<PAGE>
<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus Dated October 29, 1997)
$400,060,865
(APPROXIMATE)
CIT RV TRUST 1998-A
THE CIT GROUP SECURITIZATION CORPORATION II
SELLER
THE CIT GROUP/SALES FINANCING, INC.
SERVICER
------------------
The CIT RV Trust 1998-A (the "Trust" or the "Issuer") will be formed
pursuant to a Trust Agreement, to be dated as of June 1, 1998, between The CIT
Group Securitization Corporation II (the "Company" or the "Seller") and Bankers
Trust (Delaware), as trustee (the "Owner Trustee"), and will issue Class A-1
5.83% Asset-Backed Notes (the "Class A-1 Notes"), Class A-2 5.92% Asset-Backed
Notes (the "Class A-2 Notes"), Class A-3 5.99% Asset-Backed Notes (the "Class
A-3
(cover continued on following page)
------------------
FOR A DISCUSSION OF SIGNIFICANT MATTERS AFFECTING INVESTMENT IN THE
SECURITIES, SEE "RISK FACTORS" BEGINNING ON PAGE S-15 HEREIN AND PAGE 21 IN THE
PROSPECTUS, "MATURITY AND PREPAYMENT CONSIDERATIONS" BEGINNING ON PAGE S-23
HEREIN, AND "YIELD AND PREPAYMENT CONSIDERATIONS" BEGINNING ON PAGE S-29 HEREIN.
------------------
THE SECURITIES WILL REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST AND
WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE CIT GROUP SECURITIZATION
CORPORATION II, THE CIT GROUP/SALES FINANCING, INC. OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INTEREST
INITIAL RATE/PASS-
NOTE/CERTIFICATE THROUGH PRICE TO UNDERWRITING PROCEEDS TO THE
PRINCIPAL BALANCE RATE PUBLIC(1) DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C> <C> <C>
Per Class A-1 Note $ 111,000,000 5.83% 99.99422% 0.230% 99.76422%
Per Class A-2 Note $ 94,000,000 5.92% 99.98825% 0.285% 99.70325%
Per Class A-3 Note $ 54,000,000 5.99% 99.98485% 0.325% 99.65985%
Per Class A-4 Note $ 80,000,000 6.09% 99.98908% 0.370% 99.61908%
Per Class A-5 Note $ 37,000,000 6.12% 99.98199% 0.400% 99.58199%
Per Class B Note $ 18,000,000 6.29% 99.95892% 0.450% 99.50892%
Per Certificate $ 6,060,865 6.70% 99.96432% 0.600% 99.36432%
Total $ 400,060,865 $400,010,266 $1,260,065 $ 398,750,201
</TABLE>
(1) Plus accrued interest, if any, at the respective Interest Rate or the
Pass-Through Rate, as appropriate, from the Closing Date.
(2) Before deduction of expenses payable by the Company estimated at
$625,000.
------------------
The Securities are offered by the Underwriters, when, as and if issued,
delivered to and accepted by the Underwriters and subject to their right to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made in book-entry form through the facilities of The Depository Trust
Company ("DTC"), Cedel Bank, societe anonyme ("Cedel") and the Euroclear System
("Euroclear") and that the Certificates will be ready for delivery in fully
registered, certificated form in New York, New York, in each case on or about
June 15, 1998, against payment therefor in immediately available funds.
------------------
SALOMON SMITH BARNEY
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
June 3, 1998
<PAGE>
<PAGE>
(continued from preceding page)
Notes"), Class A-4 6.09% Asset-Backed Notes (the "Class A-4 Notes"), Class A-5
6.12% Asset-Backed Notes (the "Class A-5 Notes" and, together with the Class A-1
Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes, the "Class A
Notes") and the Class B 6.29% Asset-Backed Notes (the "Class B Notes" and,
together with the Class A Notes, the "Notes") in the principal amount of
$111,000,000, $94,000,000, $54,000,000, $80,000,000, $37,000,000, and
$18,000,000, respectively, pursuant to an Indenture, to be dated as of June 1,
1998, between the Issuer and The First National Bank of Maryland, as trustee
(the "Indenture Trustee"). The Trust will also issue 6.70% Asset-Backed
Certificates (the "Certificates" and, together with the Notes, the "Securities")
with an Original Certificate Balance of $6,060,865.
The assets of the Trust will primarily include a pool of simple interest
retail installment sale contracts and direct loans (the "Contracts") secured by
the new and used recreation vehicles financed thereby (the "Financed Vehicles"),
certain monies received under the Contracts on and after June 1, 1998 (the
"Cut-off Date"), an assignment of the security interests in the Financed
Vehicles, the Collection Account, the Certificate Distribution Account, the Note
Distribution Account and the Reserve Account, in each case together with the
proceeds thereof, the proceeds from claims under certain insurance policies in
respect of individual Financed Vehicles or the related Obligors and certain
rights under the Sale and Servicing Agreement, to be dated as of June 1, 1998
(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 and the
Class B Notes will bear interest at the per annum rate of 5.83%, 5.92%, 5.99%,
6.09%, 6.12% and 6.29%, respectively (each, an "Interest Rate"). Interest on the
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 July 15, 1998, to
the extent described herein. Principal on the Notes will be payable on each
Distribution Date to the extent described herein. No principal payments will be
made (i) on the Class A-2 Notes until the Class A-1 Notes have been paid in
full, (ii) on the Class A-3 Notes until the Class A-2 Notes have been paid in
full, (iii) on the Class A-4 Notes until the Class A-3 Notes have been paid in
full or (iv) on the Class A-5 Notes until the Class A-4 Notes have been paid in
full, except under certain circumstances described herein. No principal payments
will be made on the Class B Notes until the Class A Notes have been paid in
full. Payments of interest and principal on the Class B Notes will be
subordinated in priority of payment to payments due on the Class A Notes, to the
extent described herein. The Certificates represent fractional undivided
interests in the Trust. The Certificates will bear interest at the rate of 6.70%
per annum (the "Pass-Through Rate") which will be distributed to
Certificateholders on each Distribution Date to the extent described herein.
Interest on the Certificates will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Distributions of interest and principal on
the Certificates will be subordinated in priority of payment to payment of
interest and principal due on the Notes, to the extent described herein. No
principal will be paid on the Certificates until all of the Notes have been paid
in full. The final scheduled Distribution Date for the Certificates will be the
January 2019 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 and the Class B Notes will be the January 2004, March 2007,
April 2009, February 2012, November 2013 and January 2017 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>
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "The CIT Group/Sales
Financing, Inc., Servicer" may constitute forward-looking statements within the
meaning of Section 7A of the Securities Act of 1933, as amended, and as such may
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the recreation vehicle
portfolio of The CIT Group/Sales Financing, Inc. to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements.
This Prospectus Supplement does not contain complete information about the
offering of the Securities. Additional information is contained in the
Prospectus of the Seller dated October 29, 1997 (the "Prospectus") and
purchasers are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Securities may not be consummated unless the purchaser has
received both this Prospectus Supplement and the Prospectus. To the extent, if
any, that any statement in the final Prospectus Supplement is inconsistent with
statements contained in this Prospectus Supplement, the statements in the final
Prospectus Supplement shall control. Terms used and not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Prospectus.
S-3
<PAGE>
<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.
<TABLE>
<S> <C>
Issuer.............................. CIT RV Trust 1998-A (the "Trust" or the
"Issuer"), a Delaware business trust to be
formed by the Seller and the Owner Trustee
pursuant to the Trust Agreement, to be
dated as of June 1, 1998 (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....................... Bankers Trust (Delaware), as trustee under
the Trust Agreement (the "Owner Trustee ").
Indenture Trustee................... The First National Bank of Maryland, as
trustee under the Indenture, to be dated as
of June 1, 1998 (the "Indenture Trustee"
and, together with the Owner Trustee, the
"Trustees").
Risk Factors........................ Certain potential risks and other
considerations are particularly relevant to
a decision to invest in any securities sold
hereunder. See "Risk Factors."
The Notes........................... The CIT RV Trust 1998-A Class A-1 5.83%
Asset-Backed Notes (the "Class A-1 Notes"),
Class A-2 5.92% Asset-Backed Notes (the
"Class A-2 Notes"), Class A-3 5.99%
Asset-Backed Notes (the "Class A-3 Notes"),
Class A-4 6.09% Asset-Backed Notes (the
"Class A-4 Notes"), Class A-5 6.12%
Asset-Backed Notes (the "Class A-5 Notes"
and, together with the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes and
the Class A-4 Notes, the "Class A Notes")
and Class B 6.29% 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.
The Trust will issue $111,000,000,
$94,000,000, $54,000,000, $80,000,000,
$37,000,000, and $18,000,000 aggregate
principal amount of Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class A-4
Notes, Class A-5 Notes and Class B Notes,
respectively, pursuant to an Indenture, to
be dated as of June 1, 1998, 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
</TABLE>
S-4
<PAGE>
<PAGE>
<TABLE>
<S> <C>
under the limited circumstances described
herein and in the Prospectus. Unless and
until Notes of a class are issued in
definitive form, all references herein to
distributions, notices, reports and
statements to and to actions by and effects
upon the related Noteholders will refer to
the same actions and effects with respect
to DTC for the benefit of the related Note
Owners in accordance with the DTC
procedures. See "Certain Information
Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities"
in the Prospectus and Annex I hereto.
The Certificates.................... The CIT RV Trust 1998-A 6.70% Asset-Backed
Certificates (the "Certificates") will
represent fractional undivided interests in
the Trust. See "The Certificates--General."
The Trust will issue $6,060,865 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 Internal Revenue Code of 1986, as
amended (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.
Property of the Trust............... The property of the Trust will primarily
include (i) a pool of simple interest
retail installment sale contracts and
direct loans (the "Contracts") secured by
the new and used recreation vehicles
financed thereby (the "Financed Vehicles"),
(ii) certain monies received under the
Contracts on and after June 1, 1998 (the
"Cut-off Date"), (iii) an assignment of the
security interests in the Financed
Vehicles, (iv) the Collection Account, the
Certificate Distribution Account, the Note
Distribution Account and the Reserve
Account, in each case together with the
proceeds thereof, (v) the proceeds from
claims under certain insurance policies in
respect of individual Financed Vehicles or
the related Obligors and (vi) certain
rights under the Sale and Servicing
Agreement, to be dated as of June 1, 1998
(the "Sale and Servicing Agreement"), among
the Seller, the Servicer and the Trust.
CITSF will be obligated to repurchase
Contracts (a "Repurchased Contract") upon
the occurrence of certain breaches of
representations and warranties (a
"Repurchase Event"). See "The Purchase
Agreements and the Trust Documents--Sale
and Assignment of the Contracts" and
"--Servicing Procedures" in the Prospectus.
The Contracts....................... The property of the Trust will consist
primarily of simple interest recreation
vehicle retail installment sale contracts
originated by recreation vehicle dealers
("Dealers") and acquired by CITSF or The
CIT Group/Consumer Finance, Inc. (NY)
("CITCF-NY"), originated directly by CITSF
or one of its affiliates, or acquired by
CITSF or one of its affiliates from
unaffiliated third parties. The Financed
Vehicles will consist of motor homes, fifth
wheels,
</TABLE>
S-5
<PAGE>
<PAGE>
<TABLE>
<S> <C>
travel trailers, horse trailers and other
types of recreation vehicles. See "The
Contract Pool." On or prior to the date of
issuance of the Securities (the "Closing
Date"), CITCF-NY will sell certain
contracts that will constitute a portion of
the Contracts to CITSF pursuant to a
purchase agreement, to be dated as of June
1, 1998, and CITSF will sell the Contracts
to the Company pursuant to a purchase
agreement, to be dated as of June 1, 1998
(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 173
months and a remaining weighted average
maturity of 169 months. The final scheduled
payment date on the Contract with the last
maturity occurs in July 2018. See "The
Contract Pool." The Contracts will
generally be prepayable at any time without
premium or penalty to the purchaser of the
related Financed Vehicle or other person or
persons who are obligated to make payments
under the Contract (each, an "Obligor").
Distribution Dates.................. Payments of interest and principal on the
Securities will be made on the fifteenth
day of each month or, if any such day is
not a Business Day, on the next succeeding
Business Day (each, a "Distribution Date"),
commencing July 15, 1998. 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
January 2019 (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 and the Class B Notes will be
payable on the Distribution Date occurring
in January 2004, March 2007, April 2009,
February 2012, November 2013 and January
2017, 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" and the
"Class B Note Final Scheduled Distribution
Date," respectively).
A "Business Day" is any day other than a
Saturday, Sunday or any day on which
banking institutions or trust companies in
the states of New York, Delaware, Maryland
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
</TABLE>
S-6
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Date. The first Due Period will commence on
and include June 1, 1998 and will end on
and include June 30, 1998.
Interest Accrual Period............. Interest on the outstanding principal
amount of the Notes and Certificates will
accrue at the applicable Interest Rate or
Pass-Through Rate for any Distribution Date
from and including the preceding
Distribution Date (or the Closing Date in
the case of the first Distribution Date) to
but excluding such Distribution Date (each,
an "Interest Accrual Period").
Interest will be paid to the Noteholders
and Certificateholders of record on the
related Record Date, on each Distribution
Date, to the extent of available funds
therefor, in an amount equal to the sum of
(A) the product of (x) the applicable
Interest Rate or Pass-Through Rate, as
applicable, (y) the outstanding principal
balance of the class of Notes or
Certificate Balance, as applicable,
immediately preceding such Distribution
Date and (z) a fraction the numerator of
which is one and the denominator of which
is twelve (or, in the case of the first
Distribution Date, the numerator of which
is the actual number of days elapsed (based
on a 360-day year consisting of twelve
30-day months) from and including the
Closing Date to but excluding such
Distribution Date and the denominator of
which is 360), and (B) any applicable
Interest Carryover Shortfall.
Determination Date.................. The "Determination Date" is the third
Business Day prior to each Distribution
Date. On each Determination Date, the
Servicer will determine the Available
Amount for distribution on the related
Distribution Date, allocate such amounts
among the Notes, the Certificates and the
Servicer Payment, and advise the Trustees
(or the paying agent appointed pursuant to
the Indenture or the Trust Agreement) of
the amounts of the payments to be made to
Securityholders, all as described under
"The Purchase Agreements and The Trust
Documents--Distributions."
The "Available Amount" on any Distribution
Date is equal to the excess of (A) the sum
of (i) all amounts on deposit in the
Collection Account attributable to
collections or deposits made in respect of
the Contracts (including any Late Fees (as
defined in the Prospectus)), in the related
Due Period and (ii) the Purchase Price for
any Contract repurchased by CITSF as a
result of breaches of certain
representations and warranties or purchased
by the Servicer as a result of breaches of
certain covenants and any Monthly Advances
made by the Servicer, if such Purchase
Price or Monthly Advance is paid on the
Deposit Date immediately preceding such
Distribution Date, over (B) the sum of the
following amounts (to the extent that the
Servicer has not already withheld such
amounts from collections on the Contracts):
(i) any repossession profits on Liquidated
Contracts, Liquidation Expenses incurred
and taxes and insurance advanced by the
Servicer in respect of Financed Vehicles
that are reimbursable to the Servicer under
the Sale and Servicing Agreement, (ii) any
amounts incorrectly deposited in the
Collection Account, (iii) net investment
earnings on the funds in the Collection
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 5.83% per annum (the "Class A-1
Interest Rate"), the Class A-2 Notes will
bear interest at the rate of 5.92% per
annum (the "Class A-2 Interest Rate"), the
Class A-3 Notes will bear interest at the
rate of 5.99% per annum (the "Class A-3
Interest Rate"), the Class A-4 Notes will
bear interest at the rate of 6.09% per
annum (the "Class A-4 Interest Rate"), the
Class A-5 Notes will bear interest at the
rate of 6.12% per annum (the "Class A-5
Interest Rate") and the Class B Notes will
bear interest at the rate of 6.29% per
annum (the "Class B Interest
</TABLE>
S-7
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Rate"). The interest rates for the various
classes of Notes are referred to herein
collectively as "Interest Rates."
B. Interest......................... On each Distribution Date, the Indenture
Trustee will distribute to the Noteholders
of each class accrued interest at the
applicable Interest Rate on the outstanding
principal amount of such class to the
extent of the Available Amount remaining
after payment of the Servicer Payment. To
the extent the remaining Available Amount
on a Distribution Date is insufficient to
pay Noteholders the entire amount of
interest due on such Distribution Date,
such shortfall will be funded from the
Reserve Account, subject to the Available
Reserve Amount, under the circumstances
described herein. Interest on the 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 on the Notes will be payable on
each Distribution Date in an amount equal
to the 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 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.
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
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and Servicing Agreement, (iii) the Stated
Principal Balance of each Contract which
became a Liquidated Contract during the
related Due Period and (iv) the Principal
Carryover Shortfall; 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.
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 or (iv) on the Class A-5
Notes until the Class A-4 Notes have been
paid in full. No principal payments will be
made on the Class B Notes until the Class A
Notes have been paid in full (the "Class B
Note Cross-Over Date").
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
Class A-5 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, the outstanding Notes will be
redeemed, at a redemption price equal to
the unpaid principal amount of the Notes
plus accrued and unpaid interest thereon at
the applicable Interest Rates. See
"Summary--Optional Purchase of the
Contracts," "--Auction Sale," "The
Notes--Redemption" and "The Purchase
Agreements and The Trust
Documents--Termination" in the Prospectus.
E. Limited Rights.................. If an Event of Default occurs under the
Indenture, the Class B Noteholders will not
have any right to direct or to consent to
any remedies therefor by the Indenture
Trustee, including acceleration of the
Notes or the sale of Contracts, until the
Class A Notes have been paid in full. If an
Event of Termination occurs, the Class B
Noteholders will not have any right to
direct or consent to removal of the
Servicer or to waive any Event of
Termination until the Class A Notes have
been paid in full.
Terms of the Certificates........... The principal terms of the Certificates
will be as described below:
A. Pass-Through Rate............... The Certificates will bear interest at the
rate of 6.70% per annum (the "Pass-Through
Rate").
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B. Interest........................ On each Distribution Date, the Owner
Trustee will distribute pro rata to
Certificateholders accrued interest at the
Pass-Through Rate on the outstanding
Certificate Balance to the extent of the
Available Amount remaining after payment of
the Servicer Payment and interest and
principal due on the Notes on such
Distribution Date. To the extent the
remaining Available Amount on a
Distribution Date is insufficient to pay
Certificateholders the entire amount of
interest due on such Distribution Date,
such shortfall will be funded from the
Reserve Account, subject to the Available
Reserve Amount remaining after any
withdrawals from the Reserve Account to
make payments of interest and principal due
on the Notes on such Distribution Date,
under the circumstances described herein.
Interest on the Certificates for any
Distribution Date due but not paid on such
Distribution Date will be due on the next
Distribution Date in addition to an amount
equal to interest on such amount at the
Pass-Through Rate (to the extent lawful).
Interest on the Certificates will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. See
"The Certificates--Distributions of
Interest."
The "Certificate Balance" means the
Original Certificate Balance reduced by all
distributions allocable to principal
actually made to Certificateholders.
The rights of Certificateholders to receive
distributions of interest will be
subordinated to the rights of Noteholders
to receive distributions of interest and
principal, as described herein. If an Event
of Default has occurred and the Notes have
been accelerated, Certificateholders will
not be entitled to receive any
distributions until the Notes have been
paid in full. See "The
Certificates--Distributions of Interest."
C. Principal....................... On each Distribution Date prior to the
Distribution Date on which the Notes have
been paid in full (the "Certificate
Cross-Over Date"), the Certificateholders
will not be entitled to any payments of
principal.
On each Distribution Date on or after the
Certificate Cross-Over Date, principal on
the Certificates will be payable, subject
to the remaining Available Amount and the
remaining Available Reserve Amount, in an
amount equal to the Principal Distribution
Amount (less the portion, on the
Certificate Cross-Over Date, of the
Principal Distribution Amount required to
pay the Notes on such date) 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 Certificate 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 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.
D. Redemption...................... In the event of an Optional Purchase or
Auction Sale, the Certificates will be
redeemed at a redemption price equal to the
Certificate Balance plus accrued and unpaid
interest thereon at the Pass-Through Rate.
See "Summary--Optional Purchase of the
Contracts," "--Auction Sale" and "The
Certificates--Redemption" in the
Prospectus.
E. Limited Rights.................. If an Event of Default occurs under the
Indenture, the Certificateholders will not
have any right to direct or to consent to
any remedies therefor exercisable
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by the Indenture Trustee, including the
sale of the Contracts, until the Notes have
been paid in full, and if an Event of
Termination occurs, the Certificateholders
will not have any right to direct or
consent to removal of the Servicer or to
waive 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 Class A Notes have
been paid in full. See "Summary--Terms of
the Notes--Principal" and "The
Notes--Payments of Principal."
Reserve Account..................... On the Closing Date, an account (the
"Reserve Account") will be established
pursuant to the Sale and Servicing
Agreement. The Indenture Trustee will have
the right to withdraw (or cause to be
withdrawn) payments from the Reserve
Account under certain circumstances
specified below. The Reserve Account will
be funded on the Closing Date in the amount
of $9,000,000 (the "Initial Reserve
Amount") from the proceeds of a loan (the
"Loan") to be made by one or more
affiliates of the Company. With respect to
any Distribution Date, the amount available
to be withdrawn from the Reserve Account
(the "Available Reserve Amount") will equal
the lesser of (i) the Specified Reserve
Amount and (ii) the amount on deposit in
the Reserve Account, exclusive of interest
and earnings thereon and any net investment
gains and before giving effect to any
deposit to be made to the Reserve Account
on such Distribution Date. If the Available
Amount on any Distribution Date is
insufficient (after paying the Servicer
Payment) to pay the interest and principal
required to be distributed on the
Securities on such Distribution Date, the
Indenture Trustee will withdraw (or cause
to be withdrawn) from the Reserve Account
an amount equal to the lesser of the amount
of such deficiency or the Available Reserve
Amount. The Reserve Account will be
available to provide a source of funds to
make payments of principal or interest on
the Notes and the Certificates in the same
order of priority specified for
distributions of the Available Amount. See
"Enhancement--Reserve Account" and "The
Purchase Agreements and the Trust
Documents--Distributions." If the Available
Reserve Amount is zero, holders of the
Securities will bear the risk of loss
resulting from default by Obligors and will
have to look primarily to the value of the
related Financed Vehicles for recovery of
the outstanding principal and unpaid
interest on the defaulted Contracts.
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On each Distribution Date, the Servicer
will deposit Excess Collections, if any,
into the Reserve Account in an amount
sufficient to increase the amount on
deposit in the Reserve Account to the
Specified Reserve Amount for the next
Distribution Date. Excess Collections, if
any, not so required to be deposited in the
Reserve Account will be paid to one or more
affiliates of the Company that provided the
Loan or to the Affiliated Owner. "Excess
Collections" for any Distribution Date will
equal the amounts collected or deposited in
respect of the Contracts in the related Due
Period and which remain in the Collection
Account on such Distribution Date after
taking into account distributions to be
made on the Securities and payments and
reimbursements to be made to the Servicer
on such Distribution Date. See "The
Purchase Agreements and The Trust
Documents--Distributions." The "Specified
Reserve Amount" with respect to any
Distribution Date means 2.25% of the Pool
Balance as of the first day of the related
Due Period, but in no event less than
$4,700,000 (subject to adjustment based on
delinquencies and losses on the Contracts),
provided that the Specified Reserve Amount
shall never be greater than the sum of the
aggregate principal amount of the Notes and
the outstanding balance of the Certificates
and may be reduced from time to time if the
Rating Agencies shall have given prior
written notice to the Seller, the Servicer
and the Issuer that such reduction will not
result in a downgrade or withdrawal of the
then current ratings of the Notes or the
Certificates. See "Enhancement--Reserve
Account."
If, on any Distribution Date, the Available
Reserve Amount (after taking into account
any deposits to and withdrawals from the
Reserve Account pursuant to the Sale and
Servicing Agreement on such Distribution
Date) exceeds the Specified Reserve Amount
for the next Distribution Date, such excess
(the "Reserve Account Surplus") will be
withdrawn from the Reserve Account and paid
to one or more affiliates of the Company
which provided the Loan or to the
Affiliated Owner. See "Enhancement--Reserve
Account."
In the event that funds are withdrawn from
the Reserve Account to make payments on the
Securities or the Specified Reserve Amount
is increased, the sole source of funding of
the Reserve Account after the Closing Date
will be Excess Collections. Neither the
Seller, the Servicer nor any affiliate will
be obligated to deposit any of their own
funds into the Reserve Account in the event
that Excess Collections are not sufficient
to replenish the Reserve Account.
Monthly Advances.................... With respect to each Contract as to which
there has been a Payment Shortfall during
the related Due Period (other than a
Payment Shortfall arising from a Contract
which has been prepaid in full or which has
been subject to a Relief Act reduction
during the related Due Period), the
Servicer shall advance funds in the amount
of such Payment Shortfall (each, a "Monthly
Advance"), but only to the extent that the
Servicer, in its good faith judgment,
expects to recover such Monthly Advance
from subsequent interest collections on
such Contract made by or on behalf of the
Obligor thereunder, or from Net Liquidation
Proceeds or insurance proceeds with respect
to such Contract. The Servicer shall be
reimbursed for any Monthly Advance from
subsequent interest collections with
respect to such Contract. If the Servicer
determines in its good faith judgment that
an unreimbursed Monthly Advance shall not
ultimately be recoverable from subsequent
interest collections, the Servicer may
reimburse itself for such Monthly Advance
from collections on all Contracts. In
determining whether an advance is or will
be nonrecoverable, the Servicer need not
take into account any amounts it might
receive 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.
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"Payment Shortfall" means with respect to
any Contract and any Distribution Date, the
excess of (A) the product of (1)
one-twelfth of the Contract Rate of such
Contract and (2) the outstanding principal
amount of such Contract as of the last day
of the second preceding Due Period (or, in
the case of the first Due Period ending
after the Contract was acquired by the
Trust, as of the Cut-off Date), over (B)
the amount of interest, if any, collected
on such Contract during the related Due
Period.
Non-Reimbursable Payments........... The Servicer will not be obligated to make
any Non-Reimbursable Payments (as defined
in the Prospectus).
Servicing Fees...................... The Servicer shall receive a monthly fee
(the "Servicing Fee"), payable on each
Distribution Date, equal to the sum of (i)
one-twelfth of the product of 0.50% (the
"Servicing Fee Rate") and the Pool Balance
as of the last day of the second preceding
Due Period (or, in the case of the first
Distribution Date, as of the Cut-off Date)
and (ii) any investment earnings on amounts
on deposit in the Collection Account, the
Note Distribution Account and the
Certificate Distribution Account; provided,
however, if CITSF or an affiliate thereof
is not the Servicer, the Servicing Fee Rate
shall be a rate determined at the time of
the appointment of a successor Servicer but
not to exceed 1.00%. See "The Purchase
Agreements and The Trust
Documents--Servicing Compensation" herein
and in the Prospectus.
Optional Purchase of the 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 10% or less of the
Initial Pool Balance, at a purchase price
determined as described under "The Purchase
Agreements and The Trust
Documents--Termination" herein and in the
Prospectus. The "Initial Pool Balance"
equals the Pool Balance as of the Cut-off
Date.
Auction Sale........................ After the first Distribution Date on which
the Pool Balance as of the last day of the
related Due Period is 5% or less of the
Initial Pool Balance, the Indenture Trustee
(or, if the Notes have been paid in full
and the Indenture has been discharged in
accordance with its terms, the Owner
Trustee) shall solicit bids for the
purchase of the Contracts remaining in the
Trust. In the event that satisfactory bids
are received as described in "The Purchase
Agreements and The Trust
Documents--Termination" in the Prospectus,
the net sale proceeds (after the Servicer
Payment) will be distributed to
Securityholders, in the same order of
priority as collections received in respect
of the Contracts, on the second
Distribution Date succeeding such Due
Period. If satisfactory bids are not
received, such Trustee shall decline to
sell the Contracts and shall not be under
any obligation to solicit any further bids
or otherwise negotiate any further sale of
the Contracts. See "The Purchase Agreements
and The Trust Documents--Termination"
herein and in the Prospectus.
Ratings............................. It is a condition to the issuance of the
Class A Notes that the Class A Notes be
rated "AAA" by Standard & Poor's Ratings
Service, a division of The McGraw-Hill
Companies, Inc. ("S&P") and "Aaa" by
Moody's Investors Service, Inc. ("Moody's")
(each, a "Rating Agency"). 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 "Baa3" 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
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evaluated independently from similar
ratings on other types of securities. The
ratings do not address the possibility that
Securityholders may suffer a lower than
anticipated yield. The ratings do not
address the likelihood that the Securities
will be retired following the sale of the
Contracts by the Trustee as described above
under "Auction Sale" or "Optional Purchase
of the Contracts."
Certain Federal Income
Tax Considerations.................. For Federal income tax purposes: (1) the
Notes will constitute indebtedness and (2)
the Certificates will constitute interests
in a trust fund that will not be treated as
an association taxable as a corporation.
Each Noteholder, by acceptance of a Note,
will agree to treat the Notes as
indebtedness, and each Certificateholder,
by the acceptance of a Certificate, will
agree to treat the Trust as a partnership
in which the Certificateholders are
partners for Federal income tax purposes.
See "Certain Federal Income Tax
Consequences."
ERISA Considerations................ Subject to certain considerations discussed
under "ERISA Considerations" herein, the
Notes will be eligible for purchase by
employee benefit plans that are subject to
the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
Fiduciaries of employee benefit plans
subject to ERISA, or plans subject to
Section 4975 of the Code should carefully
review with their legal advisors whether
the purchase or holding of the Notes
offered hereby could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or the Code. Any
benefit plan fiduciary considering the
purchase of the Notes should, among other
things, consult with its counsel in
determining whether all required conditions
have been satisfied. See "ERISA
Considerations."
Employee benefit plans subject to ERISA
will not be eligible to purchase the
Certificates.
Legal Investment.................... The appropriate characterization of the
Certificates and each class of the Notes
under various legal investment restrictions
applicable to the investment activities of
certain institutions, and thus the ability
of investors subject to these restrictions
to purchase the Certificates and the Notes,
may be subject to significant interpretive
uncertainties. All investors whose
investment authority is subject to legal
restrictions should consult their own legal
advisors to determine whether, and to what
extent, the Certificates and each class of
the Notes will constitute legal investments
for them.
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RISK FACTORS
Prospective Securityholders should consider the following risk
factors in connection with the purchase of the Securities:
1. Limited Obligations. The Securities will not represent an
interest in or an obligation of The CIT Group, Inc. ("CIT"), The CIT Group
Securitization Corporation II (the "Company"), the Affiliated Owner or any
Servicer (including The CIT Group/Sales Financing, Inc. ("CITSF")) or any of
their respective affiliates. The Securities will not be insured or guaranteed by
any government agency or instrumentality, CIT or any of its affiliates
(including the Company, the Affiliated Owner, and CITSF), the Underwriters or
any of their affiliates, or any other Servicer or any of its affiliates. CIT
will not issue a Limited Guarantee (as defined in the Prospectus) supporting the
Notes or the Certificates.
2. Risk of Loss. An investment in the Securities may be affected
by, among other things, a downturn in regional or local economic conditions.
These regional or local economic conditions are often volatile and historically
have affected the delinquency, loan loss and liquidation experience of pools of
retail installment sale contracts and direct loans secured by recreation
vehicles. In addition, the credit criteria and underwriting guidelines under
which CITSF originates recreation vehicle retail installment sale contracts and
direct loans were changed in 1994. The delinquency and loan loss experience for
CITSF's portfolio has been affected adversely by this change in credit criteria.
See "The CIT Group/Sales Financing, Inc., Servicer--Delinquency and Loan Loss
Experience." Since the market value of recreation vehicles generally declines
with age and since in certain states the Trustees may not have a first perfected
security interest in the Financed Vehicles, the Servicer may not recover the
entire amount owing under a defaulted Contract. See "Certain Legal Aspects of
the Contracts" in the Prospectus. In such a case, the Securityholders may suffer
a corresponding loss. The market value of the Financed Vehicles could be or
could become lower than the outstanding principal balances of the Contracts that
they secure. Sufficiently high liquidation losses on the Contracts will have the
effect of reducing, and could eliminate (a) the protection against loss afforded
to the Class A Noteholders by the subordination of the Class B Notes and the
Certificates, (b) the protection against loss afforded to the Class B
Noteholders by the subordination of the Certificates, (c) the protection against
loss afforded to the Securityholders by the Available Reserve Amount, if any,
and (d) the amount of the Excess Collections. If the Certificate Balance and the
Available Reserve Amount is reduced to zero, the holders of the Class B Notes
and then the holders of the Class A Notes will bear the risk of loss resulting
from default by Obligors and will have to look primarily to the value of the
related Financed Vehicles for recovery of the outstanding principal and unpaid
interest on the defaulted Contracts. If the Available Reserve Amount is zero,
holders of the Certificates will bear the risk of loss resulting from default by
Obligors and will have to look primarily to the value of the related Financed
Vehicles for recovery of the outstanding principal and unpaid interest on the
defaulted Contracts.
3. Certain Matters Relating to Insolvency. CITCF-NY, CITSF and
the Company intend that transfers of Contracts from The CIT Group/Consumer
Finance, Inc. (NY) ("CITCF-NY") to CITSF, from CITSF to the Company and from the
Company to the Trust, constitute sales, rather than pledges of the Contracts to
secure indebtedness. However, if CITCF-NY, CITSF or the Company were to become a
debtor under Title 11 of the United States Code, 11 U.S.C. '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. Funds deposited in the Reserve Account which are
available to pay principal and interest on the Securities on any Distribution
Date will not exceed the Specified Reserve Amount for such Distribution Date. In
addition, amounts to be deposited in the Reserve Account are limited and will be
reduced as the Pool Balance is reduced. If the amount on deposit in the Reserve
Account is exhausted, and, in the case of the Class A Noteholders, to the extent
the subordination of amounts distributable to the Class B Noteholders and the
Certificates is insufficient, and, in the case of the Class B Noteholders, to
the extent the subordination of amounts distributable to Certificateholders is
insufficient, the Trust will depend solely on current collections on the
Contracts to make payments on the Securities.
The Trust will covenant to sell the Contracts if directed to do
so by the Indenture Trustee in accordance with the Indenture following an
acceleration of the Notes upon an Event of Default. However, there is no
assurance that the market value of the Contracts at any time will be equal to or
greater than the aggregate outstanding principal balance of the Notes and the
interest accrued thereon. Therefore, upon an Event of Default with respect to
the Notes, there can be no assurance that sufficient funds will be available to
repay Noteholders in full. Any such shortfall will be borne first by the holders
of the Class B Notes.
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In addition, the amount of principal required to be distributed to Noteholders
under the Indenture is generally limited to amounts available to be deposited in
the Note Distribution Account for such purpose. Therefore, the failure to pay
principal on any class of Notes will not result in the occurrence of an Event of
Default until the Note Final Scheduled Distribution Date applicable to such
class of the Notes. Any actions taken by the Class A Noteholders upon an Event
of Default may also increase losses to the Class B Noteholders and the
Certificateholders. Upon a sale by the Trust of the Contracts, the net proceeds
from such sale remaining after payment of all amounts due to the Servicer and
the Noteholders may not be sufficient to pay the Certificate Balance and
interest accrued thereon. See "The Notes--The Indenture--Events of Default;
Rights Upon Event of Default" in the Prospectus.
Payments of interest on and principal of the Class B Notes will
be subordinated in priority of payment to payments of interest and principal due
on the Class A Notes, to the extent described herein. In addition, if an Event
of Default has occurred and the Notes have been accelerated, payments of
interest on and principal of the Class B Notes will not be made until the Class
A Notes have been paid in full. Payments of interest on and principal of the
Certificates will be subordinated in priority of payment to payments of interest
and principal due on the Notes.
5. Limited Source of Funding for Reserve Account. Subsequent to
the Closing Date, Excess Collections will be the only source of funding of the
Reserve Account. Excess Collections may not be sufficient to fund the Reserve
Account on any Distribution Date in an amount equal to the Specified Reserve
Amount for such Distribution Date or to replenish the Reserve Account after
funds are withdrawn to make payments on the Securities. The Excess Collections
to be deposited in the Reserve Account are limited and will be reduced as the
Pool Balance is reduced. Funds deposited in the Reserve Account will be
available to pay principal and interest on the Securities on any Distribution
Date, but the funds available for such purpose will not exceed the Available
Reserve Amount for such Distribution Date. If funds in the Reserve Account are
exhausted, the Securityholders will depend solely on the Contracts as the source
of repayment.
Liquidations of Contracts may reduce, and perhaps eliminate, the
amount of Excess Collections that would otherwise have been available on any
Distribution Date to fund the Reserve Account, because before any excess
interest collections are available to fund the Reserve Account such excess
interest collections must be applied first to pay the portion of the Principal
Distribution Amount equal to the difference between the Stated Principal Balance
of Liquidated Contracts and the Net Liquidation Proceeds thereof.
Any event or circumstance which causes the Trust not to receive a
full month's interest at the Contract Rate on a Contract also will reduce the
amount of Excess Collections that would otherwise have been available on any
Distribution Date to fund the Reserve Account. Accordingly, the amount of Excess
Collections will be less than it otherwise would have been if a Contract is
prepaid in full or becomes subject to a Relief Act Reduction. Delinquencies on
the Contracts also will reduce, and perhaps eliminate, the Excess Collections
that otherwise would have been available on any Distribution Date to fund the
Reserve Account if the Servicer does not make a Monthly Advance in respect of
such delinquencies or if the Servicer reimburses itself for a Monthly Advance
from collections on other Contracts as provided herein.
6. Geographic Concentration of Obligors. A significant
concentration of the Contracts have Obligors with mailing addresses in the
states of Texas, California, Florida, Washington and Oregon. Based on the Pool
Balance as of the Cut-off Date, 15.12%, 13.75%, 7.86%, 6.16% and 5.06% of the
Contracts have Obligors with mailing addresses in Texas, California, Florida,
Washington, and Oregon, respectively. Because of the relative lack of geographic
diversity, losses on the Contracts may be higher than would be the case if there
were more diversification. The economies of such states may be adversely
affected to a greater degree than that of other areas of the country by certain
regional economic conditions. An economic downturn in Texas, California,
Florida, Washington, or Oregon may have an adverse effect on the ability of
Obligors in such states to meet their payment obligations under the Contracts.
7. Maturity and Prepayment Considerations. The weighted average
life of the Notes and the Certificates will generally be influenced by the rate
at which the principal balances of the Contracts are paid, which payment may be
in the form of scheduled amortization or prepayments. The Contracts are
prepayable by the Obligors at any time. Prepayments may also result from
Contracts becoming Liquidated Contracts or from repurchases of Contracts. Any
reinvestment risks resulting from a faster or slower incidence of prepayment of
the Contracts will be borne entirely by the Securityholders. See "The Purchase
Agreements and the Trust Documents--Termination" regarding CITSF's option to
purchase the Contracts and "The Purchase Agreements and the Trust
Documents--Sale and Assignment of the Contracts" in the Prospectus.
The distribution of prepayments among Contracts in the Contract
Pool may affect the Contract Pool's overall credit quality. For example, if the
Contracts of Obligors with higher credit scores prepay at a disproportionately
high rate, delinquencies and Net Losses as a percentage of the remaining
principal balance of Contracts in the Contract Pool would increase, and the
relative credit quality of the remaining Contracts in the Contract Pool would be
adversely affected. In addition, the Servicer may, on a case-by-case basis,
permit extensions with respect to the due dates of payments on Contracts in
accordance with the Sale and Servicing Agreement. See "The Purchase Agreements
and the Trust Documents--Modification of Contracts." Any such extensions may
increase the weighted average life of the Securities. However, the Servicer will
not be
S-16
<PAGE>
<PAGE>
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 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 "Baa3" 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 accordance with its
terms. In addition, the Certificateholders will not be allowed to direct the
Owner Trustee to take any action that conflicts with the provisions of the Sale
and Servicing Agreement. The Indenture will specifically prohibit the Owner
Trustee from taking any action that would impair the Indenture Trustee's
security interest in the Trust property and will require the Owner Trustee to
obtain the consent of the Indenture Trustee or Noteholders representing not less
than a majority of the aggregate principal amount of the Notes then outstanding
before modifying, amending, supplementing, waiving or terminating any provision
of the Sale and Servicing Agreement. Therefore, until the Notes have been paid
in full, the ability to direct the Trust with respect to certain actions
permitted to be taken under the Sale and Servicing Agreement rests with the
Indenture Trustee and the Noteholders.
If an Event of Default under the Indenture occurs and the Notes
are accelerated, the Indenture Trustee will have the right or will be required
in certain circumstances to exercise remedies as a secured party, including
selling the Contracts, in order to pay the principal of, and accrued interest
on, the Notes. Upon the occurrence of an Event of Default, the Class B
Noteholders and the Certificateholders will not have any right to direct or to
consent to any action by the Indenture Trustee, including acceleration of the
Notes or the sale of Contracts, until the Class A Noteholders have been paid in
full (and in the case of the Certificateholders, until the Class B Noteholders
have been paid in full). There is no assurance that the proceeds of any sale of
the Contracts would be equal to or greater than the aggregate outstanding
principal amount of the Notes and the Certificate Balance plus, in each case,
accrued interest thereon. Because neither interest nor principal is distributed
to the Class B Noteholders or the Certificateholders following an Event of
Default and acceleration of the Notes until the full principal amount of the
Class A Notes and interest accrued thereon have been paid in full (and in the
case of the Certificateholders, until the full principal amount of the Class B
Notes and interest accrued thereon have been paid in full), the interests of the
Class A Noteholders, the Class B Noteholders and the Certificateholders may
conflict, and the exercise by the Indenture Trustee of its right to sell the
Contracts or exercise other remedies may cause the Class B Noteholders and the
Certificateholders to suffer a loss of all or part of their investment. See "The
Notes--Rights of Noteholders; Indenture."
S-17
<PAGE>
<PAGE>
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 (unless the Class A
Noteholders have been paid in full) or the Certificateholders (unless the
Noteholders have been paid in full) will have the ability to waive defaults by
the Servicer, including defaults that could materially adversely affect the
Class B Noteholders and the Certificateholders. See "The Notes--Rights of
Noteholders; Indenture."
12. Insurance. Each Contract requires the Obligor to obtain
physical damage insurance with respect to the related Financed Vehicle. Since
Obligors may choose their own insurers to provide the required coverage, the
specific terms and conditions of their policies vary. Although insurance will
continue to be required pursuant to the terms of the Contracts, CITSF as
Servicer will not be obligated to purchase physical damage insurance on behalf
of any Obligor, verify if any insurance required under a Contract is being
maintained by an Obligor or be obligated to pursue any remedies under any
Contract or applicable law as a result of any failure of an Obligor to maintain
any such insurance. As a result, any damage to an uninsured recreation vehicle
securing a Contract may result in a reduction of Liquidation Proceeds available
to pay the Securityholders. As of the Cut-off Date, force-placed insurance has
not been obtained on any of the Contracts. Historically, CITSF has force-placed
insurance on a relatively small percentage of its recreation vehicle retail
installment sale contracts and direct loans. See "The Purchase Agreements and
the Trust Documents--Physical Damage Insurance" in the Prospectus.
