The information in this prospectus is not complete and may be changed. A
registration statement has been filed with the Securities and Exchange
Commission and has been declared effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion, Dated February 8, 1999
Prospectus Supplement to Prospectus dated September 29, 1998
$735,162,156
CIT Marine Trust 1999-A
The CIT Group Securitization Corporation II
Seller
The CIT Group/Sales Financing, Inc.
Servicer
- --------------------------------------------------------------------------------
Consider carefully the risk factors beginning on page S-11 in this prospectus
supplement and on page 22 in the prospectus.
The Securities represent obligations of the Trust only and do not represent
obligations of or interests in The CIT Group Securitization Corporation II, The
CIT Group/Sales Financing, Inc. or any of their affiliates.
This prospectus supplement may be used to offer and sell the Securities only if
accompanied by the prospectus.
- --------------------------------------------------------------------------------
The Trust will issue the following classes of Securities:
Interest Rate/Pass- Final Scheduled
Principal Amount Through Rate Distribution Date
---------------- ------------ -----------------
Class A-1 Notes ...... $325,000,000 % August 2006
Class A-2 Notes ...... $179,000,000 % March 2010
Class A-3 Notes ...... $117,000,000 % May 2013
Class A-4 Notes ...... $103,134,000 % November 2019
Certificates ......... $ 11,028,156 % November 2019
o The Trust will make distributions on the Securities on the 15th day of
each month. The first Distribution Date is March 15, 1999.
Underwriting Proceeds to
Price to Public(1) Discount(2) the Seller(3)
------------------ ----------- -------------
Class A-1 Notes ...... % % %
Class A-2 Notes ...... % % %
Class A-3 Notes ...... % % %
Class A-4 Notes ...... % % %
Certificates ......... % % %
- ----------
(1) Plus accrued interest, if any, at the respective Interest Rate or the
Pass-Through Rate, as appropriate, from the Closing Date. A portion of the
Certificates will be retained by an affiliate of the Seller.
Total price to public = $____________.
(2) Total underwriting discount = $______________.
(3) Total proceeds to the Seller = $__________ (before deduction of expenses
payable by the Seller estimated at $____).
[LOGO] MBIA
Pursuant to its financial guaranty insurance policies, MBIA Insurance
Corporation will unconditionally and irrevocably guarantee:
o the full and timely payment of interest on the Securities on each
Distribution Date; and
o the full and ultimate payment of principal of the Securities on the
applicable Final Scheduled Distribution Date.
Neither the SEC nor any state securities commission has approved these
Securities or determined that this prospectus supplement or the prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Chase Securities Inc.
First Union Capital Markets
Salomon Smith Barney
----------
The date of this Prospectus Supplement is February , 1999
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
Summary of Terms .......................................................... S-4
Risk Factors .............................................................. S-11
Structure of the Transaction .............................................. S-15
The Trust Property ........................................................ S-16
The Contract Pool ......................................................... S-17
Maturity and Prepayment Considerations .................................... S-23
Yield and Prepayment Considerations ....................................... S-29
Pool Factors .............................................................. S-30
Use of Proceeds ........................................................... S-30
The CIT Group/Sales Financing, Inc., Servicer ............................. S-30
The Insurer ............................................................... S-33
The Notes ................................................................. S-35
The Certificates .......................................................... S-40
Enhancement ............................................................... S-43
The Purchase Agreements and the Trust Documents ........................... S-47
Certain Federal Income Tax Consequences ................................... S-52
Certain State Tax Consequences ............................................ S-57
ERISA Considerations ...................................................... S-58
Plan of Distribution ...................................................... S-59
Ratings ................................................................... S-61
Legal Investment .......................................................... S-61
Experts ................................................................... S-61
Legal Matters ............................................................. S-61
Annex I ................................................................... S-62
Index to Defined Terms .................................................... S-65
Prospectus
Available Information ..................................................... 3
Prospectus Supplement ..................................................... 3
Reports to Securityholders ................................................ 3
Documents Incorporated by Reference ....................................... 4
Summary ................................................................... 6
Risk Factors .............................................................. 22
The Trusts ................................................................ 27
The Trust Property ........................................................ 28
The Contract Pool ......................................................... 28
Yield and Prepayment Considerations ....................................... 30
Pool Factors .............................................................. 31
Use of Proceeds ........................................................... 31
The CIT Group, Inc. ....................................................... 32
The CIT Group Securitization Corporation II, Seller ....................... 32
The CIT Group/Sales Financing, Inc., Servicer ............................. 33
The Certificates .......................................................... 37
The Notes ................................................................. 39
Enhancement ............................................................... 44
Certain Information Regarding the Securities .............................. 47
The Purchase Agreements and the Trust Documents ........................... 53
Certain Legal Aspects of the Contracts .................................... 66
Certain Federal Income Tax Consequences ................................... 72
Certain State Tax Consequences ............................................ 74
ERISA Considerations ...................................................... 74
Plan of Distribution ...................................................... 75
Financial Information ..................................................... 76
Ratings ................................................................... 76
Legal Matters ............................................................. 76
Experts ................................................................... 76
Index to Defined Terms .................................................... 77
S-2
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
We describe the Notes and Certificates in two separate documents that
progressively provide more detail: (a) the prospectus, which provides general
information, some of which may not apply to a particular series of Securities,
including your series; and (b) this prospectus supplement, which describes the
specific terms of your series of Securities.
If the description of the terms of your series of Notes or Certificates in
this prospectus supplement and the prospectus are different, you should rely on
the information in this prospectus supplement.
We include cross-references in this prospectus supplement and in the
prospectus to captions in these materials where you can find further related
discussions. The Table of Contents shows the page reference for each caption.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement are defined under the caption "Index to Defined Terms"
beginning on page S-65 in this prospectus supplement and under the caption
"Index to Defined Terms" beginning on page 77 in the prospectus.
----------
S-3
<PAGE>
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SUMMARY OF TERMS
o This summary highlights selected information contained in this document.
It does not contain all of the information that you need to consider in
making your investment decision. To understand all of the terms of an
offering of the Securities, you must read carefully this entire document
and the prospectus.
o This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding. For a complete description of
these calculations, cash flows and other information, you must refer to
this prospectus supplement and the prospectus.
OFFERED SECURITIES
CIT Marine Trust 1999-A (the "Trust") will issue the following Securities,
offered to you pursuant to this prospectus supplement and the prospectus:
o Class A-1 ____% Asset-Backed Notes (the "Class A-1 Notes") in the
aggregate principal amount of $325,000,000;
o Class A-2 ____% Asset-Backed Notes (the "Class A-2 Notes") in the
aggregate principal amount of $179,000,000;
o Class A-3 ____% Asset-Backed Notes (the "Class A-3 Notes") in the
aggregate principal amount of $117,000,000;
o Class A-4 ____% Asset-Backed Notes (the "Class A-4 Notes" and,
together with the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, the "Notes") in the aggregate principal amount of
$103,134,000;
o ____% Asset-Backed Certificates (the "Certificates" and, together
with the Notes, the "Securities") in the aggregate face amount of
$11,028,156.
The Trust is offering each class of Notes as book-entry securities clearing
through DTC (in the United States) and Cedel or Euroclear (in Europe). The Trust
is offering the Certificates in fully registered, certificated form. See
"Certain Information Regarding the Securities--Book-Entry Registration" and
"--Definitive Securities" in the Prospectus.
Insurer
MBIA Insurance Corporation, a New York stock insurance company. See "The
Insurer" herein.
Insurance
Pursuant to its financial guaranty insurance policies, the Insurer will
unconditionally and irrevocably guarantee:
o the full and timely payment of interest on the Securities on each
Distribution Date; and
o the full and ultimate payment of principal of the Securities on the
applicable Final Scheduled Distribution Date.
See "Enhancement--Insurance Policies" herein.
Closing Date
On or about February 23, 1999.
Cut-off Date
February 1, 1999.
Indenture Trustee
Harris Trust and Savings Bank.
Owner Trustee
Chase Manhattan Bank Delaware.
Sellers
The CIT Group Securitization Corporation II (the "Company" or the "Seller"). CIT
Marine Trust 1996-A (the "Selling Trust").
Servicer
The CIT Group/Sales Financing, Inc. ("CITSF" or the "Servicer").
Distribution Dates; Record Dates
o The Trust will make distributions on the Securities on the 15th day of
each calendar month (or, if it is not a Business Day, the next Business
Day), beginning on March 15, 1999 (each, a "Distribution Date").
o Prior to the time that Definitive Notes are issued, the Trust will make
payments on the Notes on each Distribution Date to holders of record at
the close of business on the Business
- --------------------------------------------------------------------------------
S-4
<PAGE>
- --------------------------------------------------------------------------------
Day preceding the Distribution Date and the Trust will make payments on
the Certificates on each Distribution Date to holders of record at the
close of business on the last Business Day of the prior calendar month
(each, a "Record Date").
o If Definitive Notes are issued, the Record Date for the Notes will be the
close of business on the last Business Day of the prior calendar month.
Interest Payments
The interest rate and pass-through rate for each class of Securities is as
specified above. The Trust will calculate interest on the Securities on the
basis of a 360-day year consisting of twelve 30-day months.
The Trust will calculate the amount of interest accrued on the Securities and
due on any Distribution Date by reference to the one-month period from and
including the prior Distribution Date to but excluding the current Distribution
Date.
On each Distribution Date, the Trust will distribute accrued interest to the
Noteholders at the applicable Interest Rate on the outstanding principal balance
on each class of Notes and to the Certificateholders at the Pass-Through Rate on
the outstanding Certificate Balance. Interest payments to all Noteholders will
have the same priority. The Trust will not make interest payments to
Certificateholders on any Distribution Date until all interest due to the
Noteholders on that Distribution Date has been paid in full.
Principal Payments
The Trust will pay principal on each Distribution Date to the Securityholders in
an amount generally equal to the principal actually collected on the Contracts
during the related Due Period. In addition, the Trust will pay principal on each
Distribution Date to the Noteholders (and after the Notes have been paid in
full, the Certificateholders) from Excess Collections, if any, in an amount such
that the excess of (i) the Pool Balance as of the last day of the related Due
Period over (ii) the outstanding principal amount of the Securities on such
Distribution Date, after giving effect to the principal distributed to the
Securityholders as described above, is equal to $9,189,527 (1.25% of the Initial
Pool Balance). "Excess Collections" are generally the amounts that remain in the
Collection Account on any Distribution Date after the Trust has paid amounts
owing to the Securityholders (other than additional principal distributions),
the Servicer and the Insurer, paid interest on the Loan and deposited any
amounts required to be deposited in the Reserve Account as a result of losses,
repossessions and delinquencies on the Contracts.
Each "Due Period" is the calendar month that ends prior to a Distribution Date.
The initial Due Period will be February 1999. The "Pool Balance" is the
outstanding principal balance of the Contracts at any time. The "Initial Pool
Balance" equals the Pool Balance as of the Cut-off Date.
Initially, principal collections on the Contracts will be distributed on each
Distribution Date 99.0% to the Notes and 1.0% to the Certificates. On and after
the Stepdown Date, principal collections on the Contracts will be distributed on
each Distribution Date 98.5% to the Notes and 1.5% to the Certificates. On each
Distribution Date, the Certificates will not receive their share of the
principal collections on the Contracts until the Notes receive their share.
"Stepdown Date" means the first Distribution Date on which the Certificate
Balance is equal to or less than the amount by which the Pool Balance as of the
last day of the related Due Period exceeds the principal amount of the Notes and
the Certificate Balance.
The Notes' share of principal collections on the Contracts will be allocated as
follows:
o first, to the Class A-1 Notes until the outstanding principal
balance of the Class A-1 Notes has been paid in full;
o second, to the Class A-2 Notes until the outstanding principal
balance of the Class A-2 Notes has been paid in full;
o third, to the Class A-3 Notes until the outstanding principal
balance of the Class A-3 Notes has been paid in full; and
o fourth, to the Class A-4 Notes until the outstanding principal
balance of the Class A-4 Notes has been paid in full.
The Certificates' share of principal collections on the Contracts will be
allocated to the Certificates until the outstanding principal balance of the
Certificates has been paid in full.
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
The additional principal distribution from Excess Collections described above
will be distributed to the Notes in sequential order until the Notes have been
paid in full and then to the Certificates until the Certificates have been paid
in full.
Notwithstanding the foregoing, if an Insurer Default has occurred and either is
continuing or if the Insurance Policies are no longer in effect, the Trust will
pay principal on each Distribution Date only to the Notes until they have been
paid in full and only after the Notes have been paid in full will any
Certificates receive any further principal payments.
Notwithstanding the foregoing, if an Event of Default has occurred and either an
Insurer Default has occurred and is continuing or the Insurance Policies are no
longer in effect and the Notes have been accelerated, principal payments will be
made on each class of Notes pro rata on the basis of their respective unpaid
principal amounts.
See "The Notes--Payments of Principal," "The Certificates--Distributions of
Principal" herein, and "The Purchase Agreements and the Trust
Documents--Distributions" herein and in the Prospectus for additional detail on
some of the calculations described above and for special priority rules that
would apply in a default situation.
Final Scheduled Distribution Dates
The outstanding principal amount, if any, of each class of Securities will be
payable in full on the date specified for each below:
o Class A-1 Notes: August 2006 (the "Class A-1 Note Final Scheduled
Distribution Date").
o Class A-2 Notes: March 2010 (the "Class A-2 Note Final Scheduled
Distribution Date").
o Class A-3 Notes: May 2013 (the "Class A-3 Note Final Scheduled
Distribution Date").
o Class A-4 Notes: November 2019 (the "Class A-4 Note Final Scheduled
Distribution Date").
o Certificates: November 2019 (the "Certificate Final Scheduled
Distribution Date").
The actual date on which the aggregate outstanding principal amount of any class
of Notes or of the Certificates is paid may be earlier than the respective Final
Scheduled Distribution Dates set forth herein based on a variety of factors,
including those described under "Maturity and Prepayment
Considerations--Weighted Average Life of the Securities" herein.
Accelerated Maturity Date
The Notes may be accelerated and subject to immediate payment at par plus
accrued and unpaid interest upon the occurrence of an Event of Default under the
Indenture. So long as no Insurer Default has occurred and is continuing and the
Insurance Policies are in effect, only the Insurer may declare an Event of
Default under the Indenture. In the case of the declaration of an Event of
Default and an acceleration of the Notes, the Notes will be immediately due and
payable. The Insurance Policies do not guarantee payment of any amounts that
become due on an accelerated basis. However, the Insurance Policies will
continue to guarantee payments of interest on and principal of the Securities in
accordance with their original terms. See "Enhancement--Insurance Policies"
herein.
Optional Purchase
Under certain circumstances, CITSF may elect to repurchase all of the remaining
Contracts. The repurchase price will be 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) plus all amounts, if any,
due to the Insurer. This optional repurchase is known as the "Optional
Purchase."
CITSF may exercise the Optional Purchase only after the Pool Balance as of the
last day of any Due Period is less than 10% of the Initial Pool Balance. The
exercise of an Optional Purchase will effect early retirement of the Securities
at the unpaid principal amount of the Securities plus any accrued and unpaid
interest thereon at the applicable Interest Rate or Pass-Through Rate. See "The
Notes--Redemption" and "The Certificates--Redemption" herein and "The Purchase
Agreements and the Trust Documents--Termination" herein and in the Prospectus.
- --------------------------------------------------------------------------------
S-6
<PAGE>
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Auction Call
Under certain circumstances, the Indenture Trustee must solicit bids from third
parties for the purchase of the Contracts which remain in the Trust. This
mandatory bid process and related sale, if any, is known as the "Auction Call."
The Indenture Trustee may accept third party bids to purchase the Contracts
pursuant to the Auction Call only if the bid price is sufficient to pay the
Servicer Payment and the unpaid principal amount of the Securities plus any
accrued and unpaid interest thereon at the applicable Interest Rate or
Pass-Through Rate, plus payment of all amounts, if any, due to the Insurer. If
the Indenture Trustee does not receive satisfactory bids, the Indenture Trustee
is not required to solicit additional bids, to pursue negotiations or to sell
the Contracts to any party.
The Indenture Trustee must solicit bids for an Auction Call after the first
Distribution Date that the Pool Balance is less than 5% of the Initial Pool
Balance. If the Auction Call results in a sale, the Indenture Trustee must pay
from the sale proceeds the Servicer Payment, all amounts, if any, owing to the
Insurer and all amounts owing to the holders of Securities in the same order as
collections received on the Contracts. The expenses of the Auction Call will be
paid by the Servicer. See "The Notes--Redemption" and "The
Certificates--Redemption" herein and "The Purchase Agreements and the Trust
Documents --Termination" herein and in the Prospectus.
TRUST PROPERTY
The Trust will primarily include the following property:
o a pool of marine installment sale contracts and direct loans (the
"Contracts") secured by the new and used boats, boat motors and boat
trailers each of which are financed thereby and some of which may
also be secured by U.S. preferred ship mortgages (the "Financed
Boats");
o all monies received under the Contracts on and after the Cut-off
Date, exclusive of interest due and payable prior to the Cut-off
Date;
o an assignment of the security interests in the Financed Boats;
o the Collection Account, the Certificate Distribution Account and the
Note Distribution Account in each case together with the proceeds
thereof;
o the Reserve Account (other than net investment earnings on the funds
on deposit therein related to the Loan);
o the right to proceeds from claims under certain insurance policies
which insure individual Financed Boats or the related Obligors;
o certain rights under the Purchase Agreement and the Sale and
Servicing Agreement; and
o certain rights under the Insurance Policies.
The Contracts
On the Closing Date, the Trust will acquire, from the Seller and the Selling
Trust, Contracts with an aggregate principal balance of approximately
$735,162,156. As of the Cut-off Date, the Contracts will have the following
characteristics:
Range of Contract Rates 7.50% to 21.00%
Weighted Average Contract Rate 9.50%
Range of Original Principal Balances $1,931 to $800,000
Average Original Principal Balance $34,164
Range of Remaining Principal Balances $1,073 to $785,708
Average Remaining Principal Balance $31,914
Range of Original Terms to Maturity 18 to 245 months
Weighted Average Original Term to 184 months
Maturity
Range of Remaining Terms to Maturity 12 to 240 months
Weighted Average Remaining Term to 168 months
Maturity
Percentage of New/Used Boats at Time 74.85%/25.15%
of Origination (by number of Contracts)
Percentage of New/Used Boats at Time 67.16%/32.84%
of Origination (by principal balance)
Persons obligated to make payments under the Contracts (each, an "Obligor") may
generally prepay their Contracts at any time without premium or penalty.
CREDIT ENHANCEMENT
Insurance Policies
MBIA Insurance Corporation (the "Insurer") will issue financial guaranty
insurance policies (a "Note Insurance Policy" and a "Certificate Insurance
Policy" and, together, the "Insurance Policies") to the Trust. Under the terms
of the Note Insurance Policy, the Insurer will unconditionally and irrevocably
guarantee:
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S-7
<PAGE>
- --------------------------------------------------------------------------------
o the full and timely payment of interest on the Notes on each
Distribution Date;
o the amount of any collateralization shortfall on any Distribution
Date (after giving effect to the application of funds in the Reserve
Account to cover such collateralization shortfall); and
o the full and ultimate payment of principal on the Notes on the
respective Note Final Scheduled Distribution Dates.
Under the terms of the Certificate Insurance Policy, the Insurer will
unconditionally and irrevocably guarantee:
o the full and timely payment of interest on the Certificates on each
Distribution Date;
o following the payment in full of the Notes, the amount of any
collateralization shortfall on any Distribution Date (after giving
effect to the application of funds in the Reserve Account to cover
such collateralization shortfall); and
o the full and ultimate payment of principal on the Certificates on
the Certificate Final Scheduled Distribution Date.
See "Enhancement--Insurance Policies" herein.
Reserve Account
On the Closing Date, the Company will establish an account in the name of the
Indenture Trustee (the "Reserve Account") for the benefit of the Securityholders
and the Insurer. If funds in the Collection Account are insufficient to make
required payments of interest and, in certain circumstances (see "The
Notes--Payments of Principal," "The Certificates--Payments of Principal" and
"Enhancement--Reserve Account") payments of principal due on the Securities,
then the Indenture Trustee will have the right to use funds in the Reserve
Account to make these payments. The Reserve Account will be funded as follows:
o On the Closing Date one or more financial institutions (the
"Lender") will make a loan (the "Loan") to the Trust in an amount
equal to 3.75% of the Initial Pool Balance, or approximately
$27,568,581.
o Periodically after the Closing Date the Servicer will deposit Excess
Collections in the Reserve Account so that it equals the Specified
Reserve Amount for the next Distribution Date.
o In certain circumstances, as a result of delinquencies, losses and
repossessions of Financed Boats or liquidations of Contracts,
additional amounts will be required to be deposited in the Reserve
Account.
Amounts in the Reserve Account may exceed the Specified Reserve Amount on a
Distribution Date. If this occurs, the Trust will use these excess funds to pay
principal due on the Loan made by the Lender. The Trust will release the
remaining amount to the affiliate of the Seller who will own a portion of the
Certificates.
The "Specified Reserve Amount" with respect to any Distribution Date is
generally equal to the excess of (x) the greater of:
o 5.55% of the Pool Balance as of the last day of the related Due
Period; and
o $16,541,149 (which is equal to 2.25% of the Initial Pool Balance);
over (y) the excess, if any, of
o the Pool Balance as of the last day of the related Due Period; over
o the outstanding principal amount of the Securities on such
Distribution Date (after giving effect to all principal, including
any additional principal distributions from Excess Collections,
distributed to the Securityholders on such Distribution Date).
Notwithstanding the foregoing, the Specified Reserve Amount may never be less
than $7,351,622 (1.00% of the Initial Pool Balance); provided that such minimum
amount may never be greater than the outstanding principal amount of the
Securities (the "Minimum Reserve Amount").
Overcollateralization
Overcollateralization is the excess, if any, of the Pool Balance over the
outstanding principal amount of the Securities. On the Closing Date there will
be no overcollateralization. Overcollateralization may develop after the Closing
Date as a result of additional principal distributions on the Securities from
Excess
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S-8
<PAGE>
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Collections, if any. Excess Collections will be applied to the outstanding
principal amount of the Securities such that the overcollateralization amount is
initially increased to, and thereafter maintained at, $9,189,527 (1.25% of the
Initial Pool Balance) (the "Targeted Overcollateral-ization Amount"). However,
if there are not sufficient Excess Collections, the overcollateral-ization
amount will not be increased to or maintained at the Targeted
Overcollateralization Amount. In addition, realized losses on the Contracts will
reduce the overcollateralization amount. If realized losses on the Contracts
result in a collateralization shortfall on a Distribution Date, a draw will be
made on the Note Insurance Policy and/or the Certificate Insurance Policy in the
amount of any such collateralization shortfall (after giving effect to the
application of funds in the Reserve Account to cover such collateral-ization
shortfall).
Subordination
The Certificates will be subordinated to the Notes as follows:
o the Trust will not pay interest on the Certificates on any
Distribution Date until all interest owed on the Notes through that
Distribution Date has been paid in full;
o the Trust will not pay principal on the Certificates on any
Distribution Date until the Notes have been paid their full share of
principal collections on the Contracts for such Distribution Date;
and
o the Trust will not pay additional principal distributions from
Excess Collections to the Certificates on any Distribution Date
until all the Notes have been paid in full.
In addition, if an Insurer Default has occurred and is continuing or the
Insurance Policies are no longer in effect, the Trust will not pay principal on
the Certificates on any Distribution Date until all of the Notes have been paid
in full.
Monthly Advances
The amounts received under a Contract may not be sufficient to pay interest due
under the terms of the Contract (referred to as a "Payment Shortfall"). If a
Payment Shortfall occurs, the Servicer may advance funds to the Trust to
compensate for the Payment Shortfall (referred to as a "Monthly Advance"). The
Servicer will make a Monthly Advance only if the Servicer expects to be repaid
for the Monthly Advance from future interest collections on the Contract for
which the Servicer made such a Monthly Advance. The Trust will use future
interest collections on a Contract to repay a Servicer's Monthly Advance on the
Contract. If the Servicer determines that future interest collections on a
Contract will not be sufficient to repay a Monthly Advance, then the Trust will
repay the Monthly Advance from collections on all Contracts.
The Servicer will not make a Monthly Advance:
o to cover any principal portion of a Contract payment;
o on a Contract which the Obligor has prepaid in full; and
o on a Contract which is subject to a Relief Act Reduction.
See "The Purchase Agreements and The Trust Documents--Monthly Advances" herein
and in the Prospectus.
COLLECTION ACCOUNT; PRIORITY OF
DISTRIBUTIONS
On the Closing Date, the Servicer will establish an account in the name of the
Indenture Trustee known as the "Collection Account." On a monthly basis, the
Servicer will deposit all payments which the Servicer has collected on the
Contracts into the Collection Account. See "The Purchase Agreements and the
Trust Documents--Distributions."
On each Distribution Date, the Indenture Trustee will withdraw funds in the
Collection Account to make the following transfers and payments (to the extent
sufficient funds are available therefor) in the following order of priority:
(i) pay the Servicer Payment (including the servicing fee for the prior
Due Period and any overdue servicing fees owed to the Servicer if
the Servicer is not an affiliate of CIT and to the extent not
previously retained by the Servicer) to the Servicer;
(ii) pay to the Insurer any accrued and unpaid fees of the Insurer (to
the extent accrued prior to an Insurer Default and not previously
paid);
(iii) pay interest on the Notes;
(iv) pay interest on the Certificates;
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S-9
<PAGE>
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(v) pay principal on the Securities equal to the principal collections
on the Contracts:
o initially, principal collections on the Contracts will be
distributed on each Distribution Date 99.0% to the Notes and
1.0% to the Certificates; and, on and after the Stepdown Date,
98.5% to the Notes and 1.5% to the Certificates;
o the Trust will pay the Notes' share of principal collections
on the Contracts sequentially to the holders of each class of
the Notes until paid in full; and
o after the Notes receive their share of the principal
collections on the Contracts, the Trust will pay the
Certificates' share of principal collections on the Contracts
until the Certificates have been paid in full.
(vi) pay the Reimbursement Obligations to the Insurer (to the extent not
previously paid);
(vii) pay interest on the Loan;
(viii)if CIT or one of its affiliates is the Servicer, pay (to the extent
not previously paid to the Servicer) the servicing fee (including
any unpaid servicing fees owed to the Servicer for prior Due
Periods) to the Servicer;
(ix) deposit in the Reserve Account additional amounts required to be
deposited pursuant to the Sale and Servicing Agreement as a result
of delinquencies, losses and repossessions of Financed Boats or
liquidations of Contracts;
(x) pay principal from a portion of the Excess Collections to:
o the Noteholders, sequentially to the holders of each class of
the Notes until paid in full; and
o the Certificateholders after the Note-holders have been paid
in full; and
(xi) the balance to the Reserve Account.
Funds on deposit in the Reserve Account in excess of the Specified Reserve
Amount for the next Distribution Date shall be withdrawn from the Reserve
Account and used to pay principal due on the Loan and the remaining amount shall
be released to the Affiliated Owner.
Notwithstanding the foregoing, if an Insurer Default has occurred and is
continuing or if the Insurance Policies are no longer in effect, the Trust will
not pay principal to the Certificates until all the Notes have been paid in
full.
Notwithstanding the foregoing, if an Event of Default has occurred and either an
Insurer Default has occurred and is continuing or the Insurance Policies are no
longer in effect and the Notes have been accelerated, principal payments will be
made on each class of Notes pro rata on the basis of their respective unpaid
principal amounts.
See "The Purchase Agreements and the Trust Documents--Distributions" herein for
additional details and for special priority rules that would apply in a default
situation.
TAX STATUS
For Federal income tax purposes, the Notes will constitute indebtedness and the
Certificates will constitute interests in a trust fund that will not be
characterized as an association taxable as a corporation. Each holder of a Note,
by the acceptance of a Note, will agree to treat the Notes as indebtedness and
each holder of a Certificate, by the acceptance of a Certificate, will agree to
treat the Trust as a partnership in which the holders of the Certificates are
partners for Federal income tax purposes. See "Certain Federal Income Tax
Consequences" herein and in the Prospectus for additional information concerning
the application of Federal income tax laws to the Trust and the Securities.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA Considerations," the Notes
are eligible for purchase by employee benefit plans. The Certificates are not
eligible for purchase by employee benefit plans.
RATINGS OF THE SECURITIES
The Trust will not issue the Securities unless the Notes and the Certificates
are rated in the highest long-term rating category by at least two nationally
recognized statistical rating agencies (the "Rating Agencies"). A Rating Agency
may lower or withdraw its rating if circumstances so warrant. See "Risk
Factors--Subsequent Market Value of the Securities Dependent on Ratings of
Securities and Insurer" herein.
- --------------------------------------------------------------------------------
S-10
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the Securities:
Subsequent Market Value of The ratings of the Securities will be based
the Securities Dependent on primarily on the credit rating of the
Ratings of Securities and Insurer. If the Rating Agencies lower their
Insurer ratings of the Insurer or their assessment
of the Insurer's ability to pay claims under
the Insurance Policies, the Rating Agencies
may also lower the ratings of the
Securities. Since no person or entity will
provide additional credit enhancement for
the Securities, the market price of the
Securities will decrease if the Rating
Agencies lower their ratings of the Insurer
or the Securities.
Prepayment of Contracts May The actual length of time each class of
Affect Yield Securities is outstanding will depend on the
rate of principal payments and prepayments
and losses on the Contracts. The life of any
Contract will depend on factors including
prepayments, repurchases, defaults and
extensions of maturity. These factors may
result in payment of principal on the
Securities earlier or later than anticipated
in calculating the weighted average life of
the Securities. You will bear the risk of
reinvesting principal returned to you
resulting from prepayments of principal
received sooner than expected or required
under the Contracts. If you purchase
Securities at a discount and the Obligors
repay their Contracts at a slower rate than
you anticipated, the actual yield on your
investment will be lower than your
anticipated yield. If you purchase
Securities at a premium and the Obligors
repay their Contracts at a faster rate than
you anticipated, the actual yield on your
investment will be lower than your
anticipated yield. See "The Purchase
Agreements and the Trust
Documents--Termination," "--Modification of
Contracts," "Maturity and Prepayment
Considerations," and "Yield and Prepayment
Considerations" herein and "The Purchase
Agreements and the Trust Documents--Sale and
Assignment of the Contracts" in the
Prospectus.
Events of Default Under the So long as no Insurer Default has occurred
Indenture may Accelerate and is continuing and the Insurance Policies
Liquidation of the are in effect, the Insurer will have the
Contracts; Rights of Insurer sole right to declare an Event of Default
under the Indenture. The Noteholders will
not be able to declare an Event of Default
under the Indenture and cause an
acceleration of the Notes. After declaring
an Event of Default, the Insurer will remain
obligated to make the payments required
under the Insurance Policies. The Insurer,
upon declaring an Event of Default under the
Indenture, may elect to cause the
liquidation, in whole or in part, of the
Contracts, which will result in redemption,
in whole or in part, of the Securities.
Insurer decisions with respect to defaults
may have a significant impact on the
weighted average lives of the Securities.
See "The Notes--Rights of Insurer and
Noteholders; Indenture--Control of the
Insurer" herein.
Possible Effects of Insurer In the event that the Insurer defaults on
Default its obligations under the Insurance Policies
or the Insurance Policies are no longer in
effect, you may suffer additional decreases
in the market price of the Securities and
delays in payment or losses of principal and
interest caused by numerous circumstances
beyond the control of the Trust or the
Servicer. Important factors that may arise
following an Insurer Default include:
S-11
<PAGE>
Economic Factors
Changes in economic conditions may limit or
prevent the Servicer from collecting amounts
due under the Contracts. These adverse
economic developments may result in losses
on your investment due to other risks in the
portfolio including:
o payment defaults on Contracts;
o inability to realize value of
collateral which secures the
Contracts since the Trust may not
have first priority rights or any
rights to obtain the collateral;
and
o depreciation in the value of
collateral which secures the
Contracts.
See "Certain Legal Aspects of the Contracts"
in the Prospectus.
Assets of Trust are Limited
The Trust will rely solely on current
collections on the Contracts and amounts in
the Reserve Account to make required
payments to you, which may not be sufficient
to make all required payments.
The Trust is only required to repay your
principal to the extent that there are
sufficient funds in the Collection Account
to make payments of principal. Nonpayment of
principal to you will only become a default,
creating potential legal rights, after the
Final Scheduled Distribution Date which is
applicable to your class of Securities.
Therefore, you may have no current remedy or
any remedy at all in the event of nonpayment
of principal amounts on your investment.
Source of Funding for Reserve Account
Limited
The Reserve Account will initially be funded
by a loan from one or more financial
institutions. Any additional deposits to the
Reserve Account will generally be funded
from the Excess Collections. The Excess
Collections may not be sufficient to fund
the Reserve Account on any Distribution Date
up to the Specified Reserve Amount or to
replenish the Reserve Account after funds
are withdrawn to make payments on the
Securities. If payments to you exhaust the
Reserve Account and there are no Excess
Collections, you will receive payments
solely from receipts on the Contracts.
Excess Collections may decline for several
reasons, including, but not limited to, the
following:
o liquidation of Contracts may
reduce, or eliminate, the amount of
Excess Collections that would
otherwise have been available;
o any event or circumstance which
causes the Trust to receive less
than a full month of interest at
the Contract Rate will reduce the
amount of Excess Collections. For
example, prepayment in full or a
Relief Act Reduction of a Contract
may result in collection of less
than a full month of interest at
the Contract Rate;
o delinquencies on the Contracts will
reduce or eliminate Excess
Collections if the Servicer does
not make a Monthly Advance or if
the Servicer reimburses itself for
a Monthly Advance from collections
on other Contracts; and
o disproportionate prepayments of
Contracts with higher Contract
Rates.
S-12
<PAGE>
Subordination; Priority of Payment
Payments of principal and interest on the
Certificates will be subordinated in
priority to payments of principal and
interest on the Notes, as described herein.
Actions taken by the holders of the Notes
upon an Event of Default may increase losses
to holders of the Certificates. In addition,
if an Event of Default has occurred and the
Notes have been accelerated, payments of
principal and interest on the Certificates
will not be made until the Notes have been
paid in full.
Events of Default Under the Indenture May
Accelerate Liquidation
The Noteholders will have certain powers
over the Trust and its property, including
the power to declare an Event of Default and
to accelerate payment of the Securities. See
"The Notes--Redemption; Acceleration" and
"--Rights of Insurer and Noteholders;
Indenture" herein. The Certificateholders
will not have any rights to direct the Trust
with respect to any actions so long as the
Notes are outstanding. See "The
Certificates--Limited Rights" herein.
Geographic Concentration of Obligors
Lack of geographically diverse Obligors may
cause losses on the related Contracts to be
higher than they would be if the Obligors
were more geographically diverse. As of the
Cut-off Date, the following states have
concentrations, based on Obligors' mailing
addresses, of 5% or more of the Initial Pool
Balance:
State % of Initial Pool Balance
----- -------------------------
o California 16.06%
o Texas 12.10%
o Florida 7.31%
o Missouri 5.20%
Structure of Payments to Securityholders
Because Certificateholders are entitled to
receive certain distributions of principal
at the same time as the Noteholders,
Noteholders may suffer greater losses
following an Insurer Default than if no
principal were paid to Certificateholders
until all principal had been paid to the
Noteholders. In the event that the
Certificateholders receive any payments of
principal prior to an Insurer Default and to
the extent that losses to the Trust exceed
the then outstanding principal balance of
the Certificates, the Noteholders will
suffer losses of principal that otherwise
may have resulted in additional losses to
Certificateholders.
Year 2000 Institutions around the world are reviewing
and modifying their computer systems to
ensure they are Year 2000 compliant. The
issue, in general terms, is that many
existing computer systems and
microprocessors with date-based functions
(including those in non-information
technology equipment and systems) use only
two digits to identify a year in the date
field with the assumption that the first two
digits of the year are always "19."
Consequently, on January 1, 2000, computers
that are not Year 2000 compliant may read
the year as 1900. Systems that calculate,
compare or sort using the incorrect date may
malfunction.
S-13
<PAGE>
Because the Servicer, the Indenture Trustee,
the Owner Trustee and the Insurer are
dependent upon the proper functioning of
computer systems, failure of their systems
or vendor systems to be Year 2000 compliant
could have a material adverse effect on you.
Failure of this kind could, for example,
result in:
o problems with collecting or
processing payments on the
Contracts and payments to you;
o incomplete or inaccurate accounting
or reporting; and
o generation of erroneous results.
If these risks are not remedied, you may
experience delays in payment of principal
and interest on your Securities and the
Trust may need to replace the Servicer,
which may also cause losses on the Contracts
to increase.
In addition, the Servicer, the Indenture
Trustee and the Owner Trustee depend upon
the proper functioning of third party
computer and non-information technology
systems. CITSF has been communicating with
those parties with whom it has important
financial, supplier or operational
relationships to determine the extent to
which those parties are vulnerable to the
Year 2000 issue. As part of the process of
evaluating its options and attempting to
mitigate third party risks, CITSF is
collecting and analyzing information from
third parties.
If third parties with whom the Servicer, the
Indenture Trustee and the Owner Trustee
interact have material Year 2000 problems
that are not remedied, they could experience
serious problems, including the following:
o inability to obtain or exchange
information necessary to compute
amounts due from existing obligors
or payments due on the Securities;
o inability to access or effectively
use facilities;
o failure of equipment to function
properly; and
o disruption of important services on
which they depend, such as
telecommunications and other
utilities.
CITSF has implemented a Year 2000 project to
prepare its computer systems to be Year 2000
compliant. CITSF expects to complete
substantially all Year 2000 remediation and
testing by the end of March 1999. CITSF's
Year 2000 project may not be effective or
its estimates about the timing and cost of
completing its project may not be accurate.
Special Note Regarding Certain statements contained or incorporated
Forward-Looking in this Prospectus Supplement are
Statements forward-looking statements concerning
operations, economic performance and
financial condition of the Trust.
Forward-looking statements are included, for
example, in the discussions under the Risk
Factors headings:
o Prepayment of Contracts May Affect
Yield;
o Possible Effects of Insurer Default
-- Economic Factors; and
o Year 2000.
These statements involve risks and
uncertainties and actual results may differ
materially from those expressed or implied
in those statements.
S-14
<PAGE>
Risks Associated With Structure Certain features of the structure may pose
additional risks to you. Based on the
structure of this transaction,
Certificateholders will, in most
circumstances, receive their specified share
of principal collections on the Contracts
concurrently with the Noteholders. In
addition, Certificateholders will receive
payments of principal prior to the receipt
of payments of principal by certain classes
of the Notes. The weighted average life of
the Certificates will be shorter and the
weighted average life of the Notes will be
longer than if Certificateholders received
principal payments only after the
Noteholders have been paid in full. In
addition, based on the structure of this
transaction, on each Distribution Date, the
Noteholders (and after the Notes have been
paid in full the Certificateholders) may
receive an additional principal distribution
from Excess Collections, if any. As a result
of these additional principal distributions
from Excess Collections, if any, the
weighted average life of the Notes and
Certificates may be shorter than if
Noteholders and Certificateholders received
only current interest payments and payment
of principal solely on the basis of current
principal payments and losses on the
Contracts.
STRUCTURE OF THE TRANSACTION
The Issuer, CIT Marine Trust 1999-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 the Cut-off Date between the Seller and Chase
Manhattan Bank 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 $11,028,156
(the "Original Certificate Balance"). Certificates with an aggregate original
face amount of $128,156 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 and CIT Marine Trust 1996-A (the
"Selling Trust") pursuant to the Sale and Servicing Agreement.
The Servicer will service the Contracts held by the Trust and will receive
fees for such services. CITSF will be appointed as custodian on behalf of the
Trust, and will hold the original marine installment sale contract or promissory
note as well as the originals or copies of documents and instruments relating to
each Contract and evidencing the security interest in the Financed Boat securing
each Contract (the "Contract Files").
The Trust's principal offices are in Wilmington, Delaware in care of Chase
Manhattan Bank Delaware, as Owner Trustee, at the address listed in "--The Owner
Trustee" below.
S-15
<PAGE>
Capitalization of the Trust
The following table illustrates the expected capitalization of the Trust
as of the Statistical Cut-off Date, as if the issuance and sale of the Notes and
the Certificates offered hereby had taken place on such date:
Class A-1 ____% Asset-Backed Notes ......................... $325,000,000
Class A-2 ____% Asset-Backed Notes ......................... $179,000,000
Class A-3 ____% Asset-Backed Notes ......................... $117,000,000
Class A-4 ____% Asset-Backed Notes ......................... $103,134,000
____% Asset-Backed Certificates ............................ $ 11,028,156
------------
Total ...................................................... $735,162,156
============
The Owner Trustee
Chase Manhattan Bank Delaware is the Owner Trustee under the Trust
Agreement. Chase Manhattan Bank Delaware is a Delaware banking corporation. The
principal offices of Chase Manhattan Bank Delaware are located at 1201 Market
Street, Wilmington, Delaware 19801, Attn.: Corporate Trust Administration. The
Owner Trustee will perform limited administrative functions under the Trust
Agreement, including making distributions from the Certificate Distribution
Account. The Owner Trustee's liability in connection with the issuance and sale
of the Certificates and the Notes is limited solely to the express obligations
of the Owner Trustee as set forth in the Trust Agreement and the Sale and
Servicing Agreement. The Owner Trustee may appoint a co-trustee to act as
co-trustee pursuant to a co-trustee agreement with the Owner Trustee.
The Owner Trustee may resign at any time, in which event the Servicer will
be obligated to appoint a successor trustee. The Servicer may also remove the
Owner Trustee if the Owner Trustee ceases to be eligible to continue as Owner
Trustee under the Sale and Servicing Agreement or if the Owner Trustee becomes
insolvent. In such circumstances, the Servicer will be obligated to appoint a
successor trustee. Any resignation or removal of the Owner Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
The Sale and Servicing Agreement will provide that the Servicer will pay
the Owner Trustee's fees. The Sale and Servicing Agreement will further provide
that the Owner Trustee will be entitled to indemnification by the Servicer for,
and will be held harmless against, any loss, liability or expense incurred by
the Owner Trustee not resulting from its own willful misfeasance, bad faith or
negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Sale and Servicing Agreement).
THE TRUST PROPERTY
The Notes are an obligation of the Trust and will be secured by assets of
the Trust (other than the Certificate Distribution Account). Each Certificate
represents a fractional undivided interest in the Trust. The Trust property will
include, among other things:
(i) a pool (the "Contract Pool") of marine installment sale contracts
and direct loans (the "Contracts") secured by the new and used
boats, boat motors and boat trailers each of which are financed
thereby and some of which may also be secured by U.S. preferred ship
mortgages (the "Financed Boats");
(ii) all monies received under the Contracts on and after the Cut-off
Date, exclusive of interest due and payable prior to the Cut-off
Date;
(iii) an assignment of the security interests in the Financed Boats and
any accessions thereto;
(iv) the Collection Account, the Certificate Distribution Account and the
Note Distribution Account (including all investments in such
accounts and all income from the funds therein and all proceeds
thereof);
(v) all monies on deposit in the Reserve Account (other than net
investment earnings on the funds on deposit therein related to the
Loan);
(vi) the right to proceeds from physical damage, credit life and
disability insurance policies, if any, which insure individual
Financed Boats or the related Obligors;
S-16
<PAGE>
(vii) the rights of the Trust under the Purchase Agreement and the Sale
and Servicing Agreement;
(viii) the rights of the Trust under the Insurance Policies; and
(ix) any and all proceeds of the foregoing.
THE CONTRACT POOL
General
CITSF will sell certain contracts to the Company pursuant to a Purchase
Agreement to be dated as of the Cut-off Date (the "Purchase Agreement"). The
Company and the Selling Trust will sell the Contracts to the Trust pursuant to
the Sale and Servicing Agreement to be dated as of the Cut-off Date (the "Sale
and Servicing Agreement"), among the Seller, the Selling Trust, the Servicer and
the Trust. See "The Purchase Agreements and the Trust Documents--Sale and
Assignment of the Contracts" in the Prospectus.
CITSF or one of its affiliates 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).
The Contracts which the Selling Trust will sell to the Trust were
originated or purchased by CITSF (or its affiliates). CITSF then sold the
Contracts to an affiliate of the Company which in turn sold them to the Selling
Trust in 1996 and 1997. The Selling Trust will make no representations with
respect to its Contracts, and will have no obligations to repurchase such
Contracts and no obligations with respect to the Securities. However, CITSF's
representations and warranties (and the remedies against CITSF for breach of
these representations and warranties) will cover all of the Contracts including
those sold by the Selling Trust. See "The Purchase Agreements and the Trust
Documents--Sale and Assignment of the Contracts" in the Prospectus.
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 servicing system (which,
typically, represents the date on which CITSF or one of its affiliates funds the
purchase of such Contracts from Dealers) between September 1994 and January
1999. All Contracts are marine installment contracts or direct loans, each
secured by a boat and some of which are secured by U.S. preferred ship
mortgages. Such Contracts, secured by boats, are originated by a Dealer and
purchased by CITSF or one of its affiliates, 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 $735,162,156. 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 marine installment
sale contracts and direct loans based on several criteria, including the
following:
(i) each Contract was originated in the United States of America;
(ii) each Contract has a Contract Rate not less than 7.50%;
(iii) each Contract provides for level monthly payments which include
interest at the Contract Rate and, if paid in accordance with its
schedule, fully amortizes the amount financed over an original term
of no greater than 245 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 59
days;
S-17
<PAGE>
(v) no Financed Boat 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;
(vii) as of the Cut-off Date each Contract has a remaining principal
balance of not less than $1,000 and not more than $800,000; and
(viii)as of the Cut-off Date none of the Paid Ahead Simple Interest
Contracts in the Contract Pool were paid-ahead more than twelve
scheduled monthly payments.
As of the Cut-off Date, the Contract Pool had the following
characteristics:
Range of Contract Rates 7.50% to 21.00%
Weighted Average Contract Rate 9.50%
Range of Original Principal Balances $1,931 to $800,000
Average Original Principal Balance $34,164
Range of Remaining Principal Balances $1,073 to $785,708
Average Remaining Principal Balance $31,914
Range of Original Terms to Maturity 18 to 245 months
Weighted Average Original Term to Maturity 184 months
Range of Remaining Terms to Maturity 12 to 240 months
Weighted Average Remaining Term to Maturity 168 months
Percentage of New/Used Boats at Time of
Origination (by number of Contracts) 74.85%/25.15%
Percentage of New/Used Boats at Time of
Origination (by principal balance) 67.16%/32.84%
S-18
<PAGE>
Set forth below is a description of certain characteristics of the
Contracts.
