indenture Trustee all sums so held in
trust by such Paying Agent;
A-11
<PAGE>
(iv) immediately resign as a Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it in
trust for the payment of Notes if at any time it ceases to
meet the standards required to be met by a Paying Agent in
effect at the time of determination; and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any
Notes of any applicable withholding taxes imposed thereon and
with respect to any applicable reporting requirements in
connection therewith.
(d) The Issuer may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, by Issuer Order direct any Paying Agent to pay to the
Indenture Trustee all sums held in trust by such Paying Agent, such
sums to be held by the Indenture Trustee upon the same trusts as those
upon which the sums were held by such Paying Agent; and upon such
payment by any Paying Agent to the Indenture Trustee, such Paying Agent
shall be released from all further liability with respect to such
money.
(e) Subject to applicable laws with respect to escheat of
funds, any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note and
remaining unclaimed for one year after such amount has become due and
payable shall be discharged from such trust and be paid to the Issuer
on Issuer Request; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to the Issuer for payment thereof
(but only to the extent of the amounts so paid to the Issuer), and all
liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the
Indenture Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Issuer cause to be
published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation
in the City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30
days from the date of such publication, any unclaimed balance of such
money then remaining shall be repaid to the Issuer. The Indenture
Trustee may also adopt and employ, at the expense of the Issuer, any
other reasonable means of notification of such repayment (including,
but not limited to, mailing notice of such repayment to Holders whose
Notes have been called but have not been surrendered for redemption or
whose right to or interest in monies due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying
Agent, at the last address of record for each such Holder).
SECTION 3.4 Existence. Subject to Section 3.10, the Issuer shall keep
in full effect its existence, rights and franchises as a business trust under
the laws of the State of Delaware and shall obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or agreement
included in the Trust Estate.
A-12
<PAGE>
SECTION 3.5 Protection of Trust Estate; Acknowledgment of Pledge. The
Issuer shall from time to time execute and deliver all such supplements and
amendments hereto and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and shall take such
other action necessary or advisable to: (i) maintain or preserve the lien and
security interest (and the priority thereof) of this Indenture or carry out more
effectively the purposes hereof; (ii) perfect, publish notice of or protect the
validity of any Grant made or to be made by this Indenture; (iii) enforce any
rights under this Indenture against the Collateral; or (iv) preserve and defend
title to the Trust Estate and the rights of the Indenture Trustee and the
Noteholders in such Trust Estate against the claims of all persons and parties,
and the Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Trustee pursuant to this Section 3.5.
SECTION 3.6 Opinions as to Trust Estate.
(a) On the Closing Date, the Issuer shall furnish to the
Indenture Trustee an Opinion of Counsel either stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording and filing of this Indenture, any indentures supplemental
hereto and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation
statements as are necessary to perfect and make effective the lien and
security interest of this Indenture and reciting the details of such
action, or stating that, in the opinion of such counsel, no such action
is necessary to make such lien and security interest effective.
(b) On or before April 15 in each calendar year, beginning
April 15, ____, the Issuer shall furnish to the Indenture Trustee an
Opinion of Counsel either stating that, in the opinion of such counsel,
such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect
to the execution and filing of any financing statements and
continuation statements as is necessary to maintain the lien and
security interest created by this Indenture and reciting the details of
such action or stating that in the opinion of such counsel no such
action is necessary to maintain the lien and security interest created
by this Indenture. Such Opinion of Counsel shall also describe the
recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental hereto and any other requisite documents and
the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to
maintain the lien and security interest of this Indenture until April
15 in the following calendar year.
SECTION 3.7 Performance of Obligations; Servicing of Contracts.
(a) The Issuer shall not take any action and shall use its
reasonable efforts not to permit any action to be taken by others that
would release any Person from any of such Person's material covenants
or obligations under any instrument or agreement included in the Trust
Estate or that would result in the amendment, hypothecation,
subordination,
A-13
<PAGE>
termination or discharge of, or impair the validity or effectiveness
of, any such instrument or agreement, except as otherwise expressly
provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee in the Basic
Documents or an Officers' Certificate of the Issuer shall be deemed to
be action taken by the Issuer. Initially, the Issuer has contracted
with the Servicer to assist the Issuer in performing its duties under
this Indenture.
(c) Issuer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic
Documents and in the instruments and agreements included in the Trust
Estate, including but not limited to filing or causing to be filed all
UCC financing statements and continuation statements required to be
filed by the terms of this Indenture, the Sale and Servicing Agreement
and the Purchase Agreement in accordance with and within the time
periods provided for herein and therein.
(d) If the Issuer shall have knowledge of the occurrence of an
Event of Termination under the Sale and Servicing Agreement, the Issuer
shall promptly notify the Indenture Trustee and the Rating Agencies
thereof, and shall specify in such notice the response or action, if
any, the Issuer has taken or is taking with respect to such default. If
an Event of Termination shall arise from the failure of the Servicer to
perform any of its duties or obligations under the Sale and Servicing
Agreement with respect to the Contracts, the Issuer and the Indenture
Trustee shall take all reasonable steps available to them pursuant to
the Sale and Servicing Agreement to remedy such failure or to effect a
Service Transfer pursuant to the Sale and Servicing Agreement.
Without derogating from the absolute nature of the assignment granted
to the Indenture Trustee under this Indenture or the rights of the Indenture
Trustee hereunder, the Issuer agrees that it shall not, without the prior
written consent of the Indenture Trustee or the Holders of at least a majority
in aggregate outstanding principal amount of the Notes, as applicable in
accordance with the terms thereof, amend, modify, waive, supplement, terminate
or surrender, or agree to any amendment, modification, supplement, termination,
waiver or surrender of, the terms of any Collateral or any of the Basic
Documents (other than the Cash Collateral Agreement), or waive timely
performance or observance by the Servicer or the Seller under the Sale and
Servicing Agreement, a Subsequent Purchase Agreement, a Subsequent Transfer
Agreement or the Purchase Agreement. If any such amendment, modification,
supplement or waiver shall be so consented to by the Indenture Trustee or such
Holders, as applicable, the Issuer agrees, promptly following a request by the
Indenture Trustee to do so, to execute and deliver, in its own name and at its
own expense, such agreements, instruments, consents and other documents as the
Indenture Trustee may deem necessary or appropriate in the circumstances.
A-14
<PAGE>
SECTION 3.8 Negative Covenants. So long as any Notes are outstanding,
the Issuer shall not:
(a) sell, transfer, exchange or otherwise dispose of any of
the properties or assets of the Issuer, except the Issuer may (i)
collect, liquidate, sell or otherwise dispose of Contracts (including
Repurchased Contracts and Liquidated Contracts) and Financed Boats,
(ii) make cash payments out of the Designated Accounts and (iii) take
other actions, in each case as contemplated by the Basic Documents;
(b) claim any credit on, or make any deduction from the
principal or interest payable in respect of the Notes (other than
amounts properly withheld from such payments under the Code or
applicable state law) or assert any claim against any present or former
Noteholder by reason of the payment of the taxes levied or assessed
upon any part of the Trust Estate;
(c) voluntarily commence any insolvency, readjustment of debt,
marshalling of assets and liabilities or other proceeding, or apply for
an order by a court or agency or supervisory authority for the
winding-up or liquidation of its affairs or any other event specified
in Section 5.1(e); or
(d) either (i) permit the validity or effectiveness of this
Indenture to be impaired, or permit the Lien of this 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 Notes under this Indenture except as may be expressly
permitted hereby, (ii) permit any Lien or other encumbrance (other than
the Lien of this Indenture) to be created on or extend to or otherwise
arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof (other than tax liens,
mechanics' liens and other liens that arise by operation of law, in
each case on a Financed Boat and arising solely as a result of an
action or omission of the related Obligor) or (iii) permit the Lien of
this Indenture not to constitute a valid first priority security
interest in the Trust Estate (other than with respect to any such tax,
mechanics' or other Lien).
SECTION 3.9 Annual Statement as to Compliance. The Issuer shall deliver
to the Indenture Trustee, on or before April 15 of each year, beginning April
15, ____, and otherwise in compliance with Section 314(a)(4) of the TIA, an
Officer's Certificate signed by an Authorized Officer, dated as of April 15 of
such year, stating that a review of the activities of the Issuer during such
fiscal year and of performance under this Indenture has been made and, to the
best of such Authorized Officer's knowledge, based on such review, the Issuer
has fulfilled all of its obligations under this Indenture throughout such year,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such Authorized Officer and the nature and
status thereof. A copy of such certificate may be obtained by any Noteholder by
a request in writing to the Issuer addressed to the Corporate Trust Office of
the Indenture Trustee.
SECTION 3.10 Consolidation, Merger, etc. of Issuer; Disposition of
Trust Assets.
A-15
<PAGE>
(a) The Issuer shall not consolidate or merge with or into any
other Person, unless:
(i) the Person (if other than the Issuer) formed by
or surviving such consolidation or merger shall be a Person
organized and existing under the laws of the United States of
America or any State or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form
satisfactory to the Indenture Trustee, the due and timely
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of
this Indenture on the part of the Issuer to be performed or
observed, all as provided herein;
(ii) immediately after giving effect to such merger
or consolidation, no Default or Event of Default shall have
occurred and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction and such Person;
(iv) any action as is necessary to maintain the Lien
created by this Indenture shall have been taken; and
(v) the Issuer shall have delivered to the Indenture
Trustee an Officers' Certificate and an Opinion of Counsel
addressed to the Issuer, each stating:
(A) that such consolidation or merger and
such supplemental indenture comply with this Section
3.10;
(B) that such consolidation or merger and
such supplemental indenture shall have no material
adverse tax consequence to the Trust or any
Noteholder or Certificateholder;
(C) that such consolidation or merger and
such supplemental indenture comply with this Section
3.10; and
(D) that all conditions precedent herein
provided for in this Section 3.10 have been complied
with, which shall include any filing required by the
Exchange Act.
(b) Except as otherwise expressly permitted by this Indenture
or the other Basic Documents, the Issuer shall not sell, convey,
exchange, transfer or otherwise dispose of any of its properties or
assets (other than the Excluded Assets), including those included in
the Trust Estate, to any Person unless:
A-16
<PAGE>
(i) the Person that acquires such properties or
assets of the Issuer (A) shall be a United States citizen or a
Person organized and existing under the laws of the United
States of America or any State or the District of Columbia and
(B) by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to
the Indenture Trustee: (1) expressly assumes the due and
punctual payment of the principal of and interest on all Notes
and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein; (2) expressly
agrees that all right, title and interest so sold, conveyed,
exchanged, transferred or otherwise disposed of shall be
subject and subordinate to the rights of Noteholders; (3)
unless otherwise provided in such supplemental indenture,
expressly agrees to indemnify, defend and hold harmless the
Issuer against and from any loss, liability or expense arising
under or related to this Indenture and the Notes; and (4)
expressly agrees that such Person (or if a group of Persons,
then one specified Person) shall make all filings with the
Commission (and any other appropriate Person) required by the
Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have
occurred and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction and such Person;
(iv) any action as is necessary to maintain the Lien
created by this Indenture shall have been taken: and
(v) the Issuer shall have delivered to the Indenture
Trustee an Officers' Certificate and an Opinion of Counsel
addressed to the Issuer, each stating that:
(A) such sale, conveyance, exchange,
transfer or disposition and such supplemental
indenture comply with this Section 3.10;
(B) such sale, conveyance, exchange,
transfer or disposition and such supplemental
indenture has no material adverse tax consequence to
the Trust or to any Noteholders or
Certificateholders; and
(C) that all conditions precedent herein
provided for in this Section 3.10 have been complied
with, which shall include any filing required by the
Exchange Act.
SECTION 3.11 Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in
accordance with Section 3.10(a), the Person formed by or surviving such
consolidation or merger (if other than the Issuer) shall succeed to,
and be substituted for, and may exercise every right and power
A-17
<PAGE>
of, the Issuer under this Indenture with the same effect as if such
Person had been named as the Issuer herein.
(b) Upon a sale, conveyance, exchange, transfer or disposition
of all the assets and properties of the Issuer pursuant to Section
3.10(b), the Trust shall be released from every covenant and agreement
of this Indenture to be observed or performed on the part of the Issuer
with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee from the Person acquiring such assets
and properties stating that the Trust is to be so released.
SECTION 3.12 No Other Business. The Issuer shall not engage in any
business or activity other than acquiring, holding and managing the Contracts,
the other assets of the Trust Estate, and the Excluded Assets and the proceeds
therefrom in the manner contemplated by the Basic Documents, issuing the Notes
and the Certificates, making payments on the Notes and the Certificates and such
other activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto, as set forth in Section 2.3 of the Trust
Agreement.
SECTION 3.13 No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness for money borrowed other than indebtedness for money borrowed in
respect of the Notes or in accordance with the Basic Documents.
SECTION 3.14 Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by this Indenture or the other Basic Documents, the Issuer shall
not make any loan or advance or credit to, or guarantee (directly or indirectly
or by an instrument having the effect of assuring another's payment or
performance on any obligation or capability of so doing or otherwise), endorse
or otherwise become contingently liable, directly or indirectly, in connection
with the obligations, stocks or dividends of, or own, purchase, repurchase or
acquire (or agree contingently to do so) any stock, obligations, assets or
securities of, or any other interest in, or make any capital contribution to,
any other Person.
SECTION 3.15 Servicer's Obligations. The Issuer shall use its best
efforts to cause the Servicer to comply with its obligations under the Sale and
Servicing Agreement.
SECTION 3.16 Capital Expenditures. The Issuer shall not make any
expenditure (whether by long-term or operating lease or otherwise) for capital
assets (either real, personal or intangible property) other than the purchase of
the Contracts and other property and rights from the Seller pursuant to the
Basic Documents.
SECTION 3.17 Removal of Servicer. So long as any Notes are outstanding,
the Issuer shall not remove the Servicer without cause unless the Rating Agency
Condition shall have been satisfied in connection with such removal.
A-18
<PAGE>
SECTION 3.18 Restricted Payments. Except for payments of principal or
interest on or redemption of the Notes and except as expressly provided in the
Basic Documents, so long as any Notes are outstanding, the Issuer shall not,
directly or indirectly:
(a) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a
combination thereof, to the Owner Trustee or any owner of a beneficial
interest in the Issuer or otherwise, in each case with respect to any
ownership or equity interest or similar security in or of the Issuer or
to the Servicer;
(b) redeem, purchase, retire or otherwise acquire for value
any such ownership or equity interest or similar security; or
(c) set aside or otherwise segregate any amounts for any such
purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Cash Collateral Depositor (and any
successor in interest thereto) and the Certificateholders as permitted by, and
to the extent funds are available for such purpose under, the Sale and Servicing
Agreement, the Cash Collateral Agreement or the Trust Agreement. The Issuer
shall not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with the Basic Documents.
SECTION 3.19 Notice of Events of Default. The Issuer agrees to give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder, each Event of Termination, any Insolvency Event with respect
to the Affiliated Purchaser and each default on the part of the Seller or the
Servicer of their obligations under the Basic Documents.
SECTION 3.20 Further Instruments and Acts. Upon request of the
Indenture Trustee, the Issuer shall execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
SECTION 3.21 Representations and Warranties by the Issuer to the
Indenture Trustee. The Issuer hereby represents and warrants to the Indenture
Trustee as follows:
(a) No Contract has been sold, transferred, assigned or
pledged by the Trust to any Person other than the Indenture Trustee;
immediately prior to the conveyance of the Contracts pursuant to this
Indenture, the Trust had good and marketable title thereto, free of any
Lien; and, upon execution and delivery of this Indenture by the Trust,
the Indenture Trustee shall have all of the right, title and interest
of the Trust in, to and under the Contracts, the unpaid indebtedness
evidenced thereby and the collateral security therefor, free of any
Lien; and
(b) All filings (including, without limitation, UCC filings)
necessary in any jurisdiction to give the Indenture Trustee a first
perfected ownership interest in the Contracts shall have been made.
A-19
<PAGE>
ARTICLE IV
__________
SECTION 4.1 Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to: (i)
rights of registration of transfer and exchange; (ii) substitution of mutilated,
destroyed, lost or stolen Notes; (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon; (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.19 and 3.21; (v) the rights, obligations and immunities of
the Indenture Trustee hereunder (including the rights of the Indenture Trustee
under Section 6.7 and the obligations of the Indenture Trustee under Sections
4.2 and 4.4); and (vi) the rights of Noteholders as beneficiaries hereof with
respect to the property so deposited with the Indenture Trustee payable to all
or any of them, and the Indenture Trustee, on demand of and at the expense of
the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, if:
(a) either:
(i) all Notes theretofore authenticated and delivered
(other than (A) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section 2.5
and (B) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 3.3) have been delivered to
the Indenture Trustee for cancellation: or
(ii) all Notes not theretofore delivered to the
Indenture Trustee for cancellation:
(A) have become due and payable,
(B) will be due and payable on the Class A
Final Scheduled Distribution Date within one year, or
(C) are to be called for redemption within
one year under arrangements satisfactory to the
Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
and the Issuer has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or
direct obligations of or obligations guaranteed by the United
States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire unpaid principal
and accrued interest on such Notes not
A-20
<PAGE>
theretofore delivered to the Indenture Trustee for
cancellation when due on the Class A Final Scheduled
Distribution Date for such Notes or the Redemption Date for
such Notes (if such Notes have been called for redemption
pursuant to Section 10.1(a)(i) or (ii), or Section 10.1(b)),
as the case may be;
(b) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer; and
(c) the Issuer has delivered to the Indenture Trustee an Officer's
Certificate, an Opinion of Counsel and (if required by the TIA or the Indenture
Trustee) an Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.1(a) and each stating
that all conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
SECTION 4.2 Application of Trust Money. All monies deposited with the
Indenture Trustee pursuant to Section 4.1 shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Indenture Trustee
may determine, to Holders of the particular Notes for the payment or redemption
of which such monies have been deposited with the Indenture Trustee, of all sums
due and to become due thereon for principal and interest; but such monies need
not be segregated from other funds except to the extent required herein or in
the Sale and Servicing Agreement or required by law.
SECTION 4.3 Repayment of Monies Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all monies then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.3 and thereupon such Paying Agent shall be released from all
further liability with respect to such monies.
SECTION 4.4 Duration of Position of Indenture Trustee. Notwithstanding
the earlier payment in full of all principal and interest due to the Noteholders
under the terms of the Notes and the cancellation of the Notes pursuant to
Section 3.1, the Indenture Trustee shall continue to act in the capacity as
Indenture Trustee hereunder and, for the benefit of the Certificateholders,
shall comply with its obligations under the Basic Documents, as appropriate,
until such time as all payments in respect of Certificate Balance and interest
due to the Certificateholders have been paid in full.
ARTICLE V
DEFAULT AND REMEDIES
SECTION 5.1 Events of Default. For the purposes of this Indenture,
"Event of Default" wherever used herein, means any one of the following events:
A-21
<PAGE>
(a) failure to pay any interest on any Note as and when the
same becomes due and payable, and such default shall continue for a
period of five (5) days; or
(b) except as set forth in Section 5.1(c), failure to pay any
installment of the principal of any Note as and when the same becomes
due and payable, and such default continues unremedied for a period of
thirty (30) days after there shall have been given, by registered or
certified mail, written notice thereof to the Servicer by the Indenture
Trustee or to the Servicer and the Indenture Trustee by the Holders of
not less than 25% of the outstanding principal balance of the Notes; or
(c) failure to pay in full the outstanding principal balance
of the Notes on or prior to the Class A Final Scheduled Distribution
Date; or
(d) default in the observance or performance in any material
respect of any covenant or agreement of the Issuer made in this
Indenture (other than a covenant or agreement for payment of principal
or interest) which failure materially and adversely affects the rights
of the Noteholders, and such default shall continue or not be cured for
a period of 30 days after there shall have been given, by registered or
certified mail, 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 at least 25% of the outstanding principal balance of the
Notes, a written notice specifying such default and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(e) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 90
consecutive days; or
(f) the commencement by the Issuer of a voluntary case under
any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such law,
or the consent by the Issuer to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust
Estate, or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of action by the Issuer
in furtherance of any of the foregoing.
A-22
<PAGE>
The Issuer shall deliver to the Indenture Trustee, within five Business Days
after learning of the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with the giving of notice and the lapse
of time would become an Event of Default under Section 5.1(c), its status and
what action the Issuer is taking or proposes to take with respect thereto.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default should occur and be continuing,
then and in every such case, unless the principal amount of the Notes
shall have already become due and payable, either the Indenture Trustee
or the Holders of Notes representing not less than a majority of the
aggregate outstanding principal amount of the Notes may declare all the
Notes to be immediately due and payable, by a notice in writing to the
Issuer (and to the Indenture Trustee if given by the Noteholders)
setting forth the Event or Events of Default, and upon any such
declaration the unpaid principal amount of such Notes, together with
accrued and unpaid interest thereon through the date of acceleration,
shall become immediately due and payable.
(b) At any time after such declaration of acceleration of
maturity has been made and before a judgment or decree for payment of
the money due has been obtained by the Indenture Trustee as hereinafter
provided in this Article V, the Holders of Notes representing a
majority of the aggregate outstanding principal amount of the Notes, by
written notice to the Issuer and the Indenture Trustee, may waive all
Defaults set forth in the notice delivered pursuant to Section 5.2(a),
and rescind and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the
Indenture Trustee a sum sufficient to pay
(A) all payments of principal of and
interest on all Notes and all other amounts that
would then be due hereunder or upon such Notes if the
Event of Default giving rise to such acceleration had
not occurred; and
(B) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment
of the principal of the Notes that has become due solely by
such acceleration, have been cured or waived as provided
herein;
provided that no such rescission and annulment shall extend to or
affect any subsequent default or impair any right consequent thereto;
and provided further, that if the Indenture Trustee shall have
proceeded to enforce any right under this Indenture and such
proceedings shall have been discontinued or abandoned because of such
rescission and annulment or for any other reason, or shall have been
determined adversely to the
A-23
<PAGE>
Indenture Trustee, then and in every such case, the Indenture Trustee,
the Issuer and the Noteholders, as the case may be, shall be restored
respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Indenture Trustee, the Issuer and
the Noteholders, as the case may be, shall continue as though no such
proceedings had been taken.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.
(a) The Issuer covenants that if an Event of Default occurs
and is continuing under Sections 5.1(a), 5.1(b) or 5.1(c) of this
Indenture, then the Issuer shall, upon demand of the Indenture Trustee,
pay to the Indenture Trustee, for the ratable benefit of the
Noteholders in accordance with their respective outstanding principal
amounts, the whole amount then due and payable on such Notes for
principal and interest, with interest upon the overdue principal, at
the rate borne by the Notes and in addition thereto such further amount
as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel.
(b) If the Issuer shall fail forthwith to pay such amounts
upon such demand, the Indenture Trustee, in its own name and as trustee
of an express trust, may institute a proceeding for the collection of
the sums so due and unpaid, and may prosecute such Proceeding to
judgment or final decree, and may enforce the same against the Issuer
or other obligor upon such Notes and collect in the manner provided by
law out of the property of the Issuer or other obligor upon such Notes,
wherever situated, the monies adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the
Indenture Trustee may, as more particularly provided in Section 5.4, in
its discretion, proceed to protect and enforce its rights and the
rights of the Noteholders, by such appropriate Proceedings as the
Indenture Trustee shall deem most effective to protect and enforce any
such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by
law.
(d) If there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an
ownership interest in the Trust Estate, proceedings under Title 11 of
the United States Code or any other applicable federal or state
bankruptcy, insolvency or other similar law, or if a receiver, assignee
or trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of
the Issuer or its property or such other obligor or Person, or in case
of any other comparable judicial Proceedings relative to the Issuer or
other obligor upon the Notes, or to the creditors or property of the
Issuer or such other obligor, the Indenture Trustee, irrespective of
whether the principal of any Notes shall then be due and payable as
therein expressed or by declaration or otherwise and
A-24
<PAGE>
irrespective of whether the Indenture Trustee shall have made any
demand pursuant to the provisions of this Section 5.3, shall be
entitled and empowered, by intervention in such Proceedings or
otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect
of the Notes and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the
Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor
Trustee, and their respective agents, attorneys and counsel,
and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Indenture Trustee and
each predecessor Trustee, except as a result of negligence or
bad faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of Notes in any
election of a trustee, a standby trustee or Person performing
similar functions in any such Proceedings;
(iii) to collect and receive any monies or other
property payable or deliverable on any such claims and to
distribute all amounts received with respect to the claims of
the Noteholders and of the Indenture Trustee on their behalf;
and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have
the claims of the Indenture Trustee or the Holders of Notes
allowed in any judicial proceedings relative to the Issuer,
its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar
official in any such Proceeding is hereby authorized by each of such
Noteholders to make payments to the Indenture Trustee, and, if the
Indenture Trustee shall consent to the making of payments directly to
such Noteholders, to pay to the Indenture Trustee such amounts as shall
be sufficient to cover reasonable compensation to the Indenture
Trustee, each predecessor Trustee and their respective agents,
attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Indenture Trustee and each predecessor
trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or
adopt on behalf of any Noteholder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the
rights of any Holder thereof or to authorize the Indenture Trustee to
vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Indenture
Trustee without the possession of any
A-25
<PAGE>
of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of
the expenses, disbursements and compensation of the Indenture Trustee,
each predecessor Trustee and their respective agents and attorneys,
shall be for the ratable benefit of the Noteholders.
(g) In any Proceedings brought by the Indenture Trustee (and
also any Proceedings involving the interpretation of any provision of
this Indenture to which the Indenture Trustee shall be a party), the
Indenture Trustee shall be held to represent all the Noteholders, and
it shall not be necessary to make any Noteholder a party to any such
Proceedings.
SECTION 5.4 Remedies; Priorities.
(a) If an Event of Default shall have occurred and be
continuing and the Notes have been accelerated under Section 5.2(a),
the Indenture Trustee may do one or more of the following (subject to
Section 5.5):
(i) institute Proceedings in its own name and as
trustee of an express trust for the collection of all amounts
then payable on the Notes or under this Indenture with respect
thereto, whether by declaration of acceleration or otherwise,
enforce any judgment obtained, and collect from the Issuer and
any other obligor upon such Notes monies adjudged due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect
to the Trust Estate;
(iii) exercise any remedies of a secured party under
the UCC and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee and
the Noteholders; and
(iv) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private
sales called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, unless (A)
the Holders of all of the aggregate outstanding principal amount of the
Notes consent thereto, (B) the proceeds of such sale or liquidation
distributable to the Noteholders are sufficient to discharge in full
the principal of and the accrued interest on the Notes at the date of
such sale or liquidation or (C) the Indenture Trustee determines that
the Trust Estate will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as and when they
would have become due if the Notes had not been declared due and
payable, and the Indenture Trustee obtains the consent of Holders of a
majority of the aggregate outstanding principal amount of the Notes. In
determining such sufficiency or
A-26
<PAGE>
insufficiency with respect to clauses (B) and (C), the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property
pursuant to this Article V, it shall pay out the money or property in
the following order:
FIRST: to the Indenture Trustee for any amounts due under
Section 6.7;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, ratably among all Noteholders, without
preference or priority of any kind, according to the amounts
due and payable on all the Notes for principal;
THIRD: to Noteholders for amounts due and unpaid on the Notes
for interest, ratably among all Noteholders, without
preference or priority of any kind, according to the amounts
due and payable on all the Notes for interest;
FOURTH: to the Issuer for distribution to the
Certificateholders for amounts due and unpaid on the
Certificates for interest, ratably among all such
Certificateholders, without preference or priority of any
kind, according to the amounts due and payable on all the
Certificates for interest;
FIFTH: to the Issuer for distribution to the
Certificateholders for amounts due and unpaid on the
Certificates for principal, ratably among all such
Certificateholders, without preference or priority of any
kind, according to the amounts due and payable on all the
Certificates for principal; and
SIXTH: to the Issuer for distribution to the Cash Collateral
Depositor of amounts due to it under the Cash Collateral
Agreement.
The Indenture Trustee may fix a record date and payment date
for any payment to Noteholders pursuant to this Section 5.4. At least
15 days before such record date, the Indenture Trustee shall mail to
each Noteholder and the Indenture Trustee a notice that states the
record date, the payment date and the amount to be paid.
SECTION 5.5 Optional Preservation of the Contracts. If the Notes have
been declared to be due and payable under Section 5.2 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to take and maintain
possession of the Trust Estate. It is the desire of the parties hereto and the
Noteholders that there be at all times sufficient funds for the payment of
principal of and interest on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether or not to take and maintain
possession of the Trust Estate. In determining whether to take and maintain
possession of the Trust Estate, the Indenture Trustee may, but need not, obtain
and rely upon an opinion of an Independent investment banking or accounting firm
of
A-27
<PAGE>
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose.
SECTION 5.6 Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(a) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% of the aggregate
outstanding principal amount of the Notes have made written request to
the Indenture Trustee to institute such Proceeding in respect of such
Event of Default in its own name as Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
such Proceedings; and
(e) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders of a majority of the aggregate outstanding principal amount of
the Notes;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders of Notes or to enforce any right under this Indenture, except
in the manner herein provided and for the equal, ratable and common benefit of
all holders of Notes. For the protection and enforcement of the provisions of
this Section 5.6, each and every Noteholder shall be entitled to such relief as
can be given either at law or in equity.
If the Indenture Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of the aggregate outstanding principal amount
of the Notes, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
SECTION 5.7 Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture
A-28
<PAGE>
(or, in the case of redemption, if applicable, on or after the Redemption Date)
and to institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder.
SECTION 5.8 Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.9 Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10 Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
SECTION 5.11 Control by Noteholders. The Holders of a majority of the
aggregate outstanding principal amount of the Notes shall, subject to provision
being made for indemnification against costs, expenses and liabilities in a form
satisfactory to the Indenture Trustee, have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided, however, that:
(a) such direction shall not be in conflict with any rule of
law or with this Indenture;
(b) subject to the express terms of Section 5.4, any direction
to the Indenture Trustee to sell or liquidate the Trust Estate shall be
by the Holders of Notes representing not less than 100% of the
aggregate outstanding principal amount of the Notes;
(c) if the conditions set forth in Section 5.5 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to Section 5.5, then any
A-29
<PAGE>
direction to the Indenture Trustee by Holders of Notes representing
less than 100% of the aggregate outstanding principal amount of the
Notes to sell or liquidate the Trust Estate shall be of no force and
effect; and
(d) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction;
provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might cause it to incur any liability or
might materially adversely affect the rights of any Noteholders not consenting
to such action.
SECTION 5.12 Waiver of Past Defaults.
(a) Prior to the declaration of the acceleration of the
maturity of the Notes as provided in Section 5.2, the Holders of not
less than a majority of the aggregate outstanding principal amount of
the Notes may waive any past Default or Event of Default and its
consequences 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 hereof which cannot be modified or amended without the
consent of the Holder of each Note. In the case of any such waiver, the
Issuer, the Indenture Trustee and the Noteholders shall be restored to
their former positions and rights hereunder, respectively; but no such
waiver shall extend to any subsequent or other Default or Event of
Default or impair any right consequent thereto.
(b) Upon any such waiver, such Default shall cease to exist
and be deemed to have been cured and not to have occurred, and any
Event of Default arising therefrom shall be deemed to have been cured
and not to have occurred, for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or Event of
Default or impair any right consequent thereto.
SECTION 5.13 Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any
Proceeding for the enforcement of any right or remedy under this Indenture, or
in any Proceeding against the Indenture Trustee for any action taken, suffered
or omitted by it as Trustee, the filing by any party litigant in such Proceeding
of an undertaking to pay the costs of such Proceeding, and that such court may
in its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such Proceeding, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to:
(a) any Proceeding instituted by the Indenture Trustee;
(b) any Proceeding instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
aggregate outstanding principal amount of the Notes; or
A-30
<PAGE>
(c) any Proceeding instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on
or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption
Date).
SECTION 5.14 Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, or plead or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture. The Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15 Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer.
SECTION 5.16 Performance and Enforcement of Certain Obligations.
(a) Promptly following a request from the Indenture Trustee to
do so and at the Servicer's expense, the Issuer agrees to take all such
lawful action as the Indenture Trustee may reasonably request to compel
or secure the performance and observance by the Seller and the Servicer
of their respective obligations to the Issuer under or in connection
with the Basic Documents (other than the Excluded Assets) in accordance
with the terms thereof, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in
connection with the Sale and Servicing Agreement to the extent and in
the manner reasonably directed by the Indenture Trustee, including the
transmission of notices of default on the part of the Seller or the
Servicer thereunder and the institution of legal or administrative
actions or proceedings to compel or secure performance by the Seller or
the Servicer of each of their obligations under the Basic Documents
(other than with respect to the Excluded Assets).
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and, at the direction (which direction shall be
in writing or by telephone (confirmed in writing promptly thereafter))
of the Holders of 66-2/3% of the aggregate outstanding principal amount
of the Notes shall, exercise all rights, remedies, powers, privileges
and claims of the Issuer against the Seller or the Servicer under or in
connection with the Basic Documents (other than with respect to the
Excluded Assets), including the right or power to take any action to
compel or secure performance or observance by the Seller or the
Servicer of each of their obligations to the Issuer
A-31
<PAGE>
thereunder and to give any consent, request, notice, direction,
approval, extension or waiver thereunder, and any right of the Issuer
to take such action shall be suspended.
(c) Promptly following a request from the Indenture Trustee to
do so and at the Servicer's expense, the Issuer agrees to take all such
lawful action as the Indenture Trustee may reasonably request to compel
or secure the performance and observance by CITSF of each of its
obligations to the Seller under or in connection with the Sale and
Servicing Agreement, the Purchase Agreement and the Subsequent Purchase
Agreement in accordance with the terms thereof, and to exercise any and
all rights, remedies, powers and privileges lawfully available to the
Issuer under or in connection with the Sale and Servicing Agreement,
the Purchase Agreement and the Subsequent Purchase Agreement to the
extent and in the manner reasonably directed by the Indenture Trustee,
including the transmission of notices of default on the part of the
Seller thereunder and the institution of legal or administrative
actions or proceedings to compel or secure performance by CITSF of each
of its obligations under the Sale and Servicing Agreement, the Purchase
Agreement and the Subsequent Purchase Agreement.
If an Event of Default has occurred and is continuing, the Indenture Trustee
may, and, at the direction (which direction shall be in writing or by telephone
(confirmed in writing promptly thereafter)) of the Holders of 66-2/3% of the
aggregate outstanding principal amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Seller against CITSF under or in
connection with the Sale and Servicing Agreement, the Purchase Agreement and the
Subsequent Purchase Agreement, including the right or power to take any action
to compel or secure performance or observance by CITSF of each of its
obligations to the Seller thereunder and to give any consent, request, notice,
direction, approval, extension or waiver under the Sale and Servicing Agreement,
the Purchase Agreement and the Subsequent Purchase Agreement, and any right of
the Seller to take such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1 Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by
this Indenture and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in
this Indenture and no implied covenants or obligations shall
be read into this Indenture against the Indenture Trustee; and
A-32
<PAGE>
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Indenture Trustee and conforming to the requirements of this
Indenture; provided, however, that the Indenture Trustee shall
examine the certificates and opinions to determine whether or
not they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its
own willful misconduct, except that:
(i) this Section 6.1(c) does not limit the effect of
Section 6.1(b);
(ii) the Indenture Trustee shall not be liable for
any error of judgment made in good faith by a Responsible
Officer unless it is proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith
in accordance with a direction properly delivered to it
pursuant to Section 5.11.
(d) The Indenture Trustee shall not be liable for interest on
any money received by it except as the Indenture Trustee may agree in
writing with the Issuer.
(e) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the
terms of this Indenture, the Sale and Servicing Agreement or the Trust
Agreement.
(f) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds to believe that repayments of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(g) Every provision of this Indenture relating to the
Indenture Trustee shall be subject to the provisions of this Section
6.1 and to the provisions of the TIA.
(h) The Indenture Trustee shall take the actions required to
be taken by it set forth in Article XI of the Sale and Servicing
Agreement in connection with a sale of the Contracts.
SECTION 6.2 Rights of Indenture Trustee.
A-33
<PAGE>
(a) The Indenture Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by the proper
person. The Indenture Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel. The
Indenture Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officer's Certificate or
Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys or a custodian or nominee, and the
Indenture Trustee shall not be responsible for any misconduct or
negligence on the part of, or for the supervision of, any such agent,
attorney, custodian or nominee appointed with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it reasonably believes to
be authorized or within its rights or powers; provided, however, that
the Indenture Trustee's conduct does not constitute willful misconduct,
negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to
this Indenture and the Notes shall be full and complete authorization
and protection from liability in respect to any action taken, omitted
or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
SECTION 6.3 Indenture Trustee May Own Notes. The Indenture Trustee in
its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer, the Servicer or any of their respective
Affiliates with the same rights it would have if it were not Indenture Trustee;
provided, however, that the Indenture Trustee shall comply with Sections 6.10
and 6.11. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may
do the same with like rights.
SECTION 6.4 Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.5 Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall mail to each Noteholder notice of the Default within 90
days after it occurs. Except in the case of a Default in payment of principal of
or interest on any Note, the Indenture Trustee may withhold the notice if
A-34
<PAGE>
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of Noteholders.
SECTION 6.6 Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder the information and documents set forth
in Article VII, and, in addition, all such information with respect to the Notes
as may be required to enable such holder to prepare its federal and state income
tax returns.
SECTION 6.7 Compensation; Indemnity.
(a) The Issuer shall cause the Servicer pursuant to the Sale
and Servicing Agreement to pay to the Indenture Trustee from time to
time reasonable compensation for its services. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall cause the Servicer
pursuant to the Sale and Servicing Agreement to reimburse the Indenture
Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for
its services. Such expenses shall include the reasonable compensation
and expenses, disbursements and advances of the Indenture Trustee's
agents, counsel, accountants and experts. The Issuer shall cause the
Servicer pursuant to the Sale and Servicing Agreement to indemnify the
Indenture Trustee in accordance with Section 8.02 of the Sale and
Servicing Agreement.
(b) The Issuer's obligations to the Indenture Trustee pursuant
to this Section 6.7 shall survive the discharge of this Indenture. When
the Indenture Trustee incurs expenses after the occurrence of a Default
specified in Section 5.1(d) or (e) with respect to the Issuer, the
expenses are intended to constitute expenses of administration under
Title 11 of the United States Code or any other applicable federal or
state bankruptcy, insolvency or similar law.
SECTION 6.8 Replacement of Indenture Trustee.
(a) The Indenture Trustee may resign at any time by so
notifying the Issuer. The Holders of a majority in aggregate
outstanding principal amount of the Notes may remove the Indenture
Trustee by so notifying the Indenture Trustee and may appoint a
successor Indenture Trustee. Such resignation or removal shall become
effective in accordance with Section 6.8(c). The Issuer shall remove
the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with
Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or
insolvent;
(iii) a receiver or other public officer takes charge
of the Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes
incapable of acting.
A-35
<PAGE>
(b) If the Indenture Trustee resigns or is removed or if a
vacancy exists in the office of Indenture Trustee for any reason (the
Indenture Trustee in such event being referred to herein as the
retiring Indenture Trustee), the Holders of a majority in aggregate
outstanding principal amount of the Notes may appoint a successor
Indenture Trustee, but until a successor Indenture Trustee shall have
been so appointed by the Holders of the Notes, the Issuer shall appoint
a successor Indenture Trustee, and until the Issuer has appointed such
successor the resignation of the Indenture Trustee shall not become
effective. After any such appointment other than by the holders of the
Notes, the person making such appointment shall forthwith cause notice
thereof to be mailed to the holders of the Notes at their addresses as
the same then appear in the register of the Issuer; but any successor
Trustee so appointed shall, immediately and without further act, be
superseded by a successor Trustee appointed by the holders of the Notes
in the manner above prescribed, if such appointment be made prior to
the expiration of one year from the date of the mailing of such notice
by the Issuer, or by such receivers, trustees, custodians, or
assignees. A retiring Indenture Trustee shall not be liable for any
acts or omissions of a successor Indenture Trustee occurring after the
retirement of such retired Indenture Trustee, which retirement was
effected pursuant to the terms and subject to the conditions of this
Indenture.
(c) A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee and to
the Issuer. Thereupon the resignation or removal of the retiring
Indenture Trustee shall become effective, and the successor Indenture
Trustee shall have all the rights, powers and duties of the Indenture
Trustee under this Indenture. The successor Indenture Trustee shall
mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture
Trustee to the successor Indenture Trustee.
(d) If a successor Indenture Trustee does not take office
within 60 days after the retiring Indenture Trustee resigns or is
removed, the retiring Trustee, the Issuer or the Holders of a majority
of the aggregate outstanding principal amount of the Notes may petition
any court of competent jurisdiction for the appointment of a successor
Indenture Trustee.
(e) If the Indenture Trustee fails to comply with Section
6.11, any Noteholder may petition any court of competent jurisdiction
for the removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee.
(f) Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section 6.8, the Issuer's obligations under Section
6.7 and the Servicer's corresponding obligations under the Sale and
Servicing Agreement shall continue for the benefit of the retiring
Indenture Trustee.
SECTION 6.9 Merger or Consolidation of Indenture Trustee.
A-36
<PAGE>
(a) Any corporation into which the Indenture Trustee may be
merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Indenture
Trustee shall be a party, or any corporation succeeding to the
corporate trust business of the Indenture Trustee, shall be the
successor of the Indenture Trustee under this Indenture; provided,
however, that such corporation shall be eligible under the provisions
of Section 6.11, without the execution or filing of any instrument or
any further act on the part of any of the parties to this Indenture,
anything in this Indenture to the contrary notwithstanding.
(b) If at the time such successor or successors by merger or
consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture, any of the Notes shall have been
authenticated but not delivered, any such successor to the Indenture
Trustee may adopt the certificate of authentication of any predecessor
trustee, and deliver such Notes so authenticated; and in case at that
time any of the Notes shall not have been authenticated, any successor
to the Indenture Trustee may authenticate such Notes either in the name
of any predecessor hereunder or in the name of the successor to the
Indenture Trustee. In all such cases such certificate of authentication
shall have the same full force as is provided anywhere in the Notes or
herein with respect to the certificate of authentication of the
Indenture Trustee.
SECTION 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee.
(a) Notwithstanding any other provisions of this Indenture, at
any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust or any Financed Boat may at
the time be located, the Indenture Trustee shall have the power and may
execute and deliver all instruments to appoint one or more Persons to
act as a co-trustee or co-trustees, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust, or any part hereof, and, subject to the other
provisions of this Section 6.10, such powers, duties, obligations,
rights and trusts as the Indenture Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under
Section 6.11 and no notice to Noteholders of the appointment of any
co-trustee or separate trustee shall be required under Section 6.8.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or
imposed upon and exercised or performed by the Indenture
Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is
not authorized to act separately without the Indenture Trustee
joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or
unqualified to perform
A-37
<PAGE>
such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee
hereunder; and
(iii) the Indenture Trustee may at any time accept
the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of the
then separate trustees and co-trustees, as effectively as if given to
each of them. Every instrument appointing any separate trustee or
co-trustee shall refer to this Indenture and the conditions of this
Article VI. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to
all the provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting the
liability of, or affording protection to, the Indenture Trustee. Every
such instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact with
full power and authority, to the extent not prohibited by law, to do
any lawful act under or in respect of this Indenture on its behalf and
in its name. If any separate trustee or co-trustee shall die, become
incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11 Eligibility; Disqualification. The Indenture Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition and it shall have a long
term unsecured debt rating of "Baa3" or better by Moody's and "BBB" or better by
Standard & Poor's. The Indenture Trustee shall comply with TIA ss. 310(b);
provided, however, that there shall be excluded from the operation of TIA ss.
310(b)(1) any indenture or indentures under which other securities of the Issuer
are outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 6.12 Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
A-38
<PAGE>
SECTION 6.13 Representations and Warranties of Indenture Trustee. The
Indenture Trustee represents and warrants as of the Closing Date that:
(a) the Indenture Trustee is an [__________]banking
corporation duly organized, validly existing and in good standing under
the laws of the State of [__________];
(b) the Indenture Trustee has full power, authority and legal
right to execute, deliver and perform this Indenture, and has taken all
necessary action to authorize the execution, delivery and performance
by it of this Indenture;
(c) the execution, delivery and performance by the Indenture
Trustee of this Indenture (i) shall not violate any provision of any
applicable law or regulation governing the banking and trust powers of
the Indenture Trustee or any order, writ, judgment or decree of any
court, arbitrator, or governmental authority applicable to the
Indenture Trustee or any of its assets, (ii) shall not violate any
provision of the corporate charter or by-laws of the Indenture Trustee,
or (iii) shall not violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the
creation or imposition of any Lien on any properties included in the
Trust pursuant to the provisions of any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation,
default or Lien could reasonably be expected to have a materially
adverse effect on the Indenture Trustee's performance or ability to
perform its duties under this Indenture or on the transactions
contemplated in this Indenture;
(d) the execution, delivery and performance by the Indenture
Trustee of this Indenture shall not require the authorization, consent
or approval of, the giving of notice to, the filing or registration
with, or the taking of any other action in respect of, any governmental
authority or agency regulating the banking and corporate trust
activities of the Indenture Trustee; and
(e) this Indenture has been duly executed and delivered by the
Indenture Trustee and constitutes the legal, valid and binding
agreement of the Indenture Trustee, enforceable in accordance with its
terms.
SECTION 6.14 Indenture Trustee May Enforce Claims Without Possession of
Notes. All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Indenture Trustee without the possession of any
of the Notes or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Indenture Trustee shall be brought in its
own name as Indenture Trustee. Any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, its agents and counsel, be for the ratable
benefit of the Noteholders in respect of which such judgment has been obtained.
SECTION 6.15 Suit for Enforcement. If an Event of Default shall occur
and be continuing, the Indenture Trustee, in its discretion may, subject to the
provisions of Section 6.1,
A-39
<PAGE>
proceed to protect and enforce its rights and the rights of the Noteholders
under this Indenture by Proceeding whether for the specific performance of any
covenant or agreement contained in this Indenture or in aid of the execution of
any power granted in this Indenture or for the enforcement of any other legal,
equitable or other remedy as the Indenture Trustee, being advised by counsel,
shall deem most effectual to protect and enforce any of the rights of the
Indenture Trustee or the Noteholders.
SECTION 6.16 Rights of Noteholders to Direct Indenture Trustee. Holders
of Notes evidencing not less than a majority of the aggregate outstanding
principal amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Indenture
Trustee or exercising any trust or power conferred on the Indenture Trustee;
provided, however, that subject to Section 6.1, the Indenture Trustee shall have
the right to decline to follow any such direction if the Indenture Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Indenture Trustee in good faith shall, by a Responsible
Officer, determine that the proceedings so directed would be illegal or subject
it to personal liability or be unduly prejudicial to the rights of Noteholders
not parties to such direction; and provided, further, that nothing in this
Indenture shall impair the right of the Indenture Trustee to take any action
deemed proper by the Indenture Trustee and which is not inconsistent with such
direction by the Noteholders.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer shall furnish or cause to be furnished by the Servicer
to the Indenture Trustee (a) not more than five days before each Distribution
Date, a list, in such form as the Indenture Trustee may reasonably require, of
the names and addresses of the Holders of Notes as of the close of business on
the Record Date, and (b) at such other times as the Indenture Trustee may
request in writing, within 14 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Note Registrar, no such list shall be required to be
furnished.
SECTION 7.2 Preservation of Information, Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of the Holders of
Notes contained in the most recent list furnished to the Indenture
Trustee as provided in Section 7.1 and the names and addresses of
Holders of Notes received by the Indenture Trustee in its capacity as
Note Registrar. The Indenture Trustee may destroy any list furnished to
it as provided in such Section 7.1 upon receipt of a new list so
furnished.
A-40
<PAGE>
(b) Noteholders may communicate pursuant to TIA ss. 312(b)
with other Noteholders with respect to their rights under this
Indenture or under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA ss. 312(c).
SECTION 7.3 Reports by Issuer.
(a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days
after the Issuer is required to file the same with the
Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the
Issuer may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the
Commission in accordance with rules and regulations prescribed
from time to time by the Commission such additional
information, documents and reports with respect to compliance
by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules
and regulations; and
(iii) supply to the Indenture Trustee (and the
Indenture Trustee shall transmit by mail to all Noteholders
described in TIA ss. 313(c)) such summaries of any
information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a)
as may be required by rules and regulations prescribed from
time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of
the Issuer shall end on December 31 of such year.
SECTION 7.4 Reports by Trustee.
(a) If required by TIA ss. 313(a), within 60 days after each
June 1, beginning with June 1, 1998, the Indenture Trustee shall mail
to each Noteholder as required by TIA ss. 313(c) a brief report dated
as of such date that complies with TIA ss. 313(a). The Indenture
Trustee also shall comply with TIA ss. 313(b). A copy of any report
delivered pursuant to this Section 7.4(a) shall, at the time of its
mailing to Noteholders, be filed by the Indenture Trustee with the
Commission and each stock exchange, if any, on which the Notes are
listed. The Issuer shall notify the Indenture Trustee if and when the
Notes are listed on any stock exchange.
A-41
<PAGE>
(b) On each Distribution Date, the Indenture Trustee shall
include with each payment to each Noteholder a copy of the statement
for the related Due Period applicable to such Distribution Date as
required pursuant to the Sale and Servicing Agreement.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.2 Designated Accounts and the Cash Collateral Account;
Payments.
(a) On or prior to the Closing Date, the Issuer shall cause
the Servicer to establish and maintain, in the name of the Indenture
Trustee or Owner Trustee, as appropriate, for the benefit of the
Noteholders or the Certificateholders (and, in the case of the Cash
Collateral Account, the Cash Collateral Depositor) as appropriate, the
accounts as provided in Section 5.01 of the Sale and Servicing
Agreement.
(b) On or before each Distribution Date, all amounts of monies
relating to the preceding Due Period will be deposited into the
Collection Account as provided in Section 5.02 of the Sale and
Servicing Agreement. On or before each Distribution Date, the amount
which is due to the Noteholders with respect to the preceding Due
Period will be transferred from the Collection Account to the Note
Distribution Account as provided in Section 5.05 of the Sale and
Servicing Agreement.
(c) On each Distribution Date and Redemption Date, the
Indenture Trustee shall distribute all amounts on deposit in the Note
Distribution Account to Noteholders in respect of the Notes to the
extent of amounts due and unpaid on the Notes for principal and
interest. To the extent that the funds available for distribution in
the Note Distribution Account are not sufficient to pay all amounts of
accrued and unpaid principal and interest on the Notes, such amounts
will be distributed first in respect of interest and then in respect of
principal.
SECTION 8.3 General Provisions Regarding Accounts.
A-42
<PAGE>
(a) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the funds in the
Designated Accounts and the Cash Collateral Account shall be invested
in Eligible Investments and, in the case in the Collection Account and
the Note Distribution Account, reinvested by the Indenture Trustee upon
Issuer Order, and in the case of the Certificate Distribution Account
and the Cash Collateral Account, reinvested by the Owner Trustee (or
its designated agent) subject to the provisions of Section 5.01(c) of
the Sale and Servicing Agreement. The Issuer shall not direct the
Indenture Trustee to make any investment of any funds or to sell any
investment held in any of the Collection Account and the Note
Distribution Account unless the security interest granted and perfected
in such account (to the extent provided in the Basic Documents) shall
continue to be perfected in such investment or the proceeds of such
sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer
shall deliver to the Indenture Trustee an Opinion of Counsel,
acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.1(c), the Indenture Trustee shall not
in any way be held liable by reason of any insufficiency in any of the
Designated Accounts or the Cash Collateral Account resulting from any
loss on any Eligible Investment included therein except for losses
attributable to the Indenture Trustee's failure to make payments on
such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in
accordance with their terms.
(c) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Designated Accounts to the
Indenture Trustee by 11:00 a.m., New York City Time (or such other time
as may be agreed by the Servicer and the Indenture Trustee) on any
Business Day; or (ii) a Default or Event of Default shall have occurred
and be continuing with respect to the Notes but the Notes shall not
have been declared due and payable pursuant to Section 5.2, or, if such
Notes shall have been declared due and payable following an Event of
Default, amounts collected or receivable from the Trust Estate are
being applied in accordance with Section 5.5 as if there had not been
such a declaration; then the Indenture Trustee shall, to the fullest
extent practicable, invest and reinvest funds in such Designated
Accounts in one or more Eligible Investments selected by the Indenture
Trustee; provided that the Indenture Trustee will not be liable for the
performance of such investments so long as it invests the funds in such
Designated Accounts in Eligible Investments.
SECTION 8.4 Release of Trust Estate.
(a) Subject to the payment of its fees and expenses pursuant
to Section 6.7, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release
property from the Lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances
that are consistent with the provisions of this Indenture. No party
relying upon an instrument
A-43
<PAGE>
executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire
into the satisfaction of any conditions precedent or see to the
application of any monies.
(b) The Indenture Trustee shall, at such time as there are no
Notes outstanding and all sums due to the Indenture Trustee pursuant to
Section 6.7 have been paid, release any remaining portion of the Trust
Estate that secured the Notes from the Lien of this Indenture and
release to the Issuer or any other Person entitled thereto any funds
then on deposit in the Designated Accounts (to the extent such funds
were subject to the Lien of this Indenture). The Indenture Trustee
shall release property from the Lien of this Indenture pursuant to this
Section 8.4(b) only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the
TIA) Independent Certificates in accordance with TIA ss. 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.1.
SECTION 8.5 Opinion of Counsel. The Indenture Trustee shall receive at
least seven days' notice when requested by the Issuer to take any action
pursuant to Section 8.4(a), accompanied by copies of any instruments involved,
and the Indenture Trustee shall also require as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action shall not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Estate. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with
prior written notice to the Rating Agencies and, in the case of clause
(viii), satisfaction of the Rating Agency Condition, the Issuer and the
Indenture Trustee, when authorized by an Issuer Order, at any time and
from time to time, may enter into one or more indentures supplemental
hereto (which shall conform to the provisions of the Trust Indenture
Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following
purposes:
(i) to correct or amplify the description of the
Collateral or add additional collateral;
A-44
<PAGE>
(ii) to provide for the assumption of the Note and
the Indenture obligations by a permitted successor to the
Trust;
(iii) to add additional covenants for the benefit of
the related Noteholders, or to surrender any rights or power
conferred upon the Trust;
(iv) to convey, transfer, assign mortgage or pledge
any property to or with the Indenture Trustee;
(v) to cure any ambiguity or correct or supplement
any provision in the Indenture or any supplemental indenture
which may be inconsistent with any other provision of the
Indenture or in any supplemental indenture;
(vi) to provide for the acceptance of the appointment
of a successor Indenture Trustee or to add or change any of
the provisions of the Indenture as shall be necessary and
permitted to facilitate the administration by more than one
trustee;
(vii) to modify, eliminate or add to the provisions
of the Indenture in order to comply with the Trust Indenture
Act of 1939, as amended; or
(viii) to add any provisions to, change in any manner
or eliminate any of the provisions of, the Indenture or modify
in any manner the rights of Noteholders under such Indenture;
provided that any action specified in this clause (viii) shall
not, as evidenced by an opinion of counsel, adversely affect
in any material respect the interests of any Noteholder unless
Noteholder consent is otherwise obtained as described herein.
(b) The Issuer and the Indenture Trustee, when authorized by
an Issuer Order, may, also without the consent of any of the
Noteholders but with prior notice to the Rating Agencies, at any time
and from time to time enter into one or more indentures supplemental
hereto for the purpose of adding any provisions to, changing in any
manner, or eliminating any of the provisions of, this Indenture or
modifying in any manner the rights of the Noteholders under this
Indenture; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the
interests of any Noteholder.
SECTION 9.2 Supplemental Indentures With Consent of Noteholders.
(a) The Issuer and the Indenture Trustee, when authorized by
an Issuer Order, also may, with prior notice to the Rating Agencies and
with the consent of the Holders of not less than a majority of the
aggregate outstanding principal amount of the Notes, by Act (as defined
in Section 11.3 hereof) of such Holders delivered to the Issuer and the
Indenture Trustee, enter into an indenture or indentures supplemental
hereto for the
A-45
<PAGE>
purpose of adding any provisions to, changing in any manner, or
eliminating any of the provisions of, this Indenture or of modifying in
any manner the rights of the Noteholders under this Indenture;
provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each outstanding Note affected thereby:
(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 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.
(b) The Indenture Trustee may in its discretion determine
whether or not any Notes would be affected (such that the consent of
each would be required) by any supplemental indenture proposed pursuant
to this Section 9.2 and any such determination shall be conclusive upon
the Holders of all Notes, whether authenticated and delivered
A-46
<PAGE>
thereunder before or after the date upon which such supplemental
indenture becomes effective. The Indenture Trustee shall not be liable
for any such determination made in good faith.
(c) It shall be sufficient if an Act of Noteholders approves
the substance, but not the form, of any proposed supplemental
indenture.
(d) Promptly after the execution by the Issuer and the
Indenture Trustee of any supplemental indenture pursuant to this
Section 9.2, the Indenture Trustee shall mail to the Noteholders to
which such amendment or supplemental indenture relates a notice setting
forth in general terms the substance of such supplemental indenture.
Any failure of the Indenture Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity
of any such supplemental indenture.
SECTION 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Indenture Trustee, the Issuer and the Noteholders shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5 Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the TIA as then in effect so
long as this Indenture shall then be qualified under the TIA.
SECTION 9.6 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for outstanding Notes of the same class.
A-47
<PAGE>
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption.
(a) The Notes are subject to redemption upon (i) the exercise
by the Servicer of its option to purchase the Contracts pursuant to
Section 11.01 of the Sale and Servicing Agreement, (ii) the mandatory
sale of the Contracts pursuant to Section 11.02 of the Sale and
Servicing Agreement, or (iii) at the end of the Funding Period to the
extent funds remain on deposit in the Pre-Funding Account pursuant to
Section 5.01(b)(iv) of the Sale and Servicing Agreement. Such
redemption shall occur on any Distribution Date. The purchase price for
the Notes shall be equal to the applicable redemption price as set
forth in such Sections (the "Redemption Price"), provided the Issuer
has available funds sufficient to pay such amount. The Issuer shall
furnish the Rating Agencies notice of such redemption. If the Notes are
to be redeemed pursuant to Section 10.1(a)(i) or 10.1(a)(ii), the
Issuer shall furnish notice thereof to the Indenture Trustee not later
than 25 days prior to the Redemption Date and the Issuer shall deposit
into the Note Distribution Account, on or before the Redemption Date,
the aggregate Redemption Price of the Notes to be redeemed, whereupon
all such Notes shall be due and payable on the Redemption Date. The
Servicer shall give the Indenture Trustee written notice on the
Determination Date prior to the Distribution Date on which funds are to
be released from the Pre-Funding Account pursuant to Section
5.01(b)(iv) of the Sale and Servicing Agreement with respect to
redemption of the Notes pursuant to Section 10.1(a)(iii).
(b) If the assets of the Trust are sold pursuant to Section
7.2 of the Trust Agreement, all amounts deposited in the Note
Distribution Account pursuant to the Sale and Servicing Agreement as a
result thereof shall be paid to the Noteholders. If amounts are to be
paid to Noteholders pursuant to this Section 10.1(b), the Servicer or
the Issuer shall, to the extent practicable, furnish notice of such
event to the Indenture Trustee not later than 25 days prior to the
Redemption Date whereupon all such amounts shall be payable on the
Redemption Date.
SECTION 10.2 Form of Redemption Notice.
(a) Notice of redemption of the Notes under Section 10.1(a)
shall be given by the Indenture Trustee by first class mail, postage
prepaid, mailed not less than five days in the case of Section 10(a)(i)
and (ii) and not less than three Business Days in the case of Section
10(a)(iii), prior to the applicable Redemption Date to each Noteholder
of Notes of record at such Noteholder's address appearing in the Note
Register.
(b) All notices of redemption shall state:
A-48
<PAGE>
(i) the Redemption Date;
(ii) the applicable Redemption Price; and
(iii) the place where Notes are to be surrendered for
payment of the Redemption Price (which shall be the Agency
Office of the Indenture Trustee to be maintained as provided
in Section 3.2).
(c) Notice of redemption of the Notes shall be given by the
Indenture Trustee in the name and at the expense of the Issuer. Failure
to give notice of redemption, or any defect therein, to any Holder of
any Note shall not impair or affect the validity of the redemption of
any other Note.
(d) Prior notice of redemption under Section 10.1(b) is not
required to be given to Noteholders.
SECTION 10.3 Notes Payable on Redemption Date. The Notes subject to
redemption shall, following notice of redemption as required by Section 10.2 (in
the case of redemption pursuant to Section 10.1(a)), on the Redemption Date
cease to be outstanding for purposes of this Indenture and shall thereafter
represent only the right to receive the applicable Redemption Price and (unless
the Issuer shall default in the payment of such Redemption Price) no interest
shall accrue on such Redemption Price for any period after the date to which
accrued interest is calculated for purposes of calculating such Redemption
Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the
Indenture Trustee to take any action under any provision of this
Indenture, the Issuer shall furnish to the Indenture Trustee: (i) an
Officer's Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have
been complied with, (ii) (if required by the TIA) an Opinion of Counsel
stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with and (iii) (if required by
the TIA) an Independent Certificate from a firm of certified public
accountants meeting the applicable requirements of this Section 11.1,
except that, in the case of any such application or request as to which
the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need
be furnished. Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
A-49
<PAGE>
(i) a statement that each signatory of such
certificate or opinion has read or has caused to be read such
covenant or condition and the definitions herein relating
thereto;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(iii) a statement that, in the judgment of each such
signatory, such signatory has made such examination or
investigation as is necessary to enable such signatory to
express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of
each such signatory, such condition or covenant has been
complied with.
(b) (i) Prior to the deposit with the Indenture Trustee of any
Collateral or other property or securities that is to be made
the basis for the release of any property or securities
subject to the Lien of this Indenture, the Issuer shall, in
addition to any obligation imposed in Section 11.1(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee
an Officers' Certificate certifying or stating the opinion of
each person signing such certificate as to the fair value
(within 90 days of such deposit) to the Issuer of the
Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to
the Indenture Trustee an Officers' Certificate certifying or
stating the opinion of any signer thereof as to the matters
described in clause (b)(i) above, the Issuer shall also
deliver to the Indenture Trustee an Independent Certificate as
to the same matters, if the fair value to the Issuer of the
securities to be so deposited and of all other such securities
made the basis of any such withdrawal or release since the
commencement of the then current fiscal year of the Issuer, as
set forth in the certificates delivered pursuant to clause (i)
above and this clause (b)(ii), is 10% or more of the aggregate
outstanding principal amount of the Notes, but such a
certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the
Issuer as set forth in the related Officers' Certificate is
less than $25,000 or less than one percent of the aggregate
outstanding principal amount of the Notes.
(iii) Other than with respect to the release of any
Repurchased Contracts or Liquidated Contracts or disbursement
from the Pre-Funding Account, whenever any property or
securities are to be released from the lien of this Indenture,
the Issuer shall also furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of
each Person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities
A-50
<PAGE>
proposed to be released and stating that in the opinion of
such person the proposed release will not impair the security
under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to
the Indenture Trustee an Officer's Certificate certifying or
stating the opinion of any signatory thereof as to the matters
described in clause (b)(iii) above, the Issuer shall also
furnish to the Indenture Trustee an Independent Certificate as
to the same matters if the fair value of the property or
securities and of all other property, other than Repurchased
Contracts or Liquidated Contracts or disbursement from the
Pre-Funding Account, or securities released from the lien of
this Indenture since the commencement of the then current
calendar year, as set forth in the certificates required by
clause (b)(iii) above and this clause (b)(iv), equals 10% or
more of the aggregate outstanding principal amount of the
Notes, but such certificate need not be furnished in the case
of any release of property or securities if the fair value
thereof as set forth in the related Officer's Certificate is
less than $25,000 or less than one percent of the then
aggregate outstanding principal amount of the Notes.
(v) Notwithstanding Section 2.9 or any other
provision of this Section 11.1, the Issuer may (A) collect,
liquidate, sell or otherwise dispose of Contracts, Financed
Boats and the Excluded Assets as and to the extent expressly
permitted or required by the Basic Documents, (B) make cash
payments out of the Designated Accounts, the Cash Collateral
Account and the other Excluded Assets as and to the extent
expressly permitted or required by the Basic Documents and (C)
take any other action not inconsistent with the TIA.
SECTION 11.2 Form of Documents Delivered to Indenture Trustee.
(a) In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is
not necessary that all such matters be certified by, or covered by the
opinion of, only one such Person, or that they be so certified or
covered by only one document, but one such Person may certify or give
an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an
opinion as to such matters in one or several documents.
(b) Any certificate or opinion of an Authorized Officer of the
Issuer may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to the
matters upon which his certificate or opinion is based are erroneous.
Any such certificate of an Authorized Officer or Opinion of Counsel may
be based, insofar as it relates to factual matters, upon a certificate
or opinion of, or representations by, an officer or officers of the
Servicer, the Seller or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer,
the Seller or the Issuer, unless
A-51
<PAGE>
such counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such
matters are erroneous.
(c) Where any Person is required to make, give or execute two
or more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but need
not, be consolidated and form one instrument.
(d) Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.3 Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given
or taken by Noteholders or a class of Noteholders may be embodied in
and evidenced by one or more instruments of substantially similar tenor
signed by such Noteholders in person or by agents duly appointed in
writing; and except as herein otherwise expressly provided such action
shall become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the
Indenture Trustee and the Issuer, if made in the manner provided in
this Section 11.3.
(b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any manner that the
Indenture Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind
the Holder of every Note issued upon the registration thereof or in
exchange therefor or in lieu thereof, in respect of anything done,
omitted or suffered to be done by the Indenture Trustee or the Issuer
in reliance thereon, whether or not notation of such action is made
upon such Note.
A-52
<PAGE>
SECTION 11.4 Notices, etc., to Indenture Trustee, Issuer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver
or Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at its
Corporate Trust Office and, unless otherwise specified in this
Indenture, may be sent by electronic facsimile transmission (with hard
copy to follow via first class mail), mailed by certified mail, return
receipt requested, or delivered by hand; or
(b) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and
either sent by electronic facsimile transmission (with hard copy to
follow via first class mail) or mailed, by certified mail, return
receipt requested to the Issuer and the Owner Trustee, care of the
Owner Trustee at its Corporate Trust Office or at any other address
previously furnished in writing to the Indenture Trustee by the Issuer.
The Issuer shall promptly transmit any notice received by it from the
Noteholders to the Indenture Trustee and the Indenture Trustee shall
likewise promptly transmit any notice received by it from the
Noteholders to the Issuer, with a copy to the Owner Trustee at its
Corporate Trust Office and a copy to [____________________] at
____________________, Attention: _______________.
(c) Notices required to be given to the Rating Agencies by the
Issuer, the Indenture Trustee or the Owner Trustee shall be in writing,
personally delivered, sent by electronic facsimile transmission (with
hard copy to follow via first class mail) or mailed by certified mail,
return receipt requested to: (i) in the case of Moody's Investors
Service, Inc., at the following address: Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York, New York
10007; and (ii) in the case of Standard & Poor's Corporation, at the
following address: Standard & Poor's Corporation, 26 Broadway (20th
Floor), New York, New York 10004, Attn: Asset Backed Surveillance
Department or as to each of the foregoing, at such other address as
shall be designated by written notice to the other parties.
SECTION 11.5 Notices to Noteholders; Waiver.
(a) Where this Indenture provides for notice to Noteholders of
any event, such notice shall be sufficiently given (unless otherwise
herein expressly provided) if it is in writing and mailed, first-class,
postage prepaid to each Noteholder affected by such event, at such
Person's address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. If notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of
such notice
A-53
<PAGE>
with respect to other Noteholders, and any notice that is mailed in the
manner herein provided shall conclusively be presumed to have been duly
given regardless of whether such notice is in fact actually received.
(b) Where this Indenture provides for notice in any manner,
such notice may be waived in writing by any Person entitled to receive
such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Noteholders shall
be filed with the Indenture Trustee but such filing shall not be a
condition precedent to the validity of any action taken in reliance
upon such a waiver.
(c) In case, by reason of the suspension of regular mail
service as a result of a strike, work stoppage or similar activity, it
shall be impractical to mail notice of any event to Noteholders when
such notice is required to be given pursuant to any provision of this
Indenture, then any manner of giving such notice as shall be
satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.
(d) Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights
or obligations created hereunder, and shall not under any circumstance
constitute an Event of Default.
SECTION 11.6 Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer shall furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee shall cause payments to be made
and notices to be given in accordance with such agreements.
SECTION 11.7 Conflict with Trust Indenture Act.