13. Year 2000 Compliance. The Year 2000 compliance issue arises
out of the inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a 2
digit year. In response to this issue, CITSF has developed a comprehensive
project to ensure that its software applications and systems are Year 2000
compliant. The scope of this project includes, among other things, the
assessment of "at risk" applications and systems, an assessment of the
interdependencies of various systems and the relative importance of each system
to the business, the design and execution of required modifications to achieve
Year 2000 compliance, and the plans for testing of modifications to verify Year
2000 compliance. CITSF expects to complete substantially all Year 2000
remediation and testing by the end of the first quarter of 1999. CITSF's ability
to meet this timetable is in part dependent upon the ability of third parties,
such as software vendors and developers, to meet their stated deadlines. In
addition, CITSF is communicating with other third parties, including vendors,
borrowers and obligors, to determine the status of their Year 2000 compliance
efforts in an effort to reduce the CITSF's potential exposure to such third
parties' Year 2000 issues.
STRUCTURE OF THE TRANSACTION
The Issuer, CIT RV Trust 1998-A (the "Issuer" or the "Trust"), is
a business trust formed under the laws of the State of Delaware pursuant to a
Trust Agreement (as amended and supplemented from time to time, the "Trust
Agreement"), to be dated as of June 1, 1998 between the Seller and Bankers Trust
(Delaware), acting thereunder not in its individual capacity but solely as
trustee of the Trust (the "Owner Trustee"). Prior to the sale and assignment of
the Contracts pursuant to the Sale and Servicing Agreement, the Trust will have
no assets or obligations. After its formation, the Trust will not engage in any
activity other than (i) acquiring, holding and managing the Contracts and the
other assets of the Trust and proceeds therefrom, (ii) issuing the Notes and the
Certificates, (iii) making payments on the Notes and the Certificates and (iv)
engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith.
Each Certificate will represent a fractional undivided interest
in, and each Note will represent an obligation of, the Trust.
The Trust will initially be capitalized with equity equal to
approximately $6,060,865 (the "Original Certificate Balance"). Certificates with
an aggregate original face amount of approximately $60,865 will be owned by the
Affiliated Owner and Certificates representing the remainder of the Original
Certificate Balance will be sold to third party investors that are expected to
be unaffiliated with the Affiliated Owner, the Seller, the Servicer or their
affiliates. The equity in the Trust, together with the proceeds of the initial
sale of the Notes, will be used by the Trust to purchase the Contracts from the
Seller pursuant to the Sale and Servicing Agreement.
The Servicer will service the Contracts held by the Trust and
will receive fees for such services. CITSF will be appointed as custodian on
behalf of the Trust, and will hold the original recreation vehicle retail
installment sale contract or promissory note as well as the originals or copies
of documents and instruments relating to each Contract and evidencing the
security interest in the Financed Vehicle securing each Contract (the "Contract
Files").
The Trust's principal offices are in Wilmington, Delaware in care
of Bankers Trust (Delaware), as Owner Trustee, at the address listed in "--The
Owner Trustee" below.
S-18
<PAGE>
<PAGE>
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the Trust
as of the Cut-off Date, as if the issuance and sale of the Notes and the
Certificates offered hereby had taken place on such date:
<TABLE>
<S> <C>
Class A-1 5.83% Asset-Backed Notes................. $111,000,000
Class A-2 5.92% Asset-Backed Notes................. $ 94,000,000
Class A-3 5.99% Asset-Backed Notes................. $ 54,000,000
Class A-4 6.09% Asset-Backed Notes................. $ 80,000,000
Class A-5 6.12% Asset-Backed Notes................. $ 37,000,000
Class B 6.29% Asset-Backed Notes................... $ 18,000,000
6.70% Asset-Backed Certificates.................... $ 6,060,865
------------
Total.............................................. $400,060,865
============
</TABLE>
THE OWNER TRUSTEE
Bankers Trust (Delaware), is the Owner Trustee under the Trust
Agreement. Bankers Trust (Delaware) is a Delaware banking corporation. The
principal offices of Bankers Trust (Delaware) are located at 1011 Centre Road,
Suite 200, Wilmington, Delaware 19805-1266. The Owner Trustee will maintain an
office or agency in the City of New York where Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Owner Trustee may be served. The Owner Trustee initially designates the
offices of Bankers Trust Company, 4 Albany Street, 9th Floor, New York, New York
10006 for such purposes. 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 gross negligence (other than by reason of a breach of any of its
representations or warranties set forth in the Sale and Servicing Agreement).
THE TRUST PROPERTY
The Notes are an obligation of the Trust and will be secured by
assets of the Trust (other than the Certificate Distribution Account). Each
Certificate represents a fractional undivided interest in the Trust. The Trust
property will include, among other things, (i) a pool (the "Contract Pool") of
simple interest retail installment sale contracts and direct loans secured by
the new and used recreation vehicles financed thereby, consisting of the
Contracts; (ii) all monies received under the Contracts on and after the Cut-off
Date; (iii) such amounts as from time to time may be held in one or more
accounts established and maintained by the Servicer pursuant to the Sale and
Servicing Agreement (including all investments in such accounts and all income
from the funds therein and all proceeds thereof); (iv) all monies on deposit in
the Reserve Account (including all investments in such accounts and all proceeds
thereof but excluding the net investment income thereon); (v) assignments of the
security interests in the Financed Vehicles and any accessions thereto; (vi) the
right to proceeds from physical damage, credit life and disability insurance
policies, if any, covering individual Financed Vehicles or Obligors, as the case
may be; (vii) the rights of the Trust under the Sale and Servicing Agreement and
(viii) any and all proceeds of the foregoing.
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 June 1, 1998, and CITSF will sell the Contracts to the Company pursuant to
a Purchase Agreement to be dated as of June 1, 1998 (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 June 1, 1998 (the "Sale and Servicing
Agreement"), among the Seller, the Servicer and the Trust.
S-19
<PAGE>
<PAGE>
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 October 1996
and May 1998. All Contracts are direct loans secured by recreation vehicles or
retail installment sale contracts secured by recreation vehicles originated by a
Dealer and purchased by CITCF-NY or CITSF, originated directly by CITSF or one
of its affiliates, or acquired by CITSF or one of its affiliates from
unaffiliated third parties.
CHARACTERISTICS OF CONTRACTS
The Contract Pool consists of contracts having an aggregate
unpaid principal balance as of the Cut-off Date of $400,060,865. For the
purposes of the discussion of the characteristics of the Contracts on the
Cut-off Date contained herein, the principal balance of each Contract is the
unpaid principal balance as of the Cut-off Date.
The Contracts were selected from CITSF's portfolio of recreation
vehicle retail installment sale contracts and direct loans based on several
criteria, including the following: (i) each Contract was originated in the
United States of America; (ii) each Contract has a Contract Rate equal to or
greater than 7.50%; (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 243 months; (iv) as of the Cut-off Date the most recent
scheduled payment of principal and interest, if any, on each Contract was made
by or on behalf of the related Obligor or was not delinquent more than 29 days;
(v) no Financed Vehicle has been repossessed without reinstatement as of the
Cut-off Date; (vi) as of the Cut-off Date no Obligor on any Contract was the
subject of a bankruptcy proceeding and (vii) as of the Cut-off Date each
Contract has a remaining principal balance of not less than $1,000 and not more
than $600,000. The Financed Vehicles consist of motor homes, fifth wheels,
travel trailers, horse trailers and other types of recreation vehicles.
Approximately 75.98%, 12.11%, 8.66%, 1.77% and 1.48% of the Pool
Balance as of the Cut-off Date represented Contracts secured by motor homes,
fifth wheels, travel trailers, horse trailers and other types of recreation
vehicles, respectively. Approximately 64.47% of the Contracts, by Pool Balance
as of the Cut-off Date, represented financing of recreation vehicles which were
new and approximately 35.53% represented financing of recreation vehicles which
were used at the time the related Contracts were originated. As of the Cut-off
Date, the average outstanding principal balance of the Contracts secured by
motor homes, fifth wheels, travel trailers, horse trailers and other types of
recreation vehicles was $54,700, $23,587, $13,488, $14,030 and $9,363,
respectively.
The Obligors under the Contracts have mailing addresses in 49
states and Washington D.C. As of the Cut-off Date, approximately 15.12% of the
Contracts, based upon Pool Balance as of the Cut-off Date, had Obligors with
mailing addresses in the State of Texas, approximately 13.75% had Obligors with
mailing addresses in the State of California, approximately 7.86% had Obligors
with mailing addresses in the State of Florida, approximately 6.16% had Obligors
with mailing addresses in the State of Washington and approximately 5.06% had
Obligors with mailing addresses in the State of Oregon. Each other state
accounts for less than 5.00% of the Contracts based upon Pool Balance as of the
Cut-off Date.
As of the Cut-off Date, all Contracts have an interest rate
specified in such Contract (the "Contract Rate") of at least 7.50%. As of the
Cut-off Date, the Contracts have remaining maturities of at least 7 months but
not more than 240 months, original maturities of at least 12 months but not more
than 243 months, and a weighted average remaining term to stated maturity of 169
months. The weighted average original term to maturity of the Contracts was 173
months. As of the Cut-off Date, the weighted average Contract Rate of the
Contracts was 9.69%. The final scheduled payment dates on the Contracts range
from December 1998 to July 2018. The average remaining principal balance per
Contract, as of the Cut-off Date, was $35,357 and the outstanding principal
balances of the Contracts, as of the Cut-off Date, ranged from $1,037 to
$581,579.
S-20
<PAGE>
<PAGE>
Set forth below is a description of certain characteristics of
the Contracts.
GEOGRAPHICAL DISTRIBUTION OF CONTRACTS (1)
<TABLE>
<CAPTION>
% OF CONTRACT % OF CONTRACT
NUMBER OF POOL BY NUMBER AGGREGATE PRINCIPAL POOL BY PRINCIPAL
CONTRACTS AS OF OF CONTRACTS AS OF BALANCE OUTSTANDING BALANCE OUTSTANDING
STATE CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
- ----- ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Alabama......................... 155 1.37% $ 7,325,338 1.83%
Alaska.......................... 25 0.22 1,495,066 0.37
Arizona......................... 542 4.79 18,369,675 4.59
Arkansas........................ 267 2.36 6,034,876 1.51
California...................... 1,676 14.81 55,004,967 13.75
Colorado........................ 333 2.94 13,228,281 3.31
Connecticut..................... 121 1.07 3,758,618 0.94
Delaware........................ 10 0.09 327,276 0.08
District of Columbia............ 1 0.01 66,941 0.02
Florida......................... 757 6.69 31,458,377 7.86
Georgia......................... 263 2.32 8,541,476 2.14
Idaho........................... 71 0.63 2,999,942 0.75
Illinois........................ 274 2.42 9,438,676 2.36
Indiana......................... 122 1.08 4,192,191 1.05
Iowa............................ 43 0.38 1,572,086 0.39
Kansas.......................... 221 1.95 5,917,399 1.48
Kentucky........................ 34 0.30 973,411 0.24
Louisiana....................... 111 0.98 4,550,640 1.14
Maine........................... 33 0.29 1,368,991 0.34
Maryland........................ 129 1.14 3,267,244 0.82
Massachusetts................... 248 2.19 6,509,658 1.63
Michigan........................ 108 0.95 5,480,012 1.37
Minnesota....................... 95 0.84 4,423,965 1.11
Mississippi..................... 60 0.53 1,686,431 0.42
Missouri........................ 498 4.40 12,555,653 3.14
Montana......................... 47 0.42 1,935,458 0.48
Nebraska........................ 29 0.26 1,169,015 0.29
Nevada.......................... 237 2.09 7,331,048 1.83
New Hampshire................... 69 0.61 2,119,591 0.53
New Jersey...................... 120 1.06 3,725,904 0.93
New Mexico...................... 118 1.04 4,959,618 1.24
New York........................ 252 2.23 8,437,149 2.11
North Carolina.................. 203 1.79 7,538,284 1.88
North Dakota.................... 2 0.02 56,490 0.01
Ohio............................ 110 0.97 6,861,771 1.72
Oklahoma........................ 628 5.55 15,569,569 3.89
Oregon.......................... 370 3.27 20,227,102 5.06
Pennsylvania.................... 117 1.03 4,758,134 1.19
Rhode Island.................... 63 0.56 1,283,518 0.32
South Carolina.................. 73 0.65 2,648,758 0.66
South Dakota.................... 14 0.12 510,409 0.13
Tennessee....................... 138 1.22 5,106,189 1.28
Texas........................... 1,725 15.25 60,489,975 15.12
Utah............................ 48 0.42 2,040,164 0.51
Vermont......................... 22 0.19 670,230 0.17
Virginia........................ 64 0.57 2,443,448 0.61
Washington...................... 542 4.79 24,655,332 6.16
West Virginia................... 24 0.21 842,127 0.21
Wisconsin....................... 75 0.66 3,035,638 0.76
Wyoming......................... 28 0.25 1,098,754 0.27
--------- ---------- ------------ ---------
Total........................... 11,315 100.00%(2) $400,060,865 100.00%(2)
========= ============= ============ =============
</TABLE>
- ---------------
(1) In most cases, based on the mailing addresses of the Obligors as of the
Cut-off Date.
(2) May not equal 100% due to rounding.
S-21
<PAGE>
<PAGE>
RANGE OF CONTRACT RATES
<TABLE>
<CAPTION>
% OF CONTRACT % OF CONTRACT
NUMBER OF POOL BY NUMBER AGGREGATE PRINCIPAL POOL BY PRINCIPAL
RANGE OF CONTRACTS AS OF OF CONTRACTS AS OF BALANCE OUTSTANDING BALANCE OUTSTANDING
CONTRACT RATES CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
-------------- ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
7.50%--7.99%........... 144 1.27% $ 17,032,386 4.26%
8.00%--8.99%........... 1,952 17.25 149,973,392 37.49
9.00%--9.99%........... 2,812 24.85 116,104,793 29.02
10.00%--10.99%......... 2,468 21.81 59,577,080 14.89
11.00%--11.99%......... 1,632 14.42 28,864,663 7.22
12.00%--12.99%......... 1,081 9.55 15,277,550 3.82
13.00%--13.99%......... 687 6.07 8,799,861 2.20
14.00%--14.99%......... 346 3.06 3,033,059 0.76
15.00%--15.99%......... 115 1.02 867,254 0.22
16.00%--16.99%......... 57 0.50 382,042 0.10
17.00%--21.20%......... 21 0.19 148,785 0.04
-------- --------- ------------ ---------
Total................. 11,315 100.00%(1) $400,060,865 100.00%(1)
======== ============ ============ ============
</TABLE>
- ---------------
(1) May not equal 100% due to rounding.
RANGE OF REMAINING MATURITIES
<TABLE>
<CAPTION>
% OF CONTRACT % OF CONTRACT
NUMBER OF POOL BY NUMBER AGGREGATE PRINCIPAL POOL BY PRINCIPAL
RANGE OF REMAINING CONTRACTS AS OF OF CONTRACTS AS OF BALANCE OUTSTANDING BALANCE OUTSTANDING
MATURITY IN MONTHS CUT-OFF DATE CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE
------------------ ------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
7--49.......................... 640 5.66% $ 3,460,701 0.87%
50--59......................... 473 4.18 4,348,345 1.09
60--69......................... 203 1.79 2,159,512 0.54
70--79......................... 395 3.49 3,890,961 0.97
80--89......................... 604 5.34 6,055,660 1.51
90--99......................... 402 3.55 4,790,943 1.20
100--109....................... 84 0.74 1,272,634 0.32
110--119....................... 1,647 14.56 29,931,562 7.48
120--129....................... 333 2.94 5,714,056 1.43
130--139....................... 644 5.69 14,454,700 3.61
140--149....................... 1,628 14.39 34,126,560 8.53
150--159....................... 22 0.19 1,257,034 0.31
160--169....................... 105 0.93 5,959,238 1.49
170--179....................... 3,247 28.70 193,613,802 48.40
180--189....................... 422 3.73 25,680,051 6.42
190--199....................... 4 0.04 303,094 0.08
200--209....................... 4 0.04 339,249 0.08
210--219....................... 2 0.02 284,279 0.07
220--229....................... 10 0.09 1,523,007 0.38
230--239....................... 398 3.52 54,135,749 13.53
240............................ 48 0.42 6,759,728 1.69
-------- ---------- ------------ ---------
Total.......................... 11,315 100.00%(1) $400,060,865 100.00%(1)
======== ============= ============ ============
</TABLE>
- ---------------
(1) May not equal 100% due to rounding.
S-22
<PAGE>
<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 Vehicle without the consent of
CITSF. Any reinvestment risk resulting from the rate of prepayment of the
Contracts and the distribution of such prepayments to Securityholders will be
borne entirely by the Securityholders. In addition, early retirement of the
Securities may be effected by (i) the exercise of the option of CITSF to
purchase all of the Contracts remaining in the Trust when the aggregate
principal balance of the Contracts is 10% or less of the Initial Pool Balance,
(ii) the sale by the applicable Trustee of all of the Contracts remaining in the
Trust when the Pool Balance is 5% or less of the Initial Pool Balance or (iii)
an Event of Default. See "The Purchase Agreements and The Trust
Documents--Termination" herein and in the Prospectus.
The rate of principal payments (including prepayments) on pools
of recreation vehicle retail installment sale contracts and direct loans may be
influenced by a variety of economic, geographic, social and other factors. In
general, if prevailing interest rates were to fall significantly below the
Contract Rates on the Contracts, the Contracts could be subject to higher
prepayment rates than if prevailing interest rates were to remain at or above
the Contract Rates on the Contracts. Conversely, if prevailing interest rates
were to rise significantly, the rate of prepayments on the Contracts would
generally be expected to decrease. No assurance can be given as to the influence
of these factors on the actual prepayment experience of the Contracts.
CITSF is not aware of any publicly available industry statistics
that set forth principal prepayment experience for recreation vehicle retail
installment sale contracts and direct loans similar to the Contracts over an
extended period of time, and its experience with respect to recreation vehicle
receivables included in its portfolio is insufficient to draw any specific
conclusions with respect to the expected prepayment rates on the Contracts.
CERTAIN PAYMENT DATA
Certain statistical information relating to the payment behavior
of recreation vehicle retail installment sale contracts and direct loans
originated by CITSF directly or through Dealers is set forth below. In
evaluating the information contained in this table and its relationship to the
expected prepayment behavior of the Contracts, prospective Securityholders
should consider that the information set forth below reflects, with respect to
contracts originated in a given year, all principal payments made in respect of
such contracts in a given year, including regularly scheduled payments,
liquidation or insurance proceeds applied to principal of such contracts, as
well as principal prepayments made by or on behalf of the obligors on the
contracts in advance of the date on which such principal payment was scheduled
to be made. The information set forth below also reflects charge-offs of the
contracts during a given year. In addition, the Company has not performed any
statistical analysis to determine whether the contracts to which the table
relates constitute a statistically significant sample of recreation vehicle
retail installment sale contracts and direct loans for purposes of determining
expected payment behavior. Payment rates on the contracts are influenced by a
number of economic, social and other factors. Certain of the contracts included
in the table below were originated with underwriting criteria that differ from
the underwriting criteria under which the Contracts were originated.
Furthermore, no assurance can be given that the prepayment experience of the
Contracts will exhibit payment behavior similar to the behavior summarized in
the following table. In addition to the foregoing, prospective Securityholders
should consider that the table set forth below is limited to the period covered
therein and thus cannot reflect the effects, if any, of aging on the payment
behavior of recreation vehicle retail installment sale contracts and direct
loans beyond such periods. As a result, investors should not draw any
conclusions regarding the prepayment rate of the Contracts from the information
presented in the table below. Each investor must make its own assumptions
regarding the prepayment rate of the Contracts.
The following table sets forth, with respect to all of the
recreation vehicle retail installment sale contracts and direct loans originated
by CITSF directly or through Dealers (excluding contracts purchased in bulk) in
each year since 1993, the aggregate initial principal balance of the contracts
originated in such year (or in the first three months of 1998), the approximate
aggregate principal balance outstanding on the contracts originated in such year
as of the last day of such year and the approximate aggregate principal balance
outstanding on the contracts originated in such year as of the end of each
subsequent year (and as of March 31, 1998).
S-23
<PAGE>
<PAGE>
INFORMATION REGARDING PRINCIPAL REDUCTION ON RECREATION VEHICLE RETAIL
INSTALLMENT SALE CONTRACTS AND DIRECT LOANS ORIGINATED BY CITSF
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR OF ORIGINATION
------------------- THREE MONTHS ENDED
1993(3) 1994(3) 1995(3) 1996(3) 1997(3) MARCH 31, 1998
------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Approximate Volume (1)....... $405,900 $294,500 $417,300 $452,700 $672,100 $186,400
Approximate Aggregate
Principal Balance(2):
December 31, 1993.......... $354,400
December 31, 1994.......... 274,000 $260,700
December 31, 1995.......... 213,200 208,200 $371,900
December 31, 1996.......... 162,300 156,800 271,900 $406,100
December 31, 1997.......... 120,100 118,600 194,200 306,300 $609,700
March 31, 1998............. 113,700 111,800 179,300 284,100 573,200 $182,000
</TABLE>
- ---------------------------------
(1) Volume represents aggregate initial principal balance of each contract
originated in a particular year or three-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 three-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 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.
S-24
<PAGE>
<PAGE>
As of the Cut-off Date, approximately 11.29% of the number of
Contracts in the Contract Pool were Paid-Ahead Simple Interest Contracts, with
at least one paid-ahead scheduled monthly payment. CITSF's portfolio of
recreation vehicle retail installment sale contracts and direct loans has
historically included contracts which have been paid-ahead by one or more
scheduled monthly payments. There can be no assurance as to the number of
Contracts which may become Paid-Ahead Simple Interest Contracts or the number or
the principal amount of the scheduled payments which may be paid-ahead.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayments on recreation vehicle retail installment sale
contracts and direct loans can be measured relative to a prepayment standard or
model. The model used in this Prospectus Supplement, the Absolute Prepayment
Model ("ABS"), represents an assumed rate of prepayment each month relative to
the original number of contracts in a pool of contracts. ABS further assumes
that all the Contracts are the same size and amortize at the same rate and that
each Contract in each month of its life will either be paid as scheduled or be
prepaid in full. For example, in a pool of contracts originally containing
10,000 contracts, a 1.0% ABS rate means that 100 contracts prepay each month.
ABS does not purport to be a historical description of prepayment experience or
a prediction of the anticipated rate of prepayment of any pool of contracts
including the Contracts.
As the rate of payments of principal of the Notes and in respect
of the Certificate Balance will depend on the rate of payment (including
prepayments) of the principal balance of the Contracts and the rate at which
Contracts become Liquidated Contracts, final payment of each class of the Notes
could occur significantly earlier than their respective Note Final Scheduled
Distribution Dates. The final distribution in respect of the Certificates also
could occur prior to the Certificate Final Scheduled Distribution Date.
Reinvestment risk associated with early payment of the Securities will be borne
exclusively by the Securityholders.
The tables captioned "Percent of Initial Note Principal Balance
at Various ABS Percentages" and "Percent of Original 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 June 15, 1998 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 four hypothetical pools with all of the Contracts within each
such pool having the following characteristics and that the level scheduled
monthly payment for each of the pools (which is based on its aggregate principal
balance, weighted average APR, weighted average original term to maturity and
weighted average remaining term to maturity as of the Cut-off Date) will be such
that each pool will be fully amortized by the end of its remaining term to
maturity.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
ORIGINAL TERM REMAINING TERM WEIGHTED AVERAGE
AGGREGATE WEIGHTED AVERAGE TO MATURITY TO MATURITY SEASONING
PRINCIPAL BALANCE CONTRACT RATE (MONTHS) (MONTHS) (MONTHS)
---------------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Pool 1........................ $ 60,787,543 11.20% 102 98 4
Pool 2........................ $ 48,653,916 10.62% 144 140 4
Pool 3........................ $224,491,149 9.33% 180 176 4
Pool 4........................ $ 66,128,257 8.83% 237 233 4
</TABLE>
The actual characteristics and performance of the Contracts will
differ from the assumptions used in constructing the ABS Table. The assumptions
used are hypothetical and have been provided only to give a general sense of how
the principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Contracts will prepay at a constant level
of ABS until maturity or that all of the Contracts will prepay at the same level
of ABS. Moreover, the diverse terms of Contracts within each of the hypothetical
pools could produce slower or faster principal distributions than indicated in
the ABS Table at the various constant percentages of ABS specified, even if the
original and remaining terms to maturity of the Contracts are as assumed. Any
difference between such assumptions and actual characteristics and performance
of the Contracts or actual prepayment experience will affect the percentages of
initial balances outstanding over time and weighted average lives of the Notes
and the Certificates.
S-25
<PAGE>
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES (1)
<TABLE>
<CAPTION>
CLASS A-1 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
6/15/99 86% 64% 42% 33% 24% 15% 5% 0%
6/15/00 70% 29% 0% 0% 0% 0% 0% 0%
6/15/01 52% 0% 0% 0% 0% 0% 0% 0%
6/15/02 33% 0% 0% 0% 0% 0% 0% 0%
6/15/03 12% 0% 0% 0% 0% 0% 0% 0%
6/15/04 0% 0% 0% 0% 0% 0% 0% 0%
6/15/05 0% 0% 0% 0% 0% 0% 0% 0%
6/15/06 0% 0% 0% 0% 0% 0% 0% 0%
6/15/07 0% 0% 0% 0% 0% 0% 0% 0%
6/15/08 0% 0% 0% 0% 0% 0% 0% 0%
6/15/09 0% 0% 0% 0% 0% 0% 0% 0%
6/15/10 0% 0% 0% 0% 0% 0% 0% 0%
6/15/11 0% 0% 0% 0% 0% 0% 0% 0%
6/15/12 0% 0% 0% 0% 0% 0% 0% 0%
6/15/13 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years) (2) 3.04 1.46 0.91 0.79 0.70 0.62 0.56 0.52
</TABLE>
<TABLE>
<CAPTION>
CLASS A-2 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
6/15/99 100% 100% 100% 100% 100% 100% 100% 95%
6/15/00 100% 100% 85% 64% 44% 22% 1% 0%
6/15/01 100% 94% 23% 0% 0% 0% 0% 0%
6/15/02 100% 54% 0% 0% 0% 0% 0% 0%
6/15/03 100% 15% 0% 0% 0% 0% 0% 0%
6/15/04 86% 0% 0% 0% 0% 0% 0% 0%
6/15/05 55% 0% 0% 0% 0% 0% 0% 0%
6/15/06 21% 0% 0% 0% 0% 0% 0% 0%
6/15/07 0% 0% 0% 0% 0% 0% 0% 0%
6/15/08 0% 0% 0% 0% 0% 0% 0% 0%
6/15/09 0% 0% 0% 0% 0% 0% 0% 0%
6/15/10 0% 0% 0% 0% 0% 0% 0% 0%
6/15/11 0% 0% 0% 0% 0% 0% 0% 0%
6/15/12 0% 0% 0% 0% 0% 0% 0% 0%
6/15/13 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years) (2) 7.16 4.15 2.61 2.25 1.97 1.75 1.57 1.42
</TABLE>
S-26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CLASS A-3 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
6/15/99 100% 100% 100% 100% 100% 100% 100% 100%
6/15/00 100% 100% 100% 100% 100% 100% 100% 63%
6/15/01 100% 100% 100% 90% 38% 0% 0% 0%
6/15/02 100% 100% 40% 0% 0% 0% 0% 0%
6/15/03 100% 100% 0% 0% 0% 0% 0% 0%
6/15/04 100% 62% 0% 0% 0% 0% 0% 0%
6/15/05 100% 0% 0% 0% 0% 0% 0% 0%
6/15/06 100% 0% 0% 0% 0% 0% 0% 0%
6/15/07 89% 0% 0% 0% 0% 0% 0% 0%
6/15/08 40% 0% 0% 0% 0% 0% 0% 0%
6/15/09 0% 0% 0% 0% 0% 0% 0% 0%
6/15/10 0% 0% 0% 0% 0% 0% 0% 0%
6/15/11 0% 0% 0% 0% 0% 0% 0% 0%
6/15/12 0% 0% 0% 0% 0% 0% 0% 0%
6/15/13 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years) (2) 9.83 6.23 3.94 3.39 2.96 2.62 2.34 2.11
</TABLE>
<TABLE>
<CAPTION>
CLASS A-4 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
6/15/99 100% 100% 100% 100% 100% 100% 100% 100%
6/15/00 100% 100% 100% 100% 100% 100% 100% 100%
6/15/01 100% 100% 100% 100% 100% 91% 55% 18%
6/15/02 100% 100% 100% 84% 41% 0% 0% 0%
6/15/03 100% 100% 65% 16% 0% 0% 0% 0%
6/15/04 100% 100% 10% 0% 0% 0% 0% 0%
6/15/05 100% 100% 0% 0% 0% 0% 0% 0%
6/15/06 100% 60% 0% 0% 0% 0% 0% 0%
6/15/07 100% 30% 0% 0% 0% 0% 0% 0%
6/15/08 100% 3% 0% 0% 0% 0% 0% 0%
6/15/09 91% 0% 0% 0% 0% 0% 0% 0%
6/15/10 55% 0% 0% 0% 0% 0% 0% 0%
6/15/11 21% 0% 0% 0% 0% 0% 0% 0%
6/15/12 0% 0% 0% 0% 0% 0% 0% 0%
6/15/13 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years) (2) 12.20 8.44 5.32 4.54 3.94 3.47 3.09 2.78
</TABLE>
S-27
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CLASS A-5 NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
6/15/99 100% 100 100% 100% 100% 100% 100% 100%
6/15/00 100% 100% 100% 100% 100% 100% 100% 100%
6/15/01 100% 100% 100% 100% 100% 100% 100% 100%
6/15/02 100% 100% 100% 100% 100% 93% 0% 0%
6/15/03 100% 100% 100% 0% 0% 0% 0% 0%
6/15/04 100% 100% 100% 0% 0% 0% 0% 0%
6/15/05 100% 100% 0% 0% 0% 0% 0% 0%
6/15/06 100% 100% 0% 0% 0% 0% 0% 0%
6/15/07 100% 100% 0% 0% 0% 0% 0% 0%
6/15/08 100% 100% 0% 0% 0% 0% 0% 0%
6/15/09 100% 53% 0% 0% 0% 0% 0% 0%
6/15/10 100% 0% 0% 0% 0% 0% 0% 0%
6/15/11 100% 0% 0% 0% 0% 0% 0% 0%
6/15/12 67% 0% 0% 0% 0% 0% 0% 0%
6/15/13 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years) (2) 14.13 10.93 6.61 5.61 4.82 4.23 3.75 3.36
</TABLE>
<TABLE>
<CAPTION>
CLASS B NOTES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
6/15/99 100% 100% 100% 100% 100% 100% 100% 100%
6/15/00 100% 100% 100% 100% 100% 100% 100% 100%
6/15/01 100% 100% 100% 100% 100% 100% 100% 100%
6/15/02 100% 100% 100% 100% 100% 100% 0% 0%
6/15/03 100% 100% 100% 100% 0% 0% 0% 0%
6/15/04 100% 100% 100% 0% 0% 0% 0% 0%
6/15/05 100% 100% 0% 0% 0% 0% 0% 0%
6/15/06 100% 100% 0% 0% 0% 0% 0% 0%
6/15/07 100% 100% 0% 0% 0% 0% 0% 0%
6/15/08 100% 100% 0% 0% 0% 0% 0% 0%
6/15/09 100% 100% 0% 0% 0% 0% 0% 0%
6/15/10 100% 0% 0% 0% 0% 0% 0% 0%
6/15/11 100% 0% 0% 0% 0% 0% 0% 0%
6/15/12 100% 0% 0% 0% 0% 0% 0% 0%
6/15/13 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years) (2) 14.33 11.25 6.75 5.75 4.92 4.33 3.83 3.42
</TABLE>
- ------------------
(1) Assumes the exercise by CITSF of its option to purchase all of the
Contracts on the Distribution Date on which the Pool Balance as of the last
day of the related Due Period is 10% or less of the Initial Pool Balance.
(2) The weighted average life of a Note is determined by (i) multiplying the
amount of each principal payment of the Note by the number of years from
the date of the issuance of the Note to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the related initial
principal amount of the Note.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS
DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS
AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
S-28
<PAGE>
<PAGE>
PERCENT OF ORIGINAL CERTIFICATE BALANCE AT VARIOUS ABS PERCENTAGES(1)
<TABLE>
<CAPTION>
CERTIFICATES
Distribution Date 0.0% 0.5% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
- ----------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100% 100% 100% 100% 100% 100% 100% 100%
6/15/99 100% 100% 100% 100% 100% 100% 100% 100%
6/15/00 100% 100% 100% 100% 100% 100% 100% 100%
6/15/01 100% 100% 100% 100% 100% 100% 100% 100%
6/15/02 100% 100% 100% 100% 100% 100% 0% 0%
6/15/03 100% 100% 100% 100% 0% 0% 0% 0%
6/15/04 100% 100% 100% 0% 0% 0% 0% 0%
6/15/05 100% 100% 0% 0% 0% 0% 0% 0%
6/15/06 100% 100% 0% 0% 0% 0% 0% 0%
6/15/07 100% 100% 0% 0% 0% 0% 0% 0%
6/15/08 100% 100% 0% 0% 0% 0% 0% 0%
6/15/09 100% 100% 0% 0% 0% 0% 0% 0%
6/15/10 100% 0% 0% 0% 0% 0% 0% 0%
6/15/11 100% 0% 0% 0% 0% 0% 0% 0%
6/15/12 100% 0% 0% 0% 0% 0% 0% 0%
6/15/13 0% 0% 0% 0% 0% 0% 0% 0%
Weighted Average Life (years) (2) 14.33 11.25 6.75 5.75 4.92 4.33 3.83 3.42
</TABLE>
- ------------------
(1) Assumes the exercise by CITSF of its option to purchase all of the
Contracts on the Distribution Date on which the Pool Balance as of the last
day of the related Due Period is 10% or less of the Initial Pool Balance.
(2) The weighted average life of a Certificate is determined by (i) multiplying
in the amount of each principal payment on the Certificate by the number of
years from the date of the issuance of the Certificate to the related
Distribution Date, (ii) adding the results and (iii) dividing the sum by
the related initial face amount of the Certificate.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS
DESCRIBED ABOVE (INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND
PERFORMANCE OF THE CONTRACTS WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS
AND PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
YIELD AND PREPAYMENT CONSIDERATIONS
Interest will be paid to the Noteholders on each Distribution
Date (except the first Distribution Date) to the extent of the remaining
Available Amount and the remaining Available Reserve Amount, in an amount equal
to the product of (x) the applicable Interest Rate (y) the outstanding principal
balance of each class of the Notes as of the preceding Distribution Date (after
giving effect to any distributions of principal to be made on such Distribution
Date) and (z) one-twelfth. See "The Notes--Payments of Interest." Thirty days of
interest will be passed through to Certificateholders on each Distribution Date
(except the first Distribution Date) to the extent of the remaining Available
Amount and the remaining Available Reserve Amount, in an amount equal to
one-twelfth of the product of the Pass-Through Rate and the Certificate Balance
immediately preceding such Distribution Date. The "Certificate Balance" means
the Original Certificate Balance reduced by all distributions allocable to
principal actually made to Certificateholders. See "The
Certificates--Distributions of Principal." Payment Shortfalls, to the extent not
covered by Monthly Advances and amounts on deposit in the Collection Account,
will adversely affect the yield on the Securities.
If an Event of Default occurs and the Notes are accelerated,
payments of interest on and principal of the Class B Notes will not be paid
until the Class A Notes have been paid in full.
Generally, the excess of the amount of interest at the Contract
Rate over the amount of interest payable under such Contract and allocable to
pay such Contract's share of interest on the Securities and the Servicing Fee
would be available to cover losses on Liquidated Contracts or to fund the
Reserve Account. The Trust will not receive a full month's interest at the
Contract Rate on any Contract which is prepaid in full or which is subject to a
Relief Act Reduction (as defined in the Prospectus), nor will the Servicer make
Monthly Advances for any Payment Shortfall which results from a Relief Act
Reduction or a prepayment in full of a Contract. The Servicer will not make
Non-Reimbursable Payments. As a result, there will be less interest available to
the Trust to pay interest on the Securities, to cover losses on the Liquidated
Contracts and to fund the Reserve Account.
S-29
<PAGE>
<PAGE>
POOL FACTORS
The "Note Pool Factor" with respect to a class of Notes, is an
eight-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 1.00000000 as of the Cut-off
Date, and thereafter will decline to reflect reductions in the outstanding
principal balance of the applicable class of Notes. A Noteholder's portion of
the aggregate outstanding principal balance of the related class of Notes is the
product of (i) the original denomination of the Noteholder's Note and (ii) the
applicable Note Pool Factor.
The "Certificate Pool Factor" is an eight-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 1.00000000 as of the Cut-off Date, and
thereafter will decline to reflect reductions in the outstanding principal
balance of the Certificates. A Certificateholder's portion of the aggregate
outstanding Certificate Balance is the product of (i) the original denomination
of the Certificateholder's Certificate and (ii) the Certificate Pool Factor.
On each Distribution Date, the Certificateholders and the
Noteholders of record (which in the case of the Notes in most cases will be Cede
& Co.) will receive monthly reports concerning the payments received on the
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
25 South Charles Street, 16th Floor, Corporate Trust, Baltimore, Maryland 21201.
See "Certain Information Regarding the Securities--Statements to
Securityholders" in the Prospectus.
USE OF PROCEEDS
The Company will sell the Contracts to the Trust concurrently
with the sale of the Securities and the net proceeds from the sale of the
Securities will be applied by the Trust to the purchase of the Contracts and to
the payment of certain expenses connected with pooling the Contracts and issuing
the Securities. Such net proceeds less the payment of such expenses represent
the cash purchase price paid by the Trust to the Company for the sale of the
Contracts to the Trust. Such amount will be determined as a result of the
pricing of the Securities, through the offering described in this Prospectus
Supplement. The purchase price paid to CITSF for the Contracts will be added to
CITSF's general funds and will be available for general corporate purposes,
including the purchase of new recreation vehicle retail installment sale
contracts and direct loans and the payment of the purchase price to CITCF-NY for
those Contracts acquired by CITSF from CITCF-NY.
THE CIT GROUP, INC.
In November 1997, CIT completed its initial public offering of
36,225,000 shares of its common stock.
The proceeds from the offering (other than the proceeds received
from the exercise of the over-allotment option of the underwriters) were used to
acquire from The Dai-Ichi Kangyo Bank, Limited ("DKB") its option to purchase
the 20 percent interest in the Company owned by The Chase Manhattan Corporation
("CMC") and to exercise such option. The proceeds received from the exercise of
the underwriters' over-allotment option were used for general corporate
purposes.
As a consequence of the completion of the offering, DKB continues
to own a majority of the issued and outstanding shares of common stock of CIT.
CMC is no longer a stockholder. The Stockholders Agreement (as defined in the
Prospectus) no longer exists and CMC cannot designate a nominee to the Board of
Directors of CIT.
THE CIT GROUP/SALES FINANCING, INC., SERVICER
GENERAL
As of March 31, 1998, CITSF serviced for itself and others
approximately 291,500 contracts (consisting primarily of recreation vehicle,
home equity, recreational boat and manufactured housing contracts), representing
an outstanding balance of approximately $8.1 billion. Of this portfolio,
approximately 101,100 contracts (representing approximately $2.4 billion
outstanding balance) consisted of recreation vehicle retail installment sale
contracts and direct loans. CITSF entered into agreements in 1996 and 1997 to
service additional manufactured housing, recreation vehicle and recreational
boat contracts for third parties, which increased substantially the total number
of contracts serviced by CITSF.
S-30
<PAGE>
<PAGE>
SERVICING
The following table shows the composition of CITSF's servicing
portfolio, including recreation vehicle retail installment sale contracts and
direct loans serviced by CITSF on the dates indicated:
THE CIT GROUP/SALES FINANCING, INC.
CONTRACTS BEING SERVICED BY PRODUCT LINE
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------------------------------
1993 1994 1995
------------------ ------------------ ------------------
(NUMBER) (DOLLARS) (NUMBER) (DOLLARS) (NUMBER) (DOLLARS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
RV--Owned............... 43,530 $ 961,915 39,454 $ 847,142 29,984 $ 662,468
RV--Bulk Purchases...... 3,331 60,487 3,522 50,882 2,648 36,058
RV--Servicing(1)........ 0 0 4,827 118,267 19,494 445,716
Total RV................ 46,861 1,022,402 47,803 1,016,291 52,126 1,144,242
Total MH................ 47,898 809,670 39,599 878,152 69,277 1,368,513
Total RB................ 6,048 156,861
Home Equity............. 3,545 131,322 13,545 570,772 27,122 1,039,044
Other(2)................ 1,572 41,944 1,310 74,823 148 2,142
------- ---------- ------- ---------- ------- ----------
Total Contracts Serviced 99,876 $2,005,338 102,257 $2,540,038 154,721 $3,710,802
======= ========== ======= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
------------------------------------------------------------- -------------------------
1996 1997 1998
------------------ ------------------ ------------------
(NUMBER) (DOLLARS) (NUMBER) (DOLLARS) (NUMBER) (DOLLARS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
RV--Owned............... 22,161 $ 477,355 19,548 $ 416,091 23,649 $571,813
RV--Bulk Purchases...... 2,770 32,704 3,499 82,794 9,240 72,417
RV--Servicing(1)........ 32,606 746,810 71,610 1,909,994 68,176 1,772,447
Total RV................ 57,537 1,256,869 94,657 2,408,879 101,065 2,416,677
Total MH................ 95,999 1,748,363 89,265 1,836,458 87,075 1,851,311
Total RB................ 13,281 328,110 35,677 948,884 37,830 1,013,516
Home Equity............. 52,617 2,005,498 57,284 2,446,170 58,076 2,704,465
Other(2)................ 149 3,093 5,134 121,553 7,261 153,858
------ --------- ------- --------- ------- ---------
Total Contracts Serviced 219,583 $5,341,933 282,017 $7,761,944 291,307 $8,139,827
======= ========== ======= ========== ======= ==========
</TABLE>
- -------------------
MH = Manufactured Housing
RV = Recreation Vehicle
RB = Recreational Boat
(1) Includes contracts sold by CITSF in previous securitizations which CITSF is
servicing. The 1997 and 1998 amounts also include a third party servicing
arrangement entered into in 1997.
(2) Includes inventory financing receivables. 1993 and 1994 amounts include
Recreational Boat receivables of $38.9 million and $71.6 million,
respectively.
S-31
<PAGE>
<PAGE>
DELINQUENCY AND LOAN LOSS EXPERIENCE
The following table sets forth the delinquency experience at
December 31 for the years 1993 to 1997 and at March 31, 1997 and 1998 of the
portfolio of recreation vehicle retail installment sale contracts and direct
loans originated and serviced by CITSF, excluding contracts acquired by CITSF
through portfolio purchases, contracts in repossession and contracts serviced by
CITSF but not originated by CITSF. Delinquency and loan loss experience for the
serviced portfolio was obtained from the monthly servicer reports for prior
securitization trusts.