Geographical Distribution of Contracts(1)
<TABLE>
<CAPTION>
% of Contract
% of Contract Aggregate Principal Pool by Principal
Number of Pool by Number of Balance Balance
Contracts As of Contracts As of Outstanding As of Outstanding As of
State the Cut-off Date the Cut-off Date the Cut-off Date the Cut-off Date
----- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Alabama ...... 89 0.39% $ 2,667,176 0.36%
Alaska ....... 11 0.05 1,229,093 0.17
Arizona ...... 402 1.75 16,635,498 2.26
Arkansas ..... 1,079 4.68 13,537,649 1.84
California ... 2,699 11.72 118,084,204 16.06
Colorado ..... 536 2.33 10,758,773 1.46
Connecticut .. 424 1.84 17,280,646 2.35
Delaware ..... 85 0.37 3,904,338 0.53
District of
Columbia ... 19 0.08 1,048,658 0.14
Florida ...... 1,295 5.62 53,712,248 7.31
Georgia ...... 489 2.12 14,515,382 1.97
Hawaii ....... 5 0.02 610,058 0.08
Idaho ........ 40 0.17 772,772 0.11
Illinois ..... 985 4.28 32,977,650 4.49
Indiana ...... 147 0.64 4,581,592 0.62
Iowa ......... 81 0.35 2,694,505 0.37
Kansas ....... 731 3.17 15,740,307 2.14
Kentucky ..... 83 0.36 2,727,382 0.37
Louisiana .... 77 0.33 3,752,731 0.51
Maine ........ 35 0.15 962,324 0.13
Maryland ..... 714 3.10 25,370,904 3.45
Massachusetts 751 3.26 26,449,514 3.60
Michigan ..... 192 0.83 5,503,770 0.75
Minnesota .... 282 1.22 7,643,590 1.04
Mississippi .. 62 0.27 1,480,391 0.20
Missouri ..... 1,597 6.93 38,249,740 5.20
Montana ...... 81 0.35 1,185,116 0.16
Nebraska ..... 48 0.21 1,032,821 0.14
Nevada ....... 379 1.65 12,550,989 1.71
New Hampshire 131 0.57 4,642,605 0.63
New Jersey ... 777 3.37 31,197,292 4.24
New Mexico ... 99 0.43 2,826,080 0.38
New York ..... 935 4.06 35,460,094 4.82
North Carolina 268 1.16 6,314,448 0.86
North Dakota . 5 0.02 121,715 0.02
Ohio ......... 194 0.84 7,628,487 1.04
Oklahoma ..... 680 2.95 14,934,337 2.03
Oregon ....... 269 1.17 12,088,888 1.64
Pennsylvania . 552 2.40 21,342,452 2.90
Rhode Island . 94 0.41 3,880,643 0.53
South Carolina 128 0.56 4,766,518 0.65
South Dakota . 11 0.05 223,477 0.03
Tennessee .... 183 0.79 5,815,701 0.79
Texas ........ 3,849 16.71 88,981,440 12.10
Utah ......... 168 0.73 5,433,089 0.74
Vermont ...... 16 0.07 276,718 0.04
Virginia ..... 485 2.11 17,501,360 2.38
Washington ... 554 2.40 25,362,788 3.45
West Virginia 29 0.13 653,332 0.09
Wisconsin .... 171 0.74 7,634,775 1.04
Wyoming ...... 20 0.09 416,096 0.06
------ ------ ------------ ------
Total 23,036 100.00%(2) $735,162,156 100.00%(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-19
<PAGE>
Distribution by Original Principal Balance
<TABLE>
<CAPTION>
% of Contract
% of Contract Aggregate Principal Pool by Principal
Number of Pool by Number of Balance Balance
Range of Original Contracts As of Contracts As of Outstanding As of Outstanding As of
Principal Balances the Cut-off Date the Cut-off Date the Cut-off Date the Cut-off Date
- ------------------ ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$5,000.00 or Less 386 1.68% $ 1,057,157 0.14%
$5,000.01 - $10,000.00 2,911 12.64 17,615,881 2.40
$10,000.01 - $15,000.00 5,115 22.20 54,833,532 7.46
$15,000.01 - $20,000.00 4,060 17.62 62,774,014 8.54
$20,000.01 - $30,000.00 4,524 19.64 102,228,836 13.91
$30,000.01 - $40,000.00 1,792 7.78 57,929,751 7.88
$40,000.01 - $50,000.00 880 3.82 37,289,697 5.07
$50,000.01 - $60,000.00 574 2.49 29,796,109 4.05
$60,000.01 - $70,000.00 383 1.66 23,367,607 3.18
$70,000.01 - $80,000.00 305 1.32 21,732,668 2.96
$80,000.01 - $90,000.00 231 1.00 18,694,091 2.54
$90,000.01 - $100,000.00 197 0.86 18,095,155 2.46
$100,000.01 - $125,000.00 484 2.10 52,438,717 7.13
$125,000.01 - $150,000.00 358 1.55 47,703,738 6.49
$150,000.01 - $175,000.00 257 1.12 40,099,467 5.45
$175,000.01 - $200,000.00 174 0.76 31,875,885 4.34
$200,000.01 - $250,000.00 159 0.69 34,398,403 4.68
$250,000.01 - $300,000.00 97 0.42 25,648,496 3.49
$300,000.01 - $400,000.00 94 0.41 30,956,338 4.21
$400,000.01 - $500,000.00 36 0.16 15,483,196 2.11
$500,000.01 - $600,000.00 12 0.05 6,335,929 0.86
$600,000.01 - $800,000.00 7 0.03 4,807,489 0.65
------ ------ ------------ ------
Total 23,036 100.00%(1) $735,162,156 100.00%(1)
====== ====== ============ ======
</TABLE>
- ----------
(1) May not equal 100% due to rounding.
Distribution by Cut-off Date Principal Balance
<TABLE>
<CAPTION>
% of Contract
% of Contract Aggregate Principal Pool by Principal
Number of Pool by Number of Balance Balance
Range of Cut-off Contracts As of Contracts As of Outstanding As of Outstanding As of
Date Principal Balances the Cut-off Date the Cut-off Date the Cut-off Date the Cut-off Date
- ----------------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$5,000.00 or Less 1,242 5.39% $ 4,369,738 0.59%
$5,000.01 - $10,000.00 3,847 16.70 29,707,276 4.04
$10,000.01 - $15,000.00 4,968 21.57 61,665,910 8.39
$15,000.01 - $20,000.00 3,475 15.09 59,964,501 8.16
$20,000.01 - $30,000.00 3,933 17.07 96,002,685 13.06
$30,000.01 - $40,000.00 1,570 6.82 53,994,217 7.34
$40,000.01 - $50,000.00 807 3.50 36,159,711 4.92
$50,000.01 - $60,000.00 549 2.38 30,080,061 4.09
$60,000.01 - $70,000.00 354 1.54 22,940,309 3.12
$70,000.01 - $80,000.00 280 1.22 20,908,737 2.84
$80,000.01 - $90,000.00 198 0.86 16,771,622 2.28
$90,000.01 - $100,000.00 223 0.97 21,287,951 2.90
$100,000.01 - $125,000.00 456 1.98 51,234,572 6.97
$125,000.01 - $150,000.00 357 1.55 49,016,635 6.67
$150,000.01 - $175,000.00 229 0.99 36,794,840 5.00
$175,000.01 - $200,000.00 178 0.77 33,439,828 4.55
$200,000.01 - $250,000.00 147 0.64 33,041,488 4.49
$250,000.01 - $300,000.00 91 0.40 24,931,792 3.39
$300,000.01 - $400,000.00 84 0.36 28,807,584 3.92
$400,000.01 - $500,000.00 31 0.13 13,699,199 1.86
$500,000.01 - $600,000.00 10 0.04 5,536,011 0.75
$600,000.01 - $800,000.00 7 0.03 4,807,489 0.65
------ ------ ------------ ------
Total 23,036 100.00%(1) $735,162,156 100.00%(1)
====== ====== ============ ======
</TABLE>
- ----------
(1) May not equal 100% due to rounding.
S-20
<PAGE>
Distribution by Original Term to Maturity
<TABLE>
<CAPTION>
% of Contract
Range of % of Contract Aggregate Principal Pool by Principal
Original Terms Number of Pool by Number of Balance Balance
to Maturity Contracts As of Contracts As of Outstanding As of Outstanding As of
(in Months) the Cut-off Date the Cut-off Date the Cut-off Date the Cut-off Date
- -------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
18 - 24 21 0.09% $ 53,373 0.01%
25 - 36 200 0.87 764,481 0.10
37 - 48 368 1.60 1,714,850 0.23
49 - 60 1,421 6.17 10,111,013 1.38
61 - 72 670 2.91 5,671,552 0.77
73 - 84 1,136 4.93 11,658,495 1.59
85 - 96 1,421 6.17 13,397,618 1.82
97 - 108 61 0.26 909,142 0.12
109 - 120 5,681 24.66 82,313,858 11.20
121 - 132 93 0.40 1,567,335 0.21
133 - 144 4,574 19.86 88,066,562 11.98
145 - 156 91 0.40 2,007,743 0.27
157 - 168 9 0.04 517,928 0.07
169 - 180 5,547 24.08 248,418,402 33.79
181 - 192 160 0.69 6,595,517 0.90
193 - 204 7 0.03 614,654 0.08
205 - 216 1 0.00 126,117 0.02
217 - 228 3 0.01 484,176 0.07
229 - 240 1,530 6.64 253,676,926 34.51
241 - 245 42 0.18 6,492,414 0.88
------ ------ ------------ ------
Total 23,036 100.00%(1) $735,162,156 100.00%(1)
====== ====== ============ ======
</TABLE>
- ----------
(1) May not equal 100% due to rounding.
Distribution by Remaining Term to Maturity
<TABLE>
<CAPTION>
% of Contract
Range of % of Contract Aggregate Principal Pool by Principal
Remaining Terms Number of Pool by Number of Balance Balance
to Maturity Contracts As of Contracts As of Outstanding As of Outstanding As of
(in Months) the Cut-off Date the Cut-off Date the Cut-off Date the Cut-off Date
- -------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
12 - 24 434 1.89% $ 1,515,060 0.21%
25 - 36 644 2.80 3,322,203 0.45
37 - 48 1,065 4.62 7,718,068 1.05
49 - 60 971 4.22 8,851,426 1.20
61 - 72 944 4.10 9,598,516 1.31
73 - 84 1,429 6.20 15,747,700 2.14
85 - 96 1,779 7.72 22,645,495 3.08
97 - 108 2,895 12.57 43,394,503 5.90
109 - 120 2,328 10.11 39,348,420 5.35
121 - 132 1,862 8.08 37,724,249 5.13
133 - 144 1,821 7.91 45,823,525 6.23
145 - 156 930 4.04 39,443,905 5.37
157 - 168 2,345 10.18 101,202,186 13.77
169 - 180 2,006 8.71 97,180,196 13.22
181 - 192 11 0.05 1,333,162 0.18
193 - 204 60 0.26 6,483,355 0.88
205 - 216 170 0.74 25,210,127 3.43
217 - 228 532 2.31 90,711,738 12.34
229 - 240 810 3.52 137,908,323 18.76
------ ------ ------------ ------
Total 23,036 100.00%(1) $735,162,156 100.00%(1)
====== ====== ============ ======
</TABLE>
- ----------
(1) May not equal 100% due to rounding.
S-21
<PAGE>
Distribution by Age of Contracts
<TABLE>
<CAPTION>
% of Contract
% of Contract Aggregate Principal Pool by Principal
Age of Number of Pool by Number of Balance Balance
Contracts Contracts As of Contracts As of Outstanding As of Outstanding As of
(in Months) the Cut-off Date the Cut-off Date the Cut-off Date the Cut-off Date
----------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
5 or Less 936 4.06% $ 80,587,057 10.96%
6 - 11 5,862 25.45 220,345,000 29.97
12 - 18 4,742 20.59 169,222,469 23.02
19 - 24 5,209 22.61 125,187,302 17.03
25 - 30 1,946 8.45 48,481,628 6.59
31 - 36 2,521 10.94 53,127,286 7.23
37 - 42 847 3.68 19,902,216 2.71
43 - 48 805 3.49 14,310,035 1.95
49 - 54 163 0.71 3,971,326 0.54
55 - 60 5 0.02 27,837 0.00
------ ------ ------------ ------
Total 23,036 100.00%(1) $735,162,156 100.00%(1)
====== ====== ============ ======
</TABLE>
- ----------
(1) May not equal 100% due to rounding.
Distribution by Contract Rate
<TABLE>
<CAPTION>
% of Contract
% of Contract Aggregate Principal Pool by Principal
Number of Pool by Number of Balance Balance
Range of Contracts As of Contracts As of Outstanding As of Outstanding As of
Contracts the Cut-off Date the Cut-off Date the Cut-off Date the Cut-off Date
----------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
7.50 - 7.99% 588 2.55% $ 90,603,494 12.32%
8.00 - 8.99% 3,643 15.81 244,592,958 33.27
9.00 - 9.99% 5,986 25.99 191,640,293 26.07
10.00 - 10.99% 6,244 27.11 118,993,376 16.19
11.00 - 11.99% 3,272 14.20 52,317,565 7.12
12.00 - 12.99% 1,884 8.18 23,485,335 3.19
13.00 - 13.99% 864 3.75 8,899,330 1.21
14.00 - 14.99% 343 1.49 3,013,917 0.41
15.00 - 15.99% 128 0.56 887,916 0.12
16.00 - 16.99% 25 0.11 218,798 0.03
17.00 - 17.99% 6 0.03 98,124 0.01
18.00 - 18.99% 15 0.07 148,505 0.02
19.00 - 19.99% 33 0.14 235,404 0.03
20.00 - 21.00% 5 0.02 27,141 0.00
------ ------ ------------ ------
Total 23,036 100.00%(1) $735,162,156 100.00%(1)
====== ====== ============ ======
</TABLE>
- ----------
(1) May not equal 100% due to rounding.
Distribution by Year Originated
<TABLE>
<CAPTION>
% of Contract
% of Contract Aggregate Principal Pool by Principal
Number of Pool by Number of Balance Balance
Year Contracts As of Contracts As of Outstanding As of Outstanding As of
Originated(2) the Cut-off Date the Cut-off Date the Cut-off Date the Cut-off Date
- ------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
1994 123 0.53% $ 3,684,755 0.50%
1995 1,515 6.58 31,483,055 4.28
1996 4,305 18.69 98,775,718 13.44
1997 9,210 39.98 267,905,913 36.44
1998 7,629 33.12 319,471,737 43.46
1999 254 1.10 13,840,978 1.88
------ ------ ------------ ------
Total 23,036 100.00%(1) $735,162,156 100.00%(1)
====== ====== ============ ======
</TABLE>
- ----------
(1) May not equal 100% due to rounding.
(2) Based on the date the Contracts were first entered onto CITSF's servicing
system.
S-22
<PAGE>
MATURITY AND PREPAYMENT CONSIDERATIONS
Each of the Contracts is 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. 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 Pool Balance is 10% or less of the
Initial Pool Balance, (ii) the sale by 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) 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 and acceleration of the Notes. See "The Purchase Agreements and
the Trust Documents--Termination" herein and in the Prospectus.
The rate of principal payments (including prepayments) on pools of marine
installment sale contracts and direct loans may be influenced by a variety of
economic, geographic, social and other factors. In general, if prevailing
interest rates were to fall significantly below the Contract Rates on the
Contracts, the Contracts could be subject to higher prepayment rates than if
prevailing interest rates were to remain at or above the Contract Rates on the
Contracts. Conversely, if prevailing interest rates were to rise significantly,
the rate of prepayments on the Contracts would generally be expected to
decrease. No assurance can be given as to the influence of these factors on the
actual prepayment experience of the Contracts.
CITSF is not aware of any publicly available industry statistics that set
forth principal prepayment experience for marine installment sale contracts and
direct loans similar to the Contracts over an extended period of time, and its
experience with respect to marine contracts included in its portfolio is
insufficient to draw any specific conclusions with respect to the expected
prepayment rates on the Contracts.
Certain Payment Data
Certain statistical information relating to the payment behavior of marine
installment sale contracts and direct loans originated by CITSF directly or
through Dealers is set forth below. In evaluating the information contained in
this table and its relationship to the expected prepayment behavior of the
Contracts, you should consider that the information set forth below reflects,
with respect to contracts originated in a given year, all principal payments
made in respect of such contracts in a given year, including regularly scheduled
payments, liquidation or insurance proceeds applied to principal of such
contracts, as well as principal prepayments made by or on behalf of the obligors
on the contracts in advance of the date on which such principal payment was
scheduled to be made. The information set forth below also reflects charge-offs
of the contracts during a given year. In addition, the Company has not performed
any statistical analysis to determine whether the contracts to which the table
relates constitute a statistically significant sample of marine installment sale
contracts and direct loans for purposes of determining expected payment
behavior. Payment rates on the contracts are influenced by a number of economic,
social and other factors. Furthermore, the prepayment experience of the
Contracts may not exhibit payment behavior similar to the behavior summarized in
the following table. In addition to the foregoing, you should consider that the
table set forth below is limited to the period covered therein and thus cannot
reflect the effects, if any, of aging on the payment behavior of marine
installment sale contracts and direct loans beyond such periods. As a result,
you should not draw any conclusions regarding the prepayment rate of the
Contracts from the information presented in the table below. You must make your
own assumptions regarding the prepayment rate of the Contracts.
S-23
<PAGE>
The following table sets forth, with respect to all of the marine
installment sale contracts and direct loans originated by CITSF directly or
through Dealers (excluding contracts purchased in bulk) in each period since
1994, the aggregate initial principal balance of the contracts originated in
such period, the approximate aggregate principal balance outstanding on the
contracts originated in such period as of the last day of such period and the
approximate aggregate principal balance outstanding on the contracts originated
in such period as of the end of each subsequent period.
Information Regarding Principal Reduction on Marine
Installment Sale Contracts and Direct Loans Originated by CITSF
(Dollars in Millions)
Nine Months
Ended
September 30,
1994 1995 1996(3) 1997(3) 1998(3)
---- ---- ------- ------- -------------
Approximate Volume(1) ..... $42.7 $106.3 $223.0 $432.5 $429.6
Approximate Aggregate
Principal Balance(2):
December 31, 1994 ..... 38.6
December 31, 1995 ..... 31.5 96.6
December 31, 1996 ..... 24.7 77.8 206.8
December 31, 1997 ..... 18.9 59.8 165.8 403.8
September 30, 1998 .... 13.9 44.8 131.2 338.2 409.4
- ----------
(1) Volume represents aggregate initial principal balance of each contract
originated in a particular year or nine-month period.
(2) Approximate aggregate principal balance as of any date represents the
approximate aggregate principal balance outstanding at the end of the
indicated year or nine-month period on each contract originated in a
particular year.
(3) Includes contracts sold by CITSF in a previous securitization 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" herein and 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" herein and in the Prospectus.
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.
S-24
<PAGE>
Paid-Ahead Simple Interest Contracts will affect the weighted average life
of the Securities. The distribution of the paid-ahead amount on the Distribution
Date following the Due Period in which such amount was received will generally
shorten the weighted average life of the Securities. However, depending on the
length of time during which a Paid-Ahead Simple Interest Contract is not
amortizing as described above, the weighted average life of the Securities may
be extended. In addition, to the extent the Servicer makes Monthly Advances with
respect to a Paid-Ahead Simple Interest Contract which subsequently goes into
default, because Liquidation Proceeds with respect to such Contract will be
applied first to reimburse the Servicer for such Monthly Advances, the loss with
respect to such Contract may be larger than would have been the case had such
Monthly Advances not been made.
As of the Cut-off Date, approximately 17.62% of the number of Contracts in
the Contract Pool were Paid-Ahead Simple Interest Contracts, with at least one,
but not more than twelve, paid-ahead scheduled monthly payments. CITSF's
portfolio of marine installment sale contracts and direct loans has historically
included contracts which have been paid ahead by one or more scheduled monthly
payments. There can be no assurance as to the number of Contracts which may
become Paid-Ahead Simple Interest Contracts or the number or the principal
amount of the scheduled payments which may be paid ahead.
Weighted Average Life of the Securities
Prepayments on marine installment sale contracts and direct loans can be
measured relative to a prepayment model. The model used in this Prospectus
Supplement is the prepayment assumption (the "Prepayment Assumption") which
represents an assumed rate of prepayment each month relative to the then
outstanding principal balance of a pool of marine contracts, for the life of
such contracts. A 100% Prepayment Assumption assumes prepayment rates of 0.25%
per annum of the then outstanding principal balance of the Contracts in the
first month of the life of the contracts and an additional 0.25% per annum in
each month thereafter until the twenty-fourth month (for example, 0.50% in the
second month). Beginning in the twenty-fourth month and in each month thereafter
during the life of the contracts, a 100% Prepayment Assumption assumes a
constant prepayment rate of 6% per annum each month. As used in each of the
Prepayment Tables below, 0% Prepayment Assumption assumes prepayment rates equal
to 0% of the Prepayment Assumption, i.e., no prepayments. Correspondingly, 100%
of the Prepayment Assumption assumes prepayment rates equal to 100% of the
Prepayment Assumption, and so forth. The Prepayment Assumption does not purport
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of marine 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 "Percentage of Initial Note Principal Balance at
Various Percentages of the Prepayment Assumption" and "Percentage of Initial
Certificate Balance at Various Percentages of the Prepayment Assumption" (each a
"Prepayment Table") have been prepared on the basis of certain characteristics
of the Contracts. Each Prepayment Table was prepared assuming that (i) the
Contracts prepay in full at the specified percentage of the Prepayment
Assumption, 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 balance in
the Reserve Account on each Distribution Date is equal to the Specified Reserve
Amount for the related Due Period, (v) the Closing Date occurs on February 23,
1999 and (vi) 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 Prepayment Tables indicate the projected weighted average
life of each class of the Notes and the Certificates and set forth the
percentage of the initial principal amount of each class of the Notes and the
percentage of the Original Certificate Balance that is projected to be
outstanding after each of the Distribution Dates shown at various Prepayment
Assumption percentages.
S-25
<PAGE>
The Prepayment Tables also assume that the Contracts have been aggregated
into six 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 Contract Rate, weighted average original term to
maturity, weighted average remaining term to maturity and weighted average
seasoning 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 Weighted
Average Average Weighted
Aggregate Weighted Original Term Remaining Term Average
Principal Average to Maturity to Maturity Seasoning
Balance Contract Rate (Months) (Months) (Months)
--------- ------------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Pool 1 ........ $ 95,742,923.27 11.011% 108 86 22
Pool 2 ........ $155,967,186.09 10.232% 149 131 18
Pool 3 ........ $120,233,988.91 9.671% 176 159 17
Pool 4 ........ $133,143,191.41 8.657% 204 188 16
Pool 5 ........ $119,251,303.59 8.388% 230 217 13
Pool 6 ........ $110,823,562.42 8.388% 233 220 13
</TABLE>
The information included in the following tables 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 Contracts to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The actual characteristics and performance of the
Contracts will differ from the assumptions used in constructing the Prepayment
Tables. 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 the Prepayment Assumption until maturity or that
all of the Contracts will prepay at the same level of the Prepayment Assumption.
Moreover, the diverse terms of Contracts within each of the hypothetical pools
could produce slower or faster principal distributions than indicated in each
Prepayment Table at the various constant percentages of the Prepayment
Assumption 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 each class of the Notes and the Certificates.
S-26
<PAGE>
Percentage of Initial Note Principal Balance at Various Percentages
of the Prepayment Assumption (1)
Class A-1
---------
<TABLE>
<CAPTION>
Distribution Date 0% 200% 250% 300% 350% 400% 450% 500%
- ----------------- -- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial
Percentage ..... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/00 .......... 87.43% 64.33% 58.55% 52.77% 46.98% 41.19% 35.42% 29.65%
2/15/01 .......... 76.68% 33.03% 22.98% 13.24% 3.84% 0.00% 0.00% 0.00%
2/15/02 .......... 64.82% 5.84% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/03 .......... 51.74% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/04 .......... 37.32% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/05 .......... 21.48% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/06 .......... 3.98% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/07 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/08 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/09 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/10 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/11 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/12 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/13 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/14 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/15 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------
Weighted Average
Life (years)(2): 3.94 1.52 1.29 1.13 1.00 0.89 0.80 0.73
</TABLE>
Class A-2
---------
<TABLE>
<CAPTION>
Distribution Date 0% 200% 250% 300% 350% 400% 450% 500%
- ----------------- -- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/00 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/01 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 90.47% 74.60% 59.30%
2/15/02 .......... 100.00% 100.00% 87.85% 66.57% 46.74% 28.27% 11.18% 0.00%
2/15/03 .......... 100.00% 67.59% 42.89% 20.58% 0.53% 0.00% 0.00% 0.00%
2/15/04 .......... 100.00% 30.16% 5.45% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/05 .......... 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/06 .......... 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/07 .......... 81.44% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/08 .......... 55.04% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/09 .......... 26.04% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/10 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/11 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/12 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/13 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/14 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/15 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------
Weighted Average
Life (years)(2): 9.15 4.51 3.89 3.40 3.00 2.67 2.40 2.17
</TABLE>
S-27
<PAGE>
Class A-3
---------
<TABLE>
<CAPTION>
Distribution Date 0% 200% 250% 300% 350% 400% 450% 500%
- ----------------- -- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/00 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/01 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/02 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 92.90%
2/15/03 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 73.30% 48.83% 27.05%
2/15/04 .......... 100.00% 100.00% 100.00% 75.38% 46.81% 22.13% 1.03% 0.00%
2/15/05 .......... 100.00% 96.35% 60.76% 30.80% 5.76% 0.00% 0.00% 0.00%
2/15/06 .......... 100.00% 53.13% 21.37% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/07 .......... 100.00% 20.78% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/08 .......... 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/09 .......... 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/10 .......... 92.78% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/11 .......... 60.40% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/12 .......... 25.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/13 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/14 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/15 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------
Weighted Average
Life (years)(2): 12.31 7.20 6.33 5.61 5.00 4.49 4.05 3.67
</TABLE>
Class A-4
---------
<TABLE>
<CAPTION>
Distribution Date 0% 200% 250% 300% 350% 400% 450% 500%
- ----------------- -- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/00 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/01 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/02 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/03 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/04 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 80.71%
2/15/05 .......... 100.00% 100.00% 100.00% 100.00% 100.00% 82.88% 63.46% 0.00%
2/15/06 .......... 100.00% 100.00% 100.00% 94.94% 71.32% 0.00% 0.00% 0.00%
2/15/07 .......... 100.00% 100.00% 91.74% 66.75% 0.00% 0.00% 0.00% 0.00%
2/15/08 .......... 100.00% 92.88% 65.72% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/09 .......... 100.00% 66.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/10 .......... 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/11 .......... 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/12 .......... 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/13 .......... 96.45% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/14 .......... 65.81% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/15 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------
Weighted Average
Life (years)(2): 14.96 9.94 8.92 8.00 7.14 6.48 5.91 5.36
</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 Company has prepared the foregoing Prepayment Tables 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). Remember these assumptions when you
review the Prepayment Tables.
S-28
<PAGE>
Percentage of Original Certificate Balance at Various Percentages
of the Prepayment Assumption (1)
<TABLE>
<CAPTION>
Distribution Date 0% 200% 250% 300% 350% 400% 450% 500%
- ----------------- -- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2/15/00 .......... 97.10% 90.22% 88.50% 86.78% 85.06% 83.34% 80.87% 78.27%
2/15/01 .......... 93.90% 79.79% 75.35% 71.19% 66.91% 63.17% 58.70% 54.90%
2/15/02 .......... 90.37% 67.59% 62.04% 56.98% 52.02% 47.79% 43.02% 39.09%
2/15/03 .......... 86.48% 56.95% 50.92% 45.61% 40.60% 36.49% 31.99% 28.46%
2/15/04 .......... 81.62% 47.70% 41.67% 36.55% 31.88% 28.22% 24.27% 21.34%
2/15/05 .......... 74.51% 39.66% 33.98% 29.35% 25.24% 22.21% 18.90% 0.00%
2/15/06 .......... 66.66% 32.67% 27.62% 23.65% 20.23% 0.00% 0.00% 0.00%
2/15/07 .......... 60.28% 27.45% 22.99% 19.64% 0.00% 0.00% 0.00% 0.00%
2/15/08 .......... 53.76% 23.08% 19.28% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/09 .......... 46.59% 19.30% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/10 .......... 38.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/11 .......... 33.76% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/12 .......... 28.04% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/13 .......... 23.49% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/14 .......... 19.13% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2/15/15 .......... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------
Weighted Average
Life (years)(2): 9.41 5.30 4.68 4.17 3.70 3.35 3.01 2.73
</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 Company has prepared the foregoing Prepayment Table 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 of the Contracts). Remember these
assumptions when you review the Prepayment Table.
YIELD AND PREPAYMENT CONSIDERATIONS
Thirty days of 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 one-twelfth of the product of the applicable Interest Rate and
the outstanding principal amount of each class of the Notes as of the preceding
Distribution Date (after giving effect to any distributions of principal,
including the Additional Principal Distribution Amount, to be made on such
Distribution Date). See "The Notes--Payments of Principal." Thirty days of
interest will be passed through to Certificateholders on each Distribution Date
(except the first Distribution Date) to the extent of the remaining Available
Amount and the remaining Available Reserve Amount, in an amount equal to
one-twelfth of the product of the Pass-Through Rate and the Certificate Balance
immediately preceding such Distribution Date. The "Certificate Balance" means
the Original Certificate Balance reduced by all distributions allocable to
principal actually made to Certificateholders. See "The
Certificates--Distributions of Principal."
Generally, the excess of the amount of interest paid at the Contract Rate
over such Contract's allocable share of the interest due on the Securities, the
Servicer Payment and accrued and unpaid fees of the Insurer would be available
to pay the Additional Principal Distribution Amount 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, nor will the Servicer make Monthly Advances for any Payment Shortfall
which results from a prepayment in full of a Contract or a Relief Act Reduction.
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 pay
the Additional Principal Distribution Amount and to fund the Reserve Account.
S-29
<PAGE>
If the remaining Available Amount and the remaining Available Reserve
Amount is insufficient to pay interest on the Securities, the Note Insurance
Policy will be the source of payment for the Noteholders and the Certificate
Insurance Policy will be the source of payment for the Certificateholders.
POOL FACTORS
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.
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.
On each Distribution Date, the Securityholders will receive monthly
reports concerning the payments received on the Contracts, the Pool Balance, the
Note Pool Factor, the Certificate Pool Factor and various other items of
information. Securityholders of record (which in the case of the Notes in most
cases will be Cede & Co.) during any calendar year will be furnished information
for tax reporting purposes not later than the latest date permitted by law.
Certificateholders and Note Owners may receive such reports, upon written
request, together with a certification that they are Certificateholders or Note
Owners, as the case may be, and payment of any expenses associated with the
distribution of such reports, from the Trustee (at the address listed in
"Structure of the Transaction--The Owner Trustee") and the Indenture Trustee at
311 West Monroe Street, Chicago, Illinois 60606, Attention: Indenture Trust
Administration. See "Certain Information Regarding the Securities--Statements to
Securityholders" in the Prospectus.
USE OF PROCEEDS
The Company will sell approximately $438,114,527 of Contracts to the Trust
and the Selling Trust will sell the remaining $297,047,629 of 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 aggregate cash purchase price paid by the Trust to the
Company and the Selling Trust 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 by the Company for the Contracts it sells will be added to CITSF's general
funds and will be available for general corporate purposes. The Selling Trust
will apply the purchase price paid by the Company to the Selling Trust for the
Contracts to repay indebtedness of the Selling Trust.
THE CIT GROUP/SALES FINANCING, INC., SERVICER
General
As of September 30, 1998, CITSF serviced for itself and others
approximately 286,000 contracts (consisting primarily of recreation vehicle,
home equity, recreational boat and manufactured housing contracts), representing
an outstanding balance of approximately $8.5 billion. Of this portfolio,
approximately 41,000 contracts (representing approximately $1.2 billion
outstanding balance) consisted of marine 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.
Servicing
The following table shows the composition of CITSF's servicing portfolio,
including marine installment sale contracts and direct loans serviced by CITSF
on the dates indicated:
S-30
<PAGE>
THE CIT GROUP/SALES FINANCING, INC.
Contracts Being Serviced by Product Line
(Dollar amounts in millions)
(Number of accounts in thousands)
<TABLE>
<CAPTION>
As of December 31, As of Sept. 30,
------------------------------------------------------------------------------------ ------------------
1994 1995 1996 1997 1998
(Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars) (Number) (Dollars)
-------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RB-- Owned ............ 1.1 $ 62.0 5.8 $ 152.1 1.5 $ 45.9 3.5 $ 172.9 14.1 $ 562.3
RB-- Bulk Purchases .. 0.2 9.6 0.2 4.8 0.2 3.7 0.7 18.6 1.1 21.4
RB-- Servicing(1) ..... -- -- -- -- 11.6 278.5 31.5 757.4 26.0 599.4
----- -------- ----- -------- ----- -------- ----- -------- ----- --------
Total RB .............. 1.3 71.6 6.0 156.9 13.3 328.1 35.7 948.9 41.2 1,183.1
Total RV .............. 47.8 1,016.3 52.1 1,144.3 57.5 1,256.8 94.7 2,408.9 97.0 2,409.6
Total MH .............. 39.6 878.1 69.3 1,368.5 96.0 1,748.4 89.2 1,836.4 82.0 1,884.5
Home Equity ........... 13.5 570.8 27.1 1,039.0 52.6 2,005.5 57.3 2,446.2 57.8 2,784.9
Other(2) .............. 0.1 3.2 0.2 2.1 0.2 3.1 5.1 121.5 7.5 225.1
----- -------- ----- -------- ----- -------- ----- -------- ----- --------
Total Contracts
Serviced ............ 102.3 $2,540.0 154.7 $3,710.8 219.6 $5,341.9 282.0 $7,761.9 285.5 $8,487.2
</TABLE>
- ----------
RB --Recreational Boat
RV --Recreation Vehicle
MH --Manufactured Housing
(1) Includes contracts sold by CITSF in a previous securitization 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.
Delinquency and Loan Loss Experience for Marine Loan Portfolio
The following Delinquency Experience and Loan Loss/Liquidation Experience
tables set forth data for CITSF's marine loan portfolio. The following table
sets forth the delinquency experience at December 31 for years 1994 to 1997 and
at September 30, 1997 and 1998, of the portfolio of marine 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 but not originated by CITSF.
Delinquency Experience
(Dollar amounts in millions)
December 31, At September 30,
--------------------------------- ----------------
1994 1995 1996(3) 1997(3) 1997(3) 1998(3)
------ ------ -------- ------- ------- -------
Number of Contracts
(in thousands) 1.1 5.8 13.1 24.8 23.4 32.4
Principal Balance of
Contracts Serviced $62.0 $152.1 $324.5 $663.6 $595.8 $957.4
Principal Balance of
Delinquent
Contracts(1)
30-59 Days $ 0.4 $ 1.3 $ 5.7 $ 11.0 $ 9.7 $ 10.1
60-89 Days 0.1 0.5 2.0 4.2 3.9 3.1
90 Days or More 0.1 0.7 3.5 9.4 5.1 10.4
Total Principal Balance
of Delinquent
Contracts $ 0.6 $ 2.5 $ 11.2 $ 24.6 $ 18.7 $ 23.6
Delinquencies as a
Percent of Principal
Balances(2) 0.97% 1.62% 3.45% 3.70% 3.15% 2.47%
- ----------
(1) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month. A Contract is deemed delinquent only if payments
exceeding $65 are contractually past due 30 days or more.
(2) Based on dollar percent delinquent calculated by dividing Total Principal
Balance of Delinquent Contracts by Principal Balance of Contracts
Serviced.
(3) Includes marine installment contracts and direct loans sold by CITSF in a
previous securitization which CITSF is servicing.
S-31
<PAGE>
The following table sets forth the loan loss experience for the four years
ended December 31, 1997 and the nine months ended September 30, 1997 and 1998 of
the portfolio of marine 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 but not originated
by CITSF. "Net Losses" are equal to the excess of (x) the aggregate principal
balance of all defaulted contracts that the Servicer has liquidated, disposed of
the related financed boat or deemed all amounts due under such contract to be
uncollectible during the period over (y) any liquidation proceeds or recoveries
received during the period. Net Losses include the costs of outside collection,
repossession and liquidation expenses.
Loan Loss/Liquidation Experience
(Dollar amounts in millions)
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------- -------------------
1994 1995 1996(2) 1997(2) 1997(2) 1998(2)
---- ---- ------- ------- ------- -------
Average Principal
Balance of
Contracts
Serviced(1) ..... $47.0 $107.4 $240.5 $491.2 $446.2 $806.8
Net Losses:
Dollars(3) ...... $0.02 $ 0.10 $0.74 $ 2.43 $ 1.34 $ 5.40
Percentage(4) ... 0.05% 0.09% 0.31% 0.50% 0.40%(5) 0.89%(5)
- ----------
(1) Excludes contracts in repossession.
(2) Includes marine installment sale contracts and direct outstanding loans
sold by CITSF in a previous securitization which CITSF is servicing.
(3) Represents actual losses (including the costs of outside collection,
repossession and liquidation but not including accrued interest) recorded
at the time of liquidation net of recoveries.
(4) As a percentage of the Average Principal Balance of Contracts Serviced.
(5) This percentage has been annualized, and as such, may not reflect the
actual loss experience for the entire year.
Certain of the matters discussed below 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 recreational boat portfolio of CITSF to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements.
The data presented in the preceding tables are for illustrative purposes
only. Such data relate to the performance of CITSF's entire portfolio of marine
loans originated and serviced by CITSF and are not historical data regarding the
Contracts alone, since the Contracts constitute only a portion of CITSF's
portfolio.
The loss and delinquency information presented in these tables is based
upon the method of recording a loss when all amounts, if any, expected to be
recovered by the sale or disposition of the related Financed Boat have been
received or when CITSF has deemed, in accordance with its customary practices
and procedures, any further collections, other than recovery of deficiency
judgments, to be unlikely (such method referred to herein as a "Liquidation
Basis"). The Trust will use the Liquidation Basis method of computing losses in
its monthly reports. CITSF also uses the Liquidation Basis for reporting losses
on its owned portfolios. However, CITSF may record losses prior to the sale or
disposition of the related financed boat due to valuation adjustments at various
stages of delinquency or at the point of repossession. As a result, CITSF's
reports of the timing and amount of losses and the Trust's reports of the timing
and amount of losses may differ.
Historically, several factors have influenced CITSF's delinquency and loss
experience on its marine portfolio. These factors include the seasoning of a
growing portfolio, varying economic conditions and other trends including the
increasing propensity of consumers to fail to make timely payments on consumer
credit obligations and their increasing willingness to seek bankruptcy
protection. 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.
S-32
<PAGE>
As described in the Prospectus, in August 1994, CITSF initiated an
underwriting program to provide for the approval of a broader range of credit
scores with the appropriate pricing intended to compensate for the risk
associated with lending to customers with lower credit scores. The increased
loss rate for the nine months ended September 30, 1998 is attributable to the
seasoning of contracts originated under the underwriting guidelines adopted in
1994.
CITSF has not significantly changed its marine underwriting guidelines
since 1994. However, starting in early 1997, marketing efforts have been shifted
toward larger ticket vessels with higher credit quality obligors. The
originations in this target market have resulted in decreased delinquencies on
the overall portfolio as of September 30, 1998.
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. CITSF is servicing these
contracts at its Asset Service Center, but these contracts are not included in
the preceding delinquency and loan loss/liquidation tables. The addition of
these contracts to its servicing portfolio required CITSF to increase staffing
levels and reallocate the existing staff at the Asset Service Center in order to
service these contracts. The integration of these accounts was a contributing
factor to the increase in delinquencies experienced during the fourth quarter of
1997.
THE INSURER
The MBIA Insurance Corporation (the "Insurer") is the principal operating
subsidiary of MBIA Inc., a New York Stock Exchange listed company. MBIA Inc. is
not obligated to pay the debts of or claims against the Insurer. The Insurer is
domiciled in the State of New York and licensed to do business in and subject to
regulation under the laws of all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands,
the Virgin Islands of the United States and the Territory of Guam. The Insurer
has two European branches, one in the Republic of France and the other in the
Kingdom of Spain. New York has laws prescribing minimum capital requirements,
limiting classes and concentrations of investments and requiring the approval of
policy rates and forms. State laws also regulate the amount of both the
aggregate and individual risks that may be insured, the payment of dividends by
the Insurer, changes in control and transactions among affiliates. Additionally,
the Insurer is required to maintain contingency reserves on its liabilities in
certain amounts and for certain periods of time.
Effective February 17, 1998, MBIA Inc. acquired all of the outstanding
stock of Capital Markets Assurance Corporation ("CMAC") through a merger with
its parent CapMAC Holdings Inc. Pursuant to a reinsurance agreement, CMAC has
ceded all of its net insured risks (including any amounts due but unpaid from
third party reinsurers), as well as its unearned premiums and contingency
reserves, to the Insurer. MBIA Inc. is not obligated to pay the debts of or
claims against CMAC.
The consolidated financial statements of the Insurer, a wholly owned
subsidiary of MBIA Inc. and its subsidiaries as of December 31, 1997 and
December 31, 1996 and for each of the three years in the period ended December
31, 1997, prepared in accordance with generally accepted accounting principles,
included in the Annual Report on Form 10-K of MBIA Inc. for the year ended
December 31, 1997 and the consolidated financial statements of the Insurer and
its subsidiaries as of September 30, 1998 and for the nine month periods ended
September 30, 1998 and September 30, 1997 included in the Quarterly Report on
Form 10-Q of MBIA Inc. for the period ended September 30, 1998, are hereby
incorporated by reference into this Prospectus Supplement and shall be deemed to
be a part hereof. Any statement contained in a document incorporated by
reference herein shall be modified or superseded for purposes of this Prospectus
Supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus Supplement.
All financial statements of the Insurer and its subsidiaries included in
documents filed by MBIA Inc. pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended, subsequent to the date of this
Prospectus Supplement and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference into this Prospectus
Supplement and to be a part hereof from the respective dates of filing such
documents.
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The tables below present selected financial information of the Insurer
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities ("SAP") and generally accepted
accounting principles ("GAAP"):
SAP
---------------------------------------
December 31, 1997 September 30, 1998
----------------- ------------------
(Audited) (Unaudited)
(In millions)
Admitted Assets ...................... $5,256 $6,318
Liabilities .......................... 3,496 4,114
Capital and Surplus .................. 1,760 2,204
GAAP
---------------------------------------
December 31, 1997 September 30, 1998
----------------- ------------------
(Audited) (Unaudited)
(In millions)
Assets ............................... $5,988 $7,439
Liabilities .......................... 2,624 3,268
Shareholder's Equity ................. 3,364 4,171
Copies of the financial statements of the Insurer incorporated by
reference herein and copies of the Insurer's 1997 year-end audited financial
statements prepared in accordance with statutory accounting practices are
available, without charge, from the Insurer. The address of the Insurer is 113
King Street, Armonk, New York 10504. The telephone number of the Insurer is
(914) 273-4545.
The Insurer does not accept any responsibility for the accuracy or
completeness of this Prospectus Supplement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy
of the information regarding the Insurer set forth under the heading "The
Insurer." Additionally, the Insurer makes no representation regarding the
Securities or the advisability of investing in the Securities.
THE INSURANCE POLICIES ARE NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
Moody's Investors Service, Inc. rates the financial strength of the
Insurer "Aaa."
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. rates the
financial strength of the Insurer "AAA."
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) rates
the financial strength of the Insurer "AAA."
Each rating of the Insurer should be evaluated independently. The ratings
reflect the respective rating agency's current assessment of the
creditworthiness of the Insurer and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above ratings
may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Securities, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the Securities.
The Insurer does not guaranty the market price of the Securities nor does it
guaranty that the ratings on the Securities will not be revised or withdrawn.
Available Information
The consolidated financial statements of Insurer are included in, or as
exhibits to, the following documents which have been filed with the Commission
by the Insurer's parent company MBIA Inc., a Connecticut corporation and are
hereby incorporated by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1997, and
(b) Quarterly Report on Form 10-Q for the period ended September 30,
1998.
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You are encouraged to review these documents, including the financial
statements, as well as all financial statements of the Insurer included in
documents filed by MBIA Inc. pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus Supplement and prior
to the termination of the offering of the Securities for information about the
Insurer.
THE NOTES
General
The Notes will represent obligations of the Trust secured by assets of the
Trust (other than the Certificate Distribution Account). The Trust will issue
the Notes pursuant to the terms of an Indenture, to be dated as of the Cut-off
Date (as amended and supplemented from time to time, the "Indenture") between
Harris Trust and Savings Bank, as trustee (the "Indenture Trustee"), and the
Trust, 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 the
Certificates and will be filed with 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 March 15, 1999. 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 February 1, 1999 and
will end on and include February 28, 1999. 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, insurance companies or trust companies in the states
of New York, Illinois, Delaware or Oklahoma are authorized or required by law,
regulation or executive order to be closed.
Payments of Interest
Interest on the outstanding principal amount of each class of Notes will
accrue at the applicable Interest Rate from and including the preceding
Distribution Date (or, in the case of the first Distribution Date, the Closing
Date) to but excluding the Distribution Date (each, an "Interest Accrual
Period"). The Trust will calculate interest on the Notes on the basis of a
360-day year consisting of twelve 30-day months. The Trust will distribute to
the Noteholders of each class accrued interest at the applicable Interest Rate
on the outstanding principal amount of such class on each Distribution Date.
Interest payments on the Notes will generally be made from the Available
Amount remaining after payment of the Servicer Payment and accrued and unpaid
fees due to the Insurer. In the event such remaining amount is insufficient to
pay the Note Interest Distribution Amount in full, such shortfall of interest on
the Notes will be paid, first, from amounts, if any, available in the Reserve
Account and, second,
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by the Insurer pursuant to the Note Insurance Policy. See "The Purchase
Agreements and the Trust Documents--Distributions." Under certain limited
circumstances and if an Insurer Default has occurred and is continuing or the
Insurance Policies are no longer in effect, amounts available to make interest
payments on the Notes could be less than the full amount of interest payable on
the Notes on a Distribution Date, in which case the Noteholders will receive
their ratable share of such amount, based on the aggregate amount of interest
due on such date on each class of the Notes. 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).
"Insurer Default" shall mean the occurrence and continuance of any of the
following events:
(a) the Insurer shall have failed to make a payment required under
either of the Insurance Policies in accordance with its terms;
(b) the Insurer shall have (i) filed a petition or commenced any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) made a general assignment for the
benefit of its creditors or (iii) had an order for relief entered against
it under the United States Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation, liquidation
or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for the Insurer or for all or any
material portion of its property or (ii) authorizing the taking possession
by a custodian, trustee, agent or receiver of the Insurer (or the taking
of possession of all or any material portion of the property of the
Insurer).
Payments of Principal
Principal of the Notes will be payable on each Distribution Date in an
amount equal to the Note Primary Principal Distribution Amount and the Note
Additional Principal Distribution Amount for such Distribution Date. Principal
payments will be made to each class of Notes in sequential order. Payments of
the Note Primary Principal Distribution Amount on each Distribution Date will be
made from the Available Amount remaining after payment of the Servicer Payment,
accrued and unpaid fees due to the Insurer, the Note Interest Distribution
Amount and the Certificate Interest Distribution Amount. Payments of the Note
Additional Principal Distribution Amount on each Distribution Date will be made
from the Available Amount remaining after payment of the Note Primary Principal
Distribution Amount (and all other amounts payable prior to the payment of such
Note Primary Principal Distribution Amount in accordance with the foregoing
sentence) and after payment of the Certificate Primary Principal Distribution
Amount, the Reimbursement Obligations to the Insurer, interest on the Loan,
certain additional amounts required to be deposited in the Reserve Account and,
if CITSF or one of its affiliates is the Servicer, the Servicing Fee. See "The
Purchase Agreements and the Trust Documents--Distributions."
On each Distribution Date, the Trust will pay each of the Note Primary
Principal Distribution Amount and the Note Additional Principal Distribution
Amount as follows:
(i) first, to the Class A-1 Notes, until the Class A-1 Notes have been
paid in full;
(ii) second, to the Class A-2 Notes, until the Class A-2 Notes have been
paid in full;
(iii) third, to the Class A-3 Notes, until the Class A-3 Notes have been
paid in full; and
(iv) fourth, to the Class A-4 Notes, until the Class A-4 Notes have been
paid in full.
Notwithstanding the foregoing, if an Event of Default has occurred and an
Insurer Default has occurred and is continuing or the Insurance Policies are no
longer in effect and the Notes have been accelerated, principal payments will be
made on each class of Notes pro rata on the basis of their respective unpaid
principal amounts.
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In the event that on a Distribution Date (after giving effect to the
distribution of the Note Primary Principal Distribution Amount and the Note
Additional Principal Distribution Amount to the Noteholders and the Certificate
Primary Principal Distribution Amount and the Certificate Additional Principal
Distribution Amount to the Certificateholders) the outstanding principal amount
of the Notes and the Certificates is greater than the Pool Balance (such excess,
the "Collateralization Shortfall"), such Collateralization Shortfall will be
paid to the Notes, first, from amounts, if any, available in the Reserve Account
(after payment of the Note Interest Distribution Amount and payment of the
Certificate Interest Distribution Amount) and, second, from amounts paid by the
Insurer pursuant to the Note Insurance Policy. Any such amounts will be applied
to the Notes in the sequential order of their class designation.
"Note Primary Principal Distribution Amount" means, for any Distribution
Date, the Primary Note Percentage of the Primary Principal Distribution Amount.
"Primary Note Percentage" means, for any Distribution Date, (x) prior to
the Stepdown Date, 99.0%; and (y) on and after the Stepdown Date, 98.5%;
provided, however, after the Notes have been paid in full, the Primary Note
Percentage shall be 0%.
"Stepdown Date" means the first Distribution Date on which the Certificate
Balance is equal to or less than the Current Overcollateralization Amount.
The "Primary Principal Distribution Amount" on each Distribution Date is
equal to the sum of the following amounts with respect to the related Due
Period, in each case calculated in accordance with the method specified in each
Contract:
(i) all payments of principal (including all Principal Prepayments
applied during the related Due Period) made on each Contract during
the related Due Period;
(ii) the Stated Principal Balance of each Contract which, as of the
related Deposit Date, was purchased by CITSF or the Servicer
pursuant to the Sale and Servicing Agreement; and
(iii) the Principal Carryover Shortfall.
provided, however, that payments of principal (including Principal Prepayments)
with respect to a Repurchased Contract received after the last day of the Due
Period in which the Contract became a Repurchased Contract shall not be included
in the Primary Principal Distribution Amount.