(a) If any provision hereof limits, qualifies or conflicts
with another provision hereof that is required to be included in this
Indenture by any of the provisions of the TIA, such required provision
shall control.
(b) The provisions of TIA ss.310 through 317 that impose
duties on any Person (including the provisions automatically deemed
included herein unless expressly excluded by this Indenture) are a part
of and govern this Indenture, whether or not physically contained
herein.
SECTION 11.8 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.9 Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not.
A-54
<PAGE>
All covenants and agreements of the Indenture Trustee in this Indenture shall
bind its successors and assigns, whether so expressed or not.
SECTION 11.10 Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11 Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
SECTION 11.12 Legal Holidays. If the date on which any payment is due
shall not be a Business Day, then (notwithstanding any other provision of the
Notes or this Indenture) payment need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the date on which nominally due, and no interest shall accrue for the period
from and after any such nominal date.
SECTION 11.13 Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15 Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
SECTION 11.16 No Recourse. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against:
(a) the Indenture Trustee or the Owner Trustee in its
individual capacity;
(b) any owner of a beneficial interest in the Issuer; or
A-55
<PAGE>
(c) any partner, owner, beneficiary, agent, officer, director,
employee or agent of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer,
the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Indenture Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Indenture Trustee and the Owner Trustee have no
such obligations in their individual capacity) and except that any such
partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock,
unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the
performance of any duties or obligations of the Issuer hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the
terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
SECTION 11.17 No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note issued hereunder, hereby
covenant and agree that they shall not, prior to the date which is one year and
one day after the termination of this Indenture with respect to the Trust
pursuant to Section 4.1, acquiesce, petition or otherwise invoke or cause the
Seller or the Trust to invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Seller or the
Trust under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Seller or the Trust or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Seller
or the Trust.
SECTION 11.18 Inspection. The Issuer agrees that, on reasonable prior
notice, it shall permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder. Notwithstanding
anything herein to the contrary, the foregoing shall not be construed to
prohibit (i) disclosure of any and all information that is or becomes publicly
known, or information obtained by the Indenture Trustee from sources other than
the Servicer or the Seller or any of their affiliates, (ii) disclosure of any
and all information (A) if required to do so by any applicable statute, law,
rule or regulation, (B) to any government agency or regulatory body having
authority to regulate or oversee any respects of the Indenture Trustee's
business, (C) pursuant to any subpoena, civil investigative demand or similar
demand or request of any court, regulatory authority, arbitrator or arbitration
to which the Indenture Trustee is a party, (D) to any independent or internal
auditor, agent, employee or attorney of the Indenture Trustee reasonably having
a need to know the same, provided that the Indenture Trustee advises such
recipient of the confidential nature of the information being disclosed and such
recipient
A-56
<PAGE>
agrees to keep the same confidential in accordance with the terms hereof, or
(iii) any other disclosure authorized by the Servicer or the Seller; provided,
however, the Indenture Trustee shall give the Servicer prior notice of any such
disclosure.
SECTION 11.19 Indemnification by and Reimbursement of the Servicer. The
Indenture Trustee further acknowledges and accepts the conditions and
limitations with respect to the Servicer's obligation to indemnify, defend and
hold the Indenture Trustee harmless as set forth in the Sale and Servicing
Agreement.
A-57
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
CIT MARINE TRUST ____-_
By: [____________________]
not in its individual capacity but solely as
Owner Trustee under the Trust Agreement
By: ________________________________
Name:
Title:
[________________________]
` not in its individual capacity but solely as
Indenture Trustee
By: ________________________________
Name:
Title:
A-58
<PAGE>
EXHIBIT A
FORM OF ASSET BACKED NOTES
REGISTERED $___________
No. __
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. ________
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN. ACCORDINGLY, THE
OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE
AMOUNT SHOWN ON THE FACE HEREOF.
CIT MARINE TRUST ____-_
CLASS A ____% ASSET BACKED NOTES
CIT MARINE TRUST ____-_, a business trust organized and existing under
the laws of the State of Delaware (herein referred to as the "Issuer"), for
value received, hereby promises to pay to ____________________, or registered
assigns, the principal sum of _______________ DOLLARS ($___________) payable in
accordance with the Indenture, prior to the occurrence of an Event of Default
and a declaration that the Notes are due and payable, on each Distribution Date
to the extent of amounts available therefor in an amount equal to the difference
between (i) the sum of (x) the Pool Balance on the last day of the second
proceeding Due Period (or, in the case of the first Distribution Date the
Initial Cut-off Date Principal Balance) and (y) the amount on deposit in the
Pre-Funding Account (exclusive of Pre-Funding Earnings) on the last day of the
second preceding Due Period (or, in the case of the first Distribution Date, as
of the Closing Date), less (ii) the sum of (x) the Pool Balance on the last day
of the preceding Due Period and
<PAGE>
(y) the amount on deposit in the Pre-Funding Account (exclusive of Pre-Funding
Earnings) on the last day of the preceding Due Period; provided, however, that
the outstanding principal balance of this Note shall be due and payable on the
earlier of the _______________ Distribution Date (the "Class A Final Scheduled
Distribution Date") and the Redemption Date with respect to a redemption of
Notes, if any, pursuant to Section 10.1(a)(i) or (ii) or Section 10.1(b) of the
Indenture. On each Distribution Date until the principal of this Note is paid or
made available for payment, the Issuer shall pay interest on this Note in an
amount equal to one-twelfth of the product of the rate per annum shown above and
the principal amount of this Note outstanding on the preceding Distribution Date
after giving effect to all payments of principal made on the preceding
Distribution Date (or in the case of the first Distribution Date, the original
outstanding principal amount of this Note). Interest on this Note will accrue
for each Distribution Date from and including the most recent Distribution Date
on which interest has been paid to but excluding the then current Distribution
Date or, if no interest has yet been paid, from ____________,____. Interest will
be computed on the basis of a 360-day year consisting of twelve 30-day months.
Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America which, at the time of payment, is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof or be valid or obligatory for any purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
Date: ___________, ____ CIT MARINE TRUST ____-_
By: [____________________]
not in its individual capacity but solely as
Owner Trustee under the Trust Agreement
By: ________________________________
Name:
Title:
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred
to in the within-mentioned Indenture.
[______________],
not in its individual capacity
but solely as Indenture Trustee
By: ______________________________________
Name:
Title:
A-3
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as Class A ____% Asset Backed Notes (herein called the "Class A
Notes" or "Notes"), all issued under an Indenture, dated as of ____________,
____ (such Indenture, as supplemented or amended, is herein called the
"Indenture"), between the Issuer and ____________________, an __________
corporation, as trustee (the "Indenture Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
Noteholders. The Class A Notes are subject to all terms of the Indenture. All
terms used and not otherwise defined in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture.
The Class A Notes and all other Notes issued pursuant to the Indenture
are and will be equally and ratably secured by the Collateral pledged as
security therefor as provided in the Indenture.
Subject to the immediately following paragraph, principal on the Class
A Notes shall be payable in full on the earlier of the Distribution Date which
is the Class A Final Scheduled Distribution Date for the Class A Notes set forth
above and the Redemption Date, if any, pursuant to Section 10.1(a)(i) or (a)(ii)
or Section 10.1(b) of the Indenture. In addition, principal on the Class A Notes
will be payable in installments on earlier Distribution Dates to the extent of
amounts available therefor, in the amounts and in the priorities set forth in
Section 8.2(c) of the Indenture. "Distribution Date," with respect to the Notes
means the fifteenth day of each month or, if any such date is not a Business
Day, the next succeeding Business Day, commencing _________ 15, ____.
Notwithstanding the provisions of the preceding paragraph, the entire
unpaid principal amount of this Note shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing and the
Indenture Trustee or the Noteholders representing not less than a majority of
the outstanding amount of the Notes have declared the Notes to be immediately
due and payable in the manner provided in Section 5.2 of the Indenture. In such
event, the Holders of all Notes shall be entitled to receive repayment of
principal ratably in proportion to their respective unpaid principal balances.
All principal payments on the Class A Notes shall be made pro rata to
the Holders of the Class A Notes.
Payments of interest on this Note at the rate of _____% per annum shall
be due and payable on each Distribution Date, together with the installment of
principal, if any, if not in full payment of this Note, shall be made by check
mailed to the Person whose name appears as the Registered Holder of this Note
(or one or more Predecessor Notes) on the Note Register as of the close of
business on each Record Date, except that with respect to Notes registered on
the Record
A-4
<PAGE>
Date in the name of the nominee of the Depository (initially, such nominee to be
Cede & Co.), payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. The Record Date, with respect to any
Distribution Date, means the day immediately preceding such Distribution Date,
or if Definitive Notes are issued, the last day of the month immediately
preceding the month in which such Distribution Date occurs. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Distribution Date shall be binding upon all future
Holders of this Note of any Note issued upon the registration of transfer hereof
or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds
are expected to be available, as provided in the Indenture, for payment in full
of the then remaining unpaid principal amount of this Note on a Distribution
Date, then the Indenture Trustee, in the name of and on behalf of the Issuer,
shall notify the Person who is the Registered Holder hereof as of the Record
Date preceding such Distribution Date by notice sent in accordance with Section
2.7(e) of the Indenture, and the amount then due and payable shall be payable
only upon presentation and surrender of this Note at the Indenture Trustee's
principal Corporate Trust Office or at the office of the Indenture Trustee's
agent appointed for such purposes located in the City of New York.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by a commercial bank
or trust company located, or having a correspondent located, in the City of New
York or the city in which the Corporate Trust Office is located, or a member
firm of a national securities exchange, and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Indenture Trustee or the Owner Trustee in their
individual capacities, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee or the Owner Trustee in their individual capacities, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in their individual capacities, except as any such Person may have
expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by
A-5
<PAGE>
applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture such Noteholder will not, prior to the
date which is one year and one day after the termination of this Indenture with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Seller or the Issuer to invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Seller Issuer
under any federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Seller or the Issuer or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Seller
or the Issuer.
Each Noteholder, by acceptance of a Note or, in the case of a Note
Owner, a beneficial interest in a Note, unless otherwise required by appropriate
taxing authorities, agrees to treat the Notes as indebtedness secured by the
Contracts for the purpose of federal income taxes, state and local income and
franchise taxes and any other taxes imposed upon, measured by or based upon
gross or net income.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note shall
be overdue, and neither the Issuer, the Indenture Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Holders of Notes representing a majority of the
outstanding principal amount of all the Notes. The Indenture also contains
provisions permitting the Holders of Notes representing specified percentages of
the outstanding principal amount of the Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of the Noteholders.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
A-6
<PAGE>
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer to pay the
principal of and interest on this Note at the times, place and rate, and in the
coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither the Seller, the Servicer, the Indenture
Trustee nor the Owner Trustee in their respective individual capacities, any
owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns, shall be personally liable for, nor shall recourse be had to any of
them for, the payment of principal of or interest on, or performance of, or
omission to perform, any of the covenants, obligations or indemnifications
contained in this Note or the Indenture, it being expressly understood that said
covenants, obligations and indemnifications have been made by the Owner Trustee
solely as the Owner Trustee in the assets of the Issuer.
The Holder of this Note by the acceptance hereof agrees that, except as
expressly provided in the Basic Documents, in the case of an Event of Default
under the Indenture, the Holder shall have no claim against any of the foregoing
for any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement against,
the assets of the Issuer for any and all liabilities, obligations and
undertakings contained in the Indenture or in this Note.
A-7
Exhibit 4.2
TRUST AGREEMENT
BETWEEN
THE CIT GROUP SECURITIZATION CORPORATION II,
SELLER
AND
___________________,
OWNER TRUSTEE
DATED AS OF ____________, ____
<PAGE>
TABLE OF CONTENTS
<PAGE>
TRUST AGREEMENT, dated as of ____________, ____, between THE CIT GROUP
SECURITIZATION CORPORATION II, a Delaware corporation, as Seller, and
____________________, a Delaware banking corporation, as Owner Trustee.
The Seller and the Owner Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions. Certain capitalized terms used in this
Agreement shall have the respective meanings assigned to them in the Sale and
Servicing Agreement of even date herewith, among the Seller, the Servicer and
the Trust (the "Sale and Servicing Agreement"). All references herein to "the
Agreement" or "this Agreement" are to the Trust Agreement, and all references
herein to Articles, Sections and subsections are to Articles, Sections and
subsections of this Agreement unless otherwise specified.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust created hereby shall be known as "CIT
Marine Trust ____-_" in which name the Owner Trustee may conduct the business of
the Trust, make and execute contracts and other instruments on behalf of the
Trust and sue and be sued on behalf of the Trust.
SECTION 2.2 Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address as the
Owner Trustee may designate by written notice to the Certificate Owners and the
Seller.
SECTION 2.3 Purposes and Powers. The purpose of the Trust is to engage
in the following activities:
(a) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement, and to sell, transfer or
exchange the Notes and the Certificates;
(b) with the proceeds of the sale of the Notes and the
Certificates to fund the Capitalized Interest Account and the
Pre-Funding Account and to pay the organizational, start-up and
transactional expenses of the Trust and to pay the balance of the
proceeds to the Seller pursuant to the Sale and Servicing Agreement;
(c) to acquire, manage and hold the Contracts;
<PAGE>
(d) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the terms of the Indenture and to hold,
manage and distribute to the Certificate Owners pursuant to the terms
of this Agreement and the Sale and Servicing Agreement any portion of
the Trust Estate released from the lien of, and remitted to the Trust
pursuant to, the Indenture;
(e) to enter into and perform its obligations and exercise its
rights under the Basic Documents to which it is to be a party;
(f) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith;
(g) to hold and administer the Certificate Distribution
Account and Cash Collateral Account and apply the proceeds thereof as
provided in the Sale and Servicing Agreement;
(h) to acquire Subsequent Contracts from the Seller from time
to time with funds on deposit in the Pre-Funding Account; and
(i) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities and shall
not engage in any activity other than in connection with the foregoing or other
than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4 Appointment of Owner Trustee. The Seller hereby appoints
the Owner Trustee as trustee of the Trust effective as of the date hereof, to
have all the rights, powers and duties set forth herein.
SECTION 2.5 Initial Capital Contribution of Owner Trust Estate. The
Seller hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $10. The Owner Trustee hereby
acknowledges receipt in trust from the Seller, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account.
SECTION 2.6 Declaration of Trust. The Owner Trustee hereby declares
that it shall hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificate Owners,
subject to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a business trust under
the Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. It is the intention of the parties hereto
that, solely for purposes of federal income
<PAGE>
taxes, state and local income and franchise taxes and any other taxes imposed
upon, measured by, or based upon gross or net income, the Trust shall be treated
as a partnership. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust shall file or cause to be filed annual or
other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for such tax purposes. Effective
as of the date hereof, the Owner Trustee shall have all rights, powers and
duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust.
SECTION 2.7 Title to Trust Property. Legal title to all the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be, for the benefit of the Trust.
SECTION 2.8 Situs of Trust. The Trust shall be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York. The Trust shall not have any employees in any state other than
Delaware or New York; provided, however, that nothing herein shall restrict or
prohibit the Owner Trustee from having employees within or without the State of
Delaware. Payments shall be received by the Trust only in Delaware or New York,
and payments will be made by the Trust only from Delaware or New York. The only
office of the Trust shall be the Corporate Trust Office in Delaware.
SECTION 2.9 Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Owner Trustee, as of the Closing Date,
that:
(a) The Seller has been organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and conduct its business
as such properties are presently owned and such business is presently
conducted and had at all relevant times, and now has, power, authority
and legal right to acquire and own the Contracts.
(b) The Seller is duly qualified to do business as a foreign
corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business requires such qualifications.
(c) The Seller has the power and authority to execute and
deliver this Agreement and to carry out its terms, the Seller has full
power and authority to sell and assign the property to be sold and
assigned to and deposited with, as part of, the Trust and the Seller
has duly authorized such sale and assignment to the Trust by all
necessary corporate action; and the execution, delivery and performance
of this Agreement have been duly authorized by the Seller by all
necessary corporate action.
<PAGE>
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms of this Agreement do not
conflict with, result in any breach of any of the terms and provisions
of or constitute (with or without notice or lapse of time) a default
under its certificate of incorporation or by-laws of the Seller, or any
indenture, agreement or other instrument to which the Seller is a party
or by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to or as
contemplated by the Basic Documents), or violate any law or, to the
best of its knowledge, any order, rule or regulation applicable to the
Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
SECTION 2.10 Tax Treatment. Net income of the Trust for any month as
determined for Federal income tax purposes (and each item of income, gain, loss,
credit and deduction entering into the computation thereof) shall be allocated
to the extent of available net income, among the Certificateholders as of the
first Record Date following the end of such month, in proportion to their
ownership of principal amount of Certificates on such date, an amount of net
income up to the sum of (i) the amount of monthly interest at the Pass-Through
Rate to which the Certificateholders are entitled to for the related Due Period,
(ii) interest on the excess, if any, of the amount of interest and principal due
to the Certificateholders for the preceding Distribution Date over the amount in
respect of interest at the Pass-Through Rate that is actually deposited in the
Certificate Distribution Account on such preceding Distribution Date, to the
extent permitted by law, at the Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date, and (iii) the portion
of the market discount, if any, on the Contracts accrued during such month that
is allocable to the excess of the initial aggregate principal amount, if any, of
the Certificates over their initial aggregate issue price.
Net losses of the Trust, if any, for any month as determined for
Federal income tax purposes (and each item of income, gain, loss, credit and
deduction entering into the computation thereof) shall be allocated among the
Certificateholders as of the first Record Date following the end of such month
in proportion to their ownership of principal amount of Certificates on such
Record Date until the principal balance of the Certificates is reduced to zero.
ARTICLE III
THE CERTIFICATES
SECTION 3.1 Initial Certificate Ownership. Upon the formation of the
Trust by the contribution by the Seller pursuant to Section 2.5 and until the
issuance of the Certificates, the Seller shall be the sole beneficiary of the
Trust.
SECTION 3.2 Form of the Certificates.
<PAGE>
(a) The Certificates shall be substantially in the form set
forth in Exhibit A and shall be issued in minimum denominations of
$______ and in 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. The Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of a
Responsible Officer of the Owner Trustee. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time
when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be valid and binding obligations of the
Trust, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the authentication and delivery of
such Certificates or did not hold such offices at the date of
authentication and delivery of such Certificates.
(b) The Definitive Certificates (as hereinafter defined) shall
be typewritten, printed, lithographed or engraved or produced by any
combination of these methods (with or without steel engraved borders)
all as determined by the officers executing such Certificates, as
evidenced by their execution of such Certificates.
(c) The terms of the Certificates set forth in Exhibit A shall
form part of this Agreement.
SECTION 3.3 Execution, Authentication and Delivery. Concurrently with
the sale of the Initial Contracts to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause the Certificates in an
aggregate principal amount equal to the initial Certificate Balance to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Seller, signed by its chairman of the board, its president
or any vice president, without further corporate action by the Seller, in
authorized denominations. No Certificate shall entitle its holder to any benefit
under this Agreement, or shall be valid for any purpose, unless there shall
appear on such Certificate a certificate of authentication substantially in the
form set forth in Exhibit A, executed by the Owner Trustee, or by the Owner
Trustee's authenticating agent, by manual signature. Such authentication shall
constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. ____________________ is hereby appointed as the Owner
Trustee's authenticating agent.
SECTION 3.4 Registration; Registration of Transfer and Exchange of
Certificates.
(a) The Certificate Registrar shall keep or cause to be kept,
at the office or agency maintained pursuant to Section 3.8, a
Certificate Register in which, subject to such reasonable regulations
as it may prescribe, the Owner Trustee shall provide for the
registration of Certificates and of transfers and exchanges of
Certificates as provided herein; provided, however, that no Certificate
may be subdivided upon transfer or exchange such that the denomination
of any resulting Certificate is less than $______. ____________________
shall be the initial Certificate Registrar. Upon any resignation of a
Certificate Registrar, the Owner Trustee shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the
duties of Certificate Registrar.
<PAGE>
(b) Upon surrender for registration or transfer of any
Certificate at the office or agency maintained pursuant to Section 3.8,
the Owner Trustee shall execute on behalf of the Trust, authenticate
and deliver (or shall cause its authenticating agent to authenticate
and deliver), in the name of the designated transferee or transferees,
one or more new Certificates in authorized denominations of a like
aggregate amount dated the date of authentication by the Owner Trustee
or any authenticating agent.
(c) At the option of a Holder of Certificates, Certificates
may be exchanged for other Certificates of authorized denominations of
a like aggregate principal amount upon surrender of the Certificates to
be exchanged at the Corporate Trust Office maintained pursuant to
Section 3.8. Whenever any Certificates are so surrendered for exchange,
the Owner Trustee shall execute on behalf of the Trust, authenticate
and deliver (or shall cause its authenticating agent to authenticate
and deliver) one or more Certificates dated the date of authentication
by the Owner Trustee or any authenticating agent. Such Certificates
shall be delivered to the Holder making the exchange.
(d) Every Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and
the Certificate Registrar duly executed by the Holder or his attorney
duly authorized in writing with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the
Certificate Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program
("STAMP") or such other "signature guarantee program" as may be
determined by the Certificate Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Exchange Act. Each
Certificate surrendered for registration of transfer or exchange shall
be canceled and subsequently destroyed by the Owner Trustee or
Certificate Registrar in accordance with its customary practice.
(e) No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with
any transfer or exchange of Certificates.
SECTION 3.5 Mutilated; Destroyed; Lost or Stolen Certificates.
(a) If (i) any mutilated Certificate is surrendered to the
Certificate Registrar, or the Certificate Registrar receives evidence
to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Certificate Registrar,
the Owner Trustee and the Trust such security or indemnity as may be
required by them to hold each of them harmless, then, in the absence of
notice to the Certificate Registrar or the Owner Trustee that such
Certificate has been acquired by a bona fide purchaser, the Owner
Trustee shall execute on behalf of the Trust and the Owner Trustee
shall authenticate and deliver (or shall cause its authenticating agent
to authenticate and deliver), in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a replacement
<PAGE>
Certificate of a like aggregate principal amount; provided, however,
that if any such destroyed, lost or stolen Certificate, but not a
mutilated Certificate, shall have become or within seven days shall be
due and payable, then instead of issuing a replacement Certificate the
Owner Trustee may pay such destroyed, lost or stolen Certificate when
so due or payable.
(b) If, after the delivery of a replacement Certificate or
payment in respect of a destroyed, lost or stolen Certificate pursuant
to subsection 3.5(a), a bona fide purchaser of the original Certificate
in lieu of which such replacement Certificate was issued presents for
payment such original Certificate, the Owner Trustee shall be entitled
to recover such replacement Certificate (or such payment) from the
Person to whom it was delivered or any Person taking such replacement
Certificate from such Person to whom such replacement Certificate was
delivered or any assignee of such Person, except a bona fide purchaser,
and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense
incurred by the Owner Trustee in connection therewith.
(c) In connection with the issuance of any replacement
Certificate under this Section 3.5, the Owner Trustee may require the
payment by the Holder of such Certificate of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and
expenses of the Owner Trustee and the Certificate Registrar) connected
therewith.
(d) Any duplicate Certificate issued pursuant to this Section
3.5 in replacement of any mutilated, destroyed, lost or stolen
Certificate shall constitute an original additional contractual
obligation of the Trust, whether or not the mutilated, destroyed, lost
or stolen Certificate shall be found at any time or be enforced by
anyone, and shall be entitled to all the benefits of this Agreement
equally and proportionately with any and all other Certificates duly
issued hereunder.
(e) The provisions of this Section 3.5 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or
stolen Certificates.
SECTION 3.6 Persons Deemed Certificateholders. Prior to due
presentation of a Certificate for registration of transfer, the Owner Trustee or
the Certificate Registrar may treat the Person in whose name any Certificate
shall be registered in the Certificate Register as the Certificateholder of such
Certificate for the purpose of receiving distributions pursuant to Article V and
for all other purposes whatsoever, and neither the Owner Trustee nor the
Certificate Registrar shall be affected by any notice to the contrary.
SECTION 3.7 Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Servicer and the
Seller, within 15 days after receipt by the Owner Trustee of a request therefor
from the Servicer or the Seller in writing, a list, in such form as the Servicer
or the Seller may reasonably require, of the names and addresses
<PAGE>
of the Certificateholders as of the most recent Record Date. If three or more
Holders of Certificates or one or more Holder of Certificates evidencing not
less than 25% of the Certificate Balance apply in writing to the Owner Trustee,
and such application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner Trustee
shall, within five Business Days after the receipt of such application, afford
such applicants access during normal business hours to the current list of
Certificateholders. Each Holder, by receiving and holding a Certificate, shall
be deemed to have agreed not to hold the Seller or the Owner Trustee accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
SECTION 3.8 Maintenance of Corporate Trust Office. The Owner Trustee
shall maintain in the City of _______________, an office or offices or agency or
agencies where Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner Trustee in respect
of the Certificates and the Basic Documents may be served. The Owner Trustee
initially designates the offices of ____________________, ____________________,
as its principal office for such purposes. The Owner Trustee shall give prompt
written notice to the Seller and to the Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
SECTION 3.9 Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.2 and make withdrawals from the Cash Collateral Account of
amounts to be deposited in the Certificate Distribution Account, in each case
pursuant to the Sale and Servicing Agreement and amounts to be paid to the Cash
Collateral Depositor pursuant to the Cash Collateral Agreement, and the Paying
Agent shall report the amounts of such distributions and withdrawals to the
Owner Trustee and the Servicer. Any Paying Agent shall have the revocable power
to withdraw funds from the Certificate Distribution Account and/or the Cash
Collateral Account for the purpose of making the distributions referred to
above. The Owner Trustee may revoke such power and remove the Paying Agent if
the Owner Trustee determines in its sole discretion that the Paying Agent shall
have failed to perform its obligations under this Agreement in any material
respect. The Paying Agent shall initially be [____________________], and any
co-paying agent chosen by the Owner Trustee, and acceptable to the Servicer. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Owner Trustee. If [____________________] shall no longer be the
Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent
(which shall be an Eligible Institution). The Owner Trustee shall cause such
successor Paying Agent or any additional Paying Agent appointed by the Owner
Trustee to execute and deliver to the Owner Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the Owner
Trustee that as Paying Agent, such successor Paying Agent or additional Paying
Agent shall hold all sums, if any, held by it for payment to the
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto until such sums shall be paid to such Certificateholders. The Paying
Agent shall return all unclaimed funds to the Owner Trustee and upon removal of
a Paying Agent such Paying Agent shall also return all funds in its possession
to the Owner
<PAGE>
Trustee. The provisions of Sections 6.3, 6.6, 6.7 and 6.9 shall apply to the
Owner Trustee also in its role as Paying Agent (if the Owner Trustee shall also
act as Paying Agent), for so long as the Owner Trustee shall act as Paying Agent
and, to the extent applicable, to any other paying agent appointed hereunder.
Any reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
SECTION 3.10 Book-Entry Certificates. The Certificates, upon original
issuance, shall be issued in the form of a typewritten Certificate or
Certificates representing Book-Entry Certificates, to be delivered to The
Depository Trust Company, the initial Depository by or on behalf of the Trust.
Such Certificate or Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Depository and no Certificate Owner shall receive a definitive Certificate
representing such Certificate Owner's interest in such Certificate, except as
provided in Section 3.13. Unless and until definitive fully registered
Certificates (the "Definitive Certificates") shall have been issued to
Certificate Owners pursuant to Section 3.13:
(a) the provisions of this Section 3.11 shall be in full force
and effect;
(b) the Certificate Registrar and the Owner Trustee shall be
entitled to deal with the Depository for all purposes of this Agreement
(including the payment of principal of and interest on the Certificates
and the giving of instructions or directions hereunder) as the sole
Holder of the Certificate, and shall have no obligation to the
Certificate Owners;
(c) to the extent that the provisions of this Section 3.11
conflict with any other provisions of this Agreement, the provisions of
this Section 3.11 shall control;
(d) the rights of the Certificate Owners shall be exercised
only through the Depository and shall be limited to those established
by law and agreements between such Certificate Owners and the
Depository and/or the Depository Participants. Pursuant to the
Certificate Depository Agreement unless and until Definitive
Certificates are issued pursuant to Section 3.13, the initial
Depository will make book-entry transfers among the Depository
Participants and receive and transmit payments of principal of and
interest on the Certificates to such Depository Participants;
(e) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Certificate Balance, the
Depository shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from
Certificate Owners and/or Depository Participants owning or
representing, respectively, such required percentage of Certificates
and has delivered such instructions to the Owner Trustee.
SECTION 3.12 Notices to Depository. Whenever a notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates
<PAGE>
shall have been issued to Certificate Owners pursuant to Section 3.13, the Owner
Trustee shall give all such notices and communications specified herein to be
given to Certificateholders to the Depository and shall have no further
obligation to the Certificate Owners.
SECTION 3.13 Definitive Certificates. If (i) the Servicer advises the
Owner Trustee in writing that the Depository is no longer willing or able to
properly discharge its responsibilities with respect to the Certificates, and
the Servicer is unable to locate a qualified successor, (ii) the Servicer at its
option advises the Owner Trustee in writing that it elects to terminate the
book-entry system through the Depository, or (iii) after the occurrence of an
Event of Default or an Event of Termination, Certificate Owners representing
beneficial interests aggregating at least a majority of the Certificate Balance
advise the Depository in writing that the continuation of a book-entry system
through the Depository is no longer in the best interest of the Certificate
Owners, then the Depository shall notify all Certificate Owners and the Owner
Trustee of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Owner Trustee of the typewritten Certificate or Certificates
representing the Book-Entry Certificates by the Depository, accompanied by
registration instructions, the Owner Trustee shall execute and authenticate the
Definitive Certificates in accordance with the instructions of the Depository.
Neither the Certificate Registrar nor the Owner Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. Upon the issuance of Definitive
Certificates, the Owner Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders.
SECTION 3.14 Seller as Certificateholder. The Seller in its individual
or any other capacity may become the owner or pledgee of Certificates and may
otherwise deal with the Owner Trustee or its Affiliates as if it were not the
Seller.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1 Prior Notice to Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not take action with respect to the following
matters, unless (i) the Owner Trustee shall have notified the Certificateholders
in writing of the proposed action at least 30 days before the taking of such
action, and (ii) the Certificateholders shall not have notified the Owner
Trustee in writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any material claim or lawsuit by the
Trust (except claims or lawsuit brought in connection with the
collection of payments due on the Contracts) and the compromise of any
material action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for
collection of payments due on the Contracts);
<PAGE>
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute), a conformed copy of which is
attached hereto as Exhibit B;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required
and such amendment materially adversely affects the interest of the
Certificateholders;
(e) the amendment, change or modification of the Sale and
Servicing Agreement, except to cure any ambiguity or defect or to amend
or supplement any provision in a manner that would not materially
adversely affect the interests of the Certificateholders or in
circumstances in which the Sale and Servicing Agreement expressly
provides that the consent of the Certificateholders is not required; or
(f) the appointment pursuant to the Indenture of a successor
Note Registrar, Paying Agent or Indenture Trustee or pursuant to this
Agreement of a successor Certificate Registrar, or the consent to the
assignment by the Note Registrar, Paying Agent or Indenture Trustee or
Certificate Registrar of its obligations under the Indenture or this
Agreement, as applicable.
SECTION 4.2 Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the written
direction of the Certificateholders, to (a) remove the Servicer under the Sale
and Servicing Agreement pursuant to Section 9.01 thereof, (b) appoint a
successor Servicer pursuant to Section 9.02 of the Sale and Servicing Agreement,
or (c) except as expressly provided in the Basic Documents, sell the Contracts
or any interest therein after the termination of the Indenture.
SECTION 4.3 Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Holders of Certificates and the delivery to the Owner Trustee by each such
Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent.
SECTION 4.4 Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3, nor shall the Owner Trustee be
obligated to follow any such direction, if given.
SECTION 4.5 Majority Control. Except as expressly provided herein, any
action that may be taken or consent that may be given or withheld by the
Certificateholders under this Agreement may be taken, given or withheld by the
Holders of Certificates evidencing not less
<PAGE>
than a majority of the Certificate Balance. Except as expressly provided herein,
any written notice of the Certificateholders delivered pursuant to this
Agreement shall be effective if signed by Holders of Certificates evidencing not
less than a majority of the Certificate Balance at the time of the delivery of
such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1 Establishment of Accounts.
(a) On or prior to the Closing Date, the Trust shall cause the
Servicer to establish and maintain, in the name of the Indenture
Trustee or the Owner Trustee, as appropriate, for the benefit of the
Noteholders and Certificateholders (and, in the case of the Cash
Collateral Account, for the benefit of the Certificateholders and the
Cash Collateral Depositor) the accounts as provided in Section 5.01 of
the Sale and Servicing Agreement.
(b) The Owner Trustee shall possess all right, title and
interest in and to all funds on deposit from time to time in the
Certificate Distribution Account and the Cash Collateral Account and in
all proceeds thereof. Except as otherwise provided herein or in the
Sale and Servicing Agreement, the Certificate Distribution Account and
the Cash Collateral Account shall be under the sole dominion and
control of the Owner Trustee for the benefit of the Certificateholders
and, in the case of the Cash Collateral Account, for the benefit of the
Certificateholders and the Cash Collateral Depositor, as their
respective interests may appear. If, at any time, the Certificate
Distribution Account or the Cash Collateral Account ceases to be held
at an Eligible Institution, the Owner Trustee (or the Servicer on
behalf of the Owner Trustee, if the Certificate Distribution Account or
the Cash Collateral Account is not then held by the Owner Trustee or an
Affiliate thereof) shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency
may consent) establish a new Certificate Distribution Account or Cash
Collateral Account at an Eligible Institution and shall transfer any
cash and/or any investments to such new Certificate Distribution
Account or Cash Collateral Account, as the case may be.
SECTION 5.2 Application of Trust Funds.
(a) On each Distribution Date, the Owner Trustee shall (i)
transfer or cause the transfer of amounts on deposit in the Cash
Collateral Account to the Certificate Distribution Account pursuant to
Section 5.06 of the Sale and Servicing Agreement, (ii) transfer and
distribute, or cause to be transferred and distributed, amounts on
deposit in the Cash Collateral Account to the Cash Collateral
Depositor, pursuant to Section 5.06 of the Sale and Servicing Agreement
and the applicable provisions of the Cash Collateral Agreement,
respectively, on or prior to such Distribution Date, and (iii)
distribute to the
<PAGE>
Certificateholders, on a pro rata basis, amounts deposited in the
Certificate Distribution Account pursuant to the Sale and Servicing
Agreement on or prior to such Distribution Date first in respect of
interest and then in respect of principal.
(b) On each Distribution Date, the Owner Trustee shall send to
each Certificateholder the statement provided to the Owner Trustee by
the Servicer pursuant to Section 5.08 of the Sale and Servicing
Agreement on such Distribution Date setting forth, among other things,
the amount of the distribution allocable to principal and to interest,
the Certificate Balance after giving effect to such distribution, the
amount of funds on deposit in the Pre-Funding Account during the
Funding Period, the number and aggregate principal balance of
Subsequent Contracts purchased by the Trust on the related Distribution
Date during the Funding Period and the Servicer Payment with respect to
such Distribution Date or Monthly Period, as applicable.
(c) If any withholding tax is imposed on the Trust's payment
(or allocations of income) to a Certificateholder, such tax shall
reduce the amount otherwise distributable to the Certificateholder in
accordance with this Section 5.2. The Owner Trustee is hereby
authorized and directed to retain from amounts otherwise distributable
to the Certificateholders sufficient funds for the payment of any tax
that is legally owed by the Trust (but such authorization shall not
prevent the Owner Trustee from contesting any such tax in appropriate
proceedings and withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings). The amount of any withholding
tax imposed with respect to a Certificateholder shall be treated as
cash distributed to such Certificateholder at the time it is withheld
by the Trust and remitted to the appropriate taxing authority. If there
is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-U.S. Certificateholder),
the Owner Trustee may in its sole discretion withhold such amounts in
accordance with this subsection 5.2(c). If a Certificateholder wishes
to apply for a refund of any such withholding tax, the Owner Trustee
shall reasonably cooperate with such Certificateholder in making such
claim so long as such Certificateholder agrees to reimburse the Owner
Trustee for any out-of-pocket expenses incurred.
(d) If the Indenture Trustee holds escheated funds for payment
to the Trust pursuant to Section 3.3(e) of the Indenture, the Owner
Trustee shall, upon notice from the Indenture Trustee that such funds
exist, submit on behalf of the Trust an Issuer Order to the Indenture
Trustee pursuant to Section 3.3(e) of the Indenture instructing the
Indenture Trustee to pay such funds to or at the order of the Seller.
SECTION 5.3 Method of Payment. Subject to subsection 7.1(c),
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the immediately preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Holder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder shall have provided to the Certificate
Registrar appropriate written instructions at least five Business Days prior to
such Record Date and such Holder's Certificates in the aggregate evidence a
denomination of not less than $1,000,000 or, if
<PAGE>
not, by check mailed to such Certificateholder at the address of such holder
appearing in the Certificate Register; provided, however, that, unless
Definitive Certificates have been issued pursuant to Section 3.13, with respect
to Certificates registered on the Record Date in the name of the nominee of the
Depository (initially, such nominee to be Cede & Co.), distributions will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Notwithstanding the foregoing, the final distribution in
respect of the Certificates (whether on the Certificate Final Distribution Date
or otherwise) will be payable only upon presentation and surrender of such
Certificate at the office or agency maintained for that purpose by the Owner
Trustee pursuant to Section 3.8.
SECTION 5.4 Accounting and Reports to the Certificateholders, The
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain (or
cause to be maintained) the books of the Trust on a calendar year basis on the
accrual method of accounting, (b) deliver to each Certificateholder, as may be
required by the Code and applicable Treasury Regulations or otherwise, such
information as may be required to enable each Certificateholder to prepare its
federal and state income tax returns, (c) file such tax returns relating to the
Trust and make such elections as may from time to time be required or
appropriate under any applicable state or federal statute or rule or regulation
thereunder so as to maintain the Trust's characterization as a partnership for
federal income tax purposes, (d) cause such tax returns to be signed in the
manner required by law and (e) collect or cause to be collected any withholding
tax as described in and in accordance with subsection 5.2(c) with respect to
income or distributions to Certificateholders.
SECTION 5.5 Signature on Returns; Tax Matters Partner. The Owner
Trustee shall sign on behalf of the Trust any and all tax returns of the Trust,
unless applicable law requires a Certificateholder to sign such documents, in
which case such documents shall be signed by ____________________. To the extent
one may be required, ____________________ shall be the "tax matters partner" of
the Trust pursuant to the Code.
ARTICLE VI
THE OWNER TRUSTEE
SECTION 6.1 Duties of Owner Trustee.
(a) The Owner Trustee undertakes to perform such duties, and
only such duties, as are specifically set forth in this Agreement and
the other Basic Documents, including the administration of the Trust in
the interest of the Certificateholders, subject to the Basic Documents
and in accordance with the provisions of this Agreement and the Basic
Documents. No implied covenants or obligations shall be read into this
Agreement.
(b) Notwithstanding the foregoing, the Owner Trustee shall be
deemed to have discharged its duties and responsibilities hereunder and
under the Basic Documents to the extent the Servicer has agreed in the
Sale and Servicing Agreement to perform any
<PAGE>
act or to discharge any duty of the Owner Trustee hereunder or under
any Basic Document, and the Owner Trustee shall not be liable for the
default or failure of the Servicer to carry out its obligations under
the Sale and Servicing Agreement.
(c) In the absence of bad faith on its part, the Owner Trustee
may conclusively rely upon certificates or opinions furnished to the
Owner Trustee and conforming to the requirements of this Agreement in
determining the truth of the statements and the correctness of the
opinions contained therein; provided, however, that the Owner Trustee
shall have examined such certificates or opinions so as to determine
compliance of the same with the requirements of this Agreement.
(d) The Owner Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) this subsection 6.1(d) shall not limit the effect
of subsection 6.1(a) or (b);
(ii) the Owner Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer
unless it is proved that the Owner Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Owner Trustee shall not be liable with
respect to any action it takes or omits to take in good faith
in accordance with a direction received by it pursuant to
Section 4.1, 4.2 or 6.4.
(e) Subject to Sections 5.1 and 5.2, monies received by the
Owner Trustee hereunder need not be segregated in any manner except to
the extent required by law or the Sale and Servicing Agreement and may
be deposited under such general conditions as may be prescribed by law,
and the Owner Trustee shall not be liable for any interest thereon.
(f) The Owner Trustee shall not take any action that (i) is
inconsistent with the purposes of the Trust set forth in Section 2.3 or
(ii) would, to the actual knowledge of a Responsible Officer of the
Owner Trustee, result in the Trust's becoming taxable as a corporation
for federal income tax purposes. The Certificateholders shall not
direct the Owner Trustee to take action that would violate the
provisions of this Section 6.1 and any such direction shall be null and
void.
SECTION 6.2 Rights of Owner Trustee. The Owner Trustee is authorized
and directed to execute and deliver the Basic Documents and each certificate or
other document attached as an exhibit to or contemplated by the Basic Documents
to which the Trust is to be a party, in such form as the Seller shall approve as
evidenced conclusively by the Owner Trustee's execution thereof. In addition to
the foregoing, the Owner Trustee is authorized, but shall not be obligated, to
take all actions required of the Trust pursuant to the Basic Documents. The
Owner Trustee is
<PAGE>
further authorized from time to time to take such action as the Servicer
recommends with respect to the Basic Documents.
SECTION 6.3 Acceptance of Trusts and Duties. Except as otherwise
provided in this Article VI, in accepting the trusts hereby created
[____________________] acts solely as Owner Trustee hereunder and not in its
individual capacity and all Persons having any claim against the Owner Trustee
by reason of the transactions contemplated by this Agreement or any Basic
Document shall look only to the Owner Trust Estate for payment or satisfaction
thereof. The Owner Trustee accepts the trusts hereby created and agrees to
perform its duties hereunder with respect to such trusts but only upon the terms
of this Agreement. The Owner Trustee also agrees to disburse all monies actually
received by it constituting part of the Owner Trust Estate upon the terms of the
Basic Documents and this Agreement. The Owner Trustee shall not be liable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own negligent action, its own negligent failure to act or its
own willful misconduct or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 6.6 and expressly made by the
Owner Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall at no time have any responsibility
or liability for or with respect to the legality, validity and
enforceability of any Contract, or the perfection and priority of any
security interest created by any Contract in any Financed Boat or the
maintenance of any such perfection and priority, or for or with respect
to the sufficiency of the Owner Trust Estate or its ability to generate
the payments to be distributed to Certificateholders under this
Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Financed
Boat; the existence and enforceability of any insurance thereon; the
existence and contents of any Contract on any computer or other record
thereof; the validity of the assignment of any Contract to the Trust or
of any intervening assignment; the completeness of any Contract; the
performance or enforcement of any Contract; the compliance by the
Seller or the Servicer with any warranty or representation made under
any Basic Document or in any related document or the accuracy of any
such warranty or representation or any action of the Servicer, the
Trustee or the Servicer or any subservicer taken in the name of the
Owner Trustee.
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
instructions of the Servicer or any Certificateholder;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or
powers hereunder or under any Basic Document, if the Owner Trustee
shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
<PAGE>
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes or the
Certificate Balance of and interest on the Certificates;
(e) the Owner Trustee shall not be responsible for or in
respect of and makes no representation as to the validity or
sufficiency of any provision of this Agreement or for the due execution
hereof by the Seller or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for
or in respect of the validity or sufficiency of the Basic Documents,
the Notes, the Certificates (other than the certificate of
authentication on the Certificates) or of any Contracts or any related
documents, and the Owner Trustee shall in no event assume or incur any
liability, duty or obligation to any Noteholder, to any
Certificateholder or the Cash Collateral Depositor, other than as
expressly provided for herein and in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Servicer, the Indenture Trustee, the Seller or the
Servicer under any of the Basic Documents or otherwise and the Owner
Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the Basic Documents
that are required to be performed by the Servicer under the Sale and
Servicing Agreement or the Indenture Trustee under the Indenture; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any Basic Document, at
the request, order or direction of any of the Certificateholders,
unless such Certificateholders have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses
and liabilities that may be incurred by the Owner Trustee therein or
thereby. The right of the Owner Trustee to perform any discretionary
act enumerated in this Agreement or in any Basic Document shall not be
construed as a duty, and the Owner Trustee shall not be answerable for
other than its negligence or willful misconduct in the performance of
any such act.
SECTION 6.4 Action Upon Instruction by Certificateholders.
(a) Subject to Section 4.4, the Certificateholders may by
written instruction direct the Owner Trustee in the management of the
Trust. Such direction may be exercised at any time by written
instruction of the Certificateholders pursuant to Section 4.5.
(b) Notwithstanding the foregoing, the Owner Trustee shall not
be required to take any action hereunder or under any Basic Document if
the Owner Trustee shall have reasonably determined, or shall have been
advised by counsel, that such action is likely to result in liability
on the part of the Owner Trustee or is contrary to the terms hereof or
of any Basic Document or is otherwise contrary to law.
<PAGE>
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of
this Agreement or any Basic Document, or is unsure as to the
application, intent, interpretation or meaning of any provision of this
Agreement or the Basic Documents, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances)
to the Certificateholders requesting instruction as to the course of
action to be adopted, and, to the extent the Owner Trustee acts in good
faith in accordance with any such instruction received, the Owner
Trustee shall not be liable on account of such action to any Person. If
the Owner Trustee shall not have received appropriate instructions
within ten days of such notice (or within such shorter period of time
as reasonably may be specified in such notice or may be necessary under
the circumstances) it may, but shall be under no duty to, take or
refrain from taking such action which is consistent, in its view, with
this Agreement or the Basic Documents, and as it shall deem to be in
the best interests of the Certificateholders, and the Owner Trustee
shall have no liability to any Person for any such action or inaction.
SECTION 6.5 Furnishing of Documents. The Owner Trustee shall furnish
(a) to the Certificateholders, promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents and (b) to Noteholders, promptly upon
receipt of a written request therefor, copies of the Purchase Agreement, any
Subsequent Purchase Agreements, the Sale and Servicing Agreement, any Subsequent
Transfer Agreements and this Agreement.
SECTION 6.6 Representations and Warranties of Owner Trustee. The Owner
Trustee hereby represents and warrants to the Seller, for the benefit of the
Certificateholders, that:
(a) It is a banking corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation.
(b) It has full power, authority and legal right to execute,
deliver and perform this Agreement, and has taken all necessary action
to authorize the execution, delivery and performance by it of this
Agreement.
(c) The execution, delivery and performance by it of this
Agreement (i) shall not violate any provision of any law or regulation
governing the banking and trust powers of the Owner Trustee or any
order, writ, judgment or decree of any court, arbitrator or
governmental authority applicable to the Owner Trustee or any of its
assets, (ii) shall not violate any provision of the corporate charter
or by-laws of the Owner Trustee, or (iii) shall not violate any
provision of, or constitute, with or without notice or lapse of time, a
default under, or result in the creation or imposition of any lien on
any properties included in the Trust pursuant to the provisions of any
mortgage, indenture, contract, agreement or other undertaking to which
it is a party, which violation, default or lien could reasonably be
expected to have a materially adverse effect on the Owner Trustee's
<PAGE>
performance or ability to perform its duties as Owner Trustee under
this Agreement or on the transactions contemplated in this Agreement.
(d) The execution, delivery and performance by the Owner
Trustee of this Agreement shall not require the authorization, consent
or approval of, the giving of notice to, the filing or registration
with, or the taking of any other action in respect of, any governmental
authority or agency regulating the banking and corporate trust
activities of banks or trust companies in the jurisdiction in which the
Trust was formed.
(e) This Agreement has been duly executed and delivered by the
Owner Trustee and constitutes the legal, valid and binding agreement of
the Owner Trustee, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights in general and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding
in equity or at law.
SECTION 6.7 Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or
paper believed by it to be genuine and believed by it to be signed by
the proper party or parties and need not investigate any fact or matter
in any such document. The Owner Trustee may accept a certified copy of
a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been
duly adopted by such body and that the same is in full force and
effect. As to any fact or matter the method of the determination of
which is not specifically prescribed herein, the Owner Trustee may for
all purposes hereof rely on a certificate, signed by the president or
any vice president or by the treasurer or other authorized officers of
the relevant party, as to such fact or matter, and such certificate
shall constitute full protection to the Owner Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this
Agreement or the Basic Documents, the Owner Trustee: (i) may act
directly or through its agents, attorneys, custodians or nominees
pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such
agents, attorneys, custodians or nominees if such agents, attorneys,
custodians or nominees shall have been selected by the Owner Trustee
with reasonable care; and (ii) may consult with counsel, accountants
and other skilled professionals to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything
done, suffered or omitted in good faith by it in accordance with the
opinion or advice of any such counsel, accountants or other such
Persons and not contrary to this Agreement or any Basic Document.
<PAGE>
SECTION 6.8 Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Notes and may deal with the Seller, the Indenture Trustee and
the Servicer in transactions in the same manner as it would have if it were not
the Owner Trustee.
SECTION 6.9 Compensation and Indemnity. The Owner Trustee shall receive
as compensation for its services hereunder such fees as have been separately
agreed upon before the date hereof between the Seller, or any person
representing the Seller, and the Owner Trustee, and the Owner Trustee shall be
entitled to be reimbursed by the Servicer for its other reasonable expenses
hereunder, including the reasonable compensation, expenses and disbursements of
such agents, custodians, nominees, representatives, experts and counsel as the
Owner Trustee may employ in connection with the exercise and performance of its
rights and its duties hereunder. The Servicer shall indemnify the Owner Trustee
and its successors, assigns, agents and servants in accordance with the
provisions of Section 8.02 of the Sale and Servicing Agreement. The indemnities
contained in this Section 6.9 shall survive the resignation or termination of
the Owner Trustee or the termination of this Agreement. Any amounts paid to the
Owner Trustee pursuant to this Article VI shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
SECTION 6.10 Replacement of Owner Trustee.
(a) The Owner Trustee may resign at any time and be discharged
from the trusts hereby created by giving 30 days' prior written notice
thereof to the Servicer, provided that such resignation shall not
become effective until a successor Owner Trustee has been appointed.
The Servicer may appoint a successor Owner Trustee by delivering a
written instrument pursuant to Section 6.10(b). If no successor Owner
Trustee shall have been appointed and have accepted appointment within
30 days after the giving of such notice of resignation, the resigning
Owner Trustee may petition any court of competent jurisdiction for the
appointment of a successor Owner Trustee. The Servicer shall remove the
Owner Trustee if:
(i) the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 6.13 and shall fail
to resign after written request therefor by the Servicer;
(ii) the Owner Trustee shall be adjudged bankrupt or
insolvent;
(iii) a receiver or other public officer shall be
appointed or take charge or control of the Owner Trustee or of
its property or affairs for the purpose of rehabilitation,
conservation or liquidation; or
(iv) the Owner Trustee shall otherwise be incapable
of acting.
(b) If the Owner Trustee resigns or is removed or if a vacancy
exists in the office of Owner Trustee for any reason the Servicer shall
promptly appoint a successor
<PAGE>
Owner Trustee by written instrument, in duplicate (one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed
and one copy to the successor Owner Trustee) and shall pay all fees
owed to the outgoing Owner Trustee.
(c) Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the
provisions of this Section 6.10 shall not become effective until a
written acceptance of appointment is delivered by the successor Owner
Trustee to the outgoing Owner Trustee and the Servicer and all fees and
expenses due to the outgoing Owner Trustee are paid. Any successor
Owner Trustee appointed pursuant to this Section 6.10 shall be eligible
to act in such capacity in accordance with Section 6.13 and, following
compliance with the preceding sentence, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner
Trustee. The Servicer shall provide notice of such resignation or
removal of the Owner Trustee to each of the Rating Agencies.
(d) The predecessor Owner Trustee shall upon payment of its
fees and expenses deliver to the successor Owner Trustee all documents
and statements and monies held by it under this Agreement. The Servicer
and the predecessor Owner Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor Owner
Trustee all such rights, powers, duties and obligations.
(e) Upon acceptance of appointment by a successor Owner
Trustee pursuant to this Section 6.10, the Servicer shall mail notice
of the successor of such Owner Trustee to all Certificateholders, the
Indenture Trustee, the Noteholders and the Rating Agencies .
SECTION 6.11 Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 6.13, and without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto; provided, however, that the Owner Trustee shall mail notice
of such merger, conversion or consolidation to the Rating Agencies.
SECTION 6.12 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at
any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Owner Trust Estate or any
Financed Boat may at the time be located, the Servicer and the Owner
Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the
Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or
as separate trustee or trustees, of all or any part
<PAGE>
of the Owner Trust Estate, and to vest in such Person, in such
capacity, such title to the Trust, or any part thereof, and, subject to
the other provisions of this Section 6.12, such powers, duties,
obligations, rights and trusts as the Servicer and the Owner Trustee
may consider necessary or desirable. If the Servicer shall not have
joined in such appointment within 15 days after the receipt by it of a
request so to do, the Owner Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a
successor trustee pursuant to Section 6.13 and no notice of the
appointment of any co-trustee or separate trustee shall be required
pursuant to Section 6.10.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Owner Trustee shall be conferred
upon and exercised or performed jointly by the Owner Trustee
and such separate trustee or co-trustee (it being understood
that such separate trustee or co-trustee is not authorized to
act separately without the Owner Trustee joining in such act),
except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed, the
Owner Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be
personally liable by reason of any act or omission of any
other trustee under this Agreement; and
(iii) the Servicer and the Owner Trustee acting
jointly may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Owner
Trustee shall be deemed to have been given to each of the then separate
trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall
refer to this Agreement and the conditions of this Article. Each
separate trustee and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Owner Trustee. Each such instrument shall
be filed with the Owner Trustee and a copy thereof given to the
Servicer.
(d) Any separate trustee or co-trustee may at any time appoint
the Owner Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not
<PAGE>
prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed,
all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Owner Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
SECTION 6.13 Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times: (a) be authorized to exercise corporate trust
powers; (b) have a combined capital and surplus of at least $50,000,000 and be
subject to supervision or examination by federal or state authorities; and (c)
have (or have a parent which has) a long-term unsecured debt rating of at least
"BBB" by Standard & Poor's and have a long-term unsecured debt rating of at
least "Baa3" by Moody's. If such corporation shall publish reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section 6.13,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.13, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section 6.10.
At all times, the Owner Trustee or Co-trustee appointed pursuant hereto shall be
a person that satisfies the provisions of Section 3807(a) of the Business Trust
Statute (the "Delaware Trustee").
ARTICLE VII
TERMINATION OF TRUST AGREEMENT
SECTION 7.1 Termination of Trust Agreement.
(a) This Agreement has been entered into in part to induce the
Indenture Trustee and the Certificateholders from time to time to
participate in the transactions contemplated hereby, and each of the
Owner Trustee and the Seller agree that the Indenture Trustee (so long
as the Indenture shall not have been terminated in accordance with its
terms) and the Certificateholders from time to time are third party
beneficiaries hereof, and shall be entitled to enforce the terms of
this Agreement to the same extent as if they were signatories hereto,
subject, however, to Article IV hereof and to the applicable provisions
of the Indenture. So long as the Indenture shall not have been
terminated in accordance with its terms, this Agreement and the Trust
created hereby are irrevocable by the Owner Trustee and the Seller,
unless the Indenture Trustee and the Certificateholders consent in
writing to such termination. This Agreement (other than Section 6.9)
and the Trust shall terminate and be of no further force or effect on
the earlier of: (i) the final distribution by the Owner Trustee of all
monies or other property or proceeds of the Owner Trust Estate in
accordance with the terms of the Indenture, the Sale and Servicing
Agreement (including the exercise by the Servicer of its option to
purchase the Contracts pursuant to Section 11.01 of the Sale and
Servicing Agreement or resulting from the mandatory sale of all
Contracts pursuant to Section 11.02 of the Sale
<PAGE>
and Servicing Agreement) and Article V, (ii) at the time provided in
Section 7.2 or (iii) twenty-one years less one day after the death of
the last survivor of all of the decedents of the grandparents of David
C. Rockefeller living on the date of the earliest execution of this
Agreement by any party hereto, but if this Agreement and the Trust
created hereby shall be or become authorized under applicable law to be
valid for a period commencing on the twenty-first anniversary of the
death of such last survivor (or, without limiting the generality of the
foregoing, if legislation shall become effective providing for the
validity of this Agreement and the Trust created hereby for a period in
gross exceeding the period for which this Agreement and the Trust
created hereby are hereinabove stated to extend and be valid), then
this Agreement and the Trust created hereby shall not terminate under
this subsection (iii), but shall extend to and continue in effect, but
only if such non-termination and extension shall then be valid under
applicable law, until the day proceeding such date as the same shall,
under applicable law, cease to be valid. Upon such termination, all
monies or other property or proceeds constituting part of the Owner
Trust Estate shall be distributed in accordance with the terms of the
Agreement. The bankruptcy, liquidation, dissolution, death or
incapacity of any Certificateholder, shall not (x) operate to terminate
this Agreement or the Trust, nor (y) entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any
action or proceeding in any court for a partition or winding up of all
or any part of the Trust or the Owner Trust Estate nor (z) otherwise
affect the rights, obligations and liabilities of the parties hereto.
The bankruptcy, liquidation or dissolution of the Owner Trustee (or any
other beneficiary herewith) will not terminate this Agreement or the
Trust, nor entitle such person's legal representatives or heirs, as
appropriate, to claim an accounting or to take any action or proceeding
in any court for a partition or winding up of the Trust or Owner Trust
Estate, nor otherwise affect the rights, obligations and liabilities of
the parties hereto. No creditor of any Certificateholder shall obtain
legal title to or exercise legal or equitable remedies with respect to
the Owner Trust Estate as a result of such Certificateholder's holding
of the Certificate. No transfer, by operation of law or otherwise, of
any right, title and interest of any Certificateholder in and to its
undivided beneficial interest in the Owner Trust Estate shall operate
to terminate this Agreement or the Trust created hereby.
(b) Except as provided in Section 7.1(a), neither the Seller
nor any Certificateholder shall be entitled to revoke or terminate the
Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender
their Certificates to the Paying Agent for payment of the final
distribution and cancellation, shall be given by the Owner Trustee by
letter to Certificateholders mailed within five Business Days of
receipt of notice of such termination from the Servicer given pursuant
to Section 11.01 of the Sale and Servicing Agreement, or within five
Business Days of the Owner Trustee receiving notice of such termination
from the Indenture Trustee pursuant to Section 11.02 of the Sale and
Servicing Agreement, stating: (i) the Distribution Date upon or with
respect to which final payment of the Certificates shall be made upon
presentation and surrender of the Certificates at the office of the
Paying Agent therein designated; (ii) the amount of
<PAGE>
any such final payment; and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the
office of the Paying Agent therein specified. The Owner Trustee shall
give such notice to the Certificate Registrar (if other than the Owner
Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the
Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date
pursuant to Section 5.2.
(d) If all of the Certificateholders shall not surrender their
Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee
shall give a second written notice to the remaining Certificateholders
to surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after the second
notice all the Certificates shall not have been surrendered for
cancellation, the Owner Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Subject to applicable laws with
respect to escheat of funds, any funds remaining in the Trust after
exhaustion of such remedies in the preceding sentence shall be deemed
property of ____________________ and distributed by the Owner Trustee
to ____________________.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall cause the Certificate of Trust to be canceled by
filing a certificate of cancellation with the Secretary of State in
accordance with the provisions of Section 3810 of the Business Trust
Statute.
ARTICLE VIII
AMENDMENTS
SECTION 8.1 Amendments Without Consent of Certificateholders or
Noteholders. This Agreement may be amended by the Seller and the Owner Trustee
without the consent of any of the Noteholders or the Certificateholders (but
with prior written notice to each of the Rating Agencies and in the case of
clauses (iii) and (vi), satisfaction of the Rating Agency Condition), to (i)
correct manifest error or cure any ambiguity, (ii) correct or supplement any
provision in this Agreement that may be inconsistent with any other provision in
this Agreement, (iii) add or amend any provision as requested by Moody's or
Standard & Poor's to maintain or improve the rating of the Notes or
Certificates, (iv) add to the covenants, restrictions or obligations of the
Seller, the Owner Trustee or the Indenture Trustee, (v) evidence and provide for
the acceptance of the appointment of a successor trustee with respect to the
Owner Trust Estate and add to or change any provisions as shall be necessary to
facilitate the administration of the trusts hereunder by more than one trustee
pursuant to Article VI and (vi) add, change or eliminate any other
<PAGE>
provision of this Agreement provided that an amendment pursuant to this clause
(vi), as evidenced by an Opinion of Counsel, does not adversely affect in any
material respect the interests of the Noteholders or the Certificateholders.
SECTION 8.2 Amendments With Consent of Certificateholders and
Noteholders. This Agreement may be amended from time to time by the Seller and
the Owner Trustee with the consent of Noteholders whose Notes evidence not less
than a majority of the aggregate outstanding amount of the Notes as of the close
of the preceding Distribution Date and the consent of Certificateholders whose
Certificates evidence not less than a majority of the Certificate Balance as of
the close of the preceding Distribution Date (which consent, whether given
pursuant to this Section 8.2 or pursuant to any other provision of this
Agreement, shall be conclusive and binding on such Person and on all future
Holders of such Notes or Certificates and of any Notes or Certificates issued
upon the transfer thereof or in exchange thereof or in lieu thereof whether or
not notation of such consent is made upon the Notes or Certificates) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Noteholders or the Certificateholders; provided, however, that no such
amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Contracts, or
distributions that shall be required to be made on any Note or Certificate, any
Contract Rate, the Pass Through Rate or the Class A Rate or (b) reduce the
aforesaid percentage required to consent to any such amendment, without the
consent of the holders of all Notes and all of the Certificate Balance with
respect to Certificates then outstanding. The Owner Trustee shall furnish notice
to each of the Rating Agencies prior to obtaining consent to any proposed
amendment under this Section 8.2.
SECTION 8.3 Form of Amendments.
(a) Promptly after the execution of any amendment, supplement
or consent pursuant to Section 8.1 or 8.2, the Owner Trustee shall
furnish written notification of the substance of such amendment or
consent to each Certificateholder and the Indenture Trustee.
(b) It shall not be necessary for the consent of
Certificateholders, the Noteholders or the Indenture Trustee pursuant
to Section 8.2 to approve the particular form of any proposed amendment
or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents (and any
other consents of Certificateholders provided for in this Agreement or
in any other Basic Document) and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such
reasonable requirements as the Owner Trustee may prescribe.
(c) Promptly after the execution of any amendment to the
Certificate of Trust, the Owner Trustee shall cause the filing of such
amendment with the Secretary of State.
<PAGE>
(d) Prior to the execution of any amendment to this Agreement
or the Certificate of Trust, the Owner Trustee shall be entitled to
receive and rely upon an Opinion of Counsel stating that the execution
of such amendment is authorized or permitted by this Agreement. The
Owner Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 No Legal Title to Owner Trust Estate. The
Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles V and VII. No transfer, by operation of law or otherwise, of any right,
title, and interest of the Certificateholders to and in their ownership interest
in the Owner Trust Estate shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of legal title to any part of the Owner Trust Estate.
SECTION 9.2 Limitations on Rights of Others. Except for Section 2.7,
the last sentence of Section 5.2(a) and Section 9.12, the provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Seller, the
Certificateholders, the Servicer and, to the extent expressly provided herein,
the Indenture Trustee and the Noteholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in the Owner Trust Estate or under or
in respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 9.3 Notices.
(a) All demands, notices and communications upon or to the
Seller, the Servicer, the Indenture Trustee, the Owner Trustee or the
Rating Agencies under this Agreement shall be in writing personally
delivered, sent by electronic facsimile (with hard copy to follow via
first class mail), provided, however, receipt of such is acknowledged
by return facsimile or otherwise in writing, or mailed by certified
mail-return receipt requested, and shall be deemed to have been duly
given upon receipt (a) in the case of the Seller, at the following
address: 650 CIT Drive, Livingston, N.J. 07039, (b) in the case of the
Servicer, at the following address: 650 CIT Drive, Livingston, N.J.
07039, (c) in the case of the Indenture Trustee, at its Corporate Trust
Office, (d) in the case of the Trust or the Owner Trustee, to the Owner
Trustee at its Corporate Trust Office, (e) in the case of Moody's
Investors Service, Inc., to Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007 and
(f) in the case of Standard & Poor's Corporation, to Standard & Poor's
Corporation, 26 Broadway (15th Floor), New York, New York 10004,
Attention: Asset Backed
<PAGE>
Surveillance Department, or at such other address as shall be
designated by such Person in a written notice to the other parties to
this Agreement.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid,
at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 9.4 Severability. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the holders thereof.
SECTION 9.5 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
SECTION 9.6 Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the Seller,
the Owner Trustee and each Certificateholder and their respective successors and
permitted assigns, all as herein provided. Any request, notice, direction,
consent, waiver or other instrument or action by a Certificateholder shall bind
the successors and assigns of such Certificateholder.
SECTION 9.7 No Petition Covenant. Notwithstanding any prior termination
of this Agreement, the Trust (or the Owner Trustee on behalf of the Trust), each
Certificateholder or Certificate Owner, the Indenture Trustee and each
Noteholder or Note Owner shall not, prior to the date which is one year and one
day after the termination of this Agreement with respect to the Seller,
acquiesce, petition or otherwise invoke or cause the Seller to invoke the
process of any court or governmental authority for the purpose of commencing or
sustaining a case against the Seller under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Seller or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Seller.
SECTION 9.8 No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Seller, the Servicer, the Owner Trustee, the Indenture
Trustee or any Affiliate thereof and no recourse may be had against such parties
or their assets, except as may be expressly set forth or contemplated in this
Agreement, the Certificates or the Basic Documents.
<PAGE>
SECTION 9.9 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 9.10 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 9.11 Certificate Transfer Restrictions. The Certificates may
not be acquired by or for the account of (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, a "Benefit Plan"). By accepting and holding a
Certificate, the Holder thereof and the Certificate Owner shall each be deemed
to have represented and warranted that it is not a Benefit Plan and not subject
to the foregoing limitation.
SECTION 9.12 Indemnification by the Servicer. The Owner Trustee further
acknowledges and accepts the conditions and limitations with respect to the
Servicer's obligation to indemnify, defend and hold the Owner Trustee harmless
as set forth in Section 8.02 of the Sale and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written
--------------------,
as Owner Trustee
By: ___________________________________
Name:
Title:
THE CIT GROUP SECURITIZATION
CORPORATION II
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
NUMBER ______ $_________________
CUSIP NO. _________
SEE REVERSE FOR CERTAIN DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO INTEREST IN THIS CERTIFICATE MAY BE ACQUIRED BY OR FOR THE ACCOUNT
OF (i) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, ("ERISA")) THAT IS SUBJECT
TO THE PROVISIONS OF TITLE I OF ERISA, (ii) A PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (INCLUDING, WITHOUT
LIMITATION, INDIVIDUAL RETIREMENT ACCOUNTS AND KEOGH PLANS), OR (iii) ANY ENTITY
WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN
THE ENTITY. BY ACCEPTING AND HOLDING THIS CERTIFICATE, THE HOLDER HEREOF AND THE
CERTIFICATE OWNER SHALL EACH BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT
IS NOT A BENEFIT PLAN.
<PAGE>
CIT MARINE TRUST ____-_
____% ASSET BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes a pool of retail installment sale contracts secured
by new and used boats and sold to the Trust by The CIT Group Securitization Corp
II (This Certificate does not represent an interest in or obligation of The CIT
Group Securitization Corporation II, The CIT Group/Sales Financing, Inc. or The
CIT Group, Inc. or any of their respective affiliates, except to the extent
described below.)
THIS CERTIFIES THAT ____________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in CIT Marine Trust
____-_ (the "Trust") formed by The CIT Group Securitization Corporation II, a
Delaware corporation.
The Trust was created pursuant to a Trust Agreement, dated as of
____________, ____ (as amended and supplemented from time to time, the "Trust
Agreement"), between the Seller and [____________________], as owner trustee
(the "Owner Trustee"), a summary of certain of the pertinent provisions of which
is set forth below. To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated
as ____% Asset Backed Certificates" (the "Certificates"). This Certificate is
issued under and is subject to the terms, provisions and conditions of the Trust
Agreement, to which Trust Agreement the holder of this Certificate by virtue of
the acceptance hereof assents and by which such holder is bound. The property of
the Trust includes a pool of installment sale contracts (the "Contracts")
secured by the new and used boats financed thereby (the "Financed Boats"),
certain monies received under the Initial Contracts on and after ____________,
____ (the "Initial Cut-off Date") or under the Subsequent Contracts as of the
related Subsequent Cut-off Date, security interests in the Initial Financed
Boats, the Collection Account, the Cash Collateral Account, the Note
Distribution Account, the Certificate Distribution Account, the Capitalized
Interest Account and the Pre-Funding Account, in each case together with the
proceeds thereof (except for investment earnings on the Cash Collateral
Account), the proceeds from claims under certain insurance policies in respect
of individual Initial Financed Boats or the related Obligors and certain rights
under the Sale and Servicing Agreement. The rights of the holders of the
Certificates are subordinated to the rights of the holders of the Notes, as set
forth in the Sale and Servicing Agreement.