DELINQUENCY EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------
1993 1994(3) 1995(3) 1996(3) 1997(3)
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Number of Contracts.............. 43,530 44,281 49,478 54,767 64,584
Principal Balance of Contracts
Serviced...................... $ 961,915 $ 965,409 $1,108,184 $1,224,165 $1,512,624
Principal Balance of Delinquent
Contracts(1):
30-59 Days....................... $ 6,478 $ 4,986 $ 9,218 $ 14,904 $ 25,873
60-89 Days....................... 2,211 1,959 3,071 4,342 9,357
90 Days or More.................. 3,383 2,785 4,456 6,205 16,314
--------- --------- ---------- ---------- ----------
Total Principal Balance of
Delinquent Contracts.......... $ 12,072 $ 9,730 $ 16,745 $ 25,451 $ 51,544
========= ========= ========== ========== ==========
Delinquencies as a Percent of
Principal Balances(2)......... 1.26% 1.01% 1.51% 2.08% 3.41%
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31,
----------------------
1997(3) 1998(3)
------ ------
<S> <C> <C>
Number of Contracts.............. 57,292 66,669
Principal Balance of Contracts
Serviced...................... $1,262,645 $1,594,135
Principal Balance of Delinquent
Contracts(1):
30-59 Days....................... $ 14,306 $ 17,411
60-89 Days....................... 5,202 7,680
90 Days or More.................. 6,150 15,094
---------- ----------
Total Principal Balance of
Delinquent Contracts.......... $ 25,658 $ 40,185
========== ==========
Delinquencies as a Percent of
Principal Balances(2)......... 2.03% 2.52%
</TABLE>
- -------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month. A Contract is deemed delinquent only if payments
exceeding $65 are contractually past due 30 days or more.
(2) Based on dollar percent delinquent calculated by dividing Total Principal
Balance of Delinquent Contracts by Principal Balance of Contracts Serviced.
(3) Includes recreation vehicle retail installment contracts and direct loans
sold by CITSF in previous securitizations which CITSF is servicing.
S-32
<PAGE>
<PAGE>
The following table sets forth the loan loss experience for the
five years ended December 31, 1997 and the three months ended March 31, 1997 and
1998, of the portfolio of recreation vehicle retail installment sale contracts
and direct loans originated and serviced by CITSF, excluding contracts acquired
by CITSF through portfolio purchases and contracts serviced by CITSF but not
originated by CITSF. "Net Losses" are equal to the aggregate balance of all
contracts which are determined to be uncollectible in the period less any
recoveries and liquidation proceeds on contracts charged-off in the period or
any prior periods. Net Losses include outside collection, repossession and
liquidation expenses.
LOAN LOSS/LIQUIDATION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED AT DECEMBER 31,
---------------------------------------------------------------
1993 1994(4) 1995(4) 1996(4) 1997(4)
--------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Number of Contracts(1)..... 43,530 44,281 49,478 54,767 64,584
Principal Balance of
Contracts Serviced(1).... $ 961,915 $ 965,409 $1,108,184 $1,224,165 $1,512,624
========== ========== ========== ========== ==========
Net Losses:
Dollars(2)................. $ 3,917 $ 4,887 $ 4,762 $ 9,875 $ 13,773
Percentage(3).............. 0.41% 0.51% 0.43% 0.81% 0.91%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED AT MARCH 31,
------------------------------------
1997(3) 1998(3)
------------ ----------
<S> <C> <C>
Number of Contracts(1)..... 57,292 66,669
Contracts(1)...
Principal Balance of
Contracts Serviced(1).... $1,262,645 $1,594,135
========== ==========
Net Losses:
Dollars(2)................. $ 3,847 $ 4,656
Percentage(3).............. 1.22%(5) 1.17%(5)
</TABLE>
- -----------------
(1) As of period end and excludes contracts in repossession.
(2) The calculation of net loss includes outside collection, repossession and
liquidation expenses.
(3) As a percentage of the principal balance of contracts as of period end.
(4) Includes recreation vehicle retail installment sale contracts and direct
loans sold by CITSF in previous securitizations which CITSF is servicing.
(5) Annualized. Annualized number may not be reflective of full year results.
The data presented in the preceding tables is for illustrative
purposes only. Such data relates to the performance of CITSF's entire portfolio
of recreation vehicle retail installment sale contracts and direct loans
originated and serviced by CITSF and is not historical data regarding the
Contracts alone, since the Contracts constitute only a portion of CITSF's
portfolio. Additionally, the loss and delinquency experience presented in the
preceding tables with respect to recreation vehicle retail installment sale
contracts and direct loans securitized by CITSF prior to May 1996 is calculated
using the method required by the related transaction documents which differs
from the method used by CITSF to calculate losses and delinquencies on the
remainder of its owned or subsequently securitized contracts. The
securitizations prior to May 1996 require a contract to be reflected as a loss
in the month it becomes 120 days delinquent, unless it is in repossession. The
data presented in the preceding tables reflect this calculation method for these
securitizations. The loss data presented in the preceding tables with respect to
CITSF's remaining owned or previously securitized contracts reflects CITSF's
general practice of recording a loss when all amounts CITSF expects to recover
either by sale or disposition of the related financed vehicle or otherwise have
been received. As a result, the data in the preceding tables with respect to
contracts securitized prior to May 1996 reflects higher losses and lower
delinquencies than would have been reported had these contracts not been
securitized.
In August 1994, CITSF adopted a risk-adjusted pricing policy and
changed its credit criteria and underwriting guidelines as described under "The
CIT Group/Sales Financing, Inc., Servicer--CITSF's Underwriting Guidelines" in
the Prospectus. In connection with this change, CITSF reduced the minimum credit
score for approval of a new credit in order to extend credit to less
creditworthy borrowers than under the credit criteria previously in effect.
CITSF believes that these changes have resulted in increased delinquencies and
losses. The seasoning of contracts originated using the revised 1994
underwriting guidelines and the continued runoff of contracts originated prior
to August 1994 are reflected in the increased delinquencies and loan losses
during 1996, 1997 and the first quarter of 1998. In addition, the delinquency
and loss performance of the CITSF portfolio has been and will continue to be
influenced by overall economic and other trends including the
S-33
<PAGE>
<PAGE>
propensity of consumers to fail to make timely payments on consumer credit
obligations and their willingness to seek bankruptcy protection. All of the
Contracts were originated under the credit criteria adopted by CITSF in August
1994. Accordingly, the data presented in the preceding tables should not
necessarily be considered as a basis for assessing the likelihood, amount or
severity of delinquencies or losses on the Contracts and no assurance can be
given that the delinquency and loan loss experience presented in the preceding
tables will be indicative of the experience on the Contracts.
In August 1997, CITSF entered into an agreement to provide
servicing for approximately 42,000 additional recreation vehicle and
recreational boat consumer contracts for another financial institution, which
CITSF is also servicing at its Asset Service Center (but which are not included
in the preceding tables). The addition of these contracts to its servicing
portfolio required CITSF to increase staffing levels and reallocate existing
staff at the Asset Service Center in order to support these contracts. The
integration of these accounts was a contributing factor to the increase in
delinquencies experienced during the fourth quarter of 1997.
THE NOTES
GENERAL
The CIT RV Trust 1998-A Class A-1 5.83% Asset-Backed Notes (the
"Class A-1 Notes"), Class A-2 5.92% Asset-Backed Notes (the "Class A-2 Notes"),
Class A-3 5.99% Asset-Backed Notes (the "Class A-3 Notes"), Class A-4 6.09%
Asset-Backed Notes (the "Class A-4 Notes"), Class A-5 6.12% Asset-Backed Notes
(the "Class A-5 Notes" and, together with the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes, the "Class A Notes") and
Class B 6.29% 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 $111,000,000 aggregate principal
amount of Class A-1 Notes, $94,000,000 aggregate principal amount of Class A-2
Notes, $54,000,000 aggregate principal amount of Class A-3 Notes, $80,000,000
aggregate principal amount of Class A-4 Notes, $37,000,000 aggregate principal
amount of Class A-5 Notes and $18,000,000 aggregate principal amount of Class B
Notes pursuant to the terms of an Indenture, to be dated as of June 1, 1998 (as
amended and supplemented from time to time, the "Indenture") between The First
National Bank of Maryland, 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 July 15, 1998. Payments on the Notes on each
Distribution Date will be made to the holders of record of the related Notes on
the related Record Date. A "Business Day" is any day other than a Saturday,
Sunday or any day on which banking institutions or trust companies in the states
of New York, Delaware, Maryland 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 5.83% per
annum (the "Class A-1 Interest Rate"), the Class A-2 Notes will bear interest at
the rate of 5.92% per annum (the "Class A-2 Interest Rate"), the Class A-3 Notes
will bear interest at the rate of 5.99% per annum (the "Class A-3 Interest
Rate"), the Class A-4 Notes will bear interest at the rate of 6.09% per annum
(the "Class A-4 Interest Rate"), the Class A-5 Notes will bear interest at the
rate of 6.12% per annum (the "Class A-5
S-34
<PAGE>
<PAGE>
Interest Rate") and the Class B Notes will bear interest at the rate of 6.29%
per annum (the "Class B Interest Rate"). The interest rates for the various
classes of Notes are referred to herein collectively as "Interest Rates."
Interest on the outstanding principal amount of Notes will accrue
at the applicable Interest Rate for any Distribution Date from and including the
preceding Distribution Date (or the Closing Date in the case of the first
Distribution Date) to but excluding such Distribution Date. Interest will be
paid to the Noteholders of record on the related Record Date, on each
Distribution Date, to the extent of available funds therefor, in an amount equal
to the sum of (A) the product of (x) the applicable Interest Rate, (y) the
outstanding principal balance of the class of Notes immediately preceding such
Distribution Date and (z) a fraction the numerator of which is one and the
denominator of which is twelve (or, in the case of the first Distribution Date,
the numerator of which is the actual number of days elapsed (based on a 360-day
year consisting of twelve 30-day months) from and including the Closing Date to
but excluding such Distribution Date and the denominator of which is 360), and
(B) any applicable Interest Carryover Shortfall.
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 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 on the Notes will be payable on each Distribution Date
in an amount equal to the 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
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.
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 or (iv) on the Class A-5 Notes
until the Class A-4 Notes have been paid in full. No principal payments will be
made on the Class B Notes until the Class A 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 amount of principal required to be distributed to Noteholders
under the Indenture is generally limited to amounts available to be deposited in
the Note Distribution Account for such purpose. Therefore, the failure to pay
principal on any class of Notes will not result in the occurrence of an Event of
Default until the Note Final Scheduled Distribution Date applicable to such
class of the Notes. The outstanding principal amount of the Class A-1 Notes, to
the extent not previously paid, will be payable on the January 2004 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 March 2007 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 April 2009
Distribution Date (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 February 2012 Distribution Date (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 November 2013 Distribution Date (the "Class A-5
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<PAGE>
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
January 2017 Distribution Date (the "Class B Note Final Scheduled Distribution
Date"). The actual date on which the aggregate outstanding principal amount of
each class of Notes is paid may be earlier than its respective Note Final
Scheduled Distribution Date based on a variety of factors including an Optional
Purchase or Auction Sale.
REDEMPTION
In the event of an Optional Purchase or Auction Sale, the
outstanding Notes will be redeemed in whole, but not in part, at a redemption
price equal to the unpaid principal amount of the Notes plus accrued and unpaid
interest thereon at the applicable Interest Rates. An Optional Purchase of all
the Contracts by CITSF may occur at CITSF's option on any Distribution Date on
which the Pool Balance as of the last day of the related Due Period is 10% or
less of the Initial Pool Balance. An Auction Sale may occur, and may result in
the sale of the Contracts remaining in the Trust, following the first
Distribution Date on which the Pool Balance as of the last day of the related
Due Period is 5% or less of the Initial Pool Balance.
RIGHTS OF NOTEHOLDERS; INDENTURE
The Indenture Trustee will have the power to direct the Owner
Trustee to take certain actions in connection with the administration of the
Trust property until the Notes have been paid in full and the Indenture has been
discharged in accordance with its terms. The Indenture will specifically
prohibit the Owner Trustee from taking any action that would impair the
Indenture Trustee's security interest in the Trust property and will require the
Owner Trustee to obtain the consent of the Indenture Trustee or Noteholders
representing not less than a majority of the aggregate principal amount of the
Notes then outstanding before modifying, amending, supplementing, waiving or
terminating any provision of the Sale and Servicing Agreement. Therefore, until
the Notes have been paid in full, the ability to direct the Trust with respect
to certain actions permitted to be taken under the Sale and Servicing Agreement
rests with the Indenture Trustee and the Noteholders.
If an Event of Default should occur and be continuing with
respect to the Notes, the Indenture Trustee or holders of not less than 66 2/3%
of the aggregate outstanding principal amount of the Controlling Notes (as
defined in the Prospectus) may declare the principal of the Notes to be
immediately due and payable. Such declaration may, under certain circumstances,
be rescinded by the holders of not less than 66 2/3% of the aggregate
outstanding principal amount of such Controlling Notes.
If an Event of Default under the Indenture occurs and the Notes
are accelerated, the Indenture Trustee will have the right or will be required
in certain circumstances to exercise remedies as a secured party, including
selling the Contracts, in order to pay the principal of, and accrued interest
on, the Notes. Upon the occurrence of an Event of Default, the Class B
Noteholders will not have any right to direct or to consent to any action by the
Indenture Trustee, including acceleration of the Notes or the sale of Contracts,
until the Class A Noteholders have been paid in full. There is no assurance that
the proceeds of any sale of the Contracts would be equal to or greater than the
aggregate outstanding principal amount of the Notes plus, in each case, accrued
interest thereon. Because neither interest nor principal is distributed to Class
B Noteholders following an Event of Default and acceleration of the Notes until
the Class A Notes have been paid in full, the interests of the Class A
Noteholders and the Class B Noteholders may conflict, and the exercise by the
Indenture Trustee of its right to sell the Contracts or exercise other remedies
may cause the Class B Noteholders to suffer a loss of all or part of their
investment.
Upon the occurrence of an Event of Default under the Indenture,
the assets of the Trust may be sold upon giving prior written notice to the
Rating Agencies, which may result in early retirement of the Notes. If the net
proceeds from the liquidation of the Contracts (after payment of the Servicer
Payment) and any amounts on deposit in the Note Distribution Account are not
sufficient to pay the principal amount of and accrued interest on the Notes in
full, holders of the Notes will incur a loss. Such net proceeds together with
amounts on deposit in the Note Distribution Account will be distributed to
Securityholders (after payment of the fees and expenses of the Indenture Trustee
and the Servicer Payment) in the following order of priority: (i) to the Class A
Noteholders for amounts due and unpaid on the Class A Notes for interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on each class of the Class A Notes for interest, (ii) to the
Class A Noteholders for amounts due and unpaid on the Class A Notes for
principal, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Class A Notes for principal, until the principal
amount of the Class A Notes is reduced to zero, (iii) to the Class B Noteholders
for amounts due and unpaid on the Class B Notes for interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Class B Notes for interest, (iv) to the Class B Noteholders for amounts due
and unpaid on the Class B Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Class B
Notes for principal, until the principal amount of the Class B Notes is reduced
to zero, (v) to the Certificateholders for amounts due and unpaid on the
Certificates for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Certificates for interest and
(vi) to the Certificateholders for amounts due and unpaid on the Certificates
for the Certificate Balance, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Certificates for the
Certificate Balance.
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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. Until the Class
A Noteholders have been paid in full, none of the Class B Noteholders will have
the ability to waive defaults by the Servicer, including defaults that could
materially adversely affect the Class B Noteholders.
THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to the
Trust Agreement, a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is a part. The
following summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Trust Agreement.
GENERAL
The CIT RV Trust 1998-A 6.70% Asset-Backed Certificates (the
"Certificates") will represent fractional undivided interests in the Trust. The
Trust will issue $6,060,865 aggregate face amount of Certificates pursuant to a
Trust Agreement, to be dated as of June 1, 1998 between the Seller and the Owner
Trustee (the "Trust Agreement"), a form of which was filed as an exhibit to the
Registration Statement of which this Prospectus Supplement forms a part. A copy
of the Trust Agreement will be available from the Company, upon request, to
holders of the Notes or Certificates and will be filed with the Commission
following the issuance of the Notes and the Certificates. Payments in respect of
the Certificates will be subordinated to payments on the Notes to the extent
described herein. The following summary describes certain terms of the
Certificates and the Trust Agreement. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Certificates and the Trust Agreement. Where
particular provisions or terms used in the Trust Agreement are referred to, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summary.
The Certificates will be offered for purchase in minimum
denominations of $20,000 and integral multiples of $1,000 in excess thereof;
provided, however, that one Certificate may be issued in a denomination other
than an integral multiple of $1,000 such that The CIT GP Corporation III, a
Delaware corporation and a wholly owned subsidiary of CIT (the "Affiliated
Owner") may be issued at least 1% of the Original Certificate Balance. The
Certificates will be issued in fully registered, certificated form ("Definitive
Certificates") to Certificateholders or their nominees. See "Certain Information
Regarding the Securities--Definitive Securities" in the Prospectus. Purchasers
of Certificates and their assignees (i) must represent that they are United
States persons (as defined in Section 7701(a) of the Code) and provide a
certification of non-foreign status under penalties of perjury and (ii) must
represent and certify that they are not (a) an employee benefit plan (as defined
in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(b) a plan described in Section 4975(e)(1) of the Code, or (c) any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity.
Payments of interest and principal on the Certificates with
respect to each Due Period will be made on each Distribution Date, commencing
July 15, 1998, to the extent of amounts available therefor. With respect to any
Distribution Date, the "Due Period" will be the calendar month preceding the
month of such Distribution Date. The first Due Period will commence on and
include June 1, 1998 and will end on and include June 30, 1998. 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 6.70% per
annum (the "Pass-Through Rate"). Interest on the Certificate Balance will accrue
at the Pass-Through Rate for any Distribution Date from and including the
preceding Distribution
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<PAGE>
Date (or the Closing Date in the case of the first Distribution Date) to but
excluding such Distribution Date. Interest will be paid to the
Certificateholders of record on the related Record Date, on each Distribution
Date, to the extent of available funds therefor, in an amount equal to the sum
of (A) the product of (x) the Pass-Through Rate, (y) the Certificate Balance
immediately preceding such Distribution Date and (z) a fraction the numerator of
which is one and the denominator of which is twelve (or, in the case of the
first Distribution Date, the numerator of which is the actual number of days
elapsed (based on a 360-day year consisting of twelve 30-day months) from and
including the Closing Date to but excluding such Distribution Date and the
denominator of which is 360), and (B) any applicable Interest Carryover
Shortfall.
On each Distribution Date, the Owner Trustee will distribute pro
rata to Certificateholders accrued interest at the Pass-Through Rate on the
outstanding Certificate Balance to the extent of the Available Amount remaining
after payment of the Servicer Payment and interest and principal due on the
Notes on such Distribution Date. To the extent the remaining Available Amount on
a Distribution Date is insufficient to pay Certificateholders the entire amount
of interest due on such Distribution Date, such shortfall will be funded from
the Reserve Account, subject to the Available Reserve Amount remaining after any
withdrawals from the Reserve Account to make payments of interest and principal
due on the Notes on such Distribution Date, under the circumstances described
herein. Interest on the Certificates for any Distribution Date due but not paid
on such Distribution Date will be due on the next Distribution Date in addition
to an amount equal to interest on such amount at the Pass-Through Rate (to the
extent lawful). Interest on the Certificates will be calculated on the basis of
a 360-day year consisting of twelve 30-day months.
The rights of Certificateholders to receive distributions of
interest will be subordinated to the rights of the Noteholders to receive
payment in full of all amounts of interest and principal which the Noteholders
are entitled to be paid on such Distribution Date. If an Event of Default has
occurred and the Notes have been accelerated, Certificateholders will not be
entitled to receive any distributions of interest or principal until the Notes
have been paid in full.
DISTRIBUTION OF PRINCIPAL
On each Distribution Date prior to the Certificate Cross-Over
Date, the Certificateholders will not be entitled to any payments of principal.
On each Distribution Date on or after the Certificate 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 Principal Distribution Amount (less the portion, on the Certificate
Cross-Over Date, of the Principal Distribution Amount required to pay the Notes
on such date) 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 Certificate 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 Principal
Distribution Amount due on such Distribution Date, such shortfall will be funded
from the Reserve Account, subject to the Available Reserve Amount remaining
after any withdrawals from the Reserve Account to make payments of interest and
principal due on the Notes and interest due on the Certificates on such
Distribution Date, under the circumstances described herein. The rights of
Certificateholders to receive distributions of principal (following the payment
of interest on the Certificates) will be subordinated to the rights of
Noteholders to receive distributions of interest and principal to the extent
described herein. The Certificate Balance of the Certificates, to the extent not
previously paid, will be payable on the Distribution Date occurring in January
2019 (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 10% or less of the Initial Pool Balance. An Auction Sale
may occur, and may result in the sale of the Contracts remaining in the Trust,
following the first Distribution Date on which the Pool Balance as of the last
day of the related Due Period is 5% or less of the Initial Pool Balance. The
"Initial Pool Balance" equals the Pool Balance as of the Cut-off Date.
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LIMITED RIGHTS
If an Event of Default occurs under the Indenture, the
Certificateholders will not have any right to direct or to consent to any
remedies therefor exercisable by the Indenture Trustee, including the sale of
the Contracts, until the Notes have been paid in full. If an Event of
Termination occurs, the Certificateholders will not have any right to direct or
consent to removal of the Servicer or to waive such Event of Termination until
the Notes have been paid in full. See "Risk Factors--Rights of Noteholders and
Certificateholders" herein and "The Purchase Agreements and the Trust
Documents--Event of Termination," "--Rights Upon Event of Termination" and
"--Waiver of Past Defaults" in the Prospectus.
ENHANCEMENT
Subordination. To the extent described herein, the rights of the
Certificateholders to receive distributions with respect to the Contracts will
be subordinated to the rights of the Noteholders, and the rights of the Class B
Noteholders to receive distributions with respect to the Contracts will be
subordinated to the rights of the Class A Noteholders. This subordination is
intended to enhance the likelihood of timely receipt by the Class A Noteholders
(and to a lesser extent the Class B Noteholders) of the full amount of interest
and principal required to be paid to them, and to afford the Class A Noteholders
(and to a lesser extent the Class B Noteholders) limited protection against
losses in respect of the Contracts.
No distribution will be made to the Certificateholders on any
Distribution Date in respect of (i) interest until the full amount of interest
and principal on the Notes payable on such Distribution Date has been
distributed to the Noteholders, and (ii) principal until the Notes have been
paid in full.
No distribution will be made to the Class B Noteholders on any
Distribution Date in respect of (i) interest until the full amount of interest
on the Class A Notes payable on such Distribution Date has been distributed to
the Class A Noteholders, and (ii) principal until the Class A Notes have been
paid in full.
Reserve Account. On the Closing Date, an account (the "Reserve
Account") will be established pursuant to the Sale and Servicing Agreement. The
Indenture Trustee will have the right to withdraw (or cause to be withdrawn)
payments from the Reserve Account under certain circumstances specified below.
The Reserve Account will be funded on the Closing Date in the amount of
$9,000,000 (the "Initial Reserve Amount") from the proceeds of a loan (the
"Loan") to be made by one or more affiliates of the Company. The affiliates of
CIT that provided the Loan used to fund the Reserve Account on the Closing Date
only have recourse against the Trust for repayment of the Loan from the Reserve
Account Surplus, certain investment earnings on funds deposited in the Reserve
Account and payments from the Reserve Account upon maturity of the Loan, in each
case as set forth in the Sale and Servicing Agreement and related documents.
The Reserve Account will be an Eligible Account (as defined in
the Prospectus). Funds on deposit in the Reserve Account will be invested (at
the direction of the Company or one or more of its affiliates) in certain
investments which satisfy the criteria established by each of the Ratings
Agencies (which may include obligations of CIT). The Reserve Account and any
amounts therein shall be held by or on behalf of the Indenture Trustee in
accordance with the Sale and Servicing Agreement for the benefit of the
Securityholders and the Trust, and as provided in the Sale and Servicing
Agreement and related documents.
The Reserve Account will be terminated following the earlier to
occur of (a) the date on which the Certificate Balance is paid in full or (b)
the Certificate Final Scheduled Distribution Date, and any funds remaining
therein will be paid to one or more affiliates of the Company that provided the
Loan or to the Affiliated Owner.
On each Distribution Date, the amount available to be withdrawn
from the Reserve Account for the benefit of the Securityholders (the "Available
Reserve Amount") will be equal to the lesser of (i) the Specified Reserve Amount
and (ii) the amount on deposit in the Reserve Account, exclusive of interest and
earnings thereon and any net investment gains, and before giving effect to any
deposit to be made to the Reserve Account on such Distribution Date.
On each Determination Date, the Servicer will determine the
amounts, if any, required to be withdrawn from the Reserve Account on the
related Distribution Date for payment to the Securityholders. If the Available
Amount on any Distribution Date is insufficient (after payment of the Servicer
Payment) to pay the interest and principal required to be distributed on the
Securities on such Distribution Date, the Indenture Trustee will withdraw (or
cause to be withdrawn) from the Reserve Account an amount equal to the lesser of
the amount of such deficiency or the Available Reserve Amount. The Indenture
Trustee will withdraw (or cause to be withdrawn) such amount from the Reserve
Account and will deposit (or cause to be deposited) such amount into the Note
Distribution Account and/or Certificate Distribution Account on the Business Day
before the Distribution Date with respect to which such withdrawal was made. Any
amounts withdrawn from the Reserve Account will be distributed to the
Securityholders in the same order of priority as distributions of the Available
Amount. If the Available Reserve Amount is zero, Securityholders will bear the
risk of loss resulting from default by Obligors and will have to
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look primarily to the value of the related Financed Vehicles for recovery of the
outstanding principal and unpaid interest on the defaulted Contracts.
On each Distribution Date, the Servicer will deposit Excess
Collections, if any, into the Reserve Account in an amount sufficient to
increase the amount on deposit in the Reserve Account to the Specified Reserve
Amount for the next Distribution Date. Excess Collections, if any, not so
required to be deposited in the Reserve Account will be paid to one or more
affiliates of the Company that provided the Loan or to the Affiliated Owner.
"Excess Collections" for any Distribution Date will equal the
amounts collected or deposited in respect of the Contracts in the related Due
Period and which remain in the Collection Account on such Distribution Date
after taking into account distributions to be made on the Securities, the
Servicer Payment made to the Servicer on such Distribution Date, and the
Servicing Fee (including any unpaid Servicing Fees for past Distribution Dates)
paid on such Distribution Date.
The Specified Reserve Amount with respect to any Distribution
Date will equal 2.25% of the Pool Balance as of the first day of the related Due
Period, but in no event less than $4,700,000. If, with respect to any
Distribution Date, (a) the average of the principal balance of Contracts 60 days
or more delinquent (including Contracts relating to Financed Vehicles that have
been repossessed) as a percentage of the Pool Balance for the three preceding
Due Periods exceeds the Maximum Average Delinquency Rate for such Distribution
Date or (b) the Cumulative Net Loss Rate for such Distribution Date exceeds the
Maximum Net Loss Rate for such Distribution Date, then the Specified Reserve
Amount with respect to the next Distribution Date shall be 4.25% of the Pool
Balance as of the first day of the related Due Period, but in no event less than
$4,700,000. The Specified Reserve Amount is determined on each Distribution
Date. Therefore, under certain circumstances, the Specified Reserve Amount may
increase on a Distribution Date to 4.25% of the Pool Balance as of the first day
of the related Due Period and decrease on a subsequent Distribution Date to
2.25% of the Pool Balance as of the first day of the related Due Period.
The Specified Reserve Amount shall never be greater than the sum
of the aggregate principal amount of the Notes and the outstanding Certificate
Balance. The Specified Reserve Amount may be reduced from time to time to
amounts less than the Specified Reserve Amount as described herein if the Rating
Agencies shall have given prior written notice to the Seller, the Servicer and
the Issuer that such reduction will not result in a downgrade or withdrawal of
the then current rating of the Notes or the Certificates. In several
circumstances the Servicer must determine on a Distribution Date the Specified
Reserve Amount for the next Distribution Date; in order to make the calculations
required, the Servicer will use the data for the three Due Periods preceding the
Due Period related to such next Distribution Date.
"Cumulative Net Loss Rate" means, with respect to any
Distribution Date, the fraction, expressed as a percentage, the numerator of
which is equal to the aggregate Net Liquidation Losses since the Cut-off Date
and the denominator of which is equal to the Initial Pool Balance.
"Net Liquidation Losses" means the amount, if any, by which (a)
the principal balance of all Contracts which became Liquidated Contracts since
the Cut-off Date exceeds (b) the Net Liquidation Proceeds received since the
Cut-off Date in respect of all Liquidated Contracts.
The "Maximum Average Delinquency Rate" for any Distribution Date
is as set forth below:
<TABLE>
<CAPTION>
Maximum Average
Distribution Date Delinquency Rate
----------------- ----------------
<S> <C>
July 1998 - June 1999 1.25%
July 1999 - June 2000 2.00%
July 2000 - June 2001 2.50%
July 2001 and thereafter 3.00%
</TABLE>
The "Maximum Net Loss Rate" for any Distribution Date is as set
forth below:
<TABLE>
<CAPTION>
Maximum Net
Distribution Date Loss Rate
----------------- ---------
<S> <C>
July 1998 - June 1999 0.32%
July 1999 - September 1999 0.56%
October 1999 - December 1999 0.80%
January 2000 - March 2000 1.05%
April 2000 - June 2000 1.30%
July 2000 - September 2000 1.60%
October 2000 - December 2000 1.90%
</TABLE>
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<TABLE>
<CAPTION>
Maximum Net
Distribution Date Loss Rate
----------------- ---------
<S> <C>
January 2001 - March 2001 2.20%
April 2001 - June 2001 2.50%
July 2001 - September 2001 2.70%
October 2001 - December 2001 2.90%
January 2002 - March 2002 3.20%
April 2002 - June 2002 3.40%
July 2002 - September 2002 3.50%
October 2002 - December 2002 3.70%
January 2003 - March 2003 3.80%
April 2003 - June 2003 4.00%
July 2003 - September 2003 4.10%
October 2003 - December 2003 4.20%
January 2004 - March 2004 4.30%
April 2004 and thereafter 4.40%
</TABLE>
On each Distribution Date, the Indenture Trustee will withdraw
(or cause to be withdrawn) from the Reserve Account an amount equal to the
amount by which the Available Reserve Amount (after taking into account any
deposits to and withdrawals from the Reserve Account pursuant to the Sale and
Servicing Agreement on such Distribution Date) exceeds the Specified Reserve
Amount for the next Distribution Date (the "Reserve Account Surplus") and pay
such amount to one or more affiliates of the Company which provided the Loan or
to the Affiliated Owner. Any such amounts paid will not be available for
distribution to Securityholders.
In the event that funds are withdrawn from the Reserve Account to
make payments on the Securities or the Specified Reserve Amount is increased,
the sole source of funding of the Reserve Account after the Closing Date will be
Excess Collections. Neither the Seller, the Servicer nor any affiliate will be
obligated to deposit any of their own funds into the Reserve Account in the
event that Excess Collections are not sufficient to replenish the Reserve
Account.
THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
DISTRIBUTIONS
On each Determination Date, the Servicer will determine the
amount in the Collection Account available for distribution on the related
Distribution Date and inform the Indenture Trustee, who shall allocate such
amounts between the Notes and the Certificates and make distributions to
Securityholders, all as described below.
On each Distribution Date, the Indenture Trustee will withdraw
the Available Amount from the Collection Account to make the following payments
(to the extent sufficient funds are available therefor) in the following order:
(a) the Servicer Payment will (to the extent not previously
retained by the Servicer) be paid to the Servicer;
(b) on and prior to the Class B Note 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 Certificate Cross-Over Date, the Class B
Noteholders' Interest Distribution Amount will be deposited into the
Note Distribution Account, for payment to the Class B Noteholders for
amounts due and unpaid on the Class B Notes for interest, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Class B Notes for interest;
(d) on and prior to the Certificate Cross-Over Date, the
Principal Distribution Amount will be deposited into the Note
Distribution Account, for payment to the 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 and (vi) to the principal balance
of the Class B Notes until the principal balance of the Class B Notes
is reduced to zero;
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(e) the Certificateholders' Interest Distribution Amount will be
deposited into the Certificate Distribution Account, for payment to
the Certificateholders for interest;
(f) on and after the Certificate Cross-Over Date, the Principal
Distribution Amount will be deposited, to the extent such amount is
not used to pay principal on the Notes, into the Certificate
Distribution Account, for payment to the Certificateholders for
principal;
(g) 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;
(h) 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
(i) the balance, if any, will be distributed to one or more
affiliates of the Company that provided the Loan or to the Affiliated
Owner.
For purposes hereof, the following terms shall have the following
meanings:
The "Principal Distribution Amount" on each Distribution Date is
equal to the sum of the following amounts with respect to the related Due
Period, in each case calculated in accordance with the method specified in each
Contract: (i) all payments of principal (including all Principal Prepayments
applied during the related Due Period) made on each Contract during the related
Due Period, (ii) the Stated Principal Balance of each Contract which, as of the
related Deposit Date, was purchased by CITSF or the Servicer pursuant to the
Sale and Servicing Agreement, (iii) the Stated Principal Balance of each
Contract which became a Liquidated Contract during the related Due Period, and
(iv) the Principal Carryover Shortfall; 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.
On the Note Final Scheduled Distribution Date of each class of
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 Notes to zero.
On the Certificate Final Scheduled Distribution Date, the amount
required to be distributed to Certificateholders will be the lesser of (a) any
payments of principal due and remaining unpaid on each Contract owned by the
Trust as of the last day of the immediately preceding Due Period plus the
Available Reserve Amount, or (b) the amount that is necessary (after giving
effect to the other amounts to be deposited in the Certificate Distribution
Account on such Distribution Date and allocable to principal) to reduce the
Certificate Balance to zero.
The "Stated Principal Balance" of a Contract for any Due Period
is its unpaid principal balance at the end of the related Due Period, but
without giving effect to any adjustments due to bankruptcy or similar
proceedings.
A "Liquidated Contract" is a defaulted Contract as to which the
Servicer has recovered all amounts that it expects to recover either by sale or
disposition of the related Financed Vehicle or otherwise, but in any event a
Contract shall be deemed to become a Liquidated Contract no later than the date
on which the Servicer has received proceeds from the sale or disposition of such
Financed Vehicle.
"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.
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"Liquidation Expenses" means all reasonable fees of third parties
and other expenses incurred by the Servicer in the course of converting any
defaulted Contract or Financed Vehicle into cash proceeds (including, without
limitation, expenses relating to recovery, repossession and sale of such
Financed Vehicle).
The "Available Amount" on any Distribution Date is equal to the
excess of (A) the sum of (i) all amounts on deposit in the Collection Account
attributable to collections or deposits made in respect of the Contracts
(including any Late Fees (as defined in the Prospectus)) in the related Due
Period and (ii) the Purchase Price for any Contract repurchased by CITSF as a
result of breaches of certain representations and warranties or purchased by the
Servicer as a result of breaches of certain covenants and any Monthly Advances
made by the Servicer, if such Purchase Price or Monthly Advance is paid on the
Deposit Date immediately preceding such Distribution Date, over (B) the sum of
the following amounts (to the extent that the Servicer has not already withheld
such amounts from collections on the Contracts): (i) any repossession profits on
Liquidated Contracts, Liquidation Expenses incurred and taxes and insurance
advanced by the Servicer in respect of Financed Vehicles that are reimbursable
to the Servicer under the Sale and Servicing Agreement, (ii) any amounts
incorrectly deposited in the Collection Account, (iii) net investment earnings
on the funds in the Collection Account, and (iv) any other amounts permitted to
be withdrawn from the Collection Account by the Servicer (or to be retained by
the Servicer from collections on the Contracts) pursuant to the Sale and
Servicing Agreement.
The "Purchase Price" for any Contract will be the remaining
principal amount outstanding on such Contract on the date of repurchase, plus
thirty days' interest thereon at the Contract Rate plus the reimbursement then
due to the Servicer for outstanding Monthly Advances on such Contract.
"Certificateholders' 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 (x) the Certificateholders' Monthly Interest
Amount and (y) the Certificateholders' Interest Carryover Shortfall for such
Distribution Date.
"Certificateholders' Monthly Interest Amount" means, for any
Distribution Date, an amount equal to the product of (x) one-twelfth (or, in the
case of the first Distribution Date, a fraction the numerator of which is the
actual number of days elapsed (based on a 360-day year consisting of twelve
30-day months) from and including the Closing Date to but excluding such
Distribution Date and the denominator of which is 360), (y) the Pass-Through
Rate and (z) the Certificate Balance on such Distribution Date (or, in the case
of the first Distribution Date, the Original Certificate Balance), before giving
effect to all distributions of principal to the Certificateholders on such
Distribution Date.
"Class A Noteholders' Interest Carryover Shortfall" means, for
any Distribution Date for each class of Class A Notes (other than the first
Distribution Date), the excess of (i) the Class A Noteholders' Interest
Distribution Amount for the preceding Distribution Date for such class of Class
A Notes, over (ii) the amount in respect of interest that was actually deposited
into the Note Distribution Account in respect of such class of Class A Notes on
such preceding Distribution Date, plus interest on the amount of interest due
but not paid to the Class A Noteholders of such class on the preceding
Distribution Date, to the extent permitted by law, at the applicable Interest
Rate borne by such class of Class A Notes.
"Class A Noteholders' Interest Distribution Amount" means, for
any Distribution Date for any class of Class A Notes, the sum of (x) the Class A
Noteholders' Monthly Interest Amount for such Distribution Date for such class
of Class A Notes and (y) the Class A Noteholders' Interest Carryover Shortfall
for such Distribution Date for such class of Class A Notes.
"Class A Noteholders' Monthly Interest Amount" means, for any
Distribution Date for any class of Class A Notes, an amount equal to the product
of (x) the applicable Interest Rate, (y) the outstanding principal balance of
such class of Class A Notes on such Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date) before giving effect to all
distributions of principal to the Class A Noteholders on such Distribution Date
and (z) one-twelfth (or, in the case of the first Distribution Date, a fraction,
the numerator of which is the actual number of days elapsed (based on a 360-day
year consisting of twelve 30-day months) from and including the Closing Date to
but excluding such Distribution Date and the denominator of which is 360).
"Class B Noteholders' Interest Carryover Shortfall" means, for
any Distribution Date for the Class B Notes (other than the first 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
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interest due but not paid to the Class B Noteholders on the preceding
Distribution Date, to the extent permitted by law, at the Class B Interest Rate.
"Class B Noteholders' Interest Distribution Amount" means, for
any Distribution Date for the Class B Notes, the sum of (x) the Class B
Noteholders' Monthly Interest Amount for such Distribution Date and (y) the
Class B Noteholders' Interest Carryover Shortfall for such Distribution Date.
"Class B Noteholders' Monthly Interest Amount" means, for any
Distribution Date for the Class B Notes, an amount equal to the product of (x)
the applicable Interest Rate, (y) the outstanding principal balance of the Class
B Notes on such Distribution Date (or, in the case of the first Distribution
Date, on the Closing Date) before giving effect to all distributions of
principal to the Class B Noteholders on such Distribution Date and (z)
one-twelfth (or, in the case of the first Distribution Date, a fraction, the
numerator of which is the actual number of days elapsed (based on a 360-day year
consisting of twelve 30-day months) from and including the Closing Date to but
excluding such Distribution Date and the denominator of which is 360).
"Principal Carryover Shortfall" means, for any Distribution Date,
the excess of (i) the Principal Distribution Amount for the preceding
Distribution Date, over (ii) the amount in respect of principal that was
actually distributed to holders of the Securities on such Distribution Date.
"Pool Balance" means the aggregate outstanding principal balance
of the Contracts; provided that a Liquidated Contract and a Repurchased Contract
shall cease to be included in the Pool Balance as of the last day of the Due
Period in which such Contract became a Liquidated Contract or a Repurchased
Contract, as the case may be.
To the extent that the Available Amount is insufficient to pay
the Certificateholders' Interest Distribution Amount, the Noteholders' Interest
Distribution Amount and/or the Principal 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' Interest Distribution Amount, the Noteholders' Interest
Distribution Amount and the Principal Distribution Amount over the Available
Amount remaining after payment of the Servicer Payment. Any amount so withdrawn
from the Reserve Account by or on behalf of the Indenture Trustee will be
deposited first into the Note Distribution Account for distribution to the
Noteholders in the same order of priority as described above and second into the
Certificate Distribution Account for distribution to the Certificateholders in
the same order of priority as described above.
The principal balance of the Class A-1 Notes, to the extent not
previously paid, will be due on the Class A-1 Note Final Scheduled Distribution
Date; the principal balance of the Class A-2 Notes, to the extent not previously
paid, will be due on the Class A-2 Note Final Scheduled Distribution Date; the
principal balance of the Class A-3 Notes, to the extent not previously paid,
will be due on the Class A-3 Note Final Scheduled Distribution Date; the
principal balance of the Class A-4 Notes, to the extent not previously paid,
will be due on the Class A-4 Note Final Scheduled Distribution Date; the
principal balance of the Class A-5 Notes, to the extent not previously paid,
will be due on the Class A-5 Note Final Scheduled Distribution Date; and the
principal balance of the Class B Notes, to the extent not previously paid, will
be due on the Class B Note Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of any class of Notes is paid
may be earlier than the respective Note Final Scheduled Distribution Dates set
forth above based on a variety of factors, including those described under
"Maturity and Prepayment Considerations--Weighted Average Life of the
Securities" herein.
MODIFICATION OF CONTRACTS
Consistent with its customary servicing practices and procedures,
the Servicer may, in its discretion, arrange with an Obligor to defer,
reschedule, extend or modify the payment schedule of a Contract or otherwise to
modify the terms of a Contract provided that (i) the maturity of such Contract
would not extend beyond the 180th day prior to the Certificate Final Scheduled
Distribution Date and (ii) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sale contract or direct
loan. The Servicer may, in accordance with its customary servicing procedures,
in its good faith judgment, waive any Late Fees that may be due and payable
under any Contract. Notwithstanding the foregoing, in connection with the
settlement by the Servicer of a defaulted Contract, the Servicer may forgive a
portion of such Contract, if in its discretion it believes that the acceptance
of the settlement proceeds from the related Obligor would result in the Trust's
receiving a greater amount of collections than the Net Liquidation Proceeds that
would result from repossessing and liquidating the related Financed Vehicle.
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
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Liquidation Proceeds or insurance proceeds with respect to such Contract. The
Servicer shall be reimbursed for any Monthly Advance from subsequent interest
collections with respect to such Contract. If the Servicer determines in its
good faith judgment that an unreimbursed Monthly Advance shall not ultimately be
recoverable from subsequent interest collections, the Servicer may reimburse
itself for such Monthly Advance from collections on all Contracts. In
determining whether an advance is or will be nonrecoverable, the Servicer need
not take into account that it might receive any amounts in a deficiency judgment
against an Obligor. The Servicer will not make a Monthly Advance in respect of
(i) the principal component of any scheduled payment or (ii) a Payment Shortfall
arising from a Contract which has been prepaid in full or which has been subject
to a Relief Act Reduction during the related Due Period.
NON-REIMBURSABLE PAYMENTS
The Servicer will not be obligated to make any Non-Reimbursable
Payments (as defined in the Prospectus).