"Note Additional Principal Distribution Amount" means, for any
Distribution Date, the Additional Note Percentage of the Additional Principal
Distribution Amount.
"Additional Note Percentage" means, for any Distribution Date, (a) on and
prior to the repayment in full of the Notes, 100%; and (b) after the repayment
in full of the Notes, 0%.
"Additional Principal Distribution Amount" means, for any Distribution
Date, the excess, if any, of (a) the Targeted Overcollateralization Amount for
such Distribution Date over (b) the Current Overcollateralization Amount for
such Distribution Date.
"Targeted Overcollateralization Amount" means, for any Distribution Date,
$9,189,527 (1.25% of the Initial Pool Balance).
"Current Overcollateralization Amount" means, for any Distribution Date,
the excess, if any, of (a) the Pool Balance as of the last day of the related
Due Period over (b) the outstanding principal amount of the Notes and
Certificates on such Distribution Date minus the portion of the Primary
Principal Distribution Amount to be distributed to Securityholders on such
Distribution Date.
"Principal Carryover Shortfall" means, for any Distribution Date, the
excess, if any, of (x) the Primary Principal Distribution Amount for the
preceding Distribution Date over (y) the amount in respect of principal that was
actually distributed to Securityholders on such Distribution Date.
On the Note Final Scheduled Distribution Date of each class of Notes, the
amount 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 aggregate outstanding principal amount of the related
class of Notes to zero. The Indenture Trustee will withdraw (or cause to be
withdrawn) from the Reserve Account (to the extent funds
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are available therefor in the Reserve Account), and will deposit in the Note
Distribution Account an amount equal to the aggregate outstanding principal
amount of such class of Notes. In the event that the amount withdrawn from the
Reserve Account is insufficient to pay the outstanding principal amount of such
class of Notes, the shortfall will be paid, by deposit into the Note
Distribution Account, by the Insurer pursuant to the Note Insurance Policy on
the applicable 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 the Note Final Scheduled Distribution Date of such class of Notes
based on a variety of factors including an Optional Purchase or Auction Call.
Redemption; Acceleration
In the event of an Optional Purchase or Auction Call, 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 Call 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.
The Notes may be accelerated and subject to immediate payment at par plus
accrued and unpaid interest upon the occurrence of an Event of Default under the
Indenture. So long as no Insurer Default shall have occurred and be continuing
and the Insurance Policies are in effect, an Event of Default under the
Indenture will occur only if the Insurer delivers to the Indenture Trustee a
notice of the occurrence of certain events of default under the Insurance
Agreement specifying that such event constitutes an Event of Default. In the
case of such an Event of Default, the Notes will automatically become due and
payable immediately at par plus accrued and unpaid interest. The Note Insurance
Policy does not guarantee payment of any amounts that become due on an
accelerated basis. However, the Note Insurance Policy will continue to guarantee
payments due with respect to the Notes in accordance with their original terms.
See "Enhancement--Insurance Policies" herein.
Rights of Insurer and Noteholders; Indenture
Control of the Insurer
Upon the occurrence of an Event of Default, so long as the Insurance
Policies are in effect and an Insurer Default shall not have occurred and be
continuing, the Insurer will have the right, but not the obligation, to cause
the Indenture Trustee to liquidate the Trust Property in whole or in part, on
any date or dates following the acceleration of the Securities due to such Event
of Default as the Insurer, in its sole discretion, shall elect, and to deliver
the proceeds of such liquidation to the Indenture Trustee for distribution in
accordance with the terms of the Indenture. The Insurer may not, however, cause
the Indenture Trustee to liquidate the Trust Property in whole or in part if the
proceeds of such liquidation would not be sufficient to pay all outstanding
principal of and accrued interest on the Securities, unless such Event of
Default resulted in a claim being made on the Insurance Policies or arose from
certain events of bankruptcy, insolvency, receivership or liquidation of the
Trust. Following the occurrence of any Event of Default, the Indenture Trustee
and the Owner Trustee will continue to submit claims under the Insurance
Policies for any shortfalls in the Guaranteed Security Distributions on the
Securities. Following any Event of Default under the Indenture, the Insurance
Policies will continue to guarantee payments due with respect to the Securities
in accordance with their original terms; however, the Insurer may elect to pay
all or any portion of the outstanding principal amount due on the Securities,
plus accrued interest thereon. See "Enhancement--Insurance Policies" herein. So
long as no Insurer Default has occurred and is continuing and the Insurance
Policies are in effect, an Insurance Agreement Trigger Event is an Event of
Default under the Indenture.
Unless an Insurer Default shall have occurred and be continuing, Events of
Default under the Indenture will include those events defined in the Insurance
Agreement as Insurance Agreement Trigger Events, and will constitute an Event of
Default under the Indenture only if the Insurer shall have delivered to the
Indenture Trustee, and not rescinded, a written notice specifying that any such
Event of Default, including
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an Insurance Agreement Trigger Event, constitutes an Event of Default under the
Indenture. "Insurance Agreement Trigger Events" consist of: (i) the failure of
The CIT Group, Inc. ("CIT"), the Servicer or the Company to make any payment due
under the Insurance Agreement, the Sale and Servicing Agreement, the Trust
Agreement, the Indenture, the Purchase Agreement, the Underwriting Agreement,
the Indemnification Agreement, dated the Closing Date, among the Insurer, CIT,
the Seller, the Servicer and the Underwriters (the "Indemnification Agreement")
and the Insurance Premium Side Letter Agreement, dated the Closing Date, from
the Insurer to CIT and the Seller (collectively, the "Transaction Documents")
within three Business Days of notice of such failure; (ii) an Event of
Termination occurs under the Sale and Servicing Agreement; (iii) an Event of
Default occurs under the Indenture; (iv) certain covenant breaches with respect
to the Transaction Documents by any of the Company, the Servicer or CIT and such
breach continues for thirty (30) days after written notice has been given by the
Insurer or any other authorized person pursuant to such Transaction Document;
(v) any representation or warranty made by CIT, the Servicer or the Company in
the Transaction Documents proving to be incorrect in a material respect when
made, and which has, in each case, a material adverse effect on its performance
of the Transaction Documents, except in the case of the breach of any
representation or warranty which triggers an obligation to repurchase a Contract
under any such Transaction Document; (vi) an insolvency proceeding to which CIT,
the Company or any material subsidiary that is a signatory to any Transaction
Document is a party; (vii) the security interests of the Indenture Trustee shall
cease to be effective or shall cease to be a first priority perfected security
interest and such condition shall continue for 30 days after written notice
shall have been given to the Servicer by the Insurer or any other person
authorized to deliver such notice pursuant to the terms of the Transaction
Documents; (viii) subject to certain exceptions, any of the Transaction
Documents or any other agreement contemplated therein shall cease to be in full
force and effect; and (ix) a change in control of CIT where the
acquiring/surviving entity does not have a senior unsecured long-term debt
rating of at least "BBB" by S&P and "Baa2" by Moody's and CITSF or the
acquiring/surviving entity does not continue to be in the business of servicing
prime quality marine loans. So long as no Insurer Default has occurred and is
continuing and the Insurance Policies are in effect, the occurrence of an
Insurance Agreement Trigger Event is also an Event of Default under the
Indenture.
Control of the Noteholders
If an Event of Default occurs under the Indenture and for so long as no
Insurer Default has occurred and is continuing and the Insurance Policies are in
effect, the Insurer will control all remedies exercisable by the Noteholders. If
an Insurer Default has occurred and is continuing, or the Insurance Policies are
no longer in effect, 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 Insurer (so long as no Insurer
Default has occurred and is continuing and the Insurance Policies are in
effect), Indenture Trustee or Noteholders representing not less than a majority
of the aggregate principal amount of the Notes then outstanding before
modifying, amending, supplementing, waiving or terminating any provision of the
Sale and Servicing Agreement. Therefore, except as described herein, until the
Notes have been paid in full, only the Insurer (so long as no Insurer Default
has occurred and is continuing and the Insurance Policies are in effect), the
Indenture Trustee and the Noteholders have the ability to direct the Trust with
respect to certain actions permitted to be taken under the Sale and Servicing
Agreement.
If both an Event of Default under the Indenture and an Insurer Default
occur and are continuing or the Insurance Policies are no longer in effect 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. The proceeds of any sale of the Contracts may not be
equal to or greater than the aggregate outstanding principal amount of the Notes
plus, in each case, accrued interest thereon.
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If both an Event of Default under the Indenture and an Insurer Default
occur and are continuing or the Insurance Policies are no longer in effect, the
assets of the Trust may be sold which may result in early retirement of the
Notes. If the net proceeds from the liquidation of the Contracts (after payment
of the Servicer Payment and accrued and unpaid fees due to the Insurer accrued
prior to the Insurer Default) 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 accrued and
unpaid fees due to the Insurer (accrued prior to the Insurer Default) and the
Servicer Payment) in the following order of priority: (i) to the Noteholders for
amounts due and unpaid on the Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on each class of
the Notes for interest; (ii) to the Noteholders for amounts due and unpaid on
the Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal, until the
principal amount of the Notes is reduced to zero; (iii) 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; (iv) 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; (v) to the
Insurer for Reimbursement Obligations (to the extent not previously paid) plus
interest accrued thereon prior to the Insurer Default; (vi) to pay to the Lender
interest on the Loan; (vii) to pay the Servicing Fee (including any unpaid
Servicing Fees for past Distribution Dates and only to the extent not previously
paid to the Servicer) if CITSF or one of its affiliates is the Servicer; and
(viii) to pay to the Lender principal on the Loan.
In the event that both an Event of Termination and an Insurer Default
occurs and is continuing or the Insurance Policies are no longer in effect, the
Indenture Trustee or Noteholders representing not less than a majority of the
aggregate principal amount of the Notes then outstanding may remove the Servicer
or waive such Event of Termination. So long as no Insurer Default occurs and is
continuing and the Insurance Policies are in effect, if an Event of Termination
occurs and is continuing, the Insurer may remove the Servicer or waive such
Event of Termination.
THE CERTIFICATES
The Certificates offered hereby will be issued pursuant to the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part. The following summary
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Trust Agreement.
General
The CIT Marine Trust 1999-A___% Asset-Backed Certificates (the
"Certificates") will represent fractional undivided interests in the Trust. The
Trust will issue the Certificates pursuant to a Trust Agreement, to be dated as
of the Cut-off Date 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
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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 confirm 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, (c) a governmental plan,
as defined in Section 3(32) of ERISA, subject to any federal, state or local law
which is, to a material extent, similar to the provisions of Section 406 of
ERISA or Section 4975 of the Code, (d) an entity whose underlying assets include
plan assets by reason of a plan's investment in the entity (within the meaning
of Department of Labor Regulation 29 C.F.R. ss2510.3-101 or otherwise under
ERISA) or (e) a person investing "plan assets" of any such plan (including,
without limitation, an insurance company general account, but excluding any
entity registered under the Investment Company Act of 1940, as amended) or (ii)
must confirm that they are, and each account for which they are purchasing
Certificates is, a person who is (a) a citizen or resident of the United States,
(b) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof, (c) an estate the income of which
is includible in gross income for United States tax purposes, regardless of its
source, or (d) a trust if a U.S. court is able to exercise primary supervision
over the administration of such trust and one or more persons meeting the
conditions of clause (a), (b) or (c) has the authority to control all
substantial decisions of the trust. The Certificates may not be owned by more
than 100 persons (as determined pursuant to Treasury Regulations Section
1.7704-1(h)).
Payments of interest and principal on the Certificates with respect to
each Due Period will be made on each Distribution Date, commencing March 15,
1999. Payments on the Certificates on each Distribution Date will be made to the
holders of record of the Certificates on the related Record Date.
Distribution of Interest
The Certificates will bear interest at the rate of ____% per annum (the
"Pass-Through Rate"). The Trust will calculate interest on the Certificates on
the basis of a 360-day year consisting of twelve 30-day months. Interest in
respect of a Distribution Date will accrue at the Pass-Through Rate during the
related Interest Accrual Period. The Trust will distribute pro rata to
Certificateholders accrued interest at the Pass-Through Rate on the outstanding
Certificate Balance on each Distribution Date.
Interest Payments on the Certificates will generally be made from the
Available Amount remaining after payment of the Servicer Payment, accrued and
unpaid fees due to the Insurer and the Note Interest Distribution Amount. In the
event such remaining amount is insufficient to pay the Certificate Interest
Distribution Amount in full, such shortfall will be paid, first, from amounts,
if any, available in the Reserve Account and, second, by the Insurer pursuant to
the Certificate Insurance Policy. See "The Purchase Agreements and the Trust
Documents--Distributions." Under certain limited circumstances, if an Insurer
Default has occurred and is continuing or the Insurance Policies are no longer
in effect, amounts available to make interest payments on the Certificates could
be less than the full amount of interest payable on the Certificates on a
Distribution Date. 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).
If an Insurer Default has occurred and is continuing or the Insurance
Policies are no longer in effect, 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 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.
Distributions of Principal
Principal of the Certificates will be payable on each Distribution Date in
an amount equal to the Certificate Primary Principal Distribution Amount and the
Certificate Additional Principal Distribution Amount for such Distribution Date.
Payment of the Certificate Primary Principal Distribution Amount on each
Distribution Date to the Certificateholders will be made from the Available
Amount remaining after
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payment of the Servicer Payment, accrued and unpaid fees due to the Insurer, the
Note Interest Distribution Amount, the Certificate Interest Distribution Amount
and the Note Primary Principal Distribution Amount. Payments of the Certificate
Additional Principal Distribution Amount on each Distribution Date will be made
from the Available Amount remaining after payment of the Certificate Primary
Principal Distribution Amount (and all other amounts payable prior to the
payment of such Certificate Primary Principal Distribution Amount in accordance
with the foregoing sentence) and after payment of the Reimbursement Obligations
to the Insurer, interest on the Loan, the Servicing Fee if CITSF or one of its
affiliates is the Servicer, the Note Additional Principal Distribution Amount
and certain additional amounts required to be deposited in the Reserve Account.
Payments of the Certificate Additional Principal Distribution Amount will only
be made after the Notes have been paid in full. See "The Purchase Agreements and
the Trust Documents--Distributions."
In the event that on a Distribution Date (after giving effect to the
distribution of the Note Primary Principal Distribution Amount and the Note
Additional Principal Distribution Amount to the Noteholders and the Certificate
Primary Principal Distribution Amount and the Certificate Additional Principal
Distribution Amount to the Certificateholders) a Collateralization Shortfall
exists, such Collateralization Shortfall will be paid to the Notes so long as
any Note is outstanding and then to the Certificates on or after the
Distribution Date that the Notes are paid in full, first, from amounts, if any,
available in the Reserve Account (after payment of the Note Interest
Distribution Amount and the Certificate Interest Distribution Amount) and,
second, from amounts paid by the Insurer pursuant to the Certificate Insurance
Policy.
On the Certificate Final Scheduled Distribution Date, the amount required
to be deposited in the Certificate Distribution Account in respect of the
Certificate Balance will include the amount 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 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 an
amount equal to the Certificate Balance. In the event that the amount withdrawn
from the Reserve Account is insufficient to pay the Certificate Balance of the
Certificates, such shortfall will be paid, by deposit into the Certificate
Distribution Account, by the Insurer pursuant to the Certificate Insurance
Policy on the Certificate Final Scheduled Distribution Date. The actual date on
which the aggregate outstanding principal amount of the Certificates is paid may
be earlier than the Certificate Final Scheduled Distribution Date based on a
variety of factors including an Optional Purchase or Auction Call.
"Certificate Primary Principal Distribution Amount" means, for any
Distribution Date, the Primary Certificate Percentage of the Primary Principal
Distribution Amount.
"Primary Certificate Percentage" means, for any Distribution Date, (x)
prior to the Stepdown Date, 1.0%, and (y) on and after the Stepdown Date, 1.5%;
provided, however, that after the Notes have been paid in full, the Primary
Certificate Percentage shall be 100%.
"Certificate Additional Principal Distribution Amount" means, for any
Distribution Date, the Additional Certificate Percentage of the Additional
Principal Distribution Amount.
"Additional Certificate Percentage" means, for any Distribution Date, (a)
on and prior to the repayment in full of the Notes, 0%; and (b) after the
repayment in full of the Notes, 100%.
Redemption
In the event of an Optional Purchase or Auction Call, 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 Call 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.
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Limited Rights
If an Event of Default occurs under the Indenture and for so long as no
Insurer Default has occurred and is continuing and the Insurance Policies are in
effect, the Insurer will control all remedies exercisable by the
Certificateholders. If both an Event of Default under the Indenture and an
Insurer Default have occurred and are continuing or the Insurance Policies are
no longer in effect, the Certificateholders will not have any right to direct or
to consent to any remedies therefor exercisable by the Indenture Trustee,
including the sale of the Contracts, until the Notes have been paid in full. If
an Event of Termination occurs, the Certificateholders will not have any right
to direct or consent to removal of the Servicer or the waiver of such Event of
Termination until the Notes have been paid in full and then only if an Insurer
Default has occurred and is continuing or the Insurance Policies are no longer
in effect. So long as no Insurer Default occurs and is continuing and the
Insurance Policies are in effect, in the event that an Event of Termination
occurs and is continuing, the Insurer may remove the Servicer or waive such
Event of Termination. See "Risk Factors--Events of Default under the Indenture
May Accelerate Liquidation of the Contracts; Rights of Insurer" and "The
Notes--Rights of Insurer and Noteholders; Indenture--Control of the Insurer"
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
Insurance Policies. Simultaneously with the issuance of the Securities,
the Insurer will deliver the Note Insurance Policy to the Indenture Trustee for
the benefit of each Noteholder and will deliver the Certificate Insurance Policy
to the Owner Trustee for the benefit of each Certificateholder. Under the
Insurance Policies, the Insurer will unconditionally and irrevocably guarantee
the full and complete payment of (i) Guaranteed Security Distributions on the
Securities and (ii) the amount of any Guaranteed Security Distribution which
subsequently is avoided in whole or in part as a preference payment under
applicable law. In the event the Indenture Trustee or the Owner Trustee fails to
make a claim under the applicable Insurance Policy, Securityholders do not have
the right to make a claim directly under the applicable Insurance Policy, but
may sue to compel the Indenture Trustee or the Owner Trustee to do so.
"Guaranteed Security Distributions" means payments which are scheduled to
be made on the Securities during the term of the Insurance Policies in
accordance with the original terms of the Securities when issued and without
regard to any subsequent amendment or modification of the Securities that has
not been consented to by the Insurer, which are (i) the timely payment of the
Note Interest Distribution Amount and the Certificate Interest Distribution
Amount on each Distribution Date, (ii) the ultimate payment of principal on the
Final Scheduled Distribution Date applicable to each class of Securities and
(iii) the Collateralization Shortfall. Guaranteed Security Distributions do not
include payments which are made as a result of an Insurer Optional Deposit or
which become due on an accelerated basis as a result of (a) a default by the
Trust, (b) an election by the Trust to pay principal on an accelerated basis,
(c) the occurrence of an Event of Default under the Indenture or (d) any other
cause. In the event the Insurer does not so elect, the Insurance Policies will
continue to guarantee Guaranteed Security Distributions due on the Securities in
accordance with their original terms. Guaranteed Security Distributions shall
not include (x) any portion of the Note Interest Distribution Amount or the
Certificate Interest Distribution Amount due to Securityholders because the
appropriate notice and certificate for payment in proper form was not timely
Received by the Insurer, or (y) any portion of the Note Interest Distribution
Amount or the Certificate Interest Distribution Amount due to Securityholders
representing interest on any Note Interest Carryover Shortfall or Certificate
Interest Carryover Shortfall accrued from and including the date of payment of
the amount of such Interest Carryover Shortfall pursuant to the Insurance
Policies.
"Insurer Optional Deposit" means, with respect to any Distribution Date,
an amount delivered by or on behalf of the Insurer, at its sole option, to the
Indenture Trustee or the Owner Trustee, as the case may be, for deposit into the
Note Distribution Account or Certificate Distribution Account, as applicable,
for any of the following purposes: (i) to provide funds in respect of the
payment of fees or expenses of any provider of services to the Trust with
respect to such Distribution Date; (ii) to provide funds in respect of the
payment of principal or interest on the Securities to the extent the amounts to
be distributed to the Securityholders exceed the Available Amount or to fund a
Collateralization Shortfall; or (iii) to include such amount as part
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of the Note Primary Principal Distribution Amount, the Note Additional Principal
Distribution Amount, the Certificate Primary Principal Distribution Amount, the
Certificate Additional Principal Distribution Amount, the Note Interest
Distribution Amount or the Certificate Interest Distribution Amount, as the case
may be, for such Distribution Date to the extent that without such amount a draw
would be required to be made on the Note Insurance Policy or the Certificate
Insurance Policy, respectively.
Payment of claims on the Insurance Policies made in respect of Guaranteed
Security Distributions will be made by the Insurer following Receipt by 3:00
p.m., New York City time on the third Business Day prior to the Distribution
Date by the Insurer of the appropriate notice for payment. The Insurer will
deliver amounts payable in respect of claims under the Insurance Policies to the
Indenture Trustee or the Owner Trustee, as the case may be, for deposit into the
Note Distribution Account or Certificate Distribution Account, as applicable.
If payment of any amount guaranteed under the Insurance Policies is
avoided as a preference payment in connection with any proceeding by or against
the Trust, the Seller, the Selling Trust or the Servicer commenced under the
U.S. Bankruptcy Code or any other applicable United States federal or state
bankruptcy, insolvency, receivership, rehabilitation or similar law, the Insurer
shall make payment no earlier than the first to occur of (a) the third Business
Day following Receipt by the Insurer from the Indenture Trustee or the Owner
Trustee of (i) a certified copy of the final, nonappealable order of a court
having competent jurisdiction to the effect that the Securityholder is required
to return any principal or interest paid on the Securities during the term of
the Insurance Policies because such payments were avoidable as preference
payments under applicable law (the "Order"); (ii) an assignment duly executed
and delivered by the Securityholder, in such form as is reasonably required by
the Insurer and provided to the Securityholder by the Insurer, irrevocably
assigning to the Insurer all rights and claims of the Securityholder relating to
or arising under the Securities against the Trust or otherwise with respect to
such preference payment; (iii) a notice for payment by the Indenture Trustee or
Owner Trustee; and (iv) appropriate instruments to effect the appointment of the
Insurer as agent for the Securityholders in any legal proceeding relating to
such avoided preference payment, or (b) the date of Receipt by the Insurer from
the Indenture Trustee or the Owner Trustee of the items referred to in clauses
(i) through (iv) above if the Insurer shall have received, at least three
Business Days prior to such date of Receipt, written notice from the Indenture
Trustee or the Owner Trustee that such items were to be delivered on such date
and such date was specified in such notice. Such payment shall be made to the
receiver, or trustee in bankruptcy named in the Order and not to the Indenture
Trustee or the Owner Trustee or any Securityholder directly (unless a
Securityholder has previously paid such amount to the receiver, or trustee in
bankruptcy in which case such payment shall be disbursed to the Indenture
Trustee or the Owner Trustee for distribution to such Securityholder upon proof
of such payment reasonably satisfactory to the Insurer). In connection with the
foregoing, the Insurer shall have the rights provided in the Indenture.
In the event the Insurer's claims paying ability ratings have been reduced
by any of the Rating Agencies or if the Insurer fails to make a payment required
under the Insurance Policies in accordance with their terms, the Servicer may,
but it is not obligated to, upon payment of all amounts required to be paid to
the Insurer pursuant to the Insurance Agreement through the date of any change
either (i) replace both Insurance Policies with financial guaranty insurance
policies issued by another insurer provided that, in the event that the
Insurer's claims paying ability ratings have been reduced, the ratings on the
claims paying ability of such replacement insurer are higher than those of the
insurer sought to be replaced (after giving effect to such reduction) or (ii)
terminate both Insurance Policies and provide another form of credit
enhancement; provided that in the case of clause (ii), the Rating Agencies issue
confirmation that, to the extent the ratings of the Securities have been reduced
in connection with the reduction in the Insurer's claims paying ratings, the
ratings of the Securities will be increased from their then-current levels
(after giving effect to such reduction) as a result of such action.
The terms "Receipt" and "Received" with respect to the Insurance Policies
shall mean actual delivery to the Insurer and to its fiscal agent, if any, prior
to 3:00 p.m., New York City time, on a Business Day; delivery either on a day
that is not a Business Day or after 3:00 p.m., New York City time, shall be
deemed to be Received on the next succeeding Business Day. If any notice or
certificate given under the Insurance Policies by the Indenture Trustee or the
Owner Trustee is not in proper form or is not properly completed,
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executed or delivered, it shall be deemed not to have been Received, and the
Insurer or its fiscal agent shall promptly so advise the Indenture Trustee or
the Owner Trustee and the Indenture Trustee or the Owner Trustee may submit an
amended notice.
The Insurer's obligations under the Insurance Policies in respect of
Guaranteed Security Distributions shall be discharged to the extent funds are
transferred to the Indenture Trustee or the Owner Trustee as provided in the
related Insurance Policies whether or not such funds are properly applied by the
Indenture Trustee or the Owner Trustee .
The Insurer shall be subrogated to the rights of each Securityholder to
receive payments of principal and interest to the extent of any payment by the
Insurer under the Insurance Policies.
The terms of the Insurance Policies cannot be modified or altered by any
other agreement or instrument, or by the merger, consolidation or dissolution of
the Trust. The Insurance Policies may not be canceled or revoked prior to
distribution in full of all Guaranteed Security Distributions. The Insurance
Policies are not covered by the property/casualty insurance security fund
specified in Article 76 of the New York Insurance Law. The Insurance Policies
are governed by the laws of the State of New York.
Reserve Account. On the Closing Date, the Company will establish an
account (the "Reserve Account") 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 by a loan (the "Loan")
made by the Lender in the amount of $27,568,581 (which is equal to 3.75% of the
Initial Pool Balance). After the Closing Date, the Reserve Account will be
funded with the Excess Collections, if any, and certain investment earnings on
funds deposited in the Reserve Account related to the Excess Collections.
On each Distribution Date, the amount available to be withdrawn from the
Reserve Account (the "Available Reserve Amount") will be equal to the lesser of
(i) the Specified Reserve Amount and (ii) the amount on deposit in the Reserve
Account, before giving effect to any deposit to be made to the Reserve Account
on such Distribution Date.
On each Determination Date, the Servicer will determine the amounts, if
any, required and available 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 and accrued and unpaid fees due to the Insurer) to pay the interest
required to be distributed on the Securities, 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. In
the event that on a Distribution Date (after giving effect to the distribution
of the Note Primary Principal Distribution Amount and the Note Additional
Principal Distribution Amount to the Noteholders and the Certificate Primary
Principal Distribution Amount and the Certificate Additional Principal
Distribution Amount to the Certificateholders) a Collateralization Shortfall
exists, the Indenture Trustee will withdraw (or cause to be withdrawn) from the
Reserve Account an amount equal to the lesser of such Collateralization
Shortfall 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.
On each Distribution Date, the Servicer will deposit Excess Collections,
if any, into the Reserve Account. Amounts on deposit in the Reserve Account in
excess of the Specified Reserve Amount for the next Distribution Date will be
used to pay principal due on the Loan and the remaining amount shall be released
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 (other than the
Additional Principal Distribution Amount), the Servicer Payment made to the
Servicer on such Distribution Date, including the Servicing Fee paid on such
Distribution Date and any unpaid Servicing Fees for past Distribution Dates, the
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interest on the Loan, all amounts owed to the Insurer and any amounts required
to be deposited in the Reserve Account as a result of losses, repossessions and
delinquencies on the Contracts.
Subject to the Sale and Servicing Agreement, the "Specified Reserve
Amount" with respect to any Distribution Date will generally equal the excess of
(i) 5.55% of the Pool Balance as of the last day of the related Due Period, but
in no event less than 2.25% of the Initial Pool Balance (or approximately
$16,541,149) over (ii) the excess of the Pool Balance as of the last day of the
related Due Period over the outstanding principal amount of the Securities on
such Distribution Date (after giving effect to all principal, including any
additional principal distributions from Excess Collections, distributed to the
Securityholders on such Distribution Date); but in no event less than the
Minimum Reserve Amount.
Subject to the Sale and Servicing Agreement, the "Minimum Reserve Amount"
for each Distribution Date is generally equal to $7,351,622 (1.00% of the
Initial Pool Balance); provided that the Minimum Reserve Amount shall not exceed
the outstanding principal amount of the Securities as of any Distribution Date.
On each Distribution Date, the Indenture Trustee will withdraw (or cause
to be withdrawn) from the Reserve Account an amount equal to the amount by which
the Available Reserve Amount (after taking into account any deposits to and
withdrawals from the Reserve Account pursuant to the Sale and Servicing
Agreement on such Distribution Date) exceeds the Specified Reserve Amount for
the next Distribution Date and apply such amount to pay principal due on the
Loan and release the remaining amount to the Affiliated Owner. Any such amounts
paid to the Lender or the Affiliated Owner will not be available for
distribution to Securityholders.
Generally, the sole source of funding for the Reserve Account will be the
Loan and the Excess Collections. In certain circumstances, as a result of
delinquencies, losses and repossessions of Financed Boats or liquidations of
Contracts, additional amounts will be required to be deposited in the Reserve
Account. Excess Collections may not be sufficient to fund the Reserve Account in
an amount equal to the Specified Reserve Amount or to replenish the Reserve
Account after funds are withdrawn to make payments on the Securities. None of
the Seller, the Insurer, the Selling Trust or the Servicer will be obligated to
deposit any of their own funds into the Reserve Account in the event that the
Excess Collections are not sufficient to fund the Reserve Account in an amount
equal to the Specified Reserve Amount.
Overcollateralization. Overcollateralization is the excess, if any, of the
Pool Balance over the outstanding principal amount of the Securities. On the
Closing Date there will be no overcollateralization. Overcollateralization may
develop after the Closing Date as a result of additional principal distributions
on the Securities from Excess Collections, if any. Excess Collections will be
applied to the outstanding principal amount of the Securities such that the
Current Overcollateralization Amount is initially increased to, and thereafter
maintained at, the Targeted Overcollateralization Amount. However, if there are
not sufficient Excess Collections, the Current Overcollateralization Amount will
not be increased to or maintained at the Targeted Overcollateralization Amount.
In addition, realized losses on the Contracts will reduce overcollateralization.
If realized losses on the Contracts result in a Collateralization Shortfall on a
Distribution Date, a draw will be made on the Note Insurance Policy and/or the
Certificate Insurance Policy in the amount of any such Collateralization
Shortfall (after giving effect to the application of funds in the Reserve
Account to cover such Collateralization Shortfall).
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. This subordination is intended
to enhance the likelihood of timely receipt by the 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 in the
event that an Insurer Default has occurred and is continuing.
In the event that an Insurer Default has occurred and is continuing or the
Insurance Policies are no longer in effect, no distribution will be made to the
Certificateholders on any Distribution Date in respect of (i) interest until the
full amount of interest 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.
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THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
Sale and Assignment of the Contracts
Repurchased Contracts
Under the terms of the Sale and Servicing Agreement and subject to certain
conditions specified in the Sale and Servicing Agreement, CITSF will be
obligated to repurchase from the Trust for the Purchase Price any Contract (a
"Repurchased Contract") (i) not later than sixty days after CITSF becomes aware
or after CITSF's receipt of written notice from the Owner Trustee, the Indenture
Trustee or the Servicer, of a breach of any representation or warranty by CITSF
in the Sale and Servicing Agreement that materially and adversely affects the
Trust's interest in such Contract or with respect to which the interests of the
Insurer are materially and adversely affected and which breach has not been
cured or (ii) not later than sixty days after CITSF receives written notice from
either Owner Trustee or the Indenture Trustee of a failure to make a notation of
a security interest on a title document required to perfect the security
interest of the Trust in a Financed Boat subject to a Contract that materially
and adversely affects the Trust's interest in such Contract or with respect to
which the interests of the Insurer are materially and adversely affected and
which failure has not been cured. This repurchase obligation constitutes the
sole remedy available to the Trust and the Securityholders for a breach of a
representation and warranty under the Sale and Servicing Agreement with respect
to the Contracts (but not with respect to any other breach by CITSF of its
obligations under the Sale and Servicing Agreement) or for the failure to make a
notation of a security interest in a title document required to perfect the
security interest of the Trust in a Financed Boat subject to a Contract, as the
case may be.
Security Interests in the Financed Boats
Pursuant to the Sale and Servicing Agreement, the Seller will agree to
cause filings of the assignments to the Trust of all Preferred Mortgages showing
the chain of ownership of each such Preferred Mortgage from the last mortgagee
of record of each such Contract to the Trust, within 180 days of the Closing
Date. See "Certain Legal Aspects of the Contracts--Security Interests in the
Financed Boats" in the Prospectus.
Distributions
On a monthly basis, or no later than two Business Days after receipt, as
required in certain circumstances under the Sale and Servicing Agreement, the
Servicer will deposit all payments which the Servicer has collected on the
Contracts into the Collection Account. See "The Purchase Agreements and the
Trust Documents--Collections" in the Prospectus. 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 transfers and
payments (to the extent sufficient funds are available therefor) in the
following order:
(a) pay the Servicer Payment (including the Servicing Fee for the prior
Due Period and any overdue Servicing Fees owed to the Servicer, if
the Servicer is not an affiliate of CIT, and to the extent not
previously retained by the Servicer) to the Servicer;
(b) pay the Insurer any accrued and unpaid fees (to the extent accrued
prior to an Insurer Default and not previously paid);
(c) deposit the Note Interest Distribution Amount into the Note
Distribution Account, for payment to the Noteholders for amounts due
and unpaid on the Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on
each class of the Notes for interest;
(d) deposit the Certificate Interest Distribution Amount into the
Certificate Distribution Account, for payment to the
Certificateholders for interest on such Distribution Date;
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(e) on and prior to the Distribution Date on which the Notes have been
paid in full, deposit the Note Primary Principal Distribution Amount
into the Note Distribution Account, for payment of principal to the
Noteholders in the following order of priority:
(i) to the Class A-1 Notes until the principal balance of the
Class A-1 Notes is reduced to zero;
(ii) to the Class A-2 Notes until the principal balance of the
Class A-2 Notes is reduced to zero;
(iii) to the Class A-3 Notes until the principal balance of the
Class A-3 Notes is reduced to zero; and
(iv) to the Class A-4 Notes until the principal balance of the
Class A-4 Notes is reduced to zero.
(f) on and prior to the Distribution Date on which the Certificates have
been paid in full, deposit the Certificate Primary Principal
Distribution Amount into the Certificate Distribution Account, for
payment of principal to the Certificateholders;
(g) pay the Reimbursement Obligations to the Insurer (to the extent not
previously paid);
(h) pay the Lender interest on the Loan;
(i) if CITSF or one of its affiliates is the Servicer, pay (to the
extent not previously paid to the Servicer) the Servicing Fee
(including any unpaid Servicing Fees for prior Due Periods) to the
Servicer;
(j) deposit in the Reserve Account additional amounts required to be
deposited pursuant to the Sale and Servicing Agreement as a result
of delinquencies, losses and repossessions of Financed Boats or
liquidations of Contracts;
(k) on and prior to the Distribution Date on which the Notes have been
paid in full, deposit the Note Additional Principal Distribution
Amount into the Note Distribution Account, for payment of principal
to the Noteholders in the following order of priority:
(i) to the Class A-1 Notes until the principal balance of the
Class A-1 Notes is reduced to zero;
(ii) to the Class A-2 Notes until the principal balance of the
Class A-2 Notes is reduced to zero;
(iii) to the Class A-3 Notes until the principal balance of the
Class A-3 Notes is reduced to zero; and
(iv) to the Class A-4 Notes until the principal balance of the
Class A-4 Notes is reduced to zero;
(l) on and prior to the Distribution Date on which the Certificates have
been paid in full, deposit the Certificate Additional Principal
Distribution Amount into the Certificate Distribution Account, for
payment of principal to the Certificateholders; and
(m) deposit into the Reserve Account the balance.
Funds on deposit in the Reserve Account in excess of the Specified Reserve
Amount for the next Distribution Date shall be withdrawn from the Reserve
Account and used to pay principal due on the Loan and the remaining amount shall
be released to the Affiliated Owner.
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.
"Principal Prepayment" means a payment or other recovery of principal on a
Contract (including insurance proceeds with respect to such Contract and Net
Liquidation Proceeds applied to principal on a Contract) which is received in
advance of its due date and applied upon receipt (or, in the case of a partial
Principal Prepayment, upon the next scheduled payment date on such Contract) to
reduce the outstanding principal amount of such Contract prior to the date or
dates on which such principal amount is scheduled to be paid.
"Net Liquidation Proceeds" means the monies collected (from whatever
source) during a Due Period on a Liquidated Contract (except for certain amounts
allocable to forced place insurance in accordance with the Sale and Servicing
Agreement), 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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A "Liquidated Contract" is a defaulted Contract as to which the Servicer
(A) has recovered all amounts that it expects to recover by sale or disposition
of the related Financed Boat or (B) has deemed, in accordance with its customary
practices and procedures, any further collections, other than recovery of
deficiency judgments, to be unlikely, but in any event a Contract shall be
deemed to become a Liquidated Contract no later than the date on which the
Servicer has received proceeds from the sale or disposition of such Financed
Boat, and such Contract shall have a principal balance of zero.
"Liquidation Expenses" means all reasonable fees of third parties and
other expenses incurred by the Servicer in the course of converting any
defaulted Contract or Financed Boat into cash proceeds (including, without
limitation, expenses relating to recovery, repossession and sale of such
Financed Boat).
The "Available Amount" on any Distribution Date is equal to the excess of
(A) the sum of (i) all amounts on deposit in the Collection Account attributable
to collections or deposits made in respect of the Contracts (including any Late
Fees) in the related Due Period (but excluding any payments made under the
Insurance Policies); (ii) Insurer Optional Deposits in the related Due Period;
and (iii) the Purchase Price for any Contract repurchased by CITSF as a result
of breaches of certain representations and warranties or purchased by the
Servicer as a result of breaches of certain covenants and any Monthly Advances
made by the Servicer, if such Purchase Price or Monthly Advance is paid on the
Deposit Date immediately preceding such Distribution Date, over (B) the sum of
the following amounts (to the extent that the Servicer has not already withheld
such amounts from collections on the Contracts): (i) any repossession profits on
Liquidated Contracts, Liquidation Expenses incurred and taxes and insurance
advanced by the Servicer in respect of Financed Boats that are reimbursable to
the Servicer under the Sale and Servicing Agreement, (ii) any amounts
incorrectly deposited in the Collection Account, (iii) net investment earnings
on the funds in the Collection Account, and (iv) any other amounts permitted to
be withdrawn from the Collection Account by the Servicer (or to be retained by
the Servicer from collections on the Contracts) pursuant to the Sale and
Servicing Agreement.
The "Purchase Price" for any Contract will be the remaining principal
amount outstanding on such Contract on the date of repurchase, plus thirty days'
interest thereon at the Contract Rate, plus the reimbursement then due to the
Servicer for outstanding Monthly Advances on such Contract, plus the amounts
then due to the Insurer for Reimbursement Obligations.
"Certificate Interest Carryover Shortfall" means, for any Distribution
Date, the excess of the Certificate 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.
"Certificate Interest Distribution Amount" means, for any Distribution
Date, the sum of the Certificate Monthly Interest Amount for such Distribution
Date and the Certificate Interest Carryover Shortfall for such Distribution
Date.
"Certificate Monthly Interest Amount" means, for any Distribution Date,
one month's interest (or, in the case of the first Distribution Date, interest
accrued from and including the Closing Date to but excluding such Distribution
Date) at the Pass-Through Rate on the Certificate Balance on such Distribution
Date (or, in the case of the first Distribution Date, the Original Certificate
Balance), before giving effect to any distributions of principal to the
Certificateholders on such Distribution Date.
"Note Interest Carryover Shortfall" means, for any Distribution Date for
each class of Notes (other than the initial Distribution Date), the excess of
(i) the Note Interest Distribution Amount for the preceding Distribution Date
for such class of Notes, over (ii) the amount in respect of interest that was
actually deposited into the Note Distribution Account in respect of such class
of Notes on such preceding Distribution Date, plus interest on the amount of
interest due but not paid to the 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 Notes.
"Note Interest Distribution Amount" means, for any Distribution Date for
any class of Notes, the sum of (x) the Note Monthly Interest Amount for such
Distribution Date for such class of Notes and (y) the Note Interest Carryover
Shortfall for such Distribution Date for such class of Notes.
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"Note Monthly Interest Amount" means, for any Distribution Date for any
class of Notes, interest accrued during the related Interest Accrual Period at
the applicable Interest Rate on the outstanding principal balance of such class
of Notes on such Distribution Date (or, in the case of the first Distribution
Date, on the Closing Date) before giving effect to any distributions of
principal to the Noteholders on such Distribution Date, calculated on the basis
of a 360-day year consisting of twelve 30-day months.
"Reimbursement Obligations" means the sum of (i) any unreimbursed payments
made by the Insurer under the Insurance Policies and any Insurer Optional
Deposits (to the extent not reimbursed from other amounts available to the
Insurer); (ii) any unpaid premium due and owing on the Insurance Policies; and
(iii) all other amounts due to the Insurer under the Insurance Agreement and the
Indemnification Agreement, together in each case with interest on such amounts,
to the extent not previously paid.
Modification of Contracts
Consistent with its customary servicing practices and procedures, the
Servicer may, in its discretion, arrange with an Obligor to defer, reschedule,
extend or modify the payment schedule of a Contract or otherwise to modify the
terms of a Contract provided that (i) the maturity of such Contract would not
extend beyond the 180th day prior to the Certificate Final Scheduled
Distribution Date and (ii) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sale contract or direct
loan. The Servicer may, in accordance with its customary servicing procedures,
in its good faith judgment, waive any late fees that may be due and payable
under any Contract. Notwithstanding the foregoing, in connection with the
settlement by the Servicer of a defaulted Contract, the Servicer may forgive a
portion of such Contract, if in its discretion it believes that the acceptance
of the settlement proceeds from the related Obligor would result in the Trust's
receiving a greater amount of collections than the Net Liquidation Proceeds that
would result from repossessing and liquidating the related Financed Boat.
Monthly Advances
With respect to each Contract as to which there has been a Payment
Shortfall during the related Due Period (other than a Payment Shortfall arising
from a Contract which has been prepaid in full or which has been subject to a
Relief Act Reduction during the related Due Period), the Servicer shall advance
funds in the amount of such Payment Shortfall (each, a "Monthly Advance"), but
only to the extent that the Servicer, in its good faith judgment, expects to
recover such Monthly Advance from subsequent interest collections on such
Contract made by or on behalf of the Obligor thereunder, or from Net Liquidation
Proceeds or insurance proceeds with respect to such Contract. The Servicer shall
be reimbursed for any Monthly Advance from subsequent interest collections with
respect to such Contract. If the Servicer determines in its good faith judgment
that an unreimbursed Monthly Advance shall not ultimately be recoverable from
subsequent interest collections, the Servicer shall be reimbursed for such
Monthly Advance from collections on all Contracts. In determining whether an
advance is or will be unrecoverable, 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.
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 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
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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%. The "Servicer Payment" is equal on each Distribution Date
to the sum of the reimbursement due to the Servicer for outstanding Monthly
Advances and the Servicing Fee (including unpaid Servicing Fees for past
Distribution Dates). 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 payment on such Distribution Date of accrued and unpaid fees
due to the Insurer, principal and interest payable on the Securities,
Reimbursement Obligations payable to the Insurer and the interest on the Loan.
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.
Rights Upon Event of Termination
As long as an Event of Termination under the Trust Documents remains
unremedied, the Insurer, or if an Insurer Default occurs and is continuing the
Indenture Trustee (or, if no Notes are outstanding, the Owner Trustee) may (and
at the written direction of the holders of Notes evidencing not less than a
majority of the aggregate outstanding principal amount of the Notes (or, if no
Notes are outstanding, the holders of Certificates evidencing not less than a
majority of the Certificate Balance)) will (unless prohibited by applicable
law), terminate all (but not less than all) of the rights and obligations of the
Servicer 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 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 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 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.
Waiver of Past Defaults
Notwithstanding anything to the contrary set forth under the "The Purchase
Agreements and the Trust Documents--Waiver of Past Defaults" in the Prospectus,
so long as no Insurer Default has occurred and is continuing and the Insurance
Policies are in effect, the Insurer may, on behalf of all holders of Securities,
waive any default by the Servicer in the performance of its obligations under
the Sale and Servicing Agreement and its consequences. No such waiver will
impair the Securityholders' rights with respect to subsequent defaults.
Amendment
Notwithstanding anything to the contrary set forth under "The Purchase
Agreements and the Trust Documents--Amendment" in the Prospectus, the Trust
Documents may be amended by the parties thereto and, in the event that such
amendment affects the Indenture Trustee, the Indenture Trustee, and with the
consent of the Insurer (so long as no Insurer Default has occurred and is
continuing and the Insurance Policies are in effect), but 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 Seller, the Company, the Servicer, the Owner Trustee or the Indenture
Trustee; (v) to evidence and provide for the acceptance of the appointment of a
successor trustee with respect to the property owned by the related Trust and
add to or change any provisions as shall be necessary to facilitate
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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 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. Any action specified in clauses (v) and
(vi) shall be taken only upon satisfaction of the Rating Agency Condition. The
Trust Documents may also be amended by the parties thereto, with the consent of
the Insurer (so long as no Insurer Default has occurred and is continuing) and
with the consent of the holders of not less than a majority in principal amount
of such then outstanding Notes and the holders of such Certificates evidencing
not less than a majority of the Certificate Balance 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 Note
or Certificate, the Pass-Through Rate or the Interest Rate.
A "Rating Agency Condition" means the condition that each Rating Agency
shall have notified the Seller, the Servicer, the Issuer and the Insurer (so
long as the Insurance Policies are in effect and no Insurer Default has occurred
and is continuing) in writing that such action shall not result in a downgrade
or withdrawal of the then current rating of the Notes or Certificates without
regard to the Insurance Policies.
Termination
In order to avoid excessive administrative expenses, CITSF will be
permitted at its option to purchase (the "Optional 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), plus the appraised value of any other property
held by the Trust (less Liquidation Expenses) plus all amounts, if any, due to
the Insurer. Exercise of such right will effect early retirement of the
Securities at the unpaid principal amount of the Securities plus any accrued and
unpaid interest thereon at the applicable Interest Rate or Pass-Through Rate;
provided that, unless an Insurer Default has occurred and is continuing, such
action shall not materially adversely affect the interest of the Insurer.
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
Call"). Provided that the Trust receives at least two bids from prospective
purchasers that are considered at the time to be competitive participants in the
market for marine installment sales contracts and the highest bid will result in
sale proceeds sufficient to pay the Servicer Payment, all amounts, if any, owing
to the Insurer and all amounts owing to the holders of Securities, then the
Contracts shall be sold and such sales 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. See "The
Certificates--Redemption," "The Notes--Redemption" and "The Purchase Agreements
and The Trust Documents--Termination" in the Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Certain Federal Tax Consequences with Respect to the Notes
Tax Characterization of the Notes and the Trust. Schulte Roth & Zabel LLP
has advised the Trust that, based on the terms of the Notes and the transactions
relating to the Contracts as set forth herein, the Notes will be treated as debt
for Federal income tax purposes. However, there is no specific authority with
respect to the characterization for Federal income tax purposes of securities
having the same terms as the Notes.
Schulte Roth & Zabel LLP is also of the opinion that, based on the
applicable provisions of the Trust Documents and related documents, for Federal
income tax purposes, (i) the Trust will not be classified as an association
taxable as a corporation and (ii) the Trust will not be treated as a publicly
traded partnership
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taxable as a corporation. If the IRS were to successfully characterize the Trust
as an entity taxable as a corporation for Federal income tax purposes, the
income from the Contracts (reduced by deductions, possibly including interest on
the Notes) would be subject to Federal income tax at corporate rates, which
could reduce the amounts available to make payments on the Notes. Likewise, if
the Trust were subject to state or local income or franchise tax, the amount of
cash available to make payment on the Notes could be reduced.