Under the Trust Agreement, there shall be distributed on the 15th day
of each month or, if such 15th day is not a Business Day, the next Business Day,
commencing on _________ 15, ____ (each, a "Distribution Date"), to the person in
whose name this Certificate is registered on the related Record Date (as defined
below), such Certificateholder's fractional undivided interest in the amount of
interest and principal to be distributed to Certificateholders on such
Distribution Date. On each Distribution Date interest on this Certificate shall
be distributed in an amount
<PAGE>
equal to one-twelfth of the product of the rate per annum shown above and the
outstanding principal amount of this Certificate as of the preceding
Distribution Date after giving effect to all payments of principal and other
reductions in the principal amount of this Certificate to be made on such
Distribution Date (or in the case of the first Distribution Date the original
outstanding principal amount of this Certificate). The "Record Date," with
respect to any Distribution Date, means the close of business on the day
immediately preceding such Distribution Date, or if Definitive Certificates are
issued, the last day of the month immediately preceding the month in which such
Distribution Date occurs.
The distributions in respect of principal and interest on this
Certificate are payable in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts. All payments made by the Trust with respect to this Certificate shall be
applied first to interest due and payable on this Certificate as provided above
and then to the unpaid distributions in respect of principal on this
Certificate.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as and to the extent described in the Sale and
Servicing Agreement and the Indenture.
It is the intent of the Seller, the Servicer and the Certificateholders
that, for purposes of federal income, state and local income and franchise taxes
and any other taxes imposed upon, measured by or based upon gross or net income,
the Trust shall be treated as a partnership. Except as otherwise required by
appropriate taxing authorities, the Seller and the other Certificateholders by
acceptance of a Certificate, agree to treat, and to take no action inconsistent
with the treatment of, the Certificates for such tax purposes as interests in
such partnership.
Each Certificateholder or Certificate Owner, by its acceptance of a
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Certificate, covenants and agrees that such Certificateholder or Certificate
Owner, as the case may be, shall not, prior to the date which is one year and
one day after the termination of the Trust Agreement, acquiesce, petition or
otherwise invoke or cause the Seller or the Issuer to invoke the process of any
court or governmental authority for the purpose of commencing or sustaining a
case against the Seller or the Issuer under any federal or state bankruptcy,
insolvency, reorganization or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Seller or the Issuer or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Seller or the Issuer.
Distributions on this Certificate shall be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this certificate or the making of any notation hereon, except
that with respect to Certificates registered on the Record Date in the name of
the nominee of the Depository (initially, such nominee to be Cede & Co.),
payments shall be made by wire transfer in immediately available funds to the
account designated by such nominee. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this
Certificate shall be made after due notice by the Owner Trustee of
<PAGE>
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office maintained for such purpose by the Owner Trustee.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee by manual signature, this
Certificate shall not entitle the holder hereof to any benefit under the Trust
Agreement or the Sale and Servicing Agreement or be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
CIT MARINE TRUST ____-_
By: ____________________,
not in its individual capacity,
but solely as Owner Trustee
By: ______________________________
Name:
Title:
Dated:
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred
to in the within-mentioned Trust Agreement.
By: ____________________, By: ____________________,
not in its individual capacity not in its individual capacity
but solely as Owner Trustee but solely as Owner Trustee,
as authenticating agent
By __________________________ By __________________________
Name: Name:
Title: Title:
<PAGE>
REVERSE OF CERTIFICATE
The Certificates do not represent an obligation of, or an interest in,
the Seller, the Servicer, The CIT Group, Inc., the Indenture Trustee, the Owner
Trustee, the Cash Collateral Depositor or any affiliates of any of them and no
recourse may be had against such parties or their assets, except as may be
expressly set forth or contemplated herein or in the Trust Agreement or the
Basic Documents. In addition, this Certificate is not guaranteed by any
governmental agency or instrumentality and is limited in right of payment to
certain collections and recoveries with respect to the Contracts (and certain
other amounts), all as more specifically set forth herein and in the Trust
Agreement and the Sale and Servicing Agreement. A copy of each of the Sale and
Servicing Agreement and the Trust Agreement may be examined during normal
business hours at the principal office of the Seller, and at such other places,
if any, designated by the Seller, by any Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Trust Agreement at any
time by the Seller and the Owner Trustee with the consent of the Holders of the
Notes evidencing not less than a majority of the aggregate outstanding amount of
the Notes as of the close of the preceding Distribution Date and the consent of
Certificateholders whose Certificates evidence not less than a majority of the
Certificate Balance as of the close of the preceding Distribution Date. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such holder and on all future Holders of this Certificate and of any Certificate
issued upon the transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent is made upon this Certificate. The Trust
Agreement also permits the amendment thereof, in certain circumstances, without
the consent of the Holders of any of the Certificates or the Notes.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee for such purposes, accompanied by a written instrument of
transfer in form satisfactory to the Owner Trustee and the Certificate Registrar
duly executed by the Holder hereof or such Holder's attorney duly authorized in
writing and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate interest in the Trust will be issued to the
designated transferee. The initial Certificate Registrar appointed under the
Trust Agreement is [____________________].
The Certificates are issuable only as registered Certificates without
coupons in denominations of $______ or 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. As provided in the Trust Agreement
and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate denomination, as requested by the Holder surrendering the same;
provided,
<PAGE>
however, that no Certificate may be subdivided such that the denomination of any
resulting Certificate is less than $______. No service charge shall be made for
any such registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Registrar or any such agent shall be affected by
any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Trust. CITSF may at its option purchase the Contracts at a price
specified in the Sale and Servicing Agreement, and such purchase of the
Contracts shall effect early retirement of the Certificates; provided, however,
that such right of purchase is exercisable on any Distribution Date following
any Record Date as of which the Pool Balance is [10]% or less of the Initial
Pool Balance. In addition, within ten days following a Distribution Date as of
which the Pool Balance is [5]% or less of the Initial Pool Balance an auction
sale of the remaining Contracts will be conducted (in each case, as described in
the Sale and Servicing Agreement) and such auction shall effect early retirement
of the Certificates.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________________________________________
to transfer said Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.
Dated: ______________________*
Signature Guaranteed:
____________________
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
<PAGE>
EXHIBIT B
CERTIFICATE OF TRUST OF CIT MARINE TRUST ____-_
THIS Certificate of Trust of CIT Marine Trust ____-_ (the "Trust"),
dated as of ____________, ____, is being duly executed and filed by
[____________________], a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. C. 3801 et seq.).
1. Name. The name of the business trust formed hereby is CIT Marine
Trust ____-_.
2. Delaware Trustee. The name and business address of the Trust
resident in the State of Delaware is ____________________, ____________________.
3. This Certificate of Trust shall be effective as of ____________,
____.
IN WITNESS WHEREOF, the undersigned, being the trustee of the Trust,
has executed this Certificate of Trust as of the date first-above written.
________________________________________,
not in its individual capacity but
solely as Owner Trustee under
a Trust Agreement dated as of ___________, ____
By: ______________________________
Name:
Title:
Exhibit 4.3
THE CIT GROUP SECURITIZATION CORPORATION II,
as Seller
THE CIT GROUP/SALES FINANCING, INC.,
as Servicer
CIT MARINE TRUST ____-_
SALE AND SERVICING AGREEMENT
Dated as of ____________, ____
$_____________
CIT Marine Trust ____-_
Class A _____% Asset Backed Notes
_____% Asset Backed Certificates
<PAGE>
TABLE OF CONTENTS
EXHIBITS
Exhibit A List of Initial Contracts
Exhibit B Form of Subsequent Purchase Agreement
Exhibit C Form of Subsequent Transfer Agreement
Exhibit D Form of Assignment
Exhibit E Form of Owner Trustee's Acknowledgment and Certification
Exhibit F Form of Servicer's Certificate
Exhibit G Form of Monthly Report
Exhibit H Termination - Auction Procedures
Exhibit I Form of Officers' Certificate
<PAGE>
This Sale and Servicing Agreement, dated as of ____________, ____, is
made among The CIT Group Securitization Corporation II, as seller (together with
its permitted successors and assigns, the "Company" or the "Seller"), The CIT
Group/Sales Financing, Inc., a corporation organized and existing under the laws
of the State of Delaware, as servicer (in its individual capacity, "CITSF," or,
together with its permitted successors and assigns, the "Servicer"), and CIT
Marine Trust ____-_ (the "Issuer" and the "Trust"), for which
[____________________], a __________ banking corporation, acts not in its
individual capacity but solely as Owner Trustee (together with permitted
successors and assigns, the "Owner Trustee").
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as provided herein:
ARTICLE I
DEFINITIONS
SECTION 1.01 General. For the purpose of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the terms
defined in this Article include the plural as well as the singular, the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision, and Section references refer to Sections of this Agreement.
SECTION 1.02 Specific Terms.
"Affiliate" of any specified Person means any other Person controlling
or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Agency Office" means the office of the Trust maintained pursuant to
Section 3.2 of the Indenture.
"Amount Available" on any Distribution Date is equal to all amounts on
deposit in the Collection Account attributable to collections or deposits made
in respect of such Contracts in the related Due Period (together with the
Purchase Price for any Repurchased Contracts paid on or prior to the Deposit
Date immediately preceding such Distribution Date) less the following amounts
(to the extent that the Servicer has not already withheld such amounts from
collections on the Contracts): any repossession profits on Liquidated Contracts,
any Liquidation Expenses incurred and taxes and insurance advanced by the
Servicer in respect of Financed Boats that are reimbursable to the Servicer
under the Sale and Servicing Agreement; any amounts incorrectly deposited in the
Collection Account; and net investment earnings on the funds in the Collection
<PAGE>
Account due to the Servicer pursuant to the Sale and Servicing Agreement and any
other amounts permitted to be withdrawn from the Collection Account by the
Servicer (or to be retained by the Servicer from collections on the Contracts)
pursuant to the Sale and Servicing Agreement.
"Available Cash Collateral Amount" means, with respect to any date of
determination, the lesser of (i) the Required Cash Collateral Amount and (ii)
the amount on deposit in the Cash Collateral Account, excluding Investment
Earnings with respect thereto.
"Authorized Officer" means with respect to the Trust, any officer of
the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Trust and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as
such list may be modified or supplemented from time to time thereafter).
"Basic Documents" means the Certificate of Trust, the Trust Agreement,
the Sale and Servicing Agreement, the Indenture, the Cash Collateral Agreement,
the Purchase Agreement, any Subsequent Purchase Agreement and any Subsequent
Transfer Agreements.
"Benefit Plan" means a benefit plan as described in Section 9.11 of the
Trust Agreement.
"Boat" shall mean new or used boats, boat motors and boat trailers.
"Book-Entry Certificates" means a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Depository as described in Section 3.11 of the Trust Agreement.
"Book-Entry Notes" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Depository as
described in Section 2.10 of the Indenture.
"Business Day" means any day other than a Saturday, Sunday or any day
on which banking institutions or trust companies in the States of New York,
Delaware, [__________]or Oklahoma are authorized or required by law, regulation
or executive order to be closed.
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from time to
time.
"Capitalized Interest Account" means the account designated as such,
established and maintained pursuant to Section 5.01 of the Sale and Servicing
Agreement.
"Cash Collateral Account" means the deposit account established and
maintained pursuant to Section 5.01(a)(iv) hereof.
<PAGE>
"Cash Collateral Account Property" means the Cash Collateral Account,
all amounts deposited from time to time in the Cash Collateral Account and all
investments from time to time in the Cash Collateral Account, all income on such
investments and all cash and non-cash proceeds of such investments and all cash
and non-cash proceeds of such income from the date of the establishment of the
Cash Collateral Account until the termination thereof pursuant to the terms of
the Cash Collateral Agreement.
"Cash Collateral Account Surplus" means, as of any Distribution Date,
the amount, if any, by which Available Cash Collateral Amount, after taking into
account any deposits to the Cash Collateral Account pursuant to Section 5.06(a)
on such Distribution Date and any withdrawals from the Cash Collateral Account
pursuant to Section 5.06(b) or (c) on such Distribution Date, exceeds the
Required Cash Collateral Amount for the next Distribution Date.
"Cash Collateral Depositor" means the financial institution which is a
party to the Cash Collateral Agreement and which, pursuant to the Cash
Collateral Agreement, will make a loan to the Trust on the Closing Date, the
proceeds of which will be deposited in the Cash Collateral Account on the
Closing Date.
"Cash Collateral Agreement" means the Cash Collateral Agreement dated
as of ____________, ____ among the Cash Collateral Depositor, the Trust, the
Servicer and the Owner Trustee.
"Certificate" means any one of the _____% Asset Backed Certificates
executed by the Owner Trustee and authenticated by the Owner Trustee in
substantially the form set forth in Exhibit A to the Trust Agreement.
"Certificate Balance" initially means, as of the Closing Date,
$___________ and, on any Distribution Date thereafter, the initial Certificate
Balance reduced by (i) all distributions in respect of principal to the
Certificateholders actually made, including payments of any Principal
Liquidation Loss Amount and payments of any Principal Distribution Amount, (ii)
the aggregate amount of all Principal Liquidation Loss Amounts distributable to
Certificateholders to the extent such amounts have not been previously
distributed and (iii) on or after the Cross-over Date, the aggregate amount of
all Principal Distribution Amounts distributable to Certificateholders to the
extent such amounts have not been previously distributed.
"Certificate Depository Agreement" means the Agreement, dated as of the
Closing Date, among the Trust, the Servicer, the Owner Trustee and The
Depository Trust Company (as the initial Depository), relating to the
Certificates, as the same may be amended and supplemented from time to time.
"Certificate Distribution Account" means the account designated as
such, established and maintained pursuant to Section 5.1 of the Trust Agreement.
"Certificate Final Distribution Date" means the __________,
Distribution Date.
<PAGE>
"Certificateholder" means the holder of record of a Certificate
pursuant to the terms of the Trust Agreement.
"Certificate Interest Distribution Amount" means the amount of interest
payable on a Distribution Date to the Holders of the Certificates. Such amount
will equal one-twelfth of the product of the Pass-Through Rate and the
Certificate Balance as of the preceding Distribution Date, after giving effect
to any distributions of principal on the Certificates on such preceding
Distribution Date and other reductions in the Certificate Balance on such
preceding Distribution Date (or, in the case of the first Distribution Date, on
the basis of the original Certificate Balance), for the applicable Interest
Accrual Period.
"Certificate Pre-Funded Percentage" means the percentage derived from
the fraction, the numerator of which is the Certificate Balance and the
denominator of which is the sum of the initial principal balance of the Notes
and the initial Certificate Balance.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement to be filed for
the Trust pursuant to Section 3810(a) of the Business Trust Statute.
"Certificate Owners" means with respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Book-Entry Certificate, as
reflected on the books of the Depository, or on the books of a Person
maintaining an account with such Depository (directly as a Depository
Participant or as an indirect participant, in each case in accordance with the
rules of such Depository).
"Certificate Pool Factor" means a seven-digit decimal which the
Servicer will compute each month indicating the remaining Certificate Balance as
of the Distribution Date, as a fraction of the initial Certificate Balance. The
Certificate Pool Factor will be 1.0000000 as of the Initial Cut-off Date, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the Certificates. A Certificateholder's portion of the aggregate
outstanding Certificate Balance is the product of (i) the original denomination
of the Certificateholder's Certificate and (ii) the Certificate Pool Factor.
"Certificate Register" means the register of Certificates specified in
Section 3.4 of the Trust Agreement.
"Certificate Registrar" means the registrar at any time of the
Certificate Register, appointed pursuant to Section 3.4 of the Trust Agreement.
"CIT" means The CIT Group, Inc.
"CITCF-NY" means The CIT Group/Consumer Finance (NY).
"CITSF" means The CIT Group/Sales Financing, Inc., and its successors
in interest as permitted under the related agreement.
<PAGE>
"Class A Final Scheduled Distribution Date" means the __________
Distribution Date.
"Class A Interest Distribution Amount" means the amount of interest
payable on a Distribution Date to the Holders of the Class A Notes. Such amount
will equal one-twelfth of the product of the Class A Rate and the outstanding
principal amount of Class A Notes as of the preceding Distribution Date, after
giving effect to any distributions of principal on the Class A Notes on such
preceding Distribution Date (or, in the case of the first Distribution Date, on
the original outstanding principal amount of the Class A Notes), for the
applicable Interest Accrual Period.
"Class A Note" means any one of the Class A _____% Asset Backed Notes
in the aggregate principal amount of $___________ issued pursuant to the
Indenture and substantially in the form of Exhibit A to the Indenture.
"Class A Rate" means _____% per annum, calculated on the basis of a
360-day year comprised of twelve 30-day months.
"Closing Date" means ____________, ____.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the Treasury Regulations promulgated thereunder.
"Collateral" means the collateral specified in the Granting Clause of
the Indenture.
"Collection Account" means the account designated as such established
and maintained pursuant to Section 5.01 of the Sale and Servicing Agreement.
"Commission" means the Securities and Exchange Commission.
"Company" means The CIT Group Securitization Corporation II, and its
successors in interest as permitted under the related agreement.
"Computer Tape" means the computer tape generated by the Servicer which
provides information relating to the Contracts, and includes the master file and
the history file.
"Contract(s)" means one or more of the Initial Contracts and/or
Subsequent Contracts.
"Contract File" means, as to each Contract (a) the original copy of the
Contract, (b) either (i) the original title document for the related Financed
Boat or a duplicate certified by the appropriate governmental authority which
issued the original thereof or the application for such title document, or (ii)
if the laws of the jurisdiction in which the related Financed Boat is located do
not provide for the issuance of title documents for boats, other evidence of
ownership of the related Financed Boat which is customarily relied upon in such
jurisdiction as evidence of title to a boat; (c) evidence of one or more of the
following types of perfection of the security interest in
<PAGE>
the related Financed Boat granted by such Contract, as appropriate: (i) notation
of such security interest on the title document, (ii) a financing statement
meeting the requirements of the UCC, with evidence of recording indicated
thereon, or (iii) such other evidence of perfection of a security interest in a
boat as is customarily relied upon in the jurisdiction in which the related
Financed Boat is located; (d) an assignment of the Contract evidencing the chain
of title of the Contract from the Dealer which is the originator thereof to
CITSF; and (e) any extension, modification or waiver agreement(s).
"Contract Rate" means, with respect to any particular Contract, the
rate of interest specified in that Contract.
"Corporate Trust Office" means with respect to the Indenture Trustee or
the Owner Trustee, the principal office at which at any particular time the
corporate trust business of the Indenture Trustee or the Owner Trustee,
respectively, shall be administered, which offices at the Closing Date are
located, in the case of the Indenture Trustee, at ____________________, Attn:
_______________, and in the case of the Owner Trustee, at ____________________,
Attn: _______________.
"Cross-over Date" means the Distribution Date on which the Notes have
been paid in full.
"Dealer" means the dealer which sold a Financed Boat and which
originated and assigned the Contract relating to such Financed Boat to CITSF or
CITCF-NY under a Dealer Agreement.
"Dealer Agreement" means the agreement, if any, under which Contracts
were originated by a Dealer and sold to CITSF or CITCF-NY, and all documents and
instruments relating thereto.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become an Event of Default.
"Defaulted Contract" means, with respect to any Due Period, a Contract
(other than a Repurchased Contract) in respect of which payments exceeding $[25]
in the aggregate were delinquent [120] days or more as of the last day of such
Due Period; provided, however, that a Paid-Ahead Contract and a Contract which
is delinquent due to the Soldiers' and Sailors' Relief Act of 1940 shall not be
deemed to be delinquent.
"Definitive Certificates" means the Certificates specified in Section
3.13 of the Trust Agreement.
"Definitive Notes" means the Notes specified in Section 2.12 of the
Indenture.
"Deposit Date" means, with respect to any Distribution Date, the
Business Day immediately preceding such related Distribution Date.
<PAGE>
"Depository" means the initial Depository, The Depository Trust
Company, the nominee of which is CEDE & CO., and any permitted successor
depository. The Depository shall at all times be a "clearing corporation"
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York.
"Depository Agreement" means the Agreement, dated as of the Closing
Date, among the Trust, the Servicer, the Indenture Trustee and the Depository,
relating to the Notes, as the same may be amended and supplemented from time to
time.
"Depository Participant" means a broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Designated Accounts" means the Collection Account, the Note
Distribution Account, the Certificate Distribution Account, the Pre-Funding
Account and the Capitalized Interest Account, collectively.
"Determination Date" means the third Business Day prior to each
Distribution Date.
"Distribution Date" means the date on which payments of interest and
principal on the Securities will be made. Such Distribution Dates will be on the
fifteenth day of each month or, if any such day is not a Business Day, on the
next succeeding Business Day, commencing _________ 15, ____.
"Draw Amount" has the meaning specified in Section 5.06(b) of the Sale
and Servicing Agreement.
"Due Date" shall mean, with respect to each Contract, the day set forth
in such Contract as the date on which payments under such Contract are scheduled
to be made.
"Due Period" means with respect to any Distribution Date the period
during which principal, interest and fees will be collected on the Contracts for
application towards the payment of principal and interest to the Securityholders
and the payment of fees on such Distribution Date. The "Due Period" will be the
calendar month immediately preceding the Distribution Date. The first Due Period
will commence on and include ____________, ____ and will end on and include
____________, ____.
"Electronic Ledger" means the electronic master record of installment
sale contracts of the Servicer.
"Eligible Institution" means either (i) the corporate trust department
of the Indenture Trustee, the Owner Trustee or any paying agent satisfying the
criteria under the Trust Agreement or Indenture, as applicable or (ii) a
depository institution or trust company organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch or agency of a foreign bank), (A) which has either a
long-term
<PAGE>
unsecured debt rating of "AAA" or a short-term senior unsecured debt or
certificate of deposit rating of "A-1+" or better by Standard & Poor's and a
long-term senior unsecured debt rating of "A1" or better and a short-term senior
unsecured debt rating of "P-1" or better by Moody's or any other long-term,
short-term or certificate of deposit rating acceptable to the Rating Agencies
and (B) whose deposits are insured by the FDIC.
"Eligible Investments" means, at any time, any one or more of the
obligations and securities described in Section 5.01(c) of the Sale and
Servicing Agreement.
"Eligible Servicer" means CITSF, the Trustees or any other Person
qualified to act as Servicer of the Contracts under applicable federal and state
laws and regulations, which Person services not less than $100,000,000 in
outstanding principal amount of marine installment sale contracts.
"ERISA" means The Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means an event as described in Section 5.1 of the
Indenture.
"Event of Termination" means an event specified in Section 9.01 of the
Sale and Servicing Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means any amounts on deposit in the Certificate
Distribution Account and Cash Collateral Account and any Investment Earnings
thereon.
"Final Draw Amount" has the meaning set forth in Section 5.06(c) of the
Sale and Servicing Agreement.
"Financed Boat" with respect to a Contract means the new or used Boat,
together with all accessions thereto, securing an Obligor's indebtedness under
such Contract.
"Force-Placed Insurance" means insurance described in Section 4.04(a)
of the Sale and Servicing Agreement.
"Force-Placed Insurance Premium" means any premium for theft and
physical damage insurance purchased by CITSF or CITCF-NY.
"Funding Period" means the period commencing on the Closing Date and
ending on the earliest to occur of (i) the date on which the amount on deposit
in the Pre-Funding Account is less than $100,000, (ii) the date on which an
Event of Default occurs under the Indenture, (iii) the date on which an Event of
Termination occurs under the Sale and Servicing Agreement, (iv) the insolvency
of the Company, CITSF, CITCF-NY or CIT or (v) the close of business on
____________, ____.
<PAGE>
"Grant" means to mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to the Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of, the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" means the Person in whose name a Note or Certificate is
registered on the Note Register or the Certificate Register, as applicable.
"Indenture" means the indenture, dated as of ____________, ____,
between the Issuer and the Indenture Trustee, as amended and supplemented from
time to time.
"Indenture Trustee" means [____________________], not in its individual
capacity but solely as trustee under the Indenture, or any successor trustee
under the Indenture.
"Independent" when used with respect to any specified Person, means
that the Person (i) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliates of any of the foregoing Persons, (ii)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (iii) is not connected with the Issuer, any
such other obligor, the Seller or any Affiliate of any of the foregoing Persons
as an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" in the Indenture and that the signer is Independent
within the meaning thereof.
"Initial Capitalized Interest Deposit" means the amount deposited in
the Capitalized Interest Account on the Closing Date from the proceeds of the
sale of the Notes and Certificates, which amount is $___________.
"Initial Cash Collateral Amount" means $_________.
"Initial Contract" means one or more of the installment sale contracts
described in the List of Initial Contracts, which constitute part of the corpus
of the Trust, and which Contracts are to be assigned by the Company to the
Trust; including, without limitation, all related security
<PAGE>
interests, collateral, liens, insurance policies and guarantees of the
obligations of the related Obligor (other than guarantees, if any, by the
related Dealer) and any and all rights to receive payments which are received
pursuant thereto from and after the Initial Cut-off Date, but excluding any
rights to receive payments which are received pursuant thereto prior to the
Initial Cut-off Date.
"Initial Cut-off Date" means ____________, ____.
"Initial Cut-off Date Principal Balance" means the aggregate unpaid
principal balance of all of the Initial Contracts as of the Initial Cut-off
Date.
"Initial Financed Boat " means a Financed Boat with respect to an
Initial Contract.
"Initial Pool Balance" means 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.
"Insolvency Event" with respect to a specified Person, (i) the entry of
a decree or order by a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator, receiver or
liquidator for such Person, in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of such Person's affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days; (ii) the
consent by such Person to the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to such Person or of or
relating to substantially all of such Person's property, or (iii) such Person
shall admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations.
"Insurance Policy" means, with respect to each Contract, the policy of
physical damage and all other insurance covering the Financed Boats or the
Obligors, as provided in Section 4.04(a) of the Sale and Servicing Agreement,
and which, as provided therein, may be a blanket policy maintained by the
Servicer in accordance with the terms and conditions of such Section 4.04(b) of
the Sale and Servicing Agreement.
"Insurance Proceeds" means proceeds paid by any insurer pursuant to any
Insurance Policy.
"Interest Accrual Period" means the period for which interest is
payable on a Distribution Date on the Securities, which shall be the period from
the most recent Distribution Date on which interest has been paid to but
excluding the following Distribution Date, or in the case of the initial
Distribution Date from ____________, ____ to but excluding the initial
Distribution Date.
<PAGE>
"Interest Shortfall" means with respect to any Contract and any
Distribution Date, the excess of (x) the sum of (i) the product of one-twelfth
of the weighted average of the Pass-Through Rate and the Class A Rate multiplied
by the outstanding principal amount of such Contract as of the last day of the
second preceding Due Period (or, in the case of the first Due Period ending
after the Contract was acquired by the Trust, as of the Initial Cut-off Date or
the Subsequent Cut-off Date, as applicable to such Contract) calculated on the
basis of a 360-day year comprised of twelve 30-day months and (ii) the product
of (A) one-twelfth of the Servicing Fee Rate and (B) the outstanding principal
amount of such Contract as of the last day of the second preceding Due Period
(or, in the case of the first Due Period ending after the Contract was acquired
by the Trust, as of the Initial Cut-off Date or the Subsequent Cut-off Date, as
applicable to such Contract) over (y) the amount of interest, if any, collected
on such Contract in the related Due Period.
"Investment Earnings" means investment earnings deposited in a
Designated Account or the Cash Collateral Account, as applicable, net of losses
and investment expenses.
"Issuer" means the Trust until a successor replaces it and, thereafter,
means the successor and, for purposes of any provision contained in the
Indenture and required by the TIA, each other obligor on the Notes.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"Late Fees" means any late fees, prepayment charges, extension fees or
other administrative fees or similar charges allowed by applicable law with
respect to the Contracts.
"Lien" means any security interest, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics' liens and any liens
that attach by operation of law.
"Liquidated Contract" means any Contract as to which the Servicer has
determined that all amounts which it expects to recover from or on account of
such Contract have been recovered; provided that any Contract in respect of
which the related Financed Boat has been realized upon and disposed of and the
proceeds of such disposition have been received, shall be deemed to be a
Liquidated Contract.
"Liquidation Expenses" means any out of pocket expenses incurred by the
Servicer hereunder relating to the liquidation of a Contract, permissible
hereunder.
"List of Initial Contracts" means the list attached to the Sale and
Servicing Agreement as Exhibit A identifying each Initial Contract constituting
part of the corpus of the Trust, which list (a) identifies each Initial Contract
and (b) sets forth as to each Initial Contract (i) the Initial Cut-off Date
Principal Balance, (ii) the amount of the monthly payment due from the Obligor
as of the Initial Cut-off Date, (iii) the Contract Rate as of the Initial
Cut-off Date and (iv) the maturity date.
<PAGE>
"List of Subsequent Contracts" means, with respect to the sale of any
Subsequent Contracts by the Company to the Trust pursuant to a Subsequent
Transfer Agreement, the list attached to such Subsequent Transfer Agreement
identifying each Subsequent Contract which, upon the execution and delivery of
such Subsequent Transfer Agreement, will constitute part of the corpus of the
Trust, which list (a) identifies each such Subsequent Contract and (b) sets
forth as to each such Subsequent Contract (i) the Subsequent Cut-off Date
Principal Balance, (ii) the amount of monthly payment due from the Obligor as of
the applicable Subsequent Cut-off Date, (iii) the Contract Rate as of the
applicable Subsequent Cut-off Date and (iv) the maturity date.
"Military Reservist Relief Act" means the California Military Reservist
Relief Act of 1991.
"Monthly Advance" means, with respect to any Distribution Date, any
payment made by the Servicer pursuant to Section 5.03 of the Sale and Servicing
Agreement on the preceding Deposit Date.
"Monthly Report" has the meaning assigned in Section 4.09 of the Sale
and Servicing Agreement. The form of Monthly Report is attached as Exhibit G to
the Sale and Servicing Agreement.
"Moody's" means Moody's Investors Service, Inc. and its successors in
interest.
"Net Liquidation Proceeds" means the monies collected (from whatever
source) during a Due Period on a Liquidated Contract, net of the sum of (a) any
amount expended by or on behalf of the Servicer in effecting such collections
permissible hereunder, plus (b) any payments required by law to be remitted to
the Obligor, except such amounts as constitute Post Cut-off Date Insurance
Add-ons.
"Nonrecoverable Advance" means any advance made or proposed to be made
pursuant to Section 5.03 in respect of a Contract, which the Servicer believes,
in its good faith judgment, is not, or if made would not be, ultimately
recoverable from subsequent collections in respect of interest on such Contract
made by or on behalf of the Obligor thereunder, Net Liquidation Proceeds or
insurance proceeds in respect of such Contract. 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. The determination by
the Servicer that any advance is, or if made would constitute, a Nonrecoverable
Advance, shall be evidenced by an officer's certificate of the Servicer
delivered to the Trustees and stating the reasons for such determination.
"Nonreimbursable Payment" shall have the meaning set forth in Section
5.04A of the Sale and Servicing Agreement.
"Notes" means the Class A _____% Asset Backed Notes.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.01(a) of the Sale and Servicing
Agreement.
<PAGE>
"Noteholder" means the holder of record of a Note pursuant to the
Indenture.
"Note Owners" with respect to a Book-Entry Note, means the Person who
is the beneficial owner of such Book-Entry Note, as reflected on the books of
the Depository, or on the books of a Person maintaining an account with such
Depository (directly as a Depository Participant or as an Indirect Participant,
in each case in accordance with the rules of such Depository).
"Note Pool Factor" means 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.
"Note Pre-Funded Percentage" means the percentage derived from the
fraction the numerator of which is the initial principal balance of the Notes
and the denominator of which is the initial principal balance of the Notes and
the initial Certificate Balance.
"Note Register" means the register of the Notes as specified in Section
2.4 of the Indenture.
"Note Registrar" means the registrar at any time of the Note Register,
appointed pursuant to Section 2.4 of the Indenture.
"Obligor" means each Person who is indebted under a Contract.
"Officers' Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1 of the Indenture,
and delivered to the Indenture Trustee. Unless otherwise specified, any
reference in the Indenture to an officer's certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.
"Opinion of Counsel" means a written opinion of counsel who may, except
as otherwise expressly provided, be counsel (internal or external) for the
Seller or Servicer. In addition, for the purposes of the Indenture: (i) the
opinion shall be addressed to the Indenture Trustee as Indenture Trustee and
(ii) the opinion shall comply with any applicable requirements of Section 11.1
of the Indenture and shall be in form and substance satisfactory to the
Indenture Trustee.
"Original Pre-Funded Amount" means the amount deposited in the
Pre-Funding Account on the Closing Date from the proceeds of the sale of the
Notes and Certificates, which amount is $___________.
<PAGE>
"Outstanding Certificate Interest" means the aggregate amount for each
prior Distribution Date of the difference between (i) the Certificate Interest
Distribution Amount and (ii) the amount of interest actually distributed to the
Holders of the Certificates.
"Outstanding Class A Interest" means the aggregate amount for each
prior Distribution Date of the difference between (i) the Class A Interest
Distribution Amount and (ii) the amount of interest actually distributed to the
Holders of the Class A Notes.
"Owner Trust Estate" means all right, title and interest of the Trust
in and to the property and rights assigned to the Trust pursuant to Article II
of the Sale and Servicing Agreement, all funds deposited from time to time in
the Designated Accounts and the Cash Collateral Account (except the Note
Distribution Account) and all other property of the Trust from time to time,
including any rights of the Owner Trustee and the Trust pursuant to the Basic
Documents.
"Owner Trustee" means [____________________], a ________ banking
corporation, or any successor trustee under the Trust Agreement.
"Paid-Ahead Contract" means a Contract in respect of which the related
Obligor, in addition to making his regularly scheduled payment in any Due
Period, makes one or more additional payments in such Due Period, such that the
Servicer, in accordance with its customary servicing procedures, (i) treats such
additional payments as a Principal Prepayment applied to reduce the principal
balance of the related Contract and (ii) does not require the Obligor to make a
scheduled payment in respect of such Contract for the number of Due Dates which
corresponds to the number of such additional scheduled payments.
"Pass-Through Rate" means _____% per annum, calculated on the basis of
a 360-day year comprised of twelve 30-day months.
"Paying Agent" with respect to the Indenture means the Indenture
Trustee or any other Person that meets the eligibility standards for the
Indenture Trustee specified in Section 6.11 of the Indenture and is authorized
by the Issuer to make the payments to and distributions from the Collection
Account and the Note Distribution Account, including payment of principal and
interest on the Notes on behalf of the Issuer. "Paying Agent" with respect to
the Trust Agreement means any paying agent or co-paying agent appointed pursuant
to Section 3.9 of the Trust Agreement that meets the eligibility requirements of
Section 6.13 of the Trust Agreement.
"Person" means any legal person, including any individual, corporation,
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Pool Balance" means the aggregate outstanding principal balance of the
Contracts.
"Post Cut-off Date Insurance Add-Ons" means Force-Placed Insurance
Premiums added to the Contracts on or after the Initial Cut-off Date with regard
to each Initial Contract, or on or after the related Subsequent Cut-off Date
with regard to each Subsequent Contract, which
<PAGE>
amounts are to be repaid to an account separate from the Collection Account over
the remaining life of such Contract.
"Pre-Funding Account" means the Pre-Funding Account established and
maintained in accordance with Section 5.01(b) of the Sale and Servicing
Agreement.
"Pre-Funded Amount" means, with respect to any Determination Date, the
amount on deposit in the Pre-Funding Account.
"Pre-Funding Earnings" means (i) with respect to the _________ 15, ____
Distribution Date, the actual Investment Earnings earned on the Pre-Funded
Amount during the period beginning on the Closing Date through _________ 14,
____ (inclusive), (ii) with respect to the _________ 15, ____ Distribution Date,
the actual Investment Earnings earned on the Pre-Funded Amount during the period
beginning on _________ 15, ____ through _________ 14, ____ (inclusive), and
(iii) with respect to the _________ 15, ____ Distribution Date, the actual
Investment Earnings earned on the Pre-Funded Amount during the period beginning
on _________ 15, ____ through _________ 14, ____ (inclusive).
"Predecessor Notes" with respect to any particular Note means every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for purposes of this definition, any Note
authenticated and delivered under Section 2.5 of the Indenture in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"Principal Distribution Amount" equals the difference between (i) the
sum of (x) the Pool Balance on the last day of the second preceding Due Period
(or, in the case of the first Distribution Date, the Initial Cut-off Date
Principal Balance) and (y) the Pre-Funded Amount (exclusive of Pre-Funding
Earnings) on the last day of the second preceding Due Period (or, in the case of
the first Distribution Date, as of the Closing Date), less (ii) the sum of (x)
the Pool Balance on the last day of the preceding Due Period and (y) the
Pre-Funded Amount (exclusive of Pre-Funding Earnings) on the last day of the
preceding Due Period; provided, however, that the Principal Distribution Amount
on the Class A Final Scheduled Distribution Date will equal the outstanding
principal balance of the Notes as of such date and the Principal Distribution
Amount on the Certificate Final Distribution Date will equal the Certificate
Balance on such date. For the purposes of determining the Principal Distribution
Amount, the unpaid principal balance of a Defaulted Contract or a Repurchased
Contract is deemed to be zero on and after the last day of the Due Period in
which such Contract became a Defaulted Contract or a Repurchased Contract. The
Principal Distribution Amount will not exceed the outstanding principal balance
of the Notes or, after the Cross-over Date, the Certificate Balance.
"Principal Liquidation Loss Amount" for any Distribution Date equals
the amount, if any, by which the sum of the aggregate outstanding principal
balance of the Notes and the Certificate Balance (after giving effect to all
distributions of principal on such Distribution Date but before giving effect to
any other reductions in the Certificate Balance on such Distribution Date)
<PAGE>
exceeds the sum of the Pool Balance plus the Pre-Funded Amount (exclusive of
Pre-Funding Earnings), if any, at the close of business on the last day of the
related Due Period.
"Principal Prepayment" means a payment or other recovery of principal
on a Contract (including Insurance Proceeds that are not liquidation proceeds,
but exclusive of liquidation proceeds) which is received in advance of its Due
Date and applied upon receipt (or, in the case of a partial Principal
Prepayment, upon the next scheduled payment date on such Contract) to reduce the
outstanding principal amount of such Contract prior to the date or dates on
which such principal amount is scheduled to be made.
"Principal Prepayment in Full" means any Principal Prepayment of the
entire principal balance of a Contract.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Purchase Agreement" means the Purchase Agreement dated as of
____________, ____, between the Seller and CITSF, as amended and supplemented
from time to time.
"Purchase Price" means, with respect to a Contract to be purchased
under the Sale and Servicing Agreement, an amount equal to the remaining
principal amount outstanding on such Contract on the date of purchase, plus 30
days' interest thereon in an amount equal to the sum of (i) the product of
one-twelfth of the weighted average of the Pass-Through Rate and of the Class A
Rate and the remaining principal amount outstanding on the Contract and (ii)
accrued and unpaid Servicing Fees thereon at the Servicing Fee Rate to the date
of such purchase.
"Rating Agencies" as of any date means the nationally recognized
statistical rating organizations requested by the Seller to provide ratings of
the Notes and the Certificates which are rating the Notes and Certificates on
such date.
"Rating Agency Condition" with respect to any action means, the
condition that each Rating Agency shall have been given at least 10 days prior
notice thereof and that each of the Rating Agencies shall have notified the
Seller, the Servicer and the Issuer in writing that such action shall not result
in a downgrade or withdrawal of the then current rating of the Notes or
Certificates.
"Record Date" with respect to any Distribution Date means the day
immediately preceding the related Distribution Date or, in the event Definitive
Securities have been issued, the last day of the month immediately preceding the
month in which such Distribution Date occurs.
"Redemption Date" means the Distribution Date specified by the Servicer
or the Issuer pursuant to Section 10.1(a) or (b) of the Indenture, as
applicable.
<PAGE>
"Relief Act Reduction" shall mean the reduction of the rate of interest
payable on any Contract to a rate below the Contract Rate pursuant to the
Soldiers' and Sailors' Civil Relief Act or the Military Reservist Relief Act.
"Repurchased Contract" means, for any Due Period, a Contract which (i)
CITSF purchased pursuant to Section 3.02 of the Sale and Servicing Agreement or
(ii) the Servicer purchased pursuant to Section 4.07 of the Sale and Servicing
Agreement, in each case, effective as of a date preceding such Due Period.
"Required Cash Collateral Amount" means _____% of the sum of (i) the
Pool Balance and (ii) the amount (excluding Investment Earnings) on deposit in
the Pre-Funding Account, in each case, as of the first day of the related Due
Period, but in no event less than $___________; provided, however, that if, with
respect to any Distribution Date, (a) the average of the principal balance of
Contracts 60 days or more delinquent (including Contracts relating to Financed
Boats that have been repossessed) as a percentage of the Pool Balance for the
three preceding Due Periods exceeds _____% or (b) the average of the principal
balances of all Contracts which became Defaulted Contracts, less any Net
Liquidation Proceeds on Defaulted Contracts, expressed as an annualized
percentage of the average outstanding Pool Balance of the three preceding Due
Periods exceeds _____%, then the Required Cash Collateral 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 $___________; provided, further, however, that the Required Cash
Collateral Amount 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
rating of the Notes and the Certificates.
"Responsible Officer" with respect to the Indenture Trustee or the
Owner Trustee means, any officer within the Corporate Trust Office of such
trustee, and, with respect to the Servicer, the President, any Vice President,
Assistant Vice President, Secretary, Assistant Secretary or any other officer or
assistant officer of such Person customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge and familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of ____________, ____, among the Seller, the Servicer and the Trust, as
amended and supplemented from time to time.
"Securities" means the Notes and the Certificates.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Securityholders" means the Person in whose name a Note or Certificate
is registered on the Note Register or the Certificate Register, as applicable.
<PAGE>
"Seller" means the Person executing the Sale and Servicing Agreement as
the Seller, or any successor in interest to the Seller pursuant to the terms of
the Sale and Servicing Agreement.
"Service Transfer" has the meaning assigned in Section 9.01 of the Sale
and Servicing Agreement.
"Servicer" means the Person executing the Sale and Servicing Agreement
as the Servicer, or any successor Servicer pursuant to a Service Transfer under
the Sale and Servicing Agreement.
"Servicer's Certificate" means a certificate, substantially in the form
of Exhibit F to the Sale and Servicing Agreement, completed by and executed on
behalf of the Servicer by a Servicing Officer in accordance with Section 4.09 of
the Sale and Servicing Agreement.
"Servicer's Errors and Omissions Protection Policy" means the errors
and omissions policy maintained by the Servicer or any similar replacement
policy, if any, pursuant to Section 4.14 of the Sale and Servicing Agreement.
"Servicing Fee" means, as to any Distribution Date, the sum of (i)
one-twelfth of the product of the Servicing Fee Rate and the Pool Balance as of
the last day of the second preceding Due Period (or, in the case of the first
Distribution Date, as of the Initial 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.
"Servicing Fee Rate" means [1]%.
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Contracts whose name
appears on a list of servicing officers appearing in an Officers' Certificate
furnished to the Trust by the Servicer, as the same may be amended from time to
time.
"Servicer Payment" with respect to a Distribution Date means, the sum
of the Servicing Fee for such Distribution Date and the aggregate unpaid
Servicing Fees for past Distribution Date.
"Simple Interest Contract" means a Contract as to which interest is
calculated each day on the basis of the actual principal balance outstanding on
such day.
"Soldiers' and Sailors' Civil Relief Act" means the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended.
"Standard & Poor's" means Standard & Poor's Ratings Group, a division
of McGraw-Hill, Inc. and its successors in interest.
<PAGE>
"Stated Principal Balance" means, as of any Distribution Date, the
unpaid principal balance of a Contract at the end of the related Due Period.
"Subsequent Contracts" means one or more of the fixed-rate simple
interest installment sale contracts described in the List of Subsequent
Contracts, which constitute part of the corpus of the Trust, and which Contracts
are to be assigned by the Company to the Trust; including, without limitation,
all related security interests, collateral, liens, insurance policies and
guarantees of the obligations of the related Obligor (other than guarantees, if
any, by the related Dealer) and any and all rights to receive payments which are
received pursuant thereto from and after the Subsequent Cut-off Date, but
excluding any rights to receive payments which are received pursuant thereto
prior to the Subsequent Cut-off Date.
"Subsequent Cut-off Date" means the beginning of business on the first
day of the month of the related Subsequent Transfer Date specified in a
Subsequent Transfer Agreement with respect to those Subsequent Contracts which
are transferred and assigned to the Trust pursuant to the related Subsequent
Transfer Agreement.
"Subsequent Cut-off Date Pool Principal Balance" means, as of any
Subsequent Transfer Date, the sum of (i) the Initial Cut-off Date Principal
Balance and (ii) the aggregate unpaid principal balances of the Subsequent
Contracts to be sold on such Subsequent Transfer Date as of the related
Subsequent Cut-off Date and (iii) if applicable, an amount calculated as
provided in clause (ii) with respect to all Subsequent Transfer Dates, if any,
occurring prior to such Subsequent Transfer Date.
"Subsequent Cut-off Date Principal Balance" means the aggregate unpaid
principal balance of all of the Subsequent Contracts transferred pursuant to a
Subsequent Transfer Agreement, as of the related Subsequent Cut-off Date.
"Subsequent Financed Boat" means a Financed Boat with regard to a
Subsequent Contract.
"Subsequent Purchase Agreement" means a Subsequent Purchase Agreement
dated as of a Subsequent Cut-off Date between CITSF and the Company providing
for the sale of Subsequent Contracts from CITSF to the Company and substantially
in the form of Exhibit B to the Sale and Servicing Agreement.
"Subsequent Transfer Agreement" means each Subsequent Transfer
Agreement dated as of a Subsequent Transfer Date between the Trust and the
Company substantially in the form of Exhibit C to the Sale and Servicing
Agreement, by which Subsequent Contracts are sold and assigned to the Trust.
"Subsequent Transfer Date" means the date specified in the related
Subsequent Transfer Agreement.
"Temporary Notes" means the Notes specified in Section 2.3 of the
Indenture.
<PAGE>
"TIA" or "Trust Indenture Act" means The Trust Indenture Act of 1939 as
in force on the date hereof, unless otherwise specifically provided.
"Treasury Regulations" means any proposed, temporary or final
regulation promulgated under the Code.
"Trust" means CIT Marine Trust ____-_, a Delaware business trust
created by the Trust Agreement between the Seller and the Owner Trustee.
"Trust Estate" means all money, instruments, rights and other property
that are subject or intended to be subject to the lien and security interest of
the Indenture for the benefit of the Noteholders (including, without limitation,
all property and interest Granted to the Indenture Trustee), including any
proceeds thereof, but excluding the Excluded Assets.
"Trust Indenture Act" or "TIA" means The Trust Indenture Act of 1939 as
in force on the date hereof, unless otherwise specifically provided.
"Trustees" means both the Indenture Trustee and the Owner Trustee.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
ARTICLE II
CONVEYANCE OF CONTRACTS; ACCEPTANCE BY TRUSTEE
SECTION 2.01 Conveyance of the Initial Contracts. On the Closing Date,
the Company shall sell, transfer, assign absolutely, set over and otherwise
convey to the Trust by execution of an assignment substantially in the form of
Exhibit D hereto, and the Trust shall purchase, (i) all the right, title and
interest of the Company in and to the Initial Contracts and all the rights,
benefits, and obligations arising from and in connection with each Initial
Contract, (ii) the security interests in the Initial Financed Boats granted by
the Obligors pursuant to the Initial Contracts, (iii) all payments received by
the Company on or with respect to the Initial Contracts on or after the Initial
Cut-off Date (exclusive of payments with respect to Post Cut-off Date Insurance
Add-Ons), (iv) the interest of the Company in any Initial Financed Boat
(including any right to receive future Net Liquidation Proceeds) that secures
the Initial Contracts and that shall have been repossessed by the Servicer by or
on behalf of the Trust; (v) all rights of the Company to proceeds of Insurance
Policies covering the Obligors and the Initial Contracts, (vi) the proceeds from
any Servicer's Errors and Omissions Protection Policy, any fidelity bond and any
blanket hazard policy, to the extent such proceeds relate to any Initial
Financed Boat, (vii) all rights of recourse against any cosigner or under any
personal guarantee with respect to the Initial Contracts (other than any right
as against a Dealer under a Dealer Agreement), (viii) all amounts held for the
Trust in the Collection Account, (ix) all amounts held for the Trust in the
Pre-Funding Account, (x) all amounts held for the Trust in the Capitalized
Interest Account, (xi) all
<PAGE>
proceeds in any way derived from any of the foregoing items, and (xii) all
documents contained or required to be contained in the Contract Files relating
to the Initial Contracts. The parties intend and agree that the conveyance of
the Company's right, title and interest in and to the Initial Contracts (and all
rights, entitlements and amounts listed above) pursuant to this Agreement shall
constitute an absolute sale.
The Company hereby declares and covenants that it shall at no time have
any legal, equitable or beneficial interest in, or any right, including without
limitation any reversionary or offset right, to the Collection Account, the
Pre-Funding Account, the Capitalized Interest Account and the Cash Collateral
Account, and that, in the event it receives any of the same, it shall hold same
in trust for the benefit of the Trust on behalf of the Securityholders and shall
immediately endorse over to the Trust any such amount it receives.
SECTION 2.02 Conveyance of the Subsequent Contracts. In consideration
of the Owner Trustee's delivery on the related Subsequent Transfer Date to or
upon the order of the Company of the purchase price for the Subsequent Contracts
to be conveyed to the Trust on such date up to the balance of funds on deposit
in the Pre-Funding Account on such related Subsequent Transfer Date, the Company
shall sell, transfer, assign, set over and otherwise convey to the Trust by
execution of an assignment substantially in the form of the Subsequent Transfer
Agreement attached hereto as Exhibit C, and the Trust shall purchase, (i) all
the right, title and interest of the Company in and to the Subsequent Contracts
and all the rights, benefits, and obligations arising from and in connection
with each Subsequent Contract, (ii) the security interests in the Subsequent
Financed Boats granted by the Obligors pursuant to the Subsequent Contracts,
(iii) all payments received by the Company on or with respect to the Subsequent
Contracts on or after the Subsequent Cut-off Date (exclusive of payments with
respect to Post Cut-off Date Insurance Add-Ons), (iv) the interest of the
Company in any Subsequent Financed Boat (including any right to receive future
Net Liquidation Proceeds) that secures the Subsequent Contracts and that shall
have been repossessed by the Servicer by or on behalf of the Trust; (v) all
rights of the Company to proceeds of Insurance Policies covering the Obligors
and the Subsequent Contracts, (vi) the proceeds from any Servicer's Errors and
Omissions Protection Policy, any fidelity bond and any blanket hazard policy, to
the extent such proceeds relate to any Subsequent Financed Boat, (vii) all
rights of recourse against any cosigner or under any personal guarantee with
respect to the Subsequent Contracts (other than any right as against a Dealer
under a Dealer Agreement), (viii) all proceeds in any way derived from any of
the foregoing items, and (ix) all documents contained or required to be
contained in the Contract Files relating to the Subsequent Contracts. The
parties intend and agree that the conveyance of the Company's right, title and
interest in and to the Subsequent Contracts pursuant to this Agreement shall
constitute an absolute sale. The "purchase price" shall be one hundred percent
(100%) of the aggregate principal amount outstanding on the Subsequent Contracts
so transferred as of the related Subsequent Cut-off Date.
SECTION 2.03 Acceptance by Owner Trustee.
(a) On the Closing Date, the Owner Trustee shall deliver a
certificate to the Company substantially in the form of Exhibit E
hereto acknowledging conveyance of the
<PAGE>
Initial Contracts and Contract Files relating thereto to the Owner
Trustee and declaring that the Owner Trustee, through the Servicer, as
custodian, pursuant to Section 3.03 hereto, will hold all Contracts
that have been delivered in trust, upon the trusts herein set forth,
for the use and benefit of all Certificateholders and Noteholders, as
their respective interests may appear, subject to the terms and
provisions of this Agreement and the Basic Documents.
(b) On any Subsequent Transfer Date, the Owner Trustee shall
deliver a certificate to the Company substantially in the form of
Exhibit E hereto acknowledging conveyance of the Subsequent Contracts
and Contract Files relating thereto to the Owner Trustee and declaring
that the Owner Trustee, through the Servicer, as custodian, pursuant to
Section 3.04 hereto, will hold all Contracts that have been delivered
in trust, upon the trusts herein set forth, for the use and benefit of
all Certificateholders and Noteholders, as their respective interests
may appear, subject to the terms and provisions of this Agreement and
the Basic Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; THE CONTRACTS
SECTION 3.01A Representations and Warranties Regarding Each Contract.
The Initial Contracts have been sold by CITSF to the Company pursuant to the
Purchase Agreement. Any Subsequent Contracts will be sold by CITSF to the
Company pursuant to a Subsequent Purchase Agreement. In connection with such
sales, CITSF made the representations and warranties in Sections 3.01A, 3.01B,
3.01C and 8.01 of this Agreement to the Company (such representations and
warranties being incorporated in the Purchase Agreement and any Subsequent
Purchase Agreement) and assumed the obligations in Section 3.02 of this
Agreement. As a condition of the purchase by the Company, the Company has
required that CITSF make such representations and warranties directly to the
Trust and the Securityholders so that the Trust may recover directly against
CITSF on such representations and warranties rather than indirectly through
claims by the Company against CITSF. Consequently, CITSF represents and warrants
to the Trust and the Securityholders as to each Initial Contract as of the
Closing Date and as to each Subsequent Contract as of the related Subsequent
Transfer Date (except as otherwise expressly stated):
(a) List of Contracts. The information set forth in the List
of Initial Contracts or the List of Subsequent Contracts, as
applicable, is true and correct as of its date.
(b) Payments. With respect to an Initial Contract, as of the
Initial Cut-off Date, the payment of principal and interest for its Due
Date next preceding the Cut-off Date was made by or on behalf of the
Obligor (without any advance from CITSF or any Person acting at the
request of CITSF) or was not delinquent for more than 30 days and, with
respect to a Subsequent Contract, as of the related Subsequent Cut-off
Date (or the date of origination, if later) the payment of principal
and interest for its Due Date next preceding the related Subsequent
Cut-off Date was made by or on behalf of the Obligor
<PAGE>
(without an advance from CITSF or any Person acting at the request of
CITSF) or was not more than 30 days delinquent.
(c) No Waivers. The terms of the Contract have not been
waived, altered, amended or modified in any respect, except by
instruments or documents identified in the Contract File with respect
thereto, and no waiver, alteration, amendment or modification has
caused such Contract to fail to meet any of the other representations
and warranties made by CITSF with respect thereto.
(d) Binding Obligation. The Contract is the legal, valid and
binding obligation of the Obligor thereunder and is enforceable in
accordance with its terms, except as such enforceability may be limited
by laws affecting the enforcement of creditors' rights generally and
equitable remedies.
(e) No Defenses. No facts which give rise to any right of
rescission, set-off, counterclaim or defense, including the defense of
usury, by the Obligor, have been asserted with respect to the Contract.
(f) Insurance. The Obligor on the Contract is required to
maintain physical damage insurance covering the related Financed Boat
in accordance with CITSF's normal requirements or, if not so covered,
is covered by a blanket insurance policy maintained by CITSF. As of the
Initial Cut-off Date, the Servicer has not obtained Force-Placed
Insurance with respect to any Initial Contract and, as of any
Subsequent Cut-off Date, the Servicer has not obtained Force-Placed
Insurance with respect to any Subsequent Contract.
(g) Origination. The Contract was originated by a Dealer in
the United States of America and was purchased by CITSF or CITCF-NY in
the ordinary course of its business.
(h) Lawful Assignment. The Contract was not originated in and
is not subject to the laws of any jurisdiction whose laws would make
the transfer of the Contract to the Company under the Purchase
Agreement in the case of an Initial Contract, or under a Subsequent
Purchase Agreement in the case of a Subsequent Contract, the transfer
of the Contract to the Trust under this Agreement in the case of an
Initial Contract, or under a Subsequent Transfer Agreement in the case
of a Subsequent Contract, or pursuant to transfers of Securities, or
the ownership of the Contracts by the Trust, unlawful.
(i) Compliance with Law. All requirements of any federal,
state or local law, including, without limitation, usury, truth in
lending and equal credit opportunity laws, applicable to the Contract
have been complied with in all material respects and such compliance is
not affected by the Trust's ownership of the Contracts, and CITSF shall
for at least the period of this Agreement, maintain in its possession,
available for the Trust's inspection, and shall deliver to the Trust
upon demand, evidence of compliance with all such requirements.
<PAGE>
(j) Contract in Force. The Contract has not been satisfied or
subordinated in whole or in part or rescinded, and the Financed Boat
securing the Contract has not been released from the lien of the
Contract in whole or in part.
(k) Valid Security Interest. The Contract creates a valid and
enforceable perfected first priority security interest in favor of
CITSF, CITCF-NY or the Dealer which originated such Contract in the
Financed Boat covered thereby as security for payment of the Initial
Cut-off Date Principal Balance of such Contract in the case of an
Initial Contract or the Subsequent Cut-off Date Principal Balance of
such Contract in the case of a Subsequent Contract, which security
interest (if in favor of CITCF-NY or the Dealer) has been validly and
effectively assigned to CITSF. CITSF has assigned all of its right,
title and interest in such Contract, including the security interest in
the Financed Boat covered thereby, to the Company, and the Company has
assigned all of its right, title and interest in such Contract and such
Financed Boat to the Trust.
(l) Notation of Security Interest. CITSF or CITCF-NY has taken
all necessary action with respect to the Contract to perfect the
security interest in the Financed Boat covered thereby in favor of
CITSF or CITCF-NY. With respect to each Contract, if the related
Financed Boat is located in a state in which notation of a security
interest on the title document is required or permitted to perfect such
security interest, the title document shows, or if a new or replacement
title document with respect to such Financed Boat is being applied for
such title document will be issued within 180 days and will show, CITSF
or CITCF-NY as the holder of a first priority security interest in such
Financed Boat; if the related Financed Boat is located in a state in
which the filing of a financing statement under the UCC is required to
perfect a security interest in a Boat, such filings or recordings have
been duly made and show CITSF or CITCF-NY as secured party.
(m) Capacity of Parties. All parties to the Contract had legal
capacity to execute the Contract.
(n) Good Title. CITSF or CITCF-NY purchased the Contract for
fair value and took possession thereof in the ordinary course of its
business, without knowledge that the Contract was subject to a security
interest in favor of a third party. Neither CITSF, CITCF-NY nor the
Company has sold, assigned or pledged the Contract to any person other
than CITSF, the Company or the Trust, respectively. Prior to the
transfer of the Contract by CITCF-NY to CITSF, CITSF to the Company and
by the Company to the Trust, CITCF-NY, CITSF or the Company,
respectively, had good and marketable title thereto free and clear of
any encumbrance, equity, loan, pledge, charge, claim or security
interest and was the sole owner thereof with full right to transfer the
Contract to the Company and the Trust, respectively. The Company paid
fair value to CITSF for the Contracts. Immediately upon the transfer
thereof, the Trust for the benefit of the Securityholders shall acquire
good and marketable title to each Contract free and clear of
<PAGE>
any encumbrance, equity, loan, pledge, charge, claim or security
interest, and the transfer thereof shall have been perfected under
applicable law.
(o) No Defaults. As of the Initial Cut-off Date for each
Initial Contract, and as of the related Subsequent Cut-off Date for
each Subsequent Contract, there was no default, breach, violation or
event permitting acceleration existing under the Contract and no event
which, with notice and the expiration of any grace or cure period,
would constitute such a default, breach, violation or event permitting
acceleration under such Contract (except payment delinquencies
permitted by clause (b) above). Neither CITCF-NY nor CITSF has waived
any such default, breach, violation or event permitting acceleration
except payment delinquencies permitted by clause (b) above.
(p) No Liens. As of the Closing Date for each Initial
Contract, and as of the related Subsequent Transfer Date for each
Subsequent Contract, there are, to the best of CITSF's knowledge, no
liens or claims which have been filed for work, labor or materials
affecting the Financed Boat securing the Contract which are or may be
liens prior to, or equal or coordinate with, the lien of the Contract.
(q) Equal Installments. The Contract is a Simple Interest
Contract and provides for level monthly payments which provide interest
at the stated Contract Rate and, if paid in accordance with its
schedule, fully amortize the loan over its original term.
(r) Enforceability. The Contract contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the collateral of
the benefits of the security, except as enforceability of such
provisions may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies.
(s) Obligor Not a Governmental Entity. The Obligor on the
Contract is not the United States of America or any state or any
agency, department, instrumentality or political subdivision thereof.
(t) Obligor Not Subject to Bankruptcy Proceedings. The Obligor
on the Contract was not in a bankruptcy proceeding as of the Initial
Cut-off Date for each Initial Contract or as of the related Subsequent
Cut-off Date for each Subsequent Contract.
(u) No Repossession. As of the Initial Cut-off Date for each
Initial Contract, or as of the related Subsequent Cut-off Date for each
Subsequent Contract, the Financed Boat which secured the Contract has
not been repossessed without reinstatement.
(v) Obligor Not a Relief Act Obligor. If (i) the Obligor on
the Contract is in the military (including an Obligor who is a member
of the National Guard or is in the reserves) and (ii) the Contract is
subject to the Soldiers' and Sailors' Civil Relief Act or the Military
Reservist Relief Act, such Obligor has not made a claim to CITSF that
<PAGE>
(i) the amount of interest on the related 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
(ii) payments on such Contract should be delayed
pursuant to the Military Reservist Relief Act,
in either case, unless a court has ordered otherwise upon application
of CITSF.
(w) Only One Original. There is only one original executed
copy of the Contract, which, immediately prior to the execution of the
Agreement, was in the possession of CITSF.
(x) Contract is Chattel Paper. The Contract is "chattel paper"
as defined in the New Jersey UCC.
(y) Selection Criteria. As of the Initial Cut-off Date for
each Initial Contract, or as of the related Subsequent Cut-off Date for
each Subsequent Contract, the Contract satisfies the eligibility
criteria discussed in the Prospectus for the Securities under the
heading "The Contract Pool-General".
SECTION 3.01B Representations and Warranties Regarding the Contracts in
the Aggregate. CITSF represents and warrants to the Trust and the
Securityholders, that:
(a) Amounts. The aggregate principal amounts payable by
Obligors under the Initial Contracts as of the Initial Cut-off Date
equal the Initial Cut-off Date Principal Balance.
(b) Characteristics. The Contracts have the following
characteristics as of the Initial Cut-off Date:
(i) each Contract is secured by a Financed Boat which
is a new or used Boat;
(ii) each Initial Contract has a fixed Contract Rate,
which is equal to or greater than _____%;
(iii) the remaining maturity of each Initial Contract
is at least __ months, but not more than __ months;
(iv) the original maturity of each Initial Contract
was at least __ months, but not more than __ months;
(v) the weighted average remaining term to stated
maturity of each Initial Contract was at least __ months;
<PAGE>
(vi) the weighted average Contract Rate of the
Initial Contracts was _____%;
(vii) the final scheduled payment dates on the
Initial Contracts range from ____________, ____ to
____________, ____;
(viii) the average remaining principal balance of the
Initial Contracts per contract was $___________;
(ix) the outstanding principal balances of the
Initial Contracts ranged from $___________ to $___________;
(x) each of the Initial Contracts was first entered
onto the Servicer's or CITCF-NY's servicing system (which,
typically, represents the date on which CITSF or CITCF-NY
funds the purchase of such Contracts from Dealers) between
____________, ____ and ____________, ____;
(xi) not more than _____% of the Contracts by Initial
Cut-off Date Principal Balance are located in any one state,
as determined by information provided by Obligors in their
credit applications (except Contracts secured by Financed
Boats located in __________, __________, and __________, which
represent approximately _____%, _____%, and _____%,
respectively, of the Initial Cut-off Date Principal Balance) ;
(xii) not more than _____% of the Contracts, by
Initial Cut-off Date Principal Balance, have credit scores
below ___; and
(xiii) at least _____% of the Contracts, based on
Initial Cut-off Date Principal Balance, involved new Financed
Boats at origination.
(c) Computer Tape. As of Closing Date, in the case of the
Initial Contracts, and as of the related Subsequent Transfer Date, in
the case of any Subsequent Contracts, the Computer Tape made available
by the Servicer was complete and accurate as of its date and includes a
description of the same Contracts that are described in the List of
Initial Contracts or the applicable List of Subsequent Contracts, as
the case may be.
(d) Marking Records. By the Closing Date in the case of the
Initial Contracts or by the related Subsequent Transfer Date in the
case of the Subsequent Contracts, CITSF has caused the portions of the
Electronic Ledger relating to the Contracts constituting part of the
Trust to be clearly and unambiguously marked to indicate that such
Contracts constitute part of the Trust and are owned by the Trust in
accordance with the terms of the trust created hereunder.
<PAGE>
(e) No Adverse Selection. No adverse selection procedures have
been employed in selecting the Contracts from the marine installment
sale contracts owned by CITSF which were purchased by CITSF from
CITCF-NY or Dealers, except that CITSF did not select any such contract
which would cause a breach of any representation or warranty of CITSF
contained in this Agreement that would materially adversely affect the
Trust's interest in such Contract.
SECTION 3.01C Representations and Warranties Regarding the Contract
Files. CITSF represents and warrants to the Trust and the Securityholders that:
(a) Possession. Immediately prior to the Closing Date in the
case of the Initial Contracts, or the Subsequent Transfer Date in the
case of the Subsequent Contracts, CITSF will have possession of each
original Contract and the related Contract File, and there are and
there will be no custodial agreements in effect materially and
adversely affecting the right of CITSF to make, or to cause to be made,
any delivery required in connection with the conveyance of the
Contracts to the Company or from the Company to the Trust.
(b) Bulk Transfer Laws. The transfer, assignment and
conveyance of the Contracts and the Contract Files from CITSF to the
Company and from the Company to the Trust are not subject to the bulk
transfer or any similar statutory provisions in effect in any
applicable jurisdiction.