SERVICING COMPENSATION
The Servicer will be entitled to receive, out of collections on
the Contracts, a monthly fee (the "Servicing Fee") for each Due Period, payable
on the following Distribution Date, equal to the sum of (i) one-twelfth of the
product of 0.50% (the "Servicing Fee Rate") and the Pool Balance as of the last
day of the second preceding Due Period (or, in the case of the first
Distribution Date, as of the Cut-off Date) and (ii) any investment earnings (net
of investment expenses and losses) on amounts on deposit in the Collection
Account, the Note Distribution Account and the Certificate Distribution Account;
provided, however, if CITSF or an affiliate thereof is not the Servicer, the
Servicing Fee Rate shall be a rate determined at the time of the appointment of
a successor Servicer but not to exceed 1.00%. If CITSF or one of its affiliates
is the Servicer, the Servicing Fee (including any unpaid Servicing Fees for past
Distribution Dates) shall not be included in the Servicer Payment but instead
shall be payable to the Servicer on each Distribution Date only from the
Available Amount, if any, remaining after the principal and interest payable on
the Securities on such Distribution Date have been paid.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes and the
satisfaction and discharge of the Indenture, the Owner Trustee will succeed to
all the rights of the Indenture Trustee, and the Certificateholders will succeed
to all the rights of the Noteholders under the Sale and Servicing Agreement,
except as otherwise provided therein.
TERMINATION
In order to avoid excessive administrative expenses, CITSF will
be permitted at its option to purchase from the Trust, on any Distribution Date
on which the Pool Balance as of the last day of the related Due Period is 10% or
less of the Initial Pool Balance, all remaining Contracts at a price equal to
the aggregate Purchase Price for the Contracts (including defaulted Contracts
but excluding Liquidated Contracts), plus the appraised value of any other
property held by the Trust (less Liquidation Expenses) (the "Optional
Purchase"). Exercise of such right will effect early retirement of the
Securities.
After the first Distribution Date on which the Pool Balance as of
the last day of the related Due Period is 5% or less of the Initial Pool
Balance, the Indenture Trustee (or, if the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, the Owner Trustee)
shall solicit bids for the purchase of the Contracts remaining in the Trust (the
"Auction Sale"). In the event that satisfactory bids are received as 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.
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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 Internal Revenue
Service (the "IRS") were to successfully characterize the Trust as an entity
taxable as a corporation for Federal income tax purposes, the income from the
Contracts (reduced by deductions, possibly including interest on the Notes)
would be subject to Federal income tax at corporate rates, which could reduce
the amounts available to make payments on the Notes. Likewise, if the Trust were
subject to state or local income or franchise tax, the amount of cash available
to make payment on the Notes could be reduced.
If, contrary to the opinion of Schulte Roth & Zabel LLP, the IRS
successfully asserted that the Notes were not debt for Federal income tax
purposes, the Notes might be treated as equity interests in the Trust. If so,
and if the Trust were taxable as a corporation with the adverse consequences
described above, the taxable corporation would not be able to deduct interest on
the Notes. The remainder of this discussion assumes that the Notes will be
treated as debt and that the Trust will not be taxable as a corporation.
Interest Income on the Notes. The stated interest on the Notes
will be taxable to a Noteholder as ordinary income when received or accrued in
accordance with such Noteholder's method of tax accounting. Some or all of the
Notes may be issued with "original issue discount" within the meaning of Section
1273 of the Code ("OID"). The amount of OID on the Notes will equal the
difference between the issue price and the principal amount of the Notes unless
the OID is less than 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 such 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 the clearing organization
or financial institution is a foreign entity that has entered into an effective
withholding agreement with the IRS in accordance with recently issued Treasury
Regulations, the signed statement must be accompanied by
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a Form W-8 or substitute form provided by the foreign person that owns the Note.
If such interest is not portfolio interest, then any payment of such interest
will be subject to United States Federal withholding tax at a rate of 30%,
unless reduced or eliminated pursuant to an applicable income tax treaty.
Any capital gain realized on the sale, redemption, retirement or
other taxable disposition of a Note by a foreign person will be exempt from
United States Federal income and withholding tax, provided that (i) the gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign individual is not present in the United States for 183 days
or more in the taxable year or does not have a tax home in the United States.
If the interest, gain or income on a Note held by a foreign
person is effectively connected with the conduct of a trade or business in the
United States by the foreign person, the holder generally will be subject to
United States Federal income tax on the interest, gain or income at regular
Federal income tax rates. If a holder provides a Form 4224 indicating that
interest, gain or income is effectively connected with the conduct of a trade or
business in the United States, the interest, gain or income will be exempt from
the withholding tax previously discussed. In addition, if the foreign person is
a foreign corporation, it may be subject to a branch profits tax equal to 30% of
its "effectively connected earnings and profits" within the meaning of the Code
for the taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable income tax treaty (as modified by the branch
profits tax rules).
Under recently issued Treasury Regulations, current IRS Forms W-8
and 4224 are expected to be replaced by a new replacement form by 1999.
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." The Trust's income will consist
primarily of interest accrued on the Contracts (including appropriate
adjustments for market discount (as discussed below), and any original issue
discount and bond premium), investment income from investments in the Collection
Account, Note Distribution Account, Reserve Account and Certificate Distribution
Account and any gain upon collection or disposition of the Contracts. The
Trust's
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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 described in the Code ($124,500
for taxable years beginning in 1998, 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 generally on an aggregate basis. If the
IRS were to require that such calculations be made separately for each of the
Contracts, the Trust might be required to incur additional expense, but it is
believed that there would not be a material adverse effect on
Certificateholders.
Market Discount. To the extent that the Contracts are purchased
by the Trust for a price that is less than the aggregate stated redemption price
at maturity of the Contracts, the Trust must account for "market discount" on
the Contracts pursuant to Section 1276 of the Code. Any market discount will be
accounted for each of the Contracts on an individual basis, and the Trust will
make an election to calculate such market discount as it economically accrues.
Any income resulting from the accrual of market discount will be allocated to
the Certificateholders as described above.
Original Issue Discount and Bond Premium. It is believed that the
Contracts were not and will not be issued with original issue discount or at a
premium, and, therefore, the Trust should not have original issue discount
income or amortizable bond premium.
Disposition of Certificates. Generally, capital gain or loss will
be recognized on a sale of a Certificate in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificate sold.
A Certificateholder's tax basis in a Certificate will generally equal his cost
increased by his share of Trust income that is includable in his gross income
and decreased by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificate and the amount realized on a
sale of a Certificate would include the holder's share of the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a pro rata portion of such aggregate tax basis to the Certificates sold
(rather than maintaining a separate tax basis in each Certificate for purposes
of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the
holder's share of unrecognized accrued market discount on the Contracts would
generally be treated as ordinary income to the holder and would give rise to
special tax reporting requirements. The Trust does not expect to have any other
assets that would give rise to such special reporting requirements. Thus, to
avoid these special reporting requirements, the Trust will elect to include any
such market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate
amount of income (not including income attributable to disallowed miscellaneous
itemized deductions described above) over the life of the Certificates that
exceeds the aggregate cash distributions with respect thereto, such excess will
generally give rise to a capital loss upon the retirement of the Certificates.
S-48
<PAGE>
<PAGE>
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 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.
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
S-49
<PAGE>
<PAGE>
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 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.
S-50
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") among CIT, CITSF, the Company and
Salomon Brothers Inc as representative of Chase Securities Inc. and Credit
Suisse First Boston Corporation (collectively, the "Underwriters"), the Company
has agreed to sell to the Underwriters, and the Underwriters have severally
agreed to purchase, the respective principal amount of the Certificates and the
Notes offered hereby, as set forth opposite their respective names below:
CLASS A-1 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc ......................... $ 37,000,000
Chase Securities Inc. ........................ $ 37,000,000
Credit Suisse First Boston Corporation ....... $ 37,000,000
------------
Total ........................................ $111,000,000
============
</TABLE>
CLASS A-2 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc. ........................ $ 31,333,334
Chase Securities Inc. ........................ $ 31,333,333
Credit Suisse First Boston Corporation ....... $ 31,333,333
------------
Total ........................................ $ 94,000,000
============
</TABLE>
CLASS A-3 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc. ......................... $ 18,000,000
Chase Securities Inc. ......................... $ 18,000,000
Credit Suisse First Boston Corporation ........ $ 18,000,000
------------
Total ......................................... $ 54,000,000
============
</TABLE>
CLASS A-4 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc. .......................... $ 26,666,668
Chase Securities Inc. .......................... $ 26,666,666
Credit Suisse First Boston Corporation ......... $ 26,666,666
------------
Total .......................................... $ 80,000,000
============
</TABLE>
CLASS A-5 NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc ........................... $ 12,333,334
Chase Securities Inc. .......................... $ 12,333,333
Credit Suisse First Boston Corporation ......... $ 12,333,333
------------
Total .......................................... $ 37,000,000
============
</TABLE>
CLASS B NOTES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc. .......................... $ 6,000,000
Chase Securities Inc. .......................... $ 6,000,000
Credit Suisse First Boston Corporation ......... $ 6,000,000
-----------
Total .......................................... $18,000,000
===========
</TABLE>
S-51
<PAGE>
<PAGE>
CERTIFICATES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
----------------
<S> <C>
Salomon Brothers Inc. .......................... $2,020,289
Chase Securities Inc. .......................... $2,020,288
Credit Suisse First Boston Corporation ......... $2,020,288
----------
Total .......................................... $6,060,865
==========
</TABLE>
The Underwriting Agreement provides that the obligation of the
Underwriters to pay for and accept delivery of the Certificates or Notes is
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
Certificates and Notes if any are taken.
The Underwriters have advised the Company that they propose to
offer the Certificates and Notes directly to the public at the public offering
price set forth on the cover page hereof and to certain dealers at a price that
represents a concession not in excess of the percentage of the principal
balances of the Certificates and each class of Notes set forth below. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of the percentage of the principal balances of the Certificates and each class
of Notes set forth below.
<TABLE>
<CAPTION>
Selling Reallowance
Class Concession Discount
----- ---------- --------
<S> <C> <C>
A-1 .................... .140% .050%
A-2 .................... .169% .100%
A-3 .................... .195% .125%
A-4 .................... .220% .125%
A-5 .................... .240% .125%
B ...................... .270% .125%
Certificates ........... .360% .250%
</TABLE>
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 Notes be rated "AAA" by Standard & Poor's Ratings Service, a division of
The McGraw-Hill Companies, Inc. ("S&P") and "Aaa" by Moody's Investors Service,
Inc. ("Moody's") (each, a "Rating Agency"). 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 "Baa3" by Moody's. The ratings
of the Class A Notes will be based primarily on the Contracts, the Reserve
Account, and the terms of the Securities, including the subordination provided
by the Class B Notes and the Certificates. The ratings of the Class B Notes will
be based primarily on the Contracts, the Reserve Account and the terms of the
Securities, including the subordination provided by the Certificates. The
ratings of the Certificates will be based primarily on the Contracts and the
Reserve Account. The ratings of the Securities should be evaluated independently
from similar ratings on other types of securities. The ratings do not address
the possibility that Securityholders may suffer a lower than anticipated yield.
The ratings do not address the likelihood that the Securities will be retired
following the sale of the Contracts by the Trustee as described above under
"Auction Sale" or "Optional Purchase of the Contracts."
S-52
<PAGE>
<PAGE>
There can be no assurance that any rating will remain in effect
for any given period of time or that a rating will not be lowered or withdrawn
by the assigning Rating Agency if, in its judgment, circumstances so warrant. In
the event that the rating initially assigned to any of the Securities is
subsequently lowered or withdrawn for any reason, no person or entity will be
obligated to provide any additional credit enhancement with respect to such
Securities. There can be no assurance whether any other rating agency will rate
any of the Securities, or if one does, what rating would be assigned by any such
other rating agency. A security rating is not a recommendation to buy, sell or
hold securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by
Schulte Roth & Zabel LLP, New York, New York, for the Trust by Richards, Layton
& Finger, P.A., Wilmington, Delaware, and for the Underwriters by Stroock &
Stroock & Lavan LLP, New York, New York. The material federal income tax
consequences of the Securities will be passed upon for the Company by Schulte
Roth & Zabel LLP. The material Oklahoma state income tax consequences of the
Securities will be passed upon for the Company by Crowe & Dunlevy, P.C. Certain
legal matters will be passed upon for CITSF by its Senior Vice President and
General Counsel, Norman H. Rosen, Esq.
S-53
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<PAGE>
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Notes of CIT RV Trust 1998-A (the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of DTC, Cedel or Euroclear. The Global Securities will be
tradable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global
Securities through Cedel and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global
Securities through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against payment basis
through the respective Depositories of Cedel and Euroclear (in such capacity)
and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will
be subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their Participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in
the name of Cede as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, Cedel and
Euroclear will hold positions on behalf of their Participants through their
respective Depositories, which in turn will hold such positions in accounts as
DTC Participants.
Investors electing to hold their Global Securities through DTC
will follow the settlement practices specified by the Underwriters. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel
or Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global securities
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is
important to establish at the time of the trade where both the purchaser's and
seller's accounts are located to insure that settlement can be made on the
desired value date.
Trading between DTC Participants. Secondary market trading
between DTC Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary
market trading between Cedel Participants or Euroclear Participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
Trading between DTC Seller and Cedel or Euroclear Purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a Cedel Participant or a Euroclear Participant, the purchaser
will send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear 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
A-1
<PAGE>
<PAGE>
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.
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.
A-2
<PAGE>
<PAGE>
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 current
certification procedures. Under these regulations, a new Form W-8 will replace
current Forms W-8, 1001 and 4224. Further, pursuant to the new regulations,
while a beneficial owner will still be required to submit a Form W-8 to a
"qualified intermediary" through which it holds a Global Security, such
qualified intermediary (i.e., a foreign clearing organization or financial
institution that enters into a withholding agreement with the IRS) generally
will not be required to forward the Form W-8 to the withholding agent. Investors
are urged to consult their own tax advisors with respect to the application of
these new regulations.
The term "U.S. Person" means (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the laws
of the United States or any political subdivision thereof, (iii) a trust where
(a) a U.S. court is able to exercise primary supervision over the administration
of the trust and (b) one or more U.S. persons have the authority to control all
substantial decisions of the trust, or (iv) an estate the income of which is
includable in gross income for United States tax purposes, regardless of its
source. This summary of documentation requirements does not deal with all
aspects of U.S. Federal income tax withholding that may be relevant to foreign
holders of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
A-3
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<PAGE>
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<S> <C>
ABS.............................................................................................. S-25
ABS Table........................................................................................ S-25
Affiliated Owner................................................................................. S-37
Auction Sale..................................................................................... S-45
Available Amount................................................................................. S-7, S-43
Available Reserve Amount......................................................................... S-11, S-39
Bankruptcy Code.................................................................................. S-15
Benefit Plan..................................................................................... S-50
Business Day..................................................................................... S-6, S-34
Cedel............................................................................................ S-1, S-4, S-17
Certificate Balance.............................................................................. S-10, S-29
Certificate Cross-Over Date...................................................................... S-10
Certificate Final Scheduled Distribution Date.................................................... S-6, S-37
Certificate Pool Factor.......................................................................... S-30
Certificateholders' Interest Carryover Shortfall................................................. S-43
Certificateholders' Interest Distribution Amount................................................. S-43
Certificateholders' Monthly Interest Amount...................................................... S-43
Certificates..................................................................................... S-2, S-5, S-37
CIT.............................................................................................. S-4
CITCF-NY......................................................................................... S-5, S-15
CITSF............................................................................................ S-4, S-15
Class A Noteholders' Interest Carryover Shortfall................................................ S-43
Class A Noteholders' Interest Distribution Amount................................................ S-43
Class A Noteholders' Monthly Interest Amount..................................................... S-43
Class A Notes.................................................................................... S-2, S-4, S-34
Class A-1 Interest Rate.......................................................................... S-7, S-34
Class A-1 Note Final Scheduled Distribution Date................................................. S-6, S-35
Class A-1 Notes.................................................................................. S-1, S-4, S-34
Class A-2 Interest Rate.......................................................................... S-7, S-34
Class A-2 Note Final Scheduled Distribution Date................................................. S-6, S-35
Class A-2 Notes.................................................................................. S-1, S-4, S-34
Class A-3 Interest Rate.......................................................................... S-7, S-34
Class A-3 Note Final Scheduled Distribution Date................................................. S-6, S-35
Class A-3 Notes.................................................................................. S-1, S-4, S-34
Class A-4 Interest Rate.......................................................................... S-7, S-34
Class A-4 Note Final Scheduled Distribution Date................................................. S-6, S-35
Class A-4 Notes.................................................................................. S-2, S-4, S-34
Class A-5 Interest Rate.......................................................................... S-7, S-34
Class A-5 Note Final Scheduled Distribution Date................................................. S-6, S-35
Class A-5 Notes.................................................................................. S-2, S-4, S-34
</TABLE>
B-1
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Class B Interest Rate............................................................................ S-7, S-35
Class B Note Cross-Over Date..................................................................... S-9
Class B Note Final Scheduled Distribution Date................................................... S-6, S-36
Class B Noteholders' Interest Carryover Shortfall................................................ S-43
Class B Noteholders' Interest Distribution Amount................................................ S-44
Class B Noteholders' Monthly Interest Amount..................................................... S-44
Class B Notes.................................................................................... S-2, S-4, S-34
Closing Date..................................................................................... S-6
Code............................................................................................. S-5
Commission....................................................................................... S-34
Company.......................................................................................... S-1, S-4, S-15
Contract Files................................................................................... S-18
Contract Pool.................................................................................... S-19
Contract Rate.................................................................................... S-20
Contracts........................................................................................ S-2, S-5
Cumulative Net Loss Rate......................................................................... S-40
Cut-off Date..................................................................................... S-2, S-5
Dealers.......................................................................................... S-5
Definitive Certificates.......................................................................... S-5, S-37
Deposit Date..................................................................................... S-17
Depository....................................................................................... S-17
Determination Date............................................................................... S-7
Distribution Date................................................................................ S-2, S-6, S-34
DTC.............................................................................................. S-1, S-17
Due Period....................................................................................... S-6
ERISA............................................................................................ S-14, S-50
Euroclear........................................................................................ S-1, S-4
Excess Collections............................................................................... S-12, S-40
Financed Vehicles................................................................................ S-2, S-5
Global Securities................................................................................ A-1
Indenture........................................................................................ S-4, S-34
Indenture Trustee................................................................................ S-2, S-4, S-34
Initial Pool Balance............................................................................. S-13, S-38
Initial Reserve Amount........................................................................... S-11, S-39
Interest Accrual Period.......................................................................... S-7
Interest Rate.................................................................................... S-2
Interest Rates................................................................................... S-8, S-34
IRS.............................................................................................. S-46
Issuer........................................................................................... S-1, S-4, S-18
Liquidated Contract.............................................................................. S-42
Liquidation Expenses............................................................................. S-43
Loan............................................................................................. S-11, S-39
Maximum Average Delinquency Rate................................................................. S-40
Maximum Net Loss Rate............................................................................ S-40
Monthly Advance.................................................................................. S-12, S-44
</TABLE>
B-2
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Monthly Principal Amount......................................................................... S-53
Moody's.......................................................................................... S-13, S-52
Net Liquidation Losses........................................................................... S-40
Net Liquidation Proceeds......................................................................... S-42
Net Losses....................................................................................... S-33
Note Owner....................................................................................... S-17, S-34
Note Owners...................................................................................... S-4
Note Pool Factor................................................................................. S-30
Notes............................................................................................ S-2, S-4, S-34
Obligor.......................................................................................... S-6
OID.............................................................................................. S-46
Oklahoma Tax Counsel............................................................................. S-50
Optional Purchase................................................................................ S-45
Original Certificate Balance..................................................................... S-5, S-18
Owner Trustee.................................................................................... S-1, S-4, S-18
Paid-Ahead Period................................................................................ S-23
Paid-Ahead Simple Interest Contract.............................................................. S-23
Pass-Through Rate................................................................................ S-2, S-9, S-37
Payment Shortfall................................................................................ S-13
Pool Balance..................................................................................... S-44
Principal Carryover Shortfall.................................................................... S-44
Principal Distribution Amount.................................................................... S-8, S-42
Principal Prepayment............................................................................. S-42
Prospectus....................................................................................... S-3
PTCE............................................................................................. S-50
Purchase Agreement............................................................................... S-6, S-19
Purchase Price................................................................................... S-43
Rating Agency.................................................................................... S-13, S-52
Record Date...................................................................................... S-6
Repurchase Event................................................................................. S-5
Repurchased Contract............................................................................. S-5
Reserve Account.................................................................................. S-11, S-39
Reserve Account Surplus.......................................................................... S-12, S-41
S&P.............................................................................................. S-13, S-52
Sale and Servicing Agreement..................................................................... S-2, S-5, S-19
Securities....................................................................................... S-2, S-4, S-34
Seller........................................................................................... S-1
Servicer......................................................................................... S-4
Servicer Payment................................................................................. S-8
Servicing Fee.................................................................................... S-13, S-45
Servicing Fee Rate............................................................................... S-13, S-45
Simple Interest Contract......................................................................... S-20
Specified Reserve Amount......................................................................... S-12
Stated Principal Balance......................................................................... S-42
Trust............................................................................................ S-1, S-4
Trust Agreement.................................................................................. S-4, S-18, S-37
Trustees......................................................................................... S-4
Underwriters..................................................................................... S-51
Underwriting Agreement........................................................................... S-51
</TABLE>
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<PAGE>
<PAGE>
PROSPECTUS
CIT RV TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
THE CIT GROUP/SALES FINANCING, INC., SERVICER
The Asset-Backed Certificates (the "Certificates") and the Asset-Backed
Notes (the "Notes" and, collectively with the Certificates, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on the terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each series of Securities will include either (i) one or more classes of
Certificates, (ii) one or more classes of Notes, or (iii) one or more classes of
Certificates and one or more classes of Notes, as set forth in the related
Prospectus Supplement.
Each series of Securities will be issued by a trust (a "Trust") to be
formed with respect to such series by The CIT Group Securitization Corporation
II (the "Company" or the "Seller").
The assets of each Trust will primarily include a pool of retail installment
sale contracts and direct loans (the "Initial Contracts") secured by the new
and used recreation vehicles financed thereby (the "Initial Financed Vehicles"),
certain monies received under the Initial Contracts on and after the Initial
Cut-off Date specified in the related Prospectus Supplement (the "Initial
Cut-off Date"), an assignment of the security interests in the Initial Financed
Vehicles, the proceeds from claims under certain insurance policies in respect
of individual Initial Financed Vehicles or the related Obligors and certain
other property, as more fully described herein and in the related Prospectus
Supplement. In addition, if so specified in the related Prospectus Supplement,
the assets of each Trust will include specified credit or cash flow enhancement
and monies on deposit in one or more trust accounts, which may include a
Pre-Funding Account which would be used to purchase from time to time additional
retail installment sale contracts and direct loans (the "Subsequent Contracts"
and, together with the Initial Contracts, the "Contracts") secured by the new
and used recreation vehicles financed thereby (the "Subsequent Financed
Vehicles" and, together with the Initial Financed Vehicles, the "Financed
Vehicles"), certain monies received under the Subsequent Contracts on and after
the related subsequent cut-off dates (each, a "Subsequent Cut-off Date"), an
assignment of the security interests in the Subsequent Financed Vehicles and
proceeds from claims under certain insurance policies in respect of individual
Subsequent Financed Vehicles or the related Obligors, to the extent specified in
the related Prospectus Supplement.
(Continued on following page)
A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY CAN BE FOUND ON PAGE 21
HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THE SECURITIES WILL REPRESENT INTERESTS IN OR OBLIGATIONS OF A TRUST AND
WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE CIT GROUP SECURITIZATION
CORPORATION II, THE CIT GROUP/SALES FINANCING, INC., THE CIT GROUP, INC. OR ANY
OF THEIR RESPECTIVE AFFILIATES (EXCEPT TO THE LIMITED EXTENT, IF ANY, DESCRIBED
HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is October 29, 1997.
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<PAGE>
<PAGE>
(continued from preceding page)
Each Trust will be formed pursuant to either (i) a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") to be entered into among the
Seller, The CIT Group/Sales Financing, Inc. (the "Servicer") and the trustee
specified in the related Prospectus Supplement (the "Trustee") or (ii) a Trust
Agreement (the "Trust Agreement") to be entered into among the Seller, the
trustee specified in the related Prospectus Supplement (the "Owner Trustee")
and certain other parties as specified in the related Prospectus Supplement. If
the Trust is formed pursuant to a Trust Agreement, a Sale and Servicing
Agreement (the "Sale and Servicing Agreement") will be entered into among the
Seller, the Servicer and such Owner Trustee. The Trustee or Owner Trustee for
any Trust will be referred to in this Prospectus as the "Owner Trustee." The
Notes, if any, of a series of Securities will be issued and secured pursuant to
an Indenture (the "Indenture") between the Trust and the indenture trustee
specified in the related Prospectus Supplement (the "Indenture Trustee"). The
Certificates, if any, of a series of Securities will represent fractional
undivided interests in the related Trust and/or the residual interest in the
Trust.
Except as otherwise provided in the related Prospectus Supplement, each class
of Securities of any series will represent the right to receive a specified
amount of payments of principal and interest on the related Contracts, in the
amounts, at the rates, on the dates and in the manner described herein and in
the related Prospectus Supplement. The right of each class of Securities to
receive payments may be senior or subordinate to the rights of one or more of
the other classes of such series. A series may include two or more classes of
Certificates or Notes which differ as to the timing and priority of payment,
interest rate or amount of distributions in respect of principal or interest or
both. A series may include one or more classes of Certificates or Notes entitled
to distributions in respect of principal, with disproportionate, nominal or no
interest distributions, or to distributions of interest, with disproportionate,
nominal or no distributions in respect of principal. Distributions on
Certificates of any series will be subordinated in priority to payments due on
the related Notes, if any, to the extent described herein and in the related
Prospectus Supplement.
The rate of distributions in respect of principal on the Securities of any
class will depend on the priority of payment of such class and the rate and
timing of payments (including prepayments, liquidations and repurchases of
Contracts) on the related Contracts.
If specified in the related Prospectus Supplement, a financial guaranty
insurance policy, letter of credit, surety bond, limited guarantee by The CIT
Group, Inc. ("CIT"), reserve fund, or other form of credit enhancement, or any
combination thereof, may be provided with respect to a Trust or any class of
Securities.
Unless otherwise provided in the related Prospectus Supplement, the
Certificates, if any, and the Notes, if any, of any series initially will be
represented by certificates and notes registered in the name of Cede & Co.
("Cede"), the nominee of The Depository Trust Company ("DTC"). The interests
of beneficial owners of the Securities will be represented by book entries on
the records of the participating members of DTC and, in the case of the Notes,
Cedel Bank, societe anonyme ("Cedel") and the Euroclear System ("Euroclear").
Definitive Securities will be available only under limited circumstances to the
extent described herein and in the related Prospectus Supplement.
There currently is no secondary market for the Securities and there is no
assurance that one will develop. The Underwriters expect, but are not obligated,
to make a market in the Securities. There is no assurance that any such market
will develop, or if one does develop, that it will continue or provide
sufficient liquidity.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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<PAGE>
<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.
-3-
<PAGE>
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by CIT are incorporated
by reference in this Prospectus:
(a) CIT's Annual Report on Form 10-K for the year ended December 31, 1996
together with the report of KPMG Peat Marwick LLP, independent certified
public accountants; and
(b) CIT's Quarterly Report on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997;
(c) CIT's Current Reports on Form 8-K dated January 23, 1997 (as amended
by a Form 8-K/A dated February 14, 1997), February 13, 1997, April 17, 1997,
July 14, 1997, July 17, 1997, September 26, 1997 and October 14, 1997; and
(d) CIT's Amendment No. 1 to the Registration Statement on Form S-2
(333-36435) filed on October 14, 1997.
All documents filed by CIT pursuant to Sections 13(a) and (c), 14, or 15(d)
of the Exchange Act after the date hereof and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
CIT WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON REQUEST, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS
DESCRIBED ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUEST SHOULD
BE DIRECTED TO:
CORPORATE SECRETARY
THE CIT GROUP, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 536-1950
-4-
<PAGE>
<PAGE>
SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Securities contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of each
series of Securities. Certain capitalized terms used in the Summary are defined
elsewhere in this Prospectus and in the related Prospectus Supplement. Reference
is made to the "Index of Principal Terms" for the location herein of defined
terms.
<TABLE>
<S> <C>
Issuer .................................................. With respect to each series of Securities, a trust (the "Trust" or the
"Issuer"), will be formed by the Seller pursuant to either a Pooling
and Servicing Agreement among the Seller, the Servicer and the trustee
specified in the related Prospectus Supplement, or a Trust Agreement
among the Seller, the trustee specified in the related Prospectus
Supplement and certain other parties as specified in the related
Prospectus Supplement.
Seller .................................................. The CIT Group Securitization Corporation II (the "Company" or the
"Seller"), a wholly-owned, limited purpose subsidiary of The CIT
Group, Inc. ("CIT"). Except if and to the extent specified in the
related Prospectus Supplement, neither CIT nor any of its affiliates,
including the Company and The CIT Group/Sales Financing, Inc.
("CITSF"), has guaranteed, insured or is otherwise obligated with
respect to the Securities. See "Risk Factors--Limited Obligations."
Servicer ................................................ The CIT Group/Sales Financing, Inc. (in such capacity referred to
herein as the "Servicer"), a wholly-owned subsidiary of CIT. The
Servicer will be responsible for managing, administering, servicing and
making collections on the Contracts held by each Trust.
Owner Trustee ........................................... The Trustee pursuant to a Pooling and Servicing Agreement or the Owner
Trustee pursuant to a Trust Agreement, in each case as specified in the
related Prospectus Supplement. The Trustee or Owner Trustee for any
Trust will be referred to in this Prospectus as the "Owner Trustee."
See "The Trusts--The Trustee(s)."
Indenture Trustee ....................................... With respect to any series of Securities including one or more classes
of Notes, the Indenture Trustee specified in the related Prospectus
Supplement (the "Indenture Trustee"). The Owner Trustee and the
Indenture Trustee for a series are referred to herein collectively as
the "Trustees."
Risk Factors ............................................ Certain potential risks and other considerations are particularly
relevant to a decision to invest in any securities sold hereunder. See
"Risk Factors."
The Certificates ........................................ Each series of Asset-Backed Certificates (the "Certificates") will be
issued pursuant to the related
</TABLE>
-5-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Trust Documents. The Certificates will represent fractional undivided
interests in the related Trust and/or the residual interest in the
related Trust, and will have the Original Certificate Balance, if any,
specified in the related Prospectus Supplement. If specified in the
related Prospectus Supplement, the Company or one of its affiliates
will own the entire beneficial interest in the Trust. See "The
Certificates--General."
Payments in respect of the Certificates will be subordinated to
payments on the Notes of the same series to the extent described in the
related Prospectus Supplement. See "The Certificates--General."
The Certificates will be issued in the minimum denominations and
integral multiples in excess thereof specified in the related
Prospectus Supplement; provided, however, that one Certificate of each
series may be issued in a denomination other than such integral
multiple such that the applicable Affiliated Owner, if any, specified
in the related Prospectus Supplement (the "Affiliated Owner") may be
issued at least the portion of the Original Certificate Balance
specified in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, the Certificates will
be issued in book-entry form only. Unless otherwise specified in the
related Prospectus Supplement, persons ("Certificate Owners")
acquiring beneficial interests in the Certificates will hold their
interests through The Depository Trust Company ("DTC"). Definitive
Certificates will be issued only under the limited circumstances
described herein or in the related Prospectus Supplement. Unless and
until Certificates of a class are issued in definitive form, all
references herein to distributions, notices, reports and statements to
and to actions by and effects upon the related Certificateholders will
refer to the same actions and effects with respect to DTC or Cede & Co.
("Cede"), as the case may be, for the benefit of the related
Certificate Owners in accordance with the DTC procedures. See "Certain
Information Regarding the Securities--Book-Entry Registration" and
"--Definitive Securities."
Unless otherwise specified in the related Prospectus Supplement, each
class of Certificates will have a stated Certificate Balance (as
defined in the related Prospectus Supplement) and will accrue interest
on such Certificate Balance at a specified rate (with respect to each
class of Certificates, the "Pass-Through Rate"). Each class of
Certificates may have a different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through Rate, or any combination of
the foregoing. The related Prospectus Supplement will specify the
</TABLE>
-6-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Pass-Through Rate for each class of Certificates, or the initial
Pass-Through Rate and the method for determining subsequent changes to
the Pass-Through Rate.
A series may include two or more classes of Certificates which differ
as to timing of distributions, sequential order, priority of payment,
seniority, allocation of losses, Pass-Through Rate or amount of
distributions in respect of principal or interest, or as to which
distributions in respect of principal or interest on any class may or
may not be made upon the occurrence of specified events or on the basis
of collections from designated portions of the Contract Pool. In
addition, a series may include one or more classes of Certificates
("Stripped Certificates") entitled to (i) distributions in respect of
principal with disproportionate, nominal or no interest distributions,
or (ii) interest distributions, with disproportionate, nominal or no
distributions in respect of principal.
If CITSF exercises its option to purchase the Contracts of a Trust or
if the Contracts are sold by the Indenture Trustee (or, if the series
did not include Notes or the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, the Owner
Trustee) on the terms and conditions described under "The Purchase
Agreements and the Trust Documents--Termination," Certificate Owners
may receive an amount in respect of the Certificates as specified in
the related Prospectus Supplement. In addition, if the related
Prospectus Supplement provides that the property of a Trust will
include a Pre-Funding Account (as such term is defined in the related
Prospectus Supplement, the "Pre-Funding Account"), Certificate Owners
may receive a distribution in respect of principal on or immediately
following the end of the funding period specified in the related
Prospectus Supplement (the "Funding Period") in an amount and manner
specified in the related Prospectus Supplement.
The Notes ............................................... Each series of Asset-Backed Notes (the "Notes" and, together with the
Certificates, the "Securities") will represent obligations of a Trust
secured by assets of such Trust (other than the accounts or other
property specified in the related Prospectus Supplement). See "The
Notes--General."
The Notes will be issued pursuant to an Indenture between the Issuer
and the Indenture Trustee (the "Indenture"). See "The Notes--General."
The Notes will be issued in the minimum denominations and integral
multiples in excess thereof specified in the
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related Prospectus Supplement; provided, however, that one Note of each
class of each series may be issued in a denomination other than such
integral multiple. Unless otherwise specified in the related Prospectus
Supplement, the Notes will be issued in book-entry form only. Unless
otherwise specified in the related Prospectus Supplement, persons
("Note Owners") acquiring beneficial interests in the Notes will hold
their interests through DTC in the United States or Cedel Bank, societe
anonyme ("Cedel") or the Euroclear System ("Euroclear") in Europe,
and Definitive Notes will be issued only under the limited
circumstances described herein or in the related Prospectus Supplement.
Unless and until Notes of a class are issued in definitive form, all
references herein to distributions, notices, reports and statements to
and to actions by and effects upon the related Noteholders will refer
to the same actions and effects with respect to DTC or Cede, as the
case may be, for the benefit of the related Note Owners in accordance
with the DTC procedures. See "Certain Information Regarding the
Securities--Book-Entry Registration" and "--Definitive Securities."
Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will have a stated principal amount and will bear
interest at a specified rate or rates (with respect to each class of
Notes, the "Interest Rate"). Each class of Notes may have a different
Interest Rate, which may be a fixed, variable or adjustable Interest
Rate, or any combination of the foregoing. The related Prospectus
Supplement will specify the Interest Rate and the method for
determining subsequent changes to the Interest Rate.
A series may include two or more classes of Notes which differ as to
the timing and priority of payment, seniority, allocations of loss,
Interest Rate or amount of payments of principal or interest, or as to
which payments of principal may or may not be made upon the occurrence
of specified events or on the basis of collections from designated
portions of the Contract Pool. In addition, a series may include one or
more classes of Notes ("Stripped Notes") entitled to (i) principal
payments with disproportionate, nominal or no interest payments or (ii)
interest payments with disproportionate, nominal or no principal
payments.
If CITSF exercises its option to purchase the Contracts of a Trust or
if the Contracts are sold by the Indenture Trustee (or, if the series
did not include Notes or the Notes have been paid in full and the
Indenture has been discharged in accordance with its terms, the Owner
Trustee) on the terms and conditions described under "The Purchase
Agreements and the Trust Documents--
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Termination," the outstanding Notes, if any, of such series will be
redeemed as set forth in the related Prospectus Supplement. In
addition, if the related Prospectus Supplement provides that the
property of a Trust will include a Pre-Funding Account, all or certain
classes of the outstanding Notes, if any, of such series will be
subject to partial redemption on or immediately following the end of
the Funding Period in an amount and manner specified in the related
Prospectus Supplement.
Property of a Trust ..................................... The property of a Trust will primarily include (i) a pool (the
"Contract Pool") of retail installment sale contracts and direct loans
(the "Initial Contracts") secured by the new and used recreation
vehicles financed thereby (the "Initial Financed Vehicles"), (ii)
certain monies received under the Initial Contracts on and after the
Initial Cut-off Date specified in the related Prospectus Supplement
(the "Initial Cut-off Date"), (iii) an assignment of the security
interests in the Initial Financed Vehicles, (iv) the Collection Account
and the Paid-Ahead Account, if any, including all investments therein,
all income from the investment of funds therein and all proceeds
thereof, certain other accounts and the proceeds thereof and certain
other rights under the Trust Documents specified in the related
Prospectus Supplement, and (v) the proceeds from claims under certain
insurance policies in respect of individual Initial Financed Vehicles
or the related Obligors. In addition, if so specified in the related
Prospectus Supplement, the property of a Trust will include specified
credit or cash flow enhancement and monies on deposit in a Pre-Funding
Account to be established with the Indenture Trustee or the Owner
Trustee, which will be used to purchase Subsequent Contracts from the
Seller from time to time during the Funding Period, as well as any
Subsequent Contracts so purchased. See "The Trust Property."
If and to the extent provided in the related Prospectus Supplement, a
Trust will be obligated to purchase from the Seller (subject to the
satisfaction of certain conditions described in the applicable Trust
Documents) from time to time during the Funding Period, from monies on
deposit in the Pre-Funding Account, additional retail installment sale
contracts and direct loans (the "Subsequent Contracts" and, together
with the Initial Contracts, the "Contracts") secured by the new and
used recreation vehicles financed thereby (the "Subsequent Financed
Vehicles" and, together with the Initial Financed Vehicles, the
"Financed Vehicles"), certain monies received under the Subsequent
Contracts on and after the related Subsequent Cut-off Dates (specified
in the related Prospectus Supplement), an assignment of the security
interests in the Subsequent
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Financed Vehicles, and proceeds from claims under certain insurance
policies in respect of individual Subsequent Financed Vehicles or the
related Obligors. It is expected that the Subsequent Contracts will
have an aggregate principal balance approximately equal to the
Pre-Funded Amount on the related Closing Date.
The Financed Vehicles consist of motor homes, travel trailers and other
types of recreation vehicles. See "The Contract Pool."
CITSF will be obligated to repurchase Contracts (a "Repurchased
Contract") upon the occurrence of certain breaches of representations
and warranties (a "Repurchase Event"). See "The Purchase Agreements
and the Trust Documents--Sale and Assignment of the Contracts" and
"--Servicing Procedures."
The Contracts ........................................... The property of a Trust will consist primarily of installment sale
contracts for recreation vehicles originated by recreation vehicle
dealers ("Dealers") and acquired by CITSF or The CIT Group/Consumer
Finance, Inc. (NY) ("CITCF-NY") or other affiliates of CITSF, or if
specified in the related Prospectus Supplement, originated directly by
CITSF or one of its affiliates or acquired by CITSF or one of its
affiliates from unaffiliated third parties, and direct loans. On or
prior to the date of issuance of a series of the Securities (the
"Closing Date"), CITCF-NY will sell certain contracts that will
constitute a portion of the Initial Contracts to CITSF pursuant to a
purchase agreement, and CITSF will sell the Initial Contracts to the
Company pursuant to a purchase agreement (the "Purchase Agreement"),
and the Company will sell the Initial Contracts to a Trust pursuant to
the Trust Documents. If and to the extent specified in the related
Prospectus Supplement, CITSF or the Seller or one of their respective
affiliates may retain the right to receive a portion of the interest
accruing on some or all of the Contracts sold to a Trust. See "The
Purchase Agreements and the Trust Documents--Sale and Assignment of the
Contracts."
The Contracts will generally be prepayable at any time without penalty
to the purchaser of the related Financed Vehicles or other person or
persons who are obligated to make payments under the Contract (each, an
"Obligor"). The related Prospectus Supplment will contain certain
information with respect to each Contract Pool as of the Initial
Cut-off Date or such other date specified therein, including the
proportions of each type of Financed Vehicle, the weighted average
annual percentage rate and the weighted average remaining maturity of
Contracts in the Contract Pool.
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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 subjec
to the satisfaction of certain conditions described therein, the
Company will in turn sell the Subsequent Contracts to such Trust at
a purchase price equal to the amount paid by the Company to CITSF
for such Subsequent Contracts, which purchase price shall be paid
from monies on deposit in the Pre-Funding Account. Subsequent
Contracts will be transferred from CITSF to the Company and from the
Company to such Trust on the Business Day specified by CITSF and
the Company during the month in which the related Subsequent Cut-off
Date occurs (each, a "Subsequent Transfer Date").
The Pre-Funding Account ................................. If the Prospectus Supplement for a series of the Securities specifies
that a portion of the proceeds of the offering will be deposited in a
Pre-Funding Account, the Pre-Funding Account will be maintained as an
Eligible Account, which account may be maintained with the Owner
Trustee or the Indenture Trustee, and the funds on deposit therein will
be invested solely in Permitted Investments (as defined in the related
Prospectus Supplement), that mature not later than one Business Day
prior to the next succeeding Distribution Date, until such funds are
applied during the Funding Period to pay to the Company the purchase
price for Subsequent Contracts. See "The Purchase Agreements and the
Trust Documents--Accounts." Monies on deposit in the Pre-Funding
Account will not be available to cover losses on or in respect of the
Contracts.
On the Closing Date, the Pre-Funding Account will be created with an
initial deposit, from the proceeds of the Securities, in the amount, if
any, specified in the related Prospectus Supplement (the "Pre-Funded
Amount"). The Pre-Funded Amount will not exceed one-third of the sum
of the Original Certificate Balance and the initial principal amount of
the Notes. Unless otherwise
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specified in the related Prospectus Supplement, the "Funding Period"
will be the period from the Closing Date until the earliest to occur of
(i) the date on which the amount on deposit in the Pre-Funding Account
(exclusive of investment earnings) is less than $100,000, (ii) the date
on which an Event of Default occurs under the Indenture (if any), (iii)
the date on which an Event of Termination occurs under the Trust
Documents, (iv) the insolvency of the Company, CITSF, CITCF-NY or CIT,
or (v) the close of business on the date specified in the related
Prospectus Supplement (which date will occur in the third calendar
month after the month in which the Closing Date occurred). During the
Funding Period, on one or more Subsequent Transfer Dates, the
Pre-Funded Amount will be applied to purchase Subsequent Contracts from
the Company. Unless otherwise specified in the related Prospectus
Supplement, the Company expects that the Pre-Funded Amount will be
reduced to less than $100,000 by the end of the Funding Period,
although no assurance can be given that this will in fact occur. Unless
otherwise specified in the related Prospectus Supplement, any portion
of the Pre-Funded Amount remaining on deposit in the Pre-Funding
Account at the end of the Funding Period will be payable as principal
to Noteholders and Certificateholders in accordance with the Pre-Funded
Percentage on the first Distribution Date thereafter or, if the end of
the Funding Period is on a Distribution Date, then on such date.