If, contrary to the opinion of Schulte Roth & Zabel LLP, the IRS
successfully asserted that the Notes were not debt for Federal income tax
purposes, the Notes might be treated as equity interests in the Trust. If so,
and if the Trust were taxable as a corporation with the adverse consequences
described above, the taxable corporation would not be able to deduct interest on
the Notes. The remainder of this discussion assumes that the Notes will be
treated as debt and that the Trust will not be taxable as a corporation.
Interest Income on the Notes. The stated interest on the Notes will be
taxable to a Noteholder as ordinary income when received or accrued in
accordance with such Noteholder's method of tax accounting. Some or all of the
Notes may be issued with "original issue discount" within the meaning of Section
1273 of the Code ("OID"). The amount of OID on the Notes will equal the
difference between the issue price and the principal amount of the Notes unless
the OID is less then a statutorily defined de minimis amount.
OID will accrue to the Noteholders over the life of the Notes, taking
account of a reasonable prepayment assumption, based on a constant yield to
maturity method, using semi-annual compounding, and properly adjusted for actual
prepayments on the Contracts. The portion of OID that accrues during the time a
Noteholder owns the Notes (i) constitutes interest includable in the
Noteholder's gross income for federal income tax purposes and (ii) is added to
the Noteholder's tax basis for purposes of determining gain or loss on the
maturity, redemption, prior sale, or other disposition of the Notes. Thus, the
effect of OID is to increase the amount of taxable income above the actual
interest payments during the life of the Notes.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any OID, market discount and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of any bond premium previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Subject to the rules of the Code concerning market discount on the Notes,
any such gain or loss will be capital gain or loss if the Note was held as a
capital asset. Capital losses generally may be deducted to the extent the
Noteholder has capital gains for the 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 is a "related
person" within the meaning of the Code and (ii) provides the person otherwise
required to withhold U.S. tax with an appropriate statement, signed under
penalties of perjury, certifying that the beneficial owner of the Note is a
foreign person and providing the foreign person's name and address. If the
information provided in the statement changes, the foreign person must so inform
the person otherwise required to withhold U.S. tax within 30 days of such
change. The statement generally must be provided in the year a payment occurs or
in either of the two preceding years. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the withholding agent. In the
case of payments made after December 31, 1999, unless the clearing organization
or financial institution is a foreign entity that has entered into a withholding
agreement with the IRS, the signed statement must be accompanied by a Form
W-8BEN 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.
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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 an appropriate IRS form indicating that
the interest, gain or income is effectively connected with the conduct of a
trade or business in the United States, such 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).
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
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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 payments received from
the Insurer. The Trust's deductions will consist primarily of interest accruing
with respect to the Notes, servicing, insurance 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 the Insurer) and might result in such
holder having net taxable income that exceeds the amount of cash actually
distributed to such holder over the life of the Trust. In addition, Section 68
of the Code provides that the amount of certain itemized deductions otherwise
allowable for the taxable year of an individual whose adjusted gross income
exceeds an inflation-adjusted threshold amount specified in the Code ($126,600
for taxable years beginning in 1999, in the case of a joint return) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over the
specified threshold amount or (ii) 80% of the amount of itemized deductions
otherwise allowable for such taxable year.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each of the Contracts, the
Trust might be required to incur additional expense, but it is believed that
there would not be a material adverse effect on Certificateholders.
Market Discount. To the extent that the Contracts are purchased by the
Trust for a price that is less than the aggregate stated redemption price at
maturity of the Contracts, the Trust must account for "market discount" on the
Contracts pursuant to Section 1276 of the Code. Any market discount will be
accounted for each of the Contracts on an individual basis, and the Trust will
make an election to calculate such market discount as it economically accrues.
Any income resulting from the accrual of market discount will be allocated to
the Certificateholders as described above.
Original Issue Discount and Bond Premium. It is believed that the
Contracts were not and will not be issued with original issue discount or at a
premium, and, therefore, the Trust should not have original issue discount
income or amortizable bond premium.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of a Certificate in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificate sold.
A Certificateholder's tax basis in a Certificate will generally equal his cost
increased by his share of Trust income that is includable in his gross income
and decreased by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificate and the amount realized on a
sale of a Certificate would include the holder's share of the Notes and other
liabilities of the Trust. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
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Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a pro rata portion of such aggregate tax basis to the Certificates sold
(rather than maintaining a separate tax basis in each Certificate for purposes
of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the Contracts would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid these
special reporting requirements, the Trust will elect to include any such market
discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed miscellaneous itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificates.
Allocations Between Transferor and Transferee. In general, the Trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a holder purchasing Certificates may
be allocated tax items (which will affect the tax liability and tax basis of the
holder) attributable to periods before the actual purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or is allowed only for
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Affiliated
Owner is authorized to revise the 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
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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 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.
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ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each, a "Benefit Plan"), from
engaging in certain transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to such
Benefit Plan. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such persons.
The 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
Subject to the considerations discussed below and under "ERISA
Considerations" in the Prospectus, a Benefit Plan may purchase 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.
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PLAN OF DISTRIBUTION
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES AND THE IMPOSITION OF PENALTY BIDS.
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") among CIT, CITSF, the Company and
Goldman, Sachs & Co., as representative of the serveral underwriters (the
"Underwriters"), the Company has agreed to sell to the Underwriters, and the
Underwriters have severally agreed to purchase, the respective principal amount
of the Certificates and the Notes offered hereby, as set forth opposite their
respective names below:
Class A-1 Notes
Principal
Amount
------------
Goldman, Sachs & Co. ........ $ 65,000,000
Bear, Stearns & Co. Inc. .... $ 65,000,000
Chase Securities Inc. ....... $ 65,000,000
First Union Capital Markets.. $ 65,000,000
Salomon Smith Barney ........ $ 65,000,000
------------
$325,000,000
============
Class A-2 Notes
Principal
Amount
------------
Goldman, Sachs & Co. ........ $ 35,800,000
Bear, Stearns & Co. Inc. .... $ 35,800,000
Chase Securities Inc. ....... $ 35,800,000
First Union Capital Markets.. $ 35,800,000
Salomon Smith Barney ........ $ 35,800,000
------------
$179,000,000
============
Class A-3 Notes
Principal
Amount
------------
Goldman, Sachs & Co. ........ $ 23,400,000
Bear, Stearns & Co. Inc. .... $ 23,400,000
Chase Securities Inc. ....... $ 23,400,000
First Union Capital Markets.. $ 23,400,000
Salomon Smith Barney ........ $ 23,400,000
------------
$117,000,000
============
Class A-4 Notes
Principal
Amount
------------
Goldman, Sachs & Co. ........ $ 20,626,800
Bear, Stearns & Co. Inc. .... $ 20,626,800
Chase Securities Inc. ....... $ 20,626,800
First Union Capital Markets.. $ 20,626,800
Salomon Smith Barney ........ $ 20,626,800
------------
$103,134,000
============
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Certificates
Principal
Amount
-----------
Goldman, Sachs & Co. ......... $ 2,180,000
Bear, Stearns & Co. Inc. ..... $ 2,180,000
Chase Securities Inc. ........ $ 2,180,000
First Union Capital Markets... $ 2,180,000
Salomon Smith Barney ......... $ 2,180,000
-----------
$10,900,000
===========
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.
Selling Reallowance
Class Concession Discount
----- ---------- -----------
A-1 .................. % %
A-2 .................. % %
A-3 .................. % %
A-4 .................. % %
Certificates.......... % %
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.
Until the distribution of the Notes and the Certificates is completed,
rules of the Commission may limit the ability of the Underwriters and certain
selling group members to bid for and purchase the Notes and the Certificates. As
an exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Notes and the Certificates. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Notes and the Certificates.
If the Underwriters create a short position in the Notes or the
Certificates in connection with this offering (i.e., they sell more Notes or
Certificates than are set forth on the cover page of this Prospectus), the
Underwriters may reduce that short position by purchasing Notes or Certificates,
as the case may be, in the open market.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase Notes or
Certificates in the open market to reduce the Underwriters' short position or to
stabilize the price of the Notes or the Certificates, as the case may be, they
may reclaim the amount of the selling concession from any Underwriter or selling
group member who sold those Notes or Certificates, as the case may be, as part
of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
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None of the Company, CITSF or any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Notes or the
Certificates. In addition, none of the Company, CITSF or any of the Underwriters
makes any representation that the Underwriters will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
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 Notes that the Notes be rated
"AAA" by Standard & Poor's, 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 Certificates that the
Certificates be rated at least "AAA" by S&P and "Aaa" by Moody's. The ratings of
the Securities will be based primarily on the ratings by the Rating Agencies of
the Insurer. The ratings of the Notes may also be based on the Contracts, the
Reserve Account, and the terms of the Securities, including the subordination
provided by the Certificates. The ratings of the Certificates may also be based
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
pursuant to an Auction Call or Optional Purchase.
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 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.
EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and
Subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1997, incorporated by
reference in this Prospectus Supplement, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth
& Zabel LLP, New York, New York and Robert S. Fisher, Esq., Tenafly, New Jersey,
for the Trust by Richards, Layton & Finger, P.A., Wilmington, Delaware, for the
Insurer by Shaw Pittman Potts & Trowbridge 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.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Notes of CIT
Marine Trust 1999-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
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include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date, on the basis of the
actual number of days in such accrual period and year assumed to consist of 360
days. For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. Payment
will then be made by the respective Depository of the DTC Participant's account
against delivery of the Global Securities. After settlement has been completed,
the Global Securities will be credited to the respective clearing system and by
the clearing system, in accordance with its usual procedures, to the Cedel
Participant's or Euroclear Participant's account. The securities credit will
appear the next day (European time) and the cash debt will be back-valued to,
and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Cedel or Euroclear cash debt will be valued instead as of the actual
settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depository for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depository, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases Cedel or Euroclear
will instruct the respective Depository, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
payment to and excluding the settlement date on the basis of the actual number
of days in such accrual period and a year assumed to consist of 360 days. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. The payment will
then be reflected in the account of the Cedel Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the Cedel
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
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:
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(i) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary
procedures;
(ii) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the
Global Securities sufficient time to be reflected in their Cedel or
Euroclear account in order to settle the sale side of the trade; or
(iii) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is
at least one day prior to the value date for the sale to the Cedel
Participant or Euroclear Participant.
Certain U.S. Federal Withholding Taxes and Documentation Requirements
A beneficial owner of Global Securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. Persons,
unless (i) each clearing system, bank or other financial institution that holds
customer's securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owners take one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8 or Form W-8BEN). Beneficial
owners of Global Securities that are non-U.S. Persons can obtain a complete
exemption from the withholding tax by filing the appropriate form.
Exemption for non-U.S. Persons with effectively connected income (Form
4224 or Form W-8ECI). 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 the appropriate form.
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001 or Form W-8BEN). 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 the appropriate form.
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 Global
Securities 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).
Treasury regulations which will be applicable to payments made after
December 31, 1999 (with certain transition rules), provide for the unification
and simplification of certain current certification procedures. Pursuant to the
new regulations, while a beneficial owner will still be required to submit a
Form W-8BEN 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-8BEN 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) an estate the income
of which is includable in gross income for United States tax purposes,
regardless of its source or (iv) a trust with respect to which a court within
the United States is able to exercise primary supervision over its
administration and one or more U.S. Persons have the authority to control all of
its substantial decisions. This summary of documentation requirements does not
deal with all aspects of U.S. Federal income tax withholding that may be
relevant to foreign holders of the Global Securities. Investors are advised to
consult their own tax advisors for specific tax advice concerning their holding
and disposing of the Global Securities.
S-64
<PAGE>
INDEX TO DEFINED TERMS
Additional Certificate Percentage ...................................... 42
Additional Note Percentage ............................................. 37
Additional Principal Distribution Amount ............................... 37
Affiliated Owner ....................................................... 40
Auction Call ........................................................... 7, 52
Available Amount ....................................................... 49
Available Reserve Amount ............................................... 45
Benefit Plan ........................................................... 58
Business Day ........................................................... 35
Certificate Additional Principal Distribution Amount ................... 42
Certificate Balance .................................................... 29
Certificate Final Scheduled Distribution Date .......................... 6
Certificate Insurance Policy ........................................... 7
Certificate Interest Carryover Shortfall ............................... 49
Certificate Interest Distribution Amount ............................... 49
Certificate Monthly Interest Amount .................................... 49
Certificate Pool Factor ................................................ 30
Certificate Primary Principal Distribution Amount ...................... 42
Certificates ........................................................... 4, 40
CIT .................................................................... 39
CITSF .................................................................. 4
Class A-1 Note Final Scheduled Distribution Date ....................... 6
Class A-1 Notes ........................................................ 4
Class A-2 Note Final Scheduled Distribution Date ....................... 6
Class A-2 Notes ........................................................ 4
Class A-3 Note Final Scheduled Distribution Date ....................... 6
Class A-3 Notes ........................................................ 4
Class A-4 Note Final Scheduled Distribution Date ....................... 6
Class A-4 Notes ........................................................ 4
CMAC ................................................................... 33
Collateralization Shortfall ............................................ 37
Collection Account ..................................................... 9
Company ................................................................ 4
Contract Files ......................................................... 15
Contract Pool .......................................................... 16
Contracts .............................................................. 7, 16
Current Overcollateralization Amount ................................... 37
Definitive Certificates ................................................ 41
Distribution Date ...................................................... 4, 35
Due Period ............................................................. 5, 35
ERISA .................................................................. 58
Excess Collections ..................................................... 5, 45
Financed Boats ......................................................... 7, 16
GAAP ................................................................... 34
Global Securities ...................................................... 62
Guaranteed Security Distributions ...................................... 43
Indemnification Agreement .............................................. 39
Indenture .............................................................. 35
Indenture Trustee ...................................................... 35
Initial Pool Balance ................................................... 5, 38
Insurance Agreement Trigger Events ..................................... 39
Insurance Policies ..................................................... 7
Insurer ................................................................ 7, 33
Insurer Default ........................................................ 36
Insurer Optional Deposit ............................................... 43
Interest Accrual Period ................................................ 35
Issuer ................................................................. 15
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<PAGE>
Lender ................................................................. 8
Liquidated Contract .................................................... 49
Liquidation Basis ...................................................... 32
Liquidation Expenses ................................................... 49
Loan ................................................................... 8, 45
Minimum Reserve Amount ................................................. 8, 46
Monthly Advance ........................................................ 9, 50
Moody's ................................................................ 61
Net Liquidation Proceeds ............................................... 48
Net Losses ............................................................. 32
Note Additional Principal Distribution Amount .......................... 37
Note Insurance Policy .................................................. 7
Note Interest Carryover Shortfall ...................................... 49
Note Interest Distribution Amount ...................................... 49
Note Monthly Interest Amount ........................................... 50
Note Owner ............................................................. 35
Note Pool Factor ....................................................... 30
Note Primary Principal Distribution Amount ............................. 37
Notes .................................................................. 4
Obligor ................................................................ 7
OID .................................................................... 53
Oklahoma Tax Counsel ................................................... 57
Optional Purchase ...................................................... 6, 52
Order .................................................................. 44
Original Certificate Balance ........................................... 15
Owner Trustee .......................................................... 15
Paid-Ahead Period ...................................................... 24
Paid-Ahead Simple Interest Contract .................................... 24
Pass-Through Rate ...................................................... 41
Payment Shortfall ...................................................... 9
Pool Balance ........................................................... 5
Prepayment Assumption .................................................. 25
Prepayment Table ....................................................... 25
prepayments ............................................................ 23
Primary Certificate Percentage ......................................... 42
Primary Note Percentage ................................................ 37
Primary Principal Distribution Amount .................................. 37
Principal Carryover Shortfall .......................................... 37
Principal Prepayment ................................................... 48
PTCE ................................................................... 58
Purchase Agreement ..................................................... 17
Purchase Price ......................................................... 49
Rating Agencies ........................................................ 10
Rating Agency .......................................................... 61
Rating Agency Condition ................................................ 52
Receipt ................................................................ 44
Received ............................................................... 44
Record Date ............................................................ 5
Reimbursement Obligations .............................................. 50
Repurchased Contract ................................................... 47
Reserve Account ........................................................ 8, 45
S&P .................................................................... 61
Sale and Servicing Agreement ........................................... 17
SAP .................................................................... 34
Securities ............................................................. 4
Seller ................................................................. 4
Selling Trust .......................................................... 4, 15
Servicer ............................................................... 4
Servicer Payment ....................................................... 51
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<PAGE>
Servicing Fee ......................................................... 50
Servicing Fee Rate .................................................... 50
Simple Interest Contract .............................................. 17
Specified Reserve Amount .............................................. 8, 46
Stated Principal Balance .............................................. 48
Stepdown Date ......................................................... 5, 37
Targeted Overcollateralization Amount ................................. 9, 37
Transaction Documents ................................................. 39
Trust ................................................................. 4, 15
Trust Agreement ....................................................... 15, 40
U.S. Person ........................................................... 64
Underwriters .......................................................... 59
Underwriting Agreement ................................................ 59
S-67
<PAGE>
PROSPECTUS
CIT MARINE TRUSTS
ASSET-BACKED NOTES
ASSET-BACKED CERTIFICATES
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
THE CIT GROUP/SALES FINANCING, INC., SERVICER
The Asset-Backed Certificates (the "Certificates") and the Asset-Backed
Notes (the "Notes" and, collectively with the Certificates, the "Securities")
described herein may be sold from time to time in one or more series, in
amounts, at prices and on the terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
Each series of Securities will include either (i) one or more classes of
Certificates, (ii) one or more classes of Notes or (iii) one or more classes of
Certificates and one or more classes of Notes, as set forth in the related
Prospectus Supplement.
Each series of Securities will be issued by a trust (a "Trust") to be
formed with respect to such series by The CIT Group Securitization Corporation
II (the "Company" or the "Seller").
The assets of each Trust will primarily include a pool of marine
installment sale contracts and direct loans (the "Initial Contracts") secured by
the new and used boats, boat motors and boat trailers financed thereby (the
"Initial Financed Boats"), certain monies received under the Initial Contracts
on and after the Initial Cut-off Date specified in the related Prospectus
Supplement (the "Initial Cut-off Date"), an assignment of the security interests
in the Initial Financed Boats, the proceeds from claims under certain insurance
policies in respect of individual Initial Financed Boats or the related Obligors
and certain other property, as more fully described herein and in the related
Prospectus Supplement. In addition, if so specified in the related Prospectus
Supplement, the assets of each Trust will include specified credit or cash flow
enhancement and monies on deposit in one or more trust accounts, which may
include a Pre-Funding Account which would be used to purchase from time to time
additional marine installment sale contracts and direct loans (the "Subsequent
Contracts" and, together with the Initial Contracts, the "Contracts") secured by
the new and used boats, boat motors and boat trailers financed thereby (the
"Subsequent Financed Boats" and, together with the Initial Financed Boats, the
"Financed Boats"), certain monies received under the Subsequent Contracts on and
after the related subsequent cut-off dates (each, a "Subsequent Cut-off Date"),
an assignment of the security interests in the Subsequent Financed Boats and
proceeds from claims under certain insurance policies in respect of individual
Subsequent Financed Boats or the related Obligors, to the extent specified in
the related Prospectus Supplement.
(Continued on following page)
A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY CAN BE FOUND ON PAGE 22
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 September 29, 1998.
<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.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES.
<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, Room 1024, N.W., Washington, D.C. 20549, and
the regional offices of the Commission located as follows: Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and New
York Regional Office, Seven World Trade Center, Suite 1300, 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.
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to the Securities to be offered
hereunder will, among other things, set forth with respect to such Securities,
as appropriate: (i) a description of the series and class or classes of Notes
and the series and class or classes of Certificates and the respective Interest
Rate to be paid to each such class of Notes and Pass-Through Rate or method of
determining the amount of interest, if any, to be passed through to each such
class of Certificates, (ii) the initial aggregate principal amount of each class
of Notes, the initial aggregate Certificate Balance of each class of
Certificates, Distribution Dates relating to such class or series and, if
applicable, the initial and final scheduled Distribution Dates for each series
and class; (iii) information as to the assets comprising the Trust, including
the general characteristics of the marine installment sale contracts and direct
loans included therein and, if applicable, the assignment of security interests
in the Financed Boats, specified credit or cash flow enhancement and all monies
on deposit in any specified cash account, the proceeds from claims under certain
insurance policies and certain rights under the Trust Documents; (iv) the
circumstances, if any, under which the Trust may be subject to early
termination; (v) the method used to calculate the amount of principal, if any,
to be distributed with respect to each class of Notes and Certificates; (vi) the
order of application of distributions to each of the classes within such series,
whether sequential, pro rata, or otherwise; (vii) additional information with
respect to the plan of distribution of such Securities; (viii) the aggregate
original percentage ownership interest in the Trust to be evidenced by each
class of Certificates; (ix) information as to the nature and extent of
subordination with respect to any class of Notes or Certificates that is
subordinate in right of payment to any other class of Notes or Certificates; and
(x) information as to the Seller, the Servicer, CIT, the Owner Trustee and the
Indenture Trustee.
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.
3
<PAGE>
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.
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,
1997 together with the report of KPMG Peat Marwick LLP, independent
certified public accountants;
(b) CIT's Quarterly Report on Form 10-Q for the quarters ended March
31, 1998 and June 30, 1998; and
(c) CIT's Current Reports on Form 8-K dated January 15, 1998,
January 28, 1998, March 24, 1998, April 22, 1998, June 5, 1998, July 22,
1998, July 29, 1998 and August 27, 1998.
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>
The Trustee on behalf of the Trust will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by regerence into the information that
this Prospectus incorporates). Such requests should be directed to the corporate
trust office of the Trustee specified in the accompanying Prospectus Supplement.
----------
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the securities covered by such Prospectus Supplement,
whether or not participating in the distribution thereof, may be required to
deliver such Prospectus Supplement and this Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus and Prospectus Supplement when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
5
<PAGE>
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SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Securities contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of each
series of Securities. Certain capitalized terms used in the Summary are defined
elsewhere in this Prospectus and in the related Prospectus Supplement. Reference
is made to the "Index of Principal Terms" for the location herein of defined
terms.
Issuer...................... With respect to each series of Securities, a trust
(the "Trust" or the "Issuer"), will be formed by
the Seller pursuant to either a Pooling and
Servicing Agreement among the Seller, the Servicer
and the trustee specified in the related
Prospectus Supplement, or a Trust Agreement among
the Seller, the owner trustee specified in the
related Prospectus Supplement and certain other
parties as specified in the related Prospectus
Supplement.
Seller...................... The CIT Group Securitization Corporation II (the
"Company" or the "Seller"), a wholly-owned,
limited purpose subsidiary of The CIT Group, Inc.
("CIT"). If and to the extent specified in the
related Prospectus Supplement, a trust of which a
special purpose affiliate of CIT is the depositor
(a "Selling Trust") may also be a "Seller." Except
if and to the extent specified in the related
Prospectus Supplement, neither CIT nor any of its
affiliates, including the Company, The CIT
Group/Sales Financing, Inc. ("CITSF") and any
Selling Trust, has guaranteed, insured or is
otherwise obligated with respect to the
Securities. See "Risk Factors--Limited
Obligations."
Servicer.................... The CIT Group/Sales Financing, Inc. (in such
capacity referred to herein as the "Servicer"), a
wholly-owned subsidiary of CIT. The Servicer will
be responsible for managing, administering,
servicing and making collections on the Contracts
held by each Trust.
Owner Trustee............... The Trustee pursuant to a Pooling and Servicing
Agreement or the Owner Trustee pursuant to a Trust
Agreement, in each case as specified in the
related Prospectus Supplement. The Trustee or
Owner Trustee for any Trust will be referred to in
this Prospectus as the "Owner Trustee." See "The
Trusts--The Trustee(s)."
Indenture Trustee........... With respect to any series of Securities including
one or more classes of Notes, the Indenture
Trustee specified in the related Prospectus
Supplement (the "Indenture Trustee"). The Owner
Trustee and the Indenture Trustee for a series are
referred to herein collectively as the "Trustees."
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Risk Factors................ Certain potential risks and other considerations
are particularly relevant to a decision to invest
in any securities sold hereunder. See "Risk
Factors."
The Certificates............ Each series of Asset-Backed Certificates (the
"Certificates") will be issued pursuant to the
related Trust Documents. The Certificates will
represent fractional undivided interests in the
related Trust and/or the residual interest in the
related Trust, and will have the Original
Certificate Balance, if any, specified in the
related Prospectus Supplement. If specified in the
related Prospectus Supplement, the Company or one
of its affiliates will own the entire beneficial
interest in the Trust. See "The
Certificates--General."
Payments in respect of the Certificates will be
subordinated to payments on the Notes of the same
series to the extent described in the related
Prospectus Supplement. See "The
Certificates--General."
The Certificates will be issued in the minimum
denominations and integral multiples in excess
thereof specified in the related Prospectus
Supplement; provided, however, that one
Certificate of each series may be issued in a
denomination other than such integral multiple
such that the applicable Affiliated Owner, if any,
specified in the related Prospectus Supplement
(the "Affiliated Owner") may be issued at least
the portion of the Original Certificate Balance
specified in the related Prospectus Supplement.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates will be
issued in book-entry form only. Unless otherwise
specified in the related Prospectus Supplement,
persons ("Certificate Owners") acquiring
beneficial interests in the Certificates will hold
their interests through The Depository Trust
Company ("DTC"). Definitive Certificates will be
issued only under the limited circumstances
described herein or in the related Prospectus
Supplement. Unless and until Certificates of a
class are issued in definitive form, all
references herein to distributions, notices,
reports and statements to and to actions by and
effects upon the related Certificateholders will
refer to the same actions and effects with respect
to DTC or Cede & Co. ("Cede"), as the case may be,
for the benefit of the related Certificate Owners
in accordance with the DTC procedures. See
"Certain Information Regarding the
Securities--Book-Entry Registration" and
"--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of Certificates
will have a stated Certificate Balance (as defined
in the related Prospectus
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7
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Supplement) and will accrue interest on such
Certificate Balance at a specified rate (with
respect to each class of Certificates, the
"Pass-Through Rate"). Each class of Certificates
may have a different Pass-Through Rate, which may
be a fixed, variable or adjustable Pass-Through
Rate, or any combination of the foregoing. The
related Prospectus Supplement will specify the
Pass-Through Rate for each class of Certificates,
or the initial Pass-Through Rate and the method
for determining subsequent changes to the
Pass-Through Rate.
A series may include two or more classes of
Certificates which differ as to timing of
distributions, sequential order, priority of
payment, seniority, allocation of losses,
Pass-Through Rate or amount of distributions in
respect of principal or interest, or as to which
distributions in respect of principal or interest
on any class may or may not be made upon the
occurrence of specified events or on the basis of
collections from designated portions of the
Contract Pool. In addition, a series may include
one or more classes of Certificates ("Stripped
Certificates") entitled to (i) distributions in
respect of principal with disproportionate,
nominal or no interest distributions, or (ii)
interest distributions, with disproportionate,
nominal or no distributions in respect of
principal.
If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are sold
by the Indenture Trustee (or, if the series did
not include Notes or the Notes have been paid in
full and the Indenture has been discharged in
accordance with its terms, the Owner Trustee) on
the terms and conditions described under "The
Purchase Agreements and the Trust
Documents--Termination," Certificate Owners may
receive an amount in respect of the Certificates
as specified in the related Prospectus Supplement.
In addition, if the related Prospectus Supplement
provides that the property of a Trust will include
a Pre-Funding Account (as such term is defined in
the related Prospectus Supplement, the
"Pre-Funding Account"), Certificate Owners may
receive a distribution in respect of principal on
or immediately following the end of the funding
period specified in the related Prospectus
Supplement (the "Funding Period") in an amount and
manner specified in the related Prospectus
Supplement.
The Notes................... Each series of Asset-Backed Notes (the "Notes"
and, together with the Certificates, the
"Securities") will represent obligations of a
Trust secured by assets of such Trust (other than
the accounts or other property specified in the
related Prospectus Supplement). See "The
Notes--General."
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The Notes will be issued pursuant to an Indenture
between the Issuer and the Indenture Trustee (the
"Indenture"). See "The Notes--General."
The Notes will be issued in the minimum
denominations and integral multiples in excess
thereof specified in the related Prospectus
Supplement; provided, however, that one Note of
each class of each series may be issued in a
denomination other than such integral multiple.
Unless otherwise specified in the related
Prospectus Supplement, the Notes will be issued in
book-entry form only. Unless otherwise specified
in the related Prospectus Supplement, persons
("Note Owners") acquiring beneficial interests in
the Notes will hold their interests through DTC in
the United States or Cedel Bank, societe anonyme
("Cedel") or the Euroclear System ("Euroclear") in
Europe, and Definitive Notes will be issued only
under the limited circumstances described herein
or in the related Prospectus Supplement. Unless
and until Notes of a class are issued in
definitive form, all references herein to
distributions, notices, reports and statements to
and to actions by and effects upon the related
Noteholders will refer to the same actions and
effects with respect to DTC or Cede, as the case
may be, for the benefit of the related Note Owners
in accordance with the DTC procedures. See
"Certain Information Regarding the
Securities--Book-Entry Registration" and
"--Definitive Securities."
Unless otherwise specified in the related
Prospectus Supplement, each class of Notes will
have a stated principal amount and will bear
interest at a specified rate or rates (with
respect to each class of Notes, the "Interest
Rate"). Each class of Notes may have a different
Interest Rate, which may be a fixed, variable or
adjustable Interest Rate, or any combination of
the foregoing. The related Prospectus Supplement
will specify the Interest Rate and the method for
determining subsequent changes to the Interest
Rate.
A series may include two or more classes of Notes
which differ as to the timing and priority of
payment, seniority, allocations of loss, Interest
Rate or amount of payments of principal or
interest, or as to which payments of principal may
or may not be made upon the occurrence of
specified events or on the basis of collections
from designated portions of the Contract Pool. In
addition, a series may include one or more classes
of Notes ("Stripped Notes") entitled to (i)
principal payments with disproportionate, nominal
or no interest payments or (ii) interest payments
with disproportionate, nominal or no principal
payments.
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If CITSF exercises its option to purchase the
Contracts of a Trust or if the Contracts are sold
by the Indenture Trustee (or, if the series did
not include Notes or the Notes have been paid in
full and the Indenture has been discharged in
accordance with its terms, the Owner Trustee) on
the terms and conditions described under "The
Purchase Agreements and the Trust
Documents--Termination," the outstanding Notes, if
any, of such series will be redeemed as set forth
in the related Prospectus Supplement. In addition,
if the related Prospectus Supplement provides that
the property of a Trust will include a Pre-Funding
Account, all or certain classes of the outstanding
Notes, if any, of such series will be subject to
partial redemption on or immediately following the
end of the Funding Period in an amount and manner
specified in the related Prospectus Supplement.
Property of a Trust......... The property of a Trust will primarily include (i)
a pool (the "Contract Pool") of marine installment
sale contracts and direct loans (the "Initial
Contracts") secured by the new and used boats,
boat motors and boat trailers financed thereby
(the "Initial Financed Boats"), (ii) certain
monies received under the Initial Contracts on and
after the Initial Cut-off Date specified in the
related Prospectus Supplement (the "Initial
Cut-off Date"), (iii) an assignment of the
security interests in the Initial Financed Boats,
(iv) the Collection Account and the Paid-Ahead
Account, if any, including all investments
therein, all income from the investment of funds
therein and all proceeds thereof, certain other
accounts and the proceeds thereof and certain
other rights under the Trust Documents specified
in the related Prospectus Supplement, and (v) the
proceeds from claims under certain insurance
policies in respect of individual Initial Financed
Boats or the related Obligors. In addition, if so
specified in the related Prospectus Supplement,
the property of a Trust will include specified
credit or cash flow enhancement and monies on
deposit in a Pre-Funding Account to be established
with the Indenture Trustee or the Owner Trustee,
which will be used to purchase Subsequent
Contracts from the Seller from time to time during
the Funding Period, as well as any Subsequent
Contracts so purchased. See "The Trust Property."
If and to the extent provided in the related
Prospectus Supplement, a Trust will be obligated
to purchase from the Seller (subject to the
satisfaction of certain conditions described in
the applicable Trust Documents) from time to time
during the Funding Period, from monies on deposit
in the Pre-Funding Account, additional marine
installment sale contracts and direct
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loans (the "Subsequent Contracts" and, together
with the Initial Contracts, the "Contracts")
secured by the new and used boats, boat motors and
boat trailers financed thereby (the "Subsequent
Financed Boats" and, together with the Initial
Financed Boats, the "Financed Boats"), certain
monies received under the Subsequent Contracts on
and after the related Subsequent Cut-off Dates
(specified in the related Prospectus Supplement),
an assignment of the security interests in the
Subsequent Financed Boats, and proceeds from
claims under certain insurance policies in respect
of individual Subsequent Financed Boats or the
related Obligors. It is expected that the
Subsequent Contracts will have an aggregate
principal balance approximately equal to the
Pre-Funded Amount on the related Closing Date.
CITSF will be obligated to repurchase Contracts (a
"Repurchased Contract") upon the occurrence of
certain breaches of representations and warranties
(a "Repurchase Event"). See "The Purchase
Agreements and the Trust Documents--Sale and
Assignment of the Contracts" and "--Servicing
Procedures."
The Contracts............... The property of a Trust will consist primarily of
marine installment sale contracts for boats
originated by boat dealers ("Dealers") and
acquired by CITSF or The CIT Group/Consumer
Finance, Inc. (NY) ("CITCF-NY") or other
affiliates of CITSF and marine loans originated
directly by CITSF or one of its affiliates or
acquired by CITSF or one of its affiliates from
unaffiliated third parties. On or prior to the
date of issuance of a series of the Securities
(the "Closing Date"), CITCF-NY will sell certain
contracts that will constitute a portion of the
Initial Contracts to CITSF pursuant to a purchase
agreement, and CITSF will sell the Initial
Contracts to the Company pursuant to a purchase
agreement (the "Purchase Agreement"), and the
Company (and, if and to the extent specified in
the related Prospectus Supplement, a Selling
Trust) will sell the Initial Contracts to a Trust
pursuant to the Trust Documents. If and to the
extent specified in the related Prospectus
Supplement, CITSF or the Seller or one of their
respective affiliates may retain the right to
receive a portion of the interest accruing on some
or all of the Contracts sold to a Trust. See "The
Purchase Agreements and the Trust Documents--Sale
and Assignment of the Contracts."
The Contracts will generally be prepayable at any
time without penalty to the purchaser of the
related Financed Boats, the borrower under a loan
contract or other person or persons who are
obligated to make payments under the Contract
(each, an "Obligor"). The related Prospectus
Supplement will contain certain information
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with respect to each Contract Pool as of the
Initial Cut-off Date or such other date specified
therein, including the proportions of each type of
Financed Boats, the weighted average annual
percentage rate and the weighted average remaining
maturity of the Contracts.
If and to the extent specified in the related
Prospectus Supplement, from time to time during
the Funding Period, CITSF will be obligated to
sell, and the Company will be obligated to
purchase, pursuant to a purchase agreement (the
"Subsequent Purchase Agreement") subject to the
satisfaction of certain conditions described
therein, Subsequent Contracts at a purchase price
which, unless otherwise specified in the related
Prospectus Supplement, will be equal to the
aggregate principal amounts thereof as of the
first day in the related month of transfer
designated by CITSF and the Company (each, a
"Subsequent Cut-off Date"). A portion of such
Subsequent Contracts may be acquired by CITSF from
CITCF-NY or other affiliates of CITSF. Pursuant to
one or more subsequent transfer agreements (each,
a "Subsequent Transfer Agreement") between the
Company and the related Trust, and subject to the
satisfaction of certain conditions described
therein, the Company will in turn sell the
Subsequent Contracts to such Trust at a purchase
price equal to the amount paid by the Company to
CITSF for such Subsequent Contracts, which
purchase price shall be paid from monies on
deposit in the Pre-Funding Account. Subsequent
Contracts will be transferred from CITSF to the
Company and from the Company to such Trust on the
Business Day specified by CITSF and the Company
during the month in which the related Subsequent
Cut-off Date occurs (each, a "Subsequent Transfer
Date").
Pre-Funding Account......... If the Prospectus Supplement for a series of
Securities specifies that a portion of the
proceeds of the offering will be deposited in a
Pre-Funding Account, the Pre-Funding Account will
be maintained as an Eligible Account, which
account may be maintained with the Owner Trustee
or the Indenture Trustee, and the funds on deposit
therein will be invested solely in Permitted
Investments (as defined in the related Prospectus
Supplement) that mature not later than one
Business Day prior to the next succeeding
Distribution Date, until such funds are applied
during the Funding Period to pay to the Company
the purchase price for Subsequent Contracts. See
"The Purchase Agreements and the Trust
Documents--Accounts." Monies on deposit in the
Pre-Funding Account will not be available to cover
losses on 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
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Prospectus Supplement (the "Pre-Funded Amount").
The Pre-Funded Amount will not exceed one-third of
the sum of the Original Certificate Balance and
the initial principal amount of the Notes. Unless
otherwise specified in the related Prospectus
Supplement, the "Funding Period" will be the
period from the Closing Date until the earliest to
occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of
investment earnings) is less than $100,000, (ii)
the date on which an Event of Default occurs under
the Indenture (if any), (iii) the date on which an
Event of Termination occurs under the Trust
Documents, (iv) the insolvency of the Company,
CITSF, CITCF-NY or CIT, or (v) the close of
business on the date specified in the related
Prospectus Supplement (which date will occur in
the third calendar month after the month in which
the Closing Date occurred). Unless otherwise
specified in the related Prospectus Supplement,
during the Funding Period, on one or more
Subsequent Transfer Dates, the Pre-Funded Amount
will be applied to purchase Subsequent Contracts
from the Company. Unless otherwise specified in
the related Prospectus Supplement, the Company
expects that the Pre-Funded Amount will be reduced
to less than $100,000 by the end of the Funding
Period, although no assurance can be given that
this will in fact occur. Unless otherwise
specified in the related Prospectus Supplement,
any portion of the Pre-Funded Amount remaining on
deposit in the Pre-Funding Account at the end of
the Funding Period will be payable as principal to
Noteholders and Certificateholders in accordance
with the Pre-Funded Percentage on the first
Distribution Date thereafter or, if the end of the
Funding Period is on a Distribution Date, then on
such date.
Capitalized Interest
Account..................... If the Prospectus Supplement for a series of
Securities specifies that a portion of the
proceeds of the offering will be deposited in a
Capitalized Interest Account, on the Closing Date
a portion of the proceeds from the sale of the
Securities (in an amount specified in the related
Prospectus Supplement) will be deposited into an
account (the "Capitalized Interest Account")
maintained as an Eligible Account, which account
may be maintained with the Owner Trustee or the
Indenture Trustee, and the funds on deposit
therein will be invested solely in Permitted
Investments that mature no later than one Business
Day prior to the next Distribution Date. Amounts
deposited in the Capitalized 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.
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On each Distribution Date any amount remaining in
the Capitalized Interest Account in excess of the
Required Capitalized Interest Amount (as defined
in the related Prospectus Supplement) shall be
released to the Affiliated Owner, if any, or other
person specified in the related Prospectus
Supplement. Unless otherwise specified in the
related Prospectus Supplement, any amounts
remaining in the Capitalized Interest Account on
the last day of the Funding Period and not used
for such purposes will be deposited in the
Collection Account and will be available for
distributions, as described herein or in the
related Prospectus Supplement, on the first
Distribution Date thereafter or, if the end of the
Funding Period is on a Distribution Date, then on
such date.
Distribution Dates.......... Unless otherwise specified in the related
Prospectus Supplement, payments of interest and
principal on the Securities will be made on the
fifteenth day of each month or, if any such day is
not a Business Day, on the next succeeding
Business Day (each, a "Distribution Date"),
commencing on the date specified in the related
Prospectus Supplement. Unless otherwise specified
in the related Prospectus Supplement, payments on
the Securities on each Distribution Date will be
made to the holders of record of the related
Securities at the close of business on the
Business Day immediately preceding such
Distribution Date or, in the event Definitive
Securities have been issued, at the close of
business on the last Business Day of the month
immediately preceding the month in which such
Distribution Date occurs (each, a "Record Date").
To the extent not previously paid in full prior to
such time, the outstanding principal amount of the
Notes and the Certificates will be payable on the
Distribution Date occurring in the month or months
specified in the related Prospectus Supplement
(the "Note Final Scheduled Distribution Date" and
the "Certificate Final Scheduled Distribution
Date").
A "Business Day" is any day other than a Saturday,
Sunday or any day on which banking institutions or
trust companies in the states of New York,
Oklahoma and such other states (if any) specified
in the related Prospectus Supplement are
authorized by law, regulation 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
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case of the initial Distribution Date from the
date specified in the related Prospectus
Supplement to but excluding the initial
Distribution Date (each, an "Interest Accrual
Period").
Due Period.................. With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and other amounts will be collected on
the Contracts for application towards the payment
of principal and interest to the Securityholders
and the payment of fees on such Distribution Date.
Unless otherwise specified in the related
Prospectus Supplement, the "Due Period" will be
the calendar month immediately preceding the
Distribution Date.
Determination Date.......... Unless otherwise specified in the related
Prospectus Supplement, the "Determination Date" is
the third Business Day prior to each Distribution
Date. On each Determination Date, the Servicer
will determine the Available Amount for
distribution on the related Distribution Date,
allocate such amounts between the Notes, the
Certificates and the Servicer Payment, and advise
the Trustees (or the paying agent appointed
pursuant to the Trust Documents) of the amounts of
the payments to be made to Securityholders, all as
described under "The Purchase Agreements and the
Trust Documents--Distributions." The "Servicer
Payment" is equal on each Distribution Date to the
sum of the reimbursement then due to the Servicer
for outstanding Monthly Advances and the Servicing
Fee (including any unpaid Servicing Fees for past
Distribution Dates).
Unless otherwise specified in the related
Prospectus Supplement, the "Available Amount" with
respect to each Trust on any Distribution Date is
equal to the excess of (A) the sum of (i) all
amounts on deposit in the Collection Account
attributable to collections or deposits made in
respect of such Contracts in the related Due
Period (including any late fees, prepayment
charges, extension fees or other administrative
fees or similar charges allowed by applicable law
with respect to the Contracts ("Late Fees"), and
(ii) the Purchase Price for any Contract
repurchased by CITSF as a result of breaches of
certain representations and warranties or
purchased by the Servicer as a result of breaches
of certain covenants and any Monthly Advances and
any Non-Reimbursable Payments made by the
Servicer, if such Purchase Price, Monthly Advance
or Non-Reimbursable Payment is paid on or prior to
the Deposit Date immediately preceding such
Distribution Date, over (B) the sum of the
following amounts (to the extent that the Servicer
has not already withheld such amounts from
collections on the Contracts): (i) any
repossession profits on liquidated Contracts,
Liquidation Expenses (as
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defined in the Trust Documents) incurred and taxes
and insurance advanced by the Servicer in respect
of Financed Boats that are reimbursable to the
Servicer under the Trust Documents, (ii) any
amounts incorrectly deposited in the Collection
Account, (iii) any amounts deposited in the
Paid-Ahead Account, if any, during the related Due
Period, (iv) net investment earnings on the funds
in the Collection Account and the Paid-Ahead
Account, if any, and (v) any other amounts
permitted to be withdrawn from the Collection
Account and the Paid-Ahead Account, if any, by the
Servicer (or to be retained by the Servicer from
collections on the Contracts) pursuant to the
Trust Documents.
Subordination............... The rights of the Certificateholders to receive
distributions with respect to the Contracts will
be subordinated to the rights of the Noteholders
of the same series, to the extent described in the
related Prospectus Supplement. This subordination
is intended to enhance the likelihood of timely
receipt by Noteholders of the full amount of
interest and principal required to be paid to
them, and to afford the Noteholders limited
protection against losses in respect of the
Contracts.
If and to the extent specified in the related
Prospectus Supplement, one or more classes of
Notes of a series may be subordinated to the
rights of one or more other classes of Notes of
the same series.
The protection afforded to the Noteholders by the
subordination feature described above will be
effected by the preferential right of the
Noteholders to receive, to the extent described in
the related Prospectus Supplement, current
distributions from collections on or in respect of
the Contracts prior to the application of such
collections to payments in respect of the
Certificates or any subordinated Notes.
Enhancement................. If and to the extent specified in the related
Prospectus Supplement with respect to a Trust, the
enhancement applicable to a class of Securities
may include any one or more of the following: a
financial guaranty insurance policy, a letter of
credit, a CIT Limited Guarantee, a reserve fund, a
third party guarantee, a cash collateral account,
a derivative product, a credit facility, a
liquidity facility, another form of credit
enhancement, overcollateralization, or any
combination thereof.
A financial guaranty insurance policy may be
obtained and maintained for one or more classes of
Certificates or Notes of a series of Securities.
Such policies generally unconditionally and
irrevocably guarantee to Securityholders that the
full amount of the distributions of principal and
interest, as well as any other amounts
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specified in the related Prospectus Supplement,
will be received by an agent of the Trustee on
behalf of Securityholders for distribution by the
Trustee to Securityholders. Such policies may have
certain limitations set forth in the related
Prospectus Supplement, including (but not limited
to) limitations on the insurer's obligation to
guarantee the Seller's or the Servicer's
obligation to repurchase or substitute for any
Contracts, to guarantee any specified rate of
prepayments or to provide funds to redeem
Securities on any specified date.
The enhancement with respect to any class of
Securities may be structured to provide protection
against delinquencies and/or losses on the
Contracts, against changes in interest rates, or
other risks, or to supplement the interest rate on
specified Contracts, in each case to the extent
and under the conditions specified in the related
Prospectus Supplement. Unless otherwise specified
in the related Prospectus Supplement, any form of
enhancement will have certain limitations and
exclusions from coverage thereunder, which will be
described in the related Prospectus Supplement.
Further information regarding any provider of
credit enhancement, including financial
information when material, will be included (or
incorporated by reference) in the related
Prospectus Supplement. See "The
Certificates--Enhancement."
Monthly Advances............ Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Contract as to which there has been a Payment
Shortfall during the related Due Period, the
Servicer shall advance funds in the amount of such
Payment Shortfall (each, a "Monthly Advance"), but
only to the extent that the Servicer, in its good
faith judgment, expects to recover such Monthly
Advance from subsequent collections on such
Contract made by or on behalf of the Obligor
thereunder (but only to the extent of expected
interest collections in the case of a Simple
Interest Contract) or from net liquidation
proceeds or insurance proceeds with respect to
such Contract. The Servicer shall be reimbursed
for any Monthly Advance from subsequent
collections with respect to such Contract. If the
Servicer determines in its 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
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scheduled payment on a Simple Interest Contract,
or (ii) a Payment Shortfall arising from a
Contract which has been prepaid in full or which
has been subject to a Relief Act Reduction during
the related Due Period. See "The Purchase
Agreements and the Trust Documents--Monthly
Advances." Unless otherwise specified in the
related Prospectus Supplement, "Payment Shortfall"
means (i) with respect to any Simple Interest
Contract and any Distribution Date, the excess of
(A) the product of (1) one-twelfth of the Contract
Rate of such Contract and (2) the outstanding
principal amount of such Contract as of the last
day of the second preceding Due Period (or, in the
case of the first Due Period ending after the
Contract was acquired by the related Trust, as of
the Initial Cut-off Date or the Subsequent Cut-off
Date, as the case may be), over (B) the amount of
interest, if any, collected on such Contract
during the related Due Period and (ii) with
respect to any Precomputed Contract and any
Distribution Date, the excess of (A) the scheduled
payment due on such Contract during the related
Due Period, over (B) the amount collected on such
Contract (including any amounts allocated from the
Paid-Ahead Account with respect to such Due
Period) during the related Due Period.
Non-Reimbursable Payments... If and to the extent specified in the related
Prospectus Supplement, with respect to each
Contract as to which there has been a Payment
Shortfall with respect to interest in the related
Due Period arising from either a prepayment in
full of such Contract or a Relief Act Reduction in
respect of such Contract during such Due Period,
the Trust Documents may require the Servicer to
deposit into the Collection Account on the
Business Day immediately preceding the following
Distribution Date, without the right of subsequent
reimbursement, an amount equal to such Payment
Shortfall (a "Non-Reimbursable Payment"). If the
related Prospectus Supplement does not specify
that the Servicer will make Non-Reimbursable
Payments, the Servicer will not be obligated to
make such payments with respect to the Trust.
Paid-Ahead Account.......... Early payments by or on behalf of Obligors on
Precomputed Contracts that do not constitute
scheduled payments, full prepayments or certain
partial prepayments which result in a reduction of
an Obligor's periodic payment below the scheduled
payment as of the Initial Cut-off Date or
Subsequent Cut-off Date, as the case may be, will
be deposited into the Paid-Ahead Account until
such time as the paid-ahead amount becomes due.