SECTION 3.01D Conditions of Closing for the Subsequent Contracts. On or
before the transfer of any Subsequent Contracts on the related Subsequent
Transfer Date, the following conditions shall have been satisfied:
(a) The Servicer shall have provided the Rating Agencies and
the Trustees with notice, at least 2 Business Days prior to the
Subsequent Transfer Date, of the Subsequent Contracts to be sold and
the aggregate principal balance thereof;
(b) The Servicer shall have delivered to the Trustees a duly
executed Subsequent Transfer Agreement;
(c) The Funding Period shall not have terminated;
(d) The Servicer shall have delivered to the Trustees an
Officer's Certificate confirming the satisfaction of each condition
precedent specified in this Section 3.01D and in the related Subsequent
Transfer Agreement;
(e) The Company shall have delivered to the Trustees an
Assignment in the form of Exhibit D and the Opinion of Counsel required
by the related Subsequent Purchase Agreement;
<PAGE>
(f) The Company shall have delivered an Officers' Certificate
to each Trustee and each Rating Agency certifying that immediately
following the transfer of such Subsequent Contracts to the Trust that
none of the following would occur: (i) the weighted average Contract
Rate of the Contracts based on the Subsequent Cut-off Date Pool
Principal Balance would be less than _____%, (ii) less than _____% of
the Contracts by Subsequent Cut-off Date Pool Principal Balance would
be attributable to loans to purchase new Boats at the time the related
Contract was originated, (iii) the weighted average remaining term to
maturity of the Contracts based on the Subsequent Cut-off Date Pool
Principal Balance would be more than __ months and (iv) more than
_____% of the Contracts based on the Subsequent Cut-off Date Pool
Principal Balance would have a credit score of less than ___. In
addition, all of such Subsequent Contracts must (i) be secured by Boats
with Obligors having mailing addresses in the United States at the time
of origination, (ii) have a Due Date in the month of the Subsequent
Cut-off Date with respect to such Subsequent Contract and not
constitute a Paid-Ahead Contract, (iii) have a final scheduled payment
date of no later than ____________, 20__; (iv) satisfy the
representations and warranties specified in this Agreement, (v) not be
selected by either CIT or the Seller in a manner that it believes is
adverse to the interest of the Securityholders, (vi) have a Contract
Rate of at least _____%, (vii) provide for level monthly payment which
provide interest at the related Contract Rate and, if paid in
accordance with its schedule, fully amortizes the amount financed over
an original term of no greater than ___ months, (viii) as of the
related Subsequent Cut-off Date, the most recent scheduled payment of
principal and interest on each Subsequent Contract had been made by or
on behalf of the related Obligor or not have been delinquent more than
30 days, (ix) no Subsequent Boat will have been repossessed without
reinstatement as of the related Subsequent Cut-off Date, (x) as of the
related Subsequent Cut-Off Date, no Obligor on any Contract will be the
subject of a bankruptcy proceeding, (xi) as of the related Subsequent
Cut-off Date, each Subsequent Contract will have a remaining principal
balance of not less than $___________ and not more than $___________,
and (xii) satisfy such other requirements as the Rating Agencies shall
request;
(g) The Servicer shall have delivered to the Trustees the
relevant List of Subsequent Contracts;
(h) The Servicer shall have delivered an Officers' Certificate
to the Trustees substantially in the form of Exhibit I hereto;
(i) The Servicer shall have delivered to the Trustees evidence
of filing with the appropriate office in the following jurisdictions of
the following UCC-1 Financing Statements, each listing the relevant
Subsequent Contracts as required by Article 9 of the UCC: (i) UCC-1
Financing Statements executed by CITSF as debtor, naming the Company as
Secured Party and filed in New Jersey and Oklahoma to perfect the sale
from CITSF to the Company, (ii) UCC-1 Financing Statements executed by
the Company as debtor naming the Trust as secured party and filed in
New Jersey and Oklahoma to perfect the sale from the Company to the
Trust, and (iii) UCC-1 Financing Statements
<PAGE>
executed by the Trust as debtor, naming the Indenture Trustee as
secured party and filed in New Jersey, Oklahoma and Delaware;
(j) The Servicer shall have delivered an Officers' Certificate
to the Trustees stating that the Servicer has reviewed each such
Subsequent Contract and the Contract File with respect thereto, and
confirming that each such Subsequent Contract and the Contract File
with respect thereto conforms in all material respects to the relevant
List of Subsequent Contracts, that each Contract File with respect to
such Subsequent Contract is complete in all material respects, and that
each Boat securing any such Subsequent Contract is covered by a Hazard
Insurance Policy as required by this Agreement;
(k) The Servicer shall have delivered an Officers' Certificate
to the Trustees stating that all funds received with respect to such
Subsequent Contract on and after the relevant Subsequent Cut-off Date
through the Subsequent Transfer Date have been deposited in the
Collection Account;
(l) The Servicer shall have delivered an Officers' Certificate
to the Trustees stating that the Servicer has accepted delivery of such
Subsequent Contracts and the Contract Files with respect to such
Subsequent Contracts and will hold such Subsequent Contracts and
Contract Files as custodian on behalf of the Trustees for the benefit
of the Trust as provided herein;
(m) The Servicer shall have delivered to the Trustees one or
more Opinions of Counsel, either (1) stating that, in the opinion of
such counsel, all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and
protect the interest of the Trustees in the Contracts, and reciting the
details of such filings or referring to prior Opinions of Counsel in
which such details are given, or (2) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect
such interest; it being understood that the opinions on perfection
delivered by counsel on the Closing Date, if delivered on the
Subsequent Transfer Date as to the Subsequent Contracts, shall satisfy
the foregoing requirement; and
(n) The Seller and the Trustees shall not have been advised by
either Rating Agency that the conveyance of such Subsequent Contracts
will result in a qualification, modification or withdrawal of its then
current rating of either the Notes or the Certificates.
SECTION 3.02 Repurchase of Contracts for Breach of Representations and
Warranties.
(a) Subject to Section 3.02(b), CITSF shall repurchase a
Contract, at its Purchase Price, not later than 85 days after CITSF
receives written notice from either the Trustees or the Servicer, or
not later than 90 days after CITSF otherwise becomes aware, of a breach
of any representation or warranty of CITSF set forth in Section 3.01A
or 3.01B of this Agreement that materially and adversely affects the
Trust's interest in such Contract and which breach has not been cured.
CITSF shall effect such repurchase by
<PAGE>
paying to the Servicer for deposit in the Collection Account on the
Deposit Date in the month following the month in which the loan was
repurchased the aggregate of the Purchase Price of all Contracts that
are required to be repurchased pursuant to the preceding sentence. With
respect to any Contract incorrectly described on the List of Initial
Contracts or any List of Subsequent Contracts, as the case may be, only
with respect to remaining unpaid principal balance, which CITSF would
otherwise be required to repurchase pursuant to this Section 3.02,
CITSF may, in lieu of repurchasing such Contract, deposit in the
Collection Account, not later than one Business Day after the first
Determination Date which is more than 90 days after CITSF becomes aware
or receives written notice from the Trustees or the Servicer of such
incorrect description, cash in an amount sufficient to cure such
deficiency or discrepancy. CITSF shall send written notice of any such
cash deposit to the Rating Agencies as promptly as possible following
such deposit. Notwithstanding any other provision of the Agreement, the
obligation of CITSF under this Section 3.02 shall not terminate upon a
Service Transfer pursuant to Article VII.
(b) Promptly after any repurchase referred to in Section
3.02(a), the Trust shall execute such documents as are presented to it
by CITSF and are reasonably necessary to reconvey the Repurchased
Contract to CITSF.
(c) The repurchase obligation of CITSF set forth in this
Section 3.02 shall constitute the sole remedy available to the Trust
and the Securityholders for a breach of representation and warranty
hereunder with respect to the Contracts (but not with respect to any
other breach by CITSF of its obligations hereunder, as set forth
herein).
SECTION 3.03 Custody of Contract Files. To assure uniform quality in
servicing the Contracts and to reduce administrative costs, the Trust, upon the
execution and delivery of this Agreement, revocably appoints the Servicer, and
the Servicer accepts such appointment, to act as the agent of the Trust and as
custodian of the Contract File with respect to each Contract, each of which are
hereby constructively delivered to the Trust.
SECTION 3.04 Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer, in its capacity as custodian,
shall hold the Contract Files on behalf of the Trust for the use and
benefit of the Trust and maintain such accurate and complete accounts,
records and computer systems pertaining to the Contracts as shall
enable the Owner Trustee and the Indenture Trustee to comply with its
obligations pursuant to this Agreement and the Basic Documents.
As custodian, the Servicer shall have and perform the
following powers and duties:
(i) hold the Contract Files on behalf of the Trust,
maintain accurate records pertaining to each Contract to
enable it to comply with the terms and conditions of this
Agreement, maintain a current inventory thereof, conduct
<PAGE>
annual physical inspections of Contract Files held by it under
this Agreement and certify to the Trust annually that it
continues to maintain possession of such Contract Files;
(ii) implement policies and procedures in writing and
signed by a Servicing Officer, with respect to persons
authorized to have access to the Contract Files on the
Servicer's premises and the receipting for Contract Files
taken from their storage area by an employee of the Servicer
for purposes of servicing or any other purposes; and
(iii) attend to all details in connection with
maintaining custody of the Contract Files on behalf of the
Trust.
In performing its duties under this Section 3.04, the Servicer
agrees to act with reasonable care, consistent with the same degree of
skill and care that it exercises with respect to similar contracts
serviced by it for its own account. The Servicer shall promptly report
to the Trust in writing any failure by it to hold the Contract Files as
herein provided and shall promptly take appropriate action to remedy
any such failure. In acting as custodian of the Contract Files, the
Servicer agrees further not to assert any beneficial ownership
interests in the Contracts or the Contract Files. The Servicer agrees
to indemnify the Trust, the Certificateholders, the Noteholders, the
Owner Trustee and the Indenture Trustee for any and all liabilities,
obligations, losses, damages, payments, costs, or expense of any kind
whatsoever which may be imposed on, incurred or asserted against the
Trust, the Certificateholders, the Noteholders, the Owner Trustee and
the Indenture Trustee as the result of any act or omission by the
Servicer relating to the maintenance and custody of the Contract Files;
provided, however, that the Servicer will not be liable for any portion
of any such amount resulting from the negligence or willful misconduct
of the Trust, the Certificateholders, the Noteholders, the Owner
Trustee or the Indenture Trustee.
(b) Maintenance of and Access to Records. The Servicer, in its
capacity as custodian, agrees to maintain the Contract Files at its
office in the State of Oklahoma, or at such of its offices as shall
from time to time be identified to the Trust by written notice. The
Servicer, in its capacity as custodian, may temporarily move individual
Contract Files or any portion thereof without notice as necessary to
conduct collection and other servicing activities in accordance with
its customary practices and procedures, but shall promptly return such
Contract File as soon as practicable after it is no longer needed for
such purpose.
The Servicer, in its capacity as custodian, shall make
available to the Trust or its duly authorized representatives,
attorneys or auditors the Contract Files and the related accounts,
records and computer systems maintained by the Servicer at such times
during normal operating hours as the Trust shall reasonably instruct
which does not unreasonably interfere with the Servicer's normal
operations or customer or employee relations.
<PAGE>
(c) Release of Documents. Upon instruction from the Trust, the
Servicer, in its capacity as custodian, shall release or cause to be
released any document in the Contract Files to the Trust, the Trust's
agent or the Trust's designee, as the case may be, at such place or
places as the Trust may designate, as soon as practicable. The
Servicer, in its capacity as custodian, shall not be responsible for
any loss occasioned by the failure of the Trust, its agent or its
designee to return any document or any delay in doing so.
SECTION 3.05 Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions from either of the Trustees with
respect to the Contract Files upon its receipt of written instructions signed by
a Responsible Officer. A certified copy of a by-law or of a resolution of the
Board of Directors of the Owner Trustee or the Indenture Trustee, as applicable,
shall constitute conclusive evidence of the authority of any such Responsible
Officer to act and shall be considered in full force and effect until receipt by
the Servicer of written notice to the contrary given by the Trust.
SECTION 3.06 Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section 3.06
or until this Agreement shall be terminated. The Servicer may perform its duties
as custodian through one or more agents, which agents may maintain physical
possession of Contract Files as agent for the Servicer acting as custodian. If
the Servicer shall resign as Servicer under Section 8.05 or if all of the rights
and obligations of the Servicer shall have been terminated under Section 9.01,
the appointment of the Servicer as custodian may be terminated by the Indenture
Trustee or by the Holders of Notes evidencing not less than a majority of the
aggregate outstanding principal balance of the Notes as of the close of the
preceding Distribution Date (or, if the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, by the Owner Trustee
or by the Holders of Certificates evidencing not less than a majority of the
Certificate Balance as of the close of the preceding Distribution Date), in the
same manner as rights and obligations of the Servicer may be terminated under
Section 9.01. The Trust may terminate the Servicer's appointment as custodian at
any time with cause upon written notification to the Servicer. As soon as
practicable after any termination of such appointment, the Servicer shall
deliver the Contract Files to the Trust or the Trust's agent at such place or
places as the Trust may reasonably designate. The Servicer shall cooperate with
the Trust in making the transfer and shall bear all of the Servicer's costs and
expenses with respect to such transfer, but the Trust shall bear the actual
costs and expenses of packing and transporting the Contract Files to the
location designated by the Trust. Notwithstanding the termination of the
Servicer as custodian, the Trust agrees that upon any such termination, the
Trust shall provide, or cause its agent to provide, access to the Contract Files
to the Servicer for the purpose of carrying out its duties and responsibilities
with respect to the servicing of the Contracts hereunder.
ARTICLE IV
ADMINISTRATION AND SERVICING OF CONTRACTS
<PAGE>
SECTION 4.01 Duties of Servicer.
(a) The Servicer, as agent for the Trust, shall manage,
administer, service and make collections on the Contracts and perform
or cause to be performed all contractual and customary undertakings of
the holder of the Contracts to the Obligor. The Trust, at the request
of a Servicing Officer, shall furnish the Servicer with any reasonable
documents or take any action reasonably requested, necessary or
appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
(b) In managing, administering, servicing and making
collections on the Contracts pursuant to this Agreement, the Servicer
will exercise the same degree of skill and care that the Servicer
exercises with respect to similar contracts serviced by the Servicer
for its own account.
(c) The Servicer may enter into subservicing agreements with
one or more subservicers (which shall be Eligible Servicers) for the
servicing and administration of certain of the Contracts. References in
this Agreement to actions taken, to be taken, permitted to be taken, or
restrictions on actions permitted to be taken, by the Servicer in
servicing the Contracts shall include actions taken, to be taken,
permitted to be taken, or restrictions on actions permitted to be
taken, by a subservicer on behalf of the Servicer. Each subservicing
agreement will be upon such terms and conditions as are not
inconsistent with this Agreement and the standard of care set forth
herein and as the Servicer and the subservicer have agreed. All
compensation payable to a subservicer under a subservicing agreement
shall be payable by the Servicer from its servicing compensation or
otherwise from its own funds, and none of the Trust, the Owner Trustee,
the Indenture Trustee, the Certificateholders or the Noteholders will
have any liability to the subservicer with respect thereto.
Notwithstanding any subservicing agreement or any of the
provisions of this Agreement relating to agreements or any arrangements
between the Servicer or a subservicer or any reference to actions taken
through such Persons or otherwise, the Servicer shall remain obligated
and liable to the Trust, the Owner Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders for the servicing and
administering of the Contracts and the other Trust property in
accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue of such subservicing agreements.
Any subservicing agreement that may be entered into and any
other transactions or servicing arrangements relating to the Contracts
and the other Trust property involving a subservicer in its capacity as
such and shall be deemed to be between the subservicer and the Servicer
alone, and the Owner Trustee, the Indenture Trustee, the
Certificateholders and the Noteholders shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the subservicer except as set forth in the
next succeeding paragraph.
<PAGE>
In the event the Servicer shall for any reason no longer be acting as
such, the successor Servicer may, in its discretion, thereupon assume
all of the rights and obligations of the outgoing Servicer under a
subservicing agreement. In such event, the successor Servicer shall be
deemed to have assumed all of the Servicer's interest therein and to
have replaced the outgoing Servicer as a party to each such
subservicing agreement to the same extent as if such subservicing
agreement had been assigned to the successor Servicer, except that the
outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the subservicer
under such subservicing agreement. The outgoing Servicer shall, upon
request of the Trust, but at the expense of the outgoing Servicer,
deliver to the successor Servicer all documents and records relating to
each such subservicing agreement and the Contracts and other Trust
property then being serviced thereunder and an accounting of amount
collected and held by it and otherwise use its best efforts to effect
the orderly and efficient transfer of any subservicing agreement to the
successor Servicer. In the event that the successor Servicer elects not
to assume a subservicing agreement, the outgoing Servicer, at its
expense, shall cause the subservicer to deliver to the successor
Servicer all documents and records relating to the Contracts and the
other Trust property being serviced thereunder and all amounts held (or
thereafter received) by such subservicer (together with an accounting
of such amounts) and shall otherwise use its best efforts to effect the
orderly and efficient transfer of servicing of the Contracts and the
other Trust property being serviced by such subservicer to the
successor Servicer.
(d) The Servicer's duties shall include collection and posting
of all payments, responding to inquiries by Obligors or by federal,
state or local governmental authorities with respect to the Contracts,
investigating delinquencies, reporting tax information to Obligors,
administering and enforcing Insurance Policies in accordance with its
customary practices, accounting for collections, furnishing monthly and
annual statements to the Trust with respect to distributions, and
making Monthly Advances pursuant to Section 5.03 hereof.
The Servicer shall be authorized and empowered by the Trust to
execute and deliver, on behalf of itself, the Trust, the Owner Trustee,
the Indenture Trustee, the Certificateholders, the Noteholders, or any
of them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable
instruments, with respect to the Contracts or with respect to the
Financed Boats.
Upon written request of the Servicer and receipt by the Trust of an
Officer's Certificate setting forth the facts underlying such request,
the Trust shall furnish the Servicer with any limited powers of
attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder
and the Trust shall not be held liable for such actions of the Servicer
thereunder.
<PAGE>
SECTION 4.02 Collection of Contract Payments. The Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Contracts as and when the same shall become due, and in
connection therewith shall follow such collection procedures as it follows with
respect to comparable new or used marine installment sale contracts that it
services for itself and others. The Servicer shall not reduce scheduled
payments, extend any Contract or otherwise modify the terms of any Contract;
provided, however, that, consistent with its normal procedures, the Servicer may
extend or modify the payment schedule of any Contract for credit related reasons
that would be acceptable to the Servicer with respect to comparable new or used
Boats that it services for itself or others, if (a) the maturity of such
Contract would not be extended beyond the 180th day prior to the Class A Final
Scheduled Distribution Date and (b) the reducing, 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. If, as a result of rescheduling or extending of payments or any other
modification, such rescheduling, extension or modification breaches any of the
terms of the preceding sentence, then the Servicer shall be obligated to
purchase such Contract pursuant to Section 4.07 hereof as of the last day of the
Due Period on which it became aware or receives written notice from the Trust of
such failure. The Servicer may, in accordance with its customary standards,
policies and procedures, in its discretion waive any Late Fees that may be
collected in the ordinary course of servicing a Contract.
SECTION 4.03 Realization Upon Contracts.
(a) The Servicer will, consistent with customary servicing
procedures and the terms of this Agreement, act with respect to the
Contracts in such manner as will maximize the receipt of principal and
interest on the Contracts and Net Liquidation Proceeds in respect of
Defaulted Contracts.
Notwithstanding the standard of care specified in Section 4.01
hereof, the Servicer shall commence procedures for the repossession of
any Financed Boat or take such other steps that in the Servicer's
reasonable judgment will maximize the receipt of principal and interest
or Net Liquidation Proceeds with respect to the Contract secured by
such Financed Boat, including, without limitation, selling such
Financed Boat at a public or private sale, subject to the requirements
of the applicable state and federal law. In connection with such
repossession or foreclosure, the Servicer shall follow such practices
and procedures as it shall deem necessary or advisable and as shall be
consistent with Section 4.01 hereof. In the event that title to any
Financed Boat is acquired in foreclosure or by conveyance in lieu of
foreclosure, the deed or certificate of sale shall be issued to the
Trust, or, at its election, to its nominee on behalf of the Trust.
(b) The Servicer shall be entitled to recover all reasonable
fees of third parties and expenses incurred by it in the course of
converting any Financed Boat into cash proceeds including, without
limitation, expenses relating to recovery and repossession of such
Financed Boats, from liquidation proceeds with respect to such Financed
Boat. The Net Liquidation Proceeds realized in connection with any such
action with respect to a Contract shall be deposited by the Servicer in
the Collection Account in the manner
<PAGE>
specified in Section 5.02 hereof and shall be applied to reduce (or to
satisfy, as the case may be) the Purchase Price of the Contract, if
such Contract is to be purchased by CITSF pursuant to Section 3.02
hereof, is to be purchased by the Servicer pursuant to Section 4.07
hereof, or is to be purchased by CITSF pursuant to Section 11.02
hereof. The foregoing shall be subject to the provision that, in any
case in which the Financed Boat shall have suffered damage, the
Servicer shall not expend funds in connection with the repair or the
repossession of such Financed Boat unless it shall determine in its
sole discretion that such repair and/or repossession will increase the
Net Liquidation Proceeds of the related Contract by an amount equal to
or greater than the amount of such expenses.
(c) The Servicer may sue to enforce or collect upon Contracts,
including foreclosure of any security interest on a Financed Boat, in
its own name, if possible, or as agent for the Trust. If the Servicer
elects to commence a legal proceeding to enforce a Contract or any
Insurance Policy in respect thereof, the act of commencement shall be
deemed to be an automatic assignment of the Contract to the Servicer
for purposes of collection only. If, however, in any enforcement suit
or legal proceeding it is held that the Servicer may not enforce a
Contract on the ground that it is not a real party in interest or a
holder entitled to enforce the Contract, the Trust shall, at the
Servicer's expense, take such steps as the Servicer deems necessary to
enforce the Contract, including bringing suit in its name or the names
of the Securityholders.
(d) Prior to a Service Transfer, the Servicer may grant to the
Obligor on any Contract any rebate, refund or adjustment out of the
Collection Account that the Servicer in good faith believes is required
because of Principal Prepayment in Full. The Servicer will not permit
any rescission or cancellation of any Contract.
(e) The Servicer may enforce any due-on-sale clause in a
Contract if such enforcement is called for under its then current
servicing policies for obligations similar to the Contracts, provided
that such enforcement is permitted by applicable law and will not
adversely affect any applicable insurance policy.
SECTION 4.04 Physical Damage Insurance.
(a) The Servicer, in accordance with its customary servicing
procedures, shall require that each Obligor shall have obtained and
shall maintain physical damage insurance covering the Financed Boat,
provided that such insurance shall be in an amount no greater than the
outstanding principal balance of the related Contract or, if such
insurance also covers the interest of the related Obligor in the
Financed Boat, no greater than the greater of the outstanding principal
balance of the related Contract and the value of the Financed Boat, or
such lesser amount permitted by applicable law. The Servicer shall
enforce its rights under the Contracts to require the Obligors to
maintain physical damage insurance, in accordance with the Servicer's
customary practices and procedures with respect to comparable new or
used marine installment sale contracts that it services for itself or
others. If an Obligor fails to maintain such insurance, the Servicer
shall
<PAGE>
obtain and advance on behalf of such Obligor, as required under the
terms of the applicable Contract and this Agreement, the premiums for
such insurance, with uninsured physical damage loan insurance
endorsements, each insurance policy naming the Servicer as an
additional insured and loss payee, and 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 procedures, but in no
event in an amount greater than the outstanding principal balance of
the related Contract or, if such insurance also covers the interest of
the related Obligor in the Financed Boat, no greater than the greater
of the outstanding principal balance of the related Contract and the
value of the Financed Boat, or such lesser amount permitted by
applicable law and the Servicer shall 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 procedures, require
Force-Placed Insurance when the principal balance of the related retail
installment sale contract or installment loan falls below the level or
levels periodically established in accordance with such customary
servicing procedures.
In accordance with such customary servicing procedures, the Servicer
may periodically readjust such levels, suspend Force-Placed Insurance
or arrange other methods of protection of the Financed Boats that it
deems necessary or advisable, provided that the Servicer determines
that such actions do not materially and adversely affect the interests
of the Certificateholders or the Noteholders. Any portion of the
principal balance of a Contract consisting of Post Cut-off Date
Insurance Add-Ons will not be owned by the Trust, and amounts allocable
thereto will not be available for distribution on the Securities.
Unless otherwise designated by the Obligor, the Servicer will not
allocate payments to Post Cut-off Date Insurance Add-Ons if any amount
of principal or interest is due but unpaid on the Contracts. The
Servicer shall not deposit payments posted with respect to Post Cut-off
Date Insurance Add-Ons in the Collection Account and shall instead
promptly pay such amounts to an account of the Servicer maintained for
that purpose. In the event that an Obligor under a Contract with
respect to which the Servicer has advanced funds to obtain Force-Placed
Insurance makes scheduled payments under the Contract, but has failed
to make scheduled payments of such Post Cut-off Date Insurance Add-Ons
as due, and the Servicer has determined that eventual payment of such
amount is unlikely, the Servicer may, but shall not be required to,
take any action available to it, including determining that the related
Contract is a Defaulted Contract; provided, however, that any Net
Liquidation Proceeds with respect to such Contract shall be applied
first to the accrued and unpaid interest at the Contract Rate, then to
the principal amount outstanding, and the remainder, if any, to the
Post Cut-off Date Insurance Add-Ons.
(b) The Servicer may, in lieu of causing individual Insurance
Policies to be maintained with respect to each Financed Boat pursuant
to subsection (a) of this Section 4.04 maintain one or more blanket
insurance policies covering losses on the Obligor's
<PAGE>
interest in the Contracts resulting from the absence or insufficiency
of individual Insurance Policies. To the extent that the Obligor's
individual insurance policy does not cover theft of the Financed Boat
(to the extent required under the Servicer's customary practices and
procedures with respect to comparable new or used marine installment
sale contracts that it services for itself or others), the Servicer
shall Force-Place Insurance, which may be obtained pursuant to one or
more blanket insurance policies covering theft and other risks. The
proceeds of any such blanket insurance policies relating to the
Contracts shall be deposited in the Collection Account as collections
on the Contracts in accordance with the provisions of Article V hereof.
Any such blanket policy shall be substantially in the form and
in the amount carried by the Servicer as of the date of this Agreement.
The Servicer shall pay the premium for such policy on the basis
described therein. The Servicer shall not, however, be required to
deposit any deductible amount with respect to (a) claims under
individual Hazard Insurance Policies maintained pursuant to subsection
(a) of this Section 4.04, or (b) claims under any blanket insurance
policy. If the insurer under such blanket insurance policy shall cease
to be acceptable to the Servicer, the Servicer shall exercise its best
reasonable efforts to obtain from another insurer a replacement policy
comparable to such policy. The Servicer shall provide each Rating
Agency with notice of the occurrence of any event specified in the
preceding sentence.
SECTION 4.05 Maintenance of Security Interests in Financed Boats;
Retitling.
(a) The Servicer, in accordance with its customary servicing
procedures, shall take such steps as are necessary to maintain
perfection of the security interest created by each Contract in the
related Financed Boat in favor of CITSF or CITCF-NY. The Servicer
hereby agrees to take such steps as are necessary to re-perfect such
security interest in the name of CITSF or CITCF-NY in the event of the
relocation of a Financed Boat to a jurisdiction other than the
jurisdiction in which steps had been taken to perfect the security
interest in favor of CITSF or CITCF-NY. In the event that the
assignment of the Contract to the Trust is insufficient without a
notation on the related Financed Boat's certificate of title, to grant
to the Trust a perfected security interest in the related Financed
Boat, CITSF or CITCF-NY hereby agrees to serve as the Trust's agent for
the purpose of perfecting the security interest in such Financed Boat
and that CITSF's or CITCF-NY's listing as the secured party on the
certificate of title is in the capacity as agent of the Trust.
(b) If, at any time, a Service Transfer has occurred and CITSF
is no longer the Servicer, and the new Servicer is unable to foreclose
upon a Financed Boat because the title document for such Financed Boat
does not show such Servicer or the Trust as the holder of the first
priority security interest in the Financed Boat, such Servicer shall
take all necessary steps to apply for a replacement title document
showing it or the Trust as the secured party.
<PAGE>
(c) In order to facilitate the Servicer's actions, as
described in subsection 4.05(b) hereof, CITSF will provide the Servicer
with any necessary power of attorney permitting it to retitle the
Financed Boat. The Company hereby appoints the Trust its
attorney-in-fact for the purposes to endorse, as appropriate, the
certificate of title relating to any Financed Boat in order to cause a
change in the registration of legal owner of the Financed Boat to the
Trust at such time as such certificate of title is endorsed and
delivered to the Department of Motor Vehicles of the State of
California (or any other state department of motor vehicles) with
appropriate fees. The Company will provide the Trust with any necessary
power of attorney for such purpose.
(d) If the Servicer is unable to retitle the Financed Boat, in
the event that the Servicer seeks to foreclose on a Financed Boat then
CITSF will take all actions necessary to act with the Servicer, to the
extent permitted by law, to foreclose upon the Financed Boat,
including, as appropriate, the filing of any UCC-1 or UCC-2 financing
statements necessary to perfect the security interest in any Financed
Boat.
SECTION 4.06 Covenants of Servicer. The Servicer shall make the
following covenants on which the Owner Trustee and Indenture Trustee will rely
in accepting the Contracts in trust and executing and authenticating the
Certificates and the Notes:
(a) Security Interest to Remain in Force. The Financed Boat
securing each Contract shall not be released from the security interest
granted by the Contract in whole or in part except as contemplated
herein;
(b) No Impairment. The Servicer shall not impair the rights of
the Trust in the Contracts or take any action inconsistent with the
Trust's ownership of the Contracts, except as expressly provided
herein;
(c) Amendments. The Servicer shall not increase the number of
payments under a Contract, nor increase the principal amount of such
Contract which is used to finance the purchase price of the related
Boats, nor extend or forgive payments on a Contract, except as provided
in Section 4.02 hereof; and
(d) Compliance with Insurance Policies. The Servicer shall not
fail to comply with the provisions of any Insurance Policy, if the
failure to so comply would impair the protection or benefit to be
afforded by such Insurance Policies.
SECTION 4.07 Purchase of Contracts Upon Breach. The Servicer or the
Trustees, as the case may be, shall inform the other parties promptly, in
writing, upon the discovery of any breach by the Servicer of its covenants under
Section 4.04(a) with respect to Force-Placed Insurance, Section 4.06 and the
proviso in Section 4.02 hereof which materially and adversely affects the
Trust's interest in any Contract. The Trustees shall not be deemed to have
discovered such a breach until such time as a Responsible Officer of the
Trustees receives written notice of such breach. Except as otherwise specified
in Section 4.02 hereof, unless the breach shall have been cured, the Servicer
shall purchase such Contract, at its Purchase Price, not later than the first
<PAGE>
Determination Date which is more than 60 days after the Servicer receives
written notice from the Trustees, or not later than 60 days after the Servicer
otherwise becomes aware of, a breach of any of its obligations with respect to
Force-Placed Insurance under Section 4.04(a) hereof or any representation or
warranty of the Servicer in Section 4.06 hereof that materially and adversely
affects the Trust's interest in such Contract. The Servicer shall effect such
purchase by depositing, in accordance with Section 5.04 hereof, the Purchase
Price of such Contract (less any Net Liquidation Proceeds deposited, or to be
deposited, by the Servicer in the Collection Account with respect to such
Contract pursuant to Section 5.02 hereof) in the Collection Account on the
Deposit Date immediately preceding the Determination Date referred to in the
preceding sentence. The effective date of such purchase shall be the last day of
the Due Period preceding such Determination Date. The sole remedy of the Trust,
the Owner Trustee, the Indenture Trustee, the Certificateholders or the
Noteholders against the Servicer with respect to a breach pursuant to Section
4.06 hereof or Section 4.02 hereof shall be to require the Servicer to purchase
Contracts pursuant to this Section 4.07.
SECTION 4.08 Servicing Fee. The Servicing Fee for a Distribution Date
shall be equal to the sum of (i) one-twelfth of the product of the Servicing Fee
Rate and the Pool Balance as of the last day of the second preceding Due Period
(or, in the case of the first Distribution Date, as of the Initial Cut-off Date)
and (ii) any Investment Earnings on amounts on deposit in the Collection
Account, the Certificate Distribution Account and the Note Distribution Account.
In addition, the Servicer will be entitled to collect and retain any Late Fees
received by the Servicer from Obligors during the preceding Due Period.
SECTION 4.09 Servicer's Certificate. On or before each Determination
Date, the Servicer shall furnish a report (the "Monthly Report"), which shall be
in substantially the form of Exhibit G, to the Owner Trustee, the Indenture
Trustee, any Paying Agent (under the Indenture and the Trust Agreement) and (if
CITSF is not the Servicer) CITSF. The determination by the Servicer of the
amount of the distributions to be made pursuant to Section 5.05 hereof shall, in
the absence of obvious error, be presumptively deemed to be correct for all
purposes hereunder, and the Trustees shall be protected in relying upon the same
without any independent check or verification. The Servicer shall also specify
in the Monthly Report each Contract which CITSF or the Servicer is required to
purchase as of the last day of the related Due Period and each Contract which
the Servicer shall have determined to be a Defaulted Contract or a Liquidated
Contract during such Due Period. The Trustees shall not be required to
recompute, verify or recalculate information contained in the Servicer's
Certificate.
Each Monthly Report shall be accompanied by a certificate of a
Servicing Officer substantially in the form of Exhibit F, certifying the
accuracy of the Monthly Report and that no Event of Termination or event that
with notice or lapse of time or both would become an Event of Termination has
occurred, or if such event has occurred and is continuing, specifying the event
and its status.
In addition, the Servicer shall, on request of the Trustees, furnish
the Trustees such underlying data as can be generated by the Servicer's existing
data processing system without undue modification or expense.
<PAGE>
SECTION 4.10 Annual Statement as to Compliance.
(a) The Servicer shall deliver to the Trustees within 90 days
after the end of each calendar year commencing March 31, ____, a
certificate signed by the president, the treasurer or any vice
president of the Servicer, stating that (i) a review of the activities
of the Servicer during the preceding calendar year of its performance
under this Agreement has been made under such officer's supervision and
(ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement
throughout such preceding calendar year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustees, promptly after
having obtained knowledge thereof, an Officers' Certificate specifying
any event which with the giving of notice or lapse of time, or both,
would become an Event of Termination under clause (i) or (ii) of
Section 9.01 hereof. The Company shall deliver to the Trustees,
promptly after having obtained knowledge thereof, an Officer's
Certificate specifying any event which with the giving of notice or
lapse of time, or both, would become an Event of Termination under
clause (i) or (ii) of Section 9.01 hereof.
SECTION 4.11 Annual Report of Accountants. Within 90 days after the end
of each calendar year, commencing March 31, ____, the Servicer, at its expense,
shall cause a firm of independent public accountants which is a member of the
American Institute of Certified Public Accountants to furnish a statement to the
Trustee to the effect that such firm has, with respect to the Servicer's overall
servicing operations, examined such operations in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers, and
stating such firm's conclusions relating thereto. Copies of the annual statement
of accountants shall also be provided to each Rating Agency.
SECTION 4.12 Duties of Owner Trustee. In accordance with Section 6.1(b)
of the Trust Agreement, the Servicer will comply with, on behalf of the Owner
Trustee, the requirements of Sections 5.4 and 5.5 of the Trust Agreement and
Sections 3.6, 3.9 and 7.3 of the Indenture.
SECTION 4.13 Reports to Securityholders and the Rating Agencies.
(a) Concurrently with each distribution charged to the
Certificate Distribution Account and the Note Distribution Account, the
Owner Trustee and the Indenture Trustee, respectively, so long as it
has received the Monthly Report from the Servicer, shall forward or
cause to be forwarded by mail to each Securityholder, such Monthly
Report.
(b) The Servicer shall forward to each Rating Agency each
letter of the Independent certified public accountants' described in
Section 4.11 hereof, each Servicer's
<PAGE>
Certificate, each annual statement as to compliance described in
Section 4.10 hereof and each statement to Securityholders described in
Section 5.08 hereof.
SECTION 4.14 Maintenance of Fidelity Bond and Errors and Omission
Policy. The Servicer shall during the term of its service as Servicer maintain
in force (a) a policy or policies of insurance covering errors and omissions for
failure to maintain insurance as required by this Agreement, and (b) a fidelity
bond in respect of its officers, employees and agents. Such policy or policies
and such fidelity bond shall be in such form and amount as is generally
customary among Persons which service a portfolio of marine installment sale
contracts having an aggregate principal amount of $100,000,000 or more and which
are generally regarded as servicers acceptable to institutional investors.
SECTION 4.15 Trustees to Cooperate. Upon payment in full on any
Contract, the Servicer will notify the Trustees by certification of a Servicing
Officer (which certification shall include a statement to the effect that all
amounts received in connection with such payments which are required to be
deposited in the Collection Account pursuant to Section 5.05 have been so
deposited). The Servicer is authorized to execute an instrument in satisfaction
of such Contract and to do such other acts and execute such other documents as
the Servicer deems necessary to discharge the Obligor thereunder and eliminate
the security interest in the Financed Boat related thereto. The Servicer shall
determine when a Contract has been paid in full. To the extent that insufficient
payments are received on a Contract credited by the Servicer as prepaid or paid
in full and satisfied, the shortfall shall be paid by the Servicer out of its
own funds.
SECTION 4.16 Costs and Expenses. Except as provided in Section 4.03
hereof, all costs and expenses incurred by the Servicer in carrying out its
duties hereunder, including all fees and expenses incurred in connection with
the enforcement of Contracts (including enforcement of Defaulted Contracts and
repossessions of Financed Boats securing such Contracts), shall be paid by the
Servicer and the Servicer shall not be entitled to reimbursement hereunder.
ARTICLE V
ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
SECTION 5.01 Collection Account, Pre-Funding Account, Capitalized
Interest Account and Cash Collateral Account.
(a) (i) On or before the Closing Date, there shall be
established and maintained in the name of the Indenture
Trustee, for the benefit of the Noteholders and
Certificateholders, with an Eligible Institution (which
initially shall be the Indenture Trustee) an account known as
the "CIT Marine Trust ____-_ Collection Account" (the
"Collection Account"), bearing an additional designation
clearly indicating that the funds deposited therein are held
for the benefit of the Noteholders and Certificateholders.
<PAGE>
(ii) On or before the Closing Date, there shall be
established and maintained in the name of the Indenture
Trustee, for the benefit of the Noteholders, with the
Indenture Trustee an account known as the "CIT Marine Trust
____-_ Note Distribution Account" (the "Note Distribution
Account"), bearing an additional designation clearly
indicating that the funds deposited therein are held for the
benefit of the Noteholders.
(iii) On or before the Closing Date, pursuant to the
Trust Agreement, there shall be established and maintained in
the name of the Owner Trustee, for the benefit of the
Certificateholders, with an Eligible Institution (which
initially shall be [____________________], the Paying Agent of
the Owner Trustee) an account known as the "CIT Marine Trust
____-_ Certificate Distribution Account" (the "Certificate
Distribution Account"), bearing an additional designation
clearly indicating that the funds deposited therein are held
for the benefit of the Certificateholders and owned by the
Trust.
(iv) On or before the Closing Date, there shall be
established and maintained in the name of the Owner Trustee
with an Eligible Institution (which, initially, shall be
[____________________], the Paying Agent of the Owner Trustee)
an account known as the "CIT Marine Trust ____-_ Cash
Collateral Account (the "Cash Collateral Account"), bearing a
designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders and
owned by the Trust.
(b) Pre Funding Account and Capitalized Interest Account.
(i) On or before the Closing Date, there shall be
established and maintained the Pre-Funding Account and the
Capitalized Interest Account, in the name of the Owner
Trustee, on behalf of the Trust for the benefit of the
Noteholders and Certificateholders with an Eligible
Institution (which, initially, shall be the Indenture
Trustee). If, at any time during the Funding Period, the
Pre-Funding Account or the Capitalized Interest Account ceases
to be maintained with an Eligible Institution, the Indenture
Trustee (or the Servicer on its behalf) shall within five (5)
Business Days (or such longer period, not to exceed thirty
(30) calendar days, as to which the Rating Agency may consent)
establish a new Pre-Funding Account or Capitalized Interest
Account meeting the condition specified above, transfer any
cash and/or any investments to such new Pre-Funding Account or
Capitalized Interest Account and from the date such new
Pre-Funding Account or Capitalized Interest Account is
established, they shall be the "Pre-Funding Account" or
"Capitalized Interest Account", as appropriate. The
Pre-Funding Account shall be entitled the "CIT Marine Trust
____-_ Pre-Funding Account". The Capitalized Interest Account
shall be entitled the "CIT Marine Trust ____-_ Capitalized
Interest Account". Each of the Pre-Funding Account and the
Capitalized Interest Account shall bear an additional
designation clearly indicating that the funds on deposit
therein are held for the benefit of, and owned
<PAGE>
by, the Trust. On the Closing Date, the Trust will deposit the
Original Pre-Funded Amount into the Pre-Funding Account and
deposit the Initial Capitalized Interest Deposit into the
Capitalized Interest Account.
(ii) On any Subsequent Transfer Date, the Servicer
shall instruct the Owner Trustee to withdraw from the
Pre-Funding Account an amount equal to 100% of the unpaid
principal balance thereof as of the related Subsequent Cut-off
Date of the Subsequent Contracts sold to the Trust on such
Subsequent Transfer Date and pay such amount to or upon the
order of Company with respect to such transfer. In no event
shall the Servicer be permitted to instruct the Owner Trustee
to release from the Pre-Funding Account with respect to
Subsequent Contracts to be transferred to the Trust an amount,
which, when added to the amounts previously released from the
Pre-Funding Account to acquire Subsequent Contracts, would
exceed the Original Pre-Funded Amount.
(iii) On the Distribution Dates occurring in
_________, _________ and _________ of ____, the Owner Trustee
shall withdraw Pre-Funding Earnings from the Pre-Funding
Account, to the extent available, and deposit such amount in
the Collection Account for payment to the Holders of the
Securities on such Distribution Dates, in an amount equal to
the difference, if any, between (x) the sum of the amount of
interest payable to the Noteholders on such Distribution Date
and the amount of interest payable to the Certificateholders
on such Distribution Date and (y) that portion of the Amount
Available allocated to make such interest payments to
Noteholders and Certificateholders, respectively, on such
Distribution Dates. On such Distribution Dates, such funds, if
any, shall be used first to pay to the Noteholders, to the
extent available, the Pre-Funding Earnings so withdrawn such
that the Noteholders will receive such amounts of interest due
on such Distribution Date, and second, to pay to the
Certificateholders, to the extent available, the remaining
Pre-Funding Earnings so withdrawn such that the
Certificateholders will receive such amounts of interest due
on such Distribution Date.
(iv) On the Distribution Dates occurring in
_________, _________ and _________ of ____, the Owner Trustee
shall withdraw monies on deposit in the Capitalized Interest
Account, to the extent available, and deposit such amount in
the Collection Account for payment to the Holders of the
Securities on such Distribution Date, in an amount equal to
the excess, if any, of (x) the product of (1) the weighted
average of the Class A Rate and the Pass-Through Rate as of
the first day of the related Interest Accrual Period and (2)
the undisbursed funds (excluding investment earnings) in the
Pre-Funding Account (as of the last day of the related Due
Period) over (y) the amount if any Pre-Funding Earnings in the
Pre-Funding Account that are available to pay interest on the
Securities on such Distribution Date pursuant to clause (iii)
above. On such Distribution Dates, such funds, if any, shall
be used first to pay to the Noteholders, to the extent
available, the amount so withdrawn such that the Noteholders
will receive such amounts of
<PAGE>
interest due on such Distribution Date, and second, to pay to
the Certificateholders, to the extent available, the amount so
withdrawn such that the Certificateholders will receive such
amounts of interest due on such Distribution Date.
(v) On the last day of the Funding Period (or, if
such day is not a Business Day, on the next succeeding
Business Day) (but in no event later than the _________ ____
Distribution Date) the Servicer shall instruct the Owner
Trustee to withdraw from the Pre-Funding Account, and the
Owner Trustee shall so withdraw, the difference, if any,
between (A) the sum of the Original Pre-Funded Amount, and (B)
all amounts theretofore withdrawn from the Pre-Funding Account
with respect to the purchase and transfer to the Trust of
Subsequent Contracts, and the Owner Trustee shall (i) deposit
the Note Pre-Funded Percentage of such amounts into the Note
Distribution Account and (ii) deposit the Certificate
Pre-Funded Percentage of such amounts into the Certificate
Distribution Account. Such amounts will be used to prepay the
principal amount of the outstanding Notes and Certificates in
accordance with the Note Pre-Funded Percentage and the
Certificate Pre-Funded Percentage, respectively, on the
Distribution Date immediately following the Funding Period or
if the end of the Funding Period is on a Distribution Date,
then on such date.
(vi) Any Pre-Funding Earnings on deposit in the
Pre-Funding Account and all amounts remaining on deposit in
the Capitalized Interest Account on the last day of the
Funding Period which were not distributed to the
Securityholders pursuant to Section 5.01(b) shall be deposited
by the Owner Trustee in the Collection Account on such date
and shall constitute part of the Amount Available on the first
Distribution Date thereafter or, if the end of the Funding
Period is on a Distribution Date, then on such date.
(c) The Eligible Institution maintaining the accounts
described in this Section 5.01(a) and (b) shall, in the name of the
Trust invest amounts on deposit solely in Eligible Investments that
mature not later than one Business Day prior to the next succeeding
Distribution Date, in accordance with instructions provided to the
Trustees by the Servicer in writing (or, in the case of the Cash
Collateral Account, in accordance with instructions provided to the
Servicer by the Cash Collateral Depositor, on behalf of the Owner
Trustee and the Cash Collateral Depositor, in writing). Once such funds
are invested, such Eligible Institution shall not change the investment
of such funds. Notwithstanding the foregoing, amounts deposited in the
Collection Account from funds on deposit in the Pre-Funding Account
pursuant to Section 5.01(b) may not be invested at all. All Investment
Earnings from the investment of funds in the accounts described in this
Section 5.01(a) and (b) shall be deposited in the accounts in which
such Investment Earnings were earned; provided, however, Investment
Earnings from the investment of funds in the Cash Collateral Account
shall be retained in a separate interest subaccount of the Cash
Collateral Account and realized losses, if any, on amounts so invested
shall be charged against undistributed Investment Earnings from the
Cash Collateral Account.
<PAGE>
All Investment Earnings realized from any such investment of funds in
the Collection Account, Certificate Distribution Account and Note
Distribution Account (to the extent investment of such funds is
permitted hereunder) shall be for the benefit of the Servicer and may
be withdrawn by the Servicer on each Distribution Date pursuant to
subsection 5.05(b)(ii). All Investment Earnings realized from any such
investment of funds in the Pre-Funding Account and the Capitalized
Interest Account shall be distributed as provided in Section 5.01(b).
All Investment Earnings realized from any such investment of funds in
the Cash Collateral Account shall be distributed as provided in Section
5.06. An amount equal to any net loss on such investments shall be
deposited in the Collection Account, the Certificate Distribution
Account and Note Distribution Account by the Servicer out of its own
funds, without right to reimbursement, immediately as realized.
"Eligible Investments" are any of the following:
(i) direct obligations of, and obligations fully
guaranteed by, the United States of America, the Federal Home
Loan Mortgage Corporation (if then rated "Aaa" by Moody's),
the Federal National Mortgage Association, or any agency or
instrumentality of the United States of America the
obligations of which are backed by the full faith and credit
of the United States of America and which are non-callable;
(ii) demand and time deposits in, certificates of
deposit of, bankers' acceptances issued by, or federal funds
sold by any depository institution or trust company (including
the Trustees or any Affiliate of the Trustees, acting in their
commercial capacity) incorporated under the laws of the United
States of America or any state thereof or the District of
Columbia (or any domestic branch or agency of a foreign bank)
and subject to supervision and examination by federal and/or
state authorities, so long as, at the time of such investment
or contractual commitment providing for such investment, the
commercial paper or other short-term debt obligations of such
depository institution or trust company have been rated at
least "P-1" or higher from Moody's and "A-1+" from Standard &
Poor's (or, with respect to the investment of any amounts on
deposit in the Cash Collateral Account or the Certificate
Distribution Account, such Standard & Poor's rating shall be
at least "A-1"); or any other demand or time deposit or
certificate of deposit which is fully insured by the Federal
Deposit Insurance Corporation and which is rated at least
"P-1" by Moody's;
(iii) repurchase obligations with respect to any
security described in either clause (i) or (ii) above and
entered into with any institution whose commercial paper is at
least rated "P-1" by Moody's and at least "A-1+" by Standard &
Poor's (or, with respect to the investment of any amounts on
deposit in the Cash Collateral Account or the Certificate
Distribution Account, such Standard & Poor's rating shall be
at least "A-1");
(iv) securities bearing interest or sold at a
discount issued by any corporation incorporated under the laws
of the United States of America or any
<PAGE>
State thereof which have a credit rating of at least "A2" or
"P-1" from Moody's and at least "AA"- from Standard & Poor's
at the time of such investment (or, with respect to the
investment of any amounts on deposit in the Cash Collateral
Account or the Certificate Distribution Account, such Standard
& Poor's rating shall be at least "A");
(v) commercial paper having a rating of at least
"P-1" from Moody's and at least "A-1+" from Standard & Poor's
(or, with respect to the investment of any amounts on deposit
in the Cash Collateral Account or the Certificate Distribution
Account, such Standard & Poor's rating shall be at least
"A-1") at the time of such investment; and
(vi) money market funds which are rated "Aaa" by
Moody's and at least "AAAm" or "AAAm-G" by Standard & Poor's,
including funds which meet such rating requirements for which
the Trustees or an affiliate of the Trustees serves as an
investment advisor, administrator, shareholder servicing agent
and/or custodian or subcustodian, notwithstanding that (i)
such Trustee or an affiliate of such Trustee charges and
collects fees and expenses from such funds for services
rendered, (ii) such Trustee charges and collects fees and
expenses for services rendered pursuant to this instrument,
and (iii) services performed for such funds and pursuant to
this instrument may converge at any time. (The Seller and the
Servicer specifically authorize such Trustee or an affiliate
of such Trustee to charge and collect all fees and expenses
from such funds for services rendered to such funds, in
addition to any fees and expenses such Trustee may charge and
collect for services rendered pursuant to this instrument).
The Trustees may trade with themselves, each other, or with an
Affiliate on an arm's length basis in the purchase or sale of such
Eligible Investments.
SECTION 5.02 Collections; Applications.
(a) Deposits to Collection Account. Subject to subsections 5.02(b) and
(c), the Servicer shall deposit in the Collection Account, no later than two
Business Days after the Closing Date, any amounts representing payments received
on the Contracts on or after the Initial Cut-off Date through and including the
Closing Date. Subject to subsections 5.02(b) and (c), the Servicer shall deposit
in the Collection Account as promptly as practicable (not later than the second
Business Day) following the receipt thereof by the Servicer, all amounts
received in respect of the Contracts, including all loan payments from Obligors,
Net Liquidation Proceeds and Insurance Proceeds.
(b) Monthly Deposits to Collection Account. Notwithstanding anything in
this Agreement to the contrary, for so long as, and only so long as:
(i) CITSF shall remain the Servicer hereunder and
CITSF remains a direct or indirect subsidiary of CIT, if CIT
shall have and maintain a short-term
<PAGE>
debt rating of at least "A-1" by Standard & Poor's and either
a short-term debt rating of "P-1" or a long-term debt rating
of at least "A2" by Moody's, or
(ii) the Servicer obtains a letter of credit, surety
bond or insurance policy (the "Servicer Letter of Credit")
under which demands for payment will be made to secure timely
remittance of monthly collections to the Collection Account
and the Trustees are provided with a letter from each Rating
Agency to the effect that the utilization of such alternative
remittance schedule and any amendment required to be made to
this Agreement in connection therewith will not result in a
qualification, reduction or withdrawal of its then-current
rating of the Notes or Certificates,
the Servicer may make the deposits to the Collection Account specified
in subsection 5.05(a) on a monthly basis, but not later than the
Deposit Date immediately preceding the Distribution Date following the
last day of the Due Period within which such payments were processed by
the Servicer, in an amount equal to the net amount of such deposits and
payments which would have been made to the Collection Account during
such Due Period but for the provisions of this subsection 5.02(b). In
the event that the Servicer is permitted to make remittances of
collections to the Collection Account pursuant to Section 5.02(b)(ii),
this Agreement may be modified, to the extent necessary, without the
consent of any Securityholder.
(c) Amounts Not Required to be Deposited. The Servicer will
not be required to deposit in the Collection Account amounts relating
to the Contracts attributable to the following:
(i) amounts received with respect to each Contract
(or property acquired in respect thereof) that has been
purchased by CITSF or the Servicer pursuant to this Agreement
and that are not required to be distributed to
Securityholders,
(ii) net investment earnings on funds deposited in
the Collection Account, the Certificate Distribution Account,
the Note Distribution Account and the Cash Collateral Account,
(iii) amounts received as Late Fees,
(iv) amounts received in respect of Post Cut-off Date
Insurance Add-Ons,
(v) any repossession profits on Liquidated Contracts,
(vi) amounts received as liquidation proceeds, to the
extent the Servicer is entitled to reimbursement of
liquidation expenses relating thereto pursuant to Section
4.03, and
<PAGE>
(vii) amounts to be reimbursed to the Servicer in
respect of Nonrecoverable Advances.
(e) Permitted Withdrawals from the Collection Account. The
Indenture Trustee will, from time to time as provided herein, make
withdrawals from the Collection Account of amounts deposited in said
account pursuant to this Agreement that are attributable to the
Contracts for the following purposes:
(i) to make payments and distributions in the amounts
and in the manner provided for in Section 5.05;
(ii) to pay to CITSF or the Servicer with respect to
each Contract or property acquired in respect thereof that has
been purchased pursuant to Section 3.02, 4.02, 4.07, 11.01 or
11.02, all amounts received thereon and not required to be
distributed to Noteholders and Certificateholders;
(iii) to withdraw any amount deposited in the
Collection Account that was not required to be deposited
therein; and
(iv) to reimburse the Servicer out of liquidation
proceeds for liquidation expenses incurred by it, to the
extent such reimbursement is permitted under Section 4.03 and
to the extent such expenses have not otherwise been
reimbursed.
Since, in connection with withdrawals pursuant to clauses (ii) and (iv)
of this subsection 5.02(d), CITSF's entitlement thereto is limited to
collections or other recoveries on the related Contract, the Servicer
shall keep and maintain separate accounting, on a Contract by Contract
basis, for the purpose of justifying any withdrawal from the Collection
Account pursuant to such clauses. The Servicer shall keep and maintain
an accounting for the purpose of justifying any withdrawal from the
Collection Account pursuant to clause (iii) of this subsection 5.02(d).
SECTION 5.03 Monthly Advances. With respect to each Contract as to
which there has been an Interest Shortfall during the related Due Period (other
than an Interest Shortfall arising from either (i) a Principal Prepayment in
Full of a Contract or (ii) a Contract which has been subject to a Relief Act
Reduction during such Due Period), the Servicer shall make a Monthly Advance in
the amount of such Interest Shortfall, but only to the extent the Servicer, in
its good faith judgment, expects to recoup such Monthly Advance from subsequent
payments of interest by or on behalf of the Obligors, Net Liquidation Proceeds
or proceeds from Insurance Policies with respect to the related Contract. The
Servicer shall not be obligated to make any advance to the Trust in respect of
the principal component of scheduled payments on any Contract which is not paid
during the Due Period in which they are due.
<PAGE>
The Servicer shall deposit any such Monthly Advance into the Collection
Account in next-day funds or immediately available funds no later than 12:00
noon, New York time, on the related Deposit Date. The Servicer shall be
reimbursed for any such Monthly Advance by subsequent collections in respect of
interest on such Contract made by or on behalf of the Obligor, and Net
Liquidation Proceeds or proceeds from Insurance Policies with respect to such
Contract. If an unreimbursed Monthly Advance shall become a Nonrecoverable
Advance, the Servicer shall be reimbursed from collections on all the Contracts
in the Trust in the order of priority set forth in Section 5.05 hereof.
SECTION 5.04A Non-Reimbursable Payments. On each Deposit Date, the
Servicer shall make a deposit (a "Non-Reimbursable Payment") to the Collection
Account in respect of each Contract for which there has been an Interest
Shortfall during the preceding Due Period arising either from a Principal
Prepayment in Full or a Relief Act Reduction in respect of such Contract during
such Due Period, in an amount equal to the Interest Shortfall.
The Servicer shall deposit the aggregate amount of Non-Reimbursable
Payments in respect of a Due Period into the Collection Account at the time and
in the manner specified in Section 5.03. The Servicer shall not be entitled to
reimbursement for any Non-Reimbursable Payment.
SECTION 5.04B Additional Deposits. CITSF and the Servicer, as the case
may be, shall deposit into the Collection Account the aggregate Purchase Price
pursuant to Sections 3.02, 4.02, 4.07, 11.01 and 11.02, as applicable. All
remittances shall be made to the Collection Account, in next-day funds or
immediately available funds, no later than 12:00 noon, New York time, on the
related Deposit Date.
SECTION 5.05 Distributions.
(a) On or before the Determination Date preceding a
Distribution Date, the Servicer will make a determination and inform
the Indenture Trustee and the Owner Trustee of the following amounts
with respect to the preceding Due Period: (i) the aggregate amount of
collections on the Contracts; (ii) the aggregate amount of Monthly
Advances to be remitted by the Servicer; (iii) the aggregate Purchase
Price of Contracts to be purchased by CITSF or the Servicer; (iv) the
aggregate amount to be distributed as principal and interest on the
Notes on the related Distribution Date; (v) the aggregate amount to be
distributed as principal and interest on the Certificates on the
related Distribution Date; (vi) the Servicing Fee; (vii) the aggregate
amount of Non-Reimbursable Payments; (viii) the amounts required to be
withdrawn from the Cash Collateral Account for such Distribution Date
in accordance with Sections 5.05(b) and 5.06 hereof and the applicable
provisions of the Cash Collateral Agreement; (ix) any amounts to be
deposited into the Cash Collateral Account pursuant to Sections
5.05(b)(viii) and 5.06 hereof and the applicable provisions of the Cash
Collateral Agreement and (x) the aggregate amount of unreimbursed
Monthly Advances to be reimbursed to the Servicer.
<PAGE>
(b) On each Distribution Date the Indenture Trustee, based on
the instruction provided by the Servicer in subsection (a) above, will
withdraw the Amount Available from the Collection Account to make the
following payments (to the extent sufficient funds are available
therefor) in the following order and priority:
(i) the aggregate amount of any unreimbursed Monthly
Advances made by the Servicer (and which are then due to be
reimbursed to the Servicer) will be paid to the Servicer;
(ii) the Servicer Payment (to the extent not
previously retained by the Servicer) will be paid to the
Servicer;
(iii) the Class A Interest Distribution Amount,
including any Outstanding Class A Interest, will be deposited
into the Note Distribution Account, for payment to the
Noteholders;
(iv) on and prior to the Cross-over Date, the
Principal Distribution Amount, including any unpaid principal
due on prior Distribution Dates, will be deposited into the
Note Distribution Account, for payment to the Noteholders;
(v) the Certificate Interest Distribution Amount,
including any Outstanding Certificate Interest, will be
deposited into the Certificate Distribution Account, for
payment to the Certificateholders;
(vi) prior to the Cross-over Date, the Principal
Liquidation Loss Amount, if any, will be deposited into the
Certificate Distribution Account, for payment to the
Certificateholders;
(vii) on and after the Cross-over Date, the Principal
Distribution Amount (to the extent not paid to Noteholders on
the Cross-over Date), including any unpaid principal due on
prior Distribution Dates, will be deposited into the
Certificate Distribution Account, for payment to the
Certificateholders;
(viii) an amount equal to the lesser of (a) the
balance, if any, remaining after the payments in clauses (i)
through (vii) above and (b) the sum of (1) the amount by which
the Required Cash Collateral Amount with respect to the
following Distribution Date exceeds the amount on deposit in
the Cash Collateral Account (exclusive of Investment Earnings
on amounts on deposit therein) on the current Distribution
Date after giving effect to any withdrawals therefrom on such
Distribution Date, and (2) the amount, if any, by which (I)
the amount of payments of principal and interest required to
be made on the Loan on such Distribution Date pursuant to the
Cash Collateral Agreement exceeds (II) the Investment Earnings
accrued on the Cash Collateral Account since the preceding
Deposit Date, will be deposited in the Cash Collateral
Account, for payment to the
<PAGE>
Certificateholders and, the Cash Collateral Depositor in
accordance with the provisions of Section 5.06 hereof and the
Cash Collateral Agreement; and
(ix) the balance, if any, remaining after the
payments in clauses (i) through (viii) above shall be
distributed to [____________________].
(c) On each Distribution Date, the Indenture Trustee and the
Owner Trustee shall distribute all amounts in the Note Distribution
Account and the Certificate Distribution Account, respectively, to the
Noteholders and the Certificateholders, respectively as provided in the
Indenture and Trust Agreement respectively.
SECTION 5.06 Cash Collateral Account.
(a) The Owner Trustee shall, on the Closing Date, deposit or
cause to be deposited in the Cash Collateral Account by wire transfer
of immediately available funds the Initial Cash Collateral Amount from
the proceeds of the loan to be made on the Closing Date by the Cash
Collateral Depositor under the Cash Collateral Agreement. On each
Distribution Date, the Owner Trustee shall deposit or cause to be
deposited into the Cash Collateral Account by wire transfer of
immediately available funds any amount it receives pursuant to Section
5.05(b)(viii) of this Agreement, which amount shall be designated as
being for deposit in the Cash Collateral Account. The Owner Trustee
shall have the sole right to make withdrawals from the Cash Collateral
Account and to exercise all rights with respect to the Cash Collateral
Account Property. Amounts withdrawn from the Cash Collateral Account
and paid to the Certificateholders or the Cash Collateral Deposit, as
provided herein and in the Cash Collateral Agreement, shall not be
required to be reimbursed to the Cash Collateral Account by the
Trustees, the Securityholders, the Cash Collateral Depositor, any
Paying Agent or any transferee thereof.
(b) In the event that the sum of the Certificate Interest
Distribution Amount (including any Outstanding Certificate Interest),
Principal Liquidation Loss Amount and Principal Distribution Amount to
be distributed to the Certificateholders for any Distribution Date
exceeds the amount deposited in the Certificate Distribution Account
pursuant to Sections 5.05(b)(v), 5.05(b)(vi) and 5.05(b)(vii) of this
Agreement, respectively, on such Distribution Date, the Servicer shall
instruct the Owner Trustee in writing to withdraw or cause to be
withdrawn from the Cash Collateral Account on or before the related
Deposit Date the lesser of the amount of such excess and the Available
Cash Collateral Amount (the "Draw Amount"). The Owner Trustee shall
deposit such amount, or cause such amount to be deposited, into the
Certificate Distribution Account no later than 12:00 noon, New York
City time, on such Deposit Date.
(c) On or before the Deposit Date immediately preceding the
Certificate Final Distribution Date, the Servicer shall instruct the
Owner Trustee to withdraw or cause to be withdrawn from the Cash
Collateral Account an amount (the "Final Draw Amount") equal to the
lesser of (i) the Certificate Balance on the Certificate Final
Distribution Date,
<PAGE>
after giving effect to distributions of the Principal Distribution
Amount to Certificateholders on the Certificate Final Distribution Date
pursuant to Section 5.05(b)(vii) of this Agreement and (ii) the amount
on deposit in the Cash Collateral Account, excluding Investment
Earnings with respect thereto, after giving effect to any withdrawal
from the Cash Collateral Account pursuant to clause (b) of this Section
5.06. The Owner Trustee shall deposit such amount, or cause such amount
to be deposited, into the Certificate Distribution Account no later
than 12:00 noon, New York City time, on such Deposit Date.
(d) Investment Earnings on amounts on deposit in the Cash
Collateral Account and Cash Collateral Account Surplus on deposit in
the Cash Collateral Account shall be distributed to the Cash Collateral
Depositor to the extent required by Sections 3(a) and (b) of the Cash
Collateral Agreement.
(e) If at any time the Cash Collateral Account ceases to be
maintained at an Eligible Institution as required by Section 5.01(a),
the Owner Trustee shall within 10 Business Days (or such longer period
not to exceed 30 calendar days, as to which each Rating Agency may
consent) establish a new Cash Collateral Account meeting the conditions
specified in Section 5.01(a) and shall transfer any and all cash and
investments in the Cash Collateral Account to such new Cash Collateral
Account.
SECTION 5.07 Net Deposits. CITSF (in whatever capacity) may make the
remittances required pursuant to this Agreement, net of amounts to be retained
by it or distributed to it (also in whatever capacity), pursuant to this
Agreement, for so long as (a) it shall be the Servicer and (b) it will be
entitled, pursuant to Section 5.02, to make deposits on a monthly basis, rather
than a daily basis. Nonetheless, the Servicer shall account for all of the
above-described amounts as if such amounts were deposited and distributed
separately.
SECTION 5.08 Statements to Securityholders. On each Distribution Date,
the Servicer shall prepare and will include with the distribution to each
Securityholder, a statement setting forth for the related Due Period the
following information:
(a) the amount of the distribution allocable to principal of
the Notes and to the Certificate Balance of the Certificates, including
any overdue principal;
(b) the amount of the distribution allocable to interest on or
with respect to each class of Securities, including any overdue
interest;
(c) the Pool Balance, the Note Pool Factor and the Certificate
Pool Factor as of the end of the related Due Period;
(d) the Servicer Payment for such Distribution Date;
(e) the amount of Monthly Advances and Non-Reimbursable
Payments on such date;
<PAGE>
(f) 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;
(g) during the Funding Period, the amount of funds on deposit
in the Pre-Funding Account;
(h) during the Funding Period, the number and aggregate
principal balance of Subsequent Contracts;
(i) during the Funding Period, the number and aggregate
principal balance of Subsequent Contracts purchased by the Trust on the
related Distribution Date;
(j) the aggregate outstanding principal balance of the Notes
as of such Distribution Date after giving effect to any distributions
on such Distribution Date;
(k) the Certificate Balance as of such Distribution Date after
giving effect to any distributions thereon and reductions thereto on
such Distribution Date;
(l) the Draw Amount, if any, and the Final Draw Amount (if
applicable) with respect to such Distribution Date;
(m) the Available Cash Collateral Amount, after giving effect
to any deposit to or withdrawal from the Cash Collateral Account with
respect to such Distribution Date, and such amount expressed as a
percentage of the Pool Balance; and
(n) the Required Cash Collateral Amount.
Within a reasonable period of time after the end of each calendar year,
but not later than the latest date permitted by law, the Servicer shall
furnish or cause to be furnished to each Person who at any time during
the calendar year was a Securityholder a statement containing the
information with respect to interest accrued and principal paid on its
Securities during such calendar year. Such obligation shall be deemed
to have been satisfied to the extent that substantially comparable
information shall be provided to the Securityholders pursuant to any
requirements of the Code as from time to time in force.
ARTICLE VI
[RESERVED]
ARTICLE VII
<PAGE>
THE COMPANY
SECTION 7.01 Representations of Company. The Company hereby makes the
following representations as to itself on which the Owner Trustee and the
Indenture Trustee on behalf of the Trust shall rely in accepting the Contracts
in trust and authenticating the Certificates and the Notes, respectively. The
representations shall speak as of the execution and delivery of this Agreement,
and shall survive the sale of the Contracts to the Trust.
(a) Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the corporate
power to own its assets and to transact the business in which it is
currently engaged. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in
which the character of the business transacted by it or properties
owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or other) of the
Company or on the Certificates or the transactions contemplated by this
Agreement.
(b) Authorization; Binding Obligations. The Company has the
power and authority to make, execute, deliver and perform this
Agreement and all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement. When
executed and delivered, this Agreement will constitute the legal, valid
and binding obligation of the Company enforceable in accordance with
its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable
remedies.
(c) No Consent Required. The Company is not required to obtain
the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement the failure of which so to obtain would have a material
adverse effect on the business, properties, assets or condition
(financial or otherwise) of the Company or on the Certificates or the
transactions contemplated by this Agreement.
(d) No Violations. The execution, delivery and performance of
this Agreement by the Company will not violate any provision of any
existing law or regulation or any order or decree of any court or the
Articles of Incorporation or Bylaws of the Company, or constitute a
material breach of any mortgage, indenture, contract or other agreement
to which the Company is a party or by which the Company may be bound.
(e) Litigation. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently
pending, or to the knowledge of the Company threatened, against the
Company or any of its properties or with respect to this
<PAGE>
Agreement or the Certificates which, if adversely determined, would in
the opinion of the Company have a material adverse effect on the
transactions contemplated by this Agreement.
SECTION 7.02 Merger or Consolidation of Company. Any Person into which
the Company may be merged or consolidated, or any corporation resulting from any
merger or consolidation to which the Company shall be a party, or any Person
succeeding to the business of the Company, shall be the successor of the Company
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Company shall promptly notify each Rating Agency of any
such merger to which it is a party and such merger shall satisfy the Rating
Agency Condition.
SECTION 7.03 Limitation on Liability of the Company and Others.
(a) Neither the Company nor any of the directors, officers,
employees or agents of the Company shall be under any liability to the
Owner Trustee, the Indenture Trustee, the Certificateholders or the
Noteholders for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in
judgment; notwithstanding anything herein to the contrary, no party to
this Agreement shall have any recourse against the Company for any
actions taken, or failed to be taken, by the Company.
(b) The Company and any director, officer, employee or agent
of the Company may rely in good faith on any document of any kind prima
facie properly executed and submitted by any Person respecting any
matters arising hereunder.
(c) The Company shall not be under any obligation to appear
in, prosecute or defend any legal action which arises under this
Agreement.
SECTION 7.04 The Company May Own Securities. The Company and any Person
controlling, controlled by, or under common control with the Company may in its
individual or any other capacity become the owner or pledgee of Notes or
Certificates with the same rights as it would have if it were not the Company or
an Affiliate thereof, except as otherwise provided in the definition of
"Noteholder" or "Certificateholder", respectively. Notes and Certificates so
owned by or pledged to the Company or such controlling or commonly controlled
Person shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority or distinction as among all of the
Notes and Certificates.
SECTION 7.05 Indebtedness of and Sale of Assets by the Company.
(a) The Company will not incur any material indebtedness
(other than indebtedness which is contemporaneously repaid upon the
issuance of securities by the Company or by selling any assets in
connection therewith to the extent permitted by its Certificate of
Incorporation) nor will it sell all or substantially all of its assets,
if either such action would result in the downgrading by Moody's of any
outstanding securities of
<PAGE>
the Company or any trust or other entity of which the Company is the
settlor or depositor, which securities are then rated by Moody's;
provided, however, nothing contained in this Agreement shall prohibit
the Company from issuing any securities or acting as the settlor or
depositor of any trust or other entity (or selling any assets in
connection therewith) to the extent permitted by its Certificate of
Incorporation.