Capitalized Interest Account ............................ If the Prospectus Supplement for a series of the Securities specifies
that a portion of the proceeds of the offering will be deposited in a
Capitalized Interest Account, on the Closing Date a portion of the
proceeds from the sale of the Securities (in an amount specified in the
related Prospectus Supplement) will be deposited into an account (the
"Capitalized Interest Account") maintained as an Eligible Account,
which account may be maintained with the Owner Trustee or the Indenture
Trustee, and the funds on deposit therein will be invested solely in
Permitted Investments that mature no later than one Business Day prior
to the next Distribution Date. Amounts deposited in the Capitalized
Interest Account will be used on each Distribution Date to pay interest
on the Securities, in the amount or in accordance with the formula
specified in the related Prospectus Supplement. Monies on deposit in
the Capitalized Interest Account will not be available to cover losses
on or in respect of the Contracts.
On each Distribution Date any amount remaining in the Capitalized
Interest Account in excess of the Required Capitalized Interest Amount
(as defined in the related Prospectus Supplement) shall be released to
the
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Affiliated Owner, if any, or other person specified in the related
Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, any amounts remaining in the Capitalized
Interest Account on the last day of the Funding Period and not used for
such purposes will be deposited in the Collection Account and will be
available for distributions, as described herein or in the related
Prospectus Supplement, on the first Distribution Date thereafter or, if
the end of the Funding Period is on a Distribution Date, then on such
date.
Distribution Dates ...................................... Unless otherwise specified in the related Prospectus Supplement,
payments of interest and principal on the Securities will be made on
the fifteenth day of each month or, if any such day is not a Business
Day, on the next succeeding Business Day (each, a "Distribution
Date"), commencing on the date specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus
Supplement, payments on the Securities on each Distribution Date will
be made to the holders of record of the related Securities at the close
of business on the Business Day immediately preceding such Distribution
Date or, in the event Definitive Securities have been issued, at the
close of business on the last Business Day of the month immediately
preceding the month in which such Distribution Date occurs (each, a
"Record Date").
To the extent not previously paid in full prior to such time, the
outstanding principal amount of the Notes and the Certificates will be
payable on the Distribution Date occurring in the month or months
specified in the related Prospectus Supplement (the "Note Final
Scheduled Distribution Date" and the "Certificate Final Scheduled
Distribution Date").
A "Business Day" is any day other than a Saturday, Sunday or any day
on which banking institutions or trust companies in the states of New
York, Oklahoma and such other states (if any) specified in the related
Prospectus Supplement are authorized by law, regulation or executive
order to be closed.
Interest Accrual Period ................................. Unless otherwise specified in the related Prospectus Supplement, the
period for which interest is payable on a Distribution Date on the
Securities shall be the one-month period from the most recent
Distribution Date to but excluding the following Distribution Date, or
in the case of the initial Distribution Date from the date specified in
the related Prospectus Supplement to but excluding the initial
Distribution Date (each, an "Interest Accrual Period").
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Due Period .............................................. With respect to any Distribution Date, the "Due Period" is the period
during which principal, interest and other amounts will be collected on
the Contracts for application towards the payment of principal and
interest to the Securityholders and the payment of fees on such
Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, the "Due Period" will be the calendar month immediately
preceding the Distribution Date.
Determination Date ...................................... Unless otherwise specified in the related Prospectus Supplement, the
"Determination Date" is the third Business Day prior to each
Distribution Date. On each Determination Date, the Servicer will
determine the Available Amount for distribution on the related
Distribution Date, allocate such amounts between the Notes, the
Certificates and the Servicer Payment, and advise the Trustees (or the
paying agent appointed pursuant to the Trust Documents) of the amounts
of the payments to be made to Securityholders, all as described under
"The Purchase Agreements and the Trust Documents--Distributions." The
"Servicer Payment" is equal on each Distribution Date to the sum of
the reimbursement then due to the Servicer for outstanding Monthly
Advances and the Servicing Fee (including any unpaid Servicing Fees for
past Distribution Dates).
Unless otherwise specified in the related Prospectus Supplement, the
"Available Amount" with respect to each Trust on any Distribution Date
is equal to the excess of (A) the sum of (i) all amounts on deposit in
the Collection Account attributable to collections or deposits made in
respect of such Contracts (including any late fees, prepayment charges,
extension fees or other administrative fees or similar charges allowed
by applicable law with respect to the Contracts ("Late Fees") in the
related Due Period, and (ii) the Purchase Price for any Contract
repurchased by CITSF as a result of breaches of certain representations
and warranties or purchased by the Servicer as a result of breaches of
certain covenants and any Monthly Advances and any Non-Reimbursable
Payments made by the Servicer, if such Purchase Price, Monthly Advance
or Non-Reimbursable Payment is paid on the Deposit Date immediately
preceding such Distribution Date, over (B) the sum of the following
amounts (to the extent that the Servicer has not already withheld such
amounts from collections on the Contracts): (i) any repossession
profits on liquidated Contracts, Liquidation Expenses (as defined in
the Trust Documents) incurred and taxes and insurance advanced by the
Servicer in respect of Financed Vehicles that are reimbursable to the
Servicer under the Trust Documents, (ii) any amounts incorrectly
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deposited in the Collection Account, (iii) any amounts deposited in the
Paid-Ahead Account, if any, during the related Due Period, (iv) net
investment earnings on the funds in the Collection Account and the
Paid-Ahead Account, if any, and (v) any other amounts permitted to be
withdrawn from the Collection Account and the Paid-Ahead Account, if
any, by the Servicer (or to be retained by the Servicer from
collections on the Contracts) pursuant to the Trust Documents.
Subordination ........................................... The rights of the Certificateholders to receive distributions with
respect to the Contracts will be subordinated to the rights of the
Noteholders of the same series, to the extent described in the related
Prospectus Supplement. This subordination is intended to enhance the
likelihood of timely receipt by Noteholders of the full amount of
interest and principal required to be paid to them, and to afford the
Noteholders limited protection against losses in respect of the
Contracts.
If and to the extent specified in the related Prospectus Supplement,
one or more classes of Notes of a series may be subordinated to the
rights of one or more other classes of Notes of the same series.
The protection afforded to the Noteholders by the subordination feature
described above will be effected by the preferential right of
Noteholders to receive, to the extent described in the related
Prospectus Supplement, current distributions from collections on or in
respect of the Contracts prior to the application of such collections
to payments in respect of the Certificates or any subordinated Notes.
Enhancement ............................................. If and to the extent specified in the related Prospectus Supplement
with respect to a Trust, the enhancement applicable to a class of
Securities may include any one or more of the following: a financial
guaranty insurance policy, a letter of credit, a CIT Limited Guarantee,
a reserve fund, a third party guarantee, a cash collateral account, a
derivative product, a credit facility, a liquidity facility, another
form of credit enhancement, or any combination thereof. The enhancement
with respect to any class of Securities may be structured to provide
protection against delinquencies and/or losses on the Contracts,
against changes in interest rates, or other risks, or to supplement the
interest rate on specified Contracts, in each case to the extent and
under the conditions specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, any
form of enhancement will have certain limitations and exclusions from
coverage thereunder, which will be described in the related Prospectus
Supplement. Further information regarding
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any provider of credit enhancement, including financial information
when material, will be included (or incorporated by reference) in the
related Prospectus Supplement. See "The Certificates--Enhancement."
Monthly Advances ........................................ Unless otherwise specified in the related Prospectus Supplement, with
respect to each Contract as to which there has been a Payment Shortfall
during the related Due Period, the Servicer shall advance funds in the
amount of such Payment Shortfall (each, a "Monthly Advance"), but only
to the extent that the Servicer, in its good faith judgment, expects to
recover such Monthly Advance from subsequent collections on such
Contract made by or on behalf of the Obligor thereunder (but only to
the extent of expected interest collections in the case of a Simple
Interest Contract) or from net liquidation proceeds or insurance
proceeds with respect to such Contract. The Servicer shall be
reimbursed for any Monthly Advance from subsequent collections with
respect to such Contract. If the Servicer determines in its good faith
judgment that an unreimbursed Monthly Advance shall not ultimately be
recoverable from subsequent collections, the Servicer shall be
reimbursed for such Monthly Advance from collections on all Contracts.
In determining whether an advance is or will be nonrecoverable, the
Servicer need not take into account that it might receive any amounts
in a deficiency judgment against an Obligor. Unless otherwise specified
in the related Prospectus Supplement, the Servicer will not make a
Monthly Advance in respect of (i) the principal component of any
scheduled payment on a Simple Interest Contract, or (ii) a Payment
Shortfall arising from a Contract which has been prepaid in full or
which has been subject to a Relief Act Reduction during the related Due
Period. See "The Purchase Agreements and the Trust Documents--Monthly
Advances." Unless otherwise specified in the related Prospectus
Supplement, "Payment Shortfall" means (i) with respect to any Simple
Interest Contract and any Distribution Date, the excess of (A) the
product of (1) one-twelfth of the Contract Rate of such Contract and
(2) the outstanding principal amount of such Contract as of the last
day of the second preceding Due Period (or, in the case of the first
Due Period ending after the Contract was acquired by the related Trust,
as of the Initial Cut-off Date or the Subsequent Cut-off Date, as the
case may be), over (B) the amount of interest, if any, collected on
such Contract during the related Due Period, and (ii) with respect to
any Precomputed Contract and any Distribution Date, the excess of (A)
the scheduled payment due on such Contract during the related Due
Period over (B) the amount collected on such Contract (including any
amounts allocated from the Paid-Ahead Account with
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respect to such Due Period) during the related Due Period.
Non-Reimbursable Payments ............................... If and to the extent specified in the related Prospectus Supplement,
with respect to each Contract as to which there has been a Payment
Shortfall with respect to interest in the related Due Period arising
from either a prepayment in full of such Contract or a Relief Act
Reduction in respect of such Contract during such Due Period, the Trust
Documents may require the Servicer to deposit into the Collection
Account on the Business Day immediately preceding the following
Distribution Date, without the right of subsequent reimbursement, an
amount equal to such Payment Shortfall (a "Non-Reimbursable Payment").
If the related Prospectus Supplement does not specify that the Servicer
will make Non-Reimbursable Payments, the Servicer will not be obligated
to make such payments with respect to the Trust.
Paid-Ahead Account ...................................... Early payments by or on behalf of Obligors on Precomputed Contracts
which do not constitute scheduled payments, full prepayments or certain
partial prepayments that result in a reduction of an Obligor's periodic
payment below the scheduled payment as of the Initial Cut-off Date or
Subsequent Cut-off Date, as the case may be, will be deposited into the
Paid-Ahead Account until such time as the paid-ahead amount becomes
due. See "The Contract Pool" and "The Purchase Agreements and the Trust
Documents--Paid Ahead Precomputed Contracts."
Servicing Fees .......................................... Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Servicer shall receive a
monthly fee (the "Servicing Fee"), payable on each Distribution Date,
equal to the sum of (i) one-twelfth of the product of the percentage
specified in the related Prospectus Supplement as the "Servicing Fee
Rate" and the Pool Balance as of the last day of the second preceding
Due Period (or, in the case of the first Distribution Date, as of the
Initial Cut-off Date) and (ii) any investment earnings on amounts on
deposit in the Collection Account, the Paid-Ahead Account, if any, the
Certificate Distribution Account, if any, and the Note Distribution
Account, if any; provided, however, that the Servicing Fee Rate
applicable to a Trust may be increased to a rate (or maximum rate)
specified in the related Prospectus Supplement if CITSF or an affiliate
thereof is not the Servicer. See "The Purchase Agreements and the Trust
Documents--Servicing Compensation."
Optional Purchase of the Contracts ...................... Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, at
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its option, CITSF may purchase all the Contracts in the related Trust
on any Distribution Date on which the aggregate principal balance of
the Contracts (the "Pool Balance") as of the last day of the related
Due Period is equal to or less than a percentage specified in the
related Prospectus Supplement of the Initial Pool Balance, at a
purchase price determined as described under "The Purchase Agreements
and the Trust Documents--Termination." Unless otherwise specified in
the related Prospectus Supplement, the "Initial Pool Balance" equals
the sum of (i) the Pool Balance as of the Initial Cut-off Date and (ii)
the aggregate principal balance of all Subsequent Contracts added to
the related Trust as of their respective Subsequent Cut-off Dates.
Auction Sale ............................................ Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, within ten days after the first
Distribution Date on which the Pool Balance as of the last day of the
related Due Period is equal to or less than a percentage specified in
the related Prospectus Supplement of the Initial Pool Balance, the
Indenture Trustee (or, if the series did not include Notes or the Notes
have been paid in full and the Indenture has been discharged in
accordance with its terms, the Owner Trustee) shall solicit bids for
the purchase of the Contracts remaining in the related Trust. In the
event that satisfactory bids are received as described in "The Purchase
Agreements and the Trust Documents--Termination," the net sale proceeds
will be distributed to Securityholders, in the same order of priority
as collections received in respect of the Contracts, on the second
Distribution Date succeeding such Due Period. If satisfactory bids are
not received, such Trustee shall decline to sell the Contracts and
shall not be under any obligation to solicit any further bids or
otherwise negotiate any further sale of the Contracts. See "The
Purchase Agreements and the Trust Documents--Termination."
Ratings ................................................. As a condition of issuance, the Securities of each series offered
pursuant to this Prospectus will be rated in one of the four highest
rating categories by at least one nationally recognized statistical
rating organization specified in the related Prospectus Supplement
(each, a "Rating Agency"). The ratings of the Securities should be
evaluated independently from similar ratings on other types of
securities. The ratings do not address the possibility that
Securityholders may suffer a lower than anticipated yield. The ratings
do not address the likelihood that the Securities will be retired
following the sale of the Contracts by a Trustee as described above
under "--Auction Sale" or "--Optional Purchase of the Contracts." See
"Ratings" herein.
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There can be no assurance that any rating will remain in effect for any
given period of time or that a rating will not be lowered or withdrawn
by the assigning Rating Agency if, in its judgment, circumstances so
warrant. In the event that the rating initially assigned to any of the
Securities is subsequently lowered or withdrawn for any reason, no
person or entity will be obligated to provide any additional credit
enhancement with respect to such Securities. There can be no assurance
whether any other rating agency will rate any of the Securities, or if
one does, what rating would be assigned by any such other rating
agency. A security rating is not a recommendation to buy, sell or hold
securities.
Certain Federal Income Tax Considerations ............... If the related Prospectus Supplement states that a Trust is structured
as an owner trust, in the opinion of Counsel to the Seller, for Federal
income tax purposes: (1) the Notes will constitute indebtedness; and
(2) the Certificates will constitute interests in a trust fund that
will not be treated as an association taxable as a corporation. Each
Noteholder, by acceptance of a Note, will agree to treat the Notes as
indebtedness, and each Certificateholder, by the acceptance of a
Certificate, will agree to treat the Trust as a partnership in which
the Certificateholders are partners for Federal income tax purposes.
Alternative characterizations of the Notes and the Certificates are
possible, but would not result in materially adverse tax consequences
to Noteholders or Certificateholders. See "Certain Federal Income Tax
Consequences" herein.
ERISA Considerations .................................... Fiduciaries of employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or plans
subject to Section 4975 of the Internal Revenue Code of 1986 (the
"Code") should carefully review with their legal advisors whether the
purchase or holding of the Certificates offered hereby could give rise
to a transaction prohibited or not otherwise permissible under ERISA or
the Code. See "ERISA Considerations" herein.
The related Prospectus Supplement will provide further information with
respect to the eligibility of a class of Certificates for purchase by
employee benefit plans. See "ERISA Considerations" herein and in the
related Prospectus Supplement.
Subject to certain considerations discussed under "ERISA
Considerations" herein and in the related Prospectus Supplement, and
unless otherwise specified in the related Prospectus Supplement, the
Notes will be eligible for purchase by employee benefit plans that are
subject to ERISA.
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Legal Investment ........................................ The appropriate characterization of the Certificates and the Notes
under various legal investment restrictions applicable to the
investment activities of certain institutions, and thus the ability of
investors subject to these restrictions to purchase the Certificates
and the Notes, may be subject to significant interpretive
uncertainties. All investors whose investment authority is subject to
legal restrictions should consult their own legal advisors to determine
whether, and to what extent, the Certificates and the Notes will
constitute legal investments for them.
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RISK FACTORS
Prospective Securityholders should consider the following risk factors in
connection with the purchase of the Securities:
1. Limited Obligations. The Securities will not represent an interest in or
an obligation of The CIT Group, Inc. ("CIT"), The CIT Group Securitization
Corporation II (the "Company"), any Affiliated Owner specified in the related
Prospectus Supplement, or any Servicer (including The CIT Group/Sales Financing,
Inc. ("CITSF")) or any of their respective affiliates. Unless and to the extent
otherwise specified in the related Prospectus Supplement, the Securities will
not be insured or guaranteed by any government agency or instrumentality, CIT or
any of its affiliates (including the Company, any Affiliated Owner, and CITSF),
the Underwriters or any of their affiliates, or any other Servicer or any of its
affiliates.
2. Risk of Loss. An investment in the Securities may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically have
affected the delinquency, loan loss and liquidation experience of pools of
installment sale contracts and direct loans secured by recreation vehicles. The
credit criteria and underwriting guidelines under which CITSF originates
recreation vehicle installment sale contracts and direct loans were changed in
1994. The delinquency and loan loss experience for CITSF's portfolio will be
affected adversely by this change in credit criteria. See "The CIT Group/Sales
Financing, Inc., Servicer--Delinquency and Loan Loss Experience" herein and in
the related Prospectus Supplement. Since the market value of recreation vehicles
generally declines with age and since in certain states the Trustees may not
have a first perfected security interest in the Financed Vehicles, the Servicer
may not recover the entire amount owing under a defaulted Contract. See "Certain
Legal Aspects of the Contracts." In such a case, the Securityholders may suffer
a corresponding loss. The market value of the Financed Vehicles could be or
could become lower than the outstanding principal balances of the Contracts that
they secure. Sufficiently high liquidation losses on the Contracts will have the
effect of reducing, and could eliminate (a) the protection against loss afforded
to the Noteholders by the subordination of the Certificates, if any, or by the
Enhancement, if any, applicable to the Notes and (b) the protection against loss
afforded to the Certificateholders by the Enhancement (as specified in the
related Prospectus Supplement), if any. If the amount available under the
Enhancement, if any, is reduced to zero, holders of the Certificates will bear
the risk of loss resulting from default by Obligors and will have to look
primarily to the value of the related Financed Vehicles for recovery of the
outstanding principal and unpaid interest on the defaulted Contracts. If the
Certificate Balance is reduced to zero, the holders of the Notes will bear the
risk of loss resulting from default by Obligors and will have to look primarily
to the value of the related Financed Vehicles for recovery of the outstanding
principal and unpaid interest on the defaulted Contracts.
3. Security Interests and Certain Other Aspects of the Contracts. Each
Contract will be secured by a security interest in a Financed Vehicle.
Perfection of security interests in the Financed Vehicles and enforcement of
rights to realize upon the value of the Financed Vehicles as collateral for the
Contracts are subject to a number of state laws, including the Uniform
Commercial Code (the "UCC") as adopted in each state and certificate of title
statutes. The steps necessary to perfect a security interest in a Financed
Vehicle vary from state to state. Unless otherwise specified in the related
Prospectus Supplement, all Contracts in the Contract Pool were acquired by CITSF
or The CIT Group/Consumer Finance, Inc. (NY) ("CITCF-NY") from recreation
vehicle dealers ("Dealers") and name the Dealer as obligee and as secured
party. Most of the Contracts in the Contract Pool were assigned by the related
Dealer to CITSF or CITCF-NY. In each such case, CITSF or CITCF-NY is named as
the secured party on the certificate of title for the related Financed Vehicle.
Due to the expense and administrative inconvenience involved, CITSF will not
amend any certificate of title to name the Company or any Trustee as the
lienholder and the Company will not deliver any certificate of title to such
Trustee or note thereon such Trustee's interest. Consequently, in some states,
in the absence of such an amendment to the certificate of title to reflect the
successive assignments by CITCF-NY to CITSF, by CITSF to the Company, and by the
Company to the Trust, the security interest in the Financed Vehicle may not be
effective or such security interest may not be perfected, and the assignment of
the security interest in the Financed Vehicle to the Trust may not be effective
against other creditors of the related Obligor or a trustee in bankruptcy.
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In addition, numerous federal and state consumer protection laws impose
requirements on sellers under retail installment sale contracts, such as the
Contracts, and the failure by the seller of goods to comply with such
requirements could give rise to liabilities of assignees for amounts due or paid
under such agreements and the right to set-off against claims by such assignees.
These laws would apply to a Trust as assignee of the Contracts. From time to
time, CITSF has been involved in litigation under consumer or debtor protection
laws, some of which have been class actions. The Trust is subject to the risk of
similar litigation. With respect to each series of Securities, pursuant to the
Trust Documents, CITSF will represent and warrant as of the Initial Cut-off Date
with respect to each Initial Contract, and as of the related Subsequent Cut-off
Date with respect to each Subsequent Contract, that each Contract complies with
all requirements of law and CITSF will provide certain warranties relating to
the validity, perfection and priority of the security interest in each Financed
Vehicle securing a Contract. A breach by CITSF of any such warranty that
materially and adversely affects the related Trust's interest in any Contract
would require CITSF to repurchase such Contract unless such breach is cured. If
CITSF does not honor its purchase obligation in respect of a Contract and the
Obligor for such Contract were to default, recovery of amounts due on such
Contract would be primarily dependent on repossession and resale of the Financed
Vehicle securing such Contract. Certain other factors may limit the ability of
the Securityholders to realize upon the Financed Vehicles or may limit the
amount realized to less than the amount due. See "Certain Legal Aspects of the
Contracts."
Under California law and most state vehicle dealer licensing laws, sellers of
recreation vehicles are required to be licensed to sell vehicles at retail sale.
Numerous other federal and state consumer protection laws impose requirements
applicable to the origination and assignment of retail installment sale
contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with the
provisions of these laws may affect the enforceability of the related Contract.
A Trust and the Company may not have obtained the licenses required under any
federal or state consumer laws or regulations, and the absence of such licenses
may impede the enforcement of certain rights or give rise to certain defenses in
actions seeking enforcement of such rights which may prevent a Trust from
collecting amounts due under the Contracts. In addition, with respect to used
vehicles, the Federal Trade Commission's Rule on Sale of Used Vehicles requires
that all sellers of used vehicles prepare, complete, and display a "Buyer's
Guide" which explains the warranty coverage for such vehicles. Furthermore,
Federal Odometer Regulations promulgated under the Motor Vehicle Information and
Cost Savings Act require that all sellers of used vehicles furnish a written
statement signed by the seller certifying the accuracy of the odometer reading.
If a seller is not properly licensed or if either a Buyer's Guide or Odometer
Disclosure Statement was not provided to the purchaser of a Financed Vehicle,
the obligor may be able to assert a defense against the seller of the Financed
Vehicle which defense may prevent a Trust from collecting amounts due under the
affected Contracts. See "Certain Legal Aspects of the Contracts."
Any shortfall in payments on or in respect of Contracts, or any liability of
a Trust to Obligors, as a result of noncompliance with the laws summarized above
and under "Certain Legal Aspects of the Contracts" could result in losses to the
Securityholders.
4. Certain Matters Relating to Insolvency. CITCF-NY, CITSF and the Company
intend that transfers of Contracts from CITCF-NY to CITSF, from CITSF to the
Company and from the Company to the related Trust, constitute sales, rather than
pledges of the Contracts to secure indebtedness. However, if CITCF-NY, CITSF or
the Company were to become a debtor under Title 11 of the United States Code, 11
U.S.C.'SS' 101 et seq. (the "Bankruptcy Code"), it is possible that a creditor,
receiver, other party in interest or trustee in bankruptcy of such debtor, or
such debtor as debtor-in-possession, may contend that the sales of the Contracts
by CITCF-NY to CITSF, by CITSF to the Company, or by the Company to the related
Trust, respectively, were pledges of the Contracts rather than sales and that,
accordingly, such Contracts should be part of such assigning entity's bankruptcy
estate. Such a position, if presented to a court, even if ultimately
unsuccessful, could result in a delay in or reduction of distributions to the
Securityholders. See "Certain Legal Aspects of the Contracts--Certain Matters
Relating to Insolvency."
5. Limited Liquidity. There is currently no market for the Securities of any
series. Although the Company expects that the underwriters of any particular
series will make a secondary market for such Securities, they will
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have no obligation to do so. There can be no assurance that a secondary market
will develop for the Securities of any series or, if it does develop, that it
will provide any of the Securityholders with liquidity of investment or that it
will continue for the term of any series of Securities. Unless otherwise
specified in the related Prospectus Supplement, the Securities will be issued in
book-entry, rather than physical, form which may adversely affect the liquidity
of the Securities in the secondary market and the ability of the Certificate
Owners and Note Owners to pledge the Securities.
6. The Subsequent Contracts and the Pre-Funding Account. If and to the extent
specified in the related Prospectus Supplement, the conveyance of Subsequent
Contracts by CITSF during the Funding Period will be subject to the conditions
described in the related Prospectus Supplement under "The Contract Pool." If
CITSF does not originate contracts satisfying such criteria during the Funding
Period, CITSF will have insufficient contracts to sell to the related Trust on
Subsequent Transfer Dates, thereby resulting in prepayments of principal to
Noteholders and Certificateholders as described below.
Unless otherwise specified in the related Prospectus Supplement, to the
extent that amounts on deposit in the Pre-Funding Account have not been fully
applied to the purchase of Subsequent Contracts by the related Trust by the end
of the Funding Period, Noteholders and Certificateholders will receive a
prepayment of principal in an amount equal to the Pre-Funded Percentage
allocable to the Noteholders and the Certificateholders, respectively, of the
Pre-Funded Amount remaining in the Pre-Funding Account at such time, which
prepayment will be made on the first Distribution Date following the end of the
Funding Period or, if the Funding Period ends on a Distribution Date, on such
date. Unless otherwise specified in the related Prospectus Supplement, the
"Pre-Funded Percentage" with respect to the Notes or the Certificates is the
percentage derived from the fraction, the numerator of which is the initial
principal balance of the Notes or the Original Certificate Balance, as the case
may be, and the denominator of which is the sum of the initial principal balance
of the Notes and the Original Certificate Balance. It is anticipated that the
principal amount of Subsequent Contracts purchased by the Trust will not be
exactly equal to the amount on deposit in the Pre-Funding Account and that
therefore there will be at least a nominal amount of principal prepaid to the
Noteholders and the Certificateholders at the end of the Funding Period.
Each Subsequent Contract must satisfy the eligibility criteria specified in
the related Prospectus Supplement and the Trust Documents at the time of its
sale to the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Company (the seller of any Subsequent Contracts to the related
Trust) will certify that all such eligibility criteria have been satisfied and
CITSF (the seller of any Subsequent Contracts to the Company) will certify that
all conditions precedent to the sale of the Subsequent Contracts to the Trust
have been satisfied. Unless otherwise specified in the related Prospectus
Supplement, it is a condition to the sale of any Subsequent Contracts to the
Trust that each Rating Agency, after receiving prior notice of the proposed
transfer of Subsequent Contracts to the Trust, shall not have advised the Seller
or the Trustees that the conveyance of such Subsequent Contracts will result in
a qualification, modification or withdrawal of its then current rating of either
the Notes or the Certificates. Following the transfer of Subsequent Contracts to
the Contract Pool the aggregate characteristics of the Contracts then held in
the Contract Pool may vary from those of the Initial Contracts included therein.
The ability of a Trust to invest in Subsequent Contracts is entirely
dependent upon whether CITSF is able to originate recreation vehicle contracts
that meet the requirements for transfer on a Subsequent Transfer Date under the
Trust Documents. The ability of CITSF to originate such contracts may be
affected by a variety of economic and social factors. Moreover, such factors may
affect the ability of the Obligors thereunder to perform their obligations
thereunder, which may cause contracts originated by CITSF or its affiliates to
fail to meet the requirements for transfer under the Trust Documents. Economic
factors include interest rates, unemployment levels, the rate of inflation and
consumer perception of economic conditions generally. However, CITSF is unable
to determine and has no basis to predict whether or to what extent economic or
social factors will affect CITSF's ability to originate Subsequent Contracts.
7. Prepayment from the Pre-Funding Account. To the extent specified in the
related Prospectus Supplement, if the Pre-Funded Amount has not been fully
applied by the related Trust to purchase Subsequent Contracts by the end of the
Funding Period, then the Pre-Funded Amount will be payable as principal to
Noteholders and Certificateholders in accordance with the Pre-Funded Percentage
on the first Distribution Date following the end of
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the Funding Period, or, if the end of the Funding Period is on a Distribution
Date, on such date.
In the event that amounts remain on deposit in the Pre-Funding Account at the
end of the Funding Period and are applied to the payment of principal to the
Noteholders and Certificateholders, such partial retirement of the Notes and
Certificates may shorten the average life of the Securities and may cause the
Noteholders and Certificateholders to experience a lower yield on the
Securities. In addition, any reinvestment risk resulting from such partial
retirement will be borne by the holders of such Securities.
8. Limited Assets. Unless otherwise specified in the related Prospectus
Supplement, each Trust will covenant to sell the Contracts (a) if directed to do
so by the related Indenture Trustee in accordance with the related Indenture
following an acceleration of a series of Notes upon an Event of Default, and (b)
in other circumstances specified in the related Prospectus Supplement. However,
there is no assurance that the market value of the related Contracts will at any
time be equal to or greater than the aggregate outstanding principal balance of
such Notes. Therefore, upon an Event of Default with respect to such Notes,
there can be no assurance that sufficient funds will be available to repay
Noteholders in full. In addition, the amount of principal required to be
distributed to Noteholders under the Indenture is generally limited to amounts
available to be deposited in the Note Distribution Account. Therefore, the
failure to pay principal on the Notes may not result in the occurrence of an
Event of Default until the Note Final Scheduled Distribution Date. Furthermore,
upon a sale by the Trust of the Contracts, the net proceeds from such sale
remaining after payment of all amounts due to the Servicer and the Noteholders
may not be sufficient to pay the Certificate Balance and interest accrued
thereon.
If and to the extent specified in the related Prospectus Supplement, one or
more Enhancements will be available to pay principal and/or interest on the
Notes and/or the Certificates on any Distribution Date. However, unless
otherwise specified in the related Prospectus Supplement, the amount of any
Enhancement will be limited and will be reduced as the Pool Balance is reduced.
If the amounts available under the applicable Enhancement are exhausted, a Trust
will depend solely on payments on or with respect to the Contracts, Monthly
Advances and Non-Reimbursable Payments to make distributions to the
Securityholders.
9. Ratings of the Securities. It is a condition to the issuance of a series
of Securities offered pursuant to this Prospectus that the Securities be rated
in one of the four highest rating categories by at least one Rating Agency. The
ratings do not address the likelihood that the Securities will be retired
following the sale of the Contracts by a Trustee as described under "The
Purchase Agreement and the Trust Documents--Termination." There can be no
assurance that any rating will remain in effect for any given period of time or
that a rating will not be lowered or withdrawn by the Rating Agency if, in its
judgment, circumstances so warrant. In the event that the rating initially
assigned to the Securities is subsequently lowered or withdrawn for any reason,
no person or entity will be obligated to provide any additional credit
enhancement with respect to such Securities. There can be no assurance that any
other rating agency will rate the Notes or the Certificates, or if one does,
what rating would be assigned by any such other rating agency. A security rating
is not a recommendation to buy, sell or hold securities.
10. Book Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Securities will be offered for purchase in book-entry
form only and will be initially registered in the name of the nominee of The
Depository Trust Company ("DTC" and, together with any successor depository
selected by the Company, the "Depository"). No person acquiring an interest in
the Notes through the facilities of DTC (a "Note Owner") will be entitled to
receive a Definitive Note representing such person's interest in the Notes,
except as set forth under "Certain Information Regarding the
Securities--Definitive Securities," and such persons will hold their interests
in the Notes through DTC in the United States or Cedel Bank, societe anonyme
("Cedel") or Euroclear in Europe. No person acquiring an interest in the
Certificates through the facilities of DTC (a "Certificate Owner") will be
entitled to receive a Definitive Certificate representing such person's interest
in the Certificates, except as set forth under "Certain Information Regarding
the Securities--Definitive Securities," and such persons will hold their
interests in the Certificates through DTC. Unless and until Definitive
Securities are issued under the limited circumstances described herein and in
the related Prospectus Supplement, all references to actions by Securityholders
shall refer to actions taken by DTC upon instructions from its Participants, and
all references herein to distributions, notices, reports and statements to
Securityholders shall refer to distributions, notices, reports and statements to
DTC in accordance with DTC procedures. See "Certain Information Regarding the
Securities--Definitive Securities."
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11. Risk of Commingling. At any time that the requirements as specified under
"The Purchase Agreements and the Trust Documents--Collections," are met, the
Servicer may deposit payments on or with respect to the Contracts and proceeds
of Contracts into the Collection Account or the Paid-Ahead Account, as
applicable, monthly on the Business Day immediately preceding the next
Distribution Date (the "Deposit Date"). Pending such a monthly deposit into the
Collection Account or the Paid-Ahead Account, as applicable, collections on the
Contracts may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds or if the Servicer became insolvent, the holders of
the Securities could incur a loss with respect to collections not deposited in
the Collection Account or the Paid-Ahead Account.
THE TRUSTS
With respect to each series of Securities, the Seller will establish a Trust
pursuant to the related Trust Documents. Prior to the sale and assignment of the
related Contracts pursuant to the related Trust Documents, the Trust will have
no assets or obligations. After its formation, the related Trust will not engage
in any activity other than (i) acquiring, holding and managing the Contracts and
the other assets of such Trust and proceeds therefrom, (ii) issuing the
Securities of the related series, (iii) making payments on the Securities of the
related series, (iv) entering into agreements and transactions in connection
with the Enhancement, if any, for the related series of Securities, and (v)
engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith.
Each Certificate, if any, will represent a fractional undivided interest
and/or residual interest in the related Trust. Each Note, if any, will represent
an obligation of, the related Trust.
If specified in the related Prospectus Supplement, the related Trust will
initially be capitalized with equity equal to the "Original Certificate
Balance" specified in the related Prospectus Supplement. If specified in the
related Prospectus Supplement, Certificates with an aggregate original principal
balance of at least the amount specified in the related Prospectus Supplement
will be owned by the Affiliated Owner specified in the related Prospectus
Supplement (the "Affiliated Owner") and Certificates representing the remainder
of the Original Certificate Balance will be sold to third party investors that
are expected to be unaffiliated with the Affiliated Owner, the Seller, the
Servicer or their affiliates. If specified in the related Prospectus Supplement,
the Company or one of its affiliates will own the entire beneficial interest in
the Trust. The equity in a Trust, together with the proceeds of the initial sale
of the Notes, if any, will be used by the Trust to purchase the Initial
Contracts from the Seller pursuant to the Trust Documents and, if specified in
the related Prospectus Supplement, to fund the deposit of the Pre-Funded Amount
and the deposit to the Capitalized Interest Account and for such other purposes
as are specified in the related Prospectus Supplement.
The Servicer will service the Contracts held by each Trust and will receive
fees for such services. See "The Purchase Agreement and the Trust
Documents--Servicing Compensation." Unless otherwise specified in the related
Prospectus Supplement, CITSF will be appointed as custodian on behalf of each
Trust, and will hold the original installment sales contract (or promissory
note) as well as copies of documents and instruments relating to each Contract
and evidencing the security interest in the Financed Vehicle securing each
Contract (the "Contract Files").
THE TRUSTEE(S)
The Trustee(s) for each Trust will be specified in the related Prospectus
Supplement. The Trustee(s) will perform limited administrative functions,
including making distributions from the Certificate Distribution Account and/or
the Note Distribution Account. A Trustee's liability in connection with the
issuance and sale of the Securities is limited solely to the express obligations
of such Trustee as set forth in the Trust Documents. A Trustee may appoint a
co-trustee to act as co-trustee pursuant to a co-trustee agreement with such
Trustee.
A Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee.
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The Servicer may also remove a Trustee if such Trustee ceases to be eligible to
continue as Trustee under the related Trust Documents or if such Trustee becomes
insolvent. In such circumstances, the Servicer will be obligated to appoint a
successor trustee. Any resignation or removal of a Trustee and appointment of a
successor trustee will be subject to any conditions or approvals specified in
the related Prospectus Supplement and will not become effective until acceptance
of the appointment by the successor trustee.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will pay each Trustee's fees. The Trust
Documents will further provide that each Trustee will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability or expense incurred by such Trustee not resulting from its own
willful misfeasance, bad faith or gross negligence (other than by reason of a
breach of any of its representations or warranties set forth in the Trust
Documents).
THE TRUST PROPERTY
Each Certificate, if any, will represent a fractional undivided interest
and/or residual interest in the related Trust. Each Note, if any, will be an
obligation of the related Trust and will be secured by assets of the Trust
(other than the Certificate Distribution Account, if any, and other accounts or
property specified in the related Prospectus Supplement). The property of each
Trust will include, among other things, (i) a pool (the "Contract Pool") of
retail installment sale contracts secured by new and used recreation vehicles
between Dealers and Obligors, consisting of the Initial Contracts and the
Subsequent Contracts (if any); (ii) all monies received under the Initial
Contracts on or after the Initial Cut-off Date and the Subsequent Contracts (if
any) on or after the related Subsequent Cut-off Date; (iii) such amounts as from
time to time may be held in one or more accounts established and maintained by
the Servicer pursuant to the Trust Documents (including all investments in such
accounts and all income from the funds therein and all proceeds thereof, other
than investment earnings on any account so specified in the related Prospectus
Supplement) as described herein; (iv) if specified in the related Prospectus
Supplement, specified credit or cash flow enhancement and all monies on deposit
in the Pre-Funding Account, the Capitalized Interest Account and any other
account specified in the related Prospectus Supplement (including, unless
otherwise specified in the related Prospectus Supplement, all investments in
such accounts and all income from the funds therein and all proceeds thereof,
other than investment earnings on any account so specified in the related
Prospectus Supplement); (v) assignments of the security interests in the
Financed Vehicles and any accessions thereto; (vi) the right to proceeds from
physical damage, credit life and disability insurance policies, if any, covering
individual Financed Vehicles or Obligors, as the case may be; (vii) the rights
of the Trust under the Trust Documents; and (viii) any and all proceeds of the
foregoing.
Pursuant to agreements between CITSF and many of the Dealers, the Dealer is
obligated after origination to repurchase from CITSF recreation vehicle
contracts which do not meet certain representations and warranties made by such
Dealer. Such representations and warranties relate primarily to the origination
of the contracts and the perfection of the security interests in the related
recreation vehicles, and do not typically relate to the creditworthiness of the
related Obligors or the collectability of such Contracts. Unless otherwise
specified in the related Prospectus Supplement, any Dealer agreement with
respect to the Contracts will not be assigned by CITSF to the Company or by the
Company to the Trust. However, unless otherwise specified in the related
Prospectus Supplement, the Trust Documents will authorize CITSF to transfer a
Contract to a Dealer upon a repurchase by a Dealer pursuant to a Dealer
agreement and will require that any recovery of amounts with respect to a
Contract by CITSF pursuant to Dealer repurchase obligations be deposited in the
Collection Account for the related Trust in satisfaction of CITSF's repurchase
obligations under the Trust Documents to the extent, if any, that CITSF has not
already satisfied that obligation. In accordance with its customary servicing
practices and procedures, in determining whether to exercise any right of
recourse against a Dealer, CITSF considers the prior performance of the Dealer
and other business and commercial factors, including its own commercial
relationship with such Dealer. The assignments by the Dealers of Contracts to
CITSF do not generally provide for recourse to the Dealer for unpaid amounts in
the event of a default by an Obligor, other than in connection with the breach
of the Dealer's representations and warranties.
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THE CONTRACT POOL
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of retail installment sales contracts to finance the purchase of new and
used recreation vehicles and direct loans (collectively, the "Contracts"). The
Contracts will be originated or acquired by CITSF or its affiliates (including
CITCF-NY). Except as otherwise specified in the related Prospectus Supplement,
the Contracts will (i) be fully amortizing, (ii) bear interest at a fixed or
variable rate (the "Contract Rate"), and (iii) be Simple Interest Contracts or
Precomputed Contracts.
"Simple Interest Contracts" provide for the allocation of each payment made
thereunder to principal and interest in accordance with the "simple interest"
method. For Simple Interest Contracts, the principal balance of the Contract is
amortized over a series of equal monthly payments. Each monthly interest payment
is calculated by multiplying the outstanding principal balance of the loan by
the Contract Rate. Such product is then multiplied by a fraction, the numerator
of which is the number of days elapsed since the preceding payment of interest
was made and the denominator of which is either 365 or 360, depending on
applicable state law. Payments received on a Simple Interest Contract are
applied first to interest accrued to the date payment is received and second to
reduce the unpaid principal balance of the Contract. Accordingly, if an Obligor
makes a payment on the Contract less than 30 days after the previous payment,
the interest collected for the period since the preceding payment was made will
be less than 30 days' interest, and the amount of principal repaid in such month
will be correspondingly greater. Conversely, if an Obligor makes a payment on
the Contract more than 30 days after the previous payment, the interest
collected for the period since the preceding payment was made will be greater
than 30 days' interest, and the amount of principal repaid in the month will be
correspondingly reduced. As a result, based on the payment characteristics of a
particular Obligor, the principal due on the final due date of a Simple Interest
Contract may vary from the principal payment that would be made if payments for
such Contract were always made on their due dates.
If an Obligor pays more than one installment on a Simple Interest Contract at
a time, the regular installment will be treated as described above. However, the
entire amount of the additional installment or installments will be treated as a
principal payment and applied to reduce the principal balance of the related
Contract. The Obligor will not be required to make any payments on such a
Contract (a "Paid-Ahead Simple Interest Contract"), for the number of due dates
(the "Paid-Ahead Period") for which it has paid in advance the full
installment. However, during the Paid-Ahead Period interest will continue to
accrue on the principal balance of such Paid-Ahead Simple Interest Contract, as
reduced by the application of the early installment. As a result, when the
Paid-Ahead Period ends and the Obligor pays the next required installment, such
payment may be insufficient to cover the interest that has accrued since the
last payment by the Obligor. Notwithstanding such insufficiency, such Paid-Ahead
Simple Interest Contract would be considered to be current. This situation would
continue until the monthly installments are once again sufficient to cover all
accrued interest and to reduce the principal balance of the Contract. Depending
on the principal balance and Contract Rate of the related Contract and on the
number of installments paid in advance of their due dates, there may be extended
periods of time during which Simple Interest Contracts that are not amortizing
are considered current.
"Precomputed Contracts" provide for amortization of the loan over a series
of fixed level payment monthly installments. Each monthly installment, including
the monthly installment representing the final payment on the Contract, consists
of an amount of interest equal to 1/12th of the related Contract Rate multiplied
by the unpaid principal balance of the Contract, and an amount of principal
equal to the remainder of the monthly payment.
If an Obligor with respect to any Precomputed Contract, in addition to making
his or her regularly scheduled payment, makes one or more additional scheduled
payments in any Due Period (such Contract being a "Paid-Ahead Precomputed
Contract"), the additional scheduled payments made in such Due Period will be
deposited into the Paid-Ahead Account and applied on subsequent Deposit Dates as
described herein under "The Purchase Agreements and the Trust
Documents--Paid-Ahead Precomputed Contracts." Because paid-ahead amounts on
Paid-Ahead Precomputed Contracts are deposited into the Paid-Ahead Account, no
shortfalls of interest or principal will result therefrom.