See "The Contract Pool" and "The Purchase
Agreements and the Trust Documents--Paid-Ahead
Precomputed Contracts."
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Servicing Fees.............. Unless otherwise specified in the related
Prospectus Supplement, with respect to each series
of Securities, the Servicer shall receive a
monthly fee (the "Servicing Fee"), payable on each
Distribution Date, equal to the sum of (i)
one-twelfth of the product of the percentage
specified in the related Prospectus Supplement as
the "Servicing Fee Rate" and the Pool Balance as
of the last day of the second preceding Due Period
(or, in the case of the first Distribution Date,
as of the Initial Cut-off Date) and (ii) any
investment earnings on amounts on deposit in the
Collection Account, the Paid-Ahead Account, if
any, the Certificate Distribution Account, if any,
and the Note Distribution Account, if any;
provided, however, that the Servicing Fee Rate
applicable to a Trust may be increased to a rate
(or maximum rate) specified in the related
Prospectus Supplement if CITSF or an affiliate
thereof is not the Servicer. See "The Purchase
Agreements and the Trust Documents--Servicing
Compensation."
Optional Purchase
of the Contracts............ Unless otherwise specified in the related
Prospectus Supplement, with respect to each series
of Securities, at its option, CITSF may purchase
all the Contracts in the related Trust on any
Distribution Date on which the aggregate principal
balance of the Contracts (the "Pool Balance") as
of the last day of the related Due Period is equal
to or less than a percentage specified in the
related Prospectus Supplement of the Initial Pool
Balance, at a purchase price determined as
described under "The Purchase Agreements and the
Trust Documents--Termination." Unless otherwise
specified in the related Prospectus Supplement,
the "Initial Pool Balance" equals the sum of (i)
the Pool Balance as of the Initial Cut-off Date
and (ii) the aggregate principal balance of all
Subsequent Contracts added to the related Trust as
of their respective Subsequent Cut-off Dates.
Auction Sale................ Unless otherwise specified in the related
Prospectus Supplement, with respect to each series
of Securities, within ten days after the first
Distribution Date on which 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
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Contracts, on the second Distribution Date
succeeding such Due Period. If satisfactory bids
are not received, such Trustee shall decline to
sell the Contracts and shall not be under any
obligation to solicit any further bids or
otherwise negotiate any further sale of the
Contracts. See "The Purchase Agreements and the
Trust Documents--Termination."
Ratings..................... As a condition of issuance, the Securities of each
series offered pursuant to this Prospectus will be
rated in one of the four highest rating categories
by at least one nationally recognized statistical
rating organization specified in the related
Prospectus Supplement (each, a "Rating Agency").
The ratings of the Securities should be evaluated
independently from similar ratings on other types
of securities. The ratings do not address the
possibility that Securityholders may suffer a
lower than anticipated yield. The ratings do not
address the likelihood that the Securities will be
retired following the sale of the Contracts by the
Trustee as described above under "--Auction Sale"
or "--Optional Purchase of the Contracts." See
"Ratings."
There can be no assurance that any rating will
remain in effect for any given period of time or
that a rating will not be lowered or withdrawn by
the assigning Rating Agency if, in its judgment,
circumstances so warrant. In the event that the
rating initially assigned to any of the Securities
is subsequently lowered or withdrawn for any
reason, no person or entity will be obligated to
provide any additional credit enhancement with
respect to such Securities. There can be no
assurance whether any other rating agency will
rate any of the Securities or, if one does, what
rating would be assigned by any such other rating
agency. A security rating is not a recommendation
to buy, sell or hold securities.
Certain Federal Income
Tax Considerations.......... If the related Prospectus Supplement states that a
Trust will be treated as a grantor trust, in the
opinion of counsel to the Seller, for federal
income tax purposes, the Trust will be treated as
a grantor trust. In such event, each
Certificateholder, by acceptance of a Certificate,
will be treated as the owner of an undivided
interest in the Contracts included in the Contract
Pool and any other assets held by the Trust.
If the related Prospectus Supplement does not
state that a Trust will be treated as a grantor
trust, in the opinion of counsel to the Seller,
for federal income tax purposes: (1) the Notes
will constitute indebtedness; and (2) the
Certificates will constitute interests in a trust
fund that will not be treated as an association
(or a publicly traded partnership) taxable as a
corporation. Each Noteholder, by acceptance of a
Note, will agree to treat the Notes as
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indebtedness, and each Certificateholder, by
acceptance of a Certificate, will agree to treat
the Trust as a partnership in which the
Certificateholders are partners for federal income
tax purposes.
Alternative characterizations of the Notes and the
Certificates are possible, but would not result in
materially adverse tax consequences to Noteholders
or Certificateholders. See "Certain Federal Income
Tax Consequences."
ERISA Considerations........ Fiduciaries of employee benefit plans subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or plans subject to
Section 4975 of the Internal Revenue Code of 1986
(the "Code") should carefully review with their
legal advisors whether the purchase or holding of
the Certificates offered hereby could give rise to
a transaction prohibited or not otherwise
permissible under ERISA or the Code. See "ERISA
Considerations."
The related Prospectus Supplement will provide
further information with respect to the
eligibility of a class of Securities for purchase
by employee benefit plans. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
Subject to certain considerations discussed under
"ERISA Considerations" herein and in the related
Prospectus Supplement, and unless otherwise
specified in the related Prospectus Supplement,
the Securities will be eligible for purchase by
employee benefit plans that are subject to ERISA.
Legal Investment............ The appropriate characterization of the
Certificates and the Notes under various legal
investment restrictions applicable to the
investment activities of certain institutions, and
thus the ability of investors subject to these
restrictions to purchase the Certificates and the
Notes, may be subject to significant interpretive
uncertainties. All investors whose investment
authority is subject to legal restrictions should
consult their own legal advisors to determine
whether, and to what extent, the Certificates and
the Notes will constitute legal investments for
them.
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RISK FACTORS
Prospective Securityholders should consider the following risk factors in
connection with the purchase of the Securities:
1. Limited Obligations. The Securities will not represent an interest in
or an obligation of The CIT Group, Inc. ("CIT"), The CIT Group Securitization
Corporation II (the "Company"), any Affiliated Owner specified in the related
Prospectus Supplement, or any Servicer (including The CIT Group/Sales Financing,
Inc. ("CITSF")) or any of their respective affiliates. Unless and to the extent
otherwise specified in the related Prospectus Supplement, the Securities will
not be insured or guaranteed by any government agency or instrumentality, CIT or
any of its affiliates (including the Company, any Affiliated Owner, and CITSF),
the Underwriters or any of their affiliates, or any other Servicer or any of its
affiliates.
2. Risk of Loss. An investment in the Securities may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically have
affected the delinquency, loan loss and liquidation experience of pools of
marine installment sale contracts and direct loans secured by recreational
boats. Since the market value of boats generally declines with age and since in
certain states the Trustees may not have a first perfected security interest in
the Financed Boats, the Servicer may not recover the entire amount owing under a
defaulted Contract. See "Certain Legal Aspects of the Contracts." In such a
case, the Securityholders may suffer a corresponding loss. The market value of
the Financed Boats could be or could become lower than the outstanding principal
balances of the related Contracts. Sufficiently high liquidation losses on the
Contracts will have the effect of reducing, and could eliminate (a) the
protection against loss afforded to the Noteholders by the subordination of the
Certificates, if any, or by the Enhancement, if any, applicable to the Notes and
(b) the protection against loss afforded to the Certificateholders by the
Enhancement (as specified in the related Prospectus Supplement), if any. If the
amount available under the Enhancement, if any, is reduced to zero, holders of
the Certificates will bear the risk of loss resulting from default by Obligors
and will have to look primarily to the value of the related Financed Boats for
recovery of the outstanding principal and unpaid interest on the defaulted
Contracts. If the Certificate Balance is reduced to zero, the holders of the
Notes will bear the risk of loss resulting from default by Obligors and will
have to look primarily to the value of the related Financed Boats for recovery
of the outstanding principal and unpaid interest on the defaulted Contracts.
3. Security Interests and Certain Other Aspects of the Contracts. When
originated, each Contract was secured by a security interest in the Financed
Boat. Each such security interest was required to be perfected under applicable
state law and, in the case of certain Financed Boats eligible for federal
documentation, under applicable federal law. In connection with the sale of the
Contracts to the Trust, the Seller will assign its security interest in each
Financed Boat to the Trust. However, due to administrative burden and expense,
none of the Seller, the Servicer or the Owner Trustee will amend the
certificates of title or file assignments of the UCC-1 financing statements, if
any, with respect to the Financed Boats to identify the Trust as the new secured
party, nor has any such amendment or filing been made to identify any Selling
Trust as a secured party. However, to the extent specified in the related
Prospectus Supplement, pursuant to the Sale and Servicing Agreement, the Seller
will agree to cause filings of the assignments to the Trust of certain specified
Preferred Mortgages (each, a "Designated Preferred Mortgage") within the time
period specified in the related Prospectus Supplement. (See "Certain Legal
Aspects of the Contracts--Security Interests in the Financed Boats"). In
addition, the certificates of title have not and will not be amended and the
UCC-1 financing statements have not and will not be assigned with respect to the
Financed Boats relating to the Contracts not originated by the Seller to reflect
any interim transfers of ownership of the security interest in such Financed
Boats. In a majority of states, the assignment of a Contract together with the
related security interest is, as a matter of state law, an effective conveyance
of such security interest without amendment of any lien noted on the related
certificate of title or any assignment of any UCC-1 financing statements, and
the new owner of the Contracts succeeds to the original secured party's rights
in the related Financed Boat as against creditors of the Obligor. In certain
title states, in the absence of such certificate of title amendment or
assignment of record to reflect the successive assignments of the security
interest in such Financed Boat, the Seller (if not the secured party of record),
the Trust and/or the Indenture Trustee may not have a perfected security
interest in the related Financed Boat. The priority of the Preferred Mortgages
and state security interests in the Financed
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Boats may be subject to: (i) maritime liens arising under federal statutory or
common-law for captain's or crew's wages, tort claims (so-called "general
average" claims) and salvage claims, all of which take priority over even a
Preferred Mortgage or a state security interest, and (ii) prior filed maritime
liens arising under federal law or state laws for repair, storage or supplies
which are subordinate to a Preferred Mortgage but typically have priority over
state security interests under federal law or under applicable law of the state
where the Contract was originated or under applicable law of the state to which
the related Financed Boats may have been relocated.
CITSF will be obligated to repurchase any Contract as to which the Seller
has represented that the originator of such Contract has a first perfected
security interest in the Financed Boat securing such Contract if a breach of
such representation shall materially adversely affect the interest of the Trust
in such Contract. If the Trust does not have a perfected security interest in a
Financed Boat, it will not be effective as against third parties. In such case,
if third party liens equal or exceed the value of the Financed Boat, the only
recourse of the Trust would be against the related Obligor on an unsecured basis
or (if CITSF, CITCF-NY or, in those Contracts described above, the Trust did not
have a perfected security interest in such Financed Boat) against CITSF pursuant
to its repurchase obligation.
To the extent that the Trust's security interest in a Financed Boat is
perfected, the Trust will have a prior claim over subsequent purchasers of such
Financed Boat and holders of subsequently perfected security interests in such
Financed Boat. Under the laws of many states, certain possessory liens for
repairs on a boat and storage, as well as certain rights in favor of federal and
state governmental authorities arising from the use of a boat in connection with
illegal activities, may take priority even over a perfected security interest.
Under the Ship Mortgage Statutes, certain preferred maritime liens will have
priority over security interests in Financed Boats perfected under federal law.
Certain federal tax liens may have priority over the lien of a secured party. In
addition, through fraud or negligence, the Trust could lose its security
interest or the priority of its security interest in a Financed Boat. If a
security interest in a Financed Boat is initially perfected (by titling or UCC
filing) under applicable state law and the Financed Boat subsequently is
federally documented, the Trust could lose the priority of its security interest
in such Financed Boat to a purchaser thereof or to the holder of a subsequently
perfected Preferred Mortgage covering such Financed Boat. See "Certain Legal
Aspects of the Contracts--Security Interests in the Financed Boats" for a
description of CITSF's policies with respect to federal documentation. CITSF
shall not have an obligation to repurchase a Contract as to which any of the
aforementioned occurrences result in the Trust's losing the priority of its
security interest or its security interest in such Financed Boat after the date
such security interest was conveyed to the Trust (other than through fraud or
negligence of the Seller or the Servicer). See "Certain Legal Aspects of the
Contracts--Security Interests in the Financed Boats."
In addition, numerous federal and state consumer protection laws impose
requirements on sellers under marine installment sale contracts and marine
installment loan contracts or notes, such as the Contracts, and the failure by
the seller of goods to comply with such requirements could give rise to
liabilities of assignees for amounts due or paid under such agreements and the
right to set-off against claims by such assignees. These laws would apply to a
Trust as assignee of the Contracts. From time to time, CITSF has been involved
in litigation under consumer or debtor protection laws, some of which have been
class actions. The Trust is subject to the risk of similar litigation. With
respect to each series of Securities, pursuant to the Trust Documents, CITSF
will represent and warrant as of the Initial Cut-off Date with respect to each
Initial Contract, and as of the related Subsequent Cut-off Date with respect to
each Subsequent Contract, that each Contract complies with all requirements of
law and CITSF will provide certain warranties relating to the validity,
perfection and priority of the security interest in each Financed Boat securing
a Contract. A breach by CITSF of any such warranty that materially and adversely
affects the related Trust's interest in any Contract would require CITSF to
repurchase such Contract unless such breach is cured. If CITSF does not honor
its purchase obligation in respect of a Contract and the Obligor for such
Contract were to default, recovery of amounts due on such Contract would be
primarily dependent on repossession and resale of the Financed Boat securing
such Contract. Certain other factors may limit the ability of the
Securityholders to realize upon the Financed Boats or may limit the amount
realized to less than the amount due. See "Certain Legal Aspects of the
Contracts."
Under most state vehicle dealer licensing laws, sellers of boats are
required to be licensed to sell boats at retail sale. Numerous other federal and
state consumer protection laws impose requirements applicable to the origination
and assignment of marine installment sale contracts and marine installment loan
contracts or notes, including the
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Truth in Lending Act, the Federal Trade Commission Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair
Debt Collection Practices Act and the Uniform Consumer Credit Code. In the case
of some of these laws, the failure to comply with the provisions of these laws
may affect the enforceability of the related Contract. A Trust and the Company
may not have obtained the licenses required under any federal or state consumer
laws or regulations, and the absence of such licenses may impede the enforcement
of certain rights or give rise to certain defenses in actions seeking
enforcement of such rights which may prevent a Trust from collecting amounts due
under the Contracts. See "Certain Legal Aspects of the Contracts."
Any shortfall in payments on or in respect of Contracts, or any liability
of a Trust to Obligors, as a result of noncompliance with the laws summarized
above and under "Certain Legal Aspects of the Contracts" could result in losses
to the Securityholders.
4. Foreclosure. Applicable law also imposes requirements and restrictions
relating to foreclosure sales of boats and on the obtaining of deficiency
judgments following such sales. Even if the Financed Boat securing a Contract is
successfully repossessed or arrested and sold, the full amount due on the
Contract may not be realized because of depreciation, damage or loss of or to
the Financed Boat and because the resale value of the Financed Boat may vary
significantly due to the limited market for used boats, seasonal factors and
other economic and social factors.
In sum, the Trust may not realize the full amount due on a Contract
because of (i) the failure to endorse the certificate of title, failure to file
a UCC-1 financing statement or failure to record the assignment of the Preferred
Mortgage, as the case may be, (ii) the application of requirements and
restrictions on foreclosure and deficiency judgments, (iii) depreciation, damage
or loss of or to a Financed Boat, or (iv) the application of federal and state
bankruptcy and insolvency laws, or other factors. As a result, the
Securityholders will be subject to delays in payments and losses.
5. Certain Matters Relating to Insolvency. CITCF-NY, CITSF and the Company
intend that transfers of Contracts from CITCF-NY to CITSF, from CITSF to the
Company and from the Company to the related Trust (and, if and to the extent
specified in the related Prospectus Supplement, from CITCF-NY to CITSF, from
CITSF to a special purpose affiliate of CIT ("SPV"), from SPV to a Selling Trust
and from the Selling Trust to the Trust) constitute sales, rather than pledges,
of the Contracts to secure indebtedness. However, if CITCF-NY, CITSF or the
Company (or, if and to the extent specified in the related Prospectus
Supplement, a Selling Trust) were to become a debtor under Title 11 of the
United States Code, 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code"), it is
possible that a creditor, receiver, other party in interest or trustee in
bankruptcy of such debtor, or such debtor as debtor-in-possession, may contend
that the sales of the Contracts by CITCF-NY to CITSF, by CITSF to the Company,
or by the Company to the related Trust (or, if and to the extent specified in
the related Prospectus Supplement, from CITCF-NY to CITSF, from CITSF to SPV,
from SPV to a Selling Trust and from the Selling Trust to the Trust),
respectively, were pledges of the Contracts rather than sales and that,
accordingly, such Contracts should be part of such assigning entity's bankruptcy
estate. Such a position, if presented to a court, even if ultimately
unsuccessful, could result in a delay in or reduction of distributions to the
Securityholders. See "Certain Legal Aspects of the Contracts--Certain Matters
Relating to Insolvency."
6. Limited Liquidity. There is currently no market for the Securities of
any series. Although the Company expects that the underwriters of any particular
series will make a secondary market for such Securities, they will have no
obligation to do so. There can be no assurance that a secondary market will
develop for the Securities of any series or, if it does develop, that it will
provide any of the Securityholders with liquidity of investment or that it will
continue for the term of any series of Securities. Unless otherwise specified in
the related Prospectus Supplement, the Securities will be issued in book-entry,
rather than physical, form which may adversely affect the liquidity of the
Securities in the secondary market and the ability of the Certificate Owners and
Note Owners to pledge the Securities.
7. The Subsequent Contracts and the Pre-Funding Account. If and to the
extent specified in the related Prospectus Supplement, the conveyance of
Subsequent Contracts by CITSF during the Funding Period will be subject to the
conditions described in the related Prospectus Supplement under "The Contract
Pool." If CITSF does
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not originate contracts satisfying such criteria during the Funding Period,
CITSF will have insufficient contracts to sell to the related Trust on
Subsequent Transfer Dates, thereby resulting in prepayments of principal to
Noteholders and Certificateholders as described below.
Unless otherwise specified in the related Prospectus Supplement, to the
extent that amounts on deposit in the Pre-Funding Account have not been fully
applied to the purchase of Subsequent Contracts by the related Trust by the end
of the Funding Period, Noteholders and Certificateholders will receive a
prepayment of principal in an amount equal to the Pre-Funded Percentage
allocable to the Noteholders and the Certificateholders, respectively, of the
Pre-Funded Amount remaining in the Pre-Funding Account at such time, which
prepayment will be made on the first Distribution Date following the end of the
Funding Period or, if the Funding Period ends on a Distribution Date, on such
date. Unless otherwise specified in the related Prospectus Supplement, the
"Pre-Funded Percentage" with respect to the Notes or the Certificates is the
percentage derived from the fraction, the numerator of which is the initial
principal balance of the Notes or the Original Certificate Balance, as the case
may be, and the denominator of which is the sum of the initial principal balance
of the Notes and the Original Certificate Balance. It is anticipated that the
principal amount of Subsequent Contracts purchased by the Trust will not be
exactly equal to the amount on deposit in the Pre-Funding Account and that
therefore there will be at least a nominal amount of principal prepaid to the
Noteholders and the Certificateholders at the end of the Funding Period.
Each Subsequent Contract must satisfy the eligibility criteria specified
in the related Prospectus Supplement and the Trust Documents at the time of its
sale to the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Company (the seller of any Subsequent Contracts to the related
Trust) will certify that all such eligibility criteria have been satisfied and
CITSF (the seller of any Subsequent Contracts to the Company) will certify that
all conditions precedent to the sale of the Subsequent Contracts to the Trust
have been satisfied. Unless otherwise specified in the related Prospectus
Supplement, it is a condition to the sale of any Subsequent Contracts to the
Trust that each Rating Agency, after receiving prior notice of the proposed
transfer of Subsequent Contracts to the Trust, shall not have advised the Seller
or the Trustees that the conveyance of such Subsequent Contracts will result in
a qualification, modification or withdrawal of its then current rating of either
the Notes or the Certificates. Following the transfer of Subsequent Contracts to
the Contract Pool the aggregate characteristics of the Contracts then held in
the Contract Pool may vary from those of the Initial Contracts included therein.
The ability of a Trust to invest in Subsequent Contracts is entirely
dependent upon whether CITSF is able to originate boat contracts that meet the
requirements for transfer on a Subsequent Transfer Date under the Trust
Documents. The ability of CITSF to originate such contracts may be affected by a
variety of economic and social factors. Moreover, such factors may affect the
ability of the Obligors thereunder to perform their obligations thereunder,
which may cause contracts originated by CITSF or its affiliates to fail to meet
the requirements for transfer under the Trust Documents. Economic factors
include interest rates, unemployment levels, the rate of inflation and consumer
perception of economic conditions generally. However, CITSF is unable to
determine and has no basis to predict whether or to what extent economic or
social factors will affect CITSF's ability to originate Subsequent Contracts.
8. Prepayment from the Pre-Funding Account. To the extent specified in the
related Prospectus Supplement, if the Pre-Funded Amount has not been fully
applied by the related Trust to purchase Subsequent Contracts by the end of the
Funding Period, then the Pre-Funded Amount will be payable as principal to
Noteholders and Certificateholders in accordance with the Pre-Funded Percentage
on the first Distribution Date following the end of the Funding Period, or, if
the end of the Funding Period is on a Distribution Date, on such date.
In the event that amounts remain on deposit in the Pre-Funding Account at
the end of the Funding Period and are applied to the payment of principal to the
Noteholders and Certificateholders, such partial retirement of the Notes and
Certificates may shorten the average life of the Securities and may cause the
Noteholders and Certificateholders to experience a lower yield on the
Securities. In addition, any reinvestment risk resulting from such partial
retirement will be borne by the holders of such Securities.
9. Limited Assets. Unless otherwise specified in the related Prospectus
Supplement, each Trust will covenant to sell the Contracts (a) if directed to do
so by the related Indenture Trustee in accordance with the related Indenture
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following an acceleration of a series of Notes upon an Event of Default, and (b)
in other circumstances specified in the related Prospectus Supplement. However,
there is no assurance that the market value of the related Contracts will at any
time be equal to or greater than the aggregate outstanding principal balance of
such Notes. Therefore, upon an Event of Default with respect to such Notes,
there can be no assurance that sufficient funds will be available to repay
Noteholders in full. In addition, the amount of principal required to be
distributed to Noteholders under the Indenture is generally limited to amounts
available to be deposited in the Note Distribution Account. Therefore, the
failure to pay principal on the Notes may not result in the occurrence of an
Event of Default until the Note Final Scheduled Distribution Date. Furthermore,
upon a sale by the Trust of the Contracts, the net proceeds from such sale
remaining after payment of all amounts due to the Servicer and the Noteholders
may not be sufficient to pay the Certificate Balance and interest accrued
thereon.
If and to the extent specified in the related Prospectus Supplement, one
or more Enhancements will be available to pay principal and/or interest on the
Notes and/or the Certificates on any Distribution Date. However, unless
otherwise specified in the related Prospectus Supplement, the amount of any
Enhancement will be limited and will be reduced as the Pool Balance is reduced.
If the amounts available under the applicable Enhancement are exhausted, a Trust
will depend solely on payments on or with respect to the Contracts, Monthly
Advances and Non-Reimbursable Payments to make distributions to the
Securityholders.
10. Ratings of the Securities. It is a condition to the issuance of a
series of Securities offered pursuant to this Prospectus that the Securities be
rated in one of the four highest rating categories by at least one Rating
Agency. The ratings do not address the likelihood that the Securities will be
retired following the sale of the Contracts by a Trustee as described under "The
Purchase Agreement and the Trust Documents--Termination." There can be no
assurance that any rating will remain in effect for any given period of time or
that a rating will not be lowered or withdrawn by the Rating Agency if, in its
judgment, circumstances so warrant. In the event that the rating initially
assigned to the Securities is subsequently lowered or withdrawn for any reason,
no person or entity will be obligated to provide any additional credit
enhancement with respect to such Securities. There can be no assurance that any
other rating agency will rate the Notes or the Certificates or, if one does,
what rating would be assigned by any such other rating agency. A security rating
is not a recommendation to buy, sell or hold securities.
11. Book Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Securities will be offered for purchase in book-entry
form only and will be initially registered in the name of the nominee of The
Depository Trust Company ("DTC" and, together with any successor depository
selected by the Company, the "Depository"). No person acquiring an interest in
the Notes through the facilities of DTC (a "Note Owner") will be entitled to
receive a Definitive Note representing such person's interest in the Notes,
except as set forth under "Certain Information Regarding the
Securities--Definitive Securities," and such persons will hold their interests
in the Notes through DTC in the United States or Cedel Bank, societe anonyme
("Cedel") or Euroclear in Europe. No person acquiring an interest in the
Certificates through the facilities of DTC (a "Certificate Owner") will be
entitled to receive a Definitive Certificate representing such person's interest
in the Certificates, except as set forth under "Certain Information Regarding
the Securities--Definitive Securities," and such persons will hold their
interests in the Certificates through DTC. Unless and until Definitive
Securities are issued under the limited circumstances described herein and in
the related Prospectus Supplement, all references to actions by Securityholders
shall refer to actions taken by DTC upon instructions from its Participants, and
all references herein to distributions, notices, reports and statements to
Securityholders shall refer to distributions, notices, reports and statements to
DTC in accordance with DTC procedures. See "Certain Information Regarding The
Securities--Definitive Securities."
12. Risk of Commingling. At any time that the requirements as specified
under "The Purchase Agreements and the Trust Documents--Collections," are met,
the Servicer may deposit payments on or with respect to the Contracts and
proceeds of Contracts into the Collection Account or the Paid-Ahead Account, as
applicable, monthly on the Business Day immediately preceding the next
Distribution Date (the "Deposit Date"). Pending such a monthly deposit into the
Collection Account or the Paid-Ahead Account, as applicable, collections on the
Contracts may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds or if the Servicer became insolvent, the holders of
the Securities could incur a loss with respect to collections not deposited in
the Collection Account or the Paid-Ahead Account.
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THE TRUSTS
With respect to each series of Securities, the Seller will establish a
Trust pursuant to the related Trust Documents. Prior to the sale and assignment
of the related Contracts pursuant to the related Trust Documents, the Trust will
have no assets or obligations. After its formation, the related Trust will not
engage in any activity other than (i) acquiring, holding and managing the
Contracts and the other assets of such Trust and proceeds therefrom, (ii)
issuing the Securities of the related series, (iii) making payments on the
Securities of the related series, (iv) entering into agreements and transactions
in connection with the Enhancement, if any, for the related series of
Securities, and (v) engaging in other activities that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected
therewith.
Each Certificate, if any, will represent a fractional undivided interest
and/or residual interest in the related Trust. Each Note, if any, will represent
an obligation of the related Trust.
If specified in the related Prospectus Supplement, the related Trust will
initially be capitalized with equity equal to the "Original Certificate Balance"
specified in the related Prospectus Supplement. If specified in the related
Prospectus Supplement, Certificates with an aggregate original principal balance
of at least the amount specified in the related Prospectus Supplement will be
owned by the Affiliated Owner specified in the related Prospectus Supplement
(the "Affiliated Owner") and Certificates representing the remainder of the
Original Certificate Balance will be sold to third party investors that are
expected to be unaffiliated with the Affiliated Owner, the Seller, the Servicer
or their affiliates. If specified in the related Prospectus Supplement, the
Company or one of its affiliates will own the entire beneficial interest in the
Trust. The equity in a Trust, together with the proceeds of the initial sale of
the Notes, if any, will be used by the Trust to purchase the Initial Contracts
from the Seller pursuant to the Trust Documents and, if specified in the related
Prospectus Supplement, to fund the deposit of the Pre-Funded Amount and the
deposit to the Capitalized Interest Account and for such other purposes as are
specified in the related Prospectus Supplement.
The Servicer will service the Contracts held by each Trust and will
receive fees for such services. See "The Purchase Agreement and the Trust
Documents--Servicing Compensation." Unless otherwise specified in the related
Prospectus Supplement, CITSF will be appointed as custodian on behalf of each
Trust, and will hold the original marine installment sale contracts, marine
installment loan contracts (or promissory notes) and Preferred Mortgages as well
as copies of documents and instruments relating to each Contract and evidencing
the security interest in the Financed Boat securing each Contract (the "Contract
Files").
The Trustee(s)
The Trustee(s) for each Trust will be specified in the related Prospectus
Supplement. The Trustee(s) will perform limited administrative functions,
including making distributions from the Certificate Distribution Account and/or
the Note Distribution Account. A Trustee's liability in connection with the
issuance and sale of the Securities is limited solely to the express obligations
of such Trustee as set forth in the Trust Documents. A Trustee may appoint a
co-trustee to act as co-trustee pursuant to a co-trustee agreement with such
Trustee.
A Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove a Trustee
if such Trustee ceases to be eligible to continue as Trustee under the related
Trust Documents or if such Trustee becomes insolvent. In such circumstances, the
Servicer will be obligated to appoint a successor trustee. Any resignation or
removal of a Trustee and appointment of a successor trustee will be subject to
any conditions or approvals specified in the related Prospectus Supplement and
will not become effective until acceptance of the appointment by the successor
trustee.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will pay each Trustee's fees. The Trust
Documents will further provide that each Trustee will be entitled to
indemnification by the Servicer for, and will be held harmless against, any
loss, liability or expense incurred by
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such Trustee not resulting from its own willful misfeasance, bad faith or gross
negligence (other than by reason of a breach of any of its representations or
warranties set forth in the Trust Documents).
THE TRUST PROPERTY
Each Certificate, if any, will represent a fractional undivided interest
and/or residual interest in the related Trust. Each Note, if any, will be an
obligation of the related Trust and will be secured by assets of the Trust
(other than the Certificate Distribution Account, if any, and other accounts or
property specified in the related Prospectus Supplement). The property of each
Trust will include, among other things, (i) a pool (the "Contract Pool") of
marine installment sale contracts, direct loans and Preferred Mortgages secured
by new and used boats, boat motors and boat trailers, consisting of the Initial
Contracts and the Subsequent Contracts (if any); (ii) certain monies received
under the Initial Contracts on or after the Initial Cut-off Date and the
Subsequent Contracts (if any) on or after the related Subsequent Cut-off Date;
(iii) such amounts as from time to time may be held in one or more accounts
established and maintained by the Servicer pursuant to the Trust Documents
(including all investments in such accounts and all income from the funds
therein and all proceeds thereof, other than investment earnings on any account
so specified in the related Prospectus Supplement) as described herein; (iv) if
specified in the related Prospectus Supplement, specified credit or cash flow
enhancement and all monies on deposit in the Pre-Funding Account, the
Capitalized Interest Account and any other account specified in the related
Prospectus Supplement (including, unless otherwise specified in the related
Prospectus Supplement, all investments in such accounts and all income from the
funds therein and all proceeds thereof, other than investment earnings on any
account so specified in the related Prospectus Supplement); (v) assignments of
the security interests in the Financed Boats and any accessions thereto; (vi)
the right to proceeds from physical damage, credit life and disability insurance
policies, if any, covering individual Financed Boats or Obligors, as the case
may be; (vii) the rights of the Trust under the Trust Documents; and (viii) any
and all proceeds of the foregoing.
Pursuant to agreements between CITSF or CITCF-NY and many of the Dealers,
the Dealer is obligated after origination to repurchase from CITSF boat
contracts which do not meet certain representations and warranties made by such
Dealer. Such representations and warranties relate primarily to the origination
of the contracts and the perfection of the security interests in the related
boats, and do not typically relate to the creditworthiness of the related
Obligors or the collectability of such Contracts. Unless otherwise specified in
the related Prospectus Supplement, any Dealer agreement with respect to the
Contracts will not be assigned by CITSF or CITCF-NY to the Company or by the
Company to the Trust. However, unless otherwise specified in the related
Prospectus Supplement, the Trust Documents will authorize CITSF or CITCF-NY to
transfer a Contract to a Dealer upon a repurchase by a Dealer pursuant to a
Dealer agreement and will require that any recovery of amounts with respect to a
Contract by CITSF or CITCF-NY pursuant to Dealer repurchase obligations be
deposited in the Collection Account for the related Trust in satisfaction of
CITSF's repurchase obligations under the Trust Documents to the extent, if any,
that CITSF or CITCF-NY has not already satisfied that obligation. In accordance
with its customary servicing practices and procedures, in determining whether to
exercise any right of recourse against a Dealer, CITSF and CITCF-NY consider the
prior performance of the Dealer and other business and commercial factors,
including its own commercial relationship with such Dealer. The assignments by
the Dealers of Contracts to CITSF or CITCF-NY do not generally provide for
recourse to the Dealer for unpaid amounts in the event of a default by an
Obligor, other than in connection with the breach of the Dealer's
representations and warranties.
THE CONTRACT POOL
Each pool of Contracts with respect to a Trust (a "Contract Pool") will
consist of marine installment sale contracts, direct loans and Preferred
Mortgages (collectively, the "Contracts") to finance the purchase or ownership
of new and used boats, boat motors and boat trailers. The Contracts will be
originated or acquired by CITSF or its affiliates (including CITCF-NY). Except
as otherwise specified in the related Prospectus Supplement, the Contracts will
(i) be fully amortizing, (ii) bear interest at a fixed or variable rate (the
"Contract Rate") and (iii) be Simple Interest Contracts or Precomputed
Contracts.
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Certain detailed information regarding the Contract Pool as of the Initial
Cut-off Date or such other date specified therein for each Trust will be set
forth in the related Prospectus Supplement. If specific information with respect
to the Contract Pool is not known at the time the related series of Securities
initially is offered, more general information will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report on
a Current Report on Form 8-K to be filed with the Commission within fifteen days
after the initial issuance of such Securities. A copy of the Trust Documents
with respect to each series of Securities will be attached to the Current Report
on Form 8-K and will be available for inspection at the corporate trust office
of the Owner Trustee specified in the related Prospectus Supplement. A schedule
of the Contract Pool relating to such series will be attached to the Trust
Documents delivered to the Owner Trustee upon delivery of the Securities.
Description of Contract Computations
"Simple Interest Contracts" provide for the allocation of each payment
made thereunder to principal and interest in accordance with the "simple
interest" method. For Simple Interest Contracts, the principal balance of the
Contract is amortized over a series of equal monthly payments. Each monthly
interest payment is calculated by multiplying the outstanding principal balance
of the loan by the Contract Rate. Such product is then multiplied by a fraction,
the numerator of which is the number of days elapsed since the preceding payment
of interest was made and the denominator of which is either 365 or 360,
depending on applicable state law. Payments received on a Simple Interest
Contract are applied first to interest accrued to the date payment is received
and second to reduce the unpaid principal balance of the Contract. Accordingly,
if an Obligor makes a payment on the Contract less than 30 days after the
previous payment, the interest collected for the period since the preceding
payment was made will be less than 30 days' interest, and the amount of
principal repaid in such month will be correspondingly greater. Conversely, if
an Obligor makes a payment on the Contract more than 30 days after the previous
payment, the interest collected for the period since the preceding payment was
made will be greater than 30 days' interest, and the amount of principal repaid
in the month will be correspondingly reduced. As a result, based on the payment
characteristics of a particular Obligor, the principal due on the final due date
of a Simple Interest Contract may vary from the principal payment that would be
made if payments for such Contract were always made on their due dates.
If an Obligor pays more than one installment on a Simple Interest Contract
at a time, the regular installment will be treated as described above. However,
the entire amount of the additional installment or installments will be treated
as a principal payment and applied to reduce the principal balance of the
related Contract. The Obligor will not be required to make any payments on such
a Contract (a "Paid-Ahead Simple Interest Contract"), for the number of due
dates (the "Paid-Ahead Period") for which it has paid in advance the full
installment. However, during the Paid-Ahead Period interest will continue to
accrue on the principal balance of such Paid-Ahead Simple Interest Contract, as
reduced by the application of the early installment. As a result, when the
Paid-Ahead Period ends and the Obligor pays the next required installment, such
payment may be insufficient to cover the interest that has accrued since the
last payment by the Obligor. Notwithstanding such insufficiency, such Paid-Ahead
Simple Interest Contract would be considered to be current. This situation would
continue until the monthly installments are once again sufficient to cover all
accrued interest and to reduce the principal balance of the Contract. Depending
on the principal balance and Contract Rate of the related Contract and on the
number of installments paid in advance of their due dates, there may be extended
periods of time during which Simple Interest Contracts that are not amortizing
are considered current.
"Precomputed Contracts" consist of actuarial obligations and Rule of 78's
obligations. Actuarial obligations provide for amortization of the loan over a
series of fixed level payment monthly installments. Each monthly installment,
including the monthly installment representing the final payment on the
Contract, consists of an amount of interest equal to 1/12th of the related
Contract Rate multiplied by the unpaid principal balance of the Contract, and an
amount of principal equal to the remainder of the monthly payment. If an
actuarial obligation is prepaid in full, the Obligor receives a rebate
calculated on the basis of a constant interest rate. Rule of 78's obligations
provide for the payment by the related Obligor of a specified total amount of
payments, payable in equal monthly installments, which total represents the
principal amount financed and add-on interest in an amount calculated based on
the Contract Rate. The rate at which such amount of add-on interest is earned
and, correspondingly, the amount of each fixed monthly payment allocated to
reduction of the outstanding principal are calculated in accordance with the
"Rule of
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78's". Unless otherwise specified in the related Prospectus Supplement, with
respect to any Rule of 78's obligation included as a Contract, the Servicer will
calculate the amount of interest paid on a Rule of 78's obligation in the same
manner that it calculates such amounts on actuarial obligations.
If an Obligor with respect to any Precomputed Contract, in addition to
making his or her regularly scheduled payment, makes one or more additional
scheduled payments in any Due Period (such Contract being a "Paid-Ahead
Precomputed Contract"), the additional scheduled payments made in such Due
Period will be deposited into the Paid-Ahead Account and applied on subsequent
Deposit Dates as described under "The Purchase Agreements and the Trust
Documents--Paid-Ahead Precomputed Contracts." Since the Servicer will deposit
paid-ahead amounts on Paid-Ahead Precomputed Contracts into the Paid-Ahead
Account, these additional payments will not cause shortfalls of interest or
principal payments in the Contract Pool.
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that an Obligor may prepay its Contract, in whole or in part,
at any time, without a prepayment premium.
Description of the Financed Boats
The Financed Boats will consist of runabouts (together with boat motors
and boat trailers), motor yachts, bass boats, pontoon boats, fishing skiffs,
sport fishing boats, cabin cruisers, sailboats, and personal watercraft.
Runabouts typically range from 12 to 27 feet in length and are
equipped primarily for fishing.
Motor yachts typically range from 40 to 70 feet in length and are
used for cruising and fishing in large bodies of water.
Bass boats are powered with outboard engines, range from 17 to 21
feet in length and are primarily used for fresh water fishing on
inland waters.
Pontoon boats range from 16 to 22 feet in length. They provide a
smooth ride and are used for sight seeing.
Fishing skiffs range from 16 to 22 feet in length and can
accommodate two to three people. In a fishing skiff, the fisherman
can walk from side to side without rocking the boat.
Sporting boats range from 25 to 50 feet in length, and have longer
cruising range than the bass boats or fishing skiffs. Sporting boats
are generally used in salt water for larger game fishing.
Cabin cruisers are motor boats that typically range from 25 to 50
feet in length which include sleeping and galley accommodations.
Sailboats are wind powered crafts that typically range from 27 to 50
feet in length which can accommodate more than one person.
Personal watercraft are water-jet propelled vehicles seating one to
three people, which are used for entertainment and short distance
travel.
The Financed Boats do not include competitive racing boats or commercial
fishing boats.
YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, each
Contract provides that it is prepayable, without premium, by the Obligor at any
time. Prepayments (or, for this purpose, equivalent payments to a Trust)
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also may result from liquidations due to default, receipt of proceeds from
insurance policies, repurchases by CITSF due to breach of a representation or
warranty or breach of a covenant in the Trust Documents, or as a result of CITSF
exercising its option to purchase the Contract Pool. See "The Purchase
Agreements and the Trust Documents." The rate of prepayments on the Contracts
may be influenced by a variety of economic, social and other factors. No
assurance can be given that prepayments on the Contracts will conform to any
estimated or actual historical experience, and no prediction can be made as to
the actual prepayment rates which will be experienced on the Contracts. Unless
otherwise specified in the related Prospectus Supplement, Certificateholders and
Noteholders will bear all reinvestment risk resulting from the timing of
payments of principal on the Certificates or the Notes, as the case may be.
POOL FACTORS
Unless otherwise specified in the related Prospectus Supplement, the
"Certificate Pool Factor" for each class of Certificates, if any, is a
seven-digit decimal which the Servicer will compute each month indicating the
remaining Certificate Balance as of the Distribution Date, as a fraction of the
Original Certificate Balance. The Certificate Pool Factor will be 1.0000000 as
of the Initial Cut-off Date, and thereafter will decline to reflect reductions
in the outstanding principal balance of the Certificates. A Certificateholder's
portion of the aggregate outstanding Certificate Balance is the product of (i)
the original denomination of the Certificateholder's Certificate and (ii) the
Certificate Pool Factor.
Unless otherwise specified in the related Prospectus Supplement, the "Note
Pool Factor" for each class of Notes, if any, is a seven-digit decimal which the
Servicer will compute each month indicating the remaining outstanding principal
balance of the Notes as of the Distribution Date, as a fraction of the initial
outstanding principal balance of the Notes. The Note Pool Factor will be
1.0000000 as of the Initial Cut-off Date, and thereafter will decline to reflect
reductions in the outstanding principal balance of the Notes. A Noteholder's
portion of the aggregate outstanding principal balance of the Notes is the
product of (i) the original denomination of the Noteholder's Note, and (ii) the
Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents,
unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date, the Securityholders will receive monthly reports concerning
the payments received on the Contracts, the Pool Balance, the Certificate Pool
Factor, if any, the Note Pool Factor, if any, and various other items of
information. Securityholders of record (which in most cases will be Cede) during
any calendar year will be furnished information for tax reporting purposes not
later than the latest date permitted by law. Certificate Owners, if any, and
Note Owners, if any, may receive such reports, upon written request, together
with a certification that they are Certificate Owners or Note Owners, as the
case may be, and payment of any expenses associated with the distribution of
such reports, from the Owner Trustee and the Indenture Trustee (if any) at the
addresses specified in the related Prospectus Supplement. See "Certain
Information Regarding the Securities--Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, each
Seller will sell the Initial Contracts to a Trust concurrently with the sale of
the Securities and the net proceeds from the sale of the Securities will be
applied by such Trust to the purchase of the Initial Contracts, to the payment
of certain expenses connected with pooling the Contracts and issuing the
Securities, to the deposit of the Pre-Funded Amount in the Pre-Funding Account,
if any, to the deposit of the initial amount into the Capitalized Interest
Account, if any, and to the deposit of the initial amount, if any, into a
Reserve Fund, if any. Such net proceeds less the payment of such expenses, the
Pre-Funded Amount, if any, the initial deposit into the Capitalized Interest
Account, if any, and the Reserve Fund, if any, represent the purchase price paid
by a Trust to the Company for the sale of the Initial Contracts to such Trust.
Such amount will be determined as a result of the pricing of the Securities,
through the offering described in the related Prospectus Supplement. The net
proceeds to be received by the Company from the sale of the Initial Contracts to
a Trust will be paid by the Company to CITSF as the purchase price for the
Contracts and will be added to CITSF's
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general funds and will be available for general corporate purposes, including
the purchase of new marine installment sale contracts and the payment of the
purchase price to CITCF-NY for any Contracts acquired by CITSF from CITCF-NY.
The net proceeds to be received by a Selling Trust from the sale of the Initial
Contracts to a Trust will be applied to pay indebtedness and other obligations
of such Selling Trust.
THE CIT GROUP, INC.
CIT, a Delaware corporation, is a leading diversified finance organization
with over $22 billion of managed assets at December 31, 1997. CIT offers 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 and has developed a broad
array of "franchise" businesses that focus on specific industries, asset types
and markets, which are balanced by client, industry and geographic
diversification. CIT has its principal executive offices at 1211 Avenue of the
Americas, New York, New York 10036 and its telephone number is (212) 536-1390.
CIT operates through two business segments: (i) commercial, which is
comprised of Equipment Financing (equipment financing and leasing), Capital
Finance (commercial aircraft and rail equipment financing and leasing),
Commercial Services (factoring), Business Credit (secured financing to
middle-market and larger-sized businesses) and Credit Finance (secured financing
to smaller-sized and middle-market businesses) strategic business units, and
(ii) consumer, which is comprised of Consumer Finance (home equity) and Sales
Financing (recreation vehicle, manufactured housing and recreational boat
financing) strategic businesses units. These strategic business units offer
products and services designed to satisfy the financing needs of specific
customers, industries and markets.
In November 1997, CIT issued 36,225,000 shares of Class A Common Stock in
an initial public offering. The Dai-Ichi Kangyo Bank, Limited ("DKB") owns
126,000,000 of the outstanding shares of Class B Common Stock, each of which has
five votes per share but is otherwise identical in all material respects to the
Class A Common Stock (which has one vote per share). The Class B Common Stock
owned by DKB, which is not publicly traded, represents in the aggregate 94.4% of
the combined voting power of all of the outstanding Common Stock of CIT. For as
long as DKB continues to own shares of Common Stock representing more than 50%
of the combined voting power of the Class A Common Stock and Class B Common
Stock, DKB will be able to direct the election of all of the members of CIT's
Board of Directors and exercise a controlling influence over the business and
affairs of CIT.
CIT is subject to the informational requirements of the Exchange Act and,
in accordance therewith, files reports and other information with the
Commission. Such reports and other information can be inspected and copied at
the offices of the Commission and at the offices of the New York Stock Exchange,
Inc. See "Additional Information."
THE CIT GROUP SECURITIZATION CORPORATION II, SELLER
The Company was incorporated in the State of Delaware on June 24, 1994,
and is a wholly-owned, limited purpose finance subsidiary of CIT. The Company
maintains its principal office at 650 CIT Drive, Livingston, New Jersey 07039.
Its telephone number is (973) 535-3514.
As described herein, the obligations of the Company with respect to the
Securities are limited. The Company will make no representations or warranties
with respect to the Contracts and will have no ongoing servicing obligations or
responsibilities with respect to the Contract Pool. CITSF is an affiliate of the
Company. The Company will acquire the contracts which it will sell to a Trust in
a privately negotiated transaction from CITSF.
Unless otherwise specified in the related Prospectus Supplement, neither
CIT nor any of its affiliates, including the Company and CITSF, will be
obligated with respect to the Securities. Accordingly, the Company has
determined that financial statements of CITSF and the Company are not material
to the offering of the Securities.
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THE CIT GROUP/SALES FINANCING, INC., SERVICER
General
CITSF, a Delaware corporation, is a wholly-owned subsidiary of CIT. It has
its principal executive office at 650 CIT Drive, Livingston, New Jersey 07039,
and its telephone number is (973) 740-5000.
CITSF originates, purchases, sells and services retail installment sale
contracts for recreation vehicles, manufactured housing, recreational boat
products and other consumer goods throughout the United States. CITSF has been a
lender to the recreational marine industry for more than five years. CITSF has a
centralized asset service facility (the "Asset Service Center") in Oklahoma
City, Oklahoma. Working through marine dealers and manufacturers, CITSF offers
retail installment credit. CITSF also originates marine loans through yacht
brokers and directly from consumers. In addition to purchasing marine contracts
from dealers on an individual basis, CITSF makes bulk purchases of marine
contracts. These bulk purchases may be from the portfolios of other lending
institutions or finance companies or the portfolios of other entities that
purchase and hold marine contracts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for
recreation vehicle, home equity, recreational boat and manufactured housing
retail installment contracts. The servicing portfolio includes both loans
originated or purchased by CITSF, as well as loans originated or purchased by
CITSF and subsequently securitized with servicing retained. The servicing
portfolio also includes loans owned by third parties that are serviced by CITSF
for a fee on a "contract" basis. The Asset Service Center is supplemented by
outside collectors and field remarketers located throughout the United States.
CITSF's general policies with regard to the origination of marine
installment sale contracts are described under "--Contract Origination" and
"--CITSF's Underwriting Guidelines." See "--Servicing" for a description of
certain of CITSF's servicing policies.