(b) Prior to the issuance of any securities by the Company,
the Company shall give at least 5 days' prior written notice to Moody's
with a copy of the Prospectus or Preliminary Prospectus Supplement and,
on the issuance date, a copy of the agreements pertaining to such
securities of the type in the definition of Basic Documents.
ARTICLE VIII
THE SERVICER; REPRESENTATIONS AND INDEMNITIES
SECTION 8.01 Representations of CITSF. CITSF hereby makes the following
representations on which the Owner Trustee and the Indenture Trustee on behalf
of the Trust shall rely in accepting the Contracts in trust and authenticating
the Certificates and the Notes, respectively. The representations shall speak as
of the execution and delivery of this Agreement, and shall survive the sale of
the Contracts to the Trust.
(a) Organization and Good Standing. CITSF is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and has the corporate power to own
its assets and to transact the business in which it is currently
engaged. CITSF is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure so to
qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of CITSF or on
the Certificates or the transactions contemplated by the Agreement.
(b) Authorization; Binding Obligations. CITSF has the power
and authority to make, execute, deliver and perform this Agreement and
all of the transactions contemplated under this Agreement, and has
taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. When executed and
delivered, this Agreement will constitute the legal, valid and binding
obligation of CITSF enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally
and by the availability of equitable remedies.
(c) No Consent Required. CITSF is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement the failure
<PAGE>
of which so to obtain would have a material adverse effect on the
business, properties, assets or condition (financial or otherwise) of
CITSF or on the Certificates or the transactions contemplated by the
Agreement.
(d) No Violations. The execution, delivery and performance of
this Agreement by CITSF will not violate any provision of any existing
law or regulation or any order or decree of any court or the Articles
of Incorporation or Bylaws of CITSF, or constitute a material breach of
any mortgage, indenture, contract or other agreement to which CITSF is
a party or by which CITSF may be bound.
(e) Litigation. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently
pending, or to the knowledge of CITSF threatened, against CITSF or any
of its properties or with respect to this Agreement or the Certificates
which, if adversely determined, would in the opinion of CITSF have a
material adverse effect on the transactions contemplated by this
Agreement.
SECTION 8.02 Liability of Servicer, Indemnities. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer, CITSF or the Company under this Agreement and shall
have no other obligations or liabilities hereunder.
(a) The Servicer shall defend, indemnify, and hold harmless
the Owner Trustee, the Indenture Trustee, the Trust, the
Certificateholders and the Noteholders from and against any and all
costs, expenses, losses, damages, claims, and liabilities, arising out
of or resulting from the negligent use or operation by the Servicer of
a Financed Boat, to the extent such loss is not reimbursed pursuant to
any Insurance Policy, the Servicer's Errors and Omission Policy or any
fidelity bond.
(b) Subject to Section 8.04(a), the Servicer will defend and
indemnify the Owner Trustee, the Indenture Trustee, the Trust, the
Certificateholders and the Noteholders against any and all costs,
expenses, losses, damages, claims and liabilities arising out of or
resulting from any negligent action taken, or negligently failed to be
taken, by the Servicer with respect to any Financed Boat, to the extent
such loss is not reimbursed pursuant to any Insurance Policy, the
Servicer's Errors and Omission Policy or any fidelity bond.
(c) The Servicer agrees to pay, and shall indemnify, defend,
and hold harmless the Owner Trustee, the Indenture Trustee, the Trust,
the Certificateholders and the Noteholders from and against, any taxes
that may at any time be asserted with respect to, and as of the date
of, the transfer of the Contracts to the Trust, including, without
limitation, any sales, gross receipts, personal or real property,
privilege or license taxes (but not including any federal, state or
other taxes arising out of the creation of the Trust and the issuance
of the Notes and Certificates or distributions with respect thereto)
and costs, expenses and reasonable counsel fees in defending against
the same.
<PAGE>
(d) The Servicer shall indemnify, defend, and hold harmless
the Owner Trustee, the Indenture Trustee, the Trust, the
Certificateholders and the Noteholders from and against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent
that such cost, expense, loss, claim, damage, or liability arose out
of, or was imposed upon such Persons, through the willful misfeasance,
negligence, or bad faith of the Servicer in the performance of its
duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
(e) The Servicer shall indemnify, defend, and hold harmless
from and against, and pay to the Trustees all costs, expenses, losses,
claims, damages, and liabilities arising out of or incurred in
connection with the acceptance or performance of the trusts and duties
herein contained in accordance with the terms and conditions herein and
in the Indenture and the Trust Agreement, as the case may be, except to
the extent that such cost, expense, loss, claim, damage or liability:
(i) shall be due to the willful misfeasance, gross negligence or bad
faith of such Trustee; (ii) relates to any tax other than the taxes
with respect to which the Company shall be required to indemnify such
Trustee pursuant to this Agreement; (iii) shall arise from such
Trustee's breach of any of its representations or warranties set forth
in the Trust Agreement or the Indenture, as applicable; (iv) shall be
one as to which the Company is required to indemnify such Trustee or
(v) shall arise out of or be incurred in connection with the acceptance
or performance by such Trustee of the duties of successor Servicer
hereunder.
Indemnification under this Section 8.02 shall include reasonable fees
and expenses of counsel in any litigation appointed by the Servicer and
reasonably satisfactory to the indemnitee, provided that the Servicer shall only
be required to pay the fees and expenses of one counsel in any single litigation
(or related proceedings) for all indemnitees; provided, however, if in the
written opinion of counsel reasonably satisfactory to the Servicer, the
interests of the Servicer and the Indenture Trustee conflict such that the
Servicer and the Indenture Trustee may not both be represented by such counsel,
upon ten days prior written notice to the Servicer, the Indenture Trustee may
hire one other counsel, and the Indemnification under this Section 8.02 shall
also include the reasonable fees and expenses of such other counsel. If the
Servicer or the Company shall have made any indemnity payments pursuant to this
Section 8.02 and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts to the Servicer and/or
the Company, without interest. The indemnities under this Section 8.02 shall
survive the resignation or removal of the Trustees, or the termination of the
Trust Agreement and this Agreement.
SECTION 8.03 Merger or Consolidation of Servicer. Any person 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
shall be a party, or any Person succeeding to the business of the Servicer
(which Person assumes the obligations of the Servicer), shall be the successor
of the Servicer hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that the successor or surviving
Person to the Servicer shall
<PAGE>
satisfy the criteria set forth in the definition of an Eligible Servicer. The
Servicer shall promptly notify each Rating Agency of any such merger to which it
is a party.
SECTION 8.04 Limitation on Liability of Servicer and Others.
(a) Neither the Servicer nor the Company, nor any of the
directors, officers, employees or agents of the Servicer or the Company
shall be under any liability to the Trustees, the Trust or the
Securityholders for any action taken or for refraining from the taking
of any action in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect
the Servicer, the Company or any such Person against any breach of
warranties or representations made herein, or failure to perform its or
his obligations in compliance with any standard of care set forth in
this Agreement, or any liability which otherwise would be imposed by
reason of any breach of the terms and conditions of this Agreement.
(b) The Servicer and any director, officer, employee or agent
of the Servicer may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting
any matters arising hereunder.
(c) Except as arises from its duties as Servicer hereunder,
the Servicer shall not be under any obligation to appear in, prosecute
or defend any legal action which arises under this Agreement and which
in its opinion may involve it in any expenses or liability; provided,
however, that the Servicer and the Company may in its discretion
undertake any such action which it may deem necessary or desirable in
respect of this Agreement and the rights and duties of the parties
hereto. In such event, the legal expenses and costs of such action and
any liability resulting therefrom shall be expenses, costs and
liabilities of the Trust payable from the Collection Account and the
Servicer and the Company shall be entitled to be reimbursed therefor
out of the Collection Account.
SECTION 8.05 Servicer Not To Resign. The Servicer shall not resign from
its obligations and duties under this Agreement except upon determination that
the performance of its duties shall no longer be permissible under applicable
law, compliance with which could not be realized without material adverse impact
on the Servicer's financial condition. Notice of any such determination
permitting the resignation of the Servicer shall be communicated to the Trustees
and the Rating Agencies at the earliest practicable time (and, if such
communication is not in writing, shall be confirmed in writing at the earliest
practicable time) and any such determination permitting the resignation of the
Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to
the Trustee. No such resignation shall become effective until the Indenture
Trustee or a successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 9.02.
ARTICLE IX
<PAGE>
EVENTS OF TERMINATION
SECTION 9.01 Events of Termination.
"Event of Termination" means the occurrence of any of the following:
(a) Any failure by the Servicer to make any deposit into an
account required to be made hereunder and the continuance of such
failure for a period of five Business Days after the Servicer has
become aware that such deposit was required;
(b) Failure on the Servicer's part to observe or perform in
any material respect any covenant or agreement in this Agreement (other
than pursuant to Section 9.01(a)), which failure continues unremedied
for 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Servicer by the Indenture Trustee, the Owner Trustee or the Company or
to the Servicer, the Company and the Trustees by Holders of Notes or
Certificates evidencing not less than 25% of the aggregate outstanding
principal balance of the Notes, or the outstanding Certificate Balance,
respectively;
(c) Any assignment or delegation by the Servicer of its duties
or rights hereunder except as specifically permitted hereunder, or any
attempt to make such an assignment or delegation;
(d) A court or other governmental authority having
jurisdiction in the premises shall have entered a decree or order for
relief in respect of the Servicer in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Servicer, as the
case may be, or for any substantial liquidation of its affairs, and
such order remains undischarged and unstayed for at least 60 days;
(e) The Servicer shall have commenced a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have consented to the entry of an order
for relief in an involuntary case under any such law, or shall have
consented to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian or sequestrator (or other
similar official) of the Servicer or for any substantial part of its
property, or shall have made any general assignment for the benefit of
its creditors, or shall have failed to, or admitted in writing its
inability to, pay its debts as they become due, or shall have taken any
corporate action in furtherance of the foregoing; or
(f) The failure of the Servicer to be an Eligible Servicer.
If an Event of Termination has occurred and is continuing, the
Indenture Trustee may or at the written direction of Holders of Notes evidencing
a majority of the aggregate outstanding
<PAGE>
principal balance of the Notes (or, if the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, by the Owner Trustee
or Holders of Certificates evidencing a majority or more of the Certificate
Balance) shall, unless prohibited by applicable law, terminate all (but not less
than all) of the Servicer's management, administrative, servicing and collection
functions (such termination being herein called a "Service Transfer"). On
receipt of such notice (or, if later, on a date designated therein), all
authority and power of the Servicer under this Agreement, whether with respect
to the Contracts, the Contract Files or otherwise (except with respect to the
Collection Account, the transfer of which shall be governed by Section 9.06),
shall pass to and be vested in the Indenture Trustee pursuant to and under this
Section 9.01 (however, if all of the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, such authority shall
pass to and be vested in the Owner Trustee pursuant to and under this Section
9.01); and, without limitation, such Trustee is authorized and empowered to
execute and deliver on behalf of the Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments (including, without limitation,
documents required to make such Trustee or a successor servicer the sole
lienholder or legal title holder of record of each Financed Boat), and to do any
and all acts or things necessary or appropriate to effect the purposes of such
notice of termination. Each of CITSF and the Servicer agrees to cooperate with
such Trustee in effecting the termination of the responsibilities and rights of
the Servicer hereunder, including, without limitation, the transfer to such
Trustee for administration by it of all cash amounts which shall at the time be
held by the Servicer for deposit, or have been deposited by the Servicer, in the
Collection Account, or for its own account in connection with its services
hereafter or thereafter received with respect to the Contracts and the execution
of any documents required to make such Trustee or a successor Servicer the sole
lienholder or legal title holder of record in respect of each Financed Boat. The
Servicer shall be entitled to receive any other amounts which are payable to the
Servicer under this Agreement, at the time of the termination of its activities
as Servicer, to the extent that funds in the Collection Account are available
for the payment thereof without reducing the amount of distributions that would
be made to Holders of the Notes and Certificates. The Servicer shall transfer to
the new Servicer (i) the Servicer's records relating to the Contracts in such
electronic form as the new Servicer may reasonably request and (ii) the
Contracts and any of the Contract Files in the Servicer's possession.
SECTION 9.02 Indenture Trustee to Act; Appointment of Successor. On and
after the time the Servicer receives a notice of termination pursuant to Section
9.01 or a notice of determination pursuant to Section 8.05, the Indenture
Trustee shall be the successor in all respects to the Servicer in its capacity
as Servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof, and
the Servicer shall be relieved of such responsibilities, duties and liabilities
arising after such Service Transfer; provided, however, that (i) the Indenture
Trustee will not assume any obligations of CITSF pursuant to Section 3.02 or be
obligated to deposit any net loss on an investment directed by a predecessor
Servicer pursuant to Section 5.01(b), and (ii) the Indenture Trustee shall not
be liable for any acts or omissions of the Servicer occurring prior to such
Service Transfer or for any breach by CITSF of any of its representations and
warranties contained herein or in any related document or agreement. The
Indenture Trustee and any successor Servicer shall have no
<PAGE>
responsibility for failure of CITSF and any predecessor Servicer to deliver to
the Indenture Trustee or such successor Servicer any property or funds belonging
to the Trust, including but not limited to the funds, records, Contracts and
Contract Files. As compensation therefor, the Indenture Trustee shall, except as
provided in this Section 9.02, be entitled to such compensation as the Servicer
would have been entitled to hereunder if no such notice of termination had been
given. Notwithstanding the above, the Indenture Trustee may, if it shall be
unwilling so to act, or shall, if it is legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, an Eligible Servicer as
the successor to the Servicer hereunder in the assumption of all or any part of
the responsibilities, duties or liabilities of the Servicer hereunder. Pending
appointment of a successor to the Servicer hereunder, unless the Indenture
Trustee is prohibited by law from so acting, the Indenture Trustee shall act in
such capacity as hereinabove provided. In connection with such appointment and
assumption, the Indenture Trustee may make such arrangements for the
compensation of such successor out of payments on Contracts as it and such
successor shall agree; provided, however, that no such compensation shall,
without the written consent of 100% of the Securityholders, be in excess of the
Servicing Fee. The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession.
SECTION 9.03 Notification to Securityholders.
(a) Promptly following the occurrence of any Event of
Termination, the Servicer shall give written notice thereof to the
Trustees, the Cash Collateral Depositor (so long as the Loan under the
Cash Collateral Agreement is still outstanding) and the Securityholders
at their respective addresses appearing on the Certificate Register and
the Note Register and to each Rating Agency.
(b) Within 10 days following any termination or appointment of
a successor to the Servicer pursuant to this Article IX, the Trustees
shall give written notice thereof to the Cash Collateral Depositor (so
long as the Loan under the Cash Collateral Agreement is still
outstanding) and to the Certificateholders and Noteholders at their
respective addresses appearing on the Certificate Register and the Note
Register.
(c) The Indenture Trustee shall give written notice to each
Rating Agency at least 30 days prior to the date upon which any
Eligible Servicer (other than the Indenture Trustee) is to assume the
responsibilities of Servicer pursuant to Section 9.02, naming such
successor Servicer.
SECTION 9.04 Rights to Direct Trustees and Waiver of Events of
Termination. Holders of Notes or Certificates evidencing not less than 25% of
the aggregate outstanding principal amount of the Notes or 25% of the
Certificate Balance, respectively, shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Indenture Trustee or the Owner Trustee, respectively, or exercising any trust or
power conferred on the Trustees; provided, however, that, subject to Section
10.01, the Trustees shall have the right to decline to follow any such direction
which such Trustee (being advised by counsel) determines that the action so
directed may not lawfully be taken, or if such Trustee in good faith
<PAGE>
shall, by a Responsible Officer or Officers of such Trustee, determine that the
proceedings so directed would be illegal or involve it in personal liability or
be unduly prejudicial to the rights of Noteholders or Certificateholders not
parties to such direction; provided further that nothing in this Agreement shall
impair the right of the Trustees to take any action deemed proper by such
Trustee and which is not inconsistent with such direction by the Noteholders or
Certificateholders.
Holders of Notes evidencing not less than a majority of the aggregate
outstanding principal balance of the Notes (or, if all of the Notes have been
paid in full and the Indenture has been discharged in accordance with its terms,
Certificates evidencing not less than a majority of the Certificate Balance)
may, on behalf of the Noteholders and Certificateholders, waive any past Event
of Termination hereunder and its consequences (except a continuing failure to
make any required deposits to or payments from the Collection Account and the
other accounts contemplated herein in accordance with this Agreement, which
default cannot be waived without the consent of all Securityholders) and, upon
any such waiver, such Event of Termination shall cease to exist and shall be
deemed to have been cured for every purpose of this Agreement; but no such
waiver shall extend to any subsequent or other Event of Termination or impair
any right consequent thereon.
SECTION 9.05 Effect of Transfer.
(a) After the Service Transfer, the Indenture Trustee or new
Servicer may notify the Obligors to make payments directly to the new
Servicer that are due under the Contracts after the effective date of
the Service Transfer.
(b) After the Service Transfer, the replaced Servicer shall
have no further obligations with respect to the management,
administration, servicing or collection of the Contracts and the new
Servicer shall have all of such obligations, except that the replaced
Servicer shall remain liable for any liability of the replaced Servicer
hereunder that was already accrued at the time of the Service Transfer
and except that the replaced Servicer will transmit or cause to be
transmitted directly to the new Servicer for its own account, promptly
on receipt and in the same form in which received, any amounts
(properly endorsed where required for the new Servicer to collect them)
received as payments upon or otherwise in connection with the
Contracts.
(c) A Service Transfer shall not affect the rights and duties
of the parties hereunder (including but not limited to the indemnities
and other agreements of the Servicer and CITSF) other than those
relating to the management, administration, servicing or collection of
the Contracts.
ARTICLE X
[RESERVED]
<PAGE>
ARTICLE XI
OPTIONAL PURCHASE AND AUCTION SALE
SECTION 11.01 Optional Purchase of All Contracts. On any Distribution
Date, following any Record Date as of which the Pool Balance is 10% or less of
the Initial Pool Balance, CITSF shall have the option to purchase the Contracts
(including the Defaulted Contracts), any Financed Boats in the Trust relating to
Defaulted Contracts and all rights relating to the Contracts under all Insurance
Policies. To exercise such option, CITSF shall notify the Trustees and the
Depository, if any, in writing, no later than the 20th day of the month
preceding the month as of which such purchase is to be effected occurs;
provided, however, that CITSF shall not effect any such purchase if the
long-term unsecured obligations of its parent are rated less than "Baa3" by
Moody's or less than "BBB" by Standard & Poor's, unless the Trustees shall have
received an Opinion of Counsel acceptable to it that payment of the purchase
price to the Securityholders will not constitute a voidable preference or a
fraudulent transfer under the United States Bankruptcy Code. CITSF shall effect
such purchase by depositing, in accordance with Section 5.04, the aggregate
Purchase Price of the Contracts (less any other amounts deposited, or to be
deposited, by the Servicer in the Collection Account with respect to the
Contract pursuant to Section 5.02) plus the appraised value of any other
property held by the Trust and purchased by CITSF (less liquidation expenses) in
the Collection Account on the Deposit Date immediately following the month in
which such purchase is to be effected; provided, however, in no event shall the
amount so deposited, when added to the amounts on deposit in the Collection
Account on such date and available for distribution to Securityholders on the
next Distribution Date, be less than the amount required to pay all accrued and
unpaid interest on the Notes, the remaining principal balance of the Notes,
accrued and unpaid interest on the Certificates and the Certificate Balance,
after giving effect to the reimbursement of the Servicer for all unpaid Monthly
Advances and the Servicer Payment. The effective date of such purchase shall be
the last day of the Due Period which ends in the month referred to in the
preceding sentence.
SECTION 11.02 Mandatory Sale of all Contracts. In accordance with the
procedures and schedule set forth in Exhibit H hereto (the "Auction
Procedures"), the Indenture Trustee (or, if the Notes have been paid in full and
the Indenture shall have been discharged in accordance with its terms, the Owner
Trustee) shall conduct an auction (the "Auction") of the Contracts remaining in
the Trust (such Contracts hereinafter referred to as the "Auction Property") in
order to effect a termination of the Trust pursuant to Section 7.1 of the Trust
Agreement on the second Distribution Date succeeding the Record Date on which
the Pool Balance is 5% or less of the Initial Pool Balance. Such Auction shall
be conducted within 10 days following the Distribution Date following the Record
Date on which the Pool Balance is 5% or less of the Initial Pool Balance. CITSF
and the Company may, but shall not be required to, bid at the Auction. Such
Trustee shall sell and transfer the Auction Property to the highest bidder
therefor at the Auction provided that:
(a) the Auction has been conducted in accordance with the
Auction Procedures;
<PAGE>
(b) such Trustee has received good faith bids for the Auction
Property from two prospective purchasers that are considered by such
Trustee, in its sole discretion, to be competitive participants in the
market for marine installment sale contracts;
(c) a financial advisor, as advisor to such Trustee (in such
capacity, the "Advisor"), shall have advised such Trustee in writing
that at least two of such bidders (including the winning bidder) are
participants in the market for marine installment sale contracts
willing and able to purchase the Auction Property;
(d) the highest bid in respect of the Auction Property is not
less than the aggregate fair market value of the Auction Property (as
determined by such Trustee in its sole discretion);
(e) any bid submitted by CITSF, the Company or any affiliate
of either of them shall reasonably represent the fair market value of
the Auction Property, as independently verified and represented in
writing by a qualified independent third party evaluator (which may
include the Advisor or an investment banking firm) selected by such
Trustee; and
(f) the highest bid would result in proceeds from the sale of
the Auction Property which will be at least equal to the sum of (A) the
greater of (1) 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 (2) an amount
that, when added to amounts on deposit in the Collection Account and
available for distribution to Securityholders on the second
Distribution Date following the consummation of such sale (the
"Liquidation Distribution Date"), would result in proceeds sufficient
to distribute to Securityholders the amounts of interest due to the
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
and the Certificate Balance, and (B) the sum of (1) an amount
sufficient to reimburse the Servicer for any unreimbursed Monthly
Advances for which it is entitled to reimbursement and (2) the
Servicing Fee payable on such second Distribution Date, including any
unpaid Servicing Fees with respect to one or more prior Due Periods.
Provided that all of the conditions set forth in clauses (a) through
(f) have been met, such Trustee shall sell and transfer the Auction Property,
without representation, warranty or recourse, to such highest bidder in
accordance with and upon completion of the Auction Procedures. Such Trustee
shall deposit the purchase price for the Auction Property in the Collection
Account at least one Business Day prior to such second succeeding Distribution
Date. In addition, the Auction must stipulate that the Servicer be retained to
service the Contracts on terms substantially similar to those in the Agreement.
In the event that any of such conditions are not met or such highest bidder
fails or refuses to comply with any of the Auction Procedures, such Trustee
shall decline to consummate such sale and transfer. In the event such sale and
transfer is not consummated in accordance with the foregoing, however, such
Trustee may from time to
<PAGE>
time in the future, but shall not under any further obligation to, solicit bids
for sale of the assets of the Trust Fund upon the same terms and conditions as
set forth above.
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 pursuant to this Section
11.02.
If applicable, the Indenture Trustee shall provide notice to the Owner
Trustee of the termination of the Trust pursuant to this Section 11.02 as soon
as practicable upon the consummation of the mandatory sale of the Contracts
pursuant to this Section 11.02.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.01 Amendment. This Agreement may be amended in writing by
the Company, the Servicer and the Owner Trustee (and, in the event such
amendments affect the Indenture Trustee, the Indenture Trustee) without prior
notice to or the consent of any of the Securityholders, and in the case of
clauses (vi) and (vii), upon satisfaction of the Rating Agency Condition, (i) to
correct manifest error or cure any ambiguity, (ii) to correct or supplement any
provisions herein or therein which may be inconsistent with any other provisions
herein or therein, as the case may be, (iii) to add or amend any provisions as
requested by Moody's or Standard & Poor's in order to maintain or improve any
rating of the Notes or Certificates (it being understood that, after the Closing
Date, neither the Owner Trustee, the Indenture Trustee, the Company nor CITSF is
obligated to maintain or improve such rating); (iv) to add to the covenants,
restrictions or obligations of the Company, the Servicer, the Owner Trustee or
the Indenture Trustee; (v) to evidence and provide for the acceptance of the
appointment of a successor trustee with respect to the Owner Trust Estate and
add to or change any provisions as shall be necessary to facilitate the
administration of the trusts under the Trust Agreement by more than one trustee
pursuant to Article VI of the Trust Agreement or (vi) to add, change or
eliminate any other provisions provided that an amendment pursuant to this
clause (vi), shall not, as evidenced by an Opinion of Counsel for the Servicer
or the Company, adversely affect in any material respect the interests of the
Trust, any Noteholder or any Certificateholder.
This Agreement may also be amended in writing from time to time by the
Company, the Servicer and the Owner Trustee (and, in the event such amendments
affect the Indenture Trustee, the Indenture Trustee), with the consent of
Holders of Certificates evidencing not less than a majority of the Certificate
Balance and the consent of Holders of Notes evidencing not less than a majority
of the aggregate outstanding principal balance of the Notes, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Certificateholders or Noteholders, respectively; provided, however, that no such
amendment shall (i) increase or reduce in any
<PAGE>
manner the amount of, or accelerate or delay the timing of, collections of
payments of Contracts, or distributions that shall be required to be made on any
Certificate or Note, respectively, the Contract Rate, the Pass-Through Rate or
the Class A Rate or (ii) reduce the aforesaid percentage required to consent to
any such amendment, without the consent of the Holders of all Certificates and
Notes then outstanding.
Notwithstanding the foregoing, no amendment materially affecting the
rights of the Cash Collateral Depositor shall be made without the consent of the
Cash Collateral Depositor (so long as the Loan under the Cash Collateral
Agreement is still outstanding).
Promptly after the execution of any amendment or consent pursuant to
this Section, the Owner Trustee shall furnish written notification of the
substance of such amendment to each Certificateholder and each Noteholder (but
only if such amendment is pursuant to the second paragraph of this Section
12.01) and (so long as the Loan under the Cash Collateral Agreement is still
outstanding) the Cash Collateral Depositor and, in all cases, to each Rating
Agency, which notification will be prepared by the Servicer and delivered to
such Trustee.
It shall not be necessary for the consent of the Certificateholders,
the Noteholders or the Cash Collateral Depositor pursuant to this Section 12.01
to approve the particular form of any proposed amendment or consent, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders, the Noteholders or the Cash Collateral
Depositor, as the case may be, shall be subject to such reasonable requirements
as such Trustee may prescribe.
Such Trustee may, but shall not be obligated to, enter into any such
amendment which affects such Trustee's own rights, duties or immunities under
this Agreement or otherwise. However, no such amendment shall be permitted
without the consent of the Trustee whose rights, duties or immunities are being
modified.
In connection with any amendment pursuant to this Section 12.01, the
Owner Trustee shall be entitled to receive an Opinion of Counsel to the Servicer
to the effect that such amendment is authorized or permitted by the Agreement.
Upon the execution of any amendment or consent pursuant to this Section
12.01, this Agreement shall be modified in accordance therewith, and such
amendment or consent shall form a part of this Agreement for all purposes, and
every Holder of Securities theretofore or thereafter issued hereunder shall be
bound thereby.
SECTION 12.02 Protection of Title to Trust.
(a) On or prior to the Closing Date, the Servicer shall cause
the following UCC-1 financing statements to be filed:
<PAGE>
(i) UCC-1 financing statement executed by CITCF-NY as
debtor, naming CITSF as secured party and filed in New Jersey
and Oklahoma City to perfect the sale from CITCF-NY to CITSF;
(ii) UCC-1 financing statement executed by CITSF as
debtor, naming the Company as secured party and filed in New
Jersey and Oklahoma City to perfect the sale from CITSF to the
Company;
(iii) UCC-1 financing statement executed by the
Company as debtor, naming the Owner Trustee as secured party
and filed in New Jersey and Oklahoma City to perfect the sale
from the Company to the Owner Trustee; and
(iv) UCC-1 financing statement executed by the Owner
Trustee as debtor, naming the Indenture Trustee as secured
party and filed in New Jersey, Oklahoma City, and Delaware to
perfect the security interest granted in the Collateral by the
Indenture.
The Servicer shall cause to be filed all necessary
continuation statements of the UCC-1 financing statement referred to in
the previous sentence on which it is the debtor, and the Servicer shall
cause to be filed all necessary continuation statements of the UCC-1
financing statement referred to in the previous sentence on which it is
the debtor.
From time to time the Servicer shall, subject to the following
sentence, take and cause to be taken such actions and execute such
documents as are necessary to perfect and protect the Noteholders' and
Certificateholders' interests in the Contracts and their proceeds
against all other persons, including, without limitation, the filing of
financing statements, amendments thereto and continuation statements,
the execution of transfer instruments and the making of notations on or
taking possession of all records or documents of title.
The Servicer will maintain the Trust's perfected first
priority security interest in each Financed Boat so long as the related
Contract is the property of the Trust; provided, however, that because
of the expense and administrative inconvenience involved, the Servicer
will not amend any certificate of title to name CITSF, the Company or
the Trust as the lienholder, and neither the Servicer nor the Company
will deliver any certificate of title to the Trust or note thereon the
Trust's interest.
The Servicer agrees to pay all reasonable costs and
disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of the Noteholders' and
Certificateholders' right, title and interest in and to the Contracts
(including, without limitation, the security interest in the Financed
Boats granted thereby).
(b) During the term of this Agreement, neither the Company nor
CITSF shall change its name, identity or structure or relocate its
chief executive office without first
<PAGE>
giving notice thereof to the Trustees and the Servicer. In addition,
following any such change in the name, identity, structure or location
of the chief executive office of the Company or CITSF, the Company or
CITSF, as appropriate, shall give prior written notice thereof to each
Rating Agency.
If any change in the Company's, the Servicer's or CITSF's
name, identity or structure or the relocation of its chief executive
office would make any financing or continuation statement or notice of
lien filed under this Agreement seriously misleading within the meaning
of applicable provisions of the UCC or any title statute or would cause
any such financing or continuation statement or notice of lien to
become unperfected (whether immediately or with lapse of time), the
Servicer no later than five days after the effective date of such
change, shall (subject to the proviso in the final sentence of the last
paragraph of Section 12.01(a)) file, or cause to be filed, such
amendments or financing statements as may be required to preserve,
perfect and protect the Noteholders' and Certificateholders' interests
in the Contracts and proceeds thereof and in the Financed Boats.
(c) During the term of this Agreement, the Company and CITSF
will maintain their respective chief executive offices in one of the
States of the United States.
(d) The Servicer shall maintain accounts and records as to
each Contract accurately and in sufficient detail to permit (i) the
reader thereof to know at any time the status of such Contract,
including payments and recoveries made and payments owing (and the
nature of each) and (ii) reconciliation between payments or recoveries
on (or with respect to) each Contract and the amounts from time to time
deposited in the Collection Account in respect of such Contract.
(e) Each of the Company and the Servicer shall maintain its
computer systems so that, from and after the time of sale under this
Agreement of the Contracts to the Trust, the master computer records of
the Company and the Servicer (including archives) that shall refer to a
Contract indicate clearly that such Contract is owned by the Trust.
Indication of the Trust's ownership of a Contract shall be deleted from
or modified on the Company's and the Servicer's computer systems when,
and only when, the Contract shall have been paid in full, purchased or
assigned pursuant hereto.
(f) At all times during the term hereof, the Servicer shall
afford the Trust and its authorized agents reasonable access during
normal business hours to the Servicer's records relating to the
Contracts and will cause its personnel to assist in any examination of
such records by the Trust or its authorized agents. The examination
referred to in this Section 12.01(f) will be conducted in a manner
which does not unreasonably interfere with the Servicer's normal
operations or customer or employee relations. Without otherwise
limiting the scope of the examination the Trust may make, the Trust or
its authorized agents may, using generally accepted audit procedures,
verify the status of each Contract and review the Electronic Ledger and
records relating thereto for conformity to Monthly Reports prepared
pursuant to Article V and compliance with the
<PAGE>
standards represented to exist as to each Contract in this Agreement.
Nothing in this Section 12.01(f) shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Servicer to
provide access to information as a result of such obligation shall not
constitute a breach of this Section 12.01(f).
(g) Upon request, the Servicer shall furnish to the Trust,
within five Business Days, a list of all Contracts by contract number
and name of Obligor as of the end of the most recent Due Period held as
part of the Trust, together with a reconciliation of such list to the
List of Contracts and to each of the Servicer Certificates indicating
removal of Contracts from the Trust.
At all times during the term hereof, the Servicer shall keep
available a copy of the List of Contracts at its principal executive
office for inspection by Securityholders.
(h) The Servicer shall, to the extent required by applicable
law, cause the Notes and Certificates to be registered with the
Securities and Exchange Commission pursuant to Section 12(b) or Section
12(g) of the Securities Exchange Act of 1934 within the time periods
specified in such sections.
SECTION 12.03 Limitation on Rights of Securityholders. The death or
incapacity of any Securityholder shall not operate to terminate this Agreement
or the Trust, nor entitle the Securityholder's legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations, and liabilities of the parties to this Agreement or any of
them.
No Securityholder shall have any right to vote (except as provided in
Sections 9.04 and this Section 12.02) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties to this
Agreement, nor shall anything set forth in this Agreement or contained in the
terms of the Securities, be construed so as to constitute the Holders as
partners or members of an association; nor shall any Securityholder be under any
liability to any third person by reason of any action taken pursuant to any
provision of this Agreement.
No Securityholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action, or proceeding
in equity or at law upon or under or with respect to this Agreement, except as
provided in Section 10.03(b); no one or more Holders of Securities shall have
any right in any manner whatever by virtue or by availing itself or themselves
of any provisions of this Agreement to affect, disturb, or prejudice the rights
of the Holders of any other of the Securities, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner provided in this Agreement and for
the equal, ratable and common benefit of all Securityholders. For the protection
and enforcement of the provisions of this Section 12.02, each Securityholder and
the Trust shall be entitled to such relief as can be given either at law or in
equity.
<PAGE>
SECTION 12.04 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without regard to its conflict-of-laws provisions.
SECTION 12.05 Notices. All communications and notices pursuant hereto
to the Company, the Servicer, Moody's and Standard & Poor's shall be in writing
and delivered or mailed to it at the appropriate following address:
If to the Company:
The CIT Group Securitization Corporation II
650 CIT Drive
Livingston, New Jersey 07039
Attention: President
If to the Servicer:
The CIT Group/Sales Financing, Inc.
650 CIT Drive
Livingston, New Jersey 07039
Attention: President
If to Standard & Poor's:
Standard & Poor's Corporation
25 Broadway
New York, New York 10004
Attention: ABS Group/Market Surveillance
If to Moody's:
Moody's Investors Service Inc.
99 Church Street
New York, New York 10007
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder
or a Noteholder shall be in writing and delivered or mailed at the address shown
in the Certificate Register or Note Register, respectively.
Copies of all communications and notices required hereunder to be given
to the Owner Trustee shall be sent to [____________________] at
____________________, __________, Attention: _______________.
<PAGE>
SECTION 12.06 Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates and Notes or the rights of the Holders thereof.
SECTION 12.07 Submission to Jurisdiction; Venue. The parties hereto
with respect to any action or claim brought against or by the Trust submit to
jurisdiction in the state or federal courts in New York, New York, and agree to
New York, New York as the venue for any such claim or action.
SECTION 12.08 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
SECTION 12.09 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 12.10 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of
____________, ____.
THE CIT GROUP/SALES FINANCING, INC.
By: ___________________________________
Name:
Title:
THE CIT GROUP SECURITIZATION
CORPORATION II
By: ___________________________________
Name:
Title:
CIT MARINE TRUST ____-_
By: [____________________],
not in its individual capacity but solely as
Owner Trustee on behalf of the Trust
By: ___________________________________
Name:
Title:
Acknowledged and Accepted:
[____________________],
not in its individual capacity
but solely as Indenture Trustee,
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
List of Initial Contracts
<PAGE>
EXHIBIT B
FORM OF SUBSEQUENT PURCHASE AGREEMENT
This Subsequent Purchase Agreement dated as of ____________, ____ (the
"Agreement"), is between THE CIT GROUP SECURITIZATION CORPORATION II, as
purchaser (the "Purchaser"), and THE CIT GROUP/SALES FINANCING, INC., as seller
(the "Seller").
Reference is hereby made to the Purchase Agreement dated as of
____________, ____ between the parties hereto (the "Purchase Agreement")
pursuant to which the Purchaser purchased from the Seller the marine installment
sales contracts set forth on Exhibit A thereto (the "Initial Contracts"). The
Purchaser sold the Initial Contracts to the trust established pursuant to the
Trust Agreement dated as of ____________, ____ between the Purchaser and
[____________________], as trustee (the "Owner Trustee").
Pursuant to the Sale and Servicing Agreement dated as of ____________,
____ between CIT Marine Trust ____-_ (the "Trust"), the Purchaser and the
Seller, the Purchaser agreed to purchase from the Seller and the Seller agreed
to sell to the Purchaser, subject to the terms and conditions set forth in
Section 3.01D of the Sale and Servicing Agreement, Subsequent Contracts for the
fixed purchase price specified in the Sale and Servicing Agreement for delivery
on the date specified herein. The purchase price for any Subsequent Contract
will be funded from money on deposit in the Pre-Funding Account during the
Funding Period. The purchase of any Subsequent Contract by the Purchaser must be
evidenced by the execution and delivery of a Subsequent Purchase Agreement
substantially in the form of Exhibit B to the Sale and Servicing Agreement.
Accordingly, subject to the terms hereof and the Sale and Servicing Agreement,
the Seller agrees to sell, and the Purchaser agrees to purchase, the marine
installment sales contracts set forth on Exhibit A hereto (collectively, the
"Subsequent Contracts"), having an aggregate outstanding principal balance as of
____________, ____ (the "Subsequent Cut-Off Date") of $___________.
The Purchaser and the Seller wish to prescribe the terms and conditions
of the purchase by the Purchaser of the Subsequent Contracts and the servicing
and administration of the Subsequent Contracts.
In consideration of the premises and the mutual agreements hereinafter
set forth, the Purchaser and the Seller agree as follows:
ARTICLE I
DEFINITIONS
<PAGE>
SECTION 1.1. Definitions. Certain capitalized terms used in this
Agreement shall have the respective meanings assigned to them in the Sale and
Servicing Agreement. All references in this Agreement to Articles, Sections,
subsections and exhibits are to the same contained in or attached to this
Agreement unless otherwise specified.
ARTICLE II
SALE AND CONVEYANCE OF SUBSEQUENT CONTRACTS; CONTRACT FILES
SECTION 2.1. Sale and Conveyance of Contracts. On ____________, ____
(the "Subsequent Transfer Date"), subject to the terms and conditions hereof,
the Seller shall sell, transfer, assign absolutely, set over and otherwise
convey to the Purchaser as of the Subsequent Transfer Date (i) all the right,
title and interest of the Company in and to the Subsequent Contracts and all the
rights, benefits, and obligations arising from and in connection with each
Subsequent Contract, (ii) the security interests in the Subsequent Financed
Boats granted by the Obligors pursuant to the Subsequent Contracts, (iii) all
payments received by the Company on or with respect to the Subsequent Contracts
on or after the Subsequent Cut-off Date (exclusive of payments with respect to
Post Cut-off Date Insurance Add-Ons), (iv) the interest of the Company in any
Subsequent Financed Boat (including any right to receive future Net Liquidation
Proceeds) that secures the Subsequent Contracts and that shall have been
repossessed by the Servicer by or on behalf of the Trust; (v) all rights of the
Company to proceeds of Insurance Policies covering the Obligors and the
Subsequent Contracts, (vi) the proceeds from any Servicer's Errors and Omissions
Protection Policy, any fidelity bond and any blanket hazard policy, to the
extent such proceeds relate to any Subsequent Financed Vehicle, (vii) all rights
of recourse against any cosigner or under any personal guarantee with respect to
the Subsequent Contracts (other than any right as against a Dealer under a
Dealer Agreement), (viii) all proceeds in any way derived from any of the
foregoing items, and (ix) all documents contained or required to be contained in
the Contract Files relating to the Subsequent Contracts. The parties intend and
agree that the conveyance of the Seller's right, title and interest in and to
the Subsequent Contracts (and all rights, entitlements and amounts listed above)
pursuant to this Agreement shall constitute an absolute sale.
SECTION 2.2. Purchase Price; Payments on the Subsequent Contracts.
(a) The purchase price for the Subsequent Contracts shall be
an amount equal to $___________, which is the aggregate outstanding
principal balance of the Subsequent Contracts transferred pursuant to
this Agreement as of the Subsequent Cut-off Date, and the Seller hereby
acknowledges receipt of such amount in respect of the sale of the
Subsequent Contracts hereunder. Such purchase price shall be payable in
immediately available funds on the Subsequent Transfer Date from funds
on deposit in the Pre-Funding Account.
(b) The Purchaser shall be entitled to all payments of
principal and interest received on or after the Subsequent Cut-off
Date. All payments of principal and interest
<PAGE>
received before the Subsequent Cut-off Date shall belong to the Seller.
The Seller shall hold in trust for the Purchaser and shall promptly
remit to the Purchaser, any payments on the Subsequent Contracts
received by the Seller that belong to the Purchaser under the terms of
this Agreement.
SECTION 2.3. Conditions to Sale of Subsequent Contracts. The
Purchaser's obligations hereunder are subject to the following conditions:
(a) The Purchaser shall have received: the Sale and Servicing
Agreement executed by all the parties thereto, the documents listed in
Section 3.01D of the Sale and Servicing Agreement, and such other
opinions and documents as the Purchaser may reasonably require in
connection with the purchase of the Subsequent Contracts hereunder or
the sale of the Notes and Certificates;
(b) The representations and warranties with respect to the
Subsequent Contracts of (i) the Seller and the Servicer made in the
Sale and Servicing Agreement and (ii) the Seller made in the Purchase
Agreement and this Agreement shall be true and correct with respect to
the Subsequent Contracts on the Subsequent Transfer Date; and
(c) The conditions for transfer of the Subsequent Contracts
from the Purchaser to the Trust set forth in Section 3.01D of the Sale
and Servicing Agreement have been fulfilled.
SECTION 2.4. Examination of Files. The Seller will make the Contract
Files with respect to the Subsequent Contracts available to the Purchaser or its
agent for examination at the Trust's offices or such other location as otherwise
shall be agreed upon by the Purchaser and the Seller.
SECTION 2.5. Transfer of Subsequent Contracts. Pursuant to the Sale and
Servicing Agreement, the Purchaser will assign all of its right, title and
interest in and to the Subsequent Contracts to the Trust for the benefit of the
Securityholders. The Purchaser has the right to assign its interest under this
Agreement as may be required to effect the purposes of the Sale and Servicing
Agreement, by written notice to the Seller and without the consent of the
Seller, and the assignee shall succeed to the rights and obligations hereunder
of the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER;
REPURCHASE OF CONTRACTS
SECTION 3.1. Representations and Warranties of the Seller.
(a) The representations and warranties of the Seller contained
in Article III of the Sale and Servicing Agreement with respect to the
Subsequent Contracts are
<PAGE>
incorporated herein, and are made to the Purchaser on the Subsequent
Transfer Date, as if set forth herein and as if made to the Purchaser
on the date hereof. The Seller will make such representations and
warranties in the Sale and Servicing Agreement directly to the Trust
and will become obligated in respect of such representations and
warranties pursuant to Article III of the Sale and Servicing Agreement.
On the Subsequent Transfer Date, the Seller shall deliver to the
Purchaser an Officers' Certificate, dated the Subsequent Transfer Date,
to the effect that the representations and warranties made in the Sale
and Servicing Agreement with respect to the Subsequent Contracts by the
Seller are true and correct as of the Subsequent Transfer Date.
(b) It is understood and agreed that the representations and
warranties incorporated by reference in this Agreement by Section 3.1.
A hereof shall remain operative and in full force and effect, shall
survive the transfer and conveyance of the Subsequent Contracts by the
Seller to the Purchaser and by the Purchaser to the Trust, and shall
inure to the benefit of the Purchaser, the Trust and their successors
and permitted assignees.
(c) The Seller shall indemnify the Purchaser and the Servicer
and hold the Purchaser and the Servicer harmless against any loss,
penalties, fines, forfeitures, legal fees and related costs, judgments
and other costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, a breach of
the Seller's representations and warranties contained or incorporated
by reference in this Agreement. It is understood and agreed that the
obligation of the Seller set forth in this Section 3.1 to indemnify the
Purchaser and the Servicer as provided in this Section 3.1. constitutes
the sole remedy of the Purchaser and the Servicer respecting a breach
of the foregoing representations and warranties. The Trust shall also
have the remedies provided in the Sale and Servicing Agreement.
(d) Each indemnified party shall give prompt notice to the Seller of
any action commenced against it with respect to which indemnity may be sought
hereunder but failure to so notify an indemnifying party shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement, unless the failure to notify materially prejudices the rights and
condition of the Seller. The Seller shall be entitled to participate in any such
action, and to assume the defense thereof, and after notice from the Seller to
an indemnified party of its election to assume the defense thereof, the Seller
will not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof.
(e) Any cause of action against the Seller or relating to or arising
out of the breach of any representations and warranties made or incorporated by
reference in this Section 3.01 shall accrue as to any Subsequent Contract upon
(i) discovery of such breach by the Purchaser or the Servicer or notice thereof
by the Seller to the Purchaser and the Servicer, (ii) failure by the Seller to
cure such breach and (iii) demand upon the Seller by the Purchaser for all
amounts payable in respect of such Subsequent Contract.
<PAGE>
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1. Amendment. This Agreement may be amended from time to time
by the Seller and the Purchaser by written agreement signed by the Seller and
the Purchaser.
SECTION 4.2. Counterparts. For the purpose of facilitating the
execution of this Agreement as herein provided and for other purposes, this
Agreement may be executed simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
SECTION 4.3. Termination. The Seller's obligations under this Agreement
shall survive the sale of the Subsequent Contracts to the Purchaser.
SECTION 4.4. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 4.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed by first class mail, postage prepaid, to (i) in the case of the Seller,
The CIT Group/Sales Financing, Inc., 650 CIT Drive, Livingston, New Jersey
07039, Attention: President, or such other address as may hereafter be furnished
to Purchaser in writing by the Seller, or (ii) in the case of the Purchaser, The
CIT Group Securitization Corporation II, 650 CIT Drive, Livingston, New Jersey
07039, Attention: President, or such other address as may hereafter be furnished
to the Seller by the Purchaser.
SECTION 4.6. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 4.7. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Seller and the Purchaser and their respective
successors and assigns, as may be permitted hereunder.
SECTION 4.8. Opinion. The Counsel to the Seller shall deliver to the
Purchaser and the Trustees an opinion in the form of Exhibit B hereto.
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
THE CIT GROUP SECURITIZATION
CORPORATION II,
as Purchaser
By: ___________________________________
Name:
Title:
THE CIT GROUP/SALES FINANCING, INC.,
as Seller
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
List of Subsequent Contracts
<PAGE>
EXHIBIT B
[FORM OF OPINION OF COUNSEL]
[Date]
[____________________],
solely in its capacity as Indenture Trustee
under the Sale and Servicing Agreement
referred to herein
[____________________],
solely in its capacity as Owner Trustee
under the Sale and Servicing Agreement
referred to herein
Ladies and Gentlemen:
I have acted as counsel to The CIT Group/Sales Financing, Inc.
("CITSF") and The CIT Group Securitization Corporation II, a Delaware
corporation (the "Company"), in connection with the sale of CIT Marine Trust
____-_, Class A _____% Asset Backed Notes (the "Notes") and _____% Asset Backed
Certificates (the "Certificates" and, collectively with the Notes, the
"Securities"). The Notes represent obligations of, and the Certificates
represent interests in, a trust, the CIT Marine Trust ____-_ (the "Trust"),
consisting of a pool of installment sale contracts secured by new and used boats
(collectively, the "Contracts") and certain related property. The Company
purchased certain of the Contracts from CITSF (the "Initial Contracts") pursuant
to a Purchase Agreement, dated as of ____________, ____, by and between CITSF
and the Company. Additional Contracts are being purchased by the Company from
CITSF (the "Subsequent Contracts") pursuant to the Subsequent Purchase Agreement
dated as of ____________, ____ (the "Subsequent Purchase Agreement"). Pursuant
to a Sale and Servicing Agreement, dated as of ____________, ____ (the "Sale and
Servicing Agreement"), among the Company, CITSF and the Trust, the Company
transferred the Initial Contracts to the Trust. The Company will also transfer,
pursuant to the Sale and Servicing Agreement, the Subsequent Contracts to the
Trust, the corpus of which will consist of each of the Initial Contracts and the
Subsequent Contracts and certain other property transferred by the Company to
the Trust.
All capitalized terms used herein and not defined shall have the
meanings assigned to them in the Subsequent Purchase Agreement.
In rendering the following opinions, I have examined (i) the Subsequent
Purchase Agreement; (ii) the Sale and Servicing Agreement; (iii) the Certificate
of Incorporation of each
<PAGE>
of CITSF and the Company; (iv) the By-laws of each of CITSF and the Company; (v)
copies of certain unanimous consents adopted by the Board of Directors of the
Company authorizing the issuance and sale of the Securities and the purchase of
the Contracts; and (vi) copies of certain unanimous written consents of the
Board of Directors of CITSF. I have also examined such other documents and made
such investigations of law as I have considered necessary and appropriate for
the purposes of the opinions expressed herein. I have assumed the authenticity
of signatures on original documents and the conformity to the original of all
documents submitted to me as certified, conformed or photostatic copies and have
relied as to all matters of fact on certificates, representations or statements
by officers of the Company or CITSF.
In making my examination of agreements, instruments and other documents
and in giving opinions herein, I have assumed that the Trustees have and had the
power and capacity to execute and deliver such agreements, instruments and other
documents and to perform all of their obligations thereunder and that such
agreements, instruments and other documents were duly authorized by all
requisite action by or on behalf of the Trustees were duly executed,
acknowledged, as necessary, and delivered by or on behalf of and are the legal,
valid and binding obligations of, and are enforceable in accordance with their
terms against, the Trustees.
Based upon, and subject to, the foregoing I am of the opinion that:
1. The Subsequent Purchase Agreement has been duly authorized, executed
and delivered by each of CITSF and the Company and constitutes the legal, valid
and binding agreement of each of CITSF and the Company, and is enforceable
against each of CITSF and the Company in accordance with its terms; the
Subsequent Purchase Agreement is effective to transfer all of CITSF's right,
title and interest in and to the Subsequent Contracts and other property
described in Section 2.1 of the Subsequent Purchase Agreement to the Company;
the Sale and Servicing Agreement is effective to transfer all of the Company's
right, title and interest in and to such Subsequent Contracts and other property
to the Trust subject to no prior liens or encumbrances.
2. No consent, approval, authorization or order of, registration or
filing with, or notice to any governmental authority or court is required under
federal laws or the laws of the State of Delaware for the execution, delivery
and performance by the Company of the Subsequent Purchase Agreement or the
consummation of any other transaction contemplated thereby by the Company,
except for those which have been obtained or except such as may be required
under the Securities Act of 1933, as amended or the regulations promulgated
thereunder or state securities or Blue Sky laws of any jurisdiction.
3. No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required under
federal laws or the laws of the State of Delaware for the execution, delivery
and performance by CITSF of the Subsequent Purchase Agreement or the
consummation of any other transaction contemplated thereby by CITSF except for
those which have been obtained or except such as may be required under the
Securities Act of 1933, as amended or the regulations promulgated thereunder or
state securities or Blue Sky laws of any jurisdiction.
<PAGE>
I am furnishing this opinion to you solely for your benefit. This
opinion is not to be used, circulated, quoted or otherwise referred to or relied
on by any other person or for any other purpose.
The foregoing opinion is given on the express understanding that the
undersigned is an officer of the Company and CITSF and shall in no event incur
any personal liability in connection with the said opinion.
Very truly yours,
<PAGE>
FORM OF SUBSEQUENT TRANSFER AGREEMENT
The CIT Group Securitization Corporation II, as Seller, and CIT Marine
Trust ____-_ (the "Trust"), as Purchaser, pursuant to the Sale and Servicing
Agreement, dated as of ____________, ____, among the Seller, The CIT Group/Sales
Financing, Inc., as Servicer and the Trust (the "Sale and Servicing Agreement"),
hereby confirm their understanding with respect to the sale by the Seller and
the purchase by the Purchaser of those Contracts listed on the attached List of
Subsequent Contracts (the "Subsequent Contracts").
The Seller shall sell, transfer, assign absolutely, set over and
otherwise convey to the Purchaser as of the Subsequent Transfer Date (i) all the
right, title and interest of the Seller in and to the Subsequent Contracts and
all the rights, benefits, and obligations arising from and in connection with
each Subsequent Contract, (ii) the security interests in the Subsequent Financed
Boats granted by the Obligors pursuant to the Subsequent Contracts, (iii) all
payments received by the Seller on or with respect to the Subsequent Contracts
on or after the Subsequent Cut-off Date (exclusive of payments with respect to
Post Cut-off Date Insurance Add-Ons), (iv) the interest of the Seller in any
Subsequent Financed Boat (including any right to receive future Net Liquidation
Proceeds) that secures the Subsequent Contracts and that shall have been
repossessed by the Servicer by or on behalf of the Trust; (v) all rights of the
Seller to proceeds of Insurance Policies covering the Obligors and the
Subsequent Contracts, (vi) the proceeds from any Servicer's Errors and Omissions
Protection Policy, any fidelity bond and any blanket hazard policy, to the
extent such proceeds relate to any Subsequent Financed Boat, (vii) all rights of
recourse against any cosigner or under any personal guarantee with respect to
the Subsequent Contracts (other than any right as against a Dealer under a
Dealer Agreement), (viii) all proceeds in any way derived from any of the
foregoing items and (ix) all documents contained or required to be contained in
the Contract Files relating to the Subsequent Contracts. The parties intend and
agree that the conveyance of the Seller's right, title and interest in and to
the Subsequent Contracts (and all rights, entitlements and amounts listed above)
pursuant to this Agreement shall constitute an absolute sale.
The costs relating to the delivery of the documents specified in this
Subsequent Transfer Agreement and the Sale and Servicing Agreement shall be
borne by the Seller.
The Seller hereby affirms the representations and warranties set forth
in the Sale and Servicing Agreement that relate to the Subsequent Contracts as
of the date hereof. The Seller hereby confirms that it has delivered notice of
the sale of the Subsequent Contracts pursuant to the Sale and Servicing
Agreement and that each of the conditions relating to the transfer of the
Subsequent Contracts, set forth in the Sale and Servicing Agreement, have been
satisfied as of the date hereof.
<PAGE>
All terms and conditions of the Sale and Servicing Agreement are hereby
ratified, confirmed and incorporated herein, provided that in the event of any
conflict the provisions of this Subsequent Transfer Agreement shall control over
the conflicting provisions of the Sale and Servicing Agreement.
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Sale and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Subsequent Transfer
Agreement to be duly executed as of this ____ day of _________, ____.
THE CIT GROUP SECURITIZATION
CORPORATION II
By: ___________________________________
Name:
Title:
CIT MARINE TRUST ____-_
By: [____________________],
not in its individual capacity but solely as
Owner Trustee on behalf of the Trust
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF ASSIGNMENT OF INITIAL CONTRACTS
In accordance with the Sale and Servicing Agreement (the "Agreement")
dated as of ____________, ____, among The CIT Group/Sales Financing, Inc.
("CITSF"), The CIT Group Securitization Corporation II (the "Company"), and CIT
Marine Trust ____-_ (the "Trust"), the Company does hereby sell, transfer,
assign, set over and otherwise convey to the Trust created by the Trust
Agreement, (i) all right, title and interest of the Company in and to the
Initial Contracts and all the rights, benefits and obligations arising from and
in connection with each Initial Contract, (ii) the security interests in the
Initial Financed Boats granted by the Obligors pursuant to the Initial
Contracts, (iii) all payments received by the Company on or with respect to the
Initial Contracts on or after the Initial Cut-off Date (exclusive of payments
with respect to Post Cut-off Date Insurance Add-Ons), (iv) the interest of the
Company in any Initial Financed Boat (including any right to receive future Net
Liquidation Proceeds) that secures the Initial Contracts and that shall have
been repossessed by the Servicer by or on behalf of the Trust; (v) all rights of
the Company to proceeds of Insurance Policies covering the Obligors and the
Initial Contracts, (vi) the proceeds from any Servicer's Errors and Omissions
Protection Policy, any fidelity bond and any blanket hazard policy, to the
extent such proceeds relate to any Initial Financed Boat, (vii) all rights of
recourse against any cosigner or under any personal guarantee with respect to
the Initial Contracts (other than any right as against a Dealer under a Dealer
Agreement), (viii) all amounts held for the Trust in the Collection Account,
(ix) all amounts held for the Trust in the Pre-Funding Account, (x) all amounts
held for the Trust in the Capitalized Interest Account, (xi) all proceeds in any
way derived from any of the foregoing items and (xii) all documents contained or
required to be contained in the Contract Files relating to the Initial
Contracts. The parties intend and agree that the conveyance of the Company's
right, title and interest in and to the Initial Contracts (and all rights,
entitlements and amounts listed above) pursuant to this Agreement shall
constitute an absolute sale.
All capitalized terms used herein without definition have the meanings
ascribed to such terms in the Agreement. This Assignment is made pursuant to the
Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Subsequent Transfer
Agreement to be duly executed as of this ____ day of _________, ____.
THE CIT GROUP SECURITIZATION
CORPORATION II
By: ___________________________________
Name:
Title:
<PAGE>
FORM OF ASSIGNMENT OF SUBSEQUENT CONTRACTS
For good and valuable consideration in the amount of $___________ paid
by THE CIT GROUP SECURITIZATION CORPORATION II (the "Purchaser"), to THE CIT
GROUP/SALES FINANCING, INC. (the "Seller"), CITSF does hereby sell, transfer,
assign absolutely, set over and otherwise convey to the Purchaser as of the
Subsequent Transfer Date (i) all the right, title and interest of the Company in
and to the marine installment sales contracts set forth on Exhibit A to the
Subsequent Purchase Agreement, dated as of ____________, ____, between the
Purchaser and the Seller (the "Subsequent Contracts") and all the rights,
benefits, and obligations arising from and in connection with each Subsequent
Contract, (ii) the security interests in the Subsequent Financed Boats granted
by the Obligors pursuant to the Subsequent Contracts, (iii) all payments
received by the Company on or with respect to the Subsequent Contracts on or
after the Subsequent Cut-off Date (exclusive of payments with respect to Post
Cut-off Date Insurance Add-Ons), (iv) the interest of the Company in any
Subsequent Financed Boat (including any right to receive future Net Liquidation
Proceeds) that secures the Subsequent Contracts and that shall have been
repossessed by the Servicer by or on behalf of the Trust; (v) all rights of the
Company to proceeds of Insurance Policies covering the Obligors and the
Subsequent Contracts, (vi) the proceeds from any Servicer's Errors and Omissions
Protection Policy, any fidelity bond and any blanket hazard policy, to the
extent such proceeds relate to any Subsequent Financed Boat, (vii) all rights of
recourse against any cosigner or under any personal guarantee with respect to
the Subsequent Contracts (other than any right as against a Dealer under a
Dealer Agreement), (viii) all proceeds in any way derived from any of the
foregoing items, and (ix) all documents contained or required to be contained in
the Contract Files relating to the Subsequent Contracts. The parties intend and
agree that the conveyance of the Seller's right, title and interest in and to
the Subsequent Contracts (and all rights, entitlements and amounts listed above)
pursuant to this Agreement shall constitute an absolute sale. Certain
capitalized terms used in this Assignment shall have the respective meanings
assigned to them in the Sale and Servicing Agreement, dated as of ____________,
____, among The CIT Group Securitization Corporation II, CITSF and CIT Marine
Trust ____-_.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed this ____ day of ___________, ______.
THE CIT GROUP/SALES FINANCING, INC.,
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT E
FORM OF OWNER TRUSTEE'S ACKNOWLEDGMENT AND CERTIFICATION
[____________________], a national banking association, acting as Owner
Trustee (the "Owner Trustee") of the Trust created pursuant to the Trust
Agreement, dated as of ____________, ____, between The CIT Group Securitization
Corporation II (the "Company") and the Owner Trustee, acknowledged pursuant to
the Sale and Servicing Agreement dated as of ____________, ____ among the
Company, The CIT Group/Sales Financing, Inc. and the Owner Trustee (the
"Agreement"), that the Owner Trustee has received, and holds in trust thereunder
the following through the Servicer as custodian: (i) all the right, title and
interest of the Company in and to the {Initial} {Subsequent} Contracts and all
the rights, benefits, and obligations arising from and in connection with each
{Initial} {Subsequent} Contract, (ii) the security interests in the {Initial}
{Subsequent} Financed Boats granted by the Obligors pursuant to the {Initial}
{Subsequent} Contracts, (iii) all payments received by the Company on or with
respect to the {Initial} {Subsequent} Contracts on or after the {Initial}
{Subsequent} Cut-off Date (exclusive of payments with respect to Post Cut-off
Date Insurance Add-Ons), (iv) the interest of the Company in any {Initial}
{Subsequent} Financed Boat (including any right to receive future Net
Liquidation Proceeds) that secures the {Initial} {Subsequent} Contracts and that
shall have been repossessed by the Servicer by or on behalf of the Trust; (v)
all rights of the Company to proceeds of Insurance Policies covering the
Obligors and the {Initial} {Subsequent} Contracts, (vi) the proceeds from any
Servicer's Errors and Omissions Protection Policy, any fidelity bond and any
blanket hazard policy, to the extent such proceeds relate to any {Initial}
{Subsequent} Financed Boat, (vii) all rights of recourse against any cosigner or
under any personal guarantee with respect to the {Initial} {Subsequent}
Contracts (other than any right as against a Dealer under a Dealer Agreement),
(viii) all proceeds in any way derived from any of the foregoing items, (ix) all
documents contained or required to be contained in the Contract Files relating
to the {Initial} {Subsequent} Contracts, (x) the Collection Account, (xi) the
Pre-Funding Account, and (xii) the Capitalized Interest Account. {The Owner
Trustee shall issue to, or upon the written order of, the Company Certificates
representing ownership of a beneficial interest in 100% of the Trust and Notes
representing obligations of the Trust.} Capitalized terms used herein have the
meanings given them in the Agreement.
<PAGE>
IN WITNESS WHEREOF, [____________________], as Owner Trustee, has
caused this acknowledgment to be executed by its duly authorized officer as of
this ____ day of _________, ____.
[____________________],
not in its individual capacity but solely as
Owner Trustee on behalf of the Trust
By: ___________________________________
Name:
Title:
<PAGE>
THE CIT GROUP/SALES FINANCING, INC.
CERTIFICATE OF SERVICING OFFICERS
The undersigned certify that they are the {title} and {title},
respectively of The CIT Group/Sales Financing, Inc., a corporation organized
under the laws of Delaware ("CITSF"), and that as such they are duly authorized
to execute and deliver this certificate on behalf of CITSF pursuant to Section
4.09 of the Sale and Servicing Agreement, dated as of ____________, ____ (the
"Agreement"), among CITSF, The CIT Group Securitization Corporation II and
[____________________], as Owner Trustee (all capitalized terms used herein
without definition having the respective meanings specified in the Agreement),
and further certify that:
1. The Monthly Report for the period from __________ to __________
attached to this certificate is complete and accurate in accordance with the
requirements of Sections 4.09 and 5.08 of the Agreement; and
2. As of the date hereof, no Event of Termination or event that with
notice or lapse of time or both would become an Event of Termination has
occurred. [If an Event of Termination has occurred, such Event of Termination
shall be specified and its current status reported.]
IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day
of _________, ____.
THE CIT GROUP/SALES FINANCING, INC.,
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT G
CIT MARINE TRUST ____-_
CLASS A _____% ASSET BACKED NOTES
_____% ASSET BACKED CERTIFICATES
MONTHLY REPORT
DISTRIBUTION DATE: __________, ____
Amount Available $___________
Distribution Amounts
1. Aggregate Note distribution $___________
2. Aggregate Certificate distribution $___________
Interest
3. Aggregate amount of Interest
a. Notes $___________
b. Certificates $___________
4. Total distribution in respect of interest
a. Notes $___________
b. Certificates $___________
Principal
5. Principal Distribution Amount $___________
6. Distribution made in respect of Principal
a. Notes $___________
b. Certificates $___________
7. Outstanding Principal Balance of Notes: $___________
8. Certificate Balance $___________
<PAGE>
Contract Pool
9. Pool Balance $___________
10. Note Pool Factor __________
11. Certificate Pool Factor __________
Delinquency Information
Aggregate Principal
Number Balance
12. Delinquent Contracts
a. 30-59 days ____ $___________
b. 60-89 days ____ $___________
c. 90 days or more ____ $___________
13. Repossessed Contracts ____ $___________
14. Repossessed Contracts
Remaining in Inventory ____ $___________
Miscellaneous
15. Monthly Servicing Fee $___________
16. Amount of Servicer Fee Paid $___________
17. Amount withdrawn from the Cash Collateral $___________
Account and Delivered to Certificateholders
18. Available Cash Collateral Amount after any _____% withdrawal or deposit
to the Cash Collateral Account divided by the Pool Balance
19. Amount of Funds on deposit in the Pre-Funding Account $___________
20. Weighted average Contract Rate of all outstanding Contracts _____%
21. Number of Subsequent Contracts ____
<PAGE>
22. Aggregate principal balance of Subsequent Contracts $___________
23. Number of Subsequent Contracts Purchased ____
24. Aggregate Stated Principal Balance of $___________
Subsequent Contracts Purchased
25. Amount of Monthly Advances by Servicer $___________
Amount of Non-Reimbursable Payments by Servicer $___________
<PAGE>
TERMINATION - AUCTION PROCEDURES
The following sets forth the auction procedures to be followed in
connection with a sale effected pursuant to Section 11.02 of the Sale and
Servicing Agreement (the "Agreement"), dated as of ____________, ____, between
The CIT Group Securitization Corporation II, the CIT Group/Sales Financing, Inc.
and [____________________], as Owner Trustee. Capitalized terms used herein that
are not otherwise defined shall have the meanings described thereto in the
Agreement. All references herein to "Trustee" shall be references to
[____________________], as Indenture Trustee, pursuant to an Indenture, dated as
of ____________, ____, between the Owner Trustee and the Indenture Trustee.
However, if the Notes have been paid in full, and the Indenture has been
discharged in accordance with its terms, all references herein to "Trustee"
shall be references to the Owner Trustee.
I. Pre-Auction Process
(a) Upon receiving notice of the Auction Date, the Advisor will
initiate its general Auction procedures consisting of the following: (i) with
the assistance of the Servicer, prepare a general solicitation package along
with a confidentiality agreement; (ii) derive a list of qualified bidders, in a
commercially reasonable manner; (iii) initiate contact with all qualified
bidders; (iv) send a confidentiality agreement to all qualified bidders; (v)
upon receipt of a signed confidentiality agreement, send solicitation packages
to all interested bidders on behalf of the Trustee; and (vi) notify the Servicer
of all potential bidders and anticipated timetable.
(b) The general solicitation package will include: (i) the prospectus
from the public offering of the Notes and Certificates; (ii) a copy of all
monthly servicing reports or a copy of all annual servicing reports and the
prior year's monthly servicing reports; (iii) a form of a Purchase Agreement and
Sale and Servicing Agreement; (iv) a description of the minimum purchase price
required to cause the Trustee to sell the Auction Property as set forth in
Section 11.02 of the Agreement; (v) a formal bidsheet; (vi) a detailed
timetable; and (vii) a preliminary data tape of the Pool Scheduled Principal
Balance as of the related Distribution Date reflecting the same data attributes
used to create the Initial Cut-off Date tables for the prospectus dated
____________, ____ relating to the public offering of the Notes and
Certificates.
(c) The Trustee, with the assistance of the Servicer and the Advisor,
will maintain an auction package beginning at the time of closing of the
transaction, which will contain terms (i)-(iii) listed in the preceding
paragraph. If the Advisor is unable to perform its role as advisor to the
Trustee, the Servicer acting in its capacity under the Agreement will select a
successor Advisor and inform the Trustee of its actions.
(d) The Advisor will send solicitation packages to all bidders at least
15 business days before the Auction Date. Bidders will be required to submit any
due diligence
<PAGE>
questions in writing to the Advisor for determination of their relevancy, no
later than 10 business days before the Auction Date. The Servicer and the
Advisor will be required to satisfy all relevant questions at least five
Business Days prior to the Auction Date and distribute the questions and answers
to all bidders.