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that an Obligor may prepay its Contract, in whole or in part,
at any time, without a prepayment premium.
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The Financed Vehicles will consist of motor homes, travel trailers and other
types of recreation vehicles. Motor homes are recreation camping and travel
vehicles built on or as an integral part of a self-propelled motor vehicle
chassis. A motor home may provide kitchen, sleeping and bathroom facilities, is
equipped with the ability to carry fresh water and sewage and may be one of the
following types:
Motor Home: The living unit has been constructed on a bare, specially
designed motor vehicle chassis.
Van Camper: A panel-type truck to which the manufacturer typically
adds any two of the following conveniences: sleeping, kitchen and toilet
facilities. The manufacturer also typically adds electrical hookup,
water storage, water hookup and top extension to provide more headroom.
Mini Motor Home: This unit is built on an automotive manufactured van
frame with an attached cab section typically having a gross vehicle weight
rating of 6,500 pounds or more, with an overall height of less than eight
feet. The manufacturer completes the body section containing the living area
and attaches it to the cab section.
Compact Motor Home: This unit is built on an automotive manufactured cab
and chassis typically having a gross vehicle weight rating of less than
6,500 pounds. It may provide any or all of the features of the larger units.
Travel trailers are trailers designed to be towed by a motorized vehicle
(e.g., automobile, van or pickup truck) and are of a size and weight that does
not require a special highway movement permit. A travel trailer is designed to
provide temporary living quarters for recreation, camping or travel use, does
not require permanent on-site hookup and may be one of the following types:
Conventional Travel Trailer: This unit ranges typically from 12 feet to
35 feet in length, and is towed by means of a bumper or frame hitch attached
to the towing vehicle.
Park Trailer: These units are designed for seasonal or temporary living.
When set up, the unit may be connected to utilities necessary for operation
of installed fixtures and appliances. The unit is built on a single chassis
mounted on wheels. Park trailers are no more than 40 feet in overall body
length and no more than 12 feet in overall body width when in the traveling
mode. The unit is designed for set-up by persons without special skills
using only hand tools.
Fifth-Wheel Travel Trailer: This unit can be equipped in the same way as
the conventional travel trailer, but is constructed with a raised forward
section that allows a bi-level floor plan. This style is designed to be
towed by a vehicle equipped with a device known as a fifth-wheel hitch.
Folding Camping Trailer: This is a portable unit mounted on wheels and
constructed with collapsible partial sidewalls which fold for towing by
another vehicle and unfold at the campsite to provide temporary living
quarters for recreation, camping or travel use.
Truck Camper: This is a portable unit designed to be loaded onto and
unloaded from the bed of a pickup truck, constructed to provide temporary
living quarters for recreation travel or camping use.
Certain detailed information regarding the Contract Pool as of the Initial
Cut-off Date or such other date specified therein for each Trust will be set
forth in the related Prospectus Supplement. If specific information with respect
to the Contract Pool is not known at the time the related series of Securities
initially is offered, more general information will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report on
a Current Report on Form 8-K to be filed with the Commission within fifteen days
after the initial issuance of such Securities. A copy of the Trust Documents
with respect to each series of Securities will be attached to the Current Report
on Form 8-K and will be available for inspection at the corporate trust office
of the Owner Trustee specified in the related Prospectus Supplement. A schedule
of the Contract Pool relating to such series will be attached to the Trust
Documents delivered to the Owner Trustee upon delivery of the Securities.
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YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that it is prepayable, without premium, by the Obligor at any
time. Prepayments (or, for this purpose, equivalent payments to a Trust) also
may result from liquidations due to default, receipt of proceeds from insurance
policies, repurchases by CITSF due to breach of a representation or warranty or
breach of a covenant in the Trust Documents, or as a result of CITSF exercising
its option to purchase the Contract Pool. See "The Purchase Agreements and the
Trust Documents." The rate of prepayments on the Contracts may be influenced by
a variety of economic, social and other factors. No assurance can be given that
prepayments on the Contracts will conform to any estimated or actual historical
experience, and no prediction can be made as to the actual prepayment rates
which will be experienced on the Contracts. Certificateholders and Noteholders
will bear all reinvestment risk resulting from the timing of payments of
principal on the Certificates or the Notes, as the case may be.
POOL FACTORS
Unless otherwise specified in the related Prospectus Supplement, the
"Certificate Pool Factor" for each class of Certificates, if any, is a
seven-digit decimal which the Servicer will compute each month indicating the
remaining Certificate Balance as of the Distribution Date, as a fraction of the
Original Certificate Balance. The Certificate Pool Factor will be 1.0000000 as
of the Initial Cut-off Date, and thereafter will decline to reflect reductions
in the outstanding principal balance of the Certificates. A Certificateholder's
portion of the aggregate outstanding Certificate Balance is the product of (i)
the original denomination of the Certificateholder's Certificate and (ii) the
Certificate Pool Factor.
Unless otherwise specified in the related Prospectus Supplement, the "Note
Pool Factor" for each class of Notes, if any, is a seven-digit decimal which
the Servicer will compute each month indicating the remaining outstanding
principal balance of the Notes as of the Distribution Date, as a fraction of the
initial outstanding principal balance of the Notes. The Note Pool Factor will be
1.0000000 as of the Initial Cut-off Date, and thereafter will decline to reflect
reductions in the outstanding principal balance of the Notes. A Noteholder's
portion of the aggregate outstanding principal balance of the Notes is the
product of (i) the original denomination of the Noteholder's Note, and (ii) the
Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents,
unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date, the Securityholders will receive monthly reports concerning
the payments received on the Contracts, the Pool Balance, the Certificate Pool
Factor, if any, the Note Pool Factor, if any, and various other items of
information. Securityholders of record (which in most cases will be Cede) during
any calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by law. Certificate Owners, if any, and
Note Owners, if any, may receive such reports, upon written request, together
with a certification that they are Certificate Owners or Note Owners, as the
case may be, and payment of any expenses associated with the distribution of
such reports, from the Owner Trustee and the Indenture Trustee (if any) at the
addresses specified in the related Prospectus Supplement. See "Certain
Information Regarding the Securities--Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the Company
will sell the Initial Contracts to a Trust concurrently with the sale of the
Securities and the net proceeds from the sale of the Securities will be applied
by such Trust to the purchase of the Initial Contracts, to the payment of
certain expenses connected with pooling the Contracts and issuing the
Securities, to the deposit of the Pre-Funded Amount in the Pre-Funding Account,
if any, to the deposit of the initial amount into the Capitalized Interest
Account, if any, and to the deposit of the initial amount, if any, into a
Reserve Fund, if any. Such net proceeds less the payment of such expenses, the
Pre-Funded Amount, if any, and the initial deposit into the Capitalized Interest
Account, if any, and the Reserve Fund, if any, represent the purchase price paid
by a Trust to the Company for the sale of the Initial Contracts to such
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Trust. Such amount will be determined as a result of the pricing of the
Securities, through the offering described in the related Prospectus Supplement.
The net proceeds to be received by the Company from the sale of the Initial
Contracts to a Trust will be paid by the Company to CITSF as the purchase price
for the Contracts and will be added to CITSF's general funds and will be
available for general corporate purposes, including the purchase of new
recreation vehicle installment sales contracts and the payment of the purchase
price to CITCF-NY for any Contracts acquired by CITSF from CITCF-NY.
THE CIT GROUP, INC.
CIT, a Delaware corporation, is a leading diversified finance organization
offering secured commercial and consumer financing primarily in the United
States to smaller, middle-market and larger businesses and to individuals
through a nationwide distribution network. CIT commenced operations in 1908. CIT
has developed a broad array of "franchise" strategic business units that focus
on specific industries, asset types and markets which are balanced by client,
industry and geographic diversification.
The Dai-Ichi Kangyo Bank, Limited ("DKB") owns eighty percent (80%) of the
issued and outstanding shares of common stock of CIT. DKB purchased a sixty
percent (60%) common stock interest in CIT from Manufacturers Hanover
Corporation ("MHC") at year-end 1989 and acquired an additional twenty percent
(20%) common stock interest in CIT on December 15, 1995 from CBC Holding
(Delaware) Inc. ("CBC Holding"), a wholly owned subsidiary of The Chase
Manhattan Corporation ("CMC"). DKB has an option, expiring December 15, 2000,
to purchase the remaining twenty percent (20%) common stock interest from CBC
Holding.
On September 26, 1997, CIT changed its name to The CIT Group, Inc. and filed
a registration statement with the Securities and Exchange Commission for an
initial public offering of 20% of its common stock. The proceeds of that
offering will be used to fund CIT's acquisition of DKB's option to purchase CBC
Holdings' 20% interest in CIT and the exercise of such option. Following
consummation of such offering, DKB will continue to hold its present investment
in CIT.
In accordance with a stockholders agreement among DKB, CMC, as direct
successor to CBC and indirect successor to MHC, and CIT, dated as of December
29, 1989, as amended by an Amendment to Stockholders' Agreement, dated December
15, 1995 (as amended, the "Stockholders Agreement"), one nominee of the Board
of Directors is designated by CMC. The Stockholders Agreement also contains
restrictions with respect to the transfer of the stock of CIT to third parties.
CIT is subject to the informational requirements of the Exchange Act and, in
accordance therewith, files reports and other information with the Commission.
Such reports and other information can be inspected and copied at the offices of
the Commission and at the offices of the New York Stock Exchange, Inc. See
"Additional Information."
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
The Company was incorporated in the State of Delaware on June 24, 1994, and
is a wholly-owned, limited purpose finance subsidiary of CIT. The Company
maintains its principal office at 650 CIT Drive, Livingston, New Jersey 07039.
Its telephone number is (201) 535-3514.
As described herein, the obligations of the Company with respect to the
Securities are limited. The Company will make no representations or warranties
with respect to the Contracts and will have no ongoing servicing obligations or
responsibilities with respect to the Contract Pool. CITSF is an affiliate of the
Company. The Company will acquire the Contract Pool in a privately negotiated
transaction from CITSF.
Unless otherwise specified in the related Prospectus Supplement, neither CIT
nor any of its affiliates, including the Company and CITSF, will be obligated
with respect to the Securities. Accordingly, the Company has determined that
financial statements of CITSF and the Company are not material to the offering
of the Securities.
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THE CIT GROUP/SALES FINANCING, INC., SERVICER
GENERAL
CITSF, a Delaware corporation, is a wholly-owned subsidiary of CIT. It has
its principal executive office at 650 CIT Drive, Livingston, New Jersey 07039,
and its telephone number is (201) 740-5000.
CITSF originates, purchases, sells and services retail installment sales
contracts for recreation vehicles, manufactured housing, recreational boat
products and other consumer goods throughout the United States. CITSF has been a
lender to the recreation vehicle industry for more than 30 years. CITSF has a
centralized asset service facility (the "Asset Service Center") in Oklahoma
City, Oklahoma. Working through Dealers and manufacturers, CITSF offers retail
installment credit. In addition to purchasing recreation vehicle contracts from
Dealers on an individual basis, CITSF makes bulk purchases of recreation vehicle
contracts. These bulk purchases may be from the portfolios of other lending
institutions or finance companies, the portfolios of governmental agencies or
instrumentalities or the portfolios of other entities that purchase and hold
recreation vehicle contracts.
The Asset Service Center of CITSF services consumer credit transactions in 50
states and the District of Columbia. It provides full servicing for recreation
vehicle, home equity, recreational boat and manufactured housing retail
installment contracts. The servicing portfolio includes both loans originated or
purchased by CITSF, as well as loans originated or purchased by CITSF and
subsequently securitized with servicing retained. The servicing portfolio also
includes loans owned by third parties that are serviced by CITSF for a fee on a
"contract" basis. The Asset Service Center is supplemented by outside collectors
and field remarketers located throughout the United States.
CITSF's general policies with regard to the origination of recreation vehicle
installment sale contracts are described under "--Contract Origination" and
"--CITSF's Underwriting Guidelines." See "--Servicing" for a description of
certain of CITSF's servicing policies.
CONTRACT ORIGINATION
Although CITSF does purchase recreation vehicle installment sale contracts in
bulk from other lenders, unless otherwise specified in the related Prospectus
Supplement, all of the Contracts in the Contract Pool have been originated by
CITSF or CITCF-NY through the purchase of such Contracts from Dealers.
Through its Regional Business Centers, CITSF arranges to purchase recreation
vehicle contracts from recreation vehicle Dealers located throughout the United
States. New business development officers contact the Dealers located in their
territories and explain CITSF's available financing plans, terms, prevailing
rates and credit and financing policies. If the Dealer wishes to use CITSF's
available customer financing, the Dealer must make an application for Dealer
approval. Upon satisfactory results of CITSF's investigation of the Dealer's
creditworthiness and general business reputation, CITSF and the Dealer execute a
Dealer agreement. CITSF also originates recreation vehicle installment loan
agreements directly. In addition, CITSF purchases portfolios of recreation
vehicle contracts from other lending institutions or finance companies.
Contracts that CITSF purchases from Dealers or originates itself (as opposed
to portfolios of contracts purchased from other lenders) are purchased on an
individually approved basis in accordance with CITSF's underwriting guidelines.
If CITSF believes that an obligor on a recreation vehicle contract (including
one of the Contracts) is likely to refinance the contract as a result of
interest rate changes or other reasons, CITSF may in its discretion attempt to
retain such obligor as a customer by soliciting the obligor to refinance the
contract with CITSF.
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CITSF'S UNDERWRITING GUIDELINES
All recreation vehicle contracts that are purchased by CITSF from Dealers are
written on forms provided or approved by CITSF and are purchased on an
individually approved basis. With respect to each retail recreation vehicle
contract to be purchased from a Dealer, CITSF's general practice is to have the
Dealer submit the customer's credit application, manufacturer's invoice (if the
contract is for a new vehicle) and certain other information relating to the
contract to the applicable Regional Business Center.
All credit applications are entered into an application processing system.
All applications are reviewed to determine the creditworthiness of the customer
and to evaluate certain other aspects of the proposed transaction. During 1997,
CITSF installed a new application processing system designed to enhance
productivity and provide greater control over the quality of credits approved
through the use of "decision rules" that alert analysts to further investigate
certain conditions. The new system also requires the proper level of authority
to approve transactions over an individual's dollar limits. CITSF's underwriting
guidelines require, and have required, a credit officer at a Regional Business
Center with the appropriate level of credit authority to approve an applicant's
credit history, residence history, employment history and debt-to-income payment
ratio before credit is extended. Although, with respect to these criteria, CITSF
has, and has had, certain minimum requirements, as described below, CITSF's
management does not believe that these minimum requirements are themselves
generally sufficient to warrant credit approval of an applicant. Thus, there
were and are no requirements on the basis of which, if they are met, credit is
routinely approved without review by a credit officer. Based on credit score and
other risk factors, each applicant is either approved, declined or, if
necessary, referred to a credit officer with a higher credit authority.
The retail customer generally has had a stable residence, employment and
credit history, a minimum of two years in his or her present job, a debt ratio
(the ratio of total installment debt and housing expenses to gross monthly
income) of 40% or less, a down payment of at least 10% and an overall favorable
credit profile. Approval of retail customers that do not meet the
above-described retail customer profile is considered by the appropriate level
credit officer, on a case by case basis. Such approval, if granted, is based on
the applicant's length and likelihood of continued employment, ability to pay,
and a review of the applicants' paying habits. No guarantors, endorsers or
co-signers are considered in determining whether to accept or reject an
application. The maximum amount CITSF will advance to such targeted customers is
(i) generally in the case of a new financed vehicle, 100% of the unpaid cash
balance, not to exceed 110% of the manufacturer's invoice price (on an exception
basis, discretionary credit approval may permit advances up to 130% of
manufacturer's invoice price) plus taxes, fees and insurance, and (ii) in the
case of a used financed vehicle, 100% of the unpaid cash balance, not to exceed
110% of the wholesale value as determined by the Kelly blue book or the NADA
Guide book. Funding of a contract is authorized after verification of the
conditions of approval of the application and satisfactory delivery of the
related recreation vehicle.
In August 1994, CITSF's credit criteria were changed to permit greater
reliance on credit scores and overall evaluation instead of using specific
disqualifying criteria (e.g., a minimum of two years of employment). The
interest rate charged on each recreation vehicle contract originated since
August 1994 reflects CITSF's evaluation of the relative risk associated with an
individual's application.
The credit review and approval practices of each Regional Business Center are
subject to internal reviews and internal audits that, through sampling, examine
the nature of the verification of credit histories, residence histories,
employment histories, debt ratios of the applicants and evaluate the credit
risks associated with the contracts purchased through such regional office by
rating the obligors on such contracts according to their credit histories,
employment histories, debt ratios and housing ratios.
SERVICING
Through its Asset Service Center, CITSF services recreation vehicle,
manufactured housing, recreational boat, home equity, and other consumer loans.
CITSF services all of the recreation vehicle contracts it originates or
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purchases, whether on an individual basis or in bulk (except those it has sold
to third parties on a servicing released basis). CITSF is actively seeking
arrangements pursuant to which it will service recreation vehicle contracts held
by other entities, including contracts which were not purchased by CITSF or sold
to such other entities by CITSF. Generally, such servicing responsibilities are,
and would be, also carried out through the Asset Service Center. Servicing
responsibilities include collecting principal and interest payments, taxes,
insurance premiums, where applicable, and other payments from obligors and,
where such contracts have been sold, remitting principal and interest payments
to the holders thereof, to the extent such holders are entitled thereto.
Collection procedures include repossession and resale of recreation vehicles
securing defaulted contracts and, if deemed advisable by CITSF, entering into
workout arrangements with obligors under certain defaulted contracts. Although
decisions as to whether to repossess any recreation vehicle are made on an
individual basis, CITSF's general policy is to institute repossession procedures
promptly after Asset Service Center personnel determine that it is unlikely that
a defaulted contract will be brought current, and thereafter to diligently
pursue the resale of such recreation vehicles if the market is favorable. The
Asset Service Center has developed a nationwide auction network to facilitate
resale efforts on such repossessions.
DELINQUENCY AND LOAN LOSS EXPERIENCE
Each Prospectus Supplement will include information on CITSF's loss and
delinquency experience with respect to its servicing portfolio of recreation
vehicle contracts. However, there can be no assurance that such experience will
be indicative of the performance of the Contracts included in a particular
Contract Pool. Unless otherwise specified in the related Prospectus Supplement,
the tables setting forth the delinquency experience for the portfolio of
recreation vehicle contracts originated and serviced by CITSF will exclude
contracts acquired by CITSF through portfolio purchases and contracts in
repossession.
THE CERTIFICATES
GENERAL
A series of Securities may include one or more classes of Asset-Backed
Certificates (the "Certificates") issued pursuant to the Trust Documents to be
entered into among the Seller, the Servicer, and the Owner Trustee, forms of
which have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. Payments in respect of the Certificates will be
subordinated to payments on the Notes, if any, to the extent described in the
related Prospectus Supplement. The following summary describes certain terms of
the Certificates and the Trust Documents. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Certificates and the Trust Documents, and the
following summary will be supplemented in whole or in part by the related
Prospectus Supplement. Where this summary refers to particular provisions or
terms used in the Trust Documents, the actual provisions (including definitions
of terms) are incorporated by reference as part of such summary.
The Certificates will be issued in the minimum denominations and integral
multiples in excess thereof specified in the related Prospectus Supplement;
provided, however, that one Certificate of each series may be issued in a
denomination other than such integral multiple such that the applicable
Affiliated Owner specified in the related Prospectus Supplement, if any, may be
issued at least the portion of the Original Certificate Balance specified in the
related Prospectus Supplement. If specified in the related Prospectus
Supplement, the Company or one of its affiliates will own the entire beneficial
interest in the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Certificates will be issued in book-entry form only. Unless
otherwise specified in the related Prospectus Supplement, each class of the
Certificates will initially be represented by a single Certificate registered in
the name of the nominee of DTC, except as provided below. Unless otherwise
specified in the related Prospectus Supplement, DTC's nominee will be Cede & Co.
("Cede"). No person acquiring an interest in the Certificates through the
facilities of DTC (a "Certificate Owner") will be entitled to receive a
Certificate representing such person's interest in the Certificates, except as
set forth under "Certain Information Regarding The Securities--Definitive
Securities." Unless and until Definitive Certificates are issued under the
limited circumstances described
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in the related Prospectus Supplement and herein, all references to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants, and all references herein to distributions, notices, reports
and statements to Certificateholders shall refer to distributions, notices,
reports and statements to DTC in accordance with DTC procedures. See "Certain
Information Regarding The Securities--Definitive Securities." If specified in
the related Prospectus Supplement, one or more classes of Certificates will be
issued and sold privately.
DISTRIBUTION OF PRINCIPAL AND INTEREST ON THE CERTIFICATES
The Certificates will bear interest at the rate specified in the related
Prospectus Supplement (the "Pass-Through Rate"). The timing and priority of
distributions, seniority, allocations of loss, Pass-Through Rate and amount of
or method of determining distributions with respect to principal and interest
(or, where applicable, with respect to principal only or interest only) on the
Certificates of any series will be described in the related Prospectus
Supplement. Distributions of interest on the Certificates will be made on the
dates specified in the related Prospectus Supplement (each, a "Distribution
Date") and, unless otherwise specified in the related Prospectus Supplement,
will be made prior to distributions with respect to principal. A series may
include one or more classes of Stripped Certificates entitled to (i)
distributions in respect of principal with disproportionate, nominal or no
interest distributions, or (ii) interest distributions, with disproportionate,
nominal or no distributions in respect of principal. Each class of Certificates
may have a different Pass-Through Rate, which may be a fixed, variable or
adjustable Pass-Through Rate (and which may be zero for certain classes of
Stripped Certificates), or any combination of the foregoing. The related
Prospectus Supplement will specify the Pass-Through Rate for each class of
Certificates, or the initial Pass-Through Rate and the method for determining
the Pass-Through Rate. Unless otherwise specified in the related Prospectus
Supplement, interest on the Certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Unless otherwise specified
in the related Prospectus Supplement, distributions in respect of the
Certificates will be subordinate to payments in respect of the Notes, if any,
as more fully described in the related Prospectus Supplement. Distributions in
respect of principal of any class of Certificates will be made on a pro rata
basis among all of the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes of
Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall be
as set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments of
interest and principal on the Certificates will be made on the fifteenth day of
each month or, if any such day is not a Business Day, on the next succeeding
Business Day (each, a "Distribution Date"), commencing on the date specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, with respect to any Distribution Date, the Due Period
will be the calendar month preceding the month of such Distribution Date. Unless
otherwise specified in the related Prospectus Supplement, payments on the
Certificates on each Distribution Date will be made to the holders of record of
the related Certificates on the day immediately preceding such Distribution Date
or, in the event Definitive Certificates have been issued, at the close of
business of the last day of the month immediately preceding the month in which
such Distribution Date occurs (each, a "Record Date"). A "Business Day" is any
day other than a Saturday, Sunday or any day on which banking institutions or
trust companies in the states of New York, Oklahoma and such other states (if
any) specified in the related Prospectus Supplement are authorized or required
by law, regulation or executive order to be closed.
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
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"Indenture Trustee"), a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the Notes and the
Indenture, and the following summary will be supplemented in whole or in part by
the related Prospectus Supplement. Where this summary refers to particular
provisions or terms used in the Indenture, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
The Notes will be issued in the minimum denominations and integral multiples
in excess thereof specified in the related Prospectus Supplement; provided,
however, that one Note of each class of each series may be issued in a
denomination other than such integral multiple. Unless otherwise specified in
the related Prospectus Supplement, the Notes will be issued in book-entry form
only. Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by a single Note registered in the
name of Cede, the nominee of DTC, except as provided below. No person acquiring
an interest in the Notes through the facilities of DTC (a "Note Owner" and,
together with a Certificate Owner, a "Security Owner") will be entitled to
receive a Note representing such person's interest in the Notes, except as set
forth under "Certain Information Regarding the Securities--Definitive
Securities" and such persons will hold their interests in the Notes through DTC
in the United States or Cedel or Euroclear in Europe. Unless and until
Definitive Notes are issued under the limited circumstances described in the
related Prospectus Supplement and herein, all references to actions by
Noteholders shall refer to actions taken by DTC upon instructions from its
Participants, and all references in the related Prospectus Supplement and herein
to distributions, notices, reports and statements to Noteholders shall refer to
distributions, notices, reports and statements to DTC in accordance with DTC
procedures. See "Certain Information Regarding the Securities--Definitive
Securities." If specified in the related Prospectus Supplement, one or more
classes of Notes will be issued and sold privately.
PAYMENT OF PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss, Interest
Rate and amount of or method of determining payments of principal and interest
on each class of Notes will be described in the related Prospectus Supplement.
The right of holders of any class of Notes to receive payments of principal and
interest may be senior or subordinate to the rights of holders of any class or
classes of Notes of such series, or any class of Certificates, as described in
the related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, payments of interest on the Notes will be made prior to
payments of principal thereon. A series may include one or more classes of
Stripped Notes entitled to (i) principal payments with disproportionate, nominal
or no interest payment, or (ii) interest payments with disproportionate, nominal
or no principal payments. Each class of Notes may have a different Interest
Rate, which may be a fixed, variable or adjustable Interest Rate (and which may
be zero for certain classes of Stripped Notes), or any combination of the
foregoing. The related Prospectus Supplement will specify the Interest Rate for
each class of Notes, or the initial Interest Rate and the method for determining
the Interest Rate. One or more classes of Notes of a series may be redeemable
under the circumstances specified herein and in the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments in
respect of interest to Noteholders of all classes within a series will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the aggregate amount of interest payable on the
Notes on any of the dates specified for payments in the related Prospectus
Supplement, in which case each class of Noteholders will receive its ratable
share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount then available to be distributed in respect
of interest on the Notes. In the case of a series of Securities which includes
two 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
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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 to
surrender any rights or power conferred upon the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision which
may be inconsistent with any other provision; (vi) to provide for the acceptance
of the appointment of a successor Indenture Trustee or to add to or change any
provision as shall be necessary and permitted to facilitate the administration
by more than one trustee; (vii) to modify, eliminate or add any provision in
order to comply with the Trust Indenture Act of 1939, as amended; or (viii) to
add, change in any manner, or eliminate any provision, or modify in any manner
the rights of Noteholders; provided that any action specified in this clause
(viii) shall not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any Noteholder unless Noteholder consent is
otherwise obtained as described in the Indenture. Any action specified in clause
(viii) shall be taken only upon satisfaction of the Rating Agency Condition.
"Rating Agency Condition" with respect to any action means the condition that
the Rating Agency or Agencies specified in the related Prospectus Supplement
shall have notified the Seller, the Servicer and the Issuer in writing that such
action will not result in the downgrade or withdrawal of the then current
ratings of the Securities.
Modification of Indenture with Noteholder Consent. With respect to each
Trust, with the consent of the holders of not less than a majority of the
aggregate outstanding principal amount of the Notes, and with prior notice to
the Rating Agencies, the Issuer and the Indenture Trustee may execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the Indenture, or modify in any manner the rights of the
related Noteholders.
Without the consent of the holder of each outstanding related Note affected
thereby, however, no supplemental indenture may: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the interest rate specified thereon or the redemption price with
respect thereto or change any place of payment where or the coin or currency in
which any Note or any interest thereon is payable; (ii) impair the right to
institute suit for the enforcement of certain provisions of the Indenture
regarding payment; (iii) reduce the percentage of the aggregate principal amount
of the outstanding Notes the consent of the holders of which is required for any
such supplemental indenture or the consent of the holders of which is required
for any waiver of compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided for in the
Indenture; (iv) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the related Trust, any other obligor on the Notes, the
Seller or an affiliate of any of them; (v) reduce the percentage of the
aggregate outstanding amount of the Notes the consent of the holders of which is
required to direct the Indenture Trustee to sell or liquidate the Contracts if
the proceeds of such sale would be insufficient to pay the principal amount and
accrued but unpaid interest on the outstanding Notes; (vi) decrease the
percentage of the aggregate principal amount of the Notes required to amend the
sections of the Indenture which specify the applicable percentage of aggregate
principal amount of the Notes necessary to amend the Indenture or certain other
related agreements; or (vii) permit the creation of any lien ranking prior to or
on a parity with the lien of the Indenture with respect to any of the collateral
for the Notes or, except as otherwise permitted or contemplated in the
Indenture, terminate the lien of the Indenture on any such collateral or deprive
the holder of any Note of the security
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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 Controlling Notes; (iii) any default in the observance or performance in any
material respect of any other covenants or agreements in the Indenture, which
failure materially and adversely affects the rights of Noteholders, and which
failure continues unremedied for thirty days after the giving of written notice
of such failure to the Issuer and the Seller (or the Servicer, as applicable) by
the Indenture Trustee or to the Issuer and the Seller (or the Servicer, as
applicable) and the Indenture Trustee by the holders of not less than 25% of the
aggregate outstanding principal amount of the Controlling Notes; (iv) any
failure to pay in full the outstanding principal balance of any Notes on or
prior to the Note Final Scheduled Distribution Date; and (v) certain events of
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings and certain actions by the Trust indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. However, unless otherwise specified in the related Prospectus
Supplement, the amount of principal required to be paid to Noteholders under the
Indenture will generally be limited to amounts available to be deposited in the
Note Distribution Account. Therefore, unless otherwise specified in the related
Prospectus Supplement, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Event of Default until the
Note Final Scheduled Distribution Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an Event
of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or holders of not less than a majority in
aggregate outstanding principal amount of the Controlling Notes may declare the
principal of the Notes to be immediately due and payable. Such declaration may,
under certain circumstances, be rescinded by the holders of not less than a
majority of the aggregate outstanding principal amount of such Controlling
Notes.
"Controlling Notes" means (i) if there is only one class of Notes, such
class of Notes and (ii) if there is more than one class of Notes (a) all classes
of the most senior class of Notes then outstanding voting together as a single
class until such class of Notes have been paid in full, and (b) from and after
the payment in full of such senior class of Notes then outstanding, all classes
of the next most senior class of Notes voting together as a single class until
such class of Notes have been paid in full.
Unless otherwise specified in the related Prospectus Supplement, if the Notes
of any series are due and payable following an Event of Default with respect
thereto, the related Indenture Trustee may institute proceedings to collect
amounts due or foreclose on Trust property, exercise remedies as a secured party
under the related Contracts, sell the related Contracts or elect to have the
Trust maintain possession of such Contracts and continue to apply collections on
such Contracts as if there had been no declaration of acceleration. Unless
otherwise specified in the related Prospectus Supplement, the Indenture Trustee,
however, is prohibited from selling the related Contracts following an Event of
Default, unless (i) the holders of all the outstanding related Notes consent to
such sale, (ii) the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on such outstanding related Notes at the
date of such sale, or (iii) the Indenture Trustee determines that the proceeds
of the Contracts would not be sufficient on an ongoing basis to make all
payments on the Notes as such payments would have become due if such obligations
had not been declared due and payable, and the Indenture Trustee obtains the
consent of the holders of not less than 66 2/3% of the aggregate outstanding
principal amount of the Controlling Notes. Unless otherwise specified in the
related Prospectus Supplement, following a declaration upon an Event of Default
that the Notes are immediately due and payable, (i) Noteholders will be entitled
to ratable repayment of principal on the basis of their respective unpaid
principal balances, and (ii) repayment in full of the accrued interest on and
unpaid principal balances of the Notes will be made prior to any further payment
of interest on the Certificates or in respect of the Certificate Balance (other
than payments of the "Principal Liquidation Loss Amount" (as defined in the
related Prospectus Supplement) and other payments from the Enhancement (if any)
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applicable to the Certificates).
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of such Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, the holders of not less than a majority in aggregate
outstanding principal amount of the Controlling Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee and the holders of not less than a majority
in aggregate outstanding principal amount of such Controlling Notes may, in
certain cases, waive any past default with respect thereto, except a default (i)
in the payment of principal of or interest on any of the Notes or (ii) in
respect of a covenant or provision of the Indenture that cannot be modified or
amended without the consent of the holder of each Note.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in aggregate outstanding
principal amount of the Controlling Notes have made written request of the
Indenture Trustee to institute such proceeding, (iii) such holder or holders
have offered the Indenture Trustee reasonable indemnity, (iv) the Indenture
Trustee has for sixty days after its receipt of such notice, request and offer
of indemnity failed to institute such proceeding, and (v) no direction
inconsistent with such written request has been given to the Indenture Trustee
during such sixty-day period by the holders of not less than a majority in
aggregate outstanding principal amount of such Controlling Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within ninety days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by accepting
the related Notes, will covenant that they will not, for a period of one year
and one day after the termination of the Indenture, institute against the
Affiliated Owner, if any, the Company or the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
Neither the Indenture Trustee in its individual capacity nor the Owner
Trustee in its individual capacity, nor any holder of a Certificate including,
without limitation, the Affiliated Owner (if any) or the Company, nor any of
their respective owners, beneficiaries, agents, officers, directors, employees,
affiliates, successors or assigns will, in the absence of an express agreement
to the contrary, be personally liable for the payment of the principal of or
interest on the related Notes or for the agreements of the related Trust
contained in the Indenture.
Certain Covenants. Unless otherwise specified in the related Prospectus
Supplement, each Indenture will provide that the related Trust may not
consolidate with or merge with or into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes the Trust's obligation to make due and timely payments upon
the Notes and the performance or observance of every agreement and covenant of
the Trust under the Indenture, (iii) no Event of Default shall have occurred and
be continuing immediately after such merger or consolidation, (iv) the Trust has
been advised that the rating of the related Notes or Certificates then in effect
would 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
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Documents (collectively, the "Related Documents"), sell, convey, transfer,
exchange or otherwise dispose of any of the assets of the Trust, (ii) claim any
credit on or make any deduction from the principal or interest payable in
respect of the related Notes (other than amounts withheld under the Code or
applicable state law) or assert any claim against any present or former holder
of such Notes because of the payment of taxes levied or assessed upon the Trust,
(iii) dissolve or liquidate in whole or in part, (iv) permit the validity or
effectiveness of the related Indenture to be impaired or permit the lien of the
Indenture to be amended, hypothecated, subordinated, terminated or discharged,
or permit any person to be released from any covenants or obligations with
respect to the related Notes under such Indenture except as may be expressly
permitted thereby or (v) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of the Indenture)
to be created on or extend to or otherwise arise upon or burden the assets of
the Trust or any part thereof, or any interest therein or the proceeds thereof.
No Trust will incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the related Notes and the related Indenture or
otherwise in accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required to
mail each year to all related Noteholders a brief report relating to its
eligibility and qualification to continue as Indenture Trustee under the related
Indenture, any amounts advanced by it under the Indenture, the amount, interest
rate and maturity date of certain indebtedness owing by the Trust to the
Indenture Trustee in its individual capacity, the property and funds physically
held by the Indenture Trustee as such and any action taken by it that materially
affects the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged with
respect to the assets of the Trust securing the related Notes upon the delivery
to the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with the Indenture Trustee of funds sufficient
for the payment in full of all of such Notes.
The Indenture Trustee. The Indenture Trustee for a series of Notes will be
specified in the related Prospectus Supplement. The Indenture Trustee may resign
at any time, in which event the Servicer, or its successor, will be obligated to
appoint a successor trustee. The Servicer may also remove the Indenture Trustee
if the Indenture Trustee ceases to be eligible to continue as such under the
Indenture or if the Indenture Trustee becomes insolvent. In such circumstances,
the Servicer will be obligated to appoint a successor trustee. Any resignation
or removal of the Indenture Trustee and appointment of a successor trustee will
not become effective until acceptance of the appointment by the successor
trustee and will be subject to any conditions or approvals, if any, specified in
the related Prospectus Supplement.
The Trust Documents will provide that the Servicer will pay the Indenture
Trustee's fees. The Trust Documents will further provide that the Indenture
Trustee will be entitled to indemnification by the Servicer for, and will be
held harmless against, any cost, loss, liability, claim, damage or expense
incurred by the Indenture Trustee in connection with the acceptance or
performance of the trusts and duties contained in the Indenture in accordance
with the terms and conditions therein, not resulting from its own willful
misfeasance, bad faith or gross negligence (other than by reason of a breach of
any of its representations or warranties set forth in the Indenture).
Trust Indenture Act. Each Indenture will comply with all applicable
provisions of the Trust Indenture Act of 1939, as amended.
ENHANCEMENT
General. The Prospectus Supplement will specify whether there is Enhancement
for any class of the Securities of a series and, if so, the material terms of
such Enhancement. Any Enhancement may be intended (i) to enhance
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the likelihood of receipt by the Certificateholders, if any, and/or the
Noteholders, if any, of the full amount of principal and interest due thereon
and to decrease the likelihood that the Certificateholders, if any, and/or the
Noteholders, if any, will experience losses, or (ii) to provide protection
against changes in interest rates or against other risks, or (iii) to supplement
the interest rate on the Contracts, in each case to the extent and under the
conditions specified in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, any Enhancement for a class of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal and interest thereon. If losses
occur which exceed the amount covered by any Enhancement or which are not
covered by any Enhancement, Securityholders will bear their allocable share of
such losses. In addition, if a form of Enhancement covers more than one class of
Securities of a series, Securityholders of any such class will be subject to the
risk that such Enhancement will be exhausted by the claims of Securityholders of
other classes.
Subordination. Unless otherwise specified in the related Prospectus
Supplement, the rights of Certificateholders to receive distributions of
interest and principal are subordinated to the rights of Noteholders to receive
payment in full of all amounts of interest and principal which the Noteholders
are entitled to receive on the related Distribution Date. Consequently, unless
otherwise specified in the related Prospectus Supplement, no distribution will
be made to the Certificateholders on any Distribution Date in respect of (i)
interest until the full amount of interest and principal on the Notes payable on
such Distribution Date has been distributed to the Noteholders, other than
payments from the applicable Enhancement, if any, and (ii) principal until the
Notes have been paid in full, other than distributions in respect of the
Principal Liquidation Loss Amount to the extent, if any, set forth in the
related Prospectus Supplement.
If and to the extent specified in the related Prospectus Supplement, the
rights of one or more classes of Notes of a series to receive distributions of
interest and principal may be subordinated to the rights of one or more other
classes of Notes of the same series to receive payment in full of all amounts of
interest and principal which are payable thereon on each Distribution Date.
Other Enhancement. The amounts and types of credit or cash flow enhancement
arrangements (each, an "Enhancement"), if any, with respect to each class of
Securities will be set forth in the related Prospectus Supplement. If and to the
extent provided in the related Prospectus Supplement, Enhancement may be in the
form of a financial guaranty insurance policy, letter of credit, CIT Limited
Guarantee, reserve fund, third party guarantee, cash collateral account,
derivative product, credit facility, yield supplement agreement,
overcollateralization, guaranteed investment contract, guaranteed rate
agreement, other agreements with respect to third party payments or other
support, or other form of credit or cash flow enhancement, or any combination
thereof, as may be described in the related Prospectus Supplement. If specified
in the related Prospectus Supplement, Enhancement for a class of Securities of a
series may cover one or more other classes of Securities in such series. Further
information regarding providers of Enhancement, including financial information
when material, will be included in the related Prospectus Supplement.
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
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Securityholders, the Servicer and any provider of Enhancement, it may be
referred to as a "Spread Account" or "Reserve Account." In the event that a
Reserve Fund is applied to supplement the monthly interest payments on certain
Contracts in the Contract Pool, it may be referred to as a "Yield Supplement
Account." In the event that the Reserve Fund is funded through the proceeds of
a loan to the Trust by a third party lender, it may be referred to as a "Cash
Collateral Account." The related Prospectus Supplement will specify whether any
Reserve Fund will be established as part of the Trust or held outside the Trust
by a collateral agent or similar third party (who may be a Trustee acting in a
different capacity). The related Prospectus Supplement will describe the
required levels of funding of a Reserve Fund, the circumstances under which a
Reserve Fund may be applied to make distributions on a class of Securities, and
the circumstances in which funds in a Reserve Fund may be released to persons
other than Securityholders. A Trust may contain more than one Reserve Fund, each
of which may apply only to a specified class of Securities or to specified
Contracts.
The Seller or the Affiliated Owner, if any, may at any time, without consent
of the Securityholders, sell, transfer, convey or assign in any manner its
rights to and interests in distributions from the Reserve Fund provided that (i)
the Rating Agency Condition is satisfied, (ii) the Seller or the Affiliated
Owner, as the case may be, provides to the Trustees an opinion from independent
counsel that such action will not cause the related Trust to be classified as an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes, and (iii) such transferee or assignee agrees in
writing to take positions for federal income tax purposes consistent with the
federal income tax positions agreed to be taken by the Seller or the Affiliated
Owner, as the case may be.
Limited Guarantee. If specified in the related Prospectus Supplement, certain
payments on a class of the Securities of a series, certain deficiencies in
principal or interest payments on the Contracts, or certain liquidation losses
on the Contracts, may be covered by a limited guarantee or other similar
instrument (the "Limited Guarantee"), limited in scope and amount, issued by
CIT. If not so specified, the Securityholders will have no recourse to CIT for
any amounts due on the Securities. If so specified, CIT may be obligated to take
one or more of the following actions in the event the Company fails to do so:
make deposits to an account, make advances, or purchase defaulted Contracts. Any
such Limited Guarantee will be limited in amount and a portion of the coverage
of any such Limited Guarantee may be separately allocated to certain events. The
scope, amount and, if applicable, the allocation of any Limited Guarantee will
be described in the related Prospectus Supplement.
Credit Facility. With respect to a series of Securities, one or more classes
may be entitled to the benefit of one or more letters of credit, guarantees,
limited guarantees, surety bonds or similar credit facilities (each, a "Credit
Facility"). Each such Credit Facility may be in an amount greater than, equal
to or less than the Certificate Balance of the Certificates of each class (or
the principal balance of the Notes of each class) entitled to the benefits
thereof, and may be subject to reduction or be limited as to duration, all as
described in the related Prospectus Supplement. To the extent specified in the
related Prospectus Supplement, amounts realized under a Credit Facility
supporting any class of Securities may be used for the same purposes as amounts
on deposit in a Reserve Fund. A Credit Facility may be held by a Trustee as part
of the related Trust or may be held by a collateral agent or other third party
(who may be a Trustee acting in a different capacity). The related Prospectus
Supplement will contain a description of the material terms of any Credit
Facility and any arrangement pursuant to which the Credit Facility is held
outside of the Trust and will state whether the Trust, the Seller, the Servicer
or a third party will pay the fees of the provider of the Credit Facility (the
"Credit Facility Provider"). Such Prospectus Supplement will also contain
certain information concerning the Credit Facility Provider, which information
will have been provided to the Seller by the Credit Facility Provider for use in
such Prospectus Supplement. CIT, CITSF or an affiliate thereof may be a Credit
Facility Provider.
If specified in the related Prospectus Supplement, a Credit Facility, rather
than guaranteeing distributions of particular amounts to the holders of
Securities of particular classes, may, instead, guarantee certain collections on
the related Contract Pool. These guaranteed collections may be attributable to
all or a portion of the amounts due on Contracts in liquidation, all or a
portion of the scheduled monthly payments due on the Contracts or other amounts.
The extent to which any such collections are guaranteed under a Credit Facility
which functions in this manner will be described in the related Prospectus
Supplement.