Contract Origination
In accordance with CITSF's marine underwriting criteria, CITSF purchases
marine retail installment sale contracts and loans to finance the purchases of
new and used boats and motors and trailers for boats from boat dealers,
manufacturers and financial intermediaries who regularly originate and sell such
contracts to CITSF pursuant to the terms of approved dealer agreements. CITSF
also makes direct marine loans to obligors secured by recreational boats.
Although CITSF does purchase marine installment sale contracts and marine
installment loans or notes in bulk from other lenders, unless otherwise
specified in the related Prospectus Supplement, all of the Contracts have been
originated by CITSF or CITCF-NY through the purchase of such Contracts from
dealers, manufacturers and intermediaries or through direct loan originations by
CITSF or CITCF-NY.
Through their Regional Business Centers, CITSF and CITCF-NY arrange to
purchase marine installment sale contracts from marine dealers located
throughout the United States. Regional Business Center personnel contact the
dealers located in their territories and explain CITSF's available financing
plans, terms, prevailing rates and credit and financing policies. If the dealer
wishes to use CITSF's available customer financing, the dealer must make an
application for dealer approval. Upon satisfactory results of the investigation
of the dealer's creditworthiness and general business reputation, CITSF or
CITCF-NY and the dealer execute a dealer agreement. In the assignment agreement
relating to any contracts which a dealer sold to CITSF or CITCF-NY, each dealer
makes representations and warranties concerning the obligors on such contracts
and the security interests in the financed boats relating thereto. These
representations and warranties typically include, among others, that (i) the
obligor was of legal age and competent to execute the contract; (ii) the
documentation submitted by the dealer evidenced a bona fide sale contract; (iii)
the contract was genuine, legally valid and enforceable for the sale price; (iv)
the financed boat was fully and correctly described in the contract and had been
delivered to and accepted by the obligor; (v) the dealer had clear title to the
financed boat and to the contract; (vi) the dealer had complied with all
applicable laws, regulations and rules in connection with the contract; (vii)
the obligor had not asserted a right of rescission,
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cancellation, claim, defense, set-off or counterclaim of any kind relating to
the contract; (viii) any down payment was paid in cash and the dealer received
in trade any property shown for the allowance stated in the contract; (ix) the
dealer had fully performed the terms of any purchase agreement with the obligor
at the time CITSF or CITCF-NY funded the transaction; and (x) application had
been made for a certificate of title or other ownership documents in the name of
the obligor with the security interest of the CITSF or CITCF-NY noted as a lien
thereon, or appropriate UCC financing statements had been filed, or the dealer
had followed the assignee's instructions with respect to financed boats subject
to federal documentation, to the extent applicable. CITSF and CITCF-NY may
accept assignment agreements in which dealers do not make such representations.
CITSF and CITCF-NY also purchase marine loan agreements from certain
financial intermediaries who originate and fund such transactions within CITSF's
marine underwriting guidelines. These financial intermediaries operate under
agreements with CITSF or CITCF-NY under which the intermediary generally makes
many of the representations and warranties concerning the documentation and the
obligor made by an assigning dealer. Material breaches of any such
representation or warranty generally will also trigger a right of CITSF or
CITCF-NY to demand the repurchase of the contract.
Upon material breach of any representation or warranty with respect to a
contract made by a dealer or financial intermediary, CITSF or CITCF-NY will have
a right of recourse against such dealer or intermediary to require it to
purchase or repurchase such contract. Historically, in determining whether to
exercise any right of recourse, CITSF and CITCF-NY have considered the prior
performance of the dealer or intermediary and other business and commercial
factors. The Servicer will be obligated to determine whether or not to enforce
such rights under the dealer or intermediary agreements relating to the
Contracts in accordance with its customary practices, and the right to any
proceeds received upon such enforcement will be conveyed to the Trust pursuant
to the Sale and Servicing Agreement. The Seller, CITSF and CITCF-NY will make no
representations as to the financial condition of any dealer or intermediary to
which any of them may have recourse, and there can be no assurance as to the
ability of any such dealer or intermediary to perform its obligations under a
dealer agreement, an intermediary agreement or an assignment agreement.
CITSF solicits potential direct marine loan borrowers through targeted
direct marketing programs. CITSF also solicits potential marine loan borrowers
through leads generated by a nationwide network of referral brokers. These
referral brokers usually do not have a written contract with CITSF. If their
referral results in the closing of a direct marine loan transaction with CITSF
and a customer located by the referral broker, CITSF pays the referral broker a
commission after the loan transaction occurs. Generally, the obligor under such
a direct loan transaction will submit his or her application directly to CITSF
or CITCF-NY. Accordingly, dealer or intermediary warranties on documentation
will not apply to these direct loan transactions.
CITSF or CITCF-NY underwrites on an individual basis each contract which
it purchases from dealers or originates directly in accordance with CITSF's
marine underwriting guidelines. CITSF may not individually underwrite each
transaction in portfolios of contracts which it purchases from other lenders.
Unless otherwise specified in the related Prospectus Supplement, all Contracts
were individually underwritten by CITSF or CITCF-NY.
If CITSF believes that an obligor on a marine contract is likely to
refinance the contract as a result of interest rate changes or other reasons,
CITSF may in its discretion attempt to retain such obligor as a customer by
soliciting the obligor to refinance the contract with CITSF. CITSF may continue
to apply this practice with respect to the Contracts.
CITSF's Underwriting Guidelines
All marine contracts that are purchased by CITSF from dealers are written
on forms provided or approved by CITSF and are purchased on an individually
approved basis. With respect to each marine contract to be purchased from a
dealer or financial intermediary, CITSF's general practice is to have the dealer
or financial intermediary submit the customer's credit application,
manufacturer's invoice (if the contract is for a new boat) and certain other
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information relating to the contract to the applicable Regional Business Center.
Personnel at the Regional Business Center analyze the creditworthiness of the
customer and other aspects of the proposed transaction.
With respect to marine loan contracts originated directly, the customer
will submit his or her credit application, verification of the boat's value and
certain other information directly to the National Business Center at the Asset
Service Center. Generally, personnel at the National Business Center will
analyze the creditworthiness of the customer and the value of the boat. CITSF
marine underwriting guidelines require that the customer supply a survey
appraising the value of certain used boats. If the boat is up to ten years old
and is of fiberglass construction by a United States manufacturer, surveys must
be provided for all amounts financed in excess of $100,000. If the boat is more
than ten years old or is not of fiberglass construction or was manufactured by a
manufacturer outside of the United States, surveys must be provided for all
amounts financed in excess of $35,000. This guideline applies to direct loan
business and to contracts originated by dealers or financial intermediaries.
CITSF will determine the acceptability of the survey and will usually check a
published valuation guide to confirm the accuracy of its valuation. Credit
underwriters at the National Business Center may waive or apply stricter
standards to valuation guidelines based upon the applicant's credit score and
the amount financed. On direct marine loan transactions, CITSF underwriters
prepare documentation and close such transactions directly, either in person, by
mail or through a third party closing agent.
All credit applications are entered into an application processing system.
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 five year history of residence,
employment and credit history, with no less than two years at the current
residence and at least three years in his or her present job, a debt ratio (the
ratio of total installment debt and housing expenses to gross monthly income) of
40% or less, a down payment of at least 10% and an overall satisfactory credit
profile. Self-employed applicants should be established in business for a
minimum of five years. The appropriate level credit officer may approve, on a
case by case basis, applications of customers which do not meet the
above-described retail customer profile. Such approval, if granted, is based on
the applicant's length and likelihood of continued employment, ability to pay,
and a review of the applicants' paying habits. No guarantors, endorsers or
co-signers are considered in determining whether to accept or reject an
application. The maximum amount CITSF will advance to such customers is (i) in
the case of a new boat, 110% of the invoice if the amount financed is less than
$100,000 and 100% of the invoice if the amount financed is $100,000 or more,
(ii) in the case of a used boat that is up to ten years old and is of fiberglass
construction by a United States manufacturer (a) 100% of the unpaid cash
balance, not to exceed 85% of the B.U.C. Book "low retail" value or 110% of NADA
wholesale book value for amounts financed up to $100,000, and (b) 85% of the
assessed marine survey value for amounts financed in excess of $100,000, and
(iii) in the case of a used boat that is more than ten years old or is not of
fiberglass construction or was manufactured by a manufacturer outside of the
United States (a) 85% of B.U.C. Book "low retail" value or 110% of NADA
wholesale book value for amounts financed up to $35,000, and (b) 85% of the
assessed marine survey value for amounts financed in excess of $35,000. All
amounts upon which advance rates are determined include taxes, license fees,
title, registration fees, U.S. Coast Guard documentation fee, survey, freight,
insurance, credit life A&H, extended warranties and 100% of dealer cost on
installed optional equipment. CITSF may waive certain credit requirements,
including income verification, job verification or valuation, in certain
specialized underwriting programs or if a credit score, balance or other factors
provide sufficient support to underwrite the transaction.
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Funding of a transaction is authorized after verification of the
conditions of approval of the application and satisfactory delivery of the
related boat or other proof of ownership and condition of the collateral.
In 1992, CITSF's credit criteria were changed to permit greater reliance
on credit scores and overall evaluation instead of using specific disqualifying
criteria (e.g., a minimum of two years of employment). In August 1994, CITSF
initiated an underwriting program to provide for the approval of a broader range
of credit scores with appropriate pricing intended to compensate for the risk in
customers with lower credit profiles. Accordingly, the interest rate charged on
each marine contract originated since August 1994 reflects CITSF's evaluation of
the relative risk associated with an individual's application.
The credit review and approval practices of each Regional Business Center
are subject to internal reviews and internal audits that, through sampling,
examine the quality of the underwriting; the verification of key data such as
income and employment, if required; and the accuracy and completeness of the
documentation.
Unless otherwise specified in the related Prospectus Supplement, almost
all of the Contracts are marine installment sale contracts and direct loans
originated in accordance with CITSF's marine underwriting criteria. In
substantially all cases, CITSF or CITCF-NY did not fund or purchase a Contract
until CITSF or CITCF-NY had reviewed and approved a completed customer file,
including the credit application of the customer, in accordance with CITSF's
underwriting procedures.
The underwriting guidelines of CITSF described above may change in the
future.
Servicing
Through its Asset Service Center, CITSF services recreation vehicle,
manufactured housing, recreational boat, home equity and other consumer loans.
CITSF services all of the marine contracts it originates or purchases, whether
on an individual basis or in bulk (except those it has sold to third parties on
a servicing released basis). CITSF is actively seeking arrangements pursuant to
which it will service marine contracts held by other entities, including
contracts which were not purchased by CITSF or sold to such other entities by
CITSF. Generally, such servicing responsibilities are, and would be, also
carried out through the Asset Service Center. Servicing responsibilities include
collecting principal and interest payments, taxes, insurance premiums, where
applicable, and other payments from obligors and, where such contracts have been
sold, remitting principal and interest payments to the holders thereof, to the
extent such holders are entitled thereto. Collection procedures include
repossession and resale of boats securing defaulted contracts and, if deemed
advisable by CITSF, entering into workout arrangements with obligors under
certain defaulted contracts. Although decisions as to whether to repossess any
boat are made on an individual basis, CITSF's general policy is to institute
repossession procedures promptly after Asset Service Center personnel determine
that it is unlikely that a defaulted contract will be brought current, and
thereafter to diligently pursue the resale of such boat if the market is
favorable. Geographic location, condition and market govern the method of sale
used to sell collateral. CIT uses site auctions, pool auctions, individual bids
on site, brokers, retail sale outlets, newspaper advertisements and
telemarketing. The liquidation team uses computer generated data bases to
maximize their effectiveness in the correct method of sale. The sales strategies
are reviewed at regular staff meetings, and potential markets for the collateral
and the sales plan for each unit are designed. Field personnel recommend to the
internal remarketers and managers the most effective disposition method of the
collateral i.e., move to consignment dealer for retail, move to storage facility
for wholesale, obtain as is/where is bids, or move to auction facility. The
remarketer and/or manager review the recommendation and based on product
knowledge and economic conditions make the decision in the resale of the
collateral.
Insurance Procedures
Each Contract requires the Obligor to obtain insurance against loss by
fire, theft, comprehensive and collision or full boat damage with respect to the
related Financed Boat. The dealer agreements include a representation and
warranty that each Financed Boat was subject to such insurance at the time of
origination of the Contract. Since
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Obligors may choose their own insurers to provide the required coverage, the
specific terms and conditions of their policies vary.
The Servicer does not, under its customary servicing practices and
procedures, obtain Force-Placed Insurance when the principal balance of the
related Contract falls below the level or levels periodically established in
accordance with such customary servicing practices and procedures. In accordance
with such customary servicing practices and procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or arrange
other methods of protection of the Financed Boats that it deems necessary or
advisable, provided that the Servicer determines that such actions do not
materially and adversely affect the interests of the Securityholders.
Historically, CITSF has force-placed insurance on a relatively small percentage
of its marine contracts. Unless otherwise specified in the related Prospectus
Supplement, the Servicer may, but will not be obligated to, enforce its rights
under the Contracts to require the Obligors to maintain physical damage
insurance, in accordance with the Servicer's customary practices and procedures
with respect to comparable new or used boats financed by installment sale
contracts or loans that it services for itself or others. If CITSF purchases
physical damage insurance on behalf of an Obligor, the Obligor's premium payment
obligations will not be included in the Principal Balance of the related
Contracts and will not be the property of the Trust. The historical delinquency
and loss experience included in a Prospectus Supplement will include Contracts
as to which CITSF has force-placed insurance.
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will permit the Servicer or any affiliate of the Servicer, to the
extent permitted by law, to (i) enter into agreements with one or more insurers
or other persons pursuant to which the Servicer or such affiliate will earn
commissions and fees in connection with any insurance policy purchased by an
Obligor including, without limitation, any physical damage insurance policy
(whether or not such physical damage insurance policy is force-placed pursuant
to the provisions of any Contract), or any other insurance policy whatsoever,
and (ii) in connection with the foregoing, to solicit, or permit and assist any
insurer or any agent thereof to solicit (including, without limitation,
providing such insurer or agent a list of Obligors including name, address or
other information) any Obligor.
Delinquency and Loan Loss Experience
Each Prospectus Supplement will include information on CITSF's loss and
delinquency experience with respect to its servicing portfolio of marine
contracts. However, there can be no assurance that such experience will be
indicative of the performance of the Contracts included in a particular Contract
Pool. Unless otherwise specified in the related Prospectus Supplement, the
tables setting forth the delinquency experience for the portfolio of marine
contracts originated and serviced by CITSF will exclude contracts acquired by
CITSF through portfolio purchases and contracts in repossession.
THE CERTIFICATES
General
A series of Securities may include one or more classes of Asset-Backed
Certificates (the "Certificates") issued pursuant to the Trust Documents to be
entered into among the Seller, the Servicer and the Owner Trustee, forms of
which have been filed as exhibits to the Registration Statement of which this
Prospectus forms a part. Payments in respect of the Certificates will be
subordinated to payments on the Notes, if any, to the extent described in the
related Prospectus Supplement. The following summary describes certain terms of
the Certificates and the Trust Documents. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Certificates and the Trust Documents, and the
following summary will be 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.
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The Certificates will be issued in the minimum denominations and integral
multiples in excess thereof specified in the related Prospectus Supplement;
provided, however, that one Certificate of each series may be issued in a
denomination other than such integral multiple such that the applicable
Affiliated Owner specified in the related Prospectus Supplement, if any, may be
issued at least the portion of the Original Certificate Balance specified in the
related Prospectus Supplement. If specified in the related Prospectus
Supplement, the Company or one of its affiliates will own the entire beneficial
interest in the Trust. Unless otherwise specified in the related Prospectus
Supplement, the Certificates will be issued in book-entry form only. Unless
otherwise specified in the related Prospectus Supplement, each class of the
Certificates will initially be represented by a single Certificate registered in
the name of the nominee of DTC, except as provided below. Unless otherwise
specified in the related Prospectus Supplement, DTC's nominee will be Cede & Co.
("Cede"). No person acquiring an interest in the Certificates through the
facilities of DTC (a "Certificate Owner") will be entitled to receive a
Certificate representing such person's interest in the Certificates, except as
set forth under "Certain Information Regarding The Securities--Definitive
Securities." Unless and until Definitive Certificates are issued under the
limited circumstances described in the related Prospectus Supplement and herein,
all references to actions by Certificateholders shall refer to actions taken by
DTC upon instructions from its Participants, and all references herein to
distributions, notices, reports and statements to Certificateholders shall refer
to distributions, notices, reports and statements to DTC in accordance with DTC
procedures. See "Certain Information Regarding The Securities--Definitive
Securities." If specified in the related Prospectus Supplement, one or more
classes of Certificates will be issued and sold privately.
Distribution of Principal and Interest on the Certificates
The Certificates will bear interest at the rate specified in the related
Prospectus Supplement (the "Pass-Through Rate"). The timing and priority of
distributions, seniority, allocations of loss, Pass-Through Rate and amount of
or method of determining distributions with respect to principal and interest
(or, where applicable, with respect to principal only or interest only) on the
Certificates of any series will be described in the related Prospectus
Supplement. Distributions of interest on the Certificates will be made on the
dates specified in the related Prospectus Supplement (each, a "Distribution
Date") and, unless otherwise specified in the related Prospectus Supplement,
will be made prior to distributions with respect to principal. A series may
include one or more classes of Stripped Certificates entitled to (i)
distributions in respect of principal with disproportionate, nominal or no
interest distributions, or (ii) interest distributions, with disproportionate,
nominal or no distributions in respect of principal. Each class of Certificates
may have a different Pass-Through Rate, which may be a fixed, variable or
adjustable Pass-Through Rate (and which may be zero for certain classes of
Stripped Certificates), or any combination of the foregoing. The related
Prospectus Supplement will specify the Pass-Through Rate for each class of
Certificates, or the initial Pass-Through Rate and the method for determining
the Pass-Through Rate. Unless otherwise specified in the related Prospectus
Supplement, interest on the Certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Unless otherwise specified in
the related Prospectus Supplement, distributions in respect of the Certificates
will be subordinate to payments in respect of the Notes, if any, as more fully
described in the related Prospectus Supplement. Distributions in respect of
principal of any class of Certificates will be made on a pro rata basis among
all of the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall be
as set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
of interest and principal on the Certificates will be made on the fifteenth day
of each month or, if any such day is not a Business Day, on the next succeeding
Business Day (each, a "Distribution Date"), commencing on the date specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, with respect to any Distribution Date, 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
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preceding the month in which such Distribution Date occurs (each, a "Record
Date"). A "Business Day" is any day other than a Saturday, Sunday or any day on
which banking institutions or trust companies in the states of New York,
Oklahoma and such other states (if any) specified in the related Prospectus
Supplement are authorized or required by law, regulation or executive order to
be closed.
THE NOTES
General
A series of Securities may include one or more classes of Asset-Backed
Notes (the "Notes" and, together with the Certificates, the "Securities") issued
pursuant to an Indenture (as amended and supplemented from time to time, the
"Indenture") between a Trust and an Indenture Trustee specified in the related
Prospectus Supplement (the "Indenture Trustee"), a form of which has been filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The following summary does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all of the provisions of the
Notes and the Indenture, and the following summary will be supplemented in whole
or in part by the related Prospectus Supplement. Where this summary refers to
particular provisions or terms used in the Indenture, the actual provisions
(including definitions of terms) are incorporated by reference as part of such
summary.
The Notes will be issued in the minimum denominations and integral
multiples in excess thereof specified in the related Prospectus Supplement;
provided, however, that one Note of each class of each series may be issued in a
denomination other than such integral multiple. Unless otherwise specified in
the related Prospectus Supplement, the Notes will be issued in book-entry form
only. Unless otherwise specified in the related Prospectus Supplement, each
class of Notes will initially be represented by a single Note registered in the
name of Cede, the nominee of DTC, except as provided below. No person acquiring
an interest in the Notes through the facilities of DTC (a "Note Owner" and,
together with a Certificate Owner, a "Security Owner") will be entitled to
receive a Note representing such person's interest in the Notes, except as set
forth under "Certain Information Regarding The Securities--Definitive
Securities" and such persons will hold their interests in the Notes through DTC
in the United States or Cedel or Euroclear in Europe. Unless and until
Definitive Notes are issued under the limited circumstances described in the
related Prospectus Supplement and herein, all references to actions by
Noteholders shall refer to actions taken by DTC upon instructions from its
Participants, and all references in the related Prospectus Supplement and herein
to distributions, notices, reports and statements to Noteholders shall refer to
distributions, notices, reports and statements to DTC in accordance with DTC
procedures. See "Certain Information Regarding The Securities--Definitive
Securities." If specified in the related Prospectus Supplement, one or more
classes of Notes will be issued and sold privately.
Payment of Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of loss,
Interest Rate and amount of or method of determining payments of principal and
interest on each class of Notes will be described in the related Prospectus
Supplement. The right of holders of any class of Notes to receive payments of
principal and interest may be senior or subordinate to the rights of holders of
any class or classes of Notes of such series, or any class of Certificates, as
described in the related Prospectus Supplement. Unless otherwise provided in the
related Prospectus Supplement, payments of interest on the Notes will be made
prior to payments of principal thereon. A series may include one or more classes
of Stripped Notes entitled to (i) principal payments with disproportionate,
nominal or no interest payment, or (ii) interest payments with disproportionate,
nominal or no principal payments. Each class of Notes may have a different
Interest Rate, which may be a fixed, variable or adjustable Interest Rate (and
which may be zero for certain classes of Stripped Notes), or any combination of
the foregoing. The related Prospectus Supplement 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.
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Unless otherwise specified in the related Prospectus Supplement, payments
in respect of interest to Noteholders of all classes within a series will have
the same priority. Under certain circumstances, the amount available for such
payments could be less than the aggregate amount of interest payable on the
Notes on any of the dates specified for payments in the related Prospectus
Supplement, in which case each class of Noteholders will receive its ratable
share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount then available to be distributed in respect
of interest on the Notes. In the case of a series of Securities which includes
two or more classes of Notes, the sequential order and priority of payment in
respect of principal and interest, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class will be
set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments
of interest and principal on the Notes will be made on each Distribution Date,
commencing on the date specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, with respect to any
Distribution Date, the Due Period will be the calendar month preceding the month
of such Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, payments on the Notes on each Distribution Date will be made to the
holders of record of the related Notes on the related Record Date.
The Indenture
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. CITSF will provide a copy of
the applicable Indenture (without exhibits) upon request to a holder of Notes
issued thereunder.
Modification of Indenture without Noteholder Consent. With respect to each
Trust, the Issuer and the related Indenture Trustee may, without consent of the
Noteholders, enter into one or more supplemental indentures for any of the
following purposes: (i) to correct or amplify the description of the collateral
or add additional collateral; (ii) to provide for the assumption of the Notes
and the Indenture obligations by a permitted successor to the Trust; (iii) to
add additional covenants for the benefit of the related Noteholders, or for the
Trust to surrender any rights or power conferred upon it; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision which
may be inconsistent with any other provision; (vi) to provide for the acceptance
of the appointment of a successor Indenture Trustee or to add to or change any
provision as shall be necessary and permitted to facilitate the administration
by more than one trustee; (vii) to modify, eliminate or add any provision in
order to comply with the Trust Indenture Act of 1939, as amended; or (viii) to
add, change in any manner, or eliminate any provision, or modify in any manner
the rights of Noteholders; provided that any action specified in this clause
(viii) shall not, as evidenced by an opinion of counsel, adversely affect in any
material respect the interests of any Noteholder unless Noteholder consent is
otherwise obtained as described in the Indenture. Any action specified in clause
(viii) shall be taken only upon satisfaction of the Rating Agency Condition.
"Rating Agency Condition" with respect to any action means the condition that
the Rating Agency or Agencies specified in the related Prospectus Supplement
shall have notified the Seller, the Servicer and the Issuer in writing that such
action will not result in the downgrade or withdrawal of the then current
ratings of the Securities.
Modification of Indenture with Noteholder Consent. With respect to each
Trust, with the consent of the holders of not less than a majority of the
aggregate outstanding principal amount of the Notes, and with prior notice to
the Rating Agencies, the Issuer and the Indenture Trustee may execute a
supplemental indenture to add provisions to, change in any manner or eliminate
any provisions of, the Indenture, or modify in any manner the rights of the
related Noteholders.
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
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the percentage of the aggregate principal amount of the outstanding Notes the
consent of the holders of which is required for any such supplemental indenture
or the consent of the holders of which is required for any waiver of compliance
with certain provisions of the Indenture or of certain defaults thereunder and
their consequences as provided for in the Indenture; (iv) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the related
Trust, any other obligor on the Notes, the Seller or an affiliate of any of
them; (v) reduce the percentage of the aggregate outstanding amount of the Notes
the consent of the holders of which is required to direct the Indenture Trustee
to sell or liquidate the Contracts if the proceeds of such sale would be
insufficient to pay the principal amount and accrued but unpaid interest on the
outstanding Notes; (vi) decrease the percentage of the aggregate principal
amount of the Notes required to amend the sections of the Indenture which
specify the applicable percentage of aggregate principal amount of the Notes
necessary to amend the Indenture or certain other related agreements; or (vii)
permit the creation of any lien ranking prior to or on a parity with the lien of
the Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in the Indenture, terminate the lien of the
Indenture on any such collateral or deprive the holder of any Note of the
security afforded by the lien of the Indenture.
Events of Default; Rights Upon Event of Default. With respect to each
Trust, unless otherwise specified in the related Prospectus Supplement, "Events
of Default" under the Indenture will consist of: (i) any failure to pay interest
on any Note as and when the same becomes due and payable, which failure
continues unremedied for five days; (ii) except as set forth in (iv) below, any
failure to make any installment of the principal of any Note as and when the
same becomes due and payable which failure continues unremedied for thirty days
after the giving of written notice of such failure to the Issuer and the Seller
(or the Servicer, as applicable) by the Indenture Trustee or to the Issuer and
the Seller (or the Servicer, as applicable) and the Indenture Trustee by the
holders of not less than 25% of the aggregate outstanding principal amount of
the Notes; (iii) any default in the observance or performance in any material
respect of any other covenants or agreements in the Indenture, which failure
materially and adversely affects the rights of Noteholders, and which failure
continues unremedied for thirty days after the giving of written notice of such
failure to the Issuer and the Seller (or the Servicer, as applicable) by the
Indenture Trustee or to the Issuer and the Seller (or the Servicer, as
applicable) and the Indenture Trustee by the holders of not less than 25% of the
aggregate outstanding principal amount of the Notes; (iv) any failure to pay in
full the outstanding principal balance of any Notes on or prior to the
applicable Note Final Scheduled Distribution Date; and (v) certain events of
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings and certain actions by the Trust indicating its insolvency,
reorganization pursuant to bankruptcy proceedings or inability to pay its
obligations. However, unless otherwise specified in the related Prospectus
Supplement, the amount of principal required to be paid to Noteholders under the
Indenture will generally be limited to amounts available to be deposited in the
Note Distribution Account. Therefore, unless otherwise specified in the related
Prospectus Supplement, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Event of Default until the
Note Final Scheduled Distribution Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an
Event of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or holders of not less than a majority in
aggregate outstanding principal amount of the Controlling Notes may declare the
principal of the Notes to be immediately due and payable. Such declaration may,
under certain circumstances, be rescinded by the holders of not less than a
majority of the aggregate outstanding principal amount of such Controlling
Notes.
Unless otherwise specified in the related Prospectus Supplement,
"Controlling Notes" means (i) if there is only one class of Notes, such class of
Notes and (ii) if there is more than one class of Notes (a) all Notes of the
most senior class of Notes then outstanding voting together as a single class
until such class of Notes have been paid in full, and (b) from and after the
payment in full of such senior class of Notes then outstanding, all Notes of the
next most senior class of Notes voting together as a single class until such
class of Notes have been paid in full.
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
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related Prospectus Supplement, the Indenture Trustee, however, is prohibited
from selling the related Contracts following an Event of Default unless (i) the
holders of all the outstanding related Notes consent to such sale, (ii) the
proceeds of such sale are sufficient to pay in full the principal of and the
accrued interest on such outstanding related Notes at the date of such sale, or
(iii) the Indenture Trustee determines that the proceeds of the Contracts would
not be sufficient on an ongoing basis to make all payments on the Notes as such
payments would have become due if such obligations had not been declared due and
payable, and the Indenture Trustee obtains the consent of the holders of not
less than 66 2/3% of the aggregate outstanding principal amount of the
Controlling Notes. Unless otherwise specified in the related Prospectus
Supplement, following a declaration upon an Event of Default that the Notes are
immediately due and payable, (i) Noteholders will be entitled to ratable
repayment of principal on the basis of their respective unpaid principal
balances, and (ii) repayment in full of the accrued interest on and unpaid
principal balances of the Notes will be made prior to any further payment of
interest on the Certificates or in respect of the Certificate Balance (other
than payments of the "Principal Liquidation Loss Amount" (as defined in the
related Prospectus Supplement) and other payments from the Enhancement (if any)
applicable to the Certificates).
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of such Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, the holders of not less than a majority in aggregate
outstanding principal amount of the Controlling Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee and the holders of not less than a majority
in aggregate outstanding principal amount of such Controlling Notes may, in
certain cases, waive any past default with respect thereto, except a default (i)
in the payment of principal of or interest on any of the Notes or (ii) in
respect of a covenant or provision of the Indenture that cannot be modified or
amended without the consent of the holder of each Note.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in aggregate outstanding
principal amount of the Controlling Notes have made written request of the
Indenture Trustee to institute such proceeding, (iii) such holder or holders
have offered the Indenture Trustee reasonable indemnity, (iv) the Indenture
Trustee has for sixty days after its receipt of such notice, request and offer
of indemnity failed to institute such proceeding, and (v) no direction
inconsistent with such written request has been given to the Indenture Trustee
during such sixty-day period by the holders of not less than a majority in
aggregate outstanding principal amount of such Controlling Notes.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within ninety days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not, for a period of
one year and one day after the termination of the Indenture, institute against
the Affiliated Owner, if any, the Company or the related Trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
Neither the Indenture Trustee in its individual capacity nor the Owner
Trustee in its individual capacity, nor any holder of a Certificate including,
without limitation, the Affiliated Owner (if any) or the Company, nor any of
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.
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Certain Covenants. Unless otherwise specified in the related Prospectus
Supplement, each Indenture will provide that the related Trust may not
consolidate with or merge with or into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes the Trust's obligation to make due and timely payments upon
the Notes and the performance or observance of every agreement and covenant of
the Trust under the Indenture, (iii) no Event of Default shall have occurred and
be continuing immediately after such merger or consolidation, (iv) the Trust has
been advised that the rating of the related Notes or Certificates then in effect
would not be reduced or withdrawn by the Rating Agencies as a result of such
merger or consolidation, (v) any action as is necessary to maintain the lien and
security interest created by the Indenture shall have been taken, and (vi) the
Trust has received an opinion of counsel to the effect that such consolidation
or merger will have no material adverse tax consequences to the Trust or to any
related Noteholder or Certificateholder.
Unless otherwise specified in the related Prospectus Supplement, each
Trust will covenant that it will not, among other things, (i) except as
expressly permitted by the Indenture, the Purchase Agreements or the Trust
Documents (collectively, the "Related Documents"), sell, convey, transfer,
exchange or otherwise dispose of any of the assets of the Trust, (ii) claim any
credit on or make any deduction from the principal or interest payable in
respect of the related Notes (other than amounts withheld under the Code or
applicable state law) or assert any claim against any present or former holder
of such Notes because of the payment of taxes levied or assessed upon the Trust,
(iii) dissolve or liquidate in whole or in part, (iv) permit the validity or
effectiveness of the related Indenture to be impaired or permit the lien of the
Indenture to be amended, hypothecated, subordinated, terminated or discharged,
or permit any person to be released from any covenants or obligations with
respect to the related Notes under such Indenture except as may be expressly
permitted thereby or (v) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of the Indenture)
to be created on or extend to or otherwise arise upon or burden the assets of
the Trust or any part thereof, or any interest therein or the proceeds thereof.
No Trust will incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the related Notes and the related Indenture or
otherwise in accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required
to mail each year to all related Noteholders a brief report relating to its
eligibility and qualification to continue as Indenture Trustee under the related
Indenture, any amounts advanced by it under the Indenture, the amount, interest
rate and maturity date of certain indebtedness owing by the Trust to the
Indenture Trustee in its individual capacity, the property and funds physically
held by the Indenture Trustee as such and any action taken by it that materially
affects the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. An Indenture will be discharged
with respect to the assets of the Trust securing the related Notes upon the
delivery to the related Indenture Trustee for cancellation of all such Notes or,
with certain limitations, upon deposit with the Indenture Trustee of funds
sufficient for the payment in full of all of such Notes.
The Indenture Trustee. The Indenture Trustee for a series of Notes will be
specified in the related Prospectus Supplement. The Indenture Trustee may resign
at any time, in which event the Servicer, or its successor, will be obligated to
appoint a successor trustee. The Servicer may also remove the Indenture Trustee
if the Indenture Trustee ceases to be eligible to continue as such under the
Indenture or if the Indenture Trustee becomes insolvent. In such circumstances,
the Servicer will be obligated to appoint a successor trustee. Any resignation
or removal of the Indenture Trustee and appointment of a successor trustee will
not become effective until acceptance of the appointment by the successor
trustee and will be subject to any conditions or approvals, if any, specified in
the related Prospectus Supplement.
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The Trust Documents will provide that the Servicer will pay the Indenture
Trustee's fees. The Trust Documents will further provide that the Indenture
Trustee will be entitled to indemnification by the Servicer for, and will be
held harmless against, any cost, loss, liability, claim, damage or expense
incurred by the Indenture Trustee in connection with the acceptance or
performance of the trusts and duties contained in the Indenture in accordance
with the terms and conditions therein, not resulting from its own willful
misfeasance, bad faith or gross negligence (other than by reason of a breach of
any of its representations or warranties set forth in the Indenture).
Trust Indenture Act. Each Indenture will comply with all applicable
provisions of the Trust Indenture Act of 1939, as amended.
ENHANCEMENT
General. The Prospectus Supplement for a series of Securities will specify
whether there is Enhancement for any class of the Securities of a series and, if
so, the material terms of such Enhancement. Any Enhancement may be intended (i)
to enhance the likelihood of receipt by the Certificateholders, if any, and/or
the Noteholders, if any, of the full amount of principal and interest due
thereon, and to decrease the likelihood that the Certificateholders, if any,
and/or the Noteholders, if any, will experience losses, or (ii) to provide
protection against changes in interest rates or against other risks, or (iii) to
supplement the interest rate on the Contracts, in each case to the extent and
under the conditions specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, any Enhancement for a
class of Securities will not provide protection against all risks of loss and
will not guarantee repayment of the entire principal and interest thereon. If
losses occur which exceed the amount covered by any Enhancement or which are not
covered by any Enhancement, Securityholders will bear their allocable share of
such losses. In addition, if a form of Enhancement covers more than one class of
Securities of a series, Securityholders of any such class will be subject to the
risk that such Enhancement will be exhausted by the claims of Securityholders of
other classes.
Subordination. Unless otherwise specified in the related Prospectus
Supplement, the rights of Certificateholders to receive distributions of
interest and principal are subordinated to the rights of Noteholders to receive
payment in full of all amounts of interest and principal which the Noteholders
are entitled to receive on the related Distribution Date. Consequently, unless
otherwise specified in the related Prospectus Supplement, no distribution will
be made to the Certificateholders on any Distribution Date in respect of (i)
interest until the full amount of interest and principal on the Notes payable on
such Distribution Date has been distributed to the Noteholders, other than
payments from the applicable Enhancement, if any, and (ii) principal until the
Notes have been paid in full, other than distributions in respect of the
Principal Liquidation Loss Amount to the extent, if any, set forth in the
related Prospectus Supplement.
If and to the extent specified in the related Prospectus Supplement, the
rights of one or more classes of Notes of a series to receive distributions of
interest and principal may be subordinated to the rights of one or more other
classes of Notes of the same series to receive payment in full of all amounts of
interest and principal which are payable thereon on each Distribution Date.
Other Enhancement. The amounts and types of credit or cash flow
enhancement arrangements (each, an "Enhancement"), if any, with respect to each
class of Securities will be set forth in the related Prospectus Supplement. If
and to the extent provided in the related Prospectus Supplement, Enhancement may
be in the form of a financial guaranty insurance policy, letter of credit, CIT
Limited Guarantee, reserve fund, third party guarantee, cash collateral account,
derivative product, credit facility, yield supplement agreement,
overcollateralization, guaranteed investment contract, guaranteed rate
agreement, other agreements with respect to third party payments or other
support, or other form of credit or cash flow enhancement, or any combination
thereof, as may be described in the related Prospectus Supplement. If specified
in the related Prospectus Supplement, Enhancement for a class of Securities of a
series may cover one or more other classes of Securities in such series. Further
information regarding providers of Enhancement, including financial information
when material, will be included in the related Prospectus Supplement.
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Financial Guaranty Insurance Policy. If so specified in the related
Prospectus Supplement, a financial guaranty insurance policy (each, a "Financial
Guaranty Insurance Policy") may be obtained and maintained for one or more
classes of Certificates or Notes of a series. The issuer of any Financial
Guaranty Insurance Policy (a "Financial Guaranty Insurer") will be described in
the related Prospectus Supplement. A copy of any such Financial Guaranty
Insurance Policy will be attached as an exhibit to the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, Financial
Guaranty Insurance Policies generally unconditionally and irrevocably guarantee
to Securityholders that an amount equal to each full and complete Insured
Payment will be received by an agent of the Trustee on behalf of
Securityholders, for distribution by the Trustee to each Securityholder. The
"Insured Payment" will equal the full amount of the distributions of principal
and interest to which Securityholders are entitled plus any other amounts
specified in the related Prospectus Supplement.
The specific terms of any Financial Guaranty Insurance Policy will be as
set forth in the related Prospectus Supplement. Financial Guaranty Insurance
Policies may have limitations including (but not limited to) limitations on the
Financial Guaranty Insurer's obligation to guarantee the Seller's or the
Servicer's obligation to repurchase or substitute for any Contracts, to
guarantee any specified rate of prepayments or to provide funds to redeem
Securities on any specified date.
The Financial Guaranty Insurer may be subrogated to the rights of each
Securityholder to receive payments under the Securities to the extent of any
payments by such Financial Guaranty Insurer under the related Financial Guaranty
Insurance Policy.
Reserve Fund or Reserve Account. If so specified in the related Prospectus
Supplement, an account (a "Reserve Fund" or "Reserve Account") may be
established and funded by any combination of cash, one or more irrevocable
letters of credit, Eligible Investments, one or more derivative products,
amounts otherwise distributable to one or more classes of Securityholders or to
the owners of any Retained Yield, or any other instrument satisfactory to the
Rating Agency or Agencies. A Reserve Fund may be funded from the Available
Amount remaining on each Distribution Date after all amounts then due have been
paid to the Securityholders, the Servicer, and any provider of Enhancement. In
addition, with respect to any series of Securities as to which Enhancement
includes a letter of credit or a derivative product, if so specified in the
related Prospectus Supplement, under certain circumstances the remaining amount
of the letter of credit may be drawn by the Owner Trustee or the termination
payment under a derivative product may be demanded by the Owner Trustee, and in
each case deposited in a Reserve Fund. Funds in a Reserve Fund will be applied,
invested and maintained in the manner and under the conditions specified in such
Prospectus Supplement. Amounts in a Reserve Fund may be distributed to
Securityholders, applied to reimburse the Servicer for outstanding advances, or
may be used for other purposes, in the manner and to the extent specified in the
related Prospectus Supplement. In the event that a Reserve Fund is funded
through the application of the Available Amount remaining on each Distribution
Date after all amounts then due have been paid to the Securityholders, the
Servicer and any provider of Enhancement, it may be referred to as a "Spread
Account" or "Reserve Account." In the event that a Reserve Fund is applied to
supplement the monthly interest payments on certain Contracts, it may be
referred to as a "Yield Supplement Account." In the event that the Reserve Fund
is funded through the proceeds of a loan to the Trust by a third party lender,
it may be referred to as a "Cash Collateral Account." The related Prospectus
Supplement will specify whether any Reserve Fund will be established as part of
the Trust or held outside the Trust by a collateral agent or similar third party
(who may be a Trustee acting in a different capacity). The related Prospectus
Supplement will describe the required levels of funding of a Reserve Fund, the
circumstances under which a Reserve Fund may be applied to make distributions on
a class of Securities, and the circumstances in which funds in a Reserve Fund
may be released to persons other than Securityholders. A Trust may contain more
than one Reserve Fund, each of which may apply only to a specified class of
Securities or to specified Contracts.
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
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as an association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes, and (iii) such transferee or assignee agrees in
writing to take positions for federal income tax purposes consistent with the
federal income tax positions agreed to be taken by the Seller or the Affiliated
Owner, as the case may be.
Limited Guarantee. If specified in the related Prospectus Supplement,
certain payments on a class of the Securities of a series, certain deficiencies
in principal or interest payments on the Contracts, or certain liquidation
losses on the Contracts, may be covered by a limited guarantee or other similar
instrument (the "Limited Guarantee"), limited in scope and amount, issued by
CIT. If not so specified, the Securityholders will have no recourse to CIT for
any amounts due on the Securities. If so specified, CIT may be obligated to take
one or more of the following actions in the event the Company fails to do so:
make deposits to an account, make advances, or purchase defaulted Contracts. Any
such Limited Guarantee will be limited in amount and a portion of the coverage
of any such Limited Guarantee may be separately allocated to certain events. The
scope, amount and, if applicable, the allocation of any Limited Guarantee will
be described in the related Prospectus Supplement.
Credit Facility. With respect to a series of Securities, one or more
classes may be entitled to the benefit of one or more letters of credit,
guarantees, limited guarantees, surety bonds or similar credit facilities (each,
a "Credit Facility"). Each such Credit Facility may be in an amount greater
than, equal to or less than the Certificate Balance of the Certificates of each
class (or the principal balance of the Notes of each class) entitled to the
benefits thereof, and may be subject to reduction or be limited as to duration,
all as described in the related Prospectus Supplement. To the extent specified
in the related Prospectus Supplement, amounts realized under a Credit Facility
supporting any class of Securities may be used for the same purposes as amounts
on deposit in a Reserve Fund. A Credit Facility may be held by a Trustee as part
of the related Trust or may be held by a collateral agent or other third party
(who may be a Trustee acting in a different capacity). The related Prospectus
Supplement will contain a description of the material terms of any Credit
Facility and any arrangement pursuant to which the Credit Facility is held
outside of the Trust and will state whether the Trust, the Seller, the Servicer
or a third party will pay the fees of the provider of the Credit Facility (the
"Credit Facility Provider"). Such Prospectus Supplement will also contain
certain information concerning the Credit Facility Provider, which information
will have been provided to the Seller by the Credit Facility Provider for use in
such Prospectus Supplement. CIT, CITSF or an affiliate thereof may be a Credit
Facility Provider.
If specified in the related Prospectus Supplement, a Credit Facility,
rather than guaranteeing distributions of particular amounts to the holders of
Securities of particular classes, may instead guarantee certain collections on
the related Contract Pool. These guaranteed collections may be attributable to
all or a portion of the amounts due on Contracts in liquidation, all or a
portion of the scheduled monthly payments due on the Contracts or other amounts.
The extent to which any such collections are guaranteed under a Credit Facility
which functions in this manner will be described in the related Prospectus
Supplement.
Liquidity Facility. With respect to a series of Securities, one or more
classes may be entitled to the benefit of one or more purchase agreements or
other liquidity facilities (each, a "Liquidity Facility"), pursuant to which the
provider of such Liquidity Facility (the "Liquidity Facility Provider") will
provide funds to be used to purchase some or all of such Securities. Unless
otherwise specified in the related Prospectus Supplement, a Liquidity Facility
will be held outside of the Trust by a third party (which may be a Trustee
acting in another capacity). The related Prospectus Supplement will contain a
description of the material terms of any such Liquidity Facility and any
arrangement pursuant to which it is held outside of the Trust, and will contain
certain information concerning the Liquidity Facility Provider, which
information will have been provided to the Seller by the Liquidity Facility
Provider for use in such Prospectus Supplement. CIT, CITSF or an affiliate
thereof may be a Liquidity Facility Provider. If specified in the related
Prospectus Supplement, a Reserve Fund or Credit Facility may also serve as a
Liquidity Facility.
Replacement. If specified in the related Prospectus Supplement, the Seller
may replace the Enhancement for any class of Securities with another form of
Enhancement without the consent of Securityholders, provided the Rating Agency
Condition is satisfied.
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CERTAIN INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement, persons
acquiring beneficial ownership interests in the Notes may hold their interests
through DTC in the United States or Cedel or Euroclear in Europe and persons
acquiring beneficial ownership interests in the Certificates may hold their
interests through DTC. Unless otherwise specified in the related Prospectus
Supplement, Securities will be registered in the name of Cede as nominee for
DTC. Cedel and Euroclear will hold omnibus positions with respect to the Notes
on behalf of Cedel Participants and Euroclear Participants, respectively,
through customers' securities accounts in Cedel's and Euroclear's name on the
books of their respective depositories (collectively, the "Depositories") which
in turn will hold such positions in customers' securities accounts in the
Depositories' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC accepts securities for deposit
from its participating organizations ("Participants") and facilitates the
clearance and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Security Owners who are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of Securities may do so
only through Participants or Indirect Participants (unless and until Definitive
Securities are issued). In addition, Security Owners will receive all
distributions of principal and interest on the Securities through DTC and its
Participants. Under a book-entry format, Security Owners will receive payments
after the related Distribution Date because such payments will be forwarded by
the Trustees on the Distribution Date to Cede, as nominee for DTC. DTC will
forward such payments to its Participants which thereafter will forward them to
Indirect Participants or Security Owners. It is anticipated that the only
"Holder" or "Securityholder," as such terms are used herein, will be Cede, as
nominee of DTC. Security Owners will not be recognized by the Trustees as
Securityholders, as such term will be used, in the Trust Documents. Security
Owners will only be permitted to exercise the rights of Securityholders or to
communicate with other Securityholders indirectly through DTC and its
Participants which in turn will exercise their rights through DTC. Security
Owners will not have access to the list of Security Owners of a series, which
may impede the ability of Security Owners to communicate with each other.
Security Owners will not receive or be entitled to receive Definitive Notes or
Definitive Certificates representing their respective interests in the
Securities, except under the limited circumstances described below and such
other circumstances, if any, as may be specified in the related Prospectus
Supplement.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Due to time zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participant on such business day. Cash received in Cedel or Euroclear as a
result of sales of Securities by or through a Cedel Participant or Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly or indirectly holding Notes
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
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accordance with DTC Rules on behalf of the relevant European international
clearing system by its Depository; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadline (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depository to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositories.
With respect to any series of Securities, while the Securities are
outstanding (except under the circumstances described below), under the rules,
regulations and procedures creating and affecting DTC and its operations (the
"DTC Rules"), DTC will be required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Notes and Certificates
and will be required to receive and transmit distributions of principal and
interest on the Securities. Participants and Indirect Participants with which
Security Owners have accounts with respect to the Securities will be similarly
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Security Owners.
Since DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, the ability of a Security Owner to pledge Notes
or Certificates to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such Securities, may be limited
due to the lack of physical certificates for such Securities. Issuance of the
Securities in book-entry form may reduce the liquidity of such Securities in the
secondary market since certain potential investors may be unwilling to purchase
Securities for which they cannot obtain physical certificates.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for its
participants ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled in any of 32 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by the Brussels, Belgium
Office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance Systems, S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear through, or
maintain a custodial relationship with, a Euroclear Participant, either directly
or indirectly.
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The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in Euroclear. All securities in Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through Cedel or Euroclear will
be credited to the cash accounts of Cedel Participants or Euroclear Participants
in accordance with the relevant system's rules and procedures, to the extent
received by its Depository. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a beneficial holder of Notes under the Indenture on behalf of a
Cedel Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Depository's ability to effect such
actions on its behalf through DTC.
Unless and until Definitive Securities are issued, Security Owners who are
not Participants may transfer ownership of Notes and Certificates only through
Participants by instructing such Participants to transfer such Notes and
Certificates, by book-entry transfer, through DTC for the account of the
purchasers of such Securities, which account is maintained with their respective
Participants. Under the DTC Rules and in accordance with DTC's normal
procedures, transfers of ownership of Securities will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited. Similarly, the respective Participants will make debits or credits, as
the case may be, on their records on behalf of the selling and purchasing
Securities Owners.