II. Auction Process
(a) [____________________], in its role as Advisor to the Trustee, will
be allowed to bid in the Auction, but will not be required to do so.
(b) The Servicer will also be allowed to bid in the Auction if it deems
appropriate, but will not be required to do so.
(c) On the Auction Date, all bids will be due by facsimile to the
offices of the Trustee by 1:00 p.m. New York City time, with the winning bidder
to be notified by 2:00 p.m. New York City time. All acceptable bids (as
described in Section 11.02 of the Agreement) will be due on a conforming basis
on the bid sheet contained in the solicitation package.
(d) If the Trustee receives fewer than two market value bids from
participants in the market for marine installment sale contract willing and able
to purchase the Auction Property, the Trustee shall decline to consummate the
sale.
(e) Upon notification to the winning bidder, a good faith deposit equal
to one percent (1%) of the Pool Balance will be required to be wired to the
Trustee upon acceptance of the bid. This deposit, along with any interest income
attributable to it, will be credited to the purchase price but will not be
refundable. The Trustee will establish a separate account for the acceptance of
the good faith deposit, until such time as the account is fully funded and all
monies are transferred into the Collection Account, such time not to exceed one
Business Day before the related Distribution Date (as described above).
(f) The winning bidder will receive on the Auction Date a copy of the
draft Purchase Agreement, Sale and Servicing Agreement and Servicer's
Representations and Warranties (which shall be substantially identical to the
representations and warranties set forth in Section 8.01 of the Agreement).
(g) [____________________], in its capacity as Advisor to the Trustee,
will provide to the Trustee a letter concluding whether or not the winning bid
is a fair market value bid. [____________________] will also provide such letter
if it is the winning bidder. In the case where [____________________] or the
Servicer is the winning bidder it will in its letter provide for market
comparable and valuations.
(h) The Auction will stipulate that the Servicer be retained to service
the Contracts sold pursuant to the terms of the Purchase and Sale Agreement and
Servicing Agreement.
<PAGE>
EXHIBIT I
THE CIT GROUP/SALES FINANCING, INC.
CERTIFICATE OF OFFICER
The undersigned certifies that the undersigned is the _______________
of The CIT Group/Sales Financing, Inc., a corporation organized under the laws
of Delaware ("CITSF"), and that as such is duly authorized to execute and
deliver this certificate on behalf of CITSF in connection with the Sale and
Servicing Agreement, dated as of ____________, ____ (the "Agreement"), among
CITSF, The CIT Group Securitization Corporation II and CIT Marine Trust ____-_
(all capitalized terms used herein without definition having the respective
meanings specified in the Agreement), and further certify that:
(i) attached hereto as Exhibit I is a true and correct copy of
the Articles of Incorporation of CITSF, together with all amendments
thereto as in effect on the date hereof;
(ii) attached hereto as Exhibit II is a true and correct copy
of the By-laws of CITSF, as amended, as in effect on the date hereof;
(iii) the representations and warranties of CITSF contained in
Sections 8.01 and 3.01C of the Agreement are true and correct on and as
of the date hereof and, to the best of their knowledge, the
representations and warranties of CITSF contained in Sections 3.01A and
3.01B of the Agreement are true and correct on and as of the date
hereof;
(iv) no event with respect to CITSF has occurred and is
continuing which would constitute an Event of Termination or an event
that, with notice or lapse of time or both, would become an Event of
Termination under the Agreement; and
(v) each of the agreements and conditions of CITSF to be
performed on or before the date hereof pursuant to the Agreement have
been performed in all material respects.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day
of _________, ____.
THE CIT GROUP/SALES FINANCING, INC.,
By: ___________________________________
Name:
Title:
Exhibit 4.4
THE CIT GROUP SECURITIZATION CORPORATION II,
Depositor,
THE CIT GROUP / SALES FINANCING, INC.
Servicer,
and
[ ],
Trustee and Collateral Agent.
POOLING AND SERVICING AGREEMENT
Dated as of __________, ____
$_________________
CIT Marine Trust ____-_
[____]% Marine Receivable-Backed Certificates
<PAGE>
TABLE OF CONTENTS
ARTICLE I
SECTION 1.1. Creation of Trust.................................................
ARTICLE II
SECTION 2.1. Conveyance of Receivables.........................................
ARTICLE III
SECTION 3.1. Surety Bond.......................................................
ARTICLE IV
SECTION 4.1. Acceptance by Trustee.............................................
ARTICLE V
SECTION 5.1. Additional Representations and Warranties of the Depositor........
ARTICLE VI
SECTION 6.1. The CIT Group / Sales Financing, Inc. not to resign as Servicer...
ARTICLE VII
SECTION 7.1. Definitions.......................................................
SECTION 7.2. Usage of Terms....................................................
SECTION 7.3. Cutoff Date and Record Date.......................................
ARTICLE VIII
SECTION 8.1. Representations and Warranties of Depositor.......................
SECTION 8.2. Repurchase upon Breach............................................
<PAGE>
SECTION 8.3. Custody of Receivable Files.......................................
SECTION 8.4. Duties of Servicer as Custodian...................................
SECTION 8.5. Instructions; Authority to Act....................................
SECTION 8.6. Custodian's Indemnification.......................................
SECTION 8.7. Effective Period and Termination..................................
ARTICLE IX
SECTION 9.1. Duties of Servicer................................................
SECTION 9.2. Collection of Receivables Payments................................
SECTION 9.3. Realization upon Receivables......................................
SECTION 9.4. Physical Damage Insurance.........................................
SECTION 9.5. Maintenance of Security Interests in Boats........................
SECTION 9.6. Covenants of Servicer.............................................
SECTION 9.7. Purchase of Receivables upon Breach...............................
SECTION 9.8. Servicing Fee.....................................................
SECTION 9.9. Servicer's Certificate............................................
SECTION 9.10. Annual Statement as to Compliance; Notice of Default..............
SECTION 9.11. Annual Independent Certified Public Accountants Report............
SECTION 9.12. Access to Certain Documentation and Information Regarding
Receivables ....................................................
SECTION 9.13. Servicer Expenses.................................................
SECTION 9.14. Appointment of Sub-Servicer.......................................
SECTION 9.15. Representations and Warranties of Servicer with Respect to
Receivables ....................................................
ARTICLE X
SECTION 10.1. Accounts.........................................................
SECTION 10.2. Collections......................................................
SECTION 10.3. Application of Collections.......................................
SECTION 10.4. Additional Deposits..............................................
SECTION 10.5. Distributions....................................................
SECTION 10.6. Net Deposits.....................................................
SECTION 10.7. Statements to Certificateholders.................................
ARTICLE XI
SECTION 11.1. The Certificates.................................................
SECTION 11.2. Authentication of Certificates...................................
SECTION 11.3. Registration of Transfer and Exchange of Certificates............
SECTION 11.4. Mutilated, Destroyed, Lost or Stolen Certificates................
SECTION 11.5. Persons Deemed Owners............................................
SECTION 11.6. Access to List of Certificateholders Names and Addresses.........
<PAGE>
SECTION 11.7. Maintenance of Office or Agency..................................
SECTION 11.8. Book-entry Certificates..........................................
SECTION 11.9. Notices to Clearing Agency.......................................
SECTION 11.10. Definitive Certificates..........................................
ARTICLE XII
SECTION 12.1. Representations of Depositor.....................................
SECTION 12.2. Liability of Depositor; Indemnities..............................
SECTION 12.3. Merger or Consolidation of, or Assumption of the Obligations of
Depositor .....................................................
SECTION 12.4. Limitation on Liability of Depositor and Others..................
SECTION 12.5. Depositor May Own Certificates...................................
SECTION 12.6. Depositor's Interest in Reserve Account; No Transfer.............
ARTICLE XIII
SECTION 13.1. Representations of Servicer......................................
SECTION 13.2. Liability of Servicer; Indemnities...............................
SECTION 13.3. Merger or Consolidation of or Assumption of Obligations of
Servicer ......................................................
SECTION 13.4. Limitation on Liability of Servicer and Others...................
ARTICLE XIV
SECTION 14.1. Events of Default................................................
SECTION 14.2. Appointment of Successor.........................................
SECTION 14.3. Notification to Certificateholders...............................
SECTION 14.4. Waiver of Past Defaults..........................................
ARTICLE XV
SECTION 15.1. Duties of Trustee................................................
SECTION 15.2. Trustee's Certificate............................................
SECTION 15.3. Trustee's Assignment of Purchased Receivables....................
SECTION 15.4. Certain Matters Affecting Trustee................................
SECTION 15.5. Trustee Not Liable for Certificates or Receivables...............
SECTION 15.6. Trustee May Own Certificates.....................................
SECTION 15.7. Trustee's Fees and Expenses......................................
SECTION 15.8. Representations and Warranties of Trustee........................
SECTION 15.9. Eligibility Requirements for Trustee.............................
SECTION 15.10. Resignation or Removal of Trustee................................
SECTION 15.11. Successor Trustee and Collateral Agent...........................
<PAGE>
SECTION 15.12. Merger or Consolidation of Trustee...............................
SECTION 15.13. Appointment of Co-Trustee or Separate Trustee....................
ARTICLE XVI
SECTION 16.1. Termination of the Trust.........................................
SECTION 16.2. Optional Purchase of All Receivables.............................
ARTICLE XVII
SECTION 17.1. Amendment........................................................
SECTION 17.2. Protection of Title to Trust.....................................
SECTION 17.3. Limitation on Rights of Certificateholders.......................
SECTION 17.4. Governing Law....................................................
SECTION 17.5. Notices..........................................................
SECTION 17.6. Severability of Provisions.......................................
SECTION 17.7. Assignment.......................................................
SECTION 17.8. Certificates Nonassessable and Fully Paid........................
SECTION 17.9. No Petition......................................................
SCHEDULE A: SCHEDULE OF RECEIVABLES
EXHIBIT A: FORM OF SURETY BOND
EXHIBIT B: FORM OF CERTIFICATE
EXHIBIT C: FORM OF DEPOSITORY AGREEMENT
EXHIBIT D: MONTHLY SERVICER REPORT
EXHIBIT E: CERTIFICATEHOLDER STATEMENT
EXHIBIT F: TRUSTEE'S CERTIFICATE
<PAGE>
This POOLING AND SERVICING AGREEMENT, dated as of __________, ____ is made with
respect to the formation of the CIT Marine Trust ____-_, among THE CIT GROUP
SECURITIZATION CORPORATION II, a Delaware corporation, as Depositor (the
"Depositor"), THE CIT GROUP / SALES FINANCING, INC., a Delaware corporation, as
Servicer ("the "Servicer"), and [ ], as Trustee (the "Trustee") and as
Collateral Agent (the "Collateral Agent").
WITNESSETH THAT: In consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
SECTION 1.1. Creation of Trust. Upon the execution of this Agreement by
the parties hereto, there is hereby created the CIT Marine Trust ____-_.
ARTICLE II
SECTION 2.1. Conveyance of Receivables (a) In consideration of the
Trustee's delivery, on behalf of the Trust, to or upon the order of the
Depositor of Certificates (the "Certificates") in an aggregate principal amount
equal to $______________ (the "Purchase Price"), the Depositor does hereby sell,
transfer, assign and otherwise convey to the Trustee, in trust for the benefit
of the Certificateholders and the Surety Bond Issuer, without recourse:
(i) all right, title and interest of the Depositor in and to
the Receivables and all payments received thereunder, in the case of
Simple Interest Receivables and due thereunder in the case of
Precomputed Receivables, in each case, after the Cutoff Date;
(ii) the interest of the Depositor in the security interests
in the Boats related to Receivables granted by Obligors pursuant to the
Receivables;
(iii) the Purchase Agreement, including the right of the
Depositor to cause CITSF to repurchase Receivables from the Depositor
under certain circumstances;
(iv) the interest of the Depositor in any proceeds from claims
on any physical damage, credit life or disability insurance policies
covering Boats or Obligors related to Receivables;
(v) the interest of the Depositor in any proceeds from
recourse to Dealers on Receivables; and
<PAGE>
(vi) any proceeds of the foregoing.
The Depositor intends that the assignment and transfer herein
contemplated constitute a sale of the Receivables, conveying good title thereto
free and clear of any liens and encumbrances, from the Depositor to the Trustee
and that such property not be part of the Depositor's estate or property of the
Depositor in the event of any insolvency by the Depositor and the Trustee
acquiesces in such characterization. In the event that such conveyance is deemed
to be, or to be made as security for, a loan, the Depositor hereby grants to the
Trustee a first priority perfected security interest in all of the Depositor's
right, title and interest in and to the Receivables and the other property
conveyed hereby, and this Agreement shall constitute a security agreement under
applicable law.
SECTION 2.2 The Trustee agrees to hold any amounts received in respect
of the Receivables and allocable to late payment and extension fees,
administrative charges in trust for the benefit of the Depositor and agrees to
promptly remit any such amounts to the Depositor upon receipt thereof as
directed in writing in the relevant Servicer's Certificate.
ARTICLE III
SECTION 3.1. Surety Bond. The Servicer shall, simultaneously with the
execution and delivery of this Agreement, obtain the Surety Bond for the benefit
of the Trust in accordance with the respective terms thereof and deliver it to
the Trustee.
ARTICLE IV
SECTION 4.1. Acceptance by Trustee. The Trustee does hereby accept all
consideration conveyed by the Depositor pursuant to Section 2.1, and declares
that the Trustee shall hold such consideration and the Surety Bond and any
proceeds of any draws thereunder upon the trusts herein set forth for the
benefit of all present and future Certificateholders, subject to the terms and
provisions of this Agreement.
ARTICLE V
SECTION 5.1. Additional Representations and Warranties of the
Depositor. The Depositor does hereby make the following representations and
warranties on which the Trustee, on behalf of the Trust, relies in accepting the
Receivables in trust and executing and authenticating the Certificates:
(i) Original Maturity of Receivables. Each Receivable shall have an
original maturity of not more than _____________..
<PAGE>
(ii) Remaining Maturity of Receivables. As of the Cutoff Date, each
Receivable shall have a remaining maturity of not more than __________.
(iii) Annual Percentage Rate. Each Receivable shall have a fixed Annual
Percentage Rate of not less than _____% and not greater than _____%.
(iv) Location of Receivable Files. The Receivable Files shall be kept
at the offices of CITSF. at [address].
(v) Maximum Balance. No Receivable has a Principal Balance greater than
$_______.
(vi) No Repossessions. As of the Cutoff Date, no Boat securing any
Receivable is in repossession status.
(vii) No Bankruptcies. As of the Cutoff Date, no Obligor on a
Receivable was noted in the related Receivable File as the subject of any
bankruptcy proceeding.
(viii) Delinquencies. As of the Cutoff Date, no Receivable shall have a
payment that is ___ or more days delinquent.
The foregoing representations and warranties shall (i) speak as of the
Closing Date, but shall survive the sale, transfer and assignment of the
Receivables to the Trustee, on behalf of the Trust and (ii) be subject to the
notice and repurchase provisions set forth in Section 8.2 in the same manner and
to the same extent as if they were set forth in Section 8.1.
ARTICLE VI
SECTION 6.1. CITSF Not to Resign as Servicer. Except as a result of the
operation of Section 13.3, CITSF shall not resign from the obligations and
duties hereby imposed on it as Servicer under this Agreement except upon
determination that the performance of its duties under this Agreement shall no
longer be permissible under applicable law. Notice of any such determination
permitting the resignation of CITSF shall be communicated to the Trustee at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee concurrently with or promptly after such notice. No
such resignation shall become effective until the Trustee or a successor
Servicer shall have assumed the responsibilities and obligations of CITSF in
accordance with Section 14.2.
ARTICLE VII
SECTION 7.1. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
<PAGE>
"Permitted Investments" are any of the following, which shall mature on
or prior to the next succeeding Deposit Date:
(i) any direct obligations of, and obligations fully
guaranteed by, the United States of America, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, or any
agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the
United States of America;
(ii) (A) demand and time deposits in, certificates of deposit
of, bankers' acceptances issued by, or Federal funds sold by any
depository institution or trust company incorporated under the laws of
the United States of America or any state thereof and subject to
supervision and examination by Federal and/or state authorities or
under the laws of any other jurisdiction, so long as at the time of
such investment or contractual commitment providing for such investment
the commercial paper or other short-term debt obligations of such
depository institution or trust company have the highest credit rating
available from each Rating Agency or (B) any other demand or time
deposit or certificate of deposit which is fully insured by the Federal
Deposit Insurance Corporation;
(iii) repurchase obligations with respect to (A) any security
described in clause (i) above or (B) any other security issued or
guaranteed by an agency or instrumentality of the United States of
America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (ii) (A) above
or with any money market funds maintained by a broker which has, at the
time of such investment, the highest credit rating from each Rating
Agency;
(iv) commercial paper having a rating of at least "___" by S&P
and "___" by Moody's at the time of such investment, including
commercial paper having such rating issued by the Trustee or The CIT
Group, Inc.
(v) money market funds or money market mutual funds (other
than closed-end funds), including funds for which [ ] is investment
manager or advisor, which (A) maintain a constant net asset value and
(B) have at the time of such investment a rating by AAAm or ___ by S&P
or ___ by Moody's;
(vi) if the Trustee does not receive written investment
instructions, the investments referred to in (v) above; or
(vii) any other investment approved in writing by each Rating
Agency.
"Corporate Trust Office" at the date of the execution hereof is located
at: ____________________.
"Cutoff Date" shall be the close of business on __________, ____.
<PAGE>
"Final Scheduled Distribution Date" means __________, ____.
"Insolvency Proceeding" means the commencement, after the Closing Date,
of any bankruptcy, insolvency, readjustment of debt, reorganization, marshalling
of assets and liabilities or similar proceedings by or against any person, or
the commencement, after the Closing Date, of any proceedings by or against any
Person for the winding up or liquidation of its affairs, or the consent after
the date hereof to the appointment of a trustee, conservator, receiver or
liquidator in any bankruptcy, insolvency, readjustment of debt, reorganization,
marshalling of assets and liabilities or similar proceedings of or relating to
any Person.
"Permitted Investments" shall be, at anytime, any one or more of the
obligations and securities set forth in Schedule C hereto.
"Purchase Price" has the meaning set forth in Section 2.1(a).
"Reimbursement Agreement" is the Insurance and Reimbursement Agreement
dated as of __________, ____, among the Surety Bond Issuer, the Depositor and
the Servicer.
"Required Deposit Rating" shall be a rating on short-term deposits of
"[__]" by Moody's and "[__]" by S & P or any other rating acceptable to each of
the Rating Agencies; and any requirement that deposits have the "Required
Deposit Rating" shall mean that such deposits have the foregoing ratings from
each of such rating agencies or such other rating which is acceptable to the
Rating Agencies.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 10.1(b).
"Servicing Fee Rate" shall be ____ per annum.
"Surety Bond" means the unconditional, irrevocable surety bond,
substantially in the form attached hereto as Exhibit A, to be issued by the
Surety Bond Issuer and naming the Trustee as beneficiary.
"Surety Bond Issuer" shall be _______________.
"Account Property" means all amounts and investments held from time to
time in the Reserve Account, as the case may be (whether in the form of deposit
accounts, Physical Property, book-entry securities, uncertificated securities,
securities entitlements, investment property or otherwise), and all proceeds of
the foregoing.
"Agreement" means this Pooling and Servicing Agreement executed by the
Depositor, the Servicer, the Trustee and the Collateral Agent as of the Cutoff
Date, and all amendments and supplements hereto.
<PAGE>
"Amount Financed" with respect to a Receivable means the original
amount advanced under the Receivable toward the purchase price of the Boat and
any cost to the related Obligor of any dealer installed options, extended
warranty plans and credit life and disability insurance, including any amount
allocable to the premium of collateral protection insurance purchased by CITSF
prior to the Cutoff Date.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate
of finance charges stated in the Receivable.
"Available Funds" means, for any Distribution Date, the sum of (i) all
Collections received by the Servicer during the related Collection Period, (ii)
all refunds received by the Servicer with respect to any refunded portion of
extended warranty protection plan costs, or of physical damage, credit life or
disability insurance premiums included in the Amount Financed unless such refund
must be paid to the Obligor, (iii) the Purchase Amount of all Receivables
purchased or repurchased under this Agreement on the Business Day prior to the
Distribution Date, (iv) Liquidation Proceeds received by the Servicer during the
related Collection Period and (v) all net income and gain realized on funds
deposited into the Collection Account or the Certificate Account and invested in
Permitted Investments during the related Collection Period.
"Boat" means (i) a new or used boat, or boat motor and boat trailer,
securing an Obligor's indebtedness under the respective Receivable.
"Book-Entry Certificates" shall mean beneficial interests in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 11.8.
"Business Day" means any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the City of New York, New York shall
be authorized or obligated by law or executive order to be closed.
"Carry-Over Monthly Interest" means, for any Distribution Date, the
aggregate Monthly Interest Payments for prior Distribution Dates which have not
been paid, after giving effect to any payment of the Reserve Account Withdrawal
Amount or any Surety Drawing Amount on such Distribution Date made pursuant to
Section 10.5(a)(ii) and (iii), respectively.
"Carry-Over Monthly Principal" means, for any Distribution Date, the
aggregate Monthly Principal Payments for prior Distribution Dates which have not
been paid, after giving effect to any payment of the Reserve Account Withdrawal
Amount or any Surety Drawing Amount on such Distribution Date made pursuant to
Section 10.5(a)(ii) and (iii), respectively.
"Carry-Over Servicing Fee" means, for any Distribution Date, the
aggregate Servicing Fees for prior Distribution Dates which have not been paid
after giving effect to any Reserve Account Interest Withdrawal or any Surety
Interest Drawing made on such Distribution Date pursuant to Section 10.5(a)(ii)
and (iii), respectively.
<PAGE>
"Certificate" means a certificate executed by the Trust and
authenticated by the Trustee substantially in the form of Exhibit B.
"Certificate Account" means the account designated as such, established
and maintained pursuant to Section 10.1(a).
"Certificate Balance" means, as of any date of determination, the
Original Certificate Balance, reduced by all principal distributions on the
Certificates.
"Certificate Factor" means, as of the close of business on a
Distribution Date, a seven-digit decimal figure equal to the Certificate Balance
as of such Distribution Date divided by the Original Certificate Balance.
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the Person who is the owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" mean the register
maintained and the registrar appointed pursuant to Section 11.3.
"Certificateholder" or "Holder" means the Person in whose name the
respective Certificate shall be registered in the Certificate Register, except
that, solely for the purposes of giving any consent, waiver, request or demand
pursuant to this Agreement, the interest evidenced by any Certificate registered
in the name of the Depositor or the Servicer, or any Person controlling,
controlled by, or under common control with the Depositor or the Servicer, shall
not be taken into account in determining whether the requisite percentage
necessary to effect any such consent, waiver, request or demand shall have been
obtained.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Collateral Agent" means the Person acting as Collateral Agent under
this Agreement, its successor in interest, and any successor Collateral Agent
appointed pursuant to Section 15.10.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 10.1(a).
"Collection Period" means each calendar month.
<PAGE>
"Collections" shall mean, with respect to a Collection Period, all
payments by or on behalf of the Obligors made during such Collection Period
other than Liquidation Proceeds on the Receivables (other than a Purchased
Receivable).
"Corporate Trust Office" means the office of the Trustee at which its
corporate trust business shall be administered, which office at the date hereof
is [address].
"Dealer" means the dealer who sold a Boat, and who originated and
assigned the respective Receivable to CITSF under an existing agreement between
such dealer and CITSF.
"Defaulted Receivable" means a Receivable as to which either (x) the
Servicer has determined, in accordance with its customary servicing procedures,
that eventual payment in full is unlikely or (y) (1) 90 or more days have
elapsed since the related Boat has been repossessed by the Servicer, in the case
of any Receivable with a Principal Balance of $______ or less as of the day such
Boat was repossessed by the Servicer or (2) 180 or more days have elapsed since
the related Boat has been repossessed by the Servicer, in the case of any
Receivable with a Principal Balance of greater than $______ as of the day such
Boat was repossessed by the Servicer.
"Definitive Certificates" means the Certificates specified in Section
11.8.
"Delivery" or "Deliver" when used with respect to Account Property
means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the Relevant UCC and are susceptible to physical delivery, transfer
thereof to the Trustee or its nominee, agent or custodian by physical
delivery to the Trustee or its nominee, agent or custodian endorsed to,
or registered in the name of, the Trustee, as trustee for the benefit
of the Certificateholders, or its nominee, agent or custodian or
endorsed in blank, and, with respect to a certificated security (as
defined in Section 8-102 of the Relevant UCC) transfer thereof (i) by
delivery of such certificated security endorsed to, or registered in
the name of, the Trustee, as trustee for the benefit of the
Certificateholders, or its nominee, agent or custodian or endorsed in
blank to a financial intermediary (as defined in Section 8-313 of the
Relevant UCC) and the making by such financial intermediary of entries
on its books and records identifying such certificated securities as
belonging to the Trustee, as trustee for the benefit of the
Certificateholders, or its nominee, agent or custodian and the sending
by such financial intermediary of a confirmation of the purchase of
such certificated security by the Trustee or its nominee, agent or
custodian, or (ii) by delivery thereof to a "clearing corporation" (as
defined in Section 8-102(3) of the Relevant UCC) and the making by such
clearing corporation of appropriate entries on its books reducing the
appropriate securities account of the transferor and increasing the
appropriate securities account of a financial intermediary by the
amount of such certificated security, the identification by the
clearing corporation of the certificated securities for the sole and
exclusive account of the financial intermediary, the maintenance of
such certificated securities by such clearing corporation or a
"custodian bank" (as defined in Section 8102(4) of the Relevant UCC) or
the
<PAGE>
nominee of either subject to the clearing corporation's exclusive
control, the sending of a confirmation by the financial intermediary of
the purchase by the Trustee, as trustee for the benefit of the
Certificateholders, or its nominee, agent or custodian of such
securities and the making by such financial intermediary of entries on
its books and records identifying such certificated securities as
belonging to the Trustee, as trustee for the benefit of the
Certificateholders, as applicable, or its respective nominee, agent or
custodian (all of the foregoing, "Physical Property"), and, in any
event, any such Physical Property in registered form shall be in the
name of the Trustee, as trustee for the benefit of the
Certificateholders, or its nominee, agent or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such
Account Property (as defined herein) to the Trustee, as trustee for the
benefit of the Certificateholders, or its nominee, agent or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the Federal
National Mortgage Association that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations, the following procedures, all in accordance with
applicable law, including applicable federal regulations and Articles 8
and 9 of the Relevant UCC: book-entry registration of such Account
Property to an appropriate book-entry account maintained with a Federal
Reserve Bank by a financial intermediary which is also a "depository"
pursuant to applicable federal regulations and issuance by such
financial intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Trustee or its
nominee, agent or custodian of the purchase by the Trustee, as trustee
for the benefit of the Certificateholders, or its nominee or custodian
of such book-entry securities; the making by such financial
intermediary of entries in its books and records identifying such
book-entry security held through the Federal Reserve System pursuant to
federal book-entry regulations as belonging to the Trustee, as trustee
for the benefit of the Certificateholders, or its nominee, agent or
custodian and indicating that such custodian holds such Account
Property solely as agent for the Trustee, as trustee for the benefit of
the Certificateholders, or its nominee, agent or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such
Account Property to the Trustee or its nominee, agent or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any item of Account Property that is an
uncertificated security under Article 8 of the Relevant UCC and that is
not governed by clause (b) above, registration on the books and records
of the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the purchase
by the Trustee, as trustee for the benefit of the Certificateholders,
or its nominee, agent or custodian of such uncertificated security, and
the making by such financial intermediary of entries on its books and
records identifying such uncertificated certificates as belonging to
the Trustee, as trustee for the benefit of the Certificateholders, or
its nominee, agent or custodian.
<PAGE>
"Deposit Date" means the Business Day preceding each Distribution Date.
"Depositor" means The CIT Group Securitization Corporation II, a
corporation organized under the laws of the State of Delaware, as the depositor
of the Receivables hereunder, and each successor to The CIT Group Securitization
Corporation II (in the same capacity) pursuant to Section 12.3.
"Receivables" means the marine retail installment sales contracts
listed on Schedule A.
"Receivables Files" means the documents specified in Section 8.3 that
relate to Receivables.
"Depository Agreement" means the agreement among the Depositor, the
Trustee and the initial Clearing Agency, dated __________, ____, substantially
in the form attached hereto as Exhibit C.
"Determination Date" means the ____ of each month.
"Distribution Date" means, for each Collection Period, the ____ of the
following month, or if the ____ is not a Business Day, the next following
Business Day, commencing with the date specified herein.
"Event of Default" means an event specified in Section 14.1.
"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind other than tax liens, mechanics' liens and any liens
which attach to the respective Receivable by operation of law.
"Liquidation Proceeds" means, with respect to any Collection Period,
the monies (including recoveries) collected from whatever source, during such
Collection Period on a Defaulted Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor plus any amounts
required by law to be remitted to the Obligor.
"Monthly Interest Payment" means, as of any Distribution Date,
one-twelfth of the product of the Pass-Through Rate and the Certificate Balance
as of the close of business on the prior Distribution Date or, in the case of
the first Distribution Date, the Certificate Balance as of the Closing Date.
"Monthly Principal Payment" means, (x) as of any Distribution Date
(except for the Final Scheduled Distribution Date), an amount equal to the sum
of (i) that portion of all collections received by the Servicer during the
related Collection Period on Receivables allocable to principal (which shall not
include the principal portion of proceeds from any recoveries or liquidations in
respect of any Defaulted Receivable in any Collection Period following the
Collection Period in which such Receivable became a Defaulted Receivable), (ii)
Purchase
<PAGE>
Amounts allocable to principal and paid by the Depositor to the
Servicer or by the Servicer and (iii) the Principal Balance of Defaulted
Receivables, which became Defaulted Receivables during the related Collection
Period and (y) as of the Final Scheduled Distribution Date, after giving effect
to the distribution of the amounts set forth in (i) through (iii) of clause (x),
an amount necessary to reduce the Certificate Balance to zero on such
Distribution Date.
"Moody's" means Moody's Investors Service, Inc.
"CITSF" means The CIT Group / Sales Financing, Inc., a corporation
organized under the laws of Delaware, or its successors.
"Net Credit Loss Ratio" means, for any Collection Period, an amount
expressed as an annualized percentage equal to (i) the aggregate gross losses
with respect to the Receivables recognized in such Collection Period, as
determined in accordance with the Servicer's normal practices, less any
recoveries received during such Collection Period, divided by (ii) the average
of the Pool Balances as of the last day of the prior Collection Period and as of
the last day of such Collection Period.
"Obligor" on a Receivable means the purchaser or the co-purchasers of
the Boat or any other Person who owes payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman of
the board, the president, any vice chairman of the board, any vice president,
the treasurer, any assistant treasurer or the controller of the Depositor, the
Servicer or the Surety Bond Issuer, as appropriate.
"Opinion of Counsel" means a written opinion of counsel who may but
need not be counsel to the Depositor or Servicer, which opinion shall be
acceptable to the Trustee, and provided that any opinion relating to the tax
status of the Trust shall be rendered by __________ or such other independent
outside counsel acceptable to the Trustee.
"Original Certificate Balance" means $__________ [the Certificate
Balance as of the Closing Date].
"Original Pool Balance" means $__________ [the Pool Balance as of the
Cutoff Date].
"Pass-Through Rate" means the interest rate payable to
Certificateholders.
"Permitted Investments" means those investments specified in Schedule
C.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
or government or any agency or political subdivision thereof.
<PAGE>
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Balance" means as the last day of any Collection Period, the
aggregate Principal Balance of the Receivables. For purposes of this definition
only the Principal Balance of a Defaulted Receivable shall equal zero.
"Precomputed Receivable" means any Receivable under which the portion
of a payment allocable to earned interest (which may be referred to in the
Receivable as an add-on finance charge) and the portion allocable to the Amount
Financed is determined according to the sum of periodic balances or the sum of
monthly balances or any equivalent method or are monthly actuarial receivables.
"Principal Balance" of a Receivable, as of the last day of a Collection
Period, means the Amount Financed minus the sum of (a) that portion of all
Collections received on or prior to such day by the Servicer allocable as a
payment of principal pursuant to Section 10.3, (b) any refunded portion of
extended warranty protection plan costs, or of physical damage, credit life or
disability insurance premiums included in the Amount Financed which is applied
during the related Collection Period unless such refund must be paid to the
Obligor, and (c) the principal portion of all Purchase Amounts paid by the
Depositor or the Servicer, in respect of such Receivable, after the preceding
Distribution Date but prior to the related Distribution Date.
"Purchase Agreement" means the Purchase Agreement executed by the
Depositor and CITSF as of the Cutoff Date.
"Purchase Amount" means the amount, as of the last day of a Collection
Period, required to prepay in full the Principal Balance of a Receivable plus
accrued interest thereon at one-twelfth the sum of the Pass-Through Rate plus
the Servicing Fee Rate to the last day of the month of purchase.
"Purchased Receivable" means a Receivable purchased as of the last day
of a Collection Period by the Servicer pursuant to Section 9.7 or Section 16.2
or by the Depositor pursuant to Section 8.2.
"Rating Agency" means S&P, Moody's or any other nationally recognized
rating agency initially contracted by the Depositor to rate the Certificates.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of __________, ____ between CITSF and [ ], as Administrator.
"Record Date" means for any Distribution Date the close of business on
the Business Day prior to such Distribution Date.
"Reimbursement Agreement" means the agreement relating to the Surety
Bond.
<PAGE>
"Required Deposit Rating" means the rating specified in Section 6.1.
"Reserve Account Initial Deposit" shall equal $____________.
"Reserve Account Withdrawal Amount" shall have the meaning in Section
10.5(a)(ii).
"Residual Certificate" means the Certificate specified in Section 11.1.
"Scheduled Payment" on a Receivable means that portion of the payment
required to be made by the Obligor on the related due date during the respective
Collection Period sufficient to amortize at level monthly payments the Principal
Balance and to provide interest at the APR.
"Servicer" means CITSF and each successor to CITSF(in the same
capacity) pursuant to Section 13.3.
"Servicer's Certificate" means a certificate completed and executed by
the Servicer by its chairman of the board, its president, any vice chairman of
the board, any vice president, the treasurer, any assistant treasurer or the
controller of the Servicer pursuant to Section 9.9, substantially in the form of
Exhibit D.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during each Collection Period, determined pursuant to Section 9.8.
"Servicing Standards" means, at any time, the quality of the Servicer's
(or in the event that a subservicer performs servicing operations on behalf of
the Servicer, such subservicer's) performance with respect to (i)compliance with
the terms and conditions and (ii) adequacy, measured in accordance with industry
standards and current and historical standards of the Servicer (or such
subservicer) in respect of all receivables serviced by the Servicer (or such
subservicer), regardless of whether such receivables are owned by the Servicer
(or such subservicer), of the Servicer's (or such subservicer's) servicing of
the Receivables.
"Ship Mortgage Act" means the Ship Mortgage Act of 1920, as amended.
"Simple Interest Method" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the fixed rate of
interest multiplied by the unpaid principal balance multiplied by the number of
days elapsed since the preceding payment of interest was made.
"Simple Interest Receivable" means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"Specified Reserve Account Requirement" with respect to any
Distribution Date, shall equal the greater of (i) $____________, or (ii) ____%
of the Pool Balance as of the last day of the related Collection Period. The
Specified Reserve Account Requirement may be reduced
<PAGE>
without the consent of the Certificateholders to a lesser amount, including to
zero, as determined by the Depositor; provided that such reduction is consented
to in writing by the Surety Bond Issuer and does not adversely affect the rating
of the Certificates assigned by any Rating Agency. Upon the occurrence and
continuance of the event specified in Section 14.1(b)(iv), the Specified Reserve
Account Requirement shall equal the sum of the Certificate Balance, accrued
interest thereon and the Servicing Fee payable pursuant to Section 10.5 (b) (ii)
and all amounts available under Section 10.5(b)(vi) shall be deposited in the
Reserve Account up to such amount.
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies.
"State" means any state of the United States of America or the District
of Columbia.
"Statement to Certificateholders" means a certificate completed and
executed by the Servicer by its the chairman of the board, its president, any
vice chairman of the board, any vice president, the treasurer, any assistant
treasurer or the controller of the Servicer pursuant to Section 10.7,
substantially in the form of Exhibit E.
"Surety Bond" means the unconditional, irrevocable surety bond
designated as such.
"Surety Bond Issuer Default" means the failure of the Surety Bond
Issuer to make a payment required under the Surety Bond in accordance with its
terms.
"Surety Drawing Amount" shall have the meaning set forth in Section
10.5(a)(iii).
"Trust" means the trust created hereby, the estate of which shall
consist of (i) the Receivables (other than Purchased Receivables), and all
payments received in the case of Simple Interest Receivables and all payments
due thereunder, in the case of Precomputed Receivables, in each case, after the
Cutoff Date; (ii) funds deposited into the Collection Account or the Certificate
Account; (iii) any interest of the Depositor in the security interests in the
Boats granted by the Obligors; (iv) the Surety Bond; (v) the Purchase Agreement;
(vi) any interest of the Depositor in any proceeds from claims on physical
damage, credit life or disability insurance policies covering the Boats or the
Obligors, as the case may be; (vii) any property (including the right to receive
future Liquidation Proceeds) that shall have secured a Receivable and that shall
have been acquired by or on the behalf of the Trustee; and (viii) the proceeds
of all of the foregoing.
"Trustee" means the Person acting as Trustee hereunder, its successor
in interest, and any successor trustee pursuant to Section 15.11.
"Trustee Officer" means any officer assigned to the Corporate Trust
Office, including any managing director, vice president, any assistant vice
president, any assistant secretary, any assistant treasurer, any trust officer
or any other officer of the Corporate Trust Office of the Trustee customarily
performing functions similar to those performed by persons who at the time shall
be such officers and also means, with respect to a particular corporate trust
matter, any
<PAGE>
other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Trustee's Certificate" means a certificate completed and executed by
the Trustee by a Trustee Officer pursuant to Section 15.2, substantially in the
form of, in the case of an assignment to the Depositor, Exhibit F-1, and in the
case of an assignment to the Servicer, Exhibit F-2.
"UCC" means the Uniform Commercial Code as in effect in the respective
jurisdiction.
"Unsold Contract" means any retail installment contract serviced by
CITSF other than the Receivables.
SECTION 7.2. Usage of Terms. With respect to all terms used herein, the
singular includes the plural and the plural the singular; words importing any
gender include the other gender; references to "writing" include printing,
typing, lithography and other means of reproducing words in a visible form;
references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited hereby; references to Persons include
their permitted successors and assigns; and the term "including" means
"including without limitation."
SECTION 7.3. Cutoff Date and Record Date. All references to the Record
Date prior to the first Record Date in the life of the Trust shall be to the
Cutoff Date.
ARTICLE VIII
SECTION 8.1. Representations and Warranties of Depositor. The Depositor
makes the following representations and warranties as to the Receivables on
which the Trustee relies in accepting the Receivables in trust and executing and
authenticating the Certificates. Such representations and warranties speak as of
the Closing Date, but shall survive the sale, transfer and assignment of the
Receivables to the Trustee.
(i) Characteristics of Receivables. Each Receivable (a) shall
have been originated in the United States by a Dealer for the retail
sale of a Boat in the ordinary course of such Dealer's business, shall
have been fully and properly executed by the parties thereto, shall be
denominated in U.S. dollars, (b) shall have created or shall create a
valid, subsisting and enforceable first priority perfected security
interest in favor of CITSF in the related Boat (other than in the case
of boat motors subject to certificate of title statutes that provide
for perfection of the security interests in such boat motors by the
filing of a UCC-1 financing statement), which security interest has
been assigned to the Depositor and shall be validly assignable by the
Depositor to the Trustee, (c) shall contain customary and enforceable
provisions such that the rights and remedies of the holder thereof
shall be adequate for realization against the collateral of the
benefits of the security, (d) shall provide for level monthly payments
(provided that the payment in the first or last month
<PAGE>
in the life of the Receivable may be minimally different from the level
payment) that fully amortize the Amount Financed by maturity and yield
interest at the Annual Percentage Rate, and (e) shall provide for, in
the event that such contract is prepaid, a prepayment that fully pays
the Principal Balance and includes accrued but unpaid interest due
through the date of prepayment in an amount at least equal to the
Annual Percentage Rate.
(ii) Schedule of Receivables. The information set forth in
Schedule A shall be true and correct in all material respects as of the
close of business on the Cutoff Date, and no selection procedures
believed to be adverse to the Certificateholders shall have been
utilized in selecting the Receivables.
(iii) Compliance with Law. Each Receivable and the sale of the
related Boat shall have complied at the time it was originated or made,
and at the date of issuance of the Certificates shall comply, in all
material respects with all requirements of applicable Federal, State,
and local laws and regulations thereunder, including, without
limitation, usury laws, the Federal 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
Trade Commission Credit Practices Rule, State unfair and deceptive
trade practice laws, and State adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code, and any other applicable
consumer credit, equal credit opportunity and disclosure laws.
(iv) Binding Obligation. Each Receivable shall represent the
genuine, legal, valid and binding payment obligation in writing of the
Obligor, enforceable by the holder thereof in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance and similar laws relating to creditors' rights
generally and subject to general principles of equity.
(v) No Government Obligor. None of the Receivables shall be
due from the United States of America or any State or local government
or from any agency, department or instrumentality of the United States
of America, any State or local government.
(vi) Receivables in Force. No Receivable shall have been
satisfied, subordinated or rescinded, nor shall any Boat have been
released from the security interest granted by the related Receivable
in whole or in part.
(vii) No Waiver. No provision of a Receivable shall have been waived.
(viii) No Defenses. Except for the security interests in favor
of the Depositor and the Trustee, the Receivables are free and clear of
all security interests, liens, charges, and encumbrances and to the
best knowledge of the Depositor no right of rescission, setoff,
<PAGE>
counterclaim or defense shall have been asserted or threatened with
respect to any Receivable.
(ix) No Liens. No liens or claims shall have been filed for
work, labor or materials relating to a Boat that shall be liens prior
to, or equal to the security interest in the Boat granted by the
Receivable.
(x) Insurance. The Obligor has obtained physical damage
insurance covering the Boat and the Obligor is required under the terms
of the Receivable to maintain such insurance.
(xi) Title. It is the intention of the Depositor that the sale
and assignment herein contemplated constitute a sale of the Receivables
from the Depositor to the Trust and that the beneficial interest in and
title to the Receivables not be part of the debtor's estate in the
event of the filing of a bankruptcy petition by or against the
Depositor under any bankruptcy law. No Receivable has been sold,
transferred, assigned or pledged by the Depositor to any Person other
than the Trustee. Immediately prior to the sale and assignment herein
contemplated, the Depositor had good and marketable title to each
Receivable free and clear of all Liens, and, immediately upon the sale
and assignment contemplated hereby, the Trustee for the benefit of the
Certificateholders and the Surety Bond Issuer shall have good and
marketable title to each Receivable, free and clear of all Liens,
encumbrances, security interests and rights of others; and the sale and
assignment has been perfected under the UCC.
(xiii) Lawful Assignment. No Receivable shall have been
originated in, or shall be subject to the laws of any jurisdiction
under which the sale, transfer and assignment of such Receivable under
this Agreement or pursuant to transfers of the Certificates shall be
unlawful, void or voidable.
(xiv) Security Interest. Upon the Receivables being conveyed
to the Trust pursuant to Section 2.1(a), the Trust shall have a
perfected security interest under the UCC in the Receivables.
(xv) One Original. There shall be in existence one, and only
one, original executed copy of each Receivable.
(xvi) UCC Characterization. Each Receivable constitutes
"Chattel Paper" under the UCC.
(xvii) Ship Mortgage Act. No Boat related to any Receivable
meets the requirements for documentation under the Ship Mortgage Act.
(xviii) No Default. Except for payment defaults continuing for
a period of less than 60 days as of the Cutoff Date, no default,
breach, violation or event permitting
<PAGE>
acceleration under the terms of any Receivable shall have occurred and
neither CITSF nor the Depositor shall have waived any of the foregoing.
SECTION 8.2. Repurchase Upon Breach. The Depositor or the Servicer, as
the case may be, shall inform the other parties and the Trustee promptly, in
writing, upon the discovery of any breach of the Depositor's representations and
warranties pursuant to Section 8.1. Unless the breach shall have been cured by
the second Record Date following the discovery, the Depositor shall repurchase
any Receivable, which as a result of such breach would materially and adversely
affect the interests of the Certificateholders or the Surety Bond Issuer, as of
such Record Date (or, at the Depositor's option, the first Record Date following
the discovery). In consideration of the purchase of the Receivable, the
Depositor shall remit the Purchase Amount in the manner specified in Section
10.4(a) on the Deposit Date. The sole remedy of the Trustee, the Trust or the
Certificateholders with respect to a breach of the Depositor's representations
and warranties pursuant to Section 8.1 shall be to require the Depositor to
repurchase Receivables pursuant to this Section 8.2.
SECTION 8.3. Custody of Receivable Files. To assure uniform quality in
servicing the Receivables and to reduce administrative costs, the Trustee, on
behalf of the Trust, upon the execution and delivery of this Agreement, hereby
revocably appoints the Servicer, and the Servicer hereby accepts such
appointment, to act as the agent of the Trustee as custodian of the following
documents or instruments which are hereby constructively delivered to the Trust
on behalf of the Trust, with respect to each Receivable:
(i) The original of the Receivable fully executed by the
Obligor.
(ii) The original credit application fully executed by the
Obligor.
(iii) The original certificate of title or such documents that
the Servicer or the Depositor shall keep on file, in accordance with
its customary procedures, evidencing the security interest of CITSF in
the Boat.
(iv) Any and all other documents that the Servicer shall keep
on file, in accordance with its customary procedures, relating to a
Receivable, an Obligor or a Boat.
The Trustee shall have no duty to monitor the performance of the
Servicer and shall have no liability in connection with the Servicer's
performance hereunder.
SECTION 8.4. Duties of Servicer as Custodian. (a) Safekeeping. The
Servicer shall hold the Receivable Files on behalf of the Trust for the use and
benefit of all Certificateholders and the Surety Bond Issuer, and maintain such
accurate and complete accounts, records and computer systems pertaining to each
Receivable File as shall enable the Servicer to comply with this Agreement. In
performing its duties as custodian the Servicer shall act with reasonable care,
using that degree of skill and attention that the Servicer exercises with
respect to the receivable files relating to all comparable receivables that the
Servicer services for itself or others. The Servicer shall conduct, or cause to
be conducted, periodic audits of the Receivable Files held by
<PAGE>
it under this Agreement, and of the related accounts, records and computer
systems, in such a manner as would enable the Trustee to verify the accuracy of
the Servicer's record keeping. The Servicer shall promptly report to the Trustee
any failure on its part to hold the Receivable Files and maintain its accounts,
records and computer systems as herein provided and promptly take appropriate
action to remedy any such failure. Nothing herein shall be deemed to require an
initial review or any periodic review by the Trustee of the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall maintain
each Receivable File at one of its offices specified in Section 5.1(iv), or at
such other office as shall be specified to the Trustee by written notice not
later than 90 days after any change in location. The Servicer shall make
available to the Trustee or its duly authorized representatives, attorneys or
auditors a list of locations of the Receivable Files, and shall also so make
available the Receivable Files themselves, and the related accounts, records and
computer systems maintained by the Servicer, at such times as the Trustee shall
reasonably instruct.
(c) Release of Documents. Upon instruction from the Trustee, the
Servicer shall release any Receivable File to the Trustee, the Trustee's agent
or the Trustee's designee, as the case may be, at such place or places as the
Trustee may designate, as soon as practicable.
SECTION 8.5. Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by a Trustee Officer.
SECTION 8.6. Custodian's Indemnification. The Servicer as custodian
shall indemnify the Trustee (which shall include for purposes of this section it
directors, officers, employees and agents) for any and all liabilities,
obligations, losses, compensatory damages, payments, costs or expenses of any
kind whatsoever that may be imposed on, incurred or asserted against the Trustee
as the result of any improper act or omission in any way relating to the
maintenance and custody by the Servicer as custodian of the Receivable Files;
provided, however, that the Servicer shall not be liable for any portion of any
such amount resulting from the willful misfeasance, bad faith or negligence of
the Trustee. This indemnity shall survive the termination of this Agreement and
the resignation and removal of the Trustee.
SECTION 8.7. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section 8.7.
If CITSF shall resign as Servicer or if all the rights and obligations of the
Servicer shall have been terminated under Section 14.1, the appointment of the
Servicer as custodian may be terminated by the Surety Bond Issuer, in the same
manner as the Surety Bond Issuer may terminate the rights and obligations of the
Servicer under Section 14.1. The Trustee shall, if required by the Surety Bond
Issuer following the occurrence and during the continuation of an Event of
Default or the Trustee, on behalf of the Trust, may terminate the Servicer's
appointment as custodian, with cause or as required by law at any time upon
written notification to the Servicer. As soon as practicable after any
termination of such appointment, the Servicer shall deliver the Receivable Files
to the Trustee or the Trustee's agent at such place or places as the Trustee may
reasonably designate.
<PAGE>
ARTICLE IX
SECTION 9.1. Duties of Servicer. The Servicer shall manage, service,
administer and make collections on the Receivables (other than Purchased
Receivables) with reasonable care, using that degree of skill and attention that
the Servicer exercises with respect to all comparable receivables that it
services for itself or others. The Servicer's duties shall include collection
and posting of all payments, responding to inquiries of Obligors on such
Receivables, investigating delinquencies, sending payment statements to
Obligors, reporting tax information to Obligors, accounting for collections and
furnishing monthly and annual statements to the Trustee with respect to
distributions. The Servicer shall follow its customary standards, policies and
procedures in performing its duties as Servicer. Without limiting the generality
of the foregoing, the Servicer is authorized and empowered by the Trustee to
execute and deliver, on behalf of itself, the Trust, the Certificateholders, or
the Trustee or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to such Receivables or to the Boats securing such
Receivables. If the Servicer shall commence a legal proceeding to enforce a
Receivable, the Trustee (in the case of a Receivable other than a Purchased
Receivable) shall thereupon be deemed to have automatically assigned, solely for
the purpose of collection on behalf of the party retaining an interest in such
Receivable, such Receivable to the Servicer. If in any enforcement suit or legal
proceeding it shall be held that the Servicer may not enforce a Receivable on
the ground that it shall not be a real party in interest or a holder entitled to
enforce the Receivable, the Trustee shall, at the Servicer's expense and
direction, take steps to enforce the Receivable, including bringing suit in its
name or the name of the Certificateholders or the Surety Bond Issuer. To enable
the Servicer to carry out its servicing and administrative duties hereunder, the
Trustee hereby irrevocably appoints the Servicer as its attorney-in-fact, such
appointment being coupled with an interest, to execute on its behalf such
documents or instruments as are necessary to accomplish the foregoing.
SECTION 9.2. Collection of Receivables Payments. The Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due and shall
follow such collection procedures as it follows with respect to all comparable
receivables that it services for itself or others. The Servicer may grant
extensions, rebates or adjustments on a Receivable subject to the provisions of
Section 9.6. The Servicer may in its discretion waive any late payment charge or
any other fees that may be collected in the ordinary course of servicing a
Receivable.
SECTION 9.3. Realization Upon Receivables. On behalf of the Trust, the
Servicer shall use its best efforts, consistent with its customary servicing
procedures, to repossess or otherwise convert the ownership of the Boat securing
any Receivable as to which the Servicer shall have determined eventual payment
in full is unlikely. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of marine receivables, which may include reasonable efforts to realize
upon any recourse to Dealers and selling the Boat at public or private sale. The
foregoing shall be subject to the provision that, in
<PAGE>
any case in which the Boat shall have suffered damage, the Servicer shall not
expend funds in connection with the repair or the repossession of such Boat
unless it shall determine in its discretion that such repair and/or repossession
will increase the related Liquidation Proceeds by an amount greater than the
amount of such expenses.
SECTION 9.4. Physical Damage Insurance. The Servicer, in accordance
with its customary servicing procedures, shall require that each Obligor shall
have obtained physical damage insurance covering the related Boat as of the date
of execution of the related Receivable.
SECTION 9.5. Maintenance of Security Interests in Boats. The Servicer
shall, in accordance with its customary servicing procedures, take such steps as
are necessary to maintain perfection of CITSF's security interest created by
each Receivable in the related Boat. The Trustee, on behalf of the Trust, hereby
authorizes the Servicer to take such steps as are necessary to perfect such
security interest on behalf of the Trust in the event of the relocation of a
Boat or for any other reason.
SECTION 9.6. Covenants of Servicer. The Servicer shall make within the
required time periods under the UCC all filings necessary in any jurisdiction to
give the Trustee a first priority perfected ownership interest in the
Receivables. The Servicer shall not release the Boat securing each Receivable
from the security interest granted by such Receivable in whole or in part except
in the event of payment in full by the Obligor thereunder. The Servicer shall
not impair the rights of the Certificateholders in any Receivable. The Servicer
shall make reasonable efforts to collect all payments called for under the terms
and provisions of the Receivables as and when the same shall become due and
shall follow such collection procedures as it follows with respect to all
comparable marine receivables that it services for itself and others. The
Servicer shall not sell, pledge, transfer, deliver or otherwise dispose of any
Receivable, except as provided in this Agreement. The Servicer will not increase
or decrease the number or amount of any Scheduled Payment, or the Principal
Balance of a Receivable (except with respect to a prepayment of a Scheduled
Payment that does not result in a deferral of any other Scheduled Payment) or
the APR of a Receivable, or extend, rewrite or otherwise modify the payment
terms of a Receivable; provided, however, that the Servicer may extend a
Receivable for credit related reasons that would be acceptable to the Servicer
with respect to comparable marine receivables that it services for itself and
others and in accordance with its customary standards, policies and procedures
if the cumulative extensions with respect to any Receivable shall not cause the
term of such Receivable to extend beyond the last day of the Collection Period
which is related to the Final Scheduled Distribution Date; provided, further,
that such extensions will not be made if, in the reasonable opinion of the
Servicer, the extensions would modify the terms of such Receivable in such a
manner as to constitute a cancellation of such Receivable and the creation of a
new receivable for federal income tax purposes. In the event that the Servicer
fails to comply with the provisions of the preceding sentence or with respect to
the second proviso of the preceding sentence, notwithstanding having acted
according to its reasonable opinion, or if there is a final determination that
the Servicer has modified the terms of a Receivable in such a manner as to
constitute a cancellation of such Receivable and the creation of a new
Receivable for federal income tax purposes, the Servicer shall be required to
purchase the Receivable or Receivables
<PAGE>
affected thereby, for the Purchase Amount, in the manner specified in Section
9.7 as of the first day of the Collection Period following the Collection Period
in which such failure occurs.
SECTION 9.7. Purchase of Receivables Upon Breach. The Servicer or the
Trustee shall inform the other party promptly, in writing, upon the discovery
(or, in the case of the Trustee, receipt of written notice by a Trust Officer)
of any breach pursuant to Section 9.6 or Section 9.15. Notice of any breach
pursuant to Section 9.6 or Section 9.15 may be given to the Servicer and the
Trustee by the Surety Bond Issuer. Unless the breach shall have been cured by
the second Record Date following such discovery (or, at the Servicer's election,
the first following Record Date), the Servicer shall purchase any Receivable (or
in the case of any representation and warranty set forth in clause (xiv) of
Section 9.15, the Servicer shall purchase Receivables such that, after giving
effect to such purchase, such representation and warranty would be complied
with), which as a result of such breach would materially and adversely affect
the interests of the Certificateholders or the Surety Bond Issuer, as of such
Record Date. In consideration of the purchase of such Receivable, the Servicer
shall remit the Purchase Amount in the manner specified in Section 10.4 on the
Deposit Date. The sole remedy of the Trustee, the Trust or the
Certificateholders with respect to a breach pursuant to Section 9.6 or Section
9.15 shall be to require the Servicer to repurchase Receivables pursuant to this
Section 9.7.
SECTION 9.8. Servicing Fee. The Servicing Fee for a Collection Period
shall equal the product of one twelfth times the Servicing Fee Rate times the
Initial Pool Balance, in the case of the initial Collection Period, and
thereafter, the Pool Balance as of the last day of the prior Collection Period
(except that in the case of a successor Servicer, the Servicing Fee shall equal
such amount as is arranged in accordance with Section 14.2). The Servicer shall
also be entitled to all late payment and extension fees, prepayment charges and
other administrative fees or similar charges allowed by applicable law with
respect to Receivables, collected (from whatever source) on the Receivables;
provided, however, such late payment and other fees shall not form a part of the
Servicing Fee and the Servicer shall be entitled to such fees as and when
collected.
SECTION 9.9. Servicer's Certificate. On or before 10:00 a.m. New York
time on the Determination Date, the Servicer shall deliver to the Trustee and
the Surety Bond Provider a Servicer's Certificate, containing all information
necessary to make the transfers and distributions pursuant to Section 10.5 for
the Collection Period immediately preceding the date of such Servicer's
Certificate. If on any Deposit Date there is a default by the Depositor or the
Servicer in respect of any Purchase Amounts to be deposited into the Collection
Account pursuant to Section 10.4, the Servicer shall recalculate all of the
amounts described in the Servicer's Certificate to reflect such default and
deliver to the Trustee a revised Servicer's Certificate reflecting such
recalculations on such Deposit Date.
SECTION 9.10. Annual Statement as to Compliance; Notice of Default. (a)
The Servicer shall deliver to the Trustee and the Surety Bond Issuer, on or
before March 31 of each year, beginning March 31, ____, an Officer's
Certificate, dated as of December 31 of the preceding year, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
(or such shorter period from the date of initial issuance of the Certificates to
December 31 of such year) and of its performance under this Agreement has been
made under such officer's
<PAGE>
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year (or such shorter period, as the case may be), or, if there
has been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and status thereof. A copy of
such certificate and the report referred to in Section 9.11 may be obtained by
any Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
(b) The Servicer shall deliver to the Trustee and the Surety Bond
Issuer promptly after having obtained knowledge thereof, but in no event later
than 5 Business Days thereafter, written notice in an Officer's Certificate of
any event which with the giving of notice or lapse of time, or both, would
become an Event of Default under clause (i) or (ii) of Section 14.1. The
Depositor shall deliver to the Trustee and the Surety Bond Issuer promptly after
having obtained knowledge thereof, but in no event later than 5 Business Days
thereafter, written notice in an Officer's Certificate of any event which with
the giving of notice or lapse of time, or both, would become an Event of Default
under clause (ii) of Section 14.1.
SECTION 9.11. Annual Independent Certified Public Accountant's Report.
The Servicer shall cause a firm of independent certified public accountants (who
may also render other services to the Servicer and the Depositor) to deliver to
the Trustee on or before March 31 of each year commencing March 31, ____, a
report to the effect that such firm has conducted an examination, substantially
in compliance with attestation standards established by the American Institute
of Certified Public Accountants, of certain documents and records relating to
the servicing procedures under this Agreement and that, on the basis of such
examination, such firm is of the opinion that such servicing was conducted in
compliance with the sections of this Agreement with which independent public
accountants generally possess adequate professional knowledge and which are
reasonably subject to positive assurance by them, except for such exceptions as
they believe to be immaterial and such other exceptions as shall be set forth in
such report. In the event such firm requires Trustee to agree to the procedures
performed by such firm, Servicer shall direct Trustee in writing to so agree; it
being understood and agreed that Trustee will deliver such letter of agreement
in conclusive reliance upon the direction of Servicer, and Trustee makes no
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
SECTION 9.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to the Certificateholders access to the
Receivables Files in such cases where the Certificateholder shall be required by
applicable statutes or regulations to review such documentation. Access shall be
afforded without charge, but only upon reasonable request and during the normal
business hours at the respective offices of the Servicer. Nothing in this
Section 9.12 shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access to information as a result of such
obligation shall not constitute a breach of this Section 9.12.
SECTION 9.13. Servicer Expenses. The Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of
<PAGE>
independent accountants, taxes imposed on the Servicer and expenses incurred in
connection with distributions and reports to Certificateholders.
SECTION 9.14. Appointment of Sub-servicer. The Servicer may at any time
appoint a sub-servicer to perform all or any portion of its obligations as
Servicer hereunder; provided however, that the Servicer shall remain obligated
and be liable to the Trustee and the Certificateholders for the servicing and
administering of the Receivables in accordance with the provisions hereof
without diminution of such obligation and liability by virtue of the appointment
of such sub-servicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Receivables. The fees and expenses of the sub-servicer shall be as agreed
between the Servicer and its sub-servicer from time to time and neither the
Trust, the Trustee nor the Certificateholders shall have any responsibility
therefor.
SECTION 9.15. Representations and Warranties of Servicer with respect
to the Receivables. The Servicer does hereby make the following representations
and warranties on which the Trustee on behalf of the Trust, relies in accepting
the Receivables pursuant to this Agreement and executing and authenticating the
Certificates. Such representations and warranties speak as of the Closing Date,
but shall survive the sale, transfer and assignment of the Receivables to the
Trustee on behalf of the Trust and any termination of the Servicer pursuant to
Section 14.1.
(i) Characteristics of Receivables. Each Receivable (a) shall
be denominated in U.S. dollars, (b) shall have an original maturity of
not more than 180 months, (c) as of the Cutoff Date, shall have a
remaining maturity of not more than 180 months, (d) shall contain
customary and enforceable provisions such that the rights and remedies
of the holder thereof shall be adequate for realization against the
collateral of the benefits of the security, (e) shall be kept at the
offices of CITSF at [address], (f) shall be adequate for realization
against the collateral of the benefits of the security, (g) shall
provide for level monthly payments (provided that the payment in the
first or last month in the life of the Receivable may be minimally
different from the level payment) that fully amortize the Amount
Financed by maturity and yield interest at the Annual Percentage Rate,
and (h) shall provide for , in the event that such contract is prepaid,
a prepayment that fully pays the Principal Balance and includes accrued
but unpaid interest due through the date of prepayment in an amount at
least equal to the Annual Percentage Rate.
(ii) Schedule of Receivables. The information set forth in
Schedule B shall be true and correct in all material respects as of the
close of business on the Cutoff Date, and no selection procedures
believed to be adverse to the Certificateholders shall have been
utilized in selecting the Receivables.
(iii) No Government Obligor. None of the Receivables shall be
due from the United States of America or any State or local government
or from any agency, department or instrumentality of the United States
of America, any State or local government.
<PAGE>
(iv) Receivables in Force. No Receivable shall have been
satisfied, subordinated or rescinded, nor shall any Boat have been
released from the security interests granted by the related Receivable
in whole or in part.
(v) No Waiver. No provision of a Receivable shall have been
waived.
(vi) No Defenses. Immediately following the conveyance of the
Receivables to the Trust, except for the security interests in favor of
the Depositor and the Trustee, the Receivables are free and clear of
all security interests, liens, charges, and encumbrances and to the
best knowledge of the Servicer no right of rescission, setoff,
counterclaim or defense shall have been asserted or threatened with
respect to any Receivable.
(vii) No Liens. No liens or claims shall have been filed for
work, labor or materials relating to a Boat that shall be liens prior
to, or equal to the security interest in the Boat granted by the
Receivable.
(viii) Insurance. The Obligor has obtained physical damage
insurance covering the Boat and the Obligor is required under the terms
of the Receivable to maintain such insurance.
(ix) Lawful Assignment. No Receivable shall have been
originated in, or shall be subject to the laws of any jurisdiction
under which the sale, transfer and assignment of such Receivable
pursuant to transfers of the Certificates shall be unlawful, void or
voidable.
(x) Security Interest. Upon the Receivables being conveyed to
the Trust, the Trust shall have a perfected security interest under the
UCC in the Receivables.
(xi) Ship Mortgage Act. No Boat related to any Receivable
shall be required to be documented under the Ship Mortgage.
(xii) Compliance with Law. Each Receivable complies in all
material respects with all requirements of applicable Federal, State,
and local laws and regulations thereunder, including, without
limitation, usury laws, the Federal 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
Trade Commission Credit Practices Rule, State unfair and deceptive
trade practice laws, and State adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code, and any other applicable
consumer credit, equal credit opportunity and disclosure laws.
(xiii) Title. Immediately upon the sale and assignment of the
Receivables to the Trust, the Trustee for the benefit of the
Certificateholders and the Surety Bond Issuer shall have good and
marketable title to each Receivable, free and clear of all Liens,
<PAGE>
encumbrances, security interests and rights of others; and the sale and
assignment has been perfected under the UCC.
(xiv) As of the Cutoff Date, not more than (a) approximately
____% of the number of Receivables, constituting approximately ____% of
the Initial Pool Balance are related to Boats which have been
repossessed by the Servicer, (b) approximately ____% of the number of
Receivables, constituting approximately ____% of the Initial Pool
Balance are 30 to 59 days delinquent, (c) approximately ____% of the
number of Receivables, constituting approximately ____% of the Initial
Pool Balance are related to Boats which are 60 to 89 days delinquent
and (d) approximately ____% of the number of Receivables, constituting
approximately ____% of the Initial Pool Balance are related to Boats
which are 90 or more days delinquent.
(xv) Each Receivable creates a first priority perfected
security interest in the Boat financed thereby in favor of CITSF(other
than in the case of boat motors subject to certificate of title
statutes that provide for perfection of the security interests in such
boat motors by the filing of a UCC-1 financing statement).
(xvi) To the best of the Servicer's knowledge, no Liens or
claims are pending or threatened with respect to a Boat which may be or
become prior to or equal with the Lien of the related Receivable.
ARTICLE X
SECTION 10.1. Accounts. (a) The Servicer shall establish and maintain
the Collection Account and the Certificate Account in the name of the Trustee
for the benefit of the Certificateholders and, to the extent herein provided,
for the benefit of the Surety Bond Issuer. The Collection Account shall be a
segregated, non-interest-bearing trust account initially established with the
Trustee and maintained with the Trustee so long as (i) the deposits of the
Trustee have the Required Deposit Rating or (ii) the Collection Account is
maintained as a fully segregated trust account. All amounts held in the
Collection Account (other than Purchase Amounts) shall be invested in Permitted
Investments by the Trustee, at the written direction of the Servicer, in each
case such investments maturing not later than the Deposit Date following the
Collection Period in which such amounts are so invested. Purchase Amounts
deposited on a Deposit Date shall not be invested. Such written direction shall
certify that any such investment is authorized by this Section 14.1 and complies
with the requirements of Permitted Investments as set forth in Schedule C. The
Certificate Account shall be a segregated, non-interest-bearing trust account
initially established with the Trustee and maintained with the Trustee for so
long as (x) the deposits of the Trustee have the Required Deposit Rating or (y)
the Certificate Account is maintained as a fully segregated trust account. The
amounts in the Certificate Account shall not be invested. Should the deposits of
the Trustee no longer have the Required Deposit Rating and the Collection
Account or the Certificate Account, as applicable, shall not be maintained as a
fully segregated trust account, then the Servicer shall, with the Trustee's
assistance as necessary, cause the Certificate Account and/or the Collection
Account to be moved, within 60 days after
<PAGE>
the occurrence of the later of the loss of the Required Deposit Rating or the
cessation of such accounts being maintained as fully segregated trust accounts,
to a bank or trust company organized under the laws of the United States of any
state thereof, the deposits of which shall have the Required Deposit Rating.
(b) (i) The Depositor shall establish the Reserve Account in
the name of the Collateral Agent which shall be pledged to the Trustee
for the benefit of the Certificateholders and the Surety Bond Issuer.
The Reserve Account shall be a segregated, non-interest-bearing trust
account initially established and maintained with the Trustee for so
long as (x) the deposits of the Trustee have the Required Deposit
Rating or (y) the Reserve Account is maintained as a fully segregated
trust account. The Reserve Account shall not be property of the Trust.
All amounts held in the Reserve Account shall be invested in Permitted
Investments by the Collateral Agent, at the written direction of the
Depositor, in each case such investments maturing not later than the
Deposit Date following the Collection Period in which such amounts are
so invested. Such written direction shall certify that any such
investment is authorized by this Section 10.1 and comply with the
requirements of Permitted Investments as set forth in Schedule C.
Should the deposits of the Collateral Agent no longer have the Required
Deposit Rating or the Reserve Account shall not be maintained as a
fully segregated trust account, then the Depositor shall, with the
Collateral Agent's assistance as necessary, cause the Reserve Account
to be moved, within 60 days after the occurrence of the later of the
loss of the Required Deposit Rating or the cessation of such accounts
being maintained as fully segregated trust accounts, to a bank or trust
company organized under the laws of the United States or any state
thereof, the deposits of which shall have the Required Deposit Rating.