Liquidity Facility. With respect to a series of Securities, one or more
classes may be entitled to the benefit of
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one or more purchase agreements or other liquidity facilities (each, a
"Liquidity Facility"), pursuant to which the provider of such Liquidity
Facility (the "Liquidity Facility Provider") will provide funds to be used to
purchase some or all of such Securities. Unless otherwise specified in the
related Prospectus Supplement, a Liquidity Facility will be held outside of the
Trust by a third party (which may be a Trustee acting in another capacity). The
related Prospectus Supplement will contain a description of the material terms
of any such Liquidity Facility and any arrangement pursuant to which it is held
outside of the Trust, and will contain certain information concerning the
Liquidity Facility Provider, which information will have been provided to the
Seller by the Liquidity Facility Provider for use in such Prospectus Supplement.
CIT, CITSF or an affiliate thereof may be a Liquidity Facility Provider. If
specified in the related Prospectus Supplement, a Reserve Fund or Credit
Facility may also serve as a Liquidity Facility.
Replacement. If specified in the related Prospectus Supplement, the Seller
may replace the Enhancement for any class of Securities with another form of
Enhancement without the consent of Securityholders, provided the Rating Agency
Condition is satisfied.
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
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Definitive Certificates representing their respective interests in the
Securities, except under the limited circumstances described below and such
other circumstances, if any, as may be specified in the related Prospectus
Supplement.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Due to time zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participant on such business day. Cash received in Cedel or Euroclear as a
result of sales of Securities by or through a Cedel Participant or Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly or indirectly holding Notes
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
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.
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The Euroclear System was created in 1968 to hold securities for its
participants ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled in any of 32 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by the Brussels, Belgium
Office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator"
or "Euroclear"), under contract with Euroclear Clearance Systems, S.C., a
Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for the Euroclear System
on behalf of dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear through, or
maintain a custodial relationship with, a Euroclear Participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depository. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a beneficial holder of Notes under the Indenture on behalf of a
Cedel Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Depository's ability to effect such
actions on its behalf through DTC.
Unless and until Definitive Securities are issued, Security Owners who are
not Participants may transfer ownership of Notes and Certificates only through
Participants by instructing such Participants to transfer such Notes and
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Securities, which account is maintained with their respective
Participants. Under the DTC Rules and in accordance with DTC's normal
procedures, transfers of ownership of Securities will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited. Similarly, the respective Participants will make debits or credits, as
the case may be, on their records on behalf of the selling and purchasing
Securities Owners.
DTC has advised the Company that, unless and until Definitive Securities are
issued, DTC will take any action permitted to be taken by a Securityholder under
the Trust Documents only at the direction of one or more Participants to whose
DTC accounts the Securities are credited. Additionally, DTC has advised the
Company that it will take such actions with respect to specified percentages of
a class of the Securities only at the direction of Participants whose holdings
include principal amounts of the Securities that satisfy such percentages. DTC
may take conflicting actions with respect to other principal amounts of the
Securities to the extent that such actions are taken on behalf of Participants
whose holdings include such principal amounts.
NEITHER THE TRUST, THE SELLER, THE SERVICER, CIT, ANY AFFILIATED PURCHASER,
THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, NOR ANY OF THE UNDERWRITERS WILL HAVE
ANY
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RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL PARTICIPANTS OR
EUROCLEAR PARTICIPANTS OR SECURITY OWNERS WITH RESPECT TO (1) THE ACCURACY OF
ANY RECORDS MAINTAINED BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT, (2) THE
PAYMENT BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY
SECURITY OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF, OR INTEREST ON, THE
SECURITIES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR EUROCLEAR
PARTICIPANT OF ANY NOTICE TO ANY SECURITY OWNER WHICH IS REQUIRED OR PERMITTED
UNDER THE TERMS OF THE INDENTURE OR THE TRUST DOCUMENTS TO BE GIVEN TO
SECURITYHOLDERS OR (4) ANY OTHER ACTION TAKEN BY DTC AS THE SECURITYHOLDER.
DEFINITIVE SECURITIES
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, the Notes and Certificates will be issued in
fully registered, certificated form ("Definitive Notes" and "Definitive
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
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and the Trust Documents provided such Certificateholders (i) state that they
wish to communicate with other Certificateholders with respect to their rights
under the Purchase Agreements, the Trust Documents or the Certificates and (ii)
provide the Owner Trustee and the Servicer with a copy of the proposed
communication. The Purchase Agreements and Trust Documents will not provide for
the holding of any annual or other meetings of Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, if
Definitive Notes have been issued, the Indenture Trustee will, upon written
request by three or more Noteholders within five Business Days after receipt of
such request, afford such Noteholders access during business hours to the
current list of Noteholders for purposes of communicating with other Noteholders
with respect to their rights under the Indenture provided such Noteholders (i)
state that they wish to communicate with other Noteholders with respect to their
rights under the Indenture and (ii) provide the Indenture Trustee and the
Servicer with a copy of the proposed communication. The Indenture will not
provide for the holding of any annual or other meetings of Noteholders.
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;
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(xiii) during the Funding Period, if any, the number and aggregate
principal balance of Subsequent Contracts;
(xiv) during the Funding Period, if any, the number and aggregate
principal balance of Subsequent Contracts purchased by the Trust since the
preceding Distribution Date;
(xv) during the Funding Period, if any, the amount, if any, withdrawn
from the Capitalized Interest Account, if any, to make payments of interest
on the Securities;
(xvi) during the Funding Period, if any, the amount remaining on
deposit in the Capitalized Interest Account, if any;
(xvii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in the
Pre-Funding Account;
(xviii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in the
Capitalized Interest Account, if any;
(xix) on the Distribution Date immediately following the end of the
Funding Period (or if the Funding Period ends on a Distribution Date on such
Distribution Date), if any, the aggregate principal amount and percentage of
each of the Notes, if any, and Certificates, if any, which are being
redeemed;
(xx) the aggregate principal balance of all Contracts which became
either "Defaulted Contracts" or "Liquidated Contracts" (as defined in the
related Prospectus Supplement) during the related Due Period (if the related
Prospectus Supplement includes definitions of such term or terms);
(xxi) the number and aggregate principal amount of Contracts which were
prepaid, in part or in whole, during the related Due Period;
(xxii) the aggregate outstanding principal balance of the Notes (if
applicable) as of such Distribution Date (after giving effect to any
distributions thereon and reductions thereto on such Distribution Date);
(xxiii) the Certificate Balance (if applicable) as of such Distribution
Date (after giving effect to any distributions on such Distribution Date);
(xxiv) the amount, if any, by which the amount due to be distributed to
Noteholders (if applicable) and Certificateholders (if applicable) exceeds
the actual amount distributed on the related Distribution Date to Noteholders
(if applicable) and Certificateholders (if applicable), respectively;
(xxv) if applicable, the amount of surplus to be distributed to the
Affiliated Owner, if any, after all payments have been made in respect of the
Securities, the Servicer Payment has been paid and all deposits to any
Reserve Fund and payments to a Credit Facility Provider have been made;
(xxvi) if applicable, the balance of the Paid-Ahead Account; and
(xxvii) such other information as may be specified in the related
Prospectus Supplement.
If a Limited Guarantee is issued by CIT with respect to a series of
Securities, the monthly and annual reports will include a statement to the
following effect: CIT is subject to the requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission. As a result of the
limited guarantee by CIT, information relating to CIT which is material will be
available through such reports and other information.
Within a reasonable period of time after the end of each calendar year, but
not later than the latest date
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permitted by law (where applicable law specifies such date), the Servicer will
mail to each person who at any time during such calendar year shall have been a
Securityholder, and received any payment on its Security, a statement containing
the relevant amounts described above for such calendar year for the purposes of
such Securityholder's preparation of federal income tax returns. See "Certain
Federal Income Tax Consequences."
Unless and until Definitive Certificates or Definitive Notes are issued, such
reports with respect to a series of Securities will be sent on behalf of the
related Trust to the Trustees and Cede, as registered holder of the Certificates
and the Notes and the nominee of DTC. Certificate Owners and Note Owners may
receive copies of such reports upon written request, together with a
certification that they are Certificate Owners or Note Owners, as the case may
be, and payment of reproduction and postage expenses associated with the
distribution of such reports, from the Owner Trustee or the Indenture Trustee,
as applicable. See "--Statements to Securityholders" and "--Book-Entry
Registration" above.
THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
Unless otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of the Purchase Agreement and any
Subsequent Purchase Agreement (together, the "Purchase Agreements") and the
Sale and Servicing Agreement, any Subsequent Transfer Agreements and the Trust
Agreement or the Pooling and Servicing Agreement (collectively, the "Trust
Documents"). Forms of the Purchase Agreements and the Trust Documents have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. CITSF will provide a copy of such agreements (without exhibits) upon
request to a holder of Securities described therein. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Purchase Agreements and the Trust
Documents, and the following summary will be supplemented in whole or in part by
the related Prospectus Supplement. Where this summary refers to particular
provisions or terms used in the Purchase Agreements or Trust Documents, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summary.
SALE AND ASSIGNMENT OF THE CONTRACTS
On or prior to the Closing Date for a series of Securities and on each
Subsequent Transfer Date, if any, pursuant to the Purchase Agreement or a
Subsequent Purchase Agreement, as the case may be, between CITSF and the
Company, CITSF will sell and assign to the Company, without recourse, its entire
interest in and to the Initial Contracts and Subsequent Contracts, respectively,
including its security interests in the related Financed Vehicles. On the
Closing Date and each Subsequent Transfer Date, the Company will sell and assign
to the Trust, without recourse, all of its right, title and interest in and to
such Contracts, including its security interests in the Financed Vehicles.
Unless otherwise specified in the related Prospectus Supplement, certain of the
Contracts will be purchased by CITSF from CITCF-NY before they are sold to the
Company. Each Contract will be identified in a schedule appearing as an exhibit
to the relevant Purchase Agreement and the Trust Documents (the "List of
Contracts") which includes, among other things, the Contract Rate, Initial
Cut-off Date Principal Balance and date of the last scheduled payment for each
Contract. The Owner Trustee or its designated agent will, concurrently with the
sale and assignment of the Initial Contracts to the Trust, execute, authenticate
and deliver the Securities, to the Company in exchange for the Initial
Contracts. The Company will sell all or a portion of the Securities to the
Underwriters.
CITSF will make certain representations and warranties in the Trust Documents
with respect to each Initial Contract as of the Closing Date, including, unless
otherwise specified in the related Prospectus Supplement, that (i) as of the
Initial Cut-off Date, the most recent scheduled payment of principal and
interest was made by or on behalf of the related Obligor or was not delinquent
more than thirty days; (ii) no provision of a Contract has been waived, altered
or modified in any respect, except by instruments or documents contained in the
Contract File; (iii) each Contract is a legal, valid and binding obligation of
the related Obligor and is enforceable in accordance with its terms (except as
may be limited by laws affecting creditors' rights generally); (iv) no Contract
is or will be subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, and, to the
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knowledge of CITSF, no such right has been asserted with respect to any
Contract; (v) the Obligor on each Contract is required to maintain physical
damage insurance covering the related Financed Vehicle in accordance with
CITSF's normal requirements or, if the related Financed Vehicle is not so
covered by an Obligor's insurance, it is covered by a blanket insurance policy
maintained by CITSF or the Servicer; (vi) neither CITSF nor the Servicer has
obtained Force-Placed Insurance with respect to any Contract; (vii) no Contract
was originated in or is subject to the laws of any jurisdiction whose laws would
prohibit (A) the transfer of the Contract to the Company under the Purchase
Agreements, (B) the transfer of the Contract to the Trust pursuant to the Trust
Documents, or (C) the ownership of the Contracts by the Trust; (viii) each
Contract complies with all requirements of law in all material respects; (ix) no
Contract has been satisfied, subordinated in whole or in part or rescinded, and
no Financed Vehicle has been released from the security interest of the related
Contract in whole or in part; (x) each Contract creates a valid and enforceable
first priority security interest in favor of CITSF, CITCF-NY or the related
Dealer in the Financed Vehicle covered thereby (which security interest, if in
favor of the related Dealer or CITCF-NY, has been assigned to CITSF), such
security interest has been assigned by CITSF to the Company and by the Company
to the Trust, and all necessary action with respect to such Contract has been
taken to perfect the security interest in the related Financed Vehicle in favor
of CITSF or CITCF-NY; (xi) all parties to each Contract had capacity to execute
such Contract; (xii) no Contract has been sold, assigned or pledged by CITSF to
any person other than the Company (or by the Company to any person other than
the Trust) and, prior to the transfer of the Contracts by CITSF to the Company
and the transfer of the Contracts by the Company to the Trust, CITSF or the
Company, respectively, had good and marketable title to each Contract, free and
clear of any lien, encumbrance, equity, loan, pledge, charge, claim or security
interest, and was the sole owner and had full right to transfer such Contract to
the Company and the Trust, respectively; (xiii) as of the Initial Cut-off Date,
there was no default, breach, violation or event permitting acceleration under
any Contract, and no event which with notice and/or the expiration of any grace
or cure period would constitute a default, breach, violation or event permitting
acceleration under such Contract (except for payment delinquencies permitted by
clause (i) above), and CITSF has not waived any of the foregoing (except for
payment delinquencies permitted by clause (i) above); (xiv) there are no liens
or claims which have been filed for work, labor or materials affecting a
Financed Vehicle securing a Contract, which are or may be liens prior to or
equal or coordinate with the security interest of the Contract; (xv) each
Contract is a fully-amortizing loan with interest at the stated Contract Rate
and provides for level payments over the term of such Contract; (xvi) each
Contract contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for realization against the
collateral of the benefits of the security (except as may be limited by
creditors' rights generally); (xvii) the description of each Contract set forth
in the List of Contracts is true and correct as of its date; (xviii) no Obligor
is the United States of America or any state or any agency, department,
instrumentality or political subdivision thereof; (xix) if the Obligor is in the
military (including an Obligor who is a member of the National Guard or is in
the reserves) and the Contract is subject to the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended (the "Soldiers' and Sailors' Civil Relief Act"),
or the California Military Reservist Relief Act of 1991 (the "Military Reservist
Relief Act"), such Obligor has not made a claim to CITSF that (A) the amount of
interest on the Contract should be limited to 6% pursuant to the Soldiers' and
Sailors' Civil Relief Act during the period of such Obligor's active duty
status, or (B) payments on the Contract should be delayed pursuant to the
Military Reservist Relief Act, in either case unless a court has ordered
otherwise upon application of CITSF; (xx) there is only one original executed
copy of each Contract, which, immediately prior to the execution of the Trust
Documents, was in the possession of CITSF; (xxi) the Contract is "chattel paper"
as defined in the New Jersey UCC; (xxii) the Contract satisfies the selection
criteria set forth in the related Prospectus Supplement; (xxiii) all of the
right, title and interest of CITSF, the Company and, if applicable, CITCF-NY in
the Contract has been validly sold, transferred and assigned to the Trust and
all filings necessary to evidence such sale, transfer and conveyance have been
made in all appropriate jurisdictions; and (xxiv) no adverse selection procedure
was utilized in selecting the Contracts for sale by CITSF to the Company.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require CITSF to make on each Subsequent Transfer Date the same
representations and warranties with respect to each individual Subsequent
Contract as it is required to make with respect to each Initial Contract sold to
the Trust except that each such representation and warranty shall be made as of
the Subsequent Cut-off Date relating to such Subsequent Contract. In addition,
no Subsequent Contract will be sold to the Trust on a Subsequent Transfer Date
unless such Subsequent Contract satisfies the criteria described in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the Subsequent Financed Vehicles will consist of motor homes,
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travel trailers and other types of recreation vehicles.
Unless otherwise specified in the related Prospectus Supplement, under the
terms of the Trust Documents and subject to certain conditions specified in the
Trust Documents, CITSF will be obligated to repurchase from the Trust for the
Purchase Price (as defined below) any Contract (a "Repurchased Contract") not
later than ninety days after CITSF becomes aware, or eighty-five days after
CITSF's receipt of written notice from a Trustee or the Servicer, of a breach of
any representation or warranty by CITSF in the Trust Documents that materially
and adversely affects the Trust's interest in such Contract if such breach has
not been cured. CITSF shall effect such repurchase from the Trust by depositing
the Purchase Price for such Contract in the Collection Account on the Deposit
Date immediately following the determination that such Purchase Price is owed.
Unless otherwise specified in the related Prospectus Supplement, the "Purchase
Price" for any Contract will be the remaining principal amount outstanding on
such Contract on the date of repurchase, plus thirty days' interest thereon in
an amount equal to the sum of (i) the product of (A) one-twelfth of the weighted
average of the Pass-Through Rate and the Interest Rate and (B) the remaining
principal amount outstanding (without giving effect to any reductions thereof
for unrecoverable Monthly Advances) on the Contract, and (ii) accrued and unpaid
Servicing Fees thereon at the Servicing Fee Rate to the date of such repurchase.
Upon such repurchase, the Trust shall transfer all right, title and interest in
the Contract to CITSF, free and clear of the lien of the applicable Trust
Documents. Unless otherwise specified in the related Prospectus Supplement, this
repurchase obligation constitutes the sole remedy available to the Trust and the
Securityholders for a breach of a representation and warranty under the Trust
Documents with respect to the Contracts (but not with respect to any other
breach by CITSF of its obligations under the Trust Documents).
Unless otherwise specified in the related Prospectus Supplement, CITSF, the
Company and the Trust will treat each of the transfers of the Contracts from
CITSF to the Company and from the Company to the Trust as a sale. As a result of
the sale of the Contracts by CITSF to the Company and by the Company to the
Trust, the Contracts should not be part of the assets of either CITSF or the
Company and should not be available to their respective creditors. However, in
the event of the insolvency of CITSF or the Company, it is possible that a
trustee in bankruptcy, conservator or receiver for, or a creditor of, CITSF or
the Company, as the case may be, may assert that the transaction between CITSF
and the Company or between the Company and the Trust, as the case may be, was a
pledge of the Contracts to secure a loan, rather than a true sale. This
position, if asserted, could prevent timely receipt by the Trust of payments of
amounts due on the Contracts and, if accepted by a court, may result in delays
or reductions in distributions of principal and interest on the Securities.
Since the Contracts will remain in CITSF's possession and will not be stamped or
otherwise marked to reflect the sale and assignment to the Trust, the Trust's
interest in the Contracts could be defeated if a subsequent purchaser were to
take physical possession of the Contracts without knowledge of the sale and
assignment. See "Certain Legal Aspects of the Contracts."
If specified in the related Prospectus Supplement, the terms of the sale of
some or all of the Contracts from CITSF or the Seller or both to the related
Trust may provide for the retention by CITSF or the Seller or both, as the case
may be, of the right to receive a portion of the interest accruing thereon (the
"Retained Yield").
CUSTODY OF CONTRACT FILES
Unless otherwise specified in the related Prospectus Supplement, to reduce
administrative costs, each Trust will appoint CITSF as initial custodian of the
Contracts. Prior to the appointment of any custodian other than CITSF, the Trust
and such proposed successor custodian specified in the related Prospectus
Supplement shall enter into a custodian agreement pursuant to which such
successor custodian will agree to hold the Contract Files on behalf of the
related Trust. Any such custodian agreement may be terminated by the Trust on
thirty days' notice to such successor custodian.
Unless otherwise specified in the related Prospectus Supplement, to
facilitate servicing and reduce administrative costs, the documents will not be
physically segregated from other similar documents which are in CITSF's
possession. UCC financing statements will be filed in New Jersey and Oklahoma
reflecting the sale and assignment of the Contracts to the Owner Trustee, and
CITSF's accounting records and computer systems will also reflect such sale and
assignment. The Contracts will not be stamped or otherwise marked to reflect the
transfer of
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the Contracts by CITSF to the Company and by the Company to the Trust, and will
not be segregated from the other installment sale contracts of CITSF. The
Obligors under the Contracts will not be notified of the transfer of the
Contracts to the Company or to the Trust. If, through inadvertence or otherwise,
any of the Contracts were sold to another party (or a security interest therein
were granted to another party) that purchased (or took such security interest
in) any of such Contracts in the ordinary course of its business and took
possession of such Contracts, the purchaser (or secured party) would acquire an
interest in the Contracts superior to the interest of the related Trust if the
purchaser (or secured party) acquired (or took a security interest in) the
Contracts for new value and without actual knowledge of such Trust's interest.
See "Certain Legal Aspects of the Contracts."
ACCOUNTS
For each Trust, the Servicer will establish and maintain with a Trustee one
or more accounts, in the name of such Trustee on behalf of the Securityholders
(the "Collection Account"), into which all payments made (after the Initial
Cut-off Date or the Subsequent Cut-off Date, as applicable) on or with respect
to the Contracts in the related Contract Pool will be deposited by the Servicer.
See "--Collections." The Servicer will establish and maintain with a Trustee (or
its designated agent) an account in the name of such Trustee on behalf of the
Certificateholders, if any, into which amounts released from the Collection
Account and any Enhancement for payment to the Certificateholders will be
deposited and from which distributions to the Certificateholders will be made
(the "Certificate Distribution Account"). The Servicer will establish and
maintain with the Indenture Trustee (or its designated agent) an account in the
name of the Indenture Trustee on behalf of the Noteholders, if any, into which
amounts released from the Collection Account and from any Enhancement for
payment to the Noteholders will be deposited and from which distributions to the
Noteholders will be made (the "Note Distribution Account"). If the related
Prospectus Supplement provides that the Contract Pool contains Precomputed
Contracts, the Servicer will establish and maintain with a Trustee (or its
designated agent) an account in the name of such Trustee on behalf of the
Securityholders, into which early payments by or on behalf of Obligors on
Precomputed Contracts which do not constitute scheduled payments, full
prepayments or certain partial prepayments that result in a reduction of an
Obligor's periodic payment below the scheduled payment as of the Initial Cut-off
Date or Subsequent Cut-off Date, as the case may be, will be deposited (the
"Paid-Ahead Account").
Amounts held in the Certificate Distribution Account and in such other
accounts as may be specified in the related Prospectus Supplement will not be
available to make payments of amounts due on the Notes, if any, and will not be
pledged to the Indenture Trustee as collateral security for the Notes.
Each Account will be an Eligible Account maintained with the Owner Trustee,
the Indenture Trustee and/or other depository institutions. "Eligible Account"
means any account which is (i) an account maintained with an Eligible
Institution; (ii) an account or accounts the deposits in which are fully insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the FDIC; (iii) a "segregated trust account" maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the benefit
of a Trustee, which depository institution or trust company has capital and
surplus (or, if such depository institution or trust company is a subsidiary of
a bank holding company system, the capital and surplus of the bank holding
company) of not less than $50,000,000 and the securities of such depository
institution (or, if such depository institution is a subsidiary of a bank
holding company system and such depository institution's securities are not
rated, the securities of the bank holding company) have a credit rating from
each Rating Agency in one of its generic credit rating categories which
signifies investment grade; or (iv) an account that will not cause any Rating
Agency to downgrade or withdraw its then-current rating assigned to the
Securities of such series, as confirmed in writing by each Rating Agency.
"Eligible Institution" means any depository institution organized under the
laws of the United States or any state, the deposits of which are insured to the
full extent permitted by law by the Bank Insurance Fund (currently administered
by the Federal Deposit Insurance Corporation), whose short-term deposits have
been rated in one of the two highest rating categories or such other rating
category as will not adversely affect the ratings assigned to the Securities of
such series.
Unless otherwise specified in the related Prospectus Supplement, all amounts
held in each of the accounts established by the Servicer on behalf of a Trust
shall be invested in Eligible Investments that mature not later than
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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 recreation vehicle installment sale contracts that it
services for itself and others. See "Certain Legal Aspects of the Contracts."
The Servicer may sell the related Financed Vehicle securing a defaulted Contract
at a public or private sale, or take any other action permitted by applicable
law. See "Certain Legal Aspects of the Contracts." The proceeds of such
realization (net of expenses) will be deposited in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the Servicer
shall keep in force throughout the term of the Trust Documents (i) a policy or
policies of insurance covering errors and omissions for failure to maintain
insurance as required by the Trust Documents and (ii) a fidelity bond. Such
policy or policies and such fidelity bond shall have such deductibles, and be in
such form and amount as is generally customary among persons which service a
portfolio of recreation vehicle contracts having an aggregate principal amount
of $100,000,000 or more and which are generally regarded as servicers acceptable
to institutional investors.
PURCHASE BY THE SERVICER
A breach of certain covenants made by the Servicer in the Trust Documents
that materially and adversely affects the Trust's interest in any Contract, will
require the Servicer to purchase such Contract for the Purchase Price, unless
such breach is cured within the period specified in the Trust Documents. Unless
otherwise specified in the related Prospectus Supplement, such covenants will
obligate the Servicer not to, except as permitted by the Trust Documents and in
accordance with the terms of such Contract and applicable law, (i) release the
Financed Vehicle securing such Contract from the security interest granted by
such Contract, (ii) impair the rights of the Trust in such Contract or take any
action inconsistent with the Trust's ownership of such Contract, (iii) increase
the number of payments under such Contract, nor increase the principal amount of
such Contract which is used to finance the purchase price of the related
Financed Vehicles, nor extend or forgive payments on such Contract, (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, and (v) fail to obtain and maintain any license, permit
or other approval required by any federal or state law in order for the Trust to
own any Contract or to exercise the rights under any Contract or the Trust
Documents.
MODIFICATION OF CONTRACTS
Consistent with its customary servicing practices and procedures, the
Servicer may, in its discretion, arrange with an Obligor to defer, reschedule,
extend or modify the payment schedule of a Contract or otherwise to modify the
terms of a Contract provided that (i) the maturity of such Contract would not
extend beyond the 180th day prior to the latest Final Scheduled Distribution
Date of any Security and (ii) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sales contract.
REMOVAL OF CONTRACTS
Except as otherwise specified herein or in the related Prospectus Supplement,
neither the Seller nor the Servicer
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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 "--Collections" are met.
SERVICING COMPENSATION
With respect to each series of the Securities, the Servicer will be entitled
to receive, out of collections on the Contracts, a monthly fee (the "Servicing
Fee") for each Due Period, payable on the following Distribution Date, equal,
unless otherwise specified in the related Prospectus Supplement, to the sum of
(i) one-twelfth of the product of the percentage specified in the related
Prospectus Supplement (the "Servicing Fee Rate") and the Pool Balance as of the
last day of the second preceding Due Period (or, in the case of the first
Distribution Date, as of the Initial Cut-off Date) and (ii) any investment
earnings (net of investment expenses and losses) on amounts on deposit in the
Collection Account, the Paid-Ahead Account, if any, the Note Distribution
Account, if any, and the Certificate Distribution Account, if any; provided,
however, that the Servicing Fee Rate applicable to a Trust may be increased to a
rate (or maximum rate) specified in the related Prospectus Supplement if CITSF
or an affiliate thereof is not the Servicer. Payments to the Servicer of such
amounts will compensate the Servicer for performing the functions of a third
party servicer of recreation vehicle contracts as an agent for the Trust,
including collecting and posting all payments, responding to inquiries of
Obligors, investigating delinquencies, reporting federal income tax information
to Obligors, monitoring the collateral in cases of Obligor default and handling
the foreclosure or other liquidation of the Financed Vehicle in appropriate
instances (subject to reimbursement of its expenses incurred in connection with
such foreclosure, liquidation or other realization on the Contracts).
The Servicing Fee also will compensate the Servicer for administering the
Contracts, including reimbursing the Servicer for accounting for collections,
furnishing monthly and annual statements to the Owner Trustee with respect to
distributions and generating federal income tax information. The Servicing Fee
also will compensate the Servicer for accounting fees, outside auditor fees and
data processing costs incurred in connection with administering and servicing
the Contracts.
COLLECTIONS
With respect to each series of the Securities, the Servicer will deposit all
payments on or with respect to the Contracts and all proceeds of Contracts
collected during each Due Period into the Collection Account or the Paid-Ahead
Account, as applicable, not later than two Business Days after receipt.
Notwithstanding the foregoing, unless otherwise specified in the related
Prospectus Supplement, the Servicer may make such deposits into the Collection
Account or the Paid-Ahead Account, as applicable, monthly on the Deposit Date
following the last day of each Due Period, provided that (i) the Servicer or the
direct or indirect parent of the Servicer has and maintains a short-term debt
rating of at least A-1 by Standard & Poor's Ratings Group (if it is a Rating
Agency for the series of Securities), and a short-term debt rating of at least
P-1 by Moody's Investors Service, Inc. (if it is a Rating Agency for the series
of Securities) (the "Required Servicer Ratings"), or (ii) the Servicer obtains
a letter of credit, surety bond or insurance policy (the "Servicer Letter of
Credit") as will be provided for in the related Trust Documents, under which
demands for payment may be made to secure timely remittance of monthly
collections to the Collection
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Account or the Paid-Ahead Account, as applicable, and, in the case of clause
(ii) above, the Trustees are provided with a letter from each Rating Agency to
the effect that the utilization of such alternative remittance schedule will not
result in a qualification, reduction or withdrawal of its then-current rating of
the Securities. As of the date of this Prospectus, CITSF, as Servicer, will be
permitted to remit collections to the Collection Account and the Paid-Ahead
Account, as applicable, on a monthly basis by virtue of clause (i) above. In the
event that the Servicer is permitted to make remittances of collections to the
Collection Account and the Paid-Ahead Account, if any, on a monthly basis
pursuant to satisfaction of clause (ii) above, the Trust Documents will be
modified, to the extent necessary, without the consent of any Securityholder.
Pending such a monthly deposit into the Collection Account and the Paid-Ahead
Account, if any, collections on the Contracts may be invested by the Servicer at
its own risk and for its own benefit and will not be segregated from its own
funds. See "Risk Factors--Risk of Commingling."
CITSF or the Servicer, as the case may be, will remit the aggregate Purchase
Price of any Contracts to be purchased from the Trust into the Collection
Account on or before the next succeeding Deposit Date.
Unless otherwise specified in the related Prospectus Supplement, the Servicer
will not be required to deposit in the Collection Account or the Paid-Ahead
Account, as applicable, amounts relating to the Contracts attributable to the
following: (a) amounts received with respect to each Contract (or property
acquired in respect thereof) which has been purchased by CITSF or the Servicer
pursuant to the Trust Documents, (b) net investment earnings on funds deposited
in the Collection Account, the Paid-Ahead Account, if any, the Note Distribution
Account, if any, and the Certificate Distribution Account, if any, (c) amounts
to be reimbursed to the Servicer in respect of nonrecoverable Monthly Advances,
(d) amounts received in respect of the amounts, if any, of insurance premiums
added to the principal balance of a Contract after the Initial Cut-off Date for
each such Initial Contract, or after the related Subsequent Cut-off Date for
each such Subsequent Contract, (e) amounts received as liquidation proceeds, to
the extent the Servicer is entitled to reimbursement of liquidation expenses
related thereto, and (f) repossession profits on liquidated Contracts.
MONTHLY ADVANCES
Unless otherwise specified in the related Prospectus Supplement, with respect
to each Contract as to which there has been a Payment Shortfall during the
related Due Period, the Servicer shall advance funds in the amount of such
Payment Shortfall (each, a "Monthly Advance"), but only to the extent that the
Servicer, in its good faith judgment, expects to recover such Monthly Advance
from subsequent collections on such Contract made by or on behalf of the obligor
thereunder (the "Obligor") (but only to the extent of expected interest
collections in the case of a Simple Interest Contract), or from net liquidation
proceeds or insurance proceeds with respect to such Contract. The Servicer shall
be reimbursed for any Monthly Advance from subsequent collections with respect
to such Contract. If the Servicer determines in its good faith judgment that an
unreimbursed Monthly Advance shall not ultimately be recoverable from such
collections, the Servicer shall be reimbursed for such Monthly Advance from
collections on all Contracts. In determining whether an advance is or will be
nonrecoverable, the Servicer need not take into account that it might receive
any amounts in a deficiency judgment. Unless otherwise specified in the related
Prospectus Supplement, the Servicer will not make a Monthly Advance in respect
of (i) the principal component of any scheduled payment on a Simple Interest
Contract, or (ii) a Payment Shortfall arising from a Contract which has been
prepaid in full or which has been subject to a Relief Act Reduction during the
related Due Period.
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.
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Unless otherwise specified in the related Prospectus Supplement, the
Servicer will remit any Monthly Advance with respect to each Due Period into
the Collection Account not later than the Deposit Date following the Due Period.
NON-REIMBURSABLE PAYMENT
When a payment of principal is made on or in respect of a Simple Interest
Contract, interest is paid on the unpaid principal balance of such Contract only
to the date of such payment. If and to the extent specified in the related
Prospectus Supplement, with respect to each Contract as to which there has been
a Payment Shortfall with respect to interest in the related Due Period arising
from either a prepayment in full of such Contract or a Relief Act Reduction in
respect of such Contract during such Due Period, the Trust Documents will
require the Servicer to deposit into the Collection Account on the Business Day
immediately preceding the following Distribution Date, without the right of
subsequent reimbursement, an amount equal to such Payment Shortfall (a
"Non-Reimbursable Payment"). If the related Prospectus Supplement does not
specify that the Servicer will make Non-Reimbursable Payments, the Servicer will
not be obligated to make such payments with respect to the Trust.
DISTRIBUTIONS
With respect to each Trust, on or before each Determination Date, the
Servicer will make a determination and inform the Trustees of the following
amounts with respect to the preceding Due Period: (i) the aggregate amount of
collections on the Contracts; (ii) the aggregate amount of Monthly Advances to
be remitted by the Servicer (if any); (iii) the aggregate Purchase Price of
Contracts to be purchased by CITSF or the Servicer (if any); (iv) if applicable,
the aggregate amount to be distributed as principal and interest on the Notes on
the related Distribution Date; (v) if applicable, the aggregate amount to be
distributed as principal and interest on the Certificates on the related
Distribution Date; (vi) the Servicing Fee; (vii) the aggregate amount of
Non-Reimbursable Payments (if any); (viii) the amounts required to be withdrawn
from the Enhancement (if any) for such Distribution Date; (ix) the amount which
is payable to the provider of the Enhancement (if any) or the Affiliated Owner
(if any); (x) the amounts to be deposited into the accounts established pursuant
to the Trust Documents; and (xi) the aggregate amount of unreimbursed Monthly
Advances to be reimbursed to the Servicer (if any).
Unless otherwise specified in the related Prospectus Supplement, the
"Available Amount" with respect to each Trust on any Distribution Date is equal
to the excess of (A) the sum of (i) all amounts on deposit in the Collection
Account attributable to collections or deposits made in respect of such
Contracts (including any late fees, prepayment charges, extension fees or other
administrative fees or similar charges allowed by applicable law with respect to
the Contracts ("Late Fees")) during the Due Period preceding the Distribution
Date, and (ii) the Purchase Price for any Contract repurchased by CITSF as a
result of breaches of certain representations and warranties or purchased by the
Servicer as a result of breaches of certain covenants and any Monthly Advances
and any Non-Reimbursable Payments made by the Servicer, if such Purchase Price,
Monthly Advance or Non-Reimbursable Payment is paid on the Deposit Date
immediately preceding such Distribution Date, over (B) the sum of the following
amounts (to the extent that the Servicer has not already withheld such amounts
from collections on the Contracts): (i) any repossession profits on liquidated
Contracts, Liquidation Expenses (as defined in the Trust Documents) incurred and
taxes and insurance advanced by the Servicer in respect of Financed Vehicles
that are reimbursable to the Servicer under the Trust Documents; (ii) any
amounts incorrectly deposited in the Collection Account; (iii) any amounts
deposited in the Paid-Ahead Account, if any, during the related Due Period; (iv)
net investment earnings on the funds in the Collection Account and the
Paid-Ahead Account, if any; and (v) any other amounts permitted to be withdrawn
from the Collection Account and the Paid-Ahead Account, if any, by the Servicer
(or to be retained by the Servicer from collections on the Contracts) pursuant
to the Trust Documents.
With respect to each Trust, beginning on the Distribution Date specified in
the related Prospectus Supplement, distributions of principal and interest (or,
where applicable, of principal or interest only) on each class of Securities
entitled thereto will be made by the Owner Trustee or the Indenture Trustee, as
applicable, to the Certificateholders, if any, and the Noteholders, if any, from
the Available Amount. Unless otherwise specified in the related Prospectus
Supplement, the Servicing Fee and any additional servicing compensation will be
paid from the
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Available Amount prior to distributions to the Securityholders. The timing,
calculation, allocation, order, source, priorities of and requirements for all
distributions to each class of Certificateholders, if any, and all payments
to each class of Noteholders, if any, will be set forth in the related
Prospectus Supplement.
NET DEPOSITS
Unless otherwise specified in the related Prospectus Supplement, as an
administrative convenience, the Servicer will be permitted to make deposits of
collections, Monthly Advances, Non-Reimbursable Payments and the aggregate
Purchase Price of Contracts for, or with respect to, a Due Period net of
distributions to be made to the Servicer with respect to such Due Period
(including, without limitation, the Servicing Fee, reimbursement of
nonrecoverable Monthly Advances and amounts to be deducted in the definition of
"Available Amount" set forth under "--Distributions" above). The Servicer,
however, will account to the Trustees and to the Securityholders as if all such
deposits and distributions were made on an aggregate basis for each type of
payment or deposit.
STATEMENTS TO TRUSTEES AND TRUST
Unless otherwise specified in the related Prospectus Supplement, on or before
each Determination Date, the Servicer will provide to the Trustees, any paying
agent and the Affiliated Owner (if any) as of the close of business on the last
day of the preceding Due Period, a statement setting forth substantially the
same information as is required to be provided in the periodic reports provided
to Securityholders described above under "Certain Information Regarding the
Securities--Statements to Securityholders." Each such report will be accompanied
by a statement from an appropriate officer of the Servicer certifying the
accuracy of such report and stating that the Servicer has not defaulted in the
performance of its obligations under the Trust Documents (or, if such default
has occurred, describing each such default).
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require that on or before March 31 of each year, the Servicer
will deliver to the Owner Trustee a report of independent public accountants
which opines on, at a minimum, the servicing entity's compliance with the
minimum servicing standards set forth in the Uniform Single Attestation Program
for Mortgage Bankers (in accordance with the 1995 revisions made thereto). The
Trust Documents will require that such examination and report of independent
public accountants be prepared in accordance with the requirements set forth in
the Uniform Single Attestation Program for Mortgage Bankers (in accordance with
the 1995 revisions made thereto).
The Servicer, on request of the Trustees, will furnish to the Trustees
such reasonably pertinent underlying data on the Contracts as can be
generated by the Servicer's existing data processing system without undue
modification or expense.
CERTAIN MATTERS REGARDING THE SERVICER
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer may not resign from its obligations and
duties as Servicer thereunder, except upon a determination that the Servicer's
performance of such duties is no longer permissible under applicable law. Such
resignation will not become effective until the Owner Trustee or a successor
Servicer has assumed the Servicer's servicing obligations and duties under the
Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will further provide that neither the Servicer nor the Company nor any
of their shareholders, affiliates, directors, officers, employees and agents
shall be under any liability to the Trustees, the Trust or the Securityholders
for taking any action or for refraining from taking any action pursuant to the
Trust Documents or for errors in judgment; provided, however, that neither the
Servicer nor any such person will be protected against any liability which
otherwise would be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties thereunder. In addition, unless otherwise specified in
the related
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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 Trust
Documents will provide that the Servicer, in accordance with its customary
servicing practices and procedures, shall use its best efforts to require that
each Obligor shall have obtained and shall maintain physical damage insurance
covering the Financed Vehicle, provided that such insurance shall be in an
amount no greater than the outstanding principal balance of the related Contract
or, if such insurance covers the interest of the related Obligor in the Financed
Vehicle, no greater than the greater of the outstanding principal balance of the
related Contract and the value of the Financed Vehicle, or such lesser amount
permitted by applicable law. Unless otherwise specified in the related
Prospectus Supplement, the Servicer may, but will not be obligated to, enforce
rights under the Contracts to require the Obligors to maintain physical damage
insurance, in accordance with the Servicer's customary practices and procedures
with respect to comparable new or used recreation vehicles financed by
installment sale contracts that it services for itself or others. Unless
otherwise specified in the related Prospectus Supplement, if an Obligor fails to
maintain such insurance, the Servicer will not be obligated to obtain such
physical damage insurance and advance such premiums for such insurance on behalf
of such Obligor. If the Servicer obtains such physical damage insurance and
advances such premiums for such insurance on behalf of such Obligor, such
insurance policy will name the Servicer as an additional insured and loss payee
and will be issued by an insurer having a rating of "A" or better by A.M. Best
(such insurance being referred to herein as "Force-Placed Insurance"). Such
Force-Placed Insurance and any commissions or finance charges collected by the
Servicer in connection therewith shall be, to the extent permitted by law, in an
amount in accordance with customary servicing practices and procedures, but in
no event in an amount greater than the outstanding principal balance of the
related Contract or, if such insurance also covers the interest of the related
Obligor in the Financed Vehicle, no greater than the greater of the outstanding
principal balance of the related Contract and the value of the Financed Vehicle,
or such lesser amount permitted by applicable law. The Servicer shall be
required to disclose to the related Obligor all information with respect to such
Force-Placed Insurance, commissions and finance charges as required by
applicable law.
The Servicer does not, under its customary servicing practices and
procedures, obtain Force-Placed Insurance when the principal balance of the
related Contract falls below the level or levels periodically established in
accordance with such customary servicing practices and procedures. In accordance
with such customary servicing practices and procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or arrange
other methods of protection of the Financed Vehicles that it deems necessary or
advisable, provided that the Servicer determines that such actions do not
materially and adversely affect the interests of the Securityholders.
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The Servicer may make advances ("Insurance Advances") to an Obligor to
finance insurance premiums related to the Financed Vehicle. Any such Insurance
Advances may be secured by the related Financed Vehicle.
Any portion of the principal balance of a Contract attributable to Insurance
Advances or premiums for Force-Placed Insurance acquired after the Initial
Cut-off Date, or the Subsequent Cut-off Date, as the case may be, will not be
owned by the Trust, and amounts allocable thereto will not be available for
distribution in respect of the Securities. Unless otherwise designated by the
Obligor, the Servicer will not allocate payments by the Obligor to pay Insurance
Advances or Force-Placed Insurance premiums added to the Contracts after the
Initial Cut-off Date or Subsequent Cut-off Date, as the case may be, if any
amount of principal or interest is due but unpaid on the Contracts. The Servicer
shall not deposit payments posted with respect to such Insurance Advances or
Force-Placed Insurance in the Collection Account and shall instead promptly pay
such amounts to an account of the Servicer maintained for that purpose. In the
event that an Obligor under a Contract with respect to which the Servicer has
made Insurance Advances or obtained Force-Placed Insurance makes scheduled
payments under the Contract, but fails to make scheduled payments of such
Insurance Advances or Force-Placed Insurance as due, and the Servicer has
determined that eventual payment of such amount is unlikely, the Servicer may,
but shall not be required to, take any action available to it, including
determining that the related Contract is a defaulted Contract; provided,
however, that any net liquidation proceeds with respect to such Contract shall
be applied first to the accrued and unpaid interest at the Contract Rate, then
to the principal amount outstanding, and the remainder, if any, to repayment of
any such Insurance Advances or Force-Placed Insurance premiums added to the
Initial Contracts after the Initial Cut-off Date or to any Subsequent Contracts
after the related Subsequent Cut-off Date.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will permit the Servicer or any affiliate of the Servicer, to the
extent permitted by law, to (i) enter into agreements with one or more insurers
or other persons pursuant to which the Servicer or such affiliate will earn
commissions and fees in connection with any insurance policy purchased by an
Obligor including, without limitation, any physical damage insurance policy
(whether or not such physical damage insurance policy is force-placed pursuant
to the provisions of any Contract), or any other insurance policy whatsoever,
and (ii) in connection with the foregoing, to solicit, or permit and assist any
insurer or any agent thereof to solicit (including, without limitation,
providing such insurer or agent a list of Obligors including name, address or
other information) any Obligor.