DTC has advised the Company that, unless and until Definitive Securities
are issued, DTC will take any action permitted to be taken by a Securityholder
under the Trust Documents only at the direction of one or more Participants to
whose DTC accounts the Securities are credited. Additionally, DTC has advised
the Company that it will take such actions with respect to specified percentages
of a class of the Securities only at the direction of Participants whose
holdings include principal amounts of the Securities that satisfy such
percentages. DTC may take conflicting actions with respect to other principal
amounts of the Securities to the extent that such actions are taken on behalf of
Participants whose holdings include such principal amounts.
NEITHER THE TRUST, THE SELLER, THE SERVICER, CIT, ANY AFFILIATED OWNER,
THE OWNER TRUSTEE, THE INDENTURE TRUSTEE, NOR ANY OF THE UNDERWRITERS WILL HAVE
ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL PARTICIPANTS OR
EUROCLEAR PARTICIPANTS OR SECURITY OWNERS WITH RESPECT TO (1) THE ACCURACY OF
ANY RECORDS MAINTAINED BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT, (2) THE
PAYMENT BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY
SECURITY OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF, OR INTEREST ON, THE
SECURITIES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR EUROCLEAR
PARTICIPANT OF ANY NOTICE TO ANY SECURITY OWNER WHICH IS REQUIRED OR PERMITTED
UNDER THE TERMS OF THE INDENTURE OR THE TRUST DOCUMENTS TO BE GIVEN TO
SECURITYHOLDERS OR (4) ANY OTHER ACTION TAKEN BY DTC AS THE SECURITYHOLDER.
Definitive Securities
With respect to any series of Securities, unless otherwise specified in
the related Prospectus Supplement, the Notes and Certificates will be issued in
fully registered, certificated form ("Definitive Notes" and "Definitive
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Certificates," respectively, and together, "Definitive Securities") to Security
Owners or their nominees, rather than to DTC or its nominee, only if (i) the
Servicer advises the Trustees in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Depository with respect to the
Securities and the Servicer is unable to locate a qualified successor, (ii) the
Servicer, at its option, elects to terminate the book-entry system through DTC
or (iii) after the occurrence of an Event of Default or an Event of Termination,
Note Owners or Certificate Owners representing in the aggregate not less than a
majority of the outstanding principal balance of the Notes of a series or the
Certificate Balance of the Certificates of a series advise DTC through
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interest of such Note Owners
or Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the related Trustees are required to notify DTC of the
availability of Definitive Securities. Upon surrender by DTC of the global notes
and global certificates representing the Notes and Certificates of a series and
instructions for re-registration, the Trustees will issue the Notes of a series
as Definitive Notes and the Certificates of a series as Definitive Certificates,
and thereafter the Trustees will recognize the holders of such Definitive Notes
and Definitive Certificates as Noteholders and Certificateholders, respectively,
under the Trust Documents ("Noteholders" and "Certificateholders" respectively,
and together, "Securityholders" or "Holders").
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal of the Securities and interest on the Securities
thereafter will be made by the related Trustees directly to Holders in
accordance with the procedures set forth herein and in the Trust Documents.
Distributions of principal and interest on each Distribution Date will be made
to Holders in whose names the Definitive Securities were registered on the
Record Date. Such distributions will be made by check mailed to the address of
such Holder as it appears on the register maintained by such Trustees or other
person appointed pursuant to the Trust Documents. The final payment on any
Securities, however, will be made only upon presentation and surrender of such
Note or Certificate at the office or agency specified in the notice of final
distribution to Holders.
Unless otherwise specified in the related Prospectus Supplement,
Definitive Securities will be transferable and exchangeable at the offices of
the related Trustees. No service charge will be imposed for any registration of
transfer or exchange, but such Trustees may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
List of Securityholders
Unless otherwise specified in the related Prospectus Supplement, if
Definitive Certificates have been issued, the related Owner Trustee will, upon
written request by three or more Certificateholders or by holders of
Certificates evidencing not less than 25% of the Certificate Balance, within
five Business Days after receipt of such request, afford such Certificateholders
access during normal business hours to the current list of Certificateholders
for purposes of communicating with other Certificateholders with respect to
their rights under the Purchase Agreements and the Trust Documents provided such
Certificateholders (i) state that they wish to communicate with other
Certificateholders with respect to their rights under the Purchase Agreements,
the Trust Documents or the Certificates and (ii) provide the Owner Trustee and
the Servicer with a copy of the proposed communication. The Purchase Agreements
and Trust Documents will not provide for the holding of any annual or other
meetings of Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, if
Definitive Notes have been issued, the Indenture Trustee will, upon written
request by three or more Noteholders within five Business Days after receipt of
such request, afford such Noteholders access during business hours to the
current list of Noteholders for purposes of communicating with other Noteholders
with respect to their rights under the Indenture provided such Noteholders (i)
state that they wish to communicate with other Noteholders with respect to their
rights under the Indenture and (ii) provide the Indenture Trustee and the
Servicer with a copy of the proposed communication. The Indenture will not
provide for the holding of any annual or other meetings of Noteholders.
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Statements to Securityholders
On each Distribution Date, the Servicer will prepare and provide to the
Trustees a statement, to be delivered on the Distribution Date to each
Securityholder. Unless otherwise specified in the related Prospectus Supplement,
the statement will set forth at least the following information for the related
Due Period:
(i) the amount of collections on the Contracts during the
immediately preceding Due Period;
(ii) the Available Amount for payment of all amounts distributable
in respect of the Securities and the Servicer Payment;
(iii) the amount of the distribution allocable to principal of the
Notes (if applicable) and to the Certificate Balance of the Certificates
(if applicable), including any overdue principal;
(iv) the amount of the distribution allocable to interest on or with
respect to each class of Securities, including any overdue interest;
(v) the Pool Balance, the Note Pool Factor (if applicable) and the
Certificate Pool Factor (if applicable) as of the end of the related Due
Period;
(vi) the Servicer Payment for such Distribution Date;
(vii) the amount of Monthly Advances and Non-Reimbursable Payments,
if any, on such date;
(viii) the amount, if any, withdrawn from any Enhancement (if
applicable) and distributed to the Securityholders with respect to such
Distribution Date;
(ix) the amount available under any Enhancement (if applicable),
after giving effect to any deposit to or withdrawal from the Enhancement
with respect to such Distribution Date, and such amount expressed as a
percentage of the Pool Balance;
(x) the aggregate principal balance of all Contracts which were
delinquent 30, 60 and 90 days or more as of the last day of the related
Due Period;
(xi) the amount of investment earnings, net of losses and investment
expenses, on amounts on deposit in the Collection Account;
(xii) during the Funding Period, if any, the amount of funds on
deposit in the Pre-Funding Account;
(xiii) during the Funding Period, if any, the number and aggregate
principal balance of Subsequent Contracts;
(xiv) during the Funding Period, if any, the number and aggregate
principal balance of Subsequent Contracts purchased by the Trust since the
preceding Distribution Date;
(xv) during the Funding Period, if any, the amount, if any,
withdrawn from the Capitalized Interest Account, if any, to make payments
of interest on the Securities;
(xvi) during the Funding Period, if any, the amount remaining on
deposit in the Capitalized Interest Account, if any;
(xvii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in
the Pre-Funding Account;
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(xviii) during the Funding Period, if any, the amount of investment
earnings, net of losses and investment expenses, on amounts on deposit in
the Capitalized Interest Account, if any;
(xix) on the Distribution Date immediately following the end of the
Funding Period (or if the Funding Period ends on a Distribution Date on
such Distribution Date), if any, the aggregate principal amount and
percentage of each of the Notes, if any, and Certificates, if any, which
are being redeemed;
(xx) the aggregate principal balance of all Contracts which became
either "Defaulted Contracts" or "Liquidated Contracts" (as defined in the
related Prospectus Supplement) during the related Due Period (if the
related Prospectus Supplement includes definitions of such term or terms);
(xxi) the number and aggregate principal amount of Contracts which
were prepaid, in part or in whole, during the related Due Period;
(xxii) the aggregate outstanding principal balance of the Notes (if
applicable) as of such Distribution Date (after giving effect to any
distributions thereon and reductions thereto on such Distribution Date);
(xxiii) the Certificate Balance (if applicable) as of such
Distribution Date (after giving effect to any distributions thereon and
reductions thereto on such Distribution Date);
(xxiv) the amount, if any, by which the amount due to be distributed
to Noteholders (if applicable) and Certificateholders (if applicable)
exceeds the actual amount distributed on the related Distribution Date to
Noteholders (if applicable) and Certificateholders (if applicable),
respectively;
(xxv) if applicable, the amount of surplus to be distributed to the
Affiliated Owner, if any, after all payments have been made in respect of
the Securities, the Servicer Payment has been paid and all deposits to any
Reserve Fund and payments to a Credit Facility Provider have been made;
(xxvi) if applicable, the balance of the Paid-Ahead Account; and
(xxvii) such other information as may be specified in the related
Prospectus Supplement.
If a Limited Guarantee is issued by CIT with respect to a series of
Securities, the monthly and annual reports will include a statement to the
following effect: CIT is subject to the requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission. As a result of the
limited guarantee by CIT, information relating to CIT which is material will be
available through such reports and other information.
Within a reasonable period of time after the end of each calendar year,
but not later than the latest date permitted by law (where applicable law
specifies such date), the Trustee will mail to each person who at any time
during such calendar year shall have been a Securityholder, and received any
payment on its Security, a statement containing the relevant amounts described
above for such calendar year for the purposes of such Securityholder's
preparation of federal income tax returns. See "Certain Federal Income Tax
Consequences."
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Trustees and Cede, as registered holder of the
Certificates and the Notes and the nominee of DTC. Certificate Owners and Note
Owners may receive copies of such reports upon written request, together with a
certification that they are Certificate Owners or Note Owners, as the case may
be, and payment of reproduction and postage expenses associated with the
distribution of such reports, from the Owner Trustee or the Indenture Trustee,
as applicable. See "--Statements to Securityholders" and "--Book-Entry
Registration" above.
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THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
Unless otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of the Purchase Agreement and any
Subsequent Purchase Agreement (together, the "Purchase Agreements") and the Sale
and Servicing Agreement, any Subsequent Transfer Agreements and the Trust
Agreement or the Pooling and Servicing Agreement (collectively, the "Trust
Documents"). Forms of the Purchase Agreements and the Trust Documents have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. CITSF will provide a copy of such agreements (without exhibits) upon
request to a holder of Securities described therein. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Purchase Agreements and the Trust
Documents, and the following summary will be supplemented in whole or in part by
the related Prospectus Supplement. Where this summary refers to particular
provisions or terms used in the Purchase Agreements or Trust Documents, the
actual provisions (including definitions of terms) are incorporated by reference
as part of such summary.
Sale and Assignment of the Contracts
On or prior to the Closing Date for a series of Securities and on each
Subsequent Transfer Date, if any, pursuant to the Purchase Agreement or a
Subsequent Purchase Agreement, as the case may be, between CITSF and the
Company, CITSF will sell and assign to the Company, without recourse, its entire
interest in and to the Initial Contracts and Subsequent Contracts, respectively,
including its security interests in the related Financed Boats. On the Closing
Date and each Subsequent Transfer Date, the Seller will sell and assign to the
Trust, without recourse, all of its right, title and interest in and to the
Contracts, including its security interests in the Financed Boats. Unless
otherwise specified in the related Prospectus Supplement, certain of the
Contracts will be purchased by CITSF from CITCF-NY before they are sold to the
Company. The Company established a Selling Trust in 1996, and the Company and
its affiliates may in the future establish one or more additional Selling
Trusts. The Company has sold and assigned Contracts to the existing Selling
Trust, without recourse, which the Company purchased from CITSF, without
recourse (and which, in some cases, CITSF purchased from CITCF-NY, without
recourse). In the future, the Company may sell and assign Contracts, without
recourse, to the existing Selling Trust and one or more additional Selling
Trusts. The existing Selling Trust has funded its purchases of Contracts through
its issuance of securities secured by a security interest in the Contracts. A
Selling Trust will make no representations with respect to its Contracts, and
will have no obligations with respect to the Securities.
Each Contract will be identified in a schedule appearing as an exhibit to
the relevant Purchase Agreement and the Trust Documents (the "List of
Contracts") which includes, among other things, the Contract Rate, Initial
Cut-off Date Principal Balance and date of the last scheduled payment for each
Contract. The Owner Trustee or its designated agent will, concurrently with the
sale and assignment of the Initial Contracts to the Trust, either (i) execute,
authenticate and deliver the Securities to the Company in exchange for the
Initial Contracts transferred by the Company and/or the Selling Trust (or the
Company on behalf of the Company and/or the Selling Trust) to the Trust, in
which event the Company and/or the Selling Trust will sell all or a portion of
the Securities to the Underwriters or (ii) execute, authenticate and deliver the
Securities to the Underwriters in exchange for the price specified in the
related Prospectus Supplement, and transfer to the Company and the Selling Trust
the respective prices for the Initial Contracts transferred by the Company and
the Selling Trust, respectively, to the Trust.
CITSF will make certain representations and warranties in the Trust
Documents with respect to each Initial Contract as of the Closing Date,
including, unless otherwise specified in the related Prospectus Supplement, that
(i) as of the Initial Cut-off Date, the most recent scheduled payment of
principal and interest was made by or on behalf of the related Obligor or was
not delinquent more than sixty days, unless otherwise specified in the related
Prospectus Supplement; (ii) no provision of a Contract has been waived, altered
or modified in any respect, except by instruments or documents contained in the
Contract File; (iii) each Contract is a legal, valid and binding obligation of
the related Obligor and is enforceable in accordance with its terms (except as
may be limited by laws affecting creditors' rights generally); (iv) as of the
Initial Cut-off Date, CITSF had no knowledge of any facts which would give rise
to any right of rescission, set-off, counterclaim or defense, including the
defense of usury, or of the same being asserted or threatened with respect to
any Contract; (v) the Obligor on each Contract is required to
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maintain physical damage insurance covering the related Financed Boat in
accordance with CITSF's normal requirements or, if the related Financed Boat is
not so covered by an Obligor's insurance, it is covered by a blanket insurance
policy maintained by CITSF or the Servicer; (vi) no Contract was originated in
or is subject to the laws of any jurisdiction whose laws would prohibit (A) the
transfer of the Contract to the Company under the Purchase Agreements, (B) the
transfer of the Contract to the Trust pursuant to the Trust Documents, or (C)
the ownership of the Contracts by the Trust; (vii) each Contract complies with
all requirements of law in all material respects; (viii) no Contract has been
satisfied, subordinated in whole or in part or rescinded, and no Financed Boat
has been released from the security interest of the related Contract in whole or
in part; (ix) each Contract creates a valid and enforceable first priority
security interest in favor of CITSF, CITCF-NY, or the related Dealer or
financial intermediary in the Financed Boat covered thereby (which security
interest, if in favor of the related Dealer or CITCF-NY, has been assigned to
CITSF), such security interest has been assigned by CITSF to the Company and by
the Company to the Trust (and, if and to the extent specified in the related
Prospectus Supplement, from CITSF to SPV, from SPV to a Selling Trust and from
the Selling Trust to the Trust), and all necessary action with respect to such
Contract has been taken to perfect the security interest in the related Financed
Boat in favor of CITSF or CITCF-NY; (x) all parties to each Contract had
capacity to execute such Contract; (xi) no Contract has been sold, assigned or
pledged by CITSF to any person other than the Company (or by the Company (or, if
and to the extent specified in the related Prospectus Supplement, a Selling
Trust) to any person other than the Trust) and, prior to the transfer of the
Contracts by CITSF to the Company and the transfer of the Contracts by the
Company to the Trust (and, if and to the extent specified in the related
Prospectus Supplement, by CITSF to SPV, by SPV to a Selling Trust and by the
Selling Trust to the Trust), CITSF or the Company, respectively, had good and
marketable title to each Contract, free and clear of any lien, encumbrance,
equity, loan, pledge, charge, claim or security interest, and was the sole owner
and had full right to transfer such Contract to the Company and the Trust,
respectively; (xii) as of the Initial Cut-off Date, CITSF had no knowledge of
any default, breach, violation or event permitting acceleration under any
Contract, and CITSF had no knowledge of any event which with notice and/or the
expiration of any grace or cure period would constitute a default, breach,
violation or event permitting acceleration under such Contract (except for
payment delinquencies permitted by clause (i) above), and CITSF has not waived
any of the foregoing (except for payment delinquencies permitted by clause (i)
above); (xiii) as of the Initial Cut-off Date, CITSF had no knowledge of any
liens or claims which have been filed for necessaries (e.g. fuel), work, labor
or materials affecting a Financed Boat securing a Contract, which are or may be
liens prior or equal to the security interest of the Contract; (xiv) each
Contract is a fully-amortizing loan with interest at the stated Contract Rate
and provides for level payments over the term of such Contract; (xv) each
Contract contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for realization against the
collateral of the benefits of the security (except as may be limited by
creditors' rights generally); (xvi) the description of each Contract set forth
in the List of Contracts is true and correct as of its date; (xvii) no Obligor
is the United States of America or any state or any agency, department,
instrumentality or political subdivision thereof; (xviii) if the Obligor is in
the military (including an Obligor who is a member of the National Guard or is
in the reserves) and the Contract is subject to the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended (the "Soldiers' and Sailors' Civil Relief Act"),
or the California Military Reservist Relief Act of 1991 (the "Military Reservist
Relief Act"), such Obligor has not made a claim to CITSF that (A) the amount of
interest on the Contract should be limited to 6% pursuant to the Soldiers' and
Sailors' Civil Relief Act during the period of such Obligor's active duty
status, or (B) payments on the Contract should be delayed pursuant to the
Military Reservist Relief Act, in either case unless a court has ordered
otherwise upon application of CITSF; (xix) there is only one original executed
copy of each Contract, which, immediately prior to the execution of the Trust
Documents, was in the possession of CITSF; (xx) the Contract is "chattel paper"
as defined in the New Jersey UCC; (xxi) the Contract satisfies the selection
criteria set forth in the related Prospectus Supplement; (xxii) all of the
right, title and interest of CITSF, the Company and, if applicable, CITCF-NY
(and, if and to the extent specified in the related Prospectus Supplement, the
Selling Trust), in the Contract has been validly sold, transferred and assigned
to the Trust and all filings necessary to evidence such sale, transfer and
conveyance have been made in all appropriate jurisdictions; and (xxiii) no
adverse selection procedure was utilized in selecting the Contracts for sale by
CITSF to the Company (and, if and to the extent specified in the related
Prospectus Supplement, by CITSF to SPV or by SPV to a Selling Trust).
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
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Subsequent Contract as it is required to make with respect to each Initial
Contract sold to the Trust except that each such representation and warranty
shall be made as of the Subsequent Cut-off Date relating to such Subsequent
Contract. In addition, no Subsequent Contract will be sold to the Trust on a
Subsequent Transfer Date unless such Subsequent Contract satisfies the criteria
described in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, the Subsequent Financed Boats will consist of
new and used boats, boat motors and boat trailers.
Unless otherwise specified in the related Prospectus Supplement, under the
terms of the Trust Documents and subject to certain conditions specified in the
Trust Documents, CITSF will be obligated to repurchase from the Trust for the
Purchase Price any Contract (a "Repurchased Contract") not later than ninety
days after CITSF becomes aware, or eighty-five days after CITSF's receipt of
written notice from a Trustee or the Servicer, of a breach of any representation
or warranty by CITSF in the Trust Documents that materially and adversely
affects the Trust's interest in such Contract if such breach has not been cured.
CITSF shall effect such repurchase from the Trust by depositing the Purchase
Price for such Contract in the Collection Account on the Deposit Date
immediately following the determination that such Purchase Price is owed. Unless
otherwise specified in the related Prospectus Supplement, the "Purchase Price"
for any Contract will be the remaining principal amount outstanding on such
Contract on the date of repurchase, plus thirty days' interest thereon at the
Contract Rate on the Contract, and (ii) accrued and unpaid Servicing Fees
thereon at the Servicing Fee Rate to the date of such repurchase. Upon such
repurchase, the Trust shall transfer all right, title and interest in the
Contract to CITSF, free and clear of the lien of the applicable Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, this repurchase
obligation constitutes the sole remedy available to the Trust and the
Securityholders for a breach of a representation and warranty under the Trust
Documents with respect to the Contracts (but not with respect to any other
breach by CITSF of its obligations under the Trust Documents).
Unless otherwise specified in the related Prospectus Supplement, CITSF,
the Company and the Trust will treat each of the transfers of the Contracts from
CITSF to the Company and from the Company (and, if and to the extent specified
in the related Prospectus Supplement, a Selling Trust) to the Trust as a sale.
As a result of the sale of the Contracts by CITSF to the Company and by the
Company (and, if and to the extent specified in the related Prospectus
Supplement, a Selling Trust) to the Trust, the Contracts should not be part of
the assets of either CITSF or the Company and should not be available to their
respective creditors. However, in the event of the insolvency of CITSF or the
Company, it is possible that a trustee in bankruptcy, conservator or receiver
for, or a creditor of, CITSF or the Company, as the case may be, may assert that
the transaction between CITSF and the Company or between the Company (and, if
and to the extent specified in the related Prospectus Supplement, a Selling
Trust) and the Trust, as the case may be, was a pledge of the Contracts to
secure a loan, rather than a true sale. This position, if asserted, could
prevent timely receipt by the Trust of payments of amounts due on the Contracts
and, if accepted by a court, may result in delays or reductions in distributions
of principal and interest on the Securities. Since the Contracts will remain in
CITSF's possession and will not be stamped or otherwise marked to reflect the
sale and assignment to the Trust, the Trust's interest in the Contracts could be
defeated if a subsequent purchaser were to take physical possession of the
Contracts without knowledge of the sale and assignment. See "Certain Legal
Aspects of the Contracts."
If specified in the related Prospectus Supplement, the terms of the sale
of some or all of the Contracts from CITSF or the Seller or a Selling Trust or
any of them to the related Trust may provide for the retention by CITSF or the
Seller or such Selling Trust, as the case may be, of the right to receive a
portion of the interest accruing thereon (the "Retained Yield").
Custody of Contract Files
Unless otherwise specified in the related Prospectus Supplement, to reduce
administrative costs, each Trust will appoint CITSF as initial custodian of the
Contracts. Prior to the appointment of any custodian other than CITSF, the Trust
and such proposed successor custodian specified in the related Prospectus
Supplement shall enter into a custodian agreement pursuant to which such
successor custodian will agree to hold the Contract Files on behalf of
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the related Trust. Any such custodian agreement may be terminated by the Trust
on thirty days' notice to such successor custodian.
Unless otherwise specified in the related Prospectus Supplement, to
facilitate servicing and reduce administrative costs, the documents will not be
physically segregated from other similar documents which are in CITSF's
possession. UCC financing statements will be filed in New Jersey and Oklahoma
reflecting the sale and assignment of the Contracts to the Owner Trustee, and
CITSF's accounting records and computer systems will also reflect such sale and
assignment. The Contracts will not be stamped or otherwise marked to reflect the
transfer of the Contracts by CITSF to the Company and by the Company to the
Trust (and, if and to the extent specified in the related Prospectus Supplement,
by CITSF to SPV, by SPV to a Selling Trust and by the Selling Trust to the
Trust), and will not be segregated from the other installment sale contracts of
CITSF. The Obligors under the Contracts will not be notified of the transfer of
the Contracts to the Company or to the Trust. If, through inadvertence or
otherwise, any of the Contracts were sold to another party (or a security
interest therein were granted to another party) that purchased (or took such
security interest in) any of such Contracts in the ordinary course of its
business and took possession of such Contracts, the purchaser (or secured party)
would acquire an interest in the Contracts superior to the interest of the
related Trust if the purchaser (or secured party) acquired (or took a security
interest in) the Contracts for new value and without actual knowledge of such
Trust's interest. See "Certain Legal Aspects of the Contracts."
Accounts
For each Trust, the Servicer will establish and maintain with a Trustee
one or more accounts, in the name of such Trustee on behalf of the
Securityholders (the "Collection Account"), into which all payments made (after
the Initial Cut-off Date or the Subsequent Cut-off Date, as applicable) on or
with respect to the Contracts in the related Contract Pool will be deposited by
the Servicer. See "--Collections." The Servicer will establish and maintain with
a Trustee (or its designated agent) an account in the name of such Trustee on
behalf of the Certificateholders, if any, into which amounts released from the
Collection Account and any Enhancement for payment to the Certificateholders
will be deposited and from which distributions to the Certificateholders will be
made (the "Certificate Distribution Account"). The Servicer will establish and
maintain with the Indenture Trustee (or its designated agent) an account in the
name of the Indenture Trustee on behalf of the Noteholders, if any, into which
amounts released from the Collection Account and from any Enhancement for
payment to the Noteholders will be deposited and from which distributions to the
Noteholders will be made (the "Note Distribution Account"). If the related
Prospectus Supplement provides that the Contract Pool contains Precomputed
Contracts, the Servicer will establish and maintain with a Trustee (or its
designated agent) an account in the name of such Trustee on behalf of the
Securityholders, into which early payments by or on behalf of Obligors on
Precomputed Contracts which do not constitute scheduled payments, full
prepayments or certain partial prepayments that result in a reduction of an
Obligor's periodic payment below the scheduled payment as of the Initial Cut-off
Date or Subsequent Cut-off Date, as the case may be, will be deposited (the
"Paid-Ahead Account").
Amounts held in the Certificate Distribution Account and in such other
accounts as may be specified in the related Prospectus Supplement will not be
available to make payments of amounts due on the Notes, if any, and will not be
pledged to the Indenture Trustee as collateral security for the Notes.
Each Account will be an Eligible Account maintained with the Owner
Trustee, the Indenture Trustee and/or other depository institutions. "Eligible
Account" means any account which is (i) an account maintained with an Eligible
Institution; (ii) an account or accounts the deposits in which are fully insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the FDIC; (iii) a "segregated trust account" maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the benefit
of a Trustee, which depository institution or trust company has capital and
surplus (or, if such depository institution or trust company is a subsidiary of
a bank holding company system, the capital and surplus of the bank holding
company) of not less than $50,000,000 and the securities of such depository
institution (or, if such depository institution is a subsidiary of a bank
holding company system and such depository institution's securities are not
rated, the securities of the bank holding company) have a credit rating from
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each Rating Agency in one of its generic credit rating categories which
signifies investment grade; or (iv) an account that will not cause any Rating
Agency to downgrade or withdraw its then-current rating assigned to the
Securities of such series, as confirmed in writing by each Rating Agency.
"Eligible Institution" means any depository institution organized under the laws
of the United States or any state, the deposits of which are insured to the full
extent permitted by law by the Bank Insurance Fund (currently administered by
the Federal Deposit Insurance Corporation), whose short-term deposits have been
rated in one of the two highest rating categories or such other rating category
as will not adversely affect the ratings assigned to the Securities of such
series.
Unless otherwise specified in the related Prospectus Supplement, all
amounts held in each of the accounts established by the Servicer on behalf of a
Trust shall be invested in Eligible Investments that mature not later than the
Business Day preceding the Distribution Date next succeeding the date of
investment. "Eligible Investments" are limited to investments, specified in the
applicable Trust Documents, which meet the criteria of each Rating Agency from
time to time as being consistent with their then-current ratings of the
Securities. Investment earnings on amounts on deposit in the Collection Account,
Paid-Ahead Account, if any, Certificate Distribution Account, if any, Note
Distribution Account, if any, and any cash collateral account will not be
available to make payments on the Securities, unless otherwise specified in the
related Prospectus Supplement.
Servicing Procedures
The Servicer will make reasonable efforts, consistent with the customary
servicing practices and procedures employed by the Servicer with respect to
Contracts owned or serviced by it, to collect all payments due with respect to
the Contracts and, in a manner consistent with the Trust Documents, will
continue such normal collection practices and procedures as it follows with
respect to comparable marine installment sale contracts and loans that it
services for itself and others. See "Certain Legal Aspects of the Contracts."
The Servicer may sell the related Financed Boat securing a defaulted Contract at
a public or private sale, or take any other action permitted by applicable law.
See "Certain Legal Aspects of the Contracts." The proceeds of such realization
(net of expenses) will be deposited in the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer shall keep in force throughout the term of the Trust Documents a
fidelity bond. Such fidelity bond shall have such deductibles, and be in such
form and amount as is generally customary among persons which service a
portfolio of marine contracts having an aggregate principal amount of
$100,000,000 or more and which are generally regarded as servicers acceptable to
institutional investors.
Purchase by the Servicer
A breach of certain covenants made by the Servicer in the Trust Documents
that materially and adversely affects the Trust's interest in any Contract will
require the Servicer to purchase such Contract for the Purchase Price, unless
such breach is cured within the period specified in the Trust Documents. Unless
otherwise specified in the related Prospectus Supplement, such covenants will
obligate the Servicer not to, except as permitted by the Trust Documents and in
accordance with the terms of such Contract and applicable law (i) release the
Financed Boat securing such Contract from the security interest granted by such
Contract, (ii) impair the rights of the Trust in such Contract or take any
action inconsistent with the Trust's ownership of such Contract, (iii) increase
the number of payments under such Contract, nor increase the principal amount of
such Contract which is used to finance the purchase price of the related
Financed Boat, nor extend or forgive payments on such Contract, and (iv) fail to
comply with the provisions of any insurance policy covering such Contract, if
the failure to comply would impair the protection or benefit to be afforded by
such insurance policy.
Repurchases
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will have the right and the option, but not the obligation, to purchase
for its own account any Contract which becomes delinquent, in whole or in part,
as to four consecutive monthly installments or any Contract as to which
enforcement proceedings have been brought
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by the Servicer. The purchase price for any such Contract is equal to the
Purchase Price thereof, which purchase price shall be delivered to the Owner
Trustee.
Modification of Contracts
Consistent with its customary servicing practices and procedures, the
Servicer may, in its discretion, arrange with an Obligor to defer, reschedule,
extend or modify the payment schedule of a Contract or otherwise to modify the
terms of a Contract provided that (i) the maturity of such Contract would not
extend beyond the 180th day prior to the Certificate Final Scheduled
Distribution Date and (ii) the deferral, rescheduling, extension or other
modification of the terms of the Contract would not constitute a cancellation of
such Contract and the creation of a new installment sale contract or direct
loan. The Servicer may, in accordance with its customary servicing procedures,
in its good faith judgment, waive any Late Fees that may be due and payable
under any Contract. Notwithstanding the foregoing, in connection with the
settlement by the Servicer of a defaulted Contract, the Servicer may forgive a
portion of such Contract if in its discretion it believes that the acceptance of
the settlement proceeds from the related Obligor would result in the Trust's
receiving a greater amount of collections than the Net Liquidation Proceed that
would result from repossessing and liquidating the related Financed Boat.
Removal of Contracts
Except as otherwise specified herein or in the related Prospectus
Supplement, neither the Seller nor the Servicer will have the right to remove
any Contracts from the Contract Pool after the Closing Date. In certain
circumstances, CITSF or the Servicer may have the obligation to repurchase, or
CITSF may have the option to purchase, a Contract from the Trust, but all such
repurchases or purchases will be made at the Purchase Price.
Paid-Ahead Precomputed Contracts
Early payments by or on behalf of Obligors on Paid-Ahead Precomputed
Contracts which do not constitute scheduled payments, full prepayments, or
certain partial prepayments that result in a reduction of the Obligor's periodic
payment below the scheduled payment as of the Initial Cut-off Date or Subsequent
Cut-off Date, as the case may be, will be deposited into the Paid-Ahead Account
until such time as the paid-ahead payment becomes due. Until such time as
payments are transferred from the Paid-Ahead Account to the Collection Account,
they will not constitute collected interest or collected principal and will not
be available for distribution to the Securityholders. Unless otherwise specified
in the related Prospectus Supplement, paid-ahead amounts with respect to
Paid-Ahead Precomputed Contracts may be retained by the Servicer until the
applicable Deposit Date so long as the requirements for monthly deposits as
described under "-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 marine contracts as an agent for the Trust, including
collecting and posting all payments, responding to inquiries of Obligors,
investigating delinquencies, reporting federal income tax information to
Obligors, monitoring the collateral in cases of Obligor default and handling the
foreclosure or other liquidation of
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the Financed Boat in appropriate instances (subject to reimbursement of its
expenses incurred in connection with such foreclosure, liquidation or other
realization on the Contracts).
The Servicing Fee also will compensate the Servicer for administering the
Contracts, including reimbursing the Servicer for accounting for collections,
furnishing monthly and annual statements to the Owner Trustee with respect to
distributions and generating federal income tax information. The Servicing Fee
also will compensate the Servicer for accounting fees, outside auditor fees and
data processing costs incurred in connection with administering and servicing
the Contracts.
Collections
With respect to each series of the Securities, the Servicer will deposit
all payments on or with respect to the Contracts and all proceeds of Contracts
collected during each Due Period into the Collection Account or the Paid-Ahead
Account, as applicable, not later than two Business Days after receipt.
Notwithstanding the foregoing, unless otherwise specified in the related
Prospectus Supplement, the Servicer may make such deposits into the Collection
Account or the Paid-Ahead Account, as applicable, monthly on the Deposit Date
following the last day of each Due Period, provided that (i) the Servicer or the
direct or indirect parent of the Servicer has and maintains a short-term debt
rating of at least "A-1" by Standard & Poor's Ratings Group (if it is a Rating
Agency for the series of Securities), and a short-term debt rating of at least
"P-1" by Moody's Investors Service, Inc. (if it is a Rating Agency for the
series of Securities) (the "Required Servicer Ratings"), or (ii) the Servicer
obtains a letter of credit, surety bond or insurance policy (the "Servicer
Letter of Credit") as will be provided for in the related Trust Documents, under
which demands for payment may be made to secure timely remittance of monthly
collections to the Collection Account or the Paid-Ahead Account, as applicable,
and, in the case of clause (ii) above, the Trustees are provided with a letter
from each Rating Agency to the effect that the utilization of such alternative
remittance schedule will not result in a qualification, reduction or withdrawal
of its then-current rating of the Securities. As of the date of this Prospectus,
CITSF, as Servicer, will be permitted to remit collections to the Collection
Account and the Paid-Ahead Account, as applicable, on a monthly basis by virtue
of clause (i) above. In the event that the Servicer is permitted to make
remittances of collections to the Collection Account and the Paid-Ahead Account,
if any, on a monthly basis pursuant to satisfaction of clause (ii) above, the
Trust Documents will be modified, to the extent necessary, without the consent
of any Securityholder. Pending such a monthly deposit into the Collection
Account and the Paid-Ahead Account, if any, collections on the Contracts may be
invested by the Servicer at its own risk and for its own benefit and will not be
segregated from its own funds. See "Risk Factors--Risk of Commingling."
CITSF or the Servicer, as the case may be, will remit the aggregate
Purchase Price of any Contracts to be purchased from the Trust into the
Collection Account on or before the next succeeding Deposit Date.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will not be required to deposit in the Collection Account or the
Paid-Ahead Account, as applicable, amounts relating to the Contracts
attributable to the following: (a) amounts received with respect to each
Contract (or property acquired in respect thereof) which has been purchased by
CITSF or the Servicer pursuant to the Trust Documents, (b) net investment
earnings on funds deposited in the Collection Account, the Paid-Ahead Account,
if any, the Note Distribution Account, if any, and the Certificate Distribution
Account, if any, (c) amounts to be reimbursed to the Servicer in respect of
nonrecoverable Monthly Advances, (d) amounts received in respect of the amounts,
if any, of insurance premiums added to the principal balance of a Contract after
the Initial Cut-off Date for each such Initial Contract, or after the related
Subsequent Cut-off Date for each such Subsequent Contract, (e) amounts received
as liquidation proceeds, to the extent the Servicer is entitled to reimbursement
of liquidation expenses related thereto, and (f) repossession profits on
liquidated Contracts.
Monthly Advances
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Contract as to which there has been a Payment Shortfall during
the related Due Period, the Servicer shall advance funds in the amount of
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such Payment Shortfall (each, a "Monthly Advance"), but only to the extent that
the Servicer, in its good faith judgment, expects to recover such Monthly
Advance from subsequent collections on such Contract made by or on behalf of the
obligor thereunder (the "Obligor") (but only to the extent of expected interest
collections in the case of a Simple Interest Contract), or from net liquidation
proceeds or insurance proceeds with respect to such Contract. The Servicer shall
be reimbursed for any Monthly Advance from subsequent collections with respect
to such Contract. If the Servicer determines in its good faith judgment that an
unreimbursed Monthly Advance shall not ultimately be recoverable from such
collections, the Servicer shall be reimbursed for such Monthly Advance from
collections on all Contracts. In determining whether an advance is or will be
nonrecoverable, the Servicer need not take into account that it might receive
any amounts in a deficiency judgment. Unless otherwise specified in the related
Prospectus Supplement, the Servicer will not make a Monthly Advance in respect
of (i) the principal component of any scheduled payment on a Simple Interest
Contract or (ii) a Payment Shortfall arising from a Contract which has been
prepaid in full or which has been subject to a Relief Act Reduction during the
related Due Period.
Unless otherwise specified in the related Prospectus Supplement, "Payment
Shortfall" means (i) with respect to any Simple Interest Contract and any
Distribution Date, the excess of (A) the product of (1) one-twelfth of the
Contract Rate of such Contract and (2) the outstanding principal amount of such
Contract as of the last day of the second preceding Due Period (or, in the case
of the first Due Period ending after the Contract was acquired by the related
Trust, as of the Initial Cut-off Date or the Subsequent Cut-off Date, as the
case may be) over (B) the amount of interest, if any, collected on such Contract
during the related Due Period and (ii) with respect to any Precomputed Contract
and any Distribution Date, the excess of (A) the scheduled payment due on such
Contract during the related Due Period, over (B) the amount collected on such
Contract (including any amounts allocated from the Paid-Ahead Account with
respect to such Due Period) during the related Due Period.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will remit any Monthly Advance with respect to each Due Period into the
Collection Account not later than the Deposit Date following the Due Period.
Non-Reimbursable Payment
When a payment of principal is made on or in respect of a Simple Interest
Contract, interest is paid on the 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).
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Unless otherwise specified in the related Prospectus Supplement, the
"Available Amount" with respect to each Trust on any Distribution Date is equal
to the excess of (A) the sum of (i) all amounts on deposit in the Collection
Account attributable to collections or deposits made in respect of such
Contracts (including any late fees, prepayment charges, extension fees or other
administrative fees or similar charges allowed by applicable law with respect to
the Contracts ("Late Fees")) during the Due Period preceding the Distribution
Date, and (ii) the Purchase Price for any Contract repurchased by CITSF as a
result of breaches of certain representations and warranties or purchased by the
Servicer as a result of breaches of certain covenants and any Monthly Advances
and any Non-Reimbursable Payments made by the Servicer, if such Purchase Price,
Monthly Advance or Non-Reimbursable Payment is paid on or prior to the Deposit
Date immediately preceding such Distribution Date, over (B) the sum of the
following amounts (to the extent that the Servicer has not already withheld such
amounts from collections on the Contracts): (i) any repossession profits on
liquidated Contracts, Liquidation Expenses (as defined in the Trust Documents)
incurred and taxes and insurance advanced by the Servicer in respect of Financed
Boats that are reimbursable to the Servicer under the Trust Documents; (ii) any
amounts incorrectly deposited in the Collection Account; (iii) any amounts
deposited in the Paid-Ahead Account, if any, during the related Due Period; (iv)
net investment earnings on the funds in the Collection Account and the
Paid-Ahead Account, if any; and (v) any other amounts permitted to be withdrawn
from the Collection Account and the Paid-Ahead Account, if any, by the Servicer
(or to be retained by the Servicer from collections on the Contracts) pursuant
to the Trust Documents.
With respect to each Trust, beginning on the Distribution Date specified in
the related Prospectus Supplement, distributions of principal and interest (or,
where applicable, of principal or interest only) on each class of Securities
entitled thereto will be made by the Owner Trustee or the Indenture Trustee, as
applicable, to the Certificateholders, if any, and the Noteholders, if any, from
the Available Amount. Unless otherwise specified in the related Prospectus
Supplement, the Servicing Fee and any additional servicing compensation will be
paid from the Available Amount prior to distributions to the Securityholders.
The timing, calculation, allocation, order, source, priorities of and
requirements for all distributions to each class of Certificateholders, if any,
and all payments to each class of Noteholders, if any, will be set forth in the
related Prospectus Supplement.
Net Deposits
Unless otherwise specified in the related Prospectus Supplement, as an
administrative convenience, the Servicer will be permitted to make deposits of
collections, Monthly Advances, Non-Reimbursable Payments and the aggregate
Purchase Price of Contracts for, or with respect to, a Due Period net of
distributions to be made to the Servicer with respect to such Due Period
(including, without limitation, the Servicing Fee, reimbursement of
nonrecoverable Monthly Advances and amounts to be deducted in the definition of
"Available Amount" set forth under "--Distributions" above). The Servicer,
however, will account to the Trustees and to the Securityholders as if all such
deposits and distributions were made on an aggregate basis for each type of
payment or deposit.
Statements to Trustees and Trust
Unless otherwise specified in the related Prospectus Supplement, on or
before each Determination Date, the Servicer will provide to the Trustees, any
paying agent and the Affiliated Owner (if any) as of the close of business on
the last day of the preceding Due Period, a statement setting forth
substantially the same information as is required to be provided in the periodic
reports provided to Securityholders described above under "Certain Information
Regarding The Securities--Statements to Securityholders." Each such report will
be accompanied by a statement from an appropriate officer of the Servicer
certifying the accuracy of such report and stating that the Servicer has not
defaulted in the performance of its obligations under the Trust Documents (or,
if such default has occurred, describing each such default).
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will require that on or before March 31 of each year, the Servicer
will deliver to the Owner Trustee a report of independent public accountants
which opines on, at a minimum, the servicing entity's compliance with the
minimum servicing standards set forth in the Uniform Single Attestation Program
for Mortgage Bankers (in accordance with the 1995 revisions made thereto). The
Trust Documents will require that such examination and report of independent
public
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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 gross
negligence in the performance of duties or by reason or reckless disregard of
obligations and duties thereunder. In addition, unless otherwise specified in
the related Prospectus Supplement, the Trust Documents will provide that the
Servicer is under no obligation to appear in, prosecute or defend any legal
action which arises under the Trust Documents and that, in its opinion, may
cause it to incur any expense or liability. The Servicer may, however, undertake
any reasonable action that it may deem necessary or desirable in respect of the
Trust Documents and the rights and duties of the parties thereto and the
interests of the Securityholders thereunder. In the event that the Servicer or
the Company, in its discretion, undertakes any action which it deems necessary
or desirable in connection with its rights and duties under the Trust Documents
or the interests of the Securityholders thereunder, the legal expenses and costs
of such action and any liability resulting therefrom will be expenses, costs and
liabilities of the Trust, and the Servicer and the Company will be entitled to
be reimbursed therefor out of the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, or any corporation or other entity resulting from any merger,
conversion or consolidation to which the Servicer is a party, or any corporation
or other entity succeeding to the business of the Servicer, which corporation or
other entity assumes the obligations of the Servicer, will be the successor of
the Servicer under the Trust Documents.
The Servicer may sell, transfer, assign or convey its rights as Servicer to
any entity qualified to act as servicer under the Trust Documents, upon written
notice to the Trustees and the Rating Agencies, without the consent of the
Securityholders, provided that the Rating Agency Condition is satisfied.
Physical Damage Insurance
Unless otherwise specified in the related Prospectus Supplement, the
Servicer may, but will not be obligated to, enforce its rights under the
Contracts to require the Obligors to maintain physical damage insurance, in
accordance with the Servicer's customary practices and procedures with respect
to comparable new or used boats financed by installment sale contracts or loans
that it services for itself or others. Unless otherwise specified in the related
Prospectus Supplement, if an Obligor fails to maintain such insurance, the
Servicer will not be obligated to obtain such physical damage insurance and
advance such premiums for such insurance on behalf of such Obligor. If the
Servicer obtains such physical damage insurance and advances such premiums for
such insurance on behalf of such Obligor, such insurance policy will name the
Servicer as an additional insured and loss payee (such insurance being referred
to herein as "Force-Placed Insurance"). Such Force-Placed Insurance and any
commissions or finance
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charges collected by the Servicer in connection therewith shall be, to the
extent permitted by law, in an amount in accordance with customary servicing
practices and procedures, but in no event in an amount greater than the
outstanding principal balance of the related Contract or, if such insurance also
covers the interest of the related Obligor in the Financed Boat, no greater than
the greater of the outstanding principal balance of the related Contract or the
value of the Financed Boat, or such lesser amount permitted by applicable law.
The Servicer shall be required to disclose to the related Obligor all
information with respect to such Force-Placed Insurance, commissions and finance
charges as required by applicable law.
The Servicer does not, under its customary servicing practices and
procedures, obtain Force-Placed Insurance when the principal balance of the
related Contract falls below the level or levels periodically established in
accordance with such customary servicing practices and procedures. In accordance
with such customary servicing practices and procedures, the Servicer may
periodically readjust such levels, suspend Force-Placed Insurance or arrange
other methods of protection of the Financed Boats that it deems necessary or
advisable, provided that the Servicer determines that such actions do not
materially and adversely affect the interests of the Securityholders.
The Servicer may elect to make advances ("Insurance Advances") to an
Obligor to finance insurance premiums related to the Financed Boat. Any such
Insurance Advances may be secured by the related Financed Boat.
Any portion of the principal balance of a Contract attributable to
Insurance Advances or premiums for Force-Placed Insurance acquired after the
Initial Cut-off Date or the Subsequent Cut-off Date, as the case may be, will
not be owned by the Trust, and amounts allocable thereto will not be available
for distribution in respect of the Securities. Unless otherwise designated by
the Obligor, the Servicer will not allocate payments by the Obligor to pay
Insurance Advances or Force-Placed Insurance premiums added to the Contracts
after the Initial Cut-off Date or Subsequent Cut-off Date, as the case may be,
if any amount of principal or interest is due but unpaid on the Contracts. The
Servicer shall not deposit payments posted with respect to such Insurance
Advances or Force-Placed Insurance in the Collection Account and shall instead
promptly pay such amounts to an account of the Servicer maintained for that
purpose. In the event that an Obligor under a Contract with respect to which the
Servicer has made Insurance Advances or obtained Force-Placed Insurance makes
scheduled payments under the Contract, but fails to make scheduled payments of
such Insurance Advances or Force-Placed Insurance as due, and the Servicer has
determined that eventual payment of such amount is unlikely, the Servicer may,
but shall not be required to, take any action available to it, including
determining that the related Contract is a defaulted Contract; provided,
however, that any net liquidation proceeds with respect to such Contract shall
be applied first to the accrued and unpaid interest at the Contract Rate, then
to the principal amount outstanding, and the remainder, if any, to repayment of
any such Insurance Advances or Force-Placed Insurance premiums added to the
Initial Contracts after the Initial Cut-off Date or to any Subsequent Contracts
after the related Subsequent Cut-off Date.
Event of Termination
Unless otherwise specified in the related Prospectus Supplement, an "Event
of Termination" under the Trust Documents will consist of (i) any failure by the
Servicer to make any deposit into an account required to be made under the Trust
Documents which failure continues unremedied for five (5) Business Days after
the Servicer becomes aware that such deposit was required; (ii) any failure by
the Servicer duly to observe or perform in any material respect any other of its
covenants or agreements in the Trust Documents (other than those described in
clause (i)) which materially and adversely affects the rights of the
Securityholders and which continues unremedied for 60 days after the giving of
written notice of such failure; (iii) any assignment or delegation by the
Servicer of its duties or rights under the Trust Documents, except as
specifically permitted under the Trust Documents, or any attempt to make such an
assignment or delegation; (iv) certain events of insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings regarding the
Servicer; or (v) any disqualification of the Servicer as an Eligible Servicer
(as defined in the Trust Documents). "Notice" as used herein means notice to the
Servicer by the Trustees or the Company, or to the Company, the Servicer and the
Trustees by the Noteholders holding not less than 25% of the aggregate
outstanding principal amount of the Controlling Notes issued by such Trust (or,
if no Notes of such series are outstanding, the Certificateholders holding not
less than 25% of the outstanding Certificate Balance of such Trust).