(ii) On the date of the issuance of the Certificates, the
Depositor shall cause the Reserve Account Initial Deposit to be
deposited into the Reserve Account. The Depositor hereby grants to the
Collateral Agent for the benefit of the Certificateholders and the
Surety Bond Issuer a security interest in and to the Reserve Account
and any and all Account Property credited thereto from time to time,
including, but not limited to, Permitted Investments, to secure payment
of the Certificates according to their terms. Amounts held from time to
time in the Reserve Account will continue to be held by the Collateral
Agent for the benefit of the Certificateholders and the Surety Bond
Issuer, but the Reserve Account shall not be an asset of the Trust.
Funds held in the Reserve Account shall be remitted to the Depositor
upon the Depositor's written request upon the termination of the Trust.
By acceptance of their Certificates or interest therein and by
execution and delivery of the Reimbursement Agreement by the Surety
Bond Issuer, the Certificateholders and Certificate Owners and the
Surety Bond Issuer, respectively, shall be deemed to have appointed [ ]
as Collateral Agent. [ ] hereby accepts such appointment as Collateral
Agent.
(iii) With respect to the Account Property in respect of the
Reserve Account, the Collateral Agent agrees that:
<PAGE>
A. any Account Property that is held in deposit
accounts shall be held solely in a bank with the Required
Deposit Rating; and each such bank with the Required Deposit
Rating shall be subject to the exclusive custody and control
of the Collateral Agent, and the Collateral Agent shall have
sole signature authority with respect thereto;
B. any Account Property that constitutes Physical
Property shall be delivered to the Collateral Agent in
accordance with paragraph (a) of the definition of "Delivery"
and shall be held, pending maturity or disposition, solely by
the Collateral Agent, or a financial intermediary (as such
term is defined in Section 8-313(4) of the Relevant UCC)
acting solely for the benefit of the Certificateholders;
C. any Account Property that is a book-entry security
held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered to the Collateral
Agent in accordance with paragraph (b) of the definition of
"Delivery" and shall be maintained by the Collateral Agent,
pending maturity or disposition, through continued book-entry
registration of such Account Property as described in such
paragraph; and
D. any Account Property that is an "uncertificated
security" under Article 8 of the Relevant UCC and that is not
governed by clause (C) above shall be delivered to the
Collateral Agent in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by the
Collateral Agent, pending maturity or disposition, through
continued registration of the Collateral Agent's (or its
nominee's) ownership of such security.
Effective upon Delivery of any Account Property in the form of
Physical Property, book-entry securities or uncertificated securities,
the Collateral Agent shall be deemed to have purchased such Account
Property for value, in good faith and without notice of any adverse
claim thereto.
(iv) The Depositor and the Servicer agree to take or cause to
be taken such further actions, to execute, deliver and file or cause to
be executed, delivered and filed such further documents and instruments
(including, without limitation, any financing statements under the
Relevant UCC or this Agreement) as may be determined to be necessary,
in order to perfect the interests created by this Section 10.1(b) and
otherwise effectuate the purposes, terms and conditions of this Section
14.1(b).
SECTION 10.2. Collections. The Servicer shall remit to the Collection
Account within two Business Days after receipt thereof all Collections, any
amounts referred to in clauses (ii) and (iv) of the definition of Available
Funds, each as collected during the Collection Period; provided, however, that
so long as CITSF is acting as the Servicer, the Servicer shall be permitted to
make remittances of Collections, any amounts referred to in clause (ii) of the
definition of Available Funds and Liquidation Proceeds to the Collection Account
in next-day
<PAGE>
funds or immediately available funds by 12:30 p.m. New York City time on the
Deposit Date immediately following such Collection Period if the specific terms
and conditions set forth below in this Section 10.2 are satisfied and only for
so long as such terms and conditions are satisfied:
(i) the Servicer shall be CITSF or any other Successor
Servicer pursuant to Section 13.3;
(ii) there exists no Event of Default (as described below);
(iii) if the Servicer does not have a short term debt rating
or deposit rating, as applicable, of at least A-1 from S&P and P-1 from
Moody's, a guaranty, letter of credit, surety bond or other similar
instrument is issued covering Collections, any amounts referred to in
clause (ii) of the definition of Available Funds and Liquidation
Proceeds held by CITSF or its successor, which is acceptable to the
Rating Agencies and the Surety Bond Issuer and issued by an entity,
which has a short-term debt or deposit rating, as applicable, of at
least A-1 from S&P and P-1 from Moody's; and
(iv) the Servicer, the Trustee, the Depositor and the Surety
Bond Issuer shall not have received any notice from S&P or Moody's that
failure to deposit such funds more frequently will result in a
reduction or withdrawal of the then current rating on the Certificates
by either S&P or Moody's.
The Trustee shall not be deemed to have knowledge of any event or
circumstance under clause (ii) above that would require remittance by the
Servicer of Collections and Liquidations Proceeds to the Collection Account two
Business Days after receipt thereof unless the Trustee has received notice of
such event or circumstance from the Depositor, the Servicer or the Surety Bond
Issuer in an Officer's Certificate or from the Holders of Certificates
evidencing not less than 25% of the Certificate Balance.
SECTION 10.3. Application of Collections. As of each Determination
Date, all Collections for the related Collection Period shall be applied first
to late payment and extension fees, second to interest accrued on the
Receivable, third to principal due on the Receivable during the related
Collection Period, fourth to insurance premiums or amounts due on loans to the
Obligors to finance the payment of insurance premiums for collateral protection
insurance purchased by the Servicer, and fifth to administrative charges, if
any. Last, any excess shall be applied to prepay the Principal Balance of the
Receivable.
SECTION 10.4. Additional Deposits. (a) The Servicer and/or the
Depositor shall deposit in the Collection Account the aggregate Purchase Amount
with respect to Purchased Receivables and the Servicer shall deposit therein all
amounts to be paid under Section 8.2, 13.7 and 20.2. All such deposits shall be
made in immediately available funds by 12:30 p.m. New York City Time on the
Deposit Date relating to the Collection Period during which such repurchase,
purchase or other obligation arose. The Trustee shall deposit in the Certificate
Account the aggregate of any amounts received from the Surety Bond Issuer
pursuant to Section 10.5(a)(iii) on the date of receipt thereof.
<PAGE>
(b) If the Servicer shall be required pursuant to Section 10.2 to remit
Collections to the Collection Account two Business Days after receipt rather
than on a monthly basis, then, if the Servicer is CITSF or an affiliate thereof
is the servicer it may remit payments collected on Unsold Contracts as well as
payments collected on Receivables and Liquidation Proceeds to the Collection
Account. Upon receipt of an Officer's Certificate of the Servicer identifying
the amount of funds in the Collection Account representing Collections
attributable to Unsold Contracts, the Trustee shall transfer such funds in
accordance with the instructions contained in such Officer's Certificate.
SECTION 10.5. Distributions.
(a) (i) On each Deposit Date, the Trustee shall transfer all
amounts on deposit in the Collection Account to the Certificate
Account, in immediately available funds, less any funds identified in
an Officer's Certificate of the Servicer as proceeds (x) of Unsold
Contracts and (y) of Collections on the Receivables allocable to late
payment and extension fees, and administrative charges, provided,
however, that in the event that the Servicer is required to make
deposits to the Collection Account two Business Days after receipt
pursuant to Section 10.2, the amount of Available Funds transferred
from the Collection Account to the Certificate Account will include
only those funds that were deposited into the Collection Account in the
Collection Period relating to such Distribution Date. The amount of the
transfer from the Collection Account to the Certificate Account shall
be set forth in the Servicer's Certificate for such Distribution Date.
(ii) On each Deposit Date, the Trustee shall transfer from the
Reserve Account to the Certificate Account an amount equal to the
lesser of (x) the amount on deposit in the Reserve Account and (y) an
amount equal to the shortfall, if any, between, (A) Available Funds for
such Collection Period and (B) the sum of (1) the Monthly Interest
Payment and any Carry-Over Monthly Interest, (2) the Servicing Fee and
any Carry-Over Servicing Fee to be distributed to the Servicer pursuant
to Section 10.5(b)(ii) and (3) the Monthly Principal Payment and any
Carry-Over Monthly Principal Payment, each for the related Distribution
Date (collectively "Priority Distributions") (the amount transferred
pursuant to this clause (ii) is the "Reserve Account Withdrawal Amount"
for such Deposit Date).
The Reserve Account Withdrawal Amount shall be set forth in
the Servicer's Certificate with respect to each Distribution Date.
(iii) If on any Determination Date the Servicer has reported
to the Trustee in the Servicer's Certificate that the Servicer has
determined that Available Funds for the related Distribution Date
together with any Reserve Account Withdrawal Amount for such
Distribution Date are insufficient to provide for the Priority
Distribution on such Distribution Date (the amount of such
insufficiency is referred to as the "Surety Drawing Amount" for such
Distribution Date, then, after receipt of such Servicer's Certificate,
the
<PAGE>
Trustee shall promptly (and in any event not later than 2:00 p.m. on
the second Business Day prior to the Distribution Date) deliver a
completed demand for payment under the Surety Bond to the Surety Bond
Issuer requesting payment in an amount equal to the Surety Drawing
Amount for such Distribution Date. The Surety Bond Issuer shall pay or
cause to be paid the amount of such demand for payment to the Trustee
for credit to the Certificate Account no later than the later of 11:00
a.m. on the related Deposit Date and the second Business Day after the
Surety Bond Issuer receives a demand for payment.
(b) On each Distribution Date, as set forth in the Servicer's
Certificate for such Distribution Date, the Trustee will make the following
distributions from the Certificate Account in the following order of priority:
(i) to the Certificateholders of record as of the related
Record Date, the Monthly Interest Payment and any Carry-Over Monthly
Interest;
(ii) if the Servicer is not CITSF or an affiliate thereof, to
the Servicer, the Servicing Fee and any Carry-Over Servicing Fee;
(iii) to the Certificateholders of record as of the related
Record Date, the Monthly Principal Payment and any Carry-Over Monthly
Principal;
(iv) if CITSF or an affiliate thereof is the Servicer, to the
Servicer, the Servicing Fee and any Carry-Over Servicing Fee;
(v) to the Surety Bond Issuer, any amounts owing to the Surety
Bond Issuer hereunder and pursuant to the Reimbursement Agreement and
not paid;
(vi) to the Collateral Agent, an amount up to the Specified
Reserve Account Requirement for deposit into the Reserve Account; and
(vii) to the Depositor, any remaining amounts.
(c) On each Distribution Date as set forth in the Servicer's
Certificate for such Distribution Date, the Trustee shall withdraw from the
Reserve Account and distribute to the Depositor an amount equal to the excess,
if any, of the (x) amount on deposit in the Reserve Account over (y) the
Specified Reserve Account Requirement.
Distributions to Certificateholders, except in the case of
distributions under Section 16.1, shall be made by check mailed by the Trustee
to each Certificateholder's respective address of record on the Certificate
Register (or, where a Clearing Agency is the Certificateholder, by delivery of
immediately available funds) and distributions to the Servicer, the Surety Bond
Issuer, the Collateral Agent or the Depositor shall be made by wire transfer of
immediately available funds.
<PAGE>
SECTION 10.6. Net Deposits. For so long as the Servicer shall be
entitled pursuant to Section 10.2 to remit Collections on a monthly basis rather
than more frequently, the Servicer may make the remittances pursuant to Sections
14.2 and 14.4 above net of amounts to be distributed to the Servicer pursuant to
Section 10.5(b). Nonetheless, the Servicer shall account for all the above
described remittances and distributions in the Servicer's Certificate as if the
amounts were deposited and/or transferred separately.
SECTION 10.7. Statements to Certificateholders. (a) On each
Distribution Date, the Servicer shall provide to the Trustee the Statement to
Certificateholders, setting forth for the Collection Period relating to such
Distribution Date the following information (stated in the case of items (I),
(ii) and (iii), on the basis of $1,000 initial principal amount) as of such
Distribution Date a copy of which shall be forwarded by the Trustee to each
Certificateholder on such Distribution Date:
(i) The amount of the Certificateholder's distribution which
constitutes the Monthly Principal Payment (including any Carry-Over
Monthly Principal);
(ii) The amount of the Certificateholder's distribution which
constitutes the Monthly Interest Payment (including any Carry-Over
Monthly Interest);
(iii) The Certificateholder's pro rata portion of the
Servicing Fee (including any Carry-Over Servicing Fee);
(iv) The Certificate Balance and the Certificate Factor as of
the close of business on such Distribution Date; and
(v) The Pool Balance as of the last day of the Collection
Period.
(b) Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of this Agreement, the
Trustee shall mail, to each Person who at any time during such calendar year
shall have been a Certificateholder, a statement containing the sum of the
amounts determined in each of clauses (i) and (ii), for such calendar year or,
in the event such Person shall have been a Certificateholder during a portion of
such calendar year, for the applicable portion of such year.
ARTICLE XI
SECTION 11.1. The Certificates. The Certificates shall be issued in
book-entry form in minimum denominations representing $1,000 of initial
principal balance of the Receivables and in integral multiples thereof;
provided, however, that one Certificate may be issued in a denomination that
includes any residual amount and that such Certificate shall be retained by the
Depositor (the "Residual Certificate"). The Certificates shall be executed by
the Trustee on behalf of the Trust solely in its capacity as Trustee by manual
or facsimile signature of a Trustee Officer. Certificates bearing the manual or
facsimile signatures of individuals who were, at the
<PAGE>
time when such signatures shall have been affixed, authorized to sign on behalf
of the Trust, shall be valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of such Certificates.
SECTION 11.2. Authentication of Certificates. The Trustee shall cause
the Certificates to be executed on behalf of the Trust, authenticated and
delivered to or upon the written order of the Depositor, signed by the
Depositor's chairman of the board, the president, any vice chairman of the
board, any vice president, the treasurer, any assistant treasurer or the
controller of the Depositor, without further corporate action by the Depositor,
in authorized denominations, pursuant to this Agreement. No Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit B executed by the
Trustee by manual signature; such authentication shall constitute conclusive
evidence that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
SECTION 11.3. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 11.7, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Trustee shall be the initial Certificate
Registrar.
(b) Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office, the Trustee shall execute, authenticate and deliver,
in the name of the designated transferee or transferees, one or more new
Certificates in authorized denominations of a like aggregate amount dated the
date of authentication by the Trustee. At the option of a Holder, Certificates
may be exchanged for other Certificates of authorized denominations of a like
aggregate amount upon surrender of the Certificates to be exchanged at the
Corporate Trust Office.
(c) Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by
the Holder or his attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer and exchange shall be canceled and
subsequently disposed of by the Trustee.
(d) No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
SECTION 11.4. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there
<PAGE>
shall be delivered to the Certificate Registrar or the Trustee such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Certificate shall have been acquired by a bona fide
purchaser, the Trustee on behalf of the Trust shall execute and the Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section 11.4, the Trustee and the Certificate Registrar may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section 11.4 shall Constitute conclusive evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 11.5. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 10.5 and for all other purposes whatsoever, and neither the
Trustee nor the Certificate Registrar shall be bound by any notice to the
contrary.
SECTION 11.6. Access to List of Certificateholders Names and Addresses.
At such time as the Certificates exist as Definitive Certificates, the Trustee
shall furnish or cause to be furnished to the Servicer and the Surety Bond
Issuer, within 15 days after receipt by the Trustee of a request therefor from
the Servicer or the Surety Bond Issuer in writing, a list, of the names and
addresses of the Certificateholders as of the most recent Record Date. If three
or more Certificateholders, or one or more Holders of Certificates aggregating
not less than 25% of the Certificate Balance, apply in writing to the Trustee,
and such application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and such application shall be accompanied by a copy of the
communication that such applicants propose to transmit, then the Trustee shall
promptly after the receipt of such application, afford such applicants access
during normal business hours to the current list of Certificateholders. Each
Holder, by receiving and holding a Certificate, shall be deemed to have agreed
to hold neither the Servicer nor the Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 11.7. Maintenance of Office or Agency. The Trustee shall
maintain in the Borough of Manhattan, the City of New York, an office or offices
or agency or agencies where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates and this Agreement may be served. The Trustee
initially designates the Corporate Trust Office as specified in this Agreement
as its office for such purposes. The Trustee shall give prompt written notice to
the Servicer and to Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 11.8. Book-Entry Certificates. The Certificates, upon original
issuance (except for the Residual Certificate), will be issued in the form of
one or more global Certificates
<PAGE>
registered in the name of the nominee of The Depository Trust Company, the
initial Clearing Agency, by or on behalf of the Depositor. The Certificates
delivered to The Depository Trust Company shall initially be registered on the
Certificate Register in the name of CEDE & CO., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a physical certificate
representing such Certificate Owner's interest in the Certificates, except as
provided in Section 11.10. Unless and until definitive, fully registered
Certificates (the "Definitive Certificates") have been issued to Certificate
Owners pursuant to Section 11.10:
(i) the provisions of this Section 11.8 shall be in full force
and effect;
(ii) the Depositor, the Servicer, the Certificate Registrar
and the Trustee may deal with the Clearing Agency for all purposes
(including the making of distributions on the Certificates) as the
authorized representative of the Certificate Owners;
(iii) to the extent that the provisions of this Section 11.8
conflict with any other provisions of this Agreement, the provisions of
this Section 11.8 shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Certificate Owners and the Clearing
Agency and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, unless and until Definitive Certificates are
issued pursuant to Section 11.10, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit distributions of principal and interest on the
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Pool Balance the Clearing
Agency will take such actions with respect to specified percentages of
the Pool Balance only at the direction of and on behalf of Clearing
Agency Participants whose holdings include undivided interests that
satisfy such specified percentages. DTC may take conflicting actions
with respect to other undivided interests to the extent that such
actions are taken on behalf of Clearing Agency Participants whose
holdings include such undivided interests.
SECTION 11.9. Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under this Agreement, other
than to the Holder of the Residual Certificate, unless and until Definitive
Certificates shall have been issued to Certificate Owners pursuant to Section
11.10, the Trustee and the Servicer shall give all such notices and
communications specified herein to be given to Holders of the Certificates to
the Clearing Agency.
SECTION 11.10. Definitive Certificates. If (i) the Depositor advises
the Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities as Depository with respect to the
Certificates and the Trustee or the Depositor is unable to locate a qualified
successor, (ii) the Depositor, at its option, elects to terminate the
<PAGE>
book-entry system through the Clearing Agency, or (iii) after the occurrence of
an Event of Default, Certificate owners representing beneficial interests
aggregating not less than 51% of the Certificate Balance advise the Trustee and
the Clearing Agency through the Clearing Agency Participants in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Certificate Owners, then the Trustee through the
Clearing Agency shall notify all Certificate Owners of the occurrence of any
such event and of the availability through the Clearing Agency of Definitive
Certificates. Upon surrender by the Clearing Agency of the global Certificates
representing the Certificates and instructions for re-registration, the Trustee
shall issue the Definitive Certificates and deliver such Definitive Certificates
in accordance with the instructions of the Clearing Agency. Neither the
Depositor, the Certificate Registrar nor the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. Upon the issuance of Definitive
Certificates, the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder. The Trustee shall not be liable if
the Trustee or the Depositor is unable to locate a qualified successor Clearing
Agency.
ARTICLE XII
SECTION 12.1. Representations of Depositor. The Depositor makes the
following representations on which the Trustee relies in accepting the
Receivables in trust and executing and authenticating the Certificates.
(i) Organization and Good Standing. The Depositor shall have
been duly organized and shall be validly existing as a corporation in
good standing under the laws of the State of Delaware, with power and
authority to own its properties and to conduct its business as such
properties shall be currently owned and such business is presently
conducted, and had at all relevant times, and shall have, power,
authority and legal right to acquire and own the Receivables.
(ii) Due Qualification. The Depositor shall be duly qualified
to do business as a foreign corporation in good standing, and shall
have obtained all necessary licenses and approvals, in all
jurisdictions in which the ownership or lease of property or the
conduct of its business shall require such qualifications.
(iii) Principal Place of Business. The Depositor's principal
place of business is located in the State of New Jersey.
(iv) Power and Authority. The Depositor shall have the power
and authority to execute and deliver this Agreement and to carry out
its terms; the Depositor shall have full power and authority to sell
and assign the property to be sold and assigned to and deposited with
the Trustee as part of the Trust and shall have duly authorized such
sale and assignment to the Trustee by all necessary corporate action;
and the execution, delivery and performance of this Agreement shall
have been duly authorized by the Depositor by all necessary corporate
action.
<PAGE>
(v) Valid Sale; Binding Obligations. This Agreement shall
evidence (A) a valid sale, transfer and assignment of the Receivables,
enforceable against creditors of and purchasers from the Depositor, and
(B) a legal, valid and binding obligation of the Depositor enforceable
in accordance with its terms.
(vi) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time
or both) a default under, the articles of incorporation or by-laws of
the Depositor, or any indenture, agreement or other instrument to which
the Depositor is a party or by which it shall be bound; nor result in
the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other
instrument (other than this Agreement); nor violate any law or, to the
best of the Depositor's knowledge, any order, rule or regulation
applicable to the Depositor of any court or of any Federal or State
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its
properties.
(vii) No Proceedings. There are no proceedings or
investigations pending, or to the Depositor's best knowledge,
threatened, before any court, regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the
Depositor or its properties: (A) asserting the invalidity of this
Agreement or the Certificates; (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Agreement; (C) seeking any determination or ruling
that might materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability
of, this Agreement or the Certificates; or (D) relating to the
Depositor and which might adversely affect the Federal income tax
attributes of the Certificates.
(viii) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental
body or official required in connection with the execution and delivery
by the Depositor of this Agreement, the Reimbursement Agreement and the
Certificates, the performance by the Depositor of the transactions
contemplated by this Agreement, the Reimbursement Agreement and the
Certificates, and the fulfillment by the Depositor of the terms hereof,
have been obtained; provided, however, that the Depositor makes no
representation or warranty regarding State securities or "blue sky"
laws in connection with the distribution of the Certificates.
SECTION 12.2. Liability of Depositor; Indemnities. The Depositor shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Depositor under this Agreement:
(i) The Depositor shall indemnify, defend and hold harmless
the Trustee (which for purposes of this Section 12.2 shall include its
directors, employees, officers and agents) and the Trust from and
against any taxes that may at any time be asserted against
<PAGE>
the Trustee or the Trust with respect to, and as of the date of, the
sale of the Receivables to the Trustee or the issuance and original
sale of the Certificates, including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes
(but, in the case of the Trust, not including any taxes asserted with
respect to ownership of the Receivables or Federal or other income
taxes arising out of the transactions contemplated by this Agreement)
and costs and expenses in defending against the same.
(ii) The Depositor shall indemnify, defend and hold harmless
the Trustee (which for purposes of this Section 12.2 shall include its
directors, employees, officers and agents) and the Trust from and
against any loss, liability or expense incurred by reason of (a) the
Depositor's willful misfeasance, bad faith or negligence in the
performance of its duties under this Agreement, or by reason of
reckless disregard of its obligations and duties under this Agreement,
(b) the Depositor's violation of Federal or State securities laws in
connection with the registration of the sale of the Certificates or (c)
any action taken by the Trustee at the direction of the Servicer
pursuant to Section 9.1 or otherwise.
Indemnification under this Section 12.2 shall survive the termination
of this Agreement and the resignation or removal of the Trustee, and shall
include, without limitation, reasonable fees and expenses of counsel and
expenses of litigation. If the Depositor shall have made any indemnity payments
to the Trustee pursuant to this Section 12.2 and the Trustee thereafter shall
collect any of such amounts from others, the Trustee shall repay such amounts to
the Depositor, without interest.
SECTION 12.3. Merger or Consolidation of, or Assumption of the
Obligations of Depositor. Any Person (a) into which the Depositor may be merged
or consolidated, (b) which may result from any merger or consolidation to which
the Depositor shall be a party, or (c) which may succeed to the properties and
assets of the Depositor substantially as a whole, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Depositor under this Agreement and the Reimbursement Agreement, shall be
the successor to the Depositor hereunder without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 8.1 shall have been breached
and no Event of Default, and no event that, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be continuing,
(ii) the Depositor shall have delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 16.3 and
(iii) the Depositor shall have delivered an Opinion of Counsel either (A)
stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Trustee in the
Receivables, and reciting the details of such filings, or (B) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interest. The Depositor shall provide notice of any merger,
consolidation or succession pursuant to this Section 12.3 to each Rating Agency
and the Surety Bond Issuer. Notwithstanding anything herein to the contrary, the
Depositor shall not consummate any transaction of a type referred to in clauses
(a), (b) or (c) above unless at such time or prior thereto
<PAGE>
the foregoing agreement of assumption shall have been executed and the
conditions described in clauses (i), (ii) and (iii) shall have been satisfied.
SECTION 12.4. Limitation on Liability of Depositor and Others. The
Depositor and any director or officer or employee or agent of the Depositor may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 12.5. Depositor May Own Certificates. The Depositor and any
Person controlling, controlled by or under common control with, the Depositor
may in its individual or any other capacity become the owner or pledgee of
Certificates with the same rights as it would have if it were not the Depositor
or an affiliate thereof, except as otherwise provided in the definition of
"Certificateholder" specified in Section 7.1. Certificates so owned by or
pledged to the Depositor or such controlling or commonly controlled Person shall
have an equal and proportionate benefit under the provisions of this Agreement,
without preference, priority or distinction as among all the Certificates.
SECTION 12.6. Depositor's Interest in Reserve Account; No Transfer. The
Depositor hereby acknowledges that the Reserve Account shall not be a part of
the Trust. The Depositor hereby acknowledges that any amounts on deposit in the
Reserve Account (and any investment earnings thereon) is owned directly by it,
and the Depositor agrees to treat the same as its assets (and earnings) for
federal tax and all other purposes. Funds deposited therein shall be
distributable to the Collection Account, the Surety Bond Issuer and the
Depositor as described in this Agreement and in the Reimbursement Agreement.
ARTICLE XIII
SECTION 13.1. Representations of Servicer. The Servicer makes the
following representations on which the Trustee relies in accepting the
Receivables in trust and executing and authenticating the Certificates. The
representations speak as of the execution and delivery of this Agreement and
shall survive the sale of the Receivables to the Trustee.
(i) Organization and Good Standing. The Servicer shall have
been duly organized and shall be validly existing as a corporation in
good standing under the laws of the State of its incorporation, with
power and authority to own its properties and to conduct its business
as such properties shall be currently owned and such business is
presently conducted, and had at all relevant times, and shall have,
power, authority and legal right to acquire, own, sell and service the
Receivables and to hold the Receivable Files as custodian on behalf of
the Trustee.
(ii) Due Qualification. The Servicer shall be duly qualified
to do business as a foreign corporation in good standing, and shall
have obtained all necessary licenses and
<PAGE>
approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) shall require such
qualifications.
(iii) Power and Authority. The Servicer shall have the power
and authority to execute and deliver this Agreement and to carry out
its terms; and the executions delivery and performance of this
Agreement shall have been duly authorized by the Servicer by all
necessary corporate action.
(iv) Valid Sale; Binding Obligations. This Agreement shall
constitute a legal, valid and binding obligation of the Servicer
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance and
similar laws relating to creditors' rights generally and subject to
general principals of equity.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time
or both) a default under, the articles of incorporation or by-laws of
the Servicer, or any indenture, agreement or other instrument to which
the Servicer is a party or by which it shall be bound; nor result in
the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other
instrument (other than this Agreement); nor violate any law or, any
order, rule or regulation applicable to the Servicer of any court or of
any Federal or State regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Servicer or
its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or, to the Servicer's knowledge, threatened,
before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or
its properties: (A) asserting the invalidity of this Agreement or the
Certificates; (B) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
Agreement; (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement
or the Certificates; or (D) relating to the Servicer and which might
adversely affect the Federal income tax attributes of the Certificates.
(vii) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental
body or official required in connection with the execution and delivery
by the Servicer of this Agreement and the Reimbursement Agreement, the
performance by the Servicer of the transactions contemplated by this
Agreement, the Reimbursement Agreement and the Certificates, and the
fulfillment by the Servicer of the terms hereof, have been obtained;
provided,
<PAGE>
however, that the Servicer makes no representation or warranty
regarding State securities or "blue sky" laws in connection with the
distribution of the Certificates.
SECTION 13.2. Liability of Servicer; Indemnities. The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement:
(i) The Servicer shall defend, indemnify and hold harmless the
Trustee (which for purposes of this Section 13.2 shall include its
directors, officers, employees and agents), the Trust, the
Certificateholders and the Surety Bond Issuer from and against any and
all costs, expenses, losses, damages, claims and liabilities, arising
out of or resulting from the use, ownership or operation by the
Servicer or any affiliate thereof of a Boat.
(ii) The Servicer shall indemnify, defend and hold harmless
the Trustee, (which for purposes of this Section 13.2 shall include its
directors, officers, employees and agents), the Trust and the Surety
Bond Issuer from and against any taxes that may at any time be asserted
against the Trustee, the Trust or the Surety Bond Issuer with respect
to the transactions contemplated herein or in the Reimbursement
Agreement, including, without limitation, any sales, gross receipts,
general corporation, tangible personal property, privilege or license
taxes (but, in the case of the Trust, not including any taxes asserted
with respect to, and as of the date of, the sale of the Receivables to
the Trust or the issuance and original sale of the Certificates, or
asserted with respect to ownership of the Receivables, or Federal or
other income taxes arising out of distributions on the Certificates)
and costs and expenses in defending against the same.
(iii) The Servicer shall indemnify, defend and hold harmless
the Trustee (which for purposes of this Section 13.2 shall include its
directors, officers, employees and agents), the Trust, and the
Certificateholders from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent that such cost,
expense, loss, claim, damage or liability arose out of, or was imposed
upon the Trustee, the Trust, the Surety Bond Issuer or the
Certificateholders through, the negligence, willful misfeasance or bad
faith of the Servicer in the performance of its duties under this
Agreement or the Reimbursement Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement or the
Reimbursement Agreement.
(iv) The Servicer shall indemnify, defend and hold harmless
the Trustee (which for purposes of this Section 13.2 shall include its
directors, officers, employees and agents), from and against all costs,
expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts
and duties, including any action by the Trustee at the direction of the
Servicer taken pursuant to Section 9.1, and the trusts and duties
contained in the Reimbursement Agreement, except to the extent that
such cost, expense, loss, claim, damage or liability: (a) shall be due
to the willful misfeasance, bad faith or negligence (except for errors
in judgment) of the Trustee; (b) relates to any tax other than the
taxes with respect to which either the Depositor or the Servicer shall
be required to indemnify the Trustee; (c) shall
<PAGE>
arise from Trustee's breach of any of its representation or warranties
set forth in Section 15.8; (d) shall be one as to which the Depositor
is required to indemnify the Trustee; or (e) shall arise out of or be
incurred in connection with the acceptance or performance by the
Trustee of the duties of successor Servicer hereunder unless such cost,
expense, loss, claim, damage or liability was caused by the act or
omission of the predecessor Servicer.
For purposes of this Section 13.2, in the event of the termination of
the rights and obligations of CITSF(or any successor thereto pursuant to Section
13.3) as Servicer pursuant to Section 18.1, or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall be deemed to be the Servicer
pending appointment of a successor Servicer (other than the Trustee) pursuant to
Section 14.2.
Indemnification under this Section 13.2 shall survive termination of
this Agreement and the resignation or removal of the Trustee and shall include,
without limitation, reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer shall have made any indemnity payments pursuant to
this Section 13.2 and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts to the Servicer, without
interest.
SECTION 13.3. Merger or Consolidation of, or Assumption of the
Obligations of the Servicer. Any Person (a) into which the Servicer may be
merged or consolidated, (b) which may result from any merger or consolidation to
which the Servicer shall be a party, or (c) which may succeed to the properties
and assets of the Servicer substantially as a whole, or any Person, more than
50% of the voting stock of which is, directly or indirectly, owned by The CIT
Group, Inc., which Person in each of the foregoing cases executed an agreement
of assumption to perform every obligation of the Servicer hereunder and under
the Reimbursement Agreement, shall be the successor to the Servicer under this
Agreement without further act on the part of any of the parties to this
Agreement; provided, however, that (i) immediately after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default shall have happened and be
continuing, (ii) the Servicer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
17.3, and (iii) the Servicer shall have delivered to the Trustee an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Trustee in the Receivables, and reciting the details of such filings, or (B)
stating that, in the opinion of such counsel, no such action shall be necessary
to preserve and protect such interest. The Servicer shall provide notice of any
merger, consolidation or succession pursuant to this Section 13.3 to each Rating
Agency and the Surety Bond Issuer. Notwithstanding anything herein to the
contrary, the Servicer shall not consummate any transaction of a type referred
to in clauses (a), (b) or (c) above unless at or prior thereto the foregoing
agreement of assumption shall have been executed and the conditions described in
clauses (i), (ii) and (iii) shall have been satisfied.
<PAGE>
SECTION 13.4. Limitation on Liability of Servicer and Others. (a)
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Trust or the
Certificateholders, except as provided under this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this
Agreement; provided, however, that this provision shall not protect the Servicer
or any such person against any liability that would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties under this
Agreement. The Servicer and any director or officer or employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising under this
Agreement.
(b) Except as provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute, or defend any legal action that
shall not be incidental to its duties to service the Receivables in accordance
with this Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may undertake any reasonable
action that it may deem necessary or desirable in respect of this Agreement and
the rights and duties of the parties to this Agreement and the interests of the
Certificateholders under this Agreement.
ARTICLE XIV
SECTION 14.1. Events of Default.
(a) If any one of the following events (each an "Event of Default")
shall occur and be continuing:
(i) Any failure by the Servicer to deliver to the Trustee for
distribution to Certificateholders any proceeds or payment required to
be so delivered under the terms of the Certificates and this Agreement
that shall continue unremedied for a period of three Business Days
after written notice from the Trustee is received by the Servicer as
specified in this Agreement or after discovery of such failure by an
officer of the Servicer; or
(ii) any failure on the part of the Servicer or the Depositor
duly to observe or to perform in any material respect any other
covenants or agreements of the Servicer or the Depositor (as the case
may be) set forth in the Certificates or in this Agreement, which
failure shall (a) materially adversely affects the rights of
Certificateholders as determined by the Holders of Certificates
evidencing not less than a majority of the Certificate Balance and (b)
continue unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given (1) to the Servicer or the Depositor (as the case
may be), by the Trustee, or (2) to the Servicer or the Depositor (as
the case may be) and to the Trustee by the Surety Bond Issuer; or
<PAGE>
(iii) The entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver or liquidator for the Servicer
or the Depositor in any bankruptcy, insolvency, readjustment of debt,
marshaling of assets and liabilities, or similar proceedings, or for
the winding up or liquidation of their respective affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(iv) The consent by the Servicer or the Depositor to the
appointment of a conservator or receiver or liquidator in any
bankruptcy, insolvency, readjustment of debt, marshaling of assets and
liabilities, or similar proceedings of or relating to the Servicer or
the Depositor or relating to substantially all their property; or the
Servicer or the Depositor shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations; or
(v) Any representation or warranty by the Servicer in this
Agreement shall prove to have been incorrect in any material respect
when made, which continues to be incorrect in any material respect for
a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Servicer by the Trustee, or to the Servicer and the Trustee by the
Surety Bond Issuer and as a result of which the interests hereunder of
Certificateholders are materially and adversely affected;
then, and in each and every case, so long as an Event of Default shall not have
been remedied, the Surety Bond Issuer, by notice then given in writing to the
Servicer may terminate all the rights and obligations of the Servicer under this
Agreement (a "Servicer Transfer").
(b) In addition to a Servicer Transfer effected pursuant to clause (a)
of this Section 14.1, the Surety Bond Issuer with notice in writing to the
Servicer, may effect a Servicer Transfer upon the occurrence of any of the
following events: (i) the Depositor or the Servicer, as the case may be, shall
fail to pay when due any amount payable by it hereunder or under the
Reimbursement Agreement which failure shall have continued for three (3)
Business Days after receipt of notice thereof by the Depositor or the Servicer,
as the case may be; (ii) the Surety Bond Issuer determines that the performance
of the Servicer is not, in the opinion of the Surety Bond Issuer, in conformity
with the Servicing Standards; or (iii) if, with respect to any Distribution
Date, the average of the Net Credit Loss Ratio for the three preceding calendar
months exceeds ____%.
(c) On or after the receipt by the Servicer of such written notice
which effects a Servicing Transfer, all authority and power of the Servicer
under this Agreement, whether with respect to the Certificates or the
Receivables or otherwise, shall, without further action, pass to and be vested
in the Trustee or such successor Servicer as may be appointed under Section 14.2
pursuant to and under this Section 14.1; and, without limitation, the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to
<PAGE>
complete the transfer and endorsement of the Receivables and related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer and the Trustee in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including the
transfer to the successor Servicer for administration by it of all cash amounts
that shall at the time be held by the predecessor Servicer for deposit, or shall
thereafter be received with respect to a Receivable. All reasonable costs and
expenses (including attorneys' fees and disbursements) incurred in connection
with transferring the Receivable Files to the successor Servicer and amending
this Agreement and the Reimbursement Agreement to reflect such succession as
Servicer pursuant to this Section 14.1 shall be paid by the predecessor Servicer
upon presentation of reasonable documentation of such costs and expenses.
SECTION 14.2. Appointment of Successor. (a) Upon the Servicer's receipt
of notice of termination pursuant to Section 14.1 or the Servicer's resignation
in accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the later of (x) the date 45 days
from the delivery to the Trustee of written notice of such resignation (or
written confirmation of such notice of resignation) in accordance with the terms
of this Agreement and (y) the date upon which the predecessor Servicer shall
become unable to act as Servicer, as specified in the notice of resignation and
an accompanying Opinion of Counsel. In the event of the Servicer's resignation
or termination hereunder, a successor Servicer appointed by the Trustee and
consented to by the Surety Bond Issuer in writing which consent shall not be
unreasonably withheld or the Trustee (unless it is unwilling or legally unable
to do so) will succeed to all the responsibilities, duties and liabilities of
the Servicer under this Agreement and will be entitled to similar compensation
arrangements. The successor Servicer shall accept its appointment by a written
assumption in form acceptable to the Trustee and the Surety Bond Issuer.
Notwithstanding the above, the Trustee, if it is unwilling or unable so to act,
shall appoint or petition a court of competent jurisdiction to appoint, an
established institution, having a net worth of at least $50,000,000 and whose
regular business shall include the servicing of marine retail installment sale
contracts, as the successor to the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer, and shall be entitled to the Servicing Fee
and other fees payable to the Servicer pursuant to Section 9.8, and all the
rights granted to the predecessor Servicer, by the terms and provisions of this
Agreement. No such appointment shall make the successor Servicer responsible for
any liabilities of the predecessor Servicer incurred prior to such appointment
or for any acts, omissions or misrepresentations of such predecessor Servicer.
(c) In connection with such appointment, the Trustee may, with the
consent of the Surety Bond Issuer, make such arrangements for the compensation
of such successor Servicer out of payments on Receivables as it and such
successor Servicer shall negotiate on an arms-length basis, but in no event
shall the Servicing Fee Rate be greater than ____% per annum.
<PAGE>
SECTION 14.3. Notification to Certificateholders. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article XIV,
the Trustee shall give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register and to each
Rating Agency.
SECTION 14.4. Waiver of Past Defaults. So long as no Surety Bond Issuer
Default shall have occurred and be continuing, the Surety Bond Issuer may, on
behalf of all the Holders of Certificates, waive any default by the Servicer in
the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to or payments from the Certificate
Account in accordance with this Agreement. Upon any such waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall impair such Certificateholders' rights or the
Surety Bond Issuer's rights with respect to subsequent defaults.
ARTICLE XV
SECTION 15.1. Duties of Trustee. (a) The Trustee, both prior to the
occurrence of an Event of Default and after an Event of Default shall have been
cured or waived, shall undertake to perform only such duties as are specifically
set forth in this Agreement. If an Event of Default shall have occurred and
shall not have been cured or waived and, the Trustee has received notice of such
Event of Default pursuant to Section 9.10(b), the Trustee shall exercise such of
the rights and powers vested in it by this Agreement, and shall use the same
degree of care and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs; provided,
however, that if the Trustee shall assume the duties of the Servicer pursuant to
Section 14.2, the Trustee in performing such duties shall use the degree of
skill and attention customarily exercised by a servicer with respect to
comparable receivables that it services for itself or others. For purposes of
this Article XV, an Event of Default shall be deemed to have been cured upon the
appointment of a successor Servicer (including the Trustee in such capacity).
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that shall be specifically required to be furnished pursuant to
any provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) The Trustee shall take and maintain custody of the Schedule of
Receivables included as an exhibit to this Agreement and shall retain all
Servicer's Certificates identifying Receivables that become Purchased
Receivables.
(d) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act (other than errors in judgment) or its own bad faith; provided, however,
that:
<PAGE>
(i) Prior to the occurrence of an Event of Default (or in the
case of an Event of Default described in clause (i) of Section 14.1,
before the Trustee has received notice of such Event of Default
pursuant to Section 9.10(b)), and after the curing or waiving of all
such Events of Default that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except
for the performance of such duties and obligations as shall be
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and,
in the absence of bad faith or willful misfeasance on the part of the
Trustee, the Trustee may conclusively rely on the truth of the
statements and the correctness of the opinions expressed in any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
(ii) The Trustee shall not be liable for an error of judgment
made in good faith by a Trustee Officer, unless it shall be proved that
the Trustee shall have been negligent in ascertaining the pertinent
facts;
(iii) The Trustee shall not be liable with respect to any
action taken, suffered or omitted to be taken in good faith in
accordance with this Agreement or at the direction of the Holders of
Certificates evidencing not less than 25% of the Certificate Balance
relating to the time, method and place of continuing any proceeding for
any remedy available to the Trustee, or relating to the exercise of any
trust power conferred upon the Trustee, under this Agreement;
(iv) The Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in clauses (i) or (ii) of Section 14.1, or of any failure
by the Depositor to comply with the obligations of the Depositor
referred to in clause (ii) of Section 14.1, or of any incorrect
representation or warranty referred to in clause (v) of Section 14.1,
unless a Trustee Officer assigned to the Corporate Trust Office
receives written notice of such failure or incorrectness from the
Servicer or the Depositor, as the case may be, from the Surety Bond
Issuer or from the Holders of Certificates evidencing not less than 25%
of the Certificate Balance, it being understood that knowledge of the
Servicer or the Servicer as custodian is not attributable to the
Trustee;
(v) Without limiting the generality of this Section 15.1 or
Section 15.4, the Trustee shall have no duty (i) to see to any
recording, filing or depositing of this Agreement or any agreement
referred to therein or any financing statement or continuation
statement evidencing a security interest in the Receivables or the
Boats, or to see to the maintenance if any such recording or filing or
depositing or to any rerecording, refiling or redepositing of any
thereof, (ii) to see to any insurance of the Boats or Obligors or to
effect or maintain any such insurance, (iii) to see to the payment or
discharge of any tax, assessment or other governmental charge or any
Lien or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust, (iv) to confirm or verify the
contents of any reports or certificates of the Servicer delivered to
the Trustee pursuant to this Agreement believed by the Trustee to be
<PAGE>
genuine and to have been signed or presented by the proper party or
parties, (v) to inspect the Boats at any time or ascertain or inquire
as to the performance or observance of any of the Depositor's or the
Servicer's representations, warranties or covenants or the Servicer's
duties and obligations as Servicer and as custodian of the Receivable
Files under this Agreement, or (vi) to prepare or make any filings with
the Securities and Exchange Commission with respect to the Trust; and
(vi) The Trustee shall not be deemed to be a fiduciary for the
Surety Bond Issuer in its capacity as such, and the Trustee's sole
responsibility with respect to the Surety Bond Issuer, in its capacity
as such, shall be to perform those duties with respect to the Surety
Bond Issuer as are specifically set forth herein and no implied
covenants shall be read into this Agreement against the Trustee with
respect to the Surety Bond Issuer.
(e) Neither the Trustee nor the Collateral Agent shall be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, and the Trustee shall have no
liability in connection with losses on Permitted Investments made pursuant to
this Agreement or in the exercise of any of its rights or powers, and none of
the provisions contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of performance of, any of
the obligations of the Servicer under this Agreement except during such time, if
any, as the Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Servicer in accordance with the terms of
this Agreement.
(f) Notwithstanding anything to the contrary contained herein, the
Collateral Agent shall have the same rights, indemnities and protections
afforded the Trustee.
SECTION 15.2 Trustee's Certificate. On or as soon as practicable after
each Distribution Date on which Receivables shall be assigned to the Depositor
or the Servicer, as applicable, pursuant to Section 15.3, the Trustee shall
execute a Trustee's Certificate, based on the information contained in the
Servicer's Certificate for the related Collection Period, amounts deposited to
the Certificate Account and notices received pursuant to this Agreement,
identifying the Receivables repurchased by the Depositor pursuant to Section
12.2, purchased by the Servicer pursuant to Section 9.7 or 20.2 during such
Collection Period, and shall deliver such Trustee's Certificate, accompanied by
a copy of the Servicer's Certificate for such Collection Period to the Depositor
or the Servicer, as the case may be. The Trustee's Certificate submitted with
respect to such Distribution Date shall operate, as of such Distribution Date,
as an assignment, without recourse, representation or warranty, to the Depositor
or the Servicer, as the case may be, of all the Trustee's right, title and
interest in and to such repurchased Receivable, and all security and documents
relating thereto, such assignment being an assignment outright and not for
security.
SECTION 15.3. Trustee's Assignment of Purchased Receivables. With
respect to all Receivables repurchased by the Depositor pursuant to Section 12.2
or purchased by the Servicer pursuant to Section 9.7 or 20.2, the Trustee shall
by a Trustee's Certificate assign, without recourse, representation or warranty,
to the Depositor or the Servicer (as the case may be) all the
<PAGE>
Trustee's right, title and interest in and to such Receivables, and all security
interests and documents relating thereto.
SECTION 15.4. Certain Matters Affecting Trustee. Except as otherwise
provided in Section 15.1:
(i) The Trustee may rely conclusively and shall be protected
in acting or refraining from acting upon any resolution, Officer's
Certificate, Servicer's Certificate, certificate of auditors, or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond, or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(ii) The Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
under this Agreement in good faith and in accordance with such advice
or Opinion of Counsel.
(iii) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or in
relation to this Agreement, at the request, order or direction of any
of the Certificateholders pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
security or indemnity satisfactory to it against the costs, expenses
and liabilities that may be incurred therein or thereby.
(iv) The Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement.
(v) Prior to the occurrence of an Event of Default (or in the
case of an Event of Default described in clause (i) of Section 14.1,
before the Trustee has received notice of such Event of Default
pursuant to Section 9.10(b)), and after the curing or waiving of all
Events of Default that may have occurred, the Trustee shall not be
bound to make any investigation into the facts of matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond, or other paper or
document, unless requested in writing so to do by the Surety Bond
Issuer or by Holders of Certificates evidencing not less than 25% of
the Certificate Balance; provided, however, that if the payment within
a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation shall
be, in the opinion of the Trustee, not assured to the Trustee by the
security afforded to it by the terms of this Agreement, the Trustee may
require indemnity satisfactory to it against such cost, expense or
liability as a condition to so proceeding. The expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee,
shall be reimbursed by the Servicer upon demand. Nothing in this clause
(v) shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the
Obligors.
<PAGE>
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties under this Agreement either directly or
by or through agents or attorneys or a custodian. The Trustee shall not
be responsible for any misconduct or negligence of any such agent or
custodian appointed with due care by it hereunder or of the Servicer in
its capacity as Servicer or custodian.
(vii) Subsequent to the sale of the Receivables by the
Depositor to the Trustee, on behalf of the Trust, the Trustee shall
have no duty of independent inquiry, except as may be required by
Section 15.1, and the Trustee may rely upon the representations and
warranties and covenants of the Depositor and the Servicer contained in
this Agreement with respect to the Receivables and the Receivable
Files.
SECTION 15.5. Trustee Not Liable for Certificates or Receivables. (a)
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Depositor or the Servicer, as the case may be, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee shall make no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the Certificates),
or of any Receivable or related document.
(b) The Trustee shall at no time have any responsibility or liability
for or with respect to the legality, validity and enforceability of any security
interest in any Boat or any Receivable, or the perfection and priority of such a
security interest or the maintenance of any such perfection and priority, or for
or with respect to the efficacy of the Trust or its ability to generate the
payments to be distributed to Certificateholders under this Agreement,
including, without limitation: the existence, condition, location and ownership
of any Boat; the review of any Receivable File; the existence and enforceability
of any physical damage insurance thereon; the existence and contents of any
Receivable or Receivable File or any computer or other record thereof; the
validity of the assignment of any Receivable to the Trust or of any intervening
assignment; the completeness of any Receivable or Receivable File; the
performance or enforcement of any Receivable; the compliance by the Depositor or
the Servicer with any warranty or representation made under this Agreement or in
any related document and the accuracy of any such warranty or representation
prior to the Trustee's receipt of notice or other discovery of any noncompliance
therewith or any breach thereof; any investment of monies by the Servicer or any
loss resulting therefrom; the acts or omissions of the Depositor, the Servicer
or any Obligor; any action of the Servicer taken in the name of the Trustee; or
any action by the Trustee taken at the instruction of the Servicer; provided,
however, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement.
(c) Except with respect to a claim based on the failure of the Trustee
to perform its duties under this Agreement or based on the Trustee's negligence
or willful misconduct, no recourse shall be had for any claim based on any
provision of this Agreement, the Certificates or any Receivable or assignment
thereof against the Trustee in its individual capacity, the Trustee shall not
have any personal obligation, liability or duty whatsoever to any
Certificateholder or
<PAGE>
any other Person with respect to any such claim, and any such claim shall be
asserted solely against the Trust or any indemnitor who shall furnish indemnity
as provided in this Agreement.
(d) The Trustee shall not be accountable for the use or application by
the Depositor of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Servicer in
respect of the Receivables.
(e) Any obligation of the Trustee to give any notice or statement to
any rating agency hereunder shall constitute only a best efforts obligation and
such notice or statement shall be so provided only as a matter of courtesy and
accommodation, the Trustee having no liability to any rating agency or any other
Person for any failure to so provide such notice or statement. The Depositor
hereby certifies to the Trustee that each Rating Agency is rating the
Certificates and that each Rating Agency's address is as set forth in Section
21.5. The Trustee may rely on the accuracy of such certification until it
receives from the Depositor an Officer's Certificate superseding such
certification.
SECTION 15.6. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
and may deal with the Depositor and the Servicer in banking transactions with
the same rights as it would have if it were not Trustee.
SECTION 15.7. Trustee's Fees and Expenses. (a) The Servicer shall pay
to the Trustee, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
and in the execution of the trusts created by this Agreement, and in the
exercise and performance of any of the Trustee's powers and duties under this
Agreement. The Servicer shall pay or reimburse the Trustee upon its request for
all reasonable expenses, disbursements and advances (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) incurred or made by the Trustee in
accordance with any provisions of this Agreement except any such expense,
disbursement or advance as may be attributable to its willful misfeasance,
negligence or bad faith.
(b) The Depositor shall indemnify the Trustee (which for purposes of
this subsection (b) shall include its directors, officers, employees and agents)
for, and shall hold it harmless against, any loss, liability or expense incurred
without willful misfeasance, negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this Agreement and the
Trust and the trusts created by the Reimbursement Agreement, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties under this
Agreement or the Reimbursement Agreement. Additionally, the Depositor, pursuant
to Section 12.2, and the Servicer, pursuant to Section 13 .2, shall indemnify
the Trustee with respect to certain matters, and Certificateholders, pursuant to
Section 15.4, shall upon the circumstances therein set forth, indemnify the
Trustee under certain circumstances. In the event that the Depositor fails to
pay the amounts it is obligated to pay to the Trustee pursuant to this Section
15.7(b), the Trustee shall be entitled to receive such amounts from the
Servicing Fee prior to the payment thereof to the Servicer. The
<PAGE>
indemnification provided under this Section 19.7 shall survive termination of
this Agreement and removal or resignation of the Trustee.
SECTION 15.8. Representations and Warranties of Trustee. The Trustee
shall make the following representations and warranties on which the Depositor
and Certificateholders shall rely:
(i) The Trustee is a banking corporation duly organized,
validly existing and in good standing under the laws of the State of
New York.
(ii) The Trustee has full corporate power, authority and legal
right to execute, deliver and perform its duties and obligations under
this Agreement, and shall have taken all necessary action to authorize
the execution, delivery and performance by it of this Agreement.
(iii) This Agreement shall have been duly executed and
delivered by the Trustee.
SECTION 15.9. Eligibility Requirements for Trustee. The Trustee under
this Agreement shall at all times: be a banking corporation having an office in
the same State as the location of the Corporate Trust Office as specified in
this Agreement; be organized and doing business under the laws of such State or
the United States of America; be authorized under such laws to exercise
corporate trust powers; have a combined capital and surplus of at least
$50,000,000; and be subject to supervision or examination by Federal or State
authorities.
If the Trustee shall publish reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section 15.9, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section l9.9, the Trustee shall resign immediately in the
manner and with the effect specified in Section 15.10.
SECTION 15.10. Resignation or Removal of Trustee. (a) The Trustee and
the Collateral Agent may at any time resign and be discharged from the trusts
hereby created by giving not less than 60 days' prior written notice thereof to
the Servicer; provided, however, that any such resignation in either capacity
shall be deemed a resignation as both Trustee and Collateral Agent. Upon
receiving such notice of resignation, the Servicer with the consent of the
Surety Bond Issuer (unless a Surety Bond Issuer Default shall have occurred and
be continuing) shall promptly appoint a successor Trustee and Collateral Agent
by written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and Collateral Agent and one copy to the
successor Trustee and Collateral Agent. If no successor Trustee and Collateral
Agent shall have been so appointed and have accepted appointment within 60 days
after the giving of such notice of resignation, the resigning Trustee and
Collateral Agent may petition any court of competent jurisdiction for the
appointment of a successor Trustee and Collateral Agent.
<PAGE>
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 15.9 and shall fail to resign after written
request there for by the Servicer, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer may remove the Trustee and Collateral Agent. If it shall remove the
Trustee and Collateral Agent under the authority of the immediately preceding
sentence, the Servicer shall promptly appoint a successor trustee and collateral
agent acceptable to the Surety Bond Issuer by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Trustee and Collateral
Agent so removed and one copy to the successor Trustee and Collateral Agent.
(c) Any resignation or removal of the Trustee and Collateral Agent and
appointment of a successor Trustee and Collateral Agent pursuant to any of the
provisions of this Section 15.10 shall not become effective until acceptance of
appointment by the successor Trustee pursuant and Collateral Agent pursuant to
Section 15.11 and payment of all fees and expenses owed to the outgoing Trustee
and Collateral Agent. The Servicer shall provide notice of such resignation or
removal of the Trustee to each Rating Agency.
SECTION 15.11. Successor Trustee and Collateral Agent. (a) Any
successor Trustee or Collateral Agent appointed pursuant to Section 15.10 be
approved as both Trustee and Collateral Agent and shall execute, acknowledge and
deliver to the Servicer and to its predecessor Trustee and Collateral Agent an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee and Collateral Agent shall
become effective and such successor Trustee and Collateral Agent, without any
further act, deed or conveyance, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor under this Agreement, with
like effect as if originally named as Trustee and Collateral Agent. The
predecessor Trustee and Collateral Agent shall deliver to the successor Trustee
and Collateral Agent all documents, statements and monies held by it under this
Agreement; and the Servicer and the predecessor Trustee and Collateral Agent
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Trustee and Collateral Agent all such rights, powers, duties and
obligations.
(b) No successor Trustee and Collateral Agent shall accept appointment
as provided in this Section 15.11, unless at the time of such acceptance such
successor Trustee shall be eligible pursuant to Section 15.9.
(c) Upon acceptance of appointment by a successor Trustee and
Collateral Agent pursuant to this Section 15.11, the Servicer shall mail notice
of the successor of such Trustee and Collateral Agent under this Agreement to
all Holders of Certificates at their addresses as shown in the Certificate
Register. If the Servicer shall fail to mail such notice within 10 days after
acceptance of appointment by the successor Trustee and Collateral Agent, the
successor Trustee and Collateral Agent shall cause such notice to be mailed at
the expense of the Servicer.
<PAGE>
SECTION 15.12. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible pursuant to Section 15.9, without the execution or
filing of any instrument or any further act on the part of any of the parties
hereto; anything herein to the contrary notwithstanding.
SECTION 15.13. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Boat may at the time be located, the Servicer and the
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust, and to vent in such Person, in such capacity
and for the benefit of the Certificateholders, such title to the Trust, or any
part thereof, and, subject to the other provisions of this Section 15.13, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. If the Servicer shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
or in the case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 15.9 and no notice of a
successor trustee pursuant to Section 15.11 and no notice to Certificateholders
of the appointment of any co-trustee or separate trustee shall be required
pursuant to Section 15.11.
(b) Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred upon and exercised or
performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co trustee
is not authorized to act separately without the Trustee joining in such
act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed (whether as
Trustee under this Agreement or as successor to the Servicer under this
Agreement), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) No trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
<PAGE>
(iii) The Servicer and the Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XV. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trusts or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to the Trustee. Each
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
(d) Any separate trustee or co-trustee may at any time appoint the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall become incapable of acting, resign or be removed, all its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee. Notwithstanding anything to the contrary in this Agreement,
the appointment of any separate trustee or co-trustee shall not relieve the
Trustee of its obligations and duties hereunder.
ARTICLE XVI
SECTION 16.1. Termination of the Trust. (a) The respective obligations
and responsibilities of the Depositor, the Servicer, the Trustee and the Trust
created hereby shall terminate upon (i) the payment in full or other liquidation
of the last Receivable and the disposition of any amounts received upon
liquidation of any remaining Receivables, including Defaulted Receivables, (ii)
the payment to the Certificateholders of all amounts required to be paid to them
pursuant to this Agreement and the payment to the Surety Bond Issuer of all
amounts required to be paid to it pursuant to this Agreement and the
Reimbursement Agreement and disposition of all property held by the Trust or
(iii) the purchase as of the last day of any Collection Period by the Servicer
at its option, pursuant to Section 16.2, of the corpus of the Trust; provided,
however, that in no event shall the trust created by this Agreement continue
beyond the expiration of 21 years from the date hereof. The Servicer shall
promptly notify the Trustee of any prospective termination pursuant to this
Section 16.1.
(b) Notice of any termination, specifying the Distribution Date upon
which the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders mailed not earlier than the 15th day
and not later than the 25th day of the month next preceding the specified
Distribution Date stating (A) the Distribution Date upon which final payment of
the Certificates shall be made upon presentation and surrender of the
Certificates at the office of the Trustee therein designated, (B) the amount of
any such final
<PAGE>
payment, and (C) if applicable, that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trustee
therein specified. The Trustee shall give such notice to the Certificate
Registrar (if other than the Trustee) at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 10.5.
(c) In the event that all the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Trustee upon written direction of the
Servicer delivered to the Trustee to the United Way of Metropolitan Dallas.
As soon as practicable after the Distribution Date specified for the
final distribution or upon such other date upon which all amounts to be paid to
Certificateholders pursuant to this Agreement have been paid, the Trustee shall
deliver a letter to the Surety Bond Issuer in substantially the form of Exhibit
C to the Surety Bond.
SECTION 16.2. Optional Purchase of All Receivables. On the last day of
any Collection Period as of which the Pool Balance shall decline to __% or less
of the Original Pool Balance, the Servicer shall have the option to purchase the
corpus of the Trust. To exercise such option, the Servicer shall deposit
pursuant to Section 10.4 in the Collection Account an amount equal to the
aggregate Purchase Amount for the Receivables, as of the beginning of the
Collection Period related to such Record Date plus the appraised value of any
other property held by the Trust less the amount of all Collections, any amounts
referred to in clause (ii) of the definition of Available Funds, and Liquidation
Proceeds received by the Servicer during such Collection Period, and shall
succeed to all interests in and to the Trust; provided, however, that without
the consent of the Surety Bond Issuer the Servicer may not make any such
purchase if, after giving effect to such purchase and the distributions on the
related Distribution Date there would be outstanding amounts under the
Reimbursement Agreement and this Agreement, which have not been paid to the
Surety Bond Issuer.
ARTICLE XVII
SECTION 17.1. Amendment. (a) This Agreement may be amended by the
Depositor, the Servicer and the Trustee, without the consent of the
Certificateholders or the Surety Bond Issuer, to cure any ambiguity, to correct
or supplement any provisions in this Agreement, or to add any
<PAGE>
other provisions with respect to matters or questions arising under this
Agreement that shall not be inconsistent with the provisions of this Agreement;
provided, however, that such action will not, in the opinion of counsel
satisfactory to the Trustee, materially and adversely affect the interest of any
Certificateholder or the Surety Bond Issuer.
(b) This Agreement may also be amended by the Depositor, the Servicer
and the Trustee, with the consent of the Surety Bond Issuer and the Holders of
Certificates (which consent of any Holder of a Certificate given pursuant to
this Section 17.1 or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holder and on all future Holders of such
Certificate and of any Certificate issued upon the transfer thereof or in
exchange thereof or in lieu thereof whether or not notation of such consent is
made upon the Certificate) evidencing not less than 51% of the Certificate
Balance as of the most recent Record Date, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the
Certificateholders or the Surety Bond Issuer; provided, however, that no such
amendment may (i) increase or reduce in any manner the amount of, or accelerate
or delay the timing of, Collections of payments on Receivables or distributions
that are required to be made on any Certificate, or (ii) reduce the aforesaid
percentage required to consent to any such amendment, in each case without the
consent of the holders of all Certificates then outstanding.
(c) Prior to the execution of any such amendment or consent, the
Servicer shall furnish written notification of the substance of such amendment
or consent to each Rating Agency. Promptly after the execution of any such
amendment or consent, the Trustee shall forward such written notification
provided to the Trustee by the Servicer of the substance of such amendment or
consent to each Certificateholder.
(d) It shall not be necessary for the consent of Certificateholders
pursuant to this Section 17.1 to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe, including
the establishment of record dates pursuant to the Depository Agreement.
(e) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement and the Opinion of Counsel referred to in Section 17.2(h)(i)(1). The
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Trustees own rights, duties or immunities under this Agreement or
otherwise.
(f) The provisions combined in clauses (a) and (b) of this Section 17.1
shall not apply to an amendment to the definition of "Specified Reserve Account
Requirement."
SECTION 17.2. Protection of Title to Trust. (a) The Depositor shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such
<PAGE>
manner and in such places as may be required by law fully to preserve, maintain
and protect the interest of the Certificateholders and the Trustee in the
Receivables and in the proceeds thereof. The Depositor shall deliver (or cause
to be delivered) to the Trustee file-stamped copies of, or filing receipts for,
any document filed as provided above, as soon as available following such
filing.
(b) Neither the Depositor nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed by the Depositor in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Trustee at least 30
days' prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed financing statements or continuation
statements.
(c) The Depositor and the Servicer shall give the Trustee at least 30
days' prior written notice of any relocation of its principal executive office
if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement, and shall promptly
file any such amendment. The Servicer shall at all times maintain each office
from which it shall service Receivables, and its principal executive office,
within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable. (e) The Servicer shall maintain its computer
systems so that, from and after the time of sale under this Agreement of the
Receivables to the Trustee, the Servicer's master computer records (including
any back-up archives) that refer to a Receivable shall indicate clearly with
reference to the particular grantor trust that such Receivable is owned by the
Trustee. Indication of the Trustee's ownership of a Receivable, on behalf of the
Trust, shall be deleted from or modified on the Servicer's computer systems
when, and only when, the Receivable shall have been paid in full or repurchased.
(e) If at any time the Depositor or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in marine
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trustee.
(f) The Servicer shall permit the Trustee and its agents at any time
during normal business hours to inspect, audit and make copies of and abstracts
from the Servicer's records regarding any Receivable.
<PAGE>
(g) Upon request, the Servicer shall furnish to the Trustee, within
five Business Days, a list of all Receivables (by contract number and name of
Obligor) then held as part of the Trust, together with a reconciliation of such
list to the Schedule of Receivables and to each of the Servicer's Certificates
furnished before such request indicating removal of Receivables from the Trust.
(h) The Servicer shall deliver to the Trustee:
(1) promptly after the execution and delivery of this
Agreement and of each amendment thereto, an Opinion of Counsel either
(a) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given,
or (b) stating that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cutoff Date, an Opinion of Counsel, dated as of a date during
such 90-day period, either (a) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Trustee, on behalf of the Trust, in the Receivables,
and reciting the details of such filings or referring to prior Opinions
of Counsel in which such details are given, or (b) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve
and protect such interest.
Each Opinion of Counsel referred to in clause (h)(l) or (h)(2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
(i) The Depositor shall, to the extent required by applicable law,
cause the Certificates to be registered with the Securities and Exchange
Commission pursuant to Section 12(b) or Section 12(g) of the Securities Exchange
Act of 1934, as amended, within the time periods specified in such sections, and
shall prepare and make all filings required by such Act with respect to the
Trust.
(j) For the purpose of facilitating the execution of this Agreement and
for other purposes, this Agreement may be executed simultaneously in any number
of counterparts, each of which counterparts shall be deemed to be an original,
and all of which counterparts shall constitute but one and the same instrument.
SECTION 17.3. Limitation on Rights of Certificateholders. (a) The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
<PAGE>
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
provided in Section 17.1 or 18.4) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties to this
Agreement, nor shall anything in this Agreement set forth or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken pursuant to any provision of this Agreement.
(c) No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Certificates evidencing not less than 25% of the Certificate
Balance shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee under this Agreement and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Trustee, for 30 days after its receipt of such and offer of indemnity,
shall have neglected or refused to institute any such action, suit or proceeding
and during such 30-day period no direction inconsistent with such written
request has been given to the Trustee pursuant to this Section 17.3 or Section
14.4; no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or them selves of any provisions of
this Agreement to affect, disturb or prejudice the rights of the Holders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right, under this
Agreement except in the manner provided in this Agreement and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 17.3, each Certificateholder and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 17.4. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 17.5. Notices. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt requested, or by overnight courier or telecopied (with the
original followed by mail within 24 hours) and shall be deemed to have been duly
given upon receipt (a) in the case of the Depositor, at the following address:
The CIT Group Securitization Corporation II, [address], or at such other address
as shall be designated by the Depositor in a written notice to the Trustee, (b)
in the case of the Servicer, at the following address: The CIT Group / Sales
Financing, Inc., [address], or at such other address as shall be designated by
the Servicer in a written notice to the Trustee, (c) in the case of the Trustee,
at the Corporate Trust Office, and (d) in the case of the Surety Bond
<PAGE>
Issuer, at [address]. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder shall
receive such notice. All communications and copies of all notices and reports
from the Trustee or the Servicer shall be mailed to each Rating Agency at the
following addresses:
Moody's Investors Services, Inc.
99 Church Street (4th Floor)
New York, New York 10007
Telephone No.: (212) 553-0300
Attention: ABS Monitoring Department
Standard & Poor's Ratings Services
26 Broadway (l0th Floor)
New York, New York 10004
Telephone No.: (212) 208-8925
Telecopy No.: (212) 208-8208
Attention: Asset-Backed Surveillance Group
SECTION 17.6. Severability of Provisions. If any or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
SECTION 17.7. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 16.3 and 17.3 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Depositor or the Servicer without the
prior written consent of the Trustee, the Holders of Certificates evidencing not
less than 66% of the Certificate Balance and the Surety Bond Issuer, provided
that the consent of Surety Bond Issuer shall not be unreasonably withheld.
SECTION 17.8. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof by the Trustee pursuant to Section 11.2 or 15.3,
Certificates shall be deemed fully paid.
SECTION 17.9. No Petition. Neither the Trustee nor the Servicer will
not institute against, or join any other Person in instituting against, the
Depositor or the Trust any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, until __________, ____.
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Servicer, the Trustee and the
Collateral Agent have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
THE CIT GROUP SECURITIZATION CORPORATION II,
as Depositor
By:
Name:
Title:
THE CIT GROUP / SALES FINANCING, INC.,
as Servicer
By:
Name:
Title:
[ ],
as Trustee and as Collateral Agent
By:
Name:
Title:
<PAGE>
SCHEDULE A
Schedule of Receivables
<PAGE>
EXHIBIT A
[FORM OF SURETY BOND]
<PAGE>
EXHIBIT B:
FORM OF CERTIFICATE
Front
CIT MARINE TRUST ____-_
CIT MARINE TRUST ____-_
[____]% MARINE RECEIVABLE-BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined
below, the property of which includes a pool of retail installment sale
contracts secured by new and used boats, boat motors and boat trailers,
and sold or caused to be sold to the Trust by The CIT Group
Securitization Corporation II.