EVENT OF TERMINATION
Unless otherwise specified in the related Prospectus Supplement, an "Event of
Termination" under the Trust Documents will consist of (i) any failure by the
Servicer to make any deposit into an account required to be made under the Trust
Documents which failure continues unremedied for five (5) Business Days after
the Servicer becomes aware that such deposit was required; (ii) any failure by
the Servicer duly to observe or perform in any material respect any other of its
covenants or agreements in the Trust Documents (other than those described in
clause (i)) which materially and adversely affects the rights of the
Securityholders and which continues unremedied for 60 days after the giving of
written notice of such failure; (iii) any assignment or delegation by the
Servicer of its duties or rights under the Trust Documents, except as
specifically permitted under the Trust Documents, or any attempt to make such an
assignment or delegation; (iv) certain events of insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings regarding the
Servicer; or (v) any disqualification of the Servicer as an Eligible Servicer
(as defined in the Trust Documents). "Notice" as used herein means notice to the
Servicer by the Trustees or the Company, or to the Company, the Servicer and the
Trustees by the Noteholders holding not less than 25% of the aggregate
outstanding principal amount of the Controlling Notes issued by such Trust (or,
if no Notes of such series are outstanding, the Certificateholders holding not
less than 25% of the outstanding Certificate Balance of such Trust).
RIGHTS UPON EVENT OF TERMINATION
Unless otherwise specified in the related Prospectus Supplement, as long as
an Event of Termination under the Trust Documents remains unremedied, the
Indenture Trustee (or, if no Notes of the series are outstanding, the Owner
Trustee) may, and at the written direction of the holders of related Notes
evidencing not less than a majority
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of the aggregate outstanding principal amount of the Controlling Notes issued by
such Trust (or, if no Notes of such series are outstanding, the holders of
related Certificates evidencing not less than a majority of the Certificate
Balance of such Trust), will, unless prohibited by applicable law, terminate all
(but no less than all) of the rights and obligations of the Servicer with
respect to a Trust under the Trust Documents and in and to the Contracts, and
the proceeds thereof, whereupon (subject to applicable law) all authority and
power of the Servicer under the Trust Documents, whether with respect to the
Contracts, the Contract Files or otherwise, will pass to and be vested in the
Indenture Trustee (or, if no Notes of the series are outstanding, such authority
will pass to and be vested in the Owner Trustee); provided, however, that
neither the Indenture Trustee (or, if no Notes of the series are outstanding,
the Owner Trustee) nor any successor servicer will assume any obligation of
CITSF to repurchase Contracts for breaches of representations or warranties, and
the Indenture Trustee (or, if no Notes of the series are outstanding, the Owner
Trustee) or the successor Servicer will not be liable for any acts or omissions
of the Servicer occurring prior to a transfer of the Servicer's servicing and
related functions or for any breach by the Servicer of any of its obligations
contained in the Trust Documents. Notwithstanding such termination, the Servicer
will be entitled to payment of certain amounts payable to it for services
rendered prior to such termination. No such termination will affect in any
manner CITSF's obligation to repurchase certain Contracts for breaches of
representations or warranties under the Trust Documents. In the event that the
Owner Trustee would be obligated to succeed the Servicer but is unwilling or
unable so to act, it may appoint, or petition to a court of competent
jurisdiction for the appointment of, a Servicer which meets the requirements for
an Eligible Servicer under the Trust Documents. Pending such appointment, such
Trustee is obligated to act in such capacity, unless it is prohibited by law
from so acting. The Indenture Trustee (or, if no Notes of the series are
outstanding, the Owner Trustee) and such successor may agree upon the servicing
compensation to be paid, which in no event, without written consent of not less
than 66 2/3% in principal amount of the related Securityholders, may be greater
than the compensation to CITSF as Servicer under the Trust Documents.
WAIVER OF PAST DEFAULTS
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, the holders of Notes evidencing not less than a
majority of the aggregate outstanding principal amount of the Controlling Notes
(or the holders of the Certificates evidencing not less than a majority of the
Certificate Balance of such series, in the case that all of the Notes have been
paid in full and the Indenture has been discharged in accordance with its terms)
may, on behalf of all such Noteholders and Certificateholders, waive any default
by the Servicer in the performance of its obligations under the Trust Documents
and its consequences, except an Event of Termination in making any required
deposits to or payments from any of the accounts in accordance with the Trust
Documents. No such waiver will impair such Noteholders' or Certificateholders'
right with respect to subsequent defaults.
AMENDMENT
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents may be amended by the parties thereto and, in the event that such
amendment affects the Indenture Trustee, the Indenture Trustee, without prior
notice to or the consent of the related Securityholders (i) to correct manifest
error or cure any ambiguity; (ii) to correct or supplement any provision therein
which may be inconsistent with any other provision therein; (iii) to add or
amend any provision as requested by the Rating Agencies to maintain or improve
the rating of the Securities; (iv) to add to the covenants, restrictions or
obligations of the Company, the Servicer or the Owner Trustee or to provide for
the delivery of or substitution for an Enhancement or a Servicer Letter of
Credit; (v) to evidence and provide for the acceptance of the appointment of a
successor trustee with respect to the property owned by the related Trust and
add to or change any provisions as shall be necessary to facilitate the
administration of the trusts under the Trust Documents by more than one trustee;
(vi) to add, change or amend any provision to maintain the related Trust as an
entity not subject to Federal income tax; or (vii) to add, change or eliminate
any other provisions, provided that an amendment pursuant to this clause (vii)
will not, in the opinion of counsel (which may be internal counsel to the
Company or the Servicer), adversely affect in any material respect the interests
of the Trust or the Securityholders. Unless otherwise specified in the related
Prospectus Supplement, the Trust Documents may also be amended by the parties
thereto, with the consent of the holders of not less than a majority in
principal amount of
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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 recreation vehicle
retail installment sale contracts. The highest bid may not be less than the fair
market value of such Contracts and must equal the sum of (i) the greater of (a)
the aggregate Purchase Price for the Contracts (including defaulted Contracts)
plus the appraised value of any other property held by the Trust (less
liquidation expenses), or (b) an amount that when added to amounts on deposit in
the Collection Account available for distribution to Securityholders for such
second succeeding Distribution Date would result in proceeds sufficient to
distribute to Securityholders the amounts of interest due to Securityholders for
such Distribution Date and any unpaid interest payable to the Securityholders
with respect to one or more prior Distribution Dates and the outstanding
principal amount of the Notes, if any, and the Certificate Balance, if any, and
(ii) the sum of (a) an amount sufficient to reimburse the Servicer for any
unreimbursed Monthly Advances for which it is entitled to reimbursement, and (b)
the Servicing Fee payable on such final Distribution Date, including any unpaid
Servicing
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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
recreation vehicle contracts, which are general in nature. Since such legal
aspects are governed by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor to reflect the
laws of any particular state, nor to encompass the laws of all states in which
the security for the Contracts is situated. The summaries are qualified in their
entirety by reference to the applicable federal and state laws governing the
Contracts.
GENERAL
As a result of the assignment of the Contracts to the Trust, each Trust will
succeed collectively to the rights (including the right to receive payment on
the Contracts), and will assume the obligations, of CITSF under the related
Contracts. Each Contract evidences both (a) the obligation of the obligor to
repay the loan evidenced thereby, and (b) the grant of a security interest in
the Financed Vehicle to secure repayment of such loan. Certain aspects of both
features of the Contracts are described more fully below.
The Contracts are "chattel paper" as defined in the Uniform Commercial Code
(the "UCC") as in effect in the various states of origination of the Contracts.
Pursuant to the UCC, the sale of chattel paper is treated in a manner similar to
perfection of a security interest in chattel paper. Under the Trust Documents,
the Servicer will retain possession of the Contracts as custodian for the Owner
Trustee, and will make an appropriate filing of a UCC financing statement in New
Jersey to perfect the sale of the Contracts by the Company to the Owner Trustee.
The Contracts and the related certificates of title will not be stamped to
reflect their assignment from CITCF-NY to CITSF, from CITSF to the Company or
from the Company to the Trust. The Contract Files will not be physically
segregated from the contract files for contracts owned by CITSF. If, through
inadvertence or otherwise, another party in good faith purchases (or takes a
security interest in) the Contracts for new value in the ordinary course of its
business, without actual knowledge of the Trust's interest, and takes possession
of the Contracts, such purchaser or secured party may acquire an interest in the
Contracts superior to the interest of the Trust.
Under the Trust Documents, the Servicer will be obligated from time to time
to take such actions as are necessary to continue the perfection of the Trust's
interest in the Contracts and the proceeds thereof. CITSF will warrant in the
Trust Documents, with respect to each Contract, as of the Closing Date for each
Initial Contract, and as of the related Subsequent Transfer Date, for each
Subsequent Contract, if any, that the Contract has not been sold, assigned or
pledged by CITSF to any person other than the Company, that immediately prior to
the transfer and assignment of the Contract to the Company, CITSF had good and
marketable title thereto, free and clear of any encumbrance, equity, loan,
pledge, charge, claim or security interest and, immediately upon the transfer
thereof, the Company will have good and marketable title to the Contract, free
and clear of any encumbrance, equity, loan, pledge, charge, claim or security
interest and that the transfer has been perfected under applicable law. In the
event
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of an uncured breach of any such warranty that materially adversely affects the
interest of the Trust in a Contract transferred by the Company to the Trust, the
only recourse of the Certificateholders, the Trustees, or the Trust would be to
require CITSF to repurchase such Contract.
SECURITY INTERESTS IN THE FINANCED VEHICLES
General. The Contracts are installment sale contracts that evidence the
credit sale of recreation vehicles by Obligors. The Contracts also constitute
personal property security agreements and include grants of security interests
in the related recreation vehicles under the UCC. Perfection rules relating to
security interests in recreation vehicles are generally governed under state
certificate of title statutes (Alabama, Connecticut, Georgia, Maine,
Massachusetts, Minnesota, Mississippi, New Hampshire, New York, Rhode Island and
Vermont have adopted the Uniform Motor Vehicle Certificate of Title and
Anti-Theft Act) or by the vehicle registration laws of the state in which each
recreation vehicle is located. In states which have adopted the Uniform Motor
Vehicle Certificate of Title and Anti-Theft Act, security interests in
recreation vehicles may be perfected either by notation of the secured party's
lien on the certificate of title or by delivery of the certificate of title and
payment of a fee to the state motor vehicle authority, depending on the
particular state law. In states in which perfection of a security interest in a
particular motor vehicle is not governed by a certificate of title statute,
perfection is usually accomplished by filing pursuant to the provisions of the
UCC. Notwithstanding the foregoing, in certain states, folding camping trailers
and/or slide-in campers are not subject to state titling and vehicle
registration laws and a security interest in such recreation vehicles is
perfected by filing pursuant to the provisions of the UCC. In most states, a
security interest in a recreation vehicle is perfected by notation of the
secured party's lien on the vehicle's certificate of title. Each Contract
prohibits the sale or transfer of the related Financed Vehicle without the
consent of CITSF.
Perfection of Sale. Pursuant to the Purchase Agreement, CITSF will sell and
assign its interests in the Contracts, including the security interests in the
Financed Vehicles granted thereunder, to the Company and, pursuant to the Trust
Documents, the Company will sell and assign its interest in the Contracts,
including the security interests in the Financed Vehicles granted thereunder, to
the Owner Trustee. UCC financing statements will be filed to perfect the sale of
(i) CITSF's interests in the Contracts to the Company and (ii) the Company's
interests in the Contracts to the Trust.
Perfection of CITSF's or CITCF-NY's Security Interest in the Financed
Vehicles. CITSF and CITCF-NY will take all actions necessary under the laws of
the state in which the related recreation vehicles are located at the time of
origination of the Contract to perfect their respective security interests in
such recreation vehicles, including, where applicable, having a notation of
their respective liens recorded on the related certificate of title or
delivering the required documents and fees, obtaining possession of the
certificate of title (if possible), or, where applicable, by perfecting its
security interest in the related recreation vehicles under the UCC. In the event
CITSF (or CITCF-NY) fails, due to clerical errors, to effect such notation or
delivery, or perfects the security interest under an inapplicable statute (for
example, under the UCC rather than under a motor vehicle title law), the Trust
may not have a first priority security interest in the Financed Vehicle securing
a Contract. In the Trust Documents, CITSF has represented as of the Closing Date
that each Contract creates a valid and enforceable first priority security
interest in favor of CITSF (or CITCF-NY) or the related Dealer in the Financed
Vehicle covered thereby (which security interest, if in favor of the related
Dealer (or CITCF-NY), has been assigned to CITSF) and such security interest has
been assigned by CITSF to the Company, and all necessary action with respect to
such Contract has been taken to perfect the security interest in the related
Financed Vehicle in favor of CITSF (or CITCF-NY). A breach by CITSF of such
warranty that materially adversely affects the Trust's interest in any Contract
would require CITSF to purchase such Contract unless such breach is cured.
Possible Loss of Perfection or Priority of Trust's Security Interest in
Financed Vehicles or Proceeds Thereof. The certificate of title names CITSF (or
CITCF-NY) as the secured party. Because of the administrative burden and
expense, neither CITCF-NY, CITSF, the Company nor the Trust will amend any
certificate of title to note the lien of the Trust as the new secured party on
the certificate of title relating to the Financed Vehicles nor will any such
entity execute and file any transfer instruments (including, among other
instruments, UCC-3 assignments). In some states, in the absence of such an
amendment or execution, the assignment to the Trust of a security interest in
Financed
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Vehicles may not be perfected, such assignment of the security interest to the
Trust may not be effective against creditors or a trustee in bankruptcy of CITSF
or CITCF-NY, which continue to be specified as lienholder on any certificates of
title or as secured party of any UCC filing.
(i) California. A security interest in a motor vehicle registered in the
State of California (in which the greatest number of Financed Vehicles are
currently registered) may be perfected only by depositing with the Department of
Motor Vehicles a properly endorsed certificate of title for the vehicle showing
the secured party as "legal owner" thereon or if the vehicle has not been
previously registered, an application in usual form for an original registration
together with an application for registration of the secured party as "legal
owner." However, under the California Vehicle Code, a transferee of a security
interest in a motor vehicle is not required to reapply to the Department of
Motor Vehicles for a transfer of registration when the interest of the
transferee arises from the transfer of a security agreement by the "legal owner"
to secure payment or performance of an obligation. Accordingly, under California
law, an assignment such as that under each of the Purchase Agreement and the
Trust Documents is an effective conveyance of CITSF's and the Company's
perfected security interest, as the case may be, without such re-registration,
and under the Purchase Agreement the Company will succeed to CITSF's, and under
the Trust Documents the Trust will succeed to the Company's, rights as secured
party.
(ii) Other States. In most states, assignments such as those under the
Purchase Agreement and the Trust Documents are an effective conveyance of a
security interest without amendment of any lien noted on a vehicle's certificate
of title, and the assignee succeeds thereby to the assignor's rights as secured
party. However, in some states the Trust's security interest will be unperfected
because the Trust will not be noted as the secured party on the certificates of
title to the Financed Vehicles, and therefore the Trust's security interest
would be subordinate to, among others, subsequent purchasers of such Financed
Vehicles and holders of prior perfected security interests therein. However, in
the absence of fraud, forgery or administrative error, the notation of CITSF's
or CITCF-NY's lien on the certificates of title will be sufficient in most
states to protect the Trust against the rights of subsequent purchasers of a
Financed Vehicle, judgment creditors or other creditors who take a security
interest in a Financed Vehicle.
Continuity of Perfection. Under the laws of most states, a perfected security
interest in a recreation vehicle continues for four months after the vehicle is
moved to a new state (from the state in which a financing statement was properly
filed initially to perfect the security interest or in which the certificate of
title was issued) and thereafter until the owner re-registers such recreation
vehicle in the new state. A majority of states require surrender of a
certificate of title to obtain a new certificate of title for the vehicle. In
those states (including California) that call for return of the certificate of
title to the holder of the first security interest noted thereon, the secured
party would learn of the re-registration through the request from the obligor
under the related installment sales contract to surrender possession of the
certificate of title. In the case of vehicles registered in states providing for
perfection of a lien by notation of the lien on the certificate of title without
possession of the certificate of title by the secured party, the secured party
would receive notice of surrender from the state of re-registration if the
security interest were noted on the certificate of title. Thus, the secured
party would have the opportunity to re-perfect its security interest in the
vehicle in the state to which the vehicle is moved. However, these procedural
safeguards will not protect the secured party if through fraud, forgery or
administrative error, the debtor somehow procures a new certificate of title
that does not note the secured party's lien. Additionally, in states that do not
require a certificate of title for registration of a vehicle, re-registration
could defeat perfection.
In the ordinary course of servicing the Contracts, CITSF will take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Financed
Vehicle, CITSF must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Contract before release of
the lien. Under the Trust Documents, the Servicer will be obligated to take
appropriate steps, at its own expense, to maintain perfection of a security
interest in the Financed Vehicles.
In most states, CITSF, as Servicer, will hold certificates of title relating
to the Financed Vehicles in its possession as custodian for the Trust pursuant
to the Trust Documents. In some states, the certificate of title is held by the
Obligor, but only after it is endorsed by the state motor vehicle department
with a notation of CITSF's lien.
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In the Trust Documents, CITSF, as Servicer, will covenant that it will not
release its security interest in the Financed Vehicle securing any Contract
except as contemplated by the Trust Documents. CITSF, as Servicer, will also
covenant that it will not impair the rights of the Trust in the Contacts or take
any action inconsistent with the Trust's ownership of the Contracts, except as
permitted by the Trust Documents. A breach of either such covenant that
materially and adversely affects the Trust's interest in any Contract, would
require the Servicer to purchase such Contract unless such breach is cured
within the period specified in the Trust Documents.
Priority of Certain Liens Arising by Operation of Law. Under the laws of
California and of most states, liens for repairs performed on a recreation
vehicle and liens for certain unpaid taxes take priority over even a first
perfected security interest in such vehicle. The Internal Revenue Code of 1986,
as amended, also grants priority to certain federal tax liens over the lien of a
secured party. The laws of certain states and federal law permit the
confiscation of motor vehicles by governmental authorities under certain
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in a confiscated recreation vehicle.
CITSF will represent and warrant in the Trust Documents that, as of the Closing
Date, there were no liens or claims which have been filed for work, labor or
materials affecting a Financed Vehicle securing a Contract which are or may be
liens prior or equal to the lien of the Contract. However, liens for repairs or
taxes could arise at any time during the term of a Contract. No notice will be
given to the Trustees or Securityholders in the event such a lien or
confiscation arises and any such lien or confiscation arising after the date of
initial issuance of the Securities would not give rise to an obligation of CITSF
to purchase the Contract under the Trust Documents.
REPOSSESSION
In the event of default by an obligor, the holder of the related installment
sale contract has all the remedies of a secured party under the UCC, except
where specifically limited by other state laws. The UCC remedies of a secured
party include the right to repossession by self-help means, unless such means
would constitute a breach of the peace. Self-help repossession is the method
employed by the Servicer in most cases and is accomplished simply by taking
possession of the related recreation vehicle. In cases where the obligor objects
or raises a defense to repossession, or if otherwise required by applicable
state law, a court order must be obtained from the appropriate state court, and
the vehicle must then be recovered in accordance with that order. In some
jurisdictions (not including California), the secured party is required to
notify the debtor of the default and the intent to repossess the collateral and
the debtor must be given a time period within which to cure the default prior to
repossession. In most states (including California), under certain circumstances
after the vehicle has been repossessed, the obligor may reinstate the related
contract by paying the delinquent installments and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the Obligor, some jurisdictions (not including
California) require that the Obligor be notified of the default and be given a
time period within which to cure the default prior to repossession. Generally,
this right of cure may only be exercised on a limited number of occasions during
the term of the related Contract.
The UCC and other state laws require the secured party to provide the obligor
with reasonable notice of the date, time and place of any public sale and/or the
date after which any private sale of the collateral may be held. The obligor has
the right to redeem the collateral prior to actual sale by paying the secured
party (i) the unpaid principal balance of the obligation, accrued interest
thereon plus reasonable expenses for repossessing, holding and preparing the
collateral for disposition and arranging for its sale, plus, in some
jurisdictions, reasonable attorneys' fees or (ii) in some states, the delinquent
installments or the unpaid principal balance of the related obligation.
DEFICIENCY JUDGEMENTS AND EXCESS PROCEEDS
The proceeds of resale of the Financed Vehicles generally will be applied
first to the expenses of resale and repossession and then to the satisfaction of
the related indebtedness. While some states impose prohibitions or limitations
on deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness,
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a deficiency judgment can be sought in California and certain other states that
do not prohibit or limit such judgments. In addition to the notice requirement,
the UCC requires that every aspect of the sale or other disposition, including
the method, manner, time, place and terms, be "commercially reasonable." Some
courts have held that when a sale is not "commercially reasonable," the secured
party loses its right to a deficiency judgment and courts in some other states
have held that when a sale is not "commercially reasonable" there is a
rebuttable presumption that there is no deficiency. In addition, the UCC permits
the debtor or other interested party to recover for any loss caused by
noncompliance with the provisions of the UCC. Also, prior to a sale, the UCC
permits the debtor or other interested person to restrain the secured party from
disposing of the collateral if it is established that the secured party is not
proceeding in accordance with the "default" provisions under the UCC. A
deficiency judgment is a judgment against the obligor or guarantor for the
shortfall; however, a defaulting obligor or guarantor may have very little
capital or sources of income available following repossession. Therefore, in
many cases, it may not be useful to seek a deficiency judgment or, if one is
obtained, it may be settled at a significant discount or be uncollectible.
Occasionally, after resale of a recreation vehicle and payment of all
expenses and indebtedness, there is a surplus of funds. In that case, the UCC
requires the creditor to remit the surplus to any holder of a subordinate lien
with respect to such vehicle or, if no such lienholder exists, to the former
owner of the vehicle.
CERTAIN MATTERS RELATING TO INSOLVENCY
CITSF, CITCF-NY and the Company intend that the transfers of Contracts from
CITCF-NY to CITSF, from CITSF to the Company and from the Company to the Trust
constitute sales, rather than pledges of the Contracts to secure indebtedness.
However, if CITCF-NY, CITSF or the Company were to become a debtor under Title
11 of the United States Code, 11 U.S.C. 101 et seq. (the "Bankruptcy Code"), it
is possible that a creditor, receiver, other party in interest or trustee in
bankruptcy of such debtor, or such debtor as debtor-in-possession, may contend
that the sales of the Contracts by CITCF-NY to CITSF, by CITSF to the Company,
or by the Company to the Trust, respectively, were pledges of the Contracts
rather than sales and that, accordingly, such Contracts should be part of such
assigning entity's bankruptcy estate. Such a position, if presented to a court,
even if ultimately unsuccessful, could result in a delay in or reduction of
distributions to the Securityholders.
The Company has taken steps in structuring the transactions described herein
that are intended to make it unlikely that the voluntary or involuntary
application for relief by or against CIT under the Bankruptcy Code or similar
applicable state laws (collectively, "Insolvency Laws") would result in
consolidation of the assets and liabilities of the Company with those of CIT.
These steps include the creation of the Company as a wholly-owned, limited
purpose subsidiary of CIT pursuant to a certificate of incorporation containing
certain limitations (including a requirement that the Company have at least one
"independent director" and restrictions on the nature of the Company's
business). Additionally, the Company's certificate of incorporation prohibits
merger, consolidation and the sale of all or substantially all of its assets in
certain circumstances or the commencement of a voluntary case or proceeding
under any insolvency law, without the prior affirmative unanimous vote of its
directors including any independent director. Notwithstanding the foregoing, in
the event that (i) a court concluded that the assets and liabilities of the
Company should be consolidated with those of CIT (or one of its affiliates) in
the event of the application of applicable insolvency laws to CIT (or one of its
affiliates) or following the bankruptcy or insolvency of CIT (or one of its
affiliates) the security interest in the Contracts granted by the Company to the
Trust should be avoided; (ii) a filing were made under any insolvency law by or
against the Company; or (iii) an attempt were made to litigate any of the
foregoing issues, delays in payments on the Securities and possible reductions
in the amount of such payments could occur.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include the Truth in Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's
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Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act, the Military
Reservist Relief Act, state adaptations of the National Consumer Act and of the
Uniform Consumer Credit Code, state motor vehicle retail installment sales acts,
state retail installment sales acts and other similar laws. Also, the laws of
California and of certain other states impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities upon creditors which fail to comply with their provisions.
In some cases, this liability could affect the ability of an assignee such as
the Trust to enforce consumer finance contracts such as the Contracts.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule") has the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states. Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, the Trust, as holder of the Contracts, will be subject to any
claims or defenses that the purchaser of the related Financed Vehicle may assert
against the seller of the Financed Vehicle. Such claims are limited to a maximum
liability equal to the amounts paid by the Obligor under the related Contracts.
Under California law and most state vehicle dealer licensing laws, sellers of
recreation vehicles are required to be licensed to sell vehicles at retail sale.
Numerous other federal and state consumer protection laws impose requirements
applicable to the origination and assignment of retail installment sale
contracts, including the Truth in Lending Act, the Federal Trade Commission Act,
the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer
Credit Code. In the case of some of these laws, the failure to comply with
provisions of these laws may affect the enforceability of the related Contract.
The Trust and the Company may not have obtained all licenses required under any
federal or state consumer laws or regulations, and the absence of such licenses
may impede the enforcement of certain rights or give rise to certain defenses in
enforcement actions. In addition, with respect to used vehicles, the Federal
Trade Commission's Rule on Sale of Used Vehicles requires that all sellers of
used vehicles prepare, complete, and display a "Buyer's Guide" which explains
the warranty coverage for such vehicles. Furthermore, Federal Odometer
Regulations promulgated under the Motor Vehicle Information and Cost Savings Act
require that all sellers of used vehicles furnish a written statement signed by
the seller certifying the accuracy of the odometer reading. If a seller is not
properly licensed or if either a Buyer's Guide or Odometer Disclosure Statement
was not provided to the purchaser of a Financed Vehicle, the obligor may be able
to assert a defense against the seller of the Financed Vehicle, which defense
may prevent the Trust from collecting amounts due under the Contract.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default and be used as a defense to repayment of the
obligation.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the Fourteenth Amendment to the Constitution of the United States
of America. Courts have generally either upheld the notice provisions of the UCC
and related laws as reasonable or have found that the creditor's repossession
and resale do not involve sufficient state action to afford constitutional
protection to consumers.
CITSF will represent and warrant under the Trust Documents that each Contract
complies with all requirements of law in all material respects. A breach of such
representation and warranty that materially adversely affects the interests of
the Trust in any Contract will create an obligation of CITSF to purchase such
Contract. See "The Purchase Agreements and the Trust Documents--Sale and
Assignment of the Contracts."
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OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a recreation vehicle, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the recreation vehicle at the time of bankruptcy (as determined by the
court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under the related contract or change the rate of interest
and time of repayment of the indebtedness.
Under the terms of the Soldiers' and Sailors' Civil Relief Act, an Obligor
who enters the military service after the origination of such Obligor's Contract
(including an Obligor who is a member of the National Guard or is in reserve
status at the time of the origination of the Obligor's contract and is later
called to active duty) may not be charged interest above an annual rate of 6%
during the period of such Obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the Military
Reservist Relief Act, under certain circumstances California residents called
into active duty with the reserves can delay payments on retail installment sale
contracts, including the Contracts, for a period, not to exceed 180 days,
beginning with the order to active duty and ending 30 days after release. It is
possible that the foregoing could have an effect on the ability of the Servicer
to collect full amounts of interest on certain of the Contracts. In addition,
the Relief Acts impose limitations which would impair the ability of the
Servicer to repossess a Financed Vehicle subject to an affected Contract during
the Obligor's period of active duty status. Thus, in the event that such a
Contract goes into default, there may be delays and losses caused by the
inability to realize upon the related Financed Vehicle in a timely fashion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below and in the related Prospectus Supplement for each series of
the Securities is a summary of certain Federal income tax consequences of the
purchase, ownership and disposition of the Securities, applicable to initial
purchasers of the Securities. This summary does not deal with all aspects of
Federal income taxation applicable to all categories of holders of the
Securities, some of which may be subject to special rules or special treatment
under the Federal income tax laws. For example, it does not discuss the specific
tax treatment of Securityholders that are insurance companies, banks and certain
other financial institutions, regulated investment companies, individual
retirement accounts, tax-exempt organizations or dealers in securities.
Furthermore, this summary is based upon present provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the regulations promulgated
thereunder, and judicial or ruling authority, all of which are subject to
change, which change may be retroactive. Moreover, there are no cases or
Internal Revenue Service ("IRS") rulings on similar transactions involving a
trust that issues debt and equity interests with terms similar to those of the
Notes and the Certificates. As a result, the IRS may disagree with all or part
of the discussion below and in the related Prospectus Supplement.
Prospective investors are advised to consult their own tax advisors with
regard to the Federal income tax consequences of the purchase, ownership and
disposition of the Securities, as well as the tax consequences arising under the
laws of any state, foreign country or other jurisdiction. Each Trust will be
provided with an opinion of Schulte Roth & Zabel LLP, counsel for the Seller,
regarding certain of the Federal income tax matters discussed below and in the
related Prospectus Supplement. An opinion of counsel, however, is not binding on
the IRS, and no ruling on any of the issues discussed below will be sought from
the IRS. For purposes of the following summary, references to the Trust, the
Notes, the Certificates and related terms, parties and documents will be deemed
to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary depending
on whether the Trust is intended to be treated as a partnership under the Code
or is intended to be given an alternative characterization for Federal
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income tax purposes. The related Prospectus Supplement for each series of
Certificates will specify whether the Trust is intended to be treated as a
partnership for Federal income tax purposes and, if not, how the Trust is
intended to be treated.
SCOPE OF THE TAX OPINIONS
It is expected that Schulte Roth & Zabel LLP will, upon issuance of a series
of Securities, deliver its opinion that the applicable Trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation for Federal income tax purposes. Further, with respect to each
series of Notes, Schulte Roth & Zabel LLP expects to advise the Trust that the
Notes will be classified as debt for federal income tax purposes.
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
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Oklahoma income tax purposes, and the Noteholders not otherwise subject to
taxation in Oklahoma should not become subject to taxation in Oklahoma solely
because of a holder's ownership of Notes. However, a Noteholder already subject
to Oklahoma's income tax could be required to pay additional Oklahoma tax as
a result of the holder's ownership or disposition of Notes.
TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES ISSUED BY A TRUST TREATED AS A
PARTNERSHIP
Oklahoma Tax Counsel will advise the Trust that if the arrangement created by
the Trust Agreement is treated as a partnership (not taxable as a corporation)
for U.S. federal income tax purposes, the same treatment should also apply for
Oklahoma income tax purposes; under current law, Certificateholders that are
nonresidents of Oklahoma and are not otherwise subject to Oklahoma income tax
should not be subject to Oklahoma income tax on the income from the Trust
because it is unlikely that the Trust has established a nonunitary business or
commercial situs in Oklahoma. In any event, classification of the arrangement as
a "partnership" would not cause a Certificateholder not otherwise subject to
taxation in Oklahoma to pay Oklahoma income tax on income beyond that derived
from the Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from
engaging in certain transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to such
Benefit Plan. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such persons.
THE CERTIFICATES
An interest in the Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1) of
the Code, or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (other than an insurance company
purchasing the Certificates for its general accounts). By its acceptance of a
Certificate or its acquisition of an interest in a Certificate through a
Participant or DTC, each Certificateholder or Certificate Owner will be deemed
to have represented and warranted that it is not subject to the foregoing
limitation.
A plan fiduciary considering the purchase of the Notes should consult its tax
and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
THE NOTES
The acquisition or holding of Notes by or on behalf of a Benefit Plan could
be considered to give rise to a prohibited transaction if the Seller, the Trust
or any of their respective affiliates is or becomes a party in interest or a
disqualified person with respect to such Benefit Plan. Certain exemptions from
the prohibited transaction rules could be applicable to the purchase and holding
of Notes by a Benefit Plan depending on the type and circumstances of the plan
fiduciary making the decision to acquire such Notes. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38 regarding
investments by bank collective investment funds; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers."
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PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller will agree to
sell to each of the underwriters (the "Underwriters") named therein and in the
related Prospectus Supplement, and each of such Underwriters will severally
agree to purchase from the Seller, the principal amount of each class of
Securities of the related series set forth therein and in the related Prospectus
Supplement.
In each Underwriting Agreement, the several Underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the Securities
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Securities are purchased. In the event of a default by
any such underwriter, each Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting Underwriters may be
increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Securities being offered thereby will be offered to the public and any
concessions that may be offered to certain dealers participating in the offering
of such Securities or (ii) specify that the related Securities are to be resold
by the Underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that CITSF and/or the Company will
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act.
A Trustee may, from time to time, invest the funds of the Trust in Eligible
Investments acquired from the Underwriters.
FINANCIAL INFORMATION
The Company has determined that its financial statements are not material to
the offering made hereby.
Each Trust will be formed to own the related Contracts and the other Trust
assets and to issue the related Securities. Each Trust will have had no assets
or obligations prior to the issuance of the Securities and will not engage in
any activities other than those described herein and in the related Prospectus
Supplement. Accordingly, no financial statements with respect to each Trust are
included in this Prospectus or in the related Prospectus Supplement.
RATINGS
It is a condition to the issuance of any class of Securities offered pursuant
to this Prospectus that the Securities be rated in one of the four highest
rating categories by at least one nationally recognized statistical rating
organization rating such series of Securities (each, a "Rating Agency"). The
foregoing ratings do not address the likelihood that the Securities will be
retired following the sale of the Contracts by the Trust. A security rating is
not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating agency. The security
ratings of the Securities should be evaluated independently of similar security
ratings assigned to other kinds of securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth &
Zabel LLP, New York, New York. The material federal income tax consequences of
the Securities will be passed upon for the Company by Schulte Roth & Zabel LLP.
Certain legal matters will be passed upon for CITSF, CITCF-NY and the Company by
Norman H. Rosen, Esq., Senior Vice President and General Counsel. If the
Enhancement for a class of Securities
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includes a CIT Limited Guarantee, certain legal matters will be passed upon for
CIT by its Executive Vice President and General Counsel, Ernest D. Stein, Esq.
If a Trust is formed pursuant to the laws of the State of Delaware, certain
legal matters will be passed upon for the Trust by its special Delaware counsel
named in the related Prospectus Supplement.
EXPERTS
The consolidated balance sheets of CIT as of December 31, 1996 and 1995 and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1996 in CIT's Amendment No. 1 to the Registration Statement on Form S-2 have
been incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, also incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
INDEX OF PRINCIPAL TERMS
<TABLE>
<S> <C>
Affiliated Owner........................................................6, 25
Asset Service Center.......................................................31
Available Amount.......................................................14, 55
Bankruptcy Code............................................................65
Benefit Plan...............................................................69
Business Day...........................................................13, 34
Capitalized Interest Account...............................................12
Cash Collateral Account....................................................41
CBC Holding................................................................30
Cede.................................................................2, 6, 33
Cedel................................................................2, 8, 24
Cedel Participants.........................................................43
Certificate Balance.........................................................6
Certificate Distribution Account...........................................51
Certificate Final Scheduled Distribution Date..............................13
Certificate Owner..........................................................24
Certificate Owners..........................................................6
Certificate Pool Factor....................................................29
Certificateholders.........................................................45
Certificates.........................................................1, 5, 33
CIT..................................................................2, 5, 21
CITCF-NY...............................................................10, 21
CITSF...................................................................5, 21
Closing Date...............................................................10
CMC........................................................................30
Code...................................................................19, 67
Collection Account.........................................................51
Commission..................................................................3
Company..............................................................1, 5, 21
Contract Files.............................................................25
Contract Pool.......................................................9, 26, 27
Contract Rate..............................................................27
Contracts............................................................1, 9, 27
Controlling Notes..........................................................37
Cooperative................................................................44
Credit Facility............................................................41
</TABLE>
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<TABLE>
<S> <C>
Credit Facility Provider...................................................41
Dealers................................................................10, 21
Defaulted Contracts........................................................47
Definitive Certificates....................................................45
Definitive Notes...........................................................45
Definitive Securities......................................................45
Deposit Date...............................................................25
Depositories...............................................................42
Depository.................................................................24
Determination Date.........................................................14
Distribution Date......................................................13, 34
DKB........................................................................30
DTC..................................................................2, 6, 24
DTC Rules..................................................................43
Due Period.................................................................14
Eligible Account...........................................................51
Eligible Institution.......................................................51
Eligible Investments.......................................................52
Enhancement................................................................40
ERISA......................................................................19
Euroclear.............................................................2, 7, 8
Euroclear Operator.........................................................44
Euroclear Participants.....................................................44
Event of Termination.......................................................58
Events of Default..........................................................37
Financed Vehicles........................................................1, 9
Force-Placed Insurance.....................................................57
FTC Rule...................................................................65
Funding Period..........................................................7, 12
Holder.....................................................................42
Holders....................................................................45
Indenture............................................................2, 7, 34
Indenture Trustee....................................................2, 5, 35
Indirect Participants......................................................42
Initial Contracts...........................................................1
Initial Cut-off Date.....................................................1, 9
Initial Financed Vehicles................................................1, 9
Initial Pool Balance...............................................17, 18, 60
Insolvency Laws............................................................65
Insurance Advances.........................................................58
Interest Accrual Period....................................................13
Interest Rate...............................................................8
IRS........................................................................67
Issuer......................................................................5
Late Fees..............................................................14, 55
Limited Guarantee..........................................................41
Liquidated Contracts.......................................................47
Liquidity Facility.........................................................42
Liquidity Facility Provider................................................42
List of Contracts..........................................................48
MHC........................................................................30
Military Reservist Relief Act..............................................49
Monthly Advance........................................................16, 54
Non-Reimbursable Payment...............................................17, 55
</TABLE>
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<TABLE>
<S> <C>
Note Distribution Account..................................................51
Note Final Scheduled Distribution Date.....................................13
Note Owner.............................................................24, 35
Note Owners..............................................................7, 8
Note Pool Factor...........................................................29
Noteholders................................................................45
Notes................................................................1, 7, 34
Obligor................................................................10, 54
Oklahoma Tax Counsel.......................................................68
Original Certificate Balance...............................................25
Owner Trustee............................................................2, 5
Paid-Ahead Account.........................................................51
Paid-Ahead Period..........................................................27
Paid-Ahead Precomputed Contract............................................27
Paid-Ahead Simple Interest Contract........................................27
Participants...............................................................42
Pass-Through Rate.......................................................6, 34
Payment Shortfall......................................................16, 54
Permitted Investments......................................................11
Pool Balance...........................................................17, 18
Pooling and Servicing Agreement.............................................2
Precomputed Contracts......................................................27
Pre-Funded Amount..........................................................11
Pre-Funded Percentage......................................................23
Pre-Funding Account.........................................................7
Principal Liquidation Loss Amount......................................37, 40
Prospectus Supplement.......................................................1
PTCE.......................................................................69
Purchase Agreement.........................................................10
Purchase Agreements........................................................48
Purchase Price.............................................................50
Rating Agency..........................................................18, 70
Rating Agency Condition....................................................36
Record Date............................................................13, 34
Registration Statement......................................................3
Related Documents..........................................................39
Repurchase Event...........................................................10
Repurchased Contract...................................................10, 50
Required Capitalized Interest Amount.......................................12
Required Servicer Ratings..................................................53
Reserve Account............................................................40
Reserve Fund...............................................................40
Retained Yield.............................................................50
Sale and Servicing Agreement................................................2
Securities...........................................................1, 7, 34
Security Owner.............................................................35
Securityholder.............................................................42
Securityholders............................................................45
Seller......................................................................5
Servicer.................................................................2, 5
Servicer Letter of Credit..................................................53
Servicer Payment...........................................................14
Servicing Fee..........................................................17, 53
Servicing Fee Rate.....................................................17, 53
</TABLE>
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<TABLE>
<S> <C>
Simple Interest Contracts..................................................27
Soldiers' and Sailors' Civil Relief Act....................................49
Spread Account.............................................................41
Stockholders Agreement.....................................................30
Stripped Certificates.......................................................7
Stripped Notes..............................................................8
Subsequent Contracts.....................................................1, 9
Subsequent Cut-off Date.................................................1, 11
Subsequent Financed Vehicles.............................................1, 9
Subsequent Purchase Agreement..............................................11
Subsequent Transfer Agreement..............................................11
Subsequent Transfer Date...................................................11
Terms and Conditions.......................................................44
Trust....................................................................1, 5
Trust Agreement.............................................................2
Trust Documents............................................................48
Trustee.....................................................................2
Trustees....................................................................5
UCC........................................................................21
Underwriters...............................................................70
Underwriting Agreement.....................................................70
Yield Supplement Account...................................................41
</TABLE>
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_____________________________ _____________________________
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary....................................... S-4
Risk Factors.................................. S-15
Structure of the Transaction.................. S-18
The Trust Property............................ S-19
The Contract Pool............................. S-19
Maturity and Prepayment Considerations........ S-23
Yield and Prepayment Considerations........... S-29
Pool Factors.................................. S-30
Use of Proceeds............................... S-30
The CIT Group, Inc............................ S-30
The CIT Group/Sales Financing, Inc.,
Servicer..................................... S-30
The Notes..................................... S-34
The Certificates.............................. S-37
Enhancement................................... S-39
The Purchase Agreements and the Trust
Documents.................................... S-41
Certain Federal Income Tax Consequences....... S-46
Certain State Tax Consequences................ S-49
ERISA Considerations.......................... S-50
Plan of Distribution.......................... S-51
Ratings....................................... S-52
Legal Matters................................. S-53
Annex I....................................... A-1
Index of Principal Terms...................... B-1
PROSPECTUS
Available Information......................... 3
Reports to Securityholders.................... 3
Documents Incorporated by Reference........... 4
Summary....................................... 5
Risk Factors.................................. 21
The Trusts.................................... 25
The Trust Property............................ 26
The Contract Pool............................. 27
Yield and Prepayment Considerations........... 29
Pool Factors.................................. 29
Use of Proceeds............................... 29
The CIT Group, Inc............................ 30
The CIT Group Securitization Corporation II,
Seller....................................... 30
The CIT Group/Sales Financing, Inc.,
Servicer..................................... 31
The Certificates.............................. 33
The Notes..................................... 34
Enhancement................................... 39
Certain Information Regarding the
Securities................................... 42
The Purchase Agreements and the Trust
Documents.................................... 48
Certain Legal Aspects of the Contracts........ 61
Certain Federal Income Tax Consequences....... 67
Certain State Tax Consequences................ 68
ERISA Considerations.......................... 69
Plan of Distribution.......................... 70
Financial Information......................... 70
Ratings....................................... 70
Legal Matters................................. 70
Experts....................................... 71
Index of Principal Terms...................... 71
</TABLE>
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND 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.
$400,060,865
CIT RV TRUST 1998-A
THE CIT GROUP SECURITIZATION
CORPORATION II
SELLER
THE CIT GROUP/SALES FINANCING, INC.
SERVICER
------------------
PROSPECTUS SUPPLEMENT
JUNE 3, 1998
------------------
SALOMON SMITH BARNEY
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
_____________________________ _____________________________
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as.............................. 'SS'