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Rights Upon Event of Termination
Unless otherwise specified in the related Prospectus Supplement, as long as
an Event of Termination under the Trust Documents remains unremedied, the
Indenture Trustee (or, if no Notes of the series are outstanding, the Owner
Trustee) may, and at the written direction of the holders of related Notes
evidencing not less than a majority of the aggregate outstanding principal
amount of the Notes issued by such Trust (or, if no Notes of such series are
outstanding, the holders of related Certificates evidencing not less than a
majority of the Certificate Balance of such Trust), will, unless prohibited by
applicable law, terminate all (but no less than all) of the rights and
obligations of the Servicer with respect to a Trust under the Trust Documents
and in and to the Contracts, and the proceeds thereof, whereupon (subject to
applicable law) all authority and power of the Servicer under the Trust
Documents, whether with respect to the Contracts, the Contract Files or
otherwise, will pass to and be vested in the Indenture Trustee (or, if no Notes
of the series are outstanding, such authority will pass to and be vested in the
Owner Trustee); provided, however, that neither the Indenture Trustee (or, if no
Notes of the series are outstanding, the Owner Trustee) nor any successor
servicer will assume any obligation of CITSF to repurchase Contracts for
breaches of representations or warranties, and the Indenture Trustee (or, if no
Notes of the series are outstanding, the Owner Trustee) or the successor
Servicer will not be liable for any acts or omissions of the Servicer occurring
prior to a transfer of the Servicer's servicing and related functions or for any
breach by the Servicer of any of its obligations contained in the Trust
Documents. Notwithstanding such termination, the Servicer will be entitled to
payment of certain amounts payable to it for services rendered prior to such
termination. No such termination will affect in any manner CITSF's obligation to
repurchase certain Contracts for breaches of representations or warranties under
the Trust Documents. In the event that the Owner Trustee would be obligated to
succeed the Servicer but is unwilling or unable so to act, it may appoint, or
petition to a court of competent jurisdiction for the appointment of, a Servicer
which meets the requirements for an Eligible Servicer under the Trust Documents.
Pending such appointment, such Trustee is obligated to act in such capacity,
unless it is prohibited by law from so acting. The Indenture Trustee (or, if no
Notes of the series are outstanding, the Owner Trustee) and such successor may
agree upon the servicing compensation to be paid, which in no event, without
written consent of not less than 66 2/3% in principal amount of the related
Securityholders, may be greater than the compensation to CITSF as Servicer under
the Trust Documents.
Waiver of Past Defaults
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, the holders of Notes evidencing not less than a
majority of the aggregate outstanding principal amount of the Controlling Notes
(or the holders of the Certificates evidencing not less than a majority of the
Certificate Balance of such series, in the case that all of the Notes have been
paid in full and the Indenture has been discharged in accordance with its terms)
may, on behalf of all such Noteholders and Certificateholders, waive any default
by the Servicer in the performance of its obligations under the Trust Documents
and its consequences, except an Event of Termination in making any required
deposits to or payments from any of the accounts in accordance with the Trust
Documents. No such waiver will impair such Noteholders' or Certificateholders'
right with respect to subsequent defaults.
Amendment
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents may be amended by the parties thereto and, in the event that such
amendment affects the Indenture Trustee, the Indenture Trustee, without prior
notice to or the consent of the related Securityholders (i) to correct manifest
error or cure any ambiguity; (ii) to correct or supplement any provision therein
which may be inconsistent with any other provision therein; (iii) to add or
amend any provision as requested by the Rating Agencies to maintain or improve
the rating of the Securities; (iv) to add to the covenants, restrictions or
obligations of the Company, the Servicer or the Owner Trustee or to provide for
the delivery of or substitution for an Enhancement or a Servicer Letter of
Credit; (v) to evidence and provide for the acceptance of the appointment of a
successor trustee with respect to the property owned by the related Trust and
add to or change any provisions as shall be necessary to facilitate the
administration of the trusts under the Trust Documents by more than one trustee;
(vi) to add, change or amend any provision to maintain the related Trust as an
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entity not subject to federal income tax; or (vii) to add, change or eliminate
any other provisions, provided that an amendment pursuant to this clause (vii)
will not, in the opinion of counsel (which may be internal counsel to the
Company or the Servicer), adversely affect in any material respect the interests
of the Trust or the Securityholders. Unless otherwise specified in the related
Prospectus Supplement, the Trust Documents may also be amended by the parties
thereto, with the consent of the holders of not less than a majority in
principal amount of such then outstanding Notes and the holders of such
Certificates evidencing not less than a majority of the Certificate Balance of
such series for the purpose of adding any provisions to or changing in any
manner or eliminating any provisions of the Trust Documents, or of modifying in
any manner the rights of such Noteholders or Certificateholders, respectively;
except that no such amendment may except as described above, increase or reduce
in any manner the amount of, or accelerate or delay the timing of, distributions
that are required to be made on any related Note or Certificate, the related
Pass-Through Rate or the Interest Rate. Any action specified in clauses (v) and
(vii) shall be taken only upon satisfaction of the Rating Agency Condition.
Termination
Unless otherwise specified in the related Prospectus Supplement, the
obligations of the Servicer, the Company, the Affiliated Owner, if any, and the
Trustees pursuant to the Trust Documents for a series of the Securities will
terminate upon the earliest to occur of (i) the maturity or other liquidation of
the last related Contract and the disposition of any amounts received upon
liquidation of any property remaining in the related Trust, (ii) the payment to
Securityholders of the series of all amounts required to be paid to them
pursuant to the Trust Documents, (iii) the occurrence of either event described
below, and (iv) as otherwise required by law, as described in the Trust
Documents.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, in order to avoid excessive administrative
expenses, CITSF will be permitted at its option to purchase from the Trust, on
any Distribution Date on which the Pool Balance as of the last day of the
related Due Period is less than or equal to a percentage specified in the
related Prospectus Supplement of the Initial Pool Balance, all remaining related
Contracts at a price equal to the aggregate Purchase Price for the Contracts
(including defaulted Contracts), plus the appraised value of any other property
held by the Trust (less liquidation expenses). CITSF will give notice to the
Trustees and the Depository of the exercise of such option no later than the
Determination Date succeeding such Due Period and will deposit the amount
required to purchase such Contracts on the Deposit Date succeeding such Due
Period. Exercise of such right will effect early retirement of the Securities.
Unless otherwise specified in the related Prospectus Supplement, the "Initial
Pool Balance" equals the sum of (i) the Pool Balance as of the Initial Cut-off
Date, and (ii) the aggregate principal balance of all Subsequent Contracts added
to the Trust as of their respective Subsequent Cut-off Dates.
Unless otherwise specified in the related Prospectus Supplement, within ten
days after the first Distribution Date on which the Pool Balance as of the last
day of the related Due Period is less than or equal to a percentage specified in
the related Prospectus Supplement of the Initial Pool Balance, the Indenture
Trustee (or, if the Notes have been paid in full and the Indenture has been
discharged in accordance with its terms, the Owner Trustee) shall solicit bids
for the purchase of the Contracts remaining in the Trust. In the event that
satisfactory bids are received as described below, the sale proceeds will be
distributed to Securityholders on the second Distribution Date succeeding such
Due Period. Any purchaser of the Contracts must agree to the continuation of
CITSF as Servicer on terms substantially similar to those in the Trust
Documents. Any such sale will effect early retirement of the Securities.
Unless otherwise specified in the related Prospectus Supplement, such
Trustee must receive at least two bids from prospective purchasers that are
considered at the time to be competitive participants in the market for marine
installment sale contracts. The highest bid may not be less than the fair market
value of such Contracts and must equal or exceed the sum of (i) the greater of
(a) the aggregate Purchase Price for the Contracts (including defaulted
Contracts) plus the appraised value of any other property held by the Trust
(less liquidation expenses), or (b) an amount that when added to amounts on
deposit in the Collection Account available for distribution to Securityholders
for such second succeeding Distribution Date would result in proceeds sufficient
to distribute to
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Securityholders the amounts of interest due to Securityholders for such
Distribution Date and any unpaid interest payable to the Securityholders with
respect to one or more prior Distribution Dates and the outstanding principal
amount of the Notes, if any, and the Certificate Balance, if any, and (ii) the
sum of (a) an amount sufficient to reimburse the Servicer for any unreimbursed
Monthly Advances for which it is entitled to reimbursement, and (b) the
Servicing Fee payable on such final Distribution Date, including any unpaid
Servicing Fees with respect to one or more prior Due Periods. Such Trustee may
consult with financial advisors, including any Underwriter, to determine if a
bid is equal to or greater than the fair market value of such Contracts. Upon
the receipt of such bids, such Trustee shall sell and assign such Contracts to
the highest bidder and the Securities shall be retired on such Distribution
Date. If any of the foregoing conditions are not met, such Trustee shall decline
to consummate such sale and shall not be under any obligation to solicit any
further bids or otherwise negotiate any further sale of Contracts remaining in
the Trust. In such event, however, such Trustee may from time to time solicit
bids in the future for the purchase of such Contracts upon the same terms
described above.
Unless otherwise specified in the related Prospectus Supplement, such
Trustee will give written notice of termination to each Securityholder of
record. The final distribution to each Securityholder will be made only upon
surrender and cancellation of such holder's Securities at any office or agency
of such Trustee specified for such purpose. Any funds remaining in the Trust,
after such Trustee has taken certain measures to locate a Securityholder and
such measures have failed, will be distributed to the Affiliated Owner, if any,
or as specified in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
marine contracts, which are general in nature. Since such legal aspects are
governed by applicable state law (which laws may differ substantially), the
summaries do not purport to be complete nor to reflect the laws of any
particular state, nor to encompass the laws of all states in which the security
for the Contracts is situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Contracts.
General
As a result of the assignment of the Contracts to the Trust, each Trust
will succeed collectively to the rights (including the right to receive payment
on the Contracts), and will assume the obligations, of CITSF under the related
Contracts. Each Contract evidences both (a) the obligation of the obligor to
repay the obligation evidenced thereby, and (b) the grant of a security interest
in the Financed Boat to secure repayment of such loan. Certain aspects of both
features of the Contracts are described more fully below.
The Contracts are "chattel paper" as defined in the Uniform Commercial Code
(the "UCC") as in effect in the various states of origination of the Contracts.
Pursuant to the UCC, the sale of chattel paper is treated in a manner similar to
perfection of a security interest in chattel paper. Under the Trust Documents,
the Servicer will retain possession of the Contracts as custodian for the Owner
Trustee, and will make an appropriate filing of a UCC financing statement in New
Jersey to perfect the sale of the Contracts by the Company (and, if and to the
extent specified in the related Prospectus Supplement, a Selling Trust) to the
Owner Trustee. The Contracts and the related certificates of title will not be
stamped to reflect their assignment from CITCF-NY to CITSF, from CITSF to the
Company or from the Company to the Trust (or, if and to the extent specified in
the related Prospectus Supplement, from CITSF to SPV, from SPV to a Selling
Trust and from the Selling Trust to the Trust). The Contract Files will not be
physically segregated from the contract files for contracts owned by CITSF. If,
through inadvertence or otherwise, another party in good faith purchases (or
takes a security interest in) the Contracts for new value in the ordinary course
of its business, without actual knowledge of the Trust's interest, and takes
possession of the Contracts, such purchaser or secured party may acquire an
interest in the Contracts superior to the interest of the Trust.
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Under the Trust Documents, the Servicer will be obligated from time to time
to take such actions as are necessary to continue the perfection of the Trust's
interest in the Contracts and the proceeds thereof. CITSF will warrant in the
Trust Documents, with respect to each Contract, as of the Closing Date for each
Initial Contract, and as of the related Subsequent Transfer Date for each
Subsequent Contract, if any, that the Contract has not been sold, assigned or
pledged by CITSF to any person other than the Company (or, if and to the extent
specified in the related Prospectus Supplement, SPV), that immediately prior to
the transfer and assignment of the Contract to the Company (or, if and to the
extent specified in the related Prospectus Supplement, SPV), CITSF had good and
marketable title thereto, free and clear of any encumbrance, equity, loan,
pledge, charge, claim or security interest and, immediately upon the transfer
thereof, the Company (or, if and to the extent specified in the related
Prospectus Supplement, SPV) will have good and marketable title to the Contract,
free and clear of any encumbrance, equity, loan, pledge, charge, claim or
security interest and that the transfer has been perfected under applicable law.
In the event of an uncured breach of any such warranty that materially adversely
affects the interest of the Trust in a Contract transferred by the Company (or,
if and to the extent specified in the related Prospectus Supplement, a Selling
Trust), to the Trust, the only recourse of the Certificateholders, the Trustees,
or the Trust would be to require CITSF to repurchase such Contract.
Security Interests in the Financed Boats
Perfection of Sale. Pursuant to the Purchase Agreement, CITSF will sell and
assign its interests in the Contracts, including the security interests in the
Financed Boats granted thereunder, to the Company and, pursuant to the Trust
Documents, the Company (and, if and to the extent specified in the related
Prospectus Supplement, a Selling Trust) will sell and assign its interest in the
Contracts, including the security interests in the Financed Boats granted
thereunder, to the Owner Trustee. UCC financing statements will be filed to
perfect the sale of (i) CITSF's interests in the Contracts to the Company and
(ii) the Company's interests (and, if and to the extent specified in the related
Prospectus Supplement, the interest of such Selling Trust) in the Contracts to
the Trust.
Perfection of CITSF's or CITCF-NY's Security Interest in the Financed
Boats. The Contracts represent marine retail installment sale contracts
purchased from Dealers or direct loans to Obligors secured by Financed Boats.
When originated, each Contract granted a security interest in the Financed Boat
financed thereby. Each such security interest was required to be perfected under
applicable state law and, in the case of certain Financed Boats described below,
under applicable federal law. Generally, security interests in boats may be
perfected in one of three ways: (i) in "title" states, by notation of the
secured party's lien on the certificate of title issued by an applicable state
motor vehicle or wildlife department or other appropriate state agency; (ii) in
non-title states, by filing a UCC-1 financing statement; and (iii) in respect of
a boat eligible for documentation under federal law, by filing all documents
necessary to create a first preferred ship mortgage (a "Preferred Mortgage")
under the Ship Mortgage Act of 1920 (1988 Recodification) ss. 30101 et seq. (the
"Ship Mortgage Statutes"). Vessels that meet the federal five net ton standard
(determined in a manner prescribed by 46 CFR Part 69 (Measurement of Vessels))
qualify for documentation under federal law ("U.S. Documentable Boats").
However, federal documentation of vessels used exclusively for recreational
purposes is discretionary.
CITSF has policies and procedures in place to ensure that all actions
necessary under the laws of the states in which the Financed Boats were located
at the time of origination of the Contracts were taken to perfect the
originators' security interests in the Financed Boats. In addition, CITSF has
policies and procedures in place to require that certain Financed Boats of 27
feet or more in length be federally documented and that a Preferred Mortgage on
each boat be filed. CITSF's current policy is that (i) used Financed Boats, (ii)
new Financed Boats with an original principal balance of $100,000 or more, (iii)
new Financed Boats with an original principal balance of less than $100,000 if
the Obligor's credit score falls below certain specified levels, and (iv)
Financed Boats (new or used) where the applicable state is a non-title state,
will be federally documented and Preferred Mortgages will be filed on such
Financed Boats. Prior to April 1998, CITSF's policy was to require a Preferred
Mortgage on all U.S. Documentable Boats. CITSF's policy also requires prior
perfection of a security interest in any such boat under applicable state law in
order to protect itself prior to completion of federal documentation. If a
security interest in a boat is initially perfected by a UCC-1 filing or notation
on a title under state law and such boat subsequently becomes a federally
documented vessel, the holder of such security interest could lose the priority
of its security
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interest in such boat under state law to the holder of a subsequently perfected
Preferred Mortgage covering such boat.
In the event that the originator of a Contract failed to perfect the
security interest in a Financed Boat (for example, by complying with the UCC
rather than the applicable certificate of title statute, or by failing to comply
with applicable state title law, or the Ship Mortgage Statutes or applicable
United States Coast Guard (the "Coast Guard") regulations), such originator
would not have a perfected first priority security interest in such Financed
Boat. In this event, if third party liens equal or exceed the value of the
Financed Boat, the only recourse of the Trust would be against the Obligor on an
unsecured basis, or, if applicable, against a Dealer or financial intermediary
pursuant to its repurchase obligation or against the Seller.
Pursuant to the terms of the Sale and Servicing Agreement, the Seller will
assign its security interest in the Financed Boat to the Trust and the Trust
will pledge its security interest in the Financed Boats to the Indenture
Trustee. However, due to administrative burden and expense, none of the Seller,
the Servicer, the Trust or any previous owner of the Contract will amend the
certificates of title or file assignments of the UCC-1 financing statements with
respect to the Financed Boats to identify the Trust or the Indenture Trustee as
the new secured party, nor will the Seller or the Owner Trustee execute or file
any transfer instruments with the appropriate governmental authorities. In a
majority of states, the assignment of a Contract together with the related
security interest is, as a matter of state law, an effective conveyance of such
security interest without amendment of any lien noted on the related
certificates of title or of any UCC-1 financing statements or the filing of any
transfer instruments with the appropriate governmental authorities, and the new
owner of the Contract succeeds to the original secured party's rights as owner
of the Contract against creditors of the Obligor. In certain title states, in
the absence of such certificate of title amendment or assignment of record to
reflect the successive assignments of the security interest in the Financed
Boat, the related Seller (if not the secured party of record), the Trust and/or
the Indenture Trustee may not have a perfected security interest in the related
Financed Boat. 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.
Under the Ship Mortgage Statutes, in the absence of an assignment of
record of a Preferred Mortgage, the assignment of the related Contract by itself
will not convey the perfected preferred mortgage lien on the Financed Boat
subject to such Preferred Mortgage and neither the Seller (if not the secured
party of record) nor the Trust will have a perfected security interest in such
Financed Boat. However, to the extent specified in the related Prospectus
Supplement, pursuant to the Sale and Servicing Agreement, the Seller will agree
to cause filings of the assignments to the Trust of certain specified Preferred
Mortgages (each a "Designated Preferred Mortgage") showing the chain of
ownership of each such Preferred Mortgage from the originator of each such
Contract to the Trust, within the time period specified in the related
Prospectus Supplement. However, due to administrative burden and expense,
assignments may not be made of all Preferred Mortgages relating to the
Contracts. Under the Ship Mortgage Statutes, in the absence of an assignment of
a Preferred Mortgage, or in the event an assignment of a Preferred Mortgage is
not effective, the Trust will not have a perfected security interest in the
related Financed Boat as against third parties without knowledge of the
transfer. In such case, if third party liens equal or exceed the value of such
Financed Boat, the only recourse of the Trust would be against the related
Obligor on an unsecured basis.
Except as described above, in the absence of fraud or forgery by a boat
owner or administrative error by state recording officials or the Coast Guard,
the notation of the lien of the originator of each Contract on the certificate
of title with respect to the related Financed Boat, the filing of a UCC-1
financing statement against the Obligor or the filing of an assignment of the
related Preferred Mortgage, if any, as described above will be sufficient to
protect the Trust against the rights of subsequent purchasers of such Financed
Boat or subsequent lenders who take a security interest in such Financed Boat.
If there are any Financed Boats as to which the originator of the related
Contract has failed to perfect the security interest assigned to the Trust, such
security interest would be subordinate to, among others, (i) holders of
perfected security interests in such Financed Boats and (ii) subsequent
purchasers of such Financed Boats would take possession free and clear of such
security interest. There is also a risk that, in not identifying the Trust as
the new secured party on the certificates of title or executing and filing of
transfer instruments with the Coast Guard or assignments of UCC-1 financing
statements with state officials, the security interest of the Trust or Indenture
Trustee could be released through fraud or negligence.
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A security interest perfected by a Preferred Mortgage has a nationwide
scope and no further action is necessary when an obligor moves or the related
boat is relocated. Actions must be taken to maintain the perfection of security
interests in boats perfected under state law if the boat (in the case of a
"title" state) or the Obligor (in the case of a "UCC" state) moves to a state
other than the state in which such security interest was originally perfected.
Under the laws of most states, a perfected security interest in a Financed Boat
continues for four months after the Financed Boat is relocated in a new state
(from the state in which a financing statement was properly filed initially to
perfect the security interest or in which the certificate of title was issued)
and thereafter until the owner re-registers such Financed Boat in the new state.
Many "title" states require surrender of a certificate of title to re-register a
Financed Boat. Accordingly, in such cases, the Servicer should have the
opportunity to re-perfect the security interest in the Financed Boat in the
state of relocation. In states that do not issue a certificate of title at
registration of a Financed Boat, re-registration in a different state could
defeat perfection. In the ordinary course of servicing its portfolio of marine
loans, the Servicer takes steps to effect such re-perfection upon receipt of
notice of re-registration or information from the Obligor as to relocation.
Similarly, when an Obligor sells a titled Financed Boat showing a lienholder,
unless the Servicer surrenders possession of the certificate of title, it
generally will receive notice as a result of its lien noted thereon and
accordingly will have an opportunity to require satisfaction of the related
Contract before release of the lien. Under the Sale and Servicing Agreement, the
Servicer is obligated to take such steps, at the Servicer's expense, as are
necessary to maintain perfection of security interests in the Financed Boats.
Priority of Certain Liens Arising by Operation of Law. Under the laws of
many states, certain possessory liens for repairs performed on a Financed Boat
and storage, as well as certain rights in favor of federal and state
governmental authorities arising from the use of a boat in connection with
illegal activities, may take priority over a security interest perfected under
state law. Certain U.S. federal tax liens may also have priority over the
security interest of a secured party. Under the Ship Mortgage Statutes, a
Preferred Mortgage supersedes a perfected state law security interest, a state
or federally created lien or forfeiture rights (so long as the secured party is
innocent of wrongdoing) other than preferred maritime liens such as those
arising under federal statutory or common-law for captain's or crew's wages,
tort claims (so-called "general average" claims) and salvage claims. Maritime
liens arising under federal law or state laws for repair, storage or supplies
which are subordinate to a preferred ship mortgage lien typically have priority
over state security interests under federal law or under applicable law of the
state where the Contract was originated or under applicable law of the state to
which the related Financed Boats may have been relocated. Preferred federal
maritime liens are, of course, also prior to all state created security
interests or liens. The Seller will represent in the Sale and Servicing
Agreement that, as of the Initial Cut-off Date or Subsequent Cut-off Date, as
the case may be, it has no knowledge of any such liens with respect to any
Financed Boat related to a Contract. However, such liens could arise at any time
during the term of a Contract. No notice will be given to the Owner Trustee or
the Indenture Trustee in the event such a lien arises.
Continuity of Perfection. Under the laws of most states, a perfected
security interest in a boat continues for four months after the boat is moved to
a new state (from the state in which a financing statement was properly filed
initially to perfect the security interest or in which the certificate of title
was issued) and thereafter until the owner re-registers such boat in the new
state. A majority of states require surrender of a certificate of title to
obtain a new certificate of title for the boat. In those states that call for
return of the certificate of title to the holder of the first security interest
noted thereon, the secured party would learn of the re-registration through the
request from the obligor under the related marine installment sale contract to
surrender possession of the certificate of title. In the case of boats
registered in states providing for perfection of a lien by notation of the lien
on the certificate of title without possession of the certificate of title by
the secured party, the secured party would receive notice of surrender from the
state of re-registration if the security interest were noted on the certificate
of title. Thus, the secured party would have the opportunity to re-perfect its
security interest in the boat in the state to which the boat is moved. However,
these procedural safeguards will not protect the secured party if through fraud,
forgery or administrative error, the debtor somehow procures a new certificate
of title that does not note the secured party's lien. Additionally, in states
that do not require a certificate of title for registration of a boat,
re-registration could defeat perfection.
In the ordinary course of servicing the Contracts, CITSF will take steps to
effect re-perfection upon receipt of notice of re-registration or information
from the Obligor as to relocation. Similarly, when an Obligor sells a Financed
Boat, CITSF must surrender possession of the certificate of title or will
receive notice as a result of its lien noted thereon and accordingly will have
an opportunity to require satisfaction of the related Contract before release
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of the lien. Under the Trust Documents, the Servicer will be obligated to take
appropriate steps, at its own expense, to maintain perfection of a security
interest in the Financed Boats.
In most states, CITSF, as Servicer, will hold certificates of title
relating to the Financed Boats in its possession as custodian for the Trust
pursuant to the Trust Documents. In some states, the certificate of title is
held by the Obligor, but only after it is endorsed by the state motor vehicle
department with a notation of CITSF's lien. In the Trust Documents, CITSF, as
Servicer, will covenant that it will not release its (or CITCF-NY's) security
interest in the Financed Boat securing any Contract except as contemplated by
the Trust Documents. CITSF, as Servicer, will also covenant that it will not
impair the rights of the Trust in the Contacts or take any action inconsistent
with the Trust's ownership of the Contracts, except as permitted by the Trust
Documents. A breach of either such covenant that materially and adversely
affects the Trust's interest in any Contract, would require the Servicer to
purchase such Contract unless such breach is cured within the period specified
in the Trust Documents.
Enforcement of Security Interests in Financed Boats
The Servicer on behalf of the Trust and the Indenture Trustee may take
action to enforce the Trust's security interest by repossession and resale of
the Financed Boats securing the Contracts. The actual repossession may be
contracted out to third party contractors. Under the Uniform Commercial Code and
laws applicable in most states, a creditor can repossess a boat securing a loan
by voluntary surrender, "self-help" repossession that is "peaceful" (i.e.,
without breach of the peace) and, in the absence of voluntary surrender and the
ability to repossess without breach of the peace, by judicial process. Some
jurisdictions 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 be exercised on a limited number of occasions during the
term of the contract. The Uniform Commercial Code and consumer protection laws
in most states place restrictions on repossession sales, including requiring
prior notice to the debtor and commercial reasonableness in effecting such a
sale. In the event of such repossession and resale of a Financed Boat, the Trust
would be entitled to be paid out of the sale proceeds before such proceeds could
be applied to the payment of the claims of unsecured creditors or the holders of
subsequently perfected security interests or, thereafter, to the debtor. Under
federal law notice to, the owner of a Financed Boat subject to a Preferred
Mortgage, any other lienholders who have filed notice with the Coast Guard and
the Coast Guard is required to pass ownership of such Financed Boat in a
non-judicial sale.
Under the Uniform Commercial Code and laws applicable in most states, a
creditor is entitled to obtain a deficiency judgment from a debtor for any
deficiency on repossession and resale of the boat securing such debtor's loan.
However, many states impose prohibitions or limitations on deficiency judgments.
In general, a defaulting Obligor may not have sufficient assets to make the
pursuit of a deficiency worthwhile.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws, and general equitable principles may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment. Certain other factors, including the value of a Financed Boat, may
limit the amount realized on the sale of the Financed Boat as collateral to an
amount less than the amount due on the Contract.
Certain Matters Relating to Insolvency
CITSF, CITCF-NY and the Company intend that the transfers of Contracts from
CITCF-NY to CITSF, from CITSF to the Company and from the Company to the Trust
(and, if and to the extent specified in the related Prospectus Supplement, from
CITCF-NY to CITSF, from CITSF to SPV , from SPV to a Selling Trust and from the
Selling Trust to the Trust), constitute sales, rather than pledges, of the
Contracts to secure indebtedness. However, if CITCF-NY, CITSF or the Company
(or, if and to the extent specified in the related Prospectus Supplement, a
Selling Trust) were to become a debtor under Title 11 of the United States Code,
11 U.S.C. ss.101 et seq. (the "Bankruptcy Code"), it is possible that a
creditor, receiver, other party in interest or trustee in bankruptcy of such
debtor, or such debtor as debtor-in-possession, may contend that the sales of
the Contracts by CITCF-NY to CITSF, by CITSF to the Company, or by the Company
to the Trust (and, if and to the extent specified in the related Prospectus
Supplement, from CITCF-NY to CITSF, from CITSF to SPV , from SPV to a Selling
Trust and from the
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Selling Trust to the Trust),, respectively, were pledges of the Contracts rather
than sales and that, accordingly, such Contracts should be part of such
assigning entity's bankruptcy estate. Such a position, if presented to a court,
even if ultimately unsuccessful, could result in a delay in or reduction of
distributions to the Securityholders.
The Company has taken steps in structuring the transactions described
herein that are intended to make it unlikely that the voluntary or involuntary
application for relief by or against CIT under the Bankruptcy Code or similar
applicable state laws (collectively, "Insolvency Laws") would result in
consolidation of the assets and liabilities of the Company with those of CIT.
These steps include the creation of the Company as a wholly-owned, limited
purpose subsidiary of CIT pursuant to a certificate of incorporation containing
certain limitations (including a requirement that the Company have at least one
"independent director" and restrictions on the nature of the Company's
business). Additionally, the Company's certificate of incorporation prohibits
merger, consolidation and the sale of all or substantially all of its assets in
certain circumstances or the commencement of a voluntary case or proceeding
under any insolvency law, without the prior affirmative unanimous vote of its
directors including any independent director. Notwithstanding the foregoing, in
the event that (i) a court concluded that the assets and liabilities of the
Company should be consolidated with those of CIT (or one of its affiliates) in
the event of the application of applicable insolvency laws to CIT (or one of its
affiliates) or following the bankruptcy or insolvency of CIT (or one of its
affiliates) the security interest in the Contracts granted by the Company to the
Trust should be avoided; (ii) a filing were made under any insolvency law by or
against the Company, or (iii) an attempt were made to litigate any of the
foregoing issues, delays in payments on the Securities and possible reductions
in the amount of such payments could occur.
Federal bankruptcy laws and related state laws, may interfere with or
affect the ability of a creditor to realize upon collateral or enforce a
deficiency judgment. For example, in a Chapter 13 proceeding under the federal
bankruptcy law, a court may prevent a creditor from repossessing a boat, and, as
part of the rehabilitation plan, reduce the amount of the secured indebtedness
to the market value of the boat at the time of bankruptcy (as determined by the
court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the
monthly payments due under the related contract or change the rate of interest
and time of repayment of the indebtedness.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include the Truth in Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z, the
Soldiers' and Sailors' Civil Relief Act, the Military Reservist Relief Act,
state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code, state retail installment sales acts and other similar laws. Also,
the laws of certain 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.
Under the terms of the Soldiers' and Sailors' Civil Relief Act, an Obligor
who enters the military service after the origination of such Obligor's Contract
(including an Obligor who is a member of the National Guard or is in reserve
status at the time of the origination of the Obligor's contract and is later
called to active duty) may not be charged interest above an annual rate of 6%
during the period of such Obligor's active duty status, unless a court orders
otherwise upon application of the lender. In addition, pursuant to the Military
Reservist Relief Act, under certain circumstances California residents called
into active duty with the reserves can delay payments on marine installment sale
contracts, including the Contracts, for a period, not to exceed 180 days,
beginning with the order to active duty and ending 30 days after release. It is
possible that the foregoing could have an effect on the ability of the Servicer
to collect full amounts of interest on certain of the Contracts. In addition,
the Relief Acts impose limitations which would impair the ability of the
Servicer to repossess a Financed Boat subject to an affected
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Contract during the Obligor's period of active duty status. Thus, in the event
that such a Contract goes into default, there may be delays and losses caused by
the inability to realize upon the related Financed Boat in a timely fashion.
The so-called "Holder-in-Due-Course Rule" of the Federal Trade Commission
(the "FTC Rule") has the effect of subjecting any assignee of the seller in a
consumer credit transaction to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor. The FTC Rule is generally duplicated by the
Uniform Consumer Credit Code, other state statutes or the common law in certain
states. Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, the Trust, as holder of the Contracts, will be subject to any
claims or defenses that the purchaser of the related Financed Boat may assert
against the seller of the Financed Boat. Such claims are limited to a maximum
liability equal to the amounts paid by the Obligor under the related Contracts.
Under most state vehicle dealer licensing laws, sellers of boats are
required to be licensed to sell boats at retail sale. Numerous other federal and
state consumer protection laws impose requirements applicable to the origination
and assignment of marine installment sale contracts and marine installment loan
contracts or notes, including the Truth in Lending Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the
Uniform Consumer Credit Code. In the case of some of these laws, the failure to
comply with the provisions of these laws may affect the enforceability of the
related Contract. The Trust and the Company and, if specified in the Prospectus
Supplement, the Selling Trust, may not have obtained all licenses required under
any federal or state consumer laws or regulations, and the absence of such
licenses may impede the enforcement of certain rights or give rise to certain
defenses in enforcement actions.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default and be used as a defense to repayment
of the obligation.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the Fourteenth Amendment to the Constitution of the United States
of America. Courts have generally either upheld the notice provisions of the UCC
and related laws as reasonable or have found that the creditor's repossession
and resale do not involve sufficient state action to afford constitutional
protection to consumers.
CITSF will represent and warrant under the Trust Documents that each
Contract complies with all requirements of law in all material respects. A
breach of such representation and warranty that materially adversely affects the
interests of the Trust in any Contract will create an obligation of CITSF to
purchase such Contract. See "The Purchase Agreements and the Trust
Documents--Sale and Assignment of the Contracts."
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
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Certificates. As a result, the IRS may disagree with all or part of the
discussion below and in the related Prospectus Supplement.
Prospective investors are advised to consult their own tax advisors with
regard to the federal income tax consequences of the purchase, ownership and
disposition of the Securities, as well as the tax consequences arising under the
laws of any state, foreign country or other jurisdiction. Each Trust will be
provided with an opinion of Schulte Roth & Zabel LLP, counsel for the Seller,
regarding certain of the federal income tax matters discussed below and in the
related Prospectus Supplement. An opinion of counsel, however, is not binding on
the IRS, and no ruling on any of the issues discussed below will be sought from
the IRS. For purposes of the following summary, references to the Trust, the
Notes, the Certificates and related terms, parties and documents will be deemed
to refer, unless otherwise specified herein, to each Trust and the Notes,
Certificates and related terms, parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust is intended to be treated as a grantor trust or a
partnership under the Code or is intended to be given an alternative
characterization for federal income tax purposes. The related Prospectus
Supplement for each series of Certificates will specify whether the Trust is
intended to be treated as a grantor trust or a partnership for federal income
tax purposes or how the Trust is otherwise intended to be treated.
Scope of the Tax Opinions
If the related Prospectus Supplement states that a Trust will be treated as
a grantor trust, it is expected that Schulte Roth & Zabel LLP will deliver its
opinion that, for federal income tax purposes, the Trust will be treated as a
grantor trust. In such event, each Certificateholder, by acceptance of a
Certificate, will be treated as the owner of an undivided interest in the
Contracts included in the Contract Pool and any other assets held by the Trust.
If the related Prospectus Supplement does not state that a Trust will be
treated as a grantor trust, it is expected that Schulte Roth & Zabel LLP will
deliver its opinion that, for federal income tax purposes: (1) the Notes will
constitute indebtedness; and (2) the Certificates will constitute interests in a
trust fund that will not be treated as an association (or a publicly traded
partnership) taxable as a corporation. Each Noteholder, by acceptance of a Note,
will agree to treat the Notes as indebtedness, and each Certificateholder, by
acceptance of a Certificate, will agree to treat the Trust as a partnership in
which the Certificateholders are partners for federal income tax purposes.
In addition, Schulte Roth & Zabel LLP will render its opinion that it has
reviewed the statements herein and in the related Prospectus Supplement under
the heading "Certain Federal Income Tax Consequences," and is of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion for the possible effects of the
classification of the Trust as a partnership, as a grantor trust or other
classification, as the case may be, for federal income tax purposes on investors
generally and of related tax matters affecting investors generally, but do not
purport to furnish information in the level of detail or with the attention to
the investor's specific tax circumstances that would be provided by an
investor's own tax adviser. Accordingly, each investor is advised to consult its
own tax advisers with regard to the tax consequences to it of investing in the
Securities.
Other Tax Consequences
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect of
ownership of the Securities in any state or locality. Securityholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of the Securities.
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Alternative Tax Treatment
In the event that, as a result of a change in applicable laws or
regulations or the interpretation thereof, the federal income tax
characteristics of the Notes or the Certificates are not anticipated to be as
described above, the related Prospectus Supplement will include a discussion of
the anticipated federal income tax treatment of the Notes or Certificates.
CERTAIN STATE TAX CONSEQUENCES
The activities to be undertaken by the Servicer in servicing and
collecting the Contracts will take place in Oklahoma. The State of Oklahoma
imposes a state income tax on individuals, nonresident aliens (with respect to
Oklahoma taxable income), corporations, certain foreign corporations, and trusts
and estates with Oklahoma taxable income. No ruling on any of the issues
discussed below will be sought from the Oklahoma Tax Commission.
Because of the variation in each state's or locality's tax laws, it is
impossible to predict tax consequences to Securityholders in all of the other
state and local taxing jurisdictions. Securityholders are urged to consult their
own tax advisors with respect to state and local tax consequences arising out of
the purchase, ownership and disposition of Securities.
Tax Consequences with Respect to the Notes
Crowe and Dunlevy, P.C., Oklahoma tax counsel to the Sellers ("Oklahoma
Tax Counsel") will advise the Trust that, assuming the Notes will be treated as
debt for federal income tax purposes, the Notes will be treated as debt for
Oklahoma income tax purposes, and the Noteholders not otherwise subject to
taxation in Oklahoma should not become subject to taxation in Oklahoma solely
because of a holder's ownership of Notes. However, a Noteholder already subject
to Oklahoma's income tax could be required to pay additional Oklahoma tax as a
result of the holder's ownership or disposition of Notes.
Tax Consequences with Respect to the Certificates Issued by a Trust Treated as a
Partnership
Oklahoma Tax Counsel will advise the Trust that if the arrangement created
by the Trust Agreement is treated as a partnership (not taxable as a
corporation) for U.S. federal income tax purposes, the same treatment should
also apply for Oklahoma income tax purposes; under current law,
Certificateholders that are nonresidents of Oklahoma and are not otherwise
subject to Oklahoma income tax should not be subject to Oklahoma income tax on
the income from the Trust because it is unlikely that the Trust has established
a nonunitary business or commercial situs in Oklahoma. In any event,
classification of the arrangement as a "partnership" would not cause a
Certificateholder not otherwise subject to taxation in Oklahoma to pay Oklahoma
income tax on income beyond that derived from the Certificates.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan, as well as individual retirement
accounts and certain types of Keogh Plans (each a "Benefit Plan"), from engaging
in certain transactions with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to such Benefit Plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for such persons.
The Certificates
An interest in the Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1) of
the
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Code, or (c) any entity whose underlying assets include plan assets by reason of
a plan's investment in the entity (other than an insurance company purchasing
the Certificates for its general accounts). By its acceptance of a Certificate
or its acquisition of an interest in a Certificate through a Participant or DTC,
each Certificateholder or Certificate Owner will be deemed to have represented
and warranted that it is not subject to the foregoing limitation.
A plan fiduciary considering the purchase of the Certificates should
consult its tax and or legal advisors regarding whether the assets of the Trust
would be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
The Notes
The acquisition or holding of Notes by or on behalf of a Benefit Plan could
be considered to give rise to a prohibited transaction if the Seller, the Trust
or any of their respective affiliates is or becomes a party in interest or a
disqualified person with respect to such Benefit Plan. Certain exemptions from
the prohibited transaction rules could be applicable to the purchase and holding
of Notes by a Benefit Plan depending on the type and circumstances of the plan
fiduciary making the decision to acquire such Notes. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38 regarding
investments by bank collective investment funds; PTCE 95-60 regarding
investments by insurance company general accounts; PTCE 84-14, regarding
transactions effected by "qualified professional asset managers"; and PTCE 96-23
regarding transactions effected by certain "in-house" asset managers.
A plan fiduciary considering the purchase of the Notes should consult its
tax and or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, either the Company or the
Trust will agree to sell to each of the underwriters (the "Underwriters") named
therein and in the related Prospectus Supplement, and each of such Underwriters
will severally agree to purchase from the Company or the Trust, as applicable,
the principal amount of each class of Securities of the related series set forth
therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several Underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event of a
default by any such underwriter, each Underwriting Agreement will provide that,
in certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the Underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that CIT, CITSF and/or the Company
will indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act.
A Trustee may, from time to time, invest the funds of the Trust in Eligible
Investments acquired from the Underwriters.
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FINANCIAL INFORMATION
The Company has determined that its financial statements are not material
to the offering made hereby.
Each Trust will be formed to own the related Contracts and the other Trust
assets and to issue the related Securities. Each Trust will have had no assets
or obligations prior to the issuance of the Securities and will not engage in
any activities other than those described herein and in the related Prospectus
Supplement. Accordingly, no financial statements with respect to each Trust are
included in this Prospectus or in the related Prospectus Supplement.
RATINGS
It is a condition to the issuance of any class of Securities offered
pursuant to this Prospectus that the Securities be rated in one of the four
highest rating categories by at least one nationally recognized statistical
rating organization rating such series of Securities (each, a "Rating Agency").
The foregoing ratings do not address the likelihood that the Securities will be
retired following the sale of the Contracts by the Trust. A security rating is
not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating agency. The security
ratings of the Securities should be evaluated independently of similar security
ratings assigned to other kinds of securities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Schulte Roth &
Zabel LLP, New York, New York. The material federal income tax consequences of
the Securities will be passed upon for the Company by Schulte Roth & Zabel LLP.
Certain legal matters will be passed upon for CITSF, CITCF-NY and the Company by
Norman H. Rosen, Esq., Senior Vice President and General Counsel of CITSF. If
the Enhancement for a class of Securities includes a CIT Limited Guarantee,
certain legal matters will be passed upon for CIT by its Executive Vice
President and General Counsel, Ernest D. Stein, Esq. If a Trust is formed
pursuant to the laws of the State of Delaware, certain legal matters will be
passed upon for the Trust by its special Delaware counsel named in the related
Prospectus Supplement.
EXPERTS
The financial statements of CIT as of December 31, 1997 and 1996 and for
each of the years in the three-year period ended December 31, 1997 have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, also incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
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Index to Defined Terms
Affiliated Owner...........................................................7, 27
Asset Service Center..........................................................33
Available Amount..........................................................15, 61
Bankruptcy Code...........................................................24, 70
Benefit Plan..................................................................74
Business Day..............................................................14, 39
Capitalized Interest Account..................................................13
Cash Collateral Account.......................................................45
Cede....................................................................2, 7, 38
Cedel...................................................................2, 9, 26
Cedel Participants............................................................48
Certificate Distribution Account..............................................56
Certificate Final Scheduled Distribution Date.................................14
Certificate Owner.........................................................26, 38
Certificate Owners.............................................................7
Certificate Pool Factor.......................................................31
Certificateholders............................................................50
Certificates............................................................1, 7, 37
CIT.....................................................................2, 6, 22
CITCF-NY......................................................................11
CITSF......................................................................6, 22
Closing Date..................................................................11
Code......................................................................21, 72
Collection Account............................................................56
Commission.....................................................................3
Company.................................................................1, 6, 22
Contract Files................................................................27
Contract Pool.............................................................10, 28
Contract Rate.................................................................28
Contracts..............................................................1, 11, 28
Controlling Notes.............................................................41
Cooperative...................................................................48
Credit Facility...............................................................46
Credit Facility Provider......................................................46
Dealers.......................................................................11
Definitive Certificates.......................................................50
Definitive Notes..............................................................49
Definitive Securities.........................................................50
Deposit Date..................................................................26
Depositories..................................................................47
Depository....................................................................26
Designated Preferred Mortgage.................................................68
Determination Date............................................................15
Distribution Date.........................................................14, 38
DKB...........................................................................32
DTC.....................................................................2, 7, 26
DTC Rules.....................................................................48
Due Period....................................................................15
Eligible Account..............................................................56
Eligible Institution..........................................................57
Eligible Investments..........................................................57
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Enhancement...................................................................44
ERISA.....................................................................21, 74
Euroclear...............................................................2, 9, 48
Euroclear Operator............................................................48
Euroclear Participants........................................................48
Event of Termination..........................................................63
Events of Default.............................................................41
Financed Boats.............................................................1, 11
Financial Guaranty Insurance Policy...........................................45
Financial Guaranty Insurer....................................................45
Force-Placed Insurance........................................................62
FTC Rule......................................................................72
Funding Period.............................................................8, 13
Holder........................................................................47
Holders.......................................................................50
Indenture...............................................................2, 9, 39
Indenture Trustee.......................................................2, 6, 39
Indirect Participants.........................................................47
Initial Contracts..........................................................1, 10
Initial Cut-off Date.......................................................1, 10
Initial Financed Boats.....................................................1, 10
Initial Pool Balance......................................................19, 65
Insolvency Laws...............................................................71
Insurance Advances............................................................63
Insured Payment...............................................................45
Interest Accrual Period.......................................................15
Interest Rate..................................................................9
IRS...........................................................................72
Issuer.........................................................................6
Late Fees.................................................................15, 61
Limited Guarantee.............................................................46
Liquidity Facility............................................................46
Liquidity Facility Provider...................................................46
List of Contracts.............................................................53
Military Reservist Relief Act.................................................54
Monthly Advance...........................................................17, 60
Non-Reimbursable Payment..................................................18, 60
Note Distribution Account.....................................................56
Note Final Scheduled Distribution Date........................................14
Note Owner................................................................26, 39
Note Owners....................................................................9
Note Pool Factor..............................................................31
Noteholders...................................................................50
Notes...................................................................1, 8, 39
Notice........................................................................63
Obligor...................................................................11, 60
Oklahoma Tax Counsel..........................................................74
Original Certificate Balance..................................................27
Owner Trustee...............................................................2, 6
Paid-Ahead Account............................................................56
Paid-Ahead Period.............................................................29
Paid-Ahead Precomputed Contract...............................................30
Paid-Ahead Simple Interest Contract...........................................29
Participants..................................................................47
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Pass-Through Rate..........................................................8, 38
Payment Shortfall.........................................................18, 60
Pool Balance..................................................................19
Pooling and Servicing Agreement................................................2
Precomputed Contracts.........................................................29
Pre-Funded Amount.............................................................13
Pre-Funded Percentage.........................................................25
Pre-Funding Account............................................................8
Prospectus Supplement..........................................................1
PTCE..........................................................................75
Purchase Agreement............................................................11
Purchase Agreements...........................................................53
Purchase Price................................................................55
Rating Agency.............................................................20, 76
Rating Agency Condition.......................................................40
Record Date...............................................................14, 39
Registration Statement.........................................................3
Related Documents.............................................................43
Repurchase Event..............................................................11
Repurchased Contract......................................................11, 55
Required Servicer Ratings.....................................................59
Reserve Account...............................................................45
Reserve Fund..................................................................45
Retained Yield................................................................55
Sale and Servicing Agreement...................................................2
Securities..............................................................1, 8, 39
Security Owner................................................................39
Securityholder................................................................47
Securityholders...............................................................50
Seller......................................................................1, 6
Selling Trust..................................................................6
Servicer....................................................................2, 6
Servicer Letter of Credit.....................................................59
Servicer Payment..............................................................15
Servicing Fee.............................................................19, 58
Servicing Fee Rate........................................................19, 58
Simple Interest Contracts.....................................................29
Soldiers' and Sailors' Civil Relief Act.......................................54
Spread Account................................................................45
SPV...........................................................................24
Stripped Certificates..........................................................8
Stripped Notes.................................................................9
Subsequent Contracts.......................................................1, 11
Subsequent Cut-off Date....................................................1, 12
Subsequent Financed Boats..................................................1, 11
Subsequent Purchase Agreement.................................................12
Subsequent Transfer Agreement.................................................12
Subsequent Transfer Date......................................................12
Terms and Conditions..........................................................49
Trust.......................................................................1, 6
Trust Agreement................................................................2
Trust Documents...............................................................53
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Trustee........................................................................2
Trustees.......................................................................6
UCC...........................................................................66
Underwriters..................................................................75
Underwriting Agreement........................................................75
Yield Supplement Account......................................................45
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You should rely on the information contained or incorporated by reference in
this Prospectus Supplement and the Prospectus. We have not authorized anyone to
provide you with different information. We do not claim the accuracy of the
information in this Prospectus Supplement or the Prospectus as of any date after
the dates stated on the cover pages of the Prospectus and the Prospectus
Supplement.
We are not offering the Securities in any state where the offer is not
permitted.
----------
CIT Marine Trust 1999-A
The CIT Group Securitization
Corporation II,
Seller
The CIT Group/Sales
Financing, Inc.,
Servicer
----------
Dealer Prospectus Delivery Obligation. Until May __, 1999 all dealers that
effect transactions in these Securities, whether or not participating in the
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
================================================================================
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$735,162,156
CIT Marine Trust 1999-A
$325,000,000 Class A-1 ___% Asset-Backed Notes
$179,000,000 Class A-2 ___% Asset-Backed Notes
$117,000,000 Class A-3 ___% Asset-Backed Notes
$103,134,000 Class A-4 ___% Asset-Backed Notes
$11,028,156 ___% Asset-Backed Certificates
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Prospectus Supplement
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Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Chase Securities Inc.
First Union Capital Markets
Salomon Smith Barney
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