(This Certificate does not represent an interest in or
obligation of The CIT Group / Sales Financing, Inc., The CIT Group
Securitization Corporation II or any affiliate thereof, except to the
extent described below.)
NUMBER CUSIP
FINAL SCHEDULED DISTRIBUTION DATE: $
THIS CERTIFIES THAT is the registered owner of a $__________ dollars
nonassessable, fully-paid, fractional undivided interest in the CIT Marine Trust
____-_ (the "Trust") formed by The CIT Group Securitization Corporation II, a
Delaware corporation (the "Depositor"). The Trust was created pursuant to a
Pooling and Servicing Agreement dated as of __________, ____ (the "Agreement")
among the Depositor, The CIT Group / Sales Financing Inc., as Servicer, and [ ],
as Trustee (the "Trustee") and as Collateral Agent (the "Collateral Agent"), a
summary of certain of the pertinent provisions of which is set forth below. To
the extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Agreement. This Certificate is one of the
duly authorized Certificates designated as "CIT Marine Trust ____-_ [____]%
Marine Receivable-Backed Certificates" (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement, as amended from time to time,
the holder of this Certificate by virtue of the acceptance hereof assents and by
which such holder is bound. The property of the Trust includes a pool of retail
installment sale contracts (the "Receivables") secured by new and
<PAGE>
used boats, boat motors and boat trailers ("Boats"), all payments (other than
late fees and certain other amounts) received thereunder, in the case of Simple
Interest Receivables, and due thereunder, in the case of Precomputed Receivables
after __________, ____, the interest of the Depositor in the security interests
in the Boats, such amounts as may be held from time to time in certain trust
accounts, the Surety Bond, any property that shall have secured a Receivable and
that shall have been acquired by the Trustee, the Purchase Agreement, proceeds
from claims on physical damage, credit life and disability insurance policies
covering Boats, or the Obligors as the case may be, the interests of the
Depositor in any proceeds from recourse to Dealers on the Receivables, and the
proceeds of all of the foregoing.
Under the Agreement, there will be distributed on the 15th day of each
month or, if such 15th day is not a Business Day, the next Business Day (the
"Distribution Date"), commencing on __________, ____, to the person in whose
name this Certificate is registered at the close of business on the Business Day
prior to such Distribution Date (the "Record Date"), such Certificateholder's
fractional undivided interest in the Monthly Interest Payment, any Carry-Over
Monthly Interest, the Monthly Principal Payment and any Carry-Over Monthly
Principal, all as more specifically set forth in the Agreement. On the Final
Scheduled Distribution Date, each Certificateholder shall be entitled to receive
an amount equal to the Monthly Interest Payment and an amount necessary to
reduce the Certificate Balance to zero.
Distributions on this Certificate will be made by the Trustee by check or money
order mailed to the Person entitled thereto without the presentation or
surrender of this Certificate or the making of any notation hereon. Except as
otherwise provided in the Agreement and notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon presentation and surrender of
this Certificate at the office or agency maintained for that purpose by the
Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless this Certificate is presented by an authorized representative of The
Depository Trust Company to the Trustee or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of CEDE & CO. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL since the registered owner hereof, CEDE & CO., has an
interest herein.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in its
individual capacity has caused this Certificate to be duly executed.
DATED: CIT MARINE TRUST ____-_
By: [ ],
as Trustee
By:
Name:
Title:
Authenticated:
[ ],
as Trustee
By:
Name:
Title:
<PAGE>
Reverse
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Servicer, the Trustee or any affiliate of any of them. The
Certificates are limited in right of payment as more specifically set forth in
the Agreement. A copy of the Agreement may be examined during normal business
hours at the principal office of the Depositor, and at such other places, if
any, designated by the Depositor, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Agreement at any
time by the Depositor and the Trustee with the consent of the Surety Bond Issuer
and without the consent of the Holders of any of the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee in its capacity as Certificate
Registrar, or by any successor Certificate Registrar, in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of transfer
in form satisfactory to the Trustee and the Certificate Registrar duly executed
by the holder hereof or such holder's attorney duly authorized in writing, and
thereupon one or more new certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be issued to the designated
transferee. The Certificates are issuable only as registered Certificates
without coupons in denominations of $1,000 and integral multiples hereof. As
provided in the Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same aggregate denomination, as requested by the holder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or governmental charges payable in connection therewith.
The Trustee, the Certificate Registrar and any agent of the Trustee or
the Certificate Registrar may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Certificate Registrar, nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer may at its
option purchase the corpus of the Trust at a price specified in the Agreement,
and such purchase of the Receivables and other property of the Trust will effect
early retirement of the Certificates; however, such right of purchase is
exercisable only as of the last day of a Collection Period as of which the Pool
Balance is equal to or less than __% of the Original Pool Balance.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
(Please print or typewrite name and address, including postal zip code,
and taxpayer I.D. or Social Security Number of assignee)
the within certificate, and all rights thereunder, hereby irrevocably
constituting and appointing Attorney to transfer said Certificate on the books o
f the Certificate Registrar, with full power of substitution in the premises.
Dated: * Signature Guaranteed:
By:
Name:
Title:
* NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must
be guaranteed by a member of the New York Stock Exchange or a commercial
bank or trust company.
<PAGE>
EXHIBIT C
[FORM OF DEPOSITORY AGREEMENT]
<PAGE>
EXHIBIT D
THE CIT GROUP / SALES FINANCING, INC.
MONTHLY SERVICER REPORT
CURRENT DATE: __________
I. Monthly Principal Payment:
(A) Principal received from Obligors:
(1) Total principal collected $
(2) Percent relating to Unsold Contracts $
(3) Principal owed to Trust $
(B) Purchased Receivables $
(C) Liquidation Proceeds $
II. Principal to Investors:
(A) Principal Balance at beginning of month $
(B) Certificate Factor at beginning of month $
(C) Principal Balance at end of month $
(D) Monthly principal due investors $
(E) Carry-Over Monthly Principal $
III. Monthly Interest Payment:
(A) Principal Balance at beginning of month $
(B) Pass-Through Rate % $
(C) Monthly Interest Payment $
(D) Carry-Over Monthly Interest $
IV. Draw on Reserve Account and Surety Bond:
(A) Total Available Funds equals:
(1) Principal received from Obligors (or Dealers and
insurers on non-Defaulted Receivables), plus $
(2) Interest received from Obligors, plus $
(3) Cash received from Depositor/Servicer on
Purchased Receivables, plus $
(4) Liquidation Proceeds, plus $
(5) Interest on Collection Account $
(6) Total Available Funds $
<PAGE>
(B) Total Distributions equal:
(1) Monthly Interest Payment and any carry-over
Monthly Interest Payment $
(2) Monthly Servicing Fee and any carry-over,
plus Monthly Servicing Fee
(if CITSF is not the Servicer), plus $
(3) Monthly Principal Payment and any carry-over
Monthly Principal Payment $
(4) Total Distributions $
(C) Total Surplus/(Deficiency) (IV(A)-IV(B)) $
(D) Reserve Account balance $
(E) Reserve Account withdrawal $
(F) Surety Bond demand $
V. Monthly Servicing Fee and any carry-over Monthly Servicing Fee
(if CITSF is the Servicer) $
VI. Reconciliation of Reserve Account:
(A) Beginning Reserve Account balance $
(B) Interest on Reserve Account $
(C) Amounts paid to Reserve Account under
the Pooling and Servicing Agreement $
(D) Reserve Account withdrawal $
(E) Reserve Account prior to release of excess $
(F) Required Reserve Account balance:
(1) As percent of Principal Balance $
(2) Minimum Reserve Account balance $
(3) Required amount $
(G) Release of excess $
(H) Ending Reserve Account balance $
VII. Delinquency/Charge-off Experience:
(A) Principal Balance at end of month $
(B) Number of Units $
(C) Delinquency $ #
30-59 Days $
60-89 Days $
90+ Days $
TOTAL $
(D) As % of EOM Outstanding
(E) Receivables charged-of during month$
(F) Recoveries of Receivables previously charged-off $
(G) Net loss during month $
<PAGE>
(H) Annualized monthly net loss rate $
<PAGE>
EXHIBIT E
THE CIT GROUP / SALES FINANCING, INC.
CERTIFICATEHOLDER STATEMENT
A-C (Per $1,000 Initial Balance):
(A) The amount of the Certificateholder's distribution
which constitutes the Monthly Principal Payment
(including any Carry-Over Monthly Principal) $
(B) The amount of the Certificateholder's distribution which constitutes
the Monthly Interest Payment
(including any Carry-Over Monthly Interest) $
(C) The Certificateholder's pro rata portion of the
Servicing Fee(including any Carry-Over Monthly Servicing Fee) $
(D) Certificate Balance as of Record Date $
(E) Certificate Factor as of Record Date $
<PAGE>
EXHIBIT F-1
Trustee's Certificate
pursuant to Section 15.3 of the Pooling and Servicing Agreement
[ ], as trustee (the "Trustee") of the CIT Marine Trust ____-_ created
pursuant to the Pooling and Servicing Agreement (the "Agreement") dated as of
__________, ____, among The CIT Group Securitization Corporation II, as
Depositor (the "Depositor"), The CIT Group / Sales Financing, Inc., as Servicer,
and the Trustee, does hereby sell, transfer, assign and otherwise convey to the
Depositor, without recourse, representation or warranty, all the Trustee's
right, title and interest in and to all the Receivables (as defined in the
Agreement) identified in the attached Servicer's Certificate as "Purchased
Receivables," which are to be repurchased by the Depositor pursuant to Section
8.2 of the Agreement and all security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this ____ day of ____.
Name:
Title:
<PAGE>
EXHIBIT F-2
Trustee's Certificate
pursuant to Section 15.3 of the Pooling and Servicing-Agreement
[ ], as trustee (the "Trustee") of the CIT Marine Trust ____-_ created
pursuant to the Pooling and Servicing Agreement (the "Agreement") dated as of
__________, ____, among The CIT Group Securitization Corporation II, as
Depositor, The CIT Group / Sales Financing, Inc., as Servicer (the "Servicer"),
and the Trustee, does hereby sell, transfer, assign and otherwise convey to the
Servicer, without recourse, representation or warranty, all the Trustee's right,
title and interest in and to all the Receivables (as defined in the Agreement)
identified in the attached Servicer's Certificate as "Purchased Receivables,"
which are to be purchased by the Servicer pursuant to Section 9.7 or Section
16.2 of the Agreement, and all security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this ____ day of ____.
Name:
Title:
Exhibit 4.5
LIMITED GUARANTEE, dated as of __________, ____, made by The
CIT Group, Inc. ("CIT") in favor of _______________, not in its individual
capacity but solely as Owner Trustee (the "Owner Trustee") under the Sale and
Servicing Agreement dated as of __________, ____ (the "Sale and Servicing
Agreement"), among The CIT Group Securitization Corporation II (the "Company"),
The CIT Group/Sales Financing, Inc. ("CITSF") and the CIT Marine Trust ____-_.
WHEREAS, the execution and delivery of this Limited Guarantee
by CIT on or before the Closing Date (as defined in the Sale and Servicing
Agreement) is a condition to the issuance and sale of the Notes and the
Certificates, as contemplated by the Sale and Servicing Agreement;
WHEREAS, CIT will derive substantial benefit from the
transactions contemplated by the Sale and Servicing Agreement, including,
without limitation, the payment of the Guarantee Fee (as defined in the Sale and
Servicing Agreement) to CIT;
WHEREAS, capitalized terms used herein and not otherwise
defined herein shall have the meaning ascribed to such terms in the Sale and
Servicing Agreement; and
WHEREAS, in order to induce the parties to the Sale and
Servicing Agreement to enter into the Sale and Servicing Agreement and perform
their respective obligations thereunder, CIT is willing to execute and deliver
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, CIT hereby
unconditionally agrees as follows:
SECTION 1. The Guarantee.
(a) CIT hereby unconditionally and absolutely guarantees the
payment to the Owner Trustee, on behalf of the Certificateholders, of the
Guarantee Payment due to the Certificateholders on each Distribution Date. Not
later than the third Business Day prior to each Distribution Date, the Servicer
shall notify CIT of the amount of the Guarantee Payment, if any, for such
Distribution Date (net of any reduction provided for in Section 1(e) hereof) and
not later than the Business Day preceding each Distribution Date, CIT shall
deposit the Guarantee Payment, if any, for such Distribution Date into the
Certificate Distribution Account in immediately available funds.
(b) Notwithstanding the obligation of CIT in clause (a) above,
in no event will CIT be obligated to make a Guarantee Payment if the aggregate
amounts paid under this Agreement would exceed $_________ (the "Initial
Guarantee Payment Limit"), except as provided in Section 3 hereof. Subject to
Section 3, the "Guarantee Payment Limit" will at any time equal the Initial
Guarantee Payment Limit reduced by the amount of each Guarantee
<PAGE>
Payment. On the date that the Guarantee Payment Limit is reduced to zero (if the
Nonreinstatement Notice has been given), CIT shall have no further liability
under this Limited Guarantee, and CIT shall be deemed to have satisfied in full
all of its obligations under this Limited Guarantee.
(c) The obligations of CIT under this Limited Guarantee shall
not terminate upon or otherwise be reduced by a Service Transfer pursuant to
Article VII of the Sale and Servicing Agreement, by any amendment to the Sale
and Servicing Agreement, the Purchase Agreement, any Subsequent Purchase
Agreement or any other agreement relating to the Certificateholders or any
breach by any party to any such agreement of its obligations thereunder or the
failure of CIT to receive all or any part of the Guarantee Fee.
(d) The obligations of CIT under this Limited Guarantee shall
terminate on the earlier of (i) the date referred to in Section 1(b) hereof,
(ii) one year and one day following the Distribution Date on which the
Certificate Balance has been reduced to zero and all accrued interest on the
Certificates has been paid in full, or (iii) the date on which there shall have
been delivered "Alternate Credit Enhancement" in accordance with Section [5.06]
of the Sale and Servicing Agreement.
(e) On and after the Trigger Date (if the Nonreinstatement
Notice is given), the amount of the Guarantee Payment to be made by CIT
hereunder for each Distribution Date shall be reduced by the amount to be
transferred on such Distribution Date from the Certificate Reserve Account to
the Certificate Distribution Account.
(f) The obligation of CIT to make the Guarantee Payments
described in clause (a) above shall be unconditional and irrevocable, subject to
the limitations set forth in clauses (b), (d) and (e) above.
SECTION 2. Representations and Warranties.
In making this Limited Guarantee CIT represents and warrants
to the Owner Trustee and the Certificateholders that:
(a) Organization and Good Standing. CIT is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its assets
and to transact the business in which it is currently engaged. CIT is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of CIT.
(b) Authorization; Binding Obligations. CIT has the power and
authority to make, execute, deliver and perform this Limited Guarantee and all
of the transactions
-2-
<PAGE>
contemplated under this Limited Guarantee, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this Limited
Guarantee. When executed and delivered, this Limited Guarantee will constitute
the legal, valid and binding obligation of CIT enforceable in accordance with
its terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies.
(c) No Consent Required. CIT is not required to obtain the
consent of any other party or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Limited Guarantee the failure of which so to obtain would
have a material adverse effect on the business, properties, assets or condition
(financial or otherwise) of CIT.
(d) No Violations. The execution, delivery and performance of
this Limited Guarantee by CIT will not violate any provision of any existing law
or regulation or any order or decree of any court or the Articles of
Incorporation or Bylaws of CIT, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which CIT is a party or by which CIT
may be bound.
(e) Litigation. No litigation or administrative proceeding of
or before any court, tribunal or governmental body is currently pending, or to
the knowledge of CIT threatened, against CIT or any of its properties or with
respect to this Limited Guarantee or the Certificates which, if adversely
determined, would in the opinion of CIT have a material adverse effect on the
transactions contemplated by this Limited Guarantee.
Section 3. Reinstatement after Trigger Date; Nonreinstatement.
(a) On each Distribution Date on and after the first
Distribution Date (the "Trigger Date") on which the Guarantee Payment Limit is
less than $_________, unless CIT has delivered the "Nonreinstatement Notice" to
the Servicer and the Owner Trustee on or prior to such Trigger Date, the
Guarantee Payment Limit will equal an amount equal to the least of: (i)
$_________, and (ii) the Certificate Balance. If, subsequent to the Trigger
Date, CIT delivers the Nonreinstatement Notice to the Servicer and the Owner
Trustee, the Guarantee Payment Limit on and after the date of delivery of such
notice will equal the least of: (i) $_________, (ii) the Certificate Balance,
and (iii) the Guarantee Payment Limit in effect immediately prior to the
delivery of such Nonreinstatement Notice, less any Guarantee Payments made on or
after the delivery of such Nonreinstatement Notice.
(b) The "Nonreinstatement Notice" shall mean a written notice
given by CIT to the Servicer and the Owner Trustee stating that the Guarantee
Payment Limit shall not be reinstated.
-3-
<PAGE>
(c) "Excess Spread" shall mean the Amount Available, on each
Distribution Date on and after the Trigger Date, remaining after application to
the uses specified in Section [5.05(c)(i)-(viii)] of the Sale and Servicing
Agreement.
(d) CIT, in its sole discretion, may at any time give the
Nonreinstatement Notice.
SECTION 4. Miscellaneous.
(a) All payments by CIT under this Limited Guarantee shall be
made free and clear of and without deduction for any present or future income,
stamp or other taxes, levies, imposts, deductions, charges, fees, withholdings,
liabilities, restrictions or conditions of any nature whatsoever now or
hereafter imposed, levied, collected, assessed or withheld by any jurisdiction
or by any political subdivision or taxing authority thereof or therein, and all
interest, penalties or similar liabilities ("Taxes"); provided, however, that
CIT shall not be obligated to pay any amount allocable to Taxes (i) which the
Trust was required to withhold or (ii) which result or were incurred by reason
of the ownership of any interest in a Certificate by any non-U.S. Person which
is not eligible for a complete exemption from U.S. withholding tax on U.S.
source interest.
(b) CIT shall not exercise any rights which it may acquire by
way of subrogation hereunder, by any payment made by it hereunder or otherwise,
until such date when all amounts of principal and interest payable to the
Holders of the Notes and the Certificates shall have been paid in full. If any
amount shall be paid to CIT on account of such subrogation rights at any time
when all of the amounts of principal and interest payable to the Holders of the
Notes and the Certificates shall not have been paid in full, such amount shall
be held in trust for the benefit of the Noteholders and the Certificateholders,
shall be segregated from the other funds of CIT and shall forthwith be applied
in whole or in part against such amounts owed in accordance with the terms of
the Sale and Servicing Agreement.
(c) This Limited Guarantee is not secured by a security
interest in, pledge of or lien on any assets of CIT or any of its subsidiaries.
The Limited Guarantee is a senior, unsecured general obligation of CIT and is
not supported by any letter of credit or other credit enhancement arrangement.
(d) This Limited Guarantee may be amended from time to time by
the Company, CIT, the Servicer and the Owner Trustee, without the consent of any
of the Certificateholders, (i) to correct manifest error, to cure any ambiguity,
to correct or supplement any provisions herein or therein which may be
inconsistent with any other provisions herein or therein, as the case may be,
(ii) to add any other provisions with respect to matters or questions arising
under this Limited Guarantee which shall not be inconsistent with the provisions
of this Limited Guarantee, and (iii) to add or amend any provisions as required
by Moody's, Standard & Poor's or another national statistical rating
organization in order to maintain or improve the rating of the Certificates (it
being understood that, after the rating required by the Sale and Servicing
-4-
<PAGE>
Agreement has been obtained, neither the Owner Trustee, the Company, CITSF or
CIT is obligated to maintain or improve such rating); provided, however, that
such action shall not, as evidenced by an opinion of counsel for CIT, adversely
affect in any material respect the interests of any Certificateholder.
This Limited Guarantee may also be amended from time to time
by the Company, CIT, the Servicer and the Owner Trustee, with the consent of
Holders of the Certificates aggregating 51% or more of the Certificate Balance
as of the preceding Determination Date, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Limited Guarantee or modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, any Guarantee Payment or
(ii) grant by contract or operation of law any defense to the payment of any
Guarantee Payment without the consent of the Holder of each Certificate affected
thereby.
CIT shall provide Moody's and Standard & Poor's with a copy of
any amendment made to this Limited Guarantee prior to the execution and delivery
thereof, and the Rating Agency Condition shall be satisfied prior to the
effective date of such amendment.
(e) This Limited Guarantee shall be construed in accordance
with and governed by the internal laws of the State of New York applicable to
contracts made and to be performed therein without regard to conflicts of law
principles. Any litigation relating to or arising out of this Limited Guarantee
shall be brought and maintained in the courts of the State of New York or in the
United States District Court for the Southern District of New York.
(f) CIT agrees that, prior to the date which is one year and
one day after the payment in full of the Notes and the Certificates it shall not
institute against, or join any other person in instituting against, the Company
or the Trust any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other proceedings under any Federal or state
bankruptcy or similar law.
(g) CIT hereby acknowledges that the Guarantee Fee and any
reimbursement to CIT for Guarantee Payments is subordinated to payments in
respect of the Notes and the Certificates, the Servicer Payment and the
reimbursement of Monthly Advances to the extent provided in the Sale and
Servicing Agreement and will be payable only if and to the extent funds are
available therefor in accordance with the Sale and Servicing Agreement. CIT
further acknowledges that the failure of CIT to receive, in whole or in part,
payment of the Guarantee Fee shall not in any way diminish CIT's obligations
hereunder and CIT hereby waives any right of set-off or counterclaim against the
Trust for the failure to receive all or any part of such Guarantee Fee or for
the failure to receive reimbursement for Guarantee Payments.
-5-
<PAGE>
IN WITNESS WHEREOF, The CIT Group, Inc. has duly executed this Limited
Guarantee as of the day and year first written above.
THE CIT GROUP, INC.
By:________________________
Name:
Title:
-6-
Exhibit 5.1
January 27, 1998
The CIT Group Securitization Corporation II
650 CIT Drive
Livingston, New Jersey 07039
The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
Dear Sirs:
We have acted as special counsel to you (the "Corporations")
in connection with the Registration Statement on Form S-3 (333-43323) (the
"Registration Statement"), filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the asset-backed certificates (the "Certificates"), the
asset-backed notes (the "Notes" and, collectively with the Certificates, the
"Securities") and the limited guarantees (the "Guarantees") of certain of the
Securities by The CIT Group, Inc. ("CIT"), each described in the prospectus and
prospectus supplement which form a part of the Registration Statement (the
"Prospectus" and the "Prospectus Supplement," respectively). Each series of
Certificates will be issued either pursuant to a trust agreement (the "Trust
Agreement") substantially in the form filed as Exhibit 4.2 to the Registration
Statement or pursuant to a pooling and servicing agreement (the "Pooling
Agreement") substantially in the form filed as Exhibit 4.6 to the Registration
Statement, pursuant to which The CIT Group Securitization Corporation II ("CIT
II") will originate the CIT Marine Trust (the "Trust"). Each series of Notes
will be issued pursuant to an indenture (the "Indenture") substantially in the
form filed as Exhibit 4.1 to the Registration Statement. Certain rights of the
holders of the Securities will be governed by a sale and servicing agreement
(the "Sale and
<PAGE>
The CIT Group Securitiation Corporation II
The CIT Group, Inc.
January 27, 1998
Page 2
Servicing Agreement") substantially in the form filed as Exhibit 4.3 to the
Registration Statement.
In connection with this opinion, we have examined the Trust
Agreement, the Pooling Agreement, the Indenture, the Guarantees and the Sale and
Servicing Agreement (collectively, the "Basic Documents"), each in the form of
the exhibits to the Registration Statement.
We have also assumed, that: (a) the Trust Agreement or the
Pooling Agreement and each of the other Basic Documents will be duly executed
and delivered by each of the parties thereto in the form of the exhibits to the
Registration Statement prior to the issuance of any of the Securities
thereunder; (b) at the time of such execution, each such party, other than the
Corporations, will be duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and will have all
requisite power and authority to execute, deliver and perform its obligations
under each of the Trust Agreement or the Pooling Agreement and each of the other
Basic Documents; (c) the execution and delivery of the Trust Agreement or the
Pooling Agreement and each of the other Basic Documents and performance of such
obligations will have been duly authorized by all necessary actions on the part
of each such party, other than the Corporations; (d) the Trust Agreement or the
Pooling Agreement and each of the other Basic Documents will be the legal, valid
and binding obligation of each such party, other than the Corporations, and will
be enforceable against each such party, other than the Corporations, in
accordance with its terms; and (e) during the period from the date hereof until
the date of such execution and delivery, there will be no change in (i) any
relevant authorization, law or regulation, or interpretation thereof or (ii) any
set of facts or circumstances relating to the Basic Documents.
We are attorneys admitted to practice in the State of New York
and the opinion set forth below is limited to the laws of the State of New York
and the Delaware General Corporation law. Paul N. Roth, a member of this firm,
is a director of CIT.
Based upon the foregoing, we are of the opinion that: (a)
assuming the due execution of the Trust Agreement or the Pooling Agreement and
each of the other Basic Documents, upon the issuance, authentication and
delivery of the Notes in accordance with the terms of the Sale and Servicing
Agreement and the Indenture against payment therefor as contemplated by the
Prospectus and the Prospectus Supplement, the Notes will constitute valid and
binding obligations of the Trust, each enforceable in accordance with its terms;
and (b) the Guarantees have been duly authorized and, when duly executed by CIT
and issued and delivered in accordance with the terms of the Sale and Servicing
Agreement as contemplated by the Prospectus and the Prospectus Supplement, will
be valid and binding obligations of CIT, enforceable in accordance with their
terms, subject as to enforcement of remedies with
<PAGE>
The CIT Group Securitiation Corporation II
The CIT Group, Inc.
January 27, 1998
Page 3
respect to (a) and (b) above to applicable bankruptcy, reorganization,
fraudulent conveyance, insolvency, moratorium or other laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, and will be entitled to the benefits of the Basic Documents.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm appearing under
the heading "Legal Matters" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the General Rules and Regulations of
the Commission thereunder.
Very truly yours,
EXHIBIT 5.2
[Letterhead of Richards, Layton & Finger]
January 27, 1998
The CIT Group Securitization Corporation II
650 CIT Drive
Livingston, New Jersey 07039
The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
Dear Sirs:
We have acted as special Delaware counsel to CIT Marine Trust ____-_, a
Delaware business trust (the "Trust") in connection with the Registration
Statement on Form S-3 (the "Registration Statement"), filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), registering the asset backed certificates (the
"Certificates"), the asset backed notes (the "Notes" and, collectively with the
Certificates, the "Securities") and the limited guarantees (the "Guarantees") of
certain of the Securities by The CIT Group, Inc. ("CIT"), each described in the
prospectus and the prospectus supplement which form a part of the Registration
Statement (the "Prospectus" and the "Prospectus Supplement"). Each series of
Certificates will be issued pursuant to a trust agreement (the "Trust
Agreement") substantially in the form filed as Exhibit 4.2 to the Registration
Statement, pursuant to which The CIT Group Securitization Corporation II ("CIT
II") will originate the Trust. Each series of Notes will be issued pursuant to
an indenture (the "Indenture") substantially in the form filed as Exhibit 4.1 to
the Registration Statement. Certain rights of the holders of the Securities will
be governed by a sale and servicing agreement (the "Sale and Servicing
Agreement") substantially in the form filed as Exhibit 4.3 to the Registration
Statement.
In connection with this opinion, we have examined signed copies of the
Registration Statement and the exhibits thereto. We have not reviewed any
documents other than the foregoing documents for purposes of rendering our
opinions as expressed herein, and we have assumed that there exists no provision
of any such other document that bears upon or is inconsistent with our opinions
as expressed herein. We have conducted no independent factual investigation of
our own but have relied solely upon the foregoing documents, the statements and
information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
<PAGE>
The CIT Group Securities Corporation II
The CIT Group, Inc.
January 27, 1998
Page 2
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons signing or delivering any instrument, the
authenticity of all documents submitted to us as original, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents.
We have also assumed, with respect to the Trust Agreement, the
Indenture, the Sale and Servicing Agreement and the Guarantees (collectively,
the "Basic Documents"), that: (a) each of the Basic Documents will be duly
executed and delivered by each of the parties thereto prior to the issuance of
any of the Securities thereunder; (b) at the time of such execution, each such
party will be duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and will have all requisite power
and authority to execute, deliver and perform its obligations under each of the
Basic Documents; (c) the execution and delivery of the Basic Documents and
performance of such obligations will have been duly authorized by all necessary
actions on the part of each such party; (d) at the time of such execution, the
Basic Documents will be the legal, valid and binding obligation of each such
party, and will be enforceable against each such party in accordance with their
terms; (e) the Guarantees will be duly executed and delivered by CIT; and (f)
during the period from the date hereof until the date of such execution and
delivery, there will be no change in (i) any relevant authorization, law or
regulation, or interpretation thereof, (ii) the terms and conditions of the
Basic Documents, or (iii) any set of facts or circumstances relating to the
Basic Documents.
Based upon the foregoing, we are of the opinion that assuming the due
execution of the Basic Documents, each in substantially the form presented to
us, upon the issuance, authentication and delivery of the Certificates in
accordance with the provisions of the Sale and Servicing Agreement and the Trust
Agreement against payment therefor, the Certificates will be legally issued,
fully paid and, subject to Section 2.7 of the Trust Agreement, nonassessable
Certificates representing undivided interests in the Trust, and will be entitled
to the benefits of the Trust Agreement.
We have not participated in the preparation of any offering materials
with respect to the Notes or the Certificates and assume no responsibility for
their contents.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm appearing under the
heading "Legal Matters" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the General Rules and Regulations of
the Commission thereunder.
Very truly yours,
/S/ RICHARDS, LAYTON & FINGER
Exhibit 8.1
January 27, 1998
The CIT Group Securitization Corporation II
650 CIT Drive
Livingston, New Jersey 07039
The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
Dear Sirs:
We have acted as special counsel to you in connection with the
Registration Statement on Form S-3 (333-43323) (the "Registration Statement"),
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
asset-backed certificates (the "Certificates"), the asset-backed notes (the
"Notes" and, collectively with the Certificates, the "Securities") and the
limited guarantees (the "Guarantees") of certain of the Securities by The CIT
Group, Inc. ("CIT"), each described in the prospectus and prospectus supplement
which form a part of the Registration Statement (the "Prospectus" and the
"Prospectus Supplement"). Each series of Certificates will be issued either
pursuant to a trust agreement (the "Trust Agreement") substantially in the form
filed as Exhibit 4.2 to the Registration Statement, or pursuant to a pooling and
servicing agreement (the "Pooling Agreement") substantially in the form filed as
Exhibit 4.6 to the Registration Statement pursuant to which The CIT Group
Securitization Corporation II will originate the CIT Marine Trust (the "Trust").
Each series of Notes will be issued pursuant to an indenture (the "Indenture")
substantially in the form filed as Exhibit 4.1 to the Registration Statement.
Certain rights of the holders of the Securities will be governed by a sale and
servicing agreement (the "Sale and Servicing Agreement") substantially in the
form filed as Exhibit 4.3 to the Registration Statement.
<PAGE>
The CIT Group Securitization Corporation II
The CIT Group, Inc.
January 27, 1998
Page 2
We are attorneys admitted to practice in the State of New York
and the opinion set forth below is limited to the laws of the State of New York
and the Delaware General Corporation Law. Paul N. Roth, a member of this firm,
is a director of CIT.
We hereby confirm that the statements set forth in the
Prospectus and the Prospectus Supplement under the heading "Certain Federal
Income Tax Consequences" accurately describe the material Federal income tax
consequences to holders of the Securities.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act or the General Rules and Regulations of the Commission
thereunder.
Very truly yours,
EXHIBIT 8.2
[LETTERHEAD OF CROWE & DUNLEVY]
January 27, 1998
The CIT Group/Sales Financing, Inc.
650 CIT Drive
Livingston, New Jersey 07039
Re: CIT MARINE TRUST
Ladies and Gentlemen:
For the purpose of the sale of Asset-Backed Notes and Asset-Backed
Certificates issued by the CIT Marine Trust (the "Trust"), we have acted as
Oklahoma tax counsel for The CIT Group/Sales Financing, Inc. and the Trust
regarding the anticipated Oklahoma income tax characterization of the Trust.
This letter is pursuant to your request that we advise you regarding
the likely characterization under Oklahoma income tax law of the Trust. We
understand the Trust will purchase Marine notes and/or chattel paper from a CIT
"special purpose corporation," The CIT Group Securitization Corporation II,
after purchase by the special purpose corporation from The CIT Group/Sales
Financing, Inc.
Capitalized terms used but not defined herein have the meanings
ascribed in the Form of Sale and Servicing Agreement (the "Sale and Servicing
Agreement") among The CIT Group/Sales Financing, Inc., The CIT Group/Sales
Financing, Inc. and the Trust.
In furnishing this opinion, we have examined copies of the following
documents:
(i) the Form of Trust Agreement;
(ii) the Form of Sale and Servicing Agreement;
(iii) the Form of Pooling and Servicing Agreement;
(iv) the Form of Purchase Agreement;
(v) the Form of Subsequent Purchase Agreement; and
(vi) the Form of Indenture.
<PAGE>
The CIT Group/Sales Financing, Inc.
January 27, 1998
Page 2
I. ASSUMPTIONS AND OPINION
In rendering the opinions expressed herein, we have made the following
assumptions, the accuracy of which we have not verified:
1. The Trust has been properly characterized as a nonpublicly traded
Partnership for federal income tax purposes.
2. Any Notes issued by the Trust have been properly characterized as
debt for federal income tax purposes.
Based upon the foregoing and in reliance thereon, and upon
consideration of applicable Oklahoma income tax laws, and subject to the
qualifications and limitations described below, we are of the following
opinions:
1. The Trust will be characterized as a nonpublicly traded Partnership
for purposes of Oklahoma income tax laws, and the nonpublicly traded Partnership
will not be taxed as an entity, but rather, the profits, income, losses, and
deductions of the Trust will, for income tax purposes, flow through the Trust to
the partner level. 68 Okla. Stat. ss. 2353(3) (1997 Supp.); Oklahoma Tax
Commission Rule ss. 710:50-3-35.
2. The Notes will be characterized as debt for Oklahoma income tax
purposes. 68 Okla. Stat. ss. 2353(3) (1997 Supp.); Oklahoma Tax Commission Rule
ss. 710:50-3-35. Noteholders not otherwise subject to taxation in Oklahoma
should not become subject to taxation in Oklahoma because of the holder's
ownership of Notes. However, a Noteholder already subject to Oklahoma's income
tax could be required to pay additional Oklahoma income tax as a result of the
holder's ownership or disposition of Notes.
II. ADDITIONAL DISCUSSION
For the purposes of this additional discussion, we have made the
following assumptions, the accuracy of which we have not verified:
1. The Trust is organized as a business trust under the laws of
Delaware. The activities of the Trust occurring within the State of Oklahoma
consist solely of the maintenance of the original notes and/or chattel paper and
of the related contract files and documents with a custodian within the State of
Oklahoma and of the activities described in Paragraph 4 below.
2. Less than ten percent (10%) of the notes and/or chattel paper
acquired by the Trust will originate in Oklahoma.
3. The Trust will acquire the notes and/or chattel paper in a series of
transactions occurring outside of Oklahoma.
<PAGE>
The CIT Group/Sales Financing, Inc.
January 27, 1998
Page 3
4. The only activities which the Servicer, as Servicer of the Trust,
will conduct in Oklahoma is the servicing of the loans evidenced by the notes
and chattel paper including without limitation: (i) the maintenance of custody
of the notes and/or chattel paper; (ii) the maintenance of the administrative
records concerning payments and outstanding balances on the notes and/or chattel
paper; (iii) the receipt of the payments on the notes and/or chattel paper; (iv)
the deposit of the payments received on the notes and/or chattel paper in an
Oklahoma financial institution for purposes of collection; (v) the collection
activities relating to the notes and/or chattel paper; and (vi) the repossession
and sale of the collateral therefor.
As a nonpublicly traded Partnership for Oklahoma and federal income tax
purposes, the Oklahoma distributive share of the partnership income, gains,
losses or deductions of the partnership to be reported by the partners shall be
the same portion of that reported for federal income tax purposes, as the
Oklahoma income, gain, losses or deductions determined under ss.ss. 2358 and
2362 of Title 68 of the Oklahoma Statutes for said partnership, bears to the
federal income, gains, losses or deductions. 68 Okla. Stat. ss. 2363 (1991). The
Oklahoma taxable income of a nonresident includes the distributive share of the
Oklahoma part of partnership income, gains, losses or deductions. 68 Okla. Stat.
ss. 2362(4) (1997 Supp.). However, income from intangible personal property of a
nonresident of Oklahoma is generally excluded from Oklahoma taxable income
except to the extent that such income is from property employed in an Oklahoma
trade or business or from property that has acquired a nonunitary business or
commercial situs in Oklahoma. 68 Okla. Stat. ss.ss. 2358(A)(4)(b), 2362(6) (1997
Supp.). We believe it is unlikely that the Oklahoma Tax Commission would attempt
to classify the income of the Trust as Oklahoma source income or as arising from
an Oklahoma trade or business. Accordingly, a nonresident of Oklahoma should not
incur Oklahoma taxable income solely as a result of an ownership interest in the
Trust. However, we are not aware of any authority or pronouncement of the
Oklahoma Tax Commission or the Oklahoma courts addressing this issue on
comparable facts and no absolute assurance can be given in this regard.
III. QUALIFICATIONS AND LIMITATIONS
In preparing this letter, we have reviewed Oklahoma Statutes, Oklahoma
court decisions and Oklahoma administrative rules and decisions, generally
available to the public as of the date of this letter. We have no obligation to
update or supplement this opinion to reflect any facts or circumstances that may
hereafter come to our attention or any changes in the law that may hereafter
occur which place a different interpretation on the law other than that which
has been applied herein, including interpretations of the law whether by way of
Oklahoma statutory enactments or amendments, judicial decisions or
administrative actions.
Except as provided n the last paragraph, this opinion has been rendered
solely for the benefit of The CIT Group/Sales Financing, Inc. and the Trust for
use in the Trust's offering of the Asset-Backed Notes and the Asset-Backed
Certificates and may not be used, circulated, quoted, relied upon or otherwise
referred to for any other purpose without our prior written
<PAGE>
The CIT Group/Sales Financing, Inc.
January 27, 1998
Page 3
consent; provided, however, that this opinion may be delivered to your
regulators, accountants, attorneys and other professional advisers and may be
used in connection with any legal or regulatory proceeding relating to the
subject matter of this opinion and the disclosure statement entitled "Certain
State Tax Consequences" included in the prospectus which forms a part of the
Registration Statement on Form S-3 (333-43323). The undersigned shall not be
responsible, liable or obligated to any third party who may obtain access to
this letter.
Crowe & Dunlevy hereby gives its consent solely to the parties on the
distribution list attached hereto to rely on such Opinion for use in the Trust's
sale. However, the parties on the distribution list may not use, circulate,
quote or rely on this Opinion for any purpose without Crowe & Dunlevy's written
consent.
Very truly yours,
CROWE & DUNLEVY,
A Professional Corporation
By: /s/ James H. Holloman, Jr.
--------------------------------
James H. Holloman, Jr.
<PAGE>
DISTRIBUTION LIST
The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
The CIT Group Securitization Corporation II
650 CIT Drive
Livingston, New Jersey 07039
Exhibit 10.1
PURCHASE AGREEMENT
This Purchase Agreement dated as of ____________, ____ (the
"Agreement"), is between THE CIT GROUP SECURITIZATION CORPORATION II, as
purchaser (the "Purchaser"), and THE CIT GROUP/SALES FINANCING, INC., as seller
(the "Seller").
Subject to the terms hereof, the Seller agrees to sell, and the
Purchaser agrees to purchase, the marine installment sales contracts set forth
on Exhibit A (collectively, the "Contracts"), having an aggregate outstanding
principal balance as of ____________, ____ (the "Initial Cut-off Date") of
approximately $___________.
It is the intention of the Seller and the Purchaser that the Purchaser
shall sell the Contracts to CIT Marine Trust ____-_ and shall enter into a Sale
and Servicing Agreement, dated as of the date hereof, with CIT Marine Trust
____-_ and the Seller, pursuant to which _____% Asset Backed Certificates (the
"Certificates"), evidencing ownership interests in the Contracts and Class A
_____% Asset Backed Notes secured by the Contracts, will be issued.
The Purchaser and the Seller wish to prescribe the terms and conditions
of the purchase by the Purchaser of the Contracts and the servicing and
administration of the Contracts.
In consideration of the premises and the mutual agreements hereinafter
set forth, the Purchaser and the Seller agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Certain capitalized terms used in this
Agreement shall have the respective meanings assigned to them in the Sale and
Servicing Agreement. All references in this Purchase Agreement to Articles,
Sections, subsections and exhibits are to the same contained in or attached to
this Purchase Agreement unless otherwise specified.
ARTICLE II
SALE AND CONVEYANCE OF CONTRACTS; CONTRACT FILES
SECTION 2.01. Sale and Conveyance of Contracts. On the Closing Date,
subject to the terms and conditions hereof, the Seller shall sell, transfer,
assign absolutely, set over and otherwise convey to the Purchaser (i) all the
right, title and interest of the Seller in and to the Initial Contracts and all
the rights, benefits, and obligations arising from and in connection with each
Initial Contract, (ii) the security interests in the Initial Financed Boats
granted by the Obligors pursuant to the Initial Contracts, (iii) all payments
received by the Seller on or with
<PAGE>
respect to the Initial Contracts on or after the Initial Cut-off Date (exclusive
of payments with respect to Post Cut-off Date Insurance Add-Ons), (iv) the
interest of the Seller in any Initial Financed Boat (including any right to
receive future Net Liquidation Proceeds) that secures the Initial Contracts and
that shall have been repossessed by the Servicer by or on behalf of the Trust;
(v) all rights of the Seller to proceeds of Insurance Policies covering the
Obligors and the Initial Contracts, (vi) the proceeds from any Servicer's Errors
and Omissions Protection Policy, any fidelity bond and any blanket hazard
policy, to the extent such proceeds relate to any Initial Financed Boat, (vii)
all rights of recourse against any cosigner or under any personal guarantee with
respect to the Initial Contracts (other than any right as against a Dealer under
a Dealer Agreement), (viii) all amounts held for the Trust in the Collection
Account, (ix) all amounts held for the Trust in the Pre-Funding Account, (x) all
amounts held for the Trust in the Capitalized Interest Account, (xi) all
proceeds in any way derived from any of the foregoing items, and (xii) all
documents contained or required to be contained in the Contract Files relating
to the Initial Contracts. The parties intend and agree that the conveyance of
the Seller's right, title and interest in and to the Initial Contracts pursuant
to this Agreement shall constitute an absolute sale.
The Seller hereby declares and covenants that it shall at no time have
any legal, equitable or beneficial interest in, or any right, including without
limitation any reversionary or offset right, to the Collection Account, the
Pre-Funding Account, the Capitalized Interest Account and the Cash Collateral
Account, and that, in the event it receives any of the same, it shall hold same
in trust for the benefit of the Trust on behalf of the Securityholders and shall
immediately endorse over to the Trust any such amount it receives.
SECTION 2.02. Purchase Price; Payments on the Contracts.
(a) The purchase price for the Contracts shall be an amount
equal to $___________. Such purchase price shall be payable in
immediately available funds on the Closing Date.
(b) The Purchaser shall be entitled to all payments of
principal and interest received on or after the Initial Cut-off Date.
All payments of principal and interest received before the Initial
Cut-off Date shall belong to the Seller. The Seller shall hold in trust
for the Purchaser and shall promptly remit to the Purchaser any
payments on the Contracts received by the Seller that belong to the
Purchaser under the terms of this Agreement.
SECTION 2.03. Conditions to Sale of Contracts. The Purchaser's
obligations hereunder are subject to the following conditions:
(a) The Purchaser shall have received (i) the Sale and
Servicing Agreement executed by all the parties thereto, (ii) all
documents required by the Sale and Servicing Agreement and (iii) such
other opinions and documents as the Purchaser may reasonably require in
connection with the purchase of the Contracts hereunder or the sale of
the Notes and Certificates;
2
<PAGE>
(b) The representations and warranties of the Seller and the
Servicer made in the Sale and Servicing Agreement shall be true and
correct on the Closing Date; and
(c) The Purchaser shall have received from counsel to the
Seller a letter stating that the Purchaser may rely on such counsel's
opinion delivered pursuant to the Sale and Servicing Agreement and such
counsel's opinions to Moody's Investors Service, Inc. and Standard and
Poor's Corporation in respect of the sale of the Contracts to the
Purchaser by the Seller, or such opinions may be addressed and
delivered to the Purchaser.
SECTION 2.04. Examination of Files. The Seller will make the Contract
Files with respect to the Initial Contracts available to the Purchaser or its
agent for examination at the Trust's offices or such other location as otherwise
shall be agreed upon by the Purchaser and the Seller.
SECTION 2.05. Transfer of Contracts. Pursuant to the Sale and Servicing
Agreement, the Purchaser will assign all of its right, title and interest in and
to the Contracts to the Trust for the benefit of the Securityholders. The
Purchaser has the right to assign its interest under this Agreement as may be
required to effect the purposes of the Sale and Servicing Agreement, by written
notice to the Seller and without the consent of the Seller, and the assignee
shall succeed to the rights and obligations hereunder of the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER;
REPURCHASE OF CONTRACTS
SECTION 3.01. Representations and Warranties of the Seller.
(a) The representations and warranties of the Seller contained
in the Sale and Servicing Agreement are incorporated herein, and are
made to the Purchaser on the date hereof, as if set forth herein and as
if made to the Purchaser on the date hereof. The Seller will make such
representations and warranties in the Sale and Servicing Agreement
directly to the Trust and will become obligated in respect of such
representations and warranties pursuant to the Sale and Servicing
Agreement. On the Closing Date, the Seller shall deliver to the
Purchaser an Officers' Certificate, dated the Closing Date, to the
effect that the representations and warranties made in the Sale and
Servicing Agreement by the Seller are true and correct as of the
Closing Date.
(b) It is understood and agreed that the representations and
warranties incorporated by reference in this Agreement by Section
3.01(a) hereof shall remain operative and in full force and effect,
shall survive the transfer and conveyance of the Contracts by the
Seller to the Purchaser and by the Purchaser to the Trust, and shall
inure to the benefit of the Purchaser, the Trust and their successors
and permitted assignees.
3
<PAGE>
(c) The Seller shall indemnify the Purchaser and the Servicer
and hold the Purchaser and the Servicer harmless against any loss,
penalties, fines, forfeitures, legal fees and related costs, judgments
and other costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, a breach of
the Seller's representations and warranties contained or incorporated
by reference in this Agreement. It is understood and agreed that the
obligation of the Seller set forth in this Section 3.01 to indemnify
the Purchaser and the Servicer as provided in this Section 3.01
constitutes the sole remedy of the Purchaser and the Servicer
respecting a breach of the foregoing representations and warranties.
The Trust shall also have the remedies provided in the Sale and
Servicing Agreement.
(d) Each indemnified party shall give prompt notice to the
Seller of any action commenced against it with respect to which
indemnity may be sought hereunder but failure to so notify an
indemnifying party shall not relieve it from any liability which it may
have otherwise than on account of this indemnity agreement, unless the
failure to notify materially prejudices the rights and condition of the
Seller. The Seller shall be entitled to participate in any such action,
and to assume the defense thereof, and after notice from the Seller to
an indemnified party of its election to assume the defense thereof, the
Seller will not be liable to such indemnified party under this Section
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
(e) Any cause of action against the Seller or relating to or
arising out of the breach of any representations and warranties made or
incorporated by reference in this Section 3.01 shall accrue as to any
Contract upon (i) discovery of such breach by the Purchaser or the
Servicer or notice thereof by the Seller to the Purchaser and the
Servicer, (ii) failure by the Seller to cure such breach and (iii)
demand upon the Seller by the Purchaser for all amounts payable in
respect of such Contract.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01. Amendment. This Agreement may be amended from time to
time by the Seller and the Purchaser by written agreement signed by the Seller
and the Purchaser.
SECTION 4.02. Counterparts. For the purpose of facilitating the
execution of this Agreement as herein provided and for other purposes, this
Agreement may be executed simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
SECTION 4.03. Termination. The Seller's obligations under this
Agreement shall survive the sale of the Contracts to the Purchaser.
4
<PAGE>
SECTION 4.04. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 4.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed by first class mail, postage prepaid, to (i) in the case of the Seller,
The CIT Group/Sales Financing, Inc., 650 CIT Drive, Livingston, New Jersey
07039, Attention: President, or such other address as may hereafter be furnished
to Purchaser in writing by the Seller or (ii) in the case of the Purchaser, The
CIT Group Securitization Corporation II, 650 CIT Drive, Livingston, New Jersey
07039, Attention: President, or such other address as may hereafter be furnished
to the Seller by the Purchaser.
SECTION 4.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 4.07. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Seller and the Purchaser and their respective
successors and assigns, as may be permitted hereunder.
5
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their
names to be signed hereto by their respective officers thereunto duly authorized
as of the day and year first above written.
THE CIT GROUP SECURITIZATION
CORPORATION II,
as Purchaser
By: ___________________________________
Name:
Title:
THE CIT GROUP/SALES FINANCING, INC.,
as Seller
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
List of Contracts
Exhibit 10.2
SUBSEQUENT PURCHASE AGREEMENT
This Subsequent Purchase Agreement dated as of ____________, ____ (the
"Agreement"), is between THE CIT GROUP SECURITIZATION CORPORATION II, as
purchaser (the "Purchaser"), and THE CIT GROUP/SALES FINANCING, INC., as seller
(the "Seller").
Reference is hereby made to the Purchase Agreement dated as of
____________, ____ between the parties hereto (the "Purchase Agreement")
pursuant to which the Purchaser purchased from the Seller the marine installment
sales contracts set forth on Exhibit A thereto (the "Initial Contracts"). The
Purchaser sold the Initial Contracts to the trust established pursuant to the
Trust Agreement dated as of ____________, ____ between the Purchaser and
[____________________], as trustee (the "Owner Trustee").
Pursuant to the Sale and Servicing Agreement dated as of ____________,
____ between CIT Marine Trust ____-_ (the "Trust"), the Purchaser and the
Seller, the Purchaser agreed to purchase from the Seller and the Seller agreed
to sell to the Purchaser, subject to the terms and conditions set forth in
Section 3.01D of the Sale and Servicing Agreement, Subsequent Contracts for the
fixed purchase price specified in the Sale and Servicing Agreement for delivery
on the date specified herein. The purchase price for any Subsequent Contract
will be funded from money on deposit in the Pre-Funding Account during the
Funding Period. The purchase of any Subsequent Contract by the Purchaser must be
evidenced by the execution and delivery of a Subsequent Purchase Agreement
substantially in the form of Exhibit B to the Sale and Servicing Agreement.
Accordingly, subject to the terms hereof and the Sale and Servicing Agreement,
the Seller agrees to sell, and the Purchaser agrees to purchase, the marine
installment sales contracts set forth on Exhibit A hereto (collectively, the
"Subsequent Contracts"), having an aggregate outstanding principal balance as of
____________, ____ (the "Subsequent Cut-Off Date") of $___________.
The Purchaser and the Seller wish to prescribe the terms and conditions
of the purchase by the Purchaser of the Subsequent Contracts and the servicing
and administration of the Subsequent Contracts.
In consideration of the premises and the mutual agreements hereinafter
set forth, the Purchaser and the Seller agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Certain capitalized terms used in this
Agreement shall have the respective meanings assigned to them in the Sale and
Servicing Agreement. All references in
<PAGE>
this Agreement to Articles, Sections, subsections and exhibits are to the same
contained in or attached to this Agreement unless otherwise specified.
ARTICLE II
SALE AND CONVEYANCE OF SUBSEQUENT CONTRACTS; CONTRACT FILES
SECTION 2.1. Sale and Conveyance of Contracts. On ____________, ____
(the "Subsequent Transfer Date"), subject to the terms and conditions hereof,
the Seller shall sell, transfer, assign absolutely, set over and otherwise
convey to the Purchaser as of the Subsequent Transfer Date (i) all the right,
title and interest of the Company in and to the Subsequent Contracts and all the
rights, benefits, and obligations arising from and in connection with each
Subsequent Contract, (ii) the security interests in the Subsequent Financed
Boats granted by the Obligors pursuant to the Subsequent Contracts, (iii) all
payments received by the Company on or with respect to the Subsequent Contracts
on or after the Subsequent Cut-off Date (exclusive of payments with respect to
Post Cut-off Date Insurance Add-Ons), (iv) the interest of the Company in any
Subsequent Financed Boat (including any right to receive future Net Liquidation
Proceeds) that secures the Subsequent Contracts and that shall have been
repossessed by the Servicer by or on behalf of the Trust; (v) all rights of the
Company to proceeds of Insurance Policies covering the Obligors and the
Subsequent Contracts, (vi) the proceeds from any Servicer's Errors and Omissions
Protection Policy, any fidelity bond and any blanket hazard policy, to the
extent such proceeds relate to any Subsequent Financed Vehicle, (vii) all rights
of recourse against any cosigner or under any personal guarantee with respect to
the Subsequent Contracts (other than any right as against a Dealer under a
Dealer Agreement), (viii) all proceeds in any way derived from any of the
foregoing items, and (ix) all documents contained or required to be contained in
the Contract Files relating to the Subsequent Contracts. The parties intend and
agree that the conveyance of the Seller's right, title and interest in and to
the Subsequent Contracts (and all rights, entitlements and amounts listed above)
pursuant to this Agreement shall constitute an absolute sale.
SECTION 2.2. Purchase Price; Payments on the Subsequent Contracts.
(a) The purchase price for the Subsequent Contracts shall be
an amount equal to $___________, which is the aggregate outstanding
principal balance of the Subsequent Contracts transferred pursuant to
this Agreement as of the Subsequent Cut-off Date, and the Seller hereby
acknowledges receipt of such amount in respect of the sale of the
Subsequent Contracts hereunder. Such purchase price shall be payable in
immediately available funds on the Subsequent Transfer Date from funds
on deposit in the Pre-Funding Account.
(b) The Purchaser shall be entitled to all payments of
principal and interest received on or after the Subsequent Cut-off
Date. All payments of principal and interest received before the
Subsequent Cut-off Date shall belong to the Seller. The Seller shall
hold in trust for the Purchaser and shall promptly remit to the
Purchaser, any payments on
2
<PAGE>
the Subsequent Contracts received by the Seller that belong to the
Purchaser under the terms of this Agreement.
SECTION 2.3. Conditions to Sale of Subsequent Contracts. The
Purchaser's obligations hereunder are subject to the following conditions:
(a) The Purchaser shall have received: the Sale and Servicing
Agreement executed by all the parties thereto, the documents listed in
Section 3.01D of the Sale and Servicing Agreement, and such other
opinions and documents as the Purchaser may reasonably require in
connection with the purchase of the Subsequent Contracts hereunder or
the sale of the Notes and Certificates;
(b) The representations and warranties with respect to the
Subsequent Contracts of (i) the Seller and the Servicer made in the
Sale and Servicing Agreement and (ii) the Seller made in the Purchase
Agreement and this Agreement shall be true and correct with respect to
the Subsequent Contracts on the Subsequent Transfer Date; and
(c) The conditions for transfer of the Subsequent Contracts
from the Purchaser to the Trust set forth in Section 3.01D of the Sale
and Servicing Agreement have been fulfilled.
SECTION 2.4. Examination of Files. The Seller will make the Contract
Files with respect to the Subsequent Contracts available to the Purchaser or its
agent for examination at the Trust's offices or such other location as otherwise
shall be agreed upon by the Purchaser and the Seller.
SECTION 2.5. Transfer of Subsequent Contracts. Pursuant to the Sale and
Servicing Agreement, the Purchaser will assign all of its right, title and
interest in and to the Subsequent Contracts to the Trust for the benefit of the
Securityholders. The Purchaser has the right to assign its interest under this
Agreement as may be required to effect the purposes of the Sale and Servicing
Agreement, by written notice to the Seller and without the consent of the
Seller, and the assignee shall succeed to the rights and obligations hereunder
of the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER;
REPURCHASE OF CONTRACTS
SECTION 3.1. Representations and Warranties of the Seller.
(a) The representations and warranties of the Seller contained
in Article III of the Sale and Servicing Agreement with respect to the
Subsequent Contracts are incorporated herein, and are made to the
Purchaser on the Subsequent Transfer Date, as if set forth herein and
as if made to the Purchaser on the date hereof. The Seller will make
3
<PAGE>
such representations and warranties in the Sale and Servicing Agreement
directly to the Trust and will become obligated in respect of such
representations and warranties pursuant to Article III of the Sale and
Servicing Agreement. On the Subsequent Transfer Date, the Seller shall
deliver to the Purchaser an Officers' Certificate, dated the Subsequent
Transfer Date, to the effect that the representations and warranties
made in the Sale and Servicing Agreement with respect to the Subsequent
Contracts by the Seller are true and correct as of the Subsequent
Transfer Date.
(b) It is understood and agreed that the representations and
warranties incorporated by reference in this Agreement by Section 3.1.
A hereof shall remain operative and in full force and effect, shall
survive the transfer and conveyance of the Subsequent Contracts by the
Seller to the Purchaser and by the Purchaser to the Trust, and shall
inure to the benefit of the Purchaser, the Trust and their successors
and permitted assignees.
(c) The Seller shall indemnify the Purchaser and the Servicer
and hold the Purchaser and the Servicer harmless against any loss,
penalties, fines, forfeitures, legal fees and related costs, judgments
and other costs and expenses resulting from any claim, demand, defense
or assertion based on or grounded upon, or resulting from, a breach of
the Seller's representations and warranties contained or incorporated
by reference in this Agreement. It is understood and agreed that the
obligation of the Seller set forth in this Section 3.1 to indemnify the
Purchaser and the Servicer as provided in this Section 3.1. constitutes
the sole remedy of the Purchaser and the Servicer respecting a breach
of the foregoing representations and warranties. The Trust shall also
have the remedies provided in the Sale and Servicing Agreement.
(d) Each indemnified party shall give prompt notice to the Seller of
any action commenced against it with respect to which indemnity may be sought
hereunder but failure to so notify an indemnifying party shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement, unless the failure to notify materially prejudices the rights and
condition of the Seller. The Seller shall be entitled to participate in any such
action, and to assume the defense thereof, and after notice from the Seller to
an indemnified party of its election to assume the defense thereof, the Seller
will not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof.
(e) Any cause of action against the Seller or relating to or arising
out of the breach of any representations and warranties made or incorporated by
reference in this Section 3.01 shall accrue as to any Subsequent Contract upon
(i) discovery of such breach by the Purchaser or the Servicer or notice thereof
by the Seller to the Purchaser and the Servicer, (ii) failure by the Seller to
cure such breach and (iii) demand upon the Seller by the Purchaser for all
amounts payable in respect of such Subsequent Contract.
4
<PAGE>
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 4.1. Amendment. This Agreement may be amended from time to time
by the Seller and the Purchaser by written agreement signed by the Seller and
the Purchaser.
SECTION 4.2. Counterparts. For the purpose of facilitating the
execution of this Agreement as herein provided and for other purposes, this
Agreement may be executed simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
SECTION 4.3. Termination. The Seller's obligations under this Agreement
shall survive the sale of the Subsequent Contracts to the Purchaser.
SECTION 4.4. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 4.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed by first class mail, postage prepaid, to (i) in the case of the Seller,
The CIT Group/Sales Financing, Inc., 650 CIT Drive, Livingston, New Jersey
07039, Attention: President, or such other address as may hereafter be furnished
to Purchaser in writing by the Seller, or (ii) in the case of the Purchaser, The
CIT Group Securitization Corporation II, 650 CIT Drive, Livingston, New Jersey
07039, Attention: President, or such other address as may hereafter be furnished
to the Seller by the Purchaser.
SECTION 4.6. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 4.7. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Seller and the Purchaser and their respective
successors and assigns, as may be permitted hereunder.
SECTION 4.8. Opinion. The Counsel to the Seller shall deliver to the
Purchaser and the Trustees an opinion in the form of Exhibit B hereto.
5
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
THE CIT GROUP SECURITIZATION
CORPORATION II,
as Purchaser
By: ___________________________________
Name:
Title:
THE CIT GROUP/SALES FINANCING, INC.,
as Seller
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
List of Subsequent Contracts
<PAGE>
EXHIBIT B
[FORM OF OPINION OF COUNSEL]
[Date]
[____________________],
solely in its capacity as Indenture Trustee
under the Sale and Servicing Agreement
referred to herein
[____________________],
solely in its capacity as Owner Trustee
under the Sale and Servicing Agreement
referred to herein
Ladies and Gentlemen:
I have acted as counsel to The CIT Group/Sales Financing, Inc.
("CITSF") and The CIT Group Securitization Corporation II, a Delaware
corporation (the "Company"), in connection with the sale of CIT Marine Trust
____-_, Class A _____% Asset Backed Notes (the "Notes") and _____% Asset Backed
Certificates (the "Certificates" and, collectively with the Notes, the
"Securities"). The Notes represent obligations of, and the Certificates
represent interests in, a trust, the CIT Marine Trust ____-_ (the "Trust"),
consisting of a pool of installment sale contracts secured by new and used boats
(collectively, the "Contracts") and certain related property. The Company
purchased certain of the Contracts from CITSF (the "Initial Contracts") pursuant
to a Purchase Agreement, dated as of ____________, ____, by and between CITSF
and the Company. Additional Contracts are being purchased by the Company from
CITSF (the "Subsequent Contracts") pursuant to the Subsequent Purchase Agreement
dated as of ____________, ____ (the "Subsequent Purchase Agreement"). Pursuant
to a Sale and Servicing Agreement, dated as of ____________, ____ (the "Sale and
Servicing Agreement"), among the Company, CITSF and the Trust, the Company
transferred the Initial Contracts to the Trust. The Company will also transfer,
pursuant to the Sale and Servicing Agreement, the Subsequent Contracts to the
Trust, the corpus of which will consist of each of the Initial Contracts and the
Subsequent Contracts and certain other property transferred by the Company to
the Trust.
All capitalized terms used herein and not defined shall have the
meanings assigned to them in the Subsequent Purchase Agreement.
In rendering the following opinions, I have examined (i) the Subsequent
Purchase Agreement; (ii) the Sale and Servicing Agreement; (iii) the Certificate
of Incorporation of each of
<PAGE>
CITSF and the Company; (iv) the By-laws of each of CITSF and the Company; (v)
copies of certain unanimous consents adopted by the Board of Directors of the
Company authorizing the issuance and sale of the Securities and the purchase of
the Contracts; and (vi) copies of certain unanimous written consents of the
Board of Directors of CITSF. I have also examined such other documents and made
such investigations of law as I have considered necessary and appropriate for
the purposes of the opinions expressed herein. I have assumed the authenticity
of signatures on original documents and the conformity to the original of all
documents submitted to me as certified, conformed or photostatic copies and have
relied as to all matters of fact on certificates, representations or statements
by officers of the Company or CITSF.
In making my examination of agreements, instruments and other documents
and in giving opinions herein, I have assumed that the Trustees have and had the
power and capacity to execute and deliver such agreements, instruments and other
documents and to perform all of their obligations thereunder and that such
agreements, instruments and other documents were duly authorized by all
requisite action by or on behalf of the Trustees were duly executed,
acknowledged, as necessary, and delivered by or on behalf of and are the legal,
valid and binding obligations of, and are enforceable in accordance with their
terms against, the Trustees.
Based upon, and subject to, the foregoing I am of the opinion that:
1. The Subsequent Purchase Agreement has been duly authorized, executed
and delivered by each of CITSF and the Company and constitutes the legal, valid
and binding agreement of each of CITSF and the Company, and is enforceable
against each of CITSF and the Company in accordance with its terms; the
Subsequent Purchase Agreement is effective to transfer all of CITSF's right,
title and interest in and to the Subsequent Contracts and other property
described in Section 2.1 of the Subsequent Purchase Agreement to the Company;
the Sale and Servicing Agreement is effective to transfer all of the Company's
right, title and interest in and to such Subsequent Contracts and other property
to the Trust subject to no prior liens or encumbrances.
2. No consent, approval, authorization or order of, registration or
filing with, or notice to any governmental authority or court is required under
federal laws or the laws of the State of Delaware for the execution, delivery
and performance by the Company of the Subsequent Purchase Agreement or the
consummation of any other transaction contemplated thereby by the Company,
except for those which have been obtained or except such as may be required
under the Securities Act of 1933, as amended or the regulations promulgated
thereunder or state securities or Blue Sky laws of any jurisdiction.
3. No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required under
federal laws or the laws of the State of Delaware for the execution, delivery
and performance by CITSF of the Subsequent Purchase Agreement or the
consummation of any other transaction contemplated thereby by CITSF except for
those which have been obtained or except such as may be required under the
Securities Act of 1933, as amended or the regulations promulgated thereunder or
state securities or Blue Sky laws of any jurisdiction.
<PAGE>
I am furnishing this opinion to you solely for your benefit. This
opinion is not to be used, circulated, quoted or otherwise referred to or relied
on by any other person or for any other purpose.
The foregoing opinion is given on the express understanding that the
undersigned is an officer of the Company and CITSF and shall in no event incur
any personal liability in connection with the said opinion.
Very truly yours,
<PAGE>
ASSIGNMENT OF SUBSEQUENT CONTRACTS
For good and valuable consideration in the amount of $___________ paid
by THE CIT GROUP SECURITIZATION CORPORATION II (the "Purchaser"), to THE CIT
GROUP/SALES FINANCING, INC. (the "Seller"), CITSF does hereby sell, transfer,
assign absolutely, set over and otherwise convey to the Purchaser as of the
Subsequent Transfer Date (i) all the right, title and interest of the Company in
and to the marine installment sales contracts set forth on Exhibit A to the
Subsequent Purchase Agreement, dated as of ____________, ____, between the
Purchaser and the Seller (the "Subsequent Contracts") and all the rights,
benefits, and obligations arising from and in connection with each Subsequent
Contract, (ii) the security interests in the Subsequent Financed Boats granted
by the Obligors pursuant to the Subsequent Contracts, (iii) all payments
received by the Company on or with respect to the Subsequent Contracts on or
after the Subsequent Cut-off Date (exclusive of payments with respect to Post
Cut-off Date Insurance Add-Ons), (iv) the interest of the Company in any
Subsequent Financed Boat (including any right to receive future Net Liquidation
Proceeds) that secures the Subsequent Contracts and that shall have been
repossessed by the Servicer by or on behalf of the Trust; (v) all rights of the
Company to proceeds of Insurance Policies covering the Obligors and the
Subsequent Contracts, (vi) the proceeds from any Servicer's Errors and Omissions
Protection Policy, any fidelity bond and any blanket hazard policy, to the
extent such proceeds relate to any Subsequent Financed Boat, (vii) all rights of
recourse against any cosigner or under any personal guarantee with respect to
the Subsequent Contracts (other than any right as against a Dealer under a
Dealer Agreement), (viii) all proceeds in any way derived from any of the
foregoing items, and (ix) all documents contained or required to be contained in
the Contract Files relating to the Subsequent Contracts. The parties intend and
agree that the conveyance of the Seller's right, title and interest in and to
the Subsequent Contracts (and all rights, entitlements and amounts listed above)
pursuant to this Agreement shall constitute an absolute sale. Certain
capitalized terms used in this Assignment shall have the respective meanings
assigned to them in the Sale and Servicing Agreement, dated as of ____________,
____, among The CIT Group Securitization Corporation II, CITSF and CIT Marine
Trust ____-_.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ____ day of __________, ________.
THE CIT GROUP/SALES FINANCING, INC.,
By: ___________________________________
Name:
Title:
EXHIBIT 23.4
[LETTERHEAD OF CROWE & DUNLEVY]
January 27, 1998
The CIT Group/Sales Financing, Inc.
650 CIT Drive
Livingston, New Jersey 07039
The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
The CIT Group Securitization Corporation II
650 CIT Drive
Livingston, New Jersey 07039
Re: CIT MARINE TRUST
Ladies and Gentlemen:
We hereby confirm that the statements set forth in the Amendment to the
Registration Statement on Form S-3 (333-43323) under the heading "Certain State
Tax Consequences" accurately describe the material Oklahoma income tax
consequences to holders of the securities, as limited by the discussion in our
opinion letter dated January 27 1998.
We hereby consent to the use of this opinion letter dated January 27,
1998 as an exhibit to such Registration Statement. In giving such consent, we do
not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the General Rules and
Regulations of the Commission thereunder.
Very truly yours,
CROWE & DUNLEVY,
A Professional Corporation
By: /s/ James H. Holloman, Jr.
-------------------------------
James H. Holloman, Jr.
